DNB's results for 4th quarter 2013

Rise in profits contributes to the necessary build-up of capital

DNB recorded profits of NOK 17 526 million in 2013, up NOK 3 734 million from 2012. The healthy profits contributed to an increase in the Group’s common equity Tier 1 capital ratio from 10.7 per cent at year-end 2012 to 11.8 per cent at end-December 2013, calculated according to the transitional rules. A rise in net interest income, low impairment losses on loans and strict cost control were the main factors behind the positive profit trend.

Front page Q4 2013“We are pleased with the results we managed to achieve in 2013. All business areas recorded a rise in profits. Parallel to this, we succeeded in reducing operating expenses adjusted for non-recurring effects. During the year, the banks were presented with a number of new requirements to increase their equity, and the profits recorded in 2013 thus contribute to a very necessary increase in the bank’s Tier 1 capital. DNB is well capitalised, but we need to build additional capital organically in order to meet the authorities’ requirements,” says Rune Bjerke, group chief executive.

Over the past twelve months, DNB has increased Tier 1 capital by NOK 12.4 billion. A futher increase of more than NOK 40 billion will be required towards 2016.

Lower lending growth and an increase in other operating income
Adjusted for exchange rate movements, there was an average increase of NOK 11.6 billion in DNB’s healthy loan portfolio compared with 2012. Impairment losses on loans were at a very low level and were reduced by approximately NOK 1 billion from 2012 to 2013.

Other operating income increased by NOK 1 926 million from 2012, mainly in consequence of the rise in value of DNB’s shareholding in Nets and healthy profits from insurance operations.

“Impressive efforts were made throughout the Group to ensure positive experiences for both customers and employees in 2013. The year was characterised by extensive internal restructuring, new requirements from the authorities and tough competition in the market. DNB is still one of Norway’s best liked banks, and our recent employee survey shows that the employees enjoy their work and are highly dedicated. I am extremely proud of the efforts underlying the results achieved during the past year,” says Bjerke. 
Continued progress in the fourth quarter
DNB recorded profits of NOK 5 665 million in the fourth quarter of 2013, up NOK 1 822 million from the fourth quarter of 2012. The improved profit performance reflected an increase in net interest income and lower impairment losses on loans.

Ordinary operating expenses, excluding non-recurring effects, declined by 1.1 per cent from the fourth quarter of 2012.

Future prospects
“While the global economy seems to be experiencing a cautious recovery, there are many indications of a somewhat lower growth rate in the Norwegian economy. Activity levels remain high, and the weaker Norwegian krone rate gives a hard-tested export industry renewed belief in the future. Nevertheless, credit demand appears to be somewhat lower than in 2013, enabling us to both continue to finance sound business projects and to build up sufficient capital to reach the new requirements,” says Bjerke.

“However, due to the large differences in banking regulations between the Scandinavian countries, competitors that are not subject to the same Norwegian capital requirements may be in a better position to increase their market shares at the expense of Norwegian banks. This applies to international banks, but also to Norwegian government-backed institutions that offer home mortgages. We therefore appreciate the Norwegian government’s signals that the process of harmonising the rules across the Scandinavian countries is given high priority,” says Bjerke.

DNB expects impairment losses on loans to remain low in 2014, with individual impairment in the range of NOK 2-3 billion.

Key figures for the fourth quarter of 2013

• Pre-tax operating profits before impairment were NOK 6.8 billion (5.7)
• Profit for the period was NOK 5.7 billion (3.8)
• Earnings per share were NOK 3.48 (2.36)
• Return on equity was 16.2 per cent (12.3)
• The ordinary cost/income ratio was 40.4 per cent (47.1) 

Comparable figures for the fourth quarter of 2012 in parentheses.

Key figures for the full year 2013
• Pre-tax operating profits before impairment were NOK 24.7 billion (21.0)
• Profit for the year was NOK 17.5 billion (13.8)
• The common equity Tier 1 capital ratio was 11.8 per cent (10.7)
• Earnings per share were NOK 10.76 (8.48)
• Return on equity was 13.2 per cent (11.7)
• The ordinary cost/income ratio was 45.7 per cent (49.1)
• The proposed dividend is NOK 2.70 per share (2.10) 

Comparable figures for 2012 in parentheses.

This information is subject to the disclosure requirements pursuant to section 5-12 of the
Norwegian Securities Trading Act.

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