Norges Bank Governor and The Chairman of the Executive Board Øystein Olsen gave a presentation at property market focused Estate Media traditional Eiendomsdagene! conference. The slides titled "The financial turbulence and Norway – what lessons can be drawn?" are available from the Norges Bank’s website.
Main lessons from the financial crisis were too low capital and liquidity requirements, ignorance of systemic risks and inadequate crisis resolution regimes. Basel III will address these issues. Olsen warned that largest banks in Norway will to strengthen their capital base. He felt that while local banks fulfil capital conditions fairly well, they do not have big enough capital buffers.
Although Norway has been viewed as a safe haven and according to estimates is currently the only country in the world truly deserving of AAA-rating, global crises hit the country hard. Olsen also said monetary policy can turn expansionary if it is needed.
Most recently banks in Norway have discovered that as a result of the European credit crisis, borrowing costs have gone up in the form of higher NIBOR spread and surcharges particularly in short-term money market with credit spreads close to 2008 levels. The recent key policy rate cut and liquidity measures from ECB have alleviated some of those concerns. Norwegian banks’ direct exposure to heavily indebted countries in the eurozone is limited.
In addition to a giant like DnB ASA (OSE: DNB), there are 22 small savings banks listed in Norway. There may be conditions attached regarding how big a portion a single investor can own and many only have material available in Norwegian. These issues make them quite uninteresting to large international investors.
Property market related loans are important to these banks and they normally have a strong position within their own region. Regional prospects can differ depending on local economic climate. In the long term housing prices have kept going up while household debt burdens are high. Keeping in mind systemic issues, and seeing that some of these banks are active in insurance providing as well, dividend focused individual investors can find companies with very high yield and strong balance sheet among them.
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