Charts
Financial Stability 1/08
Summary
Chart 1 Spread between money market rates with different
maturities and expected key policy rate1). Average for the US,
the euro area and the UK. Percentage points. Daily figures.
1 Jan 07 – 29 May 08
1.2
1.2
1
3-month
12-month
1.0
0.8
0.8
0.6
0.6
0.4
1-month
0.2
0
Jan-07
0.4
0.2
0.0
May-07
Sep-07
1)
Jan-08
May-08
The expected key rate is represented by the Overnight
Indexed Swap (OIS)
Sources: Bloomberg and Norges Bank
Chart 2 Banks’ capital ratio and pre-tax profit as a percentage
of average total assets.1) Annual figures. 1998 – 2007
1.5
14
Capital ratio (right-hand
scale)
12
1.2
10
0.9
0.6
8
Profit before loan
losses and writedowns (left-hand
scale)
Profit after loan
losses and writedowns (left-hand
scale)
6
4
0.3
2
0
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
1)
Excluding branches of foreign banks in Norway
Source: Norges Bank
Chart 3 Banks’ interest margin. Percentage points. Quarterly
figures. 87 Q1 – 08 Q1
6
6
5
5
4
4
3
3
2
2
1
1
0
0
1987
1990
1993
1996
Source: Statistics Norway
1999
2002
2005
2008
Chart 4 Market value for offices in Oslo1). Price per square
metre at constant 2007 NOK. Output gap2). Per cent.
Annual figures. 1983 – 2010
6
35,000
Market value at
December 2007
4
30,000
Output gap (right-hand scale)
2
25,000
0
20,000
-2
15,000
Market value
(left-hand scale)
-4
10,000
1983
1987
1991
1995
1999
1)
2003
2007
Average value for high-standard offices in central Oslo.
Value as at June.
2) Projections for 2007 – 2010
Sources: OPAK and Norges Bank
Chart 5 12-month growth in credit to mainland Norway.
Per cent. Jan 1997 – Mar 2008
28
28
Non-financial
enterprises1)
24
24
20
20
16
16
Households2)
12
12
8
8
4
4
Total credit
0
-4
1997
0
-4
1999
2001
1) All
2003
2005
2007
foreign credit to mainland Norway is assumed granted to
enterprises
2) Household domestic credit
Source: Statistics Norway
Chart 6 Banks’ gross stock of non-performing loans and
reported loan losses1). Percentage of gross lending. Quarterly
figures. 92 Q1 – 08 Q1
11
11
9
9
7
7
5
5
Non-performing loans
3
3
1
-1
1992
1)
1
Loan losses, annualised
-1
1994
1996
1998
2000
2002
2004
Excluding branches of foreign banks in Norway
Source: Norges Bank
2006
Chart 7 Household debt as a percentage of disposable income.
Annual figures. 1990 – 2007
300
300
Denmark
250
250
Iceland
200
200
150
UK
Norway
150
US
100
100
Sweden
Finland
50
50
0
0
1990
1992
1994
1996
1998
2000
2002
2004
2006
1)
The figures are not necessarily comparable because countries
may have different definitions and institutional arrangements
Sources: OECD, Sveriges Riksbank, Danmarks Nationalbank,
Sedlabanki Island, Finlands Bank and Norges Bank
1 International banks and
financial markets
Chart 1.1 Credit spreads between government bonds in the
US and Europe. Percentage points. Daily figures.
10 Apr 02 – 29 May 08
12
12
9
9
High-yield companies in the US
Emerging economies, EMBI+
6
3
6
3
US, BBB
Euro area, BBB
0
2002
2003
0
2004
Source: Reuters EcoWin
2005
2006
2007
2008
Chart 1.2 Default rates on US mortgages. Per cent of lending.
Quarterly figures. 98 Q1 – 07 Q4
18
18
16
16
14
14
Subprime
12
12
10
10
8
8
6
6
Total
4
4
Prime
2
2
0
0
98
99
00
Source: Bloomberg
01
02
03
04
05
06
07
Chart 1.3 Spread between money market rate and expected key
policy rate. 3-month maturity. Percentage points. Daily figures.
Historical (from 1 June 07) and forecasts (at 29 May 08)
1.2
1.2
UK
1.0
1.0
0.8
0.8
0.6
0.6
US
0.4
0.2
0.0
Jun-07
0.4
Euro area
Norway 2)
0.2
0.0
Oct-07
Feb-08
Jun-08
1)
Oct-08
Expected key rates are measured by Overnight Indexed Swaps
(OIS)
2) Norges Bank’s projection
Sources: Bloomberg, Reuters and Norges Bank
Chart 1.4 Writedowns and credit losses together with capital
raised for selected international banks. In billions of USD. Jan
07 – 29 May 08
5
5
Writedowns and credit losses
Capital raised
0
0
Source: Bloomberg
UBS
1
Royal Bank of
Scotland
1
Morgan Stanley
2
Merrill Lynch
2
JPMorgan
Chase
3
HSBC
3
Citigroup
4
Bank of
America
4
Chart 1.5 Share prices for selected international banks.
1 Jan 07 = 100. Daily figures. 1 Jan 07 – 29 May 08
120
120
100
100
80
80
60
60
40
Citigroup
HSBC
Merrill Lynch
UBS
20
Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08
Source: Bloomberg
40
20
Chart 1.6 CDS prices for selected US and European banks.
Basis points. Daily figures. 1 Jan 07 – 29 May 08
3.5
3
3.5
Citigroup
Merrill Lynch
3
UBS
HSBC
2.5
2.5
2
2
1.5
1.5
1
1
0.5
0
Jan-07
0.5
0
Apr-07
Source: Bloomberg
Jul-07
Oct-07
Jan-08
Apr-08
Chart 1.7 Share prices for the biggest bond insurers. USD.
1 Jan 07 – 29 May 08
100
100
Ambac
80
60
80
60
MBIA
40
40
20
20
0
Jan-07
0
May-07
Source: Bloomberg
Sep-07
Jan-08
May-08
Chart 1.8 Surveys on bank lending practices. US. Net share of
banks that have tightened their credit standards.1) Per cent.
Quarterly figures. 90 Q1 – 08 Q1
100
100
For commercial
buildings
80
For large and mediumsized enterprises
60
80
60
40
40
20
20
0
0
For household mortgages2)
-20
-40
1990
-20
-40
1993
1996
1999
1)
2002
2005
2008
Difference between the share of banks that have tightened
and the share of banks that have eased their credit standards.
2) Up to and including 06 Q1, the figures apply to all household
mortgages. Thereafter, the figures apply to prime mortgages.
Source: US Federal Reserve
Chart 1.9 Surveys on bank lending practices. Euro area. Net
share of banks that will tighten their credit standards.1)
Per cent. Quarterly figures. 03 Q1 – 08 Q1
60
60
For enterprises
40
40
20
20
For household mortgages
0
-20
2003
0
-20
2004
2005
1)
2006
2007
2008
Difference between the share of banks that will tighten and
the share of banks that will ease their credit standards.
Source: European Central Bank
Chart 1.10 GDP growth. Forecasts for 2008 at different points
in time. Increase on previous year in per cent.
12
12
US
UK
Euro area
China
9
9
Apr 2007
Oct 2007
6
May 2008
6
3
3
0
0
2008
2009
2008
2009
2008
Source: Consensus Economics
2009
2008
2009
Chart 1.11 House prices in US and Europe. 12-month rise.
Per cent. Monthly figures. Apr 03 – May 08
30
30
25
25
Denmark
20
20
15
15
Spain
10
10
5
5
UK
0
0
Ireland
-5
US
-5
-10
-10
-15
2003
-15
2004
Source: Reuters EcoWin
2005
2006
2007
2 Norwegian financial
institutions
Chart 2.1 Banks’1) assets and liabilities. Per cent.
31 March 2008
100
80
Assets exposed to
market risk
Other assets
Customer
deposits
60
Lending to
households
40
Loans from
financial
institutions
Securities
debt
20
Lending to
enterprises
0
Assets
Other
liabilities
Equity
Liabilities
All banks in Norway. Norwegian banks’ foreign subsidiaries
and branches abroad are not included in the statistical basis
1)
Sources: Statistics Norway and Norges Bank
Chart 2.2 Selected funding sources for Norwegian banks1).
Percentage of gross lending. Quarterly figures. 98 Q1 – 08 Q1
120
120
Deposits from customers in foreign currency
90
90
Deposits from customers in NOK
60
30
60
Market funding in foreign currency
30
Market funding in NOK
0
1998
1)
2000
2002
2004
2006
0
2008
All banks except branches and subsidiaries of foreign banks in Norway
Source: Norges Bank
Chart 2.3 3-month money market (NIBOR) and treasury bill
rates. Weekly figures. Average deposit rate of all banks in
Norway. Quarterly figures. 3 Jan 07 – 28 May 08
7
7
Money market
6
6
Treasury bills
5
5
4
4
Deposit rate
3
3
2
2
1
1
0
des.06
0
mar.07
jun.07
sep.07
des.07
Sources: Norges Bank and Statistics Norway
mar.08
Chart 2.4 5-year yields on Norw egian government and bank
bonds. Weekly figures. 3 Jan 07 – 28 M ay 08
7
7
Bank bonds
6
6
5
5
Government bonds
4
4
3
3
2
2
1
1
0
jan.07
0
apr.07
jul.07
okt.07
jan.08
apr.08
Sources: Norges Bank, Reuters Ecow in and DnB NOR M arkets
Chart 2.5 Indicative spreads betw een the interest rate on 5-year
bank bonds and 5-year interest rate sw ap agreements. Selected
banks. Weekly figures. Percentage points. 6 Oct 04 – 28 M ay 08
0.8
0.8
0.6
0.6
0.4
0.4
Nordea Bank Norge
0.2
0
Oct-04
DnB NOR
Sparebank 1
banker and
Sparebanken Vest
0.2
0
Oct-05
Source: DnB NOR M arkets
Oct-06
Oct-07
Chart 2.6 Selected funding sources for Norwegian banks1).
In billions of NOK. Year-end 2003 – 2007 and March 2008
1500
1500
Bonds
1200
NOK
Short-term paper
1200
Deposits / loans from financial
institutions
900
Deposits from customers
Foreign currency
600
300
900
600
300
0
0
'03 '04 '05 '06 '07 '08
Mar
1)
'03 '04 '05 '06 '07 '08
Mar
All banks except branches and subsidiaries of foreign banks
in Norway
Source: Norges Bank
Chart 2.7 Norwegian banks’¹) and mortgage companies’ funding
sources. Percentage of gross lending. Quarterly figures.
00 Q1 – 08 Q1
50
50
Bonds
40
40
30
Deposits from retail sector
30
20
Deposits / loans from financial institutions
20
Deposits from corporate sector
10
10
Notes and short-term paper
0
0
2000 2001 2002 2003 2004 2005 2006 2007 2008
1)
All banks except branches and subsidiaries of foreign banks in
Norway
Source: Norges Bank
Chart 2.8 Norwegian banks’1) market funding by maturity.
Per cent. 06 Q4 – 08 Q1
100
100
90
90
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
0
des.06
mar.07
jun.07
Less than 1 month
3 - 12 months
More than 5 years
1)
sep.07
des.07
mar.08
1 - 3 months
1 - 5 years
1
All banks except branches and subsidiaries of foreign banks
in Norway
Source: Norges Bank
Chart 2.9 Norwegian banks’1) assets and market funding with
maturity of less than 12 months. Per cent of total assets.
Mar 2008
Market funding
Norway's five largest banks
60
60
40
40
20
20
0
0
0
20
40
60
Assets
1)
All banks except branches and subsidiaries of foreign banks
in Norway
Source: Norges Bank
Chart 2.10 Norwegian banks’¹) share of deposits. Deposits from
customers in per cent of lending to customers.
Quarterly figures. 00 Q1 – 08 Q1
85
85
80
80
75
75
Small banks3)
70
70
65
DnB NOR2)
60
60
Medium-sized banks3)
55
55
50
2000
65
2002
1)
2004
2006
50
2008
All banks except branches and subsidiaries of foreign banks in
Norway
2) DnB NOR Bank (excluding branches abroad) and
Nordlandsbanken
3) The dividing line between small and medium-sized banks is NOK
10bn (measured by assets) at end-2006
Source: Norges Bank
Chart 2.11 Norwegian banks’¹) short-term foreign debt²). Per
cent of gross lending. Quarterly figures. 00 Q1 – 08 Q1
30
30
25
DnB NOR3)
25
20
20
15
15
10
10
Medium-sized banks4)
5
5
Small banks4)
0
0
2000 2001 2002 2003 2004 2005 2006 2007 2008
1)
All banks except branches and subsidiaries of foreign banks in
Norway
2) Short-term paper, deposits and loans from other financial institutions
3) DnB NOR Bank (excluding branches abroad) and Nordlandsbanken
4) The dividing line between small and medium-sized banks is NOK
10bn (measured by assets) at end-2006
Source: Norges Bank
Chart 2.12 Norwegian banks’¹) liquidity indicator (ratio of stable
funding sources to illiquid assets). Per cent.
Quarterly figures. 00 Q1 – 08 Q1
120
120
DnB NOR2)
110
DnB NOR including foreign branches,
borrowers and depositors
100
110
100
Small
banks3)
90
Medium-sized banks)
90
80
80
2000 2001 2002 2003 2004 2005 2006 2007 2008
1) All
banks except branches and subsidiaries of foreign banks in
Norway
2) DnB NOR Bank (excluding branches abroad) and Nordlandsbanken
3) The dividing line between small and medium-sized banks is NOK 10bn
(measured by assets) at end-2006
Source: Norges Bank
Chart 2.13 Banks’1) total interest margin divided into deposit
and lending margin2). Percentage points. End of quarter.
97 Q4 – 08 Q1
4
4
3,5
3,5
Total interest margin
3
3
2,5
2,5
2
2
Lending margin
1,5
1,5
1
1
0,5
0,5
Deposit margin3)
0
-0,5
1997
0
-0,5
1999
2001
1)
2003
2005
2007
All banks in Norway
and lending margins are measured against 3-month
money market rates
2) Deposit
Source: Statistics Norway
Chart 2.14 Banks’1) lending margins. Percentage points.
07 Q2 – 08 Q1
1
1
0,8
2007 Q2
2007 Q3
2007 Q4
2008 Q1
0,8
0,6
0,6
0,4
0,4
0,2
0,2
0
0
-0,2
-0,2
-0,4
-0,4
-0,6
-0,6
Non-financial
private enterprises
1)
Households
Home equity
lines of credit
All banks in Norway
Sources: Statistics Norway and Norges Bank
Repayment loans
secured on
dwellings
Chart 2.15 Banks’1) profit/loss in per cent of average total
assets. Annual figures 2002 – 2007. 07 Q1 and 08 Q1
4
4
3
3
2
2
1
1
0
0
-1
-1
Q1
-2
-2
-3
-3
2003
2004
2005
Net interest income
Operating expenses
Write-downs etc.
1) All
2006
2007
2007
2008
Other operating income
Loan losses
Pre-tax profit/loss
banks excluding branches of foreign banks in Norway
Source: Norges Bank
Chart 2.16 Banks’1) gross stock of non-performing loans.
Percentage of gross lending to sector. Quarterly figures.
97 Q1 – 08 Q1
5
5
Enterprises
4
4
3
3
All sectors
2
2
1
1
Households
0
1997
1) All
0
2000
banks in Norway
Source: Norges Bank
2003
2006
Chart 2.17 Banks’¹) Tier 1 capital ratio²). Per cent. Quarterly
figures. 02 Q1 – 08 Q1
18
18
Small banks4)
15
15
12
12
Medium-sized
banks4)
9
9
DnB NOR3)
6
6
Measured according to the
Basel I framework
3
0
2002
3
2003
2004
2005
1)
2006
2007
0
2008
All banks excluding branches of foreign banks in Norway
In 2007 Q1 eight banks reported according to Basel II. As from 2008
Q1 all banks are required to report according to Basel II. The 2008 Q1
figures are based on official first-quarter reports
3) DnB NOR Bank (excluding branches abroad) and Nordlandsbanken
4) The dividing line between small and medium-sized banks is NOK
10bn (measured by assets) at end-2006
2)
Source: Norges Bank and Kredittilsynet
Chart 2.18 Growth in banks’ and mortgage companies’¹) lending.
12-month growth. Per cent.
Monthly figures. Jan 00 – Apr 08
24
Corporate sector
24
20
20
16
16
12
Retail sector
All sectors
12
8
8
4
4
0
0
-4
-4
2000 2001 2002 2003 2004 2005 2006 2007 2008
1)
All banks and mortgage companies in Norway
Source: Norges Bank
Chart 2.19 Probabilities of bank failures). 75 and 90
per cent percentiles.2) Quarterly figures. 00 Q1 – 08 Q1
0.6
0.6
75%
90%
0.5
0.5
0.4
0.4
0.3
0.3
0.2
0.2
0.1
0.1
0
0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008
1)
2)
All banks excluding branches of foreign banks in Norway
75 (90) per cent of the banks are within the 75 (90) percentile
Source: Norges Bank
Chart 2.20 Life insurance companies’ buffer capital1) and asset mix.
Per cent of total assets. Quarterly figures. 01 Q1 – 08 Q1
40
40
Bonds "hold to maturity“2)
30
30
Bonds and shortterm paper
20
20
Equities and shares
Real estate
10
10
Buffer capital
0
2001
0
2002
2003
1)
2004
2005
2006
2007
2008
Buffer capital is defined as the sum of the securities adjustment
reserve, supplementary provisions with an upward limit of one
year, and surplus of Tier 1 capital
2) From 2007 other bonds for permanent investment are also
included
Source: Kredittilsynet
3 The Norwegian macrofinancial environment
Chart 3.1 Household real disposable income1) and
consumption2). Annual growth. Per cent. 1997 – 2007
8
8
Income
Consumption
6
6
4
4
2
2
0
0
1997
1999
2001
2003
1)
2005
2007
Adjusted for estimated reinvested share dividends for
2000 – 2005 and redemption/reduction of equity capital for
2006 – 2007
2) Includes consumption in non-profit organisations
Sources: Statistics Norway and Norges Bank
Chart 3.2 Projected key policy rate in the baseline
scenario with fan chart. Per cent. Quarterly figures.
06 Q1 – 11 Q4
9
9
8
8
7
7
6
6
5
5
4
4
3
3
2
2
30%
50%
70%
90%
1
1
0
2006
2007
2008
Source: Norges Bank
0
2009
2010
2011
Chart 3.3 Equity indices, Oslo Stock Exchange.
Daily figures. 1 Jan 07 – 29 May 08. 1 Jan 07=100.
150
150
140
130
Industrials and Materials
OSEBX
Consumer goods
Energy
Financials
140
130
120
120
110
110
100
100
90
90
80
80
70
70
60
60
jan. 07 mar. 07 mai. 07 jul. 07 sep. 07 nov. 07 jan. 08 mar. 08 mai. 08
Source: Reuters Ecowin
Chart 3.4 Risk premium 1 Norw egian bonds. 5- year maturity.
Indicative price. Per cent. Weekly figures. 2 Jan 02 – 28 M ay 08
1.2
1.2
1
1
0.8
0.8
0.6
0.6
Non-financial Enterprises
0.4
0.4
0.2
0.2
Banks
0
2002
1)
0
2003
2004
Distance to mid-sw ap
Source: DnB NOR M arkets
2005
2006
2007
2008
Chart 3.5 Aggregated bond issues registered at Oslo Stock
Exchange. Monthly figures. Billion NOK
80
80
70
70
Banks and financial
institutions 2007
60
60
50
50
Banks and financial
institutions 2008
40
40
30
30
Non-financial enterprises 2007
20
20
10
10
Non-financial enterprises 2008
0
0
Jan
Feb
Mar
Apr
May
Jun
Source: Oslo Stock Exchange
Jul
Aug
Sep
Oct
Nov
Dec
Chart 3.6 Household liabilities and assets In billions of NOK.
2007 Q4
7000
7000
Other claims
Securities
6000
6000
Insurance reserves
5000
5000
Notes, coins and
bank deposits
4000
4000
3000
Housing
wealth1)
2000
3000
2000
Other loans
1000
1000
Mortgages
0
0
Liabilities
1)
Assets
Projections
Sources: Association of Norwegian Real Estate Agents,
ECON Pöyry, Finn.no, Association of Real Estate Agency
Firms, Statistics Norway and Norges Bank
Chart 3.7 Credit to households. 12-month growth in
percent. Monthly figures. Jan 98 – Mar 081)
16
16
14
14
Mortgages
12
12
10
10
8
8
6
6
Domestic credit to households
4
2
4
2
Other loans
0
0
-2
1998
-2
1)
2000
2002
2004
Break in the series in December 2005
Source: Statistics Norway
2006
2008
Chart 3.8 Household debt growth and investment in financial
assets1) by investment instrument. Sum last four quarters. In
billions of NOK. Quarterly figures. 97 Q1 – 07 Q4
250
250
Debt growth
200
150
Securities and other claims
200
150
100
100
Notes, coins and bank deposits
50
50
Insurance reserves
0
1998
0
2000
2002
1)
2004
2006
Investment in financial assets is adjusted for reinvested share
dividends for 2000 – 2005 and redemption/reduction of equity
capital 2006 – 2007
Source: Statistics Norway
Chart 3.9 Household saving as a share of disposable income.
Per cent. Annual figures. 2000 – 2007
8
8
Saving ratio1)
6
6
4
4
2
2
0
0
-2
-4
2000
2001
2002
Saving ratio excl. share
dividends
-2
2005
-4
2007
2003
2004
2006
Adjusted for estimated reinvested share dividends for 2000 – 2005
and redemption/reduction of equity capital for 2006 – 2007
1)
Sources: Statistics Norway and Norges Bank
Chart 3.10 House prices by type of dwelling. 4-quarter rise. Per
cent. 00 Q1 – 08 Q1. Housing starts for multi-dwelling buildings.
Number. Yearly figures. 2000 – 2007
40
18000
Housing starts for multi-dwelling
buildings (right-hand scale)
35
15000
30
25
Semi-detached and
terraced houses
(left-hand scale)
Apartments
(left-hand scale)
12000
20
9000
15
10
6000
Detached houses
(left-hand scale)
5
3000
0
-5
2000
0
2001
2002
2003
2004
2005
2006
2007
Sources: Association of Norwegian Real Estate Agents,
Association of Real Estate Agency Firms, ECON Pöyry,
Finn.no and Statistics Norway
2008
Chart 3.11 Building completions and increase in the number of
households. Yearly figures. 2000 – 2007
40000
40000
Building completions
35000
35000
Increase in the number of households
30000
30000
25000
25000
20000
20000
15000
15000
10000
10000
5000
5000
0
0
2000
2001
2002
Source: Statistics Norway
2003
2004
2005
2006
2007
Chart 3.12 Post-tax income excluding share dividends
distributed by expense item and margin. Households excluding
self-employed. In billions of 2006-NOK. 1986 – 2006
800
800
700
700
600
600
500
500
400
400
300
Cost of living
200
100
300
200
Interest rates
100
Margin
0
0
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
Sources: Statistics Norway, National Institute for Consumer
Research and Norges Bank
Chart 3.13 Debt burden1) in selected household groups at end2006. Households excluding self-employed. Per cent
500
450
400
100
Debt burden (left-hand scale)
Share of total debt
(right-hand scale)
90
80
350
70
300
60
250
50
200
40
150
30
100
20
50
10
0
0
Young first-time First-time Increasing debt With debt
homebuyers homebuyers
1)
All
Debt as a percentage of disposable income adjusted for
estimated redemption/reduction of equity capital
Sources: Statistics Norway and Norges Bank
Chart 3.14 Distribution of gross financial wealth and related
debt at end-2006. Households excluding self-employed.
Per cent
40
40
35
35
30
30
Gross financial
wealth
25
25
20
20
15
15
10
10
5
5
Debt
0
0
0
10
20
30
40
50
60
70
Percentile financial wealth
Sources: Statistics Norway and Norges Bank
80
90
100
Chart 3.15 Actual and calculated1) house price.
1000 NOK/sq. m. 03 Q1 – 08 Q1
27
27
25
25
Actual house price
23
23
21
21
Calculated house price
19
19
17
17
15
15
13
2003
2004
2005
2006
2007
13
2008
1)
Calculated house price is calculated by estimating the house
price model with data up to 2004 Q1 and simulating forward by
using actual values for the explanatory variables and calculated
values for house prices in the forecast period
Sources: Association of Norwegian Real Estate Agents,
Association of Real Estate Agency Firms, FINN.no, Econ Pöyry
and Norges Bank
Chart 3.16 Real house prices. Indices. 1985 = 100.
Annual figures. 1985 – 2007
240
180
240
Deflated by CPI
Deflated
by house rent
180
Deflated by
building costs
120
120
Deflated by hourly wages
60
60
0
0
1985
1988
1991
1994
1997
2000
2003
2006
Sources: Association of Norwegian Real Estate Agents,
Association of Real Estate Agency Firms, FINN.no, Econ Pöyry,
Statistics Norway and Norges Bank
Chart 3.17 Four-quarter rise in house prices. Interest burden1).
Per cent. Quarterly figures. 91 Q1 – 11 Q42)
25
12
House prices
(left-hand scale)
20
15
9
10
5
6
0
Interest burden
(right-hand scale)
-5
3
-10
-15
1991
0
1994
1997
2000
2003
2006
2009
1) Interest
expenses after tax as a percentage of liquid disposable
income adjusted for estimated share dividends for 2000 – 2005 and
redemption/reduction of equity capital for 2006 – 2011 plus interest
expenses
2) Projections for 2008 Q2 – 2011 Q4
Sources: Association of Norwegian Real Estate Agents, ECON Pöyry,
Finn.no, Association of Real Estate Agency Firms, Statistics Norway
and Norges Bank
Chart 3.18 Debt burden1) and debt burden adjusted for
household general living expenses2). Annual figures.
1987 – 20113)
700
250
600
500
Debt burden
(right-hand scale)
150
400
300
200
200
100
Adjusted debt burden
(left-hand scale)
50
100
0
0
1987
1991
1995
1999
2003
2007
2011
Loan debt as a percentage of liquid disposable income
adjusted for estimated reinvested share dividends for 2000 2005 and redemption/reduction of equity capital for 2006 – 2011
2) Disposable income less general living expenses as calculated
by the National Institute for Consumer Research (SIFO)
3) Projections for 2008 – 2011
Sources: Statistics Norway, SIFO and Norges Bank
Chart 3.19 Debt-servicing capacity1) for different industries.
Per cent. Yearly figures. 2005 – 20072)
Construction
Manufacturing
2005
2006
Retail trade
2007
Business services
Fisheries
Hotels and
restaurants
Commercial property
Telecom
0
10
1)
20
30
40
50
60
70
80
90
100
Ordinary results before tax, write-downs and depreciation as a
percentage of bank debt and bonds. Non-financial firms,
mainland Norway. Group-financed firms are not included.
2) Projections for 2007 are based on a sample of financial
statements that were submitted early
Source: Norges Bank
Chart 3.20 Debt-servicing capacity1). Levels (right-hand scale)
and contribution to relative changes (left-hand scale) from
growth in debt, income and costs2). Per cent. 1999 – 20073)
80
50
40
40
30
0
20
-40
10
Net sales income
Debt growth
Wage costs
Financial income
Financial costs
Debt-servicing capacity
-80
0
1999
2000
2001
1)
2002
2003
2004
2005
2006
2007
See footnote 1, Chart 3.18
Net sales income is defined as sales income less the cost of
goods sold, operating costs and change in inventories
3) Projections for 2007 are based on a sample of financial
statements that were submitted early
2)
Source: Norges Bank
Chart 3.21 Key ratios for non-financial firms listed on Oslo Stock
Exchange1) Per cent. Quarterly figures. 2002 Q1 – 2008 Q1
30
30
Return on equity2)
20
20
10
10
Operating margin3)
0
0
-10
-10
-20
-20
-30
mar. 02
mar. 03
mar. 04
mar. 05
mar. 06
1) Sample
mar. 07
-30
mar. 08
consisting of 171 listed firms. Projections for 2008 Q1
are based on a smaller sample (OBX index).
2) Ordinary results before tax as a percentage of book equity
3) Operating results as a percentage of sales
Sources: Statistics Norway and Norges Bank
Chart 3.22 Credit to major debt-holding industries from
Norwegian financial institutions. 12-month growth.
Per cent. Jan 04 – Mar 08
30
30
Commercial property and business services 1)
20
20
10
10
Retail trade
0
0
Manufacturing
-10
jan. 02
1)
-10
jan. 03
jan. 04
jan. 05
Includes financial services
Source: Statistics Norway
jan. 06
jan. 07
jan. 08
Chart 3.23 Equity share of total assets1) (right-hand scale) and
contribution to relative changes (left-hand scale) from debt
growth, retained earnings, writedowns and equity injected.
Per cent. 1999 – 2007
20
50
15
40
10
5
30
0
20
-5
-10
-15
Equity injected
Retained earnings
Writedowns
Debt growth
Equity share
1)
Equity share
10
2)
-20
0
1999
2000
2001 2002 2003 2004
firms. Mainland Norway
2) Only firms with bank debt included
1) Non-financial
Source: Norges Bank
2005
2006
2007
Chart 3.24 Rental price and market value (right-hand scale) of
offices.1) Real indices (1985=100). Yield (left-hand scale).2) Per
cent. Half-year series. 1985 – 2007.
120
5
4
Rental price
100
3
2
80
1
60
0
-1
Market value
40
-2
-3
Yield3)
20
-4
-5
Dec-85
0
Dec-88
Dec-91
Dec-94
Dec-97
Dec-00
Dec-03
1)
Dec-06
High standard offices centrally located in Oslo
Rental price net of owner costs as a percentage of market value
3) Measured as a percentage deviation from 10-year government bonds
2)
Sources: Statistics Norway, OPAK and Norges Bank
Chart 3.25 Rental prices for offices in Oslo and Bergen. Average
annual growth in selected periods and equilibrium expectations1) for
future growth rates assuming different discount rates. Per cent
5
5
Oslo
Bergen
4
4
3
3
2
2
1
1
0
0
-1
Historical growth rates
1997-2007
Expected growth rates
1987-2007 Low discount High discount
rate
rate
1)
Rental growth needed to equal the present value of rental
income equal to market value. Nominal discount rate after
tax (28 per cent) is set at 5.1 (6.65) per cent. The discount
rate may reflect 75 per cent leverage,1.5 (3) per cent credit
margin, 5 per cent market premium, equity beta 0.57, and
risk free rate 5 (6) per cent
Sources: Norges Bank and OPAK
-1
Chart 3.26 Expected earnings for firms listed on Oslo Stock
Exchange. Earnings in 2008 and 2009.1) NOK per share. Monthly
figures. Feb 06 – Apr 08
50
50
Expectations for 2009
45
45
Expectations for 2008
40
40
35
35
30
30
25
feb. 06
25
1) Estimates
aug. 06
feb. 07
aug. 07
feb. 08
given by market analysts at different points in time
Source: Reuters EcoWin
Chart 3.27 Banks’ deposits with and borrowing facilities
at Norges Bank. In billions of NOK. Average daily
observation. 2000 – 20081)
175
175
Deposits
150
150
Borrowing facilities
125
125
100
100
75
75
50
50
25
25
0
0
00
01
02
1)
03
04
05
06
07
2008: Average for the last day of the months
January-April
Source: Norges Bank
08
4 Outlook and challenges
Chart 4.1 Credit risk premium on corporate bonds rated BBB.
5-year maturity. Percentage points. 1 Jan 2007 – 29 May 2008
4.0
4.0
US
3.5
3.5
3.0
3.0
2.5
2.5
Europe
2.0
2.0
1.5
1.5
1.0
1.0
0.5
0.5
0.0
Jan-07
0.0
Apr-07
Jul-07
Source: Reuters EcoWin
Oct-07
Jan-08
Apr-08
Chart 4.2 Deposit-to-loan ratio in credit institutions1) in Nordic
countries. Deposits from customers as a percentage of lending
to customers. 2001 – 20072)
100
100
90
90
Finland
80
80
70
70
60
60
Norway
Sweden
50
50
40
40
Denmark
30
30
Iceland
20
20
10
10
0
2001
1) Includes
2002
2003
2004
2005
2006
0
2007
banks, mortgage companies and other credit
institutions
2) Break in time series between 2005 and 2006
Sources: Nordic Banking Structures report (2006), EU Banking
Sector Stability report (November 2007) and Norges Bank
Chart 4.3 12-month rise in house prices1) and housing starts2)
in the US. Jan 2004 – Apr 2008
2.4
20
Housing
starts (lefthand scale)
2.0
15
1.6
10
1.2
5
0.8
0
House prices
(right-hand scale)
0.4
-5
0.0
2004
-10
2005
1) Rise
2) In
2006
2007
2008
in median prices for existing homes in per cent
million homes
Source: Reuters EcoWin
Capital adequacy ratio
Chart 4.4 Banks’1) capital adequacy ratio and lending to
commercial property as a share of gross lending.
As at 2007 Q4. Per cent
30
30
25
25
20
20
15
15
10
10
5
5
Lower bound for
capital adequacy
ratio
0
0
0
5
10
15
20
25
30
Share of lending to
commercial property
1)
All banks excluding foreign branches in Norway and banks
with a capital adequacy ratio above 30 per cent
Source: Norges Bank
Boxes
Stress testing of banks losses
and results
Chart 1 House prices. Year-on-year rise. Per cent1)
20
20
15
15
10
10
Baseline
5
5
0
0
-5
-5
-10
-10
Stress scenario
-15
-15
-20
2003
1)
2005
2007
2009
Projections for 2008 – 2011
Sources: Association of Real Estate Agents, ECON Pöyry,
FINN.no, Association of Real Estate Agency Firms and
Norges Bank
-20
2011
Chart 2 Banks’ lending rate1)
10
10
Stress scenario
8
8
Baseline
6
6
4
4
2
2
0
2003
1)
2005
2007
2009
Projections for 2008 – 2011
Sources: Statistics Norway and Norges Bank
0
2011
Chart 3 Credit to households (C2). Year-on-year growth.1)
Per cent2)
14
14
12
12
Baseline
10
10
8
8
6
6
4
4
Stress scenario
2
2
0
0
-2
2003
1)
2)
2005
2007
2009
Change in stock measured at end of year
Projections for 2008 – 2011
Sources: Statistics Norway and Norges Bank
-2
2011
Chart 4 GDP mainland Norway. Year-on-year growth.
Per cent1)
8
8
6
6
4
4
Baseline
2
2
Stress scenario
0
0
-2
2003
1)
2005
2007
2009
Projections for 2008 – 2011
Sources: Statistics Norway and Norges Bank
-2
2011
Chart 5 Banks’ losses. Percentage of gross lending.
Annual figures1)
3
3
2.5
2.5
2
2
Stress scenario
1.5
1.5
1
1
0.5
0.5
Baseline
0
0
-0.5
2003
1)
2005
Projections for 2008 – 2011
Source: Norges Bank
2007
2009
-0.5
2011
Chart 6 Post-tax profit in Norway’s five largest banks1).
Percentage of average total assets. Annual figures2)
1.5
1.5
1
1
Baseline
0.5
0.5
0
0
Stress scenario
-0.5
-0.5
-1
-1.5
2007
-1
2008
1)
2009
2010
-1.5
2011
DnB NOR Bank (excl. branches abroad), SpareBank 1
SR Bank, Sparebanken Vest, SpareBank 1 Nord-Norge and
SpareBank 1 SMN
2) Projections for 2008 – 2011
Source: Norges Bank
Chart 7 Capital adequacy in Norway’s five largest banks1).
Per cent. Annual figures2)
16
16
Baseline
Stress scenario
Capital requirement
12
12
8
8
4
4
0
0
2007
2008
1)
2009
2010
2011
DnB NOR Bank (excl. branches abroad), SpareBank 1
SR Bank, Sparebanken Vest, SpareBank 1 Nord-Norge and
SpareBank 1 SMN
2) Projections for 2008 – 2011
Source: Norges Bank
Chart 8 Expected loss in stress scenario. By industry.
Percentage of total loss.
100
Other industries
90
80
Real Estate
70
Retail trade
60
Transport and
communication
50
Business services
40
30
Construction
20
Manufacturing
10
0
2007
Source: Norges Bank
2008
2009
2010
2011
Chart 9 Debt-servicing capacity.1) Historically and in the
stress scenario. Real estate firms and all industries except
real estate2). 1988 – 20113)
45
45
40
40
Other industries
35
35
30
30
25
25
20
20
Real estate
15
15
10
10
5
5
0
0
1988
1992
1996
1)
2000
2004
2008
Pre-tax results, depreciation and writedowns as a
percentage of interest-bearing debt
2) Non-financial enterprises. Mainland Norway
3) Projections for 2007 – 2011
Source: Norges Bank
Chart 10 Percentage of households with negative margin1)
and debt in households with negative margin as a
percentage of total debt.
15
15
Households
Debt
10
10
5
5
0
0
2004
2007
2010 Base
2010 Stress
2010 Stress
with increased
cost of living
Margin = after tax income – standard cost of living
– interest payments – calculated repayments (20 year)
1)
Sources: Statistics Norway, National Institute for Consumer
research and Norges Bank
Chart 11 Debt in households with negative margin in
selected group. Percentage of group debt.
Stress scenario. 2010
15
15
10
10
5
5
0
0
Home owners with First home buyers
debt burden1 > 5
1)
Net depositors
Debt-to-disposable-income ratio
Sources: Statistics Norway and Norges Bank
All
Norges Bank’s survey of Bank
Lending
Chart 1 Change in credit standards for approving loans to nonfinancial corporations. Net percentage balances1), 2).
Quarterly figures. 07 Q4 – 08 Q1
60
60
40
40
Total
Commercial real estate
20
20
0
0
-20
-20
-40
-40
-60
-60
Q4 2007 Q1 2008 Q2 2008 Q4 2007 Q1 2008 Q2 2008
1)
Net percentage balances are calculated by weighting together
the responses in the survey. The blue bars show developments
over the past quarter. The orange diamonds show expectations
over the next quarter. The orange diamonds have been moved
forward one quarter
2) Negative net percentage balances indicate tighter credit
standards
Source: Norges Bank
Chart 2 Factors affecting credit standards for approving loans to
non-financial corporations. Net percentage balances1), 2).
Quarterly figures. 07 Q4 – 08 Q1
60
40
60
Economic
outlook
Sector-specific
outlook
Funding
Banks’ appetite
for risk
40
20
20
0
0
-20
-20
-40
-40
-60
-60
Q4 Q1 Q2 Q4 Q1 Q2 Q4 Q1 Q2 Q4 Q1 Q2
2007
08 07
08 07
08 07
08
1)
See footnote 1 in Chart 1
net percentage balances indicate that the factor
contributes to tighter credit standards
2) Negative
Source: Norges Bank
Chart 3 Change in loan conditions for non-financial
corporations. Net percentage balances1), 2).
Quarterly figures. 07 Q4 – 08 Q1
60
60
40
40
20
20
0
0
-20
Lending
margins
Equity
requirements
Collateral
requirements
-20
Fees
-40
-40
-60
-60
Q4 Q1 Q2 Q4 Q1 Q2 Q4 Q1 Q2 Q4 Q1 Q2
2007
08 07
08 07
08 07
08
1) See footnote 1 in Chart 1
2) Positive net percentage balances for lending margins indicate
higher lending margins. Positive net percentage balances for
lending margins, equity requirements, collateral requirements
and fees indicate tighter credit standards
Source: Norges Bank
Chart 4 Change in credit standards for approving loans to
households. Factors affecting credit standards. Net percentage
balances1). Quarterly figures. 07 Q4 – 08 Q1
60
40
20
60
Factors affecting credit
standards3)
Credit
standards2)
40
Economic
outlook
Banks’ appetite
for risk
Funding
0
20
0
-20
-20
-40
-40
-60
-60
Q4 Q1 Q2 Q4 Q1 Q2 Q4 Q1 Q2 Q4 Q1 Q2
2007
08 07
08 07
08 07
08
1) See footnote 1 in Chart 1
2) Negative net percentage balances indicate tighter credit
standards
3) Negative net percentage balances indicate that the factor
contributes to tighter credit standards
Source: Norges Bank
Chart 5 Change in loan conditions for households. Net
percentage balances1), 2). Quarterly figures. 07 Q4 – 08 Q1
60
60
Maximum
loan-toincome ratio
40
Maximum
loan-to-value
ratio
Interest-only
periods
40
20
20
0
0
-20
-20
Lending
margins
-40
-40
-60
-60
Q4 Q1 Q2 Q4 Q1 Q2 Q4 Q1 Q2 Q4 Q1 Q2
2007
08 07
08 07
08 07
08
1) See footnote 1 in Chart 1
2) Positive net percentage balances for lending margins indicate
higher lending margins and therefore tighter credit standards.
Negative net percentage balances for maximum LTI ratio,
maximum LTV ratio and use of interest-only periods indicate
tighter credit standards
Source: Norges Bank