Good earnings in the second quarter
“We are pleased to be delivering solid results in line with expectations at a time of major change. Municipalities’ borrowing patterns, regulatory changes and market-related considerations are placing significant demands on us. It is therefore especially pleasing that our commercial and societal goals are being met”, comments Kristine Falkgård, President and CEO of KBN.
Decrease in short-maturity loans, continued growth in green loans
Growth in KBN’s lending portfolio was virtually flat in the first six months of the year, while in the first six months of 2018 it grew by 1.4%. The change in the rate of growth was primarily due to a decrease in loans with maturities of 12 months or less. KBN continues to provide loans of this type, which are to be seen in the context of KBN’s liquidity and balance sheet management activities.
KBN’s portfolio of green loans increased by NOK 0.8 billion in the second quarter and grew in total by NOK 1.7 billion in the first six months of the year. The equivalent figures for 2018 were NOK 0.5 billion and NOK 1.1 billion respectively. KBN provides green loans with a lower interest rate for climate and environmentally friendly projects.
KBN registered demand for financing for new investment in the second quarter of 2019 totalling NOK 6.3 billion. This is NOK 3.8 billion less than in the same period in 2018. The level of demand in the first six months was NOK 16.7 billion as compared to NOK 20.8 billion in the first six months of 2018. The change was primarily due to a decrease in demand for financing for toll roads.
Strong benchmark bond
KBN’s funding activities were somewhat more extensive in the second quarter of 2019 than in the second quarter of 2018 due to a greater need for refinancing. New borrowings totalled NOK 18 billion through 12 bond issues in six currencies, as compared to approximately NOK 12 billion in the same period in 2018.
The largest single bond issued by KBN in the second quarter of 2019 was a five-year USD 1.5 billion benchmark bond, which was very well received by the market and attracted a record large orderbook.
Higher demand for loans anticipated in the second half of the year
The level of demand from the local government sector for new financing was moderate in the first six months of 2019, as was the case in 2018. The local government sector’s borrowing needs are subject to seasonal variation, and feedback from KBN’s customers gives reason to believe that the pattern seen last year will be repeated this year, with higher borrowing activity coming in the second half of the year. The local government sector’s investment activities relate in particular to schools, elderly care and the water and wastewater area, with many projects having clear environmental ambitions.