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DNB Profit Beats as Investment Banking Income Reaches Record

A DNB Bank ASA branch on Karl Johans Gate in Oslo, Norway, on Tuesday, Oct. 17, 2023. Norway’s economy shrank in August for the first time in four months, largely in line with the central bank’s outlook that projects an end of tightening in coming months. (Fredrik Solstad/Bloomberg)

(Bloomberg) -- Norway’s largest lender, DNB Bank ASA, reported better-than-expected net income in the second quarter after a surge in the number of bond deals managed by the bank.

The Oslo-based bank’s net income grew 12%, to 10.3 billion kroner ($960 million) in the three months through June, beating a 9.3 billion-krone estimate seen by analysts. A 60% jump in investment banking service income drove up net commissions and fees to 3.4 billion kroner for the quarter.

Investor appetite for yield is bolstering the Norwegian bond market after Norges Bank pushed back plans to start easing until next year. DNB has capitalized on the strong corporate bond issuance and increased the number of deals it advised on from a year earlier. At the same time, the bank has benefited as companies also tapped equity markets by selling more shares.  

Shares rose as much as 6.2%, the most since 2020, and were up 5.9% as of 10:40 a.m. in Oslo.

“We expect consensus earnings to nudge up low to mid single digits, as we doubt the full extent of the other income beat will be extrapolated,” Citigroup Inc. analysts including Shrey Srivastava said in a note.

Net interest income — or the difference it earns from lending and pays for deposits — grew 4% from a year earlier, to 15.8 billion kroner, slightly higher than analysts estimates. The increase comes after the metric fell for the first time in three years in the previous quarter.

“After muted loan growth in first half of 2024, some pick-up in growth in the second half of the year is expected,” the bank said in a statement on Thursday.

DNB said that repricing of loans following Norges Bank’s stepwise increase of the key policy rate to 4.5% had full effect in the second quarter. The central bank is likely to wait longer before cutting the policy rate than many of its peers, who have already started easing, due to the strength of the economy and persistent inflationary pressures.

What Bloomberg Intelligence Says: 

DNB’s 12% net-income beat on robust fee income (18% beat), mainly driven by investment banking activity (up 60% vs. 2Q23) may lift consensus 2024 fee estimates and help the bank hit its 4-5% growth target this year. Solid credit quality added to positive results, helping the profit beat, but cost of risk may edge higher in 2H.

— Mar’Yana Vartsaba, BI banking analyst

DNB’s impairment provisions amounted to 560 million kroner in the quarter, 20% lower than what analysts had penciled in.

The lender last month announced a program to buy back as much as 1% of the company’s own shares. 

(Updates with more details throughout and analyst comments.)

©2024 Bloomberg L.P.

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