July 12, 2018 / 9:15 AM / 6 days ago

UPDATE 1-Norwegian bank DNB's Q2 earnings fall short of expectations, shares drop

(Adds share, detail, comments)

By Gwladys Fouche and Lefteris Karagiannopoulos

OSLO, July 12 (Reuters) - Norway’s DNB, the country’s largest bank, reported second-quarter earnings below expectations on Thursday, partly due to a weak performance in its trading operations, sending its shares lower.

DNB said second-quarter net profit totalled 6.08 billion crowns ($751 million), up from 5.2 billion crowns in the same period a year earlier, but below expectations in a Reuters poll of analysts for 6.2 billion crowns.

In recent months, the bank had benefited from an upturn in the Norwegian economy and particularly in its crucial oil sector, with a number of successful restructurings completed.

But the positive news was outweighed on Thursday by concerns over the performance of the bank’s trading operations and a fall in the lending spread of 12 basis points in the quarter due to a higher NIBOR, the Norwegian interbank offered rate.

The bank’s shares were down 4.43 percent at 0852 GMT, lagging an Oslo benchmark index down 0.59 percent.

The trading business saw lower revenues in the quarter, with the division it now reports under, called “Other Operations”, seeing revenues down 44 percent year-on-year.

“A mixed revenue picture takes the gloss off, with higher NIBOR hitting NII (net interest income) and a weak trading performance,” said Jefferies analyst Kapilan Pillai in a note to clients. Jefferies has a “Buy” rating on the stock.

The bank’s net interest income came in at 9.0 billion crowns in the quarter, roughly flat year-on-year and slightly below expectations for 9.1 billion crowns in the poll.

Another analyst said he expected the share price to turn later in the day because the bank was performing well overall.

“It is an over-reaction at this moment, we do not see any major weakness in the figures, there are no major surprises in the quarter,” said Norne Securities’ Zilvinas Jusaitis.

$1 = 8.0949 Norwegian crowns Editing by Susan Fenton and Mark Potter

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