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.

Interim Report 1 January-30 June 2011 (PDF)

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