Norway's Biggest Bank Is Now Selling Off More of Its Loan Book

(Bloomberg) -- Norway’s biggest bank, DNB ASA, is picking up speed in selling off more of its corporate loans to investors.

“There will be long-term structural growth in that market,” Ottar Ertzeid, head of DNB Markets, said in an interview on Monday.

Since the financial crisis, banks have taken more of a role of originating and distributing after stricter capital requirements forced them to shrink balance sheets in order to create return on capital.

“Rather than having a buy-and-hold credit, we originate or arrange debt capital for customers and then sell part of that capital onward into the capital markets,” he said. “Now 50 percent is sold to institutional investors instead. And that business was also very good in the fourth quarter.”

DNB’s markets unit earned 719 million kroner from net fees and commissions in the fourth quarter, up 26 percent from a year earlier. Customer revenue from fixed income, currencies and commodities were steady at 584 million kroner. The equities business also kept revenue stable even after the introduction last year of the revised Markets in Financial Instruments Directive, MiFID II, which saw institutional investors pare their equity research providers.

“We’ve been kept on almost all the lists we were on,” he said. “We’ve been quite successful in positioning ourselves as a regional player and specialist and also industry specialist in certain industries.”

Equity Brokerages

But the profitability in the Nordic equity brokerage industry is not as good as it should be, according to Ertzeid.

“There’s still overcapacity in the business,” he said. “There have been some structural changes but we should definitely see more.”

The volatility in the stock markets at the end of 2018 saw new listings in Oslo canceled as share prices plunged. With a more positive start to the year, companies may return to equity markets. BEWiSynbra Group AB is one such IPO possibility, according to Ertzeid.

“It will be important to use the openings in the markets when they are there,” he said. “Because suddenly you have more volatility due to trade wars, the U.S., Brexit or macroeconomic uncertainty. There are a lot of factors that seem to create the risk of volatile periods.”

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