DnB NOR in first quarter 2008: Robust operations - profits affected by international financial turmoil

The turmoil in international financial markets was a contributing factor behind the decline in DnB NOR's pre-tax operating profits before write-downs to NOK 1.5 billion, from NOK 3.8 billion in the year-earlier period, mainly reflecting value adjustments on bonds and shares. The Group showed sound underlying performance, with an increase in net interest income of 26 per cent, healthy income from customer trading, a controlled cost trend and low write-downs on loans. First quarter 2008 * Pre-tax operating profits before write-downs were NOK 1.5 billion (3.8) * Profit for the period was NOK 1.1 billion (2.9) * Return on equity was 5.7 per cent (17.2) * Expenses represented 74.3 per cent of income (49.8) * The core capital ratio, including 50 per cent of interim profits, was 7.0 per cent (7.6) (Figures for the first quarter of 2007 in parentheses) Reduced market values due to the financial market turmoil resulted in total write-downs of NOK 2.5 billion in the first quarter of 2008. Of this, NOK 1.6 billion represented unrealised losses on the bank's bond portfolio, while ownership interests in and the guarantee issued for the bond portfolio in Eksportfinans represented NOK 309 million. The net loss recorded by Vital and write-downs on the bank's equity portfolio totalled NOK 600 million. No permanent losses are expected on any of the securities included in the bond portfolios. "The financial market turmoil resulted in widening credit risk spreads, which also had a knock-on effect on high-quality bonds. DnB NOR's bond portfolio has a very good rating, and we have registered no rise in the portfolio's credit risk. Write-downs resulting from the decline in value will be reversed over the residual maturity of the bonds. The Group has satisfactory access to funding, and the trust we enjoy in the financial markets was recently confirmed through the upgrading to an AA rating," says Rune Bjerke, group chief executive. If the markets stabilise, pre-tax operating profits before write-downs in line with the 2007 figure should be within reach in 2008. "We enjoy very healthy underlying operations and growth. Our credit portfolios are of very high quality, and our targeted cost programme underpins our ambition to achieve pre-tax operating profits before write-downs of NOK 20 billion in 2010," says Bjerke. Ordinary operations showed a healthy trend in the first quarter of the year. In spite of the financial market turmoil, pre-tax operating profits before write-downs were up 8 per cent in Corporate Banking and Payment Services, while profits in Retail Banking increased by 18 per cent. DnB NORD's operations in Denmark, Poland and the Baltic States generated 37 per cent growth in profits compared with the year-earlier period. Lending growth was 18.1 per cent over the 12-month period, while deposit growth was 11.9 per cent. "All of our key markets continue to develop well with respect to both volumes and profitability. We are expanding in both the retail and corporate markets, and write-downs on loans remain at a low level," says Bjerke. Contact person: Trond Bentestuen, group executive vice president, Corporate Communications, tel. +47 22 48 16 91, mobile +47 95 02 84 48 The quarterly report, presentation and Supplementary Information for Investors and Analysts can be downloaded from www.dnbnor.com