Q3 2026 DNB Bank ASA Pre-Close Earnings Call
Speaker #5: Good afternoon, everyone, and welcome to DNB's pre-close for the third quarter. There will be no new information during this call. The purpose of this call is to remind you of what we have already shared with the market and some relevant publicly available data.
Speaker #5: The script for the call will be published on our IR website. And as always, I will start with the NII and capital, and Anna will go through the rest of the P&L.
Speaker #5: Okay, starting with net interest income, there is one more interest day in the third quarter compared to the second. So, this is expected to impact the third quarter NII positively by approximately NOK 120 million.
Speaker #6: Can we ask you all to mute, please?
Speaker #7: Just one of these challenges—we kept innovating. The whole sort of policy products and platform launches, improving support for AI workloads on multiple pipelines.
Speaker #1: You've been muted. To unmute yourself, please press star-six (*6).
Speaker #5: On the lending volume side, we saw FX-adjusted growth of 1.4% in the second quarter: 0.6% in personal customers and 1.5% in corporate customers in Norway.
Speaker #5: And 3% in the large corporates. Keep in mind that activity levels tend to be a bit lower in the third quarter. So far in the third quarter, we've seen a fairly stable development in the average NOK.
Speaker #5: The FX split in the loan portfolio for the second quarter was 8% US dollars, 7% euro, and 6% BEC. Following the central bank's decision to raise the key policy rate by 25 basis points, effective May 6, we announced a customer repricing of loans and deposits of up to 25 basis points.
Speaker #5: This repricing became effective from July 12th, and will thus have an impact in the third quarter. With the central bank's policy rate decision today, the key policy rate was increased by another 25 basis points to 4.50%.
Speaker #5: They stated the following, it will likely be necessary to keep the policy rate elevated for a time. And the committee is prepared to raise the policy rate further if needed to bring inflation down to the 2% target within a reasonable time horizon.
Speaker #5: So the policy rate forecast is somewhat higher than the one published in June, clearly indicating a higher-for-longer interest rate path scenario. DNB Carnegie's macro team expect 4.50% to be the peak, and in the longer term, they still expect 225 basis points of cuts in late 2027 to stabilize at the terminal rate of 4%.
Speaker #5: We continue to see strong competition in the bank market. Over to capital—in the second quarter, we reported a CET ratio of 17.4%, which is 100 basis points above the NFSA expected level of 16.4%.
Speaker #5: Based on the end of period FX development so far in the quarter, there will be a small positive effect on CT1, CET1. We repeat the FX sensitivity on CET1 when there is a 10% change in FX.
Speaker #5: There is approximately a 20 basis point change in CET1. On July 14th, we announced the initiation of a 1% share buyback program. The capital cost of approximately 40 bps was taken in the second quarter.
Speaker #5: The current program will be completed by October 16th. In order to—Anna?
Speaker #6: Sure. Starting with a general comment on net commission and fees: Generally, activity levels tend to be lower in the third quarter compared to the second quarter.
Speaker #6: Impacting fee levels negatively. On financial instruments at fair value, starting with customer revenues in DNB, Carnegie, or FICC, this typically sees a seasonally lower activity level in the third quarter compared to the second quarter.
Speaker #6: And this, of course, also impacted by market volatility. The mark-to-market effects on the AT1s and the basis swaps will be announced shortly after quarter end, as we always do.
Speaker #6: A reminder on the outstanding FX AT1 amounts. We have $700 million US dollars outstanding, and SEK 4.95 billion Swedish kronor AT1s outstanding. Moving on to costs.
Speaker #6: A seasonally lower activity level that we typically then we typically see in the second quarter all else equal typically leads to somewhat lower costs in the third quarter.
Speaker #6: DNB Carnegie's macro team expects salary inflation in Norway to come in at 4.6% in 2026 and 4.1% in 2027. As communicated previously, we expect to incur integration costs related to Carnegie of up to NOK 200 million in 2026.
Speaker #6: Year-to-date for the second quarter, we've seen 77 million NOK. And a reminder on pension expenses, as previously mentioned, normalized pension expenses are expected to be approximately 500 million NOK per quarter.
Speaker #6: And the closed defined benefit compensation scheme is primarily linked to developments in global equities. On asset quality, there's really no change in our message compared to what we presented at our second quarter release.
Speaker #6: The portfolio is carefully monitored and we are still generally comfortable with the risk in the portfolio. As you know, impairments will vary from quarter to quarter driven by potential changes to macro input factors in the ECL model.
Speaker #6: And/or company-specific events, as you've seen in past quarters. As we've said previously, given the elevated level of uncertainty driven by the global macro picture, it would be natural to see more company-specific events.
Speaker #6: And we have a couple of miscellaneous items on the call. The first is as announced in July, we've entered into an agreement to divest our 20% shareholding in Luminor.
Speaker #6: As a consequence, Luminor will no longer be accounted for in DNB's financial statements, but rather as held for sale. And we expect to recognize an accounting loss of approximately NOK 1 billion in the third quarter on the line titled "Profit from investment accounted for by the equity method."
Speaker #6: Upon completion of the transaction, we expect a positive CET1 effect of approximately 20 basis points. And completion of the transaction is subject to obtaining the necessary regulatory approvals.
Speaker #6: The second miscellaneous item is on tax. As communicated with our second quarter release, we expect the tax rate for the third and fourth quarter of 2026 to be 22%.
Speaker #6: And for the full year 2026 and following years, to be 23%. And finally, a kind request or reminder to please submit your consensus contribution by the end of business on Wednesday, October 7th to me.
Speaker #6: That marks the end of our call. We thank you very much for attending and wish you a good day ahead. Take care.
Speaker #5: Thank you.
Speaker #1: Is now exiting.
Speaker #2: This meeting is no longer being recorded.
