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Higher impairment losses dent DNB Q2 result

reported second-quartergroup profit attributable to shareholders of DNB Bank ASA of 4.11 billion Norwegian kroner, down from4.55 billion kroner a year ago.

Thesecond-quarter results were hit by a negative effect of approximately 800million kroner from basis swaps and the introduction of a funding valueadjustment. The company noted, however, that the "decline in profits wasprimarily a result of higher impairment losses on loans and guarantees."

Thegroup's second-quarter impairment of loans and guarantees totaled 2.32 billionkroner, up from 667 million kroner a year ago, mainly due to the exposure tooil-related industries and shipping markets.

GroupCEO Rune Bjerke said the DNB will maintain its guidance that total impairmentlosses for 2016, 2017 and 2018 will be below 18 billion kroner. The bank hadprojected earlier that total impairment losses for 2016 will be below 6 billionkroner, although the level of impairment is now expected to be higher "assome of the losses related to the downturn in the petroleum industry arematerializing earlier than we expected," Bjerke added.

Thegroup's net interest income declined year over year to 8.62 billion kroner from8.76 billion kroner, while net commission and fee income decreased to 1.47billion kroner from 1.75 billion kroner.

AnnualizedROE was 10.0% in the first quarter, compared to 12.4% a year ago.

Forthe six months to June 30, DNB posted a year-over-year drop in profitattributable to shareholders of DNB Bank to 8.89 billion kroner from 10.69billion kroner.

Asof June 30, the group's common equity Tier 1 ratio, under transitional rules,stood at 14.5%, compared to 14.3% at 2015-end and 12.8% at June 30, 2015. DNBsaid the CET1 capital ratio shall be at least 15% at the end of 2016. Thecompany targets a CET1 capital ratio of 15.5%, including a management buffer,from 2017.

As of July 11, US$1was equivalent to 8.50 Norwegian kroner.