“Staying ahead of the changes”
GROUP CHIEF EXECUTIVE’S STATEMENT
DNB has embarked on a comprehensive and exciting change journey, and 2018 was yet another eventful year on our way to becoming an even more future-oriented bank. We took a number of active steps to keep the bank at the forefront of the changes we see in the world around us. We are constantly facing new regulations, new competition and increasing expectations from our customers. 2018 was the year when we combined Norwegian and world-leading financial technology in the payment app Vipps. It was the year when DNB and SpareBank 1 Gruppen joined forces in the field of insurance. It was the year when DNB took the position as Scandinavia’s largest bank.
The financial services industry has always been subject to change and innovation. In fact, several of the greatest innovations of our time have been developed in the financial services industry, such as the ATM, the payment card and the Internet bank. Change is nothing new. However, the pace of the changes is new. I dare say that more has happened in the last five years than in the previous decade.
If we are to meet the growing competition generated by digitalisation, we have to think differently. This means investing more in IT, focusing more on skills enhancement and employee development, developing new, effective and customer-friendly solutions, as well as finding other ways of working. Our IT investments have never been higher than in 2018, and we do not expect them to be any lower in 2019. In previous years, we have spent far too much on severance packages in connection with organisational changes. In future, we will invest in skills enhancement and employee development. We do this, among other things, through our internal Data Scientist programme, in which 15 of our employees in 2018 were given the opportunity to become skilled data analysts.
One year after the launch of the new Group strategy, the pace of change has stabilised. The bank’s employees have submitted more than 600 proofs that we, through our new strategy, have started using new ways of working in our quest to create the best customer experiences. The direction is set, now it is all about delivering results and experiences in line with the strategy.
One example of a new way of working is partnerships. The Norwegian financial services industry has deep and long-standing traditions of cooperation, demonstrated both through the BankID and BankAxept solutions, and more recently through the payment app Vipps. In 2018, the merger agreement between the three companies was approved by the Norwegian authorities. With more than 3.1 million users in Norway, and world-leading payment infrastructure and identification technology, the groundwork is laid for Vipps becoming a Norwegian export success story. At the end of last year, it was announced that Vipps plans to partner with the Chinese technology giant Alipay in order to expand to several European countries. The goal is that, before long, it will be possible to use Vipps in Europe, for instance to buy ice cream on the beach in Spain.
I would also like to highlight two other partnerships we have entered into in the past year. DNB’s insurance company DNB Forsikring has teamed up with SpareBank 1 Gruppen’s non-life insurance company to form Fremtind – a non-life insurance company that already has a strong position in the Norwegian market. Fremtind aims to become the country’s leading player within non-life insurance. I am convinced that merging the knowledge and expertise held by these two companies will lead to even better services for our customers in the time to come.
We also signed an agreement with the British fintech company 11:FS in 2018, to establish the joint company 11:FS Foundry. The goal is that 11:FS Foundry, from its base in London, will build a new bank architecture from scratch. A new architecture, which in the future will make it even easier to frequently deliver new services to our customers. The cooperation with 11:FS is an exciting opportunity both for DNB and for our customers.
In 2018, we decided to reduce our ownership interest in the Baltic banking group Luminor, and together with the American Private Equity company Blackstone, we will continue to develop Luminor in the best interest of all the bank’s customers.
The mobile savings application Spare led to a boost in the savings field in 2018. After a successful launch in 2017, where tens of thousands of customers downloaded the app, we had 320 000 active users by year-end 2018. The Spare app has become our most important sales channel for equity funds. This provides a great starting point for continuing our focus on savings initiatives. We aim to help our customers save money and realise their dreams, and we are looking forward to all the new products to be introduced in the course of 2019.
In addition to developing new and innovative products, it is also important to optimise and develop our core business. Our chat robot Aino can talk to 3 000 customers at the same time, and is becoming better and better with every customer who is helped, as a result of machine learning. At the same time, our internal efficiency program DigiDrift is daily leading to new simplifications of the manual processes – we have employed robots in as many as 35 processes so far, and there are more to come. This is a development that we welcome, and which we expect to accelerate in the years to come.
The year 2018 confirmed the importance of compliance. Other banks’ challenges and lack of control in the Baltic States have placed anti-money laundering high on the agenda. Compliance and anti-money laundering efforts are also highly prioritised in DNB – as they have been for many years, and will be in the time ahead.
By the end of 2018, DNB had become Scandinavia’s largest bank in terms of market value. This would not have been possible without the long-lasting and outstanding efforts of 10 000 DNBers, which I have the privilege of representing. But we must beware of becoming bigheaded. Our size means nothing if we are unable to create the best customer experiences.
We are also closer to the Group’s overriding financial target – a return on equity above 12 per cent. For 2018, the return on equity was 11.7 per cent, compared with 10.4 per cent in 2017. We stand by our intention of reaching our target in the course of 2019.
Our strong capital level is a result of several years of systematic and targeted work. DNB has built up in excess of NOK 100 billion in common equity Tier 1 capital since 2007. This makes us well-positioned to meet future regulations, and to a greater extent allows us to focus on creating even more value for our owners, employees, customers and society at large.
Every day, DNB creates value that is channelled back to society. In fact, more than half of the money we earn goes back to the community through dividends, share repurchases and share price appreciation, in addition to the taxes and fees that we pay. A nice thought.
Players in the business community also play a role in society. As does DNB. Being Norway’s largest bank involves a great deal of social responsibility. This role requires us to participate in the social debate, contribute to the restructuring of Norway and help solve the challenges, big or small, faced by the business community as well as private individuals. We are continuously working to integrate corporate responsibility in our processes. For instance by including corporate responsibility assessments in credit proposals, but also through our efforts to ensure diversity and equality. Although we are well on the way, this is important work that is far from completed.
We have chosen to endorse the United Nation’s Sustainable Development Goals. The world around us is constantly changing, and this is something we need to acknowledge. We have identified goal number five on gender equality, and goal number eight on decent work and economic growth, as the areas where we have the best chance of making a difference. In 2018, the SHE Index appointed DNB as Norway’s leading company in terms of gender equality. Even though this is a highly motivational appointment, there is no time for complacency. In future, we will not only work towards ensuring that both genders are well represented, we will also employ people of different ages, social backgrounds and ethnicities. Businesses that do not mirror their customers will lag behind. Diversity ensures development and is vital for all businesses.
In 2019, we will continue to deliver new and innovative services to our customers. Our employees put in a tremendous effort every single day. Whether they face competitors, regulations or other challenges. Nevertheless, the most important thing will always be the efforts we make for our customers. Both physically and on the phone. On the Internet and on the mobile. They are the ones we are here for.
We look forward to continuing our change journey.
We are here. So you can stay ahead.
Group chief executive
“Transparency builds trust”
CHAIR OF THE BOARD OF DIRECTORS’ STATEMENT
Globalisation, new technology and expectations from customers and society require DNB to change. But even though many of our operations are continuously changing in step with our surroundings, some things remain unchanged. Stand firm. Like the fact that a particular responsibility rests with, and a set of expectations are attached to, being the largest bank in Norway – and now also in Scandinavia.
DNB is not only a solid bank and a major financial player, but also an important part of society. How DNB acts, has a great impact on society. Whether in the role as provider of an effective and robust financial infrastructure, or as a lender, manager of our customers’ values, combatant of financial crime, adviser, investor or provider of other financial services. Not to mention in the role as employer for more than 9 000 employees and as a major purchaser of goods and services. DNB therefore plays an important role in society.
This involves a great deal of responsibility. To deliver on our purpose, and to be a company that succeeds with value creation now and in the future, it is crucial that we at the same time safeguard the interests of society.
DNB will create value for all its stakeholders. For customers, owners, employees and society at large. We must make sure that our customers know that we offer great products, services and advice. That our owners trust that the bank is able to evaluate risks and opportunities in order to create value. That our employees feel that they are part of something bigger and understand the ripple effects of DNB’s activities. Our surroundings expect us to contribute positively to society and to remain a solid financial institution.
The bank’s most important asset is not capital, but trust. Banks and financial institutions depend on trust to be able to operate. A bank without trust will no longer be able to deliver on its purpose. How we create value, and how we manage this trust, is therefore the very core of our corporate responsibility.
The trust of those around us gives us influential power. Being a responsible financial player is also about setting demands and expectations for our surroundings. Together we can make a positive contribution. We are conscious of the fact that capital provides an opportunity and a responsibility to influence.
DNB’s various roles and functions are associated with a range of expectations and requirements. Nevertheless, we must ensure that there is consistency between our different roles and between our attitudes and actions. We cannot set higher requirements for other companies than we ourselves are able to meet, without losing people’s trust. Integrity and credibility are essential for our ability to influence.
Issues related to sustainability and corporate responsibility are increasingly becoming the focus of attention. There are greater demands for reporting and transparency. And this serves society well. Because transparency builds trust, and it has been documented that there is a positive correlation between trust, sustainability and profitability. Players who are conscious of these issues, and who are also quick to adapt to the changes in their surroundings, will have a competitive advantage. Corporate responsibility is a premise for succeeding with long-term value creation and should, as such, be integrated in the company’s strategy. Corporate responsibility is one of the four pillars of DNB’s strategy. And a highly prioritised area in the Group.
Beyond efforts to integrate corporate responsibility into the core business, DNB also has ambitions to strengthen our position within selected strategic areas. We have chosen to focus on helping our customers manage their own finances, ensuring that we have a robust and effective financial infrastructure and helping more startups succeed. In addition, we want to contribute to a safe digital economy and to combating widespread social problems such as undeclared work, corruption and other financial crime.
But nobody can succeed on their own. The challenges associated with ensuring a sustainable society are global. If we are to succeed in contributing to a sustainable development nationally and internationally, good business partners are essential. For example, in 2018, we joined the UN Global Compact Business Action Platform for the Ocean, where the academic world, the business community, authorities and organisations across industries and countries work together for a sustainable development of the ocean industries. In addition, we joined the Responsible Ship Recycling Initiative (RSRS), where DNB and other international banks are contributing to a more responsible practice for ship breaking.
The winners of tomorrow will be the companies that over time manage to create value for their stakeholders in a sustainable manner. DNB has very high ambitions in this area. It is a privilege to be in a position to influence. This is something DNB will capitalise on, both now and in the future.
Chair of the Board