DNB Shares Fall as Dividend Target Delayed by New Capital Needs

  • DNB CEO says will do what he can to deliver as much possible
  • DNB reports 11% rise in profit after selling off bad debt

DNB ASA Chief Executive Officer Rune Bjerke said he may need another 12 months to bring the bank’s dividend policy back to normal.

The stock declined 4.8 percent to 109.60 kroner at 1:10 p.m. in Oslo.

Higher capital requirements imposed by Norwegian regulators mean it could first be 2017 when Norway’s biggest lender begins to pay back 50 percent of profit, Bjerke said. The Oslo-based bank had previously guided for 2016 as the year when it would raise the payout ratio from 30 percent. Shares fell as much as 5.6 percent.

“We’re going to do what we can to deliver as much as possible,” Bjerke said in an interview in Oslo. “We have definitely more non-core assets to sell.”

Norwegian banks face tougher capital requirements as the country’s regulator forces the industry to gird itself against stressed economic conditions just as they are unfolding. Gross domestic product on the mainland probably won’t grow more than 1.8 percent next year even amid record low central bank rates, SEB said earlier this month, citing lower-than-expected private consumption.

Additional Capital

DNB said the Financial Supervisory Authority is requiring it to hold additional capital equal to 1.5 percent of risk-weighted assets to guard against losses not covered under minimum requirements, bringing its total need to 15 percent by the end of 2016.

The bank probably will have to hold even more than that, Zilvinas Jusaitis, an analyst with Norne Securities, said.

“Given that the new requirement of CET1 now will be 15.0 percent and if you still want to have a margin on top, it is likely that DNB will probably raise its target above 15.0 percent - that is 15.5 percent or even 16 percent,” Jusaitis said in an e-mail in response to questions.

The requirements are “somewhat stricter” than DNB had anticipated, “so it might be a little bit longer before we can revert to the ordinary dividend policy,” Bjerke said. The bank also is taking other capital-efficiency measures that will probably increase its ratio by more than 80 basis points, he said.

DNB earlier reported profit rose 11 percent in the third quarter as it increased volumes and sold off bad debt. Net income rose to 6.24 billion kroner ($762 million) from 5.62 billion kroner a year earlier. That matched the average 6.2 billion-krone estimate of eight analysts surveyed by Bloomberg. DNB said it held core Tier 1 capital equal to 13.1 percent of risk-weighted assets.

Net interest income rose to 8.98 billion kroner, while fees and commissions fell to 2.08 billion kroner. That compares with analyst estimates for 8.92 billion kroner and 2.31 billion kroner, respectively.

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