Good operational performance
Profit for the third quarter 2016 was NOK 198 million, compared to NOK 572 million in the same period last year. The result is influenced by unrealised losses from valuation of financial instruments totalling NOK 228 million compared to equivalent gain during the same period in 2015. The unrealised losses are primarily related to funding operations and hedging derivatives, but also from fixed rate loans to customers.
Since financial instruments normally are held to maturity, the effect of unrealised value changes on the results are reversed when the instruments mature or by a reversal in market movements.
- KBN’s underlying operations are solid and lending growth still good in the third quarter. The results are influenced by unrealised losses on financial instruments, but since financial instruments normally are held to maturity, the effect of unrealised value changes on the results are reversed when the instruments mature or by a reversal in market movements, says Kristine Falkgård, President & CEO of KBN.
Lower debt growth
Disbursement of new loans in the third quarter totalled NOK 8.0 billion compared to NOK 5.6 billion in the third quarter of 2015. The total demand for new loans in the local government sector has remained low so far in 2016 compared to previous years. KBN’s total lending portfolio was NOK 261.3 billion end of the third quarter, representing an increase of 2.7% since year-end. KBN expects debt growth in Norwegian local government sector in 2016 to remain lower than in many years.
- KBN expects debt growth in 2016 to remain low. We continue to give priority to loans with long maturity while the amount of loans with short maturity has been reduced, says Kristine Falkgård, KBN’s CEO& President.
Moderate funding activitiy
Funding activity in the third quarter of 2016 has been modest owing to good liquidity. A total of NOK 16.0 billion in nine currencies has been issued, compared to a low NOK 7.1 billion in 2015. KBN issued its second USD benchmark this year in September with a maturity of five years. The transaction was substantially oversubscribed. KBN aims for a solid and diversified investor base and strives to adapt to opportunities in a wide range of markets to ensure the lowest possible funding costs.
Common equity Tier 1 capital adequacy ratio by the end of the third quarter 2016 was 15.96 per cent.