Municipality Finance Plc
Half year report
9 August 2017 at 3:00pm (EET)
Municipality Finance Plc Half year report January-June 2017: Strong result despite tightened competition
This release is a summary of Municipality Finance’s Half year report published on 9 August 2017. The complete Half year report with tables is attached to this release and available on www.munifin.fi.
January-June 2017 in brief:
- The Group’s net interest income grew by 13.4% compared to the previous year, reaching EUR 110.6 million (1 January-30 June 2016: EUR 97.5 million).
- The Group’s net operating profit amounted to EUR 95.9 million (1 January-30 June 2016: EUR 68.8 million). This represents a 39.4% increase from the previous year. The profit development is a result of successful funding, which has improved the net interest income. The profit includes EUR 7.0 million of unrealised changes in the fair value of financial items (1 January-30 June 2016: EUR -8.5 million).
- The balance sheet total was EUR 33,793 million (31 December 2016: EUR 34,052 million). The reduction compared to the end of 2016 was 0.8%.
- The Group’s capital adequacy remained strong, with the ratio of own funds to risk-weighted assets being 72.52% at the end of June (31 December 2016: 66.89%), and the ratio of Common Equity Tier 1 (CET1) to risk-weighted assets was 51.83% (31 December 2016: 46.21%).
- At the end of June, the Group’s leverage ratio amounted to 3.72% (31 December 2016: 3.54%).
- The total of new loans withdrawn in January-June amounted to EUR 1,046 million (1 January-30 June 2016: EUR 1,495 million). The lending portfolio stood almost steady at EUR 20,913 million (31 December 2016: EUR 20,910 million).
- At the end of June 2017, the total amount of allocated green financing amounted to EUR 903 million (31 December 2016: EUR 443 million). MuniFin’s green financing, launched in 2016, is targeted for environment-friendly investments.
- The leasing portfolio stood at EUR 349 million at the end of June (31 December 2016: EUR 286 million). Growth compared to the end of last year was 22.0%.
- In January-June, EUR 5,411 million was acquired in long-term funding (1 January-30 June 2016: EUR 4,249 million). A total of EUR 4,305 million was issued in short-term debt instruments under the Euro Commercial Paper programme during the first half of the year (1 January-30 June 2016: EUR 4,431 million). The total amount of funding grew to EUR 29,272 million (31 December 2016: EUR 28,662 million). This represents a growth of 2.1% from the end of 2016.
- At the end of June, total liquidity was EUR 8,163 million (31 December 2016: EUR 7,505 million). Growth compared to the end of last year was 8.8%.
- The turnover of MuniFin’s subsidiary Inspira was EUR 1.4 million (1 January-30 June 2016: EUR 1.1 million). Net operating profit at the end of June was EUR 0.2 million (1 January-30 June 2016: EUR 0.1 million).
President and CEO of MuniFin, Pekka Averio:
“MuniFin managed once again to improve its result in January-June 2017. Also the Finnish economy developed positively in the first half of 2017. The positive sentiment was evident in the municipalities’ economic situation, which was better than expected. This was reflected in a slight decrease in the demand for financing when compared to the previous year. In addition, the decrease in demand may have been partly caused by the uncertainty over the implementation of the health care, social welfare and regional government reform and the transition period related to the changes in municipal councils, which may stall some investment decisions.
During the first half of 2017, MuniFin’s green financing gained momentum as demand exceeded estimations. Following the great demand, there is a possibility that MuniFin’s funding will issue a new green bond during the second half year 2017. In addition to municipalities, operators involved in government-subsidised housing production discovered the green financing that was launched last year. We believe that housing production that promotes sustainable construction and energy efficiency will form a significantly larger share of the project portfolio of green financing in the future.
Price competition in financing tightened significantly during the first half of the year. However, MuniFin was able to maintain its position as the market leader in both of its main customer segments: the municipal sector and government-subsidised housing production.
Despite the tough price competition, MuniFin’s profit developed positively, and the company’s net operating profit for January-June increased to EUR 95.9 million. This shows that our funding operations were extremely successful.
Uncertainty seems to have become the new normal in politics and the economy. MuniFin intends to maintain its competitiveness even in changing circumstances through investments in development and with its efficient and flexible organisation. Our organisation grew significantly in the first half of the year and we will continue with new recruitments throughout the year.”
Key figures (Consolidated)
| 30 June 2017 | 31 December 2016 | 30 June 2016 | |
| Net interest income (EUR million) | 110.6 | 206.1 | 97.5 |
| Net operating profit (EUR million) | 95.9 | 174.2 | 68.8 |
| New loans issued (EUR million) | 1,046 | 2,924 | 1,495 |
| New funding acquisition (EUR million) | 5,411 | 6,702 | 4,249 |
| Balance sheet total (EUR million) | 33,793 | 34,052 | 35,850 |
| Common Equity Tier 1 (CET1) (EUR million) | 870 | 776 | 727 |
| Tier 1 capital (EUR million) | 1,218 | 1,124 | 1,074 |
| Total own funds (EUR million) | 1,218 | 1,124 | 1,074 |
| Ratio of Common Equity Tier 1 (CET1) to risk-weighted assets, % | 51.83 | 46.21 | 45.33 |
| Ratio of Tier 1 capital (T1) to risk-weighted assets, % | 72.52 | 66.89 | 66.99 |
| Ratio of total own funds to risk-weighted assets, % | 72.52 | 66.89 | 66.99 |
| Leverage ratio, % | 3.72 | 3.54 | 3.19 |
| Return on equity (ROE), % | 12.57 | 12.51 | 10.31 |
| Cost-to-income ratio | 0.19 | 0.17 | 0.22 |
| Personnel | 119 | 106 | 107 |
MUNICIPALITY FINANCE PLC
Further information:
Pekka Averio, President and CEO, tel. +358 500 406 856
Esa Kallio, Executive Vice President, Deputy to the CEO, tel. +358 50 3377 953
Marjo Tomminen, CFO, Executive Vice President, tel. +358 50 3861 764
Measured by the group’s balance sheet, MuniFin (Municipality Finance Plc) is Finland’s second largest credit institution: the company’s balance sheet totals nearly EUR 34 billion. The company is owned by Finnish municipalities, the public sector pension fund Keva and the Republic of Finland. MuniFin is an integral part of the Finnish public economy.
MuniFin’s mission is to help its customers thrive in changing circumstances. The company ensures competitive funding for its customers in all market conditions. Its customers are Finnish municipalities, municipal federations, municipally controlled companies and non-profit housing corporations. Lending is used for environmentally and socially responsible investment targets such as public transportation, sustainable buildings, hospitals and healthcare centers, schools and day care centers, and homes for the elderly.
MuniFin’s customers are domestic but the company operates in a completely global business environment. It is the most active Finnish bond issuer in international capital markets. The funding is exclusively guaranteed by the Municipal Guarantee Board.
The Municipality Finance Group also includes the subsidiary company, Financial Advisory Services Inspira Ltd.