These are good times for DNB when interest rates are rising and lending growth is still going strong.
In the second quarter of the year, net interest income ended at NOK 11.5 billion. This is up from NOK 9.4 billion in the same period last year. Average estimates of 18 analysts forward expected net interest income to end at NOK 11.3 billion in the quarter, according to TDN Direkt.
Profit before tax ended at NOK 10 billion in the second quarter, compared to NOK 8.3 billion in the same period last year. In advance, analysts expected about nine billion crowns.
Volatility is a word that describes very well the quarter we left behind, whether in the financial markets or elsewhere. However, as the Norwegian economy has proven robust in the face of turmoil, and we had a quarter with strong results across all business areas, CEO Kjerstin Braathen kicked off his quarterly presentation on Tuesday morning.
After taxes, the result ended up at NOK 7.8 billion, an increase of more than one billion from the same quarter last year.
DNB also wrote that the second quarter result, with strong solvency and increased profitability, means the bank is well positioned for further growth.
There are also reports of a stable level of so-called customer-oriented activities, or commission income, which reached 1.9 percent in the second quarter of last year, when there were record highs.
The major policy rate increase is good news for the DNB. The main bank’s milk and bread business, which is net interest income on loans and deposits to customers, increased by more than NOK 2 billion from the second quarter of last year, and over NOK 1 billion from the first quarter of this year, to NOK 11.5 billion.
The quarterly report indicates that DNB experienced a growth in lending and deposits to retail and corporate customers, from the first quarter to the second quarter of this year. In his quarterly presentation, CEO Prathin nevertheless mentioned that there are uncertain times.
It is important to stress that uncertainty is greater now than it has been for a while. Norway as a small and open economy is not protected. She said that the expected higher interest rates will also lead to lower consumption over time.
It further states that the net loss allowance of NOK 209 million in the quarter was reversed, primarily from corporate clients in oil and gas and overseas.
In total, DNB received revenue of NOK 16.3 billion in the second quarter, an increase of more than one billion over the first quarter of this year and nearly three billion over last year.
Number of interest rate increases
Last year, Norway’s largest bank received help attracting on the income side from several interest rate increases. This can be easily explained because the higher the interest rate margins – the profit – the higher the interest rate level.
In addition, it is common for loan interest rates to grow faster than deposits when interest rates are raised from a low level.
The DNB began a series of mortgage rate hikes in September last year, after Norges Bank raised its key rate. The next rate hikes came in December of last year and March of this year.
These increases led to higher interest rates on existing loans in early November last year, and then in January and May this year. By June at the latest, interest rates have been raised again, so the current loan rate will rise on August 10. Since last fall, the lowest floating rate on mortgages has risen from about 1.40 to about 2.40 percent.
The arrow is back
On the other hand, the turmoil in the financial market has affected the share price of DNB in recent months.
After peaking at just over NOK 217 per share in February of this year, the stock has fallen to levels around NOK 180 per share. This corresponds to a decrease of about 17 percent from the top.
Danske Bank announced this week that it is lowering its profit forecast for this year. From 13-15 billion DKK to 10-12 billion DKK. This is mainly due to the turmoil in the financial market and thus the increased cost of financing for borrowing for many northern banks.(Conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using a link that leads directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For additional terms look here.
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