DNB Bank A company in the DNB group Annual report 2019 Financial highlights Income statement DNB Bank Group Amounts in NOK million 2019 2018 2017 2016 2015 Net interest income 39 908 37 388 35 914 34 517 35 535 Net commissions and fees 6 618 6 605 5 884 5 634 5 956 Net gains on financial instruments at fair value 3 173 1 351 4 513 6 506 8 704 Other operating income 2 482 2 522 2 029 3 176 2 248 Net other operating income, total 12 272 10 478 12 425 15 316 16 909 Total income 52 181 47 866 48 339 49 833 52 444 Operating expenses (21 952) (20 681) (20 801) (19 892) (20 275) Restructuring costs and non-recurring effects (326) (565) (1 128) (624) 1 084 Pre-tax operating profit before impairment 29 903 26 620 26 410 29 317 33 253 Net gains on fixed and intangible assets (33) 529 735 (19) 45 Impairment of financial instruments (2 191) 139 (2 428) (7 424) (2 270) Pre-tax operating profit 27 678 27 288 24 718 21 874 31 028 Tax expense (4 825) (4 976) (4 903) (3 964) (7 755) Profit from operations held for sale, after taxes (49) (204) (1) 4 (51) Profit for the year 22 805 22 109 19 813 17 914 23 222 Balance sheet DNB Bank Group 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. Amounts in NOK million 2019 2018 2017 2016 2015 Total assets 2 470 640 2 307 710 2 359 860 2 348 272 2 315 603 Loans to customers 1 671 350 1 598 017 1 531 345 1 492 268 1 531 932 Deposits from customers 977 530 940 087 980 374 945 694 957 322 Total equity 229 619 207 933 203 685 190 078 173 412 Average total assets 2 564 525 2 434 354 2 537 681 2 545 103 2 662 039 Key figures DNB Bank Group 2019 2018 2017 2016 2015 Return on equity, annualised (per cent) 1) 11.1 11.5 10.5 10.3 15.1 Combined weighted total average spread for lending and deposits (per cent) 1) 1.33 1.30 1.30 1.32 1.33 Average spread for ordinary lending to customers (per cent) 1) 1.84 1.94 2.07 2.04 2.17 Average spread for deposits to customers (per cent) 1) 0.51 0.29 0.17 0.21 0.01 Cost/income ratio (per cent) 1) 42.7 44.4 45.4 41.2 36.6 Ratio of customer deposits to net loans to customers at end of period 1) 58.5 58.8 64.0 63.4 62.5 Net loans and financial commitments in stage 2, per cent of net loans 1) 6.65 6.96 Net loans and financial commitments in stage 3, per cent of net loans 1) 1.09 1.45 1.13 1.67 0.91 Impairment relative to average net loans to customers (per cent) 1) (0.13) 0.01 (0.16) (0.48) (0.15) Common equity Tier 1 capital ratio at year-end (per cent) 18.3 17.3 16.6 17.7 15.9 Leverage ratio (per cent) 7.2 7.4 6.9 7.1 6.4 Number of full-time positions at year-end 8 614 8 597 8 544 10 366 10 608 1) Defined as alternative performance measure (APM). APMs are described on ir.dnb.no. Contents – annual accounts Directors' report .................................................................................... 2 Balance sheet Note 26 Classification of financial instruments ........................................ 71 Annual accounts Note 27 Fair value of financial instruments at amortised cost ................. 73 Income statement ........................................................................................... 9 Note 28 Financial instruments at fair value .............................................. 75 Comprehensive income statement ................................................................ 10 Note 29 Offsetting .................................................................................... 81 Balance sheet ................................................................................................ 11 Note 30 Shareholdings ............................................................................. 82 Statement of changes in equity ..................................................................... 12 Note 31 Transferred assets or assets with other restrictions .................. 83 Cash flow statement ...................................................................................... 14 Note 32 Securities recieved which can be sold or repledged .................. 84 Note 33 Investment properties ................................................................. 84 Notes to the accounts Note 34 Investments accounted for by the equity method ........................85 Note 1 Accounting principles .................................................................. 15 Note 35 Investments in subsidiaries ........................................................ 86 Note 2 Segments .................................................................................... 24 Note 36 Intangible assets ........................................................................ 87 Note 3 Capitalisation policy and capital adequacy ................................. 26 Note 37 Fixed assets ................................................................................ 90 Note 38 Leasing ....................................................................................... 92 Credit risk Note 39 Other assets ............................................................................... 93 Note 4 Credit risk management ............................................................... 30 Note 40 Deposits from customers by industry segment .......................... 93 Note 5 Measurement of expected credit loss .......................................... 32 Note 41 Debt securities issued ................................................................ 94 Note 6 Credit risk exposure and collateral .............................................. 37 Note 42 Subordinated loan capital and perpetual Note 7 Credit risk exposure by risk grade ............................................... 41 subordinated loan capital securities ........................................... 96 Note 8 Impairment of financial instruments ............................................ 43 Note 43 Other liabilities ............................................................................ 97 Note 9 Development in gross carrying amount and maximum Note 44 Equity ........................................................................................... 97 exposure ...................................................................................... 44 Note 10 Development in accumulated impairment of financial Additional information instruments .................................................................................. 46 Note 45 Remunerations etc. .................................................................... 98 Note 11 Loans and financial commitments to customers by industry Note 46 Information on related parties .................................................. 105 segment ....................................................................................... 50 Note 47 Contingencies .......................................................................... 106 Market risk Statement pursuant to the Securities Trading Act ....... 107 Note 12 Market risk ................................................................................... 53 Note 13 Interest rate sensitivity ................................................................ 54 Auditor's report ................................................................................. 108 Note 14 Currency positions ...................................................................... 54 Note 15 Financial derivatives and hedge accounting ................................ 55 Governing bodies ............................................................................ 113 Liquidity risk Note 16 Liquidity risk ................................................................................. 59 Income statements Note 17 Net interest income ..................................................................... 62 Note 18 Interest rates on selected balance sheet items .......................... 63 Note 19 Net commission and fee income ................................................. 63 Note 20 Net gains on financial instruments at fair value .......................... 64 Note 21 Salaries and other personnel expenses ..................................... 64 Note 22 Other expenses .......................................................................... 65 Note 23 Depreciation and impairment of fixed and intangible assets ...... 65 Note 24 Pensions ...................................................................................... 66 Note 25 Taxes ........................................................................................... 68 DNB BANK – ANNUAL REPORT 2019 / 1 Directors’ report The DNB Bank Group is part of the DNB Group 1). The DNB Group, hereinafter called DNB, is Scandinavia’s largest financial services group. DNB offers a full range of financial services, including loans, savings, advisory services, real estate broking, insurance and pension products for retail and corporate customers and the public sector. The banking group serves customers in Norway through its customer service centres, online banking services and branch offices. 1 Operations in 2019 Net interest income The banking group recorded profits of NOK 22 805 million in 2019, Amounts in NOK million 2019 2018 up NOK 696 million, or 3.1 per cent, compared with 2018, driven by Lending spreads, customer segments 28 096 28 152 higher net interest income. Deposit spreads, customer segments 4 808 2 742 Return on equity was 11.1 per cent, compared with 11.5 per Amortisation effects and fees 3 369 3 200 cent in the year-earlier period. Operational leasing 1 731 1 525 Resolution fund fee and deposit The common equity Tier 1 (CET1) capital ratio was 18.3 per guarantee fund levy (1 106)