DNB ASA, Norway’s largest bank, said profit in the third quarter rose 38 percent after net interest income increased and loan losses declined.
Net income rose to 4.88 billion kroner ($825 million) from 3.54 billion kroner a year earlier, the Oslo-based lender said in a statement today. That beat the average 3.83 billion-krone estimate of 12 analysts surveyed by Bloomberg. Loan losses slid 9 percent to 475 million kroner and net interest income rose 16 percent to 7.92 billion kroner.
“In consequence of the interest rate increases implemented for personal and corporate customers, interest income has reached a higher level,” the bank said. “Due to weaker market developments, volumes are expected to show a less favorable trend than forecast, especially in the corporate market.”
DNB has been raising mortgage rates and loan prices to help cover the cost of more capital. The lender got “written marching orders” from Norwegian authorities to build more capital this year and to give that its highest priority, DNB Chief Executive Officer Rune Bjerke said in July. DNB is lagging behind Swedish rivals such as Svenska Handelsbanken and Swedbank AB, the most well-capitalized major banks in Europe.
DNB reported a common equity Tier 1 capital ratio of 11 percent under transitional rules at the end of September, compared with 10.8 percent at the end of June.
Swedbank had a common equity Tier 1 ratio under Basel II of 18.8 percent and a ratio of 18 percent under Basel III at the end of September, while Handelsbanken reported core Tier 1 ratios of 19.3 percent and 18.8 percent, respectively.
“The requirements regarding higher risk weights on home mortgages have now been defined and will result in a strict, specifically Norwegian capital requirement,” DNB said. “On a comparable basis, Norwegian banks will also appear to be less capitalized than international banks.”
The bank said it sees a need of 40 billion kroner to 60 billion kroner in additional capital through 2016.