Increased quality of loan portfolio, reduction of operating costs and increase in housing projects connected to the governments support for housing.
The HFF´s Results in line with expectations
• The Housing Financing Fund's operating surplus amounted to ISK 1,366 million
• Equity ratio is 8.5%, which is the highest ratio since the establishment of the Fund
• Loans with delinquencys are 2.1% and decrease from being 2.9% last year
• Salaries and related expenses decreased by 9.7% since last year
The Housing Financing Fund's Financial Statement for the year 2017 was confirmed by the Fund's Board of Directors today. Operating results for the period were positive, amounting to ISK 1,366 million. The Fund's equity ratio is now 8.5%, while the Fund's long-term goal is to exceed 5.0%. The Housing Financing Fund's equity at the end of 2017 is ISK 24,894 million, compared to ISK 23,528 million on 31 December 2016. The Fund's total assets amount to ISK 762 billion and total liabilities amount to ISK 737 billion.
The Fund's operations
Net interest income from 1 January to 31 December 2017 amounted to ISK 1,641 million compared to ISK 1,857 million in 2016. Operating expenses for the period amounted to ISK 1,706 million, decreasing by 1.7% over the year. Salaries and related expenses decreased by 9.7%, and full-time equivalent positions decreased from 77 in 2016 to 66 at the end of 2017. The Fund has received new housing projects including the granting and monitoring of public housing support such as initial capital contributions and housing benefits. Other operating expenses increase by 10.8% primarily due to payments to the Debtors' Ombudsman. The Housing Financing Fund made payments amounting to ISK 161 million to the operations of other government agencies, The Financial supervisory Authority Iceland and The Debtors´ Ombudsman, or the equivalent of 20% of the other operating expenses of the Fund. The streamlining measures undertaken in previous years have been fully implemented.
The proportion of interest-bearing assets outside of the loan portfolio increases due to prepayments
At the end of the year 2017, loans held by the Fund amounted to ISK 500 billion, decreasing by ISK 78 billion since the beginning of the year. The reduction in the loan portfolio is due to prepayments, depreciation and the allocation of private pension savings to the fund as payments on loans. Prepayments by customers are largely the result of increased market share of pension funds in mortgage lending.
Assets outside of the loan portfolio including liquid assets increased during the period and are now ISK 254 billion. The main challenges for managing assets outside the loan portfolio are interest rate, inflation risk and the size of the Fund. In view of this, it is worth mentioning that the yield on the bond market has generally dropped in line with the Central Bank’s interest rates reductions, which affects the return on assets outside the loan portfolio.
Development of arrears and quality of loan portfolio
Loans in arrears now account for 2.1% of total loans, compared to accounting for 2.9% at year-end 2016. Favourable economic conditions and effective collection processes have reduced the risk of the loan portfolio. The calculated adjusted balance of the total of the Fund's loans in arrears was ISK 10.922 million, of which delinquency amounted to ISK 1.888 million. The provision for the impairment of loans amounted to ISK 6,917 million at the end of the period, a decrease of the provision by ISK 563 million since the beginning of the year. About 97% of the book value of the Housing Financing Fund's loan portfolio lies in a collateral range within 90% of the real estate valuation of the underlying mortgage loans at the end of the year. Housing prices have risen in excess of general price levels during the period and delinquency has decreased significantly, therefore the collateral position of the loan portfolio has strengthened.
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Further information please contact Rut Hreinsdóttir, Director of Operations, tel. 354 569 6900.
