The KLP Banken Group finances mortgages and other credit to retail customers as well as loans to municipalities, county municipalities and companies that perform public tasks. Additionally, the KLP Banken manages a lending portfolio on behalf of its parent company KLP (Kommunal Landspensjonskasse). The Group manages a lending total of NOK 118 (115) billion. The overall business of KLP Banken AS and its subsidiaries is divided into the retail market and public sector loans business areas. The business is nationwide.
In the retail market KLP Banken will provide products and services at competitive terms to contribute to enterprises having elected KLP as their pension scheme provider are perceived as attractive employers.
In the public sector market KLP Kommunekreditt AS, together with KLP, will contribute to market competition and thereby access to favorable long-term financing for the sector.
Towards the end of the fourth quarter, Corona restrictions were introduced again, and most of the bank’s employees are working from home.
KLP Banken AS is owned 100 per cent by Kommunal Landspensjonskasse gjensidig forsikringsselskap (KLP). KLP Banken AS has two wholly owned subsidiaries, KLP Kommunekreditt AS and KLP Boligkreditt AS. The main office is located in Trondheim.
INCOME STATEMENT
By the end of the fourth quarter, the KLP Banken Group had a pre-tax profit of NOK 116.1 (136.8) million. The change is mainly related to lower lending margins, increased costs, and changes in the value of financial instruments. Distributed into the two business areas, the retail market segment generated a profit of NOK 87.6 (101.6) million while the public sector segment achieved a profit of NOK 28.5 (35.2) million. Group total income after taxes and actuarial adjustments amounted to NOK 121.0 (129,8) million by fourth quarter end 2021.
The Board’s opinion is that the Bank’s underlying operations are in good a development and loan activities are growing. Based on the very special conditions embossing the accounts last year, the Board is well satisfied with the profit statement for 2021.
Net interest income in the KLP Banken Group at the end of the fourth quarter was NOK 308.6 (317.3) million. Lending margins in the fourth quarter were affected by KLP Bankens decision to keep mortgage rates unchanged after the central bank interest rate rise in September. Increased borrowing costs have thus resulted in lower net interest income in the fourth quarter compared to earlier in 2021.
Net charges and commissions income was NOK 19.5 (18.5) million at the end of the quarter.
The bank group administers housing mortgages and public sector lending financed by its parent company (KLP). The management fee for this task amounted to NOK 59.4 (59.2) million at quarter end.
Operating expenses including depreciations amounted to NOK 236.2 (227.8) million.
At the end of the quarter, the income statement includes a net loss associated with securities amounting to NOK -32.9 (-26.1) million. The profit and loss effects are mainly due to one-off expenses from buy-back of own bond issues in the daughter enterprises and to market value changes in the liquidity investment portfolios.
In 2021 loan loss provisions and realized losses amounted to NOK 2.3 (4.3) million in the retail market. This is mainly due to loss on credit card drawn credits. The pandemic has not increased loan losses on mortgages, and total losses have been significantly reduced from last year. Nor in 2021 the public sector market has incurred realized loan losses.
LENDING AND CREDITS
On 31 December 2021, the KLP Banken Group had a lending balance of NOK 39.9 (38.2) billion. The distribution between the retail market and public sector lending was NOK 22.1 (20.5) billion and NOK 17.8 (17.7) billion, respectively.
The retail market in KLP Banken show a strong growth in volumes this fourth quarter. For the year, the annual growth rate on mortgages was NOK 1.5 (2.2) billion, of which about half was in the fourth quarter. KLP Banken experiences that market growth for mortgages market is flattening, and this contributes to increased competition. It has also become increasingly easier to change lender. Demand for new financing in KLP Banken has nevertheless increased among the members of KLP's pension schemes, but the proportion of early redemptions has also increased.
Mortgage loans amounting NOK 6.0 (7.5) billion are in 2021 sold from KLP Banken to the daughter company KLP Boligkreditt AS. Managed mortgages for KLP was reduced by NOK 0.2 (0.1) billion due to ordinary repayments and redemptions.
Outstanding credits drawn on credit cards are reduced by approximately 12 per cent compared to last year. This is assumed to be due to a general reduction in the need for unsecured credits. Granted credits still shows an increase and the number of credit card customers is growing.
The lending volume in the public market increased by NOK 0.3 (1.0) billion during 2021. Loans to public borrowers managed for KLP increased by NOK 4.7 (7.1) billion in the same period. Managed loans to foreign debtors in foreign currency have been further reduced by NOK -3.5 (-0.9) billion since the turn of last year.
LIQUID INVESTMENT
On the reporting date, the portfolio of liquid investments comprising interest bearing securities amounted to NOK 6.0 (3.1) billion. Net profit and loss effects due to market value changes as at fourth quarter end was NOK -3.4 (14.8) million.
BORROWING
The KLP Banken Group's external financing comprise deposits and bonds. At the reporting date, deposits from individuals and companies was NOK 12.9 (11.8) billion and bonds issued amounted to NOK 31.9 (25.8) billion. Of the outstanding volume of bonds issued, covered bonds (OMF) issued by KLP Kommunekreditt AS and KLP Boligkreditt AS, amounted to NOK 18.6 (17.4) billion and NOK 12.4 (10.6) billion respectively. All covered bond issues have achieved AAA rating. Outstanding securities debt in KLP Banken AS amounted to NOK 0.9 (0.8) billion.
RISK AND CAPITAL ADEQUACY
The KLP Banken Group is exposed to various types of risks and the bank has established a framework for risk management aimed at ensuring risks are identified, analysed, and subject to management using policies, limits, routines and instructions.
The bank is to have a prudent risk profile and earnings are to be principally a result of borrowing and lending activities, as well as liquidity management. This means that the bank is to have low market risk, and interest risk arising within the borrowing and lending activities is reduced using derivatives.
The KLP Banken Group and its subsidiaries are to have sound long-term financing due to regulatory requirements, and limits have been established to ensure that that this objective is achieved.
The credit risk associated with the bank’s assets is low, and lending is mainly limited to loans with local government risk and loans with lien on housing property. Management of the bank's liquidity is conducted through investments in other banks satisfying set credit quality requirements, and in securities in accordance with Board-approved credit lines.
At the end of the fourth quarter, eligible Tier 1 and Tier 2 capital i.a.w. the capital adequacy rules were NOK 2 498 (2 402) million. Eligible Tier 1 and Tier 2 capital comprise core capital only. Lending is risk-weighted in accordance with the authorities' capital adequacy regulations. The KLP Banken Group had a capital adequacy ratio of 18.7 (19.5) per cent at the end of the quarter. The minimum statutory requirement is 12.5 per cent core capital adequacy and 16.0 per cent capital adequacy. Leverage ratio was 5.2 (5.5) per cent. Here the requirement is 3.0 per cent.
Board members
Income statement KLP Banken Group
NOTES
NOK THOUSANDS
Q4 2021
Q4 2020
01.01.2021 -31.12.2021
01.01.2020 -31.12.2020
Interest income, effective interest method
164 783
158 597
621 624
768 442
Other interest income
20 422
22 356
68 176
132 655
3
Total interest income
185 205
180 953
689 801
901 098
Interest expense, effective interest method
-89 448
-67 842
-290 728
-469 541
Other interest expense
-19 939
-25 106
-90 463
-114 210
3
Total interest costs
-109 387
-92 948
-381 191
-583 751
0
3
Net interest income
75 818
88 005
308 609
317 346
0
Commision income and income from banking services
6 000
4 790
21 520
20 285
Commision cost and cost from banking services
-571
-456
-2 033
-1 766
Net charges and commission income
5 429
4 335
19 487
18 519
Other fee income
14 850
14 820
59 400
59 220
17
Net gain/ (loss) financial instruments
-9 439
-4 435
-32 896
-26 145
Total other operating income
5 411
10 385
26 504
33 074
Salaries and administrative costs
-23 519
-22 605
-81 930
-76 228
Depreciation
-1 431
-1 589
-6 409
-6 038
Other operating expenses
-38 400
-43 255
-147 846
-145 571
15
Net loan losses
-958
-127
-2 299
-4 302
Total operating expenses
-64 307
-67 576
-238 484
-232 139
Operating profit/loss before tax
22 351
35 149
116 117
136 801
Tax ordinary income
-5 242
-8 063
-423
-4 288
Profit/loss for the period
17 109
27 086
115 694
132 514
Estimate difference, pension obligation and assets
18 688
8 745
7 136
-3 557
Tax on actuarial gains and losses
-4 672
-2 186
-1 784
889
Items that will not be reclassified to profit and loss
14 016
6 559
5 352
-2 668
Changes in the fair value through profit and loss
0
0
0
0
Tax on changes in fair value of available for sale financial assets
0
0
0
0
Items that may be reclassified to profit and loss
0
0
0
0
Other comprehensive income for the period
14 016
6 559
5 352
-2 668
Comprehensive income for the period
31 125
33 644
121 046
129 846
Balance sheetKLP Banken Group
NOTES
NOK THOUSANDS
31.12.2021
31.12.2020
ASSETS
5
Claims on central banks
67 244
68 941
5
Loans to credit institutions
1 398 501
1 175 714
4,5
Loans to customers
39 934 100
38 224 087
5,6,14
Fixed-income securities
6 001 099
3 148 228
5,6
Shareholdings
1 187
1 197
5,6,9
Financial derivatives
42 051
42 630
Intangible assets
16 789
19 018
18
Right-of-use assets
18 236
1 948
Fixed assets
436
444
11
Other assets
2 217
5 819
Total assets
47 481 860
42 688 027
LIABILITIES AND OWNERS EQUITY
LIABILITIES
5,8
Debt to credit institutions
0
2 504 192
5,7
Debt securities issued
31 917 798
25 799 465
5
Deposits and borrowings from the public
12 901 004
11 781 187
5,6,9
Financial derivatives
9 990
80 425
Deferred tax liabilities
23 343
21 179
18
Lease liabilities
18 323
2 023
12
Other liabilities
38 369
14 056
12
Provision for accrued costs and liabilities
52 249
58 700
Total liabilities
44 961 078
40 261 226
EQUITY
Share capital
1 065 000
1 065 000
Share premium
825 000
825 000
Other owners' eqyity
630 782
536 801
Total equity
2 520 782
2 426 801
Total liabilities and equity
47 481 860
42 688 027
Statement of changes in equityKLP Banken Group
2021 NOK THOUSANDS
Share capital
Share premium
Other equity
Total owners’ equity
Equity 1 January 2021
1 065 000
825 000
536 801
2 426 801
Income for the year
0
0
115 694
115 694
Other comprehensive income
0
0
5 352
5 352
Total comprehensive income for the period
0
0
121 046
121 046
Group contribution received during the period
0
0
84 919
84 919
Group contribution paid during the period
0
0
-111 985
-111 985
Total transactions with the owners
0
0
-27 065
-27 065
Equity 31 December 2021
1 065 000
825 000
630 782
2 520 782
2020 NOK THOUSANDS
Share capital
Share premium
Other equity
Total owners’ equity
Owners’ equity 31 December 2019
1 057 500
732 500
430 561
2 220 561
Merger with KLP Bankholding AS
0
0
4 536
4 536
Owners’ equity 1 January 2020
1 057 500
732 500
435 097
2 225 097
Income for the year
0
0
132 514
132 514
Other comprehensive income
0
0
-2 668
-2 668
Comprehensive income for the year
0
0
129 846
129 846
Group contribution received during the period
0
0
141 681
141 681
Group contribution paid during the period
0
0
-169 823
-169 823
Owners' equity received during the period
7 500
92 500
0
100 000
Total transactions with the owners
7 500
92 500
-28 142
71 858
Equity 31 December 2020
1 065 000
825 000
536 801
2 426 801
Statement of cash flowsKLP Banken Group
NOK THOUSANDS
01.01.2021 -31.12.2021
01.01.2020 -31.12.2020
OPERATING ACTIVITIES
Payments received from customers – interest, commission and charges
638 105
812 696
Payments to customers – interest, commission and charges
-89 196
-128 918
Disbursements on loans to customers and credit institutions
-16 640 961
-19 998 713
Receipts on loans to customers
14 782 637
16 596 718
Net receipts on customer deposits banking
1 119 290
295 164
Disbursements on operations
-148 301
-152 043
Payments to staff, pension schemes, employer's social security contribution etc.
-81 174
-73 207
Interest investment accounts
9 617
7 871
Net receipts/disbursements from operating activities
64 335
111 414
Net cash flow from operating activities
-345 647
-2 529 017
INVESTMENT ACTIVITIES
Receipts on the sale of securities
9 763 759
11 425 797
Payments on the purchase of securities
-9 551 367
-11 440 399
Receipts of interest from securities
45 074
50 630
Payments on the purchase of tangible fixed assets
-2 578
-2 983
Net cash flow from investment activities
254 889
33 045
FINANCING ACTIVITIES
Receipts on loans from credit institutions
0
5 470 000
Repayment and redemption from credit institutions
-2 500 000
-2 970 000
Net payment of interest from credit institutions
-6 517
-838
Receipts on loans
9 300 000
7 250 407
Repayments and redemption of securities debt
-6 569 839
-6 756 063
Buy-back of securities debt
343 369
-480 000
Net payment of interest on loans
-238 607
-416 991
Payment of lease liabilities
-1 654
-1 570
Group contributions made
-27 066
-28 144
Equity contributions received
0
100 000
Net cash flows from financing activities
299 685
2 166 802
Net cash flow during the period
208 928
-329 171
Cash and cash equivalents at the start of the period
1 212 067
1 541 238
Cash and cash equivalents at the end of the period
1 420 995
1 212 067
Net receipts/disbursements (-)
208 928
-329 171
Notes to the financial statement
Note 1 General information
KLP Banken AS was formed on 25 February 2009. KLP Banken AS owns all the shares in KLP Kommunekreditt AS and KLP Boligkreditt AS. These companies together form the KLP Banken AS Group. KLP Banken AS Group provide or acquire loans to Norwegian municipalities and county authorities, as well as to companies with public sector guarantee. The lending activities are principally financed by issuance of covered bonds. The Group also offers standard banking products to private customers. KLP Banken AS is registered and domiciled in Norway. It's head office is at Beddingen 8 in Trondheim. The company has a branch office in Dronning Eufemiasgate 10, Oslo.
The company, KLP Banken AS, is a wholly owned subsidiary of Kommunal Landspensjonskasse (KLP). KLP is a mutual insurance company.
Note 2 Accounting principles
The interim report includes the interim Financial Statements of KLP Banken Group for the period 1 January 2021 – 31 December 2021, with a specification of the results in the fourth quarter. The interim Financial Statements has not been audited.
The interim financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting".
In January 2022, the Norwegian Accounting Standards Board published updated guiding assumptions for pension liabilities. In relation to the assumptions used as at 31.12.2020, the discount rate for corporate bonds was changed from 1.7 % to 1.9 %. At the same time, wage growth was changed from 2.25 % to 2.50 %, the National Insurance Scheme's basic amount (G) was changed from 2.0 % to 2.25 % and pension adjustment was changed from 1.24 % to 1.74 %. In total, these changes result in a NOK 7.1 million decrease in recognised pension liabilities for the Group as at 31.12.2021.
Other accounting principles and calculations are the same in the interim financial statement as in the annual report for 2020.
Note 3 Net interest income
NOK THOUSANDS
Q4 2021
Q4 2020
01.01.2021 -31.12.2021
01.01.2020 -31.12.2020
Interest income on loans to customers
162 516
157 931
617 688
760 567
Interest income on loans to credit institutions
2 266
666
3 937
7 875
Total interest income, effective interest method
164 783
158 597
621 624
768 442
Interest income on bonds and certificates
13 021
7 669
36 486
50 241
Other interest income
7 401
14 687
31 690
82 414
Total other interest income
20 422
22 356
68 176
132 655
Total interest income
185 205
180 953
689 801
901 098
Interest expenses on deposits to customers
-18 482
-16 480
-70 216
-122 407
Interest expenses on issued securities
-70 879
-51 351
-220 403
-347 080
Interest expense lease liabilities
-87
-11
-109
-54
Total interest expenses, effective interest method
-89 448
-67 842
-290 728
-469 541
Other interest expenses
-15 631
-22 300
-73 196
-102 988
Interest expenses on deposits to customers
-4 308
-2 806
-17 268
-11 222
Total other interest expenses
-19 939
-25 106
-90 463
-114 210
Total interest expenses
-109 387
-92 948
-381 191
-583 751
Net interest income
75 818
88 005
308 609
317 346
Note 4 Loans to customers
NOK THOUSANDS
31.12.2021
31.12.2020
Principal on loans to customers
39 870 185
38 057 684
Credit portfolio
43 355
49 595
Overdraft current account
179
531
Write-downs step 1 and 2
-1 075
-1 558
Write-downs step 3
-1 040
-872
Loans to customers after write-downs
39 911 604
38 105 380
Accrued interest
53 852
53 806
Premium/discount
0
74
Fair value hedging
-31 356
64 827
Loans to customers
39 934 100
38 224 087
Note 5 Categories of financial instruments
NOK THOUSANDS
31.12.2021
31.12.2020
Capitalized value
Fair value
Capitalized value
Fair value
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS
Fixed-income securities
6 001 099
6 001 099
3 148 228
3 148 228
Financial derivatives
42 051
42 051
42 630
42 630
Shares and holdings
1 187
1 187
1 197
1 197
Total financial assets at fair value through profit and loss
6 044 337
6 044 337
3 192 054
3 192 054
FINANCIAL ASSETS FAIR VALUE HEDGING
Loans to and receivables from customers
2 012 822
2 056 718
3 734 955
3 790 329
Total financial assets fair value hedging
2 012 822
2 056 718
3 734 955
3 790 329
FINANCIAL ASSETS AT AMORTIZED COST
Loans to and receivables from credit institutions
67 244
67 244
68 941
68 941
Loans to and receivables from central banks
1 398 501
1 398 501
1 175 714
1 175 714
Loans to and receivables from customers
37 921 278
37 877 270
34 489 133
34 489 133
Total financial assets at amortized cost
39 387 023
39 343 014
35 733 788
35 733 788
Total financial assets
47 444 182
47 444 069
42 660 798
42 716 172
FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT AND LOSS
Financial derivatives
9 990
9 990
80 425
80 425
Total financial liabilities at fair value through profit and loss
9 990
9 990
80 425
80 425
FINANCIAL LIABILITIES FAIR VALUE HEDGING
Liabilities created on issuance of securities
508 146
515 581
1 139 041
1 148 872
Total financial liabilities fair value hedging
508 146
515 581
1 139 041
1 148 872
FINANCIAL LIABILITIES AT AMORTIZED COST
Liabilities to credit institutions
0
0
2 504 192
2 504 192
Liabilities created on issuance of securities
31 409 652
30 977 884
24 660 423
25 283 898
Deposits from customers
12 901 004
12 901 004
11 781 187
11 781 187
Total financial liabilities at amortized cost
44 310 656
43 878 888
38 945 802
39 569 276
Total financial liabilities
44 828 792
44 404 459
40 165 268
40 798 573
Fair value shall be a representative price based on what a corresponding asset or liability would have been traded for on normal market terms and conditions. A financial instrument is considered to be listed in an active market if the listed price is simply and regularly available from a stock market, dealer, broker, industry grouping, price setting service or regulatory authority, and these prices represent actual and regularly occurring transactions at arm’s length. If the market for the security is not active, or the security is not listed on a stock market or similar, valuation techniques are used to set fair value. These are based for example on information on recently completed transactions carried out on business terms and conditions, reference to trading in similar instruments and pricing using externally collected yield curves and yield spread curves. As far as possible the estimates are based on externally observable market data and rarely on company-specific information.
The different financial instruments are thus priced in the following way:
Fixed-income securities - government
Nordic Bond Pricing is used as a source for pricing Norwegian government bonds. The prices are compared with the prices from Bloomberg to reveal any errors.
Fixed-income securities - other than government
Norwegian fixed-income securities, except government are priced directly on prices from Nordic Bond Pricing. Those securities that are not included in Nordic Bond Pricing are priced theoretically. The theoretical price is based on the assumed present value on the sale of the position. A zero-coupon curve is used for discounting. The zero-coupon curve is adjusted upwards by means of a credit spread, which is to take account of the risk the bond entails. The credit spread is calculated on the basis of a spread curve taking account of the duration of the bond. Nordic Bond Pricing is the main source of spread curves. They provide company-specific curves for Norwegian savings banks, municipalities and energy. Savings banks have various spread curves based on total assets. For companies where Nordic Bond Pricing do not deliver spread curves, the Group use spread curves from three Norwegian banks. When spread curves are available from more than one of these banks, an equal-weighted average is used. If a bond lacks an appropriate spread curve, spread from a comparable bond from the same issuer is used.
Financial derivatives
These transactions are valued based on the applicable swap curve at the time of valuation. Derivative contracts are to be used only to hedge balance amounts and to enable payments obligations to be met. Derivative contracts may be struck only with counterparties with high credit quality.
Shares (unlisted)
For liquid shares and units, the closing price on the balance sheet date is used as the basis for measurement at fair value. If the prices are not quoted, the last price traded is used. Illiquid shares are priced on the basis of the Oslo Stock Exchange’s index algorithm based on the last traded prices. If the price picture is out of date, a derived valuation is produced from relevant equity indices or other similar securities. If this is also considered unsatisfactory, a discretionary valuation is made in which the Company’s financial key figures, broker assessment etc. are used.
Fair value of loans to retail customers
The fair value through profit/loss is calculated by discounting contractual cash flows to present values. The discount rate is determined as the market rate, including a suitable risk margin. For loans measured at fair value through other comprehensive income, the fair value is calculated as the recognised principal minus estimated loss provisions on loans classified in Stage 2 and 3 (see note 15 Loan losses provision).
Fair value of loans to Norwegian local administrations
The fair value of these loans is considered to be virtually the same as the book value, as the contract terms are constantly adjusted in line with market interest rates. The fair value of fixed rate loans is calculated by discounting contractual cash flows by market interest rates including a suitable risk margin at the end of the reporting period. This is valued at Level 2 in the valuation hierarchy, cf. Note 6.
Fair value of deposits
The fair value of floating rate deposits is taken to be approximately equal to the deposit amount including accrued interest. The fair value of fixed rate deposits is calculated by discounting contractual cash flows by market interest rates including a suitable risk margin. Discounting contractual cash flows by market interest rates including a suitable risk margin. This is valued at Level 2 in the valuation hierarchy, cf. Note 6.
Fair value of loans to and receivables from credit institutions
All receivables from credit institutions (bank deposits) are at variable interest rates. The fair value of these is considered to be virtually the same as the book value, as the contract terms are continuously changed in step with change in market interest rates. This is valued at Level 2 in the valuation hierarchy, cf. Note 6. As the contract terms are continuously changed in step with change in market interest rates. This is valued at Level 2 in the valuation hierarchy, cf. Note 6.
Liabilities created on issuance of securities
Fair value in this category is determined on the basis of internal valuation models based on external observable data. This is valued in Level 2 in the valuation hierarchy, cf. Note 6.
Note 6 Fair value hierarchy
31.12.2021 NOK THOUSANDS
Level 1
Level 2
Level 3
Total
ASSETS BOOKED AT FAIR VALUE
Fixed-income securities
595 610
5 405 489
0
6 001 099
Shareholdings
0
0
1 187
1 187
Financial derivatives
0
42 051
0
42 051
Total assets at fair value
595 610
5 447 540
1 187
6 044 337
LIABILITIES BOOKED AT FAIR VALUE
Financial derivatives (liabilities)
0
9 990
0
9 990
Total financial liabilities at fair value
0
9 990
0
9 990
31.12.2020 NOK THOUSANDS
Level 1
Level 2
Level 3
Total
ASSETS BOOKED AT FAIR VALUE
Fixed-income securities
581 905
2 566 322
0
3 148 228
Shareholdings
0
0
1 197
1 197
Financial derivatives
0
42 630
0
42 630
Total assets at fair value
581 905
2 608 952
1 197
3 192 054
LIABILITIES BOOKED AT FAIR VALUE
Financial derivatives (liabilities)
0
80 425
0
80 425
Total financial liabilities at fair value
0
80 425
0
80 425
NOK THOUSANDS
31.12.2021
31.12.2020
CHANGES IN LEVEL 3 UNLISTED SHARES
Opening balance
1 197
2 053
Additions/purchases of shares
77
125
Unrealized changes
-87
-981
Closing balance
1 187
1 197
Realized gains/losses
0
0
Fair value shall be a representative price based on what a corresponding asset or liability would have been traded for at normal market terms and conditions. Highest quality in regard to fair value is based on listed prices in an active market. A financial instrument is considered as listed in an active market if listed prices are simply and regularly available from a stock market, dealer, broker, industry group, price-setting service or regulatory authority, and these prices represent actual and regularly occurring transactions at arm's length.
LEVEL 1:
Instruments at this level obtain fair value from listed prices in an active market for identical assets or liabilities to which the entity has access at the reporting date. Examples of instruments in Level 1 are stock market listed securities.
LEVEL 2:
Instruments at this level obtain fair value from observable market data. This includes prices based on identical instruments, but where the instrument does not maintain a high enough trading frequency and is therefore not considered to be traded in an active market, as well as prices based on corresponding assets and price-leading indicators that can be confirmed from market information. Example instruments at Level 2 are fixed-income securities priced on the basis of interest rate paths.
LEVEL 3:
Instruments at Level 3 contain non-observable market data or are traded in markets considered to be inactive. The price is based generally on discrete calculations where the actual fair value may deviate if the instrument were to be traded.
Note 5 discloses the fair value of financial assets and financial liabilities that are recognized at amortized cost and according to the rules on hedge accounting. Financial assets measured at amortized cost and hedge accounting comprise lending to and due to credit institutions, Norwegian municipalities and retail customers. The stated fair value of these assets is determined on terms qualifying for level 2. Financial liabilities recognized at amortized cost and hedge accounting consist of debt securities issued and deposits. The stated fair value of these liabilities is determined by methods qualifying for level 2.
There have been no transfers between level 1 and level 2.
Interest rate on borrowings through the issuance of securities at the reporting date:
1.10%
0.64 %
The interest rate is calculated as a weighted average of the act/360 basis. It includes interest rate effects and amortization costs.
NOK THOUSANDS
Balance sheet 31.12.2020
Issued
Matured/ redeemed
Other adjustements
Balance sheet 31.12.2021
Changes in debt securities issued - stock exchange listed covered bonds and cerftificates
Bond debt, nominal amount
27 628 407
9 300 000
-6 570 000
3 068 233
33 426 640
Adjustments
74 537
0
0
-13 934
60 603
Accrued interest
26 521
0
0
12 033
38 554
Own holdings, nominal amount
-1 930 000
0
322 000
0
-1 608 000
Total debt securities issued
25 799 465
9 300 000
-6 248 000
3 066 332
31 917 798
Note 8 Liabilities to credit institutions
NOK THOUSANDS
Due date
Nominal value
Accrued interest
Book value 31.12.2021
Norges Bank
-
0
0
0
Total liabilities to credit institutions
-
0
0
0
All loans in Norges Bank have been redeemed as of 31.12.2021.
NOK THOUSANDS
Due date
Nominal value
Accrued interest
Book value 31.12.2020
Norges Bank
26.03.2021
700 000
1 823
701 823
Norges Bank
06.04.2021
300 000
750
300 750
Norges Bank
16.04.2021
100 000
229
100 229
Norges Bank
20.04.2021
200 000
445
200 445
Norges Bank
01.07.2021
150 000
227
150 227
Norges Bank
26.08.2021
550 000
579
550 579
Norges Bank
13.01.2021
300 000
97
300 097
Norges Bank
10.02.2021
200 000
42
200 042
Total liabilities to credit institutions
2 500 000
4 192
2 504 192
In the fourth quarter of 2020, KLP Banken AS applied F-loans from Norges Bank and was granted loan with nominal value of NOK 510 million.
Nominal value 31.12.2020
Issued
Matured/ redeemed
Other adjustements
Nominal value 31.12.2021
F-loans Norges Bank
2 504 192
0
-2 500 000
-4 192
0
Total liabilities to credit institutions
2 504 192
0
-2 500 000
-4 192
0
Note 9 Financial assets and liabilities subject to net settlement
31.12.2021 NOK THOUSANDS
Related sums that are not presented net
Gross financial assets/liabilites
Gross assets/ liabilities presented net
Book value
Financial instruments
Security in cash
Net recognised value
ASSETS
Financial derivatives
42 051
0
42 051
-9 200
0
32 851
Total
42 051
0
42 051
-9 200
0
32 851
LIABILITIES
Financial derivatives
9 990
0
9 990
-9 200
-3 628
0
Total
9 990
0
9 990
-9 200
-3 628
0
31.12.2020 NOK THOUSANDS
Related sums that are not presented net
Gross financial assets/liabilites
Gross assets/ liabilities presented net
Book value
Financial instruments
Security in cash
Net recognised value
ASSETS
Financial derivatives
42 630
0
42 630
-42 630
0
0
Total
42 630
0
42 630
-42 630
0
0
LIABILITIES
Financial derivatives
80 425
0
80 425
-42 630
-6 390
31 405
Total
80 425
0
80 425
-42 630
-6 390
31 405
The purpose of the note is to show the potential effect of netting agreements at the KLP Banken Group .
The note shows derivative positions in the financial position statement.
Note 10 Transactions with related parties
NOK THOUSANDS
01.01.2021 -31.12.2021
01.01.2020 -31.12.2020
KLP, fees lending management
59 400
59 200
KLP Kapitalforvaltning AS, fees for services provided
-171
-315
KLP, rent
-2 699
-2 725
KLP Skipsbygget AS, rent
-1 727
-1 854
KLP Bassengtomten AS, rent parking
-87
-85
KLP Eiendomsdrift AS, cost office buildings
-366
-195
KLP, pension premium
-13 140
-10 960
KLP, staff services (at cost)
-68 399
-66 596
KLP Group companies, subsidised interest employee loans
11 825
14 187
NOK THOUSANDS
31.12.2021
31.12.2020
BALANCES
KLP, net internal accounts
-1 667
92
KLP, loan settlement
-1 333
3 004
KLP Group companies, net other internal accounts
1 046
1 163
Transactions with related parties are carried out at general market terms, with the exception of the company's share of common functions, which are allocated at cost. Allocation is based on actual use. All internal receivables are settled as they arise.
Note 11 Other assets
NOK THOUSANDS
31.12.2021
31.12.2020
Intercompany receivables
2 196
5 472
Miscellaneous receivables
0
117
Prepaid expenses
21
229
Total other assets
2 217
5 819
Note 12 Other liabilities and provision for accrued costs
NOK THOUSANDS
31.12.2021
31.12.2020
Creditors
2 867
5 086
Intercompany payables
4 150
1 213
Other liabilities
31 352
7 757
Total other liabilities
38 369
14 056
Withholding tax
2 813
2 949
Social security contributions
2 265
2 570
Capital activity tax
820
1 227
Holiday pay
6 273
5 856
Pension obligations
36 693
41 550
VAT
211
36
Provisioned costs
3 176
4 512
Total accrued costs and liabilities
52 249
58 700
Note 13 Capital adequacy
NOK THOUSANDS
31.12.2021
31.12.2020
Share capital and share premium fund
1 890 000
1 890 000
Other owners' equity
630 782
536 801
Total owners' equity
2 520 782
2 426 801
Adjustments due to requirements for proper valuation
-6 001
-6 226
Deduction goodwill and other intangible assets
-16 789
-19 018
Core capital/Tier 1 capital
2 497 992
2 401 558
Supplementary capital/Tier 2 capital
0
0
Supplementary capital/Tier 2 capital
0
0
Total eligible own funds (Tier 1 and Tier 2 capital)
2 497 992
2 401 558
Capital requirement
1 070 801
983 091
Surplus of own funds (Tier 1 and Tier 2 capital)
1 427 191
1 418 468
Estimate basis credit risk:
Institutions
286 512
242 831
Retail
302 739
163 069
Local and regional authorities (incl. municipalities/county administations)
3 628 147
3 559 832
Investments with mortgage security in real estate
7 824 605
7 386 329
Investments fallen due
36 584
72 770
Covered bonds
498 905
227 068
Other holdings
131 535
54 755
Calculation basis credit risk
12 709 027
11 706 654
Credit risk
1 016 722
936 532
Operating risk
53 416
46 448
Credit valuation adjustments (CVA)
663
110
Total capital requirement assets
1 070 801
983 091
Core capital adequacy ratio
18.7 %
19.5 %
Supplementary capital ratio
0.0 %
0.0 %
Capital adequacy ratio
18.7 %
19.5 %
Leverage ratio
5.2 %
5.5 %
CAPITAL REQUIREMENT PER 31.12.2021
Core capital/Tier 1 capital
Supplementary capital/Tier 2 capital
Own funds
Minimum requirement excl. buffers
4.5 %
3.5 %
8.0 %
Protective buffer
2.5 %
0.0 %
2.5 %
Systemic risk buffer
3.0 %
0.0 %
3.0 %
Counter-cyclical capital buffer
1.0 %
0.0 %
1.0 %
Pilar 2-requirement
1.5 %
0.0 %
1.5 %
Current capital requirement incl. buffers
12.5 %
3.5 %
16.0 %
Capital requirement leverage ratio
3.0 %
0.0 %
3.0 %
Note 14 Fixed-income securities
NOK THOUSANDS
31.12.2021
31.12.2020
Acquisition cost
Market value
Acquisition cost
Market value
Certificates
567 264
567 443
650 553
651 453
Bonds
5 437 376
5 433 656
2 492 844
2 496 775
Total fixed-income securities
6 004 640
6 001 099
3 143 397
3 148 228
Fixed income securities are brought to account at market value, including accrued but not due interests.
Note 15 Loan loss provision
In the fourth quarter of 2021 the bank has made some adjustments in the expected loss model. The bank now calculates excepted loss on deposit accounts with overdrafts. It also calculates expected loss on loan commitments. The total loan loss provisions in KLP Banken AS were increased by 8 percent and by 4 percent on the group level.
Refer to Note 18 and Note 2 in the annual report for more details of the model.
Expected credit loss (ECL) - loans to customers, all segments
NOK THOUSANDS
12 months ECL
Lifetime ECL (not credit impaired)
Lifetime ECL (credit impaired)
stage 1
stage 2
stage 3
Total stage 1-3
Opening balance ECL 01.01.2021
4 422
586
1 567
6 577
Transfer to stage 1
261
-119
-142
0
Transfer to stage 2
-71
160
-89
0
Transfer to stage 3
-11
-191
203
0
Net changes
-473
-148
8
-613
New losses
552
18
45
614
Write-offs
-337
-38
-30
-405
Change in risk model
3
15
191
209
Closing balance ECL 31.12.2021
4 346
282
1 753
6 382
Changes (01.01.2021 - 31.12.2021)
-76
-304
185
-195
Expected credit loss (ECL) loans to customers – mortgage
NOK THOUSANDS
12 months ECL
Lifetime ECL (not credit impaired)
Lifetime ECL (credit impaired)
stage 1
stage 2
stage 3
Total stage 1-3
Opening balance ECL 01.01.2021
324
357
1 468
2 148
Transfer to stage 1
110
-9
-102
0
Transfer to stage 2
-24
109
-84
0
Transfer to stage 3
0
-169
169
0
Net changes
-366
-175
44
-497
New losses
119
11
0
130
Write-offs
-10
-2
0
-12
Change in risk model
7
-1
2
8
Closing balance ECL 31.12.2021
159
121
1 498
1 777
Changes (01.01.2021 - 31.12.2021)
-165
-237
30
-371
Expected credit loss (ECL) - public lending
NOK THOUSANDS
12 months ECL
Lifetime ECL (not credit impaired)
Lifetime ECL (credit impaired)
stage 1
stage 2
stage 3
Total stage 1-3
Opening balance ECL 01.01.2021
173
0
0
173
Transfer to stage 1
0
0
0
0
Transfer to stage 2
0
0
0
0
Transfer to stage 3
0
0
0
0
Net changes
-9
0
0
-9
New losses
26
0
0
26
Write-offs
-15
0
0
-15
Closing balance ECL 31.12.2021
176
0
0
176
Changes (01.01.2021 - 31.12.2021)
3
0
0
3
Expected credit loss (ECL) - credit card
NOK THOUSANDS
12 months ECL
Lifetime ECL (not credit impaired)
Lifetime ECL (credit impaired)
stage 1
stage 2
stage 3
Total stage 1-3
Opening balance ECL 01.01.2021
3 907
229
101
4 237
Transfer to stage 1
151
-111
-41
0
Transfer to stage 2
-47
51
-4
0
Transfer to stage 3
-11
-23
34
0
Net changes
-405
-9
-23
-436
New losses
400
7
0
407
Change in risk model
-9
16
0
7
Closing balance ECL 31.12.2021
3 987
161
67
4 215
Changes (01.01.2021 - 31.12.2021)
80
-67
-34
-22
Expected credit loss (ECL) loans to customers - senior loans
NOK THOUSANDS
12 months ECL
Lifetime ECL (not credit impaired)
Lifetime ECL (credit impaired)
stage 1
stage 2
stage 3
Total stage 1-3
Opening balance ECL 01.01.2021
18
0
0
18
Transfer to stage 1
0
0
0
0
Transfer to stage 2
0
0
0
0
Transfer to stage 3
0
0
0
0
Net changes
-2
0
0
-2
New losses
3
0
0
3
Closing balance ECL 31.12.2021
19
0
0
19
Changes (01.01.2021 - 31.12.2021)
1
0
0
1
Expected credit loss (ECL) loans to customers - overdrafts of accounts
NOK THOUSANDS
12 months ECL
Lifetime ECL (not credit impaired)
Lifetime ECL (credit impaired)
stage 1
stage 2
stage 3
Total stage 1-3
Opening balance ECL 01.01.2021
0
0
0
0
Transfer to stage 1
0
0
0
0
Transfer to stage 2
0
0
0
0
Transfer to stage 3
0
0
0
0
Net changes
-4
0
-44
-47
New losses
4
0
45
49
Change in risk model
5
0
188
193
Closing balance ECL 31.12.2021
5
0
189
194
Changes (01.01.2021 - 31.12.2021)
5
0
189
194
Book value of loans and receivables for customers - all segments
NOK THOUSANDS
12 months ECL
Lifetime ECL (not credit impaired)
Lifetime ECL (credit impaired)
stage 1
stage 2
stage 3
Total stage 1-3
Lending 01.01.2021
37 940 905
166 651
54 315
38 161 871
Transfer to stage 1
26 144
-17 560
-8 584
0
Transfer to stage 2
-401 112
413 743
-12 631
0
Transfer to stage 3
-4 189
-7 915
12 104
0
Net changes
-1 338 481
-10 335
1 288
-1 347 528
New losses
12 320 968
46 816
3 146
12 370 930
Write-offs
-9 139 803
-63 815
-13 683
-9 217 300
Lending 31.12.2021
39 404 432
527 587
35 954
39 967 973
Book value of loans and receivables for customers – mortgages
NOK THOUSANDS
12 months ECL
Lifetime ECL (not credit impaired)
Lifetime ECL (credit impaired)
stage 1
stage 2
stage 3
Total stage 1-3
Lending 01.01.2021
18 672 122
162 057
51 005
18 885 185
Transfer to stage 1
23 024
-15 711
-7 313
0
Transfer to stage 2
-399 277
411 751
-12 475
0
Transfer to stage 3
-3 284
-7 213
10 497
0
Net change
-5 025 645
-29 782
-10 461
-5 065 888
New lending
9 431 086
46 673
3 101
9 480 860
Write-offs
-2 915 409
-43 572
-789
-2 959 770
Lending 31.12.2021
19 782 618
524 203
33 565
20 340 386
Losses on lending and receivables from customers - public lending
NOK THOUSANDS
12 months ECL
Lifetime ECL (not credit impaired)
Lifetime ECL (credit impaired)
stage 1
stage 2
stage 3
Total stage 1-3
Lending 01.01.2021
17 592 253
0
0
17 592 253
Transfer to stage 1
0
0
0
0
Transfer to stage 2
0
0
0
0
Transfer to stage 3
0
0
0
0
Net change
-853 994
0
0
-853 994
New lending
2 624 925
0
0
2 624 925
Write-offs
-1 487 251
0
0
-1 487 251
Lending 31.12.2021
17 875 934
0
0
17 875 934
Losses on lending and receivables from customers - credit card
NOK THOUSANDS
12 months ECL
Lifetime ECL (not credit impaired)
Lifetime ECL (credit impaired)
stage 1
stage 2
stage 3
Total stage 1-3
Lending 01.01.2021
42 146
4 594
3 310
50 049
Transfer to stage 1
3 120
-1 849
-1 271
0
Transfer to stage 2
-1 835
1 992
-157
0
Transfer to stage 3
-780
-702
1 482
0
Net change
-7 890
-796
-1 163
-9 848
New lending
3 524
144
0
3 667
Lending 31.12.2021
38 284
3 383
2 202
43 869
Losses on lending and receivables from customers - senior loans
NOK THOUSANDS
12 months ECL
Lifetime ECL (not credit impaired)
Lifetime ECL (credit impaired)
stage 1
stage 2
stage 3
Total stage 1-3
Lending 01.01.2021
1 633 715
0
0
1 633 715
Transfer to stage 1
0
0
0
0
Transfer to stage 2
0
0
0
0
Transfer to stage 3
0
0
0
0
Net change
-187 612
0
0
-187 612
New lending
261 429
0
0
261 429
Lending 31.12.2021
1 707 532
0
0
1 707 532
Book value of overdrafts of accounts
NOK THOUSANDS
12 months ECL
Lifetime ECL (not credit impaired)
Lifetime ECL (credit impaired)
stage 1
stage 2
stage 3
Total stage 1-3
Lending 01.01.2021
670
0
0
670
Transfer to stage 1
0
0
0
0
Transfer to stage 2
0
0
0
0
Transfer to stage 3
-125
0
125
0
Net change
-485
0
18
-467
New lending
4
0
44
49
Lending 31.12.2021
65
0
188
252
Exposure - unused credit
NOK THOUSANDS
12 months ECL
Lifetime ECL (not credit impaired)
Lifetime ECL (credit impaired)
stage 1
stage 2
stage 3
Total stage 1-3
Lending 01.01.2021
993 121
3 434
290
996 845
Transfer to stage 1
2 147
-1 983
-164
0
Transfer to stage 2
-56 903
56 903
0
0
Transfer to stage 3
-69
-90
159
0
Net change
49 605
3 116
-103
52 618
New lending
243 297
1 451
0
244 748
Write-offs
-72 891
-230
-29
-73 150
Lending 31.12.2021
1 158 308
62 601
153
1 221 062
Losses recognised in the profit and loss account consist of:
NOK THOUSANDS
01.01.2021 -31.12.2021
01.01.2020 -31.12.2020
Change in loss provisions in stage 1, 2 and 3
-2 509
-4 838
Established losses
-356
-55
Recovery for previously established losses
566
591
Total losses in the income statement
-2 299
-4 302
Note 16 Contingent liabilites
NOK THOUSANDS
31.12.2021
31.12.2020
Credit facilities for lending not utilized
949 244
743 495
Credit facilities issued credit card
271 818
253 580
Loan promise
1 458 520
651 063
Total contingent liabilities
2 679 581
1 648 138
Credit facilities for lending not utilized: The ‘Fleksilån’ product is included here; this is a credit facility which allows the customer to borrow up to a specified credit limit.
Credit facilities issued credit card: Customers’ credit card limits are a contingent liability for the Bank, where the customer can choose to utilise the credit up to the allocated credit limit.
Loan commitment: The Bank issues funding certificates that customers can use in bidding procedures for home purchases. This also includes other loans that have been granted but not disbursed.
Note 17 Net gain/(loss) on financial instruments
NOK THOUSANDS
Q4 2021
Q4 2020
01.01.2021 -31.12.2021
01.01.2020 -31.12.2020
Net gain/(loss) on fixed-income securities
-8 970
1 468
-3 395
14 823
Net gain/(loss) financial derivatives and realized amortization linked to lending
-750
-1 344
-750
-1 303
Net gain/(loss) financial derivatives and realized repurchase of own debt
493
-4 283
-28 146
-38 905
Net value change lending and borrowing, hedge accounting
0
935
336
500
Other financial income and expenses
-212
-1 211
-941
-1 260
Total net gain/(loss) on financial instruments
-9 439
-4 435
-32 896
-26 145
Note 18 Leases
NOK THOUSANDS
31.12.2021
31.12.2020
Property
RIGHT-OF-USE ASSETS
Opening balance 01.01.
1 948
3 506
Depreciation
-1 636
-1 558
Closing balance
18 236
1 948
LEASE LIABILITIES
Opening balance 01.01.
2 023
3 573
Repayments
-1 582
-1 550
Closing balance
18 323
2 023
NOK THOUSANDS
Q4 2021
Q4 2020
01.01.2021 -31.12.2021
01.01.2020 -31.12.2020
Property
Interest expense lease liabilities
87
11
109
54
Interest expense lease liabilities
87
11
109
54
In the fourth quarter of 2021, a new 10-year lease has been capitalized. It is an intercompany lease for the rental of office premises with KLP Eiendom.
Note 19 Pension obligations - own employees
NOK THOUSANDS
31.12.2021
31.12.2020
Capitalized net liability
41 550
35 649
Pension costs taken to profit/loss
12 983
10 798
Finance costs taken to profit/loss
942
1 084
Actuarial gains and losses incl. social security contributions
-7 136
3 557
Premiums/supplement paid-in including admin
-11 646
-9 539
Capitalized net liability
36 693
41 550
ASSUMPTIONS
31.12.2021
31.12.2020
Discount rate
1.90 %
1.70 %
Salary growth
2.50 %
2.25 %
The National Insurance basic amount (G)
2.50 %
2.00 %
Pension increases
1.74 %
1.24 %
Social security contribution
14.10 %
14.10 %
Capital activity tax
5.00 %
5.00 %
Quarterly earnings trend
NOK MILLIONS
Q4 2021
Q3 2021
Q2 2021
Q1 2021
Q4 2020
Interest income
185.2
166.5
170.2
167.9
180.0
Interest expense
-109.4
-86.6
-93.1
-92.1
-92.0
Net interest income
75.8
80.0
77.1
75.7
88.0
Commision income and income from banking services
6.0
5.7
5.2
4.6
4.8
Commision cost and cost from banking services
-0.6
-0.6
-0.5
-0.4
-0.5
Net charges and commission income
5.4
5.2
4.7
4.2
4.3
Other fee income
14.9
14.9
14.9
14.9
14.8
Net gain/(loss) financial instruments
-9.4
-4.9
-33.0
14.5
-4.4
Total other operating income
5.4
10.0
-18.2
29.3
10.4
Salaries and administrative costs
-23.5
-17.7
-20.5
-20.3
-22.6
Depreciation
-1.4
-1.7
-1.7
-1.7
-1.6
Other operating expenses
-38.4
-36.1
-35.2
-38.1
-43.3
Net loan losses
-1.0
-0.2
-0.6
-0.5
-0.1
Total operating expenses
-64.3
-55.6
-58.0
-60.6
-67.6
Operating profit/loss before tax
22.4
39.5
5.7
48.6
35.1
Tax ordinary income
-5.2
-9.2
-1.3
15.4
-8.1
Profit/loss for the period
17.1
30.2
4.4
64.0
27.0
Other comprehensive income
18.7
-19.3
0.0
7.7
8.7
Tax on other comprehensive income
-4.7
4.8
0.0
-1.9
-2.2
Other comprehensive income for the period
14.0
-14.5
0.0
5.8
6.6
Comprehensive income for the period
31.1
15.8
4.4
69.8
33.6
Key figures – accumulated
NOK MILLIONS
Q4 2021
Q3 2021
Q2 2021
Q1 2021
Q4 2020
Pre-tax income
116.1
93.8
54.3
48.6
136.8
Net interest income
308.6
232.8
152.8
75.7
317.3
Other operating income
78.9
58.6
38.6
19.0
77.7
Other operating cost and depreciation
-238.5
-174.2
-118.6
-60.6
-232.1
Net gain/(loss) financial instruments
-32.9
-23.5
-18.6
14.5
-26.1
Deposits
12 901.0
12 773.7
12 642.6
12 103.2
11 781.2
Lending customers
0.0
21 364.8
21 409.3
20 893.9
20 569.8
Lending with public sector guarantee
0.0
16 842.2
16 752.1
16 734.4
17 654.3
Non-performing loans
36.0
31.5
34.1
57.0
54.3
Total liabilities created on issuance of securities