Somewhat Improved Outlook for Norwegian Borrowers
Norges Bank. Financial Stability › Nbr. 2, December 2009
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Summary
Banks 'credit risk on corporate loans has fallen somewhat since the previous Financial Stability report. Profitability and debt-servicing capacity have picked up. Financial strength has also improved, reducing the risk of default. However, the situation in commercial property continues to be challenging. In addition, there are demanding times ahead for shipping. Falling collateral values in these industries increase bank losses in the event of default. In the short term, banks 'credit risk on loans to households has decreased somewhat since the previous Financial Stability report. The interest burden has fallen, and it appears that unemployment will be considerably lower than previously projected, while savings have risen. This reduces the short-term risk of default on household loans. House prices are rising steeply from a level that is already high. This increases collateral values and, in isolation, reduces banks' loan losses given default. High and rising house prices are pushing up the household debt burden. An increasing number of households have a debt burden that makes them vulnerable to a higher interest rate, increased unemployment or falling house prices.
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Somewhat Improved Outlook for Norwegian Borrowers
C.1 Enterprises1
Increased profitability in Norwegian enterprises in 2009So far in 2009, the profitability of listed companies has been better than expected. Both operating margins and average return on equity have shown a considerable increase (see Chart Cl). However, there are wide variations across industries. Enterprises expect their own profitability to increase over the next 12 months according to a survey conducted by the survey company Perduco in 2009 Q3. Market analysts also expect to see an increase in listed companies' future earnings (see Chart C.2).In most industries, enterprises' financial expenses as a share of pre-tax profits were very high in 2008 (see Chart C.3). Overall, enterprises are in a net debt position. The low level of interest rates in 2009 has therefore made a positive contribution to profits. Companies have moreover reduced th...See the full content of this document
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