DNB beats forecasts despite pressure from lending competition

DNB Surpasses Expectations Despite Intense Lending Competition and Lower Margins

DNB's Third-Quarter Performance and Market Context

By Jagoda Darlak and Agnieszka Gosciak

Financial Results Overview

Oct 21 (Reuters) - Norway's largest bank DNB reported better-than-expected third-quarter earnings on Wednesday, despite continued pressure on margins from intense competition across lending markets.

Its net profit fell 7.9% to 9.84 billion Norwegian crowns ($1.05 billion) in the July-to-September period, from 10.68 billion a year earlier. Analysts had expected 9.06 billion crowns on average, a poll compiled by the bank showed.

Margin Pressure and Lending Competition

DNB has weathered a period of margin pressure driven by fierce competition across lending markets, even as Norway's central bank has returned to raising interest rates in response to persistent inflation.

Savings and Investment Growth

"We are seeing a strong development in savings and investments, with both more customers and increased saving," DNB's CEO Kjerstin Braathen said in a statement.

Lending Growth and Interest Income

DNB said it delivered profitable lending growth across its businesses, while average lending spreads widened by 3 basis points quarter-on-quarter to 1.33%.

Net interest income, a key measure of lending profitability, fell to 15.50 billion Norwegian crowns in the quarter from 15.99 billion a year earlier, slightly below the 15.59 billion expected by analysts.

Quarterly Trends and Contributing Factors

However, it rose 2.5% from the previous quarter due to repricing effects and higher interest on equity, as well as one additional interest day, the bank said.

Monetary Policy and Inflation Impact

Norway's central bank last month raised its policy interest rate by 25 basis points to 4.50% and said it may hike again to contain inflation.

Implications for Borrowers and Savers

The new rates will apply from November 29 for existing mortgages and deposits, it said.

Inflation Outlook

Norway's annual core inflation rate remained at 3.0% year-on-year in September, Statistics Norway (SSB) data showed earlier in October, supporting expectations that interest rates will stay elevated.

($1 = 9.3951 Norwegian crowns)

(Reporting by Jagoda Darlak and Agnieszka Gosciak-Rabalska; editing by Matt Scuffham)