Good lending growth in a normalised market
KBN’s net interest income in the third quarter of 2020 was NOK 437 million as compared to NOK 476 million in the same period in 2019. KBN won a significant proportion of requests for financing for new projects, and its lending portfolio grew by NOK 5.7 billion in the third quarter.
Profit for the period in the third quarter totalled NOK 517 million as compared to NOK 373 million in the third quarter of 2019. The main reason for this increase was unrealised gains on financial instruments and loans measured at fair value totalling NOK 317 million in the third quarter of 2020.
- KBN’s gains in the third quarter of 2020 were partially the result of a continuing such reversal of losses related to the market turmoil seen in the first quarter. KBN operated virtually as normal in the third quarter of 2020, and the level of uncertainty in the real economy was further reduced, says CEO Jannicke Trumpy Granquist.
Green loans lead the way
In the third quarter of 2020 the lending portfolio grew by NOK 5.7 billion, to NOK 312.4 billion. The strong growth seen in the third quarter of 2020 reflects favourable market conditions for KBN in general and a high level of demand for green loans in particular. KBN’s lending portfolio grew by NOK 2.6 billion or 0.8% in the first nine months of 2020, compared to growth of 1.0% in the first nine months of 2019.
- KBN’s portfolio of green loans grew by NOK 2.5 billion in the third quarter or 11.7%. Our reduced-rate green loans are offered for investments that contribute to solving the climate challenges of the future today, says Granquist.
The third quarter saw particularly strong growth in loans without instalment payments with maturities of up to ten years. The growth in fixed-rate loans continued in line with the growth seen in the first and second quarters. KBN has introduced stricter requirements for customers' maximum share of total debt maturing over the next twelve months.
High funding activity
KBN’s funding activities in the third quarter of 2020 were more extensive than in the third quarter of 2019 due to a greater net liquidity requirement and the greater stability of the Norwegian krone relative to other currencies as compared to the same period in 2019. New borrowings in the third quarter of 2020 totalled NOK 24 billion through eleven bond issues, compared to approximately NOK 3.6 billion in the same period in 2019.
KBN’s funding activities were generally strong across all markets. The largest single bond KBN issued in the third quarter was a USD 1.5 billion five-year fixed-rate benchmark bond. The bond was very well received and attracted the highest level of subscriptions ever for a KBN-issued bond. KBN also completed funding transactions with institutional investors in British pounds, Australian dollars and New Zealand dollars as well as in US dollars with a floating rate format.
Based on its result from ordinary activities, KBN’s return on equity in the first nine months of 2020 was 7.8%, compared to 8.4% in the same period in 2019. Based on its core earnings, KBN’s return on equity in the first nine months of 2020 was 6.6%, compared to 8.6% in the same period in 2019. The decrease was partially expected on the basis of higher funding costs, but it otherwise related to the temporary impact of the coronavirus outbreak on the net interest income from KBN’s lending in the second quarter. KBN’s increased share capital also contributed somewhat to the decrease. A more long-term effect of the outbreak of coronavirus is that KBN's return on equity will be lower as a result of market interest rates having fallen towards zero.
KBN's capital position at the end of the third quarter of 2020 was approximately unchanged from the end of the second quarter of 2020 due to factors including the further normalisation of the markets during the third quarter of 2020.