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Nordic Investment Bank – ‘18-K/A’ for 12/31/18 – ‘EX-99.IX’

On:  Thursday, 9/5/19, at 9:43am ET   ·   For:  12/31/18   ·   Accession #:  1193125-19-238385   ·   File #:  1-08907

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 9/05/19  Nordic Investment Bank            18-K/A     12/31/18    3:817K                                   Donnelley … Solutions/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 18-K/A      Amendment to Annual Report by a Foreign Government  HTML     15K 
                or Political Subdivision                                         
 2: EX-99.IX    Miscellaneous Exhibit                               HTML    292K 
 3: EX-99.X     Miscellaneous Exhibit                               HTML      7K 

Exhibit IX

Table of Contents

2 | Interim Financial Report

Highlights

During the half year ending 30 June 2019, a total of EUR 1,339 million in new loans were agreed and EUR 1,484 million were disbursed. The disbursements in the first half year were lower than the historically high level of 2018. The net profit for the period amounted to EUR 95 million, down from EUR 110 million for the corresponding period in 2018.

In January, NIB issued its first Nordic–Baltic Blue Bond. The five-year SEK 2 billion bond was launched under the NIB Environmental Bond Framework and the proceeds will finance investments in water resource management and protection.

At its annual meeting on 24 May 2019, the Nordic Investment Bank’s Board of Governors approved amendments to NIB’s Statutes, which will be submitted to undergo the required national procedures of member countries. The intent of the amendments is to ensure continued adherence with sound banking principles and maintain the Bank’s relevance to fulfil its mandate.

Key figures and ratios

3 | Interim Financial Report

President & CEO’s comments January–June 2019

NIB provides long-term loans to its customers to ensure sustainable growth and lasting impact on the productivity and environment of the Nordic-Baltic region. Demand for long-term financing from NIB is still strong. The disbursements in the first half of the year were, as anticipated, lower than the historically high level of 2018. During the six-month period ended 30 June 2019, a total of EUR 1.3 billion in new loans were agreed and EUR 1.5 billion million were disbursed. The credit quality of the loan portfolio improved during the period resulting in a reduction in loan loss provisions.

NIB reviews all projects and scores them for productivity gains and environmental benefits in the Nordic–Baltic countries. Projects that contribute sufficiently to sustainable development qualify for financing by NIB. All projects financed this year have been assessed as having significant positive impact on the productivity and/or environment of the region.

As expected, the profit for the period amounting to EUR 95 million was lower than for the corresponding period in 2018. The main reason for the decrease was a lower unrealised result on financial operations and lower net interest income.

During the first six months of 2019, the Bank raised EUR 2.9 billion in new funding (January–June 2018: EUR 5.2 billion). The decrease in funding requirements is a result of lower loan disbursements and lower collateral requirements. In February, NIB listed its inaugural Nordic–Baltic Blue Bond for water management and protection on Nasdaq Stockholm. The listing marked the first blue bond on NASDAQ’s Nordic Sustainable Debt Market. The bond was issued under NIB’s Environmental Bond Framework and supports the Bank’s lending to selected wastewater treatment projects, prevention of water pollution and water-related climate change adaptation.

The Banking industry has undergone significant changes since the last financial crisis in terms of capital and risk management and regulatory oversight. In order to ensure continued adherence with sound banking principles the Bank is in the process to change its Statutes. At its annual meeting in May, the Nordic Investment Bank’s Board of Governors approved amendments to the Bank’s Statutes, subject to the required national procedures (including ratification if needed) to enter into force. These amendments will permit NIB to be more relevant in its operations and thereby add more value and efficiency in achieving its mission. Sound and comprehensive polices for capital and risk management allow NIB to maintain the highest possible issuer credit rating and obtain funds from the capital markets on advantageous terms, which is essential for the implementation of its mandate.

Henrik Normann, President & CEO

4 | Interim Financial Report

Operating and financial review

Total comprehensive income

January–June 2019 compared to January–June 2018

NET PROFIT

The net profit for the period January–June 2019 amounted to EUR 94.7 million, down from EUR 110.4 million in the same period last year. Total operating income decreased from EUR 131.1 million to EUR 113.3 million. Total operating expenses increased by EUR 0.5 million to EUR 22.7 million, resulting in profit before net loan losses decreasing to EUR 90.6 million (January–June 2018: EUR 108.8 million).

NET INTEREST INCOME

Net interest income for the period amounted to EUR 106.5 million (January–June 2018: EUR 111.6 million). Net interest income on lending activities increased by EUR 1.0 million, due to higher average loans outstanding. Interest income on treasury activities decreased by EUR 6.0 million due to the low yield environment.

NET COMMISSION INCOME AND FEES

Net fee and commission income for the period January–June 2019 was EUR 4.0 million, compared to EUR 5.9 million in 2018, due to the lower volume of loans agreed and disbursed in the six month period under review.

NET PROFIT   EUR m		NET INTEREST INCOME   EUR m		NET COMMISSION INCOME AND FEES   EUR m

5 | Interim Financial Report

NET PROFIT ON FINANCIAL OPERATIONS

The net profit on financial operations for the period January–June 2019 totalled EUR 2.8 million, which was EUR 10.8 million lower than the same period in 2018. The result includes unrealised gains of EUR 2.8 million. The unrealised results will reverse when the underlying transactions reach maturity.

TOTAL OPERATING EXPENSES

Total operating expenses were EUR 0.5 million higher than in 2018. The Bank continues to focus on costs to ensure an efficient ratio of operating cost to income.

NET LOAN LOSSES

The total provision for expected credit losses on assets held at amortised cost amounted to EUR 116.7 million at 30 June 2019, which is EUR 3.4 million less than at 31 December 2018. This provision covers both loans outstanding and treasury assets held at amortised cost. There were no new non-performing loans during the period and no realised losses. The gain recognised in the income statement for net loan losses of EUR 4.0 million relates to recoveries on non-performing loans of EUR 1.4 million and EUR 2.6 million related to the improved credit quality of performing loans.

OTHER COMPREHENSIVE INCOME

The Bank separates the foreign currency basis spread from financial instruments used in fair value hedge accounting, and this separated amount is recorded in “Other comprehensive income” (OCI) which amounted to EUR 9.2 million for the period (January–June 2018: EUR 9.3 million). The resulting total comprehensive income for the period amounted to EUR 103.9 million, compared to EUR 119.7 million in 2018.

NET PROFIT ON FINANCIAL OPERATIONS   EUR m		TOTAL OPERATING EXPENSES   EUR m		NET LOAN LOSSES   EUR m

6 | Interim Financial Report

Financial position

LOANS OUTSTANDING

Total loans outstanding amounted to EUR 18,715 million, which is EUR 448 million higher than on 30 June 2018. Demand for NIB’s long-term financing remains strong. However, the disbursements in the first half year were lower than the historically high level in 2018. The total loans disbursed during the period amounted to EUR 1,484 million, which is EUR 669 million lower than for the same period in 2018. Total repayments amounted to EUR 1,083 million compared to EUR 258 million for the corresponding period in 2018.

Total loans outstanding, excluding exchange rate and valuation effects, decreased from EUR 19,065 million at 31 December 2018 to EUR 18,671 million. The book value amounted to EUR 18,715 million due to foreign exchange and fair valuations/transfers and hedge accounting effects of EUR 1 million and EUR 42 million, respectively.

DEVELOPMENT OF LOANS OUTSTANDING DURING 2019

EUR m

7 | Interim Financial Report

LENDING HIGHLIGHTS

MISSION FULFILMENT

Projects financed by NIB contribute to the Bank’s mission of improving productivity and the environment in the Nordic–Baltic countries. Before approval is given in each individual case, all eligible projects are evaluated and rated against the criteria developed based on the Bank’s mission. In the six-month period that ended on 30 June 2019, loans achieving a “good” or “excellent” mandate rating accounted for 100% of the total amount of loans agreed.

MANDATE RATING FOR AGREED LOANS

(Excluding lending green bond purchases)

8 | Interim Financial Report

FUNDING

The Bank expects to fund between EUR 5.0 billion and EUR 6.0 billion during 2019. The strategy for 2019 is to complete two benchmark transactions in US dollars or euros, complemented by other public and private issues, to maintain a diversified portfolio of currencies and a global investor base. In addition, NIB’s aim is to continue issuing NIB Environmental Bonds. By the end of June, the Bank had raised EUR 2.9 billion (January–June 2018: EUR 5.2 billion) in new funding. The decrease in funding requirements is a result of lower loan disbursements and lower collateral requirements.

In January, NIB issued its first Nordic–Baltic Blue Bond. The five-year SEK 2 billion bond was launched under the NIB Environmental Bond Framework and will focus on investments within water resource management and protection.

In May, the Bank issued a USD 1 billion benchmark, the first of the year, which has a final maturity of 21 May 2024.

DEBT DEVELOPMENT DURING 2019

EUR m

9 | Interim Financial Report

Financial statements

Statement of comprehensive income

The accompanying notes are an integral part of these financial statements.

10 | Interim Financial Report

Statement of financial position

The accompanying notes are an integral part of these financial statements.

11 | Interim Financial Report

The accompanying notes are an integral part of these financial statements.

12 | Interim Financial Report

Statement of changes in equity

The accompanying notes are an integral part of these financial statements.

13 | Interim Financial Report

Cash flow statement

The accompanying notes are an integral part of these financial statements.

14 | Interim Financial Report

The accompanying notes are an integral part of these financial statements.

The cash flow statement has been prepared using the indirect method and cash flow items cannot be directly concluded from the statements of financial positions.

15 | Interim Financial Report

Notes to the interim financial statements

Note 1: Segment information

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker (“CODM”), who is responsible for allocating resources and assessing the performance of the operating segments. The CODM at NIB is the President. Segment results that are reported to the management include items directly attributable to that segment as well as other items allocated on a reasonable basis. In its segment reporting, NIB divides its operations into two major segments: lending and treasury operations. Treasury operations consist of asset and liability management, funding operations and portfolio management. Funding operations are reported as part of asset and liability management. The operating segments are explained in more detail in the Financial Report 2018, Note 3 “Segment information”.

16 | Interim Financial Report

17 | Interim Financial Report

Note 2: Net interest income

Note 3: Net profit on financial operations

18 | Interim Financial Report

Note 4: Expected credit loss