Good results for Norwegian banks
Norwegian banks’ profit in the third quarter of 2010 amounted to NOK 6.3 billion. This was NOK 591 million higher than the result in the equivalent quarter last year. Most of the increase came from lower loan losses and high net interest income.
At the end of the third quarter of 2010, Norwegian banks’ accumulated profits were NOK 21.0 billion. For comparison, the accumulated profits were NOK 16.8 billion at the same time last year.
As a percentage of total assets, profit in the third quarter accounted for 0.17 per cent. At the same time last year this share was 0.15 per cent. On average, the result as a percentage of total assets has been 0.17 per cent over the last 10 years.
Lower loan losses
Norwegian banks’ loan losses in the third quarter of 2010 were NOK 768 million; a decrease of NOK 538 million from the previous quarter. At the same time last year the loan losses were NOK 2.6 billion. To find a lower level of loan losses we need to go back to the second quarter of 2008.
High net interest income
Norwegian banks’ interest income increased from NOK 29.9 billion in the second quarter this year to NOK 32.9 billion in the third quarter. The interest expenses increased in the same period from NOK 18.1 to 19.5 billion. The net interest income was thus NOK 13.4 billion in the third quarter. This is an increase from NOK 11.9 billion in the second quarter. With the exception of the fourth quarter of 2008, the level of net interest income has never been higher.
As a percentage of total assets, the net interest income accounted for 0.37 per cent in the third quarter of 2010. This share has been stable between 0.32 and 0.38 per cent in the last 5 years.
Gains on securities and currency
Norwegian banks’ total gains on securities and currency amounted to NOK 2.5 billion in the third quarter this year. In the second quarter there was a loss on securities and currency of NOK 511 million. The accumulated gains on securities and currency amounted to NOK 3.4 billion at the end of the third quarter. At the same time last year the accumulated gains amounted to NOK 3.0 billion.
In the third quarter of 2010 the net gain on currency amounted to NOK 5.4 billion; an increase of NOK 7.4 billion from the second quarter. On the other hand there was a loss on other financial assets and liabilities in the third quarter of NOK 5.9 billion; a decrease of NOK 9.6 billion from last quarter.
Fluctuations in the mortgage companies’ profits
Mortgage companies’ profits fell by 49.3 per cent from the second quarter and amounted to NOK 794 million in the third quarter of 2010. As a percentage of total assets, profits accounted for 0.06 per cent, down from 0.12 per cent in the previous quarter. Losses on securities and currency were the strongest contributor to the decrease. The profits in the third quarter of 2010 were almost NOK 1.1 billion higher than in the same quarter in 2009.
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 net interest income was NOK 2.7 billion in the third quarter, up from 1.9 billion in the second quarter this year. The level of net interest income in the third quarter this year is the highest ever recorded for mortgage companies.
Decrease in profits for finance companies
In the third quarter of 2010 there was a merger between a finance company and a bank. Comparisons of the results before and after the merger are therefore difficult for the finance companies.
Norwegian finance companies’ profits were NOK 230 million in the third quarter, and the net interest income amounted to NOK 443 million in the third quarter.
Source: Statistics Norway
