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
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
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.
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
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
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.
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.
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.
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
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.
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
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
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
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:
148
148
-37
-37
Items that may not be reclassified subsequently to the
income statement
Defined benefit plans:
-1,945
-1,945
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:
7,019
7,019
-1,755
-1,755
Items that may not be reclassified subsequently to the
income statement
Defined benefit plans:
1,504
1,504
-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
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.
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
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
equity and subordinated liabilities, such as new issues of
shares, group contribution paid or received and
issued/amortised subordinated liabilities.
Cash and cash equivalents
institutions with no fixed maturity (bank deposits).
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.
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
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
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
-3,588
-2,260
Payments
-28
-43
-28
-43
Lending Products
111,634
109,563
111,634
109,563
Other
-23,078
-30,282
4,687
1,983
-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.
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.
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
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
3
13,023
2
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.
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”.
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
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.
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
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".
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
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
2
agreements are on the balance sheet classified as Deposits by credit institution or as Deposits and borrowings from the public.
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
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.
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
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
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
2
3
4
5
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.
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.
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
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.
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
3
-42,670
-55,554
Carrying amount of hedged liabilties
2
21,937,456
15,599,363
3
-297,984
-555,408
1
2
3
Hedging instruments
Total nom
amount
31 Dec 2023, NOKt
Positive
Negative
Fair value hedges
Interest rate risk
157,720
518,870
22,344,000
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
Total nom
amount
31 Dec 2022, NOKt
Positive
Negative
Cash flow hedges
Interest rate risk
26,238
0
938,000
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.
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:
595,316
41,160
-148,829
-10,290
-595,168
-34,140
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
17,314,000
Total
0
165,000
7,000
7,793,000
9,349,000
17,314,000
Maturity profile of the nominal amount of hedging instruments - Cash flow hedges
31 Dec 2023
Payable on
demand
Maximum 3
months
3-12 months
1-5 years
More than 5
years
Total
Instrument hedging foreign exchange risk
0
0
0
0
938,000
938,000
Total
0
0
0
0
938,000
938,000
31 Dec 2022
Instrument hedging foreign exchange risk
0
0
3,270,000
0
0
3,270,000
Total
0
0
3,270,000
0
0
3,270,000
Note 3.8
Cover Pool
31 Dec 2023
31 Dec 2022
NOKt
Nominal value
Net present
value
Nominal value
Net present
value
Loans to the public
333,867,921
333,695,176
323,064,144
322,450,476
- whereof pool of eligible loans
313,352,624
313,190,494
244,935,636
244,470,375
Supplementary assets and derivatives:
183,200
-266,132
409,225
-84,792
- whereof CIRS
183,200
45,739
409,225
180,556
- whereof IRS
0
-311,870
0
-265,348
Total cover pool
313,535,824
312,924,362
245,344,861
244,385,583
Debt securities in issue (net outstanding amount)
195,948,200
196,799,615
148,332,225
148,427,632
Over-collateralization calculated on net outstanding covered bonds
60.0%
59.0%
65.4%
64.6%
Debt securities in issue (issued amount)
195,948,200
196,799,615
148,332,225
148,427,632
Over-collateralization calculated on issued covered bonds (gross outstanding covered
bonds)
1
60.0%
59.0%
65.4%
64.6%
1
Without deduction for holdings of own bonds, if any.
The cover pool increase during 2023 is due to both lending
growth and implementation of a dynamic cover pool
allocation logic that allows loans with LTV above the 80%
limit (60% for holiday homes) to be included in the cover
pool with the portion up to the LTV limit.
The guidelines for calculating the over-collateralization
requirement in the Norwegian legislation is given in the
Financial Undertakings Act (Act No. 17 of 10 April 2015)
Chapter 11 Bonds secured on a loan portfolio (covered
bonds), and appurtenant regulations. The calculation shall
be based on gross outstanding covered bonds and by use
of nominal values. Net present values are disclosed for
information and may differ from fair values disclosed in
other notes to this report due to different calculation
methods.
Nordea Eiendomskreditt AS Annual Report 2023
36
Note 3.9
Debt securities in issue and loans from financial institutions
31 Dec 2023
31 Dec 2022
NOKt
Nominal value
Other
1
Carrying
amount
Nominal value
Other
1
Carrying
amount
Covered bonds issued in Norwegian kroner
194,827,000
143,715,000
Outstanding covered bonds issued in Norwegian kroner
194,827,000
143,715,000
Covered bonds issued in GBP (in NOK)
0
3,565,425
Covered bonds issued in EUR (in NOK)
1,121,200
1,051,800
Total outstanding covered bonds
195,948,200
1,501,215
197,449,415
148,332,225
1,020,049
149,352,274
Loans and deposits from financial institutions for a fixed term
124,930,000
915,296
125,845,296
155,312,021
601,858
155,913,879
Subordinated loan
1,100,000
4,751
1,104,751
1,100,000
3,819
1,103,819
Total
321,978,200
2,421,262
324,399,462
304,744,246
1,625,727
306,369,973
1
Maturity information
Maximum 1 year
60,987,000
65,238,796
More than 1 year
260,991,200
239,505,450
Total
321,978,200
304,744,246
Norwegian covered bonds (NOKt) at 31 December 2023
ISIN code
Issue date
Final
payment
date
Interest
Interest rate in %
Currency
Outstanding
nominal
amount
NO0013072991
22/11/2023
22/11/2028
Float
3M Nibor + 0.54%
NOK
7,000,000.00
NO0012982729
10/08/2023
10/08/2032
Fixed
4.61
NOK
1,000,000.00
NO0012959636
14/07/2023
14/07/2025
Float
3M Nibor + 0.28%
NOK
1,000,000.00
NO0012838277
14/02/2023
14/02/2035
Fixed
3.39
NOK
1,420,000.00
NO0012829763
02/02/2023
02/02/2028
Float
3M Nibor + 0.48%
NOK
19,800,000.00
NO0012732017
28/10/2022
28/10/2037
Fixed
4.0
NOK
1,420,000.00
NO0012720988
12/10/2022
12/10/2029
Fixed
4.0
NOK
6,350,000.00
NO0012513532
03/05/2022
17/03/2027
Float
3M Nibor + 0.33%
NOK
23,800,000.00
NO0012441643
15/02/2022
15/02/2030
Fixed
2.45
NOK
3,500,000.00
NO0011151771
17/11/2021
17/09/2026
Float
3M Nibor + 0.75%
NOK
7,000,000.00
NO0010981301
21/04/2021
18/03/2026
Float
3M Nibor + 1.50%
NOK
27,400,000.00
NO0010893282
16/09/2020
16/09/2025
Float
3M Nibor + 1.50%
NOK
25,000,000.00
NO0010873334
22/01/2020
19/03/2025
Float
3M Nibor + 0.26%
NOK
30,000,000.00
NO0010852650
22/05/2019
22/05/2026
Fixed
2.17
NOK
6,000,000.00
NO0010843626
26/02/2019
19/06/2024
Float
3M Nibor + 0.34%
NOK
32,387,000.00
NO0010821986
04/05/2018
04/05/2048
Fixed
2.6
NOK
300,000.00
NO0010812084
11/12/2017
17/06/2043
Fixed
3M Nibor + 0.75%
NOK
300,000.00
NO0010766827
21/06/2016
18/06/2031
Fixed
2.2
NOK
500,000.00
NO0010678766
08/05/2013
08/05/2025
Fixed
3.6
NOK
100,000.00
NO0010593064
22/12/2010
18/06/2025
Fixed
4.8
NOK
550,000.00
Total
194,827,000
Covered bonds issued in foreign currency at 31 December 2023
ISIN code
Issue date
Final
payment
date
Interest
Interest rate in %
Currency
Outstanding
nominal
amount
XS1451306036
19/07/2016
15/07/2031
Fixed
0.738
EUR
100,000.00
Total (in NOKt equivalent)
1,121,200
Nordea Eiendomskreditt AS Annual Report 2023
37
NOKt
2023
2022
Commitments
4 818
8 211
1 581
2 505
3 233
5 706
4
0
Total
4 818
8 211
4 Provisions
Loan loss provisions on off-balance sheet items amounted
to NOK 4.8m (NOK 8.2m). These provisions are related to
commitments as described in Note 5.2 “Commitments”.
Provisions
Nordea Eiendomskreditt AS Annual Report 2023
38
5 Off-balance sheet items
Note 5.1
Assets pledged as security for own
liabilities
Assets pledged as security for own liabilities contain
mortgage loans to the public that have been registered as
collateral for issued covered bonds. Counterpart is the
public. These transactions are long term with maturity 3-6
years.
The terms and conditions that apply to the collateral
pledged are regulated by the Financial Undertakings Act
(Act No. 17 of 10 April 2015) Chapter 11 Bonds secured on
a loan portfolio (covered bonds), and appurtenant
regulations.
NOKt
31 Dec 2023
31 Dec 2022
Assets pledged as security for own liabilities:
Loans to the public
313,603,507
245,131,742
Total
313,603,507
245,131,742
The above pledges pertain to the following liability and committment items:
Debt securities in issue
1
197,747,399
149,907,682
Total
197,747,399
149,907,682
1
Note 5.2
Commitments
NOKt
31 Dec 2023
31 Dec 2022
Accepted, not disbursed loans (unutilised portion of granted limit on flex loans)
35,072,002
31,618,092
Total
35,072,002
31,618,092
1
Nordea Eiendomskreditt AS Annual Report 2023
39
6 Employee benefits and key management
personnel remuneration
All forms of consideration given by Nordea Eiendomskreditt
to its employees as compensation for services performed
are employee benefits. Short-term benefits are to be settled
within twelve months after the reporting period when the
services have been performed. Post-employment benefits
are benefits payable after termination of the employment.
Post-employment benefits in the company consist only of
pensions.
Note 6.1
Staff costs
Accounting policies
Short-term benefits
Short-term benefits consist mainly of fixed and variable
salary. Both fixed and variable salaries are expensed in the
period when the employees have performed services to
Nordea Eiendomskreditt.
Staff costs
Remuneration structure
The company’s remuneration structure compromise fixed
remuneration and variable remuneration.
Fixed base salary
and is affected by job complexity, responsibility,
performance and local market conditions.
Pension and insurance
standard of living for employees after retirement as well as
personal insurance coverage during employment. Pension
and insurance provisions are in accordance with local laws,
regulations and market practice and are either collectively
agreed schemes or company-determined or a combination.
The company aims to have defined contribution pension
schemes.
Benefits
that is either individually agreed or based on local laws,
market practice, collective bargaining agreements and
company-determined practice.
The Nordea Incentive Plan (NIP)
motivate and retain senior leaders and select roles in
primarily in business areas where the use of variable pay is
established market practice. The NIP aims to reward strong
performance and efforts. The assessment of individual
performance is based on a predetermined set of well-
defined financial as well as non-financial goals. Individual
NIP awards will not exceed the annual fixed salary. Awards
from the NIP 2023 for people who are defined as material
risk takers are allocated partly in cash and partly in
instruments with subsequent retention. Parts of the awards
for participants in the NIP who are material risk takers are
subject to a four - to five-year pro rate deferral period, in
certain exceptions three years, with forfeiture conditions
during the deferral period.
Profit Sharing Plan (PSP)
Nordea employees but not to employees that is eligible for
any of Nordea’s other formal annual variable remuneration
plans. For eligible employees, the Profit Sharing Plan is
offered irrespective of position and salary and aims to
collectively reward employees based on achievement in
relation to predetermined financial goals as well as goals
relation to customer satisfaction and ESG. The Profit
Sharing Plan is capped financially, and the outcome is not
linked to the value of Nordea’s share price. The plan
includes forfeiture conditions.
Explanations of individually specified remuneration in
the table below.
Fixed salary and fees
for the financial year paid by Nordea Eiendomskreditt AS.
Variable salary
Benefits
communication allowance.
Pensions
rights under the pension plan during the financial year. The
amount stated is the annual change in the present value of
the pension obligations (PBO) exclusive of social security
tax, which best reflects the change in pension rights for the
financial year.
No director's fee is paid to directors who are employees of
the Nordea group. The fees shown in the table are fees
paid in 2023 for services provided in 2022.
Nordea Eiendomskreditt has provided mortgage loans to its
employees on standard employee terms, close to ordinary
customer terms. Loans to the executive management are
made from the balance sheet of Nordea Bank Norway.
The company has not entered into any agreements that
entitle the Managing Director or the Chairman of the Board
to specific compensation in the event of any change in their
employment or office.
Nordea Eiendomskreditt AS Annual Report 2023
40
31 Dec 2023, NOKt
Fixed salary
and fees
Variable
salary
Other
benefits
Total
remunerations
Executive management of Nordea Eiendomskreditt AS
Elen M Stiksrud, CEO
(acting CEO from 6.2.2023 and CEO from 9.11.2023)
1,108
520
290
211
2,129
Børre Sten Gundersen, CEO
(until 9.11.2023)
1
1,659
552
419
156
2,786
Total for the executive management
2,767
1,072
710
367
4,915
1
Board of Directors of Nordea Eiendomskreditt AS
Gro Elisabeth Lundevik
210
210
Alex Madsen
150
150
Total for the directors of Nordea Eiendomskreditt AS
360
0
0
0
360
Total remuneration of executive management and elected officers of
Nordea Eiendomskreditt AS
3,127
1,072
710
367
5,275
31 Dec 2022, NOKt
Fixed salary
and fees
Variable
salary
Other
benefits
Total
remunerations
Executive management of Nordea Eiendomskreditt AS
Børre Sten Gundersen, CEO
1,618
465
385
200
2,667
Total for the executive management
1
1,618
465
385
200
2,667
1
period before the merger with Nordea Eiendomskreditt AS.
Board of Directors of Nordea Eiendomskreditt AS
Gro Elisabeth Lundevik
140
140
Alex Madsen
140
140
Total for the directors of Nordea Eiendomskreditt AS
2
280
0
0
0
280
2
Total remuneration of executive management and elected officers of
Nordea Eiendomskreditt AS
1,898
465
385
200
2,947
Nordea Eiendomskreditt AS Annual Report 2023
41
Note 6.2
Retirement benefit obligations
Accounting policies
Post-employment benefits
Pension plans
The company’s liabilities in respect of its retirement benefit
obligations to its employees are mainly funded schemes
covered by assets in pension funds. If the fair value of plan
assets, associated with a specific pension plan, is lower
than the gross present value of the defined benefit
obligation, determined using the projected unit credit
method, the net amount is recognised as a liability
(“Retirement benefit obligations”). If not, the net amount is
recognised as an asset (“Retirement benefit assets”). Non-
funded pension plans are recognised as “Retirement
benefit obligations”.
Pension costs
Obligations for defined contribution pension plans are
recognised as an expense as the employee renders
services to the entity and the contribution payable in
exchange for that service becomes due. Nordea
Eiendomskreditt’s net obligation for defined benefit pension
plans is calculated separately for each plan by estimating
the amount of future benefit that employees have earned
for their service in the current and prior periods. That
benefit is discounted to determine its present value.
Actuarial calculations including the projected unit credit
method are applied to assess the present value of defined
benefit obligations and related costs, based on several
actuarial and financial assumptions.
When establishing the present value of the obligation and
the fair value of any plan assets, remeasurement effects
may arise as a result of changes in actuarial assumptions
and experience effects (actual outcome compared to
assumptions). The remeasurement effects are recognised
immediately in equity through other comprehensive
income.
When the calculation results in a benefit, the recognised
asset is limited to the present value of any future refunds
from the plan or reductions in future contributions to the
plan.
Social security contribution are calculated and accounted
for based on the net recognized surplus or deficit by the
plan and is included in the balance sheet as “Retirement
benefit obligations” or “Retirement benefit assets”.
Discount rate in Defined Benefit Plans
The discount rate is determined by reference to high quality
corporate bonds, where a deep enough market for such
bonds exists. Covered bonds are in this context considered
to be corporate bonds. In Norway, the discount rate is
determined with reference to covered bonds.
Nordea Eiendomskreditt sponsors both defined contribution
plans (DCP) and defined benefit plans (DBP).
Nordea Eiendomskreditt is obliged to have an occupational
pension scheme pursuant to the Mandatory Occupational
Pension Plan Act. Nordea Eiendomskreditt's pension
schemes meet the demands required by this act. The
company has funded its pension obligations through
Nordea Norge Pensjonskasse (pension fund), which is
managed by Gabler AS, and are final salary and service
based pension plans providing pension benefits on top of
the statutory systems. The company also has retirement
benefit obligations in connection with supplementary
pensions and early retirement pensions, which are not
covered by the pension fund. The defined benefit plan
(DBP) is closed for new employees as from 2011, and
pensions for new employees are instead based on defined
contribution plan (DCP) arrangements. From 01 January
2017 employees born later than 1957 were converted to
DCP. For employees affected by this change, all earned
benefit will retain as paid-up premiums. The DCP
arrangements are administered by Nordea Liv. Nordea
Eiendomskreditt is also member of Fellesordningen for
AFP (Avtalefestet Pensjon) established with effect from
2011. DCPs are not reflected in the balance sheet, unless
when earned pension rights have not been paid for.
Defined benefit plans may impact Nordea Eiendomskreditt
via changes in the net present value of obligations and/or
changes in the market value of plan assets. Changes in the
obligation are most importantly driven by changes in
assumptions on discount rates (interest rates and credit
spreads), salary increases, turnover and mortality as well
as relevant experience adjustments where the actual
outcome differs from the assumption. Assets are invested
in diversified portfolios as further disclosed below, with
bond exposures mitigating the interest rate risk in the
obligations and a fair amount of real assets (inflation
protected) to reduce the long term inflationary risk in
liabilities.
In 2016 the Board of Directors of Nordea Eiendomskreditt
approved of changing the pension plan for employees born
after 1957, and they were converted from DBP to DCP
from 1 January 2017.
During 2023 employees in the DCP have had the following
contribution rates:
* Pensionable salary representing 0-7.1 times G: 7%
* Pensionable salary representing 7.1-12 times G: 18%
The pension cost recognised in Nordea Eiendomskreditt's
income statement (as staff costs) for the DCP is NOKt
2.423 in 2023.
NOKt
31 Dec 2023
31 Dec 2022
Defined benefit plans, net
-27,417
-24,682
Total
-27,417
-24,682
IAS 19 Pension calculations and assumptions
Assumptions
1
2023
2022
Discount rate
3.81%
3.40%
Salary increase
3.50%
3.50%
Inflation
2.25%
2.00%
Social Security increase
3.50%
3.50%
Expected adjustments of current pensions
1.70%
1.00%
Nordea Eiendomskreditt AS Annual Report 2023
42
¹ The assumptions disclosed for 2023 have an impact on the liability calculation by year-end 2023, while the assumptions disclosed for 2022 are used for calculating the pension
expense in 2023.
Sensitivities - Impact on Pension Benefit Obligation (PBO)
2023
2022
Discount rate - Increase 50bps
-6.8%
-7.0%
Discount rate - Decrease 50bps
7.5%
7.7%
Salary increase - Increase 50bps
0.1%
0.2%
Salary increase - Decrease 50bps
-0.1%
-0.1%
Inflation - Increase 50bps
7.6%
7.8%
Inflation - Decrease 50bps
-6.9%
-7.1%
Net retirement benefit liabilities/assets
NOKt
2023
2022
Obligations
63,983
59,231
Plan assets
36,566
35,301
Restriction to Net Defined Benefit Asset due to the Asset Ceiling
0
-751
Net liability (-)/asset (+)
-27,417
-24,682
Movements in the obligation
NOKt
2023
2022
Opening balance
59,231
63,248
Current service cost
772
517
Interest cost
1,858
1,145
Pensions paid
-1,154
-1,461
Remeasurement from changes in financial assumptions
2,801
-7,615
Remeasurement from experience adjustments
349
3,350
Closing balance before social security contribution
63,858
59,184
Change in provision for social security contribution
1
126
47
Closing balance
63,983
59,231
1
The average duration of the PBO is 15 years based on discounted cash flows. The fact that all DBPs are closed for new
entrants leads to lower duration. The increase in average duration during the year is due to changed assumptions.
Movements in the fair value of plan assets
NOKt
2023
2022
Opening balance
35,301
37,241
Interest income (calculated using the discount rate)
1,185
724
Pensions paid
-444
-784
Contributions/refunds by employer
90
15
Administration cost
-11
0
Remeasurement (actual return less interest income)
446
-1,895
Closing balance
36,566
35,301
Asset composition
The combined return on assets in 2023 was 3,4% (-6,0%). All asset classes generated positive return with equities as the
main driver. At the end of the year, the equity exposure in the foundation represented 12% (18%) of total assets.
Asset composition in funded schemes
2023
2022
Equity
12%
21%
Bonds
72%
61%
Real estate
15%
16%
Other assets
1%
3%
Movements in the effect of the Asset Ceiling
NOKt
2023
2022
Opening balance
-751
0
Interest on the effect of the Asset Ceiling in Profit and Loss Account
-26
0
Change in the Effect of the Asset Ceiling in Other Comprehensive Income (OCI)
777
-751
Closing balance
0
-751
Defined benefit pension costs and Defined contribution plan cost
The total net pension cost recognised in Nordea Eiendomskreditt's income statement (as staff costs) for 2023 is NOKt
4.542. The amount covers both funded and unfunded pension plans, DCP as well as AFP premium.
Nordea Eiendomskreditt AS Annual Report 2023
43
Recognised in the income statement, NOKt
2023
2022
Current service cost
772
517
Net interest
671
421
Social Security Contribution
317
179
Pension cost on defined benefit plans
1,761
1,118
Recognised in other comprehensive income, NOKt
2023
2022
Remeasurement from changes in financial assumptions
3,167
-4,151
Remeasurement of plan assets (actual return less interest income)
-446
1,895
Change in the Effect of the Asset Ceiling excluding Interest
-777
751
Pension cost on defined benefit plans
1,944
-1,504
The defined benefit pension plan cost for 2024 is expected to be NOKt 1.966.
Nordea Eiendomskreditt AS Annual Report 2023
44
Note 7
Capital
adequacy
Capital adequacy is a measure of the financial strength of a
bank, usually expressed as a ratio of capital to assets.
There is a worldwide capital adequacy standard (Basel III)
drawn up by the Basel Committee on Banking Supervision.
Within the EU, the capital adequacy requirements outlined
in the Capital Requirement Directive (CRD IV) and Capital
Requirement Regulation (CRR), entered into force on 1
January 2014. In Norway, CRR and CRD IV entered finally
into force on 31 December 2019.
Over the years, amendments have been made to the first
version of the capital adequacy regulation. In 2014, revised
rules for calculating capital adequacy required higher
capitalisation levels and better quality of capital, better risk
coverage, the introduction of a leverage ratio as a backstop
to the risk based requirement, measures to promote the
build-up of capital to be drawn in periods of stress and new
liquidity standards were introduced. The CRD IV and the
BRRD were implemented through national law within all EU
countries during 2014, while the CRR entered into force in
all EU countries from the first of January 2014. In June
2019, the ‘Banking package’ containing revisions to the
BRRD, the CRD and the CRR was adopted .The
implementation of the ‘banking package’ in Norway entered
into force 1 June 2022.
The Basel III framework is implemented in the EU through
the CRR and the CRD IV and is built on three Pillars;
• Pillar I – requirements for the calculation of REA
and capital requirements
• Pillar II – rules for the Supervisory Review
Process (SREP), including the Internal Capital
Adequacy Assessment Process (ICAAP)
• Pillar III – rules for the disclosure on risk and
capital management, including capital adequacy
Nordea Eiendomskreditt performs an ICAAP with the
purpose to review the management, mitigation and
measurement of material risks within the business
environment in order to assess the adequacy of
capitalisation and to determine an internal capital
requirement reflecting the risks of the institution.
The ICAAP is a continuous process which increases
awareness of capital requirements and exposure to
material risks throughout the organisation, both in the
business area and legal entity dimensions. Stress tests are
important drivers of risk awareness, looking at capital and
risk from a firm-wide perspective on a regular basis and on
an ad-hoc basis for specific areas or segments. The
process includes a regular dialogue with supervisory
authorities, rating agencies and other external stakeholders
with respect to capital management, measurement and
mitigation techniques used.
Nordea Eiendomskreditt’s capital levels continue to be
adequate to support the risks taken, both from an internal
perspective as well as from the perspective of supervisors.
Heading into 2024, Nordea will continue to closely follow
the development of the new capital requirement regime as
well as maintain its open dialogue with the supervisory
authorities.
Common Equity Tier 1 capital and Tier 1 capital
Common Equity Tier (CET) 1 capital is defined as eligible
capital including eligible reserves, net of regulatory required
deductions made directly to CET 1 capital. The capital
recognised as CET 1 capital holds the ultimate
characteristics for loss absorbance defined from a going
concern perspective and represents the most subordinated
claim in the event of liquidation. The Tier 1 capital is
defined as the sum of CET 1 capital and Additional Tier 1
(AT1) capital where AT1 capital is the total of instruments
(hybrids) issued by the bank that meet the transitional
regulatory criteria and not included in the CET1 net after
AT1 deductions. All AT1 capital instruments are undated
subordinated capital loans.
Eligible capital and eligible reserves
Paid up capital is the share capital contributed by
shareholders, including the share premium paid. Eligible
reserves consist primarily of retained earnings, other
reserves and income from current year. Retained earnings
are earnings from previous years reported via the income
statement. Positive income from current year is included as
eligible capital after verification by the external auditors;
however negative income must be deducted. Repurchased
own shares or own shares temporary included in trading
portfolios are deducted from eligible reserves.
Additional Tier 1 instruments
The inclusion of undated subordinated loans in additional
Tier 1 capital is restricted and repurchase can normally not
take place until five years after original issuance of the
instrument. Undated subordinated loans may be repaid
only upon decision by the Board of Directors in Nordea
Eiendomskreditt and with the permission of the Norwegian
FSA. Further, there are restrictions related to step-up
conditions, order of priority, and interest payments under
constraint conditions. Additional Tier 1 instruments issued
that fulfil the regulatory requirements are fully included
whereas remaining instruments are phased out according
to transitional rules.
For the additional Tier 1 instruments, conditions specify
appropriation in order to avoid being obliged to enter into
liquidation. To the extent that may be required to avoid
liquidation, the principal amounts of additional Tier 1
instruments (together with accrued interest) would be
written down and converting such amount into a conditional
capital contribution.
Tier 2 capital
Tier 2 capital must be subordinated to depositors and
general creditors of the bank. It cannot be secured or
covered by a guarantee of the issuer or related entity or
include any other arrangement that legally or economically
enhances the seniority of the claim vis-á-vis depositors and
other bank creditors.
Tier 2 instruments
Tier 2 instruments consist mainly of subordinated debt. Tier
2 instruments include two different types of subordinated
loan capital; undated loans and dated loans. Tier 2
instruments issued that fulfil the regulatory requirements
are fully included whereas remaining instruments are
phased out according to transitional rules.
The basic principle for subordinated debt in own funds is
the order of priority in case of a default or bankruptcy
situation. Under such conditions, the holder of the
subordinated loan would be repaid after other creditors, but
before shareholders. The share of outstanding loan amount
possible to include in the Tier 2 capital
Nordea Eiendomskreditt AS Annual Report 2023
45
related to dated loans is reduced if the remaining maturity
is less than five years.
These disclosures have been prepared in accordance with
Part 8 of the CRR and applicable national regulations.
Summary of items included in own funds
NOKm
31 Dec 2023
31 Dec 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
Own Funds, excluding profit
NOKm
31 Dec 2023
31 Dec 2022
Common Equity Tier 1 capital, excluding profit
21,293
21,330
Total Own Funds, excluding profit
22,555
22,543
Minimum capital requirement and REA, Risk Exposure Amount
31 Dec 2023
31 Dec 2023
31 Dec 2022
31 Dec 2022
NOKm
Minimum
Capital
requirement
REA
Minimum
Capital
requirement
REA
Credit risk
6,276
78,450
6,111
76,377
9
111
10
124
IRB
5,733
71,661
5,360
66,995
25
308
17
214
5,708
71,351
5,343
66,780
4,946
61,830
4,691
58,634
762
9,521
652
8,146
0
2
0
1
Standardised
543
6,789
751
9,382
- institutions
49
613
21
260
- retail
0
0
1
16
- secured by mortgages on immovable properties
493
6,168
726
9,069
- in default
1
8
3
37
Operational risk
283
3,537
302
3,784
Standardised
283
3,537
302
3,784
Total
6,559
81,987
6,413
80,161
Capital ratios
Percentage
31 Dec
2023
31 Dec
2022
Common Equity Tier 1 capital ratio
26.0
26.6
Tier 1 capital ratio
26.0
26.6
Total capital ratio
27.5
28.1
Leverage ratio
Common Equity Tier 1 capital ratio
21,285.2
21,317.0
Tier 1 capital ratio
364,888.8
344,994.3
Total capital ratio
5.8
6.2
Nordea Eiendomskreditt AS Annual Report 2023
46
8 Other disclosures
Note 8.1
Additional disclosures on the
statement of changes in equity
Accounting policies
Share premium
The share premium consists of the difference between the
subscription price and the quota value of the shares in
Nordea Eiendomskreditt’s rights issue. Transaction costs in
connection to the rights issue have been deducted.
Other reserves
Other reserves comprise income and expenses, net after
tax effects, which are reported in equity through other
comprehensive income. These reserves include reserves
for cash flow hedges and accumulated remeasurements of
defined benefit pension plans.
Retained earnings
Apart from undistributed profits from previous years,
retained earnings may also include the equity portion of
untaxed reserves. Untaxed reserves according to national
rules are accounted for as equity net of deferred tax at
prevailing tax rates in the respective country.
Net profit
Net profit before Other comprehensive income in percent of
average total assets was 0.15% in 2023 (0.20% in 2022).
Note 8.2
Maturity analysis for assets and liabilities
Contractual undiscounted cash flows
31 Dec 2023, NOKm
< 1 month
1-3 month
3-12
month
1-2 years
2-5 years
5-10 years
>10 years
Total
Loans to the public
2,758
4,496
20,608
26,572
83,081
167,182
273,023
577,721
Loans to credit institutions
1,962
505
0
0
0
0
0
2,467
Interest-bearing securities
123
101
123
2,500
9,272
0
0
12,120
Total non-derivative financial assets
4,844
5,101
20,731
29,073
92,353
167,182
273,023
592,308
Deposits by credit institutions
572
1,906
31,192
61,128
41,473
0
0
136,271
Debt secuirities in issue
11
2,534
39,365
63,729
98,430
13,735
3,947
221,751
- of which covered bonds
11
2,534
39,365
63,729
98,430
13,735
3,947
221,751
Subordinated liabilities
0
1,121
0
0
0
0
0
1,121
Total non-derivative financial liabilities
583
5,561
70,557
124,857
139,903
13,735
3,947
359,143
Derivatives, cash inflows
0
404
1,076
931
1,715
2,377
505
7,008
Derivatives, cash outflows
336
213
1,514
1,491
2,556
2,713
762
9,586
Derivatives, net cash flows
-336
191
-437
-561
-841
-336
-258
-2,579
Credit commitments
35,072
31 Dec 2022, NOKm
< 1 month
1-3 month
3-12
month
1-2 years
2-5 years
5-10 years
>10 years
Total
Loans to the public
2,181
4,328
16,793
21,396
69,889
140,974
230,237
485,798
Loans to credit institutions
731
0
0
0
0
0
0
731
Interest-bearing securities
430
26
293
499
4,731
0
0
5,980
Total non-derivative financial assets
3,343
4,354
17,086
21,895
74,619
140,974
230,237
492,509
Deposits by credit institutions
111
70
42,058
60,432
62,049
0
0
164,720
Debt secuirities in issue
0
1,357
23,864
43,061
84,560
8,938
1,277
163,058
- of which covered bonds
0
1,357
23,864
43,061
84,560
8,938
1,277
163,058
Subordinated liabilities
0
14
41
1,114
0
0
0
1,169
Other non-derivative financial liabilities and equity
5
0
0
0
0
0
0
5
Total non-derivative financial liabilities
115
1,441
65,964
104,606
146,609
8,938
1,277
328,951
Derivatives, cash inflows
3
374
4,555
954
1,255
1,774
277
9,193
Derivatives, cash outflows
199
268
4,536
1,228
1,527
1,721
368
9,847
Derivatives, net cash flows
-196
106
20
-274
-272
54
-91
-654
Credit commitments
31,618
Nordea Eiendomskreditt AS Annual Report 2023
47
Note 8.3
Related-party transactions
Accounting policies
Nordea Eiendomskreditt defines related parties as:
- shareholders with significant influence
- other Nordea Group companies
- other related parties
- key management personnel
All transactions with related parties are made on the same
criteria and terms as those of comparable transactions with
external parties of similar standing .
Shareholders with significant influence
At 31 December 2023 Nordea Bank Abp owned 100% of
the share capital of Nordea Eiendomskreditt AS and has
significant influence.
Other Nordea Group Companies
Other Nordea Group Companies means the group parent
company Nordea Bank Abp and its subsidiaries.
Key management personnel
Key management personnel include the following positions:
- the Board of Directors
- the Chief Executive Officer (CEO)
For information about compensation, pensions and other
transactions with key management personnel, see Note 6.1
“Staff costs”.
From May 2019 mortgage loans are originated directly from
the company's own balance sheet, and there has been no
transfers of loans from the parent bank Nordea Bank Abp,
filial i Norge in 2023.
Nordea Eiendomskreditt AS has from 1 October 2018 been
a wholly owned subsidiary of Nordea Bank Abp.
Transactions between Nordea Eiendomskreditt AS and
other legal entities or branches in the Nordea Group are
performed in conformity with OECD guidelines on transfer
pricing.
NOKt
Nordea Group companies
Other related parties
31 Dec 2023
31 Dec 2022
31 Dec 2023
31 Dec 2022
Profit and loss account
Interest income on loans with financial institutions
63,536
44,839
Other interest income
28,145
15,115
Net gains/losses on items at fair value
122,016
211,821
Commisson income
1,282
1,282
Other operating income
551
3,359
Total income
215,530
276,416
0
0
Interest expenses on liabilities to financial institutions
6,408,714
3,426,966
Interest and related expense on securities issued incl. hedging
1,341,981
310,068
Other interest expenses
122,521
152,758
Net gains/(losses) on items at fair value
13,478
868,060
Interest and related expense on subordinated loan capital
61,631
36,518
Commission and fee expense for banking services
18,921
24,506
8,149
7,336
Other operating expenses
1,130,518
1,326,241
6,257
5,481
Total expenses
9,097,764
6,145,117
14,406
12,817
Balance sheet
Loans and receivables to credit institutions
2,462,506
731,472
Derivatives
185,622
418,937
Other assets
0
0
1,200
Accrued income and prepaid expenses
46,927
16,948
Total assets
2,695,055
1,167,357
1,200
0
Deposits by credit institutions
125,845,296
155,913,879
Issued bonds
36,562,775
20,342,413
Derivatives
661,303
757,843
Accrued expenses and prepaid income
218,266
227,671
Subordinated loan capital
1,104,751
1,103,819
Share capital and share premium
11,753,647
11,753,647
Total libilities and equity
176,146,038
190,099,272
0
0
Off balance sheet items
Interest rate swaps (nominal value)
45,282,000
57,584,000
Nordea Eiendomskreditt AS Annual Report 2023
48
Note 9.
Risks and uncertainties
Contents
1. Risk governance
2. Credit risk
3. ESG (Environmental, Social and Governance)
related risk
4. Counterparty credit risk
5. Market risk
6. Operational risk
7. Compliance risk
8. Liquidity risk
1. Risk governance
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.
Currently, there are significant risks related to the
macroeconomic environment due to geopolitical
turbulence. The consequential risks include impacts from
possibly increasing energy prices, interest rates staying
higher for longer and elevated inflationary pressures.
Furthermore, geopolitical instability can cause a risk that
investment product demand remains subdued.
Repeated negative supply shocks could lead to continued
high inflation simultaneously with a sharp contraction in
output, resulting in recession. A sharp upward shift in
business and consumer inflationary expectations would
result in a steepening yield curve.
In order to continuously monitor potential adverse
outcomes, Nordea has executed a number of internal
stress tests with a focus on inflation and geopolitical
developments. Depending on government and central bank
responses, a stagflation scenario could test the
vulnerability of Nordea to an increase in unemployment
combined with a potential decline in commercial and
residential real estate prices. Nordea could see significant
fair value adjustments due to higher interest rates and
increased covered bond spreads while net interest income
(NII) could be negatively affected by an inverted yield curve
and higher funding spreads. In the internal stress tests,
Nordea Eiendomskreditt’s capital and liquidity situation has
shown resilience. Nordea Eiendomskreditt has also
enhanced the regular monitoring of credit risk
developments.
1.1 Internal Control Framework
Nordea Eiendomskreditt’s Board has adopted Nordea’s
Group Board Directive on Internal Governance which
describes the Internal Control Framework.
The Internal Control Framework ensures effective and
efficient operations, adequate identification, measurement
and mitigation of risks, prudent conduct of business, sound
administrative and accounting procedures, reliability of
financial and non-financial information (both internal and
external) and compliance with applicable laws, regulations,
standards, supervisory requirements and Nordea
Eiendomskreditt’s internal rules.
The internal control process is carried out by Nordea
Eiendomskreditt’s governing bodies that consist of Board,
CEO, senior management, the risk management function
and other staff in Nordea Eiendomskreditt and, as
regulated by intra-group agreements, by units within the
Nordea Group. The internal control process is based on
five main components: control environment, risk
assessment, control activities, information and
communication as well as monitoring. The internal control
process aims to create the necessary fundamentals for the
entire organisation to contribute to the effectiveness and
high quality of internal controls through, for instance, clear
definitions, assignment of roles and responsibilities and
common tools and procedures.
1.2 Governing bodies for risk, liquidity and capital
management
The Board of Directors of Nordea Eiendomskreditt (NE
Board), the Chief Executive Officer of Nordea
Eiendomskreditt’s (NE CEO) executive management are
the key decision-making bodies for risk and capital
management in Nordea Eiendomskreditt. In addition, NE
Board has delegated the credit decision-making to the
parent company Nordea Bank Abp through the internal risk
management framework and intra-group outsourcing
agreements. With effect from 1st of January 2022 NE
Board established subsidiary Board Risk Committee
(BRIC) in Nordea Eiendomskreditt.
1.3 Nordea Eiendomskreditt Board of Directors and
Board Risk Committee (BRIC)
NE Board has the following overarching risk management
responsibilities:
• Decide on Nordea Eiendomskreditt’s risk strategy
and the Risk Appetite Framework, including the
Risk Appetite Statements, with at least annual
reviews and additional updates when needed.
• Decides on and oversees an adequate and
effective Risk Management Framework and
regularly evaluates whether Nordea
Eiendomskreditt has effective and appropriate
controls to manage the risks.
• NE Board adopts the Group Board Directive on
Capital, which ensures adequate capital levels
within the Nordea Group, on an ongoing and
forward-looking basis, consistent with the
business model, risk appetite, and regulatory
requirements and expectations.
• NE BRIC assists NE Board in fulfilling its oversight
responsibilities concerning management and
control of risk, risk frameworks, controls and
processes associated with Nordea
Eiendomskreditt’s operations, including capital,
credit, market, liquidity, model and operational
risk, as well as conduct and compliance risk and
related frameworks and processes.
1.4 Nordea Eiendomskreditt Chief Executive Officer
NE CEO is responsible to NE Board for the overall
management of Nordea Eiendomskreditt’s operations and
risks. Responsibilities include ensuring that the risk
strategy and risk management decided by NE Board are
implemented, that necessary practical measures are taken,
and that risks are monitored and limited. In discharging
these responsibilities, NE CEO is supported by Nordea
Eiendomskreditt Executive Management (NE
management).
Nordea Eiendomskreditt AS Annual Report 2023
49
1.5 Nordea Eiendomskreditt Executive Management
NE management consist of CEO, Head of Credit & Risk
Management, Head of Development & Product
Management, Chief Financial Officer, Chief Risk Officer
and Chief Operating Officer. In addition, appointed
compliance officer has the right and duty to attend the
management meetings.
1.6 Credit decision making bodies
The governing bodies for Credit Risk and/or the Credit Risk
Management Framework are NE Board. NE Board has
delegated credit decision-making according to the powers-
to act as described in the adopted Group Board Directive
for Risk. The Nordea Group has established a number of
committees that also covers Nordea Eiendomskreditt credit
decisions. According to the Group Board Directive for Risk,
all limits within the Nordea Group are based on credit
decisions or authorizations made by an ultimate Decision-
Making Authority with the right to decide upon that limit.
Credit decisions include, inter alia, pricing, risk mitigation
and any terms and conditions related to the limit or
expected utilization. Credit decisions also serve to delegate
decision making within the approved limit to lower decision
makers, unless otherwise explicitly decided.
1.7 Governance of Risk Management and Compliance
The flow of risk- related information is passed from the
business areas and group functions to NE Board through
NE management. The flow of information starts with the
divisions that monitor and analyse information on the
respective risk types according to intra-group agreements.
The risks information is presented and discussed in NE
management and then brought to NE BRIC and NE Board.
Group Compliance (GC) constitutes the compliance
function for Nordea Eiendomskreditt according to intra-
group agreement and is responsible for developing and
maintaining the risk management framework for managing
compliance risks in cooperation with other functions in GR
and for guiding the business in their implementation of the
framework to ensure continuous adherence to the
framework. Reporting from GC is presented directly to NE
management, NE BRIC and NE Board.
The Risk Management Framework (RMF) ensures
consistent processes for identifying, assessing and
measuring, responding to and mitigating, controlling and
monitoring, and reporting risks to enable informed
decisions on risk-taking. The Risk Management Framework
encompasses all risks to which the Nordea Group,
including Nordea Eiendomskreditt, is or could be exposed,
including off-balance sheet risks and risks in a stressed
situation. Detailed risk information covering all risks and
Nordea Eiendomskreditt’s compliance with regulatory
requirements are regularly reported to the NE CEO in NE
management, NE BRIC and NE Board.
The Risk Identification and Materiality Assessment Process
starts with identifying potential risks to which Nordea Group
is or could be exposed. Risks are then assessed for
relevance, classified, and included in the Nordea Group’s
Common Risk Taxonomy. All risks within the Nordea
Common Risk Taxonomy are categorized as material or
not material for risk management and capital purposes for
Nordea Eiendomskreditt. Material risks are those assessed
as having a material impact on Nordea Eiendomskreditt’s
current and future financial position, its customers and
stakeholders.
1.8 Risk Appetite
The Risk Appetite Framework (RAF) supports effective risk
management and a sound risk culture by enabling informed
decisions on risk-taking, with the objective of ensuring that
risk-taking activities are conducted within Nordea
Eiendomskreditt’s risk appetite and -capacity. Risk capacity
is the maximum level of risk Nordea Eiendomskreditt is
deemed able to assume given its capital (Own funds), its
risk management and control capabilities, and its regulatory
constraints. The Risk Appetite specifies the aggregate level
and types of risk Nordea Eiendomskreditt is willing to
assume within its risk capacity, in line with its business
model, to achieve its strategic objectives.
The Risk Appetite Statements (RAS) are the articulation of
the NE Board approved risk appetite and consist of the
qualitative statements and quantitative limits and triggers
by main risk type, which are deemed appropriate to be able
to operate to ensure a prudent risk profile. Stress test
metrics are established for credit risk, market risk metrics
and liquidity risk to ensure a forward-looking approach to
risk management. Operational risk metrics cover both
residual risk levels and requirements for mitigating actions
as well as limits for incidents and losses. Model risk is
defined as the risk of adverse effects on capital adequacy,
financial loss, poor business and strategic decision-making
and damage to Nordea Eiendomskreditt’s and Nordea’s
reputation from the use of models.
1.9 Risk Appetite processes
The RAF contains all processes and controls to establish,
monitor and communicate Nordea Eiendomskreditt’s risk
appetite:
• Risk capacity setting based on the capital position:
On an annual basis, Nordea Eiendomskreditt’s
overall risk capacity is aligned with the financial
and capital planning process, based on Nordea
Eiendomskreditt’s risk strategy. The risk capacity
is set in line with the capital and liquidity position,
including an appropriate shock absorbing
capacity.
• Risk appetite allocation by risk type: Risk appetite
includes Risk Appetite Limits for the main risk
types that Nordea Eiendomskreditt is or could be
exposed to, in line with the Common Risk
Taxonomy. Risk Appetite Triggers are also set for
these main risk types, to act as early indicators for
key decision-makers that the risk profile for a
particular risk type is approaching its Risk Appetite
Limit.
• Risk limit setting: Risk Appetite Limits set by NE
Board are the basis for the lower risk limits in 1st
LoD which are established and approved at lower
decision-making levels, including NE
management. Risk limits are set in alignment with
Norwegian regulatory requirements and the risk
capacity and consistent with the Nordea Group
Risk Limits.
• Controlling and monitoring of risk exposures
against risk limits: Risk appetite limits and risk
limits are regularly monitored and controlled to
ensure that risk taking activity remains within the
risk appetite.
• Risk appetite limit breach management process:
Nordea Eiendomskreditt’s Chief Risk Officer (NE
CRO) ensures that any Risk Appetite Limit
breaches are appropriately escalated to NE
management, NE BRIC, NE
Nordea Eiendomskreditt AS Annual Report 2023
50
Board and other parties as specified in internal
escalation routines. In case of a breach of the risk
appetite limit, NE CRO reports at least monthly to
NE management and NE Board and other
relevant governing bodies, including a follow-up
on the status of actions to be taken, until the
relevant risk exposure is back within the risk
appetite.
1.10 Embedding risk appetite in business processes
The end-to-end risk appetite process cycle is aligned with
other strategic processes, including the Internal Capital
Adequacy Assessment Process (ICAAP), Internal Liquidity
Adequacy Assessment Process (ILAAP) and the Recovery
and Resolution Plan. Moreover, the risk appetite is
embedded in business processes and communicated
across the organisation in order to meet Nordea
Eiendomskreditt’s objectives of maintaining a sound risk
culture. This includes, but is not limited to, ensuring a
strong link between the assessed risk appetite and the
business plans and budgets, the capital and liquidity
position, the systemic risk profile/the recoverability and
resolvability assessments, as well as the incentive
structures/remuneration framework. A separate risk
description is reported to the Board of Directors in Nordea
Eiendomskreditt once a year according to requirements in
CCR/CRD IV chapter 8, adopted by the Norwegian FSA.
1.11 Disclosure requirements of the CRR - Capital and
Risk Management report
Additional information on risk and capital management is
presented in the Capital and Risk Management Report, in
accordance with the Capital Requirements Regulation
(CRR). The report is available at
2. Credit risk
Credits granted shall conform to the common principles
established for the Nordea Group. Nordea Eiendomskreditt
strives to have a well-diversified credit portfolio that is
adapted to the structure of its home market. The key
principles for managing Nordea Eiendomskreditt’s risk
exposures are:
• the three Lines of Defence (LoD) as further
described in the Group Board Directive on internal
Governance that has been adopted by NE Board;
• independence, i.e. the risk control function should
be independent of the business controls; and,
• risk-based approach, i.e. the risk control functions
should be aligned to the nature, size and
complexity of Nordea Eiendomskreditt’s business,
ensuring that efforts undertaken are proportional
to the risks in question.
NE Head of Credit & Risk Management in 1LoD is
responsible for implementing the Nordea Group’s credit
process framework and operational credit risk guidelines
and SOPs (Standard Operating Procedures) in Nordea
Eiendomskreditt. NE CRO in 2LoD is responsible for
implementing the Nordea Group’s credit risk framework,
consisting of policies and instructions. NE CRO is also
responsible for controlling and monitoring the quality of the
credit portfolio and the credit process. NE Head of Credit &
Risk Management and NE CRO are supported by Nordea
Group resources in these responsibilities according to
intragroup agreements.
Nordea Eiendomskreditt’s credit risk management
framework includes the credit RAF which provides a
comprehensive and risk-based portfolio perspective
through relevant asset quality and concentration risk
measures. Individual credit decisions within the approved
internal credit risk limit are taken within the customer
responsible unit (CRU) in Nordea Bank Abp, filial i Norge or
in Group Credit Management. The risk categorisation
together with the exposure of the customer determine at
what level the credit decision will be made.
Responsibility for credit risk lies with the customer
responsible unit. Customers are risk categorized by a score
in accordance with the Nordea Group’s common scoring
guidelines. The scoring of customers aims to predict their
probability of default and consequently rank them
according to their respective default risk. Scoring are used
as integrated parts of the credit risk management and
decision-making process.
2.1 Credit risk definition and identification
Credit risk is defined as the potential for loss due to failure
of a borrower(s) to meet its obligations to clear a debt in
accordance with agreed terms and conditions. The
potential for loss is lowered by credit risk mitigation
techniques. Credit risk stems mainly from various forms of
lending, but also from issued guarantees and documentary
credits and includes counterparty credit risk, transfer risk
and settlement risk. Credit risk in Nordea Eiendomskreditt
is mainly related to the lending portfolio. The lending
portfolio is secured by collateral in real estate with average
loan to value of 58,3% (56.0%). The risk of material losses
in the portfolio is therefore considered to be limited.
2.2 Credit risk mitigation
Credit risk mitigation is an inherent part of the credit
decision process. In every credit decision and review, the
valuation of collateral is considered as well as the
adequacy of covenants and other risk mitigations. Pledge
of collateral is a fundamental credit risk mitigation
technique in the bank and collaterals are always sought,
when reasonable and possible, to minimize the potential for
credit losses. In every credit decision and review, the value
of collaterals must be considered.
The collateral value shall always be based on the market
value. The market value is defined as the estimated
amount for which the asset would exchange between a
willing buyer and willing seller in an arm's-length
transaction, after proper marketing and where the parties
had each acted knowledgeably, prudently and without
compulsion. From this market value, a haircut is applied.
The haircut is defined as a percentage by which the asset’s
market value is reduced ensuring a margin against loss.
The margin reflects the adjustments needed to assess the
cash proceeds when the collateral is liquidated in a forced
sale situation. A maximum collateral ratio is set for each
collateral type.
The same principles of calculation must be used for all
exposures. For High Risk customers, the foreclosure value
may differ from the maximum collateral values and should
be based on a realistic assessment for the particular asset
at that time. Risk transfer to other creditworthy parties,
through guarantees and insurance, shall be based on
legally enforceable documentation.
Maximum exposure to credit risk
Nordea Eiendomskreditt AS Annual Report 2023
51
NOKm
Note
Amortised cost and
Fair value through
other comprehensive
income
Financial assets at
fair value through
profit or loss
Loans to credit institutions
2 463
Interest-bearing securities
3.6
10 586
Loans to the public incl accrued
interest
3.5
334 308
Derivatives
26
Total loans and receivables
(on-balance exposure)
336 770
10 612
Off balance credit exposure:
5.2
35 072
Off balance credit exposure
35 072
0
Total
371 842
10 612
31 Dec 2023
NOKm
Note
Amortised cost and
Fair value through
other comprehensive
income
Financial assets at
fair value through
profit or loss
Loans to credit institutions
731
Interest-bearing securities
3.6
5 436
Loans to the public incl accrued
interest
3.5
323 252
Derivatives
203
Total loans and receivables
(on-balance exposure)
323 983
5 639
Off balance credit exposure:
5.2
31 618
Off balance credit exposure
31 618
0
Total
355 602
5 639
31 Dec 2022
Retail mortgage exposure
NOKbn
in %
NOKm
in %
<50%
239
80
217
81
50-70%
38
13
33
12
70-80%
9
3
7
3
80-90%
4
1
4
1
>90%
8
3
6
2
Total
298
100
266
100
1
allocated to the appropriate bucket.
31 Dec 2023
31 Dec 2022
2.2 Loan-to-value
The loan-to-value (LTV) ratio is considered a useful
measure to evaluate quality of collateral, i.e. the credit
extended divided by the market value of the collateral. In
the table, retail mortgage exposures are distributed by LTV
buckets based on the LTV ratio.
Loan-to-value
2.3 Collective assessment of impairment
Requirements for impairment are set forth in IFRS 9, which
are based on an expected loss model.
Assets tested for impairment are divided into three groups
depending on the stage of credit deterioration. 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
includes defaulted assets. All assets are assessed
individually for staging. Assets are tested for impairment
collectively. Impairment testing is applying three forward
looking and weighted scenarios.
Throughout the process of identifying and mitigating credit
impairment, Nordea continuously reviews the quality of
credit exposures. Weak and credit impaired exposures are
closely monitored and reviewed at least on a quarterly
basis in terms of current performance, future debt service
capacity, and the possible need for provisions.
Default
Customers with exposures that are past due more than 90
days, being in bankruptcy or considered unlikely to pay are
regarded as defaulted and can be either servicing debt or
non-servicing. If a customer recovers from being in default,
the customer is seen as cured. Typically, this situation
occurs if the customer succeeds in creating a balance in
financials. In order to be cured the recovery should include
the customer’s total liabilities, an established satisfactory
repayment plan and an assessment that the recovery is
underway.
Collective provisioning
The collective model is executed quarterly and assessed
for each legal unit/branch. One important driver for
provisions is the trigger for the transferring of assets from
stage 1 to stage 2. For assets recognized from 1 January
2018, changes to the lifetime Probability of Default (PD) are
used as the trigger. In addition, customers with forbearance
measures and customers with payments more than thirty
days past due are also transferred to stage 2. In stage 1,
the provisions equal the 12 months expected loss. In stage
2 and 3, the provisions equal the lifetime expected loss.
The output is complemented with an expert-based analysis
process to ensure adequate provisioning. Defaulted
customers without individual provisions have collective
provisions.
Forbearance
Forbearance means eased terms or restructuring due to
the borrower experiencing or about to experience financial
difficulties. The intention with granting forbearance for a
limited time period is to ensure full repayment of the
outstanding debt. Examples of negotiated terms are
changes in amortization profile, repayment schedule,
customer margin as well as ease of financial covenants.
Forbearance is undertaken on a selective and individual
basis, approved according to powers-to-act and followed by
impairment testing. Forborne exposures can be servicing or
non-servicing. Loan loss provisions are recognized if
necessary.
2.4 Sensitivities
The provisions are sensitive to rating migration even if the
triggers are not reached. The table below shows the impact
on provisions from a one-notch downgrade of Nordea
Eiendomskreditt’s household lending portfolio. It includes
both the impact of the higher risk for all exposures and the
impact of transferring exposures that reach the trigger, from
stage 1 to stage 2. It also includes the impact of exposures
with one rating grade above default going into default. For
more information on the rating scale, see table
“Rating/scoring information on loans measured at
amortised cost” above.
Nordea Eiendomskreditt AS Annual Report 2023
52
2.5 Forward-looking information
Forward looking information is used both for assessing
significant increases in credit risk and in the calculation of
expected credit losses. Nordea Eiendomskreditt uses three
macroeconomic scenarios, a baseline scenario, a
favourable scenario and an adverse scenario. For the
fourth quarter of 2023 the scenarios were weighted into the
final expected credit losses (ECL) as follows: baseline
50%, adverse 40% and favourable 10% (baseline 50%,
adverse 40% and favourable 10% at the end of 2022). The
weight of the adverse scenario was kept at an elevated
level, reflecting continued uncertainty regarding the
macroeconomic outlook.
The macroeconomic scenarios are provided by Group Risk
in Nordea, based on the Oxford Economics Model. The
forecast is a combination of modelling and expert
judgement, subject to thorough checks and quality control
processes. The model has been built to give a good
description of the historical relationships between economic
variables and to capture the key linkages between those
variables. The forecast period in the model is ten years. For
periods beyond, a long-term average is used in the ECL
calculations.
The macroeconomic scenarios reflect Nordea’s view of
how the Nordic economies might develop in the light of the
conflict in the Middle East and the war in Ukraine. They
take into consideration the possibility of continued high
inflation, reinforced by a renewed surge in energy prices,
and the potential impact of high interest rates on financial
markets and economic activity. When developing the
scenarios and determining the relative weighting between
them, Nordea took into account projections made by Nordic
central banks, Nordea Research and the European Central
Bank.
The baseline scenario foresees soft landings in the Nordic
economies and slightly higher unemployment in the coming
years as the pass-through of higher rates and elevated
inflation continues to weigh on economic activity. While
growth in 2024 remains moderate in Denmark and Norway,
GDP stagnates in Finland and Sweden. Core inflation is
expected to remain elevated. House prices have stabilised
after the downward adjustment in 2023. In 2024 prices are
expected to rise slowly before picking up further in 2025
and 2026. The risks around the baseline forecast are tilted
to the downside.
Nordea’s two alternative macroeconomic scenarios cover a
range of plausible risk factors which may cause growth to
deviate from the baseline scenario. Persistent and high
inflation, reinforced by higher energy prices, may lead
central banks to adopt a higher-for-longer strategy,
triggering a deep recession due to falling private
consumption and investment. In addition, house prices may
see an even larger decline due to high interest rates, a
squeeze in household purchasing power. A stabilisation of
energy prices at a lower level may on the other hand lead
to a milder setback over the winter and a stronger recovery
going forward.
At the end of the fourth quarter of 2023 adjustments to
model-based allowances/provisions (management
judgements) amounted to NOK 92m (NOK 101m at the end
of the third quarter 2023 and NOK 102m at the end of
2022). The management judgements cover expected credit
losses not yet adequately captured by the IFRS 9 modelled
outcome. The cyclical management judgement allowance
amounted to NOK 88m at the end of the fourth quarter of
2023 (NOK 97m at the end of the third quarter of 2023 and
NOK 95m at the end of 2022) and the reserve covering
issues identified in the IFRS 9 model to be later covered in
model updates (structural reserve) amounted to NOK 4m
(NOK 4m at the end of the third quarter of 2023 and NOK
7m at the end of 2022).
Scenarios
2.6 Credit portfolio
Including on- and off -balance sheet exposures and
exposures related to securities, the total credit risk
exposure at year end was NOK 382.5 bn (NOK 361.2bn
last year). More information and breakdown of exposure
according to the CRR definition is presented in the Capital
and Risk Management Report (Pillar 3 report) at
.
Nordea Eiendomskreditt AS Annual Report 2023
53
On-balance lending consists of fair value lending and
amortized cost lending and constitutes the major part of the
credit portfolio. Amortized cost lending is the basis for
impaired loans allowances and loan losses. Credit risk in
lending is measured and presented as the principle amount
of on-balance sheet claims, i.e. loans to credit institutions
and to the public-, and off-balance sheet potential claims
on customers and counterparts, net after allowances.
Credit risk exposure also includes the risk related to
derivative contracts, which was NOK 0.0bn at year end
(NOK 0.2bn).
Nordea Eiendomskreditt’s total lending to the public
increased to NOK 334bn at the end of 2023 (NOK 323bn).
The portfolio includes residential mortgage loans as well as
loans to holiday homes, secured by properties in Norway,
and secured construction loans for residential properties
and holiday homes. Including off-balance sheet exposures
the total credit risk exposure at year end was NOK 369.4bn
(NOK 354.9bn). Lending to credit institutions amounted to
NOK 2.5bn at the end of the year (NOK 0.7bn), all of which
was placed in the parent bank as cash accounts, payable
on demand. Nordea Eiendomskreditt also has interest
bearing securities amounting to NOK 10.6bn at the end of
2023 (NOK 5.4bn).
2.7 Scoring distribution
One way of assessing credit quality is through analysis of
the distribution across risk grades for scored household
customers.
The average credit quality decreased slightly in the scoring
portfolio in Q4-2023. 14,2% of the number of customers
migrated downwards while 12,2%% migrated upwards. The
migration is mainly seen within the best risk classes.
Information on scoring distribution in the lending portfolio is
shown in Note 3.5 “Loans and impairment”.
2.8 Impaired loans (Stage 3)
Impaired loans gross in Nordea Eiendomskreditt increased
during the year from NOK 609m in 2022 to NOK 1 033m in
2023 and corresponded to 31bps (19bps) of total loans.
63% of impaired loans gross are servicing loans and 37%
are non-servicing loans. Impaired loans net, after
allowances for Stage 3 loans, amounted to NOK 871m
(NOK 494m), corresponding to 26bps (15bps) of total
loans. Allowances for Stage 3 loans amount to NOK 162m
(NOK 115.2m). Allowances for Stages 1 and 2 amounted to
NOK 203m (NOK 195.3m). The ratio of allowances in
relation to impaired loans is 15,68% (9%) and the
allowance ratio for loans in Stages 1 and 2 is 0,06%
(0,06%) of total loans in Stages 1 and 2.
The volume of past due loans to household customers
(excluding impaired loans) was NOK 4 667m at the end of
2023 (NOK 2 416m). The majority of the volume is past
due between 6 and 30 days, but there are also
corresponding increases in all other periods. The
development is closely monitored related to potential
negative impact of interest raises and high inflation. Nordea
Eiendomskreditt has not taken over any properties for
protection of claims due to default.
Loan losses amounted to NOK 47.1 in 2023 (NOK
106.4m). This corresponds to a loan loss ratio of 1.4 basis
points (3.4 basis points).
2.9 Past due loans
The table below shows loans past due 6 days or more that
are not considered impaired.
Past due loans excluding impaired loans
The majority of the volume is past due between 6 and 30
days, but there are also corresponding increases in all
other periods. The development is closely monitored
related to potential negative impact of interest raises and
high inflation.
3. ESG (Environmental, Social and
Governance) related risk
Nordea defines ESG risk as the risk of negative financial
impact over the short to longer term, stemming from the
direct or indirect impact that environmental (including
climate), social and governance issues may have on
Nordea. It is important for us to integrate ESG
assessments into our risk management frameworks.
EU Taxonomy set the standard for classification of
economic activities and regulation in this area is under
development.
Further information about how the Nordea Group works
with Sustainability is available in Nordea’s Annul Report
published at
. The report covers the Nordea Group and
its subsidiaries.
4. Counterparty credit risk
Counterparty credit risk is the risk that Nordea
Eiendomskreditt’s counterpart in an interest or currency
derivative contract defaults prior to maturity of the contract
and that Nordea Eiendomskreditt at that time has a claim
on the counterpart. Counterparty credit risk can also exist
in repurchasing agreements and other securities financing
transactions. Nordea Eiendomskreditt enters into derivative
contracts in order to hedge positions that arise through
lending and funding activities. The exposure at the end of
2023 for Nordea Eiendomskreditt was NOK 111m (NOK
124m). 100% of the exposure and 100% of the current
exposure net was towards financial institutions. Nordea
Eiendomskreditt uses only counterparties in the Nordea
group in derivative transactions. For information about
financial instruments subject to master netting agreement,
see Note 3.4 “Financial instruments set off on balance or
subject to netting agreements”.
5. Market risk
Market risk is the risk of loss on Nordea Eiendomskreditt’s
positions in the non-trading book as a result of changes in
market rates and parameters that affect the market values
or net interest income flows. Market risk exist irrespective
of the accounting treatment of the positions.
The market risk appetite for Nordea Eiendomskreditt is
expressed through risk appetite statements issued by NE
Board. The statements are defined for the banking book as
Nordea Eiendomskreditt AS Annual Report 2023
54
Nordea Eiendomskreditt does not have any trading book
assets.
The second line of defence ensures that the risk appetite is
appropriately translated through relevant committees into
specific risk appetite limits for Group Treasury. Group
Treasury is responsible for managing the market risk
according to intra group outsourcing agreement.
As part of the overall Risk Appetite Framework (RAF),
holistic and bespoke stress tests are used to measure the
market risk appetite and calibrate limits to monitor and
control the full set of material market risk factors to which
Nordea Eiendomskreditt is exposed.
5.1 Non-traded market risk
In Nordea market risk in the banking book is classified as
non-traded market risk. In Nordea Eiendomskreditt it
principally arises from the core banking business, related
hedges and regulatory or other external requirements (e.g.
liquid asset buffer). Group Treasury is responsible for the
risk management of all non-traded market risk exposures in
the Nordea Group’s balance sheet, including Nordea
Eiendomskreditt.
For transparency and a clear division of responsibilities
within Group Treasury, the banking book risk management
is divided across several frameworks – each with a clear
risk mandate and specific limits and controls.
The non-traded market risks that Nordea Eiendomskreditt
is exposed to is interest rate risk in the banking book
(IRRBB) defined as the current or prospective risk to
Nordea Eiendomskreditt’s capital and earnings arising from
adverse movements in interest rates and customer
behaviour. The market risks are managed centrally by
Group Treasury and include gap risk, basis risks, credit
spread risk and behavioural risk and floor option risk
embedded in issued and purchased bonds (not relevant at
current interest levels though).
Due to the lending structure in Nordea Eiendomskreditt’s
home market Norway, most of the contractual interest rate
exposures are floating rate while fixed rate lending only
constitutes a small part of the loan book. Consequently,
wholesale funding is also issued in or swapped to floating
rate format. The resulting residual repricing gap risk and
fixing risk are managed by Group Treasury for Nordea
Eiendomskreditt. The net outright interest rate risk
stemming from the repricing gaps, together with the limited
fixed interest rate risk, are hedged with interest rate swaps
(IRS).
Liquid assets held to satisfy liquidity buffer requirements
are managed with minimal market risk exposure in
accordance with the Liquidity Buffer frameworks.
5.2 Measurement of market risk
IRRBB Economic value (EV) of equity risk measurement
considers the change in EV of banking book assets,
liabilities and interest-bearing derivative exposures
resulting from interest rate movements, independently of
the accounting classification and ignoring credit spreads
and commercial margins. Nordea’s IRRBB EV model
assumes a run-off balance sheet and includes behavioural
modelling for pre-payments. Changes in the EV of the
equity of the banking book are measured and limited
against the 6 standardised scenarios defined by the Basel
Committee on Banking Supervision (BCBS). The exposure
limit under this metric is measured against the worst
outcome out of the 6 scenarios measured.
The IRRBB earnings risk metric measures the change in
net interest income relative to a base scenario, creating a
Net Interest Income (NII) value over a one-year horizon.
The model uses a constant balance sheet assumption,
implied forward rates and behavioural modelling for pre-
payments. IRRBB earnings risk is measured and limited
against a +/-200bp shock in line with regulatory guidance
for NII measurement.
The measurement of IRRBB is dependent on key
assumptions applied in the models. The most material
assumptions relate to the modelling of embedded
behavioural options in both assets and liabilities. The
behavioural option held by Nordea Eiendomskreditt’s
lending customers to execute early loan pre-payments is
estimated using pre-payment models. On the other hand
Nordea has floor options towards customers stemming
from the fact that customer rates are modelled to not go
negative. Furthermore, issued bonds also contain floors
because Nordea currently does not charge negative rates
to investors in bonds issued by Nordea Eiendomskreditt.
5.3 Market risk analysis
Net Interest Income (NII) / Economic Value (EV)
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).
6. Operational risk
Operational risk is defined as the risk of loss resulting from
inadequate or failed internal processes, people and
systems or from external events, and includes legal risk.
Operational risks are inherent in all of Nordea
Eiendomskreditt’s businesses and operations.
Consequently, all managers are accountable for the
operational risks related to their area of responsibility, and
responsible for managing these risks within risk limits and
risk appetite limits in accordance with the operational risk
management framework. NE CRO constitutes the 2LoD
risk control function for operational risk and is responsible
for developing and maintaining the overall operational risk
management framework as well as for monitoring and
controlling the operational risk management of the 1LoD.
The 2LoD control function monitors and controls that
operational risks are appropriately identified, assessed and
mitigated. The 2LoD control function also follows-up on risk
exposures towards risk appetite limits and assesses the
adequacy and effectiveness of the operational risk
management framework and framework implementation.
Staff within the 2LoD control function are responsible for
preparing and submitting regular risk reports on all material
risk exposures including risk appetite limit utilization and
operational risk incidents to NE CRO, who thereafter
reports to NE CEO in NE management and NE Board.
Nordea supports a hybrid working model and preventive
measures focusing on e.g. awareness communications and
training activities, as well as preventive and compensating
controls have been put in place to mitigate operational risk
related to remote working.
The RAS for operational risk is expressed in terms of:
1) residual risk level
2) total loss amount from incidents and management
of Incidents.
Nordea Eiendomskreditt AS Annual Report 2023
55
6.1 Management of operational risk
The Nordea Group’s Group Board Directives on Risk, Risk
Appetite and Internal Governance, which have been
adopted by NE Board, set the principles for the
management of risks in Nordea Eiendomskreditt. Based on
these principles, the Nordea Group has established
supporting internal rules for operational and compliance
risk that form the overall operational risk and compliance
risk management frameworks. These also apply to Nordea
Eiendomskreditt. Management of operational and
compliance risk includes all activities aimed at identifying,
assessing and measuring, responding and mitigating,
controlling and monitoring and reporting on risks. Risks are
identified through various processes as detailed in the
following section.
6.2 Risk and control self-assessment (RCSA)
The RCSA process provides an overview and assessment
of operational and compliance risks for Nordea
Eiendomskreditt. The process improves risk awareness
and enables effective assessment, control, and mitigation
of identified risks.
6.3 Change Risk Management and Approval (CRMA)
framework
The objective of the CRMA framework is to ensure that
there is a full understanding of both financial and non-
financial risks when executing changes. Associated risks
shall be adequately managed consistent with Nordea
Eiendomskreditt’s Risk Strategy, Risk Appetite and
corresponding risk limits before a change is approved,
executed or implemented. Changes in scope of the CRMA
framework include e.g. new or significant changes to
processes, products, services, or IT systems. The CRMA
includes Quality and Risk Analysis.
6.4 Issue Management
Issues are defined as deficiencies in the control
environment, i.e. defects and/or quality matters within the
internal control environment for managing risk. When such
deficiencies are discovered, they must be reported as
issues. The Issue Management Framework consists of
multiple processes across all three lines of defence
identified in different risk management processes, and they
together fall under the purpose of issues and action
management.
6.5 Incident Reporting Management
The objectives of Incident Reporting Management are to
ensure appropriate handling and reporting of detected
incidents to minimize the impact on Nordea
Eiendomskreditt and its customers, prevent reoccurrence,
and reduce the probability and impact of future incidents. In
addition, the Incident Management shall secure timely
notification to defined external bodies and parties, including
relevant supervisory authorities.
6.6 Raising Your Concern (RYC)
The objectives of the RYC (“whistleblowing”) process are to
ensure that Nordea Group employees and customers have
the right to and feel safe when speaking up if they witness
or suspect misconduct or unethical behaviour. The RYC
process encompasses ways to report a suspected breach
of ethical standards, or breach of internal or external rules.
Concerns can be raised openly, confidentially or
anonymously by individuals. The RYC process also
outlines rules and procedures for how RYC investigations
are conducted.
6.7 Complaints Handling
The objective of complaints handling is to ensure customer
satisfaction and to identify pain points for IT-development
or process changes. Complaints handling is managed by
the customer responsible units together with the “Customer
Ombudsman” as regulated by an intra-group agreement.
Reporting on the number and types of complaints is
produced monthly and presented to members of NE
management together with ongoing or proposed mitigating
actions per complaint area.
6.8 Third Party Risk Management (TPRM)
The objective of TPRM is to ensure compliance to
regulatory requirements and that risks related to Third
Parties (TPs) and TP Activities, including but not limited to
Outsourcing, are appropriately managed both before,
during as well as when exiting a TP arrangement. While
Nordea Eiendomskreditt may delegate day-to-day
operational activities to TPs, Nordea Eiendomskreditt
always remains fully accountable and responsible and must
demonstrate effective over-sight and governance of the
procured or outsourced services and functions.
6.9 Business Continuity and Crisis Management (BC &
CM)
The objective of BC & CM is the overall risk management
under which Nordea Eiendomskreditt is building and
maintaining the appropriate levels of resilience, readiness,
response and management of extraordinary events and
crises. The Business Continuity Plan sets out the
procedures to respond, recover, resume and restore
operations following an extraordinary event. Crisis
Management provides the governance to execute plans
and enhance decision making during a crisis.
6.10 Information Security Management
The objective of Information Security Management is to
ensure the protection and preservation of information with
respect to confidentiality, integrity and availability. The
Nordea Group’s information security management system,
consisting of e.g. policies, procedures, tools and methods,
supports the management and control of information
security risks as well as the protection and preservation of
information security and the achievement of business
objectives.
6.11 Cyber security
Introducing new technologies, exploring new ways of doing
business and connecting with customers widen bank’s
attack surface. At the same time, entities that pose cyber
threats are becoming more organised, resourceful and
experienced. Nordea focuses not only on maintaining
effective basic information security controls but also on
enhancing its cyber defence with new tools and functions
for security, detection and response. Nordea develops
innovative security practices to meet new business
demands, such as robust mobile applications and proactive
customer support for fraud detection and prevention.
6.12 Significant/Key Operating Processes (SiOPs)
The objective of the SiOPs framework is to identify and
document SiOPs to ensure risks and controls in the most
important processes are assessed and managed, for these
processes to operate as intended, which includes ensuring
Nordea Eiendomskreditt’s customers are offered products
and services in a compliant, safe and timely way.
Nordea Eiendomskreditt AS Annual Report 2023
56
6.13 Reputational Risk
The objective of Reputational Risk Management is to
protect the Nordea Group’s and Nordea Eiendomskreditt’s
reputation. Reputational risk is defined as the risk of
damage to the trust in the Nordea brand from our
customers, employees, authorities, investors, partners and
the general public with the potential for adverse financial
impact. Reputational risk is often an impact from, or a
cause of, other types of risks, e.g. credit, liquidity, market,
operational, compliance and legal risks inherent in the
business. A reputational risk framework with guiding
principles for managing reputational risk has been
developed. The framework is strongly linked with the risk
management framework and related processes for
identifying, assessing and mitigating risk. It includes
considering stakeholders’ perceptions in the decision-
making processes.
6.14 Minimum own funds requirement for operational
risk
Nordea Eiendomskreditt’s own funds requirements for
operational risk are calculated according to the
standardised approach. In this approach, the institution’s
activities are divided into eight standardised business lines
and the gross income-based indicator for each business
line is multiplied by a predefined beta coefficient. The
consolidated own funds requirement for operational risk is
calculated as the average of the last three years’ own funds
requirement.
7. Compliance risk
Nordea defines compliance risk as the risk of failure to
comply with applicable regulations and related internal
rules. Management of compliance risk is governed by
Nordea’s Compliance Risk Appetite Statement which also
sets out the requirements for the mitigation of compliance
risk. Employees throughout Nordea are accountable for the
compliance risks related to their mandate and for managing
these risks in accordance with the Compliance Risk
Management Framework. The key governance principle for
management of risks at Nordea is the three Lines of
Defence (“LoD”) model.
1LoD is represented by the staff in Nordea Eiendomskreditt
performing business activities as well as staff in the Nordea
Group operating under intra-group agreement on account
of Nordea Eiendomskreditt. All employees in the 1LoD
have a role of understanding and adhering to prudent risk
management and are accountable for managing
compliance risks as part of performing their tasks. All
managers are fully responsible for the risks they assume
and are accountable for ensuring compliance with
applicable regulations within their respective area of
responsibility. Hence, they are responsible for ensuring that
the appropriate organisation, governance, controls,
procedures and support systems are implemented to
ensure a sufficient system of internal controls.
Group Risk (GR) and Group Compliance (GC) represent
Nordea’s independent second line of defence (2nd LoD)
control function. GR & GC oversee the implementation of
the financial and the non-financial risk policies and
according to a risk-based approach, monitor and control
the Risk Management Framework including the
Compliance Risk Management Framework and oversee
that all risks that Nordea is or could be exposed to, are
identified, assessed, monitored, managed and reported on.
GR is organized in divisions with individual risk type
responsibility. The following divisions are part of GR; Group
Credit Risk Control, Model Risk & Validation, Group
Financial Risk Management & Control, Group Operational
Risk, Risk Models, Chief Security Office, Enterprise-wide
Risk Management and Recovery & Resolution Planning,
CRO Office and Country CROs.
Group Compliance (GC) constitutes the compliance
function for Nordea Eiendomskreditt according to intra-
group agreement and is responsible for developing and
maintaining the risk management framework for managing
compliance risks in cooperation with other functions in GR
and for guiding the business in their implementation of the
framework to ensure continuous adherence to the
framework. GC is responsible for regular reporting on
annual compliance plan to NE Board and NE CEO at least
quarterly. GC reports on the status and development of
Nordea Eiendomskreditt’s compliance risks including
information on major deficiencies along with consequence
analyses and emerging risks and trends; status and key
observations from monitoring activities and investigations;
general updates on Financial Supervisory Authority
interactions and impact; and preparations on regulatory
changes. The reports shall also contain recommendations
on actions to be undertaken to mitigate compliance risk.
Group Internal Audit (GIA) represents the 3LoD according
to intra-group agreement. GIA conducts risk based and
general audits and shall assess whether the internal control
framework is both effective and efficient, including
assessing whether existing policies and procedures and
Group internal Rules remain adequate and comply with
legal and regulatory requirements, and with the risk
appetite and strategy of Nordea. GIA is also in charge of
the independent review of 1LoD and 2LoD including
ensuring that the segregation of duties is defined and
established between risk management (1LoD) and risk
control (2LoD).
7.1 Customer Protection
The aim of Customer Protection is to ensure fair treatment
of customers and fair customer outcomes. Treating
customers fairly include open and transparent
communication, meeting the customer needs (outcome
focused), employee awareness, honest and open approach
in customer complaints and communication as well as
timely, accurate and relevant management information.
The key areas covered in Customer Protection are financial
advice (including mortgage credit offering), product
governance arrangements, employee knowledge and
competence, and customer complaints handling. Customer
Protection related to advisory activities seeks to ensure that
advice given to the customers meets customers' needs and
circumstances; the advice given on suitable products; and
that lending is responsible. Customer Protection related to
products and services consists of delivering high quality,
good, and valuable products and services which meet
customer needs. This means defining and meeting target
market, delivering value for money and provision of fair
product materials and customer communications. It is also
important to manage conflicts of interest in relation to
products and services. Customer complaints are an
important tool for monitoring customer protection. The
complaints handling framework has in the recent years
been developed and the process is renewed with clear and
regular reporting, a strong feedback culture, root cause
analysis and mitigating activities.
7.2 Conduct Risk Management
Nordea Eiendomskreditt AS Annual Report 2023
57
Conduct risk is defined as the risk of inappropriate culture
and behaviour of employees, or the risk that intentional or
unintentional actions across the end to end customer
lifecycle can lead to unfair outcomes and harm for
customers or disrupt market integrity. Conduct risk
management approaches are continuously developed to
ensure that culture and employee behaviours are
consistent with the values, and that employees deliver fair
outcomes for customers across all stages of the customer
lifecycle. This includes driving a strong focus on putting the
customer first in the business strategy, the design and
development of products, the sales, and the ongoing
service provided to Nordea Eiendomskreditt’s customers.
7.3 Financial Crime Prevention
Financial crime is a serious threat to the security and
integrity of the global financial system, and cooperation
between banks and authorities is what is required to fight it.
It is a joint responsibility to improve safety in the global
financial system. The Nordea Group is committed to
comply with applicable laws and regulations concerning
anti-money laundering, counter terrorist financing,
sanctions, bribery and corruption in the jurisdictions in
which Nordea operates. Nordea and Nordea
Eiendomskreditt will not accept being exploited for money
laundering or any other types of financial crime. Therefore,
a number of global policies has been established by the
Nordea Group in order to achieve robust and consistent
standards of compliance. These have been adopted by the
NE Board and support the broader customer strategy,
values and vision, and provide a uniform set of risk
management principles and mandatory standards for
Nordea Eiendomskreditt and the Nordea Group as a whole.
It is important for Nordea Eiendomskreditt that robust risk-
based due diligence measures are conducted when
onboarding new customers, and on a continuous basis. By
knowing customers and counterparties well, screening and
monitoring activities can be performed to detect suspicious
or illegal activity and reported to the authorities for further
investigation. Nordea Eiendomskreditt has outsourced to
the customer responsible units in the Nordea Group to
perform all due diligence measures and regulated this
service in an intra group outsourcing agreement.
To detect suspicious transactions, monitoring systems and
controls are in place to detect transaction activities that are
outside normal activity patterns. Every year, these
processes generate hundreds of thousands of alerts in the
Nordea Group, although only a fraction is for Nordea
Eiendomskreditt’s customers. All alerts are managed and,
where necessary, investigated for potential suspicious
activity which may result in a Suspicious Activities Report
being filed with the relevant authorities in the relevant
jurisdictions.
Nordea Eiendomskreditt also has an obligation to comply
with all international and local sanctions programmes.
Nordea Eiendomskreditt’s customers and their transactions
are therefore screened against applicable sanctions lists to
ensure adherence to sanctions requirements. In recent
years, considerableimprovements have been implemented
to reduce financial crime risks through significant
investment in technology, capabilities and more
sophisticated assessment techniques.
8. Liquidity risk
8.1 Liquidity management
During 2023, Nordea Eiendomskreditt continued to benefit
from its prudent liquidity risk management, in terms of
maintaining a diversified and strong funding base and a
diversified liquidity buffer. Nordea Eiendomskreditt
maintained a strong liquidity position, and the situation with
volatility in global markets driven by geopolitical and
macroeconomic uncertainty and tightening monetary policy
has not affected the liquidity management. Throughout
2023, Nordea Eiendomskreditt remained compliant with the
requirement for Liquidity Coverage Ratio (LCR) and the Net
Stable Funding Ratio (NSFR).
8.2 Liquidity risk definition and identification
Liquidity risk is the risk that Nordea Eiendomskreditt can
only meet its liquidity commitments at an unsustainably
high price or, ultimately, is unable to meet its obligations as
they come due.
Nordea Eiendomskreditt is exposed to liquidity risk in its
lending, investment, funding, off-balance sheet exposures
and other activities which could result in negative cash flow
mismatches and an inability to liquidate assets or obtain
adequate funding. Nordea Eiendomskreditt’s liquidity
management is an integral part of the Nordea Group’s
liquidity risk management.
8.3 Management principles and control
Liquidity risk in the Nordea Group is managed across three
lines of defence:
• The first line of defence consists of Group
Treasury and the business areas (Nordea
Eiendomskreditt included). Group Treasury is
responsible for the day to day management of the
liquidity positions, liquidity buffers, external and
internal funding including the mobilisation of cash
around the Nordea Group, and Funds Transfer
Pricing (FTP). Nordea Eiendomskreditt and Group
Treasury have entered into an intra-group
agreement for the purpose of liquidity risk
management.
• The second line of defence, which includes
Nordea Eiendomskreditt CRO and units within the
Nordea’s Group Risk (GR) acting in accordance
with intra-group agreement, are responsible for
providing independent oversight of, and challenge
to the first line of defence.
• The third line of defence includes Group Internal
Audit, which is responsible for providing
independent oversight of the first and second lines
of defence.
Nordea Eiendomskreditt’s Board of Directors defines the
liquidity risk appetite by setting limits for applied liquidity
risk metrics. The most central metrics are the regulatory
Liquidity Coverage Ratio (LCR) for measurement of short-
term funding risk, the Net Stable Funding Ratio (NSFR) for
structural liquidity risk and the internal Liquidity Stress
Horizon. The latter sets a minimum survival period of three
months under institution-specific and market-wide stress
scenarios with limited mitigation actions. A framework of
limits and monitoring metrics is in place to ensure Nordea
Eiendomskreditt stays within the defined risk appetite.
8.4 Liquidity risk management strategy
Nordea Eiendomskreditt’s liquidity management strategy is
based on policy statements resulting in various liquidity risk
measures, limits and organisational procedures.
Nordea Eiendomskreditt AS Annual Report 2023
58
The objective of liquidity risk management is to ensure that
Nordea Eiendomskreditt can always meet its cash flow
obligations, including on an intraday basis, across market
cycles and during periods of stress. Nordea
Eiendomskreditt strives to diversify its sources of funding to
a larger pool of investors and seeks to establish and
maintain relationships with investors in order to ensure
market access.
Nordea Eiendomskreditt’s funding programme is limited to
long-term covered bonds. Short- and medium-term funding
are arranged as intra-group loans priced at market rate.
Confidence is fundamental in the funding market.
Therefore, Nordea Eiendomskreditt periodically publishes
information on the liquidity situation and the cover pool.
Furthermore, Nordea Eiendomskreditt regularly performs
stress testing of the liquidity risk position and the cover pool
to capture relevant risk drivers. Nordea Eiendomskreditt is
covered by the Nordea Group’s business contingency
plans for liquidity crisis management.
8.5 Liquidity risk measurement
To ensure funding in situations where Nordea
Eiendomskreditt is in urgent need of cash and the normal
funding sources do not suffice, Nordea Eiendomskreditt
holds a liquidity buffer. The liquidity buffer consists of
central bank eligible, high credit quality and liquid securities
that can be readily sold or used as collateral in funding
operations.
Liquidity risk management focuses on both short-term
liquidity risk and long-term structural liquidity risk. Liquidity
risk is limited by the Board of Directors via the Liquidity
Stress Coverage and Liquidity Stress Horizon metrics
stipulating that the liquidity buffer needs to be sufficient to
cover peak cumulative stressed outflows experienced over
the first 90 days of a combined stress event, whereby
Nordea Eiendomskreditt is subject to a market-wide stress
similar to what many banks experienced in 2007-08, as
well as idiosyncratic stress corresponding to a three-notch
credit rating downgrade.
The liquidity metrics mentioned above forms the basis for
Nordea Eiendomskreditt’s liquidity risk appetite, which is
reviewed and approved by the NE Board at least annually.
8.6 Liquidity risk analysis
The Liquidity Coverage Ratio (LCR) according to the LCR
Delegated Act was 1780% (1274%) at the end of the year.
Nordea Eiendomskreditt does not have other significant
currencies than Norwegian krone.
The Liquidity Stress Coverage (LSC) and Liquidity Stress
Horizon (LSH) were at the end of the year 210% (152%)
and 172 days (172 days) respectively. Net Stable Funding
Ratio (NSFR) was at the end of the year 115.1% (113.1%).
Nordea Eiendomskreditt AS Annual Report 2023
59
Auditor’s report
Nordea Eiendomskreditt AS Annual Report 2023
60
Nordea Eiendomskreditt AS Annual Report 2023
61
Nordea Eiendomskreditt AS Annual Report 2023
62
Nordea Eiendomskreditt AS Annual Report 2023
63
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
Statement by the Chief Executive Officer
and the Board of Directors
Pursuant to Section 5-5 of the Securities Trading Act
The Chief Executive Officer and the Board of Directors have today considered and approved the Board of Director’s Report and
the annual accounts of Nordea Eiendomskreditt AS for 2023, including comparative figures for 2022 (the “2023 Annual Report”).
The Annual Report has been prepared in accordance with IFRS as adopted by the EU, and additional Norwegian disclosure
requirements pursuant to the Accounting Act, the Regulations for Annual Accounts and the Securities Trading Act. According to
our best knowledge, the 2023 Annual Report has been prepared in accordance with the applicable accounting standards and
gives a true and fair view of the company’s assets, liabilities and net profit as of 31 December 2023 and as of 31 December
2022.
According to our best knowledge, the Board of Directors’ report gives a true and fair view of the company’s activities, results and
financial position including disclosure of related party transactions and the description of the most relevant risk factors the
company faces the coming year.
Nordea Eiendomskreditt AS
Oslo, 5 March 2024
Nordea Eiendomskreditt AS Annual Report 2023
64
Board of Directors and Auditor
Board of Directors
Chair
Randi Marjamaa
Nordea Bank Abp, filial i Norge
Head of Personal Banking Norway, Nordea
Country Senior Executive, Nordea Norway
Board member since 2023
Members
Gro Elisabeth Lundevik
University of Agder
Senior Advisor, Economic and property division
Vice Chair, Board member since 2019
Ola Littorin
Nordea Bank Abp, filial i Sverige
Head of Long Term Funding & Structuring, Group
Treasury, Nordea
Board member since 2013
Tina Sandvik
Nordea Bank Abp, filial i Sverige
Head of Products and Development, Personal Banking,
Nordea
Board member since 2023
Lene Steinum
Nordea Bank Abp, filial i Norge
Head of Cross Technology Capabilities, Technology
Nordea
Board member since 2022
Asbjørn Rødal
Independent consultant and non-executive board member
with 25 years’ experience as partner in global audit firm
Board member since 2023
Anne Sofie Knoph (Employee representative)
Nordea Eiendomskreditt AS
Master expert in Nordea
Board member since 2017
Auditor
PricewaterhouseCoopers AS
Jon Haugervåg
Authorised Public Accountant
Nordea Eiendomskreditt AS Annual Report 2023
65
Contact information
Nordea Eiendomskreditt AS
Visiting address: Essendropsgate 7
Postal address: P.O. Box 1166 Sentrum, 0107 Oslo
Telephone: +47 22 48 50 00
Internet: www.nordea.no