Results in line with expectations
Increased quality of loan portfolio, reduction of operating costs and increase in housing projects
• The Housing Financing Fund’s operating surplus amounted to ISK 614 million
• Equity ratio is 7.8%, which is the highest ratio since the establishment of the Fund
• Loans in arrears are 2.4% and decrease from being 4.8% last year
• Salaries and related expenses decrease by 22% since last year
The Housing Financing Fund’s Interim Financial Statements for the first half of the year 2017 were confirmed by the Fund’s Board of Directors today. Operating results for the period were positive, amounting to ISK 614 million. The Fund’s equity ratio is now 7.8%, while the Fund’s long-term goal is to exceed 5.0%. The Housing Financing Fund’s equity at the end of the period is ISK 24,142 million, compared to ISK 23,528 million on 30 June 2017. The Fund’s total assets amount to ISK 777,323 billion and total liabilities amount to ISK 753,182 billion.
The Fund’s operations continue to improve
Net interest income from 1 January to 30 June amounted to ISK 532 million compared to ISK 525 million during the same period in 2016. Operating expenses for the period amounted to ISK 843 million, decreasing by 7% over the period. Salaries and related expenses decreased by 22%, and full-time equivalent positions decreased from 85 in the first half of 2016 to 70 during the year. The Fund has received new housing projects and assigned eight new employees to these projects. Other operating expenses increase by 12.8% primarily due to payments to the Debtors’ Ombudsman. The Housing Financing Fund made payments amounting to ISK 184 million to the operations of other government agencies or the equivalent of 22% of the other operating expenses of the Fund. The streamlining measures undertaken in previous years have been fully implemented.
The Fund’s results from sales of appropriated assets was positive during the year and proceeds from sales exceeded the book value of the properties by ISK 370 million. The improved quality of the loan portfolio resulted in a value increase of loans amounting to ISK 340 million during the period. The effects of onetime components decrease significantly.
The proportion of interest-bearing assets outside of the loan portfolio increases due to prepayments
At the end of the period, loans held by the Fund amounted to ISK 544 billion, decreasing by ISK 34 billion since the beginning of the year. The reduction in the loan portfolio is due to prepayments, depreciation and the allocation of private pension savings. Prepayments by customers are largely the result of the expansion of pension funds into the mortgage market. There has been no need for issuance of financing bonds during the period.
Assets outside of the loan portfolio including liquid assets increased during the period and are now ISK 217 billion. The increase is primarily attributable to the sale of appropriated assets and loan prepayments. The main challenges for managing assets outside of the loan portfolio are interest rate and inflation risk. In view of this, it is worth mentioning that the yield on the bond market has generally dropped in line with Central Bank interest rates. However, the yield on indexed bonds has fallen somewhat more especially following the recent weakening of the krona.
Development of arrears and quality of loan portfolio
Loans in arrears now account for 2.4% of total loans, compared to accounting for 4,8% at year-end 2016. Favorable economic conditions and effective collection processes have reduced the risk of the loan portfolio. The calculated adjusted balance of the total of the Fund’s loans in arrears was ISK 13,600 million, of which defaults amounted to ISK 2,854 million. The provision for the impairment of loans amounted to ISK 6,740 million at the end of the period, a decrease of the provision by ISK 740 million since the beginning of the year. About 98.6% of the book value of the Housing Financing Fund’s loan portfolio lies in a collateral range within 90% of the real estate valuation of the underlying mortgage loans at the end of the period. Housing prices have risen in excess of price levels during the period and defaults have decreased significantly, therefore the collateral position of the loan portfolio has strengthened.
Hermann Jónasson, CEO of the Housing Financing Fund: “The Fund’s performance in the first half of the year is in line with plans, and we witness for example in lower labor costs, the results of the streamlining measures taken by the Fund. At the same time, it is positive to observe the successful implementation of the Fund’s changed role, as the Fund now plays an important role in responding to the situation in the housing market. The implementation of housing plans by municipalities, the granting of capital contributions for the construction of affordable rental apartments, the analysis of the housing market by the planning and analysis division, as well as increased public disclosure, are among the many new projects of the Fund. It is imperative that the management of housing affairs in the near future will be effective. The measures taken by the government and bestowed upon the Housing Financing Fund are being implemented, and their impact will shortly be noticeable in the form of an increase in the availability of affordable housing and more support for those groups most needing it in the housing market.”
Further information is available from Hermann Jónasson, CEO and Rut Hreinsdóttir, Director of Operations, tel. 569 6900.
