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Impairment losses dent DNB's Q4'16 profit

Impairment losses on loans and guarantees continued to impact DNB ASA's results in the fourth quarter of 2016.

The bank reported fourth-quarter 2016 profit attributable to shareholders of 5.14 billion Norwegian kroner, down from 6.66 billion kroner earned in the year-ago period. EPS amounted to 3.16 kroner, down from 4.11 kroner in the fourth quarter of 2015.

The group's net interest income decreased year over year to 8.37 billion kroner from 9.06 billion kroner. Net commission and fee income totaled 2.14 billion kroner in the period, compared to 2.08 billion kroner in the fourth quarter of 2015. Net gains on financial instruments at fair value declined to 1.69 billion kroner in the fourth quarter of 2016 from 2.16 billion kroner a year earlier.

Impairment of loans and guarantees cost DNB 1.75 billion kroner in the period, up from 1.42 billion kroner a year earlier.

Annualized ROE decreased to 10.9% in the fourth quarter from 15.0% in the same period in 2015.

For full year 2016, DNB reported profit attributable to shareholders of 18.66 billion kroner, down from 24.40 billion kroner a year ago. Full-year EPS decreased to 11.46 kroner from 14.98 kroner.

The bank's common equity Tier 1 capital ratio, under transitional rules, stood at 16.0% at 2016-end, compared to 14.4% a year ago. The lender noted that it has fulfilled its capital requirements one year ahead of schedule and is well positioned in relation to possible new requirements.

"As we have now reached our capital target, our most important financial tasks in the period ahead will be to increase our return on equity and provide a robust dividend payout ratio," said CEO Rune Bjerke.

The board of directors proposed a dividend of 5.70 kroner per share for 2016, which corresponds to a payout ratio of 49.8% of profits, compared to 4.50 kroner per share in 2015. DNB's long-term target is to distribute more than 50% of profits as dividends to its shareholders, with the lender planning a share buyback program to be implemented in the course of 2017.

As of Feb. 1, US$1 was equivalent to 8.25 Norwegian kroner.