DNB fourth quarter 2015: Healthy profits give strong improvement in capital adequacy

DNB recorded profits of NOK 24 762 million in 2015, up NOK 4 145 million from 2014. The increase partly reflected the effect of basis swaps, while a rise in income and reduced costs also contributed to the high profit level. DNB’s common equity Tier 1 capital increased by NOK 20.9 billion through 2015, which makes the bank even more robust to cope with uncertain times.

“This is a strong financial performance by DNB and shows that parts of the Norwegian business community are still expanding in spite of the sharp drop in oil prices. It also demonstrates that we are
an attractive bank for Norwegian personal customers. The number of new home mortgage contracts increased by more than 170 000 in 2015, which is a significant rise from the previous year. Overall, we are very pleased with our returns and cost performance,” says Rune Bjerke, group chief executive.

Tier 1 capital approaching the target
Most of the annual profits is retained in the Group in order to reach the statutory capital requirements. Calculated according to the transitional rules, the common equity Tier 1 capital ratio rose from 12.7 per cent in 2014 to 14.4 per cent in 2015.
“A strong level of profits, a number of capital efficiency measures and the sale of certain loans and properties helped raise Tier 1 capital. DNB is already one of the world’s best capitalised banks, but we will continue to build capital organically until we have fulfilled the capital requirements,” says Bjerke.

Impairment losses on loans and guarantees increased by NOK 631 million in 2015 compared with 2014. The rise referred primarily to the shipping and offshore segments, while there was a significant reduction in the personal customer segment as a consequence of the sale of portfolios of non-performing loans to Lindorff last autumn.

There was a rise in net interest income through 2015, reflecting higher volumes and wider deposit spreads. Lending spreads narrowed by 0.18 percentage points while deposit spreads widened by 0.23 percentage points compared with 2014. Net interest income increased by 8.8 per cent from 2014. The weakening of the Norwegian krone had a positive effect on income and a negative impact on costs.

Growth in the fourth quarter
DNB recorded profits of NOK 6 804 million in the fourth quarter of 2015, up NOK 1 839 million from the fourth quarter of 2014. Adjusted for basis swaps, there was a NOK 2 213 million increase in profits.

DNB experienced a rise in both deposits and loans throughout the quarter. Adjusted for exchange rate movements, deposit and lending volumes were up 3.2 per cent and 2.8 per cent, respectively. Higher volumes and wider deposit spreads helped raise net interest income by 4.2 per cent from the fourth quarter of 2014. Impairment losses on loans rose somewhat during the quarter. However, this was compensated for by lower taxes. 

Expecting continued growth in 2016
In spite of challenging times for oil-related activities, we still expect moderate growth in the Norwegian economy. Nevertheless, reduced petroleum activity will dampen investment in a number of mainland companies, make households more cautious and contribute to moderate wage settlements.

“DNB is planning for lending growth of between 2 and 3 per cent in 2016 and anticipates stable volume-weighted spreads. Moreover, the year will be characterised by intense competition for customers and continued extensive digitalisation of our services and products. Our payment app Vipps did not exist a year ago and has now been downloaded 1.4 million times. This is amost unbelievable and demonstrates the importance of being on the platforms where customers wish to meet us. We will add a lot of new functionality to Vipps this year,” says Bjerke.

Key figures for the fourth quarter of 2015

• Pre-tax operating profits before impairment were NOK 9.3 billion (7.0)

• Profit for the period was NOK 6.8 billion (5.0)

• Earnings per share were NOK 4.11 (3.05)

• Return on equity was 15.0 per cent (12.6)

• The cost/income ratio was 28.1 per cent (42.2)

• The common equity Tier 1 capital ratio (transitional rules) was 14.4 per cent (12.7)

  Comparable figures for 2014 in parentheses.
  
  
  This information is subject to the disclosure requirements pursuant to section 5-12 of the
  Norwegian Securities Trading Act.

Contact persons:
Thomas Midteide, group executive vice president, Corporate Communications, tel.: + 47 962 32 017
Rune Helland, head of Investor Relations, tel: +47 977 13 250

The quarterly report, presentation and Fact Book can be downloaded from
www.dnb.no/investor-relations