KBN well positioned entering second half
Throughout Q2, KBN continued to see solid global demand across the curve as investors sought exposure to KBN and Norway, given the country’s stable political environment and solid fiscal position. KBN is 100% owned by the Kingdom of Norway and as a result, is widely regarded as the best proxy for the Kingdom in international debt markets.
Funding highlights for the quarter included KBN’s return to the Euro market with a 10-year EUR 1.0bn benchmark transaction, KBN’s second USD benchmark of 2017, issuance in the USD FRN market and active participation in both the Kangaroo and Kauri markets.
KBN ACCESSES BOTH MAJOR BENCHMARK MARKETS
On 13th June 2017, KBN issued it’s first 3-year USD benchmark since October 2013, pricing a new USD 1.0bn long 3-year RegS/144a benchmark at mid-swaps +8bps, equating to a spread of 28.4bps over UST 1.50% June 2020.
After announcing on Monday 12th June with initial price thoughts of MS+10bps area, the deal found immediate support with interest of over US$1.6 billion indicated when orderbooks officially opened on Tuesday. Momentum continued to grow very rapidly thereafter, with books at US$1.9 billion before 9.00 am (BST). The degree of interest for this US$1bn trade meant that price guidance was further revised to MS+8bps with Europe and Asia books closing at 9.30am (BST). The final book composed of 65 orders totalling in excess of US$ 2 billion.
Central Banks and Official Institutions dominated final allocation accounting for 71% of placement, Banks accounted for 19%, Asset Managers took 9% while Pension Funds / Insurance collectively took the remaining 1% of the deal. Geographically the America’s accounted for 46%, Asia took 30%, Europe 22% and Middle East/Africa 2%.
On 16th May 2017, KBN priced their third EUR benchmark and first of 2017, issuing a EUR 1bn 10-year benchmark. The new transaction is due on May 24th 2027, pays a coupon of 0.875% and priced with a spread of 4bps over mid-swaps, equivalent to 45bps over the DBR 0.250% due February 2027.
With a final orderbook in excess of EUR 1.3bn, KBN managed to price inside initial guidance at mid-swaps +4bps. The transaction was well distributed with over 45 accounts involved, predominately from Europe. Banks accounted for 47% of the bonds, Central Banks / Official Institutions took 23%, Pension Funds / Insurance 16% and Asset Managers accounted for 14%.
This successful transaction, KBN’s third EUR benchmark since 2014, cements KBN as an established EUR issuer and demonstrates the strong commitment from the EUR investor base.
KBN COMMITTED TO GREEN BONDS DEVELOPMENT
KBN’s Sigbjørn Birkeland has been elected executive committee member of the Green Bond Principles (GBP), the leading international green bonds standard.
During the 2017 Green Bond Principles General Meeting, KBN was elected as one of 24 Green Bond Executive Committee members. The committee consists of leading financial institutions such as the World Bank, Bank of China and investment management corporation Blackrock. GBP is considered the leading standard for green bonds and used as guidelines for issuers of this type of bond. More than 130 of the largest and most important issuers, investors and underwriters follow the standard.
KBN looks forward to making it’s contribution to the continued development of the Green Bond Principles. The membership is a recognition of KBN’s early participation in the green bonds market and our commitment to maintaining the expertise necessary for further growth in the green bonds market.
For more information on KBN Green Bonds
SOLID FIRST QUARTER PERFORMANCE FOR KBN
KBN’s net interest income in the first quarter was NOK 561 million compared to NOK 502 million in the same period of 2016.
Profit after tax for the first quarter 2017 was NOK 360 million compared to NOK 257 million in the same period of last year. The increase is due to strong underlying operations and lending growth throughout the quarter as well as to lower credit spreads on financial instruments compared to the first quarter of 2016. Unrealised losses in the first quarter is due to lower credit spreads on KBN’s debt.
KBN’s new disbursements in the first quarter amounted to NOK 17.1 billion compared to NOK 14.0 billion in the first quarter of 2016. KBN has seen demand for loans with variable maturities throughout the quarter and the lending portfolio has increased in all loan categories. KBN regards long-term financing to be its core product. KBN’s total lending portfolio has increased by 3.4% during the first three months compared to 1.7% for the first quarter of 2016.
At the end of the first quarter of 2017 KBN had a common equity Tier 1 capital adequacy ratio of 16.67% and a Total capital adequacy ratio of 21.01%. KBN achieved a return on equity after tax of 12.57% in the first three months of 2017.
For the full report, please visit KBN’s website.
KBN MAINTAINS INSTITUTIONAL ACTIVITY
Despite being active in both the EUR and USD benchmark markets during Q2, KBN has also been regular issuer in Institutional markets. KBN has completed 8 TAPs over four different maturities in the Kangaroo market, raising a combined AUD 480m. In addition to the Kangaroo market, KBN has accessed the Kauri market for the second time in 2017. KBN completed a NZD 125m TAP of its outstanding August 2025 line. Bringing this line to NZD 450m outstanding.
KBN also maintained its presence in the USD FRN market throughout Q2 with two successful TAPs. On 3rd May, KBN tapped its outstanding USD RegS / 144A FRN June 2020 by USD 500m and on 31st May, KBN tapped its outstanding USD RegS / 144A FRN March 2020 by USD 400m. Both deals saw very good support and priced with oversubscribed books, pricing 1bp inside initial guidance.
KBN’s expected funding Programme for 2017 is USD 12 billion. Having completed USD 10 billion year to date, it is expected, markets permitting, to raise the remaining USD 2 billion via accessing a combination of institutional, private and retail markets. KBN will also consider issuance of another USD benchmark during the second half of the year.
The KBN Funding Team