First quarter 2005:
- Good first quarter results at credit institutions
- Loan losses and defaults at a low level
- Continued fall in net interest income (see chart)
- Higher bank lending growth due to continued strong growth in lending to households and faster growth in lending to enterprises
- Stable tier 1 capital adequacy
– Continued very low loan losses contributed to good first quarter results for the banking sector. Persistent pressure on interest margins and falling net interest income indicate keen competition in the banking market. This, combined with slower volume growth, could bring some reduction in net profits ahead, comments Kredittilsynet’s director general, Bjørn Skogstad Aamo.
Banks recorded an aggregate pre-tax result of NOK 5.1 billion in the first quarter, about NOK 0.4 billion more than in the same period last year. The pre-tax result measured about 1.17% of average total assets (ATA). Return on equity (after tax) rose from 13.2% in the first quarter of 2004 to 13.5% in the first quarter of 2005. Net interest income – 0.06 percentage points down on the same-period level last year – continued to decline in terms of ATA. Even so, reduced costs improved the pre-loss result to 1.13% of total assets compared with 0.96% one year back. At a mere 0.05% of lending, loan losses were again at a very low level in the first quarter of 2005. This was the fifth consecutive quarter of very low loan losses. Four small banks had an accounting deficit in the first quarter.
Banks recorded an aggregate 10.2% growth in lending in the 12 months to end-March 2005, growth having edged up since the third quarter of 2003. Lending to retail customers rose 13.9% in the year to end-March, slightly lower than the end-2004 figure. Growth in lending to enterprises was higher than in last year’s fourth quarter. Gross loan defaults for all banks combined fell 27% in the year to end-March, measuring 1.1% of gross lending at quarter-end. Deposit growth came to 10.5%, the highest growth figure since 2001, contributing to a slight increase in the deposit-to-loan ratio. Tier 1 capital adequacy was 9.6% for the banks as a whole, 0.3 percentage points higher than the previous year’s figure.
Finance companies posted a result of NOK 365 million on ordinary operations, equivalent to 1.77% of ATA. Net interest income measured 3.84% of ATA. Finance companies’ aggregate losses were lower than one year back. Gross loan defaults fell by 2.5%, measuring 1.9% of gross lending. Finance companies’ lending rose 15.7% in the 12 months to end-March – a far higher growth rate than in the case of bank lending. Tier 1 capital adequacy was 9.4% at end-March 2005 compared with 9.3% one year earlier.
Mortgage companies’ result of ordinary operations came to NOK 339 million, a decline of NOK 55 million on the same period last year. The result fell 0.11% to 0.38% of ATA. Although mortgage companies recorded net incomings on loan losses, lower net interest income and higher expenses impaired their results. Gross loans to customers rose 12.4% in the year to end-March. Tier 1 capital adequacy was 9.3% at quarter-end.
Chart: Quarterly net interest income (as per cent of ATA, ann.) (pdf)
Preliminary key figures and ratios reported to Kredittilsynet after the first quarter 2005 (xls)
Contact persons:
Mr Bjørn Skogstad Aamo, Director General, Kredittilsynet, tel. +47 229 39 929
Ms Anne Stine Aakvaag, Special Adviser, tel. +47 229 39 874
