A solid level of demand for new loans
A good level of growth in KBN’s lending in the first six months of the year, together with higher interest rates, contributed to the increase in KBN’s income.
KBN’s core earnings(1) totalled NOK 360 million in the second quarter of 2023, compared to NOK 342 million in the second quarter of 2022. KBN’s net interest income in the second quarter of 2023 was NOK 507 million, as compared to NOK 477 million in the same period in 2022.
– The relatively unattractive terms available to KBN’s customers in the capital markets continue to create good market conditions for KBN’s long-term instalment loans. There are also favourable market conditions for fixed rate loans, with long-term fixed rates being lower than floating rates. Favorable fixed interest loans have resulted in many customers choosing to change from floating to fixed-rate loans, says CEO Jannicke Trumpy Granquist.
In the second quarter of 2023, KBN recognised a net unrealised loss on financial instruments totalling NOK 143 million, compared to a net unrealised loss of NOK 583 million in the second quarter of 2022. KBN’s fixed-rate lending and associated hedging instruments contributed a net unrealised loss of NOK 128 million in the second quarter of 2023, primarily as a result of a widening of credit spreads for the local government sector. KBN’s unrealised gains and losses are expected to reverse, either as market conditions normalise or as the instruments approach maturity.
Results for the first six months of 2023
KBN’s core earnings(1) in the first six months of 2023 totalled NOK 640 million as compared to NOK 591 million in the first six months of 2022. KBN’s core earnings in the first six months of 2023 were affected by a realised gain of NOK 101 million before tax resulting from KBN repurchasing subordinated debt capital, while its core earnings in the first six months of 2022 were affected by the reversal of a tax expense of NOK 54 million.
Lending
KBN’s lending portfolio totalled NOK 336 billion(2) at the end of the second quarter of 2023. The lending portfolio increased by NOK 5.5 billion in the second quarter, while it decreased by NOK 4.0 billion in the second quarter of 2022. In the second quarter, the relatively unattractive terms available to KBN’s customers in the capital markets created better market conditions for KBN’s long-term instalment loans.
KBN continued to experience a good level of growth in its green lending, and its portfolio of green loans increased by NOK 1.2 billion in the second quarter of 2023, as compared to NOK 1.5 billion in the same period in 2022. KBN granted green loans in the quarter to municipalities and county authorities including Møre og Romsdal county authority and Bergen municipality. At the end of the second quarter, KBN’s green lending represented 13.2% of its overall lending portfolio. KBN’s target is for 15% of its lending to be green lending by the end of 2023.
Increased liquidity
The weakness of the Norwegian krone relative to the US dollar increased KBN’s liquidity as a result of liquidity inflows from cash collateral from currency hedging instruments over the second quarter, and KBN's funding activities were therefore somewhat less extensive during the quarter. In the first six months of 2023 KBN’s new borrowings totalled approximately NOK 32.9 billion through 26 bond issues in nine currencies, as compared to NOK 47.5 billion in the first six months of 2022.
(1): Profit after tax for the accounting period adjusted for unrealised gains or losses on financial instruments after deducting estimated tax at the rate of 25% and the portion allocated to owners of additional Tier 1 capital. This performance measure is included to give relevant information about the company’s underlying operations.
(2): Principal amount
