Municipality Finance Plc
August 5, 2022 at 1:00 p.m. (EEST)
equippedEnd Group Half-year report January–June 2022: Activity remained stable despite a turbulent operating environment
This release is a summary of the MuniFin Group half-year report published on August 5, 2022. The full half-year report with tables is attached to this release and available at www.munifin.fi.
MuniFin Group will publish its Pillar III 2022 Half-Year Information Report the week of August 8 in accordance with Regulation (EU) No 575/2013 and Directive 2013/36/EU.
In brief: MuniFin Group iin the first half of 2022
- Group net operating income excluding unrealized changes in fair value amounted to €74 million (€108 million) in the reporting period, down 31.0% from the record result of the comparison period (growth of 15.6%). This decrease is influenced by the modification of the credit conditions applied at the end of 2021 and a non-recurring element linked to the stoppage of the implementation of the IT system. During the period under review, the Group’s net interest income amounted to 122 million euros (138 million euros). Costs for the reference period amounted to 48 million euros (34 million euros). Costs excluding non-recurring items increased and amounted to 38 million euros, or 13.4% more than during the comparison period. The costs culminated most in the fees collected by the authorities.
- The Group’s net operating income amounted to 91 million euros (127 million euros). Unrealized changes in fair value amounted to 16 million euro (20 million euro) during the period under review.
- The Group’s leverage ratio stood at 10.6% (12.8%) at the end of June. The Group repaid its only Tier 1 capital AT1 loan in April, which reduced Tier 1 capital by €347 million. This explains the reduction in the leverage ratio.
- At the end of June, the Group’s CET1 capital ratio was very solid at 83.8% (95.0%). The CET1 capital ratio exceeded the total requirement of 13.2% by more than six times, taking into account capital buffers. The repayment of the AT1 capital loan reduced the Tier 1 and the total capital ratio to 83.8% (118.4%), currently bringing them back to the level of the CET1 capital ratio.
- Russia’s invasion of Ukraine had only a minor effect on the Group’s financial position and operating result. Despite market turbulence, the Group continued to finance itself in the normal way during the reference period. Due to the uncertainties associated with the war and the outlook for inflation, the Group nonetheless maintained higher than normal liquidity reserves as a precaution.
- Long-term customer financing (long-term loans and leased assets) excluding changes in fair value amounted to 29,807 million euros (29,064 million euros) at the end of June and grew by 2.6%. (2.8%). Long-term customer financing decreased by 1.3% (+2.0%) due to unrealized changes in fair value. New loans from January to June amounted to EUR 2,006 million (EUR 1,601 million). Short-term customer financing increased by 41.4% (a year earlier, growth was 13.1%) and reached 1,540 million euros (1,089 million euros).
- Of all long-term customer financing, the amount of green financing for environmentally sustainable investments amounts to €2,700 million (€2,328 million) and the amount of social financing for investments promoting equality and community at 1,296 million euros (1,161 million euros) at the end of June. Green and social finance was extremely well received by clients, and the total amount of such financing increased by 14.6% (24.3%) compared to the end of 2021.
- In January-June, new long-term financing reached EUR 5,962 million (EUR 6,025 million). At the end of June, the total funding amounted to 40.850 million euros (40.712 million euros), of which long-term funding accounted for 37.315 million euros (36.893 million euros).
- The Group’s total liquidity is very strong and amounted to €11,798 million (€12,222 million) at the end of the reporting period. The liquidity coverage ratio (LCR) stood at 292.6% (334.9%) and the stable net funding ratio (NSFR) to 129.4% (123.6%) at the end of June.
- Outlook for the second half of 2022: In 2021, the Group decided to change the conditions of its long-term customer loans for the benefit of its customers. The decision was made knowing that this would significantly reduce the Group’s net interest income in 2022. The Group expected in February and still expects its net operating income excluding unrealized fair value changes to be significantly lower this year than the previous year. The Group expects its solvency ratio and leverage ratio to remain very strong. The valuation principles defined in the IFRS framework can lead to significant but temporary variations in the unrealized fair value, some of which increase the volatility of net operating income and make it more difficult to estimate it in the short term. A more detailed perspective is presented in the section Outlook for the second half of 2022.
The comparison figures from the income statement and the figures describing the development during the reporting period are based on the figures published for the corresponding period in 2021. The comparison figures from the balance sheet and other cross-sectional items are based on December 31, 2021 figures unless otherwise stated.
President and CEO of MuniFin, Esa Kallio:
“In the first half of 2022, the operating environment was again turbulent, but MuniFin’s business activities remained stable and continued uninterrupted. The COVID-19 pandemic began to subside in the spring, but the invasion of Ukraine by Russia has caused a new global humanitarian, political and economic crisis, which also strongly affects Finland through the acceleration of inflation, the rise in interest rates and the sanctions imposed on Russia. At MuniFin, we have been able to operate stably even in these turbulent times.Our core mandate is to provide our clients with financing under all circumstances.
The ongoing economic upheaval and Russia’s invasion of Ukraine has had only a minor impact on MuniFin so far. In the first half of 2022, demand for our financing was a little lower than expected, but it remained stable. Moderate demand for municipal sector funding is partly explained by pandemic stimulus measures, such as the central government’s COVID-19 support package, and partly by one-time items from the sale of healthcare assets and social services by some municipalities during the ongoing health crisis. social services reform
Our other clientele, operators of social housing production, suffered more from the difficult operating environment of the first half. The shortage of materials and the increase in the price of raw materials, which both began before the war but were further accelerated by it, slowed construction contracts and reduced demand for our financing in the housing sector. .
Our funding has remained stable even in the new exceptional circumstances. Despite market turbulence, our access to capital markets remained strong throughout the first half of the year. We also benefited from strong investor demand: for example, the green bond we issued in May was again significantly oversubscribed.
The pandemic has transformed our lives into something that should become the new normal, but the outlook has turned even bleaker than expected after the outbreak of war in Europe. Amidst all of this uncertainty, it is important to note that at MuniFin, we are working hard every day to create stability in these uncertain times and to keep all of our customers running smoothly.
|30 June 2022||30 June 2021||31 Dec 2021|
|Net operating income excluding unrealized changes in fair value (in millions of euros)*||74||108||213|
|Net operating income (millions of euros)*||91||127||240|
|Net interest income (million EUR)*||122||138||280|
|New loans (million EUR)*||2006||1,601||3,275|
|Long-term customer financing (million EUR)*||28,831||28,582||29,214|
|New long-term financing (million EUR)*||5,962||6,025||9,395|
|Balance sheet total (million EUR)||47,491||45,658||46,360|
|CET1 capital (EUR million)||1,421||1,346||1,408|
|Tier 1 capital (EUR million)||1,421||1,694||1,756|
|Total equity (million EUR)||1,421||1,694||1,756|
|CET1 capital ratio, %||83.8||91.1||95.0|
|Tier 1 capital ratio, %||83.8||114.7||118.4|
|Total capital ratio, %||83.8||114.7||118.4|
|Leverage ratio, %||10.6||12.6||12.8|
|Return on equity (ROE), annualized, %*||8.5||11.7||10.7|
* Alternative performance indicator.
MUNICIPAL FINANCING SARL
Further information :
President and CEO
Phone. +358 50 337 7953
+358 50 592 9454
MuniFin (Municipality Finance Plc) is one of the largest credit institutions in Finland. The company is owned by Finnish municipalities, the public sector pension fund Keva and the Republic of Finland. The MuniFin group also includes the subsidiary Financial Advisory Services Inspira Ltd. Jhe Groups balance sheet amounts to nearly 47.5 billion euros.
MuniFin builds a better and more sustainable future with its customers. MuniFin’s clients to understand Finnish municipalities, intermunicipal, municipally–controlled entities, county welfare services, as good as non-profit housing organizations. Loans are used for environmentally and socially responsible investment targets such as public transportation, sustainable buildings, hospitals and health centers, schools and daycares, and homes for people with special needs.
MuniFin’s customers are national, but the company operates in a completely global trading environment. The company is a Finnish bond issuer active in international capital markets and Finland’s first green issuer and social bond issuer. The financing is exclusively guaranteed by the Municipal Guarantee Commission.
Read more: www.munifin.fi
MuniFin 2022 half-year report
MuniFin Half-Year Report 2022.pdf