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DNB Q1 profit falls as impairments more than double


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According to Market Intelligence, April 2023

DNB Q1 profit falls as impairments more than double

reported ayear-over-year fall in first-quarter profit to 5.22 billion Norwegian kronerfrom 6.54 billion kroner as impairment losses more than doubled.

EPS forthe period amounted to 3.14 kroner, compared to 4.01 kroner a year earlier.

Impairmentof loans and guarantees rose year over year to 1.17 billion kroner from 575million kroner, with collective impairment losses representing 55% of the 1.17billion kroner total. DNB said individual impairment losses were level with theyear-ago period, as an increase in shipping, offshore and energy was balancedby a decline in the small and medium-sized enterprise segment. Collectiveimpairments rose because of "less favorable economic conditions in someindustries and negative migration in some portfolios."

Thebank also noted that it sold several portfolios of nonperforming loans at theend of the first quarter, producing a positive pretax effect of 573 millionkroner in the period. Without the sale, impairments would have totaled 1.75billion kroner.

Impairmentlosses within the large corporate and international customers segment were 1.36billion kroner, compared to 312 million kroner a year earlier, with the rise"partly due to the exposure to oil-related industries." Impairmentlosses fell in the small and medium-sized enterprise segment to 251 millionkroner from 290 million kroner a year earlier.

Inthe personal customers segment, the bank booked reversals on impairments of 430million kroner in the first quarter, up from 45 million kroner in the year-agoperiod. The first-quarter 2016 figure included reversals of 559 million kronerrelated to the NPL sale.

Netnonperforming and doubtful loans and guarantees represented 0.88% of theoverall loan portfolio at the end of March, up from 0.76% at the end of 2015and 0.83% at March 31, 2015.

Notingthe first-quarter increase in collective impairment and "a negative trendin the offshore supply vessel and rig markets," DNB projected impairmentlosses of up to 6 billion kroner in 2016 and again in 2017, compared to 2.27billion kroner in 2015. A reduction in impairment losses is expected in 2018,it added.

Thegroup recorded net interest income of 8.71 billion kroner during the quarter,compared to 8.59 billion kroner a year ago. Net commissions and fees reached1.99 billion kroner, down from 2.21 billion kroner in the first quarter of 2015.Net gains on financial instruments at fair value dropped on a yearly basis to2.38 billion kroner from 3.40 billion kroner.

Thebank booked net unrealized gains on basis swaps of 1.00 billion kroner in the first quarter,compared to 1.81 billion kroner a year earlier. Adjusted for the effect ofbasis swaps, the decline in profits was 746 million kroner, mainly reflectingrestructuring costs and higher impairment losses.

AnnualizedROE for the period was 11.2%, compared to 16.1% in the first quarter of 2015.

Asof March 31, the bank's common equity Tier 1 capital ratio, according totransitional rules, stood at 15.2%, compared to 14.4% at the end of 2015 and12.7% at March 31, 2015.

Asof April 27, US$1 was equivalent to 8.18 Norwegian kroner.