Higher risk levels for outstanding commitments - Financial Statements of the Finnvera Group 1 January–31 December 2011

For Finnvera’s SME financing, 2011 was a busier year than 2010, and the volume of financing offered increased considerably on the previous year. Similarly, the value of offers given for export credit guarantees and special guarantees was over one and a half times more than in 2010. Losses from SME financing were about one fifth greater than the year before; this reduced the parent company’s profit. Losses from export financing remained low. As in the previous year, the financial performance of the Finnvera Group and that of the parent company were still clearly in the black.

In 2011, Finnvera’s financing for enterprises’ domestic operations amounted to EUR 977 million (914 million). The value of export credit guarantees and special guarantees offered totalled EUR 3,796 million (2,380 million).

“Investments continued to be low, and working capital accounted for over half of the SME financing offered. The number of export credit guarantees that came into effect rose steeply, increasing the company’s fee and commission income. For this reason, despite higher credit losses, the financial performance for the year remained at a good level, when seen as a whole,” says Managing Director Pauli Heikkilä.

Financial performance

The Finnvera Group’s profit was EUR 64 million, or one million euros better than the year before. The main factors improving the result were changes in the fair value of venture capital investments and an increase in the net interest income. The increase in the parent company’s credit and guarantee losses had a negative effect on the result.

Export financing accounted for EUR 54 million of the parent company’s profit of EUR 58 million (66 million). The rest of the profit came from the cancellation of a subordinated loan because of the loss shown by Finnvera’s subsidiary, Seed Fund Vera Ltd, in 2010.Bankruptcies and restructuring remained at a high level in Finland. Owing to the credit losses materialised, and the parent company’s additional self-risk portion of EUR 6 million in loss compensation, the result for SME financing was zero.

Credit losses increased by bankruptcies

Credit and guarantee losses in SME financing and impairment losses on receivables totalled EUR 83 million (68 million) before the State’s credit loss compensation. This was 21 per cent more than in 2010. The credit loss compensation received from the State was EUR 32 million (25).

Losses on export credit guarantees and special guarantees, as well as provisions for losses, remained low, at EUR 4 million (5 million).

Increased outstanding commitments and higher risk levels

Within the past few years, Finnvera’s outstanding commitments and their risk levels have risen significantly. This is reflected in SME financing, for instance, as poorer risk ratings for client enterprises and as an increase in the relative share of non-performing receivables and payment delays. The higher risk level for outstanding commitments was also seen in the losses recorded for SME financing in 2011; these were clearly greater than in 2010. In export financing, outstanding commitments have more than doubled within four years. However, no major losses were recorded and no major increases were made in provisions for losses in export financing during the year.

Capital adequacy

At the end of 2011, the capital adequacy ratio of the Finnvera Group was 15.5 per cent (14.6). According to the target set, the capital adequacy ratio should be at least 12 per cent. Finnvera plc’s capital adequacy was 15.2 per cent (14.5).

Future prospects

Restlessness on the financial market and uncertain prospects for the world economy will slow down economic growth in Finland, too. SMEs will still need financing for working capital. Companies’ low level of investments reduces the demand for Finnvera’s financing, whereas banks would like to see Finnvera participating increasingly often in financing projects, to share risks with them.

The uncertainty on the financial market, triggered by the high debt rates of developed economies, has darkened the future expectations of export companies. The new instrument for financing export credits granted by banks is likely to increase Finnvera’s share of buyer credit arrangements. Demand for export financing is greatly influenced by development trends in the economies of Finland’s key export countries, such as Sweden, Russia and Germany, and Finland’s own competitiveness.

The uncertainty factors associated with economic trends make it more difficult to predict Finnvera’s financial performance. According to the current estimate, the financial performance for 2012 is likely to fall below that for 2011.

For the first time, Finnvera publishes its Annual Report as an electronic document on the company’s website. The Annual Report consists of the Annual Review and Financial Review published previously as separate reports. The Annual Report also includes the Corporate Responsibility Report.

Read the Annual Report: www.finnvera.fi/annualreport2011

Additional information:
Pauli Heikkilä, Managing Director, tel. +358 20 460 7321
Ulla Hagman, Senior Vice President, Finances and IT, tel. +358 20 460 7409