The Finnvera Group’s Interim Report for January–June 2014

A substantial increase in the authority to grant export credit guarantees and export credits

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| Source: Finnvera Oyj
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Finnvera received substantially more authority for export financing during the Q2/2014 period. The maximum amount of export credit guarantees rose by EUR 4.5 billion to EUR 17 billion and the maximum amount of financing for export credits increased by EUR 4.0 billion to EUR 7.0 billion. Finnvera now has better possibilities to supplement the private financial markets with regard to financing arrangements for SMEs and for export transactions that require long-term financing. Finnvera also received the possibility to subscribe to SME bonds, thereby strengthening Finnvera’s operational possibilities.

During the period under review, demand for Finnvera’s financing was slightly lower than in the first quarter of the year. Financial markets functioned reasonably well in Finland in the first half of the year. The greatest impediments to arranging financing for companies were unprofitable activities and insufficient equity.
 
Business operations and financial trend
   
The euro value of the loan and guarantee offers given to SMEs in JanuaryJune increased by 10 per cent on the same period in 2013. As in 2013, most of the offers involved working capital. In contrast, the amount of offers given for export financing fell by one-third in comparison to the first half of the previous year.

The Finnvera Group’s profit for JanuaryJune was EUR 34 million. This was EUR 10 million less than the profit for the corresponding period in the previous year (44 million). The most important factors decreasing the profits were the increase in the impairment losses on receivables and guarantee losses incurred by the parent company Finnvera plc, and losses on venture capital investments for items carried at fair value. At the same time, the downturn in profits was partially offset by higher fee and commission income and lower administrative expenses than in the corresponding period of 2013.

The profit of the parent company Finnvera plc amounted to EUR 40 million, or EUR 7 million less than the year before (46 million). The parent company’s profit for export credit and special guarantee activities was EUR 31 million (39 million), while the result for credit and guarantee operations related to SME financing was EUR 4 million (8 million). 

Finnvera Group Q2/2014 Q1/2014    Change Q2/2013 Change H1/2014 H1/2013 Change
Financial performance MEUR MEUR % MEUR % MEUR MEUR %
Net interest income 15 13 16 14 7 28 28 0
Fee and commision income and expenses (net) 34 37 -9 30 12 71 62 15
Gains/losses from items carried at fair value -4 -3 12 -2 147 -7 -3 149
Administrative expenses -11 -10 2 -12 -9 -21 -23 -8
Impairment losses, guarantee losses -7 -28 -77 -16 -58 -35 -18 94
   Loans and domestic guarantees -22 -19 14 -24 -8 -41 -44 -7
   Credit loss compensation from the State 11 12 -1 8 34 23 27 -15
   Export credit guarantees and special guarantees 4 -21 -119 0 - -17 0 -
Operating profit 27 7 290 15 85 34 44 -23
Profit for the period 27 8 248 14 86 34 44 -22

The Group’s key figures on 30 June 2014

  • Equity ratio 16.5 per cent (17.9)
  • Capital adequacy 18.5 per cent (16.5)
  • Cost-income ratio 25.8 per cent (29.5)

Outlook for financing

During the latter half of the year, demand for SME financing will probably remain at moderate levels, a result of uncertain economic prospects and investments that are lower than normal. SMEs need financing for working capital and the rescheduling of existing credits.

The situation in Russia causes uncertainty in the financing of the exports and trade. Current sanctions and the threat of further sanctions and countermeasures by Russia impede the operation of banks. In practice, banks in the EU region will have to take account of the existing sanctions issued by the United States, and those anticipated, because they have operating licences in the US and extensive payment transactions denominated in the US dollar. Businesses in Russia are finding it more difficult to obtain financing. This situation has impacted on the demand for Finnvera’s short-term guarantees, which is lower than in the corresponding period during 2013 in terms of both numbers and value. The value of guarantees applied for capital goods exports in January–June was only about half of the preceding year’s figure although new orders received by Finnish industry have shown an upward trend during the first six months of the year. Finnvera expects the demand for export guarantees to revive in the latter half of the year. The outstanding commitments for export credit guarantees include some cases where credit rearrangement may become necessary or where the risk of loss has increased during the spring.

CEO Pauli Heikkilä:

“The amendments made to the Act on the State’s Export Credit Guarantees in June increased the maximum amounts of Finnvera’s export credit guarantees and export credits. When exports from Finland return to a growth track, we will be well prepared, alongside banks, to participate in the arrangement of financing for the international customers of Finnish export companies. We obtain the funds needed to finance export credits and SMEs from the capital markets. In April, we successfully launched a EUR 500 million bond, which is the largest bond to date for our acquisition of funds.

We can still provide coverage for political and commercial risks incurred by Finnish exporters for projects carried out in Russia. We abide by the sanctions approved by the EU and assess our possibilities to participate in projects on a case-by-case basis according to our normal criteria.

One of our targets is to identify growth companies and encourage them to grow internationally. In order to accelerate this process, together with Tekes and Finpro, we started the Team Finland LetsGrow project, which provides financing and advisory services to help companies implement their internationalisation plans. The LetsGrow programme allows Finnvera, for the first time ever, to offer unsecured financing on a broad basis.”

Additional information:

Pauli Heikkilä, CEO, tel. +358 29 460 2400
Ulla Hagman, Senior Vice President, Finances and IT, tel. +358 29 460 2458

This Interim Report is available at www.finnvera.fi > Finnvera > Publications > Annual Reviews and Interim Reports.