Financing offered by Finnvera increased during the first quarter
Press release on the Finnvera Group’s Interim Report for 1 January–31 March 2011
Key figures for the first quarter of 2011
- Loans and domestic guarantees granted: EUR 221 million (Q1/2010: EUR 211 million)
- Export credit guarantees, export guarantees and special guarantees granted: EUR 598 million (Q1/2010: EUR 422 million)
- Outstanding commitments for domestic financing: EUR 3,082 million (12/2010: EUR 3,079 million)
- Outstanding commitments for export financing: EUR 8,813 million (12/2010: EUR 8,927 million)
- The Finnvera Group’s financial performance: EUR 10 million (Q1/2010: EUR 13 million)
- Finnvera plc’s financial performance: EUR 11 million (Q1/2010: EUR 13 million)
- Impairment losses on Finnvera plc’s receivables and guarantee losses: EUR 23 million (Q1/2010: EUR 18 million)
In January–March, demand for Finnvera’s domestic financing increased by nearly one fifth on the corresponding period the year before. In contrast, demand for export credit guarantees and special guarantees was over one third less than a year ago. The decline was caused partly by the return of markets to the normal state and partly by seasonal variation in large, individual capital goods transactions.
“We granted clearly more loans and domestic guarantees than during the first quarter of 2010. Financing continued to be needed mostly for working capital. This indicated that SMEs were still cautious about investing. The total volume of counter-cyclical financing nearly tripled. During the first quarter, it was granted to about 100 enterprises. The volume of export credit guarantees offered was about 40 per cent more than the year before: the projects concerned the main export sectors, such as telecommunications, the forest industry and power generation,” says Finnvera’s Managing Director Pauli Heikkilä.
In January–March, the Finnvera Group’s profit came to EUR 10 million (13 million), or over EUR 2 million less than during the first three months of 2010. The profit of the parent company, Finnvera plc, stood at EUR 11 million (EUR 13 million).
Export financing brought in a profit of EUR 12 million. Despite large-scale commitments and risk concentrations, no major individual claims materialised during the period. Domestic financing showed a loss of EUR 1 million because, despite the overall economic improvement, the number of bankruptcies among Finnvera’s client enterprises was greater than a year ago.
In domestic financing, the parent company’s losses, impairment losses and provisions for credits and guarantees amounted to EUR 23 million (17 million). This sum consisted of credit and guarantee losses materialised, EUR 24 million (13 million); cancellations of losses recorded earlier, EUR 1 million (1 million); and impairment losses and provisions for losses, EUR 0.5 million (5 million).
Foreseeable risks and future prospects
Demand for financing among SMEs has gained momentum in early 2011, and the growth is expected to continue as investments increase. At the same time, the number of bankruptcies among enterprises in difficulties has risen, and Finnvera may therefore sustain more credit losses as the year progresses.
Export credit guarantees are in demand not only for exports to the traditional countries with political risks but also, for instance, for large individual projects in industrialised countries. There is also continued demand for long-term financing for the exports of capital goods. The private market for short-term credit insurance still has shortcomings, especially with respect to export projects carried out by SMEs and payment terms exceeding six months.
The temporary model of providing funding for export credits, based on the acquisition of funds by the State, will cease at the end of June this year. In its programme, the next Government will probably take a stand as to whether a permanent model of providing funding for export credits, based on Finnvera’s acquisition of funds, should be created in Finland, as proposed by the Export Financing 2011 working group. In this model, banks could arrange export credits and transfer them to the balance sheet of Finnvera’s subsidiary, Finnish Export Credit Ltd.
According to the current estimate, Finnvera’s profit for 2011 is likely to be less than in 2010. However, if more risks materialise than has been anticipated, the situation may weaken.
Pauli Heikkilä, Managing Director, tel. +358 20 460 7321
Topi Vesteri, Executive Vice President, tel. +358 20 460 7238
Veijo Ojala, Executive Vice President, tel. +358 20 460 7405
Ulla Hagman, Senior Vice President, Finances and IT, tel. +358 20 460 7409