Demand for financing revived despite uncertainty From the perspective of the economy, the first quarter of 2015 was varied. Despite unstable and negative economic outlook, the weakening of the euro brought a little light to export enterprises. SME financing was sought actively, and Finnvera strove to meet enterprises’ expectations through its wider range of financing possibilities. The great majority of enterprises can obtain financing for profitable projects even though banks have introduced more stringent requirements for loans and collateral. Thanks to some major individual projects, the total demand for export credit guarantees, expressed in euros, was many times greater than during the same period a year ago.
Finnvera’s risks pertaining to Russia have increased. The company continues to grant export credit guarantees for Finnish exporters’ projects in Russia, but the Russian counterparty's credit standing is examined increasingly carefully. The exposure trend and repayment times are monitored.
Business operations and the financial trend
In January–March, the value of offers given by Finnvera for export transactions was over three times greater than the year before. Loans and guarantees granted to SMEs and – by virtue of the authorisation received by Finnvera at the start of 2015 – to enterprises larger than the EU’s definition of an SME increased by over 40 per cent on the figure for the previous year.
The Finnvera Group’s financial performance in January–March came to EUR 26 million, or EUR 19 million more than during the corresponding period the year before (8 million). The main factors improving the performance were the decrease in impairment losses on receivables and in guarantee losses, as well as profits on items carried at fair value.
The profit of the parent company, Finnvera plc, stood at EUR 26 million (10 million). The subsidiaries and associated companies had an impact of EUR 1 million on the Group’s profit (-3 million). Venture capital investments accounted for EUR -0.5 million (-3.3 million) of this impact. Interest equalisation and financing of export credits by Finnish Export Credit Ltd accounted for EUR 1.1 million (0.7 million).
The parent company’s export financing and SME financing showed a profit: the separate result for export credit guarantees and special guarantees came to EUR 24 million (5 million) while the profit for credits and guarantees in SME financing was EUR 0.3 million (5 million). The parent company’s result included a surplus of EUR 2 million (0.2 million) from export credit financing.
| Finnvera Group | Q1/2015 | Q1/2014 | Change | Change | *2014 | *2013 | Change |
| Financial performance | MEUR | MEUR | MEUR | % | MEUR | MEUR | % |
| Net interest income | 14 | 13 | 1 | 6 | 52 | 56 | -7 |
| Fee and commission income and expenses (net) | 37 | 37 | 0 | 0 | 138 | 134 | 3 |
| Gains/losses from items carried at fair value | 1 | -3 | -5 | -135 | -10 | -2 | 496 |
| Administrative expenses | -11 | -10 | 1 | 9 | -41 | -43 | -5 |
| Impairment losses, guarantee losses | -12 | -28 | -16 | -58 | -34 | -64 | -47 |
| Loans and domestic guarantees | -65 | -19 | -46 | -241 | -105 | -101 | 4 |
| Credit loss compensation from the State | 55 | 12 | 44 | 381 | 64 | 48 | 33 |
| Export credit guarantees and special guarantees | -2 | -21 | -19 | -91 | 8 | -11 | -173 |
| Operating profit | 27 | 7 | 20 | 295 | 102 | 75 | 36 |
| Profit for the period | 26 | 8 | 19 | 245 | 101 | 75 | 36 |
The Group’s key figures on 31 March 2015 (31 December 2014)
• Equity ratio 13.9% (14.4%) • Capital adequacy, Tier 2 18.1% (18.6%) • Cost-income ratio 24.1% (25.7%) Outlook for financing During the first quarter of 2015, demand for Finnvera’s SME financing was livelier than during the same period a year ago. The total sum of applications for financing increased by nearly 50 per cent. The deal flow in financing for growth and internationalisation is likely to remain good, and some signs of recovery are also visible in the subcontracting chains of large enterprises. However, most of the demand for SME financing still focuses on working capital; this would indicate that the investment level will remain low.
Demand for export financing is rising when compared to the previous year. Owing to ownership arrangements in the shipyard industry, demand for ship financing will increase. Another consideration contributing to the higher demand for export credit guarantees is the fact that Finnvera can now provide financing for large enterprises’ domestic projects targeted at exports. Demand for guarantees to finance transactions in Russia has been very brisk in early 2015 despite the fact that Finnish exports to Russia have shrunk. Finnvera estimates that the Russian share of the total exposure will not increase.
CEO Pauli Heikkilä:
“The international market has improved although the prospects for the Finnish economy are unclear. Finnvera’s financing possibilities have been expanded in various ways. For instance, Finnvera can now subscribe bonds, finance domestic investments benefiting exports, and provide financing for larger enterprises than before. An indication of this was that demand for financing during the first quarter clearly exceeded the figure for the year before. A welcome feature was that, after a long time, enterprises also sought financing for some fairly large investments, although most of the demand still focused on working capital needs.
In the challenging financial situation, banks require more self-financing from enterprises, which may make it more difficult for enterprises to obtain financing. It would therefore be important to strengthen the equity of Finnish enterprises.”
Additional information: Pauli Heikkilä, CEO, tel. +358 29 460 2400 Ulla Hagman, Senior Vice President, Finance and IT, tel. +358 29 460 2458
DISTRIBUTION NASDAQ OMX Helsinki Ltd Oslo Børs ASA London Stock Exchange Major media www.finnvera.fi
This Interim Report is available at www.finnvera.fi > Finnvera > Publications > Annual Reviews and Interim Reports.
