The KLP Banken Group finances mortgages and other credit in the retail marked, lending to municipalities, county administrations and companies carrying out public sector assignments. 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 115 (101)¹ billion. The overall business is divided into the business areas retail market and public sector loans. The business is nationwide.
In the retail market, KLP Banken aspire to be a consumer bank for customers seeking a long-term and predictable partner. The aim is to become the preferred bank in the retail market for individuals who are members of the KLP pension schemes and find the bank products and its core values attractive. In the public sector market KLP Kommunekreditt AS together with KLP shall contribute to market competition and thereby access to favorable long-term financing for the sector.
As part of a customer-owned group, KLP Banken AS has taken its share of responsibility for handling the situation that the pandemic has caused for customers and members this year. In the retail market we have implemented; faster interest rate cuts, closer follow-up and guidance, as well as granting of installment deferrals for those members who have needed it. In the public sector market, the bank contributed by increasing the loan offer based on extraordinary liquidity provided by KLP, as well as with guidance and information through close ongoing contact with customers. The fourth quarter of 2020 was also characterized by this special situation, and most employees in KLP Banken have had home offices. The company has nevertheless operated with close to normal operations.
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 in Trondheim. Until the autumn of 2020, KLP Bank Holding AS was group leader of the banking group.
¹Figures in parenthesis refer to the corresponding period last year.
Income statement
Net interest income for the KLP Banken Group by fourth quarter end 2020, amounted to NOK 328.6 (292.9)¹ million. Increased interest income is primarily related to lending growth. In the third and fourth quarter, lending margins increased compared with the second quarter. This is mainly a consequence of deposit rates and other financing costs gradually adjusting to the lower interest rates that occurred at the start of the pandemic in March.
The KLP Banken group charges its banking services to a limited extent. The bank's earnings from fees mainly follow changes in the volume of outstanding credit in the retail market. Net fees and commission income amount to NOK 18.5 (19.2) million in 2020.
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 59.2 (58.9) million at quarter end.
Operating expenses including depreciations amounted to NOK 239,1 (231.9) million.
The accounting line; net gain / loss on financial instruments mainly comprises the effects of changes in value on the securities portfolio and repurchase of borrowings. In total, financial instruments had a total cost of NOK 26.1 (30.2) million during the financial year.
Loan loss provisions and realized losses in 2020 amounted to NOK 4.3 (6.6) million in the retail market. This is mainly due to loss on credit card drawn credits. The pandemic has so far not led to increased mortgage losses. No losses associated with public lending were found in 2020 either.
The KLP Banken Group had a pre-tax profit by the end of the fourth quarter of NOK 136.8 (102.3) million. The retail market segment generated a profit of NOK 101.5 (75.6) million while the public sector segment achieved a profit of NOK 35.3 (26.7) million. Group total income after taxes and actuarial adjustments amounted to NOK 129.8 (82.9) million by fourth quarter end 2020.
Lending and credits
On 31 December 2020, the KLP Banken Group had a lending balance of NOK 38.2 (34.9) billion. The distribution between the retail market and public sector lending was NOK 20.5 (18.3) billion and NOK 17.7 (16.5) billion, respectively.
The retail market in KLP Banken had strong growth in mortgages in 2020 also, NOK 2.2 (2.1) billion. The growthrate is about the same as last year. This shows that even in turbulent times, the bank's mortgage products hit home with the target group, members of the pension schemes in KLP. The target group of young borrowers particularly, has accounted for a large part of the growth.
Mortgage loans amounting NOK 7.5 (2.9) billion was sold from KLP Banken AS to the daughter company KLP Boligkreditt AS in 2020. Managed mortgages for KLP were reduced by NOK 0,1(0,1) billion due to ordinary repayments and redemptions.
Drawn credits on credit cards has been reduced in 2020. This is related to a general reduction in the market for unsecured credit. The number of credit card customers, on the other hand, has increased somewhat.
The public sector lending balance has increased by NOK 1.2 billion in 2020. Managed public sector loans on behalf of KLP has increased in the same period by NOK 7.1 (5.9) billion. KLP extended its lending credit facilities by NOK 5 billion as the pandemic hit the market. KLP Banken was then able to contribute with continued lending at favorable terms to public sector borrowers, worrying about the reduced possibilities of new loans and refinancing in the lending markets at the time.
Liquid investment
The liquidity is invested in other banks and in interest-bearing securities. Investments in credit institutions, including financing of the subsidiaries, amounted to NOK 1.2 (1.5) billion. The book value of interest-bearing securities valued at fair value was NOK 3.1 (3.1) billion in the KLP Banken Group at the end of the quarter.
Borrowing
The KLP Banken Group's external financing comprise deposits, certificates and bonds. On the date of reporting, deposits from individuals and companies were NOK 11.8 (11.5) billion and issued securities amounted to NOK 25.8 (25.8) billion. Of the outstanding volume of issued securities, covered bonds (OMF) issued by KLP Kommunekreditt AS and KLP Boligkreditt AS, amounted to NOK 17.4 (17.4) billion and NOK 10.6 (7.0) billion respectively. All covered bond issues have achieved AAA rating. Outstanding securities debt in KLP Banken AS amounted to NOK 0.8 (1.4) billion.
In 2020, KLP Banken AS has used the extended access to F-loans in Norges Bank. At quarter end the volume was NOK 2.5 billion. This borrowing involves deposition of securities with equivalent value.
Risk and capial 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 subjected to management using policies, limits, procedures 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 responsible long-term financing and limits have been established to ensure that that this objective is achieved.
The credit risk associated with the bank 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 fourtg quarter, eligible Tier 1 and Tier 2 capital i.a.w. the capital adequacy rules were NOK 2 396 (2 187) 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 19.5 (19.1) 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 5.5 (5.4) per cent. Here the requirement is 3.0 per cent.
Summary of pandemic effects on the financial statement as at fourth quarter
The market turmoil caused by the pandemic affected the bank’s lending margins negatively in the second quarter. From the third quarter, lending margins have been stable at roughly normal levels. (see comments under Income Statement above).
Reduced regulatory capital adequacy, for the countercyclical capital buffer, has enhanced the Bank Group’s capital adequacy position relative to the statutory requirements.
KLP Banken AS has utilized the extended access to F-loans in Norges Bank (Norwegian Central Bank). to provide more liquidity to the lending business.
The bank's provisions for future losses increased when the pandemic hit, but these have been reduced to the level before the pandemic.
1The Boards signatures
Income statementKLP Banken Group
NOTE
NOK THOUSANDS
Q4 2020
Q4 2019
01.01.2020 -31.12.2020
01.01.2019 -31.12.2019
Interest income, amortised cost
158 613
250 728
768 442
910 090
Interest income at fair value
21 412
44 984
132 655
164 825
3
Total interest income
180 025
295 712
901 098
1 074 914
Interest expense, amortized cost
-66 898
-181 449
-469 541
-658 224
Interest expense at fair value
-22 300
-30 742
-102 988
-123 819
3
Total interest costs
-89 199
-212 191
-572 529
-782 044
3
Net interest income
90 826
83 520
328 569
292 871
Commision income and income from banking services
4 790
5 584
20 285
21 240
Commision cost and cost from banking services
-456
-433
-1 766
-2 040
Net charges and commission income
4 335
5 152
18 519
19 200
Other fee income
14 820
14 473
59 220
58 873
17
Net gain/ (loss) financial instruments
-4 436
-7 436
-26 145
-30 159
Total other operating income
10 384
7 036
33 074
28 713
Salaries and administrative costs
-22 605
-22 029
-76 228
-75 681
Depreciation
-1 589
-1 479
-6 038
-8 180
Other operating expenses
-46 135
-46 792
-156 793
-148 021
15
Net loan losses
-127
-461
-4 302
-6 642
Total operating expenses
-70 455
-70 761
-243 361
-238 524
Operating profit/loss before tax
35 090
24 947
136 801
102 260
Tax ordinary income
-8 050
-6 056
-4 288
-24 737
Profit/loss for the period
27 040
18 892
132 514
77 523
Estimate difference, pension obligation and assets
8 745
9 575
-3 557
7 182
Tax on actuarial gains and losses
-2 187
-2 394
889
-1 796
Items that will not be reclassified to profit and loss
6 558
7 182
-2 668
5 387
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
6 558
7 182
-2 668
5 387
Comprehensive income for the period
33 598
26 073
129 846
82 909
Balance sheetKLP Banken Group
NOTE
NOK THOUSANDS
31.12.2020
31.12.2019
ASSETS
5
Claims on central banks
68 941
68 798
5
Loans to credit institutions
1 175 714
1 497 793
4,5
Loans to customers
38 224 087
34 933 743
5,6,14
Fixed-income securities
3 148 228
3 118 503
5,6
Shareholdings
1 197
2 053
5,6,9
Financial derivatives
42 630
40 849
Deffered tax assets
5 886
10 196
Fixed assets
444
511
18
Right-of-use assets
1 948
3 506
Intangible assets
19 018
20 447
11
Other assets
5 819
2 309
Total assets
42 693 913
39 698 709
LIABILITIES AND OWNERS EQUITY
LIABILITIES
8
Debt to credit institutions
2 504 192
0
5,7
Debt securities issued
25 799 465
25 822 190
5
Deposits and borrowings from the public
11 781 187
11 486 525
5,6,9
Financial derivatives
80 425
64 455
18
Lease liabilities
2 023
3 573
12
Other liabilities
41 121
51 854
12
Provision for accrued costs and liabilities
58 700
49 550
Total liabilities
40 267 112
37 478 148
EQUITY
Share capital
1 065 000
1 057 500
Share premium
825 000
732 500
Other owners' eqyity
536 801
430 561
Total equity
2 426 801
2 220 561
Total liabilities and equity
42 693 913
39 698 709
Statement of changes in equityKLP Banken Group
2020 NOK THOUSANDS
Share capital
Share premium
Other equity
Total owners' equity
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
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
Total comprehensive income for the period
0
0
129 846
129 846
Group contribution received
0
0
141 681
141 681
Group contribution made
0
0
-141 681
-141 681
Tax on group contribution made 2019
0
0
-28 142
-28 142
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
2019 NOK THOUSANDS
Share capital
Share premium
Other equity
Total owners' equity
Equity 1 January 2019
1 057 500
732 500
347 652
2 137 652
Income for the year
0
0
77 523
77 523
Other comprehensive income
0
0
5 387
5 387
Total comprehensive income for the period
0
0
82 909
82 909
Group contribution received
0
0
61 052
61 052
Group contribution made
0
0
-61 052
-61 052
Total transactions with the owners
0
0
0
0
Equity 31 December 2019
1 057 500
732 500
430 561
2 220 561
Statement of cash flowKLP Banken Group
NOK THOUSANDS
01.01.2020 -31.12.2020
01.01.2019 -31.12.2019
OPERATING ACTIVITIES
Payments received from customers – interest, commission and charges
812 696
900 764
Payments to customers – interest, commission and charges
-128 918
-173 230
Disbursements on loans to customers and credit institutions
-19 998 713
-11 072 876
Receipts on loans to customers
16 596 718
9 535 488
Net receipts on customer deposits banking
295 164
824 798
Disbursements on operations
-152 043
-151 461
Payments to staff, pension schemes, employer's social security contribution etc.
-73 207
-78 646
Interest investment accounts
7 871
23 837
Net receipts/disbursements from operating activities
111 414
31 807
Net cash flow from operating activities
-2 529 017
-159 519
INVESTMENT ACTIVITIES
Receipts on sale of securities
11 425 797
2 708 725
Payments on the purchase of securities
-11 440 399
-3 810 624
Receipts of interest from securities
50 630
56 527
Payments on the purchase of tangible fixed assets
-2 983
-1 614
Net cash flow from investment activities
33 045
-1 046 987
FINANCING ACTIVITIES
Receipts on loans from credit institutions
5 470 000
0
Repayment and redemption from credit institutions
-2 970 000
0
Net payment of interest from credit institutions
-838
0
Receipts on loans
7 250 407
9 000 000
Repayment and redemption of loans
-6 790 000
-7 708 000
Change in payment for loan buybacks
-480 000
484 000
Net payment of interest on loans
-383 054
-465 689
Payment of lease liabilities
-1 570
-1 542
Group contributions made
-28 144
-19 431
Receipts on issue of owners' equity
100 000
0
Net cash flows from financing activities
2 166 802
1 289 339
Net cash flow during the period
-329 171
82 833
Cash and cash equivalents at the start of the period
1 536 846
1 454 013
Cash and cash equivalents at the end of the period
1 207 676
1 536 846
Net receipts/disbursements (-) of cash
-329 171
82 833
Notes Banken Group
1Notes chapter illustration
Note 1 Generell 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.
In 2020, KLP Banken merged with KLP Bank Holding AS, where KLP Banken AS was the acquiring company. The merger was completed with accounting continuity, and with accounting effect on 01.01.2020. 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 2020 – 31 December 2020, 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".
The amendments to IAS 12 Income Tax, effective from 2019 have had an effect on the interim financial statements. The tax effect of all distributions in 2019 was in the first quarter recognized to profit or loss, other income and expenses or in equity in accordance with where the company originally recognized the transactions that generated the distribution. This entailed an income recognition of the tax effect on the group contribution provided in the income statement, which was recognized in other owners’ equity. At the same time, this was offset against higher earnings, so that the net effect on equity was zero. Comparative figures are not changed.
Other accounting principles and calculations are the same in the interim financial statement as in the annual report for 2019.
Note 3 Net interest income
NOK THOUSANDS
Q4 2020
Q4 2019
01.01.2020 -31.12.2020
01.01.2019 -31.12.2019
Interest income on loans to customers, amortised cost
157 947
244 677
760 567
892 192
Interest income on loans to credit institutions, amortised cost
666
6 050
7 875
17 898
Total interest income, amortised cost
158 613
250 728
768 442
910 090
Interest income on bonds and certificates, fair value
6 725
17 560
50 241
58 866
Other interest income, fair value
14 687
27 424
82 414
105 958
Total interest income, fair value
21 412
44 984
132 655
164 825
Total interest income
180 025
295 712
901 098
1 074 914
Interest expenses on debt to KLP Banken, amortised cost
-16 480
-46 997
-122 407
-171 759
Interest expenses on issued securities, amortised cost
-50 408
-134 435
-347 080
-486 384
Interest expense lease liabilities
-11
-18
-54
-82
Total interest expenses, amortised cost
-66 898
-181 449
-469 541
-658 224
Other interest expenses, fair value
-22 300
-30 742
-102 988
-123 819
Total interest expenses, fair value
-22 300
-30 742
-102 988
-123 819
Total interest costs
-89 199
-212 191
-572 529
-782 044
Net interest income
90 826
83 520
328 569
292 871
Note 4 Loans to customers
NOK THOUSANDS
31.12.2020
31.12.2019
Principal on loans to customers
38 057 684
34 769 527
Credit portfolio
49 595
63 945
Overdraft current account
531
506
Write-downs step 1 and 2
-1 558
-1 328
Write-downs step 3
-872
-2 547
Loans to cutomers after write-downs
38 105 380
34 830 101
Accrued interest
53 806
86 259
Premium/discount
74
-7 202
Fair value hedging
64 827
24 585
Loans to customers
38 224 087
34 933 743
Note 5 Categories of financial instruments
NOK THOUSANDS
31.12.2020
31.12.2019
Capitalized value
Fair value
Capitalized value
Fair value
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS
Fixed-income securities
3 148 228
3 148 228
3 118 503
3 118 503
Financial derivatives
42 630
42 630
40 849
40 849
Shares and holdings
1 197
1 197
2 053
2 053
Total financial assets at fair value through profit and loss
3 192 054
3 192 054
3 161 405
3 161 405
FINANCIAL ASSETS FAIR VALUE HEDGING
Loans to and receivables from customers
3 734 955
3 790 329
2 897 943
2 935 099
Total financial assets fair value hedging
3 734 955
3 790 329
2 897 943
2 935 099
FINANCIAL ASSETS AT AMORTIZED COST
Loans to and receivables from credit institutions
68 941
68 941
68 798
68 798
Loans to and receivables from central banks
1 175 714
1 175 714
1 497 793
1 497 793
Loans to and receivables from customers
34 489 133
34 489 133
32 035 800
31 676 869
Total financial assets at amortized cost
35 733 788
35 733 788
33 602 391
33 243 460
Total financial assets
42 660 798
42 716 172
39 661 739
39 339 964
FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT AND LOSS
Financial derivatives
80 425
80 425
64 455
64 455
Total financial liabilities at fair value through profit and loss
80 425
80 425
64 455
64 455
FINANCIAL LIABILITIES FAIR VALUE HEDGING
Liabilities created on issuance of securities
1 139 041
1 148 872
1 793 121
1 809 391
Total financial liabilities fair value hedging
1 139 041
1 148 872
1 793 121
1 809 391
FINANCIAL LIABILITIES AT AMORTIZED COST
Liabilities to credit institutions
2 504 192
2 504 192
0
0
Liabilities created on issuance of securities
24 660 423
25 283 898
24 029 069
24 120 851
Deposits from customers
11 781 187
11 781 187
11 486 525
11 486 525
Total financial liabilities at amortized cost
38 945 802
39 569 276
35 515 594
35 607 376
Total financial liabilities
40 165 268
40 798 573
37 373 171
37 481 222
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
Bloomberg is used as a source for pricing Norwegian government bonds. The prices are compared with the prices from Nordic Bond Pricing 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
31.12.2020 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
31.12.2019 NOK THOUSANDS
Level 1
Level 2
Level 3
Total
ASSETS BOOKED AT FAIR VALUE
Fixed-income securities
259 574
2 858 929
0
3 118 503
Shareholdings
0
0
2 053
2 053
Financial derivatives
0
40 849
0
40 849
Total assets at fair value
259 574
2 899 778
2 053
3 161 405
LIABILITIES BOOKED AT FAIR VALUE
Financial derivatives (liabilities)
0
64 455
0
64 455
Total financial liabilities at fair value
0
64 455
0
64 455
NOK THOUSANDS
31.12.2020
31.12.2019
CHANGES IN LEVEL 3 UNLISTED SHARES
Opening balance
2 053
2 053
Additions/purchases of shares
125
0
Unrealized changes
-981
1 592
Closing balance
1 197
3 645
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:
0.64 %
2.22 %
The interest rate is calculated as a weighted average of the act/360 basis. It includes interest rate effects and amortization costs.
Balance sheet 31.12.2019
Issued
Matured/ redeemed
Other adjustements
Balance sheet 31.12.2020
Changes in securities liabilities - stock exchange listed covered bonds and cerftificates
Bond debt, nominal amount
27 168 000
10 300 000
-6 790 000
-3 049 593
27 628 407
Adjustments
21 526
0
0
53 011
74 537
Accrued interest
82 665
0
0
-56 143
26 521
Own holdings, nominal amount
-1 450 000
0
-480 000
0
-1 930 000
Total debt securities issued
25 822 190
10 300 000
-7 270 000
-3 052 726
25 799 465
Note 8 Liabilities to credit institutions
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 loans with nominal value of NOK 510 million.
Balance sheet 31.12.2019
Issued
Matured/ redeemed
Other adjustements
Balance sheet 31.12.2020
F-loans Norges Bank
0
5 470 000
-2 970 000
4 192
2 504 192
Total liabilities to credit institutions
0
5 470 000
-2 970 000
4 192
2 504 192
Note 9 Financial assets and liabilities subject to net settlement
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
31.12.2019 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
40 849
0
40 849
-40 849
0
0
Total
40 849
0
40 849
-40 849
0
0
LIABILITIES
Financial derivatives
64 455
0
64 455
-40 849
-6 409
17 197
Total
64 455
0
64 455
-40 849
-6 409
17 197
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
01.01.2020 -31.12.2020
01.01.2019 -31.12.2019
KLP, fees lending management
59 200
58 843
KLP Kapitalforvaltning AS, fees for services provided
-315
-166
KLP, rent
-2 725
-2 765
KLP Skipsbygget AS, rent
-1 854
-1 632
KLP Bassengtomten AS, rent parking
-85
-63
KLP Eiendomsdrift AS, cost office buildings
-195
-449
KLP, pension premium
-10 960
-12 329
KLP, staff services (at cost)
-66 596
-66 865
KLP Group companies, subsidised interest employee loans
14 187
8 134
NOK THOUSANDS
31.12.2020
31.12.2019
BALANCES
KLP, net internal accounts
92
912
KLP, loan settlement
3 004
-15 144
KLP Group companies, net other internal accounts
1 163
1 083
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
31.12.2020
31.12.2019
Intercompany receivables
5 472
2 189
Miscellaneous receivables
117
114
Prepaid expenses
229
6
Total other assets
5 819
2 309
Note 12 Other liabilities and provision for accrued costs
NOK THOUSANDS
31.12.2020
31.12.2019
Creditors
5 086
2 741
Intercompany payables
1 213
15 339
Tax payable
27 065
28 143
Other liabilities
7 757
5 631
Total other liabilities
41 121
51 854
Withholding tax
2 949
2 622
Social security contributions
2 570
2 312
Capital activity tax
1 227
836
Holiday pay
5 856
5 540
Pension obligations
41 550
35 649
VAT
36
208
Provisioned costs
4 512
2 382
Total accrued costs and liabilities
58 700
49 550
Note 13 Capital adequacy
NOK THOUSANDS
31.12.2020
31.12.2019
Share capital and share premium fund
1 890 000
1 790 000
Other owners' equity
536 801
430 561
Total owners' equity
2 426 801
2 220 561
Adjustments due to requirements for proper valuation
-6 226
-3 119
Deduction goodwill and other intangible assets
-19 018
-20 447
Deferred tax asset
-5 886
-10 196
Core capital/Tier 1 capital
2 395 672
2 186 800
Supplementary capital/Tier 2 capital
0
0
Supplementary capital/Tier 2 capital
0
0
Total eligible own funds (Tier 1 and Tier 2 capital)
2 395 672
2 186 800
Capital requirement
983 091
914 461
Surplus of own funds (Tier 1 and Tier 2 capital)
1 412 581
1 272 340
Estimate basis credit risk:
Institutions
242 831
307 730
Retail
163 069
170 558
Local and regional authorities (incl. municipalities/county administations)
3 559 832
3 348 562
Investments with mortgage security in real estate
7 386 329
6 575 624
Investments fallen due
72 770
97 389
Covered bonds
227 068
273 712
Other holdings
54 755
57 476
Calculation basis credit risk
11 706 654
10 831 051
Credit risk
936 532
866 484
Operating risk
46 448
47 880
Credit valuation adjustments (CVA)
110
97
Total capital requirement assets
983 091
914 461
Core capital adequacy ratio
19.5 %
19.1%
Supplementary capital ratio
0.0 %
0.0%
Capital adequacy ratio
19.5 %
19.1%
Leverage ratio
5.5 %
5.4%
CAPITAL REQUIREMENT PER 31.12.2020
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
31.12.2020
31.12.2019
Acquisition cost
Market value
Acquisition cost
Market value
Certificates
650 553
651 453
238 331
238 517
Bonds
2 492 844
2 496 775
2 877 980
2 879 986
Total fixed-income securities
3 143 397
3 148 228
3 116 311
3 118 503
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 2020 the bank has adjusted the LGD-calculation to take into account the changes in the LGD in the stress scenarios. Isolated the change increased the loan loss provisions, but the stress scenarios were recalibrated to maintain the loan loss provisions at the same level as before. The bank has improved the data quality of the bank’s mortgage portfolio to get more correct valuations of the mortgage objects in the quarterly update of the market values from Eiendomsverdi AS. As a result of better data quality some loans have a significant reduction in both LTV and LGD. Based on this the loan loss provisions were significantly reduced for some of these loans, and the total loan loss provisions in KLP Banken AS was reduced by nine percent on the group level and seven percent in KLP Banken AS compared to last quarter. 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-month ECL
Lifetime ECL (not credit impaired)
Lifetime ECL (credit impaired)
stage 1
stage 2
stage 3
Total
Opening balance ECL 01.01.2020
3 955
205
2 549
6 710
Transfer to stage 1
124
-79
-45
0
Transfer to stage 2
-71
334
-263
0
Transfer to stage 3
-30
-31
61
0
Net changes
-167
173
-471
-465
New losses
603
37
1
642
Write-offs
-253
-12
-194
-458
Change in risk model
261
-42
-71
149
Closing balance ECL 31.12.2020
4 422
586
1 567
6 577
Changes (01.01.2020 - 31.12.2020)
468
381
-981
-133
Expected credit loss (ECL) - loans to customers, amortised cost
NOK THOUSANDS
12-month ECL
Lifetime ECL (not credit impaired)
Lifetime ECL (credit impaired)
stage 1
stage 2
stage 3
Total
Opening balance ECL 01.01.2020
1 183
148
2 547
3 878
Transfer to stage 1
95
-51
-44
0
Transfer to stage 2
-46
309
-263
0
Transfer to stage 3
-25
-31
56
0
Net changes
-84
147
-474
-411
New losses
247
26
1
274
Write-offs
-155
-4
-193
-352
Change in risk model
-141
-57
-72
-270
Closing balance ECL 31.12.2020
1 075
486
1 559
3 120
Changes (01.01.2020 - 31.12.2020)
-108
339
-988
-758
Losses on unused credit
NOK THOUSANDS
12-month ECL
Lifetime ECL (not credit impaired)
Lifetime ECL (credit impaired)
stage 1
stage 2
stage 3
Total
Opening balance ECL 01.01.2020
2 772
58
2
2 832
Transfer to stage 1
29
-28
-1
0
Transfer to stage 2
-25
25
0
0
Transfer to stage 3
-4
0
4
0
Net changes
-83
26
3
-53
New losses
356
11
0
367
Write-offs
-98
-8
-1
-107
Change in risk model
402
15
1
418
Closing balance ECL 31.12.2020
3 350
99
8
3 457
Changes (01.01.2020 - 31.12.2020)
578
41
7
626
Value of lending and receivables for customers recognised in the balance sheet - all segments
NOK THOUSANDS
12-month ECL
Lifetime ECL (not credit impaired)
Lifetime ECL (credit impaired)
stage 1
stage 2
stage 3
Total
Gross lending 01.01.2020
34 780 207
53 202
86 038
34 919 447
Transfer to stage 1
23 602
-20 183
-3 418
0
Transfer to stage 2
-33 706
41 960
-8 254
0
Transfer to stage 3
-14 965
-14 728
29 693
0
Net changes
-1 250 716
3 668
-4 269
-1 251 317
New losses
14 094 796
130 755
8 590
14 234 140
Write-offs
-9 658 313
-28 022
-54 065
-9 740 400
Gross lending 31.12.2020
37 940 905
166 651
54 315
38 161 871
Losses on lending and receivables from customers rated at amortised cost
NOK THOUSANDS
12-month ECL
Lifetime ECL (not credit impaired)
Lifetime ECL (credit impaired)
stage 1
stage 2
stage 3
Total
Gross lending 01.01.2020
34 780 207
53 202
86 038
34 919 447
Transfer to stage 1
23 602
-20 183
-3 418
0
Transfer to stage 2
-33 706
41 960
-8 254
0
Transfer to stage 3
-14 965
-14 728
29 693
0
Net change
-1 250 716
3 668
-4 269
-1 251 317
New lending
14 094 796
130 755
8 590
14 234 140
Write-offs
-9 658 313
-28 022
-54 065
-9 740 400
Gross lending 31.12.2020
37 940 905
166 651
54 315
38 161 871
Exposure - unused credit
NOK THOUSANDS
12-month ECL
Lifetime ECL (not credit impaired)
Lifetime ECL (credit impaired)
stage 1
stage 2
stage 3
Total
Gross lending 01.01.2020
892 264
2 258
71
894 592
Transfer to stage 1
1 147
-1 112
-34
0
Transfer to stage 2
-2 589
2 589
0
0
Transfer to stage 3
-385
-1
386
0
Net change
18 418
-380
-104
17 933
New lending
169 666
370
0
170 036
Write-offs
-85 399
-289
-28
-85 716
Gross lending 31.12.2020
993 121
3 434
290
996 845
Losses recognised in the profit and loss account consist of:
NOK THOUSANDS
01.01.2020 -31.12.2020
01.01.2019 -31.12.2019
Change in loss provisions in stage 1, 2 and 3
-4 838
-6 653
Established losses
-55
-239
Recovery for previously established losses
591
250
Total losses in the income statement
-4 302
-6 642
Note 16 Contingent liabilites
NOK THOUSANDS
31.12.2020
31.12.2019
Credit facilities for lending not utilized
743 495
649 868
Credit facilities issued credit card
253 580
234 061
Loan promise
651 063
1 232 829
Total contingent liabilities
1 648 138
2 116 758
Note 17 Net gain/(loss) on financial instruments
NOK THOUSANDS
01.01.2020 -31.12.2020
01.01.2019 -31.12.2019
Net gain/(loss) on fixed-income securities
14 823
-1 214
Net gain/(loss) financial derivatives and realized amortization linked to lending
-1 303
0
Net gain/(loss) financial derivatives and realized repurchase of own debt
-38 905
-27 854
Net value change lending and borrowing, hedge accounting
500
50
Other financial income and expenses
-1 260
-1 141
Total net gain/(loss) on financial instruments
-26 145
-30 159
Note 18 Leases
NOK THOUSANDS
31.12.2020
31.12.2019
Property
Property
RIGHT-OF-USE ASSETS
Opening balance 01.01.
3 506
5 064
Depreciation
-1 558
-1 558
Closing balance
1 948
3 506
LEASE LIABILITIES
Opening balance 01.01.
3 573
5 064
Repayments
-1 550
-1 491
Closing balance
2 023
3 573
NOK THOUSANDS
01.01.2020 -31.12.2020
01.01.2019 -31.12.2019
Property
Property
Interest expense lease liabilities
54
82
Interest expense lease liabilities
54
82
Note 19 Pension obligations - own employees
NOK THOUSANDS
31.12.2020
31.12.2019
Capitalized net liability
35 649
38 265
Pension costs taken to profit/loss
10 798
12 189
Finance costs taken to profit/loss
1 084
1 312
Actuarial gains and losses incl. social security contributions
3 557
-7 182
Premiums/supplement paid-in including admin
-9 539
-8 934
Capitalized net liability
41 550
35 649
ASSUMPTIONS
31.12.2020
31.12.2019
Discount rate
1.70%
2.30 %
Salary growth
2.25%
2.25 %
The National Insurance basic amount (G)
2.00%
2.00 %
Pension increases
1.24%
1.24 %
Social security contribution
14.10 %
14.10 %
Capital activity tax
5.00 %
5.00 %
Quarterly earnings trend
NOK MILLIONS
Q4 2020
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Interest income
180.0
191.8
243.8
302.6
295.7
Interest expense
-89.2
-95.6
-180.7
-224.1
-212.2
Net interest income
90.8
96.2
63.1
78.5
83.5
Commision income and income from banking services
4.8
5.2
5.1
5.1
5.6
Commision cost and cost from banking services
-0.5
-0.5
-0.4
-0.5
-0.4
Net charges and commission income
4.3
4.8
4.8
4.6
5.2
Other fee income
14.8
14.8
14.8
14.8
14.5
Net gain/(loss) financial instruments
-4.4
-5.6
3.3
-19.4
-7.4
Total other operating income
10.4
9.2
18.1
-4.6
7.0
Salaries and administrative costs
-22.6
-15.5
-19.2
-19.0
-22.0
Depreciation
-1.6
-1.5
-1.5
-1.5
-1.5
Other operating expenses
-46.1
-30.0
-39.8
-40.8
-46.8
Net loan losses
-0.1
-1.3
-0.6
-2.3
-0.5
Total operating expenses
-70.5
-48.3
-61.1
-63.6
-70.8
Operating profit/loss before tax
35.1
61.8
24.9
15.0
24.9
Tax ordinary income
-8.1
-14.7
-6.2
24.6
-6.1
Profit/loss for the period
27.0
47.1
18.7
39.6
18.9
Other comprehensive income
8.7
3.8
-2.5
-13.7
9.6
Tax on other comprehensive income
-2.2
-1.0
0.6
3.4
-2.4
Other comprehensive income for the period
6.6
2.9
-1.8
-10.3
7.2
Comprehensive income for the period
33.6
50.0
16.9
29.3
26.1
Key figures – accumulated
NOK MILLIONS
Q4 2020
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Pre-tax income
136.8
101.7
39.9
15.0
102.3
Net interest income
328.6
237.7
141.6
78.5
292.9
Other operating income
77.7
58.6
39.0
19.4
78.1
Other operating cost and depreciation
-243.4
-172.9
-124.6
-63.6
-238.5
Net gain/(loss) financial instruments
-26.1
-21.7
-16.1
-19.4
-30.2
Deposits
11 781.2
11 992.9
12 244.9
12 034.5
11 486.5
Lending customers
20 569.8
20 610.3
20 121.0
19 142.5
18 386.6
Lending with public sector guarantee
17 654.3
16 932.7
17 356.5
16 823.2
16 547.1
Non-performing loans
54.3
48.2
77.3
97.2
86.0
Total liabilities created on issuance of securities