DNB Bank ASA (DNB) Earnings Call Transcript & Summary

Hello, everyone, and welcome to DNB's pre-call for the first quarter in 2025. We will do it -- [ Ida ] will take the remaining of the P&L. I will take the NII and the capital. First of all, I would just remind you of the objective of this call, that is to remind you of what we have communicated earlier that might have an effect on the first quarter results. We will also give you some public available statistics, which might be of help. There will be no new information during this call. I will just start to remind you that the Carnegie figures are included from the 1st of March and that selected historical Carnegie figures for the fourth quarter and the whole of 2024, will be posted on our IR web page and also sent out as the stock exchange notice tomorrow morning. Starting with the net interest income. First of all, remind you that there will be 2 interest days less compared to the fourth quarter, which will have a negative effect of approximately minus NOK 260 million. On the volume side, we had a good speed into -- out of the fourth quarter where we reported a growth of 1.9% FX adjusted. This included 0.8% in the Personal segment and at 4.7% growth in the large Corporate segment. We also said after Q4 that ACI will not grow at this speed going forward. Also remember that the first quarter is a seasonal slower quarter with less activity. Statistics Norway reported last 12 months growth per February, 3.6% of which household was 4% and corporate was 1.5%. The Norwegian kroner has strengthened by the end of the quarter, but the average change in FX would only give a small negative effect. Just to remind you of the FX split in the loan portfolio for the fourth quarter was 9% U.S. dollars, 6% euro and 6% Swedish kroner. On the margin side, the Central Bank rate is unchanged at 4.5%. And the Central Bank expects the key policy rate to remain stable at 4.5% over the next quarters with 125 bps cut before the end of the year and with a gradual reduction towards [ 350 ] by the end of 2026. Under other NII, we reported a higher than normal level in treasury and amortization effects and fees in the fourth quarter. So just to remind you again that the first quarter is a seasonal slower quarter with less activity. Moving on to capital. In the fourth quarter, we reported a CET1 ratio of 19.4% versus the Norwegian FSA's expectations of 16.6%. In Q1, we will book the ordinary dividend from DNB Life, which will have an effect of approximately 13 basis points. During the quarter, as I mentioned, we had some -- we will have some positive FX effects since the Norwegian kroner has been strengthened. Just to remind you on the FX sensitivity, which is approximately 10% change in exchange rate, will give approximately 20 basis points change in CET1 ratio. Remind you that the acquisition of Carnegie was closed in March with a negative effect on the CET1 ratio of 120 basis points. Further headwinds going forward. Implementation of CRR III will be in the second quarter and with a negative effect of approximately 20 basis points. The increase in risk-weight floors for mortgages from 20% to 25%, will have effect in the third quarter with negative minus 70 basis points. We'll also just add that the Board of Directors will request an authorization from the AGM per share buyback program in line with previous years. Over to you, [ Ida ]?

Sure. Starting with the commission and fees and other operating income, a general comment on commission and fees. Activity levels tend to be lower in the first quarter compared to the fourth, of course, impacting fee levels. And a reminder on net insurance results. These are materially negatively impacted every year in the first quarter after the introduction of IFRS 17 due to the booking or recognition of expected losses arising from loss-making or onerous contracts. Moving on to net gains on financial instruments at fair value. Starting with customer revenues in DNB markets or FICC, again, typically sees a seasonally lower activity level in the first quarter compared to the fourth. The mark-to-market effects on the AT1s and the basis swaps will be announced shortly as we usually do after quarter end. And a reminder on the outstanding FX AT1s, we have USD 700 million AT1s outstanding and SEK 4.95 billion AT1s outstanding. Moving on to costs. A seasonally lower activity level in the first compared to the fourth, all else equal, typically leads to a somewhat lower cost level. As we announced in September, we plan to reduce the number of FTEs working in staff and support functions. We booked a restructuring costs related to this of NOK 427 million in the fourth quarter, and we expect to conclude the process now in the first half of the year. Salary inflation for Norway for 2024 came in at 5.6% and market expectations for salary inflation in Norway for 2025, most recently published by the Central Bank is at 4.5%. Furthermore, the annual centralized wage negotiation process was concluded earlier this week with a frame agreement of 4.4%. And a reminder on pension expenses, normalized pension expenses are expected to be slightly higher than NOK 400 million in a quarter. And the closed defined benefit compensation scheme is primarily linked to the development in global equities. Impairments and asset quality, there's really no change in our message on asset quality. The portfolio is carefully monitored, and we are still generally comfortable with the risk in the portfolio. As you know, impairments will vary from quarter-to-quarter, driven by potential changes to macro input factors in the ECL model and/or company-specific events as you've seen in past quarters. Given the elevated level of uncertainty these days driven by the global macro picture, it would be natural to see more company specific events. But again, we do not see any systemic areas of concern in our portfolio. And finally, a kind request or a reminder to please submit your consensus estimates to [ Rune Helland ] by the end of business Friday, April 11. And with that, we thank you for your attention and wish you a good rest of the day. Thank you.

Thank you.