Advance information about Finnvera Group’s operations in 2019: Finnvera’s SME financing and export financing granted to large corporates increased – authorisations to grant export financing were raised significantly
After a couple of years’ hiatus, Finnvera’s financing granted to SMEs and midcap enterprises increased in 2019, reaching nearly EUR 1 billion. Financing granted to large corporates for export transactions also increased year on year, amounting to more than EUR 5 billion. Growth stemmed particularly from the wave of investments in cruise shipping, which creates demand in shipyards and their subcontracting networks in Finland. Demand for new export credit guarantees and export credits remained high. At the turn of the year, the Finnish Parliament decided to significantly raise Finnvera’s authorisations to grant export financing, which makes it possible to promote export trade in the future, too.
The wave of investments in cruise shipping could be seen in Finnvera’s export financing
In 2019, export financing increased year on year, and Finnvera granted the following financing for large corporates’ export transactions: EUR 5.2 billion (EUR 3.0 billion) in export credit guarantees and special guarantees and EUR 2.5 billion (EUR 2.2 billion) in export credits.
The realisation and timing of individual major export transactions have an impact on the amount of financing granted. As a result, the annual variation is typically large. As in the previous years, financing focused especially on cruise shipping, telecommunications, and pulp and paper, and demand for new export credit guarantees and export credits remained high.
Measured in euros, the category of guarantees granted by Finnvera that grew most in 2019 was buyer credit guarantees: the amount granted increased to EUR 3.8 billion (EUR 2.3 billion). Demand for buyer credit guarantees reflects the structure of Finnish exports and the fact that the financing of capital goods exports requires long payment periods and long-term credits to the export company’s foreign buyer. The international wave of investments in cruise shipping could be seen in projects guaranteed by Finnvera. In December 2019, Finnvera signed one of the largest financing agreements in its history, more than EUR 1.2 billion, with Royal Caribbean Cruises. The agreement is associated with a cruise ship to be delivered in 2025.
Finnvera’s exposure related to export credit guarantees and special guarantees granted to large corporates for export transactions was EUR 25.2 billion at the end of 2019 (EUR 23.3 billion). Drawn guarantees accounted for approximately EUR 11.1 billion (EUR 10.0 billion) of the exposure. In other words, more than half of the exposure was related to binding financing offers or agreements that are related to future deliveries by export companies, and thus they do not yet create any credit risks for Finnvera.
The raising of the authorisations enables Finnvera to promote export trade
As long delivery times have tied up Finnvera’s authorisations to grant export financing, the raising of the authorisations became topical in 2019. At the end of the year, the Finnish Parliament decided on legislative amendments. Along with the amendments, the authorisation to grant export credit guarantees was raised from EUR 27 billion to EUR 38 billion and the authorisation to finance export credits was raised from EUR 22 billion to EUR 33 billion. The authorisation to provide interest equalisation, related to export credits, was also increased from EUR 22 billion to EUR 33 billion. The changes took effect at the beginning of 2020.
“The fact that our authorisation to grant export credit guarantees was raised to EUR 38 billion was a very significant development. This figure is extremely high, and it results from the exceptional wave of investments in cruise shipping. The order book extends a long way into the future, and to ensure the completion of these orders together with Finnish shipyards and to serve also other sectors and SMEs at the same time, we need these authorisations,” says Finnvera’s CEO Pauli Heikkilä.
In SME and midcap financing, growth took place especially in SMEs seeking growth and internationalisation and transfers of ownership
Finnvera granted a total of EUR 990 million (EUR 943 million) in financing to SMEs and midcap enterprises, which was the highest amount in three years. The amount of financing granted to SMEs seeking growth and internationalisation, defined as a key enterprise category in Finnvera’s strategy, totalled EUR 448 million (EUR 389 million), which accounts for 45 per cent (41%) of SME and midcap financing granted.
The share of financing for working capital out of overall projects in SME and midcap financing decreased year on year. The euro-denominated share of investments out of the overall projects financed was at the same level as in the previous year, 38 per cent (38%).
Finnvera granted EUR 197 million (EUR 178 million) in guarantees related to SMEs’ export activities, an increase of 11 per cent from the previous year. One of the strategic goals is to increase the number of enterprises using export financing services by 2023.
To accelerate the corporate structure renewal, a record-breaking amount of financing was granted for transfers of ownership over the five-year review period, and financing increased by one fifth from the previous year, amounting to EUR 155 million (EUR 129 million). Finnvera was involved in 912 (921) transfers of ownership. In domestic SME and midcap financing, the relative share of financing granted for transfers of ownership grew to 17 per cent (15%).
SME and midcap financing exposure was EUR 2.3 billion at the end of 2019 (EUR 2.3 billion).
The new SME Guarantee was introduced to improve the availability of SME financing
The shift of the focus of financing from loans to guarantees continued in accordance with the strategy. Finnvera and the European Investment Fund (EIF) signed a two-year COSME guarantee programme agreement in June 2019, and the new SME Guarantee, applied for through banks, was introduced at the beginning of September. Within the framework of the programme, Finnvera can grant an unsecured 80 per cent guarantee for a loan of a maximum of EUR 150,000. The COSME guarantee programme and the guarantee from the European Fund for Strategic Investments (EFSI) make it possible to grant this guarantee without security. The SME Guarantee is intended for SMEs seeking growth and provides financing for working capital, product development and investments. In September–December, a total of EUR 13 million was granted in SME Guarantees to 185 enterprises. Increasing the provision and awareness of the SME Guarantee is a key goal for 2020.
Finnvera granted EUR 38 million (EUR 31 million) in Start Guarantees intended for start-ups, which was 22 per cent more than in the previous year.
Finnvera Group’s report of the Board of Directors, financial statements and annual review for 2019 will be published on 26 February 2020.
Pauli Heikkilä, CEO, tel. +358 29 460 2400