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Confidential
Nordea Eiendomskreditt AS is part of the Nordea Group. Nordea is a leading Nordic universal bank. We are helping our customers realise
their dreams and aspirations – and we have done that for 200 years. We want to make a
 
real difference for our customers and the
communities where we operate – by being a strong and personal financial partner.
 
The Nordea share is listed on the Nasdaq Helsinki,
Nasdaq Copenhagen and Nasdaq Stockholm exchanges. Read more about us on Nordea.com.
Annual
report
2023
Nordea Eiendomskreditt AS
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Nordea Eiendomskreditt AS
 
Annual Report 2023
1
Key financial figures
Summary of the income statement (NOKm)
2023
2022
2021
2020
2019
Net interest income
1,937
2,319
3,018
2,399
1,879
Net fee and commission income
85
77
77
0
0
Net result from items at fair value
-77
-11
-179
-34
-31
Other operating income
1
3
2
74
66
Total operating income
1,945
2,388
2,918
2,439
1,914
Staff costs
38
31
27
23
19
Other expenses
1,192
1,387
1,713
894
604
Total operating expenses
1,230
1,419
1,740
917
623
Loan losses (negative figures are reversals)
47
106
53
98
-2
Operating profit
668
863
1,125
1,424
1,293
Income tax expense
168
215
281
356
323
Net profit for the period
500
648
844
1,068
970
Summary of the balance sheet (NOKm)
2023
2022
2021
2020
2019
Loans to the public, gross
334,668
323,563
305,898
266,240
245,978
Allowance for loan losses
-361
-311
-218
-190
-103
Other assets
13,239
6,555
6,813
7,143
6,689
Debt securities in issue
197,449
149,352
107,152
142,744
98,124
Other liabilities
128,192
158,401
183,216
110,690
135,276
Equity
21,905
22,054
22,125
19,759
19,164
Total assets
347,547
329,807
312,493
273,192
252,564
Ratios and key figures
2023
2022
2021
2020
2019
Basic/diluted Earnings per share (EPS), annualised basis,
 
NOK
29.8
38.6
50.3
69.6
63.2
Equity per share
1
, NOK
1305.3
1314.1
1318.4
1288.4
1249.6
Shares outstanding
1
, million
16.8
16.8
16.8
15.3
15.3
Return on average equity
2.3%
2.9%
3.9%
5.5%
5.5%
Cost/income ratio
63.2%
59.4%
59.6%
37.6%
32.6%
Loan loss ratio, annualised, basis points
1.4
3.4
1.8
3.8
-0.1
Risk Exposure Amount1, NOKm
81,987
80,161
74,676
62,546
58,023
Own funds, NOKm
1
22,548
22,530
22,471
21,489
20,789
Common Equity Tier 1 capital ratio
26.0%
26.6%
28.5%
30.6%
31.8%
Tier 1 capital ratio
1
26.0%
26.6%
28.5%
30.6%
31.8%
Total capital ratio
1
27.5%
28.1%
30.1%
34.4%
35.8%
Number of employees (Full-time equivalents)
1
24.0
21.5
20.5
17.5
16.5
1
 
At the end of the period.
Figures for the years 2019-2020 include only Nordea Eiendomskreditt (NE), while figures for 2021 have been updated to
include Nordea Direct Boligkreditt (NDBK). Risk Exposure Amount has been calculated according to different methods in
NE and NDBK. Figures for NDBK have not been recalculated according to NE’s methodology.
 
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Nordea Eiendomskreditt AS
 
Annual Report 2023
2
Table
 
of contents
Board of Directors’ Report
Income statement
 
Statement of comprehensive income
Balance sheet
Statement of changes in equity
Cash flow statement
Notes to the financial statements
Note 1 Accounting policies
Note 2 Financial performance and returns
Note 2.1 Net interest income
Note 2.2 Net fee and commission income
Note 2.3 Net result from items at fair value
Note 2.4 Other expenses
Note 2.5 Loan losses
Note 2.6 Taxes
Note 3 Financial instruments
Note 3.1 Recognition and derecognition of financial
 
instruments on the balance sheet
Note 3.2 Classification of assets and liabilities
Note 3.3 Assets and liabilities at fair value
Note 3.4 Financial instruments set off on balance or
 
subject to netting agreements
Note 3.5 Loans and impairment
Note 3.6 Interest-bearing securities
Note 3.7 Derivatives and hedge accounting
Note 3.8 Cover pool
Note 3.9 Debt securities in issue and loans from
 
financial institutions
Note 4 Provisions
Note 5 Off-balance sheet items
Note 5.1 Assets pledged as security for own liabilities
Note 5.2 Commitments
Note 6 Employee benefits and key management personnel remuneration
Note 6.1 Staff costs
Note 6.2 Retirement benefit obligations
Note 7 Capital adequacy
Note 8 Other disclosures
Note 8.1 Additional disclosures on the statement of
 
changes in equity
Note 8.2 Maturity analysis for assets and liabilities
Note 8.3 Related-party transactions
Note 9 Risk and liquidity management
Auditor’s report
Statement by the Chief Executive Officer and the Board of Directors
Board of Directors and Auditor
Contact information
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Nordea Eiendomskreditt AS
 
Annual Report 2023
3
Board of Directors´ Report
Introduction
Nordea Eiendomskreditt AS was first incorporated in 1927 as
a credit association known as Norges Hypotekforening for
Næringslivet. During the course of autumn 2009, the
company's commercial property lending activities were sold to
the parent bank, Nordea Bank Norge ASA. With effect from
2010 the company has operated solely as a mortgage credit
institution, licenced by the Norwegian Financial Supervisory
Authority (FSA) to issue covered bonds. The business
objective is to grant and acquire residential mortgage loans
and loans to holiday homes in Norway, including secured
construction loans, and to finance its lending activities mainly
by issuing covered bonds. The mortgage loan portfolio of
NOK 334bn at the end of 2023 consists of loans originated
directly from own balance sheet, bought from the parent bank,
or added as a result of the merger with Nordea Direct
Boligkreditt AS in 2022. Nordea Eiendomskreditt is part of the
Personal Banking Business Area in Nordea.
Nordea Eiendomskreditt AS is domiciled in Oslo, and its
business registration number is 971 227 222.
The company’s share capital is NOK 1,880m, made up of
16,781,828 ordinary shares, each with a nominal value of
NOK 112. The entire issued share capital is owned by Nordea
Bank Abp.
Comments on the Income Statement
Income
Total
 
operating income in 2023 was NOK 1 945m (NOK 2
388m), a decrease of 19% from 2022. The reduction
compared to last year is mainly driven by significant reduction
in the lending margin as a result of the steep increase in
interest rates, following 6 rate hikes by Norwegian Central
Bank, and the effect of 2 months’ notice period for changes in
customer mortgage rates. Net loss from items at fair value
was also higher in 2023 than the year before.
Net interest income decreased 16% and ended at NOK 1
937m in 2023 (NOK 2 319m). The decrease is explained by
lower lending margin, partly offset by higher lending volume
and higher income from the liquidity portfolio.
Net fee and commission income was NOK 85m in 2023 (NOK
77m). Commission expense includes provision related to a
Liquidity Transfer and Support agreement with the parent
bank.
 
Net result from items at fair value ended at a cost of NOK
77m in 2023 (cost of NOK 11m). In accordance with IFRS, net
result from items at fair value includes both realized gain/loss
from buybacks of own bonds, as well as fair value changes of
interest rate swaps and the corresponding hedged items
(fixed-rate lending and fixed-rate bonds) in the hedge
portfolio, due to changes in market rates.
Expenses
Total
 
operating expenses were NOK 1 230m in 2023 (NOK 1
419m) whereof NOK 38m (NOK 31m) is staff related. The
number of employees at the end of 2023 was 24 (23). Other
operating expenses are mainly related to services bought
from the parent bank, such as sales and distribution of
mortgage loans, management of the loan portfolio and
customer contact, as well as funding, risk control, accounting,
reporting and IT related services. The main part is related to
sales, distribution and management of the mortgage loans,
where the fee is calculated based on net interest income, and
will therefore fluctuate between periods. Nordea
Eiendomskreditt AS does not incur any costs for research and
development (R&D) activities.
Transactions between Nordea Eiendomskreditt AS and other
legal entities or branches in the Nordea Group are settled in
conformity with OECD guidelines on transfer pricing. The
cost/income ratio for 2023 was 63.2% compared to 59.4% last
year.
Loan losses
Net loan losses and provisions recognised in the accounts for
2023 were NOK 47m (NOK 106m), covering both realised
loan losses and changes in loan loss allowances. This
corresponds to a loan loss ratio of 1.4 basis points (3.4 bps).
Realised loan losses were NOK 1m (NOK 9m). Loan loss
allowances have increased from NOK 311m at the beginning
of the year to NOK 361m at the end of the year, mainly due to
migration of loans into Stage 3 where loan loss provisions are
calculated and booked for the full remaining lifetime of the
loans. The management judgements included in the loan loss
allowances were NOK 92m at the end of 2023 (NOK 102m).
See Note 2.5 and Note 3.5 for further information about loan
losses and impairment.
 
Nordea Eiendomskreditt will continue to take appropriate
actions to adjust management judgements as respective
losses are realised or captured by Nordea’s models, whilst
maintaining in place an adequate total collective allowance for
loan losses.
 
Taxes
Taxes
 
for the year amounted to NOK 168m, of which NOK
54m relates to tax payable and NOK 114m due to changes in
deferred tax.
Net profit
Net profit for the year amounted to NOK 500m (NOK 648m).
This gives a return on average equity of 2.3% (2.9%). The
return on equity is on a historically low level. This is to a large
extent explained by the lower lending margins, but also as a
result of the agreed pricing model for sales- and distribution
fees that are paid to the parent bank.
Comments on the Balance sheet
Assets and lending activities
Gross lending to customers at 31 December 2023 amounted
to NOK 334bn (NOK 323bn) and consists only of residential
mortgage loans and loans to holiday homes in Norway
including constructions loans, used as collateral in securing
the covered bonds issued by the company. NOK 313bn of the
loan portfolio is included in the collateral pool for the purposes
of the calculation of the asset coverage requirement under the
covered bond legislation. This represents surplus collateral of
60.0% in relation to the covered bonds issued. See Note 3.8
“Cover pool” for further information.
The cover pool has a weighted average indexed loan-to-value
(LTV) ratio of 55.9% at the end of 2023 (48.6%). The increase
since last year is mainly due to changed cover pool allocation
logic where a portion up to the regulatory LTV limit, of loans
with LTV above the cover pool regulatory limit, is now
included in the cover pool. The average
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Nordea Eiendomskreditt AS
 
Annual Report 2023
4
NOKm
31 Dec 2023
31 Dec 2022
Covered bonds in NOK
194 827
 
143 715
 
Covered bonds in GBP
-
 
3 565
 
Covered bonds in EUR
1 121
 
1 052
 
Unsecured funding from Nordea
124 930
 
155 312
 
Subordinated debt
1 100
 
1 100
 
Total
321 978
 
304 744
 
loan size was NOK 2,315m (NOK 2,060m). The cover pool is
split between 66% amortizing loans and 34% flex loans
(including amortising loans in amortising free period),
compared to 64% and 36% at end of last year.
 
Concentration risk in the loan portfolio
Nordea Eiendomskreditt’s mortgage loans and collaterals
have a good geographical spread with a major part
concentrated around the 5 largest Norwegian cities. See the
figures below for more detailed information on the loan
portfolio split by collateral and geography.
Liabilities and funding activities
Nordea Eiendomskreditt’s main funding source is issuance of
covered bonds. Covered bonds are debt instruments,
regulated by the Financial Undertakings Act (Act No. 17 of 10
April 2015), that gives investors a preferential claim into a
pool of high quality assets in case of the issuer’s insolvency.
Norwegian covered bonds can only be issued by mortgage
credit institutions that hold a license from the Norwegian FSA
and whose articles of association comply with certain
mandatory requirements. The cover pool in Nordea
Eiendomskreditt consists only of Norwegian residential
mortgage loans and loans to holiday homes in Norway.
 
During 2023 Nordea Eiendomskreditt has issued covered
bonds amounting to NOK 74.5bn in the Norwegian domestic
market under its NOK 250bn domestic covered bond
program. Issuance is done via taps of outstanding bonds and
new bonds via designated dealers. During 2023 bonds
amounting to NOK 23.4bn have matured or been bought
back. As of 31 December 2023, Nordea Eiendomskreditt had
outstanding covered bonds totalling NOK 194.8bn in the
Norwegian market and EUR 0.1bn in the European market.
Nordea Eiendomskreditt had also subordinated debt
outstanding to the amount of NOK 1.1bn.
In addition to the covered bond funding Nordea
Eiendomskreditt also raised unsecured funding
from the parent bank. At the end of 2023 such borrowings
amounted to NOK 125bn.
See the table below for breakdown of the company’s funding.
Equity
Shareholder’s equity was NOK 21.9bn at 31 December 2023
(NOK 22.1bn). This includes net profit for the year of NOK
500m (NOK 648m).
Allocation of net profit for the year
Nordea Eiendomskreditt AS reported an operating profit for
the year of NOK 668m, and a net profit after tax for the year of
NOK 500m. The Board of Directors will propose to the Annual
General Meeting on 7 March 2024 that the company
distributes 100% of net profit as dividend to the parent
company Nordea Bank Abp.
 
According to IFRS, distribution of group contributions and
dividends will not be booked before formal decision is made in
the Annual General Meeting. All net profit as of 31 December
2023 is therefore distributed to retained earnings in the
balance sheet as of 31 December 2023. The Board of Nordea
Eiendomskreditt is of the view that total equity and capital
adequacy following the allocation will be sound, and well in
excess of the minimum requirements subject to CRR and
CRD IV, implemented in Norway on 31 December 2019.
Off-balance sheet commitments
The company’s business operations include different off-
balance sheet items. Interest rate and currency swaps are
used to hedge interest rate and currency risk. At the close of
2023, the company was party to interest rate swaps with a
nominal value of NOK 45.3bn.
 
Nordea Eiendomskreditt has covered bonds of EUR 0.1bn
issued in the European market. In order to eliminate the
foreign exchange risk, the company has entered into a
currency swap of the same amount. All derivative contracts
are with counterparties within the Nordea Group.
 
Around 25% of the loan portfolio is home flex loans where the
customer has been granted a credit line. The portion of the
credit line that has been drawn, is reported as Loans to the
public in the balance sheet while the unutilised portion is
reported as an off-balance sheet commitment.
 
For total exposure regarding off-balance sheet commitments,
see Note 3.7 “Derivatives and hedge accounting”, Note 4
“Provisions” and Note 5.2 “Commitments”.
Other information
The Board’s expectations for the year were, in all major
respects, achieved.
 
The Board of Directors confirms the assumption that Nordea
Eiendomskreditt AS is a going concern and the annual
accounts have been prepared based on this assumption.
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Nordea Eiendomskreditt AS
 
Annual Report 2023
5
Acquisition of Danske Bank’s Norwegian mortgage loan
portfolio
Nordea has entered into an agreement with Danske Bank to
acquire its Norwegian personal customer and private banking
business and associated asset management portfolios,
whereof the mortgage loan portfolio will be purchased by
Nordea Eiendomskreditt AS. The Norwegian Competition
Authority announced its approval of the acquisition on 15
December 2023 and the Norwegian Supervisory Authority
approved the acquisition on 6 February 2024. Nordea
Eiendomskreditt expects to close the acquisition in late 2024,
whereafter the acquired mortgage loans will be integrated into
the company.
Impacts from Russia’s invasion of Ukraine
The impact of uncertainty after the onset of the war – reflected
in higher inflation and higher interest rates etc – on the global
and Nordic economies was further assessed during 2023.
These assessments have been reflected in the regular update
of Nordea’s macroeconomic scenarios, which are used to
update the financial forecasts and IFRS 9 expected credit
losses. Nordea Eiendomskreditt has also reviewed its
management judgements to ensure that the overall
provisioning levels are appropriate. Nordea will continue to
follow developments closely.
 
Information on the financial and operational impacts of the
war in Ukraine on Nordea Eiendomskreditt, as well as the
measures taken to address these impacts, have been
provided in various sections of this Annual Report. See the
section “Risk and uncertainties”, Note 1 “Accounting policies”,
Note 9 section “Credit risk management” and Note 3.5 “Loans
and impairment”.
Rating
The company has since April 2010 had the rating Aaa from
Moody's Investor Service for the covered bonds issued by the
company.
Risks and risk management
Risk management
Maintaining risk awareness in the organization is an integral
part of Nordea Eiendomskreditt’s business strategies. The
Nordea Group has defined clear risk, liquidity and capital
management frameworks, including policies and instructions
for different risk types, capital adequacy and capital structure,
which have
been implemented by Nordea Eiendomskreditt.
The Board has the overarching risk management
responsibility and decides on Nordea Eiendomskreditt’s risk
strategy and the Risk Appetite Framework. For further
information see Note 9 “Risk and liquidity management”.
Risks and uncertainties
Within the framework of its normal business operations
Nordea Eiendomskreditt (NE) faces various risks and
uncertainties. These risks and uncertainties include but are
not limited to;
 
Credit risk - Loss due to failure of the borrower(s) to
meet their obligations;
 
Counterparty credit risk - Loss because NE’s
counterparty in an interest or currency derivative
contract defaults prior to maturity of the contract;
 
Market risk - Loss in NE’s positions in the non-
trading book as a result of changes in market rates
and parameters that affect market values or net
interest income flows;
 
Operational risk - Loss resulting from inadequate or
failed internal processes, people and systems or
from external events, including legal risk and cyber
security risk;
 
Compliance risk – Failure to comply with regulations
and related internal rules, potentially resulting in
criticism, reputational loss or fines;
 
Financial reporting risk - Risk of misstatements or
deficiencies in financial reporting, tax reporting and
regulatory reporting and disclosures;
 
Liquidity risk - NE’s ability to service its cash flow
obligations related to lending, investment, funding,
off-balance sheet exposures, or its ability to meet its
cash flow obligations without incurring significant
additional funding costs;
 
Environmental, social and governance (ESG) risks,
covering transitional and physical risks related to
climate, nature and social factors.
Including on- and off -balance sheet exposures and
exposures related to securities, the total credit risk exposure
at year end was NOK 382.5bn (NOK 361.2bn last year).
Credit risk exposure includes the risk related to derivative
contracts, which was NOK 0.0bn at year end of 2023 (NOK
0.2bn). Counterparty credit risk exposure at the end of 2023
was NOK 111m
 
(NOK 124m).
Market risk is measured through NII - Net Interest Income and
EV - Economic Value. At the end of the year,
 
the loss for NII
was NOK 581.5m for the 200 bps down scenario (NOK
590.4m). The most severe impact from the Basel scenarios
on EV was NOK 87.5m loss at end of year 2023 (NOK
168.4m).
Short-term liquidity risk is limited via the Liquidity Coverage
Ratio (LCR) as well as the internal parameters Liquidity
Stress Coverage (LSC) and Liquidity Stress Horizon (LSH).
Long-term structural liquidity risk is limited via the Net Stable
Funding Ratio (NSFR). At the end of 2023 the liquidity metrics
were);
 
LCR: 1780% (1274%)
 
LSC: 210% (152%)
LSH: 172 days (172 days)
 
NSFR: 115.1% (113.1%)
Being an issuer of covered bonds, the company is also
exposed to changes in the residential property market and the
market for holiday homes. A decline in housing prices will
reduce the value of the company’s cover pool for the purpose
of calculating the regulatory asset coverage requirement.
Quarterly stress tests are carried out to estimate the effects of
declining prices for residential properties and holiday homes.
At the end of 2023 the over-collateralization (OC) was 60.0%,
meaning that the company can withstand a significant price
drop without breaching the regulatory OC requirement of 5%.
A drop in house prices will also increase the credit risk and
may lead to increased loan losses in case of default, due to
decreased value of the collateral.
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Nordea Eiendomskreditt AS
 
Annual Report 2023
6
Economic uncertainty
The uncertain and rapidly changing geopolitical situation
related to multiple ongoing conflicts and wars and
technological and environmental changes, combined with a
volatile interest rate environment driven by monetary policy
targeting normalised inflation levels, represents risks to the
macroeconomic outlook. The impact of higher commodity
prices and broader inflationary pressure could dampen
consumer spending and lead to cost increases, reinforcing
recessionary trends. This potential shift in business and
consumer expectations could cause a deeper recession,
prompting a rise in unemployment with additional price
pressure in the Norwegian housing market. Such
macroeconomic trends could feed through to Nordea
Eiendomskreditt’s credit portfolio resulting in losses.
Potential future credit risk losses are addressed in Note 3.5
“Loans and impairment” and in the section “Credit risk” in
Note 9.
Macroeconomy
Activity in the Norwegian economy flattened out at a high level
in 2023. Real mainland GDP increased by 0.1% quarter on
quarter during the third quarter of 2023. Registered
unemployment was at a low level of 1.9% in December.
Consumer price inflation decreased while core inflation
remained high. In 2023 headline CPI inflation came in at 5.5%
year on year, and excluding energy and taxes, underlying
inflation stood at 6.2% year on year. Norges Bank has
increased its key policy rate 14 times since 2021, bringing it to
4.5% as of December 2023. Housing prices moved broadly
sideways during 2023. The Norwegian krone weakened
broadly against most currencies in 2023, but gained ground in
the last two weeks of 2023.
Further information on the company’s risk exposure and risk
management can be found in Note 9 “Risk and liquidity
management”.
Capital management
 
Nordea strives to be efficient in its use of capital and therefore
actively manages its balance sheet with respect to assets,
liabilities and risk categories. Nordea Eiendomskreditt reports
risk exposure amounts according to applicable external
regulations (CRR/CRD IV), which stipulate the limits for the
minimum capital (the capital requirement).
Minimum capital requirements
Risk exposure amount (REA) is calculated in accordance with
CRR/CRD IV. Nordea Eiendomskreditt had 91.3% of its REA
for credit risk covered by internal rating based (IRB) approach
at the end of 2023. Rating and scoring are key components in
the credit risk management. For operational risk the
standardised approach is applied. The Board decides
ultimately on the targets for capital ratios, and the capital and
dividend policies follows from the overall framework of capital
management at Nordea.
Regulatory minimum capital requirements
The CRR requires banks to comply with the following
minimum capital requirements in relation to REA:
 
CET1 capital ratio of 4.5%
 
Tier 1 capital ratio of 6.0%
 
Total
 
capital ratio of 8.0%
In addition, banks are required to maintain a Leverage Ratio
of 3%. The leverage ratio is a non-risk-based measure
calculated as the Tier 1 capital divided by an exposure
measure, comprising of on-balance and off-balance sheet
exposures with adjustments for certain items such as
derivatives and securities financing transactions.
Internal capital requirement
Nordea Eiendomskreditt bases its internal capital
requirements under the Internal Capital Adequacy
Assessment Process (ICAAP) on risks defined by CRR/CRD
IV, and risks internally defined under Pillar 2. The ICR
specifies the amount, type and distribution of internal capital
considered adequate to cover the nature and level of all risks
to which Nordea Eiendomskreditt is or might become exposed
to over a foreseeable future, including during periods of
stress.
 
The following major risk types are included in the internal
capital requirement: credit risk, market risk, operational risk,
interest rate risk in the banking book and business risk.
 
The ICAAP also describes Nordea Eiendomskreditt’s
management, mitigation and measurement of material risks
and assesses the adequacy of internal capital by defining
internal capital requirements reflecting the risk of the
institution. As a complement to the ordinary credit risk
quantification, comprehensive stress testing is performed at
least annually in accordance with current requirements, after
which capital requirements are measured. Regulatory buffers
were introduced with the implementation of the CRR/CRD IV
rules.
Own funds
Own funds is the sum of tier 1 and tier 2 capital. Tier 1 capital
consists of both common equity tier 1 (CET1) and additional
tier 1 capital. CET1 capital is considered to be capital of the
highest quality with ultimate loss-absorbance characteristics
and consists predominately of paid in capital and retained
earnings. Accumulated profit in accordance with the audited
accounts can be included in the own funds when any
foreseeable charge or dividend has been deducted from the
amount of profit.
 
Additional tier 1 and tier 2 capital consist mostly of undated
and dated subordinated loans, respectively. Holdings of other
financial sector entities’ subordinated loans are deducted from
the corresponding tier.
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Nordea Eiendomskreditt AS
 
Annual Report 2023
7
Summary
 
of items
 
included
 
in own
 
funds
31 Dec
31 Dec
NOKm
2023
2022
Equity
21 905
22 054
Proposed/actual
 
dividend -500
 
-648
Common
 
Equity
 
Tier 1 capital
 
before regulatory adjustments
21 405
21 406
Deferred tax assets
 
Intangible
 
assets
 
IRB
 
provisions shortfall (-)
 
-114
 
-79
Pension
 
assets in excess
 
of related liabilities
 
Other items,
 
net -6
 
-9
Total regulatory adjustments
 
to Common
 
Equity
 
Tier 1 capital -120
 
-88
Common
 
Equity Tier
 
1 capital (net
 
after
 
deduction)
21 285
21 317
Additional
 
Tier 1 capital
 
before regulatory adjustments
 
Total regulatory adjustments
 
to Additional
 
Tier 1 capital
 
Additional
 
Tier 1 capital
 
Tier
 
1 capital (net
 
after
 
deduction)
21 285
21 317
Tier 2 capital
 
before regulatory adjustments
1 100
1 100
IRB
 
provisions excess
 
(+)
162
113
Deductions for investments in
 
insurance companies
 
Other items,
 
net
 
Total regulatory adjustments
 
to Tier 2 capital
162
113
Tier 2 capital
1 262
1 213
Own funds
 
(net
 
after
 
deduction)
22 548
22 530
Capital position and risk exposure amount
Nordea Eiendomskreditt’s Common Equity Tier 1 capital ratio
was 26.0% at the end of 2023, a decrease of 0.6 percentage
points from the end of last year. Total
 
Capital ratio decreased
0.6 percentage points to 27.5%. The decrease was primarily
due to increased Risk Exposure Amount (REA).
REA was NOK 81 987m, an increase of 2.3% compared to
the end of last year (NOK 80 161m). The main driver for the
increase in REA was the IRB retail portfolio, primarily
stemming from growth in lending to the public.
Own funds was NOK 22 548m at the end of 2023, of which
NOK 1 100m is a subordinated loan. The Tier 1 capital and
the Common Equity Tier 1 capital were NOK 21 285m (no
additional Tier 1 capital).
Further information
Further information on capital management and capital
adequacy is presented in Note 7 “Capital adequacy” and in
the Capital and Risk Management Report at
Regulatory development
The Capital Requirement Directive IV (CRD IV) and Capital
Requirement Regulation (CRR) entered into force on 1
January 2014 followed by the Bank Recovery and Resolution
Directive (BRRD) and Single Resolution Mechanism
Regulation (SRMR) in May 2014. The CRR became
applicable in all EU countries from 1 January 2014 while the
CRD IV and BRRD were implemented through national law
within all EU member states from 2014. The three EEA EFTA
countries Norway, Iceland and Lichtenstein, have different
legal structures compared to the EU, thus a parallel
implementation with the EU is seldom feasible. The CRR and
CRD IV were implemented in Norway on 31 December 2019.
In June 2019, the ‘banking package’ containing revisions to
the BRRD, the CRD and the CRR was adopted.
 
In the EU, the revised CRD (CRD V) and BRRD (BRRD II)
applied from 28 December 2020, while the majority of the
changes in the CRR (CRR II) applied from 28 June 2021. In
Norway, the ‘banking package’ was implemented from 1 June
2022, and from the same date a Net Stable Funding Ratio
(NSFR) of 100% became a regulatory requirement for
measuring long-term structural liquidity risk.
The new European Covered Bond Directive (EU 2019/2162)
and Regulation (EU 2019/2160) include a harmonised EU
framework for covered bonds, including common definitions,
supervision and rules for allowing the use of ‘European
Covered Bonds’ label including conditions to be granted
preferential capital treatment. The framework was
implemented in Norwegian law from 8 July 2022
simultaneously as in the EU.
Capital buffers
In Norway, a Systemic Risk Buffer (SRB) of 4.5% was
implemented from 31 December 2020. Extended
implementation period until 31.12.2023 was adopted to banks
not using the Advanced IRB Approach. Norges Bank has
decided to keep the countercyclical buffer (CCyB) unchanged
at 2.5 %. In addition, there is a Capital Conservation Buffer
(CCoB ) of 2.5%.
On 29 September 2023, the Norwegian Ministry of Finance
decided the identification of the four O-SII (Other Systemically
Important Institutions) entities in Norway, of which Nordea
Eiendomskreditt (NEK) is identified, similar to last year. NEK
is being subject to the same O-SII buffer of 1 %.
 
In Norway, the risk weight floor for residential real estate is set
at 20% and for commercial real estate at 35% in accordance
with article 458 of the CRR. On 16 December 2022, the
Norwegian Ministry of Finance decided to extend the floors at
same level until 31 December 2024.
EU implementation of finalised Basel III framework
(“Basel IV”)
Basel III is a global regulatory framework for bank capital
adequacy, stress testing and liquidity risk. In December 2017,
the finalised Basel III framework, often called the Basel IV
package, was published. It includes revisions to credit risk,
market risk, operational risk, credit valuation adjustment
(CVA) risk and the leverage ratio and introduces a new output
floor.
 
Before being applicable to Nordea, the Basel IV package
needs to be implemented into EU regulatory framework,
which is achieved by amending the CRR and CRD. The
negotiations between the EU Commission, EU Council and
EU Parliament have been finalised and the final approval on
the CRR3 regulation is expected in the first half of 2024. The
new regulation is expected to be in force on 1 January 2025.
 
On credit risk, the proposal includes revisions to both the IRB
approach, where restrictions on the use of IRB for certain
exposures are implemented, as well as on the standardised
approach. Also, for market risk, the internal model approach
and the standardised approach have been revised. For
operational risk, the three existing approaches will be
removed and replaced by one standardised approach to be
used by all banks. On CVA risk, the internally modelled
approach is removed and the standardised approach is
revised.
 
The output floor is to be set at 72.5% of the standardised
approaches on an aggregate level, meaning that the capital
Q4 2023 Eiendomskredittp2i0 Q4 2023 Eiendomskredittp4i1
Nordea Eiendomskreditt AS
 
Annual Report 2023
8
requirement will be floored to 72.5% of the total Pillar 1 REA
calculated with the standardised approaches for credit, market
and operational risk. The floor is expected be phased in,
starting with 50% from 1 January 2025 to be fully
implemented at 72.5% from 1 January 2030 and with
transitional rules for the calculation of the REA for the output
floor extending to end of 2032.
Corporate governance
 
Section 3-3b of the Norwegian Accounting Act
(regnskapsloven) requires disclosures of the composition and
nomination of the Board of Directors and a description of
internal control and risk management regarding financial
reporting.
Articles of association regulating the Board of Directors
According to Nordea Eiendomskreditt’s articles of association,
last amended at 1 November 2022 in connection with the
merger with Nordea Direct Boligkreditt, the Board comprises a
minimum of 5 members who are elected by the Annual
General Meeting. The chairman of the Board shall be elected
by separate ballot.
 
According to section 8-5 of the Financial Undertakings Act
(finansforetaksloven), at least one fourth of the board of
directors must be external members. According to internal
guidelines both genders shall be represented. Further
information on the composition of the Board of Directors is
disclosed at page 71.
 
Board and CEO insurance
Section 3-3a of the Norwegian Accounting Act
(regnskapsloven) requires disclosures of insurance coverage
for board members and the CEO of the company. Nordea
Eiendomskreditt is covered by the Nordea Group insurance
covering the personal liabilities of its management (e.g. board
members, CEO). The terms and conditions including total limit
of liability of the policy are in line with large European banks.
Financial reporting risk management
Financial reporting risk (FRR) is defined as the risk of
misstatements or deficiencies in financial reporting, regulatory
reporting, disclosures, tax reporting, management reporting
and reporting of Environment, Social and Governance
(“ESG”) information.
 
An internal control framework for managing the financial
reporting risk is in place, providing the structure and
standards for designing, operating and evaluating the internal
controls over financial reporting across the Nordea Group.
The framework is the mechanism through which management
expresses its financial statement assertions. Group Risk is the
risk control function for financial reporting risk and is
responsible for the independent monitoring and oversight of
the risks and the Group’s implementation of the framework.
A
self-assessment of the effectiveness of key controls for
Nordea Eiendomskreditt is conducted with the purpose of
ensuring proper monitoring of the quality of the financial
reporting, and with reporting to the Board/Board Risk
Committee.
 
Further disclosures regarding corporate governance and
internal control can be found in Note 9 “Risk and liquidity
management”.
People and working environment
Working in Nordea means working in a relationship bank in
which everyone is responsible for supporting great customer
experiences. This is why attracting, developing and
maintaining highly motivated people are among our main
priorities.
Nordea Eiendomskreditt is part of the Nordea Group’s
processes for leadership and employee development,
including training programmes, performance dialogues and
employee satisfaction surveys. Gender diversity and equal
opportunities are an integrated part of the development of the
organisation and its employees.
At the end of 2023 the company had 24 (23) employees.
Staffing was equivalent to 22.0 (21.5) full time positions.
Services related to sales and distribution of mortgage loans,
management of the loan portfolio, customer contact, funding
and risk management, accounting and reporting are
purchased from other units in the Nordea Group. In line with
the Nordea Group organisation, the company was
reorganized from 1 January 2017, as the company was
assigned the product responsibility for Norwegian mortgage
loans.
 
Absence due to sickness during 2023 was 7.5% (6.3%). A
total of 449 (330) working days were lost to sickness in 2023.
There are no reports of work-related personnel injuries as
caused by accidents or other incidents in Nordea
Eiendomskreditt in 2023. The working environment is
considered to be good.
Information on remuneration to the company’s employees and
 
officers can be found in Note 6.1 “Staff costs”.
Gender equality and diversity
50% of the employees in Nordea Eiendomskreditt and 63% of
the members of the management group at the end of 2023
were female. Board composition at the end of 2023 is made
up of 4 women and 2 men, employee representative
excluded. The company has adopted Nordea Group’s
diversity policy for the Group Board
. The ambition for the board composition is of each
gender to have at least 40% representation in compliance
with the policy and the requirements in the new Limited
Liability Companies Act section 11-6a by year-end 2024. The
Board and management take a proactive approach to
promoting equal opportunity in the company. The company
follows the Nordea Group’s guidelines and regulations
concerning corporate social responsibility, including those
relating to discrimination/diversity and ethics.
Changes in Management and Board of Directors
On 9 November 2023 Elen M. Stiksrud was appointed new
CEO in Nordea Eiendomskreditt AS after having served as
acting CEO of the company since 6 February 2023. On 1
June 2023 Randi Marjamaa was appointed new chair of
 
the board and replaced Marte Kopperstad. On 2 May 2023
Tina Sandvik was appointed new board member and replaced
Pål Ekberg.
Q4 2023 Eiendomskredittp2i0 Q4 2023 Eiendomskredittp4i1
 
Nordea Eiendomskreditt AS
 
Annual Report 2023
9
Randi Marjamaa
Gro Elisabeth
 
Lundevik
Ola Littorin
Chair
Vice Chair
Board member
Asbjørn Rødal
Tina Sandvik
Lene Steinum
Board member
Board member
Board member
Anne Sofie Knoph
Elen M. Stiksrud
Employee representative
Chief Executive Officer
Legal proceedings
There have been no disputes or legal proceedings in which
material claims have been raised against the company.
Subsequent events
No events have occurred after the balance sheet date, which
may materially affect the assessment of the annual financial
statements of Nordea Eiendomskreditt.
Sustainability
 
In accordance with the sustainability-related ambition of the
Nordea Group, Nordea Eiendomskreditt is committed to
sustainable business development by combining financial
performance with environmental and social responsibility as
well as sound governance practices. At the core of our
operations is the development and provision of financial
services and offerings that support the transition to a
sustainable economy and with that, enable customers to
make conscious and sustainable choices
(
).
In Nordea Eiendomskreditt this resulted in the first Nordea
green covered bond issued in 2021, and a second green
covered bond issued in 2023. In addition to product offering of
Green mortgage loans for energy efficient dwellings, Nordea
Eiendomskreditt launched a new product in 2023, called
Energy savings loan, which is a loan to finance measures that
will improve the energy efficiency of the customer’s home. All
housing measures recommended by Enova qualify for Energy
savings loans.
 
For more information on how the Nordea Group works with
sustainability, please see Nordea’s Annual Report, published
at
. This report also cover the sustainability reporting
requirements for Nordea Eiendomskreditt as required by
section 3-3c of the Norwegian Accounting Act
(regnskapsloven).
Environmental, social and corporate
governance (ESG) related risks
Nordea defines ESG risk as the risk of an adverse financial
impact in the short to longer term, deriving from the direct or
indirect impact that environmental (including climate), social
and governance issues may have on Nordea. It is important
for Nordea to integrate ESG assessments into our risk
management frameworks. Further information on ESG related
risk in Nordea can be found in Pillar 3, Nordea’s capital and
risk reporting, published at
. Nordea Eiendomskreditt’s operations result in minimal
pollution of the environment.
Due diligence assessment under the Transparency Act
 
Nordea Eiendomskreditt has conducted a due diligence
assessment in accordance with the OECD guidelines for
multinational enterprises. These assessments have
investigated whether there are any actual, or risks of, adverse
impacts on human rights or decent working conditions in our
operations, supply chain and other business relationships.
Information about Nordea Eiendomskreditt’s due diligence
assessment and the corresponding report is available on
Outlook for 2024
During 2024, Nordea Eiendomskreditt AS will prepare for a
successful acquisition and integration of mortgage loans from
Danske Bank towards the end of the year.
 
In the context of the uncertain macroeconomic environment
with higher inflation and interest rates, and how this will affect
our customers, Nordea Eiendomskreditt AS will continuously
monitor the economic outlook and the development of the
lending portfolio in order to react timely to adverse
developments.
Depending on the development of consumer prices, wages
and the Norwegian krone, we expect a stable or a moderate
decrease in the Norwegian Central Bank’s key policy rate in
2024. A stabilisation of the interest rate level could ease some
of the uncertainties rooted in the housing market.
Nordea Eiendomskreditt AS
Oslo, 5 March 2024
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Nordea Eiendomskreditt AS
 
Annual Report 2023
10
Income statement
Note
Jan-Dec
2023
Jan-Dec
2022
NOKt
Operating income
Interest income calculated using the effective interest
 
rate method
15,553,396
8,458,243
Other interest income
358,198
98,957
Interest expense
13,975,092
6,238,603
Net interest income
2.1, 8.3
1,936,502
2,318,597
Fee and commission income
116,322
111,547
Fee and commission expense
31,381
34,569
Net fee and commission income
2.2
84,940
76,978
Net result from items at fair value
2.3, 8.3
-77,058
-11,077
Other income
584
3,359
Total operating income
1,944,968
2,387,857
Staff costs
6.1, 6.2
37,902
31,171
Other operating expenses
2.4, 8.3
1,191,832
1,387,333
Depr/amortisation and impairment charges
155
136
Total operating expenses
1,229,889
1,418,640
Profit before loan losses
715,079
969,216
Loan losses
2.5
47,139
106,375
Operating profit
667,940
862,841
Income tax expense
2.6
167,677
215,022
Net profit for the period
500,263
647,819
Attributable to:
Shareholder of Nordea Eiendomskreditt AS
500,263
647,819
Total
500,263
647,819
Statement of comprehensive income
Jan-Dec
2023
Jan-Dec
2022
NOKt
Net profit for the period
500,263
647,819
Items that may be reclassified subsequently to the
 
income statement
Cash flow hedges:
Valuation gains/losses
148
7,019
Tax on valuation
 
gains/losses
-37
-1,755
Items that may not be reclassified subsequently to the income
 
statement
Defined benefit plans:
Remeasurement of defined benefit plans
-1,945
1,504
Tax on remeasurement
 
of defined benefit plans
486
-376
Other comprehensive income, net of tax
-1,347
6,393
Total comprehensive income
498,916
654,212
Attributable to:
Shareholders of Nordea Eiendomskreditt AS
498,916
654,212
Total
498,916
654,212
Q4 2023 Eiendomskredittp2i0 Q4 2023 Eiendomskredittp2i1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nordea Eiendomskreditt AS
 
Annual Report 2023
11
Randi Marjamaa
Gro Elisabeth
 
Lundevik
Ola Littorin
Chair
Vice Chair
Board member
Asbjørn Rødal
Tina Sandvik
Lene Steinum
Board member
Board member
Board member
Anne Sofie Knoph
Elen M. Stiksrud
Employee representative
Chief Executive Officer
Balance sheet
Note
31 Dec 2023
31 Dec 2022
NOKt
Assets
Loans to credit institutions
8.3
2,462,506
731,472
Loans to the public
2.5, 3.5, 3.8, 5.1
334,307,675
323,251,987
Interest-bearing securities
3.6
10,585,566
5,435,886
Derivatives
3.7, 3.4, 8.3
183,957
423,732
Fair value changes of the hedged items in portfolio hedges
 
of interest rate risk
-42,670
-55,554
Property and Equipment owned and RoU
681
77
Other assets
-186
-33
Accrued income and prepaid expenses
49,380
19,524
Total assets
347,546,908
329,807,091
Liabilities
Deposits by credit institutions
3.9, 8.3
125,845,296
155,913,879
Debt securities in issue
3.9, 5.1, 8.3
197,449,415
149,352,274
Derivatives
3.7, 3.4, 8.3
665,463
761,036
Current tax liabilities
2.6
53,530
209,296
Other liabilities
15,149
20,845
Accrued expenses and prepaid income
8.3
228,641
226,015
Deferred tax liabilities
2.6
247,210
133,515
Provisions
4,818
8,211
Retirement benefit obligations
6.2
27,417
24,682
Subordinated loan capital
8.3
1,104,751
1,103,819
Total liabilities
325,641,690
307,753,572
Equity
Share capital
8.3
1,879,565
1,879,565
Share premium
8.3
9,874,082
9,874,082
Other reserves
-23,040
-21,693
Retained earnings
9,674,348
9,673,746
Net profit for the period
500,263
647,819
Total equity
21,905,218
22,053,520
Total liabilities and equity
347,546,908
329,807,091
Off-balance sheet commitments
Assets pledged as security for own liabilities
5.1
313,603,507
245,131,742
Commitments
5.2
35,072,002
31,618,092
Nordea Eiendomskreditt AS
Oslo, 5 March 2024
Q4 2023 Eiendomskredittp2i0 Q4 2023 Eiendomskredittp2i1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nordea Eiendomskreditt AS
 
Annual Report 2023
12
Statement of changes in equity
Other reserves
NOKt
Share
capital
1
Share
premium
Cash flow
hedges
Defined
benefit plans
Retained
earnings
Total equity
Balance at 1 January 2023
1,879,565
9,874,082
-9,681
-12,012
10,321,567
22,053,520
Net profit for the year
500,263
500,263
Items that may be reclassified subsequently to the
income statement
Cash flow hedges:
 
Valuation gains/losses
148
148
 
Tax on valuation
 
gains/losses
-37
-37
Items that may not be reclassified subsequently to the
income statement
Defined benefit plans:
 
Remeasurement of defined benefit plans
-1,945
-1,945
 
Tax on remeasurement
 
of defined benefit plans
486
486
Other comprehensive income, net of tax
0
0
111
-1,459
0
-1,347
Total comprehensive income
 
0
0
111
-1,459
500,263
498,916
Contribution and distribution
Share Based Payments
602
602
Dividend paid
-647,819
-647,819
Balance at 31 December 2023
1,879,565
9,874,082
-9,570
-13,470
10,174,613
21,905,218
Other reserves
NOKt
Share
capital
1
Share
premium
Cash flow
hedges
Defined
benefit plans
Retained
earnings
Total equity
Balance at 1 January 2022
1,938,662
9,814,985
-14,945
-13,140
10,399,499
22,125,061
Net profit for the year
647,819
647,819
Items that may be reclassified subsequently to the
income statement
Cash flow hedges:
 
Valuation gains/losses
 
7,019
7,019
 
Tax on valuation
 
gains/losses
 
-1,755
-1,755
Items that may not be reclassified subsequently to the
income statement
Defined benefit plans:
 
Remeasurement of defined benefit plans
1,504
1,504
 
Tax on remeasurement
 
of defined benefit plans
-376
-376
Other comprehensive income, net of tax
0
0
5,265
1,128
0
6,393
Total comprehensive income
 
0
0
5,265
1,128
647,819
654,212
Contribution and distribution
Share Based Payments
247
247
Dividend paid
-726,000
-726,000
Change of share capital
-59,097
59,097
0
Balance at 31 December 2022
1,879,565
9,874,082
-9,681
-12,012
10,321,567
22,053,520
 
1 The company's share capital at 31 December 2023 was
 
NOKt 1,879,565,-. The number of shares was
 
16 781 828, each with a quota value of NOK 112.
All shares are owned by Nordea Bank AB (publ).
The equity in Nordea Eiendomskreditt increased by NOK 2,143m, as a result of the merger with Nordea Direct Boligkreditt
AS on 1 November 2022. The share capital was increased by NOK 162m, and replaced the share capital in Nordea Direct
Boligkreditt AS of NOK 221m. The share premium increased by NOK 1,058m including NOK 59m reclassified from share
capital. Retained earnings increased by NOK 923m as a result of the merger.
Q4 2023 Eiendomskredittp2i0 Q4 2023 Eiendomskredittp2i1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nordea Eiendomskreditt AS
 
Annual Report 2023
13
Jan-Dec
Jan-Dec
NOKt
2023
2022
Interest
 
payments
 
received
15 499 255
8 157 307
Interest
 
expenses
 
paid
-13 206 032
-5 341 358
Cash flow statement
NOKt
Note
2023
2022
Operating activities
Operating profit before tax
667,940
862,841
Adjustments for items not included in cash flow (related to
 
loan loss allowances)
2.5
46,496
97,727
Income taxes paid
2.6
-209,299
-261,312
Cash flow from operating activities before changes in
 
operating assets and liabilities
505,137
699,256
Changes in operating assets
Change in loans to credit inst, non-liquid
-504,116
0
Change in loans to the public
3.5
-11,105,577
-17,664,399
Change in interest-bearing securities
3.6
-5,149,679
-41,346
Change in derivatives, net
3.7
144,201
949,386
Change in other assets
-43,190
46,176
Changes in operating liabilities
Change in deposits by credit institutions
3.9
-30,068,583
-25,462,473
Change in debt securities in issue
3.9
48,097,140
42,227,149
Change in other liabilities
-2,130
-32,454
Cash flow from operating activities
1,873,203
721,295
Financing activities
Change of accrued interest on subordinated loan capital
3.9
932
1,993
Dividend paid
-647,819
-726,000
Share Based Payment Programme
602
274
Cash flow from financing activities
-646,285
-723,733
Cash flow for the period
1,226,918
-2,438
Cash and cash equivalents
NOKt
31 Dec 2023
31 Dec 2022
Cash and cash equivalents at beginning of the period
 
(Loans to credit institutions)
731,472
733,910
Cash and cash equivalents at end of the period (included
 
in Loans to credit institutions)¹
1,958,390
731,472
Change
 
1,226,918
-2,438
¹Excluding non-liquid loans to credit institutions of NOK
 
504m.
Comments on the cash flow statement
The cash flow statement shows inflows and outflows of
cash and cash equivalents during the year. Nordea
Eiendomskreditt's cash flow has been prepared in
accordance with the indirect method, whereby operating
profit is adjusted for effects of non-cash transactions such
as loan losses. The cash flows are classified by operating,
investing and financing activities.
Operating activities
 
are the principal revenue-producing
activities and cash flows are mainly derived from the
operating profit for the year with adjustment for items not
included in cash flow and income taxes paid. Items not
included in cash flow relates to changes in impairment
charges. Changes in operating assets and liabilities consist
of assets and liabilities that are part of normal business
activities, such as loans and receivables, deposits from
credit institutions and debt securities in issue. Changes in
derivatives are reported net.
Cash flow from operating activities include interest
payments received and interest expenses paid in the
following amounts:
Financing activities
 
are activities that result in changes in
equity and subordinated liabilities, such as new issues of
shares, group contribution paid or received and
issued/amortised subordinated liabilities.
Cash and cash equivalents
 
comprise loans to finance
institutions with no fixed maturity (bank deposits).
Q4 2023 Eiendomskredittp2i0 Q4 2023 Eiendomskredittp4i1
 
 
Nordea Eiendomskreditt AS
 
Annual Report 2023
14
Notes to the financial statements
Note 1
Accounting policies
Table
 
of contents
1.1
 
Basis for presentation
1.2
 
Changed accounting policies and presentation
1.3
 
Changes in IFRSs not yet applied
 
1.4
 
Critical judgements and estimation uncertainty
1.5
 
Translation of assets and liabilities denominated in
foreign currencies
1.6
 
Exchange rates
1.1 Basis for presentation
The financial statements of Nordea Eiendomskreditt AS are
prepared in accordance with IFRS® Accounting Standards
as adopted by the EU Commission. In addition, certain
complementary rules in the Norwegian Accounting Act with
supported regulation have been applied.
 
The disclosures required by the standards,
recommendations and legislation above have been
included in the notes, or in other parts of the financial
statements.
On 5 March 2024 the Board of Directors approved the
financial statements, subject to final approval of the Annual
General Meeting on 7 March 2024.
The accounting policies, method of computation and
presentations are unchanged in comparison with the
Annual Report 2022, except for the items presented in the
section “Changed accounting policies and presentation”
below.
Nordea Eiendomskreditt is part of the Nordea Group and
the Group’s Annual Report is available at
 
1.2 Changed accounting policies and
presentation
New accounting policies and presentation implemented
during 2023 and their impact on the financial statements of
Nordea Eiendomskreditt are described below.
Amendments to IAS 12 Income Taxes: Deferred Tax
related to Assets and Liabilities arising from a Single
Transaction
 
On 1 January 2023 Nordea Eiendomskreditt started
applying the amendments to IAS 12 Income Taxes:
Deferred Tax
 
related to Assets and Liabilities arising from a
Single Transaction.
The amendments require companies to recognise deferred
tax on particular transactions that, on initial recognition,
give rise to taxable and deductible temporary differences of
equal amounts. Such a requirement may apply on the initial
recognition of a lease liability and the corresponding right-
of-use asset at the commencement of a lease. The
requirement also applies in the context of
decommissioning, restoration and similar liabilities where
the corresponding amounts are recognised as part of the
cost of the related asset.
The gross deferred tax assets and liabilities will be
disclosed, but will be set off on the balance sheet if such
requirements are met.
The amendments have not had any significant impact on
the financial statements or capital adequacy of Nordea
Eiendomskreditt in the period of initial application.
Amendments to IAS 12 Income Taxes:
 
International Tax Reform – Pillar Two
 
Model Rules
In May 2023 the International Accounting Standards Board
(IASB) published amendments to IAS 12 Income Taxes:
International Tax
 
Reform – Pillar Two Model Rules. The
amendments include a temporary exception to the
accounting for deferred taxes arising from the
implementation of the Pillar 2 model rules. The
amendments also include disclosure requirements for
periods in which the pillar two legislation is enacted or
substantively enacted, but not yet in effect. Known or
reasonably estimable information that helps users of
financial statements understand the entity’s exposure to
Pillar 2 income taxes arising from that legislation, should be
disclosed.
The amendments were effective as of publication of the
amendments and have been endorsed by the EU. The
amendments have not had any impact on the financial
statements or capital adequacy compared with the previous
situation as the potential impact of the Pillar 2 model rules
is not reflected in the financial statements.
 
Norway enacted the Pillar 2 legislation at the end of 2023.
Since the newly enacted tax legislation was not effective
until 1 January 2024, it had no current tax impact on
Nordea Eiendomskreditt in 2023.
 
At the time this Annual Report was published, it was not
possible to comment on the impact of the amendments on
the Nordea Eiendomskreditt’s financial statement, as a full
assessment of the financial impact of the enacted Pillar 2
legislation has not been completed.
 
Other amendments to IFRS
The following amended standards issued by the
International Accounting Standards Board (IASB) were
implemented by Nordea Eiendomskreditt on 1 January
2023, but have not had any significant impact on its
financial statements.
 
Amendments to IAS 1 Presentation of Financial
Statements and IFRS Practice Statement 2:
Disclosure of Accounting Policies
 
Amendments to IAS 8 Accounting policies,
Changes in Accounting Estimates and Errors:
Definition of Accounting estimates
1.3 Changes to IFRSs not yet applied
The IASB has published the following new or amended
standards that are assessed not to have any significant
impact on Nordea’s financial statements or capital
adequacy in the period of initial application:
 
Amendments to IAS 1 Presentation of Financial
Statements: Classification of Liabilities as Current
or Non-current as well as Classification of
Liabilities as Current or Non-current Deferral of
Effective Date; and Non-current Liabilities with
Covenants
 
Amendments to IAS 7 Statement of Cash Flows
and IFRS 7 Financial Instruments
 
Amendments to IFRS 16 Leases: Lease Liability
in a Sale and Leaseback.
Q4 2023 Eiendomskredittp2i0 Q4 2023 Eiendomskredittp4i1 Q4 2023 Eiendomskredittp16i1
Nordea Eiendomskreditt AS
 
Annual Report 2023
15
1.4 Critical judgements and estimation
uncertainty
The preparation of financial statements in accordance with
generally accepted accounting principles requires, in some
cases, the use of judgements and estimates by
management. Actual outcome can later, to some extent,
differ from the estimates and the assumptions made. In this
section a description is made of:
 
the sources of estimation uncertainty at the end of
the reporting period that have a significant risk of
resulting in a material adjustment to the carrying
amount of assets and liabilities within the next
financial year, and
 
the judgements made when applying accounting
policies (apart from those involving estimations)
that have the most significant impact on the
amounts recognised in the financial statements.
Critical judgements and estimates are in particular
associated with:
-
 
the fair value measurement of certain financial
instruments (hedging portfolio)
-
 
the impairment testing of loans to the public
Nordea Eiendomskreditt applied critical judgements in the
preparation of this annual report due to the uncertainty
concerning the potential long-term impact of higher energy
and raw material prices and reduced consumer spending in
various economic sectors on the company’s financial
statements. Area of particular importance during 2023 was
the impairment testing of loans to the public. In terms of
direct credit risk Nordea Eiendomskreditt does not have
any exposure towards Russia and Ukraine. For more
information, see Note 3.5 “Loans and impairment”.
 
1.5 Translation of assets
 
and liabilities
denominated in foreign currencies
The functional currency for Nordea Eiendomskreditt is
NOK. Foreign currency is defined as any currency other
than the functional currency of the entity. Foreign currency
transactions are recorded at the exchange rate on the date
of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated at the
exchange rate on the balance sheet date. Nordea
Eiendomskreditt has items only in GBP and EUR in
addition to Norwegian kroner. For exchange rates at 31
December 2023, see section 1.6 Exchange rates.
Exchange differences arising on the settlement of
transactions at rates different from those at the date of the
transaction, and unrealised translation differences on
unsettled foreign currency monetary assets and liabilities,
are recognised in the income statement under “Net result
on items at fair value”.
1.6 Exchange rates
Q4 2023 Eiendomskredittp2i0 Q4 2023 Eiendomskredittp4i1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nordea Eiendomskreditt AS
 
Annual Report 2023
16
2 Financial performance and returns
Note 2.1
Net interest income
Accounting policies
Interest income and expenses from financial instruments
are classified as “Net interest income”.
Interest income is presented on two rows in the income
statement, Interest income calculated using the effective
interest rate method and Other interest income. On the row
Interest income calculated using the effective interest
method, Nordea Eiendomskreditt present interest income
from financial assets measured at amortised cost. This line
item also includes the effect from hedge accounting relating
to these assets. All other interest income is presented as
on the income statement row “Other interest income”.
NOKt
Jan-Dec
2023
Jan-Dec
2022
Interest income calculated using the effective interest
 
rate method
15,553,396
8,458,243
Other interest income
358,198
98,957
Interest expense
13,975,092
6,238,603
Net Interest income
1,936,502
2,318,597
Interest income calculated using the effective interest rate
 
method
Loans to credit institutions
63,536
44,839
Loans to customers
15,411,921
8,338,649
Yield fees
50,584
69,467
Net interest paid or received on derivatives in accounting
 
hedges of assets
27,355
5,288
Interest income
15,553,396
8,458,243
Other interest income
Interest-bearing securities measured at fair value
358,198
98,957
Other interest income
1
358,198
98,957
Interest expense
Deposits by credit institutions
6,404,791
3,425,269
Debt securities in issue
7,112,913
2,611,354
Subordinated loan capital
61,631
36,518
Other interest expenses
129,843
156,613
Net interest paid or received on derivatives in hedges
 
of liabilities
265,913
8,849
Interest expense
 
13,975,092
6,238,603
Interest from categories of financial instruments
NOKt
Jan-Dec
2023
Jan-Dec
2022
Financial assets at amortised cost
15,526,041
8,454,945
Financial assets at fair value through profit or loss (including
 
hedging instruments)¹
385,553
102,256
Financial liabilities at amortised cost
-13,709,179
-6,229,755
Financial liabilities at fair value through profit or loss (related
 
to hedging instruments)¹
-265,913
-8,849
Net interest income
1,936,502
2,318,597
1
 
Includes net interest income from derivatives, measured
 
at fair value and related to Nordea Eiendomskreditt’s
 
funding. This can have both a positive
 
and negative impact on other interest expense.
Note 2.2
Net fee and commission income
Accounting policies
The company's fee income is treated as administration fees
for maintaining customer accounts related to customers’
mortgage loans, and is recognised to income as part of the
item ”Fee and commission income” in accordance with
standard Nordea policy.
Commission expenses are mainly transaction based and
recognised in the period the services are received.
NOKt
2023
2022
Custody and issuer services
-3,588
-2,260
 
- of which expense
-3,588
-2,260
Payments
-28
-43
 
- of which expense
-28
-43
Lending Products
111,634
109,563
 
- of which income
111,634
109,563
Other
-23,078
-30,282
 
- of which income
4,687
1,983
 
- of which expense¹
-27,765
-32,266
Total
84,940
76,978
¹Other commission expense include NOK
 
19.2m related to the Liquidity Transfer and Support
 
agreement with the parent bank and NOK
 
7.8m for market data services.
Q4 2023 Eiendomskredittp2i0 Q4 2023 Eiendomskredittp2i1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nordea Eiendomskreditt AS
 
Annual Report 2023
17
Note 2.3
Net result from items at fair value
Accounting policies
Realised and unrealised gains and losses on financial
instruments measured at fair value through profit or loss,
include interest-bearing securities and derivatives and are
recognised under “Net result from items at fair value”.
 
This item also includes realised gains and losses from
financial instruments measured at amortised cost, such as
interest compensation received or paid and realised
gains/losses on buy-backs of issued own debt.
Impairment losses from instruments within other categories
than “Financial assets at fair value through profit or loss”
are recognised under “Loan losses” (see also the sub-
section “Loan losses” below).
Net gains/losses for categories of financial instruments
2023
2022
Financial assets and liabilities mandatorily at fair value
 
through profit or loss¹
84,642
-866,788
Financial assets at amortised cost²
-6,274
-65,688
Financial liabilities at amortised cost³
-155,529
920,915
Foreign exchange gains/losses excluding currency hedges
103
483
Total
-77,058
-11,078
¹ This row comprises of interest bearing securities and derivatives, including derivates held for economic hedging, which do not meet the requirements for hedge accounting according
to IAS 39.
² This row includes net gain/loss arising from derecognition of financial assets measured at amortised cost. The reason for derecognition is that the assets were prepaid by the
customer. This line item also includes fair value changes of hedged amortised cost assets in hedges of interest rate risk.
³ This row mainly includes fair value changes of hedged amortised cost liabilities in hedges of interest rate risk.
Note 2.4
Other expenses
NOKt
2023
2022
Market data services
6,294
5,406
Services bought from Group companies
1,130,084
1,326,320
Auditor's fee
1,668
2,017
Resolution fees
51,084
47,037
Other operating expenses
2,703
6,554
Total
1,191,832
1,387,333
Auditor's fee for 2023 comprise NOKt 1 668 incl.VAT,
 
of which NOKt 1 621 relates to audit work and NOKt 46 relates
 
to other audit related services.
Q4 2023 Eiendomskredittp2i0 Q4 2023 Eiendomskredittp2i1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nordea Eiendomskreditt AS
 
Annual Report 2023
18
Note 2.5
Loan losses
Accounting policies
Impairment losses from financial assets classified into the
category “Amortised cost” (see accounting policies Note
3.2), under “Loans to the public” in the balance sheet, are
reported as “Loan losses”. Losses are reported net of any
collateral and other credit enhancements. Nordea
Eiendomskreditt’s accounting policies for the calculation of
impairment losses on loans can be found in accounting
policies to Note 3.5.
Counterparty losses on instruments classified into the
category “Financial assets at fair value through profit or
loss” are reported under “Net result from items at fair
value”.
NOKt
Jan-Dec
2023
Jan-Dec
2022
Net loan losses, Stage 1
-3,974
16,112
Net loan losses, Stage 2
3,409
62,172
Total loan losses, non-defaulted
-565
78,284
Stage 3, defaulted
Net loan losses, individually assessed, collectively calculated
49,525
19,946
Realised loan losses
3,007
15,709
Recoveries on previous realised loan losses
-2,549
-7,122
Reversals of provisions
-2,280
-442
Net loan losses, defaulted
 
47,703
28,091
Net loan losses
47,138
106,375
Key ratios
1
Jan-Dec
2023
Jan-Dec
2022
Loan loss ratio, basis points
 
1.42
3.37
- of which stage 1
-0.11
0.51
- of which stage 2
0.10
1.97
- of which stage 3
1.44
0.89
1
 
Net loan losses divided by average total loans during the
 
period.
Q4 2023 Eiendomskredittp2i0 Q4 2023 Eiendomskredittp20i1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nordea Eiendomskreditt AS
 
Annual Report 2023
19
Note 2.6
Taxes
Income tax expense
 
NOKt
2023
2022
Current tax
1
54,264
222,352
Deferred tax
2
113,414
-7,330
Total
167,678
215,022
1
 
of which relating to prior years
3
13,023
2
 
of which relating to prior years
730
-13,023
Total
733
0
Current and deferred tax recognised in Other comprehensive
 
income
Deferred tax on remeasurements of pension obligations DBP
486
-376
Deferred tax relating to cash flow hedges
-37
-1,755
Total
449
-2,131
Tax on the company's
 
operating profit may differ from the theoretical amount
 
that would arise using the tax rate in Norway,
 
as follows:
NOKt
2023
2022
Profit before tax
667,940
862,841
Tax calculated
 
at a tax rate of 25%
-166,935
-215,010
Non-deductable expenses
-10
-12
Adjustments related to prior years
-733
0
Total tax charge
-167,678
-215,022
Average effective tax rate
-25.1 %
-24.9 %
Deferred tax
NOKt
2023
2022
Deferred tax expense (-) / income (+)
Deferred tax due to temporary differences
 
-113,414
-5,693
Income tax expense, net
-113,414
-5,693
Deferred tax assets
Deferred tax liabilities
NOKt
2023
2022
2023
2022
Deferred tax assets/liabilities related to:
Financial instruments and derivatives
-253,984
-139,585
Retirement benefit obligations
6,854
6,171
Property and equipment
-81
-101
Other
Netting between deferred tax assets and liabilities
-6,854
-6,171
6,854
6,171
Total deferred tax assets/liabilities
0
0
-247,211
-133,515
Movements in deferred tax assets/liabilities net, are as
 
follows:
2023
2022
Balance at 1 January
-133,515
-138,714
Deferred tax relating to items recognised in Other comprehensive
 
income
449
-2,131
Adjustments relating to prior years
-730
13,023
Deferred tax in the income statement
-113,414
-5,693
Balance at 31 December
-247,210
-133,515
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the deferred tax income taxes relates to the same fiscal authority.
Deferred tax totalling NOK 247m is carried in the balance sheet in full since the company expects to be able to offset this
against future earnings. Nordea Eiendomskreditt had no tax losses carried forward at 31 December 2023.
Q4 2023 Eiendomskredittp2i0 Q4 2023 Eiendomskredittp4i1
 
 
 
 
 
 
Nordea Eiendomskreditt AS
 
Annual Report 2023
20
3 Financial instruments
Note 3.1
Recognition on and derecognition
from the balance sheet
Accounting policies
Derivative instruments, quoted securities and foreign
exchange spot transactions are recognised on and
derecognised (from the balance sheet on the trade date.
Between trade date and settlement date these assets and
liabilities are recognised as “Other assets” or ”Other
liabilities” on the balance sheet.
Other financial instruments are recognised in the balance
sheet on settlement date.
 
Note 3.2
Classification of assets and liabilities
Accounting policies
Classification of financial instruments
Each financial instrument in Nordea Eiendomskreditt has
been classified into one of the following categories:
Financial assets.
 
Amortised cost
 
 
Financial assets at fair value through profit or loss:
­
 
Mandatorily measured at fair value
through profit or loss
­
 
Derivatives used for hedging
Financial liabilities.
 
Amortised cost
 
 
Financial liabilities at fair value through profit or
loss:
­
 
Mandatorily measured at fair value
through profit or loss
­
 
Derivatives used for hedging
The classification of a financial assets is dependent on the
business model for the portfolio in which the instrument is
included and on whether the cash flows are solely
payments of principal and interest (SPPI).
Financial assets with cash flows that are not solely
payments of principal and interest (SPPI) are measured at
fair value through profit or loss. All other assets are
classified based on the business model. Instruments
included in a portfolio with a business model where the
intention is to keep the instruments and collect contractual
cash flows are measured at amortised cost. Financial
assets included in any other business model are measured
at fair value through profit or loss.
 
In order to determine the business model, Nordea
Eiendomskreditt has divided its financial assets into
portfolios and/or sub-portfolios based on how groups of
financial assets are managed together to achieve a
particular business objective.
 
When determining the right for the portfolios, Nordea
Eiendomskreditt has taken the current business area
structure into account. When determining the business
model for each portfolio Nordea Eiendomskreditt has
analysed the objective with the financial assets as well as
for instance past sales behaviour and management
compensation.
 
In the table below the classification of the financial
instruments on Nordea Eiendomskreditt’s balance sheet
into the different categories under IFRS 9 is presented.
Amortised cost
Financial assets and liabilities measured at amortised cost
are initially recognised on the balance sheet at fair value,
including transaction costs. Subsequent to initial
recognition, the instruments within this category are
measured at amortised cost. In an amortised cost
measurement, the difference between acquisition cost and
redemption value is amortised in the income statement
over the remaining term using the effective interest rate
method. Amortised cost is defined as the amount at which
the financial asset or financial liability is measured at initial
recognition minus the principal repayments plus or minus
the cumulative amortisation using the effective interest rate
method of any difference between that initial amount and
the maturity amount and for financial assets, adjusted for
any loss allowance. For more information about the
effective interest rate method see accounting policies in
Note 2.1 “Net interest income”. For information about
impairment under IFRS 9, accounting policies Note 3.5
“Loans and impairment”.
Interest on assets and liabilities classified at amortised cost
is recognised under “Interest income” and “Interest
expense” in the income statement.
 
Financial assets and financial liabilities at fair value
through profit or loss
Financial assets and financial liabilities at fair value through
profit or loss are measured at fair value, excluding
transaction costs. All changes in fair value are recognised
directly in the income statement under “Net result from
items at fair value”.
Derivatives
All derivatives are recognised in the balance sheet and
measured at fair value. Derivatives with a positive fair
value, including any accrued interest, are recognised as
assets under “Derivatives” on the asset side.
 
Derivatives with a negative fair value, including any
accrued interest, are recognised as liabilities under
“Derivatives” on the liability side.
Realised and unrealised gains and losses from derivatives
are recognised in the income statement under “Net result
on items at fair value”.
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Nordea Eiendomskreditt AS
 
Annual Report 2023
21
Of the assets listed below, Loans to credit institutions, Loans to
 
the public, Interest-bearing securities, Derivatives, as well
 
as accrued
interest on these items, are exposed to credit risk.
 
The exposure equals the book value presented
 
in the tables below.
Fair value through profit or
loss (FVPL)
31 December 2023, NOKt
Amortised
cost (AC)
Mandatorily
Derivatives
used for
hedging
Non-financial
assets
Total
Assets
Loans to credit institutions
2,462,506
2,462,506
Loans to the public
334,307,675
334,307,675
Interest-bearing securities
10,585,566
10,585,566
Derivatives
183,957
183,957
Fair value changes of the hedged items in portfolio hedge
 
of interest rate risk
-42,670
-42,670
Property and Equipment owned and RoU
681
681
Other assets
-186
-186
Accrued income and prepaid expenses
48,127
1,253
49,380
Total assets
336,775,638
10,585,566
183,957
1,748
347,546,908
Fair value through profit or
loss (FVPL)
31 December 2023, NOKt
Amortised
cost (AC)
Mandatorily
Derivatives
used for
hedging
Non-financial
assets
Total
Liabilities
 
Deposits by credit institutions
125,845,296
125,845,296
Debt securities in issue
197,449,415
197,449,415
Derivatives
146,593
518,870
665,463
Current tax liabilities
53,530
53,530
Other liabilities
3,518
11,631
15,149
Accrued expenses and prepaid income
11,145
217,496
228,641
Deferred tax liabilities
247,210
247,210
Provisions
4,818
4,818
Retirement benefit obligations
27,417
27,417
Subordinated loan capital
1,104,751
1,104,751
Total liabilities
324,414,125
146,593
518,870
562,102
325,641,690
Fair value through profit or
loss (FVPL)
31 December 2022, NOKt
Amortised
cost (AC)
Mandatorily
Derivatives
used for
hedging
Non-financial
assets
Total
Assets
Loans to credit institutions
731,472
731,472
Loans to the public
323,251,987
323,251,987
Interest-bearing securities
5,435,886
5,435,886
Derivatives
-17,698
441,430
423,732
Fair value changes of hedged items in portfolio hedges
 
of interest rate risk
-55,554
-55,554
Equipment owned and RoU
77
77
Other assets
-33
-33
Prepaid expenses and accrued income
18,148
1,376
19,524
Total Assets
323,946,054
5,418,188
0
-33
329,807,092
Fair value through profit or
loss (FVPL)
NOKt
Amortised
cost (AC)
Mandatorily
Derivatives
used for
hedging
Non-financial
assets
Total
Liabilities
 
Deposits by credit institutions
155,913,879
155,913,879
Debt securities in issue
149,352,274
149,352,274
Derivatives
158,537
602,499
761,036
Current tax liabilities
209,297
209,297
Other liabilities
3,597
17,247
20,844
Accrued expenses and prepaid income
3,883
222,132
226,015
Deferred tax liabilities
133,515
133,515
Provisions
8,211
8,211
Retirement benefit obligations
24,682
24,682
Subordinated loan capital
1,103,819
1,103,819
Total Liabilities
306,377,452
158,537
602,499
615,083
307,753,572
Q4 2023 Eiendomskredittp2i0 Q4 2023 Eiendomskredittp4i1
 
 
 
Nordea Eiendomskreditt AS
 
Annual Report 2023
22
Note 3.3
Assets and liabilities at fair value
Accounting policies
Financial assets and liabilities classified into the categories
“Financial assets/liabilities at fair value through profit or
loss” (including derivative instruments) are recorded at fair
value in the balance sheet with changes in fair value
recognised in the income statement under “Net result from
items at fair value”.
Fair value is defined as the price that at the measurement
date would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market
participants under current market conditions in the principal
market for the asset or liability or, in the absence of a
principal market, in the most advantageous market for the
asset or liability.
The existence of published price quotations in an active
market is the best evidence of fair value and when they
exist, they are used to measure the fair value of financial
assets and financial liabilities. An active market for the
asset or liability is a market in which transactions for the
asset or liability occur with sufficient frequency and volume
to provide pricing information on an on-going basis. The
absolute level of liquidity and volume required for a market
to be considered active varies depending on the class of
instruments. For some classes low price volatility is seen,
also for those instruments within the class where the trade
frequency is high. For instruments in such a class, the
liquidity requirements are lower and correspondingly, the
age limit for the prices used to establish fair value is higher.
The trade frequency and volume are monitored regularly in
order to assess if markets are active or not active.
 
If quoted prices for a financial instrument fail to represent
actual and regularly occurring market transactions or if
quoted prices are not available, fair value is established by
using an appropriate valuation technique. The adequacy of
the valuation technique, including an assessment of
whether to use quoted prices or theoretical prices, is
monitored on a regular basis.
 
Valuation techniques can range from a simple discounted
cash flow analysis to complex option pricing models.
Valuation models are designed to apply observable market
prices and rates as input whenever possible, but can also
make use of unobservable model parameters. The
adequacy of the valuation model is assessed by measuring
its capability to match market prices. This is done by
comparing calculated prices with relevant benchmark data,
e.g. quoted prices from exchange, the counterparty´s
valuations, price data from consensus services etc. Nordea
Eiendomskreditt is using valuation techniques to establish
fair value for items disclosed under the following balance
sheet items:
 
Interest bearing securities (when quoted prices in
an active market are not available)
 
Derivatives (OTC-derivatives)
For financial instruments, whose fair value is estimated by
a valuation technique, it is investigated whether the
variables used in the valuation model are predominantly
based on data from observable markets. By data from
observable markets, Nordea Eiendomskreditt considers
data from observable markets to be data that can be
collected from generally available external sources and
which is deemed to represent realistic market prices. If
unobservable data has a significant impact on the
valuation, the instrument cannot be recognised initially at
the fair value estimated by the valuation technique and any
upfront gains are thereby deferred and amortised through
the income statement over the contractual life of the
instrument.
The deferred upfront gains are subsequently released to
income if the non-observable data becomes observable.
See a breakdown below of fair values of financial
instruments measured on the basis of:
 
quoted prices in active markets for the same
instrument (level 1),
 
 
valuation techniques using observable data (level
2), and
 
 
valuation techniques using non-observable data
(level 3).
The valuation models applied by the Nordea Group are
consistent with accepted economic methodologies for
pricing financial instruments, and incorporate the factors
that market participants consider when setting a price.
 
New valuation models are subject to approval by Model
Risk Committee and all models are reviewed on a regular
basis.
Fair value measurement of certain financial
instruments
Critical judgements that have a significant impact on the
recognised amounts for financial instruments are exercised
when determining fair value of OTC derivatives and other
financial instruments that lack quoted prices or recently
observed market prices. Those judgements relate to the
following areas:
 
The choice of valuation techniques.
 
The determination of when quoted prices fail to
represent fair value (including the judgement of
whether markets are active).
 
The calculation of fair value adjustments in order
to incorporate relevant risk factors such as credit
risk, model risk and liquidity risk.
 
The judgement of which market parameters that
are observable.
The critical judgements required when determining fair
value of financial instruments that lack quoted prices or
recently observed market prices, also introduce a high
degree of estimation uncertainty.
 
In all of these instances, decisions are based upon
professional judgement in accordance with Nordea
Eiendomskreditt’s accounting and valuation policies.
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Nordea Eiendomskreditt AS
 
Annual Report 2023
23
Fair value of financial assets and liabilities
31 Dec 2023
31 Dec 2022
NOKt
Carrying amount
Fair value
Carrying amount
Fair value
Financial assets
Loans
 
336,727,511
337,499,000
323,927,906
328,228,331
Interest-bearing securities
10,585,566
10,585,566
5,435,886
5,435,886
Derivatives
183,957
183,957
423,732
423,732
Other assets
0
0
0
0
Accrued income and prepaid expenses
48,127
48,127
18,148
18,148
Total financial assets
347,545,159
348,316,649
329,805,671
334,106,097
Financial liabilities
Deposits and debt instruments
324,399,462
324,500,812
306,369,973
306,385,298
Derivatives
665,463
665,463
761,036
761,036
Other financial liabilities
3,518
3,518
3,597
3,597
Accrued expenses and prepaid income
11,145
11,145
3,883
3,883
Total financial liabilities
325,079,589
325,180,938
307,138,489
307,153,814
For information about valuation of items not measured at fair value on the balance sheet, see the section "Financial assets
and liabilities not held at fair value on the balance sheet" below in this note.
Assets and liabilities held at fair value on the balance sheet
Quoted prices in active
markets for same
instrument
Valuation technique
using observable data
Valuation technique
using non-observable
data
31 December 2023, NOKt
(Level 1)
(Level 2)
(Level 3)
Total
Financial assets
1
Interest-bearing securities
10,158,609
426,957
10,585,566
Derivatives
203,185
-19,228
183,957
Total assets
0
10,361,794
407,729
10,769,523
Financial liabilities
1
Derivatives
665,463
0
665,463
Total liabilities
0
665,463
0
665,463
Quoted prices in active
markets for same
instrument
Valuation technique
using observable data
Valuation technique
using non-observable
data
31 December 2022, NOKt
(Level 1)
(Level 2)
(Level 3)
Total
Financial assets
1
Interest-bearing securities
5,435,886
0
5,435,886
Derivatives
423,732
0
423,732
Total assets
0
5,859,618
0
5,859,618
Financial liabilities
1
Derivatives
702,726
58,310
761,036
Total liabilities
0
702,726
58,310
761,036
1
 
All items are measured at fair value on a recurring basis at the end of each reporting period.
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Nordea Eiendomskreditt AS
 
Annual Report 2023
24
31 December
 
2023, NOKt
1 January
2023
Unrealised
fair value
gains/losses
recorded in
income
statement
Purchases
Transfers
out of level 3
31 December
2023
Interest-bearing
 
securities
426 957
426 957
Derivatives (net)
-58 310
-5 521
44 603
-19 228
Total, net
-58 310
-5 521
426 957
44 603
407 729
Determination of fair values for items measured at fair
value on the balance sheet
Fair value measurements of assets and liabilities carried at
fair value have been categorised under the three levels of
the IFRS fair value hierarchy. The fair value hierarchy gives
the highest priority to quoted prices (unadjusted) in active
markets for identical assets or liabilities (Level 1) and the
lowest priority to unobservable inputs (Level 3). The
categorisation of these instruments is based on the lowest
level input that is significant to the fair value measurement
in its entirety.
Level 1 in the fair value hierarchy consists of assets and
liabilities valued using unadjusted quoted prices in active
markets for identical assets or liabilities. An active market
for the asset or liability is a market in which transactions for
the asset or liability occur with sufficient frequency and
volume to provide pricing information on an on-going basis.
Nordea Eiendomskreditt AS has no financial assets or
financial liabilities measured according to level 1.
 
Level 2 in the fair value hierarchy consists of assets and
liabilities that do not have directly quoted market prices
available from active markets. The fair values are based on
quoted prices for similar assets or liabilities in active
markets or quoted prices for identical or similar assets or
liabilities in markets that are not active. Alternatively, the
fair values are estimated using valuation techniques or
valuation models based on market prices or rates
prevailing at the balance sheet date, and where any
unobservable inputs have had an insignificant impact on
the fair values. This is the case for interest-bearing
securities and derivatives in Nordea Eiendomskreditt AS.
Level 3 in the fair value hierarchy consists of those types of
assets and liabilities which fair values cannot be obtained
directly from quoted market prices or indirectly using
valuation techniques or models supported by observable
market prices or rates.
 
All valuation models, both complex and simple models,
make use of market parameters. These parameters
comprise interest rates, volatilities, correlations etc. Some
of these parameters are observable while others are not.
For most non-exotic currencies the interest rates are all
observable, and the volatilities and the correlations of the
interest rates and FX rates are observable up to a certain
maturity. For each instrument the sensitivity towards
unobservable parameters is measured. If the impact from
unobservable parameters on the valuation is significant the
instrument is categorised as Level 3 in the fair value
hierarchy.
For interest-bearing securities the categorisation into the
three levels are based on the internal pricing methodology.
 
These instruments can either be directly quoted in active
markets (Level 1) or measured using a methodology giving
a quote based on observable inputs (Level 2). If the impact
from unobservable parameters on the valuation of the bond
is significant the bond is categorised as Level 3 in the fair
value hierarchy.
For OTC derivatives valuation models are used for
establishing fair value. The models are usually in-house
developed, and based on assumptions about the behaviour
of the underlying asset and statistical scenario analysis.
Most OTC derivatives are categorised as Level 2 in the fair
value hierarchy implying that all significant model
parameters are observable in active markets.
Fair value of financial assets and liabilities are generally
calculated as the theoretical net present value of the
individual instruments. This calculation is supplemented by
a portfolio adjustment.
Nordea Eiendomskreditt incorporates credit valuation
adjustments (CVA) and debit valuation adjustments (DVA)
into derivative valuations. CVA and DVA
 
reflect the impact
on fair value of the counterparty´s credit risk and Nordea
Eiendomskreditt’s own credit quality, respectively.
Calculations are based on estimates of exposure at default,
probability of default and recovery rates, on a counterparty
basis. Generally, exposure at default for CVA
 
and DVA is
based on expected exposure and estimated through the
simulation of underlying risk factors. Where possible,
Nordea obtains credit spreads from the credit default swap
(CDS) market, and probabilities of defaults (PDs) are
inferred from this data. For counterparties that do not have
a liquid CDS, PDs are estimated using a cross sectional
regression model, which calculates an appropriate proxy
CDS spread given each counterparty's rating region and
industry.
Nordea Eiendomskreditt’s pricing models are calibrated to
the market and if climate risk has any impact on a particular
market, it will already be taken into consideration by other
market participants. Hence, Nordea Eiendomskreditt have
not implemented any changes to pricing models to
accommodate for climate risk and no critical valuation
adjustments are taken. Going forward, Nordea
Eiendomskreditt will follow areas in the valuation space
where climate risk could have an impact on the models
(e.g. in relation to Credit Valuation Adjustment).
Transfers between Level 1 and Level 2
There has not been any transfers between Level 1 and
Level 2 in 2023. When transfers between levels occur,
these are considered to have occurred at the end of the
reporting period.
Movements in Level 3
In 2023 one derivative contract has been transferred from
level 3 to level 2, while one derivative contract is still
valuated according to level 3. One interest-bearing security
purchased in 2023 is valuated according level 3. Valuation
according to level 3 is due to observable market data not
being available. Fair value gains and losses in the income
statement during the period are included in Net result from
items at fair value, see Note 2.3 "Net result from items at
fair value".
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Nordea Eiendomskreditt AS
 
Annual Report 2023
25
31 December
 
2023, NOKt
Fair value
Valuation techniques
Unobservable input
Interest-bearing
 
securities
Other credit institutions
426 957
Option model
Correlation,
volatilities
Total
426 957
Derivatives,
 
net
Interest rate derivatives
-19 228
Option model
Correlation,
volatilities
Total
-19 228
Valuation techniques and inputs used in the fair value
in Level 3
The table above shows, for each class of assets and
liabilities categorised in level 3, the fair value, the valuation
techniques used to estimate the fair value and significant
unobservable inputs used in the valuation techniques.
Fair value of assets and liabilities in level 3 are estimated
using valuation techniques based on assumptions that are
not supported by market observable prices or rates. There
may be uncertainty about a valuation, resulting from the
choice of valuation technique or model used, the
assumptions embedded in those models, the extent to
which inputs are not market observable, or as a result of
other elements affecting the valuation technique. For
financial instruments portfolio adjustments are applied to
reflect such uncertainties and are deducted from the fair
values produced by the models or other valuation
techniques (for further information see accounting policies
in this note).
Financial assets and liabilities not held at fair value on
 
the balance sheet
31 Dec 2023
31 Dec 2022
Level in fair
value
hierarchy
NOKt
Carrying amount
Fair value
Carrying amount
Fair value
Assets not held at fair value on the balance sheet
Loans
 
336,727,511
337,499,000
323,927,906
328,228,331
3
Other financial assets
0
0
0
0
3
Prepaid expenses and accrued income
48,127
48,127
18,148
18,148
3
Total assets
336,775,638
337,547,127
323,946,054
328,246,479
Liabilities not held at fair value on the balance sheet
Deposits and debt instruments
324,399,462
324,500,812
306,369,973
306,385,298
3
Other financial liabilities
3,518
3,518
3,597
3,597
3
Accrued expenses and prepaid income
11,145
11,145
3,883
3,883
3
Total liabilities
324,414,125
324,515,475
306,377,453
306,392,778
Loans
The fair value of "Loans to credit institutions" and "Loans to
the public" have been estimated by discounting the
expected future cash flows with an assumed customer
interest rate that would have been used on the market if the
loans had been issued at the time of the measurement.
The assumed customer interest rate is calculated as the
benchmark interest rate plus the average margin on new
lending in Personal Banking. The fair value measurement
is categorised into Level 3 in the fair value hierarchy.
Other assets and prepaid expenses and accrued
income
The balance sheet items "Other assets" and "Prepaid
expenses and accrued income" consist of short
receivables, mainly accrued interest receivables. The fair
value is therefore considered to equal the carrying amount
and is categorised into Level 3 in the fair value hierarchy.
Deposits and debt instruments
The fair value of “Deposits by credit institutions”, “Debt
securities in issue” and “Subordinated liabilities” has been
calculated as the carrying amount adjusted for fair value
changes in interest rate risk and in own credit risk. The fair
value is categorised into Level 3 in the fair value hierarchy.
The fair value changes related to interest rate risk is based
on changes in relevant interest rates compared with
corresponding nominal interest rate in the portfolios. The
fair value changes in the credit risk is calculated as the
difference between the credit spread in the nominal interest
rate compared with the current spread that is observed in
the market. This calculation is performed on an aggregated
level for all long term issuance recognised in the balance
sheet items “Debt securities in issue” and “Subordinated
liabilities”. As the contractual maturity is short for “Deposits
by credit institutions” the changes in own credit risk related
to these items is assumed not to be significant. This is also
the case for short term issuances recognised in the
balance sheet items “Debt securities in issue” and
“Subordinated liabilities”.
Other liabilities and accrued expenses and prepaid
income
The balance sheet items "Other liabilities" and "Accrued
expenses and prepaid income" consist of short-term
liabilities, mainly liabilities on securities settlement. The fair
value is therefore considered to be equal to the carrying
amount and is categorised into Level 3 in the fair value
hierarchy.
Note 3.4
Financial instruments set off on
balance or subject to netting
agreements
Accounting policies
 
Nordea Eiendomskreditt offsets financial assets and
liabilities on the balance sheet if there is a legal right to
offset, in the ordinary course of business and in case of a
situation of resolution or public
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Nordea Eiendomskreditt AS
 
Annual Report 2023
26
administration, and if the intent is to settle the items net or
realise the asset and settle the liability simultaneously.
Enforceable master netting arrangements and similar
agreements
The fact that financial instruments are being accounted for
on a gross basis on the balance sheet, would not imply that
the financial instruments are not subject to master netting
agreements or similar arrangements. Generally financial
instruments (derivatives, repos and securities lending
transactions), would be subject to master netting
agreements, and as a consequence Nordea
Eiendomskreditt would be allowed to benefit from netting in
the case of default by its counterparties, in any calculations
involving counterparty credit risk.
For a description of counterparty risk see section
Counterparty credit risk in Note 9 “Risk and liquidity
management”.
Financial instruments set off on the balance sheet or subject to netting agreements
Amounts not set off but subject to master netting
agreements and similar agreements
31 Dec 2023, NOKt
Gross recognised
financial assets
1
Gross recognised
financial liabilities
set off on the
balance sheet
Net carrying
amount on the
balance sheet
2
Financial
instruments
Financial
collateral
 
received
 
Cash collateral
received
Net amount
Assets
Derivatives
183,957
0
183,957
-157,719
0
0
26,238
Total
183,957
0
183,957
-157,719
0
0
26,238
Liabilities
Derivatives
665,463
0
665,463
-157,719
0
0
507,744
Total
665,463
0
665,463
-157,719
0
0
507,744
Amounts not set off but subject to master netting
agreements and similar agreements
31 Dec 2022, NOKt
Gross recognised
financial assets
1
Gross recognised
financial liabilities
set off on the
balance sheet
Net carrying
amount on the
balance sheet
2
Financial
instruments
Financial
collateral
 
received
 
Cash collateral
received
Net amount
Assets
Derivatives
423,732
0
423,732
-221,051
0
0
202,681
Total
423,732
0
423,732
-221,051
0
0
202,681
Liabilities
Derivatives
761,036
0
761,036
-221,051
0
0
539,985
Total
761,036
0
761,036
-221,051
0
0
539,985
1
 
All amounts are measured at fair value.
2
 
Reverse repurchase agreements and Securities borrowing agreements are on the balance sheet classified as Loans to central banks, Loans to credit
 
institutions or Loans to the public. Repurchase agreements and Securities lending
agreements are on the balance sheet classified as Deposits by
 
credit institution or as Deposits and borrowings from the public.
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Nordea Eiendomskreditt AS
 
Annual Report 2023
27
Note 3.5
Loans and impairment
Accounting policies
 
Scope
Financial instruments classified as “Amortised cost” are
subject to impairment testing due to credit risk. This
includes assets recognized on the balance sheet as “Loans
to central banks”, “Loans to credit institutions”, “Loans to
the public” and “Interest-bearing securities”. These balance
sheet lines also include assets classified as Fair value
through profit or loss, which are not subject to impairment
testing. See accounting policies in Note 2.5 “Loan losses”
and Note 3.2 “Classification of assets and liabilities”.
Off-balance sheet commitments are also subject to
impairment testing.
Recognition and presentation
Amortised cost assets are recognised gross with an
offsetting allowance for the expected credit losses if the
loss is not regarded as final. The allowance account is
disclosed net on the face of the balance sheet, but the
allowance account is disclosed separately in the notes.
Changes in the allowance account are recognised in the
income statement and classified as “Loan losses”.
If the impairment loss is regarded as final, it is reported as
a realised loss and the carrying amount of the loan and the
related allowance for impairment loss are derecognised. An
impairment loss is regarded as final when the obligor is
filed for bankruptcy and the administrator has declared the
economic outcome of the bankruptcy procedure, or when
Nordea Eiendomskreditt waives its claims either through a
legal based or voluntary reconstruction, or when Nordea
Eiendomskreditt, for other reasons, deem it unlikely that the
claim will be recovered. See also section “Write-offs”
below.
Provisions for off-balance sheet exposures are classified as
“Provisions” on the balance sheet, with changes in
provisions classified as “Loan losses”.
Impairment testing
 
Nordea Eiendomskreditt classifies all exposures into stages
on an individual basis. Stage 1 includes assets where there
has been no significant increase in credit risk, stage 2
includes assets where there has been a significant
increase in credit risk and stage 3 (impaired loans) includes
defaulted assets. Nordea Eiendomskreditt monitors
whether there are indicators of exposures being credit
impaired (stage 3) by identifying events that have a
detrimental impact on the estimated future cash flows (loss
event). Nordea Eiendomskreditt applies the same definition
of default as the Capital Requirements Regulation. More
information on the identification of loss events can be found
in Note 9 “Risk and liquidity management”. Exposures
without individually calculated allowance will be covered by
the model based impairment calculation.
For significant exposures where a credit event has been
identified, the exposure is tested for impairment on an
individual basis. If the exposure is found impaired, an
individual provision is recognised. The carrying amount of
the exposure is compared with the sum of the net present
value of expected future cash flows. If the carrying amount
is higher, the difference is recognised as an impairment
loss. The expected cash flows are discounted with the
original effective interest rate and include the fair value of
the collaterals and other credit enhancements. The
estimate is based on three different forward-looking
scenarios that are probability weighted to derive the net
present value.
For insignificant exposures that have been individually
identified as credit impaired, the measurement of the
impairment loss is measured using the model described
below, based on the fact that the exposures are already in
default.
 
Model based allowance calculation
For exposures not impaired on an individual basis, a
statistical model is used for calculating impairment losses.
The provisions are calculated as the exposure at default
times the probability of default (PD) times the loss given
default (LGD). For assets in stage 1 this calculation is only
based on the coming 12 months, while for assets in stage 2
and 3 it is based on the expected lifetime of the asset.
The provisions for exposures for which there has been no
significant increase in credit risk since initial recognition are
based on the 12-month expected loss (stage 1). Provisions
for exposures for which there has been a significant
increase in credit risk since initial recognition, but that are
not credit impaired, are based on the lifetime expected
losses (stage 2). This is also the case for the insignificant
credit impaired exposures in stage 3.
 
Nordea Eiendomskreditt uses two different models to
identify whether there has been a significant increase in
credit risk or not. For assets held at transition to IFRS 9 on
1 January 2018, the change in internal rating and scoring
data is used to determine whether there has been a
significant increase in credit risk or not.
Internal rating/scoring information is used to assess the risk
of the customers and a deterioration in rating/scoring
indicates an increase in the credit risk of the customer.
Nordea Eiendomskreditt has concluded it is not possible to
calculate the lifetime PDs at origination without the use of
hindsight for assets already recognised on the balance
sheet at transition. Changes to the lifetime Probability of
Default (PD) are used as the trigger for assets recognised
after transition.
For assets evaluated based on lifetime PDs, Nordea
Eiendomskreditt uses a mix of absolute and relative
changes in PD as the transfer criterion:
 
Retail customers with an initial 12-month PD
below 1%:
Exposures with a relative increase in lifetime PD
above 100% and an absolute increase in 12-
month PD above 45bp are transferred to stage 2.
 
Retail customers with an initial 12-month PD
above or equal to 1%:
Exposures with a relative increase in lifetime PD
above 100% and an absolute increase in 12-
month PD above 300bp are transferred to stage 2.
For assets for which rating and scoring models are used,
the change in rating/scoring notches is calibrated to match
the significant increase in credit risk based on lifetime PD.
 
In addition, Nordea Eiendomskreditt applies the following
backstops for transfers between stages;
 
 
Customers with forbearance measures and
customers with payments more than thirty days
past due are also transferred to
Q4 2023 Eiendomskredittp2i0 Q4 2023 Eiendomskredittp4i1
 
Nordea Eiendomskreditt AS
 
Annual Report 2023
28
stage 2, unless already identified as credit
impaired (stage 3). Exposures with forbearance
measures will stay in stage 2 for a probation
period of 24 months from when the measures
were introduced. Once transferred back to stage
1, after the probation period, the exposures are
treated as any other stage 1 exposure when
assessing significant increase in credit risk.
 
 
Exposures more than 90 days past due will
normally be classified as stage 3, but this
classification will be rebutted if there is evidence
the customer is not in default. Such exposures will
be classified as stage 2.
 
 
Exposures with a relative change in annualised
lifetime PD exceeding 200% and with at least one
rating grade of deterioration are transferred to
stage 2.
 
Exposures classified as “high risk”, i.e. with a
rating grade of 2 or below, are transferred to stage
2.
 
When calculating provisions, including the staging
assessment, the calculation is based on both historical data
and probability weighted forward looking information.
Nordea Eiendomskreditt applies three macro-economic
scenarios to address the non-linearity in expected credit
losses. The different scenarios are used to adjust the
relevant parameters for calculating expected losses and a
probability weighted average of the expected losses under
each scenario is recognised as provisions. The model is
based on data collected before the reporting date, requiring
Nordea Eiendomskreditt to identify events that could affect
the provisions after the data is sourced to the model
calculation. Management evaluates these events and
adjusts the provisions if deemed necessary.
 
Write-offs
A write-off is a de-recognition of a loan or receivable from
the balance sheet and a final realisation of a credit loss
provision. When assets are considered as uncollectable
they should be written off as soon as possible, regardless
of whether the legal claim remains or not. A write-off can
take place before legal actions against the borrower to
recover the debt have been concluded in full. Although an
uncollectable asset is removed or written-off from the
balance sheet, the customer remains legally obligated to
pay the outstanding debt. When assessing the
recoverability of non-performing loans and determining if
write-offs are required, exposures with the following
characteristics are in particular focus (list not exhaustive):
 
Exposures past due more than 90 days. If,
following this assessment, an exposure or part of
an exposure is deemed as unrecoverable, it is
written-off.
 
Exposures under insolvency procedure where the
collateralisation of the exposure is low.
 
Exposures where legal expenses are expected to
absorb the proceeds from the bankruptcy
procedure and estimated recoveries are therefore
expected to be low.
 
A partial write-off may be warranted where there is
reasonable financial evidence to demonstrate an
inability of the borrower to repay the full amount,
i.e. a significant level of debt which cannot be
reasonably demonstrated to be recoverable
following forbearance treatment and/or the
execution of collateral.
 
Restructuring cases.
Discount rate
The discount rate used to measure impairment is the
original effective interest rate for loans attached to an
individual customer or, if applicable, to a group of loans. If
considered appropriate, the discount rate can be based on
a method that results in an impairment that is a reasonable
approximation of using the effective interest rate method as
basis for the calculation.
Impairment testing on loans to the public
Management is required to exercise critical judgements
and estimates when calculating loan impairment
allowances. When calculating allowances for individually
significant impaired loans, judgement is exercised to
estimate the amount and timing of the expected cash flows
to be received from the customers under different
scenarios, including the valuation of any collateral received.
Judgement is also applied when assigning the likelihood of
the different scenarios occurring.
Judgement is exercised to assess when an exposure has
experienced a significant increase in credit risk. If this is the
case, the provision should reflect the lifetime expected
losses, as opposed to a 12-month expected loss for
exposures not having increased significantly in credit risk.
Judgement is also exercised in the choice of modelling
approaches covering other parameters used when
calculating the expected losses, such as the expected
lifetime used in stage 2, as well as in the assessment of
whether the parameters based on historical experience are
relevant for estimating future losses.
The statistical models used to calculate provisions are
based on macro-economic scenarios, which requires
management to exercise judgement when identifying such
scenarios and when assigning the likelihood of the different
scenarios occurring. Judgement is also exercised in the
assessment of to what extent the parameters for the
different scenarios, based on historical experience, are
relevant for estimating future losses.
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Nordea Eiendomskreditt AS
 
Annual Report 2023
29
NOKt
31 Dec 2023
31 Dec 2022
Loans measured at amortised cost, impaired (Stage 1 and
 
2)
333,635,547
322,953,240
Impaired loans (Stage 3)
 
1,032,728
609,274
- Servicing
381,706
206,772
- Non-servicing
651,022
402,502
Loans before allowances
334,668,275
323,562,514
Allowances for individually assessed impaired loans (Stage
 
3)
-162,454
-115,213
- Servicing
-47,565
-36,088
- Non-servicing
-114,889
-79,124
Allowances for collectively assessed impaired loans (Stage
 
1 and 2)
-198,147
-195,315
Allowances
-360,601
-310,527
Loans, carrying amount
334,307,675
323,251,987
Accrued interest on loans to the public is included with NOK 800m at 31 December 2023.
Nordea Eiendomskreditt does not have any financial instruments for which a loss allowance has not been recognised
because of the collateral.
Carrying amount of loans measured at amortised
 
cost, before allowances
Credit institutions
The public
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Balance as at 1 January 2023
731,472
0
0
731,472
309,546,490
13,406,750
609,274
323,562,514
Changes due to origination and acquisition
0
0
0
0
106,878,337
389,327
138,714
107,406,378
Changes due to transfers between Stage 1 and
Stage 2, (net)
0
0
0
0
-1,491,060
1,491,060
0
0
Changes due to transfers between Stage 2 and
Stage 3, (net)
0
0
0
0
0
-49,369
49,369
0
Changes due to transfers between Stage 1 and
Stage 3, (net)
0
0
0
0
-85,127
0
85,127
0
Changes due to repayments and disposals
0
0
0
0
-122,601,603
-6,174,438
-259,804
-129,035,845
Changes due to write-offs
0
0
0
0
0
0
-3,007
-3,007
Other changes
1,731,034
0
1,731,034
23,946,065
8,379,114
413,056
32,738,235
Closing balance at 31 December 2023
2,462,506
0
0
2,462,506
316,193,103
17,442,444
1,032,728
334,668,275
Credit institutions
The public
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Balance as at 1 January 2022
748,009
0
0
748,009
294,411,988
10,955,292
530,835
305,898,114
Changes due to origination and acquisition
0
0
0
0
67,889,259
454,195
61,313
68,404,767
Changes due to transfers between Stage 1 and
Stage 2, (net)
0
0
0
0
-1,740,554
1,740,554
0
0
Changes due to transfers between Stage 2 and
Stage 3, (net)
0
0
0
0
0
-34,341
34,341
0
Changes due to transfers between Stage 1 and
Stage 3, (net)
0
0
0
0
-94,029
0
94,029
0
Changes due to repayments and disposals
0
0
0
0
-79,325,355
-3,298,755
-187,930
-82,812,041
Changes due to write-offs
0
0
0
0
0
0
-15,709
-15,709
Other changes
-16,537
0
-16,537
28,405,182
3,589,806
92,396
32,087,383
Closing balance at 31 December 2022
731,472
0
0
731,472
309,546,490
13,406,750
609,274
323,562,514
Movements of allowance accounts for loans measured at
 
amortised cost
The public
Stage 1
Stage 2
Stage 3
Total
Balance as at 1 January 2023
-50,045
-145,269
-115,213
-310,527
Changes due to origination and acquisition
-32,678
-47,828
-15,608
-96,113
Changes due to transfers from Stage 1 to Stage 2
3,525
-59,387
0
-55,862
Changes due to transfers from Stage 1 to Stage 3
116
0
-35,870
-35,754
Changes due to transfers from Stage 2 to Stage 1
-1,065
55,581
0
54,516
Changes due to transfers from Stage 2 to Stage 3
0
4,302
-26,803
-22,502
Changes due to transfers from Stage 3 to Stage 1
-30
0
9,150
9,121
Changes due to transfers from Stage 3 to Stage 2
0
-1,157
16,879
15,722
Changes due to changes in credit risk without stage transfer
20,729
-575
-36,592
-16,439
Changes due to repayments and disposals
12,454
43,182
41,602
97,238
Closing balance at 31 December 2023
-46,995
-151,151
-162,454
-360,601
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Nordea Eiendomskreditt AS
 
Annual Report 2023
30
The public
Stage 1
Stage 2
Stage 3
Total
Balance as at 1 January 2022
-35,501
-87,014
-95,703
-218,218
Changes due to origination and acquisition
-28,894
-36,748
-4,466
-70,108
Changes due to transfers from Stage 1 to Stage 2
1,764
-67,368
0
-65,604
Changes due to transfers from Stage 1 to Stage 3
50
0
-20,469
-20,419
Changes due to transfers from Stage 2 to Stage 1
-1,126
34,266
0
33,140
Changes due to transfers from Stage 2 to Stage 3
0
1,335
-11,285
-9,949
Changes due to transfers from Stage 3 to Stage 1
-98
0
5,796
5,698
Changes due to transfers from Stage 3 to Stage 2
0
-703
4,400
3,697
Changes due to changes in credit risk without stage transfer
6,362
-15,371
-32,961
-41,970
Changes due to repayments and disposals
10,117
27,383
41,529
79,029
Other changes
-2,719
-1,049
-2,055
-5,822
Closing balance at 31 December 2022
-50,045
-145,269
-115,213
-310,527
Rating / scoring information for loans measured at
 
amortised cost
Gross carrying amounts 31 Dec 2023
Gross carrying amounts 31 Dec 2022
Rating /scoring grade
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
A+
169,961,507
1,284,107
51,329
171,296,943
171,859,834
1,159,199
40,615
173,059,648
A
35,459,311
437,936
13,267
35,910,513
30,147,349
595,400
24,295
30,767,044
A-
21,895,783
572,654
13,061
22,481,498
19,782,796
591,616
3,674
20,378,086
B+
16,581,010
846,378
14,437
17,441,825
12,774,291
676,131
545
13,450,967
B
12,299,251
1,228,053
0
13,527,303
10,338,335
947,612
3,462
11,289,409
B-
7,159,737
1,261,714
17,668
8,439,120
6,289,202
955,618
7,478
7,252,298
C+
5,263,362
1,422,050
10,024
6,695,436
3,852,982
771,503
7,293
4,631,779
C
17,344,153
1,479,418
100,568
18,924,139
4,032,623
1,017,703
12,081
5,062,407
C-
3,085,519
823,429
26,508
3,935,456
2,852,195
697,378
19,571
3,569,144
D+
2,843,175
771,752
17,879
3,632,805
2,598,328
634,100
2,032
3,234,460
D
2,622,776
1,218,374
2,759
3,843,908
2,502,895
879,202
0
3,382,096
D-
16,248,673
2,385,448
43,113
18,677,234
12,848,614
1,539,774
11,133
14,399,521
E+
1,585,566
1,052,632
12,661
2,650,860
1,583,110
797,797
3,269
2,384,176
E
577,315
649,523
10,986
1,237,825
498,689
497,736
11,373
1,007,799
E-
2,122,930
650,781
72,774
2,846,486
1,020,262
593,809
47,373
1,661,444
F+
119,524
163,045
1,495
284,064
91,234
144,709
3,265
239,208
F
29,123
143,960
12,606
185,689
42,903
102,493
0
145,395
F-
251,932
781,317
15,204
1,048,453
217,459
356,870
33,403
607,733
0+ / 0 / 0-
324,327
252,915
576,958
1,154,200
142,899
125,742
335,141
603,783
Internal
1
2,588,291
0
0
2,588,291
857,257
0
0
857,257
Standardised/Unrated
2
292,346
16,959
19,431
328,736
25,944,705
322,357
43,271
26,310,333
Total
318,655,609
17,442,444
1,032,728
337,130,781
310,277,962
13,406,750
609,274
324,293,986
1
 
Exposures towards Nordea entities.
 
2
Of the standardized/unrated portfolio at end of 2022 NOK 25 973 946t stems from Nordea Direct Boligkreditt which where merged with Nordea Eiendomskreditt 1 November 2022.
Key ratios
31 Dec 2023
31 Dec 2022
Impairment rate, (stage 3) gross, basis points
1
30.9
18.8
Impairment rate (stage 3), net, basis points
2
26.0
15.3
Total allowance
 
rate (stage 1, 2 and 3), basis points
3
10.8
9.6
Allowances in relation to credit impaired loans (stage 3), %
4
15.7
18.9
Allowances in relation to loans in stage 1 and 2 ,
 
basis points
5
5.9
6.0
1
 
Impaired loans (Stage 3) before allowances divided by
 
total loans measured at amortised cost before allowances.
2
 
Impaired loans (Stage 3) after allowances divided by total loans
 
measured at amortised cost before allowances.
3
 
Total allowances
 
divided by total loans measured at amortised cost before
 
allowances.
4
 
Allowances for impaired loans (stage 3) divided by impaired
 
loans measured at amortised cost (stage 3) before
 
allowances.
5
 
Allowances for not impaired loans (stage 1 and 2) divided
 
by not impaired loans measured at amortised cost (stage
 
1 and 2) before allowances.
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Nordea Eiendomskreditt AS
 
Annual Report 2023
31
Note 3.6
Interest-bearing securities
Interest-bearing securities is split on different types of counterparties by acquired amount and carrying amount.
31 Dec 2023
31 Dec 2022
NOKt
Aquired amount
Carrying amount
Aquired amount
Carrying amount
Financial assets
States, municipalities and other public bodies
4,414,614
4,384,207
2,241,620
2,267,883
Mortgage institutions
6,180,428
6,201,359
3,189,464
3,168,003
Total
10,595,042
10,585,566
5,431,085
5,435,886
Note 3.7
Derivates and hedge accounting
Accounting policies
 
As a part of Nordea Eiendomskreditt’s risk management
policy, Nordea Eiendomskreditt has identified a series of
risk categories with corresponding hedging strategies using
derivative instruments, as set out below.
 
When a hedging relationship meets the specified hedge
accounting criteria set out in IAS 39, Nordea
Eiendomskreditt applies two types of hedge accounting:
 
 
Fair value hedge accounting
 
Cash flow hedge accounting
Nordea Eiendomskreditt has elected, as a policy choice
permitted under IFRS 9, to continue to apply hedge
accounting in accordance with the carve out version of IAS
39.
 
Under the EU carve-out version of IAS 39, fair value macro
hedge accounting may for instance, in comparison with IAS
39 as issued by the IASB, be applied to on-demand (core)
deposits, and hedge ineffectiveness in a hedge of assets
with prepayment options is only recognised when the
revised estimate of the amount of cash flows falls below the
designated bottom-layer.
At inception, Nordea Eiendomskreditt formally documents
how the hedging relationship meets the hedge accounting
criteria, including the economic relationship between the
hedged item and the hedging instrument, the nature of the
risk, the risk management objective and strategy for
undertaking the hedge and the method that will be used to
assess the effectiveness of the hedging relationship on an
ongoing basis.
 
The application of hedge accounting requires the hedge to
be highly effective. A hedge is regarded as highly effective
if at inception and throughout its life it can be expected that
changes in the fair value of the hedged item, as regards the
hedged risk can be essentially offset by changes in the fair
value of the hedging instrument. The result should be
within a range of 80–125 per cent.
Transactions that are entered into in accordance with
Nordea Eiendomskreditt’s hedging objectives but do not
qualify for hedge accounting, are economic hedge
relationships.
Fair value hedge accounting
Fair value hedge accounting is applied when derivatives
are hedging changes in the fair value of a recognised asset
or liability attributable to a specific risk in accordance with
Nordea Eiendomskreditt’s risk management policies. The
risk of changes in the fair value of assets and liabilities in
Nordea Eiendomskreditt’s financial statements originates
from loans with a fixed interest rate, causing interest rate
risk in accordance with Nordea Eiendomskreditt’s risk
management policies set out in Note 9 “Risk and liquidity
management”. The risk of changes in the fair value of
assets and liabilities in Nordea Eiendomskreditt’s financial
statements originates mainly from loans and securities with
a fixed interest rate, causing interest rate risk. Changes in
the fair value from derivatives as well as changes in the fair
value of the hedged item attributable to the risks being
hedged, are recognised separately in the income statement
under “Net result on items at fair value”. Given the hedge is
effective, the changes in the fair value of the hedged item
and the hedging instrument will offset each other.
 
The changes in the fair value of the hedged item
attributable to the risks hedged with the derivative
instrument are reflected in an adjustment to the carrying
amount of the hedged item, which is also recognised in the
income statement. The fair value change of the hedged
items held at amortised cost in hedges of interest rate risks
in macro hedges are reported separately in the balance
sheet item “Fair value changes of the hedged items in
portfolio hedge of interest rate risk”.
Fair value hedge accounting in Nordea Eiendomskreditt is
performed both on micro and on portfolio basis. Any
ineffectiveness is recognised in the income statement
under the item “Net result from items at fair value”.
 
Hedged items
A hedged item in a fair value hedge can be a recognised
single asset or liability, an unrecognised firm commitment,
or a portion thereof. The hedged item can also be a group
of assets, liabilities or firm commitments with similar risk
characteristics. Hedged items in Nordea Eiendomskreditt
consist of both individual assets or liabilities and portfolios
of assets and/or liabilities.
Hedging instruments
The hedging instruments used in Nordea Eiendomskreditt
are interest rate swaps and cross currency interest rate
swaps, which are always held at fair value.
 
Hedge effectiveness
When assessing hedge effectiveness retrospectively
Nordea Eiendomskreditt measures the fair value of the
hedging instruments and compares the change in the fair
value of the hedging instrument to the change in the fair
value of the hedged item. The effectiveness measurement
is made on a cumulative basis.
 
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Nordea Eiendomskreditt AS
 
Annual Report 2023
32
If the hedging relationship does not fulfil the hedge
accounting requirements, the hedge accounting is
terminated. For fair value hedges the hedging instrument is
reclassified to a trading derivative and the change in the
fair value of the hedged item, up to the point when the
hedge relationship is terminated, is amortised to the
income statement on a straight-line basis over the
remaining maturity of the hedged item.
 
Hedge ineffectiveness can arise from:
 
 
differences in timing of cash flows of hedged items
and hedging instruments
 
different interest rate curves applied to discount
the hedged items and hedging instruments
 
the effect of changes in Nordea’s or a
counterparty’s credit risk on the fair value of the
hedging instruments
 
disparity between expected and actual
prepayments of the loan portfolio
 
Cash flow hedge accounting
In accordance with Nordea Eiendomskreditt’s risk
management policies, cash flow hedge accounting is
applied when hedging the exposure to variability in future
interest payments on instruments with variable interest
rates and for the hedging of currency exposures. The
portion of the gain or loss on the hedging instrument, that is
determined to be an effective hedge, is recognised in other
comprehensive income and accumulated in the cash flow
hedge reserve in equity. The ineffective portion of the gain
or loss on the hedging instrument is recycled to the item
“Net result from items at fair value in the income
statement”.
 
Gains or losses on hedging instruments recognised in the
cash flow hedge reserve in equity through other
comprehensive income are recycled through other
comprehensive income and recognised in the income
statement in the same period as the hedged item affects
profit or loss, normally in the period that interest income or
interest expense is recognised.
Hedged items
A hedged item in a cash flow hedge can be highly probable
floating interest rate cash flows from recognised assets or
liabilities or from future assets or liabilities. Nordea
Eiendomskreditt uses cash flow hedges when hedging
currency risk on future payments of interest and principal in
foreign currency (both from issued debt in foreign currency
and/or intragroup lending).
 
Hedging instruments
The hedging instruments used in Nordea Eiendomskreditt
are cross currency basis swaps which are always held at
fair value, where the currency component is designated as
a cash flow hedge of currency risk and the interest
component as a fair value hedge of interest rate risk.
 
Hedge effectiveness
The hypothetical derivative method is used when
measuring the effectiveness retrospectively of cash flow
hedges, meaning that the change in a perfect hypothetical
swap is used as proxy for the present value of the
cumulative change in expected future cash flows from the
hedged transaction (the currency component).
 
If the hedging relationship does not fulfil the hedge
accounting requirements, the hedge accounting is
terminated. Changes in the unrealised value of the hedging
instrument will prospectively from the last time it was
proven effective be accounted for in the income statement.
The cumulative gain or loss on the hedging instrument that
has been recognised in the cash flow hedge reserve in
equity through other comprehensive income from the
period when the hedge was effective is reclassified from
equity to “Net result from items at fair value” in the income
statement if the expected transaction no longer is expected
to occur.
If the expected transaction no longer is highly probable, but
is still expected to occur, the cumulative gain or loss on the
hedging instrument that has been recognised in other
comprehensive income from the period when the hedge
was effective remains in other comprehensive income until
the transaction occurs or is no longer expected to occur.
The possible sources of ineffectiveness for cash flow
hedges are generally the same as for those for fair value
hedges described above. However, for cash flow hedges,
prepayment risk is less relevant, and the causes of hedging
ineffectiveness arise from the changes in the timing and the
amount of forecast future cash flows.
Effectiveness testing of cash flow hedges
Nordea Eiendomskreditt’s accounting policies for cash flow
hedges are described in section 8 “Hedge accounting”.
One important judgement in connection to cash flow hedge
accounting is the choice of method used for effectiveness
testing.
Where Nordea Eiendomskreditt applies cash flow hedge
accounting the hedging instruments used are
predominantly cross currency interest rate swaps, which
are always held at fair value. The currency component is
designated as a cash flow hedge of currency risk and the
interest component as a fair value hedge of interest rate
risk. The hypothetical derivative method is used when
measuring the effectiveness of these cash flow hedges,
meaning that the change in a perfect hypothetical swap is
used as proxy for the present value of the cumulative
change in expected future cash flows on the hedged
transaction (the currency component). Critical judgement
has to be exercised when defining the characteristics of the
perfect hypothetical swap.
Nordea Eiendomskreditt enters into derivatives for risk
management purposes. Derivatives held for risk
management purposes include hedges that either meet the
hedge accounting requirements or hedges that are
economic hedges, but do not meet the hedge accounting
requirements. The table below shows the fair values of
derivative financial instruments together with their notional
amounts. The notional amounts indicate the volume of
transactions outstanding at the year end and are not
indicative of either the market or credit risk.
Q4 2023 Eiendomskredittp2i0 Q4 2023 Eiendomskredittp2i1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nordea Eiendomskreditt AS
 
Annual Report 2023
33
Fair Value
Total nominal
amount
31 December 2023, NOKt
Positive
Negative
Derivatives at FVPL - Mandatorily
1
:
Interest rate swaps
-24,697
146,593
22,000,000
Total
 
-24,697
146,593
22,000,000
Derivatives used for hedge accounting:
Interest rate swaps
182,417
518,870
22,344,000
Currency interest rate swaps
26,238
0
938,000
Total
208,655
518,870
23,282,000
- of which fair value hedges
182,417
518,870
22,344,000
- of which cash flow hedges
26,238
0
938,000
Total derivatives
183,957
665,463
45,282,000
1
 
Derivatives at "Fair value through profit and loss (FVPL) -
 
Mandatorily" consists of derivatives held for economic
 
hedging, which do not meet the
requirements for hedge accounting according to IAS 39.
Fair Value
Total nominal
amount
31 December 2022, NOKt
Positive
Negative
Derivatives at FVPL - Mandatorily
1
:
Interest rate swaps
-17,698
158,537
37,000,000
Total
 
-17,698
158,537
37,000,000
Derivatives used for hedge accounting:
Interest rate swaps
146,033
504,303
16,376,000
Currency interest rate swaps
295,397
98,196
4,208,000
Total
441,430
602,499
20,584,000
- of which fair value hedges
146,033
504,303
16,376,000
- of which cash flow hedges
295,397
98,196
4,208,000
Total derivatives
423,732
761,036
57,584,000
Hedge Accounting
 
Risk management
Nordea Eiendomskreditt manages its identified market risks
according to the risk management framework and strategy
described in the Market risk section in Note 9 "Risk and
liquidity management".
Nordea Eiendomskreditt's exposure to market risk is non-
trading (the Banking Book), and includes all hedges
qualifying for hedge accounting. The hedging instruments
and risks hedged are further described below per risk and
hedge accounting relationship.
Interest rate risk
Nordea Eiendomskreditt’s primary business model is to
grant mortgage loans and fund these by issuing covered
bonds. Interest rate risk is the impact that changes in
interest rates could have on Nordea Eiendomskreditt’s
margins, profit or loss, and equity. Interest rate risk arises
from mismatch of interest from interest-bearing liabilities
and interest-bearing assets such as the loan portfolio and
the liquidity portfolio.
 
As part of Nordea Eiendomskreditt’s risk management
strategy, the Board has established limits on the non–
trading interest rate gaps for the interest rate sensitivities.
These limits are consistent with Nordea Eiendomskreditt’s
risk appetite and the company aligns its hedge accounting
objectives to keep exposures within those limits. Nordea
Eiendomskreditt's policy is to monitor positions on a daily
basis. For further information on measurement of risks, see
the Market risk section in Note 9 "Risk and liquidity
management".
For hedge accounting related to interest rate risk, the
hedge relationship is mainly on a portfolio basis and is
established by matching the notional of the derivatives
against the principle of the hedged items.
The benchmark rate is determined as a change in present
value of the future cash flows using benchmark rate
discount curves. The benchmark rate is separately
identifiable and reliably measurable and is typically the
most significant component of the overall change in fair
value or cash flows.
Fair value hedges
In order to reduce or eliminate changes in the fair value of
financial assets and financial liabilities due to movements in
interest rates, Nordea Eiendomskreditt enters into fair value
hedge relationships as described under accounting policies
in this note. Nordea Eiendomskreditt uses pay
floating/receive fixed interest rate swaps to hedge its fixed
rate liabilities.
There is an economic relationship between the hedged
item and the hedging instrument as the terms of the
interest rate swap match the terms of the fixed rate loan
(i.e., notional amount, maturity, payment and reset dates).
The below table presents the accumulated fair value
adjustments arising from continuing hedge relationships,
irrespective of whether or not there has been a change in
hedge designation during the year.
Q4 2023 Eiendomskredittp2i0 Q4 2023 Eiendomskredittp4i1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nordea Eiendomskreditt AS
 
Annual Report 2023
34
Hedged items
 
Interest rate risk
Fair value hedges
Carrying amount of hedged assets
1
904,000
1,076,000
 
- of which accumulated amount of fair value hedge adjustment
3
-42,670
-55,554
Carrying amount of hedged liabilties
2
21,937,456
15,599,363
 
- of which accumulated amount of fair value hedge adjustment
3
-297,984
-555,408
1
 
Presented on the balance sheet rows Loans to the public and Fair value changes of the hedged items in portfolio hedge of interest rate risk.
2
 
Presented on the balance sheet rows Debt securities in issue.
3
 
Of which all relates to continuing portfolio / micro hedges of interest rate risk.
Hedging instruments
 
Fair value
Total nom
amount
31 Dec 2023, NOKt
Positive
Negative
Fair value hedges
Interest rate risk
157,720
518,870
22,344,000
 
Fair value
Total nom
amount
31 Dec 2022, NOKt
Positive
Negative
Fair value hedges
Interest rate risk
146,033
504,303
16,376,000
The below table presents the changes in the fair value of
 
the hedged items and changes in fair value of the
 
hedging instruments used as the basis for
recognising ineffectiveness. These changes are recognised
 
on the row “Net result from items at fair value” in the
 
income statement.
Hedge ineffectiveness
Interest rate risk
NOKt
31 Dec 2023
31 Dec 2022
Fair value hedges
Changes in fair value of hedging instruments
83,505
-870,873
Changes in fair value of hedged items used as basis for
 
recognising hedge ineffectiveness
-130,335
898,117
Hedge ineffectiveness recognised in the income statement
-46,830
27,244
Currency risk
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.
Nordea Eiendomskreditt operates with a policy of hedging all currency risk (fx risk). All assets and liabilities of any material
amount that are denominated in foreign currencies are hedged through currency swaps. A change in foreign exchange
rate will therefore not have any impact on the net result for the year or on the equity.
Cash flow hedges
For hedge accounting relationships related to currency risk, the hedged item is a foreign currency component. The
hedging ration is one-to-one and is established by matching the notional of the derivatives against the principle of the
hedged item.
The below tables provide information about the hedging instruments addressing currency risk including the notional and
the carrying amounts of the hedging instruments as well as the cash flow hedge reserve.
Hedging instruments
 
Fair value
Total nom
amount
31 Dec 2022, NOKt
Positive
Negative
Cash flow hedges
 
Interest rate risk
26,238
0
938,000
 
Fair value
Total nom
amount
31 Dec 2022, NOKt
Positive
Negative
Cash flow hedges
 
Interest rate risk
295,397
98,196
4,208,000
In the below table, the fair value adjustments arising from continuing hedging relationships, irrespective of whether there
has been a change in hedge designation during the year, are specified.
Q4 2023 Eiendomskredittp2i0 Q4 2023 Eiendomskredittp2i1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nordea Eiendomskreditt AS
 
Annual Report 2023
35
Cash flow hedge reserve
Foreign exchange risk
NOKt
31 Dec 2023
31 Dec 2022
Balance at 1 January
-9,680
-14,945
Cash flow hedges:
 
Valuation gains/losses during
 
the year
595,316
41,160
 
Tax on valuation
 
gains/losses during the year
-148,829
-10,290
 
Transferred to the income statement during
 
the year
-595,168
-34,140
 
Tax on transfers
 
to the income statement during the year
148,792
8,535
Other comprehensive income, net of tax
111
5,265
Balance at 31 December
-9,569
-9,680
 
Maturity profile of the nominal amount of hedging instruments - Fair value hedges
31 Dec 2023
Payable on
demand
Maximum 3
months
3-12 months
1-5
 
years
More than 5
years
Total
Instrument hedging interest rate risk
 
0
3,000
550,000
6,743,000
15,048,000
22,344,000
Total
0
3,000
550,000
6,743,000
15,048,000
22,344,000
31 Dec 2022
Instrument hedging interest rate risk
 
0
165,000
7,000
7,793,000
9,349,000