Good lending growth
Positive tone in the capital markets
KBN’s funding activities were less extensive in the first quarter of 2019 than in the same period in 2018 due to a reduced need for refinancing. New borrowings totalled approximately NOK 35 billion through 16 bond issues in six currencies in the first quarter of 2019, compared to NOK 54 billion in the same period in 2018.
“There was a positive underlying tone in the capital markets, with KBN enjoying good market access throughout the quarter despite the political turmoil associated with the UK’s withdrawal from the EU. Stable access to financing is important to our ability to provide the local government sector with low-cost loans when needed”, comments Kristine Falkgård, the President and CEO of KBN.
Modest start to the year for green lending
KBN’s lending portfolio totalled NOK 305.7 billion at the end of the first quarter of 2019. In the first quarter of 2019 KBN’s lending portfolio grew by NOK 3.5 billion, equivalent to growth of 1.2%. KBN’s lending portfolio grew by 0.4% in the same period in 2018.
Eight green loans totalling NOK 663 million were disbursed in the first quarter, compared to NOK 846 million in the first quarter of 2018. The projects that were financed range from a shore-side power supply in Kristiansund and a recycling centre in Hedmarken to an upper secondary school in an energy-plus standard building in Tvedestrand.
“We have a target of increasing the proportion of our lending that is for climate friendly projects across the country, and we expect this growth to increase”, comments Kristine Falkgård
Profit for the first quarter of 2019 was NOK 164 million as compared to NOK 474 million in the same period in 2018. Unrealised losses of NOK 164 million related to changes in the value of financial hedging instruments reduced KBN’s profit for the first quarter. In the first quarter of 2018, unrealised gains of NOK 205 million were recognised.
Net interest income totalled NOK 458 million in the first quarter of 2019 as compared to NOK 495 million in the same period in 2018. The decrease was in line with KBN’s expectations and should be viewed in the context of KBN’s strong earnings at the start of 2018 and increased borrowing costs in Norwegian kroner in the first quarter of 2019. KBN’s margins were lower than in the first quarter of 2018 primarily due to less favourable prices for converting borrowings denominated in foreign currencies into Norwegian kroner as well as to lower credit spreads in the local government bond market.
At the end of the first quarter, KBN had a common equity Tier 1 capital adequacy ratio of 17.0%, a Tier 1 capital adequacy ratio of 19.8%, and a total capital adequacy ratio of 22.4%.