Financial corporations, accounts, Q2 2009

Norwegian banks’ profits in the second quarter of 2009 were one of the strongest quarterly profits ever achieved, surpassed only by the profits in the fourth quarters of 2006 and 2007, and the second quarter of 2008. The profits in these three quarters were 7.1, 6.7 and 6.6 respectively. Compared to the first quarter of 2009, the profits increased by almost NOK 2 billion in the second quarter of 2009.

High net interest income and decreasing loan losses

Norwegian banks’ net interest income in the second quarter of 2009 was equivalent to the first quarter of 2009, amounting to a total of NOK 12.2 billion. This is the highest net interest income ever measured in the first two quarters of a year. Compared to the second quarter of 2008, the net interest income has increased by NOK 1 billion, while it is somewhat lower than the record levels in the third and fourth quarters of 2008 when the net interest income was NOK 13 and 14.2 billion respectively.

Losses on loans in Norwegian banks were NOK 1.7 billion in the second quarter of 2009. This is a decrease of NOK 1.3 billion from the first quarter of 2009 and a decrease of almost NOK 3 billion compared to the last quarter of 2008. However, the loan losses are still higher than they have been in years. Not since 2003 have there been higher loan losses in an equivalent quarter; the losses were then NOK 2.2 billion.

Unprecedented revenues from ownership interest in associated companies and group companies

Norwegian banks’ revenues from ownership interest in associated companies and group companies amounted to a total of NOK 1.6 billion at the end of the second quarter of 2009. This is the highest ever recorded. By comparison, these revenues were NOK 425 million in the second quarter of 2008.

Still large gains on securities and currency

At the end of the second quarter of 2009 Norwegian banks had a net gain on securities and currency amounting to a total of NOK 2.5 billion. With the exception of the first quarter of 2009, this is the largest gain on securities and currency ever measured.

Net gain on currency is the largest contributor with NOK 1.1 billion in the second quarter of 2009. Although this is a decrease of nearly NOK 2.5 billion from the first quarter of 2009, it is still the highest gain on currency since the second quarter of 2007. Net gain on short-term papers, bonds and other interest-bearing securities amounted to NOK 913 million in the second quarter of 2009; an increase of NOK 60 million from the first quarter of 2009. Net gain on shares and other securities with variable returns were NOK 787 million at the end of the second quarter of 2009; an increase of NOK 606 million compared to the first quarter of 2009. The gain in interest-bearing securities and securities with variable returns in the first two quarters of 2009 contrasts with the end of 2008 when there were losses of almost NOK 1.5 billion for both these types of securities. With regard to derivative instruments, Norwegian banks experienced a loss of NOK 149 million in the second quarter of 2009.

Losses for mortgage companies

Norwegian mortgage companies’ profits were NOK -961 million in the second quarter of 2009. Increased losses on securities and currency were a strong contributor to the weak result. These losses amounted to NOK -3.3 billion at the end of the second quarter of 2009, which is the highest loss on securities and currency for the mortgage companies ever. By comparison, there was a net gain of NOK 4.8 billion at the end of 2008, and in the first quarter of 2009 there was a net gain of NOK 2.1 billion.

Losses on derivative instruments amounted to NOK -4.6 billion of the total loss on securities and currency in the second quarter of 2009, but losses on currency were also a strong contributor with NOK -2.9 billion. While the loss on derivative instruments was reduced compared to the first quarter of 2009, net gains on currency of NOK 4.4 billion in the first quarter of 2009 were turned to losses in the second quarter of 2009.

Norwegian mortgage companies’ losses on loans were NOK 105 million at the end of the second quarter of 2009; an increase of NOK 71 million from the first quarter of 2009. The net interest income was NOK 2 billion in the second quarter of 2009, unaltered from the first quarter.

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.

The best quarter ever for Norwegian finance companies

Norwegian finance companies delivered the strongest quarter ever recorded in the second quarter of 2009 with a profit of NOK 614 million. This is an increase of NOK 87 million compared to the first quarter of 2009 and NOK 65 million more than the third quarter of 2005, which until now has been the quarter with the highest profit. The strong result is caused by an unprecedented net interest income of NOK 1.8 billion, but the increase in profits from the first to the second quarter of 2009 is also largely due to increasing commission income.

Norwegian finance companies’ losses on loans amounted to NOK 375 million at the end of the second quarter of 2009; a decrease of NOK 21 million from the first quarter of 2009, but an increase of NOK 217 million compared to the second quarter of 2008.