DNB Bank ASA

Earnings Release • Jul 12, 2022

Results DNB Group

Q2

Second quarter 2022

Kjerstin R. Braathen (CEO) Ida Lerner (CFO)

12 July 2022

Continued strong results and solid asset quality

Return on equity (ROE) of 13.3 per cent in the quarter Strong performance in the customer segments Return on equity

Net interest income (NII) up 22.5 per cent from 2Q21 and 10.3 per cent from 1Q22 Driven by profitable volume growth and higher interest rates

Net commissions and fees down 1.9 per cent – close to record-high 2Q21 Strong performance across most areas despite market turmoil

Robust and well-diversified portfolio 98.9 per cent in stages 1 and 2, net reversals of impairment provisions

Earnings per share (EPS) up 22.4 per cent from 2Q21 EPS of NOK 4.91 for the quarter

High activity in Norwegian economy

• Post-pandemic activity levels in Norwegian economy remain high
• Consumer price index and core inflation have increased in Norway but still at lower level than comparable economies
• Norwegian central bank utilising monetary policy to mitigate pressure steeper interest rate path expected

Stable investment outlook with fiscal room to manoeuvre if necessary

• Growth in private consumption is expected to cool down continued low unemployment strengthening consumer robustness
• Corporate investments expected to increase in both energy sector and mainland economy
• Norwegian Government Pension Fund Global provides ample fiscal flexibility to manoeuvre if necessary

1) Market capitalisation as of 7 July 2022.

Sources: NAV (the Norwegian Labour and Welfare Administration), Statistics Norway, DNB Markets, Norges Bank, Norwegian Ministry of Finance

Personal customers – solid result driven by high customer activity

Pre-tax operating profit

Before impairment provisions

Highlights in the quarter

• NOK million Currency-adjusted loans up 0.9 per cent and deposits up 4.2 per cent
• NII up 22.1 per cent driven by volume growth and repricing of customer loans and deposits
• Norges Bank increased the key policy rate from 0.75 to 1.25 per cent in June – DNB announced fourth repricing with effect from mid-August

Solid volume growth

Volumes at end of period, NOK billion

5

Corporate customers – strong result driven by profitable growth

Highlights in the quarter

• NOK million Currency-adjusted loans up 5.9 per cent (SMEs 3.4 and large corporates 8.4)
• Currency-adjusted deposits up 2.3 per cent (SMEs 1.7 and large corporates 2.6)
• Net interest income up 9.7 per cent
• No. 1 Equity Capital Markets adviser in Norway and Sweden 1H221)

Income from Markets products

NOK million

Before impairment provisions

Profitable growth in both loans and deposits

• Total loan growth in the customer segments of 4.9 per cent (currency-adjusted 3.3) from 1Q22
• Total deposit growth in the customer segments of 5.5 per cent (currency-adjusted 3.1) from 1Q22

Continued increase in net interest margin

• Net interest margin and combined spreads increased by 2 basis points from 1Q22
• Lending and deposit spreads affected by increase in average NOK money market rates and repricing

NII driven by profitable volume growth, increased interest rates and the inclusion of Sbanken

Net interest income from 1Q22 to 2Q22 NOK million

• NII up NOK 1 079 million or 10.3 per cent in the quarter NOK 674 million or 6.5 per cent excluding Sbanken
• Full effect of the customer repricing implemented end-January 2022 and partial effect of the repricing from mid-May 2022

Commissions and fees – strong performance across product areas

Operating expenses driven by more normalised activity level

• Salaries reflected further strengthening of core competence and ongoing projects
• Pension expenses: non-recurring transaction in the UK branch offset by low return on the closed defined-benefit scheme
• Other expenses reflected a return to a more normalised customer-related activity level

11

Robust and well-diversified credit portfolio

• 98.9 per cent of the portfolio in stages 1 and 2
• Reversals in stages 1 and 2 in Corporate customers driven by macro developments within specific industry segments and low-risk loan growth
• Reversals in stage 3 driven by successful restructurings of customer-specific cases in Corporate customers

Impairment of financial instruments by industry segment NOK million				Maximum exposure (on- and off-balance sheet items), net of accumulated impairment provisions
	2Q22	1Q22	2Q21	Stage 1 NOK 2 451 billion	Stage 2 NOK 156 billion	Stage 3 NOK 27 billion
Personal customers				(+59)	(+13)	(+2)
- Stages 1 and 2	(49)	3	69
- Stage 3	(45)	(39)	(30)
Corporate customers
- Stages 1 and 2	149	78	244			1.0%
- Stage 3	154	547	550	93.0%	5.9%
Total	209	589	833

High-quality personal customer credit portfolio

Home mortgages – EAD NOK 1 106 billion

• 99 per cent Norwegian exposure
• Average loan-to-value ratio (LTV) currently 54.3 per cent (55.8 in 2Q21) – provides significant buffers
• Lending regulations in Norway:
• − LTV limited to 85 per cent
• − Stress test of debt-servicing ability in the event of an immediate interest rate increase of 5 percentage points
• − Maximum 5 times debt-to-income

Other personal customers – EAD NOK 135 billion

Consumer finance NOK 45.7 billion EAD, of which NOK 11.6 billion in drawn amounts

Commercial real estate portfolio robust and diversified – 10 per cent of total exposure

• Firm credit strategy over time to focus on corporate lending and to finance cashflow
• 94 per cent of exposure in the Norwegian market
• 75 per cent of exposure towards low-risk customers diversified sub-segments

Continued strong capital position

• 1) The FSA's expectation including pre-pandemic counter-cyclical buffer requirements (with effect from 1Q23).
• 2) The FSA's current expectation.
• 3) The FSA's current requirement.

Key points

CET1 capital ratio

• ~130 basis-point headroom to current Financial Supervisory Authority of Norway (FSA) expectation and comfortable headroom to long-term expectation
• Retained profits contributed to a ~40 basis-point increase in the quarter
• Exchange rate effects and volume growth contributed to a ~50 basis-point reduction
• Limited effects of implementing CRR II/ CRD V (the EU banking package)

Leverage ratio

Stable development

15

Strong key figures

Cost/income ratio Per cent				Return on equity Per cent			Earnings per share NOK
44.4	39.4	40.0	11.1	12.9	13.3	4.01	4.71	4.91
2Q21	1Q22	2Q22	2Q21	1Q22	2Q22	2Q21	1Q22	2Q22

16

Appendix

Income statement

NOK million	2Q22	1Q22	2Q21	Change from 1Q22	Change from 2Q21
Net interest income	11 525	10 445	9 409	1 079	2 116
Other operating income	4 794	4 695	4 184	99	610
Total income	16 319	15 141	13 593	1 178	2 726
Operating expenses	(6 524)	(5 966)	(6 038)	(558)	(485)
Pre-tax operating profit before impairment	9 795	9 175	7 555	620	2 240
Impairment of loans and guarantees and gains on assets	209	590	730	(381)	(521)
Pre-tax operating profit	10 005	9 765	8 285	240	1 720
Tax expense	(2 301)	(2 246)	(1 823)	(55)	(478)
Profit from operations held for sale, after taxes	81	36	(30)	46	111
Profit for the period	7 785	7 555	6 432	230	1 353
Portion attributable to shareholders	7 611	7 299	6 210	312	1 401

Other operating income

NOK million	2Q22	1Q22	2Q21	Change from 1Q22	Change from 2Q21
Net commissions and fees	2 829	2 844	2 883	(15)	(54)
Customer revenues in DNB Markets	680	626	515	54	165
Trading revenues in DNB Markets	132	386	30	(254)	102
Hedging of defined-benefit pension scheme	(141)	(28)	67	(114)	(209)
Credit spreads on bonds	(78)	(144)	18	66	(96)
Credit spreads on fixed-rate loans	(253)	(285)	14	32	(267)
CVA/DVA/FVA	(19)	48	30	(67)	(49)
Other mark-to-market adjustments	(120)	469	12	(590)	(132)
Basis swaps	428	629	(212)	(201)	640
Exchange rate effects on additional Tier 1 capital	997	(138)	59	1 135	938
Net gains on financial instruments at fair value	1 624	1 562	532	62	1 092
Net financial and risk result, life insurance	(102)	32	228	(134)	(330)
Profit from investments accounted for by the equity method	144	(15)	260	159	(117)
Other	299	272	281	27	19
Net other operating income, total	4 794	4 695	4 184	99	610

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The statements contained in this presentation may include forward-looking statements, such as statements of future expectations. These statements are based on the management's current views and assumptions and involve both known and unknown risks and uncertainties.

Although DNB believes that the expectations implied in any such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to be correct.

Actual results, performance or events may differ materially from those set out or implied in the forward-looking statements. Important factors that may cause such a difference include, but are not limited to: (i) general economic conditions, (ii) performance of financial markets, including market volatility and liquidity, (iii) the extent of credit defaults, (iv) interest rate levels, (v) currency exchange rates, (vi) changes in the competitive climate, (vii) changes in laws and regulations, (viii) changes in the policies of central banks and/or foreign governments, or supranational entities.

DNB assumes no obligation to update any forward-looking statement.

This presentation contains alternative performance measures, or non-IFRS financial measures. Definitions and calculations are presented on ir.dnb.no.

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