Norway's DNB beats forecasts as margin pressure eases

By Jagoda Darlak and Agnieszka Gosciak

Oct 21 (Reuters) - Norway's largest bank DNB reported better-than-expected third-quarter earnings on Wednesday, as pressure on margins eased and lending growth helped boost income despite strong competition across lending markets.

Its net profit fell 7.9% to 9.84 billion Norwegian crowns ($1.05 billion) in the July-to-September period, from 10.68 billion a year earlier. Analysts had expected 9.06 billion crowns on average, a poll compiled by the bank showed.

DNB has weathered a period of margin pressure driven by fierce competition across lending markets, even as Norway's central bank has resumed raising interest rates in response to persistent inflation.

Chief Financial Officer Rasmus T. Figenschou told a conference call that "pressure on margins due to competition was somewhat lower than in the previous quarter."

Chief Executive Kjerstin Braathen added, however, that the bank saw "no material change in the competitive landscape" and that competition remained strongest in retail banking and among small and medium-sized businesses.

DNB said it delivered lending growth across its businesses, while average lending spreads widened by 3 basis points quarter-on-quarter to 1.33%.

Net interest income, a key measure of lending profitability, fell to 15.50 billion Norwegian crowns in the quarter from 15.99 billion a year earlier, slightly below the 15.59 billion expected by analysts.

However, it rose 2.5% from the previous quarter due to repricing effects and higher interest on equity, as well as one additional interest day, the bank said.

Norway's central bank last month raised its policy interest rate by 25 basis points to 4.50% and said it may hike again to contain inflation.

The new rates will apply from November 29 for existing mortgages and deposits, DNB said, while the full effect of its July repricing measures has yet to be reflected in earnings.

Norway's annual core inflation rate remained at 3.0% year-on-year in September, Statistics Norway data showed earlier in October, supporting expectations that interest rates will stay elevated.

DNB's shares traded 1.9% higher at 0851 GMT.

($1 = 9.3951 Norwegian crowns)

(Reporting by Jagoda Darlak and Agnieszka Gosciak-Rabalska; editing by Matt Scuffham)