Financial stability 1/12

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Financial stability 1/12

Charts

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Financial Stability 2/11 Financial Stability 1/12

Structure of banking sector

Funding of banking sector

Capital and earnings in banking sector

Enterprises

Households Money and credit

markets Macroeconomic

conditions Vulnerability in banking sectorExternal sources of risk to banking sector

Chart 1.1 Vulnerabilities in the Norwegian banking sector and external sources of risk to the banking sector

¹⁾

1) A value of 0, ie. origo, denotes the lowest level of risk or vulnerability. A value of 10 denotes the highest level of risk or vulnerability.

Source: Norges Bank

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-3 -2 -1 0 1 2 3 4

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Net interest income Other operating income Personnel expenses Other operating expenses Loan losses Pre-tax profits

3

Chart 1.2 Banks’

¹⁾

pre-tax profits as a percentage of average total assets.

Percent. Annual figures. 2002 – 2011

1) All banks except branches of foreign banks in Norway and branches of Norwegian banks abroad Source: Norges Bank

(4)

0 0.5 1 1.5 2

2010 2011

Average 2002-2010

Norges Bank Finansiell stabilitet

Chart 1.3 Banks’

¹⁾

losses on lending to various sectors and industries in 2011.

Percentage of lending to the respective sectors and industries

1) All banks in Norway except branches of foreign banks

2) Shipping is limited to lending to Norwegian shipping companies Source: Norges Bank

Retail market

Total for all industries

Commercial

real estate Shipping²⁾ Primary

industries Retail trade

Manufacturing

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-100 -80 -60 -40 -20 0 20 40 60

Dec-07 Sep-08 Jun-09 Mar-10 Dec-10 Sep-11 Jun-12

Non-financial enterprises Commercial real estate Households

1) Negative net percentage balances denote tighter credit standards compared with previous quarter, while positive balances denote easing in credit standards. The points/diamonds show expectations over the next quarter. The points/diamonds have been moved forward one quarter.

Source: Norges Bank

Chart 1.4 Change in banks’ credit standards for households and enterprises.

Net percentage balances

¹⁾

. Quarterly figures. 2007 Q4 – 2012 Q1

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0 2 4 6 8 10 12 14

1992 1995 1998 2001 2004 2007 2010

Common Equity Tier I capital /risk-weighted assets Common Equity Tier I capital /total assets

Common Equity Tier I capital /risk-weighted assets without floor 9 per cent Common Equity Tier I capital /risk-weighted assets

1) All banks except branches of foreign banks in Norway

Source: Finanstilsynet (Financial Supervisory Authority of Norway)

Chart 1.5 Common Equity Tier I capital in banks

¹⁾

and covered bond mortgage

companies. Percentage. Annual figures. 1992 – 2011

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0 2 4 6 8 10 12 14

Basel II

2013 2014 2015 2016 2017 2018 Basel III

Countercyclical buffer Conservation buffer Tier 2

Hybrid Tier 1

Common Equity Tier 1

Chart 1 Basel III phase-in of capital requirements

Source: Basel Committee on Banking Supervision

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-80 -70 -60 -50 -40 -30 -20 -10 0 10 20 30

1988 1991 1994 1997 2000 2003 2006 2009

Banks

Enterprises

1) All banks except branches of foreign banks in Norway. From 2008 all banks (legal entity) excluding branches of foreign banks in Norway

Source: Norges Bank

Chart 1.6 Return on equity. Norwegian banks

¹⁾

and enterprises.

Percent. Annual figures. 1988 – 2011

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Chart 1.7 Banks’ and covered bond mortgage companies’ stock of non-

performing loans. Percentage of gross lending to the same sector.

¹⁾

Quarterly figures. 1990 Q4 - 2011 Q4

0 3 6 9 12 15

Dec-90 Dec-95 Dec-00 Dec-05 Dec-10

Enterprises Households

Change in definition

1) All banks including branches of foreign banks in Norway and covered bond mortgage companies.

From 2007 Q4 all banks including branches of foreign banks in Norway and branches of Norwegian banks abroad and covered bond mortgage companies

Source: Norges Bank

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Chart 1.8 Banks’ and covered bond mortgage companies’ stock of non-

performing loans to households.

¹⁾

Percentage of gross lending to households.

Quarterly figures. 2007 Q4 – 2011 Q4

0.0 0.5 1.0 1.5 2.0

Dec-07 Dec-08 Dec-09 Dec-10 Dec-11

Covered bond mortgage companies Banks and covered bond mortgage companies

Banks

Change in definition

1) All banks including branches of foreign banks in Norway and covered bond mortgage companies.

From 2007 Q4 all banks including branches of foreign banks in Norway and branches of Norwegian banks abroad and covered bond mortgage companies

Source: Norges Bank

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Chart 1.9 Norges Banks’ key policy rate and banks’ average lending and deposit rates. Percent. Daily and quarterly figures. 31 December 2007 – 31 December 2011

0 1 2 3 4 5 6 7 8 9

Dec-07 Dec-08 Dec-09 Dec-10 Dec-11

Norges Banks' key policy rate Average deposit rate

Average lending rate

Sources: Statistics Norway and Norges Bank 11

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1) DNB Bank, Nordea Bank Norge, Sparebank 1 SR Bank, Sparebank 1 SMN, Sparebank 1 Nord- Norge and Sparebanken Vest

2) Projections for 2012 - 2015

Sources: Statistics Norway and Norges Bank

Chart 1.10 Banks’

¹⁾

pre-tax profits as a percentage of average total assets.

Baseline scenario. Percent. Annual figures. 2006 – 2015

²⁾

-3 -2 -1 0 1 2 3

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

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0 20 40 60 80 100

Dec-07 Sep-08 Jun-09 Mar-10 Dec-10 Sep-11

Equity Customer deposits

Other long-term debt in NOK Swap arrangement and F-loans > 1 year Other long-term debt in foreign currency Other short-term debt in foreign currency Other short-term debt in NOK

1

Chart 1.11 Funding as a percentage of total assets. Norwegian-owned banks and covered bond mortgage companies. Quarterly figures. 2007 Q4 – 2011 Q4

13

1) Short-term debt is debt with a maturity of 1 year or less Source: Norges Bank

1

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0 1 2 3 4 5 6 7

2008-1 2008-2 2009-1 2009-2 2010-1 2010-2 2011-1 2011-2 2012 0

1 2 3 4 5 6 7

Senior bank bonds Covered bonds

Sources: Bloomberg and Stamdata ¹⁴

Chart 1.12 Average volume-weighted maturities on new bonds issued by Norwegian banks and mortgage companies. Years. Semiannual figures.

2008 – April 2012

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0 50 100 150 200 250 300

New issues Jan - Apr 2012 All bonds maturing in 2012 and funding of gap between lending and

deposit growth 0

50 100 150 200 250

300

Bank bonds in NOK

Bank bonds in foreign currency Covered bonds in NOK

Covered bonds in foreign currency

Funding of gap between lending and deposit growth

1) It has been assumed that lending growth and deposit growth are consistent with the baseline scenario (see Section 2)

Sources: Bloomberg and Stamdata ¹⁵

Chart 1.13 Banks’ and covered bond mortgage companies’ bond debt. New

issues, maturing bonds, and funding of assumed gap between lending and

deposit growth in 2012.

¹⁾

In billions of NOK

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0 50 100 150 200 250 300 350

2012 2013 2014 2015 2016 2017 >=2018 0

50 100 150 200 250 300 350

Covered bonds in NOK

Covered bonds in foreign currency Bank bonds in NOK

Bank bonds in foreign currency Maturities in swap arrangement

1) Covered bonds used in the swap arrangement may mature in one of the years following the expiry of the swap agreement

Sources: Bloomberg and Stamdata ¹⁶

Chart 1.14 Banks’ and covered bond mortgage companies’ bond debt by

maturity in NOK and foreign currency.

¹⁾

As at 7 May 2012. In billions of NOK

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0 20 40 60 80 100 120 140

All banks DNB + commercial banks

Savings banks Total assets >

NOK 20bn

Savings banks Total assets <

NOK 20bn

2011 Q1 2011 Q3 2011 Q4

NSFR requirement in Basel III

1) All banks except branches of foreign banks in Norway.

2) Estimated by Norges Bank Source: Norges Bank

Chart 1.15 Banks’

¹⁾

stable funding as a percentage of stable funding

requirement (NSFR).

²⁾

Weighted average for group. As at end of quarter

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-15 -10 -5 0 5 10 15 20 25 30

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Gross funding Assets Net funding

1) All banks except branches and subsidiaries of foreign banks in Norway

2) Net of the following short-term assets: Deposits with central banks and government securities maturing in one year or less.

Source: Norges Bank

Chart 1.16 Banks’

¹⁾

net

²⁾

short-term market funding in foreign currency as a

percentage of total assets. Quarterly figures. 2002 Q1 – 2011 Q4

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19

Chart 1.17 VPS-registered notes and bonds issued by banks and mortgage companies

¹⁾

by holding sector. Percent. Quarterly figures. 2006 Q3 - 2011 Q4

0 20 40 60 80 100

Sep-06 Jun-07 Mar-08 Dec-08 Sep-09 Jun-10 Mar-11 Dec-11 Pension providers Banks

Securities funds Central government Rest of the world Other

1) Nominal value. Except central government holdings of securities issued by mortgage companies Source: Statistics Norway

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1) All banks except branches of foreign banks in Norway and Norwegian OMF covered bond mortgage companies

2) Pension funds’ holdings in 2011 are estimated Sources: Statistics Norway and Norges Bank

Chart 1.18 Banks’ and OMF covered bond mortgage companies’

¹⁾

bond debt and pension providers’ securities holdings

²⁾

. In billions of NOK. Annual figures.

2008 – 2011

0 200 400 600 800 1000 1200 1400

2008 2009 2010 2011

Pension providers' securities holdings

Banks' and OMF covered bond mortgage companies' note and bond debt

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Chart 1.19 Capital requirement for spread risk in Solvency II. As a percentage of market value

Source: EU Commission (QIS5)

0 5 10 15 20 25 30 35

1 2 3 4 5 6 7 8 9 10

Duration in years

Covered bonds AAA AA A Unrated BBB

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Chart 1.20 Government bond spreads. Compared with German government bonds. 10-year maturity. Percentage points. Daily figures.

1 January 2007 – 4 May 2012

0 4 8 12 16 20 24 28 32 36 40

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12

Greece Portugal Italy Spain Belgium Ireland France

Source: Thomson Reuters

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Chart 1.21 Projected output gap

¹⁾

for mainland Norway and Norway’s trading partners. Percent. Quarterly figures. 2008 Q1– 2015 Q4

-6 -4 -2 0 2 4

2008 2009 2010 2011 2012 2013 2014 2015

Mainland Norway FS 1/12 Mainland Norway FS 2/11 Trading partners FS 1/12 Trading partners FS 2/11

1) The output gap measures the percentage deviation between GDP and projected potential GDP Sources: Statistics Norway, IMF and Norges Bank

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-5 -4 -3 -2 -1 0 1 2

Euro area Greece Portugal Italy Spain France Ireland Germany

September 2011 April 2012

Chart 1.22 IMF’s projections of 2012 GDP growth in selected euro area countries. Percent

Sources: IMF, World Economic Outlook database

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82 85 88 91 94 97 100 103 106 82

85 88 91 94 97 100 103 106

1995 1998 2001 2004 2007 2010

Import-weighted exchange rate

Chart 1.23 Import-weighted exchange rate index (I-44)

¹⁾

. Monthly figures.

January 1995 – April 2012

1) A positive slope denotes a stronger krone exchange rate Source: Norges Bank

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0 100 200 300 400 500 600 700

1965 1971 1977 1983 1989 1995 2001 2007

Chart 1.24 Oil price in NOK (Brent Blend). Quarterly figures.1965 Q1 – 2012 Q1

Sources: Statistics Norway, Thomson Reuters and Norges Bank

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Chart 1.25 Risk premiums in European bond indices. Difference against government bonds. Financial sector, rating AAA to BBB. 5-year average maturity. Basis points. 1 January 2007 – 4 May 2012

0 100 200 300 400 500 600 700

Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Source: Thomson Reuters

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Sources: DNB Markets and Norges Bank

Chart 1.26 Market funding costs. Norwegian banks. Percentage points. Daily figures. 1 August 2007 – 4 May 2012

0 1 2 3 4 5 6 7 8 9 10 11

Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12

Risk premium covered bonds (5-year) Difference between NIBOR (3-month effective) and key policy rate

Key policy rate

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0 1 2 3 4

Jan-07 Oct-07 Jul-08 Apr-09 Jan-10 Oct-10 Jul-11 Apr-12

Norway Euro area US

Chart 1.27 Spread between 3-month money market rate and market

expectations as to the key rate.

¹⁾

Percentage points. 5-day moving average.

Daily figures. 1 January 2007 – 2 May 2012

29

1) Expected key rates are derived from Overnight Index Swap (OIS) rates. Expected key rates for Norway are estimated by Norges Bank

Sources: Bloomberg, Thomson Reuters and Norges Bank

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Chart 1.28 Indicative risk premiums on 5-year Norwegian bank bonds and

covered bonds. Spread against swap rates. Percentage points. Weekly figures.

2 July 2007 – 4 May 2012

1) Banks with total assets between NOK 5bn and 15bn and rated A by DNB Markets Source: DNB Markets

-0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5

Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12

Small banks with high rating DNB Bank

Covered bonds

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Chart 1.29 CDS prices. 5-year senior bond debt. iTraxx Senior Financials

¹⁾

and Nordic banks. Basis points. Daily figures. 1 January 2007 – 4 May 2012

1) iTraxx Senior Financials comprises 25 large European financial institutions Source: Bloomberg

0 50 100 150 200 250 300 350 400

Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

iTraxx

Danske Bank DNB

Nordea

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1) Difference against swap rates

Sources: DNB Markets and Norges Bank

Chart 1.30 Estimated average risk premium

¹⁾

Norwegian banks and mortgage companies. Monthly average. Basis points. 1 January 2008 – 30 April 2012

0 50 100 150 200 250

Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Average risk premium outstanding senior bonds Average risk premium outstanding covered bonds Risk premium new covered bonds

Risk premium new senior bonds

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Chart 1.31 Banks’ and mortgage companies’ qualitative assessment of access to and premiums on market funding.

¹⁾

Monthly data.

March 2008 – April 2012

1) Average reported by banks in Norges Bank’s liquidity survey

Red indicates poorer access and higher premiums, grey indicates unchanged, green indicates improved access and lower premiums

Source: Norges Bank

Access funding Short-term NOK

Short-term foreign curr.

Long-term NOK

Long-term foreign curr.

Risk premium funding Short-term NOK

Short-term foreign curr.

Long-term NOK

Long-term foreign curr.

2008 2009 2010 2011 2012

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34

0 50 100 150 200 250 300 350 400

2006 2007 2008 2009 2010 2011 Jan-Apr 2011

Jan-Apr 2012

Bank bonds - NOK Bank bonds - foreign currencies

Covered bonds - NOK

Covered bonds - foreign currencies

Sources: Stamdata and Bloomberg

Chart 1.32 Volume of bonds and covered bonds issued by Norwegian banks and mortgage companies. In billions of NOK. Annual and monthly figures.

2006 – 2011. January – April 2011 and 2012

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Chart 1.33 Household debt burden

¹⁾

and interest burden

²⁾

. Percent.

Quarterly figures. 1988 Q1 – 2015 Q4

³⁾

0 2 4 6 8 10 12

1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 0 50 100 150 200 250

Debt burden (right-hand scale) Interest burden (left-hand scale)

1) Debt as a percentage of disposable income adjusted for estimated reinvested share dividends for 2000 – 2005 and redemption/reduction of equity capital for 2006 – 2015

2) Interest expenses after tax as a percentage of disposable income adjusted for estimated reinvested share dividends 2000 – 2005 and redemption/reduction of equity capital for

2006 – 2015, plus interest expenses

3) Projections for 2012 Q1 – 2015 Q4 from Monetary Policy Report 1/2012.

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Chart 1.34 Post-tax income by expense item and margin. Households excluding self-employed. In billions of 2009-NOK. 1987 – 2009

0 100 200 300 400 500 600 700 800 900 1000

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

Cost of living

Interest expenses Margin

Sources: Statistics Norway, National Institute for Consumer Research and Norges Bank

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Chart 1.35 Households excluding self-employed with a debt burden above 500 percent of disposable income. Percent. Annual figures. 1987 – 2010

¹⁾

0 2 4 6 8 10 12 14

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

500 to 600 600 to 700 700 to 800 800 to 900 900 to 1000 Above 1000 500 or more

1) Estimates for 2010

Source: Norges Bank

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-15 -10 -5 0 5 10 15

Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11

Net lending adjusted for dividend payments Net investment in fixed assets

Saving ratio adjusted for dividend payments

1) Includes non-profit organisations

2) Saving as a percentage of disposable income adjusted for dividend payments. Net lending and Net investment in fixed assets as relative contributions to the saving ratio

Source: Statistics Norway

Chart 1.36 Household

¹⁾

saving ratio adjusted for dividend payments,

decomposed into net lending and net investment in fixed assets. Percent

²⁾

.

Sum over last four quarters. 2002 Q4 – 2011 Q4.

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Chart 1.37 House prices and estimated contributions from explanatory variables. Contributions in percentage points to four-quarter growth.

2006 Q1 – 2012 Q1

-30 -20 -10 0 10 20 30 40

Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12

Income Housing stock Interest rate Unemployment

Expectations Credit standards Unspecified House prices

Sources: Association of Norwegian Real Estate Agents, Pöyry, Finn.no, Association of Real Estate Agency Firms and Norges Bank

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0 50 100 150 200 250

Dec-75 Dec-80 Dec-85 Dec-90 Dec-95 Dec-00 Dec-05 Dec-10

Credit/Mainland GDP Trend

Chart 1 Credit as a percentage of GDP. Mainland Norway.

¹⁾

Percent. Quarterly figures. 1975 Q4 –2011 Q4

1) From 1995, credit to the private and municipal sector in mainland Norway as a percentage of mainland GDP (summed over the latest four quarters). Before 1995 the ratio is calculated using the increase in the ratio for total credit to the private and municipal sector as a percentage of GDP (summed over the latest four quarters).

Sources: Statistics Norway, IMF and Norges Bank

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Chart 2 Credit gap

¹⁾

. Percentage points. Quarterly figures. 1980 Q4 – 2011 Q4

-25 -20 -15 -10 -5 0 5 10 15 20 25

Dec-80 Dec-85 Dec-90 Dec-95 Dec-00 Dec-05 Dec-10

1) Deviation from trend for total credit to the private and municipal sector measured as a

percentage of GDP (summed over the latest four quarters). From 1995, credit to the private and municipal sector in mainland Norway as a percentage of mainland GDP.

Sources: Statistics Norway, IMF and Norges Bank

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Chart 1.38 Bank and OMF mortgage company lending by industry. Percentage of total corporate lending. As at end-2011

0 5 10 15 20 25 30 35

Oil and gas extraction and oil services Utilities Transport Manufacturing Primary industries Retail trade, hotels and restaurants Shipping Construction Services Foreign enterprises Commercial property

1)

2)

1) Shipping accounts for a large share of lending to foreign enterprises 2) Including development of building projects

Source: Norges Bank

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Chart 1.39 Bank and OMF mortgage company lending by selected industries.

12-month change. Percent. Monthly figures. May 2010 – February 2012

-20 -15 -10 -5 0 5 10 15 20

May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Feb-12

All industries Services

Manufacturing

Construction and development of building projects

Source: Norges Bank

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-70 -50 -30 -10 10 30 50 70

Dec-07 Dec-08 Dec-09 Dec-10 Dec-11

-1 -0.5 0 0.5 1

Credit demand Credit standards

Investment plans (right-hand scale)

Chart 1.40 Investment plans

¹⁾

, corporate credit demand

²⁾

and banks’ credit standards for enterprises. Quarterly figures. 2007 Q4 – 2012 Q1

1) Enterprises in Norges Bank’s regional network. Expected change in investments next 12 months.

The index ranges from -5 to +5, where -5 indicates a sharp fall and +5 indicates strong growth 2) The scale ranges from -100% to 100%, where -100% indicates considerable tightening of credit standards/reduction in credit demand, and 100% indicates considerable easing of credit

standards/increase in credit demand Source: Norges Bank

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0 10 20 30 40

0 50 100 150 200 250 300 350

<10 10-100 100-1000 >1000

Debt to credit institutions Notes and bonds

Number of enterprises (in thousands, right-hand scale)

Chart 1.41 Enterprises’ debt to credit institutions together with note and bond debt by enterprises’ balance sheet total (value of total assets). In millions of NOK. As at end-2010

1) Enterprises with debt to credit institutions and/or note/bond debt. Figures based on Norwegian limited companies’ annual financial statements

Source: Norges Bank

Balance sheet total (in millions of NOK)

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-0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

0 20 40 60 80 100

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Debt-servicing capacity (left-hand scale) Non-performing loans

Loan losses

Chart 1.42 Debt-servicing capacity for the most widely traded companies listed on Oslo Børs

¹⁾

, banks and OMF covered bond companies’ stock of non-

performing corporate loans

²⁾

and corporate loan losses

³⁾

. Percent. Annual and quarterly figures. 2001 Q1 – 2011 Q4

1) Profit before tax, depreciation and impairment losses over the past four quarters as a percentage of interest-bearing debt. Sample consisting of enterprises in the OBX index excl. Statoil and

bank/insurance

2) Stock of non-performing loans as a percentage of total lending. The definition was slightly changed as from 2010

3) Loan losses as a percentage of total lending Sources: Bloomberg and Norges Bank

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Chart 1.43 Freight rates (Clarksea index)

¹⁾

and orders (stock of ordered

newbuildings). USD per day and number of ships respectively. Monthly figures.

January 1996 – April 2012

1) Weighted average for earnings in the tanker, bulk, container and gas segments.

Deflated by US CPI Source: Clarksons Ltd

0 2000 4000 6000 8000 10000 12000 14000

0 10000 20000 30000 40000 50000 60000

1996 1999 2002 2005 2008 2011

Freight rates

Orders (right-hand scale)

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0 20 40 60 80 100 120

All banks DNB + commercial banks

Savings banks Total assets >

NOK 20bn

Savings banks Total assets <

NOK20bn

2011 Q1 2011 Q3 2011 Q4

LCR requirement (Basel III)

Chart 2.1 Banks’

¹⁾

liquid assets as a percentage of liquidity requirement (LCR).

²⁾

Weighted average for the group. As at end of quarter

1) All banks except branches of foreign banks in Norway.

2) Estimated by Norges Bank Source: Norges Bank

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Chart 2.2 GDP trading partners. Annual volume change. Percent.

Annual figures. 2005 – 2015

¹⁾

-10 -8 -6 -4 -2 0 2 4 6

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Baseline scenario Adverse scenario 1 Adverse scenario 2

1) Projections for 2012 – 2015

Sources: Statistics Norway, IMF, Thomson Reuters and Norges Bank

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-4 -2 0 2 4 6 8 10 12 14 16

2005 2007 2009 2011 2013 2015

Chart 2.3 Weighted growth in credit to enterprises (C3) and households (C2). Year-on-year growth

¹⁾

. Percent. Annual figures. 2005 – 2015

²⁾

1) Change in stock of loans measured at year-end 2) Projections for 2012 – 2015

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 82 84 86 88 90 92 94 96 82

84 86 88 90 92 94 96

Baseline scenario and adverse scenario 1 Adverse scenario 2

Chart 2.4 Nominal exchange rate. Import-weighted exchange rate index (I-44)

¹⁾

. Annual Figures. 2005 - 2015

²⁾

1) A positive slope denotes a stronger krone exchange rate 2) Projections for 2012 – 2015

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Chart 2.5 Mainland GDP. Annual volume change. Percent. Annual figures.

2005 – 2015

¹⁾

-4 -2 0 2 4 6

2005 2007 2009 2011 2013 2015

(53)

Sources: Statistics Norway and Norges Bank Norges Bank Finansiell stabilitet 53

Chart 2.6 Banks’ pre-tax profits as a percentage of average total assets.

Adverse scenario 1. Annual figures. 2006 – 2015

¹⁾

-3 -2 -1 0 1 2 3

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

(54)

Sources: Statistics Norway and Norges Bank Norges Bank Finansiell stabilitet 54

Chart 2.7 Banks’ pre-tax profits as a percentage of average total assets.

Adverse scenario 2. Annual figures. 2006 – 2015

¹⁾

-3 -2 -1 0 1 2 3

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

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-0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4

-0.2 0 0.2 0.4 0.6 0.8 1 1.2 1.4

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 From 1st to 3rd quartile

Median

Chart 2.8 Scatter diagram for loan losses as a percentage of gross lending for all Norwegian banks. Adverse scenario 2. Annual figures. 2006 – 2015

¹⁾

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Norges Bank Finansiell stabilitet 56

Chart 2.9 Banks’ Tier 1 capital ratio. Baseline scenario and adverse scenarios.

Percent. Annual figures. 2006 – 2015

¹⁾

0 2 4 6 8 10 12 14

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Sources: Finanstilsynet (Financial Supervisory Authority of Norway) and Norges Bank

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1) DNB, Sparebank 1 SMN, Sparebank 1 Nord-Norge, Sparebank 1 SR-bank, Nordea Bank Norge and Sparebanken Vest

2) Baseline scenario in Financial Stability 1/2011 3) Baseline scenario in Financial Stability 2/2011 Sources: Statistics Norway and Norges Bank

Chart 1 Banks’

¹⁾

pre-tax profits as a percentage of average total assets.

Baseline scenario. Annual figures. 2011

-2 -1 0 1 2 3

2011 - Actual 2011 - FS 1/11 2011 - FS 2/11

2) 3)

Norges Bank Finansiell stabilitet 57

(58)

Chart 2 Banks’

¹⁾

losses as a share of gross lending. Baseline scenario. Percent.

Annual figures. 2006 – 2015

-0.5 -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Baseline scenario FS 1/12 Baseline scenario FS 2/11 Baseline scenario FS 1/11

Sources: Statistics Norway and Norges Bank ⁵⁸

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Chart 3 Banks’

¹⁾

Tier 1 capital ratio in baseline scenarios. Percent. Annual figures. 2006 – 2015

0 2 4 6 8 10 12 14

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Baseline scenario FS 1/12 Baseline scenario FS 2/11 Baseline scenario FS 1/11

Sources: Finanstilsynet (Financial Supervisory Authority of Norway) and Norges Bank ⁵⁹

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Chart 1 Sum of debt for households, non-profit organisations, non-financial corporations and the public sector. As a percentage of GDP. Quarterly figures.

1999 Q1 – 2011 Q3

Sources: ECB and Eurostat Financial Accounts

150 175 200 225 250 275 300

Mar-99 Mar-01 Mar-03 Mar-05 Mar-07 Mar-09 Mar-11

Spain France

Italy UK

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0 20 40 60 80 100 120

Mar-99 Mar-01 Mar-03 Mar-05 Mar-07 Mar-09 Mar-11

Spain France Italy UK

Chart 2 Debt for households and non-profit organisations. As a percentage of GDP. Quarterly figures. 1999 Q1 – 2011 Q3

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40 60 80 100 120 140 160

Mar-99 Mar-01 Mar-03 Mar-05 Mar-07 Mar-09 Mar-11

Chart 3 Debt for non-financial corporations. As a percentage of GDP. Quarterly figures. 1999 Q1 – 2011 Q3

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30 50 70 90 110 130 150

Mar-99 Mar-01 Mar-03 Mar-05 Mar-07 Mar-09 Mar-11

Chart 4 Debt in the public sector. As a percentage of GDP. Quarterly figures.

1999 Q1 – 2011 Q3

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-10 10 30 50 70 90 110

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Spain France UK Italy

Chart 5 Net foreign debt, computed as the (negative) “net international investment position” of each country. As a percentage of GDP. Annual figures. 2002 – 2011

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3.6 3.7 3.9 4.6 5.3 5.5

11.2 11.8

15.6

13.7

15.7

9.8

0 2 4 6 8 10 12 14 16 18 20

Equity ratio Common Equity Tier 1 ratio (not including the transitional floor)

Chart 1 Equity ratio

¹⁾

and Common Equity Tier 1 ratio

²⁾

not including the transitional floor for the six largest financial groups in the Nordic region.

Percent. As at 31 December 2011

1) Equity ratio = Equity / Total assets

2) Tier 1 capital excluding hybrid instruments / Sum risk-weighted assets Source: Public financial information from the institutions

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10.5

16.0

12.8

16.8

5.4 7.2

12.1 52.7

57.4

55.0

36.6

33.4

63.5

50.3

0 10 20 30 40 50 60 70

Residential mortgage loans Corporate loans

Chart 2 Average risk weights for residential mortgage loans and corporate

loans (IRB models) for the six largest financial groups in the Nordic region and the subsidiary Nordea Bank Norge. Percent. As at 31 December 2011

Source: Pillar 3 reports from the institutions

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8.0

9.2 9.3

10.2

11.2 15.6

11.2

9.8

15.7

13.7

11.8

0 2 4 6 8 10 12 14 16 18 20

0 2 4 6 8 10 12 14 16 18

20

Including the transitional floor Not including the transitional floor Minimum requirement from EBA

Chart 3 Common Equity Tier 1 ratio

¹⁾

for the six largest banking groups in the Nordic region. Percent. As at 31 December 2011

1) Tier 1 capital excluding hybrid instruments / Sum risk-weighted assets Source: Public financial information from the institutions

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0 10 20 30 40 50 60

0 5 10 15 20 25 30 35 40 45 50 55 60

Excluding defaults Including defaults

Chart 1 Reduction in eligible cover pool after a fall in house prices. Percentage points. As at end-2011.

Sources: DNB Boligkreditt, Sparebanken Vest Boligkreditt, SpareBank 1 Boligkreditt, Terra Boligkreditt, Norges Bank

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0 20 40 60 80 100 120 140

0 5 10 15 20 25 30 35 40 45 50 55 60

Over-collateralisation

Balance sheet requirement Eligible cover pool

Eligible cover pool incl defaults

Sources: DNB Boligkreditt, Sparebanken Vest Boligkreditt, SpareBank 1 Boligkreditt, Terra Boligkreditt, Norges Bank