Finnvera Oyj - Interim report (Q1 and Q3)

The Finnvera Group’s Interim Report for JanuaryMarch 2014

Recovery in the demand for financing hampered by political crises

During the first quarter of 2014, the Finnish financial markets performed
better than statements presented in public would suggest. There are occasional
blind spots but private providers of funding are well able to meet the demand
for financing for credible growth investments, partly with help from Finnvera.
However, companies that have several loss-making years behind them and not
enough equity are facing major problems. 

The crisis between Ukraine and Russia has a negative impact on the economies of
both countries. At the end of the period under review, Russia accounted for
Finnvera's third biggest country exposure (EUR 879 million). With the weakening
of the Russian economy and a decline in Finnish exports, there has also been a
slight decrease in Finnvera's exposure involving Russia recently. Finnvera
continues to provide Finnish exporters with financing for trade with Russia.
However, developments are being monitored closely and Finnvera is also prepared
for higher risks. Finnvera's exposure involving Ukraine totalled four million
euros and at the moment no new guarantees can be provided for export
transactions to that country. 

Business operations and financial trend

The euro value of the loan and guarantee offers given to SMEs in JanuaryMarch
increased by 15 per cent from the same period in 2013. As in 2013, most of them
were associated with the need for working capital. Some of the credit agreement
negotiations connected with export transactions that were still uncompleted
last year were concluded and as a result, the number of export financing offers
increased by 81 per cent from the first quarter of 2013. 

The Finnvera Group's profit for JanuaryMarch was EUR 8 million. This was EUR
22 million less than the profit for the corresponding period in the previous
year (30 million). The most important factors pushing the profits downwards
were the increase in the impairment losses on receivables and guarantee losses
incurred by the parent company Finnvera plc as well as a decline in net
interest income. At the same time, the weakening in profits was partially
offset by higher fee and commission income and lower administrative expenses. 

The profit from the parent company Finnvera plc's export financing and SME
financing amounted to EUR 10 million, or EUR 21 million less than a year
earlier (31 million). Export financing, or the separate result of export credit
guarantee and special guarantee operations laid down in section 4 of the Act on
the State Guarantee Fund, showed a profit of EUR 5 million (21 million), while
the profit for SME credit and guarantee operations amounted to EUR 5 million
(11 million). 

Finnvera Group     Financial  Q1/201  Q1/201  Change  Change  2013  2012  Change
 performance                       4       3    MEUR       %  MEUR  MEUR       %
                                MEUR    MEUR                                    
Net interest income               13      14      -1      -8    56    63     -11
Fee and commission income         37      32       6      17   134   112      20
 and expenses (net)                                                             
Gains/losses from items           -3      -1      -2    -151    -2     2    -178
 carried at fair value                                                          
Administrative expenses          -10     -11       1      -6   -43   -43       0
Impairment losses, guarantee     -28      -2     -26       -   -64   -75     -16
 losses                                                                         
- Loans and domestic             -19     -21       1      -7  -101  -115     -12
 guarantees                                                                     
- Credit loss compensation        12      18      -7     -37    48    50      -3
 from the State                                                                 
- Export credit guarantees       -21       0     -21       -   -11   -10       7
 and special guarantees                                                         
Operating profit                   7      30     -23     -77    75    54      39
Profit for the period              8      30     -22     -74    75    53      40

The Group's key figures on 31 March 2014 (31 March 2013)

  -- Equity ratio 18.8% (20.1%)
  -- Capital adequacy 17.9% (16.0%)
  -- Expense-income ratio 25.1% (28.3%)

Outlook for financing

During the early part of the year, demand for SME financing will remain at a
moderate level, a result of uncertain economic prospects and the low level of
investments. Most of the financing needs are associated with working capital
and the rescheduling of existing credits. 

Finnish exports have continued to decline during the early months of the year
and there are no clear signs of any upturn. As a result of the crisis in
Ukraine, there is also an exceptional degree of uncertainty in the economic
situation. Economic growth in Russia had already slowed down before the crisis
and as a result of the crisis, the prospects seem to be getting even weaker.
The state of Russia's banking and financing system and the economic sanctions
will also make it more difficult for companies to get financing in Russia,
which will have a direct impact on Finnish exports to Russia. Changes in
banking regulation, risks in target countries, slow economic growth and stiffer
export competition, accentuating the financing solutions offered to the buyer,
help to maintain demand for export credit guarantees and export credits. 

CEO Pauli Heikkilä:

“There are many reports showing that financing for credible growth investments
is available in Finland. The situation becomes more difficult when financing is
sought for continuing unprofitable operations. In such cases, the providers of
financing require that the company has adequate plans for restructuring its
operations. For start-up enterprises, difficulties arise if they lack capital
of their own for the project. Because the economic outlook remains unclear,
banks require a higher proportion of self-financing. Companies that can meet
this requirement can also acquire debt financing. The most important
consideration is to encourage equity investments in Finnish companies. 

Significant increases in Finnvera's financial powers regarding SMEs and export
companies were put forward in the Government's 2013 supplementary budget and in
this spring's discussion on spending limits. If implemented, these measures
will further improve Finnvera's possibilities to complement the availability of
financing from the private market. It is also important that Finnish export
companies have access to competitive export financing so that they can submit
tenders on the same terms as the exporters in competitor countries.” 


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_2014_eng.pdf