Financial institutions (discontinued), Q2 2006

The strong growth in the overall lending from the financial institutions is mainly due to the high growth in the banks’ lending to the public (municipalities, households and non-financial corporations) which increased by 4.7 per cent to NOK 1 667 billion during the second quarter of 2006. The banks’ lending to the public increased by 20.4 per cent during the last 12 months. The growth is mainly caused by high growth rates in the house prices, high housing investments, and high business-sector investments. Deposits from the public increased by 15.2 per cent to NOK 1 041 billion, while the banks’ borrowing from abroad rose with 41.1 per cent to NOK 782 billion during a 12 months period.

Falling interest margin

The interest margin in the banking sector keeps falling due to the high competition. The interest rate margin is defined as the difference between the weighted average interest rates on NOK loans to the public and weighted average interest rates on deposits from the public. Norges Bank reports that the banks' interest rate margin was 2.26 per cent at the end of the second quarter of 2006. The interest rate margin fell by 0.03 percentage points compared with last quarter.

Increased stock of securities

The value of investments in securities fell 1.8 per cent to NOK 1 129 billion during the second quarter of 2006. The quarterly decrease in the value of investments in securities was mainly caused by the decrease in Norwegian and international stock prices in the middle of May and June. However, the 12 - months growth rate was 9.6 per cent at end of the second quarter of 2006. The value of investments in equities, units and primary capital certificates has increased by 26.2 per cent, while the value of investments in bonds has increased by 6.3 per cent since the end of the second quarter of 2005. Furthermore, the value of investments in certificates fell by 18.6 per cent during the same period. Bonds still have the largest share of the stock of securities by 64.9 per cent, while equities, units and primary capital certificates accounts for 29.6 per cent. The value of investments in securities, measured as share of total assets, has been relatively stable the last 12 month.

Increased total assets

Total assets for all financial institutions increased by 15.8 per cent to NOK 4 340 billion compared with the corresponding quarter last year. The total assets in banks’ increased by 22.1 per cent, while the total assets in insurance companies and finance companies increased by respectively 12 per cent and 4.9 per cent, during the same period. Total assets indicate the size of the financial institutions. Thus, banks’ consolidates their position as the leading financial institution in Norway, followed by insurance companies and finance companies.