Finnvera Oyj - Interim report (Q1 and Q3)

Brisk demand for financing

During the first six months of 2009, demand for Finnvera's domestic financing
exceeded the euro amount for the corresponding period a year ago by 61 per
cent. The number of applications for export credit guarantees and special
guarantees increased by 133 per cent when compared to the first half of 2008.
Credit and guarantee losses in domestic financing rose from the figure recorded
the year before; in consequence, the result for domestic operations and the
Finnvera Group's financial performance for the period under review showed a
loss. The separate result calculated for export credit guarantees and special
guarantees was positive. 

“Companies have been particularly keen to apply for working capital because of
the tighter economic and financial situation. Some financing is still sought
for investments, but clearly less than in the past few years,” says Executive
Vice President Veijo Ojala, who is responsible for Finnvera's domestic regional
financing. 

The total value of the loans and domestic guarantees granted by Finnvera was
EUR 698.6 million (EUR 513.6 million), or 36 per cent more than in the first
six months of 2008. Altogether 60 per cent of the financing was granted to
industrial sectors, in particular to the mechanical engineering industry. 

In March 2009, Finnvera supplemented its product selection by introducing
products for counter-cyclical financing; these have been in great demand.
Counter-cyclical loans and guarantees can be granted to enterprises with at
most 1,000 employees that have encountered financial difficulties because of
the recession. 

Counter-cyclical loans and guarantees accounted for EUR 137.1 million of all
domestic financing provided. In all, they were granted to 327 enterprises. - In
counter-cyclical financing, Finnvera can take higher risks than normally, Ojala
points out. 

More applications in financing for exports

During the first half of the year, the global financial crisis was reflected in
the demand for Finnvera's financing products for exports. In January-June,
demand for export credit guarantees and special guarantees totalled EUR 3,600.6
million. The number of applications rose by 133 per cent, but the total sum
applied for fell by 51 per cent from the figure recorded the year before. The
reason for this is that some large projects were under processing during the
first half of 2008. 

The value of export credit guarantees and export guarantees offered by Finnvera
totalled EUR 3,820.8 million (EUR 4,000.4 million). The biggest guarantee
offers were given to the telecommunications and shipyard sectors. The value of
guarantees that came into effect totalled EUR 2,258.7 million (EUR 1,047.8
million). The number of guarantees that came into effect was 49 per cent higher
than during the corresponding period the year before. 

“Finnvera is still needed to guarantee political and commercial risks and to
share risks. We can now also participate in guaranteeing export transactions
with a payment term of under two years in EU Member States and in other Western
industrialised countries. This, too, increases the demand for our export
credits guarantees,” says Executive Vice President Topi Vesteri, who is
responsible for Finnvera's export financing. 

During the period under review, a temporary refinancing model was taken into
use in export financing. In this model, a bank providing financing for a
foreign buyer can transfer part of the financing to the balance sheet of
Finnish Export Credit Ltd, a subsidiary of Finnvera's. The value of refinancing
offers given by the end of the period under review totalled EUR 500 million. 

Financial trend

The economic situation and weaker risk ratings among Finnvera's client
enterprises had a major impact on Finnvera's credit risks. The State of Finland
compensates Finnvera for some of the losses arisen from domestic credits and
guarantees. Owing to the amendment made to the State's commitment to compensate
for credit and guarantee losses, the State's compensation was EUR 4.0 million
less than during the corresponding period in 2008. 

The Finnvera Group's result for the period under review was EUR -2.7 million.
For the same period last year, there had been a profit of EUR 29.7 million.
Thus, financial performance declined by EUR 32.4 million when seen against the
first half of 2008. 

The main items sapping the financial performance of the Finnvera Group were the
rise in impairment losses on financial assets and the rise in guarantee losses,
altogether by EUR 31.9 million, of which Finnvera plc's share was EUR 31.3
million. 

Finnvera plc's final losses for credits and guarantees in domestic financing
during the period under review came to EUR 25.5 million (EUR 19.1 million).
When cancellations of losses recorded earlier, individually and collectively
assessed impairment losses on loans, and provisions for guarantee losses are
taken into account in the calculation, the losses on credits and guarantees
totalled EUR 45.2 million. The State's compensation for the losses was EUR 8.7
million. 

Losses on export credit guarantees and special guarantees totalled EUR 6.6
million; these consisted mainly of a change in the provision for guarantee
losses. The separate result calculated for export credit guarantees and special
guarantees was positive for the period under review. 

The subsidiaries' credit losses came to EUR 0.6 million.

When the annual income statements for Finnvera's domestic financing and export
financing show a profit, the profits are transferred to two separate funds on
the company's balance sheet: the fund for domestic operations and the fund for
export credit guarantees and special guarantees. Correspondingly, when the
annual income statements show a loss, losses incurred in domestic operations
and losses incurred in export credit and special guarantee operations are
covered separately from these two funds. There is no cross-subvention between
the funds. On 30 June 2009, the assets of the funds totalled EUR 288 million.
The State Guarantee Fund and the State of Finland are responsible for
Finnvera's losses only if the losses cannot be covered by assets in these two
funds. 

“The financial situation will continue to be challenging in the near future.
Credit risks in domestic operations will remain high, and risks will also be
realised as credit losses more than before. By working together with other
financiers, we strive to restore the profitability of enterprises whose
operations have run into difficulties. So far, export credit guarantees have
given rise to relatively few losses, but continuing economic difficulties will
increase the risk of losses,” says Finnvera's Managing Director Pauli Heikkilä. 

Future prospects 

Pauli Heikkilä predicts that the economic recession and the situation
prevailing on the financial market will keep demand for Finnvera's financing
high in Finland, especially as concerns counter-cyclical financing. Finnvera's
role in supplementing the financial market gains added importance when the
principal goal is to continue and develop the operations of viable Finnish
enterprises beyond the recession. Finnvera works in close cooperation with
private financiers, enterprise organisations, and the Ministry of Employment
and the Economy. 

As the number of enterprises in difficulties increases, it is likely that
credit losses will rise during the second half of the year. Some sectors show
positive signs of a slight upturn in demand for exports, as stocks are running
out. 

It is expected that Finnvera's outstanding commitments for buyer credit
guarantees in capital goods transactions will continue to rise sharply during
the second half of 2009 and in 2010, especially in the shipyard and
telecommunications sectors, as the offers already given come into effect.
Demand for credit insurance is also expected to keep increasing during the
second half of 2009. This is because the market situation continues to be
challenging and the European Commission granted Finnvera temporary permission
in June to guarantee export transactions in EU Member States and other Western
industrialised countries when the payment term is under two years. 

According to the current estimate, the financial performance for 2009 is likely
to fall clearly below that for 2008. However, if more risks materialise than
has been anticipated, the situation may change considerably. 


Additional information:
Pauli Heikkilä, Managing Director, tel. +358 20 460 7231 
Topi Vesteri, Executive Vice President, tel. +358 20 460 7238 (Financing of
exports) 
Veijo Ojala, Executive Vice President, tel. +358 20 460 7405 (Domestic
financing) 
Ulla Hagman, Senior Vice President, Finances and IT, tel. +358 20 460 7409

Leena Jaakkola, Senior Vice President, Communications and Marketing, tel. +358
40 352 9332 


The Finnvera Group's Interim Report 1 January-30 June 2009 is available at
www.finnvera.fi > Finnvera > Reports 


Finnvera plc is a specialised financing company owned by the State of Finland.
It provides its clients with loans, guarantees, venture capital investments and
export credit guarantees. Finnvera has official Export Credit Agency (ECA)
status.

Attachments:

osavuosikatsaus_eng_final.pdf