Report for 3rd quarter 2025

KBN’s net interest income totalled NOK 588 million in the third quarter of 2025, compared to NOK 595 million in the third quarter of 2024. KBN’s aggregate customer financing¹ was reduced by NOK 2 billion in the third quarter of 2025. The growth in green lending amounted to NOK 1 billion this quarter. Green lending represented 20.6% of KBN’s total lending portfolio at the end of the quarter.

KBN’s core earnings² totalled NOK 308 million in the third quarter of 2025, compared to NOK 345 million in the third quarter of 2024. The decrease in core earnings was due to lower net interest income combined with higher operating costs relative to the same period last year. KBN’s net interest income totalled NOK 588 million in the third quarter of 2025, as compared to NOK 595 million in the corresponding period of 2024. Norges Bank cut its key policy rate by 0.25 of a percentage point at its September monetary policy committee meeting. The rate now stands at 4%, while the money market interest rate at the end of the quarter was 4.13%.

KBN’s result for the accounting period in the third quarter of 2025 was a profit of NOK 445 million, compared to a profit of NOK 310 million in the same period in 2024. In the third quarter of 2025, KBN recognised a net gain on financial instruments totalling NOK 133 million, as compared to a net loss of NOK 54 million in the third quarter of 2024. KBN’s net gains/losses on financial instruments comprise the sum of the realised and unrealised gains and losses recognised by KBN. There was a net realised gain from market transactions of NOK 3 million for the third quarter of 2025, while there was a net realised gain from market transactions of NOK 47 million in the third quarter of 2024. Unrealised gains amounted to NOK 130 million in the third quarter of 2025, compared to unrealised loss of NOK 101 million in the same period in 2024.

KBN’s fixed rate lending and associated hedging instruments contributed a net unrealised loss of NOK 15 million in the third quarter of 2025. Net unrealised gain on fixed rate lending and associated hedging instruments amounted to NOK 64 million in the same period in 2024. KBN started to apply hedge accounting to all its new fixed rate lending with effect from 1 January 2022. KBN’s introduction of hedge accounting to its fixed rate lending will over time reduce the size of the portfolio of fixed rate loans carried at fair value, and this will reduce the net unrealised gains and losses included in KBN’s earnings. At the end of the third quarter of 2025, 31 % of KBN’s portfolio of fixed lending was carried at fair value.

KBN’s liquidity portfolio and associated hedging instruments contributed a net unrealised gain of NOK 50 million for the third quarter of 2025, while KBN's own bonds and associated hedging instruments contributed a net unrealised gain of NOK 95 million to its result from ordinary activities in the same period. KBN’s unrealised gains and losses are expected to reverse as the instruments approach maturity.

KBN’s provision for expected credit losses is relatively limited. This is because the Norwegian Local Government Act states that municipalities cannot be declared insolvent. KBN’s liquidity management portfolio is also of very high credit quality. KBN decreased its provision for expected credit losses by NOK 6 million in the third quarter of 2025, bringing the total to NOK 46 million at the end of the quarter.

KBN’s total operating costs for the third quarter of 2025 were NOK 111 million, compared to NOK 102 million in the same period in 2024. This increase was in accordance with the plans adopted by KBN and was primarily due to a higher level of activity in developing and improving KBN’s operations.

KBN’s core earnings³ for the first nine months of 2025 totalled NOK 905 million, compared to NOK 984 million in the first nine months of 2024. KBN’s net interest income in the first nine months of 2025 was NOK 1,709 million, as compared to NOK 1,699 million in the first nine months of 2024.

KBN’s result for the accounting period in the first nine months of 2025 was a profit of NOK 1 261 million as compared to a profit of NOK 1 194 million in the first nine months of 2024. KBN recognised net gains on financial instruments totalling NOK 339 million in the first nine months of 2025, compared with NOK 219 million in the first nine months of 2024.

KBN’s total operating costs for the first nine months of 2025 were NOK 322 million, compared to NOK 285 million in the first nine months of 2024. This increase was in accordance with the plans adopted by KBN and was primarily due to increased staffing and a higher level of activity in developing and improving KBN’s operations. KBN’s cost-to-income ratio⁴ for the first nine months of 2025 was 19.6 %, compared to 16.7 % in the first nine months of 2024.

KBN’s annualised return on equity in the first nine months of 2025 was 8.3 %, compared to 8.0 % in the same period in 2024. Based on its core earnings, KBN’s annualised return on equity in the third quarter of 2025 was 6.6 %, compared to 7.3 % in the same period in 2024. The decrease was due to somewhat lower core earnings as well as to an increase in retained earnings. The return target set by KBN’s Board of Directors for the 2025-2027 period is at least 7%.

KBN’s total comprehensive income in the first nine months of 2025 was NOK 1 204 million, compared to NOK 1 024 million in the first nine months of 2024. There was an unrealised loss after tax from changes to KBN’s own credit risk of NOK 57 million, as compared to an unrealised gain after tax of NOK 170 million in the same period in 2024.

Table 1: Result for the period and total comprehensive income

KBN’s lending portfolio totalled NOK 373 billion⁵ at the end of the third quarter of 2025, while aggregate customer financing⁶ totalled NOK 380 billion⁷ at the end of the third quarter of 2025. KBN's aggregate customer financing decreased by NOK 2 billion in the third quarter of 2025, as compared to an increase of NOK 8 billion in the third quarter of 2024. The main reason for the reduction in growth in KBN’s aggregate customer financing was the favourable terms and low prices available to local government sector borrowers in the capital markets.

KBN’s portfolio of green loans increased by NOK 1 billion in the third quarter of 2025, as compared to NOK 5 billion in the same period in 2024. KBN's green lending in the third quarter of 2025 included green loans for Nedre Romerike Vann- og Avløpsselskap IKS and the municipality of Oslo. At the end of the third quarter of 2025, KBN’s green lending represented 20.6% of its overall lending portfolio.

The annual rate of debt growth in the local government sector as at the end of September 2025 was calculated to be 7.5 %. After adjusting for borrowing from the Norwegian State Housing Bank, the rate of debt growth was 6.9 %. After adjusting for borrowing from the Norwegian State Housing Bank, KBN’s market share based on its aggregate customer financing⁸ as at the end of the third quarter of 2025 was 49.6 %.

Chart 1: Quarterly growth in aggregate customer financing in billion kroner

The rate of inflation in Norway was running at 3.6% at the most recent assessment in June, while core inflation was 3%. The goal of monetary policy is for the annual rate of growth in the consumer price index to be as close as possible to 2% annual growth.

The change in economic policy following the change of President in the USA has led to significant fluctuations in the fixed income and foreign exchange markets so far in 2025, and there is significantly more uncertainty than usual regarding future growth both nationally and internationally.

Following a weakening of the US dollar in the first half of the year, the exchange rate against both the US dollar and the euro was approximately unchanged at the end of the third quarter of 2025 compared to the end of the third quarter of 2024, although there were periods of significant volatility within the quarter. Credit spreads on local government and covered bonds remained relatively stable throughout the quarter.

KBN enjoyed good access to the international capital markets in the first nine months of 2025 and completed all its funding transactions as planned. KBN’s new borrowings in the first nine months of 2025 totalled approximately NOK 114 billion through 49 bond issues in 8 currencies, as compared to NOK 83 billion in the third quarter of 2024.

KBN continues to enjoy low borrowing costs and good market access thanks to its AAA/Aaa rating.

Chart 2: New borrowings by currency in 2025

KBN’s liquidity portfolio totalled NOK 115 billion⁹ at the end of the third quarter of 2025, as compared to NOK 128 billion at the end of the third quarter of 2024. KBN’s liquidity portfolio is managed with the aim of matching its financing requirements, including lending growth, for the subsequent twelve months, and it is managed on the basis of a low-risk investment strategy.

The liquidity portfolio is largely held in zero-risk weighted assets that are particularly liquid. Investments denominated in foreign currencies represented 54% of the portfolio at the end of the third quarter of 2025. Fluctuations in the value of the Norwegian krone relative to other currencies will therefore result in fluctuations in the size of the liquidity portfolio in NOK terms.

Table 2: Capital adequacy key figures

KBN’s total assets at the end of the third quarter of 2025 amounted to NOK 534 billion, down from NOK 568 billion at the end of 2024. The decrease from the end of 2024 was primarily due to a decrease in the NOK value of balance sheet assets as a result of the strengthening of the Norwegian krone and the weakness of the American dollar.

KBN’s Pillar 2 capital requirement at the end of the third quarter of 2025 consisted of 1.7% of the basis for calculation under Pillar 1. The Pillar 2 requirement is intended to address risks that the undertaking is exposed to and that are not, or are only partially, covered by the general capital requirements in Pillar 1. The requirement must be satisfied with at least 56.25% common equity Tier 1 capital and at least 75% Tier 1 capital.

KBN’s leverage ratio at the end of the third quarter of 2025 was 4.2%, as compared to the requirement of 3.0%.

KBN’s capital adequacy at the end of the third quarter of 2025 was in excess of the requirements set by the authorities.

Capital adequacy figures are sensitive to large fluctuations in exchange rates, particularly the USD-NOK rate, because these impact the size of KBN’s balance sheet through the conversion into NOK. In addition, changes in the value of KBN’s outstanding currency hedging instruments lead to fluctuations in cash collateral that influence KBN’s capital adequacy key figures. KBN has internal buffers that are intended to ensure its capital adequacy does not fall below the regulatory requirements as a result of such exchange rate fluctuations.

KBN has a long-term goal of reducing its own emissions by at least 55% by 2030 compared to the 2019 level. KBN has calculated that its own CO₂e emissions¹⁰ in the first nine months of 2025 were 33 tonnes of CO₂e, representing a 77% decrease from the 2019 level and a decrease from 70 tonnes of CO₂e in the same period in 2024. In other words, the 2030 reduction goal has already been achieved in 2025. The reduction is due to lower energy consumption in new office premises as well as reduced travel activity.

At its monetary policy committee meeting in September 2025, Norges Bank stated that a restrictive monetary policy was still required, but that the outlook for the coming year indicates lower inflation than previously expected. Norges Bank stated that a cautious normalisation of the policy rate would pave the way for inflation to return to the target of 2% without restricting the economy more than necessary. The future path of the policy rate thereafter will depend on economic developments.

There is greater uncertainty than normal and worsening expectations regarding the outlook for the global economy, including due to the effect of changes to the USA’s economic policy.

KBN has good access to liquidity and will continue to provide its customers with attractive financing for local government sector projects across Norway.

Oslo, 6 November 2025

The Board of Directors and Chief Executive Officer of Kommunalbanken AS