DNB Bank ASA's robust and well-diversified loan portfolio as well as expectations of further rate hikes in Norway will help the group weather economic volatility and inflationary pressures, CEO Kjerstin Braathen said at the bank's first-quarter earnings presentation.
"We see a somewhat higher inflation in Norway, but they are far from the levels that are observed in the U.S. and across many European countries," Braathen said, describing current and expected core inflation rates as being at "comfortable levels."
The small business and large corporate segments continue to exhibit low impairment levels and have contributed to the growth in DNB's corporate banking business, the CEO said. The bank, which aims for an annual loan growth of between 3% and 4%, will continue to focus on further boosting its position in both segments.
DNB is also targeting a 4% to 5% increase in net commissions and fees income annually. For the first quarter, net income from commissions and fees reached 2.84 billion kroner, up 8% from a year earlier.
Net interest income also rose over the period by 13% to 10.45 billion kroner, benefiting from the Norwegian central bank's recent rate increases. The regulator has said it expects another seven interest rate hikes before the end of 2023.
The increase in income helped drive a nearly 29% rise in DNB's first-quarter attributable profit to 7.30 billion kroner.
Its annualized return on equity stood at 12.9%, up from 10.3% in the previous quarter and 10.0% a year earlier. The bank continues to target an ROE of above 12% by the end of 2023.
Also contributing to the bank's bottom line are net reversals of impairments of financial instruments, which widened year over year to 589 million kroner from 110 million kroner, mainly due to reversals in the corporate customers segment within the oil, gas and offshore industry segment.
DNB's common equity Tier 1 capital ratio — a key measure of a bank's financial strength — stood at 18.1%, down from 19.4% three months earlier and 19.2% a year earlier, mainly due to DNB's acquisition of Sbanken ASA, which was approved in March.
As for the impact of the Russia-Ukraine war, Braathen said equity and debt capital markets had naturally been "calmer" toward the end of the quarter, but the bank has seen strong contributions from M&A and fixed-income, currencies and commodities activities, resulting in a "very strong" quarter for its investment banking business.
The bank has a "very limited exposure" to Russia and Ukraine, it said.
As of April 27, US$1 was equivalent to 9.37 Norwegian kroner.