The leading Norwegian bank, DnB NOR, reports a net profit of NOK 6,1bn, a 33% decrease compared to the 2008 result of NOK 9,2bn. Individual write downs at the Baltic operations increased to NOK 3,3bn last year, up from 2,1bn in 2008.
“It is too early to say whether the improvement represents a lasting trend.”
“2009 was a turbulent and demanding year characterized by financial turmoil and a period of contraction both in Norway and internationally. However, the economic situation gradually improved during the second half of the year,” DnB NOR writes in its 2009 report.
The “improvement” seen by DnB NOR is mainly an increase in pre-tax operating profits before write-downs of 11,4%, that comes from cutting cost, reducing staff and increasing the costs for the banks customers.
However, the banking group recorded a significant increase in write-downs on loans, from NOK 3 509 million in 2008 to NOK 7 710 million in 2009, of which NOK 3 929 million related to operations in DnB NORD.
The losses at DnB NORD represent over 50% of the Norwegian banking groups total losses.
DnB NORD’s loan portfolio on average represented no more than 7% of the group’s total loan portfolio.
“The serious international economic downturn thus had a material negative effect on the banking group’s financial performance, not least in the Baltic region.”
“Due to the difficult economic conditions which affected parts of the banking group’s operations, it was necessary to record total impairment losses for goodwill of NOK 730 million relating to operations in DnB NORD and Sweden in the income statement.”
Excluding DnB NORD, individual write-downs totalled NOK 2 719 million in 2009, up by NOK 1 218 million from 2008. The level of write downs was relatively stable through 2009, according to the report.
This is what the DnB NOR says about their Baltic operations:
“DnB NORD was strongly affected by the recession, recording a pre-tax operating loss of NOK 4 289 million, compared with a loss of NOK 605 million in 2008. DnB NORD’s financial performance was marked by a steep increase in write-downs on loans in consequence of the significant economic downturn in the Baltic region. Average lending in DnB NORD was NOK 83.6 billion in 2009, up 11.3 per cent from 2008, though there was a reduction in lending through the year. Net write-downs totaled NOK 3 929 million or 4.70 per cent of average lending in 2009, an increase from NOK 1 388 million or 1.85 per cent in 2008. DnB NORD expects the level of write-downs to remain relatively high in 2010. DnB NORD will focus on consolidating its operations, reducing losses and improving cost-efficiency. Impairment losses for goodwill relating to operations in the Baltic States of NOK 619 million and impairment losses of NOK 306 million relating to operations in Poland were recorded in 2009. For the DnB NOR Bank Group, impairment losses for goodwill relating to DnB NORD totaled NOK 529 million in 2009. At year-end 2009, it was clear that DnB NORD will require new capital during 2010. DnB NOR Bank will exercise its ownership role and honor its obligations by providing its proportional share of the capital required by DnB NORD.”
The Board of Directors of DnB NOR Bank decided at the end of 2009 to initiate an evaluation of the shareholder agreement with NORD/LB aiming for a possible purchase of their 49 per cent ownership interest in DnB NORD.
The process is expected to be finalized in the course of 2010.
The 2009 figures were presented at a Capital Market Day, Thursday, but the market don’t seem overwhelmingly happy with what they was told.
The share price of DnB NOR has gained more than 150% over the last 12 months, but today the investors sent the stock down 1,46% at the Oslo Stock Exchange, dragging the benchmark index down 0,75%.
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