Strong results enabled good lending growth
“We are very satisfied with the year as a whole. We have strong underlying operations and strong margins. Our customer survey demonstrates that customers are satisfied with KBN and its important role. In 2016 we have completed a comprehensive program to ensure we will be even better at managing our corporate social responsibility. We have launched KBN Finans, a digital platform for customers giving users a good overview of their borrowings and facilitating analysis as part of our work with responsible credit. We have established a new Green Bond Framework according to best practice for issuance of bonds financing ambitious climate projects in Norwegian municipalities”, comments KBN’s President and CEO, Kristine Falkgård.
Profit after tax for 2016 was NOK 689 million as compared to NOK 1,870 million in 2015. Net interest income was higher than in 2015,this was due to a combination of continued strong operational margins throughout large parts of 2016 and strong lending growth early in the year. KBN’s profit for the year was also influenced by unrealised losses of NOK 974 million, which stem from losses on fixed-rate loans and derivatives contracts used to convert KBN’s funding into Norwegian kroner.
Growth in lending
KBN’s loan portfolio grew by NOK 12.1 billion in 2016, representing an increase of 4.8%. Total lending to the local government sector at the end of 2016 was NOK 266.6 billion. 99% of Norway’s municipalities had loans from KBN at the end of 2016.
“Our strong earnings throughout 2016 enabled us to grow our lending by more than in previous years while also meeting the higher capital requirements. We assume that the local government sector will continue to have sizeable investment needs going forward. As the largest lender to the local government sector we want to meet the investment needs in the years to come. We need to maintain our lending capacity through solid profitability”, comments Kristine Falkgård.
KBN has financed new investments and upgrades particularly related to primary schools and secondary education, and to the water, wastewater and sanitation (WWS) area. Lending for climate and environment projects increased by 11% in 2016. Examples of projects financed using the green interest rate product in 2016 includes Norway’s first energy-plus nursery in the municipality of Asker, innovative water and wastewater solutions in northern Jæren and Romerike, and Norway’s first nursing home constructed out of mass timber in the municipality of Frogn.
Increased funding and more green
KBN’s new long-term borrowings amounted to NOK 82.8 billion in 2016, which is NOK 14.1 billion higher than in 2015. KBN’s access to funding is well diversified, and Japan, other Asian markets, Europe and the USA are its most important markets. KBN issued bonds in 12 currencies in 2016.
KBN carried out three benchmark bonds issues in 2016, in US dollars and euro. KBN experienced strong demand and the bond issues were substantially oversubscribed. KBN is the largest Norwegian issuer of green bonds andcarried out its third green bond issue in October 2016 with a USD 500 million issue of four-year bonds.
“There is increasing demand globally for socially responsible investments and projects that benefit the climate. Increasing quantification of climate risk contributes to the climate issue receiving ever greater attention among investors in the financial markets. It is important for us to contribute to the sustainable development of society. We want to develop best practice for climate reporting for green bonds – while at the same time helping Norwegian municipalities realising their important green welfare projects”, comments Kristine Falkgård.