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DNB aims to cut 2B kroner in costs by 2020

DNB ASA will cut costs by between 1.5 billion Norwegian kroner and 2 billion kroner by 2020, CEO Rune Bjerke said during a capital markets day in London.

The bank reaffirmed its target of a dividend payout ratio above 50% and a return on equity of above 12% for 2019. It also continues to aim to reduce its cost income ratios to less than 40% and achieve an end-2019 common equity Tier 1 ratio of around 16.1%.

DNB recorded an ROE of 10.6% in the first nine months of 2017, and had a CET1 ratio under transitional rules of 16.3%.

The bank's ROE targets are within reach and it is well-capitalized for Basel IV, CFO Kjerstin Braathen said, adding that DNB Livsforsikring ASA is also in dividend position for the first time in 10 years.

DNB estimated that a full implementation of the new IFRS 9 accounting standards, which set tougher requirements for bad loan provisioning, would reduce its equity by between 3.0 billion and 4.0 billion kroner, equivalent to a reduction of its CET1 ratio of 20 to 30 basis points. The bank noted that Norway will implement IFRS 9 in a similar transitional way to the EU, meaning that the immediate CET1 impact will be "very limited."

The bank's net interest income is expected to reduce by around 400 million kroner from 2019 owing to the sum of the deposit guarantee fund levy and resolution fund fee, under the European Bank Recovery and Resolution Directive aims, DNB said.

As of Nov. 22, US$1 was equivalent to 8.2 Norwegian kroner.