DNB Sees Shrinking Capital Needs as Profit Climbs Amid Recovery

DNB ASA (DNB), Norway’s largest bank, may need to raise less money than estimated to meet stricter capital requirements as falling loan losses, reduced costs and a recovering European economy help boost earnings.

The Oslo-based lender has increased its Tier 1 capital by 12.4 billion kroner ($2 billion) during the last 12 months and expects “a further increase of more than 40 billion kroner will be required towards 2016,” it said in a statement today.

“As it looks now, we need between 34 and 40 billion kroner before the end of 2016,” Chief Executive Officer Rune Bjerke said in an interview in Oslo. “We’re better positioned than we planned for at the beginning of 2013 based especially upon the results we generated in the last quarter.”

Banks in Norway and Sweden, which are subject to some of the strictest capital requirements in Europe, have increased mortgage rates and loan prices to help cover the cost of more capital. Signs of an economic recovery in Europe, along with growing credit demand, has meant Scandinavian banks are now building reserves faster than expected.

Danske Bank A/S (DANSKE), Denmark’s biggest bank, today announced its first dividend since 2007, joining DNB, Nordea AB and Svenska Handelsbanken AB in increasing returns to shareholders as capital buffers swell amid rising profits and cost-cutting.

DNB is targeting a return on equity of more than 12 percent “towards 2016” based on a core equity Tier 1 capital ratio of 13.5 percent to 14 percent. That measure stood at 11.8 percent as of Dec. 31, according to a statement today.

The Norwegian lender plans to pay a dividend of 2.7 kroner a share for 2013, up from 2.1 kroner a year earlier, it said.

To contact the reporter on this story: Stephen Treloar in Oslo at streloar1@bloomberg.net

To contact the editor responsible for this story: Christian Wienberg at cwienberg@bloomberg.net

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