dnbnor.no DnB NOR Bank Annual Report 2010 Important events in 2010 First quarter DnB NOR presented new financial targets at its Capital Markets Day in London DnB NOR Bank initiated an evaluation of the shareholder agreement relating to DnB NORD Second quarter The merger between Nordito and the Danish company PBS Holding was completed The Board of Directors decided to unite the DnB NOR Group under one brand and to discontinue the use of the Postbanken brand The bank established its own Facebook page DnB NOR Eiendom launched a property search application for Iphone Third quarter DnB NOR Bank exercised the option entitling the banking group to purchase the remaining 49 per cent of the shares in DnB NORD DnB NOR climbed seven places in Synovate's annual corporate reputation ranking and was among the best banks For the second consecutive year, DnB NOR qualified for inclusion in the Dow Jones World Sustainability Index and was thus among the top 10 per cent within its industry worldwide in terms of sustainability Fourth quarter Standard & Poor's ranked DnB NOR as the eleventh best capitalised bank among the 75 largest international banks worldwide DnB NOR's score in the annual Greenwich survey, measuring customer satisfaction in the large corporate segment, improved from 59 points in 2009 to 74 points in 2010 DnB NOR was ranked as one of the best banks in the category "home mortgages above NOK 2 million" by Dine Penger, a Norwegian personal finances magazine The banking group launched special home mortgages for young people The bank introduced 24/7 customer service 2010 2009 Pre-tax operating profits before write-downs (NOK million) 19 412 18 094 Profits for the year (NOK million) 11 685 6 139 Total assets at year-end (NOK billion) 1 638 1 616 Return on equity (per cent) 14.8 10.0 For a more detailed table of key figures, see page 110. Contents Directors' report ........................................................2 Balance sheet Note 29 Classification of financial instruments ........................... 69 Annual accounts ....................................................... 10 Note 30 Fair value of financial instruments at amortised cost ....... 71 Note 31 Financial instruments at fair value ................................ 73 Income statement .................................................................... 10 Note 32 Shareholdings ............................................................ 77 Balance sheet ........................................................................... 11 Note 33 Repurchase agreements and securities lending ……………….78 Statement of changes in equity ................................................... 12 Note 34 Securities recieved which can be sold or repledged ......... 79 Cash flow statement .................................................................. 13 Note 35 Commercial paper and bonds, held to maturity .............. 79 Accounting principles ................................................................. 14 Note 36 Investment properties ................................................ 81 Note 37 Investments in associated companies ............................ 82 Notes to the accounts Note 38 Investments in subsidiaries ......................................... 83 Note 1 Important accounting estimates and discretionary Note 39 Intangible assets ........................................................ 84 assessments .............................................................. 23 Note 40 Goodwill and intangible assets with Note 2 Changes in group structure........................................... 25 an indefinite useful life ................................................ 86 Note 3 Segments .................................................................. 26 Note 41 Fixed assets ............................................................... 89 Note 4 Capitalisation policy and capital adequacy ..................... 31 Note 42 Leasing ..................................................................... 91 Note 5 Risk management ...................................................... 35 Note 43 Other assets .............................................................. 92 Note 44 Deposits from customers for principal sectors ................ 92 Credit risk Note 45 Debt securities issued ................................................. 93 Note 6 Credit risk ................................................................. 37 Note 46 Subordinated loan capital and perpetual subordinated Note 7 Commitments for principal sectors ............................... 40 loan capital securities ................................................. 95 Note 8 Commitments according to geographical location ........... 42 Note 47 Provisions ................................................................. 97 Note 9 Impaired commitments for principal sectors .................. 46 Note 48 Other liabilities .......................................................... 97 Note 10 Write-downs on loans and guarantees ........................... 47 Note 11 Write-downs on loans and guarantees for principal Additional information sectors ...................................................................... 48 Note 49 Remunerations etc. .................................................... 98 Note 12 Developments in write-downs on loans and guarantees ... 49 Note 50 Information on related parties ................................... 102 Note 51 Off-balance sheet transactions, contingencies and Market risk post-balance sheet events ......................................... 105 Note 13 Market risk ................................................................ 50 Note 14 Interest rate sensitivity ............................................... 51 Signatures of the board members ............................................. 106 Note 15 Currency positions ...................................................... 51 Statement pursuant to the Securities Trading Act ........................ 107 Note 16 Financial derivatives ................................................... 52 Liquidity risk Auditor's report ...................................................... 108 Note 17 Liquidity risk .............................................................. 55 Control Committee's report ........................... 109 Income statements Note 18 Net interest income .................................................... 58 Key figures ................................................................. 110 Note 19 Interest rates on selected balance sheet items ............... 59 Note 20 Net commissions and fees receivable ............................ 60 Governing bodies ................................................... 111 Note 21 Other income ............................................................. 60 Note 22 Net gains on financial instruments at fair value .............. 61 DnB NOR Banks’ geographic presence .. 112 Note 23 Salaries and other personnel expenses ......................... 62 Note 24 Other expenses ......................................................... 62 Note 25 Depreciation and write-downs of fixed and intangible assets ........................................................ 62 Note 26 Pensions ................................................................... 63 Note 27 Number of employees/full-time positions ....................... 66 Note 28 Taxes ....................................................................... 67 DnB NOR Bank Annual Report 2010 1 Directors’ report 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. Pursuant to Section 3-9 of the Norwegian Accounting Act, DnB NOR Bank prepares consolidated annual accounts in accordance with IFRS, International Financial Reporting Standards, approved by the EU. The statutory accounts of DnB NOR Bank ASA have been prepared in accordance with Norwegian IFRS regulations. Operations in 2010 thus had no significant effect on the income statements and balance The DnB NOR Bank Group 1) recorded profits of NOK 11 685 million in sheets. The DnB NOR Bank Group is in the process of integrating DnB 2010, a major improvement from NOK 6 139 million in 2009. Higher NORD’s operations into the banking group. income and lower write-downs on loans had a positive effect on During 2010, the DnB NOR Bank Group stepped up customer and profits. Profit figures for 2010 also reflected non-recurring income. market activities, aiming to strengthen its market position in all Pre-tax operating profits before write-downs rose from NOK 18 094 segments. The market activities underpin the Group's vision and million in 2009 to NOK 19 412 million in 2010. values. DnB NOR climbed seven places in Synovate's annual cor- Net interest income rose by NOK 275 million or 1.2 per cent from porate reputation ranking in 2010, and was among the best banks. In 2009 to 2010. Lending volumes increased by 4.9 per cent from year- addition, DnB NOR improved its scores in other reputation and cus- end 2009 to end-December 2010, while deposits rose by 8.2 per cent tomer satisfaction surveys. Thus, the Group's reputation was from year-end 2009. Lending spreads remained unchanged from markedly enhanced during 2010. During the year, a new Internet 2009, but increased towards the end of 2010. Relative to the 3- portal was developed, and with effect from 1 January 2011, the month money market rate, deposit spreads widened by 0.02 per- Group's customer service phone is open 24