DNB Bank ASA

Good morning to everyone watching the stream and to everyone here in Oslo. We are going to present the results from D&B's first quarter, a quarter that will be remembered for lots of different reasons, but above all for the fine results of D&B Group. We will take questions after this session, and there will be a possibility for journalists to ask questions to management after this session as well. Our CEO Kerstin Bråten and CFO Ida Lerner are ready to present the numbers. So Kerstin, please go ahead.

Thank you so much, Even, and a warm welcome to all of you who are here and also you following us online. We are delivering today a set of numbers that demonstrates a strong start to the year, reflecting a robust and active Norwegian economy with a high activity level across all our customer segments. Among the many key events in this quarter were the legal close of the Carnegie transaction that happened in March, and the March number for Carnegie is also included in the numbers that we report today. Last week, the General Assembly approved the dividend for 2024. So this Friday, 25 billion kroners will be paid out to our shareholders, and we are always motivated to see that close to half of this 12 billion kroners will go back to the Norwegian society through the Sparbankstiftelsen DNB and the Minister of Affairs. No doubt, the uncertainty towards the end of the quarter related to the world economy increased substantially and impacted the markets through a higher volatility to the end of the quarter and the beginning of the second quarter. We are well equipped to handle and maneuver in a more uncertain environment. We are one of the most robust and best capitalized banks in Europe, and we are operating in one of the most resilient economies in the world. We are furthermore humbled to see that these numbers reflect that an increasing number of customers trust us with their business. And I would like to give a big shout out to the team who work relentlessly every day to create value and support these customers and earn their trust. In terms of numbers, return on equity for the quarter comes in at 15.9%. This is well above the targeted level of minimum 14%. This reflects increased earnings across all key revenue lines and a cost control and robust quality across the business. NII is down 1.8% compared to the fourth quarter, where a volume growth is more than offset by two fewer interest days in the quarter. It's, however, up by 5.7% compared to the same quarter last year. We see volume growth both in loans and deposits for this quarter. Net fees and commissions, we deliver an all-time high first quarter results, up close to 30% compared to the same quarter last year, and it's a broad representation of strong performance across product areas, but investment banking and real estate broking are the two strongest areas this quarter. Carnegie revenue came in with the March numbers and represent 398 million across net fees and commissions in total. But even without the Carnegie numbers, it's still an all time high fee and commission income in a first quarter ever. The portfolio remains very robust and well diversified, 99.3% in low risk, and we book impairment provisions of 410 million for the quarter. Very strong capital generation from these results has offset parts of the Carnegie transaction, which has been deducted with 120 basis points in our core capital ratio, but capital remains strong at 18.5% for the core equity tier one ratio. This is a headroom by 180 basis points down to the expected and required level by the Norwegian FSA. The strong capitalization enables us to amply support and work with our customers in the time ahead, and we further also plan to send an application to the Norwegian FSA this week to apply for an approval to buy back up to 1% of the outstanding shares. 1% of the outstanding shares would represent 40 basis points on our capital ratio. The strong start to the year is visible also in the earnings per share, which are 7.04 for the quarter, up by 8.6% from the same quarter last year. The outlook for the Norwegian economy remains robust, and the estimate for the GDP growth this year is 1.5%, which is up from the 0.6% last year. Main drivers for increased economic growth are related to increased consumption and increased construction activity. Unemployment remains, however, the most important factor for financial and social health in the economy, and unemployment has remained low throughout the previous years and is also expected to remain low around 2% in the coming period. Core inflation has come down, but has proven to be stickier than most economists have expected, and the central bank chose to keep the policy rate unchanged at 4.5% during their meeting in March. Wage settlement and wage growth is expected in the area of 4.4-4.5% this year, representing yet another year where we expect real wage growth and increased disposable income for consumers. No doubt, the level of uncertainty in the world economy and the outlook has increased throughout the quarter. And again, we saw increased volatility across markets. Despite this and the fact that the base case for the Norwegian economy remains very sound economic growth, There are also built-in stabilizers in the Norwegian economy that enables this economy to offset and take initiatives if the development should prove to be somewhat weaker. First of all, the rate policy already mentioned, with the key policy rate of 4.5%. No rate hike in March, but we do expect there to be two rate cuts. Apologies. We do expect there to be two rate cuts during the second half of this year, but rates to remain at a higher level than surrounding countries. The currency has weakened, but the weakening of the currency also represents an increased competitiveness for our manufacturing industries and in some ways then representing a natural hedge in more turbulent periods. And last but not least, the Norwegian economy is one of the wealthiest in the world, with more than 18,000 billion kronors in the Norwegian sovereign wealth fund. And both the central bank and the government has a proven ability, but has also proven the willingness to put these stabilisers to work if that becomes necessary to the economy. So altogether, we continue to believe that this represents a very sound backdrop for our business going forward. I mentioned the legal close of Carnegie that took place in March. Next week will be the official launch of the joint investment bank DNB Carnegie, a merger of equals forming the foundation for a Nordic powerhouse in both investment banking and wealth management. The complementarity of this business and the strengthening of the competitive offering has been further confirmed during the earlier days of the integration. And we maintain our outlook and expectations of revenue synergies for our joint efforts in this area of 800 million kroner per year to be realized in the coming two to three year period. We are very excited about this venture and already see that customers really appreciate the improved offering that we are able to deliver. And we have many strong positions and number one positions across the Nordic businesses in both investment banking and asset management. A few highlights on each of the segments are three customer segments that represent not equal but similar parts of the revenue and the profits in the business. For the personal customer segments, profits are up 1.6 billion from the fourth quarter, 8% if we compare to last year. The clear highlights in this quarter has been very high activity in the mortgage market as well as the real estate brokerage sector. And we have a record demand and a record inventory of finance certificates, which are 30% higher going into the second quarter than they were going into the first quarter. Corporate customers, Norway. Again, a very solid development across SME customers where the underlying growth is 1.5% on the lending side for the quarter. I would also like to emphasize in this area the strong growth in other income. 13% increased revenue stemming from other products than deposits and loans. further demonstrating the increased cooperation with investment banking across different products towards these customers, as well as a continued growth in defined pension activity with this customer group. Large corporates, pre-tax profits are down compared to fourth quarter by 10%, with the fourth quarter being a seasonally very high activity quarter for fees and commissions, but up 20% if we compare to the first quarter last year. Volume development more stable this quarter after a very strong growth in the second half last year, but a record growth in revenue from other areas than lending and deposits, and a material increase in the share of this revenue compared to the total revenue. the revenue from other areas than lending and deposit now represents 35% of the revenue, up from 30% during the same period last year, and this is by only including one month of the Carnegie revenue in the month of March. So, as you can see, a clearly and broad improved and good performance across all of the business and our customer segments. And with that, I will leave it to Ida to take you through more of the details.

Thank you, Kerstin, and a warm welcome to everyone here in the room and also listening in online. I would now like to turn in more detail to the quarterly results. We noted continued good momentum in all customer segments, with FX-adjusted loan growth of 0.5%. Unadjusted, this was down by 0.3%, driven by the FX effects we saw particularly in large corporates. We note that Cheston said a continued strong growth in the personal customer segments, where lending volumes were up by 0.8%. Corporate customer Norway noted a volume growth in loans of 0.5%, where continued low activity, in particular in the real estate and construction industries, were counteracted by a stronger growth across the other parts of the small and medium-sized enterprises. Large corporates and international noted a solid quarter with stable volumes compared to a very high level we saw in the fourth quarter, and FX-adjusted volumes were up by 0.1%. Deposit volumes were up by 3.8% in the quarter, unadjusted up 2.1%. Personal customers saw an uptake of 4.1%, corporate customers by 2.3%, and in large corporate and international, deposits were up by 4.7%. We continue to maintain a strong deposit-to-loan ratio, and this quarter, this ends up at 76.1%. The net interest margin was down by four basis points, now ending up at 190 basis points. The reduction reflects increased average volumes in the quarter and in particularly a relatively larger share of increase in deposit volumes. The combined spreads are down by three basis points, reflecting product mix effects and continued strong but rational competition in the Norwegian market. NII was down by 308 million in the quarter, positively impacted by profitable loan volumes and volumes in deposits, but offset by two fewer interest days in the quarter. The reduction in money market rates affected interest on equity as well as spreads. The latter is also affected by some portfolio and product mix effects in the quarter. The decreased treasury-related NII reflect the high positive contribution that we saw in the fourth quarter related to liquidity management. Our fee platform is strong and well diversified. The results represent, as Kerstin said, an all-time high results when combining the results with the Carnegie inclusion, up 29.5%, but also when taking out the Carnegie transaction, we see a record high result in the commission and fee line, up 15% year over year. In addition to what you can see on this slide, there is a continued strong contribution from FICC related to strong customer activity also in this area. When looking more specifically onto commission and fees, we're happy to see an increased activity in the real estate market. and particularly in the secondary real estate market, where we see a strong uptick, resulting in a 28% higher income stemming from real estate brokerage. Investment banking was up 83% from the corresponding quarter last year, with record high income stemming from high yield and investment grade bonds, but also a good momentum in the M&A part of the business. As Kerstin mentioned, we see positive prospects in the combination of D&B and Carnegie and are really looking forward to seeing the results of that in the coming quarters. Carnegie contributes with 244 million in this line, representing their March numbers. Asset management and custodial services was up by 44% from the first quarter in 2024. We continue to see that the majority of our customers stick to their long-term savings schemes. Asset under management in the quarter was down by 47 billion, driven by reduced market values. We noted some net outflow towards the end of the quarter from retail customers, which was offset by an increased net inflow from institutional customers, leaving the positive net inflow at 0.8 billion in the quarter. We note continued strong demand for trade finance products, and as you can see from the slide, guarantee commissions are up by 12%. Money transfer and banking services was down by 13%, but increased income stemming from the travel activity was somewhat offset by reduced income from banking services. Sale of insurance product was up by 19%, driven by continued strong development, particularly in the defined contribution pension area. Operating expenses are seasonally lower in the first quarter compared to the fourth quarter. But costs in this quarter also shows effects of the announced downsizing of support functions as personnel expenses are down quarter on quarter. Important to note in this quarter is also that the March numbers for Carnegie is included, adding 318 million to our cost base. We estimate a full year one-off cost associated with the Carnegie transaction of approximately 250 million in 2025, of which 77 million was taken in the first quarter. Moving on to portfolio quality, which remains robust and well diversified, with 99.3% of the portfolio in stage one and two. For personal customers, representing approximately 50% of our exposure at default, The portfolio remains strong. We're not seeing any negative developments in the portfolio, if anything, the opposite. For corporate customers, Norway and LCI, impairment provision total 119 million and 225 million respectively. The corporate portfolio remains solid and well diversified across geographies as well as industries, with no systematic change, negative migration within any segment or industry. We remain comfortable with our credit portfolio, but please bear in mind that losses will vary from quarter to quarter. Let's now proceed to capital. The core tier one capital ratio remains strong at 18.5%, with 180 basis points above the regulatory expectation. The core tier one capital ratio was positively impacted by 40 basis points from profitability, as well as an ordinary dividend from D&B Life Insurance of 1.5 billion in the quarter. The Carnegie transaction reduced the core T1 capital ratio by 120 basis points, well in line with what we have communicated previously. Leverage ratio remains strong at 6%, well above the regulatory requirement of 3%. We have now received approval from the NFSA to move the S-Banken portfolio from standard approach to IRB. This will be done in the second quarter alongside the implementation of CRR3. These two effects in combination will have a neutral effect on the core T1 capital ratio. The increased risk weight flaws on residential real estate being implemented on the 1st of July 2025 will have an estimated negative effect on the quarter one capital ratio of approximately 60 basis points now implemented in the third quarter. The Board of Directors has, as Kerstin said, received an authorization by the annual General Assembly to buy back up to 3.5% of outstanding shares. We will intend to send in an application later on this week for a share buyback of up to 1%. And we'll come back to you once that has been approved. With a core tier one capital ratio of 18.5%, a leverage ratio of 6%, our capital position remains strong. We are very well equipped to handle the announced regulatory changes, but also at the same time to support our customers in the times ahead, as well as standing up to our dividend policy ahead. So summing up. We are delivering a strong set of results in the first quarter, reflected in the key numbers you see on this slide. Return on equity came in at 15.9%, earnings per share at 7.04%, an increase of 8.6% from the corresponding quarter last year, cost-income ratio at 36.1%, a strong set of results. And with that, I would like to thank you for your attention, and we are now opening up for questions.