High asset quality
At the end of 4Q22, 3.8% of the gross performing loan book (not in Stage 3) was classified as forborne, down from 5.3% at the end of 3Q22 and down from 8.5% from year-end 2021.
At the end of the 4Q22, the share of credit-impaired loans to customers, Stage 3, was 1.8% (gross), up from 1.7% at the end of 3Q22. For the mortgage portfolio, the share was 0.7% at end of 4Q22 , unchanged from the end of 3Q22.
Loans to customers in Stage 2 was 2.5% at year-end 2022, down from 4.4% at the end of 3Q22. For the mortgage portfolio the share of loans in Stage 2 was 0.8% at the end of 4Q22, unchanged from the end of 2Q22.
Deposits remain the largest source of funding
Funding is raised to match the Bank’s lending programmes using three main funding sources: stable deposits, covered bonds and senior preferred bonds.
Deposits from customers grew by 1.1% during the fourth quarter. Personal Banking had an increase of ISK 7.1 billion, Corporate & Investment Banking an increase of ISK 17.7 billion and Business Banking a decrease of ISK 15.6 billion. All deposit concentration levels are monitored closely, with concentration remaining stable in 4Q22.
The ratio of customer loans to customer deposits was 150% at the end of 4Q22, from the previous 148% at the end of 3Q22. Deposits from retail, businesses and corporations are the Bank’s main source of funding, comprising 45% of total funding sources and 86% of the Bank’s total deposit base at the period-end.
On 15 November the Bank launched two new ISK-denominated senior bonds in the amount of ISK 9.1 billion. The bonds were green bonds issued under the Bank’s sustainable programme. During 4Q22 the Bank exercised a call option on outstanding SEK 750 million Tier 2 bonds due 2027 and bought back EUR 262.7 million of a EUR 300 million senior bond due January 2024 and callable in January 2023.
The liquidity position remains strong, with all ratios well above regulatory requirements and internal thresholds. The Bank’s total liquidity coverage ratio (LCR) was 205% in YE22, up from 156% at YE21. The LCR in foreign currencies was 492% for YE22, up from 235% at YE21 and the LCR in ISK decreased from 141% at YE21 to 109% at YE22.
The total net stable funding ratio (NSFR) was 118% at YE22, compared to 122% at YE21 and the NSFR in foreign currencies was 198% at YE22, compared with 157% at YE21.
As the Bank’s liquidity position remains strong across currencies and is above requirements, the Bank may consider debt buybacks, calls or exchanges of outstanding transactions during 2023.