Interest income up
“KBN is demonstrating that its operations are growing positively. Its strong second quarter results are helping to provide a base for meeting higher capital requirements and are also strengthening our capacity to provide the long-term financing required for investment in local welfare projects”, comments Kristine Falkgård, President and CEO of KBN.
Profit after tax for the second quarter was NOK 480 million, as compared to NOK 3 million in the same period in 2014. KBN achieved good margins on both its lending activities and its liquidity management in the quarter. Unrealised gains on financial instruments of NOK 295 million were recognised in the second quarter, as compared to unrealised losses of NOK 317 million in the second quarter of 2014. The gains were principally a result of changes in the second quarter to the prices of hedging derivatives related to KBN’s borrowings.
More long-term loans
KBN’s lending portfolio recorded a decrease of NOK 1.5 billion in the second quarter of 2015 compared to an increase of NOK 2.5 billion in the same period last year. The second quarter was characterised by a slightly lower level of demand for loans and a decrease in the portfolio of short-maturity loans. The proportion of loans with maturities of over one year has increased. At 30 June 2015 KBN’s total lending amounted to NOK 253.1 billion. The lending portfolio has grown by NOK 6 billion since the start of the year.
“We clearly demonstrated our position as a long-term institution this quarter. We saw an increase in the proportion of loans to the municipal sector that are long term, and in April we issued our longest ever benchmark bond in US dollars”, adds Kristine Falkgård.
KBN issued a 10-year benchmark bond in US dollars in mid April, raising USD 1 billion. The transaction was significantly oversubscribed at very satisfactory terms. In the first six months of 2015 KBN issued bonds totalling NOK 52.7 billion in 11 currencies, as compared to NOK 79.4 billion in the same period last year.
KBN is currently well capitalised according to the requirements set by the authorities. The Norwegian Ministry of Finance has decided that the countercyclical buffer requirement will increase from 1% to 1.5% from July 2016. KBN works to adapt its operations to ensure that it satisfies all regulatory requirements related to capitalisation by a satisfactory margin.