A good result in a competitive market
KBN’s net interest income in the first quarter of 2021 was NOK 384 million as compared to NOK 443 million in the first quarter of 2020. KBN’s underlying operations were good. The decrease relates to very low interest rates and strong competition in the market for loans to the local government sector.
KBN’s profit for the period in the first quarter of 2021 was NOK 398 million as compared to a loss of NOK 229 million in the first quarter of 2020. The main reason for the increase was unrealised gains of NOK 230 million on financial instruments and loans measured at fair value, in contrast to unrealised losses totalling NOK 626 million in the first quarter of 2020. KBN’s net interest income in the first quarter of 2021 was NOK 384 million as compared to NOK 443 million in the first quarter of 2020.
- KBN’s underlying operations were good and we are pleased with this result. We achieved good margins on our lending and liquidity management activities in the first quarter. The decrease in return on equity as compared to 2020 was because interest rates were cut to zero following the outbreak of coronavirus, says CEO of KBN Jannicke Trumpy Granquist.
Strong competition
KBN’s lending portfolio totalled NOK 313.6 billion at the end of the first quarter of 2021. In the first quarter the lending portfolio decreased by NOK 4.66 billion, equivalent to 1.5%. In the first quarter of 2020 KBN’s lending portfolio decreased by 1.0%. The main reason for the decrease in the size of KBN’s lending portfolio was the deliberate decrease in the size of KBN’s portfolio of loans with maturities of twelve months or less as a result of the low level of profitability on this lending.
- The competition in the market for loans to the local government sector is strong and we have had to prioritize profitability over growth. The competition is particularly strong where KBN is competing with our customers’ direct use of the capital markets, where credit spreads were at record-low levels during the first quarter, says Granquist.
New loan disbursements totalled NOK 5.9 billion in the first quarter of 2021 as compared to NOK 14.4 billion in the first quarter of 2020. These figures include both loans disbursed as new financing and as refinancing for existing loans.
Good market access
KBN’s funding activities in the first quarter of 2021 were more extensive than in the same period in 2020 due to a greater need for refinancing and the greater strength of the Norwegian krone. KBN’s new borrowings totalled approximately NOK 40 billion across seven currencies, as compared to NOK 30 billion across four currencies in the first quarter of 2020. The largest bond issued by KBN in the first quarter was a five-year US dollar benchmark bond totalling NOK 2 billion, which KBN issued in January. This was the biggest single bond issued by KBN since 2013, and it was well received by the market and significantly oversubscribed at launch.
At the end of the first quarter of 2021, KBN’s total common equity Tier 1 capital was NOK 14.8 billion, its total Tier 1 capital was NOK 17.2 billion, and its total primary capital was NOK 19.2 billion.