The systemically important credit institutions posted sound earnings in the 1st half of 2016, and this continued in the 3rd quarter. However, net interest income is under pressure from low interest rates. Lending rates have to a greater extent than deposit rates fallen in step with the monetary policy interest rates, and the average interest margins for households and the corporate sector have decreased.
Banks are making up for the decline in net interest income by seeking new business areas and by adjusting fees. Earnings are still being lifted by large reversals of previous years' loan impairment charges.
The current combination of economic growth and rapidly increasing house prices in the cities intensifies the competition for customers. Competition on the housing loan market providing attractive terms for customers is desirable, but should not go hand in hand with more lenient credit standards. The share of new loans granted to borrowers with a high loan-to-income, LTI, ratio has risen to almost 40 per cent in Copenhagen and Aarhus in recent years, and is thus reaching the level prior to the financial crisis.
Danmarks Nationalbank's accounts-based stress test has been expanded to include stress on the institutions' funding costs. Results from the stress test, which projects the excess capital adequacy of the institutions in three macroeconomic scenarios over the next 2½ years, show that in 2018 all the systemic banks will still have positive excess capital adequacy relative to the current minimum requirements in a severe recession scenario.