DNB’s ratings are driven by its strong franchise as the leading financial services provider in Norway. For some time, management has been proactively addressing the challenges stemming from digitalisation to sustain the group’s dominant market position. DNB is investing more in IT, creating new customer-friendly solutions and pursuing initiatives to develop new sources of non-interest income.

The group consistently generates robust earnings capable of absorbing loan impairments from more cyclical energy and shipping related exposures. At the same time, DNB continues to strengthen its capital position via earnings and active balance sheet management in order to meet relatively stringent solvency requirements. As of 1Q 2019, the group’s CET1 capital and leverage ratios were 17.2% (Basel III basis) and 7%, respectively.

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

The operating environment is expected to be supportive as Norway benefits from solid economic growth, low unemployment and high wealth levels. The economy continues to recover from the impact of the 2014-2016 decline in oil prices, with investments in the oil and gas sector projected to continue increasing this year. Meanwhile, the high levels of personal indebtedness and elevated property valuations remain concerns.

Download the rating report here.