DNB has over the years grown to become of the most influential and respected companies in Norway. The financial conglomerate operates more business areas than ever before, housing approximately 4000 employees in their
three-building-complex headquarter located in “Barcode”, in the center of Oslo. The bank is ranked as the most wanted workplace for business graduates the last several years, in addition to dominating all entertainment channels in the country through sponsorships and events.
It is always hard to quantify a merger like this, as the evolution of the economy can determine whether a business is successful or not. However, what is certain, is the fact that the banking industry would have been dominated by large, international actors, have this merger not taken place.
As many other large corporations, DNB are in 2017 heavily
investing in technologic innovation. One of the main focus areas is their payment solution “VIPPS”, intensively competing with Danske Banks’s “Mobile Pay” for market shares. The app was downloaded 1,8 million times during the first year, and are now being used by 50 % of the adults in Norway. Even though DNB does not gain a profit on this solution yet, it clearly shows the kind of power and brand influence they have on the Norwegian consumers.
DNB Group generated in 2016 a profit of BNOK 19 251, with a share price at year-end of 128.40 and a cost per NOK income of 40,9 %. All figures are obviously a significant improvement from the estimation period in the analysis, but as we observe in the figure below, DNB’s market value has also had a relatively stronger development than their competitors in the years after the merger, indexed with a reference point of 100 as of December 31st, 2003.
This indicates a healthy development, as a result of many good decisions and probably also the choice of merging with the largest savings bank in 2003.
0 50 100 150 200 250 300 350 400
des. 03 aug. 04 apr. 05 des. 05 aug. 06 apr. 07 des. 07 aug. 08 apr. 09 des. 09 aug. 10 apr. 11 des. 11 aug. 12 apr. 13 des. 13 aug. 14 apr. 15 des. 15 aug. 16 apr. 17
Indexed performance
Nordea Danske Bank DNB Handelsbanken
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Table of figures
FIGURE 1-DNB’S HISTORY ... 5
FIGURE 2-DOT.COM BUBBLE ... 8
FIGURE 3-GDP GROWTH IN NORWAY AND OECD ... 27
FIGURE 4-UNEMPLOYMENT RATE NORWAY ... 27
FIGURE 5-MARKET SHARE OF NORWEGIAN BANKS (ASSETS UNDER MANAGEMENT) ... 34
FIGURE 6-MARKET SHARE OF NORWEGIAN BANKS (CUSTOMER DEPOSITS) ... 35
FIGURE 7-NUMBER OF SAVINGS BANKS IN NORWAY ... 36
FIGURE 8-NUMBER OF BRANCH OFFICES IN NORWAY ... 52
FIGURE 9-SWOT ANALYSIS ... 58
FIGURE 10-TOTAL ASSETS COMPARABLE COMPANIES FIGURE 11-INCOME COMPARISON ... 59
FIGURE 12-GROWTH IN CUSTOMER DEPOSIT ... 65
FIGURE 13-GROWTH IN CREDIT TO HOUSEHOLDS AND ENTERPRISES ... 65
FIGURE 14-GROWTH IN CUSTOMER LOANS ... 66
FIGURE 16-RETURN ON EQUITY (ROE) ... 72
FIGURE 17-KEY INTEREST RATE NORWAY ... 74
FIGURE 18-HISTORICAL INTEREST MARGIN ... 75
FIGURE 18-NON-PERFORMING LOANS ... 75
FIGURE 19-HISTORICAL RAW BETA DNB ... 84
FIGURE 20-SHARE DEVELOPMENT AROUND THE ANNOUNCEMENT ... 91
FIGURE 21-STOCK PRICE DEVELOPMENT SEPT.02-MARCH.03 ... 93
FIGURE 22-MARKET VALUE SENSITIVITY ... 93
FIGURE 23-ACCUMULATED SYNERGIES ... 95
FIGURE 24-REPORTED COST SAVINGS ... 96
FIGURE 25-REPORTED STAFF CUTS ... 97
FIGURE 26-PLANNED VS ACTUAL COST SAVINGS ... 98
FIGURE 27-RESTRUCTURING COSTS ... 99
FIGURE 28-NORMALIZED PROFITABILITY ... 100
FIGURE 29-LENDING VOLUME AND INTEREST RATE MARGIN ... 101
FIGURE 30–WAGE- AND PERSONNEL COST ... 102
FIGURE 31-EDB COST DEVELOPMENT ... 102
FIGURE 32-INCOME AND OPERATING MARGIN 2002 ... 103
FIGURE 33-INCOME DEVELOPMENT ... 104
FIGURE 34-OPERATING MARGIN DEVELOPMENT ... 105
FIGURE 35-INDEXED OPERATING MARGINS ... 106
Tables
TABLE 1-RISK WEIGHT OF ASSET CLASSES UNDER BASEL I ... 23
TABLE 2-RESOURCE ANALYSIS OVERVIEW ... 43
TABLE 3-SALES CHANNEL VS COST PER TRANSACTION IN THE US BANKING SECTOR ... 45
TABLE 4-FINANCIAL RESOURCES AND PROFIT DEVELOPMENT OF DNB AND GNO ... 46
TABLE 5-CUSTOMER SATISFACTION OF NORWEGIAN BANKS 2002/03 ... 48
TABLE 6-CUSTOMER LOYALTY NORWAY ... 48
TABLE 7-HISTORICAL LOSSES DNB,GNO,NORDEA ... 62
TABLE 8-DEPOSIT-TO-LOAN RATIO ... 64
TABLE 9-NET CUSTOMER LOAN AS A PERCENTAGE OF ASSETS ... 66
TABLE 10-SOLVENCY:CAPITAL ADEQUACY RATIO (CAR) ... 67
TABLE 11-LOAN PORTFOLIO DNB ... 68
TABLE 12-LOAN PORTFOLIO GNO ... 69
TABLE 13-LOSSES AS A PERCENTAGE OF NET LOANS ... 70
TABLE 14-LEVERAGE RATIO OVERVIEW ... 71
TABLE 15-EARNINGS PER SHARE (EPS) OVERVIEW ... 72
TABLE 16-GROWTH VARIABLES -INCOME STATEMENT ... 76
TABLE 17-GROWTH IN DEPOSITS AND LOANS ... 77
TABLE 18-DNB FORECASTED INCOME STATEMENT ... 78
TABLE 19-GNO FORECASTED INCOME STATEMENT ... 79
TABLE 20-DNB FORECASTED BALANCE SHEET ... 79
TABLE 21-GNO FORECASTED BALANCE SHEET ... 80
TABLE 22-HISTORICAL DIVIDEND POLICY ... 81
TABLE 23-FREE CASH FLOW TO EQUITY (FCFE) ... 81
TABLE 24-COST OF EQUITY ... 85
TABLE 25-DISCOUNTED CASH FLOW MOTEL -ENTERPRISE VALUE CALCULATION ... 86
TABLE 26-PEER MULTIPLE COMPARISON ... 88
TABLE 27-EQUITY PER SHARE ... 89
TABLE 28-ENTERPRISE VALUE METHOD COMPARED ... 89
TABLE 29-MARKET VALUE PER 12.03.2003 ... 92
APPENDIX
APPENDIX 1–DNBINCOME STATEMENT ... 124
APPENDIX 2-DNBBALANCE SHEET ... 125
APPENDIX 3-GJENSIDIGE INCOME STATEMENT ... 126
APPENDIX 4-GJENSIDIGE BALANCE SHEET ... 127
APPENDIX 5-HISTORICAL GROWTH VARIABLES ... 127
APPENDIX 6-ASSET UNDER MANAGEMENT AND TOTAL INCOME COMPARISON ... 128
APPENDIX 7–HISTORICAL RETURN ON EQUITY ... 128
APPENDIX 8-SICK ABSENCE REPORT ... 129
APPENDIX 9-OVERVIEW COMMERCIAL VS SAVINGS BANKS - CUSTOMER DEPOSITS ... 130
APPENDIX 10–INCOME DEVELOPMENT AND OPERATING MARGIN POST-MERGER ... 131
APPENDIX 11-TABLE OF SYNERGIES PER BUSINESS AREA ... 132
Appendix 1 – DnB Income statement
Appendix 2 - DnB Balance sheet
Appendix 3 - Gjensidige Income statement
Appendix 4 - Gjensidige Balance sheet
Appendix 5 - Historical growth variables
Customer deposits
Growth 1999 2000 2001 2002
DnB 58,04 % 2,65 % 9,20 % 45,50 % GNO 31,32 % 6,74 % 9,77 % 13,38 %
Customer loans
Growth 1999 2000 2001 2002
DnB 23,87 % 11,36 % 8,91 % 1,28 % GNO -0,95 % 8,07 % 10,57 % 7,37 %
Appendix 6 - Asset under management and total income comparison
Appendix 7 – Historical return on Equity
Appendix 8 - Sick absence report
Appendix 9 - Overview commercial vs savings banks - customer deposits
Commercial banks 1998 1999 2000 2001 2002
Den norske Bank 108 139 170 900 175 430 191 575 278 748 Kreditkassen (Nordea) 78 238 91 946 106 468 104 332 190 917
Fokus Bank 22 694 23 243 27 622 26 848 49 691
BNbank 6 261 7 222 8 821 10 488 33 362
Nordlandsbanken 8 079 8 927 9 542 11 140 24 177 VÅR Bank (Bank 1 Oslo) 10 166 10 453 8 895 9 396 13 390
Finansbanken 5 853 5 604 8 381 7 421 13 537
239 430 318 295 345 159 361 200 603 822
Growth 32,94 % 8,44 % 4,65 % 67,17 %
Savings banks 1998 1999 2000 2001 2002
SPAREBANKEN NOR (GNO) 70250 92 252 98 468 108087 122544
SPAREBANK 1 SR-BANK 16 547 18 045 21 022 22900 26716
SPAREBANK 1 NORD-NORGE 14 277 14 504 17 402 18499 20249
SPAREBANK 1 VEST 14 665 15 788 17 828 19410 19082
SPAREBANK 1 MIDT-NORGE 13 687 15 253 17 374 17913 22257
SPAREBANKEN MØRE 8 102 9 764 10 504 11774 12274
SPAREBANKEN HEDMARK 9 442 10 394 11 515 13063 13895
SPAREBANKEN SØR 7 101 7 527 9 147 9189 10363
SPAREBANKEN PLUSS 3 948 4 357 5146 5719 6786
158 019 187 884 208 406 226 554 254 166
Growth 18,90 % 10,92 % 8,71 % 12,19 %
Appendix 10 – Income development and operating margin post-merger