Financial stability 1/12 Charts

Chart 1.1 Vulnerabilities in the Norwegian banking sector and external sources of risk to the banking sector1) Financial Stability 2/11

Funding of banking sector

External sources of risk to banking sector

Vulnerability in banking sector

Financial Stability 1/12 Structure of banking sector

Capital and earnings in banking sector

Macroeconomic conditions

Enterprises

Money and credit markets

Households

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

Chart 1.2 Banks’1) pre-tax profits as a percentage of average total assets. Percent. Annual figures. 2002 – 2011 4

4

3

3

2

2

1

1

0

0

-1

-1

-2

-2

-3

-3 2002

2003

2004

Net interest income Other operating expenses

2005

2006

2007

2008

Other operating income Loan losses

2009

2010

2011

Personnel expenses Pre-tax profits

1) All banks except branches of foreign banks in Norway and branches of Norwegian banks abroad Source: Norges Bank 3

Chart 1.3 Banks’1) losses on lending to various sectors and industries in 2011. Percentage of lending to the respective sectors and industries 2

2 2010 2011 Average 2002-2010

1.5

1

1.5

1

0.5

0.5

0

0 Retail market

Total for all Commercial Shipping2) industries real estate

Primary industries

Retail Manufacturing trade

1) All banks in Norway except branches of foreign banks 2) Shipping is limited to lending to Norwegian shipping companies Norges Bank Finansiell stabilitet Source: Norges Bank

Chart 1.4 Change in banks’ credit standards for households and enterprises. Net percentage balances1). Quarterly figures. 2007 Q4 – 2012 Q1 60

60 Non-financial enterprises

40 20

40

Commercial real estate Households

20

0

0

-20

-20

-40

-40

-60

-60

-80

-80

-100 Dec-07

-100 Sep-08

Jun-09

Mar-10

Dec-10

Sep-11

Jun-12

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 1.5 Common Equity Tier I capital in banks1) and covered bond mortgage companies. Percentage. Annual figures. 1992 – 2011 14

14

12

12

10

10

8

8

6

6

4

Common Equity Tier I capital /risk-weighted assets

4

Common Equity Tier I capital /total assets

2

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

2

9 per cent Common Equity Tier I capital /risk-weighted assets

0 1992

0 1995

1998

2001

2004

1) All banks except branches of foreign banks in Norway Source: Finanstilsynet (Financial Supervisory Authority of Norway)

2007

2010

Chart 1 Basel III phase-in of capital requirements 14

14 Countercyclical buffer

12

Conservation buffer

12

Tier 2

10

Hybrid Tier 1

10

Common Equity Tier 1

8

8

6

6

4

4

2

2

0

0 Basel II

2013 2014 2015 2016 2017 2018

Source: Basel Committee on Banking Supervision

Basel III

Chart 1.6 Return on equity. Norwegian banks1) and enterprises. Percent. Annual figures. 1988 – 2011 30

30

20

20

10

10

0

0

-10

-10

-20

-20

-30

-30

-40

-40 Banks

-50

-50

Enterprises

-60

-60

-70

-70

-80 1988

-80 1991

1994

1997

2000

2003

2006

2009

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 1.7 Banks’ and covered bond mortgage companies’ stock of nonperforming loans. Percentage of gross lending to the same sector.1) Quarterly figures. 1990 Q4 - 2011 Q4 15

15 Enterprises Households

12

12

9

9 Change in definition

6

6

3

3

0 Dec-90

0 Dec-95

Dec-00

Dec-05

Dec-10

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

Chart 1.8 Banks’ and covered bond mortgage companies’ stock of nonperforming loans to households.1) Percentage of gross lending to households. Quarterly figures. 2007 Q4 – 2011 Q4 2.0

1.5

2.0

Covered bond mortgage companies Banks and covered bond mortgage companies Banks

1.5

1.0

0.5

0.0 Dec-07

1.0

Change in definition

Dec-08

Dec-09

0.5

Dec-10

0.0 Dec-11

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 Norges Bank Finansiell stabilitet Source: Norges Bank

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 9

9 Norges Banks' key policy rate

8

8

Average deposit rate Average lending rate

7

7

6

6

5

5

4

4

3

3

2

2

1

1

0 Dec-07

Dec-08

Sources: Statistics Norway and Norges Bank

Dec-09

Dec-10

0 Dec-11 11

Chart 1.10 Banks’1) pre-tax profits as a percentage of average total assets. Baseline scenario. Percent. Annual figures. 2006 – 20152) 3

3

2

2

1

1

0

0

-1

-1

-2

-2

-3

-3 2006

2007

2008

Net interest income Other operating expenses

2009

2010

2011

2012

Other operating income Loan losses

2013

2014

2015

Personnel expenses Pre-tax profits

1) DNB Bank, Nordea Bank Norge, Sparebank 1 SR Bank, Sparebank 1 SMN, Sparebank 1 NordNorge and Sparebanken Vest 2) Projections for 2012 - 2015 Sources: Statistics Norway and Norges Bank

Chart 1.11 Funding as a percentage of total assets. Norwegian-owned banks and covered bond mortgage companies. Quarterly figures. 2007 Q4 – 2011 Q4 1 100

100

80

80

60

60

40

40

20

20

0 Dec-07

0 Sep-08

Jun-09

Equity Other long-term debt in NOK Other long-term debt in foreign currency Other short-term debt 1 in NOK

Mar-10

Dec-10

Sep-11

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

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

13

Chart 1.12 Average volume-weighted maturities on new bonds issued by Norwegian banks and mortgage companies. Years. Semiannual figures. 2008 – April 2012 7

7 Senior bank bonds

6

Covered bonds

6

5

5

4

4

3

3

2

2

1

1

0

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

Sources: Bloomberg and Stamdata

2011-2

2012 14

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 300 250

300

Bank bonds in NOK Bank bonds in foreign currency

250

Covered bonds in NOK

200

Covered bonds in foreign currency

200

Funding of gap between lending and deposit growth

150

150

100

100

50

50

0

0 New issues Jan - Apr 2012

All bonds maturing in 2012 and 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 1.14 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 350 300 250

350 Covered bonds in NOK Covered bonds in foreign currency Bank bonds in NOK Bank bonds in foreign currency Maturities in swap arrangement

300 250

200

200

150

150

100

100

50

50

0

0 2012

2013

2014

2015

2016

2017

>=2018

1) Covered bonds used in the swap arrangement may mature in one of the years following the expiry of the swap agreement 16 Sources: Bloomberg and Stamdata

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 140

140 2011 Q1

120

120

2011 Q3 2011 Q4

100

100

NSFR requirement in Basel III

80

80

60

60

40

40

20

20

0

0 All banks

DNB + commercial banks

Savings banks Total assets > NOK 20bn

1) All banks except branches of foreign banks in Norway. 2) Estimated by Norges Bank Source: Norges Bank

Savings banks Total assets < NOK 20bn

Chart 1.16 Banks’1) net2) short-term market funding in foreign currency as a percentage of total assets. Quarterly figures. 2002 Q1 – 2011 Q4 30

30 Gross funding

25

Assets

Net funding

25

20

20

15

15

10

10

5

5

0

0

-5

-5

-10

-10

-15 2002

-15 2003

2004

2005

2006

2007

2008

2009

2010

2011

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 1.17 VPS-registered notes and bonds issued by banks and mortgage companies1) by holding sector. Percent. Quarterly figures. 2006 Q3 - 2011 Q4 100

100

80

80

60

60

40

40

20

20

0 Sep-06

Jun-07 Mar-08 Dec-08 Pension providers Securities funds Rest of the world

Sep-09 Jun-10 Mar-11 Banks Central government Other

0 Dec-11

1) Nominal value. Except central government holdings of securities issued by mortgage companies Source: Statistics Norway 19

Chart 1.18 Banks’ and OMF covered bond mortgage companies’1) bond debt and pension providers’ securities holdings2). In billions of NOK. Annual figures. 2008 – 2011 1400

1400 Pension providers' securities holdings

1200

1200

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

1000

1000

800

800

600

600

400

400

200

200

0

0 2008

2009

2010

2011

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 1.19 Capital requirement for spread risk in Solvency II. As a percentage of market value 35

35 Covered bonds

AAA

AA

A

Unrated

BBB

30

30

25

25

20

20

15

15

10

10

5

5

0

0 1

2

3

Source: EU Commission (QIS5)

4

5 6 Duration in years

7

8

9

10

Chart 1.20 Government bond spreads. Compared with German government bonds. 10-year maturity. Percentage points. Daily figures. 1 January 2007 – 4 May 2012 40

40 Greece

36 32 28 24

Portugal Italy Spain Belgium Ireland France

36 32 28 24

20

20

16

16

12

12

8

8

4

4

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

0

Source: Thomson Reuters

Chart 1.21 Projected output gap1) for mainland Norway and Norway’s trading partners. Percent. Quarterly figures. 2008 Q1– 2015 Q4 4

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

2

2

Trading partners FS 2/11

0

0

-2

-2

-4

-4

-6 2008

-6 2009

2010

2011

2012

2013

2014

2015

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

Chart 1.22 IMF’s projections of 2012 GDP growth in selected euro area countries. Percent 2

2

1

1

0

0

-1

-1

-2

-2

-3

-3

-4

September 2011

-4

April 2012

-5

-5 Euro area Greece Portugal

Italy

Sources: IMF, World Economic Outlook database

Spain

France

Ireland Germany

Chart 1.23 Import-weighted exchange rate index (I-44)1). Monthly figures. January 1995 – April 2012 82

82 Import-weighted exchange rate

85

85

88

88

91

91

94

94

97

97

100

100

103

103

106 1995

106

1998

2001

2004

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

2007

2010

Chart 1.24 Oil price in NOK (Brent Blend). Quarterly figures.1965 Q1 – 2012 Q1 700

700

600

600

500

500

400

400

300

300

200

200

100

100

0 1965

0 1971

1977

1983

1989

1995

Sources: Statistics Norway, Thomson Reuters and Norges Bank

2001

2007

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 700

700

600

600

500

500

400

400

300

300

200

200

100

100

0 Jan-07

0 Jan-08

Source: Thomson Reuters

Jan-09

Jan-10

Jan-11

Jan-12

Chart 1.26 Market funding costs. Norwegian banks. Percentage points. Daily figures. 1 August 2007 – 4 May 2012 11 10

9 8 7

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

10

9 8 7

6

6

5

5

4

4

3

3

2

2

1

1

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

0

Sources: DNB Markets and Norges Bank

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 4

4 Norway Euro area US

3

3

2

2

1

1

0 Jan-07

Oct-07

Jul-08

Apr-09

Jan-10

Oct-10

Jul-11

0 Apr-12

1) Expected key rates are derived from Overnight Index Swap (OIS) rates. Expected key rates for Norway are estimated by Norges Bank 29 Sources: Bloomberg, Thomson Reuters and Norges Bank

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 3.5 3.0

3.5 Small banks with high rating DNB Bank Covered bonds

3.0

2.5

2.5

2.0

2.0

1.5

1.5

1.0

1.0

0.5

0.5

0.0

0.0

-0.5 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 1) Banks with total assets between NOK 5bn and 15bn and rated A by DNB Markets Source: DNB Markets

-0.5

Chart 1.29 CDS prices. 5-year senior bond debt. iTraxx Senior Financials1) and Nordic banks. Basis points. Daily figures. 1 January 2007 – 4 May 2012 400

400 iTraxx

350

Danske Bank

350

DNB

300

Nordea

300

250

250

200

200

150

150

100

100

50

50

0

0

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

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

Jan-12

Chart 1.30 Estimated average risk premium1) Norwegian banks and mortgage companies. Monthly average. Basis points. 1 January 2008 – 30 April 2012 250

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

200

200

Risk premium new senior bonds

150

150

100

100

50

50

0 Jan-08

0 Jan-09

1) Difference against swap rates Sources: DNB Markets and Norges Bank

Jan-10

Jan-11

Jan-12

Chart 1.31 Banks’ and mortgage companies’ qualitative assessment of access to and premiums on market funding.1) Monthly data. March 2008 – April 2012

Access funding

2008

2009

2010

2011

2012

2008

2009

2010

2011

2012

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.

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

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 400 350 300 250

400

Bank bonds - NOK

350

Bank bonds - foreign currencies Covered bonds NOK Covered bonds foreign currencies

300 250

200

200

150

150

100

100

50

50

0

0 2006

2007

2008

Sources: Stamdata and Bloomberg

2009

2010

2011

Jan-Apr Jan-Apr 2011 2012 34

Chart 1.33 Household debt burden1) and interest burden2). Percent. Quarterly figures. 1988 Q1 – 2015 Q43)

12

250

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

10

200

8 150 6 100 4 50

2 0 1988

0 1991

1994

1997

2000

2003

2006

2009

2012

2015

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. Sources: Statistics Norway and Norges Bank

Chart 1.34 Post-tax income by expense item and margin. Households excluding self-employed. In billions of 2009-NOK. 1987 – 2009 1000

Cost of living

1000

900

Interest expenses

900

800

Margin

800

700

700

600

600

500

500

400

400

300

300

200

200

100

100

0 0 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 Sources: Statistics Norway, National Institute for Consumer Research and Norges Bank

Chart 1.35 Households excluding self-employed with a debt burden above 500 percent of disposable income. Percent. Annual figures. 1987 – 20101) 14 12

14 500 to 600

600 to 700

700 to 800

900 to 1000

Above 1000

500 or more

800 to 900

12

10

10

8

8

6

6

4

4

2

2

0 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

0

1) Estimates for 2010 Source: Norges Bank

Chart 1.36 Household1) saving ratio adjusted for dividend payments, decomposed into net lending and net investment in fixed assets. Percent2). Sum over last four quarters. 2002 Q4 – 2011 Q4. 15 10

15 Net lending adjusted for dividend payments Net investment in fixed assets Saving ratio adjusted for dividend payments

10

5

5

0

0

-5

-5

-10

-10

-15 -15 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 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 1.37 House prices and estimated contributions from explanatory variables. Contributions in percentage points to four-quarter growth. 2006 Q1 – 2012 Q1 40 30

40 Income

Housing stock

Interest rate

Unemployment

Expectations

Credit standards

Unspecified

House prices

30

20

20

10

10

0

0

-10

-10

-20

-20

-30 Mar-06

Mar-07

Mar-08

Mar-09

Mar-10

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

Mar-11

-30 Mar-12

Chart 1 Credit as a percentage of GDP. Mainland Norway.1) Percent. Quarterly figures. 1975 Q4 –2011 Q4 250

250 Credit/Mainland GDP

Trend

200

200

150

150

100

100

50

50

0 Dec-75

0 Dec-80

Dec-85

Dec-90

Dec-95

Dec-00

Dec-05

Dec-10

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

Chart 2 Credit gap1). Percentage points. Quarterly figures. 1980 Q4 – 2011 Q4 25

25

20

20

15

15

10

10

5

5

0

0

-5

-5

-10

-10

-15

-15

-20

-20

-25 Dec-80

-25 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

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

1)

Services Construction2) Shipping Retail trade, hotels and restaurants Primary industries Manufacturing Transport Utilities Oil and gas extraction and oil services 0

5

10

15

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

20

25

30

35

Chart 1.39 Bank and OMF mortgage company lending by selected industries. 12-month change. Percent. Monthly figures. May 2010 – February 2012 20

20

15

15

10

10

5

5

0

0

-5

-5

-10 -15 -20 May-10

-10

All industries Services Manufacturing Construction and development of building projects

Aug-10

Source: Norges Bank

Nov-10

Feb-11

May-11

Aug-11

-15

Nov-11

-20 Feb-12

Chart 1.40 Investment plans1), corporate credit demand2) and banks’ credit standards for enterprises. Quarterly figures. 2007 Q4 – 2012 Q1 70

1 Credit demand

50 30

Credit standards

0.5

Investment plans (right-hand scale)

10 0 -10 -30

-0.5

-50 -70 Dec-07

-1 Dec-08

Dec-09

Dec-10

Dec-11

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

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 350

40 Debt to credit institutions

300

Notes and bonds

250

30

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

200 20 150 100

10

50 0

0 1000

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

Chart 1.42 Debt-servicing capacity for the most widely traded companies listed on Oslo Børs1), banks and OMF covered bond companies’ stock of nonperforming corporate loans2) and corporate loan losses3). Percent. Annual and quarterly figures. 2001 Q1 – 2011 Q4 100

80

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

60 40 20 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

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

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

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 60000

14000 Freight rates

50000

12000

Orders (right-hand scale)

10000

40000

8000 30000 6000 20000

4000

10000 0 1996

2000 0 1999

2002

2005

2008

2011

1) Weighted average for earnings in the tanker, bulk, container and gas segments. Deflated by US CPI Source: Clarksons Ltd

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 120 100

120

2011 Q1 2011 Q3

100

2011 Q4

LCR requirement (Basel III)

80

80

60

60

40

40

20

20

0

0 All banks

DNB + commercial banks

Savings banks Total assets > NOK 20bn

1) All banks except branches of foreign banks in Norway. 2) Estimated by Norges Bank Source: Norges Bank

Savings banks Total assets < NOK20bn

Chart 2.2 GDP trading partners. Annual volume change. Percent. Annual figures. 2005 – 20151) 6

6

4

4

2

2

0

0

-2

-2

-4

-4

-6

-6 Baseline scenario

-8

-8

Adverse scenario 1 Adverse scenario 2

-10 2005

2006

2007

2008

2009

2010

2011

2012

1) Projections for 2012 – 2015 Sources: Statistics Norway, IMF, Thomson Reuters and Norges Bank

2013

2014

-10 2015

Chart 2.3 Weighted growth in credit to enterprises (C3) and households (C2). Year-on-year growth1). Percent. Annual figures. 2005 – 20152) 16

16

14

14

12

12

10

10

8

8

6

6

4

4

2

2

0

-2 -4 2005

0

Baseline scenario Adverse scenario 1 Adverse scenario 2

2007

-2 2009

1) Change in stock of loans measured at year-end 2) Projections for 2012 – 2015 Sources: Statistics Norway and Norges Bank

2011

2013 Norges Bank Finansiell stabilitet

-4 2015

Chart 2.4 Nominal exchange rate. Import-weighted exchange rate index (I-44)1). Annual Figures. 2005 - 20152) 82

82

84

84

86

86

88

88

90

90

92

92

94

96 2005

Baseline scenario and adverse scenario 1 Adverse scenario 2

2006

2007

2008

94

2009

2010

2011

1) A positive slope denotes a stronger krone exchange rate 2) Projections for 2012 – 2015 Sources: Statistics Norway and Norges Bank

2012

2013

2014

96 2015

Chart 2.5 Mainland GDP. Annual volume change. Percent. Annual figures. 2005 – 20151) 6

6

4

4

2

2

0

0

-2

-2

Baseline scenario Adverse scenario 1 Adverse scenario 2

-4 2005

2007

2009

1) Projections for 2012 – 2015 Sources: Statistics Norway and Norges Bank

2011

2013

-4 2015

Chart 2.6 Banks’ pre-tax profits as a percentage of average total assets. Adverse scenario 1. Annual figures. 2006 – 20151) 3

3

2

2

1

1

0

0

-1

-1

-2

-2

-3

-3 2006

2007

2008

2009

2010

2011

2012

Net interest income Other operating income Other operating expenses Loan losses 1) Projections for 2012 – 2015 Sources: Statistics Norway and Norges Bank

2013

2014

2015

Personnel expenses Pre-tax profits Norges Bank Finansiell stabilitet

53

Chart 2.7 Banks’ pre-tax profits as a percentage of average total assets. Adverse scenario 2. Annual figures. 2006 – 20151) 3

3

2

2

1

1

0

0

-1

-1

-2

-2

-3

-3 2006

2007

2008

2009

2010

2011

2012

Net interest income Other operating income Other operating expenses Loan losses 1) Projections for 2012 – 2015 Sources: Statistics Norway and Norges Bank

2013

2014

2015

Personnel expenses Pre-tax profits Norges Bank Finansiell stabilitet

54

Chart 2.8 Scatter diagram for loan losses as a percentage of gross lending for all Norwegian banks. Adverse scenario 2. Annual figures. 2006 – 20151) 1.4 1.2

1.4 From 1st to 3rd quartile

1.2

Median

1

1.0

0.8

0.8

0.6

0.6

0.4

0.4

0.2

0.2

0

0.0

-0.2

-0.2 2006

2007

2008

2009

2010

1) Projections for 2012 – 2015 Sources: Statistics Norway and Norges Bank

2011

2012

2013

2014

2015

Norges Bank Finansiell stabilitet

Chart 2.9 Banks’ Tier 1 capital ratio. Baseline scenario and adverse scenarios. Percent. Annual figures. 2006 – 20151) 14

14

12

12

10

10

8

8

6

6

4

4

2 0 2006

Baseline scenario Adverse scenario 1 Adverse scenario 2

2007

2008

2

2009

2010

2011

2012

2013

2014

1) Projections for 2012 – 2015 Norges Finansiell stabilitet Sources: Finanstilsynet (Financial Supervisory Authority of Norway) andBank Norges Bank

0 2015 56

Chart 1 Banks’1) pre-tax profits as a percentage of average total assets. Baseline scenario. Annual figures. 2011 3

3

2

2

1

1

0

0

-1

-1

-2 2011 - Actual Net interest income Other operating expenses

2011 - FS 1/11

2)

Other operating income Loan losses

2011 - FS 2/11

3)

-2

Personnel expenses Pre-tax profits

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 Norges Bank Finansiell stabilitet 57 Sources: Statistics Norway and Norges Bank

Chart 2 Banks’1) losses as a share of gross lending. Baseline scenario. Percent. Annual figures. 2006 – 2015 0.5

0.5

0.4

0.4

0.3

0.3

0.2

0.2

0.1

0.1

0

0

-0.1

-0.1

-0.2

-0.2

-0.3

Baseline scenario FS 1/12

-0.3

Baseline scenario FS 2/11

-0.4

-0.5 2006

-0.4

Baseline scenario FS 1/11

2007

2008

2009

2010

2011

2012

2013

2014

-0.5 2015

1) DNB, Sparebank 1 SMN, Sparebank 1 Nord-Norge, Sparebank 1 SR-bank, Nordea Bank Norge and Sparebanken Vest Norges Bank Finansiell stabilitet 58 Sources: Statistics Norway and Norges Bank

Chart 3 Banks’1) Tier 1 capital ratio in baseline scenarios. Percent. Annual figures. 2006 – 2015 14

14

12

12

10

10

8

8

6

6

4

4 Baseline scenario FS 1/12

2

Baseline scenario FS 2/11

2

Baseline scenario FS 1/11

0 2006

2007

2008

2009

2010

2011

2012

2013

2014

0 2015

1) DNB, Sparebank 1 SMN, Sparebank 1 Nord-Norge, Sparebank 1 SR-bank, Nordea Bank Norge and Sparebanken Vest Norges Finansiell stabilitet 59 Sources: Finanstilsynet (Financial Supervisory Authority of Norway) andBank Norges Bank

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

300

300

Spain

France

275

275 Italy

UK

250

250

225

225

200

200

175

175

150 Mar-99

150 Mar-01

Mar-03

Mar-05

Sources: ECB and Eurostat Financial Accounts

Mar-07

Mar-09

Mar-11

Chart 2 Debt for households and non-profit organisations. As a percentage of GDP. Quarterly figures. 1999 Q1 – 2011 Q3 120

120 Spain

France

100

100 Italy

UK

80

80

60

60

40

40

20

20

0 Mar-99

0 Mar-01

Mar-03

Mar-05

Sources: ECB and Eurostat Financial Accounts

Mar-07

Mar-09

Mar-11

Chart 3 Debt for non-financial corporations. As a percentage of GDP. Quarterly figures. 1999 Q1 – 2011 Q3 160

160 Spain

France

140

140 Italy

UK

120

120

100

100

80

80

60

60

40 Mar-99

40 Mar-01

Mar-03

Mar-05

Sources: ECB and Eurostat Financial Accounts

Mar-07

Mar-09

Mar-11

Chart 4 Debt in the public sector. As a percentage of GDP. Quarterly figures. 1999 Q1 – 2011 Q3 150

150

130

130

110

90

Spain

France

Italy

UK

110

90

70

70

50

50

30 Mar-99

30 Mar-01

Mar-03

Mar-05

Sources: ECB and Eurostat Financial Accounts

Mar-07

Mar-09

Mar-11

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 110

90

110 Spain

France

UK

Italy

90

70

70

50

50

30

30

10

10

-10 2002

2003

2004

2005

2006

Sources: ECB and Eurostat Financial Accounts

2007

2008

2009

2010

-10 2011

Chart 1 Equity ratio1) and Common Equity Tier 1 ratio2) not including the transitional floor for the six largest financial groups in the Nordic region. Percent. As at 31 December 2011 20 18

20 Equity ratio

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

15.7

15.6

16

16

13.7

14 12

14

11.8

11.2

12 9.8

10 8

10 8

6 4

18

3.6

3.7

3.9

4.6

5.3

5.5

6 4

2

2

0

0

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

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 70

70 Residential mortgage loans

60

57.4 52.7

Corporate loans

63.5

60

55.0 50.3

50 40

50 40

36.6 33.4

30

30

20 10.5

20

16.8

16.0 12.8

10 0

Source: Pillar 3 reports from the institutions

12.1 5.4

7.2

10 0

Chart 3 Common Equity Tier 1 ratio1) for the six largest banking groups in the Nordic region. Percent. As at 31 December 2011 20 18

Including the transitional floor Minimum requirement from EBA

16

15.6

Not including the transitional floor

18 15.7

16 13.7

14 12

11.2

10 8

9.2

11.2

9.3

9.8

20

14 11.8

12

10.2

8.0

10 8

6

6

4

4

2

2

0

0

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

Chart 1 Reduction in eligible cover pool after a fall in house prices. Percentage points. As at end-2011. 60

60 Excluding defaults

Including defaults

50

50

40

40

30

30

20

20

10

10

0

0 0

5

10

15

20

25

30

35

40

45

50

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

55

60

Chart 2 Eligible cover pool and over-collateralisation after a fall in house prices. Percentage of outstanding volume of covered bonds and percentage points. As at end-2011. 140

140 Over-collateralisation Balance sheet requirement Eligible cover pool Eligible cover pool incl defaults

120

120

100

100

80

80

60

60

40

40

20

20

0

0

0

5

10

15

20

25

30

35

40

45

50

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

55

60