Good lending growth and underlying operations in the second quarter
KBN´s net interest income in the second quarter of 2021 was NOK 364 million as compared to NOK 412 million in the same period in 2020. It has been good growth in lending and the KBNs loan portfolio grew by NOK 4.7 billion in second quarter. Profit for the period totalled NOK 119 million in the second quarter and NOK 516 million in the first six months of 2021.
KBN's core earnings1 totalled NOK 195 million in the second quarter of 2021, compared to NOK 237 million in the second quarter of 2020. In the second quarter KBN received a decision from the Norwegian Tax Administration regarding a change to the tax treatment of the periodisation of various types of financial instruments for the years 2015 to 2018. The decision resulted in a non-recurring interest expense on KBN’s tax liability of NOK 59 million. After adjusting for the interest expense on KBN’s tax liability, KBN’s core earnings for the second quarter of 2021 were NOK 16.4 million higher than in the corresponding period in 2020.
"We are very pleased with KBN's results for the second quarter, and with the good underlying operations. Net interest income from KBN’s lending activities and its liquidity portfolio was higher than in the second quarter of 2020. The interest expense on KBN’s tax liability explains the overall decrease from the second quarter of 2020. The fall in money market rates in the second quarter benefitted KBN’s customers by reducing the lending rates that applied from 2 June 2021", comments Jannicke Trumpy Granquist, President and CEO of KBN.
Good growth in lending in the second quarter
KBN’s lending portfolio totalled NOK 318.2 billion at the end of the second quarter of 2021. In the second quarter of 2021 the lending portfolio grew by NOK 4.7 billion, meaning that at the end of the second quarter the portfolio was back to the same size as at the start of the year. The growth in the lending portfolio in the second quarter of 2021 was in loans without instalments offered in competition with the capital markets. KBN's portfolio of green loans grew by NOK 889 million, equivalent to growth of 3.1%. The growth in green lending in the first six months of 2021 was 6.0%.
"There continued to be strong competition in the market for local government loans in the second quarter, but KBN’s competitive position was somewhat stronger than in the first quarter of 2021. It is particularly pleasing to see continuing good demand for KBN's green loan product which finances projects with a clear climate ambition. KBN has a leading position in this market", comments Jannicke Trumpy Granquist.
On the basis of a survey of its customers, KBN expects increasing demand for new loans in the third and fourth quarters. The expected increase in demand applies particularly to long-term instalment-based loans, of which KBN is the most important provider.
First bond issue using a new benchmark interest rate
KBN’s funding activities in the second quarter of 2021 were somewhat less extensive than in the second quarter of 2020 due to a decrease in its need for refinancing. New borrowings in the second quarter of 2021 totalled NOK 22.9 billion through eleven bond issues in four currencies, compared to NOK 24.9 billion in the same period in 2020.
In the second quarter of 2021 KBN became the first Norwegian financial institution to issue a US-dollar bond with SOFR (Secured Overnight Financing Rate) as the benchmark rate. The bond was well received by the market and was significantly oversubscribed.
1 Profit after tax for the quarter adjusted for unrealised gains or losses on financial instruments after tax and the portion allocated to owners of additional Tier 1 capital. This result measure is included to give relevant information about the company’s underlying operations.