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DNB: Excellent First Quarter Weighed Down By COVID-19

Jun. 11, 2020 8:54 AM ETDNB ASA (DNBHF) Stock, DNHBY Stock5 Comments


  • I presented Norway's biggest bank in December of 2019. COVID-19 pushed this bank down, and I loaded up massively during the drop.
  • DNB is now my 4th-largest financial stake.
  • Short-term performance has been spectacular - long-term promises even more.
  • DNB is a "BUY" at this time.

I've continued to invest in financial stocks during most of the crisis with relative regularity. The difference is, I've been extremely picky about my financial investments and focused for the most part on non-Scandinavian picks, such as Ameriprise Financial (AMP), Reinsurance Group of America (RGA), Visa (V) and others.

There was one exception to this, however.

The dual trends of a weakening Norwegian crown - NOK - combined with a global pandemic wreaked havoc even in the very conservative Norwegian financial market, and a bank which typically trades at extreme premiums compared to peers, was suddenly very buyable both from an FX point of view, with the NOK/SEK pairing being 1:1 or even in favor of the SEK, and the share price being down almost 30-40%.

So, I invested - and I invested a lot, knowing full well what would most likely happen when things turned around. DNB (OTCPK:DNBHF) (OTCPK:DNHBY) was sadly one of the only investments where I dared pull out all the stops and increased the stake to my desired size of nearly 2% at a very cheap price.

(Source: Nordnet)

I bought more than $10,000 worth of dividend reinvestments and capital injections worth of stock as the price crashed to levels nearing 100 NOK/share. Today, that position has appreciated significantly and stands at a gain of 37% in less than 6 months, and it hasn't even appreciated back to pre-pandemic levels yet. My YoC on the LTM dividend is close to 8.8% for what is without a doubt one of Scandinavia's best banks.

Let's look at how the first quarter went for DNB.

DNB - How has the company been doing?

The quarterly results for banks have been heavily impacted by COVID-impairments, credit loss provisions and banks reviewing their current operations and risks to make sure that they

This article was written by

Wolf Report profile picture

Wolf Report is a senior analyst and private portfolio manager with over 10 years generating value ideas in European and North American markets.

He is a contributing author for the investing group iREIT on Alpha where in addition to the U.S. market, he covers the markets of Scandinavia, Germany, France, UK, Italy, Spain, Portugal and Eastern Europe in search of reasonably valued stock ideas. Learn more.

Analyst’s Disclosure: I am/we are long DNBHF, DNHBY, SWDBF, SVNLF, AMP, RGA, V. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

While this article may sound like financial advice, please observe that the author is not a CFA or in any way licensed to give financial advice. It may be structured as such, but it is not financial advice. Investors are required and expected to do their own due diligence and research prior to any investment. I own the European/Scandinavian tickers (not the ADRs) of all European/Scandinavian companies listed in my articles.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (5)

Questions. Is it preferable to buy this company on Oslo exchange or as ADR. Also, is there a reciprocal treaty on taxation between Norway and USA.
Tudor Invest Holdings profile picture
@Wolf Report

Great bank. A safe bet, if I may say so.

Wolf Report profile picture
@Tudor Invest Holdings

Long-term, an absolutely safe bet, aye :).
hi Wolf

I really liked Norwegian Finance who has a big owner in Sampo now.

What are your thoughts on it ?
Wolf Report profile picture

On Sampo, my thoughts are a "BUY", unless you're currently overexposed to the stock :).

Thanks for reading and commenting!
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