Good start to the year

Norwegian banks’ profits in the first quarter of 2010 amounted to NOK 6.2 billion. This is NOK 2.3 billion better than last quarter and NOK 1.5 billion higher than the first quarter of last year. The net interest income was somewhat reduced, but reductions in loan losses contributed to the increased profits. Finance companies delivered the best quarterly results ever in this quarter.

Norwegian banks’ loan losses were NOK 951 billion in the first quarter of 2010. This is down NOK 635 billion compared to the last quarter of 2009, and the lowest level of loan losses since the second quarter of 2008. Compared to the first quarter last year, the loan losses are reduced by NOK 2 billion.

The difference between interest income and interest expenses; the net interest income, amounted to NOK 11.8 billion in the first quarter this year, down from NOK 12.1 billion in the previous period. Even though the net interest income has fallen, it is still at a high level and contributes to the good results. The gross interest income was NOK 28.4 billion in the first quarter of 2010, while the interest expenses amounted to NOK 16.6 billion.

High, but decreasing gains on securities and currency

By the end of the first quarter of 2010, the banks’ total gains on securities and currency amounted to NOK 1.4 billion. This is a high level, but NOK 1.9 billion lower than in the first quarter last year.

Gains on currency and gold contributed the most to the decrease; the gains amounting to NOK 3.6 billion in the first quarter of 2009 fell to NOK 356 million in the first quarter this year. Derivative instruments increased from NOK -400 million to the first quarter of 2009 to NOK 802 million to the end of the first quarter this year.

Norwegian banks’ gains on short-term papers, bonds and other interest-bearing securities were NOK 485 million in the first quarter this year, while gains on stocks and other securities with varying return amounted to NOK 82 million.

Slight increase in mortgage companies’ profits

The mortgage companies’ results in the first quarter of 2010 were NOK 11 million higher than the fourth quarter last year, and ended at NOK 699 million. The results for the mortgage companies in the last year have been 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 mortgage companies had losses on securities and currency amounting to NOK 593 million in the first quarter of 2010. This is still far less than the second and third quarter of 2009, where the losses ended on NOK 3.3 and 2.3 billion respectively. The gains on currency and gold are reduced by NOK 4 billion in one year and ended on NOK 424 million in the first quarter of 2010. From the first quarter of 2009 to the first quarter of 2010, the losses on derivative instruments are reduced by NOK 5.3 million, while other financial assets turned a profit of NOK 4.3 billion in the first quarter of 2009 into a loss of NOK 9 million in the first quarter this year.

The net interest income for the mortgage companies amounted to NOK 2.1 billion in the first quarter of 2010. The loan losses were only NOK 14 million in the first quarter this year, down NOK 56 million from the fourth quarter of 2009. The low loan losses could be 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 they have more secure loans than other financial corporations.

Very good results for the finance companies

Norwegian finance companies delivered the strongest results ever recorded in a single quarter, and ended on NOK 602 million. This is NOK 75 million higher than the first quarter last year. Reduced loan losses were important to the improved results. The loan losses were NOK 295 million in the first quarter, down from NOK 384 million in the fourth quarter last year.

At NOK 1.8 billion for the first quarter of 2010, the net interest income is stable, and is the biggest income item for the banks and the mortgage companies.

Source: Statistics Norway

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