Creating value

Long-term profitability is the underlying premise for everything we do. To reach these goals, we must continue to improve, develop and streamline our current operations, while actively phasing out the activities that are no longer profitable. These types of changes are essential in order to position ourselves for the future, but the traditional business activities will continue to be the main contributor to the financial results for the foreseeable future. We must acquire some of the strengths of our new competitors, and this means implementing fundamental changes and making tough decisions.

WHAT DID WE DO IN 2018?

We delivered a good result in 2018, and we are well underway with the changes that we have to implement.

At the start of 2018, we established a new Group management team. The new structure was finalised during the spring, and in the autumn, we could already see results in the form of improved internal processes, faster product development and better customer experiences. The four priority areas are constantly being filled with more content and serve as important guidelines for prioritising scarce resources.

Under the headline of increased innovative power, we initiated several exciting projects, with the launch of DNB Puls (described in more detail here) as a prominent example. New technology and new ways of working provide gradual improvements and increasingly effective operation.

We systemised partnership in 2018. The insurance merger with SpareBank 1 Gruppen is the best example of this. In the course of the year, our Chief Data Officer (CDO) set up his organisation and started the implementation of customer insight tools that will make our customer service both more personalised and more relevant in the years to come. Better tools and structure will enable a faster pace of development. This will in turn be a prerequisite for creating new opportunities in which data and customer insight are the underlying values.

The changes we see in the world around us are also influencing the skills mix of the Group. In the course of the year, we therefore educated the first group of skilled data analysts through our internal Data Scientist programme. The participants have acquired new and relevant skills, while at the same time being familiar with the DNB culture and the organisation. We upskill all employees with simple tools and offer more in-depth training to those who need to top up their expertise. New colleagues bring new skills, and the Group currently has a far more diversified group of employees than it did only a year ago.

Corporate responsibility forms the basis for everything we do, from enhancing the skills of our own employees, to setting requirements in credit processes. We delivered more green mutual funds and investment products to the market and are experiencing strong demand for green funding – both from investors and customers.

2018 was a year of transformation. A new organisational structure, new work tools and a large number of proofs of changes that have been made across the Group. In 2019, this trend will continue, and the customers will notice increasingly better and more personalised products and services.

Our organisation

In the variable remuneration model, the total amount is based on profits achieved over the past two years. Variable remuneration cannot exceed 50 per cent of fixed salary for members of the group management team. DNB does not offer other long-term incentive schemes for its employees.

Read more about risk management and the remuneration scheme under Corporate governance.

WHAT DID WE DO IN 2018?

In 2018, we continued the work to ensure compliance with the corporate standard for approval of all products and services. This “Shelf Control”, which was introduced in 2017, is meant to ensure that all products and services satisfy the requirements set by owners, customers and society at large. In the course of 2018, all products and services were reviewed, evaluated and approved, and some products were phased out. The purpose of this group standard is to ensure high quality in our portfolio of products and services, and thereby increase our competitiveness, improve our reputation and safeguard our corporate responsibility. Thus, the standard helps reduce risk in connection with individual commitments and services, as well as at group level.

The ability to balance risks and opportunities over time is also essential to the successful operation of the business, and this is followed up through our governance system. How we do this is described in more detail later in the annual report, where we have defined and described the 15 material topics we consider to be most vital for our ability to create value over time. We believe this is a good way to evaluate how we hedge against downside risk, while at the same time safeguarding the scope of opportunities related to responsible products and services. It also demonstrates how we are working to integrate corporate responsibility in all our processes. Moreover, it is natural that Group Audit assesses DNB’s work of incorporating ESG factors in credit proposals, as the Group gains more experience in this field.  (See the materiality analysis and stakeholder dialogue for the 15 topics below.)

In the efforts to see risks and opportunities in a long-term perspective, we are particularly pleased with our work with the updated materiality analysis, which includes a wide range of topics, all related to the bank’s core business. Linking sustainability closely with business operations also makes it easier to define specific goals and ambitions for the various topics in the course of the year.

THE WAY FORWARD

In 2019, we will continue to focus on strengthening the work related to general risk appetite in the Group’s various business areas and support units.

STAKEHOLDER DIALOGUE AND MATERIALITY ANALYSIS

DNB is in a key position to and thus also has a particular responsibility to assert a positive influence in the areas that are most closely related to the core business. To assess which topics that are strategically important for the bank’s long-term value creation, seen in the context of the expectations from our various stakeholders within the different topics, DNB has developed an updated materiality analysis. This analysis is a tool that helps us define the areas where we can make the greatest difference in society and that support our long-term value creation. Moreover, our goals of creating the best customer experiences and delivering on financial targets form a foundation for the analysis.

As part of the work with the materiality analysis, and with including input from stakeholders in decision-making processes, an ongoing stakeholder dialogue is an important part of the operations. In the course of 2018, we have therefore engaged in dialogue with customers, employees, shareholders, the authorities and other relevant stakeholders in society. Through various meeting places, we have received a lot of input and gained a greater understanding of what our stakeholders expect of us, as well as the areas where it is particularly important that we deliver.

The figure below presents the results of the stakeholder dialogue and the Group’s internal materiality analysis. The topics identified here are the most significant topics for DNB as a company.

DNB IN SOCIETY

With significant loan and investment portfolios, a broad customer base, a large range of financial services and products as well as several thousand dedicated employees, DNB has a broad role in society both in Norway and internationally.

We manage a substantial investment portfolio both for our customers and for the bank itself. Customers expect our investment activities to be responsible. Responsible and sustainable investments imply taking environmental, social and economic conditions into account and ensuring sound corporate governance in investment management. As an investor, DNB can assert influence through our selection of investment objects, exclusion and active ownership. To be a responsible investor is not just about what to select or exclude, but also about having a dialogue with and setting requirements for the companies.

With over two million personal customers, we want to make a contribution by offering great services to and sharing knowledge with the Norwegian people. We want to assist the personal customers through the various stages of life and generally help them to manage their own finances. Furthermore, we can assert influence through offering sustainable mutual funds and products, thus making it easier for customers to make sustainable choices.

As a lender, DNB shall contribute to a sustainable development of society. Responsible business practices with an emphasis on environmental, social and corporate factors are important in the decision about which customers to fund. Risk factors related to corporate responsibility must be analysed and emphasised on an equal footing to other risk drivers in the credit process. Requirements for both new and existing customers, as well as an ongoing dialogue about challenges and opportunities related to the companies’ own corporate responsibility, are means to guide customers in the right direction. As Norway’s largest bank, DNB has an important role to play in helping the Norwegian business community gain access to capital. Business loans are an important source of growth and profitability for companies, but we can also contribute beyond pure lending.

By enabling corporate customers to raise equity and debt capital, we are an important contributor to growth and value creation in Norway and the business community at large. Advisory services related to restructuring, acquisitions and mergers help promote growth and change. Through the NXT concept, we connect ideas and companies with capital at an early stage, and offer advisory services to entrepreneurs. The restructuring of Norway also requires private capital to be put to work to promote future growth and value creation. DNB has Norway’s largest network of entrepreneurs and startups, as well as the country’s largest network of investors. Through our role, we enable the members of these networks to meet. It is when ideas and capital meet that future value and jobs are created.

Furthermore, a good financial infrastructure is necessary for money, transactions and information to flow seamlessly between the different parties, and for customers’ assets and data to be safe and secure. From a social perspective, an effective and secure infrastructure is critical for maintaining financial stability and trust in the financial system. The infrastructure must therefore constantly be further developed in line with the technological advances. Because of our size, we are an important participant in the financial community’s traditional cooperation, whose objective is to ensure that the Norwegian payment infrastructure is world-class.

As a large company in a Norwegian perspective, DNB also has an important role as an employer. Our employees are critical to the success of our strategy and long-term contribution to society, and it is through their skills, motivation and actions that corporate responsibility can be integrated in all processes and decisions. In 2018, we have therefore focused a lot on enhancing the employees’ skills related to corporate responsibility in general and in their individual business areas and support units.