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Advance information about Finnvera Group’s year 2020

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Advance information about Finnvera Group’s year 2020: The separate result for export credit guarantee and special guarantee operations shows a significant loss due to loss provisions - The coronavirus pandemic increased domestic financing, export financing decreased year on year

Stock Exchange Release 28 January 2021, Finnvera Plc, Inside Information

The separate result for Finnvera’s export credit guarantee and special guarantee operations for 2020 shows a loss of EUR 1,178 million due to significantly increased loss provisions in export credit guarantee and special guarantee operations. Of the unprofitable separate result, EUR 829 million is covered from the reserve for export credit guarantees and special guarantees on Finnvera’s balance sheet and the exceeding amount will be covered from the State Guarantee Fund by law. Finnvera will apply for a fund contribution of EUR 349 million from the State Guarantee Fund. Finnvera Group’s result for 2020 will show a significant loss due to the separate result. The Group’s result 2020 as a whole will be released on 23 February 2021. The coronavirus pandemic increased companies’ need for financing in 2020. Finnvera’s domestic financing increased to a record-high level. Export financing decreased year on year.

As a result of the coronavirus pandemic, Finnvera focused on securing the availability of funding for viable enterprises and ensuring the maintenance of the operating conditions for export financing. The number of Finnvera clients increased to approximately 26,500 (24,500) at the end of 2020.

Separate result for export credit guarantees and special guarantees at a loss

Finnvera Group’s Report of the Board of Directors and Financial Statements for 2020 will be published on 23 February 2021. The Group’s result for 2020 will show a clear loss as a result of significantly increased loss provisions in export credit guarantee and special guarantee operations.

The separate result for export credit guarantee and special guarantee operations for 2020 shows a loss of EUR 1,178 million (profit of EUR 56 million) before the State Guarantee Fund’s contribution. The loss was caused by the significant credit loss provisions in export credit guarantee and special guarantee operations, made due to the coronavirus pandemic. The calculation of credit loss provisions is carried out in accordance with IFRS 9, and the calculated impact of macroeconomic variables and decline of risk ratings of individual high-risk subjects contributed to the increase in loss provisions.

The separate result for export credit guarantee and special guarantee operations showing a loss will primarily be covered from the reserve for export credit guarantees and special guarantees on Finnvera’s balance sheet. If the funds of the reserve are not sufficient for covering the loss, the loss will be covered from the State Guarantee Fund by law. The State Guarantee Fund is a fund not included in the state budget, the funds of which have been accumulated in the activities of Finnvera’s predecessor organisations. According to the Act on the State Guarantee Fund, the State is responsible for Finnvera’s export credit guarantees and special guarantees.

The reserve for export credit guarantees and special guarantees on Finnvera’s balance sheet totalled EUR 829 million (EUR 773 million) at the beginning of 2020. In order to cover the loss, Finnvera will apply for a fund contribution of EUR 349 million from the State Guarantee Fund.

Domestic financing increased to a record-high level following the coronavirus situation

The Parliament of Finland raised Finnvera’s domestic credit and guarantee authorisation from the maximum of EUR 4.2 billion to EUR 12 billion by  amendment in May 2020. This constituted a significant boost to Finnvera’s opportunities to grant financing. The State raised the credit and guarantee loss compensation paid to Finnvera from 50 per cent to 80 per cent.

Finnvera granted a total of EUR 1.7 billion (EUR 1.0 billion) of financing to companies in Finland. The granted financing includes loans and guarantees as well as export credit guarantees for SMEs and midcap enterprises. In addition, this amount includes EUR 239 million of domestic financing granted to large corporations. In 2020, Finnvera was authorised to grant working capital financing to large corporations for financing needs caused by the coronavirus situation.

The amount of restructurings of financing for enterprises nearly tripled from the previous year. Domestic financing was granted to all main sectors more than previously during this exceptional year. The growth was proportionally the highest in tourism, which suffered the worst from the coronavirus pandemic, with EUR 174 million (EUR 55 million) of financing granted. Measured in euros, the most financing was granted to industry, totalling EUR 787 million (EUR 526 million).

Exposure in domestic financing increased and amounted at the end of 2020 to EUR 2.9 billion (EUR 2.3 billion).

Export financing decreased measured in euros, but increased in number

Finnvera granted financing mainly for large corporations’ export transactions EUR 2.9 billion (EUR 5.2 billion) in export credit guarantees and special guarantees and EUR 1.1 billion (EUR 2.5 billion) in export credit. Of the key export financing sectors, the impacts of the pandemic hit cruise shipping the worst. Approximately one-half of Finnvera’s export financing liabilities are associated with cruise shipping.

The annual volume of export financing is always influenced by the timing of individual major export transactions. Even though export financing decreased measured in euros, the number of export credit guarantees increased year on year due to increased demand for credit insurance. Credit insurance arrangements were used by exporting SMEs in particular.

Exposure in export financing was EUR 22.0 billion at the end of 2020 (EUR 25.2 billion). Drawn guarantees accounted for approximately EUR 11.4 billion (EUR 11.1 billion) of the exposure. In other words, approximately half of the exposure was related to binding financing offers or agreements that are related to future deliveries by export companies.

Previously published outlook for 2020

On 1 July 2020, Finnvera gave a profit warning, reducing Finnvera Group’s outlook for 2020. In the H1 Half-Year Report published on 21 August 2020, the company estimated that its result for 2020 will show a loss. In the revised outlook published on 3 November 2020 the company estimated that the coronavirus pandemic causes still exceptional uncertainty in the outlook. The Finnvera Group's profit outlook for 2020 is in line with that given in the January‒June Half-Year Report i.e. owing to credit loss provisions, the Group’s result for 2020 will show a loss due to the calculated impact of macroeconomic indicators and the decline of risk ratings of individual risk subjects.

Publication of the report of the Board of Directors and the financial statements

Finnvera Group’s Report of the Board of Directors and the Financial Statements for 1 January‒31 December 2020 as well as the Annual Review will be released on 23 February 2021.

Further information:

Pauli Heikkilä, CEO, tel. +358 29 460 2400

Ulla Hagman, CFO, tel. +358 29 460 2458

Distribution:

NASDAQ Helsinki Ltd, London Stock Exchange, the principal media, www.finnvera.fi/eng