Finnvera’s financing in demand especially for working capital and exports of goods

The Finnvera Group’s Interim Report for January–September 2010

Key figures for January–September 2010

• Loans and domestic guarantees offered: EUR 0.6 billion (1–9/2009: 0.9 billion)
• Export credit guarantees, export guarantees and special guarantees offered: EUR 1.5 billion
  (1–9/2009: 3.8 billion)
• Outstanding commitments, loans and domestic guarantees: EUR 3.1 billion (6/2010: 3.0 billion)
• Outstanding commitments, export credit guarantees, export guarantees and special guarantees:
  EUR 9.5 billion (6/2010: 10.0 billion)
• The Finnvera Group’s profit: EUR 45 million (1–9/2009: 8 million)
• Finnvera plc’s profit: EUR 49 million (1–9/2009: 11 million), of which domestic financing accounted for
  EUR 14 million and export financing for EUR 34 million
• The Finnvera Group’s impairment losses on receivables and guarantee losses: EUR 35 million
  (1–9/2009: 57 million)

Thanks to improved export demand, Finland’s total production continued to increase during the third quarter of the year. The normalisation of financial markets continued and it became easier for companies to acquire financing.

“Despite the stronger growth, domestic financing was still needed mostly for working capital, since there was little increase in investments. Some SMEs still suffer from financial difficulties caused by the recession, and some also have problems in obtaining financing. Demand for export credit guarantees continued to be active in all sectors of capital goods exports, but demand for short-term guarantees declined slightly from the high level in 2009,” says Pauli Heikkilä, Finnvera’s Managing Director.

Demand for Finnvera’s domestic financing amounted to EUR 1.2 billion in January–September. The sum declined by 34 per cent and the number of applications by 10 per cent when compared against the corresponding period in 2009. However, when compared against the figures for January–September 2008, the number of applications was now much higher and the sum applied for was almost at the same level.

The value of loans and domestic guarantees granted by Finnvera totalled EUR 0.6 billion, or 26 per cent less than the year before. A total of EUR 75 million in counter-cyclical financing was granted to 184 enterprises.

Demand for export credit guarantees and special guarantees amounted to EUR 4.8 billion. The total sum applied for increased by 5 per cent, whereas the number of applications fell by one quarter from the corresponding figure in 2009.

The value of export credit guarantees, export guarantees and special guarantees offered by Finnvera totalled
EUR 1.5 billion, or 60 per cent less than during the first nine months of 2009. Financing was granted for projects in the traditional export sectors, such as telecommunications, energy and the forest industry.

Financial trend

The Finnvera Group’s financial performance for January–September was EUR 45 million (8 million), or EUR 38 million better than for the corresponding period the year before. The parent company Finnvera plc’s financial performance was EUR 49 million, as against EUR 11 million the year before. For the parent company, impairment losses on receivables and guarantee losses were clearly lower than in 2009. Both domestic financing and export financing recorded a positive result.

When compared against the previous year, the factors that had the greatest impact on the result were a decline of 40 per cent in the parent company’s impairment losses on receivables and guarantee losses, calculated after the State’s compensation for losses, and a net increase of 14 per cent in the parent company’s fee and commission income and expenses.

The parent company’s impairment losses on receivables and guarantee losses totalled EUR 34 million (57 million), of which domestic financing accounted for EUR 28 million (50 million) and export credit guarantees and special guarantees for EUR 6 million (7 million). The losses incurred by Seed Fund Vera Ltd, a subsidiary of Finnvera, came to
EUR 0.9 million.

On 30 September 2010, the parent company’s capital adequacy was 14.5 per cent and that of the Group 14.8
per cent.

Foreseeable risks and future prospects

Many sectors have unused production capacity, for which reason the volume of investments is low. Lack of investments weakens SMEs’ potential for future growth. On the other hand, there is a fair number of investment plans, for instance, in the sector of renewable energy. It is also expected that company reorganisations – especially changes of generation – will increase as entrepreneurs age.

Demand for export credit guarantees is expected to remain fairly active. Competition over export contracts is stiff and, increasingly often, the terms of financing are part of the competition. Amendments made to banking regulations limit long-term lending by banks even though the financial market has otherwise been normalised.

According to the current estimate, Finnvera’s financial performance for 2010 is likely to be better than that for 2009. However, if more losses materialise than has been anticipated, the situation may change 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, tel. +358 20 460 7409

Leena Jaakkola, Senior Vice President, Communications, tel. +358 40 352 9332

The Finnvera Group’s Interim Report for January–September 2010 (PDF)

Information on Finnvera’s operations in 2010 will be published on 26 January 2011 and the Financial Statements and Annual Report for 2010 on 22 March 2011.