DNB, Norway's largest financial services group, recorded profits of NOK 5,222 million in the first quarter of 2016.
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This is a reduction of NOK 1,315 million from the first quarter of 2015. Adjusted for the effect of basis swaps, the decline in profits was NOK 746 million, reflecting restructuring costs in connection with reorganisation processes and the closing of branch offices, as well as higher impairment losses.
DNB’s common equity Tier 1 capital ratio increased from 12.7 percent in the first quarter of 2015 to 15.2 percent in 2016.
The first three months of 2015 were characterised by major changes. On 4 February, Personal Banking Norway in DNB announced its new strategy to meet tomorrow’s retail banking needs, with a large-scale reduction in the number of branch offices, and, at the same time, a clear focus on digital development and the customer service centre.
Solutions for associations and companies have recently been launched in the payment app Vipps.
Impairment losses on loans and guarantees totalled NOK 1 174 million for the quarter, up from NOK 575 million in the first quarter of 2015.
More than 50 percent of the impairment losses represented collective impairment, which is affected by a less positive outlook for the Norwegian economy and a negative trend in some sectors.
Individual impairment losses were on a level with the year-earlier period. Non-performing and doubtful loans and guarantees increased by NOK 1 billion from 2015.
There was a negative trend in the offshore service vessel and rig markets during the quarter, which had an impact on collective impairment.
In consequence of this, impairment losses are estimated to total up to NOK 6 billion in 2016. The level of impairment in 2017 is expected to be on a level with the estimate for 2016. A reduction in impairment losses is anticipated in 2018.
Net interest income increased by NOK 127 million, reflecting exchange rate movements and wider spreads. Currency-adjusted operating expenses, excluding non-recurring restructuring expenses, declined by NOK 159 million from the first quarter of 2015. The cost/income ratio for the quarter was 41.8 percent.
Norwegian Mainland GDP rose by 1 percent in 2015, which was lower than most forecasts.
The trend at year-end 2015 carried on into 2016, with continued low oil prices and a slight increase in unemployment. ■