DNB Bank ASA (DNB) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to DNB's pre-close call for the second quarter. The reason for this call is to remind you of what we already have shared with the market and some relevant public data, which could possibly affect the second quarter results. There will be no new information during this call. The script for this call will be published on our IR website. And as usual, I will start with the NII and the capital, and Anne will continue with the rest of the P&L. Starting with the NII, there is one more interest day in the second quarter compared to the first. So this is expected to impact the second quarter's NII positively by approximately NOK 120 million. On the lending volume side, we saw FX adjusted growth of 0.3% in the first quarter. So far this quarter, we've seen the average NOK strengthen, impacting NII negatively. The FX split in the loan portfolio for the first quarter was 8% U.S. dollars, 7% Euro and 6% SEK. Following the Central Bank's decision to raise the key policy rate by 25 basis points to 4.25% on May 6, we announced a customer repricing of loans and deposits of up to 25 bps. This repricing will become effective from July 12 for existing customers. With the Central Bank's decision to raise key policy rate by 25 basis points to 4.25 -- sorry, with the Central Bank's latest policy rate decision today, the key policy rate was kept unchanged at 4.25%. It states that it's likely to raise the policy rate further at one of the forthcoming monetary policy meetings. The policy forecast is a little higher than the one published in March and is just above 4.5% at the end of the year. DNB Carnegie's macro team expect a 25 bps rate hike in August. Longer term, they expect 225 bps cuts in late 2027 to stabilize at a terminal rate of 4%. We continue to see strong competition in the bank market. Over to capital. In the first quarter, we reported a CET1 ratio of 18.1%, well above the Norwegian FSA's expected level of 16.4% -- based on the FX development so far in the second quarter, there will be a small positive effect on CET1. To repeat the FX sensitivity on CET1, when there is a 10% change in FX, there is approximately 20 bps change in CET1 ratio. On May 15, we announced the initiation of a 1% share buyback program. The capital cost of approximately 40 bps will be taken in the second quarter. Over to you, Anne.

Sure. Thanks, [ Jenna ]. Starting with a general comment on net commission and fees. Generally, activity levels tend to be higher in the second quarter compared to the first quarter, impacting fee levels positively. Moving on to financial instruments at fair value and starting with customer revenues in DNB Carnegie or FICC. This typically sees a seasonally higher activity level in the second quarter compared to the first and is, of course, also impacted by market volatility. The mark-to-market effects on the AT1s and the basis swaps will be announced shortly after quarter end. And a reminder on the outstanding FX AT1 amounts, we have USD 700 million outstanding, and we have SEK 4.95 billion AT1s outstanding. Moving on to costs. Seasonally higher activity level than we typically see in the first quarter, all else equal, typically leads to somewhat higher costs in the second quarter. The central wage negotiation in Norway came in at 4.4% for 2026, and the wage adjustments will have effect from May 1. DNB Carnegie's macro team expect salary inflation in Norway to come in at 4.6% in 2026. As communicated previously, we expect to incur nonrecurring integration costs related to Carnegie of up to NOK 200 million in 2026, and we saw NOK 33 million in the first quarter. A reminder on pension expenses. As previously mentioned, normalized pension expenses are expected to be approximately NOK 500 million per quarter and the closed defined benefit compensation scheme is primarily linked to the development in global equities. Asset quality, there is really no change in our message on asset quality compared to what we presented at our first quarter release. The portfolio is carefully monitored, and we are still generally comfortable with the risk in the portfolio. As you know, impairments 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. And as we've said previously, given the elevated level of uncertainty driven by the global macro picture, it would be natural to see more company-specific events. And finally, a kind request or a reminder to please submit your consensus estimates to Rune by close of business on Friday, July 3. That marks the end of our call. We thank you very much for attending and wish you a good day ahead. Thank you very much.

Thank you.