Solid underlying operations and satisfying margins
KBN’s result for the second quarter was a profit of NOK 323 million as compared to a profit of NOK 90 million in the same period in 2017. The increase was due to unrealised gains on financial instruments in the second quarter of 2018 in contrast to unrealised losses in the same period in 2017. Net interest income was lower in the second quarter relative to the same period in 2017. The decrease was due to less favourable terms for converting borrowings in foreign currencies into Norwegian krone, as well as to slower lending growth and a reduction in the liquidity portfolio.
“We have strong underlying operations and are well capitalised. We are very pleased with our performance in the second quarter. Our margins have been lower in 2018 in line with our target of providing financing on favourable terms”, comments Kristine Falkgård, President and CEO of KBN.
Reduced demand for loans
KBN’s lending portfolio grew by NOK 2.7 billion or 1.0% in the second quarter, as compared to growth of 0.1% in the same period in 2017. In the first six months of 2018, KBN’s lending portfolio grew by NOK 3.9 billion or 1.4%, as compared to growth of 3.5% in the first six months of 2017.
“In the first six months of 2018 we registered less demand for both new financing and refinancing. At the same time, a review we have carried out that covered a majority of municipalities’ 2018 investment budgets points to an expected level of investment in line with 2017. We therefore expect to see greater demand for financing from the sector in the second half of the year”, explains Lars Strøm Prestvik, Chief Lending Officer at KBN.
Green loans, which are used to finance climate-friendly projects undertaken by the local government sector, continued to grow strongly. In the first six months of 2018 disbursements of green loans totalled over NOK 1 billion, with KBN’s total green lending surpassing the NOK 15 billion mark. KBN is seeing an increase in demand for loans with no repayment instalments prior to maturity and some increase in demand for loans with maturities of twelve months or less, which are offered as part of KBN’s own liquidity management activities.
KBN’s funding activities were somewhat less extensive in the second quarter of 2018 than in the same period in 2017 due to a reduced need for financing. New borrowings totalled NOK 12 billion through 15 bond issues, as compared to approximately NOK 38 billion in the same period in 2017. In the first six months of 2018, new borrowings totalled NOK 65.9 billion as compared to NOK 84.6 billion in the same period in 2017.
At the end of the second quarter, KBN had a common equity Tier 1 capital adequacy ratio of 17.9%. Its leverage ratio was 4.0%.
More information is available in the complete quarterly report:
Tor Ole Steinsland, Chief Communications Officer
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