Financial corporations, balance sheet, July 2009

Banks finance their operations from different sources. Customer deposits are usually regarded as the safest, least expensive and most stable of these sources, but the banks are also dependant on other funding sources. These other sources include, among others, bond loans, short-term security loans, inter-bank loans and loans in the central bank. Customer deposits amounted to NOK 1 522 billion at end-July. This is almost 50 per cent of the banks’ total funding. The other aforementioned funding sources totalled NOK 1 533 billion in the same period.

High foreign funding

Foreign funding sources still constitute a considerable part of Norwegian banks’ funding. The Norwegian banks are therefore directly affected by the situation in the international credit markets.

Funding from foreign sources such as bond loans, short-term security loans and inter-bank loans constitutes over 75 per cent of the banks’ total funding in the money market. In spite of this large share of foreign funding July was the first month in 2009, except from April, with a positive monthly growth. Funding from foreign sources increased by 1.5 per cent from June to July, and amounted to NOK 1 116 billion at end-July 2009. This is the highest monthly growth so far in 2009. Funding from domestic sources decreased by 0.6 and amounted to NOK 356 billion at end-July 2009.

Increasing inter-bank loans

Norwegian banks’ total inter-bank loans increased from June to July 2009 by 2.4 per cent. At end-July, Norwegian banks’ total inter-bank loans amounted to NOK 820 billion, up from NOK 802 billion the previous month. This is still lower than the highest level measured in 2009, which was NOK 861 billion at end-February. Inter-bank loans are Norwegian banks’ second largest funding source following customer deposits.

The largest part of the inter-bank loans is foreign. Norwegian banks’ foreign inter-bank debt amounted to a total of NOK 741 billion at end-July 2009. This constitutes over 90 per cent of Norwegian banks’ total inter-bank debt. The dominance of foreign inter-bank loans is largely due to loans from the parent company to foreign-owned banks operating in Norway. The foreign inter-bank debt increased by 3.2 per cent from June to July. This is the highest monthly growth measured so far in 2009. The domestic inter-bank loans decreased by 4.7 per cent compared to the previous month. It is important to point out that a large part of the inter-bank loans are in foreign currency and changes in exchange rates may therefore influence the growth.

Increase in short-term security debt

At end-July 2009, Norwegian banks’ total short-term security debt amounted to NOK 125 billion; an increase of NOK 4 billion from the previous month. This equals a growth of 3.4 per cent from June to July.

The increase in Norwegian banks’ total short-term security loans stems from the foreign short-term debt. This debt increased by 4.2 per cent from June to July and amounted to NOK 104 billion at end-July. This is the first month with positive growth since December 2008, with the exception of April 2009. The domestic short-term debt decreased by only 0.2 per cent from June to July, following a decrease of over 12 per cent the previous month. At end-July, the domestic short-term debt amounted to NOK 21 billion; the lowest level since July 2007.

Decrease in bond debt

Bond loans are an important long-term funding source for the banks. Norwegian banks’ total bond debt amounted to NOK 527 billion at end-July 2009. From June to July 2009, the total bond debt decreased by 1.7 per cent, following a decrease of 1.8 per cent the previous month. The domestic bond debt increased by 0.7 per cent from June to July, while the foreign debt decreased by 3.8 per cent in the same period. At end-July 2009, Norwegian banks’ domestic and foreign debt amounted to NOK 256 and 271 billion respectively.