DNB Bank (OTCPK:DNBB.Y) Update / Briefing Transcript

Summary of DNB Bank (OTCPK:DNBB.Y) Pre-Close Call - October 07, 2025 Industry Overview - The call pertains to the banking industry, specifically focusing on DNB Bank's performance and outlook for the third quarter of 2025. Key Points and Arguments Net Interest Income (NII) - There is an additional interest day in Q3 compared to Q2, expected to positively impact NII by approximately NOK 130 million [1] - Q2 lending volume growth was reported at 1.7% when adjusted for foreign exchange [1] Credit Demand and Economic Conditions - Activity levels are typically lower in Q3, particularly in the corporate sector due to summer holidays [2] - Statistics Norway indicates stable credit demand, with household growth at 4.2% and corporate growth at 2% over the last 12 months [2] - The Norwegian Krone (NOK) has strengthened against the U.S. dollar, which is anticipated to negatively affect NII [2] Policy Rate Changes - The central bank cut the key policy rate by 25 basis points (bps) in June and again in September, with a further cut expected in June 2026, leading to a terminal rate of 3.75% [3] - Customer repricing of loans and deposits will reflect these cuts, with adjustments taking effect from August 25 and November 18 [2][3] Capital and CET1 Ratio - DNB Bank reported a Common Equity Tier 1 (CET1) ratio of 18.3%, significantly above the expected level of 16.5% [3] - A higher risk weight floor on mortgages is expected to negatively impact CET1 by 60 bps [3] - A 10% change in foreign exchange rates results in approximately a 20 bps change in the CET1 ratio [4] Non-Recurring Costs and Financial Performance - Non-recurring integration costs related to Carnegie are expected to total NOK 250 million for 2025, with NOK 170 million incurred year-to-date [6] - Normalized pension expenses are projected at approximately NOK 500 million per quarter [6] - The macro team anticipates salary inflation in Norway to be around 4.8% in 2025 [6] Asset Quality and Impairments - There are no significant changes in asset quality; the portfolio is closely monitored, and the bank remains comfortable with the associated risks [6][7] - Impairments may fluctuate due to macroeconomic factors and company-specific events, but no systemic concerns are noted [7] Additional Information - The call concluded with a reminder for participants to submit their consensus estimates by October 10 [8] Other Important Content - The call emphasized the seasonal nature of financial activity, which typically leads to lower costs in Q3 compared to Q2 [5] - Mark-to-market effects on financial instruments were noted, with basis swaps yielding a positive NOK 264 million and FX 81s resulting in a negative NOK 136 million [5]