DNB Bank ASA

Good morning, everyone. Welcome to the presentation of the first quarter results for D&B. And also welcome to everyone following the stream. Just for information, the emergency exits are in the front and also in the back, and there are no planned drills this morning. Spring is here, the sun is shining, and we are really eager to present the results for you. CEO Kerstin Broten will kick off, and then our CFO, Rasmus Figgenskau, will continue with the details. And there will be time for questions afterwards. Kerstin, the floor is yours.

Thank you so much, Even. And a particularly warm welcome, we can say, since it's spring, as Even said, and the sun outside is shining. Yes. That nonetheless does not mean that there are calm waters around us in the world, because this quarter the turbulence around geopolitics has continued, certainly with the increasing conflict and the war in the Middle East. This is something that has led to high and very volatile energy prices, and the level of uncertainty is, as we have seen now for several quarters and years, higher than what we have been used to. Despite the geopolitical backdrop and despite energy prices being higher, the market reactions overall we would qualify as relatively benign. And the Norwegian economy continues to be resilient in this environment. Business activity overall across the Nordic markets, which does represent the majority of our activity, we would consider at healthy levels, and the Norwegian households are robust. So despite a turbulent environment, we are relentless in our focus, which remains with our customers, focusing on giving them Good customer experiences contributing with value creation and focus on the business short term and longer term. As always, I would like to start also with the customer and demonstrate how we are working towards our mission, which is really to simplify life and help our customers prosper. In terms of simplification, we have this quarter launched a new equity trading platform in our digital savings app, Skade. This was launched in March, and already in the month of March, we saw that one out of four trades in shares were actually done on the platform. And I don't think we can get better feedback from our customers than that, that this is actually contributing both to simplicity and efficiency. We continue to see that our customers are putting their trust in us with their savings and their investments, and this is demonstrated by a record net inflow in our asset management business this quarter of 20 billion kroner. Making it easier for the young children and adolescents to become customers is also something that we've done this quarter. Now young people below the age of 18 can become a customer with D&B in less than two minutes. For our S-Bunkin customers in chat, we have introduced an all-generative AI chatbot, meaning it's not a chatbot that we have trained. It trains itself, and this has rapidly taken over 75% of the responses in chat and inquiries from our customers in S-Bunkins with very good customer satisfaction. Across large corporates and BNB Carnegie, we continue to see a confirmation of our strengthened position and the offering. First, from Prospera in the grand total survey for Norway, where we are qualified as the leading bank in terms of customer satisfaction. And for BNB Carnegie this quarter in equities, where individually we are number one in each of the four Nordic countries and also with the overall number one position. And as always, I am very proud of the efforts that our team put in every day for our customers. On to the results. The return on equity comes in at 14% this quarter, 15.5% on a rolling 12-month basis. This does represent a solid contribution from all our customer segments and also the macroeconomic development with lower rates than we saw this time last year. We do see profitable growth both in loans and deposits, a stronger development in deposits than loans this quarter. And the growth is offset by repricing effects and also a fewer number of interest days in the first quarter. And NII as a result of this is down by 5.4% compared to the previous quarter. Net commission and fees is up by 18%. Contributions materially from all various product areas. The strong point again I would highlight is asset management where We see a strong net inflow. We see assets under management grow despite values coming down. And we also see a record flow for the past 12-month period. The portfolio in a turbulent environment, again, remains very robust and well diversified. We do not see any structural changes or any negative migration in the portfolio as such. We do book impairments of 644 million in the quarter, not in all its entirety, but primarily related to customer-specific events and no systematic development in the portfolio. Capital position remains solid, 18.1%. Core equity, Tier 1 ratio, 170 basis points headroom to the required and expected level. And the strong earnings per share, we believe, was 6.5 kroner in the first quarter. The Norwegian economy is impacted by what goes on around us in the world. We are an open economy. We are an economy that trades with others. As a net exporter of oil and gas, we are partly benefiting also from higher energy prices and somewhat less impacted by inflation stemming from higher energy prices than other countries. But we emphasize that there is an increased uncertainty in the environment around us. This has led to growth estimates for the year coming somewhat down. but to what we would still qualify as healthy levels with an expected GDP growth in the mainland economy of 1.4% this year and 0.9% next year. Unemployment is something that we follow very clearly and talk to you about every quarter. Still a stable level. We would qualify it with 2.1% and we expect it to stay low and relatively stable in the time ahead of us. We do expect yet again this year to see real wage growth for consumers. This leads to increases in disposable income, and it does support consumption as a key driver for economic growth. Given a development in inflation that has been more sticky than expected, I think, by both the Norwegian Central Bank and markets, we have seen a shift in the outlook for interest rates during this quarter, both in the messaging from the central bank as well as in the messaging from our own team in the NB Carnegie. The outlook for rates is now an expectation that we will see two rate increases this year, each by 25 basis points up to the level of 4.5% for the key policy rate, and rates are expected to come down by 10%. the similar amount in the year 2027 and stabilize around 4%. So again, in an uncertain world, the robustness of the Norwegian economy continues to be demonstrated as well as the resilience in households. And we do qualify this as a very healthy environment for us to run a sustainable business in. A few highlights on the customer segments, and I would underline that we continue to see a very solid underlying performance across all of our customer segments in a competitive environment. The growth platform we've talked about in Norway as well as outside of Norway continues to deliver, and we see growth. strongest growth on the lending side in large corporates. And in this quarter, the nominal growth in large corporates is offset by a somewhat stronger Norwegian kronor. We see a very healthy deposit growth across personal customers as well as corporate customers in Norway. In large corporates, we are more, I would call it opportunistic. We qualify pricing towards the cost of funding in treasury and the volumes develop accordingly. For personal customers, we see that the activity in the housing market is somewhat more muted this quarter, but I would highlight the very strong results that we see in our brokerage business and personal customers. I would like to highlight the pace of innovation that we experience from the team in personal customers. as well as a strong cost control development in this area. In Corporate Customers Norway last quarter we talked to you about some larger transactions that were closed towards the end of the quarter in commercial real estate and the plan to syndicate and distribute these. This has been done successfully both in terms of syndicating to other banks as well as taking out parts of the volume in the bond market. This has impacted volumes along a more stable development of volumes also across the SME market, and volumes are slightly down in Corporate Customers Norway. We do note a strong growth in other income in Corporate Customers Norway compared to the same quarter last year, and this reflects not only an increased level of activity with D&B Carnegie, but also the systematic effort over time to work broadly on cross-selling in this area. Large corporates that delivers the strongest growth this quarter comes in at 2.3 for the quarter, 9.1 if we look at the year overall currency adjusted. We are working and making progress in terms of strengthening the team in Sweden and we are getting positive feedback from that process and also how the cooperation is developing with the team across the MB Carnegie, and we see that half of the growth that we deliver is outside of Norway. And again, I reiterate the robustness and the strong quality of the portfolio, and that we do not see other systematic risk outside of customer-specific situations. So all in all, a robust development we see for our customer segments. We continue to talk about our activity across D&B Carnegie and across wealth management as the key growth drivers in our business going forward. And we saw a very strong start to the year that has been somewhat impacted by more turbulence towards the month of March. But despite this, we continue to see that the level of revenue grows both in D&B Carnegie and our wealth management business. One year now after closing the Carnegie transaction, the integration is progressing well, and we continue to reap the benefits from having an improved and more competitive and broader offering towards our customers. We saw a very strong talk to the ear again across all product areas, I would say, in investment banking. With the conflict in the Middle East, we have seen and experienced that some of our clients naturally have decided to postpone some of their investment activity and activity related to to stock listing and others. But we have not yet seen this leading to any cancellations of any plans. So the pipeline in the business remains strong going into the second quarter. On asset management, again, I would highlight the strong point being net flows. 20 billion for the quarter, 65 billion for the year. This last quarter, more than 5 billion stems from the retail market. And this is an effort we're systematically working on to grow that part of the business as it's more sticky, more recurring. And we have seen that customers are changing their positions, but they are more comfortable remaining in their investments in the markets compared to what we saw during 2020. the turbulence that stemmed from Liberation Day during 2025. So all in all, a robust quarter. And with that, I will hand over to my excellent CFO, Rasmus, who will take it from here.

Thank you, Justin. I will now take you through the Q1 results in more detail. And please keep in mind that for 2025, Carnegie's results were included in one month of the first quarter. We note continued high activity across all segments, with FX-adjusted loan growth up 0.3%. Looking at the retail personal customer segment, the growth is up by 0.2%. As mentioned by Justin, and as mentioned last quarter to the market, the growth in the commercial real estate had a planned syndication in Q1, and has been taken out with other banks as well as in the bond market, and thus leading to a volume reduction of 1.2%. Within the large corporate area, FX adjusted volumes were up by 2.3%, driven by increasing volumes across industries and across geographies, mainly in low-risk customers. And we see that more than 50% of the growth comes from our international growth platform. Currency-adjusted deposits were up by 2.6%, driven by posted development, both in the personal customer segment and corporate customers in Norway. we maintain a strong deposit-to-loan ratio within the customer segment of 73.8%. As in almost every first quarter, activity is slower. This naturally impacts net interest margin, which was down by 7 basis points, ending at 174 basis points. The reduction reflects narrowed combined spreads and other NII not included in the customer segments. Combined spreads in the customer segments were down by five basis points, driven by repricing effects, product portfolio mix effects, and margin pressure and continued strong competition. NII is down 5.4% in the quarter. We note that spreads are down by $449 million, where roughly a third stems from the full effects of the most recent repricing in November. Roughly a third comes from portfolio and product mix effects, and slightly less than a third comes from stronger competition. Higher average volumes during the quarter increased, offset this with 231 million, and then having a negative FX effect of 86 million. The reduction of two fewer interest days in the quarter came in at 248 million. Amortization effects and fees are down by 176 million, reflecting lower activity as mentioned in the quarter. No treasury effects in other NII of roughly 150 million. Moving on to commission and fees. Our fee platform is strong and well diversified, in total up 18% from the corresponding quarter last year. Real estate broking was up 3%, reflecting strong performance in a slower market. where fewer properties were sold compared to Q1 last year. Investment banking services was up by 38%. We note strong development despite of market uncertainties. Our pipeline remains strong, as mentioned by Justin, noting though that transaction in recent months have been postponed. Asset management and custodial services was up by 34%. And assets under management were down 1.2% due to high volatility and negative market developments. However, and more importantly, we noted the positive net flow of 20.4 billion this quarter, a record high, but also a record high when looking at the last 12 months of 65 billion, well balanced between the retail and institutional investors. Money transfer and banking services were down by 17%. We note high customer activity offset by costs related to payment services and use of credit insurance related to corporate exposures, which is part of our OAD model, driving profitability for the group as a whole. Sale of insurance products was up by 19%. supported by positive development from the non-life insurance commissions and continued strong income from defined contribution in our life insurance business. In addition to what can be seen on this slide, we also note positive momentum in other income with strong results from our life insurance company, Dan Believe, and our non-life insurance provider, Femtip. Operating expenses are down by 920 million compared to Q4, of which 51 million is currency effect. The reduction reflects seasonally lower activity, as well as a persistent cost culture to drive efficiency. Activity is exemplified by the decrease in expenses related to variable salaries and IT, and the non-recurring effects booked last quarter of 200 million. Low return on the closed defined benefit pension scheme is related to market development contribution, and that contributes to lower costs this quarter. The scheme is partly hedged and reflected in our financial instruments. Due to decisionality, the second quarter generally carries higher activity-related costs, compared to the first quarter, as well as the effect from the annual salary increases, adjustments from May 1st. Now, moving on to portfolio quality, which remains robust and well diversified, with 99.4% being in stages 1 and 2. In the personal customers portfolio, which accounts for approximately 50% of our exposure, remains strong. We continue to note record low requests for installment holidays and fewer loans with interest only compared to last quarter. Impairment provisions in the personal customer segment is affected by a model adjustment on inputs on consumer finance and the underlying portfolio remains solid. For the corporate customer, impairments totaled 556 million. The portfolio remains robust and well diversified across industries and geographies. There's no structural change to our portfolio or general negative migration to note. The impairments in stage three are related to customer-specific situations, and these are typically exposures we've been following over time. And most are industries that have been challenging for some time, such as construction. We remain comfortable with the quality of our portfolio. Now, moving over to capital. Our CT1 ratio remains strong at 18.1%, with 170 basis point headroom to the regulatory expectations. It was positively affected by the profit generation in the quarter, as well as ordinary dividend of 1.9 billion from D&D. In line with previous years, the AGM on Tuesday gave the board directors authority to buy back up to 3% of outstanding shares, and an application has been sent to the FSA for approval. The leverage ratio remains strong at 6.5%, well above the regulatory requirements of 3%, and combined with a CT1 ratio of 18.1, our capital position remains strong and enables us to continue to deliver on our dividend policy and continue to support our customers. Summing up, we deliver a strong set of results in the first quarter, having return on equity coming in at 14%, cost-income ratio of 38.7, and an earnings per share of 6.5 kroners. We also mentioned that for 2026, tax rate is expected to be 22%, but our long-term guiding remains unchanged at 23%. With that, I thank you for your attention, and we open up for questions.

Thank you so much, Rasmus and Kerstin. We have a few microphones in Zoom. Please, yes, right away from Arctic.

Go ahead. Thank you, and good morning. A couple of questions from me. Just on the, I could touch upon the margin side, just on the competitive picture on retail in particular. Has it changed anything recently, or is it kind of still the same? pressure? And is there anything similar on the corporate side? That's the first question. And then a question on funding. So, monthly market rates have come up quite significantly in the last few weeks. On the funding side, you've already got the rate hike in your funding cost, I guess, and spreads have also widened somewhat. So just wondering, are you able to mitigate any of that on pricing on the asset side? I guess repricing mortgages will be difficult until we get an actual rate hike, but have you done anything on deposits? And then the third one, just on buybacks, have you sent an application to the FSA? And if you have, when would be an expected answer?

Thank you, Roy. I can do the first and the two following. Competition is fierce. I would say it's gradually intensifying. We've seen that over the past year. it does reflect that there is ample capacity in the market that surpasses the credit demand overall. It is fair in personal customers. It's definitely fair also in corporate customers in Norway, including in the commercial real estate sector that we usually see when there is capital looking for employment across the market. Still, we are... Very pleased to see that there is a high activity and interest coming into the business as such. In particular, we are focusing on our position towards young people. We have 12,000 young people buying their first home during the course of last year. We continue to see stable to growing volumes even in a competitive market. For us, it's a demonstration of the performance in our team overall, and we are able to continue to grow at sustainable levels, and that continues to be a priority for us, and it will be. But overall, the market is impacted by competition.

Very good. On the funding side, of course, when there's volatility, I'm very happy that we have... a strong set of treasury team that plans ahead. So for us, we are not affected by the day-to-day developments in that funding. And I will not go into detail of when we move in the market, but we are well funded. And we, of course, when the whole key policy, well, when the market is moved in total, we are, of course, affected by that. And then that will feed on to our customers. But the volatility that you are referring to, we are finding our way through it, so to speak. When it comes to the FSA application, we have applied similar to previous years for 1% and we'll refer to the market when we have their answer.

As Rasmus is saying very correctly, we have our team has funded a bit early in terms of expecting market development to be more volatile but do keep in mind that relative to the NIBOR and the money market rate our position is more or less stable and this is in view of how our assets and liability size are matched in terms of margin related exposure to customer versus what we are funding in the third party market so there is a slight impact from rate movement but really overall I think you should see that more or less stable and then What matters beyond that is, of course, the level of spreads. And coming into the year, we saw the lowest risk premiums that we've seen in a long time. They have come out somewhat, but not to a very large extent. And our goal is always to fund ourselves better than our peers. That increases our competitiveness towards customers, and we continue to see that we get very, very competitive funding.

Thank you very much. Thank you. Herman Sahl from Pareto. Thank you. Just following up on competition, could you say something about what kind of peers are driving competition in Norway corporate segment specifically? It seems like both larger savings banks and your Nordic peers have stepped up a bit.

I think we have a clear principle that we'd rather talk about our performance and not so much specifically about others. I think what we can contribute and shed light on is that it's a broad specter of players that are active in the market. Changes that have been made to capital structures that have increased improved the position of standard banks, as a more general example, has taken an impact. We can see that that has made that category of banks more competitive. Otherwise, there is a larger number of players who are very actively driving competition in the markets.

And then just on some of the core banking fees, I think you mentioned some margin changes in guaranteed on the slides and money transfer fees as well. Is there something structural we should bear in mind there, or is it mixed effects?

It's an element impacting over the past four or five quarters or so where we have more actively engaged in ensuring part of the exposure that we provide for some of our clients in larger corporates. So it's an added tool in the toolbox to originate and distribute. So when we look at that on a transaction-per-transaction basis, the return on the transaction on the customer and then to the group is improved because we have less exposure. But the cost related to this does appear in the commission and fee part of the book and has an impact there.

Thank you. Thank you.

Thomas Hansen, S&M. Good morning. First, a question to commercial real estate. I know that the hope for interest rate declines have diminished and the rates are going up. One could imagine that that impacts the cash flow and the liquidity for these companies. So how do you look at commercial real estate?

We continue to remain comfortable with... commercial real estate Thomas but as you know of course rates are very important in that sector of activity and we have followed it closely and I would say since rates topping out the last time around there has been a restructuring and a shift in values that now is more or less two years back in time where some players that needed to reposition have positioned We are now going back to interest rate levels we were at not too long ago, at least that's the expectation in the market. We do not see this as a particularly concerning factor related to our commercial real estate exposure overall. Keep in mind that it is 10% of our book and it's limited to that. 72% of the exposure is in low-risk customers. It is a diversified exposure across geographies, but mainly concentrated in the larger cities in Norway, and it's diversified across offices, across hotels, across shopping malls and others, and there is no particular concern that we would like to highlight in view of rates coming somewhat back up again.

Okay, thank you. And just second question. On your latest CMD, you said you were targeting 3 billion NOx in gross cost-cutting. Now that more than one year has passed, how are you according to this target? Should we expect it to be sort of linear over the planning period?

So we are progressing according to plan on that. And we are, as our cost slide represented, we are working adamantly. on the cost efficiency in the bank and we see numerous specific targets areas that we're working on. We're not going into detail on that except that we are progressing according to that.

But I think roughly we can share that we feel that we are more or less on track. Our cost income ratio this quarter is somewhat north of 38 so it's higher than what you've seen in previous quarter. This isn't expected impact from the Carnegie acquisition. We have bought a meaningful piece of business that has a higher cost income component, but an improved return for the business overall. And of course, we acknowledge that it's more difficult for you to follow gross cost-saving initiatives, but you have seen us taking several initiatives in terms of restructuring and making changements to our staff. We are working in areas such as digitization and automation, but I would also add innovation in terms of simplifying and reinventing value chains. And of course, AI is a very important tool for us in this area. Also, simplifying business, increasing the magnitude of straight through processing in more complex processes. I talked about a couple of examples in simplifying life for our customers and we like doing that, but of course simplifying life for customers also means improved efficiency for us. So we are on plan. It's not necessarily linear. Of course, we would also see what can be done with AI. That is a moving picture. But I think it's hard to give you sort of any guidance in terms of how you will see it being linear or not.

Thank you. Thank you. Rune, any questions from the online audience? Yes, if we can pass the mic to Rune.

We have a question from Marcus Sandgren from Kepperschevro. Nordea recently highlighted that Norwegian saving banks are currently competing quite aggressively, particularly on pricing. Are you seeing and sharing this view? And how is this affecting your ability to grow volumes without sacrificing margins? More specifically, how should we think about the trade-off between defending market share and protecting net interest margin in the current environment?

Thank you. I think we've touched upon parts of this question already, and it is a very important question. We recognize that there is competition in the markets. I don't think we would limit it to a specific category of banks. I think we see it more broadly. But we also see that our team continues to perform and that we are able to continue to do profitable and sustainable business. Our growth platform stems across all of our customer segments. This is part of the strength that we have highlighted both in Norway and outside of Norway and across the sectors we will continue to prioritize growth and I think we have proven that In periods, if growth is somewhat slower in Norway, we are able to leverage other parts of that growth platform to deliver profitable growth in the area of 3% to 4%, which we continue to target. Growth in the previous 12-month period has been 3.5% in terms of lending, non-currency adjusted. Currency adjusted, I believe it has been somewhat stronger. And we have seen... A growth in personal customers of 1.6%. We have seen in corporate customers 5.6% and then large corporates 5% non-currency adjusted for the year as a whole. And I think this demonstrates also in what has been a competitive market our ability to deliver growth. But priority remains very firm also on profitability.

Thank you. Any more questions for Rune? I think we will close the session if I don't see any more hands. Management will be available for members of the press, like we always are, in the couch area afterwards. And I will wish you all a very nice Thursday.