2014-10-30 13:32:02 CET
2014-10-30 13:33:03 CET
REGULATED INFORMATION
Finnvera Oyj - Interim report (Q1 and Q3)
The Finnvera Group’s Interim Report for January–September 2014
More tools and authorisations for enterprise financing
Thanks to legislative amendments and Government decisions, Finnvera has gained
important additional authorisations to participate in the financing of projects
undertaken by both SMEs and export companies.
Finnvera can increase risk-taking in the financing of SMEs because the
compensation paid by the State of Finland to Finnvera will cover a greater
share of potential losses in Southern Finland as well. In export financing, the
statutory ceilings for export credit guarantees and export credits have been
raised markedly. The new financing instruments include the option to subscribe
to bonds issued by SMEs, the joint Team Finland LetsGrow financing programme of
Finnvera, Finpro and Tekes, and the possibility to guarantee domestic
investments associated with exports.
Russia's weakened economy and the sanctions and retaliatory sanctions that have
stemmed from the Russo-Ukrainian crisis have strained Finnish companies engaged
in trade with Russia. The sluggish economy and the low investment level were
reflected in the demand for financing.
Business operations and the financial trend
The euro sum of the loan and guarantee offers given to SMEs in
January-September was slightly higher than during the corresponding period the
year before. Many of the offers continued to be associated with working capital
or with the rearrangement of financing granted earlier. The amount of offers
given for the financing of export trade was almost one third higher than at the
same time the year before.
The Finnvera Group's profit for January-September was EUR 76 million. This was
8 per cent more than for the first nine months of 2013 (71 million). The main
factors affecting the improved performance were lower administrative expenses
than last year, the increase in net interest income and fee and commission
income, and decreased guarantee losses and loss provisions in export credit
guarantee and special guarantee operations. Underlying the increase of the fee
and commission income were some individual major export credit guarantees that
came into effect and the general rise in risk premiums on the market. In
contrast, the improved performance was weighed down by impairment losses on
receivables in SME financing and by losses from venture capital investments,
both of which were greater than the year before.
The financial performance of export financing and SME financing by the parent
company, Finnvera plc, came to EUR 85 million, or EUR 11 million more than
during the corresponding period the year before (74 million). Finnvera plc's
profit for export financing was EUR 79 million (63 million) and that for
credits and guarantees in SME financing EUR 4 million (11 million).
Finnvera Group Q3/201 Q2/201 Change Q3/201 Change 1-9/20 1-9/20 Change
4 4 3 14 13
--------------------------------------------------------------------------------
Financial MEUR MEUR % MEUR % MEUR MEUR %
performance
--------------------------------------------------------------------------------
Net interest 14 15 -6 12 15 42 40 4
income
--------------------------------------------------------------------------------
Fee and 33 34 -3 35 -7 103 97 7
commission
income and
expenses (net)
--------------------------------------------------------------------------------
Gains/losses -6 -4 68 0 - -14 -3 316
from items
carried at fair
value
--------------------------------------------------------------------------------
Administrative -8 -11 -20 -8 0 -29 -31 -5
expenses
--------------------------------------------------------------------------------
Impairment 10 -7 -254 -11 -192 -25 -29 -14
losses,
guarantee
losses
--------------------------------------------------------------------------------
Loans and -38 -22 73 -24 56 -79 -70 12
domestic
guarantees
--------------------------------------------------------------------------------
Credit loss 23 11 98 14 59 45 41 11
compensation
from the State
--------------------------------------------------------------------------------
Export credit 25 4 -545 0 - 9 0 -
guarantees and
special
guarantees
--------------------------------------------------------------------------------
Operating profit 41 27 53 27 53 75 71 6
--------------------------------------------------------------------------------
Profit for the 42 27 59 27 55 76 71 8
period
--------------------------------------------------------------------------------
The Group's key figures on 30 September 2014
-- Equity ratio 15.9 per cent (19.3 per cent/30 September 2013)
-- Capital adequacy, Tier 2 18.2 per cent (16.9 per cent/30 September 2013)
-- Cost-income ratio 25.3 per cent (25.1 per cent/30 September 2013)
Outlook for financing
The economy has started to revive in the United States, but in Europe growth
continues to be sluggish. Political turmoil in the Middle East maintains the
overall uncertainty. Owing to the dispute between Russia and Ukraine,
uncertainty about the financing of transactions to Russia, a market important
to Finnish exporters, will continue.
Banks are very cautious when funding transactions in Russia, as banks operating
in the EU must also consider the existing and anticipated sanctions posed by
the United States. In Finland, SMEs and medium-sized enterprises encounter
increasing difficulties in financing export trade, as banks are directing their
export finance services to projects that are more profitable to banks, which in
practice means major companies and their larger transactions.
The decision on the ownership of the Turku shipyard, reached in September, and
the new orders publicised at the same time, mean that Finnvera's commitments
pertaining to shipbuilding contracts will rise. The authorisation to guarantee
debt financing for domestic investments associated with exports, which came
into effect at the beginning of September, has aroused much interest among
export companies and Finnvera's financing partners. It seems that this
opportunity given to Finnvera to share risks can be a significant boost to
decisions concerning new investments, and investments to replace ageing
production capacity, within the export industry. The reform may also promote
individual infrastructure investments serving the export industry, as well as
domestic deliveries of equipment and services for these projects.
Finnvera does not expect the demand for SME financing to reach a very high
level during the final months of the current year. The factors contributing to
this situation include the pessimistic economic outlook, an unusually low
investment level and, in part, the regulations posed on banks. Increasingly
often, SMEs need financing for working capital.
According to the current estimate, the Finnvera Group's financial performance
for 2014 is likely to reach at least the same level as in 2013. A similar
estimate made early in 2014 expected the financial performance to fall below
that in 2013. The uncertainty factors associated with economic trends and if
more risks materialise than has been anticipated, the situation may weaken
considerably from what is projected.
CEO Pauli Heikkilä:
“During the past couple of years, and especially this year, the government has
greatly improved Finnvera's possibilities to provide public financing. Thanks
to the amendments made to legislation and commitments, we can increase our
risk-taking in both SME financing and export financing. The possibility to
subscribe bonds issued by SMEs and to guarantee large enterprises' domestic
investments relating to exports diversified our selection of instruments. It
would be essential, as of the beginning of next year, to implement the
financing possibility for enterprises larger than the SME definition applied by
the EU so that measures such as the possibility to subscribe bonds could be
utilised in our enterprise financing. I also hope that the legislative proposal
for what are known as refinancing guarantees will be presented before the end
of the year. After these changes we can state that, in terms of authorisations
and financial instruments, we are on the same level as our principal competitor
countries.
The consequences of recent events complicate the operations of Finnish
companies engaged in exports to Russia.
For this reason, the turnover of an SME may have fallen considerably. We can
offer financing to strengthen the working capital of SMEs that are encountering
difficulties because of the crisis. We also continue to grant export credit
guarantees for exports to the Russian market. We comply with the sanctions
approved in the EU and we assess our possibilities to participate in projects
on a case-by-case basis, in keeping with our normal criteria.
Finnvera also continues to provide venture capital investments for innovative
start-up enterprises. Owing to the decisions made on the division of tasks
between public actors, we shall gradually give up venture capital investments
within the next few years.”
Additional information:
Pauli Heikkilä, CEO, tel. +358 29 460 2400
Ulla Hagman, Senior Vice President, Finances and IT, tel. +358 29 460 2458
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