DnB NOR seeks more capital

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Norway’s biggest bank, DnB NOR, announced on Friday what analysts and the media had been expecting for weeks: A new stock issue aimed at boosting the bank’s balance sheet and its ability to lend more money.

The bank’s board of directors is proposing a capital expansion of NOK 14 billion (around USD 2.4 billion). News site e24.no reported that the bank holding company’s total market value when trading ended Thursday was, by comparison, NOK 85.3 billion.

The new stock issue is thus considered huge, but DnB NOR’s chief executive, Rune Bjerke, insisted there’s no emergency. Rather, Bjerke claimed, the new capital will place DnB NOR in the top ranks of banks around the world.

“After this, the quality of our capitalization will be absolutely prime,” Bjerke said.

The Norwegian state has been among DnB NOR’s largest shareholders since bailing out the bank during a crisis in the early 1990s. State officials have agreed to pump nearly NOK 5 billion of the newly sought capital into the bank, thus maintaining the state’s holding at 34 percent.The stock issue also has won support from DnB NOR’s other largest shareholders which, together with investment banks, have guaranteed the issue. If other investors don’t buy the new stock, they will.

Bjerke, who has close ties to Prime Minister Jens Stoltenberg, claimed that DnB NOR has remained “solid” throughout the recent global finance crisis and has continued to deliver profits. The bank has not sought funding from a state program set up earlier this year to help Norwegian banks prop up lending capacity.

Boosting capital through the new stock issue will, however, increase the bank’s ability “to meet our customers’ financial needs in the future,” he said.

It will also better position the bank to meet higher capital requirements in the banking sector, the bank noted in a prepared statement.

DnB’s stock jumped on the news, up 6.79 percent to NOK 68.40 by mid-day.