DNB: 1Q24 Looks Spread Positive, Issuer Hardly Lagged YTD Anyway.

DNB 1Q24 results are credit positive with better NPLs and loan losses than expected. Mgmt only sees slow recovery in its domestic market, striking a resilient tone, we feel. The credit has lagged the sector marginally YTD (28bp tighter vs. 33bp avg.) so market has already discounted some of this positive news, it seems.

• Key credit metrics: loan losses were barely one-third of the consensus figure (at 6bp of loans, from 18bp in 4Q23) which is clearly positive. Non-performers (stage 3) are 10bp better than Dec-23 (at 107bp), reversing the uptick seen in 4Q23. This was driven by improved domestic corporates. CET1 is 70bp better than consensus (19.0% vs. 18.3% est.).
• Income statement: revenues missed consensus by 1% (down marginally y/y) but costs were slightly better than expected with most of the 6% net income beat driven by that strong loan loss performance. Equity investors will question the sustainability here, especially in light of the strong performance of the equity since last results.
• Outlook: mgmt sees GDP accelerating slowly from last year’s slowdown as rates falling only in Dec-24. It sees consumers remaining resilient and property prices starting to grow again. Financial targets remain unchanged but a slow recovery appears the overall takeaway.

Analyst call is 1230 (London time) at: https://events.webcast.no/dnb/zaEeS9WUTiwEQDAw15I3/JqzkDUuCauj1X6fftN8l