DNB shares slide over 7% as Q2 earnings miss forecasts

Investing.com -- DNB (OL:DNB) shares fell more than 7% on Friday after the bank reported a second-quarter profit of NOK 10.44 billion, down 3% from a year earlier and 5% below consensus expectations.

Earnings per share declined to NOK 6.79 from NOK 6.83. Pre-tax operating profit fell to NOK 13.09 billion, while return on equity was 15.4%, compared with 16.6% a year earlier.

Pre-provision profit came in 4% below analyst estimates, as revenues from net interest income, fees, and trading all underperformed. 

Net interest income rose 2.1% year-over-year to NOK 16.15 billion but was 2% below forecasts. 

This was attributed to narrower interest margins and a NOK 102 million impact from interest rate adjustments on swaps. Net interest margin fell 5 basis points quarter-on-quarter.

Loan and deposit volumes were lower than expected, with lending 2% below consensus and deposits 4% below, largely due to lower balances in the large corporates and international customers segment. 

However, average lending balances for personal and corporate customers in Norway rose 1% from the previous quarter.

Fee income increased by 27.1% to NOK 4.37 billion, supported by investment banking and asset management, including the first full-quarter contribution from Carnegie. 

This was still 1% below consensus due to weaker income from money transfers and banking services. 

Trading income declined to NOK 519 million, missing the NOK 935 million forecast, driven by NOK 327 million in negative mark-to-market adjustments.

Total (EPA:TTEF) operating income rose to NOK 22.49 billion from NOK 21.57 billion in the year-earlier quarter. 

Operating expenses increased 16.2% to NOK 8.73 billion, reflecting a full quarter of Carnegie-related costs. The cost-to-income ratio was 39%.

Impairment provisions totaled NOK 677 million, above the NOK 574 million consensus. 

The increase was driven by corporate exposures, including the legacy portfolio in Poland and other customer-specific provisions across industry segments. Cost of risk was 12 basis points, higher than the expected 10 basis points.

The common equity Tier 1 capital ratio was 18.3%, 10 basis points below consensus and down 20 basis points from the first quarter. 

The decrease was attributed to a 40 basis-point impact from the ongoing share buyback, which offset a 30 basis-point contribution from retained earnings. 

The CET1 ratio remained 180 basis points above the regulatory expectation set by the Norwegian Financial Supervisory Authority.

DNB’s total assets rose to NOK 3.84 trillion, up from NOK 3.68 trillion a year earlier. Loans to customers grew 13.9% to NOK 2.29 trillion, while deposits declined 0.8% to NOK 1.55 trillion. The deposit-to-loan ratio decreased to 73.4% from 77.1%.

In sustainability, the bank reported NOK 835.5 billion in cumulative green financing and NOK 223.5 billion in sustainability-focused fund investments, exceeding its 2025 target.

For the first half of 2025, DNB posted a profit of NOK 21.29 billion, up 1.5% year-over-year. 

Net interest income rose 3.9% to NOK 32.56 billion and net other operating income increased 11.4% to NOK 11.84 billion. 

Operating expenses grew 12.5% to NOK 16.63 billion. Earnings per share for the half-year were NOK 13.83, and return on equity was 15.6%.