Asset liability management

The Bank's net operational liquidity totalled EUR 4,213 million at the end of 2010, of which holdings in liquid securities totalled EUR 2,618 million. Gross liquidity amounted to EUR 5,344 million, as money market loans and received cash as collateral stood at EUR 1,131 million at year-end. The Bank's liquidity was primarily held in euro and US dollars, while a minor portion was held in Nordic and other currencies. Liquidity distribution is shown in figure 29 and the distribution by rating is shown in figure 30.

The Bank maintained sufficient liquidity during the year. It is the Bank's target to ensure a sufficient level of liquidity to be able to continue disbursing new loans and fulfil all payment obligations for one year forward, without necessitating additional funding.

Again in 2010, the valuation of the bonds in the liquidity portfolio contributed to a positive result to the Bank's earnings.

Own Capital Portfolio management

NIB's Own Capital Portfolio is invested in highly rated fixed-income securities denominated in euro and it is not counted as part of the net operational liquidity. The objective of the portfolio is to contribute to the stable income of the Bank by generating a satisfactory return comparable to a euro-denominated government-bond benchmark index.

During the year, the duration of the portfolio has been kept lower than the benchmark duration of 4.5 years and at year-end it was 4.1 years. The portfolio return for 2010 was 3.07% compared with the benchmark return of 1.15%.

At year-end, the portfolio's nominal value amounted to EUR 2,157 million. The net interest income from the portfolio, EUR 77.9 million, is approximately one-third of NIB's total net interest income in 2010.

During the year, the allocation to the core European government bonds was increased further and this investment policy has sustained the high ratings of the securities in the portfolio.

The portfolio has overweighed investments in segments with a maturity of up to five years compared to the benchmark while being under-allocated in the long-term maturity segment. The portfolio and benchmark maturity profiles are shown in figure 33.

NIB uses external managers for fixed income trading with the objective of increasing returns and diversifying risks. All external managers had positive returns for the year and, overall, the performance exceeded the targets. The internal interest rate portfolio, with similar guidelines as those used for the external managers, also performed positively.

The sum of the percentage shares may not total 100% due to rounding.