- Earlier this year, we decided to reduce our lending margins because KBN’s borrowing costs had decreased in the preceding months. We are very satisfied with KBN’s earnings for the period, as well as with our stable operational performance”, comments Kristine Falkgård, President and CEO of KBN.
KBN’s result after tax for the third quarter of 2017 was a profit of NOK 272 million, compared to a profit of NOK 198 million in the same quarter in 2016. The increase was due to lower unrealised losses on financial instruments in the third quarter of 2017 than in the same period of 2016. Unrealised losses in the third quarter of 2017 totalled NOK 94 million and were principally due to changes in the credit spreads on KBN’s debt. KBN’s positions are normally held until maturity, and unrealised losses are normally reversed by an opposite change in market prices or when the position matures.
Decrease in short-term lending
In the third quarter, new disbursements totalled NOK 7.8 billion, a marginal decrease from the third quarter of 2016. New disbursements in the first nine months of 2017 totalled NOK 35 billion as compared to NOK 33.1 billion in the first nine months of 2016. Local government sector debt growth continued to grow in the third quarter, and the trend in the pattern of demand is less use of short-term loans and more use of loans with maturities of between one and two years.
- We are seeing a continuing increase in demand for loans with long maturities. After several years of strong growth in the use of short-term financing, more customers are choosing loans with longer maturities. We think this is important for reducing refinancing risk and for achieving greater predictability as a borrower”, comments Lars Strøm Prestvik, Chief Lending Officer at KBN.
In the third quarter, new borrowings totalled NOK 26.4 billion as compared to NOK 16.0 billion in the same period in 2016. KBN issued its first two-year benchmark bond in US dollars at the turn of August/ September. The bond was well received and was significantly oversubscribed. Central banks and public sector institutions comprised a record high of 75% of investors.
At the end of the third quarter, KBN had a common equity Tier 1 capital adequacy ratio of 17.58%.