Financial Statements of the Finnvera Group 1 January–31 December 2010
Owing to the low level of investments, demand for Finnvera’s domestic financing was nearly one third less than the year before. In contrast, demand was brisk for export credit guarantees for large export projects where the repayment period is over seven years. Thanks to the upward trend in the economy, losses in domestic financing were smaller than in 2009 and the financial performance of domestic operations rose from the red to the black despite greater risk-taking during the year. Nor were any major losses recorded in export financing. Seen as a whole, the financial performance for the year was clearly better than in 2009.
In 2010, Finnvera provided EUR 914 million in financing for enterprises’ domestic operations; this was 24 per cent less than the year before. Offers for export credit guarantees and special guarantees amounted to EUR 2.4 billion (4.4 billion).
The Finnvera Group’s profit for 2010 totalled EUR 63 million, or EUR 45 million more than the year before. The factors having the greatest impact on the improved result were the increase of EUR 18 million in fee and commission income and the decrease of EUR 15 million in credit and guarantee losses remaining after the State’s compensation for losses.
Out of the parent company’s profit of EUR 66 million (24 million), domestic financing accounted for EUR 11 million (-9 million) and export financing for EUR 55 million (33 million). “Our outstanding commitments have been rising in the last few years. This has increased the amount of fee and commission income,” says Managing Director Pauli Heikkilä.
Smaller losses than the year before
Credit and guarantee losses in domestic financing and impairment losses on receivables totalled EUR 68 million (85 million) before the State’s credit loss compensation. This was 20 per cent less than in 2009. The losses were about 2 per cent of the outstanding commitments. In 2008 and 2009 they had been around 3 per cent. The State’s compensation for credit losses totalled EUR 25 million (32 million).
Claims paid on export credit guarantees and special guarantees were still low, totalling EUR 14 million (5 million). Losses and provisions for losses in export credit guarantee and special guarantee operations came to EUR 5 million (10 million).
The number of bankruptcies in Finland declined by 13 per cent during the period under review, but the number of Finnvera’s clients that filed a petition for bankruptcy was almost the same as in 2009.
Finnvera plc’s outstanding credits and guarantees in domestic financing totalled EUR 2,796 million (2,671 million) at year’s end. Outstanding commitments arising from export credit guarantees (current commitments and offers given together) totalled EUR 8,930 million (EUR 9,665 million).
In recent years, Finnvera has increased its risk-taking both in the financing of companies’ domestic operations and in the financing of export trade.
In domestic financing, counter-cyclical financing has increased both outstanding commitments and the risk level. An estimated 70 per cent of financing is without protective security. In 2000, the corresponding share of commitments without protective security was 55 per cent. At year’s end, non-performing credits accounted for 3.6 per cent of outstanding commitments. Three years earlier this figure had been 2.9 per cent. Payments that had been in default less than three months accounted for 2.0 per cent of outstanding commitments.
In recent years, exports covered by Finnvera’s export financing have accounted for an increasing share of all exports. The decline in total exports also affected the increase in this relative share in 2009. Exports covered by export credit guarantees accounted for 5.8 per cent (5.1) of total exports. The share of exports to countries with political risk was 9.5 per cent (8.0). The biggest business sectors in export financing were telecommunications, ship financing, and the forest industry. These sectors accounted for 89 per cent of all corporate commitments at the end of 2010.
At the end of 2010, the Finnvera Group’s capital adequacy ratio was 14.6 per cent (15.0).
The goal is to keep capital adequacy at a minimum of 12 per cent. Finnvera plc’s capital adequacy was 14.5 per cent (14.4).
As companies have made few investments, demand for domestic financing has been exceptionally sluggish.
“If there is an upturn in the volume of investments, demand for financing is expected to pick up already during spring. Owing to changes of generation, the number of company reorganisations among SMEs is expected to rise. Demand for export financing is likely to remain at the same level as before. At the same time, the volume of existing commitments is decreasing, and therefore the total commitments are not expected to rise,” Pauli Heikkilä says.
According to the current estimate, the financial performance for 2011 is likely to fall below that for 2010. If more risks materialise than has been anticipated, the financial performance may differ considerably from that projected.
Pauli Heikkilä, Managing Director, tel. +358 20 460 7321
Ulla Hagman, Senior Vice President, Finances and IT, tel. +358 20 460 7409