KommuneKredit has announced Interim report for first half 2024

Summary

• Profit before value adjustments and tax came to DKK 230 million, a year-on-year increase of DKK 143 million.

• Total net interest income for the first half of 2024 was DKK 336 million, up DKK 145 million from the year-earlier level.

• The value of total loans and leases rose by DKK 3.6 billion from end-2023 to DKK 190.7 billion at 30 June 2024, primarily because the increase in net lending was partly offset by negative value adjustments of lending due to slightly rising interest rates.

• Common Equity Tier 1 (CET1), equivalent to equity, decreased to DKK 9,968 million from DKK 10,180 million at end-2023. The decrease is due to negative value adjustments.

KommuneKredit is organised as an association in which all local municipalities and regions are members. We fund our activity by issuing bonds, for which our members have joint and several liability. This means our bonds are very secure and can be traded at low yields relative to market rates. Moreover, we do not have to make a profit on our business, and we do not pay dividends.

Our success can be measured in terms of the low lending rates we offer our customers when we help to finance their investments – irrespective of the size of the investment or where in Denmark a project is located. In other words, we provide equal opportunities for local sustainable growth.

Sustained growth in lending and negative comprehensive income
KommuneKredit’s profit before value adjustments and tax came to DKK 230 million, a year-on-year increase of DKK 143 million. The result includes net interest income of 336 million DKK, which is higher than the same period last year, as well as administrative expenses for the period of DKK 99 million.

The higher net interest income was driven primarily by improved earnings on securities in the amount of DKK 95 million as a result of a higher level of interest rates in 2024.

Profit before value adjustments and tax came to DKK 230 million, a year-on-year increase of DKK 143 million. KommuneKredit has recorded large positive value adjustments in recent years. Most of these are offset by negative value adjustments in later periods. This was the case in the first half of 2024, which saw negative value adjustments of financial instruments in the amount of DKK 502 million. Against this background, comprehensive income was negative in the amount of DKK 212 million at 30 June. Comprehensive income for the period has been transferred to equity, which now stands at DKK 9,968 million.

The Board of Directors has defined a target that earnings should provide appropriate capitalisation, corresponding to an equity ratio of at least 3 pct. At 4.0 pct., the equity ratio was slightly lower than the 2024 estimate of 4.2 pct., but still meeting the Board’s target.

Outlook for 2024
Relative to previous guidance, we upgrade our guidance for net interest income from DKK 500 million to DKK 650 million, primarily owing to higher interest income on investments. We have also upgraded our guidance for net lending from DKK 4.5 billion to DKK 6.5 billion because net lending has so far been higher than expected. Our guidance for administrative expenses of DKK 200 million is unchanged. Accordingly, we are guiding for a profit for the year before value adjustments and tax of DKK 450 million.

Given the negative value adjustments in the first half of 2024 of DKK 502 million, comprehensive income for the year is likely to be negative. We still expect to maintain our equity ratio at not less than 3 pct. both in the short term and in the long term.