OSLO, Feb 6 (Reuters) - DNB, Norway's biggest bank, beat all expectations with its fourth-quarter earnings on Thursday and sharply increased its dividend as loan losses virtually evaporated.
State-controlled DNB said its quarterly pretax operating profit rose 54 percent to 6.86 billion crowns ($1.10 billion), well above the consensus estimate of 5.74 billion crowns in a Reuters poll. Loan losses were less than a tenth of the market's forecast.
DNB proposed a dividend of 2.7 crowns per share, more than the 2.43 crowns expected, but warned it still needed to build capital as regulators force banks across the Nordics to add more reserves.
"Over the past twelve months, DNB has increased its tier 1 capital by 12.4 billion crowns," it said. "A further increase of more than 40 billion crowns will be required towards 2016."
DNB is among the best capitalised banks in Europe and survived the global financial crisis relatively unharmed, but Norway's regulators, keen to avoid the banking collapse of the 1990s, are asking for even more reserves.
The new capital rules have forced the bank to rein in its dividend plans. It expects to pay shareholders just 25 percent of profits through 2016, before returning to a 50 percent pay-out ratio.
The bank reported a return on equity of 13.2 percent for the full year, well above its long-term target of above 12 percent.
For "the period ahead", the bank said, lending volume would grow by 3 to 4 percent, picking up from late 2013, while volume-weighted spreads were seen either stable or rising. ($1 = 6.2428 Norwegian krones) (Reporting by Balazs Koranyi; editing by Terje Solsvik and Tom Pfeiffer)