DNB Bank ASA

Welcome everyone to the presentation of the third quarter results for D&B. And welcome also everyone who follows us online on the stream. For security, we have a fire exit on your left in the front and also in the back and there are no fire drills planned for today. I'm sure those of you who read Norwegian newspapers have seen that we put a lot of time and effort into creating secret cover names for our secret projects in D&B. But this project has the rather ordinary name of Q3. Although the results are anything but ordinary, and our CEO will now go through the headlines, and CFO Ida Lanner will present the details afterwards. So, Kerstin, the floor is yours.

Thank you so much, Even, and a very good morning to all of you and welcome to this results presentation. I remember when we presented our second quarter results, we highlighted that there had been a shift in sentiment and a shift in customer activity in our business throughout the quarter with a very strong end towards the end of the second quarter. This sentiment has continued all the way throughout the third quarter and is reflected in the numbers that we delivered today. And we are grateful to see that an increasing number of customers trust us with their business and an increasing number of customers increase the business they trust us with in a quarter where the Norwegian economy continues to show resilience. Return on equity for the quarter comes in at a solid 18.9%. During the quarter, we recognize a gain from the merger between Fremtin and EICA, our non-life insurance company, of 716 million. Adjusted for that, the return on equity for the quarter is 18%. overall driven by solid growth across segments, stable margins, and low losses. Net interest income is up by 2% compared to the previous quarter, by 2.6% compared to the same quarter last year. Lending volumes overall, 1.6% across segments with a particularly strong momentum in personal customers and large corporates. We experience a high activity in the housing market throughout the quarter and see an increasing number of customers also choosing D&B when they're looking to change their bank. We deliver an all-time high third quarter in fees and commissions, up by 11.1% from the third quarter last year. And the key drivers, yet again, are asset management and investment banking from a very solid and well-diversified fee platform. The portfolio remains robust, well diversified, if anything, a slight tick to the better with 99.3% of the portfolio in stage one and two, and losses are what I would define as marginal for the quarter. Capital is solid at 19%. Profit for the period comes in at 12.2%, with a solid and healthy uplift in earnings per share to 7.83 kroners per share, which is an increase of 22.5%. Year-to-date earnings per share are 21.2 kroner per share, comfortably supporting our ability to deliver on our dividend policy. A few comments on macro, which is a continued development in line with what we communicated during our previous earnings release. The economy continues to move in the direction of a soft landing, and the start to the year has been stronger than what was expected at the outset. The central bank has conducted a new regional survey amongst business leaders in the month of September and the results from this continue to show a stable and slightly increasing optimistic outlook. Construction is still low in terms of activity and shows a slow pickup. Servicing related businesses have a stable outlook expectations, whereas the servicing industry towards oil and gas shows an increased positive sentiment. In aggregate, they expect to invest somewhat less during the year of 2024, but expect to increase their investments in 2025. Unemployment remains low, 2% steady throughout these years with inflation increasing and interest rates growing. And a slight increase is expected towards the end of the year, but it's expected to peak at 2.3% in 2026. So we're talking still very, very low levels of unemployment. Inflation numbers in September came out a little bit lower than the central bank anticipated, but inflation remains above the targeted level from the central bank and are expected to continue to decrease in the time to come, however, at a slower pace than we have seen so far. Overall, the picture remains very healthy for the economy. But bear in mind that Norway is a small and open economy and that we are impacted by what happens outside of our country. A few highlights this quarter from our customer segments when we for the first time report three segments in total. Personal customers, we see a very high activity level and a healthy growth of 0.8%, with more than 7 billion kroner being added to our mortgage book in new volumes. We have looked back and had to go all the way to 2017 in order to find an equally strong third quarter in terms of growth. Our customers continue to sign up for new savings agreements. If you look at the number of savings agreements, they're up by 8.7% during the last year. Costs in this area are down compared to the previous quarter. Pre-tax profit up by 10% compared to the last quarter, demonstrating a very strong performance from the team. Business Customers Norway is being reported for the first time, and our strong position in this area is underpinned by net profits of 4.1 billion kroner. We see a healthy growth across regions and across activity areas, with the exception of construction, which remains low, where we see smaller signs of indicating a pickup, but still a slow activity this quarter. Other operating income is up, which means we deliver an increasing number of services to our customers in this area. Key drivers are pension and a continued strong cooperation and activity with D&B markets. In large corporate, lending grows by 4.7%, NII by 7% from the previous quarter. High level of activity and new businesses in areas such as renewables, such as manufacturing and seafood, and overall a high activity level of refinancings during the quarter. We continue to serve our customers with cross-sells and products from many activities within the bank. Pensions, a very active quarter in terms of hedging and FX, as well as capital raise in the bond market. And the operating income this quarter is at par with the same quarter last year, But then we had a very meaningful contribution from a market-to-market adjustment on shares we were sitting on from companies that had been restructured. So also a strong quarter in large corporates on the operating income side. Pre-tax profit in D&B markets came in at one billion kroner, a very high quality revenue mix. We always look for the customer related revenue and the customer related revenue in D&B markets is up by 23% compared to the same period last year. During the years, we have consistently communicated our ambition to grow our fee base more than our volumes and lending based activity. And two areas we have identified particularly to be key drivers of this growth, and these are investment banking and asset management. Adding all the customer revenue in D&B markets and revenue from asset management, you can see the growth that has been delivered this quarter compared to the two prior years with third quarter, where we delivered 25% growth in revenues. Further to the right, you can see assets under management and how we've consistently grown our asset base that we have under management. And the aggregate growth for the past two years is 41% in this area. I wanted to particularly highlight these two that has a very solid growth momentum on its own, but these two are also the two particular areas that we strengthened with the acquisition that we announced yesterday. As many of you have heard, we announced the agreement to acquire all the outstanding shares in Carnegie. Carnegie is a Nordic leading investment bank and asset manager, and jointly we will hold the number one position in the Nordics. We view this to be a perfect match for DNB and Carnegie view DNB to be the perfect match for them and very much for us in line with the strategy we have communicated of growing fees and also growing our Nordic presence. In the discussions we've engaged in over the past years, we've increasingly found both cultural similarities and complementary business activities even more than we anticipated at the outset. So this, we strongly believe, will strengthen our offering to customers, both in terms of geography, in terms of products, and in terms of industry expertise. We are excited about the opportunities that lie ahead, but even at the outset, this will increase our revenue base from the Nordic area by 45% in terms of fees. The rationale for the transaction is primarily based on revenue synergies and the value of the strategic positions that we enter into. The next steps for us now will be to apply for the relevant regulatory approvals, and we hope to close during the first half of 2025. We are jointly excited about the opportunity to serve our customers better from this new platform we will have from joining forces. But also looking at the fee-based revenue in total, just joining forces will increase the total fee income in DNB by 30%. So with those remarks, I will leave the floor to Ida.

Thank you, Kerstin. Thank you and welcome to everyone here and to those of you listening in. I would now like to go through the third quarter results in a bit more detail. Loan volumes are up 1.6%, driven by increased customer activity across all three different customer segments. We note a good momentum in the personal customer segment with an increase of loan volumes of 0.8%, driven by a stronger activity in the real estate market in addition to refinancing activity. The volumes in business customers Norway increased by 0.3%. And in large corporate and international, we saw a strong uptake of growth of 4.7%. It was a strong customer activity across the board in large corporates, but I would like primarily to put focus on the increase we saw in renewable energy as well as in the future and technology business area. Deposit volumes are down by 4.1%. In personal customers, this is completely in line with seasonal effects. And in business customers, Norway, this is also a seasonal effect related to the public sector. In large corporate area, there is a decrease, which is more related to a customer-specific outflow of deposits that are in low margin, as you can also see on the increase in deposit spreads on the next slide. We continue to maintain a strong deposit to loan ratio in the customer segment of 72.7%. And as communicated earlier, we expected the muted growth in the first half of this year and an increase in activity in the second half of this year, which is something you can also see in our numbers presented today. Net interest margin was up by one basis points in the quarter to 190 basis points, driven by an increase in other NII. The combined spreads in the customer segments were down by one basis points, affected by increased money market rates, but also continued strong but rational competition in Norway. Net interest income increased by 312 million, up 2%. Effects from spreads, treasury and interest on equity reduced NII by a total of 65 million in the quarter. Volumes and FX increased NII by 37 million, and one additional interest day added 127 million. Amortization effects and the increased activity that we saw increased NII by another 70 million, driven by high refinancing activity. In addition, NII was positively impacted by a number of other items, totaling 143 million. The third quarter was characterized by a high customer activity, and in FICC, the customer-related income was actually all-time high. We continue to benefit from a robust and well-diversified fee platform, resulting in an all-time high third quarter result in net commission and fees. Net commission and fees comes in at 3 billion, up 11.1% from the corresponding solid third quarter we saw last year. Real estate broking was up 1.6%. We noted increased income in the residential real estate broking business, but this was somewhat offset by a lower activity in the commercial real estate brokerage. Investment banking services was up by 19.1%, representing an all-time high third quarter results. There was particularly strong contribution from debt capital markets in the quarter. Asset management and custodial services was up by 27.6%. There was continued growth in asset under management, up 208 billion, and we noted positive net inflow, both from retail as well as institutional customers in the quarter. In addition to that, as Kerstin pointed to, we continue to see an increase in number of savings agreements in our portfolio. Guarantee commission was up 18.9%, driven by a continued increase in demand for trade finance products. Money transfer and banking services were stable, down 2.7%. We noted continued high transaction and international travel activity, but this was somewhat offset by increased volume-related costs, which is annualized and therefore affects the third quarter results. Sale of insurance products was up by 5%, where we saw a continued strong contribution from non-guaranteed pensions, also as Kerstin pointed to. Moving on to costs, which were stable quarter on quarter. We noted lower marketing, travel and training costs, all in line with lower activity in the quarter. IT costs were down, also in line with a higher activity related to IT costs in the second quarter due to the integration of S-Banken. The increase in employers national insurance as well as ordinary salaries are related to the annual salary increase, which is now being implemented. Cost effectiveness is always high on our agenda, and we continue to actively manage our cost base through increased automation, but also through the recently announced reduction of 500 full time employees. Now over to the portfolio quality, which remains robust and well diversified, with 99.2% of the portfolio in stage one and two. For personal customers, which accounts for a bit more than 50% of our portfolio, remains strong. We are not seeing any negative developments or movements in that portfolio. For business customers Norway, impairment provisions totaled 147. The portfolio is robust and well diversified. There are no structural changes in the portfolio or general negative migration to note, but these are customer specific situations in stage three. For LCI, we noted net reversals of 12 million. The portfolio is robust and well diversified and shows no signs of structural changes. We remain comfortable with the credit quality in the portfolio, but please bear in mind that losses will vary from quarter to quarter. Now moving on to capital. Our core tier 1 capital remains strong at 19%, with a 220 basis points headroom to the regulatory expectation. The core tier 1 capital ratio was positively impacted by profit generation, but this was offset by increased risk exposure amount from volume growth as well as currency effects. Leverage ratio remains strong at 6.3%, well above the regulatory requirement of 3%. With a core tier 1 capital ratio of 19% and a leverage ratio of 6.3%, our capital position remains strong and enables us to continue to deliver on our dividend policy as well as make the acquisition of Carnegie. Summing up. We deliver a strong set of results across the board. Return on equity came in at 18.9%, earnings per share at 7.83, an increase of 14.6 from the previous quarter. Our cost income ratio is at 32.5%. And with that, I would like to thank you for your attention and open up for a Q&A, as well as extending an invitation to our Capital Markets Day on the 19th of November in London.