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DNB to Raise Dividend as Profit Gains on Lower Loan Losses

Feb. 6 (Bloomberg) -- DNB ASA, Norway’s largest bank, proposed raising its dividend by 29 percent after profit in the fourth quarter jumped as credit losses slumped.

The bank plans to pay a dividend of 2.7 kroner ($0.43) a share for 2013, up from 2.1 kroner a year earlier, Oslo-based DNB said today in a statement. It was projected to pay shareholders 2.5 kroner, according to Bloomberg dividend forecasts, which take into account seven variables including analysts’ estimates, company guidance and industry analysis.

DNB joins Sweden’s biggest banks in increasing dividends after capital buffers swelled amid rising profits and cost-cutting measures. The governments of Norway and Sweden are subjecting their banks to some of the strictest capital requirements in Europe. DNB has been raising mortgage rates and loan prices to help cover the cost of more capital.

“During the year, the banks were presented with a number of new requirements to increase their equity, and the profits recorded in 2013 thus contribute to a very necessary increase in the bank’s Tier 1 capital,” Chief Executive Officer Rune Bjerke said in the statement. “DNB is well capitalized, but we need to build additional capital organically in order to meet the authorities’ requirements.”

DNB shares rose as much as 1.8 percent in Oslo trading, the highest intraday price since Jan. 24, and advanced 0.5 percent to 109.1 kroner as of 10:53 a.m.

Net Jumps

Net income jumped to 5.67 billion kroner from 3.84 billion kroner a year earlier, beating the average 4.23 billion-krone estimate of 11 analysts surveyed by Bloomberg.

Costs, adjusted for restructuring expenses, fell 1.1 percent to 5.16 billion kroner as DNB cut 1,179 employees in 2013. Net interest income rose 12 percent to 7.94 billion kroner while loan losses fell 97 percent to 36 million kroner, “due to reductions in the shipping and energy segments.”

“The situation in the shipping sector remains challenging, though 2013 turned out somewhat better than expected,” DNB said in the statement. “A cautious upturn is anticipated in the shipping markets over the coming years.”

The bank said it anticipates loan losses to be “low” in 2014, with impairment in the range of 2 billion to 3 billion kroner, according to the statement.

Special Rules

DNB reported a common equity Tier 1 capital ratio of 11.8 percent at the end of December, compared with 10.7 percent at the end of 2012. The bank said a further increase of more than 40 billion kroner will be needed “towards 2016.”

DNB’s “common equity Tier 1 ratio ‘‘under the special Norwegian transition rule ended at 11.8 percent, above our 11.5 percent estimate,’’ Nordea Bank AB said in a research note today. ‘‘Dividend per share was over, at 2.7 kroner -- we and consensus expected 2.4 kroner. We reiterate our view that DNB will return to normal dividend as early as from 2015.’’

Nordea Bank AB, the largest Nordic lender, proposed last month to raise its dividend by 26 percent, while Swedbank AB said it plans to increase its payout by 2 percent to 10.1 kronor. Svenska Handelsbanken AB this week proposed boosting it 53 percent to 16.5 kronor, including an ordinary dividend of 11.5 kronor. SEB AB plans to raise its payout by 45 percent.

That puts DNB’s payout ratio of 25 percent of net income below that of its Swedish peers. Swedbank’s payout ratio was 75 percent for 2013, while Nordea’s was 56 percent. Svenska Handelsbanken proposed a dividend equivalent to 73 percent of profit while SEB plans to pay 59 percent for 2013.

To contact the reporter on this story: Niklas Magnusson in Stockholm at nmagnusson1@bloomberg.net

To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net

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