Finnvera Oyj - Interim report (Q1 and Q3)

The Finnvera Group’s Interim Report for January–March 2013

Finnvera's capacity to take risks in SME financing increased

Finnvera will be even more active in providing financing for the working
capital and investments of SMEs. Cooperation is conducted with banks and
insurance companies whose business is affected by the increased regulation.
Additional risk-taking in keeping with the Government Programme is directed so
as to meet the needs of companies aiming at growth and internationalisation, as
well as the needs of start-up companies. As of the start of the current year,
the State will compensate Finnvera for a greater share, or 75 per cent, of any
losses that may arise from financing granted to these companies. The
compensation remains otherwise unchanged, gradated according to the division
into assisted areas. In practice, the increased capacity to take risks means
that Finnvera can account for a larger share of financing granted to
enterprises striving to enter international markets. At the same time, the
principles of self-financing and risk-sharing required in projects of various
types have been specified to make them nationally uniform. 

Business operations and financial trend

The value of financing offers given by Finnvera for exports during
January-March was four per cent less than the year before. The value of the
financing offers given to SMEs was one fifth less than during the corresponding
period last year. The number of financing applications was bigger than the year
before. However, the average size of projects was smaller. 

Investment decisions made by Finnvera's Venture Capital Investments in
January-March increased on the previous year. The private investor network,
which comprised about 250 business angels at the end of 2012, will be
transferred to the private Finnish Business Angels Network (FiBAN) during 2013. 

The Finnvera Group's profit in January-March was EUR 30 million. The profit was
nearly one third greater than during the corresponding period last year (23
million).The main factors contributing to the improved performance were the
increase in the parent company's fee and commission income and the decrease in
impairment losses on receivables and guarantee losses in SME financing. 

Export financing accounted for EUR 21 million (14 million) of the Group's
profit, while domestic credit and guarantee operations accounted for EUR 11
million (9 million). The Group companies and associated companies had an effect
of EUR -2 million on the profit (0.3 million). 

Finnvera Group                        Q1/201  Q1/201  Change  2012  2011  Change
                                           3       2       %  MEUR  MEUR       %
                                        MEUR    MEUR                            
Net interest income                       14      16   -12 %    63    63     0 %
Fee and commission income and             32      26    21 %   112    95    17 %
 expenses (net)                                                                 
Gains/Losses from items carried at      -1,4     1,3  -203 %     2     6   -64 %
 fair value                                                                     
Administrative expenses                  -11     -11     3 %   -43   -42     2 %
Impairment losses on receivables,         -2      -8   -72 %   -75   -55    36 %
 guarantee losses                                                               
Impairment losses on loans and           -29     -12   133 %   -90   -81    11 %
 domestic guarantees                                                            
Change in impairment losses and            8      -1  -720 %   -25    -2   963 %
 guarantee provisions                                                           
Credit loss compensation from the         18       7   158 %    50    32    56 %
 State                                                                          
Losses from export credit guarantees      -2      -4   -52 %   -11    -3   309 %
 and special guarantees                                                         
Change in provisions for export            2       2   -12 %     1    -1  -242 %
 credit and special guarantees                                                  
Operating profit                          30      23    29 %    54    62   -13 %
Profit for the period                     30      23    29 %    53    60   -11 %

The Group's key figures on 31 March 2013

• Capital adequacy 16.0 per cent (15.7)
• Cost/income ratio 28.3 per cent (28.1)
• Equity ratio 20.1 per cent (24.7).

Outlook for the rest of the year

The effects of bank regulation restrict banks' participation in the financing
of enterprises and raise the price paid for financing. These factors, together
with the low level of investments, will keep the demand for SME financing at a
moderate level. 

It is likely that the decline in export demand is reflected in reduced demand
for export credit guarantees and export credits. However, Finnvera's role will
be even more important for export financing. 

Finnvera's Q1 result was clearly better than in the corresponding period last
year. Due to the financial insecurity and the high risks attached to Finnvera's
commitments, however, the result for 2013 will probably be similar to the
result last year. If materialised, individual risks may weaken the result
considerably. 

CEO Pauli Heikkilä:

“The sluggish economy and the low level of investments were reflected in the
demand for our financing products during the first quarter. The fact that
investments remained slight clearly reduced the need for both domestic and
export financing. 

The number of applications we received from SMEs was five per cent more than
during the first quarter of 2012, but their total sum declined by 14 per cent.
This indicates that financing was needed largely for working capital and very
little for investments. Demand for export credit guarantees and export credits
was fairly brisk and only slightly less than the year before. It is typical
that demand for export financing varies in step with individual major capital
goods transactions. 

The Ministry of Employment and the Economy has redefined the division of labour
concerning the State's venture capital investments, and Finnvera will gradually
exit from venture capital investments. Direct investments in innovative
start-up enterprises through Seed Fund Vera Ltd will continue until 2017.” 

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.

Attachments:

ovk_q1_2013_eng.pdf