Norway’s Biggest Bank Surges as Virus Impairments Ease

DNB ASA, Norway’s biggest bank, delivered second-quarter earnings that beat even the most optimistic estimates as impairments proved less dire than feared.

Shares in DNB soared 12%, its biggest jump in more than a decade, as the market digested the surprise. Chief Executive Officer Kjerstin Braathen said she, too, was surprised.

“We’ve seen a gradual but much more rapid recovery than I think we dared to hope for entering the quarter,” Braathen said in an interview. June in particular was “a very strong month for activities in investment banking and housing sales and consumer spending.”

Read: Scandinavia Returns From Economic Abyss as Rebound Takes Hold

The Oslo-based lender’s net income reached 4.77 billion kroner ($508 million) in the three months through June, well above the 2.35 billion kroner predicted in a Bloomberg survey of analysts. Impairments fell 63% from the first quarter, DNB said on Monday.

The results increase the likelihood that DNB will pay out dividends for 2019 and 2020, after it decided to postpone the payment for last year following calls from national and European authorities. The bank plans to hold an extraordinary general assembly in the fourth quarter to decide.

“We are, in terms of capital, more robust than we have ever been, with our core equity ratio of 18.2, which doesn’t include the dividend reserved for 2019,“ Braathen said. “And we continue to accrue 50% of our earnings for dividends for 2020.”

Thomas Eskildsen, an analyst at Handelsbanken, said trading and commission income also came in better than expected, providing a “positive read across” for the other big Nordic banks due to report earnings this week.

DNB’s 12% jump as of 3 p.m. in Oslo was the biggest since May 2009.

Click here for an overview of DNB’s 2Q numbers

The main bank in western Europe’s biggest gas and oil exporter said almost 90% of the 2.1 billion kroner in credit losses last quarter came from oil-related industries. But otherwise, the “overall credit quality in the portfolio was stable during the quarter,” with the travel industry a notable exception.

DNB is the first of the big Nordic banks to report second-quarter results. And with some forecasters pointing to a milder economic crisis in the region than elsewhere, there’s a chance that Nordic banks may dodge the worst when it comes to impairments.

“DNB’s activity level in the second quarter was less impacted by the COVID-19 pandemic than expected,” the bank said. “There is now a more positive outlook for the Norwegian economy, although there are still significant uncertainties concerning future developments.”

©2020 Bloomberg L.P.

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