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On Monday, Barclays (LON:BARC) made an adjustment to its view on DNB ASA (OTC:DNBBY) (DNB:NO) (OTC:DNHBY), downgrading the bank’s stock rating from Overweight to Equal Weight, while simultaneously raising the price target from NOK266.00 to NOK296.00. The revision by Barclays reflects a reassessment of the stock’s valuation in light of the current financial environment.
The decision to downgrade the rating is based on the assessment that, despite Norway’s relatively high terminal rate expectations compared to other Nordic countries, DNB’s net interest income (NII) estimates for fiscal years 2025 to 2027 no longer surpass the consensus. In fact, for fiscal year 2027, Barclays’ estimates are 1% below the consensus.
Barclays acknowledges that DNB’s stock is trading at 1.5 times the price-to-tangible-book value (PTBV) for a return on tangible equity (RoTE) of 15.8% in fiscal year 2026 estimates. This valuation led the firm to conclude that the shares are now fairly valued, prompting the downgrade in rating.
Despite the rating downgrade, Barclays has increased its earnings per share (EPS) estimates for DNB very slightly, by 0-1%, for the fiscal years 2025 to 2027. The increase in the price target from NOK266 to NOK296 is attributed to these minor EPS estimate upgrades and a reduction in the cost of equity from 10.6% to 9%.
Barclays’ adjustment of DNB’s stock outlook and price target is a reflection of its latest analysis and projections for the bank’s financial performance in the coming years. The new price target suggests a modest optimism about the bank’s earnings potential, despite the more neutral stance on the stock’s current valuation.
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