* Q1 net profit NOK 5.9 bln vs forecast NOK 4.9 bln
* Return on equity was 10% for the quarter
* Unlikely to hit 12% ROE goal this year (Adds background, detail)
OSLO, April 29 (Reuters) - Norway’s DNB, which recently launched a bid for rival Sbanken, reported a bigger-than-expected rise in first-quarter earnings on Thursday but said it was unlikely to reach its return on equity target for the year.
The banking group’s net profit rose to 5.89 billion Norwegian crowns ($720.8 million) for the January-March period from 4.0 billion crowns a year ago, beating an average forecast of 4.93 billion crowns in a Refinitiv poll of analysts.
Return on equity (ROE) rose to 10% for the quarter from 8.9% in the fourth quarter of 2020, although the bank maintained its goal for the period 2021 to 2023 for ROE to exceed 12%.
“Due to the COVID-19 pandemic and the subsequent developments in the macroeconomic environment, the ROE target is, however, unlikely to be achieved in 2021,” the bank said in its quarterly report.
Still, DNB expects to reach the goal during the target period thanks to an expected rise in Norwegian interest rates along with growth in loans, deposits, commissions and fees, as well as reduced impairments, cost control and capital efficiency.
The potential acquisition of Sbanken will also help it achieve the ROE target, DNB said.
Norway’s biggest bank on April 15 presented an all-cash offer of 11.1 billion Norwegian crowns ($1.36 billion) for Sbanken in a bid supported by both companies.
The planned acquisition, which faces regulatory scrutiny over competition concerns, would boost DNB’s share of the Norwegian mortgage market to an estimated 27% from about 24% and also strengthen its asset management business.
Sbanken’s share price has mostly traded above DNB’s bid level since the offer was launched however, suggesting rival bids may yet emerge. ($1 = 8.1710 Norwegian crowns) (Editing by Gwladys Fouche and Carmel Crimmins)