DNB’s ratings are driven by its strong franchise as the leading financial services provider in Norway. The group has demonstrated the ability to generate resilient earnings capable of absorbing higher-than-average loan impairments stemming from the oil-related sector while strengthening its capital position to meet relatively stringent solvency requirements. Further, Scope sees management proactively addressing challenges such as increasing competition from non-bank players and lower switching costs to reinforce the group’s leading position.

The operating environment is expected to be supportive as Norway benefits from solid economic growth, low unemployment and high wealth levels, although the high level of personal indebtedness and elevated property valuations remain concerns. DNB has guided to more normalised loan loss provisions of around 17bps in 2018-2019.

While DNB has a material reliance on market funding, Scope acknowledges the group’s good market access and the growing use of covered bonds.

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