Finnvera Group's Report of the Board of Directors and Financial Statements for 2017

CEO Pauli Heikkilä:

“In the important export sectors, especially in cruise shipping, telecommunications, energy and forestry sectors, the outlook is good. In the EUR 22.2 billion exposure for large corporates’ export credit guarantees and special guarantees, drawn guarantees and credits accounts for approximately EUR 9.0 billion. More than half of the exposure is tenders or agreements that are related to future deliveries by export companies. Demand extending this far into the future has not been previously witnessed at Finnvera.

Throughout its history, Finnvera’s export credit guarantee operations have been self-sustainable and our performance has been profitable, which has enabled our export credit guarantee operations to accumulate approximately EUR 1.4 billion in buffer assets for potential future losses. In line with our goals, the result for the financial period 2017, EUR 107 million, showed a profit. This improves our ability to cover current and future commitments. We constantly develop our risk management, and we invest heavily in reinsurance and other risk transfer methods.

Economic activity and investments picked up also in Finland; however, this did not directly lead to growth in Finnvera’s SME and midcap financing. For its part, the European Fund for Strategic Investments (EFSI) replaces or complements our financing offering, and EFSI financing has proved to be easily found by Finnish enterprises. This is a good indication of corporate financing options becoming more versatile.

In line with our strategy, we target our financing first and foremost at corporate changes, that is, setting up a company, growth, internationalisation and transfers of ownership. Currently, 80 per cent of our financing is already allocated to our focus areas. Impact is one of the key indicators of our success. The common denominator in impact is the fact that enterprises grow and become more international in a manner that would not have been possible without Finnvera.”

Finnvera Group, business operations and the financial trend, 2017 (vs. 2016)

• Loans and guarantees granted: EUR 782 million (EUR 845 million), change -7%
• Export credit guarantees and special guarantees granted: EUR 7,693 million¹ (EUR 4,438 million), change 73%
• Export credits granted: EUR 6,555 million¹ (EUR 760 million), change 763%
• Exposure, loans and guarantees for SMEs and midcap enterprises: EUR 2,129 million (EUR 2,232 million), change -5%
• Exposure, export credit guarantees and special guarantees, incl. SME and midcap export credit guarantees: EUR 22,562 million (EUR 18,426 million), change 22%
  • of which drawn guarantees amount to EUR 9,136 million (EUR 9,659 million), change -5%
• Exposure, export credits: EUR 4,758 million² (EUR 4,782 million), change -1%
• Net interest income and net fee and commission income: EUR 174 million (EUR 194 million), change -11%
• Impairment losses on receivables, guarantee losses, incl. the State’s credit loss compensation: EUR 19 million (EUR 66 million), change -72%
• Finnvera Group’s profit for the period: EUR 107 million (EUR 70 million), change 52%
• Equity EUR 1,314 million (EUR 1,207 million), change 9%
• Balance sheet total: EUR 10,337 million (EUR 9,498 million), change 9%

^{1 One of the factors behind the significant increase in the financing granted was individual major tenders in shipping and telecommunications.
2 The credit risk for Finnish Export Credit Ltd’s export credits is covered by the parent company Finnvera plc’s export credit guarantee.}

Finnvera Group, year 2017 (vs. 2016)

Cumulative self-sustainability has been realised according to the goals, Finnvera's operations have been economically self-sustainable during company's almost 20 years of operation.
Return on equity, ROE 1–12/2017 8,5% (6,0%)	Return on assets, ROA 1–12/2017 1,1% (0,8%)	Reserve for domestic operations 31 Dec. 2017 214 M€ (155)	Reserve for export credit guarantees and special guarantees 688 M€ and SGF3 673 M€ 31 Dec. 2017 1 361 M€ (1 334)
Equity ratio 31 Dec. 2017 12,7% (12,7%)	Capital adequacy, Tier 1, domestic operations 31 Dec. 2017 25,3% (22,4%)	Expense-income ratio 1–12/2017 27,2% (27,0%)	Number of employees 31 Dec. 2017 375 persons (381 pers.)

^{3) SGF=The State Guarantee Fund}

^{Finnvera Group’s profit for H2/2017 was EUR 50 million (EUR 77 million) and for the entire year EUR 107 million (EUR 70 million). The result for the entire year 2017 was EUR 36 million, or 52 per cent, more than in the previous year. Profit was boosted by the fact that the parent company Finnvera plc’s impairment losses on receivables and guarantee losses were EUR 53 million, or 56 per cent, lower than in the previous financial period.}

Finnvera Group Financial trend	H2/2017 MEUR	H1/2017 MEUR	Change %	H2/2016 MEUR	2017 MEUR	2016 MEUR	Change MEUR	Change %
Net interest income	23	23	-2 %	24	46	50	-4	-8 %
Net fee and commission income	61	66	-8 %	77	127	144	-17	-12 %
Gains and losses from financial instruments carried at fair value through P&L	-2	3	-177 %	-10	1	-20	20	103 %
Administrative expenses	-21	-22	-4 %	-22	-43	-44	-1	-2 %
- of which personnel expenses	-14	-15	-3 %	-15	-29	-30	-1	-4 %
Impairment loss on financial assets	-22	-20	9 %	-13	-41	-94	-53	-56 %
Credit loss compensation from the State	12	11	6 %	13	23	28	-5	-19 %
Operating profit	49	60	-18 %	77	109	69	39	57 %
Profit for the period	50	57	-13 %	77	107	70	36	52 %

Outlook for financing

The outlook for the Finnish economy for 2018 is good. According to the Bank of Finland’s forecast, GDP will grow by 2.5 per cent this year. Demand for financing is expected to remain high in the entire SME and midcap sector, and the availability of financing is estimated to stay at a good level this year, too. Finnvera’s goal is still to shift the focus of SME and midcap financing to growing and internationalising enterprises, enterprises seeking change, transfers of ownership, and start-ups. The campaign to accelerate transfers of ownership continues, and demand for financing for transfers of ownership and company acquisitions will probably remain high, as in previous years.

Another goal is to increase the number of SMEs involved in exports and target advisory services at such SMEs, in order to enable them to prepare for risks associated with export trade transactions. We expect that this will increase demand for financing this year.

Financing solutions offered to buyers play a pivotal role in the export trade of capital goods sold by large corporates. Demand for export credit guarantees and export credits is expected to remain strong in 2018. As in previous years, the overall demand is affected by the realisation of individual major projects. Demand is expected to be strong especially in cruise shipping, forestry and telecommunications sectors. Regionally, the strongest demand is anticipated to occur in the United States and Latin America. Finnish enterprises’ interest in the Russian market took an upward turn in 2017, and further demand is expected for 2018.

It is estimated that the implementation of the strategy throughout the Group will proceed as planned in 2018 and that operations will be self-sustainable in the current financial period as well. The trends in impairment losses on receivables and in guarantee losses involve some uncertainty. In consequence, the results realised may differ from the forecasts even significantly.

Report of the Board of Directors and Financial Statements for 1 January–31 December 2017 (PDF)
Statement on the Corporate Governance and Steering System 2017 (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