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4571
Weak start to 2008 for Norwegian banks
statistikk
2008-05-22T10:00:00.000Z
Banking and financial markets
en
orbofrk, Financial corporations, accounts, banks, mortgage companies, finance companies, state lending institutions, period result, profit and loss accountFinancial institutions and other financial corporations, Banking and financial markets
false

Financial corporations, accounts, Q1 2008

As from 2016 the statistics is published with Banks and mortgage companies.

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Weak start to 2008 for Norwegian banks

Norwegian banks’ profit amounted to NOK 3.9 billion in the first quarter of 2008 -the lowest first quarter result since 2004 and NOK 1.4 billion lower than the profit in the first quarter of 2007. The main contributor to the weak quarterly result was large net losses on securities and losses on loans.

The main cause of the NOK 1.4 billion decrease in profit from the first quarter of 2007 to the first quarter of 2008 is that Norwegian banks suffered large losses on securities in the first quarter of 2008. The negative effect of the losses on securities and increased losses on loans exceeded the positive effect of an unprecedented net interest income.

Banks. Selected items from the profit and loss statement. Q1 2002-Q1 2008. NOK million
 
  Net interest
earnings		 Losses on
loans etc.		 Net gain on short-term papers,
bonds and other interest
bearing securities		 Profit and loss
for the financial period
 
Q1 2002 7 608  404 -44 2 867
Q2 2002 8 016 1 068 19 1 751
Q3 2002 8 209 1 411  177 1 202
Q4 2002 8 454 4 940  151 -291
Q1 2003 7 889 1 764  369 1 603
Q2 2003 8 104 2 227  536 2 377
Q3 2003 8 222 1 650  112 2 440
Q4 2003 7 680 1 500  153 3 069
Q1 2004 7 621  458  415 3 558
Q2 2004 7 864  233 -179 3 367
Q3 2004 8 433  231  144 4 127
Q4 2004 8 193  276  147 3 974
Q1 2005 8 042  179 -34 4 036
Q2 2005 7 822 -773  437 4 918
Q3 2005 8 384 -396 -70 4 988
Q4 2005 8 824 -220 3 5 700
Q1 2006 8 333 -319 -38 5 065
Q2 2006 9 313 -136 -127 4 799
Q3 2006 9 181 -531  210 5 007
Q4 2006 9 513 -443 -326 7 076
Q1 2007 9 498 -7  323 5 358
Q2 2007 9 963  106  414 5 608
Q3 2007 11 086 10 -1 479 5 347
Q4 2007 11 180 -15 -755 7 100
Q1 2008 11 823  361 -2 200 3 921
 

Banks. Net interest income, losses and profit and loss. Q1 2005-Q1 2008.

Banks. Net gain on short-term papers, bonds and other interest bearing securities, and derivative instruments Q1 2002-Q1 2008.

Large net losses on securities and increased losses on loans

Norwegian banks had large net losses on securities in the first quarter of 2008. The main part of these losses were losses linked to short-term papers, bonds and other interest bearing securities, and losses linked to derivative instruments. These losses amounted to NOK 2.2 and NOK 1.1 billion respectively. The losses linked to short-term papers, bonds and other interest bearing securities represented the largest losses ever recorded for this type of instruments, and the losses on derivative instruments were at the highest level since the second quarter of 2003. The large losses are related to the turbulence in the international financial markets caused by the problems in the subprime market.

Losses on loans etc. amounted to NOK 361 million in the first quarter of 2008. This is the highest losses on loans Norwegian banks have experienced since the first quarter of 2004. The losses have increased by close to NOK 400 million from the first quarter of 2007 to the first quarter of 2008, and with the same amount from the forth quarter of 2007.

Unprecedented net interest income

Norwegian banks experienced unprecedented net interest income levels throughout 2007 and preliminary figures for the first quarter of 2008 show that this trend has continued in 2008. Banks’ net interest income (interest income less interest costs) reached a substantial NOK 11.8 billion in the first quarter of 2008. This is an increase of NOK 2.3 billion, or close to 25 per cent, compared to the first quarter of 2007. The increase is primarily due to increased interest income and other income on loans and receivables from customers and credit institutions caused by a continued high growth rate in loans and a higher interest rate.

Weak profits for mortgage companies - finance companies do better

Norwegian mortgage companies’ profits amounted to NOK 92 million in the first quarter of 2008. This is considerably weaker than the NOK 220 million profit achieved in the first quarter of 2007. As was the case for the banks, large losses on short-term papers, bonds and other interest bearing securities were the main cause of the fall in profit from the first quarter of 2007 to the first quarter of 2008. Losses on currency were also a main contributor to the weak quarterly result.

Norwegian finance companies achieved a NOK 471 million profit in the first quarter of 2008. This is NOK 72 million higher than in the first quarter of 2007. Net write-back of losses amounting to NOK 113 million and absence of losses in the security market seem to be the main contributors to the increase, as well as a continued increase in net interest income.

There is uncertainty as to how the international financial market will develop in the time ahead and how this will affect the profitability of Norwegian banks. After the end of the first quarter of 2008, the stock markets have improved, which may lead to lower losses on securities in the time ahead. Other important factors which may affect the banks’ profit in a positive direction are increased interest rate levels and the high net interest income, while the prospect of increased net losses on loans and continued volatility in the international financial markets may have negative effects.

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