KBN / A quarter characterised by geopolitical uncertainty
05 May 2022KBN’s net interest income in the first quarter of 2022 was NOK 436 million as compared to NOK 384 million in the same period in 2021. KBN’s result for the period in the first quarter of 2022 was a loss of NOK 352 million as compared to a profit of NOK 398 million in the first quarter of 2021. The decline in KBN’s result, is caused by unrealised losses on financial instruments, as a result of market volatility.
- The market conditions have been demanding, but we are satisfied with higher net interest income. Net interest income led to a solid result in KBN’s core earnings. KBN’s unrealised gains and losses are expected to reverse, either as market conditions normalise or as the instruments approach maturity, says CEO Jannicke Trumpy Granquist.
Higher net interest income
KBN’s core earnings totalled NOK 248 million in the first quarter, compared to NOK 210 million in the first quarter of 2021. The main explanation for the increase in KBN’s core earnings was higher net interest income.
KBN’s net interest income in the first quarter of 2022 totalled NOK 436 million as compared to NOK 384 million in the same period in 2021. The main reason for the increase in net interest income was the increase in interest rates. Lending margin has been falling through the quarter. The money market rate increased in the quarter as a result of the expected increases to Norges Bank’s key policy rate. Norges Bank raised its key policy rate by 0.25 percentage points at its monetary policy meeting on 24 March 2022. KBN decided on an interest rate increase of 0.50 percentage points with effect from 12 April as a result of the increases in the money market rate and Norges Bank’s key policy rate.
KBN’s result for the period in the first quarter of 2022 was a loss of NOK 352 million as compared to a profit of NOK 398 million in the first quarter of 2021. The market turmoil and its impact on credit spreads and basis spreads in the first quarter resulted in KBN recognising significant unrealised losses in connection with the measurement of the fair value of its financial instruments, and this is the reason for the decrease in the result for the period. In the first quarter of 2022, KBN recognised unrealised losses on financial instruments totalling NOK 821 million, while in the first quarter of 2021 it recognised unrealised gains totalling NOK 230 million.
Growth in green lending
KBN continued to experience a good level of growth in its green lending, and its portfolio of green loans increased by NOK 1.6 billion in the quarter, which is more than double the increase of NOK 0.6 billion seen in the first quarter of 2021. The projects financed by a green loan from KBN in the first quarter of 2022 include a new school, sports and swimming complex in Lørenskog municipality, a recycling centre in Drammen and a shore-side power system for Nordfjord port.
The war in Ukraine
On 24 February Russia commenced a military invasion of Ukraine. The invasion has caused a humanitarian disaster in Ukraine. In addition, the war has also had a major impact on the world economy. The market turmoil caused a significant widening in credit spreads, which impacted KBN’s results for the first quarter of 2022.
KBN has no direct exposure to either Russia or Ukraine, nor does it have any outsourced activities or suppliers located in these areas. KBN has some indirect exposure through multinational institutions that have provided loans or financing for projects in Ukraine and Russia. Sanctions against investors that own securities issued by KBN are being monitored and followed up.