DNB Bank ASA

Hello, everyone. Welcome to the presentation of the results for the first quarter for DMB. And thanks to the DJ for the dance music this morning. Also, welcome everyone on the stream following us online. And first, a few safety instructions. There is a safety exit back here and in the back and on your left side. And there are no planned safety drills today. We will be presenting the results, our CEO and CFO, and then afterwards, there will be ample time for questions, and members of the press will be able to meet management outside as usual afterwards. Kerstin, the floor is yours.

Thank you so much, Even, and a very good morning to all of you. So pleased to see so many of you here for the announcement of our first quarter result in this year, 2024. It's been a good start to the year for the Norwegian economy, and the start has actually been better than anticipated. Inflationary pressure somewhat lower than expected, a continued low unemployment, and we see some improvement in certain sectors who have been more challenged, we see improvements in the retail trade as well as the servicing industry. It has indeed also been a very active quarter across the group, which is demonstrated by the strong set of results that we deliver today. As usual, I'll take you through some of the highlights from the numbers. The profit for the period is 10.2 billion and the return on equity 15.6%, a level that is well above the minimum targeted level of 13%. Our net interest income is down by 2.9% compared to the fourth quarter, substantially up from the first quarter last year, but the downtick this quarter is impacted by a lower credit demand and lower refinancing activity. Over to fees. This is the strongest first quarter we've ever seen on the fee and commission side. It is a strong and diversified fee platform that we build gradually, bit by bit. And the real strong point this quarter, I would highlight assets under management, a continued very active saving markets that we've been working systematically with for a long time. Portfolio continues to be very robust, 99.3% of the portfolio in status one or two. Impairment provisions for the quarter, 323 million kroner, and nothing in particular to highlight from that relatively low cost of risk for the quarter. Capital position remains rock solid, 19% core equity ratio. That should be seen also in combination with our earnings per share, which has increased close to 10%, 9.3% from the previous quarter, 6.48 for the quarter. And that, in combination with a rock solid balance sheet, provides a very solid base for delivering on our dividend policy. Back to the economy, as I said, a stronger start to the year than anticipated. This has led to a projected uptick in the expected growth for the year. D&B markets previously said 0.5. They now believe in a growth for the Norwegian economy overall for 0.8%. The activity also from the corporates and the businesses is expected to hold steady during the first half of the year and thereafter gradually pick up. Inflation levels are continuing to come down, both headline and core inflation. Headline inflation was at 3.9% for the month of March, expected to continue downwards also in the year ahead of us. Key policy rate was kept stable at 4.5% in the central bank's meeting during the month of March, further confirming that we have now reached the top of interest rate hikes. But DNB markets, on the back of a stronger start in the economy, lower inflation pressure and expectations of higher spending has pushed out their expectations for the first rate hike that was in September, and now it has been pushed out towards December this year. Rates are thereafter gradually expected to come down towards 3.25%, that is seen more as the longer-term equilibrium in this cycle. Looking again at households, unemployment has remained very low, and households indeed very, very resilient in this economic cycle with increasing inflation and increasing rates. They are expected to remain low. They might tick slightly upwards from 1.8% unemployment up towards 2.4%, but still at levels which are considered to be very low. This year's wage negotiations have not yet been fully completed for all sectors, but the most important wage negotiation that happens in Norway is with the industry, and they have finalized their negotiations with an agreed level of 5.2% wage growth. Others are expected to follow their lead, and this strengthens the belief and the outlook for a growth this year in real wage and a growth in disposable income. This is likely to strengthen confidence, it strengthens purchasing power, and it strengthens consumer spending towards the second half and the end of the year. If we look at the housing market there hasn't been a decrease it's constantly been moving more positively than expected this has also been the case so far this year the expectations from markets is now for house prices to grow three percent this year and six percent next year There is an increased activity in the market. There is a low activity in construction. And both of these elements underlines the likelihood of continued increasing prices in the housing markets going forward. All in all, the outlook for the Norwegian economy provides a very healthy backdrop for our business going forward. All the same, we again highlight the elevated geopolitical risk and the conflicts that are ongoing, which does provide a higher level of uncertainty than we have been used to having for quite some years. And that is important to keep in mind. Turning to some of the highlights for the key business areas. In personal customers, they deliver solid financial results. Pre-tax profits are up 8.3% from last year, 4.6% from the previous quarter. It has been a slower quarter on growth. This is impacted by a slower credit demand and a lower activity in refinancing, among others. The growth in the quarter has also been negatively impacted by the technical integration of S-Banken onto the DNB platform. This is all the same a very important milestone in our journey of strengthening our competitive position and our ability to both build better services for our customers as well as take out synergies from S-Banken, which is still a very strong business case and improves our competitive position overall. We continue to see very attractive growth in savings, gradually, quarter by quarter, as you can see. We continue to have net growth in sales of saving agreements. We continue to have an increased number of users in our savings app that receives very good ratings. And our retail position, alongside a strong distribution position and good management has been key drivers for enabling asset management to now pass through the level of 1000 billion kroner that they have under their actively managed portfolio. Another highlight to mention from private banking is that they have systematically for some time been working to build portfolio that are discretionally mandated from their customers. That portfolio is now 19 billion, closing in on 20 billion. And the growth that we have seen for the past year has been at 34%. So there are many important drivers that build systematically our position and growth our presence in the savings and asset management market. Another thing to highlight strongly for personal customers is the resilience and robustness of the portfolio. Very, very few situations that are challenging and very low reserves on that portfolio overall. So overall, a very strong performance for the team in a quarter with very, very high customer activity. Moving on to corporate banking, also an area with high activity and increasing activity during the quarter, in particular in the export-related industries in Norway and in renewable and anything related to companies investing into the energy transition. We have seen a growth in lending volumes of 2.8 for the quarter on the lending side and 7.2 on the deposit side, where we continue to see that the quality and robustness of D&B provides us the trust from customers to put their deposits with us. There's been also, I'd say, a high activity from other areas than lending. Pre-tax profit is down, and revenue also in this area is down, but if you adjust for the market-to-market elements in the previous quarters, earnings from non-lending-related activity is at par with the first quarter last year, and this was a very, very strong quarter. We have further also strengthened our position with our customers. Last year, Prospera rated us the number one bank for corporates in general. This first quarters, we are humbled to see that our clients rate us as the number one bank for payment services as well as trade finance. And these are areas that we have invested into both through technology and people for quite a while to continue to build services and value for our customers. A strong start to the year for D&B markets, surpassing the 1 billion also in pre-tax profit for the first quarter this year. Strong elements being more on the debt capital market side, credit broking, as well as customer-related revenue. And we continue to see how this business benefits from a broad, diversified platform that reduces volatility compared to some of our peers in this area. All in all, a good quarter in both the main areas. And with that, I will leave the floor to you, Ida.

Thank you, Kerstin. I would now like to take you through the quarterly results in a bit more detail. Loan volumes are up 0.7% in the quarter, with corporate customers up 2.8% and 1.1% FX adjusted. Personal customers are down 1.4%. There was a strong momentum in the corporate customer segment towards the end of the quarter, which provides us with a strong pipeline moving into the second quarter. Volumes in personal customers are primarily affected by lower average growth that you see in the overall market, lower refinancing activity, and the technical integration of S-banken onto the same IT platform as D&B. The latter is expected to level off, and the integration is important for us, primarily to ensure innovation going forward, but also to take out synergies further down the line. This is an important milestone and we are now well positioned to create customer value and profitable growth also supported by the increased activity that we have seen during the end of the quarter in the real estate market. We reiterate our long-term ambition of a profitable annual loan growth of between 3% to 4% over time. But as mentioned earlier, we expect this to vary year on year. We still expected muted growth in the first half of this year and then start to pick up in the second half, driven by the strong Norwegian economy, as Kerstin pointed to, increase in real wages, as well as the underlying growth in market activity. Deposit volumes are up by 3.9%. Deposits from corporate customers are up by 7.2%, while we see a decrease in the personal customers of 0.9%. We continue to maintain a strong deposit to loan ratio of 77.3%. The net interest margin was down by three basis points in the quarter, now amounting to 187, driven by lower average volumes in the quarter, strong competition, and product mix effects. The combined spreads in the customer segments are up one basis points. This includes the full effects of the repricings implemented in October, as well as in November, and partial effects of the repricing implemented end of February. That takes me to net interest income, which decreased by 471 million in the quarter. Total effects from customer repricings and product mix effects amounts to 105 million in the quarter. The effects of change in spreads amounted to 162 million. Development in spreads reflects effects of repricings combined with a relatively stable money market rates. This was somewhat counteracted by lower average volumes, strong competition, and the product mix effect I mentioned related to deposits, which we also saw in the fourth quarter. The decrease in NII coming from Treasury relates to a flatter yield curve. Fewer interest dates negatively affected NII by 161 million, somewhat higher due to the effect that we see of the leap year. Volumes and FX effects decreased NII by 93 million. Lending growth coming from the corporate customer segment came late in the quarter. FX effects was driven by a stronger average knock during the quarter. NII in the quarter was also negatively impacted by a number of other items, totalling 322 million. Among others, interest on impaired loans, as well as amortisation effects and fees. We continue to note a strong contribution from our customer-related fee income stemming from a diversified product platform. In addition to what's shown on the slide behind me, we also see a continued strong development in FICC. We deliver an all-time high first quarter results when it comes to net commission and fees at 2.7 billion, up 2.6% from, as Kerstin mentioned, a solid quarter last year. The results from real estate broking was down 14%, reflecting a lower activity and the fact that Easter came in the first quarter this year compared to last year when Easter was in the second quarter. Investment banking was down 7% compared to a strong first quarter 2023. We noted a strong contribution from debt capital markets, somewhat lower activity in relation to M&A and equity capital markets. Bond issuance picked up during the quarter, and we saw that bringing increased activity towards the end. Asset management and custodial services was up 30% compared to the same period last year. Asset under management was up 157 billion, driven by positive market developments, but also positive net inflow effects from both our retail customers as well as institutional customers. As Kerstin mentioned, we have now surpassed 1,000 billion in asset under management. This is a solid proof that our customers continue to be committed to their long-term savings schemes, and we also see increased number of savings schemes in addition to increased savings on a monthly basis. Guarantee commission was up 0.3%, reflecting a solid demand for trade finance products also in this quarter. Money transfer and banking services was up 1.4%, driven by higher travel activity and increased income from banking services. Sale of insurance product was down by 3.6%, where we recognised a continued positive development in the non-guaranteed pension side, which is somewhat offset by a decrease in non-life insurance. Moving on to cost. Operating expenses are down by 419 million compared to the fourth quarter, reflecting a seasonally lower activity in the quarter. This is exemplified by the decrease in expenses related to variable salaries, travel and training, as well as IT. Due to seasonality, the second quarter generally carries higher activity-related costs than the first quarter. Now over to the portfolio quality, which remains robust and well diversified, with 99.3% of the portfolio in stage one and two. The personal customer portfolio, which accounts for approximately 50% of our exposure default, remains strong. We do not see a negative development in the portfolio and there have been fewer requests for interest only periods in the quarter. For the corporate customers, impairment provisions total 212 million. The portfolio remains robust and well diversified and there are no structural changes in the portfolio or general negative migration to note. The impairments in state three are related to customer specific situation, both in large corporates as well as in the small and medium sized enterprises. We remain comfortable with the credit quality in the portfolio, but would like to remind you that losses will vary quarter to quarter in light of the current macroeconomic environment. Now moving on to capital. Our core tier one capital remains strong at 19% with a 214 basis points headroom to NFSA's expectation. The increase in core tier one capital ratio is supported by profit generation as well as the ordinary dividend stemming from the D&B life insurance business accounting for 31 and eight basis points respectively. Portfolio growth and currency effects was offset by positive migration in the credit portfolio. The latest share buyback program was completed during the quarter and the Board of Directors will seek an approval from the annual General Assembly of buying back up to 3.5% of outstanding shares. Leverage ratio remains strong at 6.2%. And with a core tier one capital ratio of 19% and a leverage ratio of 6.2%, our capital position remains strong, which will also enable us to continue to deliver on our dividend policy in the years ahead. Summing up. We deliver a strong result in the first quarter, which also reflected in our key numbers. Return on equity came in at 15.6%, earnings per share at 6.48, cost income ratio at 35.7. I also want to point to the fact that the tax rate for 2024 is expected to be 20%, but our long-term guiding remains unchanged at 23%. Thank you. And then we open up for questions.