Financial corporations, accounts, Q3 2009

At the end of the third quarter of 2009 Norwegian banks’ accumulated profits were close to NOK 17 billion. For comparison, this result was NOK 15 billion at the same time last year. The result for the third quarter of 2009 accounted for NOK 5.7 billion. This is an increase of close to NOK 1 billion compared to the equivalent quarter last year, but a decrease of NOK 800 million from the second quarter of 2009. High net interest income and increasing gains on securities and currency contributed positively to the result, while increasing loan losses and a sharp fall in revenues from ownership interest in associated companies and group companies compared to the second quarter of 2009 contributed negatively.

Increasing loan losses

Norwegian banks’ loan losses amounted to NOK 2.6 billion at the end of the third quarter of 2009. This is an increase of almost NOK 1 billion from the previous quarter, and an increase of NOK 1.6 billion compared to the equivalent quarter last year. With the exception of the fourth quarter of 2008 and the first quarter of 2009, the loan losses in the third quarter of 2009 were the highest since the end of 2002.

The third highest net interest income ever

Norwegian banks’ interest income was reduced by almost NOK 3 billion from the second to the third quarter of 2009, but a decrease of over NOK 3 billion also in the interest expenses still led to a high net interest income. Norwegian banks’ net interest income in the third quarter of 2009 was NOK 12.6 billion. This is a decrease of approximately NOK 500 million compared to the equivalent quarter last year, but with the exception of the third and fourth quarter last year, when the net interest income was an unprecedented NOK 13.1 and 14.2 billion; this is the highest net interest income ever recorded.

Increasing gains on securities and currency

At the end of the third quarter of 2009 Norwegian banks’ total gains on securities and currency amounted to a total of NOK 3 billion. This is the second highest ever, only beaten by the first quarter this year when the gains on securities and currency were NOK 3.3 billion. Net gain on currency was the largest contributor with NOK 2.6 billion at the end of the third quarter of 2009. This was followed by gains on short-term papers, bonds and other interest bearing securities, and gains on shares and other securities with variable returns which amounted to NOK 1.2 and 1.1 billion respectively. Norwegian banks experienced a loss on derivative instruments amounting to NOK 1.2 billion in the third quarter of 2009.

Unprecedented losses on currency for Norwegian mortgage companies

Norwegian mortgage companies’ profits were NOK -267 million in the third quarter of 2009. This was a small improvement compared to the previous quarter when the profits amounted to NOK -958 million, but the profits were still negative. The second and third quarters of 2009 are the only two quarters ever with negative profits for the Norwegian mortgage companies.

Just as the previous quarter, losses on securities and currency were the strongest contributor to the weak result in the third quarter of 2009. These losses amounted to NOK -2.3 billion at the end of the third quarter of 2009. In the equivalent quarter last year Norwegian mortgage companies also experienced losses on securities and currency, but only NOK - 222 million. Compared to the second quarter of 2009 the losses were reduced by approximately NOK 1.1 billion. Losses on currency were the main contributor with NOK -4.1 billion; the highest ever recorded.

The Norwegian mortgage companies’ net interest income was NOK 2.2 billion at the end of the third quarter of 2009; a small increase from the second quarter. Loan losses were low, only NOK 22 million.

The profits of Norwegian mortgage companies are affected by the introduction of the International Financial Reporting Standards (IFRS), which can lead to fluctuations in book values for liabilities and assets at fair value. The profits of Norwegian mortgage companies are also affected by portfolio movements of loans between banks and mortgage companies. These companies may be less exposed to losses on loans due to the fact that they have more secure loans than the banks.

Unprecedented net interest income for Norwegian finance companies

Norwegian finance companies delivered the strongest quarter ever recorded in the second quarter of 2009 with a profit of almost NOK 600 million. In the third quarter of 2009 the profits were reduced to NOK 489 million, but it was still a good result historically.

Just as the previous quarter, the net interest income was the strongest contributor to the good result. The net interest income amounted to an unprecedented NOK 1.9 billion at the end of the third quarter of 2009.

Norwegian finance companies’ loan losses amounted to NOK 416 million at the end of the third quarter of 2009; an increase of NOK 41 million from the second quarter, and an increase of NOK 180 million compared to the equivalent quarter last year.