Norway’s largest bank DNB earned just over NOK 50 billion in 2023. The result is the highest ever for DNB. The background is all the interest rate increases we have seen in the last two years. Banks, not just DNB, make more money when interest rates rise. Let me explain how this fits together. Customers obviously pay more in kroner and øre in interest on their loans when interest rates rise. But that is not what this is about: This is about what are called interest margins. Between the deposit and lending rates lies the money market rate. The money market rate is the price banks pay to borrow money from each other. Between the interest rate on lending and the money market rate, and between the interest rate on deposits and the money market rate, lies what is called an interest margin – that is, the money the bank takes in between. Margins are the business model itself. The bank makes money by charging a slightly higher interest rate on mortgages than the money market interest rate, and by giving a slightly lower interest rate on the deposit rate. Therefore, the banks’ interest rate on deposits is mostly below, while the lending rate is above. This is the banks’ business model. The large profit from DNB is therefore linked to the fact that they have raised the interest rate on mortgages as much as the interest rate increases from Norges Bank, while at the same time that they have not raised the interest rates on deposits as much. This also increases what is called net interest income. Therefore, it is perhaps a little surprising that DNB now has a lower interest margin on lending than when Norges Bank started raising interest rates two years ago. At the same time, the margin on deposits has increased. Thus, it is actually the deposit customers who “suffer” the most, relatively speaking. Could have chosen not to raise as much One can still criticize the banks for taking advantage of lending customers. Among other things, the Consumer Council has repeatedly pointed out that the banks could choose not to raise the lending rate as much as Norges Bank, now that people really know what a sloppy bank account is. They could, for example, see it as part of their social responsibility, some believe. Still, let there be no doubt: running a bank is no charity project. The banks have owners, and DNB is a listed company with many small and large shareholders. Shareholders demand a return on their investment, either in the form of dividends or in the form of an increase in the value of the shares they own. Everyone wants to earn as much as possible. The Norwegian state is the largest owner of DNB, with a share of over 30 per cent. It is occasionally pointed out, somewhat naively, that perhaps the state could have intervened. It should have worked out. It is questionable whether any of the other owners would sit and own together with the state if, for example, Minister of Industry and Trade Jan Christian Vestre were to intervene and ask DNB to reduce lending rates and thus make less money. That’s simply not how it works in the financial market. Kjerstin Braathen’s job is to ensure that DNB earns as much money as possible, within the bank’s ethical guidelines. Vote with your feet! So there is only one option left: you and me. Are you dissatisfied and feel ripped off by your bank; change bank! Just vote with your feet and leave it. The Consumer Council rightly points out that there are a number of complicating elements, such as, for example, that customers are locked into banks because, among other things, there is a requirement for a salary account in the bank when taking out a mortgage. It makes it more difficult to change banks, and people perceive it as more of a “pes”. But impossible? Far from. This is about being willing to take action yourself. The DNB boss said at the quarterly presentation on Wednesday that DNB must fight for its customers, and that it is important to her that people are customers because it is worth it – not because it is difficult to switch. It is an invitation that more Norwegian bank customers should take to heart, regardless of which bank you are with.
ttn-69
It is clear that she will make money – Statement
