Finnvera plc's profit for the period 1 January-31 December 2002 amounted to EUR 22.0 million, while the profit for the previous year had been EUR 24.1 million. At year's end, the outstanding commitments of Finnvera plc amounted to EUR 4,633.5 million (EUR 4,913.9 million). Client enterprises numbered nearly 26,000 (27,000) With its financing schemes, Finnvera contributed to the creation of about 9,500 new jobs (10,700).
During the period under review, the risk financing granted by Finnvera plc to enterprises operating in Finland totalled EUR 770.2 million (EUR 708.3 million), while the export credit guarantees granted totalled EUR 1,708.8 million (EUR 1,764.1 million).
As in previous years, the trend in domestic financing continued to shift from loans to guarantees. Guarantees accounted for 54.3 per cent of the total amount granted in domestic financing (53.1).
The value of guarantee applications pertaining to projected export transactions that would involve foreign risk-taking, submitted to Finnvera by exporters and financiers during 2002, was record high: EUR 5.2 billion (EUR 4.2 billion). Once the enterprises had carried out their export transactions, the value of guarantees that came into effect in 2002 totalled EUR 745.5 million (EUR 908.1 million). The figure is one-fifth less than in 2001 mainly because the value of guarantees pertaining to the export of machines and equipment in the wood-processing industry was almost EUR 130 million less than in the previous year.
In the shipyard industry, the total value of guarantees that came into effect during the year with regard to tenders and pre-delivery payments associated with export projects was EUR 56.3 million (EUR 200.2 million).
At year's end, the parent company had 402 employees (399).
Positive economic development continued
The Finnvera Group's profit for the year 2002 was EUR 16.2 million, while the profit for the previous year had been EUR 26.2 million. The Group companies and associated companies had an effect of EUR -5.8 million on the profit. The associated companies Start Fund of Kera plc (EUR 1.1 million) and Matkailunkehitys Nordia Oy (EUR 0.2 million), and the subsidiary Fide Ltd (EUR 0.7 million) had the greatest positive impact on the Group's performance. Removal of Incap plc from the Group decreased the Group's profit by EUR 6.2 million.
The parent company's profit was EUR 22.0 million, as compared to EUR 24.1 million in 2001.
The interest subsidy from the State and from the European Regional Development Fund (ERDF) totalled EUR 22.8 million (EUR 24.2 million), of which the interest subsidy passed on directly to clients accounted for EUR 16.5 million.
Commissions income includes EUR 35.8 million as commissions received by the parent company for export credit guarantee and special guarantee operations, EUR 10.7 million as other guarantee commissions, EUR 5.2 million as handling fees for loans and guarantees, and EUR 1.3 million as other commissions for lending. The Group's commissions income totalled EUR 54.3 million. This was EUR 14.9 million more than in the previous year.
The Group's administrative expenses totalled EUR 31.9 million (EUR 30.4 million), of which personnel expenses accounted for 63.7 per cent. The parent company's administrative expenses amounted to EUR 31.4 million (EUR 29.8 million), of which personnel expenses accounted for 63.6 per cent. Other operating expenses are mainly costs for business premises.
At the end of the year, Finnvera's outstanding credits totalled EUR 1,217.2 million. Credits increased by EUR 35.0 million during 2002. Guarantees increased more briskly than credits, by EUR 132.0 million, to EUR 623.3 million at the end of 2002. The book value of the liability, as referred to in the Act on the State¿s Export Credit Guarantees, totalled EUR 2,192.9 million (EUR 1,250.6 million). Outstanding commitments for export credit guarantees and special guarantees (current commitments and offers given) totalled EUR 2,793.0 million (EUR 3,240.5 million).
No significant increase in credit and guarantee losses
Credit and guarantee losses, as shown by the profit and loss account, continued to be reasonably low. The parent company's credit and guarantee losses totalled EUR 28.1 million (EUR 29.5 million). Compensation by the State totalled EUR 16.0 million.
Claims from export credit and special guarantees came to EUR 3.2 million. Claims provisions were reduced by EUR 6.0 million.
Capital adequacy and fund-raising
Capital adequacy has been calculated in accordance with the Credit Institutions Act and the regulations issued by the Financial Supervision, even though Finnvera is not governed by the Credit Institutions Act. The capital adequacy ratio of the Finnvera Group was 14.62 per cent (15.30) at the end of 2002. The Group's own assets stood at EUR 291.2 million, while the risk-weighted receivables, investments and commitments outside the balance sheet totalled EUR 1,991.8 million.
The capital adequacy ratio of Finnvera plc was 14.46 per cent (14.89) at the end of 2002. The parent company's own assets stood at EUR 287.9 million, while the risk-weighted receivables, investments and commitments outside the balance sheet totalled EUR 1,991.4 million.
The long-term fund-raising realised by Finnvera amounted to EUR 490 million. During the year, Finnvera withdrew two loans of EUR 50 million from the European Investment Bank and two loans of EUR 100 million from Kreditanstalt für Wiederaufbau. Bonds issued abroad totalled EUR 190.4 million.
Most ownership and industrial policy goals were met
The Ministry of Trade and Industry has defined ownership and industrial policy goals for Finnvera; these are adjusted annually. The indicators used for measuring how the ownership policy goals have been met are the efficiency of operations and capital adequacy. The indicator used for measuring efficiency at the Group level is cost-effectiveness, as shown by the expense-income ratio. The target set for the Group for 2002 was met. Finnvera's capital adequacy should be between 12 and 20 per cent. The Group's capital adequacy ratio was 14.62 per cent (15.30) at the end of the financial year.
Attainment of the goal of economic self-sustainability is assessed in domestic financing over the review period of 1999-2004. It is assumed that the period constitutes one business cycle. For export credit guarantees and special guarantees, the attainment of the goal of self-sustainability is assessed over a period of 10 to 20 years, during which the cumulative result should be zero. The cumulative results of both domestic financing and export credit guarantee operations have shown a surplus in 1999¿2002.
Industrial policy indicators are used to measure Finnvera's success in offsetting deficiencies detected in the operation of the financial market, as well as Finnvera's role in the development of the operating environment of SMEs, in the internationalisation of enterprises, in the promotion of exports, and in the furtherance of the government's regional policy goals.
Attainment of the industrial policy goals is measured, for instance, by monitoring the number of new jobs created in projects funded by Finnvera, both nationally and regionally. In 2002, the number of new jobs created totalled 9,500 (10,700 in 2001). Altogether 5,700 of them were created during the first half of the year; this is an indication that the economic trend weakened towards the end of the year.
The goal for 2002 was that the total sum of Finnvera's financing allocated to national Aid Areas (1, 2 and 3) should be at least as high as the sum allocated in 2001. Altogether EUR 383.4 million was granted to the Aid Areas in 2002 (EUR 341.2 million).
Exports covered by means of Finnvera's export credit guarantees accounted for 2.1 per cent (1.6) of Finland's total exports. As concerns exports to countries with political risks, the ratio between exports covered with export credit guarantees and the total volume of Finland's exports to these countries was 6.9 per cent (4.6).
Measures to promote entrepreneurship and to ensure the financing of SMEs will gain more weight in 2003 as the slow economic growth and uncertain international economic trend are expected to continue. Especially service enterprises will play an increasingly important role as providers of jobs. Other areas of focus in the near future include more efficient financing on regional policy grounds, and development of financing alternatives that suit the present economic situation, improve employment and ensure balanced regional development.
The prospects of export companies remain uncertain, as the economic growth rate and investments are lower than before in the countries of Finland's principal export clients. Demand for Finnvera's export credit guarantees will, however, remain relatively brisk for mobile telephone network investments and for financing projects in the shipyard industry. Outstanding commitments arising from guarantees in these sectors are expected to increase, although the financing arrangements for mobile telephone network investments to be guaranteed will probably be on a somewhat lower level than in the past few years. Thus, outstanding commitments concerning export credit guarantees pertaining to network investments are not expected to grow to any significant extent.
In the financing of both telecommunications and shipbuilding projects, the project-specific commitments are very high; this inevitably increases risk concentrations, while the opportunities for reinsurance are limited. On average, the financial standing of enterprises is weaker than it has been during the past few years; this also increases guarantee risks.
Export companies need to seek trading partners on increasingly difficult markets. This highlights the importance of export credit guarantees. The outstanding commitments concerning guarantees granted for exports to Latin America, Russia and the OECD industrialised countries are expected to increase. In contrast, Asia¿s share is diminishing. The reasons for this are repayment of the existing guarantees and the rapid decrease in exports of Finnish capital goods to countries in this area.
For further information:
Markku Mäkinen, Managing Director, tel. +358 (0) 20 460 7226
Aarno Järvinen, Director, Financial Services, tel. +358 (0) 20 460 7224
Offering financial services, Finnvera plc is a specialised financing company that develops the domestic operations of Finnish enterprises and promotes exports and the internationalisation of enterprises. The State of Finland owns the entire stock of Finnvera plc. Finnvera is Finland's official Export Credit Agency (ECA). Moreover, Finnvera acts as an intermediary between the European Union's financing programmes and Finnish SMEs.