20.8.2024 10:30:23 EEST | Finnvera Oyj | Half Year financial report Finnvera Group, Stock Exchange Release 20 August 2024
Finnvera Group’s Half-Year Report 1 January–30 June 2024 Number of financing decisions at the previous year’s level, weaker demand for new export financing – result for the period under review EUR 85 million Finnvera Group, summary H1/2024 (vs. H1/2023 or 31 December 2023) Result 85 MEUR (148) – The result for the period under review was strong for all business operations. Net interest income increased by 43% to 69 MEUR (48). Net fee and commission income increased by 11% to 101 MEUR (91). The loss provisions for export credit guarantee and special guarantee operations, which have had a significant impact on Finnvera’s financial performance in recent years, remained unchanged during the period under review, when in the reference period they were reversed by 150 MEUR. Expense-income ratio was very good and whereas by 4.4 pp to 16.4% (20.8%). Non-restricted equity and the assets of the State Guarantee Fund, which provides the Group’s buffer reserves for covering possible future losses, grew by 5% and totalled EUR 2.0 bn (1.9). Expected credit losses on the balance sheet were EUR 1.2 bn (1.2) and increased by 1% during the period under review. The cumulative self-sustainability target set for Finnvera’s operations is achieved when the results of domestic and export financing are calculated to the end of June 2024. Results by business area – The result of the SME and midcap business of the parent company, Finnvera plc, during the period under review was 9 MEUR (15), while the Large Corporates business was 53 MEUR (119). The impact of Finnish Export Credit Ltd, a Finnvera subsidiary, on the Group’s result was 23 MEUR (14). The balance sheet total was EUR 15.4 bn (14.3), representing an increase of 8%. Contingent liabilities stood at EUR 17.6 bn (16.4), increasing by 7%. Equity ratio was reduced by 0.1 pp to 9.2% (9.3). The NPS index, which is used to measure client satisfaction, was at an excellent level, improving by 25 points to 86 (61).
| Finnvera Group, H1/2024 |
| Result H1/2024 85 MEUR (H1/2023: 148 MEUR) change -42% | Balance sheet total 30 June 2024 EUR 15.4 bn (31 Dec 2023: EUR 14.3 bn) change 8% |
| Contingent liabilities 30 Jun 2024 EUR 17.6 bn (31 Dec 2023: EUR 16.4 bn) change 7% | Non-restricted equity and The State Guarantee Fund after H1/2024 result 30 Jun 2024 EUR 2.0 bn (31 Dec 2023: EUR 1.9 bn) change 5% |
| Expense-income ratio H1/2024 16.4% (H1/2023: 20.8%) change -4.4 pp | Equity ratio 30 Jun 2024 9.2% (31 Dec 2023: 9.3%) change -0,1 pp |
| NPS-index (net promoter score) H1/2024 86 (H1/2023: 61) change 25 points | Expected credit losses based on the balance sheet items 30 Jun 2024 EUR 1.2 bn (31 Dec 2023: EUR 1.2 bn) change 1% |
Comments from CEO Juuso Heinilä: “Our economic operating environment stabilised during the first half of the year, and fears of continuing interest rate hikes were dissipated. The outlook for the global economy is improving as a result of decreasing inflation, lower interest rates, and growth in real income. Between January and June, Finnvera granted EUR 0.5 billion (0.8) in domestic loans and guarantees. The decrease denominated in euros from the previous year is due to a major individual financing decision that was made during the reference period. The number of financing decisions was at the same level as during reference period, demonstrating that the decline in business activity has ceased, and SMEs in particular have begun implementing their previous investment plans. Although the amount of domestic financing decreased from the previous year, the financing granted was still at a higher level than during the pre-pandemic period. A total of EUR 34 million (5) was granted for climate and digital loans, which are intended for green transition and digitalisation projects under the InvestEU Guarantee Programme. The granting of climate and digital loans began in June 2023. As a result of long-term economic uncertainty, the number of payment difficulties faced by domestic financing clients was still high, although the situation is not alarming. In accordance with Finnvera’s strategy, 92% of domestic financing was allocated to start-ups, SMEs seeking growth and internationalisation, investments, transfers of ownership, export and delivery projects, and SME guarantee projects. The importance of exports to the Finnish economy is undeniable, and the improved outlook for exports is currently subject to high expectations, as is the growth and renewal of the entire business field. Demand for Finnvera’s export financing decreased in the first half of the year, with fewer new export credit guarantee offers being submitted than in the previous year. This was mainly due to the focus of Finnish exporters on investment goods and the decline in export demand due to both the economic operating environment and higher interest rates. Between January and June, Finnvera granted EUR 1.8 billion (3.5) in export credit guarantees, export guarantees, and special guarantees. The annual volume of financing is also always affected by the timing of individual large export transactions. The most active sector was telecommunications, where in April Finnvera signed its largest export credit guarantee agreement for the telecommunications sector with Nokia, to finance the creation of India’s 5G network. The demand for export credits remained low, and Finnvera granted EUR 3 million (425) of export credits during the period under review. The financing of export trade is increasingly provided by banks to which Finnvera grants guarantees. Finnvera’s result during the period under review was strong for all its business operations. The result for January–June was EUR 85 million (148). The results of all business operations, i.e. SME and midcap financing, export credit guarantee and special guarantee operations, and Finnvera’s subsidiary Finnish Export Credit Ltd, were positive. The loss provisions for export credit guarantee and special guarantee operations, which were mainly related to the cruise shipping and shipyard sector and Russia, were kept unchanged. In longer-term comparisons, the result of the review period is excellent, even though it did not reach the result of the previous year. The result of the reference period was exceptional due to the reversal of loss provisions in export credit guarantee operations. However, the credit loss risk of export financing exposure remains high, which may affect Finnvera’s future financial performance and buffer reserves. Finnvera’s mission is to supplement the financial market and enable future growth. The guarantee-related collaboration agreement that Finnvera signed in May with the European Investment Bank helps share the risk of the financing granted to midcap enterprise-level growth projects and investments. We strive to increase the number of Finnish export companies and enable SME-level exports through our financing. Our new bill of exchange financing is intended for export sales of machinery and equipment worth less than EUR 2 million. Our unsecured SME Guarantee, which was renewed at the turn of the year, can now be used to finance corporate acquisitions. The overall reform of the legislation concerning Finnvera, which is part of the new Government Programme, is crucial for the development of our operations and the competitiveness of our export financing. At the first half of the year, Finnvera’s NPS index, which is used to measure the willingness of our clients to recommend our services, stood at a stellar level of 86 points. The creation of a good customer experience is also supported by digitalisation. The reform of Finnvera’s online services progressed as planned at the beginning of the year. In accordance with our strategy, we will continue increasing the versatility of our financing for the rest of the year as well.”
Finnvera Group Financing granted Jan?June/2024 (vs. Jan–June/2023) Domestic loans and guarantees: EUR 0.5 bn (0.8), change -35%. Export credit guarantees, export guarantees and special guarantees: EUR 1.8 bn (3.5), change -48%. Export credits: EUR 0.0 bn (0.4), change -99%. The credit risk for the subsidiary Finnish Export Credit Ltd’s export credits is covered by the parent company Finnvera plc’s export credit guarantee. The fluctuation in the amount of export credit guarantees and export credits is influenced by the timing of individual major export transactions.
Exposure 30 June 2024 (vs. 31 December 2023) The exposure includes binding credit commitments and recovery and guarantee receivables. Domestic loans and guarantees, export credit guarantees, export guarantees and special guarantees, total EUR 27.3 bn (26.4), change 4%. Domestic loans and guarantees: EUR 3.0 bn (3.0), change -1%. Export credit guarantees, export guarantees and special guarantees: EUR 24.3 bn (23.4), change 4%. Drawn exposure EUR 14.4 bn (14.2), change 2%, of which Large Corporates’ cruise shipping and shipyard sector-related exposure EUR 7.3 bn (7.3). Undrawn exposure EUR 5.8 bn (4.5) and binding offers EUR 4.1 bn (4.7), in total EUR 9.9 bn (9.2), change 8%, of which Large Corporates’ cruise shipping and shipyard sector-related exposure in total EUR 4.4 bn (4.6). Export credits: Drawn EUR 7.1 bn (7.3), undrawn EUR 3.3 bn (3.7), contract portfolio EUR 10.4 bn (11.0), change -6%.
Financial performance Finnvera Group
Financial performance | Q2/2024
MEUR | Q1/2024
MEUR | H1/2024
MEUR | H1/2023 MEUR | Change
MEUR | Change
% | 2023
MEUR |
| Net interest income | 34 | 35 | 69 | 48 | 21 | 43% | 115 |
| Net fee and commission income | 58 | 43 | 101 | 91 | 10 | 11% | 177 |
| Gains and losses from financial instruments carried at fair value through P&L and foreign exchange gains and losses | 3 | 6 | 10 | -3 | 12 | - | -9 |
| Net income from investments and other operating income | 0 | 0 | 0 | 0 | 0 | - | 1 |
| Operational expenses | -13 | -14 | -27 | -26 | 1 | 3% | -50 |
| Other operating expenses, depreciation and amortisation | -1 | -1 | -3 | -3 | 0 | 8% | -5 |
| Realised credit losses and change in expected credit losses, net | -48 | -12 | -60 | 42 | 101 | - | 210 |
| Operating result | 34 | 57 | 91 | 150 | -59 | -39% | 439 |
| Income tax | -2 | -3 | -6 | -2 | 3 | 154% | -6 |
| Result | 31 | 54 | 85 | 148 | -63 | -42% | 433 |
T
he Finnvera Group’s result for January–June 2024 was EUR 85 million (148). Finnvera’s result was strong for all business operations. Of the total result, EUR 54 million was generated in the first quarter and EUR 31 million in the second quarter. Compared to the corresponding period in the previous year, the result was most significantly affected by the lower amount of realised credit losses and changes in loss provisions, as well as better net interest income. The loss provisions for export credit guarantees and special guarantees, which have had a significant impact on Finnvera’s result in recent years, were kept unchanged during the period under review. The Group’s loss provisions increased by EUR 16 million between January and June whereas this figure decreased by EUR 140 million during the reference period. During the reference period, Finnvera was able to partially reverse its loss provisions for the cruise shipping and shipyard sector as the business outlook of cruise shipping companies improved and their liabilities decreased. This reduced Finnvera’s credit risk and had a positive impact on its result. The credit risk of liabilities related to the cruise shipping and shipyard sector and the need for loss provisions are estimated not to have changed substantially during the period under review. Realised credit losses during the period under review totalled EUR 54 million (105). One larger, individual credit loss was realised in export financing during the period under review. The State’s loss compensation covering domestic credit losses totalled EUR 10 million (6). The realised losses and the change in expected losses, i.e. loss provisions, when taking into account the State’s loss compensation, totalled EUR 60 million during the period under review, whereas the corresponding item during the reference period was positive with a figure of EUR 42 million. During the period under review, the Group’s net interest income totalled EUR 69 million (48) and its net fee and commission income was EUR 101 million (91). In total, net interest income and net fee and commission income increased by 23%. The net interest income was improved from the reference period, in particular, by the higher market interest rate level. After the result of the period under review, the parent company’s reserves for domestic operations and export credit guarantee and special guarantee operations for covering potential future losses amounted to a total of EUR 1,740 million (1,676). The credit risk for the subsidiary Finnish Export Credit Ltd’s export credits is covered by the parent company Finnvera plc’s export credit guarantee. At the end of June, the reserves consisted of a reserve for domestic operations of EUR 419 million (405) as well as a reserve for export credit and special guarantee financing and the assets in the State Guarantee Fund totalling EUR 1,320 million (1,272). The State Guarantee Fund is an off-budget fund whose assets include assets accumulated from the activities of Finnvera’s predecessor organisations. Under the Act on the State Guarantee Fund, the Fund covers the result showing a loss in the export credit guarantee and special guarantee operations if the reserve funds in the company’s balance sheet are not sufficient. The non-restricted equity of the subsidiary, Finnish Export Credit Ltd, amounted to EUR 221 million (198) at the end of June.
Outlook for financing The Finnish economy is expected to recover from recession and turn to growth by the end of 2024. We expect the fall in inflation and interest rates to increase the willingness of Finnish companies to grow and invest domestically, which is also expected to be reflected in the amount of granted financing. In particular, the demand for financing for small companies has started to grow, which indicates a turning point. According to a report by Finnvera, the availability of financing for micro-enterprises is currently weaker than for larger companies, which is why Finnvera is launching a pilot project for granting direct loans to micro-enterprises at the end of the year. We encourage companies to take part in the growth opportunities created by the green transition, for example with the help of our climate and digital loans and other incentives for sustainable financing. Demand for export credit guarantees was lower than in last year’s corresponding period, and we have not yet reached a turning point in the demand for export financing. The exporting of investment goods is post-cyclical, and the increase in demand will be reflected in the granting of export credit guarantees with a delay. We will continue granting export credit guarantees to Ukraine, which was initiated at the turn of the year, as part of Finland’s national reconstruction programme for the country. Exports are of great importance to the Finnish economy. The goal of the Trade Facilitators, who were appointed by Finnvera at the start of 2024, is to bring together foreign buyers and Finnish exporters and promote trade using Finnvera’s export financing, in close collaboration with Business Finland. The aim is also to increase the number of medium-sized midcap companies in Finland in cooperation with the new Tesi Group. The guarantee-related collaboration agreement that Finnvera signed with the European Investment Bank (EIB) in May will increase the opportunities for financing the growth and investments of midcap companies. The EIB will provide Finnvera with a guarantee of EUR 200 million for financing midcap companies.
Outlook for 2024 remains unchanged The business outlook for cruise shipping companies has improved, and the Group’s exposure in the cruise shipping sector as well as in Russia has decreased. However, it is estimated that the credit loss risk related to export financing has not experienced any significant changes during the period under review. According to the Interim Management Report for Q1/2024, published in May, Finnvera’s credit loss risk remains high, which may lead to uncertainty concerning the Finnvera Group’s financial performance in 2024.
Further information: Juuso Heinilä, CEO, tel. +358 29 460 2576 Ulla Hagman, CFO, tel. +358 29 460 2458 This stock exchange release is a summary of the essential points of the Finnvera Group’s half-year report for January–June 2024. The half-year report has been attached in its entirety as a PDF file to this release, and it is also available in Finnish and English on the company’s website at
www.finnvera.fi/financial_reports.
Half-year report 1 January–30 June 2024 (PDF) Distribution: NASDAQ Helsinki Ltd, London Stock Exchange, the principal media,
www.finnvera.fi About Finnvera Oyj Finnvera provides financing for the start, growth and internationalisation of enterprises and guarantees against risks arising from exports. Finnvera strengthens the operating potential and competitiveness of Finnish enterprises by offering loans, guarantees and other services associated with the financing of exports. The risks included in financing are shared between Finnvera and other providers of financing. Finnvera is a specialised financing company owned by the State of Finland and it is the official Export Credit Agency (ECA) of Finland.
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