DNB Profit Beats Estimates as Bank Sees Lower Loan Losses

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DNB ASA, Norway’s biggest lender, reported second-quarter profit that beat analyst estimates and said impairment losses will be lower than expected.

Net income rose to 5.1 billion kroner ($630 million) from 4.6 billion kroner a year earlier, the Oslo-based bank said in a statement on Friday. That surpassed the average 4.9 billion-krone estimate of 12 analysts surveyed by Bloomberg.

“The risk of losses from customers with a base in the Norwegian economy has increased because of the oil price drop,” Chief Executive Officer Rune Bjerke said in an interview on Friday. “But what we thought would happen in the second half of 2015 might not affect our customer portfolio until 2016, 2017 and 2018.”

The bank’s shares rose 5.1 percent to 133.9 kroner as of 12:19 p.m. in Oslo. They are up 21 percent this year.

“It’s a good report with nice figures,” said Vegard Eid Mediaas, an analyst at Pareto Securities AS. “The most interesting is the guidance on impairments.”

Loan losses this year will be below 3 billion kroner, compared with an earlier estimate of 3 billion kroner to 4 billion kroner, DNB said.

DNB has faced headwinds as the plunge in oil prices weighs on the Norwegian economy. Helping lending volumes, Norway’s central bank cut its key interest rate to a record low 1 percent in June. Prime Minister Erna Solberg, backed by a $865 billion wealth fund, said this week that she’s ready to help the economy as oil companies have cut more that 20,000 jobs in western Europe’s largest crude producer.

“It will be more and more demanding to maintain interest rate spreads after more than one rate cut,” Bjerke said. “There may be a possibility to increase revenue in some of the riskiest customer segments.”

DNB’s net interest income rose to 8.73 billion kroner in the quarter, in line with the 8.67 billion kroner predicted by analysts. Impairments of loans and guarantees climbed to 667 million kroner from 554 million kroner a year earlier, below the 684 million kroner forecast by analysts.