Europe's safest bank sees investors lining up for bail-in bonds

The European bank with the most capital relative to total assets is DNB ASA of Norway. That pedigree will make it easier to sell a new kind of senior debt that’s designed to absorb losses if issuers get into trouble, according to the bank.

“We don’t think that will be a big challenge or problem for DNB due to the fact that we are so solid compared to other banks,” Chief Executive Officer Rune Bjerke said in an interview in Oslo. “And we know that demand for all kind of DNB papers in the market is very strong.”
 

Norway isn’t part of the European Union and generally implements EU rules later than members. That means Norwegian banks haven’t yet been told by authorities how to fill so-called minimum requirements for own funds and eligible liabilities (MREL), which is part of a set of rules intended to protect taxpayers known as the Bank Recovery and Resolution Directive. For the most part, European banks are expecting to have to fill MREL with so-called senior non-preferred notes.

“Right now we’ve had no requirements related to this from the Norwegian FSA so this will be a regulatory issue between us and the regulator according to what’s European law,” Bjerke said. “We have no near-term plans to issue such kind of papers.”

In the meantime, DNB is looking for ways to use its extra cash. The bank has doubled its payout ratio over the past half decade, and returned a record amount to shareholders for 2017.

Bjerke said DNB’s cash dividend “should be at least 50 per cent and it should it be so that the nominal cash pay-out should increase year by year.”

“First and foremost we will pay out more than 50 per cent as a cash dividend and the target is to pay out more for 2018 than we paid out for 2017,” he said. “Buybacks will be used to optimize the capital structure.”

The CEO says the level of any buyback “will depend upon currency fluctuations, growth opportunities and how we look at the future.”