Den Norske Bank Has Steady First Quarter

Den norske Bank, the leading custodian bank in Norway, today announced pre tax operating profits before losses of NOK 1 047 million in the first quarter of the year, slightly down on earnings in the same period last year (NOK

By None

Den norske Bank, the leading custodian bank in Norway, today announced pre-tax operating profits before losses of NOK 1 047 million in the first quarter of the year, slightly down on earnings in the same period last year (NOK 1 081 million). Nordlandsbanken, which was acquired earlier this year, made its first contribution to the group.

“We have achieved sound profits on ordinary banking operations and in DnB Markets,” says group chief executive Svein Aaser. “Retail activities showed healthy progress, and corporate banking operations exhibited a stable trend. Moreover, we are pleased to note that Nordlandsbanken, which was integrated in the Group in March, provided a positive contribution in its first quarter as part of the DnB Group. Profits for the first three months of the year were, however, impaired by developments in financial markets and some parts of the business sector. Market developments had a particular impact on profits from Vital and DnB Asset Management, though equity markets showed significant improvement in April. Stringent cost control was maintained throughout the Group and, on a comparable basis, costs were brought down relative to the first quarter of 2002. Credit quality has been maintained, though we are aware that changes in the general economy and market developments could have a negative impact on credit quality in future.”

Retail Banking enjoyed a healthy rise in volume, along with low costs and losses in the first quarter of 2003, while Corporate Banking showed a stable trend and sound operations. DnB Markets again recorded good quarterly figures, with healthy income from trading in foreign exchange and interest rate instruments and advisory services compensating for the low level of activity within equities trading.

Due to stock market developments and the strengthening of disability reserves, Vital showed weak profit performance in the first quarter. Premium income was up, however, and there was a positive inflow of transfers. Vital’s cost reduction programme helped bring down expenses. DnB Asset Management saw brisk volume growth in the first quarter, mainly due to exchange rate developments. On the other hand, due to the slump in stock markets, income showed a less favourable trend. The cost reduction programme in DnB Asset Management remains on schedule and will provide the basis for strengthening long-term profitability.

Excluding goodwill amortisation, return on equity was 8.8 per cent, down from 14.3 per cent in the corresponding period of last year.

Income totalled NOK 3 133 million, up NOK 154 million from the year-earlier period.

Net interest income in the DnB Group totalled NOK 2 123 million in the first quarter of 2003, up NOK 172 million on the year-earlier figure. The acquisition of Nordlandsbanken caused a NOK 115 million rise in net interest income.

Net other operating income amounted to NOK 1 010 million in the first quarter of 2003, as against NOK 1 029 million in the year-earlier period. The acquisition of Nordlandsbanken and Skandia Asset Management gave a total rise in income of NOK 110 million. The underlying reduction in income resulted from the deterioration in stock markets which along with an increase in disability provisions reduced Vital’s profit contribution by NOK 100 million relative to the previous year. Income from equities trading, custodial services and asset management also showed a negative trend, parallel to a decline in the value of Den norske Bank’s shareholdings. On the other hand, income from trading in foreign exchange and interest rate instruments was up, especially relating to customer business.

Operating expenses totalled NOK 2 087 million in the first quarter of 2003, an increase of NOK 188 million from the first quarter of 2002. The acquisitions of Skandia Asset Management and Nordlandsbanken pushed up expenses for the first quarter of 2003 by just over NOK 100 million and NOK 109 million respectively. Goodwill amortisation relating to the acquisitions came to NOK 34 million and NOK 12 million respectively for the quarter. Ordinary operating expenses in other units were brought down by NOK 49 million. Measures to streamline operations and improve cost efficiency have enabled the Group to compensate for wage and price growth. Excluding goodwill amortisation, the cost/income ratio was 64.4 per cent in the first quarter of 2003, up from 62.9 per cent in the year-earlier period.

Net losses on loans and guarantees totalled NOK 367 million in the first quarter of 2003, compared with net reversals of NOK 127 million in the corresponding period of 2002. New losses and loan-loss provisions amounted to NOK 484 million, while reversals on previous losses and loan-loss provisions totalled NOK 117 million. The first quarter of 2002 saw new losses of NOK 153 million and reversals of NOK 280 million. New losses in the first quarter of 2003 included the write-down of DnB’s shareholding in Pan Fish from NOK 0.52 to NOK 0.10 per share, which corresponds to the market price at end-March. The write-down represented a loss of NOK 244 million. Net non-performing and doubtful commitments were up NOK 358 million to NOK 3.0 billion at end-March 2003. In addition, net problem commitments in Nordlandsbanken totalled NOK 2.2 billion.

The Group’s tax charge for the first quarter of 2003 is based on an estimated average tax charge representing 26 per cent of the Group’s pre-tax operating profits.

At end-March 2003, total combined assets in the DnB Group were NOK 749 billion. Total assets in the Group’s balance sheet were NOK 434 billion, following an ordinary increase of NOK 24 billion during the quarter along with an additional NOK 25 billion resulting from the acquisition of Nordlandsbanken. Total assets in Vital stood at NOK 76 billion, up NOK 2 billion during the quarter. Other assets under management totalled NOK 245 billion at end-March 2003.

Net lending rose by NOK 9.9 billion during the January through March period. In addition, the acquisition of Nordlandsbanken increased net lending by NOK 24.2 billion. First-quarter lending growth represented NOK 2.9 billion in the retail market and NOK 7.0 billion in the corporate market. There was a rise in traditional bank deposits of NOK 3.9 billion from the beginning of the year till end-March. The acquisition of Nordlandsbanken gave an additional NOK 9.2 billion rise in deposits. The ratio of deposits to lending was 66.5 per cent at end-March 2003, compared with 69.9 per cent at end-December 2002. The acquisition of Nordlandsbanken brought down the Group’s deposits-to-lending ratio by 2.5 percentage points.

The DnB Group’s core capital ratio was 6.8 per cent at end-March 2003, while the capital adequacy ratio was 9.7 per cent. Including 50 per cent of profits in the calculations would lift the ratios by around 0.1 percentage points

«