Comment from the CEO
Despite the severe strain brought by the corona pandemic, the local government sector economy demonstrated manifest strength during the first half of the year. Extensive central government allocations in connection with the pandemic were one reason for this. Another was the rapid economic recovery that began in the autumn of 2020. The pace of investment remained high. Accordingly, we also witnessed increased lending. However, because many municipalities and regions experienced favourable liquidity, the rate at which lending increased was relatively subdued.
The Riksbank’s purchases of municipalbonds, within the QE programme, continued to have consequences in the market during the first half of the year. The effect of the programme in holding interest rates down is mainly positive. Its effect in squeezing interest rate differentials between different issuers is, however, problematic. The programme has not had any fundamental impact on Kommuninvest’s business model. In our lending, however, we are noticing increased activity among individual municipal borrowers to some extent.
Operating profit for the first half of the year reached SEK 124.2 million. Operating income ended up at SEK 224.5 million. This reflects a positive and stable development of the operations.
In September 2020, the central government presented a proposal for a so-called risk tax for banks and other credit institutes. This was updated in late May 2021. With the proposed design, Kommuninvest would be fully encompassed by the tax. This would take important resources away from welfare. The fact that funding through local government cooperation would be taxed, unlike other municipal funding, would also cause imbalances and increased risk in the market. Through active advocacy efforts during the spring, particularly following the launch of the revised proposal, we argued for an exemption for municipal cooperation through Kommuninvest. With Kommuninvest being guaranteed by its members and with lending only being provided to members and their companies, there is no real risk in our operations of the kind to which the central government has referred in motivating the tax. In June, just as in November 2020, we submitted a critical consultation response together with the Swedish Association of Local Authorities and Regions (SALAR). At the end of the first six months of the year, it remained unclear what would happen with the proposal.
During the spring, our sustainability work passed two important milestones. In late March, following a pilot phase, we launched Social Sustainability Loans for all members. Accordingly, we broadened the horizons of sustainable financing. In April we received the Environmental targets award, Miljömålspriset 2021. We won the award in the category “Courage and pace”, for our contribution towards achieving the environmental objective of limited impact on the climate. This provided amazing recognition of the green financing programme that we have built up over the past 5-6 years. At the same time, it should be underscored that the key to success has been the impressive sustainability work advanced daily in the municipalities and regions.
President and CEO
Kommuninvest is a municipal collaboration for efficient and sustainable financing of housing, infrastructure, schools, hospitals, etc. Together we get better loan terms than each one individually. Since the start in 1986, the collaboration has saved billions for members in the form of lower interest rates. At present, 293 municipalities and regions are members of this voluntary collaboration. With a balance sheet total of approx. SEK 550 billion, Kommuninvest is the municipal sector’s largest lender and Sweden’s sixth largest credit institution. The head office is located in Örebro.