Directors’ report and annual accounts

It is when you take stock of where you are that you will know how well you have succeeded. The accounts tell you where you are heading, what you can reap from what you have sowed and what are the parameters for further success.

For us in DNB, this means recording healthy profits and having sound justifications for everything we do, which is essential if we are to deliver on our promise to you: We are here. So you can stay ahead.

Directors’ report

DNB delivered a strong performance in 2017. Profits were NOK 21 803 million, an increase of NOK 2 552 million from 2016, driven by strong net interest income and lower impairment losses on loans and guarantees.

Earnings per share were NOK 12.84, up from NOK 11.46 in 2016. The common equity Tier 1 capital ratio was 16.4 per cent at end-December 2017, an increase from 16.0 per cent a year earlier.

The leverage ratio for the Group was 7.2 per cent, a slight reduction from 7.3 per cent a year earlier, but still well above the minimum requirement of 6 per cent.

Return on equity was 10.8 per cent, compared with 10.1 per cent in 2016.

Net interest income increased by NOK 1 313 million from 2016, reflecting lower long-term funding costs, higher volumes and wider lending spreads, excluding the Baltic portfolio. There were rising volumes in the personal customers and small and medium-sized enterprises segments, and a planned reduction in volumes to large corporates and international customers.

Net other operating income was NOK 15 718 million, down NOK 2 335 million compared with 2016. In 2016, income was positively affected by the sale of Visa Norge’s holdings in Visa Europe, providing a gain of NOK 1 128 million. Excluding this non-recurring item, net operating income decreased by NOK 1 207 million, mainly due to a negative contribution from exchange rate effects on additional Tier 1 capital and net gains on other financial instruments due to reduced volatility in the financial markets.

Operating expenses were up NOK 1 261 million compared with 2016. The increase was mainly due to provisions for financial activities tax, a higher level of digitalisation, IT projects and non-recurring effects. Non-recurring items represented goodwill impairment, value added tax on an IT system and changes in pension schemes in 2016.

Impairment losses on loans and guarantees decreased by NOK 4 996 million during the year due to lower individual and collective impairment in the shipping, oil and offshore segments. The reduction in collective impairment reflected more favourable economic conditions and positive migration in some industries. Excluding the sale of non-performing portfolios during 2016, impairment losses decreased by NOK 5 664 million.

Following the establishment of Vipps AS as a separate company, DNB recorded a gain which gave a NOK 754 million rise in profits in the third quarter of 2017.

The Board of Directors has proposed a dividend for 2017 of NOK 7.10 per share, which corresponds to 54.6 per cent of profits. When considering the dividend proposal, the Board of Directors took the regulatory capital adequacy requirements into account. The payout ratio is in accordance with the Group’s ambition to increase dividend payments.

Read more about important events for DNB in chapter 1.

DNB’s overarching goals are to create the best customer experiences and to reach its financial targets.

Strong customer relationships are essential in order to retain customers and ensure continued profitability. With a gradually more open infrastructure and declining switching costs and customer loyalty, it will be increasingly difficult to “own” the customer relationship. Instead, DNB will have to earn it through each experience the Group offers its customers. In order to succeed, DNB has formulated a purpose in relation to its customers: We are here. So you can stay ahead. The group values – curious, bold and responsible – will underpin the purpose.

The Board of Directors has identified four areas as critical to the Group’s success in creating the best customer experiences:

  • Increase innovative power: To help its customers stay ahead, DNB must also make sure to stay ahead of developments, and this requires increased innovative power.
  • Increase the use of customer insight: To meet the needs of its customers, the Group must have insight into who they are and which products they need.
  • Drive skills enhancement: To meet the needs of the future, DNB’s employees must ensure that they have relevant expertise.
  • Incorporate corporate responsibility in all processes: To generate long-term and sustainable financial value creation for its owners, DNB must contribute positively to society and be honest and transparent about its operations.

Long-term profitability is the underlying premise for all of the Group’s activities and a prerequisite for being perceived as an attractive market participant. Consequently, DNB’s long-term ambition to achieve a return on equity above 12 per cent was retained as the overriding target on the Capital Markets Day in November 2017. Cost effectiveness is a prerequisite for achieving satisfactory profitability, and the Group therefore aspires to have a cost/income ratio below 40 per cent. At the same time, DNB must meet the authorities’ capital requirements and has an ambition to deliver a dividend of minimum 50 per cent.

Due to strong growth in equity over several years as a result of higher capital requirements as well as persistent low interest rates, the long-term ambition of 12 per cent return on equity is not expected to be reached until towards the end of 2019. In 2017, DNB achieved a return on equity of 10.8 per cent. The cost/income ratio of 44.2 per cent did not meet the target. The need to invest in digital solutions to ensure future competitiveness and meet development needs related to regulatory requirements, resulted in increased costs.

Adequate capitalisation is a prerequisite for the Group’s operations. In line with the authorities’ requirements, DNB raised the target for its common equity Tier 1 capital ratio to approximately 16.1 per cent from year-end 2017. The target consists of a requirement of approximately 15.1 per cent and a recommended buffer of around 1 per cent. The Group achieved a common equity Tier 1 capital ratio of 16.4 per cent at end–December 2017, which fulfils the authorities’ requirement and provides a sound basis for its future dividend capacity. The target for the common equity Tier 1 capital ratio was thus reached after taking the proposed dividend payout ratio of 54.6 per cent into account. In addition, DNB completed buy-back programmes representing 1.0 per cent of the Group’s outstanding shares in the course of 2017.¹⁾

Read more about the Group’s strategy and targets in chapter 1.

1) In addition, the proportional share of the Norwegian government’s holding will be redeemed after the Annual General Meeting in 2018. Including the government holdings, the repurchases completed in 2017 totalled 1 per cent. Shares representing  an additional 0,5 per cent, including government holdings, where repurchased up to 7 March 2018.

In accordance with the provisions of the Norwegian Accounting Act, the Board of Directors confirms that the accounts have been prepared on a going concern basis and that the going concern assumption applies.

Pursuant to Section 3-9 of the Norwegian Accounting Act, DNB prepares consolidated annual accounts in accordance with IFRS, International Financial Reporting Standards, approved by the EU. The statutory accounts of DNB ASA have been prepared in accordance with Norwegian IFRS regulations.

Net interest income

wdt_ID Amounts in NOK million 2017 Change 2016
1 Net interest income 35 422 1 313 34 110
2 Long-term funding costs 485
3 Other net interest income 463
4 Lending and deposit volumes, customer segments 386
5 Interest income on loans subject to impairment provisions 174
6 Guarantee fund fee 103
7 Lending and deposit spreads, customer segments 57
8 Amortisation effects and fees 50
9 Exchange rate movements (96)
10 Deconsolidation of Baltic operation (309)

Net interest income was up NOK 1 313 million from 2016. The increase was mainly attributable to lower long-term funding costs and higher volumes, excluding the Baltic portfolio.

Average lending spreads widened by 0.03 percentage points from 2016, while deposit spreads contracted by 0.05 percentage points. Average loans increased by NOK 13.5 billion, while average deposits rose by NOK 37.1 billion compared with 2016.

Net other operating income

wdt_ID Amounts in NOK million 2017 Change 2016
1 Net other operating income 15 718 (2 335) 18 053
2 Net financial and risk result from DNB Livsforsikring¹⁾ 630
3 Net commissions and fees 242
4 Net gains on investment property 136
5 Deconsolidation of Baltic operation (32)
6 Other operating income (305)
7 Exchange rate effects additional Tier 1 capital (811)
8 Net gains on other financial instruments (1 067)
9 Sale of holdings in Visa (1 128)

1) Guaranteed returns and allocations to policyholders deducted.

Net other operating income decreased by NOK 2 335 million from 2016. There was a strong increase in the net financial and risk result from DNB Livsforsikring and net gains on investment property. Commissions and fees also showed solid growth. Profits from the sale of Visa Norway’s holding in Visa Europe gave a NOK 1 128 million rise in income in 2016. Net gains on other financial instruments had a negative effect of NOK 1 067 million compared with the same period in 2016 due to volatility in the currency, commodity and interest rate markets.

Operating expenses

wdt_ID Amounts in NOK million 2017 Change 2016
1 Operating expenses (22 593) (1 261) (21 333)
2 Deconsolidation of Baltic operation 270
3 Pension expenses (39)
4 Travel expenses (47)
5 Other costs (134)
6 Salaries and other personnel expenses (excl. restructuring costs) (197)
7 Provisions for financial activities tax (248)
8 IT expenses (340)
9 Restructuring costs (non-recurring effects) 511
10 Other non-recurring effects (1 037)

Total operating expenses were up 5.9 per cent from 2016. Excluding non-recurring effects, there was a 3.6 per cent increase in expenses. The increase was mainly due to the introduction of financial activities tax in 2017, a higher level of digitalisation and other IT projects. Non-recurring items represented impairment of goodwill related to the external distribution of credit cards under the Cresco brand, changes in pension schemes in 2016 and value added tax on an IT system.


Impairment losses on loans and guarantees totalled NOK 2 428 million in 2017, down NOK 4 996 million from 2016 and down
NOK 5 664 million excluding the sale of non-performing portfolios in 2016.

Impairment losses for 2017 were mainly related to shipping, offshore and energy in the large corporate and international customers segment.

The reduction in collective impairment primarily reflected positive migration in some industries and more favourable economic conditions in the shipping, offshore and energy industries. The other credit portfolios are still of high quality and the difficult situation in the oil-related industries has had no material spillover effects on these portfolios.

Net non-performing and doubtful loans and guarantees amounted to NOK 17.3 billion at end-December 2017, down from NOK 25.7 billion at year-end 2016. This represented 0.98 per cent of the loan portfolio, a reduction of 0.51 percentage points from end-December 2016. The decrease in non-performing and doubtful loans and guarantees reflects more favourable conditions within shipping, offshore and energy in the large corporate and international customers segment.


The DNB Group’s tax expense for 2017 was NOK 5 054 million, representing 19 per cent of pre-tax operating profits. The tax rate was lower than the anticipated rate of 22 per cent, mainly due to equity sales under the tax exemption model and Norwegian taxation rules for the allocation of interest expenses between Norway and the US.

The short-term funding markets were generally sound throughout the year. New regulatory reforms for US money market funds were introduced, and the short-term funding market normalised during 2017 compared with 2016. Due to an increase in short-term interest rates, prices rose somewhat during the year, which resulted in slightly higher short-term funding costs for banks. As the markets stabilised, investors regarded an increasing number of banks as attractive. DNB had ample access to short-term funding throughout 2017.

The markets for long-term funding proved to be better than many assumed at the start of 2017. The first quarter of the year showed the highest level of activity in the market, as most issuers wanted to enter the market before the political elections in Europe. However, the long-term funding market generally functioned well throughout 2017. The market for covered bonds was still dominated by the asset purchase programme of the European Central Bank, ECB. In November, the ECB announced a gradual reduction in its asset purchases, which was well received in the market, as many had feared a more aggressive de-escalation plan beforehand. Total issue volumes of covered and senior bonds were somewhat lower in 2017 than in 2016. In particular the latter have largely been replaced by so-called non-preferred senior bonds in order to adapt to the coming MREL regulations (minimum requirement of own funds and eligible liabilities). There was a considerably higher level of activity in the market for subordinated loans than in 2016, partly due to regulatory requirements and partly due to favourable prices for the issuers. DNB had good access to long-term funding in 2017, and funding costs on covered bonds and ordinary senior debt were further reduced during the year.

The nominal value of long-term debt securities issued by the Group was NOK 596 billion at end-December 2017, compared with NOK 580 billion a year earlier. The average remaining term to maturity for these debt securities was 4.0 years at year-end 2017, up from 3.9 years at end-December 2016.

Did you know…

Did you know that DNB operates one of Norway’s largest payroll offices for pension payments, making more than 200 000 payments each month?

The short-term liquidity requirement, Liquidity Coverage Ratio, LCR, remained stable at above 100 per cent throughout the year. At end-December 2017, the LCR was 117 per cent.

Total combined assets in the DNB Group were NOK 3 026 billion at year-end 2017, up from NOK 2 931 billion a year earlier. Total assets in the Group’s balance sheet were NOK 2 698 billion at year-end 2017 and NOK 2 653 billion a year earlier. Of this, total assets in DNB Livsforsikring amounted to NOK 317 billion and NOK 299 billion, respectively.

In the DNB Bank Group, loans to customers increased by NOK 39.1 billion or 2.6 per cent from end-December 2016. Customer deposits were up NOK 34.7 billion or 3.7 per cent during the same period. For the banking group, the ratio of customer deposits to net loans to customers was up from 63.4 per cent at end-December 2016 to 64.0 per cent a year later. The Group’s ambition is to have a ratio of customer deposits to net loans, for the banking group, of minimum 60 per cent.

The management of DNB is based, inter alia, on the Norwegian Accounting Act and the Norwegian Code of Practice for Corporate Governance. Read more about the Group’s corporate governance principles and practice in the Governance chapter.


The Board of Directors continually monitors the Group’s capital situation.

DNB has established two policies within risk management, the policy for risk management and the policy for compliance. The policies are elaborated on in standards, which provide more detailed governance principles in these two areas. The policies serve as a guide for the Group’s overall risk management and compliance and describe the ambitions for, attitudes to and work on risk. Read more about risk aspects and the capitalisation of the Group in section 10 under Corporate governance and in the Group’s Pillar 3 report at


The DNB Group quantifies risk by measuring economic capital. Changes were implemented in the model for measuring economic capital in December 2017, which gave a reduction in economic capital of approximately 20 per cent. Figures for previous periods have been updated based on the new model. Net economic capital was down NOK 0.7 billion from year-end 2016, to NOK 56.2 billion at year-end 2017.

Economic capital for the DNB Group

wdt_ID Amounts in NOK billion 31 Dec. 2017 change 31 Dec. 2016
1 Credit risk 40.2 (1 261) 43.7
2 Market risk 7.8 270 5.9
3 Market risk in life insurance 3.5 (39) 4.2
4 Insurance risk 1.4 (47) 1.4
5 Operational risk 8.5 (134) 9.0
6 Business risk 6.1 (197) 5.9
7 Gross economic capital 67.5 (248) 70.1
8 Diversification effect¹⁾ (11.2) (340) (13.2)
9 Net economic capital 56.2 511 56.9
10 Diversification effect in per cent of gross economic capital¹⁾ 16.6 (1 037) 18.8

1) The diversification effect refers to the risk-mitigating effect achieved by the Group by having operations which are affected by different types of risk where unexpected losses are unlikely to occur at the same time.

Economic capital for credit risk declined by NOK 3.5 billion through 2017. The reduction was a result of active rebalancing of the large corporate portfolio throughout the year, whereby credit volume in this portfolio was reduced by approximately NOK 107 billion in terms of exposure at default, EAD.

Just under half of the reduction in EAD can be attributed to the deconsolidation of the Group’s Baltic operation. The subsidiaries in the Baltics were previously included in credit risk, operational risk and business risk, while the ownership interest in Luminor is defined as market risk.

The quality of DNB’s credit portfolio is generally good and was stable throughout the year. There are still some challenges in the offshore portfolio, but customers within this segment are closely followed up.

Housing prices declined by 2.1 per cent in the course of the year. Home mortgages represent approximately half of the Group’s loan portfolio. This portfolio is of high quality, with very low losses over several years, even in periods with strong lending growth. There was a 5.7 per cent increase in DNB’s home mortgage portfolio during the year.

In June, Finanstilsynet (the Financial Supervisory Authority of Norway) published new guidelines for responsible lending practices for consumer loans. DNB has initiated the necessary measures to ensure that the bank complies with the guidelines. The bank’s portfolio of unsecured consumer loans totalled NOK 1 billion at the end of 2017, while the credit card portfolio represented just below NOK 19 billion in terms of the total amount drawn.

Economic capital for market risk in DNB Livsforsikring declined by NOK 0.8 billion during the year, reflecting higher buffers. The reduction in economic capital was somewhat limited by larger positions in Norwegian and international equities. The company’s solvency capital increased by NOK 1.2 billion in 2017. DNB Livsforsikring’s solvency margin, without applying the transitional rules, was 146 per cent at year-end 2017.

Economic capital for market risk rose by NOK 1.9 billion in the course of the year. The ownership interest in Luminor is the main factor behind the increase.

The transition from a defined-benefit to a defined-contribution scheme for the bank’s employees has given a reduction in economic capital. DNB has chosen to establish a compensation scheme for the employees whose pensions have been transferred to a defined-contribution scheme. Consequently, there is still risk associated with the Group’s pension commitments.

The operational risk situation in 2017 was satisfactory. There was a stable, low level of losses, which was well below the limit in the risk appetite framework. In the banking industry, there is high risk of data fraud, whereby confidential information goes astray or the bank is exposed to digital attacks and data vandalism. Measures to strengthen information security in DNB have been identified in order to meet an ever-more serious threat scenario.

Within compliance, DNB’s main focus areas were anti-money laundering, privacy protection, international tax reporting and corruption. In the course of 2017, training programmes for all employees were implemented or planned in key compliance areas, such as anti-money laundering (AML), the General Data Protection Regulation (GDPR), and anti-corruption. Clearly defined roles, a high level of expertise and a strong compliance culture are key elements in DNB’s compliance work.

Calculated according to transitional rules, risk-weighted assets were NOK 1 043 billion, down from NOK 1 051 billion at end-December 2016. The common equity Tier 1 capital ratio was 16.4 per cent, while the capital adequacy ratio was 20.0 per cent.

Financial governance in DNB is adapted to the different customer segments. The follow-up of total customer relationships and segment profitability are important dimensions when making strategic priorities and deciding where to allocate the Group’s resources. Reported figures reflect the Group’s total sales of products and services to the relevant segments.

1) Portfolio composition in terms of exposure at default.

Personal customers

This segment includes the Group’s more than 2 million personal customers in Norway. The personal customer segment showed strong profitability in 2017. Pre-tax operating profits were up NOK 918 million compared with 2016, driven by a strong trend in net interest income and reduced restructuring expenses. The return on allocated capital increased by 0.6 percentage points to 18.9 per cent.

Net interest income increased by 4.4 per cent from 2016, reflecting rising volumes combined with a widening of the volume-weighted spread of 0.01 percentage points. Net loans to customers showed a satisfactory trend, rising by 5.3 per cent on average from 2016 to 2017. After adjusting for an internal transfer of deposits to the SME segment in December 2016, deposits were up 2.3 per cent during the same period.

Net other operating income increased by 2.6 per cent from 2016. Income from payment services declined as a consequence of the regulation of interchange fees introduced in the fourth quarter of 2016, while other income from payment transfers were on a level with 2016. Price adjustments on manual services during the year compensated for rising costs related to the SAS Eurobonus agreement and discounts on card usage. The level of income from real estate broking was retained in spite of a small reduction in the number of residential properties sold. Increased focus on savings gave a boost in income from asset management and the sale of pension products.

Expenses were reduced by 2.7 per cent from 2016. Adjusted for a high level of restructuring expenses in 2016, however, expenses were up 3.7 per cent. A high level of activity, increased IT development and the financial activities tax contributed to the increase, while implemented restructuring measures gave a reduction in salary costs during the period.

Net impairment losses on loans were at a low level in both 2016 and 2017. There is low risk in the home mortgage portfolio. The sale of portfolios of non-performing loans resulted in net reversals on loans in 2016, while such sales had a more limited effect in 2017. There was a stable level of impairment losses on consumer loans during the year.

The market share of credit to households stood at 24.7 per cent at end-December 2017, down from 25.0 per cent at end-December 2016. The market share of total household savings was 31.0 per cent. DNB Eiendom increased its average market share to 19.7 per cent during the year.

wdt_ID Income statement in NOK million 2017 2016
1 Net interest income 13 367 12 804
2 Net other operating income 5 113 4 984
3 Total income 18 480 17 788
4 Operating expenses (8 279) (8 504)
5 Pre-tax operating profit before impairment 10 201 9 284
6 Impairment of loans and guarantees (207) 379
7 Pre-tax operating profit 9 995 9 662
8 Profit for the year 7 496 7 246
9 Average balance sheet items in NOK billion
10 Net loans to customers 725.6 689.4

1) Portfolio composition in terms of exposure at default.

DNB aspires to achieve continued profitable growth in the personal customer segment and is continuing its efforts to adapt products, service concepts and cost levels to the future competitive situation. Customers increasingly use self-service options, not least on their mobile phones. The communication between the customer and the bank is also changing, and fewer customers visit DNB in person while an increasing number use the chat service.

DNB is continuing its work to automate and digitise products and services to meet customer needs and expectations. Automation of the home mortgage process is a ground-breaking innovation for the bank. In 2017, DNB customers were given the opportunity to refinance their home mortgages automatically, and in October, DNB launched a fully automated application process whereby customers who meet given criteria, receive binding pre-qualification letters within two minutes. The process to digitise the mortgage process will be continued in 2018, when automated solutions for taking up home mortgages will be introduced for new borrowers.

DNB also took a strong position within savings in 2017. Important contributing factors were the launch of the ‘Spare’ (Save) app, which gives customers an overview of their total savings in DNB, the share savings account, an account for trading in shares and mutual funds with deferred taxation, and a new product for individual pension savings, IPS. Spare was downloaded more than 250 000 times in 2017 and contributed to strong growth in the sale of savings agreements.

Did you know…

Did you know that DNB Markets’ recommended weekly equity portfolio has outperformed the market for 11 of the last 13 years?

Small and medium-sized enterprises

This segment includes sales of products and advisory services to the Group’s small and medium-sized corporate customers in Norway. Strong growth in both net interest income and other operating income, combined with lower impairment losses, helped raise pre-tax operating profits by as much as 23.9 per cent from 2016. The return on allocated capital in the segment was 16.9 per cent, up from 13.3 per cent in 2016.

Average net loans to customers rose by 7.2 per cent from 2016. Deposits were up 11.7 per cent during the same period, adjusted for a customer portfolio transferred from the personal customer segment at the end of 2016. Lending growth was 9.5 per cent from year-end 2016 to year-end 2017. Higher volumes and wider lending and deposit spreads contributed to an 8.0 per cent rise in net interest income compared with 2016.

Net other operating income rose by 3.4 per cent from 2016, reflecting increased sales of pension products and higher income from payment transfers. There was also a rise income from the sale of foreign exchange products compared with 2016, while income from interest rate hedging products and capital market activities was somewhat reduced from the previous year.

wdt_ID Income statement in NOK million 2017 2016
1 Net interest income 8 578 7 941
2 Net other operating income 2 101 2 031
3 Total income 10 678 9 972
4 Operating expenses (4 380) (4 130)
5 Pre-tax operating profit before impairment 6 298 5 842
6 Net gains on fixed and intangible assets (1) 2
7 Impairment of loans and guarantees (413) (1 088)
8 Profit from repossessed operations 14 6
9 Pre-tax operating profit 5 899 4 762
10 Profit for the year 4 424 3 572

1) Portfolio composition in terms of exposure at default.

Operating expenses were up 6.0 per cent from 2016, reflecting higher IT development and restructuring costs. In addition, the financial activities tax and higher pension costs due to transitional schemes caused a higher cost level.

Net impairment losses on loans were significantly reduced compared with 2016. Impairment losses represented 0.15 per cent of average net loans in 2017, a reduction from 0.42 per cent the previous year. The impairment losses in 2017 stemmed primarily from a few exposures, and the quality of the loan portfolio is considered to be satisfactory. Developments are closely monitored, and preventive measures are continually considered and implemented to retain the strong portfolio quality.

DNB aspires to achieve profitable growth in the SME segment in the coming period. It will become easier to become a customer, and both large and small businesses will be given even better advisory services. This means being present in both physical and digital channels, offering a wide range of traditional banking services. There is a strong focus on automating and digitising products and services to meet customer needs and expectations in the period ahead. Parallel to this, DNB is developing new services to make customers’ everyday lives easier, such as accounting and invoice services.

Large corporates and international customers

This segment includes the Group’s largest Norwegian corporate customers and all international corporate customers. On 1 October 2017, DNB and Nordea combined its operations in the Baltics and established Luminor Group AB. Operations in the Baltic countries were part of this segment until the cooperation agreement entered into force and are thus reflected in the figures up until this date. Lower volumes gave a reduction in income, while a decline in impairment losses on loans helped increase pre-tax operating profits compared with 2016.

The trend in volumes over the past two years has been affected by measures to rebalance operations, which includes restructuring the portfolios and reducing exposure within shipping, oil and offshore-related segments. In addition, DNB sold some loans and entered into guarantee contracts relating to other exposures during the year to help strengthen the Group’s capital adequacy ratios.

wdt_ID Income statement in NOK million 2017 2016
1 Net interest income 12 683 13 183
2 Net other operating income 5 730 6 016
3 Total income 18 413 19 200
4 Operating expenses (7 572) (7 276)
5 Pre-tax operating profit before impairment 10 842 11 924
7 Net gains on fixed and intangible assets 20 23
8 Impairment of loans and guarantees (1 800) (6 715)
9 Profit from repossessed operations (19) 8
10 Pre-tax operating profit 9 043 5 240
11 Profit for the year 6 511 3 829

1) Portfolio composition in terms of exposure at default.

Average loans to customers were down 9.4 per cent from 2016, while there was a reduction of 21.3 per cent from year-end 2016 to year-end 2017. Adjusted for the operations in the Baltics, there was a reduction of 13.9 per cent. Average deposits declined by 0.2 per cent from 2016, while deposit volumes were down 14.2 per cent from year-end 2016 to year-end 2017. After adjusting for the Baltic operation, there was a 5.1 per cent decline in deposits.

Due to the reduction in volumes and lower fee income, there was a decline in net interest income in spite of wider deposit spreads. Volume-weighted spreads contracted by 0.02 per centage points from 2016, to 1.2 per cent in 2017.

Net other operating income was reduced by 4.8 per cent compared with 2016. A strong focus on using the entire product range and a shift towards reducing final hold on DNB’s books helped raise income from arranging debt capital issues. Costs related to measures to reduce risk-weighted assets had a negative effect on income towards the end of the year.

Total operating expenses were up 4.1 per cent from 2016. The number of full-time positions was reduced by 51 from end-December 2016, adjusted for positions in the Baltic operation. The reductions took place in both Norwegian and international operations.

There was a reduction in net impairment losses on loans compared with 2016, partly due to successful efforts to restructure the portfolio. Net impairment represented 0.38 per cent of average loans in 2017, down 0.89 percentage points from the previous year. There was a 0.23 percentage point reduction in individual impairment losses, to 0.63 per cent in 2017. More favourable economic conditions combined with lower volumes of high-risk loans and positive migration in the portfolios gave reversals on collective impairment losses in 2017. Net non-performing and doubtful loans and guarantees totaled NOK 11.9 billion at end-December 2017, compared with NOK 20.0 billion a year earlier.

DNB is operating in highly competitive markets, and one of the challenges facing the Group is different capital requirements for banks. The main aim for the Large Corporates and International business area is to strengthen profitability and contribute to fulfilling DNB’s long-term ambitions. Active portfolio management in the large corporate segment will continue in 2018 by channeling capital and resources to segments, customers and transactions that will ensure higher profitability in the longer term. An ‘originate and distribute’ approach, which gives higher turnover in the portfolio, will ensure lower final hold on DNB’s books and increase ancillary income. DNB will continue to focus on utilising in-depth industry expertise, offering a wide product range and up-to-date technological solutions to priority customers. Through close relations with leading companies, DNB is well-positioned to enter into dialogue with customers to meet their extensive financial needs. This will form the basis for increasing the contribution from non-lending products, such as investment banking, trade finance, leasing, factoring and defined-contribution pensions.


This segment comprises market making and other trading in foreign exchange, fixed-income, equity and commodity products, including the hedging of market risk inherent in customer transactions. Customer activities are supported by trading activities, which are undertaken by Markets.

wdt_ID Income statement in NOK million 2017 2016
1 Net interest income (76) 28
2 Net other operating income 2 453 2 976
3 Total income 2 377 3 004
4 Operating expenses (502) (548)
5 Pre-tax operating profit 1 876 2 455
6 Profit of the year 1 444 1 841
7 Key figures in per cent
8 Return on allocated capital 21.1 25.4

Low volatility in the markets contributed to the reduction in income from money market activities and foreign exchange trading. A weaker than expected Norwegian krone also had a more negative impact on income from foreign exchange. There was a high level of income from trading in Norwegian interest rate instruments. Income from bonds was positively affected by narrower credit spreads.

Sound risk management ensured a continued high level of income from market making and other trading.

Traditional pension products

This segment comprises the portfolio of traditional defined-benefit pension products in DNB Livsforsikring. DNB no longer offers such products to new customers.

wdt_ID Income statement in NOK million 2017 2016
1 Upfront pricing of risk and guaranteed rate of return 130 288
2 Owner's share of administration result 210 241
3 Owner's share of risk result 133 177
4 Owner's share of interest result 143 (366)
5 Return on corporate portfolio 736 439
6 Pre-tax operating profit 1 351 779
7 Profit for the year 1 359 783
9 Average balance sheet items in NOK billion
10 Assets under management 203.3 203.2
11 Key figures in per cent

There was a strong level of profits in 2017 despite reduced income from upfront pricing. The decline in income reflected the conversion from defined-benefit to defined-contribution pension schemes. The rise in profits was primarily attributable to a healthy return on the corporate portfolio and a reduction in the owner’s share of provisioning for higher life expectancy.

The prolonged low interest rate level could make it challenging for life insurance companies to achieve a satisfactory level of earnings over the coming years. DNB Livsforsikring has adapted to the low interest rate level by holding a large portfolio of long-term bonds at amortised cost, fixed-rate home mortgages and real estate investments. The structure of the portfolios will help ensure that returns will cover the guaranteed rate of return over the next years.

Each quarter, DNB Livsforsikring carries out a test to assess whether the company has adequate premium reserves. In the test, insurance provisions calculated on the basis of market rates and insurance liabilities calculated on the basis of the contracts’ guaranteed rate of return are compared. The test showed positive margins as at 31 December 2017.

In consequence of higher life expectancy, it has been necessary to strengthen the premium reserve for group pension insurance. DNB Livsforsikring started to strengthen its reserves in 2012. At year-end 2017, the reserves required to reflect new life expectancy assumptions were fully financed. The reserves have been increased by a total of NOK 12.9 billion, of which 20 per cent has been financed by the company’s equity and 80 per cent by the policyholders’ interest result. There was a NOK 0.6 billion increase in reserves in 2017, and the financing of reserves has thus been completed. This increased the company’s flexibility to build buffer capital, continue to generate strong profits and pay dividends to the parent company DNB ASA.

Did you know…

Did you know that more women than men work in the Private Equity Department in DNB Asset Management?

The Solvency II directive stipulates regulatory solvency capital requirements. DNB Livsforsikring has been given permission to use the transitional rules for insurance provisions, which ensures a controlled and predictable implementation of Solvency II. The solvency margin, calculated according to the transitional rules, was 190 per cent as at 31 December 2017. Without the transitional rules, DNB Livsforsikring had a solvency margin of 146 per cent. At year-end 2016, the solvency margins were 211 per cent and 152 per cent, respectively. Dividend payments of NOK 1.5 billion from DNB Livsforsikring to DNB ASA have been proposed for the 2017 accounting year, which corresponds to 75 per cent of annual profits after tax. This will give an 8 percentage point reduction in the solvency margin both with and without the transitional rules, which has been reflected in the solvency margin at year-end 2017. Adjusted for dividend payments, there was no material change in the solvency margin without the transitional rules through 2017. The effects of a somewhat lower yield curve are offset by higher buffer capital and the effects of model improvements implemented during the year.

As Norway’s largest bank, DNB wants to promote sustainable value creation by integrating ethical, environmental and social aspects into its business operations. The principles for corporate responsibility provide the main framework for the governance of DNB’s operations. Corporate responsibility is an integral part of corporate governance and is taken into account in decision-making processes.

DNB meets the authorities’ requirements for reporting relating to human rights, labour rights and social conditions, the external environment and the fight against corruption in its business strategies, daily operations and in the relationships with stakeholders through integrated annual reporting and through reporting according to the Global Reporting Initiative, GRI.

Read more about how DNB meets its corporate responsibility commitments and the challenges the Group considers to be most important to meet to ensure long-term value creation and responsible operations in the chapter Strategy and organisation, the chapter Role in society and at

Adapting to the new banking reality, with rapid changes in customer behaviour, digitalisation and stricter capital adequacy requirements, characterised organisational and leadership development in 2017. Systematic efforts were made to ensure that the Group has the right competencies and to promote change capacity and employee engagement. The engagement index in the employee survey remained high at 85 points. This paints a picture of a robust organisation that has coped well through extensive restructuring. Sickness absence in DNB’s Norwegian operations was 4.5 per cent in 2017, in line with 2016.

Read more about the priorities that are considered to be essential to ensuring the right competencies, and about the working environment, equality and discrimination in the chapter Human resources and a more detailed description in note 22 Salaries and other personnel expenses in the annual accounts.

Over the last few years, a number of new regulations setting stricter requirements for the financial services industry have been introduced or announced. The Norwegian authorities have introduced more stringent capital adequacy requirements and earlier implementation compared with the EU. Following the adoption of the latest Basel regulations, the requirements now look set to be harmonised.

Read more about the new regulations and the regulatory framework in the chapter New regulatory framework.

Global GDP growth is expected to be 3.5 per cent in 2017, up from 3.0 per cent in 2016, reflecting higher growth in both industrialised countries and emerging economies. Persistent strong growth in demand from China and widespread optimism have contributed to a synchronous boost in growth across countries and sectors. Global growth is expected to increase further in 2018 due to a higher level of growth in emerging economies. In China, however, growth is expected to slow down somewhat as a result of retrenchment measures implemented by the authorities. Economic growth in industrialised countries is expected to remain at around 2 per cent. This is higher than the normal growth rate and will contribute to a further decline in unemployment. Parallel to this, wage growth is restrained by national and global factors in a number of countries. This puts a damper on inflation and limits the rise in interest rates.

The upturn in the US economy has lasted for nine years, and there are still no clear signs of a slowdown. GDP growth is assumed to be 2.3 per cent in 2017 and 2.4 per cent in 2018. The US tax reform is expected to have a limited effect on consumption, as it primarily affects high-income groups. Although it will probably contribute to a certain rise in corporate investment, the effect is expected to be moderate. The unemployment rate dropped to 4.1 per cent and is expected to decline further in 2018. As a consequence, the Federal Reserve is likely to raise interest rates an additional three times in 2018, in spite of the fact that inflation is somewhat lower than the 2 per cent target. In addition, the Federal Reserve will probably start to scale down its balance sheet by reducing reinvestments in Treasury bills and mortgage-backed securities (MBS).

In the eurozone, GPD growth is estimated at 2.3 per cent in 2017 and is expected to remain a the same level in 2018. The recovery is broad-based across countries and sectors, with strong growth in large member countries such as Germany and Spain. Confidence indexes for households and businesses indicate a further recovery in the eurozone, but the cool-down in China is expected to dampen the upturn from the second half of 2018. Growth will nevertheless be higher than normal, which is expected to lead to lower unemployment. Wage and price growth is also assumed to increase somewhat, reflecting less slack in the economy. In consequence of this, the European Central Bank will begin to gradually depart from its expansionary policy by finalising its asset purchases by the end of the year and gradually increasing interest rates from the second quarter of 2019.

The British ‘No’ to further EU membership had fewer negative consequences than expected in the short term. Growth slowed down however, from 1.8 per cent in 2016 to an estimated 1.5 per cent in 2017, and is expected to decline to 1.1 per cent in 2018, reflecting a reduction in consumption and investment due to the uncertainty surrounding Brexit. A significant weakening of the British pound has caused a temporary increase in inflation, which made the Bank of England raise its key policy rate to 0.5 per cent in November 2017. Inflation is expected to decline due to weaker growth and higher unemployment, and the key policy rate is therefore expected to remain at 0.5 per cent over the coming years. Uncertainty regarding the process around Brexit and the results thereof makes future prospects more unpredictable than normal.

GDP for Mainland Norway was up 1.8 per cent in 2017, after increasing by only 1.0 per cent in 2016. The rise was due to a less negative effect of oil investments, higher consumption and a marked increase in housing investment. Growth is anticipated to rise further to 2 per cent in 2018, driven by corporate and petroleum investment. Over the next few years, the upswing in the Norwegian economy will probably be curbed by lower housing investment and a more neutral contribution from fiscal policy. Higher manufacturing growth has also been reflected in lower unemployment. The unemployment rate has declined gradually since the summer of 2016, mainly due to a lower labour force participation rate. Throughout 2017, employment growth also picked up and contributed to a further drop in the unemployment rate. A slight rise in employment is expected in the period ahead, resulting in a certain reduction in the unemployment rate.

The seasonally adjusted housing price index fell after reaching a peak in March, and annual growth rates in December 2017 were negative at -1.1 per cent for Norway and -10.5 per cent for Oslo. Low interest rates and a more positive situation in the Norwegian economy, with falling unemployment and rising income growth, will limit the downward trend in housing prices, which are expected to show modest growth from 2019.

Inflation, in terms of annual growth in the consumer price index, declined more than expected in 2017. The core inflation rate ended at 1.4 per cent, while total inflation was 1.8 per cent. In 2018, core inflation is expected to be 1.5 per cent, which is well below Norges Bank’s inflation target. In light of continued low inflation and a weak housing market, Norges Bank is not expected to raise its key policy rate until September 2019. In its monetary policy report from December 2017, the central bank indicated that the policy rate hike may be implemented in December 2018.

DNB presented updated financial ambitions towards year-end 2019 at its Capital Markets Day in November 2017. The Group’s overriding financial target is a return on equity above 12 per cent towards the end of 2019. Several factors will contribute to reaching the return on equity target, including strong growth in capital-light products, increasing lending volumes, greater cost efficiency through the automation of internal processes, and optimal use of capital.

The Group has set a target for its common equity Tier 1 capital ratio of 16.1 per cent, and the common equity Tier 1 capital ratio achieved at year-end 2017 was 16.4 per cent. DNB is well–positioned for new regulatory requirements resulting from the implementation of IFRS 9 and the revised Basel regulations. The latter is expected to have minimal effects for DNB. The implementation effect of IFRS 9 is estimated at NOK 2 billion after tax and is expected to reduce the common equity Tier 1 capital ratio by approximately 28 basis points.

DNB’s ambition is to have a cost/income ratio below 40 per cent. DNB’s dividend policy remains unchanged, with a payout ratio of more than 50 per cent and an increase in the nominal dividend per share each year. In addition to dividend payments, DNB will use repurchases of own shares as a flexible tool to allocate excess capital to its owners. The dividend payout ratio for 2017 is 54.6 per cent. Including the share buy-back programmes, the total distribution to shareholders in 2017 is 72.9 per cent of profits for 2017.

Volume-weighted spreads are expected to be stable, while the annual increase in lending volumes is anticipated to be 3 to 4 per cent in 2018 and 2019. During this period, higher growth in lending volumes is expected for personal customers and small and medium-sized enterprises, while the Group will continue to actively reduce its lending volumes to large corporates and international customers in cyclical industries.

For the full year 2018, impairment losses are expected to represent approximately 17 basis points of exposure at default, or around NOK 3,2 billion.

DNB’s Board of Directors has approved a dividend policy which aims to provide an attractive and competitive return for shareholders through a combination of increases in the share price and dividend payments. DNB is well capitalised and fulfills the statutory requirements in addition to having an adequate buffer. The significant build-up of capital through 2017 provides for a normalisation of dividends to a level above 50 per cent in the form of a cash dividend combined with a share buy-back programme also in 2018.

When considering the dividend proposal for 2017, the Board of Directors has taken into account the capital adequacy requirements and the Group’s ambition to have a dividend payout ratio of more than 50 per cent. The Board of Directors has thus proposed a dividend for 2017 of NOK 7.10 per share. The proposed dividend gives a dividend yield of 4.7 per cent based on a share price of NOK 152.10 as at 31 December 2017 and implies that DNB ASA will distribute a total of NOK 11 392 million in dividends for 2017. The payout ratio represents 54.6 per cent of profits. A dividend of NOK 5.70 per share was paid for 2016.

In connection with the satisfactory attainment of the Group’s financial targets, the Board of Directors has decided to make allocations of NOK 219 million to the Group’s employees.


Profits for 2017 in DNB ASA came to NOK 18 419 million, compared with NOK 10 472 million in 2016. The profits for 2017 attributed mainly to the transfer of group contributions and dividends from subsidiaries.

wdt_ID Amounts in NOK million 2017 2016
1 Profit for the year 18 419 10 472
2 Proposed dividend per share (NOK) 7.10 5.70
3 Share dividend 11 392 9 284
4 Transfers to other equity 7 027 1 188
5 Total allocations 18 419 10 472

The Board of Directors proposes allocating a group contribution of NOK 450 million after tax to DNB Livsforsikring AS. At the same time, DNB ASA will receive a group contribution of NOK 1 950 million after tax from DNB Livsforsikring AS.

In view of the DNB Group’s capital adequacy ratio of 20.0 per cent and common equity Tier 1 capital ratio of 16.4 per cent at year-end 2017, the Board of Directors is of the opinion that, following the proposed allocations, DNB ASA will have adequate financial strength and flexibility to provide sufficient support to operations in subsidiaries and meet the Group’s expansion requirements and changes in external parameters.


Oslo, 7 March 2018
The Board of Directors of DNB ASA

Anne Carine Tanum (chairman)

Tore Olaf Rimmereid

Karl-Christian Agerup

Carl A. Løvvik

Berit Svendsen

Vigdis Mathisen


Jaan Ivar Semlitsch

Rune Bjerke
(group chief executive)


Annual accounts

The annual accounts report can be downloaded from here.

Auditor’s report

The auditor’s report can be downloaded from here.