DNB, Norway's largest financial services group, recorded profits of NOK 4 569 million in the second quarter of 2016, a reduction of NOK 512 million from Q2 2015.
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The decline in profits was primarily a result of higher impairment losses on loans and guarantees, though basis swaps also had a negative effect on profits.
The common equity Tier 1 capital ratio, calculated according to the transitional rules, was 15.2 percent, up from 13 percent a year earlier. DNB is thus one of the best capitalised banks in the world.
Net interest income was reduced by NOK 185 million from the second quarter of 2015, reflecting lower lending volumes, adjusted for exchange rate effects, and higher long-term funding costs.
Net other operating income increased by NOK 732 million. A positive effect from the completion of the sale of DNB’s holding in Visa Europe, announced in November 2015, was partly offset by the negative effect from fair value adjustments of derivatives.
Operating expenses were reduced by 2.6 percent or NOK 142 million from the second quarter of 2015.
Vipps is now being launched as a means of payment in shops and online stores. In addition, Vipps has been introduced as a payment option for public transport in the RuterBillett app and has been taken into use by thousands of sports clubs and associations.
Impairment losses on loans and guarantees totalled NOK 2 321 million, rising by NOK 1 654 million from the second quarter of 2015. There was an increase in both individual and collective impairment losses on loans, reflecting a challenging situation for a number of oil-related companies.
The company is maintaining our guiding that total impairment losses for 2016, 2017 and 2018 will be below NOK 18 billion.
The company previously stated that total impairment losses will be below NOK 6 billion in 2016. The way things look now, however, the level of impairment will probably be higher, as some of the losses related to the downturn in the petroleum industry are materialising earlier than we expected.
DNB is continuing to work closely with customers who are affected by the oil price collapse. A number of these companies are operating under challenging market conditions, but DNB is still not experiencing any material secondary effects in the Norwegian economy. ■