Good results in a normalised market
KBN’s net interest income in the second quarter of 2020 was NOK 412 million as compared to NOK 470 million in the same period in 2019. KBN’s underlying operations were good, and the decrease was due to KBN reducing its own lending rates during the period.
Profit for the period in the second quarter totalled NOK 614 million as compared to NOK 323 million in the second quarter of 2019. The main reason for the increase was unrealised gains totalling NOK 485 million on financial instruments and loans in the second quarter of 2020, which were reversals of unrealised losses from the first quarter in connection with the turmoil in the markets. KBN’s net interest income in the second quarter of 2020 was NOK 412 million as compared to NOK 470 million in the same period in 2019.
“The decrease in net interest income was expected and was due to us quickly reducing our own lending rates in line with the decrease in Norway’s key policy rate. We took this action to help reduce our customers’ interest costs because of the challenging times. KBN’s underlying operations were good and demonstrate that our business is robust, even in challenging markets”, comments Jannicke Trumpy Granquist, the acting CEO of KBN.
Demand for loans continues to be high
Following the major financial turmoil seen at the end of the first quarter and the start of the second, both supply and demand for loans to Norwegian municipalities and county authorities quickly normalised from mid-April. A managed reduction in loans with maturities of 12 months or less resulted in the size of KBN’s overall lending portfolio remaining approximately unchanged despite the high level of demand and growth in loan disbursals. KBN’s lending portfolio totalled NOK 306.7 billion at the end of the second quarter of 2020, a decrease of 1% since the start of the year.
“According to a survey we carried out of our customers, a large majority of municipalities expect that their financial results will be weaker in 2020 but that the consequences of coronavirus will only have a limited impact on their level of planned investment spending. We therefore expect that the sector will continue to have a significant need for debt financing”, comments Jannicke Trumpy Granquist.
New loan disbursements totalled NOK 27.5 billion in the first six months of 2020, compared to NOK 22.0 billion in the same period in 2019. These figures include both loans disbursed as new financing and as refinancing for existing loans.
Good access to financing
KBN’s funding activities in the second quarter of 2020 were somewhat more extensive than in the second quarter of 2019 due to a greater need for refinancing. Throughout the turmoil KBN was very liquid and had no requirement to raise financing, with this requirement only arising again in the final part of the quarter once the markets had stabilised. New borrowings in the second quarter totalled approximately NOK 25 billion as compared to NOK 18 billion in the second quarter of 2019. KBN issued a ten-year USD 1.5 billion benchmark bond in June, which was very well received by the market, attracted a significant amount of interest from central banks and public sector institutions, and was significantly oversubscribed. In addition to this funding in US dollars, KBN carried out smaller bond issues in New Zealand dollars and Australian dollars.
At the end of the second quarter of 2020, KBN’s total common equity Tier 1 capital was NOK 14.7 billion, its total Tier 1 capital was NOK 17.1 billion, and its total primary capital was NOK 19.1 billion.
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