Financial corporations, accounts, Q4 2009

The annual profit for Norwegian banks in 2009 was NOK 21.6 billion, which was an increase of NOK 5.2 billion compared to 2008. The profit for the last quarter of 2009 accounted for NOK 4.8 billion. This is an increase of NOK 3.5 billion compared to the corresponding quarter in 2008, but a decrease of NOK 890 million from the third quarter of 2009. The net interest income was high all through 2009 and contributed positively to the result together with increasing gains on securities and currency. Loan losses were relatively high in all quarters of 2009, varying between NOK 1.7 and 3.0 billion. However the quarterly loan losses in 2009 were substantially lower than the high loan loss in the 4^{t h} quarter of 2008.

Increasing loan losses

Norwegian banks’ loan losses in 2009 were NOK 9.4 billion. The loan losses rose sharply in the fourth quarter of 2008, but fell by NOK 1.7 billion, to NOK 3.0 billion in the first quarter of 2009. In the following quarters of last year, the loan losses remained relatively stable; NOK 1.7 billion in the second quarter and NOK 2.6 billon in the third quarter. The loan losses then fell to NOK 2.1 billion in the last quarter of 2009. The loan losses in the fourth quarter of 2008 and the first quarter of 2009 were the highest since the end of 2002.

Net interest income is high

Norwegian banks’ interest income and interest expenses were reduced by NOK 28 and 26 billion respectively from the fourth quarter of 2008 to the end of 2009. The net interest income was consequently held at a high level, but fell from a peak of NOK 14.2 billion in the 4^{t h} quarter of 2008 to NOK 12.1 billion in the 4^{t h} quarter of 2009.

Rising gains on securities and currency and increasing losses on derivatives

Norwegian banks’ total gains on securities and currency amounted to NOK 13.9 billion for the whole of 2009. The gains were high in the first and the third quarter of 2009, at about NOK 4 billion, but fell to approximately NOK 2 billion in the last quarter last year. Net gain on currency was the largest contributor with NOK 3.0 billion at the end of the third quarter of 2009. Net gains on currency fell to NOK 1.6 billion in the last quarter of 2009. Gains on short-term papers, bonds and other interest-bearing securities, and gains on shares and other securities contributed positively to the profit in 2009. However, the banks experienced a loss on derivative instruments in the second and the third quarter of 2009 amounting to NOK 1.6 billion for 2009 as a whole.

Mortgage companies’ profits still high but decreasing

Mortgage companies’ profits fell from a peak of NOK 5.4 billion in 2008 to NOK 2.1 billion in 2009. In the first quarter of 2009 the profit was high, at NOK 2.1 billion, but this fell to NOK -958 million in the second quarter. The second and third quarters of 2009 are the only two quarters ever with negative profits for the Norwegian mortgage companies. In the last quarter of 2009, profits rose to NOK 688 million.

As in previous quarters, losses on securities and currency were the strongest contributor to the weak results in the fourth quarter of 2009. These losses amounted to NOK -2.3 billion at the end of the third quarter of 2009 and NOK -562 million in the last quarter. The annual net losses on securities and currency amounted to NOK 4.1 billion in 2009. In 2008, mortgage companies experienced a net gain of NOK 4.6 billion.

The mortgage companies’ net interest income was high in all quarters of 2009 and amounted to NOK 8.2 billion for 2009 as a whole. Loan losses were low in 2009, at only NOK 231 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.

High profits in finance companies

Norwegian finance companies delivered the strongest results ever recorded in 2009 of NOK 2.1 billion. The profits rose from NOK 1.4 billion in 2008. In the second quarter of 2009 the profits were almost NOK 600 million and in all other quarters the profits ranged between NOK 489 and 527 million.

As was the case earlier in 2009, the net interest income was the strongest contributor to the good result. The net interest income amounted to an unprecedented NOK 7.4 billion at the end of 2009.

The loan losses rose to NOK 1.6 billion in 2009; an increase of about NOK 300 million from 2008. However, the quarterly loan losses fell from a peak of NOK 800 million in the last quarter of 2008 to about NOK 400 million in each quarter of 2009.