Shares of DNB Bank surged 5% during Tuesday's mid-morning trading session following the release of third-quarter results that exceeded market expectations, primarily driven by positive repricing effects and a strong fee income platform. Norway's largest financial services institution reported profits attributable to shareholders for the three months ending September 30, amounting to 11.63 billion Norwegian kroner, marking a significant increase from 9.81 billion kroner during the same period last year.
Analysts surveyed by Visible Alpha had projected a dip in profits to around 9.73 billion kroner against the backdrop of a high-interest rate environment. The Nordic region's economy has shown resilience, characterized by a combination of high activity levels, low unemployment rates, and a gradual decrease in inflation, which collectively contributed to a reduction in lending losses.
DNB Bank's impairment provisions fell year-over-year to 170 million kroner from a significant 937 million kroner, bolstering the favorable results. Substantially owned by the Norwegian government, DNB generated total income of 22.85 billion kroner, surpassing both the previous year's total of 20.97 billion kroner and the Visible Alpha consensus estimate of 20.85 billion kroner.
The bank’s net interest income experienced a slight increase of 2%, reaching 16.13 billion kroner, attributed to customer repricing effects and enhanced returns on equity. Loan applications at DNB rose by 10%, with lending volumes expanding across all three customer segments. Notably, large corporates and international clients were the leading contributors, exhibiting a 4.7% growth in loan volumes.
This was trailed by a 0.8% rise in lending to personal customers and a 0.3% increase for business customers within Norway. Furthermore, DNB's third-quarter commission and fee income surged by 11.1% year-over-year, reaching a record 3 billion kroner, largely fueled by growth in investment banking and asset management activities. "There has been a clear shift in customer behavior throughout the summer and into autumn," commented Chief Executive Officer Kjerstin Braathen.
"The competition in the Norwegian banking sector is intense, and we are excited that a growing number of customers in transition are choosing to join us." Looking ahead, DNB projects that continued economic growth and rising housing prices will bolster earnings. The firm anticipates a sustainable annual growth rate of 3% to 4% in organic loans, with the understanding that variations could occur in particular years.
DNB also aims to raise net commissions and fees at a rate between 4% and 5% annually. The bank maintains its dividend strategy, targeting an over 50% payout to ensure an increase in the nominal dividend per share each year. Price: $233.80, Change: $+10, Percent Change: +4.47%.