Finnvera Group's Half-Year Report 1 January-30 June 2019

Demand for export financing grew during the first half of the year – in Finland, the share of growth enterprises out of all financing increased

CEO Pauli Heikkilä:

”During the first half of the year, Finnvera granted more export credit guarantees and special guarantees than in the corresponding period last year and the trend-like growth of demand for new guarantees continued. Demand for export credits also increased although the volume of new credits granted during the first half of the year decreased year on year. Financing granted concentrated on cruise shipping, telecommunications and pulp and paper. The world’s largest cruise shipping companies are undergoing a boom of investments in fleet renewal, which can be seen in the shipyard capacity being booked for years to come. Finland is one of the few countries in the world that has capability for carrying out the most demanding cruise ship building projects, and research has indicated that this creates significant added value for the national economy.

The timing of individual large export transactions has an impact on the annual variation in financing volumes. However, it is still important that the Government Programme ensures the adequacy of Finnvera’s authorisations considering risk management needs. The impact of export financing extends widely through subcontracting networks and jobs created, which strengthens its importance for the national economy. When measured with several financial indicators, the first six months of the year went well; however, the trade conflict between great powers has impaired growth prospects especially in emerging markets.

In addition to the fact that demand for Finnvera’s services has grown, the commercial financial market has become more active in export financing and some of Finnvera’s exposures were prepaid. The same phenomenon has been witnessed in domestic financing, too. The SME and midcap financing granted by Finnvera during the first half of the year decreased slightly year on year. However, the relative share of growth enterprise financing out of all financing granted increased. The share of investments in the overall projects financed was 40 per cent, at the same level as last year. In line with the strategy, 85 per cent of financing granted was allocated to start-ups, enterprises seeking growth, internationalisation and change, and transfers of ownership.

The Group’s profit for the first six months of the year was EUR 72 million, increasing by 47 per cent year on year. The positive result increases Finnvera’s financial reserves for the future. In line with the goal of self-sustainability set for Finnvera, we expect that the income received from the company’s operations covers, in the long run, the company’s operating expenses."

Finnvera Group, business operations and the financial performance

H1/2019 (H1/2018)

• Loans and guarantees granted: EUR 430 million (EUR 442 million), change -3%
• Export credit guarantees and special guarantees granted: EUR 2,259 million (EUR 1,411 million), change 60%
• Export credits granted: EUR 132 million (EUR 1,124 million), change -88%
  • The credit risk for export credits is covered by the parent company’s export credit guarantee
  • Individual large tenders in cruise shipping and telecommunications have an impact on the amount of export credit guarantees and export credits during the periods under review

30 June 2019 (30 June 2018)

• Exposure, loans and guarantees for SMEs and midcap enterprises: EUR 1,949 million (EUR 1,974 million), change -1%
• Exposure, export credit guarantees and special guarantees, incl. SME and midcap export credit guarantees: EUR 23,665 million (EUR 23,631 million), change 0%
  • of which drawn guarantees amount to EUR 11,056 million (EUR 10,275 million), change 8%
  • Includes exposure for export credit guarantees that covers the credit risk for export credits
• Exposure, export credits: EUR 6,992 million (EUR 5,981 million), change 17%

Finnvera Group, H1/2019 (vs. H1/2018)
Profit for the period H1/2019 72 MEUR (49), change 47%	Balance sheet total 30 June 2019 EUR 12.2 bn (11.0), change 10%
Average number of employees H1/2019 363 (376), change -3%	Non-restricted equity and The State Guarantee Fund 30 June 2019 EUR 1.9 bn  (1.8), change 4%
Expense-income ratio H1/2019 24.6% (29.3), change -4.7 pp	Equity ratio 30 June 2019 11.8% (12.3%), change -0.5 pp
Focus of financing H1/2019 85%* (86), change -1 pp	Net promoter score index H1/2019 64 (70), change -6 points
* of SME and midcap financing focused on start-ups, enterprises seeking growth, internationalisation and change, and transfers of ownership.

The Group’s profit for January–June was EUR 72 million (EUR 49 million), showing a year-on-year increase of 47 per cent. The financial performance was improved especially by the positive changes in the fair value of liabilities and derivatives as well as the notable year-on-year decrease in realised and expected losses. The increase in net fee and commission income and expenses also improved the result when compared to the corresponding period last year.

Finnvera Group Financial performance	H1/2019 MEUR	H1/2018 MEUR	Change MEUR	Change %	2018 MEUR
Net interest income	19	23	-4	-17%	42
Net fee and commission income	68	65	3	5%	135
Gains and losses from financial instruments carried at fair value through P&L and foreign exchange gains and losses	17	0.1	17	-	-9
Administrative expenses	-23	-23	-0.3	-1%	-46
Realised and expected credit losses	-9	-27	-19	-68%	-45
Credit loss compensation from the State	7	13	-5	-43%	24
Operating profit	77	51	26	50%	100
Profit for the period	72	49	23	47	98

Outlook for financing

The growth of the Finnish economy is expected to slow down in 2019. The Bank of Finland lowered its growth forecast in June: according them, GDP will grow by 1.6 per cent this year.

Finnvera’s goal is to keep the focus of SME and midcap financing especially on start-ups, enterprises seeking growth, internationalisation and change, and transfers of ownership. The slowing down of economic growth may financing offered by banks less readily available, highlighting Finnvera’s role in supplementing the financing market. In the autumn, Finnvera will introduce a new financial product that enables us to better fulfil the financing needs of small growth enterprises. In line with the strategy, the aim is to increase the number of SMEs utilising export financing as well as to continue to offer advisory services related to financing export transactions and preparing for risks. This is expected to increase demand for export financing this year. The acceleration of transfers of ownership continues, and demand for related financing is expected to remain high.

Demand for export financing has grown during the first half of the year. Demand for export credit guarantees and export credits is expected to remain strong in 2019 and to continue to focus on cruise shipping, telecommunications and pulp and paper. As in previous years, the overall demand is affected by the realisation of individual major projects. Regionally, the strongest demand is anticipated to occur in the United States and Latin America and, to an increasing extent, in other emerging markets. Typically, the role of export credit agencies in financing export transactions becomes more significant when financial and political uncertainties increase.

Additional information:

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

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

Half-year report 1 January-30 June 2019 (PDF)

Distribution:

NASDAQ Helsinki Ltd, London Stock Exchange, the principal media, www.finnvera.fi
The financial statements are available in English at www.finnvera.fi/finacial_reports

The half-year report is available in Finnish and English at www.finnvera.fi/financial_reports