DNB Bank (OTCPK:DNBB.Y) Update Summary Company Overview - **Company**: DNB Bank - **Date of Briefing**: January 07, 2026 Key Points Financial Performance - **Corporate Growth**: Reported at 1.8% for the fourth quarter [1] - **Net Interest Income (NII)**: Expected to be negatively impacted by regulatory changes related to tax accounts in Norway, with an anticipated annual NII impact of approximately 300 million NOK [2] - **Technical Correction**: A one-off technical correction of approximately negative 80 million NOK in other NII is expected in Q4 [2] Monetary Policy and Interest Rates - **Policy Rate Changes**: The central bank cut the key policy rate by 25 basis points twice, first from 450 to 425 in June and then again in September [1][2] - **Future Expectations**: DNB Carnegie anticipates one additional 25 basis points cut to the key policy rate in June, reaching a terminal level of 3.75% [2] Capital and Ratios - **CT1 Ratio**: Reported at 17.9%, exceeding the NFSA's expected level of 16.6% [3] - **FX Sensitivity**: A 10% change in FX results in approximately a 20 basis points change in the CT1 ratio [3] - **Pillar 2 Guidance**: Reduced by 25 basis points from 1.25% to 1% effective December 31, 2025 [3] Operational Risk and Costs - **Operational Risk REA Volume**: Expected to increase due to higher income over the last years, with adjustments made annually [4] - **Non-Recurring Costs**: Anticipated integration costs related to Carnegie of NOK 250 million for the full year 2025, with NOK 200 million incurred year to date [6] - **Salary Inflation**: Expected to be 4.8% for the year 2025 [6] Asset Quality - **Monitoring**: The asset quality remains stable, with no systemic areas of concern identified in the portfolio [7][8] - **Impairments**: Expected to vary based on macroeconomic factors and company-specific events [7] Market Activity - **Net Commission and Fees**: Higher activity levels typically observed in Q4 compared to Q3, positively impacting fee levels [5] - **Financial Instruments**: Seasonally higher activity in DNB Carnegie's FICC, with positive mark-to-market effects reported [5] Miscellaneous - **Pension Expenses**: Normalized pension expenses expected to be approximately 500 million NOK per quarter [7] - **Consensus Estimates**: Reminder for submission of consensus estimates by January 9, 2026 [8]

Core Viewpoint - The Federal Reserve is expected to announce a quarter-point cut in its policy rate for the second consecutive month, with the Fed Fund futures market indicating a 98% probability of this outcome [1]. Group 1 - The Fed Fund futures market reflects a high likelihood of a quarter-point rate cut, suggesting strong market expectations for monetary easing [1].

Core Insights - The Federal Reserve has cut the policy rate during the last meeting and has committed to two additional cuts by the end of 2025 despite inflation remaining above the target for several years [1] Group 1 - The Fed's recent decision indicates a proactive approach to monetary policy in response to economic conditions [1] - The commitment to further rate cuts suggests a long-term strategy to stimulate economic growth [1] - The persistence of inflation above target levels raises questions about the effectiveness of these rate cuts [1]