The Finnvera Group’s Interim Report for January–September 2012
The best credit ratings for Finnvera's acquisition of funds
Finnvera’s loan programme of three billion euros received the best possible ratings from two credit rating agencies: Moody’s (Aaa) and Standard & Poor’s (AAA). The ratings correspond to the ratings assigned to the State of Finland for its long-term funding. Finnvera’s loan programme is guaranteed by the State of Finland and is used for acquiring funds from the market for financing both SMEs and export credits.
Business operations and financial trend
The value of financing offers given by Finnvera for exports during January–September was four per cent less than the year before but more than double the value of offers given during the corresponding period in 2010. The number of financing offers given for SMEs declined slightly, and the value of the offers was about one fifth less than during the corresponding period last year.
In Finnvera’s venture capital investments, the value of initial investments made in January–September increased on the figure for the same period in 2011. Moreover, 53 new business angels joined Finnvera’s network of business angels during the period under review, bringing the total to 232. Demand for services offered by Finnish Export Credit Ltd was brisk, while the value of offers remained at the same level as last year.
The Group’s profit for the third quarter was EUR 11 million, or clearly better than the result for the second quarter. The profit accounted for over one third of the profit of EUR 30 million recorded for January–September. The nine-month profit that was clearly less than in 2011 is explained by increased credit risks in SME financing and the resulting impairment losses and provisions for losses.
The Group’s net interest income and the net sum of fee and commission income and expenses increased in January–September by 10 per cent on the previous year. In January–September, administrative expenses remained more or less unchanged from the previous year, but impairment losses on receivables and guarantee losses increased by over 40 per cent. Owing to the losses recorded, SME financing showed a negative result for January–September. Export financing showed a profit.The Group companies and associated companies had an effect of EUR -4 million on the profit.
- At the end of September, the Finnvera Group’s capital adequacy ratio was 15.8 per cent, or 0.5 percentage points better than a year ago.
- The Group’s cost/income ratio improved by 0.4 percentage points on the previous year and was 27.6 per cent.
- The Group’s equity ratio declined by 3.5 percentage points and stood at 23.4 per cent at the end of September.
Outlook for the rest of the year
Demand for SME financing is not expected to change significantly during the rest of 2012. The sluggish economy will not encourage investments or company reorganisations; in this respect, demand will thus remain moderate. Demand for financing will still focus on working capital and on the arrangement of delivery security enabling transactions.
Demand for Finnvera’s export credit guarantees and export credits is likely to continue fairly active despite the downturn in exports. The underlying factors are the increased awareness of risks and the banks’ need to reduce the share of long-term credits on their balance sheets. Finnvera’s guarantees and financing are likely to play a greater role for Finnish exports.
The uncertain economic trend makes it more difficult to predict Finnvera’s financial performance. According to current estimates, the financial performance of both the Group and the parent company is expected to fall below that for 2011. If materialised, individual risks may weaken the result considerably.
CEO Pauli Heikkilä:
The debt crisis in the euro zone and the uncertainty of the global economy have continued to weaken the overall economic situation when compared against the first six months of the current year. This has been reflected as caution especially in the investments of SMEs. Another indication is that most of the financing we have offered to SMEs has been needed for working capital. Demand for export credit guarantees has been high both in Finland and internationally. However, only some of the planned export transactions materialise in the end.
Finnvera issued the first notes under the Euro Medium Term Note programme to the international capital market at the end of October. This funding enables us to finance export credits for buyers of Finnish capital goods. The scheme helps to ensure the competitive standing of Finnish export companies because, in most cases, securing an export contract also requires the arrangement of long-term financing for the buyer.
The Ministry of Employment and the Economy has stated that venture capital investments for start-up enterprises with growth potential will be transferred from Finnvera to Tekes at the latest in January 2014. Finnvera will focus on providing SMEs with loans and domestic guarantees, as well as export credits and export credit guarantees for export financing. The funds needed for this purpose are acquired from the market.
Pauli Heikkilä, CEO, tel. +358 29 460 2400
Ulla Hagman, Senior Vice President, Finances and IT, tel. +358 29 460 2458
Terhi Kannisto, Communications Officer, tel. +358 29 460 2860