Finnvera Oyj - Annual Financial Report

Revival of the economy improved Finnvera's financial performance

Financial Statements of the Finnvera Group 1 January-31 December 2010

Owing to the low level of investments, demand for Finnvera's domestic financing
was nearly one third less than the year before. In contrast, demand was brisk
for export credit guarantees for large export projects where the repayment
period is over seven years. Thanks to the upward trend in the economy, losses
in domestic financing were smaller than in 2009 and the financial performance
of domestic operations rose from the red to the black despite greater
risk-taking during the year. Nor were any major losses recorded in export
financing. Seen as a whole, the financial performance for the year was clearly
better than in 2009. 

In 2010, Finnvera provided EUR 914 million in financing for enterprises'
domestic operations; this was 24 per cent less than the year before. Offers for
export credit guarantees and special guarantees amounted to EUR 2.4 billion
(4.4 billion). 

Financial performance

The Finnvera Group's profit for 2010 totalled EUR 63 million, or EUR 45 million
more than the year before. The factors having the greatest impact on the
improved result were the increase of EUR 18 million in fee and commission
income and the decrease of EUR 15 million in credit and guarantee losses
remaining after the State's compensation for losses. 

Out of the parent company's profit of EUR 66 million (24 million), domestic
financing accounted for EUR 11 million (-9 million) and export financing for
EUR 55 million (33 million). “Our outstanding commitments have been rising in
the last few years. This has increased the amount of fee and commission
income,” says Managing Director Pauli Heikkilä. 

Smaller losses than the year before

Credit and guarantee losses in domestic financing and impairment losses on
receivables totalled EUR 68 million (85 million) before the State's credit loss
compensation. This was 20 per cent less than in 2009. The losses were about 2
per cent of the outstanding commitments. In 2008 and 2009 they had been around
3 per cent. The State's compensation for credit losses totalled EUR 25 million
(32 million). 

Claims paid on export credit guarantees and special guarantees were still low,
totalling EUR 14 million (5 million). Losses and provisions for losses in
export credit guarantee and special guarantee operations came to EUR 5 million
(10 million). 

The number of bankruptcies in Finland declined by 13 per cent during the period
under review, but the number of Finnvera's clients that filed a petition for
bankruptcy was almost the same as in 2009. 

Finnvera plc's outstanding credits and guarantees in domestic financing
totalled EUR 2,796 million (2,671 million) at year's end. Outstanding
commitments arising from export credit guarantees (current commitments and
offers given together) totalled EUR 8,930 million (EUR 9,665 million). 

Increased risk-taking

In recent years, Finnvera has increased its risk-taking both in the financing
of companies' domestic operations and in the financing of export trade. 

In domestic financing, counter-cyclical financing has increased both
outstanding commitments and the risk level. An estimated 70 per cent of
financing is without protective security. In 2000, the corresponding share of
commitments without protective security was 55 per cent. At year's end,
non-performing credits accounted for 3.6 per cent of outstanding commitments.
Three years earlier this figure had been 2.9 per cent. Payments that had been
in default less than three months accounted for 2.0 per cent of outstanding
commitments. 

In recent years, exports covered by Finnvera's export financing have accounted
for an increasing share of all exports. The decline in total exports also
affected the increase in this relative share in 2009. Exports covered by export
credit guarantees accounted for 5.8 per cent (5.1) of total exports. The share
of exports to countries with political risk was 9.5 per cent (8.0). The biggest
business sectors in export financing were telecommunications, ship financing,
and the forest industry. These sectors accounted for 89 per cent of all
corporate commitments at the end of 2010. 

Capital adequacy

At the end of 2010, the Finnvera Group's capital adequacy ratio was 14.6 per
cent (15.0). 
The goal is to keep capital adequacy at a minimum of 12 per cent. Finnvera
plc's capital adequacy was 14.5 per cent (14.4). 

Future prospects

As companies have made few investments, demand for domestic financing has been
exceptionally sluggish. 

“If there is an upturn in the volume of investments, demand for financing is
expected to pick up already during spring. Owing to changes of generation, the
number of company reorganisations among SMEs is expected to rise. Demand for
export financing is likely to remain at the same level as before. At the same
time, the volume of existing commitments is decreasing, and therefore the total
commitments are not expected to rise,” Pauli Heikkilä says. 

According to the current estimate, the financial performance for 2011 is likely
to fall below that for 2010. If more risks materialise than has been
anticipated, the financial performance may differ considerably from that
projected. 

Finnvera's Annual Review and Financial Review for 2010 are available on the
company's website: www.finnvera.fi > Finnvera 


Additional information:
Pauli Heikkilä, Managing Director, tel. +358 20 460 7321
Ulla Hagman, Senior Vice President, Finances and IT, tel. +358 20 460 7409

Attachments:

FV_VSK2010_EN_FINAL.pdf

FV_Tal_katsaus_2010_EN_FINAL.pdf