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DNB - DNB ASA News Story

NOK182.7 3.3  1.9%

Last Trade - 14/05/21

Sector
Financials
Size
Large Cap
Market Cap £23.98bn
Enterprise Value £55.88bn
Revenue £5.01bn
Position in Universe 30th / 1828

UPDATE 2-Norway's DNB warns of weaker loan demand as economy slows

Thu 11th July, 2013 10:32am
* Q2 net profit 3.80 bln vs 3.67 bln seen in poll * Repeats 2013 loan losses seen in NOK 3-4 bln range * Says shipping losses declined from Q1 * CEO says loan growth ambitions look tough to achieve * Shares drop 1.5 pct, retreat from six-week high (Adds CEO, CFO comments, shares, detail) By Victoria Klesty and Terje Solsvik OSLO, July 11 (Reuters) - Norway's largest bank DNB ASA DNB.OL  warned of weakening loan demand in its home market, especially in the in the corporate sector, as economic growth slows and customers become more wary of investing. Nordic economies have been some of Europe's most resilient  performers, but low interest rates, a cautious corporate sector and increasingly tough capital requirements have squeezed banks' profitability. "We see that there is a somewhat lower growth rate in Norway's economy, especially on the mainland (where) small- and mid-sized firms are more cautious in their investment activities compared to earlier years," Chief Executive Rube Bjerke told reporters on Thursday. "This will mean our loan growth ambitions will be more difficult to achieve," he added. "We still aim at 3 to 4 percent, but we admit this could be tough." Oil-rich Norway is slowly succumbing to the continent's crisis, with unemployment picking up and companies becoming more cautious of taking up more debt. In neighbouring Sweden, banks have already been suffering from sluggish corporate lending, as cash-rich companies use their own reserves or tap the bond market instead of relying on bank loans.  All Swedish banks, including Nordic market leader Nordea NDA.ST , report quarterly earnings next week. DNB, the first of the big Scandinavian banks to report April-June figures, saw net interest income rising 13 percent in the second quarter, thanks to higher lending rates, countering the slowing trend in lending volumes. It said its underlying results had improved considerably from a year ago, after being adjusted for items related to cost cuts and losses on derivative contracts. SHIPPING EXPOSURE  DNB shares fell 1.5 percent by 0808 GMT, having initially spiked to their highest in six weeks. The stock had risen almost 50 percent year-to-date, more than the 27 percent rise in the European bank index  .SX7P . DNB's net profit fell to 3.80 billion Norwegian crowns ($620.1 million) from 4.61 billion at the same time last year, beating the 3.67 billion seen in a Reuters poll of analysts. The bank, which has struggled with its exposure to a hard-hit shipping sector, repeated it expected impairment losses on loans this year to be between 3 and 4 billion crowns, compared with 3.2 billion in 2012.  "I think the news is that the provision trajectory in the domestic retail division was weaker," said Ronny Rehn, analyst at brokerage Keefe Bruyette & Woods. "You have a slowing Norwegian economy and we have seen a little bit in the numbers now. People are taking some profits."  DNB said a rise in impairments could indicate a weakening of the Norwegian economy and that losses in the shipping sector, while still relatively high compared with other segments, were significantly lower than in the preceding quarters. Norway has suggested banks meet tough new core capital requirements earlier than in most other European countries, a move likely to constrain credit growth and cool an overheated housing market.  DNB, which has already cut its dividend and earlier this year raised its lending rates ahead of the new rules, has said it would need up to 60 billion crowns of extra core capital by 2016.  Its common equity Tier 1 capital ratio, calculated according to the transitional rules, has risen to 10.8 percent from 9.6 percent in the second quarter of 2012.  Chief Financial Officer Bjoern Erik Naess said the bank would manage to raise that capital without needing to issue new shares. ($1 = 6.1281 Norwegian crowns) (Additional reporting by Mia Shanley; Editing by David Holmes) ((victoria.klesty@thomsonreuters.com)(+47 2293 6979)(Reuters Messaging: victoria.klesty.thomsonreuters.com@reuters.net)) Keywords: DNB RESULTS/
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