NORWEGIAN FINANS HOLDING ASA

STRONG FINANCIAL PERFORMANCE IN AN UNCERTAIN ENVIRONMENT

Norwegian Finans Holding (the NFH Group) reported comprehensive income in the first quarter of 2020 NOK 368 million after tax, compared with NOK 504 million in the fourth quarter of 2019. The decrease is caused by a discretionary additional provision for loan losses of NOK 230.0 million related to Covid-19 in the first quarter.

The NFH Group's resilient financial position with high profitability, strong capitalization and high levels of liquid assets make the NFH Group well equipped to withstand the anticipated adverse effects of Covid-19. The total capital ratio was 23.2%, the core capital ratio was 21.1% and the common equity tier 1 ratio was 19.6%. The capital ratio includes a 63bp dividend set aside according to the NFH Group dividend policy.

Return on equity was 16.2%, compared with 23.5% in the fourth quarter and the return on assets was 2.5%, compared with 3.6% in the fourth quarter. Adjusting for the discretionary additional provision, the return on equity was 23.9% and the return on assets was 3.7%.

Gross loans to customers increased NOK 2 860 million compared with NOK 972.5 million in the previous quarter and totaled NOK 47 015 million. Currency adjusted gross loan growth was NOK -733.3 million compared with NOK 874.7 million in the previous quarter.  Broken down by product the currency adjusted loan growth for instalment loans was NOK 375.4 million compared with NOK 400.9 million in the previous quarter, and for credit cards NOK -1 109 million compared with NOK 473.8 million in the previous quarter. The negative growth in credit cards is mainly due to lower spending related to Covid-19. Instalment loans amounted to NOK 33 371 million and credit card loans amounted to NOK 13 645 million.

Despite the turbulence, the NFH Group recruited 31 000 new customers in the first quarter. At the end of the first quarter 2020 the NFH Group had a customer base of 1 747 500 customers, which can be broken down into 1 276 300 credit card customers, 210 100 instalment loan customers and 261 100 deposit customers.

It is still too early to predict how the highly uncertain effects of Covid-19 will affect the NFH Group. As of the reporting date, there is limited evidence in observed customer behavior that indicate a significant increase in credit risk (SICR). However, the drop-off in economic activity has led to a sharp increase in unemployment, which is expected to culminate in higher credit losses.