Finnvera Oyj - Interim report (Q1 and Q3)

Greater demand for Finnvera's domestic financing - lesser demand in export financing

Press release on the Finnvera Group's Interim Report for 1 January-30 June 2011

In January-June, demand for Finnvera's domestic financing was clearly greater
(11%) than during the corresponding period the year before. In contrast, demand
for export credit guarantees and special guarantees fell by almost half. The
decline was partly caused by seasonal variation in capital goods acquisitions
but also by uncertainty factors that delayed investment decisions. However, the
number of financing offers given by Finnvera rose during the first half of the
year in both domestic and export financing. The credit and guarantee losses
realised in domestic financing totalled EUR 48 million. No major losses were
recorded in export financing during the period under review. The financial
performance was positive both for export and special guarantee operations and
for domestic financing. 

Key figures 1 January-30 June 2011

  -- Loans and domestic guarantees granted: EUR 518 million (Q2/2010: EUR 470
     million)
  -- Export credit guarantees, export guarantees and special guarantees granted:
     EUR 2,386 million (Q2/2010: EUR 1,072 million)
  -- Outstanding commitments for domestic financing: EUR 3,111 million (12/2010:
     EUR 3,079 million)
  -- Outstanding commitments for export financing: EUR 9,549 million (12/2010:
     EUR 8,927 million)
  -- The Finnvera Group's financial performance: EUR 32 million (Q2/2010: EUR 26
     million)
  -- Finnvera plc's financial performance: EUR 27 million (Q2/2010: EUR 30
     million)
  -- Finnvera plc's losses, impairment losses and provisions: EUR 42 million
     (Q2/2010: EUR 36 million)

“The greater demand for domestic financing stemmed from SMEs' increased need
for working capital and a slight upturn in investments. Our offers for loans
and domestic guarantees increased by 10 per cent on the figure a year ago, and
the volume of counter-cyclical financing offered nearly tripled. A total of EUR
115 million in counter-cyclical financing was granted to 235 enterprises. The
cautious rise in investments last spring may have died down during summer, but
if the current restlessness on financial markets continues, demand for our
domestic financing may continue to increase during the second half of the year,
especially if it becomes more difficult to obtain financing on private
markets,” says Finnvera's Managing Director Pauli Heikkilä, projecting into the
future. 

According to Heikkilä, counter-cyclical financing has been an efficient tool
during the downturn, and nearly 1,100 enterprises have already made use of it.
Finnvera can still grant counter-cyclical financing until the end of this year. 

“With the present uncertain economic outlook, it would be highly justified to
continue counter-cyclical financing next year as well,” Heikkilä says. 

The guarantees offered by Finnvera for export trade came to EUR 2.4 billion
during the first six months of the year. The total sum of offers more than
doubled on the sum for the first half of 2010, whereas the number of offers
given was about one third less. The traditional export sectors, such as
telecommunications, the forest industry and ship financing, dominated export
projects. 

“Customs statistics show that the growth in Finnish exports came almost to a
halt in June. The low demand for our export financing throughout spring was
advance warning of this. Introduction of the export financing scheme mentioned
in the Government Programme and increased risk-taking would be of primary
importance for the competitiveness of Finland and Finnish export companies,”
Heikkilä stresses. 

The number of Finnvera's clients continued to rise and was 29,719 at the end of
June (29,060). 

Financial trend

The financial performance of the Finnvera Group for January-June was EUR 32
million (26 million), or over EUR 6 million better than during the
corresponding period in 2010. The profit of the parent company, Finnvera plc,
stood at EUR 27 million (EUR 30 million). 

Export financing accounted for EUR 23 million of the profit. Despite
large-scale commitments and risk concentrations, no major individual claims
materialised during the period. The profit from domestic credit and guarantee
operations was EUR 0.3 million, as there were more bankruptcies among
Finnvera's client enterprises than a year ago. 

In domestic financing, the parent company's losses and provisions for credit
and guarantee losses amounted to EUR 40 million (30 million). Of this sum,
credit and guarantee losses materialised accounted for EUR 48 million,
cancellations of losses recorded earlier for EUR 3 million, and decreases in
impairment losses on receivables and in provisions for EUR 5 million.
Compensation by the State and the ERDF for the losses materialised totalled EUR
13 million (9 million). 

At the end of June, the parent company's capital adequacy was 14.3 per cent
(14.3) and that for the Group 15.1 per cent (14.8). 

Outlook for the rest of the year

Many SMEs have yet to recover fully from the previous recession. Thus,
enterprises' situation will quickly become more difficult if economic growth
slows down dramatically in Finland. 

The growth in export demand was sluggish throughout the first half of the year
because debt problems in the United States and Europe, and the consequent
uncertainty factors have delayed investment decisions. The uncertain economic
outlook, combined with the cost competitiveness problems burdening some sectors
of our export industry, is likely to weaken the growth prospects of exports and
thereby also the demand for export credit guarantees. 

Finnvera's profit for the current year is estimated to remain at the same level
as in 2010. If there is a downturn in the economy and more risks materialise
than have been anticipated, financial performance may dwindle considerably. 


Additional information:
Pauli Heikkilä, Managing Director, tel. +358 20 460 7321
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

Attachments:

Osavuosikatsaus_q2_2011_eng.pdf