Finnvera Group’s Half-Year Report 1 January–30 June 2021

Finnvera Group, Stock Exchange Release 11 August 2021

Finnvera's domestic financing still at a higher level than usual, demand for export financing decreased – the Group's result showed a profit of EUR 65 million

Finnvera Group, summary

• Result EUR 65 million (EUR -423 million) – during the first half of the year, no new significant loss provisions had to be made, and no material final losses were realised from exposure for export credit guarantees – however, there were no grounds for decreasing the credit loss provisions made in 2020 
• Profit by segments: profit of the parent company Finnvera plc's SME and midcap business stood at EUR 11 million (EUR 36 million) and Large Corporates business at EUR 35 million (EUR -461 million); the subsidiaries had an impact of EUR 19 million (EUR 2 million) on the Group’s profit,
• The separate result for export credit guarantee and special guarantee operations was EUR 38 million (EUR -476 million).
• Balance sheet total EUR 12.3 billion (EUR 12.7 billion) – the -3 per cent change was due to a decrease in outstanding export credits.
• Contingent liabilities stood at EUR 15.7 billion (EUR 15.4 billion) – an increase of 2 per cent, which was most significantly affected by the increase in outstanding domestic guarantees and binding credit commitments.
• The total exposure of the parent company Finnvera plc remained unchanged at EUR 25.0 billion (EUR 25.0 billion).
• As a result of the profitable result, non-restricted equity and the State Guarantee Fund, that is, the buffer reserves in total, increased to EUR 0.9 billion (EUR 0.8 billion).
• Equity ratio rose by 0.6 percentage points to 6.3 per cent (5.7 per cent).
• The expected credit losses based on the balance sheet items remained at the same level as at the end of the previous year, EUR 1.4 billion (EUR 1.4 billion).
• The expense-income ratio improved by 2.5 percentage points to 26.6 per cent (29.1 per cent).
• Net promoter score (NPS) index, measuring customer satisfaction, 70 (50) – the improvement in the NPS index for Locally operating small companies and Large Corporates boosted the average.

Finnvera Group, H1/2021 and 30 June 2021
Result H1/2021 65 MEUR H1/2020: −423 MEUR	Balance sheet total 30 June 2021 EUR 12.3 bn 31 Dec 2020: EUR 12.7 bn change -3%
Total exposure, the parent company’s domestic, export credit guarantee and special guarantee operations 30 June 2021 EUR 25.0 bn 31 Dec 2020: EUR 25.0 bn change -0.3%	Non-restricted equity  and The State Guarantee Fund after H1/2021 result 30 June 2021 EUR 0.9 bn 31 Dec 2020: EUR 0.8 bn change 8%
Expense-income ratio H1/2021 26.6% H1/2020: 29.1% change -2,5 pp	Equity ratio 30 June 2021 6.3% 31 Dec 2020: 5.7% change 0.6 pp
NPS index (net promoter score)  H1/2021 70 H1/2020: 50  change 20 points	Expected credit losses based on the balance sheet items 30 June 2021 EUR 1.4 bn 31 Dec 2020: EUR 1.4 bn change 0.2%

Finnvera Group, financing granted and exposure

H1/2021 (H1/2020)

• Loans and guarantees granted: EUR 918 million (EUR 926 million), change -1%
• Export credit guarantees and special guarantees granted: EUR 1,594 million (EUR 1,747 million), change -9%
• Export credits granted: EUR 346 million (EUR 402 million), change -14%
  • The credit risk for Finnish Export Credit Ltd’s export credits is covered by the parent company Finnvera plc’s export credit guarantee
  • The fluctuation in the amount of export credit guarantees and export credits is influenced by the timing of individual major export transactions

30 June 2021 (31 December 2020)

• Exposure, drawn domestic loans and guarantees: EUR 2,753 million (EUR 2,430 million), change 13%
• Exposure, export credit guarantees and special guarantees, incl. SME and midcap export credit guarantees and export guarantees: EUR 21,971 million (EUR 22,408 million), change -2%
  • Drawn exposure: EUR 11,363 million (EUR 11,762 million), change -3%, of which Large Corporates’ cruise shipping exposure in total EUR 4,501 million (EUR 4,427 million)
  • Undrawn exposure EUR 8,452 million (EUR 7,749 million) and binding offers EUR 2,155 million (EUR 2,896 million), total change 0%, of which Large Corporates’ cruise shipping exposure in total EUR 6,991 million (EUR 7,089 million)
• Exposure, export credits drawn: EUR 7,292 million (EUR 7,561 million), change -4%

CEO Pauli Heikkilä:

“During the first half of 2021, the global economy and the Finnish economy have taken an upward turn after the coronavirus year 2020, and the number of bankruptcies has not increased as feared. The financing system has worked well in Finland throughout the crisis. The banks have had access to Finnvera's 80 per cent guarantee and a record number of EU instruments.

In January-June, Finnvera granted domestic loans and guarantees amounting to EUR 0.9 billion (EUR 0.9 billion). The volume of financing remains at a higher level than usual, even though demand has stabilised. During the first half of the year, of the sectors, the largest amount of financing was granted to industry. Its share of financing in relation to other sectors grew most, which is descriptive of the accelerating growth in industry.

In January–June, the amount of export credit guarantees and special guarantees came to EUR 1.6 billion (EUR 1.7 billion). The lack of individual large projects has reduced demand for export financing. The EGF guarantee programme of the European Investment Bank, introduced by Finnvera, enables working capital financing for large enterprises. As a whole, the Finnish export industry has come through the pandemic quite well.

In January–June 2021, the Finnvera Group made a profit of EUR 65 million. No new significant loss provisions had to be made during the first half of the year, and no material final losses were realised from exposure for export credit guarantees and special guarantees. However, there were no grounds for decreasing the substantial credit loss provisions made in 2020.

Of the key export financing sectors, the impacts of the coronavirus pandemic hit cruise shipping the worst. In 2020, Finnvera had to make credit loss provisions of EUR 1.2 billion, of which cruise shipping accounted for 90 per cent. This significantly reduced Finnvera's capital. To enable financing of new export projects, in the third supplementary budget for 2021 Parliament approved a provision for a transfer of EUR 650 million to the State Guarantee Fund in order to capitalise Finnvera's export credit guarantee and special guarantee operations. The State Guarantee Fund is a fund not included in the state budget, which covers losses from export credit guarantee and special guarantee operations if the assets of the reserve for export credit guarantee and special guarantee operations on Finnvera’s balance sheet are not sufficient to cover an unprofitable result.

Finnvera’s role is to supplement the financial market and to accelerate business growth and exports to ensure that Finnish enterprises can be involved in the recovery of the global economy. Although the pandemic is not over, the economic outlook is brighter. In line with our strategy, in addition to dealing with the crisis, we will now increasingly focus on enabling growth, investment and internationalisation, taking care of our corporate responsibility.”

Finnvera Group Financial performance	H1/2021 MEUR	H1/2020 MEUR	Change MEUR	Change %	2020 MEUR
Net interest income	27	24	3	13%	51
Net fee and commission income	78	68	10	15%	143
Gains and losses from financial instruments carried at fair value through P&L and foreign exchange gains and losses	-2	-2	-0.3	-13%	2
Other operating income	0.1	0.1	0	-34%	349
Operational expenses	-22	-22	0.2	1%	-44
Other operating expenses and depriciations	-5	-4	1	26%	-8
Realised credit losses and change in expected credit losses, net	-6	-481	-476	-99%	-1,233
Operating profit/loss	69	-418	487	-	-740
Profit/loss for the period	65	-423	488	-	-748

Financial performance

The Finnvera Group’s result for January–June 2021 showed a profit after an unprofitable year 2020. The profit for the first half of 2021 was EUR 65 million, whereas the result for the corresponding period last year showed a loss of EUR 423 million. The profitable result is due to the stabilisation in the credit loss provision development caused by the coronavirus over the first half of the year.

During January–June 2021, no new significant loss provisions had to be made, and no material final losses were realised in export credit guarantee and special guarantee operations. However, there were no grounds for decreasing the substantial credit loss provisions made in 2020. In January–June, the expected credit losses amounted to only EUR 2 million (EUR 477 million), and the final credit losses totalled EUR 14 million (EUR 17 million)

In terms of segments, both SME and midcap financing and export financing made a positive result. The result of the SME and midcap business totalled EUR 11 million (EUR 36 million) and that of Large Corporates was EUR 35 million (EUR -461 million). The result of the subsidiary Finnish Export Credit Ltd was EUR 19 million (2) and the result of venture capital financing was slightly positive (-1).

The Group’s net interest income in January–June was EUR 27 million (EUR 24 million), increasing by 13 per cent from the corresponding period last year. Net fee and commission income increased by 15 per cent, totalling EUR 78 million (EUR 68 million). Totalling EUR 22 million (EUR 22 million), fee and commission expenses were on a par with the corresponding period last year.

Outlook for financing

In the second half of 2021, demand for Finnvera's domestic financing is expected to remain calm, and, in addition to working capital financing, demand is expected to shift to investments by SMEs. We also estimate that the investments made by large corporates will accelerate the launch and implementation of investment plans in the SME sector towards the end of the year.

Banks have access to a higher number of guarantee programmes granted by the European Investment Bank group than before, which may reduce demand for financing from Finnvera.

Due to the prolonged coronavirus pandemic and uncertainty in the global economy, the number of new major export projects has decreased, affecting the future volumes of export guarantees and credits. As in previous years, the overall demand is affected by the realisation of individual major projects. The focus of demand for export financing is expected to be on the pulp and paper as well as telecommunications sectors. The prospects of and demand for export financing in cruise shipping sector are strongly influenced by when shipping companies will be able to restart their operations to a larger extent. Credit insurance is expected to remain at a slightly higher level than normal. Until the end of 2021, working capital financing for large corporates will be possible through the European Investment Bank's EGF guarantee programme.

The dissipation of uncertainty caused by the pandemic is a key factor in how financial performance will develop in 2021. If the economic development and the business operations of Finnvera's individual high-risk subjects are back on a sufficient growth path, which will thus limit or reduce significant loss provision and loss recognition entries, it is possible that the Finnvera Group's result for 2021 will show a profit. If, on the other hand, the economy and business operations recover at a slower pace, the Group's result may show even a significant loss, as it did in 2020.

Further information:

Pauli Heikkilä, CEO, tel. +358 29 460 2400

Ulla Hagman, CFO, tel. +358 29 460 2458

Half-year report 1 January–30 June 2021 (PDF)

Distribution:

NASDAQ Helsinki Ltd, London Stock Exchange, the principal media, www.finnvera.fi

The half-year report is available in Finnish and English at www.finnvera.fi/financial_reports

As from the beginning of 2022, Finnvera will publish its reviews quarterly.