Good morning, everyone, and welcome to the presentation of the second quarter results for DNB, and also welcome to everyone following us on the stream. It's 30 degrees outside, and I don't see very many with a tie inside. I think that's a good sign that we are approaching summer. But first. Let's dive into the numbers for DNB. Our CEO, Kjerstin Braathen, and CFO, Ida Lerner, will present the results. There will be time for questions after the presentation, and I do see some new faces from the press here today. Very welcome. For your information, you will be able to ask questions to management outside in the lounge area after the presentation. Kjerstin, please go ahead.
Thank you so much, Even, and a very warm welcome to all of you to this second quarter earning release for DNB. In this quarter, where increased uncertainty is becoming the new normal, we still present yet another strong set of results reflecting a high activity and high growth across the group overall. It has indeed been an eventful quarter. This is the first quarter we are fully integrating the Carnegie numbers into our numbers, and we had, from the central bank, the first rate cut in more than five years, further boosting an already high activity level. I wanted to start this quarter with a few examples of initiatives and events that are key drivers for our results. The DNB Carnegie position combined further strengthens our position as a leading Norwegian—not Norwegian, but Nordic investment bank—that we have been targeting.
We have seen a high activity year to date, and we hold several number one positions, more specifically in equity capital markets in terms of volume of capital raised, in M&A, in terms of number of transactions completed, and maybe for many the most prestigious one being ranked the number one Nordic broker by Extel, who surveys institutional investors. For personal customers, we continue to scale and grow our activity across the country. With several initiatives being fulfilled, we have strengthened the pace and activity in our digital offering, with now 75% of mortgage applications coming in digitally, and we, in some locations, open up local satellites to further boost local activity and growth. We have launched the digital advisor in our savings app, Spare, and we have been ranked—our chatbot has been ranked the best chatbot in Norway.
In addition to this, we are further motivated by seeing that our customers across private banking and large corporate customers have rated the satisfaction at the highest level we've ever seen. I wanted to show an appreciation to the organization who has worked relentlessly throughout this quarter as well in order to deliver to our customers these results. This quarter, I also would like to send one appreciation in particular to one of our employees who walked in the doors of DNB 43 years ago and who has her last day of working today. Sølvi has been material in developing the profitability measurement systems. She's one of the people who works very closely producing the numbers, analyzing the numbers. Sølvi is the DNA of DNB and part of what DNB is all about.
I would hope that you all would join me in showing an appreciation to Sølvi today. Over to the key highlights of the numbers. Indeed, reflecting a high activity across all customer segments and product areas, return on equity for the quarter comes in at 15.4%, well above the minimum 14% that we have targeted. NII is down compared to the previous quarter by 1.6% and up compared to the same quarter prior year by 2.1%. The most important message to convey is that customer margins are roughly stable. We have seen growth in lending across all customer segments accelerating throughout the quarter, and this is offset by some low margin outflows in deposits and a lower contribution from non-customer related interest income elements such as funding and interest on equity. In net commission and fees, we are seeing a sharp uptick naturally with 27. 1% with a full integration of Carnegie in the numbers.
Many areas delivering particularly strong this quarter, and I would highlight equities, bond, and asset management. Our portfolio overall remains robust and well diversified. We see no material movements or negative migration in any area. We do book NOK 677 million of provisions this quarter, predominantly related to customer-specific situation. Our capital position remains rock solid, 18.3%. Still within 180 basis points headroom to the required and expected level by the FSA. As you know, we have a share buyback program ongoing, buying back 1% of the share and expect to complete this in September or early October. Earnings per share came in at NOK 6.79 for the quarter and are up by 3.9% year to date. The Norwegian economy remains robust, and the outlook is healthy. We continue to expect a GDP growth this year of 1.3% and 1.5% next year.
Unemployment remains low, around 2%, and we continue to say that the fact that people have a job is the most important factor for both financial and social wealth. We have seen the central bank over years acting decisively to bring down inflation, and while not being fully down to the desired level around 2%, we continue to see inflation decreasing and healthy wage growth contributing to the spending of consumers. We did expect the first rate hike to happen this year, and we saw that materialize in the month of June. Ahead, DNB Carnegie expects another two rate decreases this year and rates to stabilize around 3.75%. While the level of uncertainty globally is higher than normal, we continue to see robust and strong fundamentals in the Norwegian economy with a positive outlook. A few highlights from the customer segments.
First of all, p ersonal customers deliver a very strong quarter. We see a very healthy growth of 0.8% in lending, 3.2% in the past 12-month period, and a ceaselessly strong growth in deposits of 5.8%. Even stronger than we usually see, and it might be boosted by the healthy levels of the wage settlements. Rate cuts came and further boosted what was already a high activity, and we saw a sharp increase in the number of customers showing an interest in moving their mortgages to DNB, as well as a significant number of requests for financial certificates. People continue to buy apartments and houses in the month of July this summer, which provides a healthy pipeline going into the third quarter. Net other income is up by 29.9%, boosted by the Carnegie integration, but also a solid performance on what was the basis prior to Carnegie, amongst other real estate brokerage activity.
For both our corporate segments, pre-tax profit is slightly down compared to the previous quarter, but up compared to the same quarter prior year. The highlight for corporate customers in Norway, I would point to the growth of 1.8%, and this is before having seen a real uptick in the construction activity related to housing, which we do expect to pick up in the second half. We see results of the systematic work to improve customer satisfaction amongst the smaller customers, as well as an uptick in the market share of a number of startups who are choosing to start their banking relationship with DNB. This is a tremendously valuable position for us across corporate customers in Norway overall, and return on allocated capital is 21.9% in the quarter. Large corporates' growth is 3.3% in the quarter, accelerating towards the end of the quarter, showing healthy activity.
Growth driven by industrials and energy across our core markets. There is a strong momentum in net other income and an increase by 17.6%, and the portfolio continues to remain very robust. I would like to end this quarter with a few comments related to our activities across investment banking and asset management. You will remember that we have talked about systematically working to strengthen these areas strategically for many years. Here you can clearly see how these two areas have become an increasingly important part of our business, now further strengthened also with the Carnegie acquisition. The integration of DNB Carnegie and the merger is going in accordance with plan. I would add also slightly better than expected. We see that the offering is very well received by our customers.
We continue to see a confirmation of the strategic rationale and our ability to offer services and products that wins mandates we would not have been able to do separately on our own. We remain committed to deliver on the synergies that we highlighted at the outset of announcing the acquisition. There are several particularly strong areas this quarter as already mentioned: equities, bonds, and asset management that shows an inflow of more than NOK 10 billion in the quarter. With those remarks, I will hand over to our CFO, Ida.
Thank you, Kjerstin, and thank you everyone for listening in to this and also participating here today. I would now like to turn to the second quarter in a bit more detail.
We continue to see the good momentum that we saw already in the first quarter in all customer segments, with profitable loan growth ticking up with 1.7% in the quarter. We note a continued good growth, profitable growth in the personal customer segment, up 0.8%. Large corporate customers in Norway were up 1.8%, and large corporates we noted a solid quarter with increasing lending volumes of 3.3%. For large corporates, it's important to note that the lending growth came towards the end of the quarter and therefore does not fully impact NII in this quarter. We noted a larger shift in our deposit portfolio this quarter, where low margin deposits in large corporates were partially replaced by high margin deposits in the personal customer segments. This meant that the deposit volumes were down by 1.8% in the quarter.
Personal customers were up 5.9%, positively impacted by the annual holiday payments, which were made in June. Corporate customers in Norway were up 2%, with a continued positive contribution from the public sector. Volumes in LCI were down by 13.9%, reflecting outflow due to repricing of short-term low margin deposits, as well as one additional payment of the petroleum tax this quarter. We continue to maintain a strong deposit-to-loan ratio in our customer segments of 73.4%. The customer spreads are, as Kjerstin pointed to, stable, while the net interest margin is down by five basis points, now amounting to 185 basis points. The net interest margin is predominantly affected by the non-customer related other NII, such as amortization effects, treasury, as well as interest on equity, which is reducing this quarter.
Lending and deposit spreads were, among others, impacted by the increase in average money market rates, where you see a positive effect of deposits as well as a negative effect on overall lending spreads. In addition, we continue to see a fierce but rational competition in the Norwegian market, also impacting our margins. The repricing announced following the Norwegian central bank's cut of key policy rate will have a full effect from the 25th of August. NII was down by NOK 258 million in the quarter. We had a positive impact of an additional interest day by NOK 130 million. The lending margins were affected by the increased money market rates and continued strong competition, as I mentioned earlier.
This was partly offset by the increased spreads on deposit, but due to the fact that there was a shift in portfolio mix during the quarter, you will also see an impact of that. Since loan growth came in in the later part of the quarter, average loan growth was lower, therefore impacting NII. Volumes in NII. The combined effect from spreads and volumes was NOK 108 million in the quarter. Additional elements impacting NII this quarter were front-loading of funding activity, interest on equity, as well as amortization and fees that were coming down from a high level in the first quarter. We deliver strong quarter results within net commission and fees, with a solid performance across the board and from a very diversified platform.
Income from Carnegie is, as Kjerstin pointed to, now fully integrated in our quarterly numbers and represents a step change in terms of the fee platform from now. Real estate brokerage was up 4% from the corresponding quarter last year, reflecting a higher activity overall in the housing market. Investment banking was up by 51% from the corresponding quarter last year, driven by a strong quarter within equities and bonds, and this was accelerating during the quarter, also following the 2nd of April. Asset management and custodial services were up by 69% from the same quarter last year. Assets under management had an uptick of NOK 95 billion during the quarter, with a positive net inflow of NOK 10.3 billion. We're happy to see that the majority of our retail customers stick to their savings agreements.
This is also reflected by the strong positive net inflow of NOK 4.5 billion in the quarter from retail customers and net inflow from institutional customers of NOK 5.8 billion. We note continued strong demand for trade finance products, and that's where you can see the increase in guarantee commissions up by 13%. Money transfer and banking services were down by 20%. There was a stable contribution from money transfers but reduced income from banking services. Sale of insurance products was up by 10%, with a continued positive development in the defined contribution pensions as well as non-life insurance products. Now moving on to costs, which this quarter was impacted by the full integration of Carnegie. Some one-off effects, as well as overall higher activity. Costs increased by NOK 818 million from a seasonally low quarter in the first quarter. Q1 numbers only included one month of Carnegie.
With Carnegie now being fully integrated in our numbers, we note increased costs related to fixed salaries, variable salaries, and depreciation, in addition to one-off costs linked to the integration process. As mentioned last quarter, we estimate a one-off cost this year of around NOK 250 million. That means that there should be approximately NOK 100 million more to be taken in the two next quarters in relation to one-off costs. Pension expenses are up by NOK 212 million, related to a higher return on the closed defined benefit scheme. The scheme is, as you know, partly hedged, and you can therefore find a corresponding gain under net gains on financial instruments. Portfolio quality remains robust and well diversified, with 99.3% of the portfolio in stage one and two.
The personal customer portfolio, which accounts for approximately 50% of our exposure to default, remains strong, and we do not see any negative development in that portfolio. For corporate customers in Norway and large corporates, impairment provision totaled NOK 203 million and NOK 462 million, respectively. Stage three impairment provision relates to customer-specific situations, but we're not seeing any systematic change or negative migration in any segment or geography in those portfolios. We remain comfortable with our credit quality in the portfolio, but please bear in mind that losses will vary from quarter to quarter. Now over to capital. Our core equity tier one ratio remains strong at 18.3%, 180 basis points above the regulatory expectation.
The core equity tier one was positively impacted by profit generation of 35 basis points in the quarter, which was somewhat offset by the share buyback program, which we announced in June, accounting for approximately 40 basis points on the core equity tier one. The combined effects of CRR3, as well as the S-Banken and moving over to our IRB models, was, as mentioned last quarter, almost neutral. As indicated earlier, we estimate a negative effect of approximately 60 basis points related to the increased risk-weight floors on residential mortgages coming into play in the third quarter. The leverage ratio remains strong at 6.2%, well above the regulatory requirement of 3%. With a core tier one equity ratio of 18.3, a leverage ratio of 6.2%, our capital position remains strong.
We are well positioned to meet announced regulatory changes while at the same time continue to deliver on our dividend policy, as well as supporting our customers in the years ahead. Thank you for your attention, and with that, we open up for questions.
Thank you so much, Ida and Kjerstin, and we will open up for questions from the audience and also from the online viewers. Any questions from the audience? Thomas from SEB? Just wait for the microphone.
Yes, good morning. I have two questions. First, on the NII. These amortization effects on fees within the NII were strong in Q4 and even higher in Q1, and now they are coming down. Do you think they have come down to a more normal level, or should we expect a further decline next quarter? And the second question on commission and fees, these banking services. That you pointed to as due to the decline, year-on-year decline. Could you give some more flavor on that? Also, would this decline impact your commission and fee growth targets? Thank you.
I'll do the first, and Ida can answer the second one. On the amortization and fee income element in NII, it's typically an element that will vary from quarter to quarter. Over time, usually the quarters with the higher activity are the fourth quarter and the second quarter, and it's been a bit atypical this quarter, with the first quarter being so strong and a slightly lower level in the second quarter. Keep in mind also that activity grew towards the end of the quarter in large corporates. These fees are typically generated once we do and complete syndications, as well as refinancing.
It is a bit hard to guide you specifically in coming quarters, but we can repeat that the activity level across large corporates is high and that we continue to focus on originate and distribute. That typically provides a good contribution over time, also in the amortization and fee part.
On the banking services, the reason why we are seeing a decrease in net income from banking services is because we have an increased cost associated with insurance, which is tightly linked to originate and distribute as well, where it is more kind of capital optimization in the large corporate area, where we are also using insurance as being an important part of that. That comes in on banking services, which means that there is a net reduction, but underlying income has not really changed to the same degree as you are seeing on the net numbers.
I would not change anything in terms of the overall picture and the contribution overall from commission and fees based on that.
Thank you.
Yes, next question from the only guy with a tie in the audience, Herman Zahl from Pareto.
Thank you. You mentioned high activity following the rate cut in June. I was wondering how you see the competitive environment in PC lending currently, and if you have seen any changes in behavior from the smaller banks in Norway following CRR3 being implemented in the quarter.
The competitive environment is fierce, and we are seeing signs that the smaller banks have improved their competitiveness after the implementation of CRR3. It is always high in Norway, but intensifying slightly this first half, where there is a lot of liquidity in the market.
Even so, we already had a high activity, in particular for financing certificates, also prior to the rate cut, and the rate cut in particular stimulated activity related to bank switching, and we saw a sharp uptick in the number of customers who showed an interest in taking their mortgage over to DNB. A very active market, a very fierce competition, but still a rational market overall. I think that's the most important message, that the rationality in general in the Norwegian market persists and continues.
Thank you. Since it's a bit more than a year since technical merger with S-Banken, and just thinking that you mentioned, I think, some child, what you referred to as child diseases last year. How has the development there been since integration, and are you able to sort of leverage that brand when there is increased customer mobility in the market, such as now?
A lot of the so-called child diseases have certainly been fixed, and the liking has improved, and we are benefiting from a broader spectrum of offering, where we typically see S-Banken more attractive as a bank swapping offering, and the DNB brand more competitive on buying new housing. Even so, we also now see the DNB brand being seen very attractive for people who are looking to move their mortgage. Definitely, there continues to be a broader optionality and a broader competitive position across the two brands, and we will continue to work to differentiate among the two and improve the offering across both brands as we move ahead.
One more if I may?
Yes, please.
On your ROE target for above 14% until 2027, just given the interest rate expectations you showed here and you are still very well capitalized, do you think the earnings part of that or the capital base, what levers are the most important to reach 14%, do you think, or do you think it's are you able to reach 14% at your current capitalization, so to speak?
We maintain a clear ambition to deliver higher than 14% return on equity. Currently, we are delivering well above that, and even with an outlook that indicates two more rate cuts, we are comfortable maintaining our ambition to deliver above 14% return.
Okay, thank you.
A second question from Thomas.
Final question from my side on lending growth and capitalization. Have you considered speeding up the lending growth, for instance, outside Norway, as a supplement. To buying back shares, as you're buying back these shares at a higher and higher price or currency these days?
I think our ambitions and guiding on lending remains intact. We still say 3-4% annually across the customer segments, but we have also shown that in selective years, we may grow a little bit faster. It is a key element in our large corporate operations that we focus on a rapid turnover of capital, and combine this with an increasingly attractive offering across our investment bank. That is the key to provide return on a very, very robust capital base, and we will continue to push for that. We are not being limited in terms of how much growth we can take, and indeed, we have.
Specializations and competence in sectors also outside of Norway and the Nordics that are growing on the back of global trends at the moment. We focus equally much on distributing that capital and raising capital in the market for these customers, in addition to using our own balance sheet.
On share buybacks, have you considered other engagement?
We maintain our previously communicated strategy on share buyback and are not at a level where we have considered to make any changes to that at the moment.
Thank you.
Thank you so much, and thank you for your questions. I do not see any more questions, so I think we will wrap it up and have a good summer, everyone. Thank you so much.
Thank you.