KLP Boligkreditt AS
Annual Report 2021
The corporate loan balance increased from NOK 10.8 to 12.3 billion. Operating profit before tax increased from NOK 19.2 to 32.9 million. The Company’s financing consists mainly of covered bonds. These bonds have the highest possible rating (Aaa).
KLP Boligkreditt AS is a mortgage company wholly owned by KLP Banken AS.
KLP Banken AS is a commercial bank owned by Kommunal Landspensjonskasse gjensidig forsikringsselskap (KLP). KLP Banken AS also owns all the shares in its subsidiary KLP Kommunekreditt AS.
The collective operations of KLP Banken AS and its subsidiaries (KLP Banken) are divided into two business areas: retail market and public-sector lending. The business is nationwide and the companies’ head office is in Trondheim.
KLP Banken is an online bank with no physical branch network. The Bank offers simple and competitive savings and loan products, and digital solutions to establish and manage them.
The Bank aims to provide products and services on competitive terms, to help companies that have chosen KLP as their pension provider to be viewed as attractive employers.
Profit (NOK millions) | 2021 | 2020 | Change |
---|---|---|---|
Profit before tax | 32.9 | 19.2 | 13.7 |
Net interest income | 108.0 | 98.1 | 9.8 |
Operating expenses | -66.6 | -58.8 | -7.8 |
Changes in value financial instr. | -8.5 | -20.1 | 11.6 |
Loan loss provisions | -0.0 | -0.0 | 0.0 |
Balance sheet (NOK billions) | 2021 | 2020 | Change |
---|---|---|---|
Property mortgages | 12.3 | 10.8 | 1.5 |
Total assets | 14.3 | 11.5 | 2.8 |
INCOME STATEMENT
The Company’s profit before tax was NOK 32.9 (19.2) million and the total profit for the year was NOK 27.0 (16.1) million. This gave a return on equity of 4.4 (3.8) per cent before tax. The change in profit compared to last year was mainly due to lending growth and reduced losses on financial instruments.
Interest income from loans to customers in 2021 totalled NOK 185.9 (208.5) million. Interest income from bank deposits and securities produced a further NOK 8.8 (8.0) million.
Interest expenses are divided between NOK 82.2 (113.0) million on covered bonds issued and NOK 4.6 (5.4) million on debt to KLP Banken AS.
Net interest income in 2021 was NOK 108.0 (98.1) million. The main reason for the change is higher lending volumes. Average margins were more or less in line with the previous year, but fluctuated widely through the year. Towards the end of the year, margins fell as mortgage rates were kept unchanged even after the central bank increased its rates from September.
During the term of its borrowing agreements, the Company makes regular adjustments to reduce its liquidity risk and meet regulatory requirements with respect to liquidity indicators and capital adequacy. Refinancing of the borrowing side then results in a need to buy back the Company’s own issuance. In 2021, the effect on profits due to repurchases of borrowings was NOK -4.9 (-19.8) million. See Note 6 to the accounts.
Credit premiums in the securities market also fluctuated widely in 2021. The overall profit effect of the fall in the value of the company’s securities investments shows realised and unrealised losses of NOK -3.6 (-0.3) million.
The total accounting effect of changes in the value of financial instruments in 2021 was NOK -8.5 (-20.1) million. See Note 6.
The Company’s lending is managed by KLP Banken AS, and most of the operating expenses are regulated in a management agreement with the parent company. Under this agreement, KLP Boligkreditt AS is charged for its share of the parent Company’s costs for the management of mortgages, based on volume. Costs are settled monthly. Operating expenses in excess of this are mainly direct costs incurred by the Company in connection with external assistance, such as rating, auditing, etc. In 2021, the Company’s operating expenses increased by 13 (25) per cent. This is roughly on par with the percentage growth in lending.
LENDING
During 2021, KLP Boligkreditt AS purchased home loans worth NOK 6.0 (7.5) billion from KLP Banken AS. Outstanding mortgages on the Company’s balance sheet totalled NOK 12.3 (10.8) billion at the end of the year, a growth of 14 per cent.
The mortgage portfolio is secured with collateral within cautious valuations whereby all borrowers are assessed with respect to solvency and willingness to pay before the loan is approved. The average loan per customer came to NOK 1.5 (1.4) million. All lending was at floating interest rates.
At the end of 2021, the mortgage portfolio in the Company had an average loan-to-value ratio (debt as a percentage of the estimated housing value - LTV) of 52 (52) per cent.
No individual losses on mortgages were recognised in 2021, and there were no loans more than 90 days past due at the end of the year. Estimated loss provisions under IFRS 9 had an effect on profits of NOK -1 (-2) thousand. See Note 8.
LIQUIDITY
The Company’s liquidity situation is satisfactory, as its financing more than covers the liquidity requirement from operations.
KLP Boligkreditt AS is subject to strict rules with respect to the assets it may invest in. The portfolio of liquid investments comprises safe securities and deposits in other banks. The securities are extremely secure certificates and bonds, largely covered bonds with an Aaa rating. Holdings of cash and cash equivalents have been used to pay out new loans or for redemptions and buy-backs of borrowings.
As new borrowings occur when the terms for them are considered favourable, a need sometimes arises to invest surplus liquidity. This liquidity contributes to earnings and provides the flexibility needed to meet the demand for new lending.
At the end of 2021, NOK 273 (130) million of the Company’s liquidity was invested in bank deposits and NOK 1 704 (519) million in interest-bearing securities. Securities are recognised at market value.
BORROWING
KLP Boligkreditt AS has established a programme for issuing covered bonds.
At the end of 2021, the Company had outstanding covered bond debt of NOK 13.0 (12.0) billion. The Company’s own holdings account for NOK 0.6 (1.4) billion of this. During the year, new covered bonds in the amount of NOK 3.5 (6.0) billion were issued. The remaining financing comprises equity and loans from the parent company.
The bonds are issued with security in the Company’s mortgage portfolio. All issues have achieved Aaa rating.
The Company’s debt to credit institutions at the end of the year comprised internal financing from KLP Banken AS in the amount of NOK 1.1 (0.1) billion.
BALANCE SHEET AND CAPITAL ADEQUACY
Total assets stood at NOK 14.3 (11.5) billion at the end of the year.
The Company’s equity and subordinated loan capital, based on the Board of Directors’ proposal for the allocation of the year’s profit, totalled NOK 770.2 (745.8) million at the end of the year. Core capital is identical with equity and subordinated loan capital. This gives a capital adequacy and tier 1 capital ratio of 16.4 (18.8) per cent.
The current capital requirement, including capital buffers, is 11.0 per cent tier 1 core capital ratio and 14.5 per cent capital adequacy. The unweighted tier 1 capital ratio was 5.4 (6.5) per cent, compared with the requirement of 3.0 per cent.
The risk-weighted balance came to NOK 4.5 (3.9) billion. Capital adequacy is considered good.
ALLOCATION OF THE PROFIT FOR THE YEAR
KLP Boligkreditt AS’s financial statements for 2021 show a total profit of NOK 27.0 (16.1) million. The Board of Directors proposes that a group contribution of NOK 14.6 million be paid to KLP, with tax effect. NOK 11.4 million will be received from KLP as a group contribution without any tax effect. Net profit and group contribution will be transferred to other equity. The group contribution first has an accounting effect at the time of the decision.
ABOUT THE FINANCIAL STATEMENTS
The Board of Directors believes that the financial statements provide a true and fair view of the Company’s assets and liabilities, financial position and profit. The conditions for continued operations are present, and this is assumed in the annual financial statements.
KLP Boligkreditt AS prepares its financial statements in accordance with international accounting standards (IFRS), as approved by the EU with associated interpretations. See Note 2 for further details.
RATING
The rating agencies’ assessments of the Company have a bearing on its borrowing terms. The Company has engaged Moody’s to provide a credit rating of the Company’s bonds. All issued covered bonds are rated Aaa.
RISK MANAGEMENT
KLP Boligkreditt AS is subject to KLP Banken’s risk management framework, the purpose of which is to ensure that risks are identified, analysed and managed by means of policies, limits, procedures and instructions.
It has established its own guidelines for the most important individual risks (liquidity, credit, market, operational and compliance risk) and an overall policy for risk management, which includes principles, organisation, limits, etc. for the Bank’s overall risk. The risk policies are adopted by the Board of Directors and are reviewed at least once a year. The policies are of an overarching nature and are complemented by procedures, rules, and instructions determined at the administrative level.
The Company aims to maintain a low level of operational risk, and to be characterised by a high level of professional competence, good procedures and efficient operations.
The Company is included in the KLP Banken Group’s process to assess and quantify material risks and calculate its capital requirement (ICAAP). The capital requirement assessment is forward-looking and, in addition to calculating needs based on current exposure (and, if appropriate, limits), an assessment is made of needs in light of planned growth, determined strategic changes, etc. The Company’s Board of Directors takes an active part in these assessments and, in addition to the capital requirement assessment, determines a desired level for total capital (capital target).
The boards of KLP Banken AS, KLP Kommunekreditt AS and KLP Boligkreditt AS have appointed a joint risk committee. Based on the total assets, this is not required by law. The Risk Committee deals with matters specifically related to risk and has an advisory function to the Board of KLP Boligkreditt AS.
CORPORATE GOVERNANCE AND MANAGEMENT
The Company’s articles of association and applicable legislation provide guidelines for corporate governance, corporate management and define a clear division of roles between governing bodies and corporate management.
The Board of Directors sets the policies for the Company’s activities. The Board of Directors held eight board meetings in 2021. The Board comprised two women and two men at the end of the year.
The Managing Director is in charge of the day-to-day management of the Company in accordance with instructions issued by the Board of Directors.
WORKING ENVIRONMENT AND ORGANISATION
There are no direct employees of KLP Boligkreditt AS. The Company’s governance and management are handled by people employed by KLP Banken AS.
A management agreement has been entered into with KLP Banken AS, covering administration, IT support, finance and risk management, as well as borrowing and liquidity management.
CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY
Through its social responsibility strategy, KLP has pledged to maintain good procedures for the measurement and reduction of its subsidiary companies’ environmental impact. Like the rest of the KLP Group, KLP Boligkreditt AS takes its environmental impact seriously. As an office-based Company, it has greatest control over energy consumption, transport, waste management and procurement. The parent company, KLP Banken AS, is environmentally certified.
As part of the KLP Group, KLP Boligkreditt AS aims to contribute to sustainable investments and responsible business operations. Social responsibility is of strategic importance for KLP. This is manifested through actions linked to the Group’s business. KLP is a signatory to the UN Global Compact, and is thereby committed to working for human rights, workers’ rights, the environment, and against corruption. A more detailed description of targets, measures and results can be found on the KLP website.
KLP Banken AS signed the UN Principles for Sustainable Banking in the autumn of 2019 and has committed to implementing these principles in its operations. The Principles for Sustainable Banking mean that banks are transparent about how their products and services create value for customers and investors, as well as for society as a whole. The principles are intended to guide banks in their work on sustainability, and support society's overall goals in line with the UN Sustainable Development Goals and the Paris Agreement.
OUTLOOK
KLP Boligkreditt AS is part of the financing structure of KLP Banken. KLP Boligkreditt AS has a licence to operate as a mortgage company and will be further developed through the purchase of loans from KLP Banken AS or KLP. The business will be financed mainly through the issuance of covered bonds secured against mortgages. The Company aims to help reduce the banking group’s borrowing costs and so make a major contribution to financing mortgages for KLP’s members.
The Board believes that the potential for further development of the Company is in place and that a significant proportion of KLP Banken’s lending for residential purposes can be financed by KLP Boligkreditt AS, including forms of financing that benefit the environment and sustainability.
The Board is worried about the development following the war in Ukraine. The Company has no credit exposure in this area, but may as other Norwegian banks, be affected by the financial turmoil following the situation.
Declaration pursuant to the Norwegian securities trading act, section 5-5
We hereby declare that, to the best of our knowledge, the annual financial statements for the period from 1 January to 31 December 2021 have been prepared in accordance with applicable accounting standards, and that the information in the financial statements gives a true and fair view of the Company’s assets, liabilities, financial position and overall profit or loss.
We also declare that the Directors' report provides a true and fair overview of the development, profit or loss and the financial position of the Company, together with a description of the most significant risk and uncertainty factors the Company faces.
Income statement KLP Boligkreditt AS
NOTES | NOK THOUSANDS | 01.01.2021 -31.12.2021 | 01.01.2020 -31.12.2020 |
---|---|---|---|
Interest income, effective interest method | 186 905 | 209 790 | |
Other interest income | 7 827 | 6 735 | |
5 | Total interest income | 194 732 | 216 525 |
Interest expenses, effective interest method | -86 760 | -118 398 | |
5 | Total interest expense | -86 760 | -118 398 |
5 | Net interest income | 107 972 | 98 127 |
6 | Net gain/(loss) on financial instruments | -8 512 | -20 114 |
Total net gain/(loss) on financial instruments | -8 512 | -20 114 | |
7 | Other operating expenses | -66 593 | -58 817 |
8 | Net loan losses | -1 | -2 |
Total other operating expenses | -66 594 | -58 819 | |
Operating profit/loss before tax | 32 866 | 19 194 | |
9 | Tax on ordinary income | -5 860 | -3 068 |
Income for the year | 27 005 | 16 126 | |
Other comprehensive income | - | - | |
Other comprehensive income for the year after tax | - | - | |
COMPREHENSIVE INCOME FOR THE YEAR | 27 005 | 16 126 | |
ALLOCATION OF INCOME | |||
Allocated to/from retained earnings | -27 005 | -16 126 | |
TOTAL ALLOCATION OF INCOME | -27 005 | -16 126 | |
Total profit in% of total assets | 0.19% | 1.14% |
Balance sheetKLP Boligkreditt AS
NOTES | NOK THOUSANDS | 31.12.2021 | 31.12.2020 |
---|---|---|---|
ASSETS | |||
10,11,12 | Loans to and receivables on credit institutions | 273 318 | 129 852 |
11,12 | Loans to and receivables on customers | 12 331 526 | 10 823 740 |
12,13,14 | Fixed-income securities | 1 704 134 | 518 860 |
15 | Other assets | 4 687 | 3 239 |
TOTAL ASSETS | 14 313 666 | 11 475 690 | |
LIABILITIES AND OWNERS’ EQUITY | |||
LIABILITIES | |||
12,16 | Liabilities to credit institutions | 1 094 579 | 103 373 |
12,17 | Liabilities created on issuance of securities | 12 433 452 | 10 616 951 |
18 | Other liabilities | 5 700 | 6 955 |
9 | Deferred tax | 7 982 | 2 122 |
18 | Provisions for accrued costs and liabilities | 28 | - |
TOTAL LIABILITIES | 13 541 741 | 10 729 400 | |
OWNERS’ EQUITY | |||
Share capital | 330 000 | 330 000 | |
Share premium | 380 463 | 380 463 | |
Other owners’ equity | 61 462 | 35 827 | |
20 | TOTAL OWNERS’ EQUITY | 771 925 | 746 290 |
TOTAL LIABILITIES AND OWNERS’ EQUITY | 14 313 666 | 11 475 690 |
Statement of owners’ equityKLP Boligkreditt AS
2021 NOK THOUSANDS | Share capital | Share premium | Other equity | Total owners’ equity |
---|---|---|---|---|
Owners’ equity 1 January 2021 | 330 000 | 380 463 | 35 827 | 746 290 |
Income for the year | - | - | 27 005 | 27 005 |
Other comprehensive income | - | - | - | - |
Total comprehensive income | - | - | 27 005 | 27 005 |
Group contribution received | - | - | 4 857 | 4 857 |
Group contribution made | - | - | -6 227 | -6 227 |
Total transactions with the owners | - | - | -1 370 | -1 370 |
Owners’ equity 31 December 2021 | 330 000 | 380 463 | 61 462 | 771 925 |
2020 NOK THOUSANDS | Share capital | Share premium | Other equity | Total owners’ equity |
---|---|---|---|---|
Owners’ equity 1 January 2020 | 220 000 | 270 463 | 20 855 | 511 318 |
Income for the year | - | - | 16 126 | 16 126 |
Other comprehensive income | - | - | - | - |
Total comprehensive income | - | - | 16 126 | 16 126 |
Group contribution received | - | - | 4 093 | 4 093 |
Group contribution paid after tax | - | - | -5 248 | -5 248 |
Paid-up equity in the period | 110 000 | 110 000 | - | 220 000 |
Total transactions with the owners | 110 000 | 110 000 | -1 155 | 218 845 |
Owners’ equity 31 December 2020 | 330 000 | 380 463 | 35 827 | 746 290 |
NOK THOUSANDS | Number of shares | Par value | Share capital | Share premium | Other equity | Total |
---|---|---|---|---|---|---|
Equity at 1 January 2021 | 1 000 | 330 | 330 000 | 380 463 | 35 827 | 746 290 |
Changes in the period 1 January - 31 December | - | - | - | - | 25 635 | 25 635 |
Equity at 31 December 2021 | 1 000 | 330 | 330 000 | 380 463 | 61 462 | 771 925 |
There is one class of shares. All the shares are owned by KLP Banken AS. |
Statement of cash flowsKLP Boligkreditt AS
NOK THOUSANDS | 01.01.2021 -31.12.2021 | 01.01.2020 -31.12.2020 |
---|---|---|
OPERATING ACTIVITIES | ||
Payments received from customers – interest, commission & charges | 185 695 | 210 047 |
Disbursements on loans customers & credit institutions | -6 006 193 | -7 459 189 |
Receipts on loans customers & credit institutions | 4 496 969 | 3 970 442 |
Disbursements on operations | -67 556 | -55 622 |
Net receipts/payments on other operating activities | -3 163 | -2 933 |
Interest from credit institutions | 978 | 1 268 |
Net cash flow from operating activities | -1 393 271 | -3 335 985 |
INVESTMENT ACTIVITIES | ||
Payments on purchase of securities | -1 748 791 | -629 585 |
Receipts on sales of securities | 561 545 | 570 298 |
Interest received from securities | 6 133 | 7 188 |
Net cash flow from investment activities | -1 181 113 | -52 100 |
FINANCING ACTIVITIES | ||
Receipts on loans | 3 500 000 | 6 000 000 |
Repayments, buybacks and redemption of securities debt | -2 518 000 | -1 127 457 |
Change in securities debt, own funds | 834 899 | -1 284 000 |
Net payment of interest on loans | -87 463 | -131 794 |
Receipts in internal funding | 7 427 296 | 8 335 579 |
Repayment in internal funding | -6 436 333 | -8 619 111 |
Net payment of interest on internal funding | -4 342 | -5 652 |
Change in owners' equity | - | 220 000 |
Group contribution paid | -1 370 | -1 155 |
Net cash flow from financing activities | 2 714 686 | 3 386 410 |
Net cash flow during the period | 140 303 | -1 676 |
Cash and cash equivalents at start of period | 121 661 | 123 338 |
Cash and cash equivalents at end of period | 261 964 | 121 661 |
Net receipts/disbursements (-) of cash | 140 303 | -1 676 |
Notes
Note 1 General information
KLP Boligkreditt AS was founded on 30 October 2013. The company is a housing credit enterprise and finance the activity primary through issuing covered bonds (OMF). The Company's functional currency is Norwegian kroner.
KLP Boligkreditt AS is registered and domiciled in Norway. KLP Boligkreditt AS’s head office is at Beddingen 8 in Trondheim and the company has a branch office in Oslo.
The Company is a wholly owned subsidiary of KLP Banken AS, which is in turn wholly owned by Kommunal Landspensjonskasse (KLP). KLP is a mutual insurance company.
The company’s financial statement for 2021 were approved by the company’s board on 09.03.2022. The annual financial statement is available at www.klp.no.
Note 2 Summary of the most important accounting principles
Below is a description of the most important accounting principles used in the preparation of the financial statements for KLP Boligkreditt AS. These principles are applied in the same way in all periods presented unless indicated otherwise.
2.1 FUNDAMENTAL PRINCIPLES
The financial statements for KLP Boligkreditt AS have been prepared in accordance with international accounting standards (IFRS) and interpretations from the IFRS interpretations committee (IFRIC), as adopted by the EU. The Norwegian Accounting Act and the Regulations concerning annual accounts for banks, mortgage firms and finance companies (the Accounting Regulations) contain individual requirements for additional information, which is not required under IFRS. These supplementary information requirements have been incorporated into the notes to the financial statements.
The annual accounts have been prepared on the principle of historic cost, with the following exceptions:
- Financial assets and liabilities (including financial derivatives) are valued at fair value through profit or loss
- Financial assets and liabilities are valued in accordance with the rules on fair value hedging
To prepare the accounts in accordance with IFRS, management has to make accounting estimates and approximate valuations. This will affect the value of the company’s assets and liabilities, income and expenses recognised in the financial statements. Actual figures may deviate from estimates used. Areas in which discretionary valuations and estimates of material significance to the Company have been used are described in Note 3.
All amounts are presented in NOK thousands without decimals unless stated otherwise.
The financial statements have been prepared in accordance with the going concern assumption.
2.1.1. Changes in accounting principles and information
a) New and changed standards adopted by the company in 2021:
There are no new and/or changed standards with material effect adopted by the company in 2021.
b) Standards, changes to and interpretations of existing standards that have not come into effect and where the company has not chosen early application.
A limited change was made in IAS 1 Presentation of Financial Statements, specifying that debt must be classified as short-term or long-term debt based on the rights that exist at the end of the reporting period. The classification is unaffected by expectations for the entity or events after the balance sheet date (e.g. breach of borrowing terms). The changes also specify what IAS 1 means when it refers to the ‘settlement’ of a commitment. It also specifies that breach of borrowing terms once the period has ended must be taken into account, even though no measurement is performed at this time.
The changes may affect the classification of debt, particularly for entities that previously considered management’s intentions in determining the classification, as well as for certain debt items that can be converted to equity. The change must be applied retroactively in accordance with the main rule of IAS 8 Accounting Policies and will enter into force from 1 January 2023.
There are no other IFRS standards or IFRIC interpretations not yet in force that are expected to have a significant impact on the company’s financial statements.
2.2 FOREIGN CURRENCY
2.2.1 Functional currency and presentation currency
The accounts are presented in NOK, which is the functional currency of the parent company and the presentation currency of the company.
2.3 FINANCIAL INSTRUMENTS
The most important accounting policies relating to financial instruments are described below.
2.3.1 Recognition and derecognition
Financial assets and liabilities are recognised on the balance sheet on the date when the KLP Boligkreditt AS becomes party to the instrument’s contractual terms and conditions. Regular purchases and sales of investments are recognised on the date of the agreement. Financial assets are removed from the balance sheet when the rights to receive cash flows from the investment expire or when these rights have been transferred and the KLP Boligkreditt AS has essentially transferred the risk and the potential benefit from ownership. Financial liabilities are derecognised when the rights to the contractual conditions have been fulfilled or cancelled or have expired.
2.3.2 Classification and subsequent measurement
2.3.2.1 Financial assets
The classification and measurement of financial assets, other than equity instruments and derivatives, are assessed on the basis of a combination of the entity's business model criteria for asset management and the instrument's contractual cashflow characteristics.
Financial assets are classified on initial recognition in one of the following categories:
- Amortised cost
- Fair value through profit or loss
A financial asset is measured at amortised cost if both of the following criteria are met and the financial asset has not been reported at fair value through profit or loss (the ‘fair value option’):
- The financial asset is held in a business model whose purpose is to keep financial assets in order to receive the contractual cash flows (the ‘business model criterion’), and
- At certain times, the contractual terms of the financial asset lead to cash flows that only include repayments and interest on the outstanding principal amount (the ‘cash flow criterion’).
The business model criterion
KLP Boligkreditt AS assesses the target with a business model in which an asset is held at the portfolio level, because this best reflects the way the business is managed, and information is given to management. The information that is assessed includes:
- Explicit guidelines and goals for the portfolio and application of these guidelines in practice. In particular, if the management’s strategy and goal is to keep the asset in order to collect the contractual cash flows, maintain a specific interest profile, and match duration between financial assets and the corresponding financial liabilities used to finance these assets, or realise cash flows through the sale of the assets
- How the return on the portfolio is assessed and reported to management
- The risks that affect the performance of the business model (and the financial assets held within this business model) and how these risks are managed
- How the managers are compensated, e.g. whether the compensation is based on the fair value of the managed assets or the total contractual cash flows
- Frequency, volume and date of sale in previous periods, the reasons for such sales and expectations of future sales activity. Information about the sales activities is not however assessed in isolation, but as part of an overall assessment of how the company’s stated goals for managing the financial assets are achieved and how the cash flows are realised.
Assessment of the business model is based on reasonable future scenarios without regard to ‘worst case’ or ‘stress case’ scenarios. If cash flows after initial recognition are realised in a way that is different from the company’s original expectations, the classification of the remaining financial assets in the relevant business model does not change, but the information is incorporated into the assessment of the newly issued or acquired financial assets in the future.
Cash flow criterion
In this evaluation the principal amount is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as payment for the time value of money and for credit risk related to outstanding principal in a specific period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative expenses), as well as a profit margin.
In assessing whether the contractual cash flows are only repayments and interest on the outstanding principal amount, KLP Boligkreditt AS consider the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual clause that can change the date or the amount of the contractual cash flows so that it will not meet this condition. In assessing this, the company considers:
- Contingent events that would change the amount and the date of the cash flows;
- Influence on functions;
- Advance payments and extended terms
- Terms that limit the company’s claim to cash flows from specific assets (e.g. ‘nonrecourse asset arrangements’)
- Terms that change the assessment of the time value of money - e.g. periodic resetting of interest rates.
All other financial assets are measured at fair value with changes in value through profit/loss, i.e:
- Assets with contractual cash flows that do not meet the cash flow criterion; and/or
- Assets held in a different business model than ‘held to collect contractual cash flows’; or
- Assets designated at fair value through profit or loss (the ‘fair value option’).
KLP Boligkreditt AS may designate a debt instrument that meets the criteria to be measured at amortised cost to be reported at fair value through profit or loss if this eliminates or significantly reduces inconsistencies in measurement (‘accounting mismatches’).
Impairment model
The Financial Supervisory Authority of Norway published a circular 4/2020 criteria’s for identifying defaults, and with this the default definition was somewhat changed. The changes have not had a significant impact for the company. The impairment model for losses on loans and receivables is based on expected credit losses. The impairment model defines default as “a payment that is more than 90 days past due, or an account that is continuously overdrawn for a minimum of 90 days (by at least NOK 1000)”. Also, a commitment is considered defaulted on if it has been forfeited for various reasons, such as debt negotiations How the impairment loss is to be measured is determined for each individual stage and the model uses the effective interest rate method). Upon initial recognition, and in cases where the credit risk has not increased significantly after initial recognition, provision has to be made for credit losses that are expected to occur over the next 12 months (Stage 1). If the credit risk has increased significantly, the provisions should correspond to the expected credit losses over the expected useful life (Stage 2). If there is a loss event, impairments are raised equal to the expected loss on the commitment throughout its life (Stage 3).
In the company, the assessment of what is considered to be a significant change in credit risk for mortgage loans is based on a combination of quantitative and qualitative indicators and ‘backstops’.
For more information regarding loan loss provisions, please see note 8.
2.3.2.2 Financial liabilities
The company has classified all financial liabilities measured at amortised cost.
2.3.2.3 Presentation, classification and measurement in the balance sheet and the income statement
Based on the descriptions above, the presentation, classification and measurement of financial instruments can be summarized in the following table:
Financial instruments | Classification |
---|---|
Loans to and receivables from credit institutions | Amortised cost |
Loans to and receivables from customers | Amortised cost |
Fixed-income securities | Fair value through profit or loss |
Covered bonds issued | Amortised cost |
Liabilities to credit institutions | Amortised cost |
2.3.3 Netting
Financial assets and liabilities are presented net in the statement of financial position when there is an unconditional offsetting entitlement that can be legally enforced and the intention is to settle net, or realise the asset and liability simultaneously.
2.3.4 Modification
When the contractual cash flows from a financial asset are renegotiated or otherwise amended, and the renegotiation or change does not lead to derecognition of the financial asset, the gross book value of the financial asset is recalculated and a gain or loss is recognised in the income statement. The gross book value of the financial asset is recalculated as the present value of the renegotiated or amended contractual cash flows, discounted at the original effective interest rate for the financial asset. Any costs or fees incurred adjust the book value of the modified financial asset and are written down over the remaining lifetime of the changed financial asset.
2.4 CASH AND CASH EQUIVALENTS
Cash and cash equivalents are defined as receivables from credit institutions without termination date. The amount does not include receivables from credit institutions that are linked to purchase and sale of securities in the management of the securities portfolios. The statement of cash flows has been prepared in accordance with the direct method.
2.5 FINANCIAL LIABILITIES
The company’s financial liabilities comprise liabilities to credit institutions and covered bonds issued.
2.5.1 Liabilities to credit institutions
Liabilities to credit institutions are capitalized at market value on take-up. As a rule, on subsequent measurement the liability is recognized at amortized cost in accordance with the effective interest rate method. The interest costs are included in the amortization and are shown in the line “Interest expenses effective interest rate method” in the income statement.
2.5.2 Covered bonds issued
In the first instance covered bonds issued are recognized at fair value on take-up adjusted for purchase costs, i.e. nominal adjusted for any premium/discount on issue. On subsequent valuation the bonds are valued at amortized cost by the effective interest method. The interest costs are shown in the line “Interest expenses effective interest rate method” in the income statement. Upon repurchase of covered bond issued, any gain or loss is recognized in the line “net gain/(loss) on financial instruments”.
2.6 OWNERS’ EQUITY
The owners’ equity in the company comprises owners’ equity contributed and retained earnings.
2.6.1 Owners’ equity contributed
Owners’ equity contributed comprises share capital, the share premium fund and other owners’ equity contributed.
2.6.2 Retained earnings
Retained earnings comprise other owners’ equity. Ordinary company law rules apply to any allocation or use of the retained earnings.
2.7 PRESENTATION OF INCOME
2.7.1 Interest income/expenses
Interest income and interest expenses associated with all interest-bearing financial instruments valued at amortized cost are taken to income using the effective interest rate method (internal rate of return). This is presented in the financial statement under the line “Interest income/expenses effective interest rate method”.
Internal interest rates are determined by discounting contractual cash flows within the expected maturity. The cash flows include setup fees and direct transaction costs that are not paid by the customer. Amortized cost is the present value of these cash flows discounted by the internal rate of return.
Interest income for financial assets in stage 1 and stage 2 is calculated using the effective interest method on the gross asset value of the financial asset, while interest income for financial assets in stage 3 is calculated based on the financial asset's amortized cost.
For interest-bearing financial investments and derivatives measured at fair value through the income statement, interest income is classified as “’Interest income and similar income, fair value’, while other value changes are classified as ‘Net gain or loss on financial investments’.
2.8 TAX
Tax costs in the income statement comprise tax payable and changes in deferred tax. Tax is charged to the income statement, apart from tax relating to items reported under “other comprehensive income”. Deferred tax and tax assets are calculated as differences between the accounting and taxation value of assets and liabilities. Deferred tax assets are capitalized to the extent it can be shown probable that the company will have sufficient taxable profit to exploit the tax asset.
The company is a part of a financial services group and a tax group. Except for the limitations pursuant to the Financial Institutions Act, any tax-related surplus may be passes in its entirety to the parent company and subsidiaries as a group contribution with tax effect.
The company pays no benefits to employees and is not covered by the rules on capital activity tax. The company's nominal income tax rate in 2021 is 22 per cent.
Note 3 Important accounting estimates and valuations
The company prepares estimates and assumptions about future situations. These are constantly evaluated and are based on historical data and expectations concerning probable future events considered on the basis of data available at the time of presentation of the financial statements. The estimates may be expected to differ from the final outcome and the areas where there is significant risk of substantial change in capitalised values in future periods are discussed below.
The company's financial position comprises primarily lending secured by housing mortgage, housing title deeds or housing association shares (hypothesised residential loans) or other real estate (hypothesised property loans) and borrowing taken up through issuance of covered bonds. For accounting purposes these items are valued at amortized cost.
Financial instruments are assessed for impairment for expected losses. The method for measuring impairment for expected loss depends on whether the credit risk has increased significantly since initial recognition. Upon initial recognition, and when the credit risk has not increased significantly after initial recognition, provisions are based on 12 months’ expected loss (stage 1). If the credit risk has increased significantly since initial recognition, but there is no objective evidence of impairment, write-downs are based on expected loss over the lifetime (stage 2). If the credit risk has increased significantly and there is objective evidence of impairment, a provision should be raised for the expected loss over its lifetime (stage 3).
In the company, the assessment of what is considered to be a significant change in credit risk for home mortgage loans is based on a combination of quantitative and qualitative indicators and ‘backstops’. The most important driver for a significant change in credit risk for home mortgage loans in the group is a change in the probability of default (PD) from initial recognition up to the reporting date. A relative change in PD of more than 2.5 is considered to be a significant change in credit risk. The change in PD must also be at least 0.6 percentage points for the change to be considered significant.
The company's provisions for future losses increased somewhat with the onset of the pandemic in 2020 but have normalized throughout the year. Realized losses are not currently affected.
For more information about the company's calculation of losses, refer to Note 8.
Note 4 Segment information
KLP Boligkreditt AS has no division of its income by products or services. The Company has only the retail market segment and offers its customers only loans that are secured by property mortgage. The Company has only Norwegian customers. The Company has no external customers representing more than 10 per cent of the Company’s total operating income.
Note 5 Net interest income
NOK THOUSANDS | 01.01.2021 -31.12.2021 | 01.01.2020 -31.12.2020 |
---|---|---|
Interest income on loans to customers | 185 929 | 208 521 |
Interest income on loans to credit institutions | 976 | 1 269 |
Total interest income, effective interest method | 186 905 | 209 790 |
Interest income on bonds and certificates | 7 827 | 6 735 |
Total other interest income | 7 827 | 6 735 |
Total interest income | 194 732 | 216 525 |
Interest expenses on debt from KLP Banken AS | -4 586 | -5 399 |
Interest expenses on issued securities | -82 175 | -112 998 |
Total interest expense, effective interest method | -86 760 | -118 398 |
Total interest expense | -86 760 | -118 398 |
Net interest income | 107 972 | 98 127 |
Note 6 Net gain/(loss) on financial instruments
NOK THOUSANDS | 01.01.2021 -31.12.2021 | 01.01.2020 -31.12.2020 |
---|---|---|
Net gain/(loss) on fixed-income securities | -3 622 | -290 |
Net gain/loss on realized repurchase of own debt | -4 890 | -19 824 |
Total net gain/(loss) on financial instruments | -8 512 | -20 114 |
Note 7 Auditor’s fee
NOK THOUSANDS | 01.01.2021 -31.12.2021 | 01.01.2020 -31.12.2020 |
---|---|---|
Ordinary audit | 161 | 267 |
Certification services | 137 | 115 |
Total auditor’s fee | 298 | 382 |
The audit fee is expensed according to received invoice. The amounts above include VAT.
Note 8 Loan loss provision
Framework for loan loss provisions
The measurement of the provision for expected credit losses on financial assets according to IFRS 9 depends on whether the credit risk has increased significantly since initial recognition. At initial recognition and if the credit risk has not increased significantly, the provision should equal 12-month expected credit losses (stage 1). If the credit risk has increased significantly from the initial recognition (stage 2) or if the asset is classified as impaired (stage 3), the provision should equal lifetime expected credit losses.
Calculation of expected credit loss
Expected credit loss (ECL) is calculated as the exposure at default (EAD) multiplied by the probability of default (PD) multiplied by the loss given default (LGD).
Probability of Default (PD) is a calculated probability based on statistical models to estimate the probability of an exposure going into default during the following 12-month period (12-month PD). In addition to calculating 12 months PD, the bank has developed PD graphs used for calculating marginal PD for the exposure’s remaining lifetime (Lifetime PD).
Loss given default (LGD) is what the bank expects to lose given that an exposure goes into default. The calculation is based on how probable it is that a defaulted exposure is cured and expected credit loss if the exposure is not cured.
Exposure at default (EAD) is expected exposure at the moment of a future default.
In KLP Boligkreditt AS, the assessment of what is considered to be a significant change in credit risk for retail mortgage loans is based on a combination of quantitative and qualitative indicators and ‘backstops’. The most important driver for a significant change in credit risk for retail mortgage loan is a change in the probability of default (PD) from the initial recognition up to the reporting date. A relative change in 12 month PD of more than 2.5 is considered a significant change in credit risk. In addition, the change in 12 month PD must also be at least 0.6 percentage points for the change to be considered significant. Exposures that are more than 30 days past due will automatically be placed in Stage 2, and exposures more than 90 days past due will be placed in Stage 3. The loans go back to Stage 2 and Stage 1 when the criteria for significant change in credit risk and default are no longer fulfilled.
Definition of default
Finanstilsynet published in Circular 4/2020 criteria for identification of default and this gave some minor changes in the definition of default. The changes has not have any major consequences for the company. Default is defined as "a claim that is over 90 days past due, or an account that has been continuously overdrawn for a minimum of 90 days (minimum amount NOK 1,000). Furthermore, a commitment is considered as default if for various reasons it has been written off, e.g. through debt negotiations, established debt settlement and/or bankruptcy.
Follow-up of defaulted and doubtful commitments
Mortgages in arrears are handled by a special commitments department in the bank, Banken Group currently uses its own collection process up to and including legally enforced recovery and execution of sale/foreclosure. If a repayment agreement is not reached, any residual debt after realisation of the collateral is transferred to a collection agency for further follow-up.
Individual loss write-downs
Mortgages over 90 days past due are reviewed and followed up regularly. In addition, exposures are also reviewed when the bank receives information about debt negotiations or other conditions that would indicate increased risk. A loss assessment is carried out for all such exposures. The collateral is assessed on the basis of previously determined value, in addition to new information about the bank's collateral in the case, for example from a broker if a sale/foreclosure has already been initiated. If the realisation value proves to be lower than the residual debt of the commitment, a loss write-down of the exposure is carried out.
Exposures with individual loss write-downs are followed up with a view to the realisation of the collateral. This can be undertaken by agreement on an ordinary sale or legally by means of foreclosure. In some cases, a payment agreement to repay the full amount of residual debt is reached. In these cases, the loss write-down will be maintained for a minimum of 1 year after the loan has been satisfactorily served, before the commitment is considered cured.
Determination of loss
For mortgages, the determination of loss will only occur after the security has been realised and further legal proceedings have not succeeded, that is after an application for distraint has not yielded a result. The case is then monitored by a debt collection agency and followed up on a regular basis.
Description of inputs, assumptions and estimation techniques in the model for expected losses (ECL model)
KLP Banken has developed PD and LGD models for the bank's/group's mortgage loan portfolio. A PD model has been developed for new mortgage customers and a PD model for existing mortgage customers. The first model uses data that is available at the time of application and is valid for three months after the mortgage is granted. The second model begins after three months, and also include data that depends on the customer's behaviour (for example the number of days in arrears). Explanatory variables are age, income, number of reminders sent in the last 12 months, total number of days in arrears in the last 12 months, loan-to-value ratio, co-borrower, defaults in the last 12 months and product type.
Logistical regression was used to create the PD model. This method is considered an industry standard for PD models, it is easy to interpret and analyse the output from the model and it can provide high coefficient of determination given that certain assumptions are met. The method also makes it possible to combine pure quantitative analyses with expert assessments, which was useful when the data base was somewhat limited. A thorough manual analysis of a relatively small sample of potential variables (due to limited data basis) was carried out to arrive at an optimal combination of variables.
The most important measure for a PD model is the model's ability to discriminate, i.e. the ability to distinguish bad customers from good customers. The ability to discriminate is measured using ROC (Receiver Operating Characteristic), which provides some information about the proportion of predictions that are correct. The PD model for mortgage was validated autumn 2021, and the results showed that the model has a good ranging ability and stabile PD values without large fluctuations even that time period for the valuation was characterized by very low degree of default based on the corona measures such as low interest and exemption from repayment. The model is validated at least yearly and the coefficient values can then be updated and the prediction level adjusted.
The lifetime probability of default (Lifetime PD) is used for all retail mortgage loans in KLP Banken Groups excluding senior loans where a simplified model for expected loss is used. The lifetime probability of default (LTPD) of an exposure is calculated based on aggregated figures for historically observed default rates for each year of all exposures and each exposure's probability of default 12 months after start. The results from model development show that the default rate increases slightly in year 2 before then decreasing, so that the PD in year 2 is higher than in year 1. This is in line with the expected result, since it is expected that it will take some time before a newly granted mortgage loan experiences problems. A customer will typically seek to avoid default on the mortgage loan, and will typically default on other debts before he goes into default on the mortgage loan. The reduction in PD after year 2 can be explained by a "survivalship effect", i.e. the contracts that have not defaulted in the first 2 years are typically of better credit quality, and as the loans are repaid the risk becomes lower. Experience from the industry is that contracts that have existed for a certain period of time converge towards a stable observed default rate. For KLP Banken/Group's mortgage loan portfolio, 3 years has been set as the parameter for when the default level converges towards a long-term PD level. The long-term PD level is set at 0.3 per cent, which corresponds to the average PD for the best contracts in the portfolio.
Exposure at default (EAD) is used for all mortgages in KLP Banken/Group excluding senior loans where a simplified model for expected loss is used. The EAD model has the same data sample as the LTPD model. If an exposure is in default, the exposure's balance at the time will be the bank's/group's exposure exposure at default. EAD can be expressed for an exposure as a function of the likelihood that the contract will not be repaid within the time t. For repayment loans, EAD at time t is estimated as the exposure's balance at the time pursuant to the repayment schedule multiplied by the likelihood of the contract not being repaid within time t. The probability of a contract being terminated early within the year t is calculated as a percentage for each year in the future from 1 to 7 years.
Loss given default (LGD)
When estimating future credit loss it is important to look at the proportion of customers in default whose accounts become cured. The bank/group has examined at all historical defaults over 90 days and analysed the outcomes of these defaults. The results of the analysis show a very high level of defaults becoming cured. KLP Banken/Group has, since its inception, handled defaults and debt collection internally within the bank/group, and has one dedicated employee who handles exposures in default. The cases are followed closely, and there has been a limited number of defaults since the bank's inception. The analysis shows that the bank has had minimal losses, and most defaults have been reported as cured.
Cured default is defined as the account returning to ongoing status (no longer 90 days past due/90 days in arrears over the bank's significant amount), or that the account is terminated without loss (typically through voluntary sale of collateral or refinancing in another bank). Non-cured default is defined as where the recovery process has resulted in the account having an established loss, or that an application for distraint has been made against the customer (foreclosure of the property or recovery of guarantee). Customers with status "nothing for distraint" also belong in this category). If the customer has entered into debt negotiations, this is also defined as non-cured default. One last possibility is that we do not know the final outcome of the default due to a short time horizon between the default date and modelling date. The figure below illustrates the various outcomes for a default.
The observed cure rate is calculated and validated at least yearly in the same way as it during model development. If the observed cure rate deviates by more than 10 percentage points from the estimate used in the IFRS 9 model, an assessment shall be made of whether measures are needed, e.g. a re-estimation of the model.
Forward-looking information
A part of the assessment of future losses is the assessment of how the future will look regarding to the macroeconomic conditions that affect the bank's credit losses, e.g. interest rates, housing prices, unemployment rates etc. To calculate the expected credit loss (ECL), the bank has assumed three different scenarios, which are weighted for probability based on an assessment of the probability of each of the three outlined scenarios occurring. The scenarios used by the bank are one expected outcome, one pessimistic outcome and one optimistic outcome for expected credit loss, where the three scenarios have a factor for outcome and a probability that the scenario occurs. The sum of the weighted scenarios constitutes the expected credit loss, and the probability that each scenario will occur will thus affect the expected credit loss. In the expected outcome we assume unchanged house prices and stabile PD. In the negative scenario, a house price fall of 10 per cent and an increase in average PD of 32 per cent are assumed, while the number of cured defaults decrease with 5 per cent. This scenario is given a 30 per cent weight. In the positive scenario it is assumed that house prices increase with 5 per cent and that the PD is halved. The positive scenario is given a 10 per cent weight. The expected scenario is thereby given a 60 per cent weight.
KLP Banken's risk forum assesses these scenarios and their weighting on a quarterly basis, based on changes in macroeconomic factors or other factors that may affect expected credit loss in the bank.
EXPECTED CREDIT LOSS (ECL) - LOANS TO CUSTOMERS - MORTGAGE
NOK THOUSANDS | 12-month ECL | Lifetime ECL not credit impaired | Lifetime ECL credit impaired | |
---|---|---|---|---|
2021 | stage 1 | stage 2 | stage 3 | Total |
Opening balance ECL 01.01.2021 | 22 | 3 | - | 25 |
Transfer to Stage 1 | - | - | - | - |
Transfer to Stage 2 | -1 | 1 | - | - |
Transfer to Stage 3 | - | - | - | - |
Net changes | -8 | -1 | - | -9 |
New losses | 19 | 2 | - | 21 |
Write-offs | -10 | -2 | - | -12 |
Closing balance ECL 31.12.2021 | 23 | 3 | - | 26 |
Changes (01.01.2021- 31.12.2021) | 1 | - | - | 1 |
VALUE OF LENDING AND RECEIVABLES FOR CUSTOMERS RECOGNISED IN THE BALANCE SHEET - MORTGAGE
NOK THOUSANDS | 12-month ECL | Lifetime ECL not credit impaired | Lifetime ECL credit impaired | |
---|---|---|---|---|
2021 | stage 1 | stage 2 | stage 3 | Total |
Lending 01.01.2021 | 10 722 112 | 101 578 | - | 10 823 690 |
Transfer to Stage 1 | 6 335 | -6 335 | - | - |
Transfer to Stage 2 | -211 607 | 211 607 | - | - |
Transfer to Stage 3 | - | - | - | - |
Net change | -436 655 | -10 237 | - | -446 891 |
New lending | 4 881 324 | 22 679 | - | 4 904 003 |
Write-offs | -2 905 678 | -43 572 | - | -2 949 249 |
Lending 31.12.2021 | 12 055 832 | 275 721 | - | 12 331 552 |
EXPECTED CREDIT LOSS (ECL) - LOANS TO CUSTOMERS - MORTGAGE
NOK THOUSANDS | 12-month ECL | Lifetime ECL not credit impaired | Lifetime ECL credit impaired | |
---|---|---|---|---|
2020 | stage 1 | stage 2 | stage 3 | Total |
Opening balance ECL 01.01.2020 | 23 | - | - | 23 |
Transfer to Stage 1 | - | - | - | - |
Transfer to Stage 2 | - | - | - | - |
Transfer to Stage 3 | - | - | - | - |
Net changes | 132 | 21 | - | 153 |
New losses | 15 | 3 | - | 19 |
Write-offs | -3 | - | - | -3 |
Change in risk model | -145 | -21 | - | -166 |
Closing balance ECL 31.12.2020 | 22 | 3 | - | 25 |
Changes (01.01.2020 - 31.12.2020) | -1 | 3 | - | 2 |
VALUE OF LENDING AND RECEIVABLES FOR CUSTOMERS RECOGNISED IN THE BALANCE SHEET - MORTGAGE
NOK THOUSANDS | 12-month ECL | Lifetime ECL not credit impaired | Lifetime ECL credit impaired | |
---|---|---|---|---|
2020 | stage 1 | stage 2 | stage 3 | Total |
Lending 01.01.2020 | 7 325 676 | 11 372 | - | 7 337 048 |
Transfer to Stage 1 | 9 948 | -9 948 | - | - |
Transfer to Stage 2 | -5 799 | 5 799 | - | - |
Transfer to Stage 3 | - | - | - | - |
Net change | -258 392 | 2 751 | - | -255 641 |
New lending | 5 529 628 | 93 028 | - | 5 622 656 |
Write-offs | -1 878 948 | -1 424 | - | -1 880 372 |
Lending 31.12.2020 | 10 722 112 | 101 578 | - | 10 823 690 |
Note 9 Tax
NOK THOUSANDS | 01.01.2021 31.12.2021 | 01.01.2020 31.12.2020 |
---|---|---|
Accounting income before taxes | 32 866 | 19 194 |
Reversal of value increase financial assets | 2 205 | -297 |
Change in differences between book and taxable income | -20 491 | -12 670 |
Taxable income | 14 579 | 6 227 |
Group contribution made with tax effect | 14 579 | 6 227 |
DEFFERED TAX ASSETS LINKED TO | ||
Financial instruments | -577 | -92 |
Total tax-reducing temporary differences | -577 | -92 |
DEFERRED TAX LINKED TO | ||
Amortization of premium fund, borrowing | 5 351 | 843 |
Tax effect of group distribution | 3 207 | 1 370 |
Total tax-increasing temporary differences | 8 559 | 2 213 |
Net deferred tax(+)/tax assets(-) | 7 982 | 2 122 |
SUMMARY OF TAX EXPENSES OF THE YEAR | ||
Change in deferred tax taken to income excl. effect of group distribution | 4 023 | 2 853 |
Capitalized tax from Group contribution | 3 207 | 1 370 |
Reallocated tax from paid out Group contribution | -1 370 | -1 155 |
Total tax costs | 5 860 | 3 068 |
Effective tax rate | 18% | 16% |
RECONCILIATION OF TAX RATE | ||
Accounting income before taxes | 32 866 | 19 194 |
Income tax expense, nominal tax rate | 7 230 | 4 223 |
Income tax expense, effective tax rate | 5 860 | 3 068 |
Difference between effective and nominal tax | 1 370 | 1 155 |
Effect of reallocated tax from paid out Group contribution | 1 370 | 1 155 |
Total | 1 370 | 1 155 |
Note 10 Cash and cash equivalents and other loans and receivables from credit institutions
NOK THOUSANDS | 31.12.2021 | 31.12.2020 |
---|---|---|
Bank deposits operations | 261 964 | 121 661 |
Cash | - | - |
Total cash and cash equivalents (liquidity) | 261 964 | 121 661 |
Bank accounts to be used for the purchase and sale of securities | 11 354 | 8 191 |
Loans and receivables from credit institutions | 273 318 | 129 852 |
Note 11 Lending and receivables
NOK THOUSANDS | 31.12.2021 | 31.12.2020 |
---|---|---|
LOANS TO AND RECEIVABLES FROM CREDIT INSTITUTIONS | ||
Bank deposits | 273 318 | 129 852 |
Loans to and receivables from credit institutions | 273 318 | 129 852 |
LOANS TO AND RECEIVABLES FROM CUSTOMERS | ||
Principal on loans to customers | 12 323 830 | 10 816 200 |
Write-downs steps 1 and 2 | -25 | -24 |
Premium/discount | - | 74 |
Accrued interest | 7 722 | 7 489 |
Loans to and receivables from customers | 12 331 526 | 10 823 740 |
Note 12 Categories of financial assets
NOK THOUSANDS | 31.12.2021 | 31.12.2020 | ||
---|---|---|---|---|
Book value | Fair value | Book value | Fair value | |
FINANCIAL ASSETS AT FAIR VALUE | ||||
Fixed-income securities | 1 704 134 | 1 704 134 | 518 860 | 518 860 |
Total financial assets at fair value | 1 704 134 | 1 704 134 | 518 860 | 518 860 |
FINANCIAL ASSETS AT AMORTIZED COST | ||||
Loans to and receivables from credit institutions | 273 318 | 273 318 | 129 852 | 129 852 |
Lending to the retail market | 12 331 526 | 12 331 526 | 10 823 740 | 10 823 740 |
Total financial assets at amortized cost | 12 604 844 | 12 604 844 | 10 953 592 | 10 953 592 |
Total financial assets | 14 308 979 | 14 308 979 | 11 472 452 | 11 472 452 |
FINANCIAL LIABILITIES AT AMORTIZED COST | ||||
Liabilities to credit institutions | 1 094 579 | 1 094 579 | 103 373 | 103 373 |
Covered bonds issued | 12 433 452 | 12 464 959 | 10 616 951 | 10 655 078 |
Total financial liabilities at amortized cost | 13 528 031 | 13 559 539 | 10 720 324 | 10 758 450 |
Total financial liabilities | 13 528 031 | 13 559 539 | 10 720 324 | 10 758 450 |
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. 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. If the market for the security is not active, or the security is not listed on a stock market or similar, the Group uses valuation techniques 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 revaeal any errors.
Fixed-income securities - other than government
Norwegian fixed-income securities except government are generally priced using prices from Nordic Bond Pricing. Those securities that are not included in Nordic Bond Pricing are priced theoretically. In theoretical price is based on the assumed present value on the sale of the position. A zero-coupon curve is used for discounting. The sero-coupon curve is asjusted 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 mainsource of spread curves. They provide company-specific curves for Norwegian saving banks, municipalities and energy. Saving banks have various spread curves based on total assets. For companies where Nordic Bond Pricing do not deliver spread curved, 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.
Fair value of loans to retail customers
Fair value of lending without fixed interest rates is considered virtually the same as book value since the contract terms are continuously changed in step with market interest rates. Fair value of fixedrate loans is calculated by discounting contractual cash flows by the marked rate including a relevant risk margin on the reporting date. This is valued in Level 2 in the valuation hierarchy, cf. note 14.
Fair value of loans to and receivables from credit institutions
All receivables from credit institutions (bank deposits) are at variable interest rates. Fair value of these is considered virtually the same as book value since the contract terms are continuously changed in step with change in market interest rates. This is valued in Level 2 in the valuation hierarchy, cf. note 14.
Fair value of liabilities to credit institutions
These transactions are valued using a valuation model, including relevant credit spread adjustments obtained from the market. This is valued in Level 2 in the valuation hierarchy, cf. note 14.
Liabilities created on issuance of covered bonds
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 14.
Note 13 Fixed-income securities
NOK THOUSANDS | 31.12.2021 | |||
---|---|---|---|---|
Debtor categories | Acquisition cost | Unreal. gain/loss | Accr. int. not due | Market value |
Government/social security administration | 3 997 | - | - | 3 997 |
Credit enterprises | 1 700 645 | -2 621 | 2 114 | 1 700 138 |
Total fixed-insome securities | 1 704 642 | -2 621 | 2 114 | 1 704 134 |
Effective interest rate: 0.94% |
NOK THOUSANDS | 31.12.2020 | |||
---|---|---|---|---|
Debtor categories | Acquisition cost | Unreal. gain/loss | Accr. int. not due | Market value |
Government/social security administration | 4 000 | - | - | 4 000 |
Credit enterprises | 514 855 | -416 | 420 | 514 860 |
Total fixed-insome securities | 518 855 | -416 | 420 | 518 860 |
Effective interest rate: 0.54% |
Effective interest is calculated as a yield-to-maturity, i.e. it is the constant interest rate level at which one may discount all the future cash flows from the securities to obtain the securities’ total market value.
Note 14 Fair value hierarchy
31.12.2021 NOK THOUSANDS | Level 1 | Level 2 | Level 3 | Total |
---|---|---|---|---|
ASSETS BOOKED AT FAIR VALUE | ||||
Fixed-income securities | 3 997 | 1 700 138 | - | 1 704 134 |
Total assets at fair value | 3 997 | 1 700 138 | - | 1 704 134 |
31.12.2020 NOK THOUSANDS | Level 1 | Level 2 | Level 3 | Total |
---|---|---|---|---|
ASSETS BOOKED AT FAIR VALUE | ||||
Fixed-income securities | 4 000 | 514 860 | - | 518 860 |
Total assets at fair value | 4 000 | 514 860 | - | 518 860 |
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 not therefore 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 12 discloses the fair value of financial assets and financial liabilities that are recognized at amortized cost. Financial assets measured at amortized cost comprise lending to and due to credit institutions, and retail customers. The stated fair value of these assets is determined on terms qualifying for level 2. Financial liabilities recognized at amortized cost consist of debt securities issued. 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.
Note 15 Other assets
NOK THOUSANDS | 31.12.2021 | 31.12.2020 |
---|---|---|
Receivables between Group companies | 4 687 | 3 239 |
Total other assets | 4 687 | 3 239 |
Note 16 Liabilities to credit institutions
31.12.2021 NOK THOUSANDS | Currency | Interest | Due date | Nominal | Accrued interest | Book value |
---|---|---|---|---|---|---|
Debt from KLP Banken AS | NOK | Fixed | 15.12.2023 | 800 000 | 219 | 800 219 |
Debt from KLP Banken AS | NOK | Fixed | 15.12.2023 | 294 308 | 52 | 294 360 |
Total liabilities to credit institutions | 1 094 308 | 271 | 1 094 579 | |||
Interest rate on debt to credit institutions at the reporting date | 0.58% | |||||
The interest rate is calculated as a weighted average of the act/360 basis. |
NOK THOUSANDS | Book value 31.12.2020 | Receipts internal funding | Disbursements internal funding | Changes accrued interest | Book value 31.12.2021 | Interest paid in 2021 |
---|---|---|---|---|---|---|
Debt from KLP Banken AS | 103 373 | 7 427 296 | -6 436 333 | 243 | 1 094 579 | -4 342 |
Debt from KLP Banken AS | 103 373 | 7 427 296 | -6 436 333 | 243 | 1 094 579 | -4 342 |
31.12.2020 NOK THOUSANDS | Currency | Interest | Due date | Nominal | Accrued interest | Book value |
---|---|---|---|---|---|---|
Debt from KLP Banken AS | NOK | Fixed | 15.12.2022 | 103 345 | 28 | 103 373 |
Total liabilities to credit institutions | 103 345 | 28 | 103 373 | |||
Interest rate on debt to credit institutions at the reporting date | 0.56% | |||||
The interest rate is calculated as a weighted average of the act/360 basis. |
NOK THOUSANDS | Book value 31.12.2019 | Receipts internal funding | Disbursements internal funding | Changes accrued interest | Book value 31.12.2020 | Interest paid in 2020 |
---|---|---|---|---|---|---|
Debt from KLP Banken AS | 387 157 | 8 335 579 | -8 619 111 | -252 | 103 373 | -5 652 |
Debt from KLP Banken AS | 387 157 | 8 335 579 | -8 619 111 | -252 | 103 373 | -5 652 |
Note 17 Securities liabilities - stock exchange listed covered bonds
NOK THOUSANDS | 31.12.2021 | 31.12.2020 |
---|---|---|
Bonds, nominal value | 12 404 000 | 10 584 000 |
Revaluations | 21 847 | 30 743 |
Accrued interest | 7 605 | 2 208 |
Total liabilities created on issuance of securities | 12 433 452 | 10 616 951 |
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/ redemed | Other adjustments | Balance sheet 31.12.2021 | Interest paid in 2021 |
---|---|---|---|---|---|---|
Change in liabilities created on issuance of securities | ||||||
Bonds, nominal value | 10 584 000 | 3 500 000 | -1 680 000 | - | 12 404 000 | - |
Revaluations | 30 743 | - | - | -8 896 | 21 847 | - |
Accrued interest | 2 208 | - | - | 5 397 | 7 605 | -87 463 |
Total liabilities created on issuance of securities | 10 616 951 | 3 500 000 | -1 680 000 | -3 499 | 12 433 452 | -87 463 |
NOK THOUSANDS | Balance sheet 31.12.2019 | Issued | Matured/ redemed | Other adjustments | Balance sheet 31.12.2020 | Interest paid in 2020 |
---|---|---|---|---|---|---|
Change in liabilities created on issuance of securities | ||||||
Bonds, nominal value | 7 014 000 | 6 000 000 | -2 430 000 | - | 10 584 000 | - |
Revaluations | -583 | - | - | 31 326 | 30 743 | - |
Accrued interest | 13 963 | - | - | -11 755 | 2 208 | -131 794 |
Total liabilities created on issuance of securities | 7 027 380 | 6 000 000 | -2 430 000 | 19 571 | 10 616 951 | -131 794 |
Note 18 Other liabilities and provision for accrued costs and liabilities
NOK THOUSANDS | 31.12.2021 | 31.12.2020 |
---|---|---|
Receivables between companies in the same Group | 5 612 | 6 889 |
Creditors | 88 | 66 |
Total other liabilities | 5 700 | 6 955 |
Value-added tax | 28 | - |
Total accrued costs and liabilities | 28 | - |
Note 19 Transactions with related parties
NOK THOUSANDS | 01.01.2021 -31.12.2021 | 01.01.2020 -31.12.2020 |
---|---|---|
Income statement items | ||
KLP Banken AS, interest on borrowing | -4 586 | -5 399 |
KLP Banken AS, interest on deposits | 785 | 267 |
KLP Banken AS, administrative services (at cost) | -62 267 | -54 387 |
KLP Kapitalforvaltning AS, fees for services provided | -17 | -20 |
KLP Group companies, subsidised interest on staff loans | 7 273 | 8 584 |
Total | -58 812 | -50 956 |
NOK THOUSANDS | 31.12.2021 | 31.12.2020 |
---|---|---|
Financial position statement items | ||
KLP Banken AS, debt to credit institutions | -1 094 579 | -103 373 |
KLP Banken AS, deposit | 201 052 | 100 267 |
KLP Banken AS, loan settlement | 2 982 | 1 262 |
Net outstanding accounts to: | ||
KLP Banken AS | -5 612 | -6 889 |
KLP Group companies, net other internal accounts | 1 705 | 1 977 |
Purchase of loans from KLP Banken AS | 6 006 193 | 7 459 189 |
Total | 5 111 740 | 7 452 433 |
There are no direct salary costs in KLP Boligkreditt AS. Personnel costs (administrative services) are allocated from KLP Banken AS.
Transactions with related parties are carried out on general market terms, with the exception of the Company’s share of common functions, which is allocated at cost.
Allocation is based on actual use. All internal receivables are settled as they arise.
Note 20 Capital adequacy
NOK THOUSANDS | 31.12.2021 | 31.12.2020 |
---|---|---|
Share capital and share premium | 710 463 | 710 463 |
Other owners’ equity | 61 462 | 35 827 |
Total owners’ equity | 771 925 | 746 290 |
Adjustments due to requirements for proper valuation | -1 704 | -519 |
Core capital/Tier 1 capital | 770 221 | 745 771 |
Supplementary capital/Tier 2 capital | - | - |
Supplementary capital/Tier 2 capital | - | - |
Total own funds (eligible Tier 1 and Tier 2 capital) | 770 221 | 745 771 |
Capital requirement | 374 663 | 318 069 |
Surplus of own funds (eligible Tier 1 and Tier 2 capital) | 395 558 | 427 702 |
Calculation basis credit risk | ||
Institutions | 55 484 | 26 479 |
Mortgage security in real estate | 4 316 034 | 3 788 309 |
Covered bonds | 170 014 | 51 486 |
Other holdings | 587 | 696 |
Calculation basis credit risk | 4 542 119 | 3 866 970 |
Credit risk | 363 369 | 309 358 |
Operational risk | 11 294 | 8 711 |
Total capital requirement assets | 374 663 | 318 069 |
Core capital adequacy ratio | 16.4% | 18.8% |
Supplementary capital ratio | 0.0% | 0,0 % |
Capital adequacy ratio | 16.4% | 18.8% |
Leverage ratio | 5.4% | 6.5% |
Capital requirement per 31.12.2021 | Core capital/ Tier 1 capital | Supplementary capital/Tier 2 capital | Own funds |
---|---|---|---|
Minimum requirement without buffers | 4.5% | 3.5% | 8.0% |
Protective buffers | 2.5% | 0.0% | 2.5% |
System risk buffers | 3.0% | 0.0% | 3.0% |
Counter-cyclical buffers | 1.0% | 0.0% | 1.0% |
Applicable capital requirement incl. buffers | 11.0% | 3.5% | 14.5% |
Capital requirement leverage ratio | 3.0% | 0.0% | 3.0% |
Note 21 Financial risk management
Organisation of risk management
KLP Boligkreditt AS is a wholly owned subsidiary of KLP Banken AS. The Board of Directors of the Bank has established a risk management framework aimed at ensuring that risks are identified, analysed and managed based on policies, limits, procedures and instructions. The Board has adopted risk policies covering the key individual risks as well as an overarching risk policy that covers principles, organisation, limits etc. for the Bank’s total risk. The risk policies are of an overarching nature and are complemented by procedures, guidelines and instructions laid down at the senior management level. The policies state which departments are responsible for handling the various risks and also cover the establishment of a separate risk control function. One purpose of the risk control function is to check that the risk policies and other guidelines for risk management are being followed. This function is carried out by the head of the Risk Analysis and Control Department, which is responsible for preparing periodic risk reports to senior management and the Board as well as reporting on any breaches of policies or guidelines. The Department, which has an independent role in relation to other departments, also has other tasks associated with the Bank’s risk management. The responsibility for the operational direction of the Bank’s liquidity risk, exchange rate risk and interest rate risk lies with the Finance Department.
Note 22 Credit risk
Credit risk is defined as the risk of loss associated with loan customers, derivative counterparties, issuers of securities and other counterparties being unable or unwilling to settle at the agreed time and in accordance with written contracts, where the collateral established does not cover the outstanding claim.
KLP Boligkreditt AS provides property mortgage loans to retail customers. The principal customer group is made up of members of KLP, who represent about 73% of the lending volume.
22.1 CONTROL AND LIMITATION OF CREDIT RISK
The Board has adopted a policy for credit risk which contains overarching guidelines, requirements and limits associated with credit risk. The policy states that KLP Boligkreditt AS should have a low credit risk profile and includes limits on types of lending and principles for the organisation and operation of the Bank’s lending activity. The policy also includes an overarching mandate structure for lending and other counterparty exposure. KLP Boligkreditt only provides loans mortgaged in residential property within 75% of the market value of the mortgaged object. In processing loan applications the borrower’s servicing ability and the value of the mortgage object is assessed and loans are provided only within set limits and authorisations.
The market value of the mortage assets is updated quarterly against Eiendomsverdis of market value of housing in Norway.
22.2 LOANS ACCORDING TO TYPE OF SECURITY/EXPOSURE (PRINCIPAL)
NOK THOUSANDS | 31.12.2021 | 31.12.2020 |
---|---|---|
LOANS ACCORDING TO TYPE OF SECURITY/EXPOSURE (PRINCIPAL) | ||
Retail mortgage loans | 12 323 830 | 10 816 200 |
Total | 12 323 830 | 10 816 200 |
Sums falling due more than 12 months after the end of the reporting period | 11 794 863 | 10 351 762 |
NOK THOUSANDS | 31.12.2021 | 31.12.2020 |
---|---|---|
ALLOCATION OF LOAN TO VALUE (PRINCIPAL) FOR RETAIL MORTGAGE LOANS | ||
Loan to value ratio up to 50 per cent | 4 835 403 | 4 346 246 |
Loan to value ratio from 51 to 60 per cent | 2 967 765 | 2 513 728 |
Loan to value ratio from 61 to 75 per cent | 4 154 089 | 3 706 507 |
Loan to value ratio above 75 per cent | 366 573 | 249 720 |
Total | 12 323 830 | 10 816 201 |
Average loan-to-value ratio (volume weighted) | 52.10% | 51.00% |
KLP Boligkreditt uses a risk classification system to classify retail customers with loans or credits. Customers are classified from A to K, where A indicates very low risk while K is for customers on which the bank has incurred losses. Below is a distribution table with the volume of loans divided into low, medium and high risk, where low risk is defined as lending to customers in class A or B, medium risk is defined as lending to customers in class C or D, and high risk is defined as lending to customers in classes E to K.
The table below shows the total book value of the various risk classes and per stage in the impairment model. Stage 1 is all healthy loans, which must be written down by the estimated losses for 12 months. Stage 2 indicates that the exposure has a substantially increased credit risk since its initial recognition on the balance sheet, and means that the loan must be written down by the estimated losses throughout the entire term. Stage 3 is all loans in default (over 90 days past due) or with individual loss write-downs, which must be written down by the estimated losses throughout the entire term.
2021 | ||||
---|---|---|---|---|
LOANS BY RISK CLASS AND STAGE IN IFRS9 | Stage 1 | Stage 2 | Stage 3 | Total CB book value |
Low risk - risk class A | 4 781 139 | 60 026 | - | 4 841 165 |
Low risk - risk class B | 6 783 662 | 104 457 | - | 6 888 119 |
Medium risk - risk class C | 439 170 | 75 281 | - | 514 451 |
Medium risk - risk class D | 51 582 | 33 901 | - | 85 483 |
High risk - risk class E | 279 | 2 054 | - | 2 333 |
High risk - risk class F | - | - | - | - |
High risk - risk class K | - | - | - | - |
Engagements without risk class (new customers) | - | - | - | - |
Total CB book value | 12 055 831 | 275 721 | - | 12 331 552 |
2020 | ||||
---|---|---|---|---|
LOANS BY RISK CLASS AND STAGE IN IFRS9 | Stage 1 | Stage 2 | Stage 3 | Total CB book value |
Low risk - risk class A | 4 522 992 | 8 742 | - | 4 531 734 |
Low risk - risk class B | 5 516 331 | 58 296 | - | 5 574 627 |
Medium risk - risk class C | 539 056 | 22 439 | - | 561 495 |
Medium risk - risk class D | 140 533 | 5 304 | - | 145 837 |
High risk - risk class E | 3 199 | 6 797 | - | 9 996 |
High risk - risk class F | - | - | - | - |
High risk - risk class K | - | - | - | - |
Engagements without risk class (new customers) | - | - | - | - |
Total CB book value | 10 722 111 | 101 578 | - | 10 823 689 |
The Company also invests in securities issued by municipalities and county administrations and will in addition have credit risk exposure in the form of “additional collateral”. The additional collateral can amount up to 20 percent of the cover. In accordance with the Company’s internal guidelines the additional collateral may be in the form of deposits in banks satisfying minimum rating requirements as well as covered bonds issued by Norwegian credit enterprises.
CREDIT QUALITY OF SECURITIES, BANK DEPOSITS AND DERIVATIVES
NOK THOUSANDS | 31.12.2021 | 31.12.2020 |
---|---|---|
SECURITIES WITH EXTERNAL CREDIT RATING (MOODY’S) | ||
Aaa | 1 704 134 | 518 860 |
Total | 1 704 134 | 518 860 |
NOK THOUSANDS | 31.12.2021 | 31.12.2020 |
---|---|---|
DEPOSITS IN BANKS GROUPED BY EXTERNAL CREDIT ASSESSMENT (MOODY’S) | ||
Aa1-Aa3 | 64 957 | 27 468 |
A1-A3 | 208 361 | 102 384 |
Total | 273 318 | 129 852 |
The Company may also be exposed to credit risk as a result of derivative agreements struck. The purpose of such agreements is to reduce risks arising as a result of the Company’s borrowing and lending activities. The Company’s internal guidelines specify creditworthiness requirements for derivative counterparties. As of 31 December 2021, KLP Boligkreditt AS had no derivative agreements with any counterparties.
22.3 MAXIMUM EXPOSURE TO CREDIT RISK
KLP Boligkreditt AS measures maximum exposure as principal and accrued interest. Security in cash or securities is not exchanged, nor are other credit improvements carried out. The table below shows the maximum exposure for KLP Boligkreditt AS.
NOK THOUSANDS | 31.12.2021 | 31.12.2020 |
---|---|---|
MAXIMUM EXPOSURE TO CREDIT RISK | ||
Loans to and receivables from credit institutions | 273 318 | 129 852 |
Loans to and receivables from customers | 12 331 552 | 10 823 690 |
Fixed-income securities | 1 704 134 | 518 860 |
Financial derivatives | - | - |
Loss write-downs stage 1 and 2 | 26 | 24 |
Total | 14 309 030 | 11 472 426 |
22.4 LOANS FALLEN DUE OR WRITTEN DOWN
The Company has not incurred losses on lending. The company considers all receivables to be satisfactorily secured. The loans are secured with mortgages within 75% of market value, and losses will only arise when the value of the mortgaged object falls below the residual amount of the loan.
NOK THOUSANDS | 31.12.2021 | 31.12.2020 |
---|---|---|
LOANS FALLEN DUE OR WRITTEN DOWN | ||
Principal on loans with payments overdue by 7-30 days | 31 726 | 61 741 |
Principal on loans with payments overdue by 31-90 days | 5 937 | - |
Principal on non-performing loans | - | - |
Total loans fallen due | 37 663 | 61 741 |
Relevant security or guarantees | 37 663 | 61 741 |
Lending that has been written down | - | - |
22.5 CONCENTRATION OF CREDIT RISK
The Company's lending is in its entirety linked to financing of real estate where the loans are secured with mortgages within 75% of themarket value. All borrowers are Norwegian and the collateral is in Norwegian. The company has a risk consentration where it is exposed to a general impairment in the Norwegian housing market.
The concentration against individual borrowers is limited by individual Board-set limits. KLP Boligkreditt AS’s largest exposure as at 31 December 2021 was about 0.1 per cent of the Company's total lending.
Note 23 Market risk
Market risk is understood here as the risk of reduced fair value of the Company’s owners’ equity as a result of fluctuations in market prices for the Company’s assets and liabilities. Changes in credit margins are however excluded since this comes under the term credit risk.
KLP Boligkreditt AS is exposed to market risk as a result of the Company’s borrowing and lending activity and management of the Company’s liquidity. The exposure is however limited to interest rate risk and exchange rate risk. Interest rate risk arises as a result of differences in timing of interest rate adjustment for the Company’s assets and liabilities. The risk associated with such imbalances is reduced by using derivative contracts. All borrowing is in Norwegian kroner. The whole of the lending portfolio comprises loans in NOK.
23.1 MEASUREMENT OF MARKET RISK
Interest rate risk is measured as change in value on a one percentage point change in all interest rates.
23.2 INTEREST RATE RISK
The market risk policy is the Company’s overarching guidelines, requirements and limits associated with market risk. The policy dictates that the market risk should be minimized so that the total market risk is low. It further states that the Company should not actively take positions that expose the Company to market risk. The policy also sets limits for interest rate risk both for the total interest rate risk for the infinite future and for rolling 12-month periods. The risk limits are set to ensure that the low market risk profile policy is complied with. The operational responsibility for managing the Company’s market risk lies with the Finance Department in KLP Banken. The Risk Analysis and Control Department reports the Company's actual exposure in relation to limits in accordance with guidelines set by the Board.
Interest rate risk arises because the fixed interest periods for the bank’s assets and liabilities are not the same. The table below shows repricing dates for the Company’s interest-bearing assets and liabilities, and the gap shows the difference between assets and liabilities that can be interest-adjusted within the given time intervals. Lending at variable rates, and cash and receivables with credit institutions, are assumed to be able to be repriced within 0–3 month horizon. The debt falls into the time interval for which interest adjustment has been agreed.
INTEREST-RATE RISK KLP BOLIGKREDITT AS
Repricing dates for interest-bearing assets and liabilities as at 31 December 2021
NOK THOUSANDS | Total Principal | Up to 1 mth | From 1 mths to 3 mths | From 3 mths to 12 mths | From 1 year to 5 years | Over 5 years |
---|---|---|---|---|---|---|
Loans to and receivables from customers | 12 323 830 | 6 062 | 12 317 768 | - | - | - |
Fixed-income securities | 1 691 000 | 200 000 | 1 491 000 | - | - | - |
Loans to and receivables from credit institutions | 273 061 | 273 061 | - | - | - | - |
Total | 14 287 891 | 479 123 | 13 808 768 | - | - | - |
Liabilities created on issuance of securities | 13 498 308 | 3 594 308 | 9 904 000 | - | - | - |
Liabilities to credit institutions | 1 094 308 | 1 094 308 | - | - | - | - |
Total | 14 592 616 | 4 688 616 | 9 904 000 | - | - | - |
Net gap | -304 725 | -4 209 493 | 3 904 768 | - | - | - |
Repricing dates for interest-bearing assets and liabilities as at 31 December 2020
NOK THOUSANDS | Total Principal | Up to 1 mth | From 1 mths to 3 mths | From 3 mths to 12 mths | From 1 year to 5 years | Over 5 years |
---|---|---|---|---|---|---|
Loans to and receivables from customers | 10 816 200 | 3 853 | 10 812 347 | - | - | - |
Fixed-income securities | 515 000 | 51 000 | 464 000 | - | - | - |
Loans to and receivables from credit institutions | 129 852 | 129 852 | - | - | - | - |
Total | 11 461 052 | 184 705 | 11 276 347 | - | - | - |
Liabilities created on issuance of securities | 10 584 000 | 18 000 | 10 566 000 | - | - | - |
Liabilities to credit institutions | 103 345 | 103 345 | - | - | - | - |
Total | 10 687 345 | 121 345 | 10 566 000 | - | - | - |
Net gap | 773 707 | 63 360 | 710 347 | - | - | - |
The Company’s interest rate sensitivity as at 31 December 2021 (2020), measured as value change in the event of one percentage point change in all interest rates, was NOK 5.0 million (8.3 million).
Note 24 Liquidity risk
Liquidity risk means the risk that the Company does not manage to meet its obligations and/or finance increases in its assets without substantial additional costs arising in the form of price falls in assets that must be realized, or in the form of more costly financing.
24.1 MANAGEMENT OF LIQUIDITY RISK
The management of KLP Boligkreditts’s liquidity risk must be viewed in the context of the management of the liquidity risk in the KLP Banken Group. A liquidity policy is established for the Group containing principles, guidelines, requirements and limits that apply to the management of the liquidity risk. The policy states that the Group is to have a moderate liquidity risk profile and various requirements and limits have been set to achieve this, including targets for deposit cover, limits for refinancing requirements for various time periods and requirements for liquidity buffers. The Board has further adopted an emergency plan for liquidity crises as part of the liquidity policy. In addition to the requirements at Group level, separate specific requirements have been established for KLP Boligkreditt, including requirements for continually positive cash flows, limits for refinancing requirements and requirements for liquidity reserves and drawing rights. The operational responsibility for managing the Company’s liquidity risk lies with the Finance Department. The Risk Analysis and Control Department reports the Company's actual exposure in relation to limits in accordance with guidelines set by the Board.
24.2 MATURITY ANALYSIS
The tables below show the maturity analysis of the Company’s assets and liabilities including stipulated interest rates.
LIQUIDITY RISK KLP BOLIGKREDITT AS
Maturity analysis for assets and liabilities as at 31 December 2021
NOK THOUSANDS | Total | Undefined | Up to 1 mth | From 1 mths to 3 mths | From 3 mths to 12 mths | From 1 year to 5 years | Over 5 years |
---|---|---|---|---|---|---|---|
Loans to and receivables from customers | 14 548 767 | - | 58 234 | 117 632 | 537 010 | 2 885 678 | 10 950 214 |
Fixed-income securities | 1 744 862 | - | 337 | 8 778 | 400 368 | 1 335 378 | - |
Loans to and receivables from credit institutions | 273 318 | - | 72 266 | 201 052 | - | - | - |
Total | 16 566 947 | - | 130 837 | 327 462 | 937 378 | 4 221 057 | 10 950 214 |
Liabilities created on issuance of securities | 12 832 956 | - | 6 197 | 32 277 | 2 006 918 | 10 284 849 | 502 715 |
Liabilities to credit institutions | 1 107 178 | - | 547 | 1 040 | 4 848 | 1 100 743 | - |
Total | 13 940 135 | - | 6 744 | 33 317 | 2 011 767 | 11 385 592 | 502 715 |
NET CASH FLOW | 2 626 813 | - | 124 094 | 294 145 | -1 074 389 | -7 164 536 | 10 447 499 |
Maturity analysis for assets and liabilities as at 31 December 2020
NOK THOUSANDS | Total | Undefined | Up to 1 mth | From 1 mths to 3 mths | From 3 mths to 12 mths | From 1 year to 5 years | Over 5 years |
---|---|---|---|---|---|---|---|
Loans to and receivables from customers | 12 937 486 | - | 52 019 | 105 848 | 482 392 | 2 588 541 | 9 708 686 |
Fixed-income securities | 525 798 | - | 118 | 5 003 | 34 297 | 486 381 | - |
Loans to and receivables from credit institutions | 129 852 | - | 129 852 | - | - | - | - |
Total | 13 593 136 | - | 181 989 | 110 850 | 516 688 | 3 074 922 | 9 708 686 |
Liabilities created on issuance of securities | 10 873 153 | - | 18 027 | 23 431 | 637 501 | 10 194 194 | - |
Liabilities to credit institutions | 104 539 | - | 51 | 97 | 450 | 103 942 | - |
Total | 10 977 693 | - | 18 077 | 23 527 | 637 951 | 10 298 137 | - |
NET CASH FLOW | 2 615 443 | - | 163 912 | 87 323 | -121 263 | -7 223 215 | 9 708 686 |
A 24-month internal loan of NOK 1 094 millions has been provided from KLP Banken AS to KLP Boligkreditt AS, which is defined as Liabilities to credit institutions. This loan is rolled over currently every third month and the interest rate is set each month.
Note 25 Over-collateralisation
NOK THOUSANDS | Fair value | |
---|---|---|
31.12.2021 | 31.12.2020 | |
SECURITY POOL | ||
Loans to customers 1) | 11 978 685 | 10 800 414 |
Additional collateral 2) | 2 445 850 | 2 060 109 |
Total security pool | 14 424 536 | 12 860 524 |
Outstanding covered bonds incl. own funds and premium/discount | 13 060 145 | 12 092 108 |
Coverage of the security pool | 110.4% | 106.4% |
1) Excluding mortgage loans that do not qualify for security pool.
2) Additional collateral includes loans to and receivables from credit institutions, bonds and certificates. Liquid assets used in the LCR liquidity reserve are not included in additional collateral.
Section 11-7 of the Regulations on Financial Institutions lays down a requirement for over-collateralisation by at least 2 percent of the value of the outstanding covered bonds.
Note 26 Salary and obligations to senior management
2021 NOK THOUSANDS | Paid from KLP Boligkreditt AS | Paid from another company in the same group | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Salaries, fees etc. | Other benefits | Annual pension accumulation | Loans | Interest rate as at 31.12.2020 | Repayment plan 1) | Salaries, fees etc. | Other benefits | Annual pension accumulation | Loans | Interest rate as at 31.12.2021 | Repayment plan 1) | |
SENIOR EMPLOYEES | ||||||||||||
Christopher A. Steen, Managing Director | - | - | - | 1 363 | 1,00 | A30 | 1 389 | 30 | 287 | 678 | 1,00 | A41 |
BOARD OF DIRECTORS | ||||||||||||
Aage E. Schaanning, Chair | - | - | - | - | - | - | 3 758 | 178 | 1 269 | 6 390 | 1,00 | HC |
Lill Stabell | 83 | - | - | - | - | - | - | - | - | - | - | - |
Aina Slettedal Eide | - | - | - | - | - | - | - | - | - | - | - | - |
Kristian Lie-Pedersen | - | - | - | - | - | - | 118 | - | - | - | - | - |
EMPLOYEES | ||||||||||||
Total salary for employees of KLP Boligkreditt | - | - | - | 1 363 | - | - | - | - | - | 678 | - | - |
2020 NOK THOUSANDS | Paid from KLP Boligkreditt AS | Paid from another company in the same group | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Salaries, fees etc. | Other benefits | Annual pension accumulation | Loans | Interest rate as at 31.12.2020 | Repayment plan 1) | Salaries, fees etc. | Other benefits | Annual pension accumulation | Loans | Interest rate as at 31.12.2020 | Repayment plan 1) | |
SENIOR EMPLOYEES | ||||||||||||
Christopher A. Steen, Managing Director | - | - | - | 1 654 | 1,00 | A31 | 1 351 | 44 | 239 | - | - | - |
BOARD OF DIRECTORS | ||||||||||||
Aage E. Schaanning, Chair | - | - | - | - | - | - | 3 659 | 209 | 1 222 | 5 179 | 1,00 | HC |
Marit Barosen | 40 | - | - | - | - | - | 6 | - | - | - | - | - |
Karianne Oldernes Tung | 23 | - | - | - | - | - | 145 | - | - | - | - | - |
Kjell Fosse | 23 | - | - | - | - | - | 157 | - | - | - | - | - |
Lill Stabell | 44 | - | - | - | - | - | - | - | - | - | - | - |
Aina Slettedal Eide | - | - | - | - | - | - | - | - | - | - | - | - |
Kristian Lie-Pedersen | - | - | - | - | - | - | 62 | - | - | - | - | - |
EMPLOYEES | ||||||||||||
Total salary for employees of KLP Boligkreditt | - | - | - | 1 654 | - | - | - | - | - | - | - | - |
1) A= Annuity loan, last payment, HC = Housing Credit. |
The KLP Board of Directors has laid down principles and guidelines for remuneration that apply for the entire Group and set up a remuneration committee as a subcommittee of the Board. The committee reports on and carries out checks that the remuneration schemes in the Group are in line with the Board's principles and guidelines.
The Managing Director receives no remuneration or pension accumulation from KLP Boligkreditt AS. The incumbent receives all benefits from the parent company, KLP Banken AS, where he holds the position of Head of Finance KLP Boligkreditt refunds the portion of the benefits that can be linked to the role as Managing Director. There is no agreement on performance pay or special consideration on termination or change in employment contract. The pensionable age is 70 years.
There are no obligations to provide the Chair of the Board of Directors special consideration or other benefits on termination or change in employment contract or appointment.
Directors’ fees are set by the General Assembly. Board members employed in the KLP Group, not having been elected by and from the employees, do not receive a fee for the Board appointment. Benefits in addition to Directors’ fees for Board members employed in the KLP Group are stated only if they are included in the senior management group employed in the KLP Group. This also applies to any loans they may have with the Group. Of the board members, Aage E. Schaanning, Aina Slettedal Eide and Kristian Lie-Pedersen are employed in the KLP Group.
All benefits are shown without the addition of social security costs.
The KLP Group offers loans for various pruposes. There are separate loan terms for employees, and no senior employees hav loan terms that deviate from these. Loans to external directors are only granted under ordinary loand terms. The interest rebate that accrues to employees is refunded to the lending company.
Attention is drawn otherwise to the description of the main principles on determination of remuneration in the KLP Group that may be found at klp.no.
Note 27 Number of FTEs and employees
KLP Boligkreditt AS has one employee, who receive no salary or other form of remuneration from the Company.
KLP Boligkreditt AS buys personnel services from other companies in the KLP Group.
Independent Auditor´s report
Contact information
KLP BOLIGKREDITT AS
Beddingen 8
7042 Trondheim
Organization number: 912 719 634
Visitors address, Trondheim
Beddingen 8
Visitors address, Oslo
Dronning Eufemias gate 10
klpbanken.no
Phone: +47 55 54 85 00
klpboligkreditt@klp.no