Important events during the year
50 percent of the sector’s borrowing
In 2017, Kommuninvest passed SEK 300 billion in lending, for the first time, as a result of increased borrowing needs among municipalities and county councils/regions, new members and an increased share of lending among existing members. At the end of the year, the lending volume was SEK 310 billion, corresponding to 50 percent of the local government sector’s total external borrowing.
Clarification from the EU regarding leverage ratio
During 2017, the European Commission revised the requirements placed on “public development credit institutions” (PDCI), related to the introduction of a leverage ratio requirement. The revised proposal clarifies that even indirect exposures (e.g. lending to municipal companies) are subject to the special leverage regulation for PDCIs. In addition, it is now stated that an institution need not be established under public law to be considered a PDCI.
In Kommuninvest’s assessment, the Company meets all of the stated criteria to be defined as a PDCI, which would result in significantly lower capital requirement in contrast to a situation where the leverage ratio is based on the total balance sheet. The leverage ratio requirement is expected to be introduced in 2019, however, the proposal is not final.
UN award for Swedish municipalities
At the UN climate conference COP23, in Bonn in November 2017, the Swedish local government sector received the UN’s Momentum for Change Climate Solutions Award for the green financing model developed by Kommuninvest and its members.
There to receive the prize was Margareta Rönngren, Deputy Chairman of the municipal executive board in Umeå, and Björn Bergstrand, Head of Sustainability at Kommuninvest. Kommuninvest was one of the three winners nominated in the category Financing for Climate Friendly Investment. According to the UN, the Kommuninvest green finance model is an example of a concrete, innovative and scalable solution by which others can be inspired.
How we create sustainable value to society
Kommuninvest operations serve to secure long-term, stable financing for members’ investments. Our view of sustainability originates in the value of the Swedish municipal sector. It is therefore consistent with the international framework of the ILO Fundamental Conventions, the OECD Guidelines for Multinational Enterprises, the UN Guiding Principles on Business and Human Rights, and the UN Global Compact.
Focus of sustainability efforts
Behaving ethically and taking responsibility for economic, environmental and long-term sustainable social development are fundamental elements of Kommuninvest’s sustainability efforts. We also seek to promote a dynamic dialogue and communication with stakeholders about this work.
Focus of sustainability efforts
Local government sector sustainability efforts and UN development goals
Almost half of all Swedish municipalities and county councils/regions use Agenda 2030 in their sustainability work, according to a survey from the Swedish Association of Local Authorities and Regions (SALAR).
Kommuninvest finances the development of Sweden’s local and regional sectors, as well as investments for a sound and sustainable society. The Company and its employees shall adhere to the legislation, regulations and rules applicable to the operations and shall always behave in an ethically correct manner, with transparency, integrity and honesty.
Respect for human rights is a basic prerequisite for being able to generate value within Kommuninvest in the long term. We will work to prevent discrimination, promote diversity and equality, and ensure good working conditions.
Kommuninvest’s view is that integrated consideration for the environment is a prerequisite for long-term value creation. The work is partly performed by addressing the direct environmental impact of the office operations, purchasing and services, and partly by managing the indirect environmental impact from the financial operations, i.e. lending, borrowing and management of the liquidity reserve.
Growing market for Kommuninvest’s loans
In 2017, the Swedish local government loan market grew by SEK 40 billion to SEK 616 (576) billion. Growth is driven by continued high investment volumes in the municipalities and municipal companies. Of the local government sector’s total borrowing, 50 (48) percent was financed through Kommuninvest.
Local government loan financing
Loans that meet customers’ needs
In 2017, Kommuninvest’s lending grew to SEK 310.1 (277.0) billion. The increase reflects higher local government sector investments and borrowing, but also a strengthened market position for Kommuninvest. At year-end 2017, the Company had a total 914 (825) active borrowers, either members of the Society or legal entities controlled by the members.
Significant international player with the highest credit rating
Kommuninvest finances its lending to municipalities and county councils/regions by borrowing funds on the Swedish and international capital markets. Demand for low-risk issuers remained good during the year and Kommuninvest was able to meet its funding plans on favourable terms. At the end of the year, total borrowing amounted to SEK 339.1 (344.0) billion.
Liquidity reserve to meet customer needs under all circumstances
To continue providing its customers with financing during periods of uncertainty in the financial markets, Kommuninvest maintains a liquidity reserve. At year-end, the reserve amounted to SEK 37.8 (60.1) billion, equivalent to 12 (22) percent of the lending volume.
Sustainable personnel make for a sustainable organisation
To achieve the overall strategic objectives, work in 2017 continued to focus on cultural issues, competence development, internal communications and work environment issues.
In 2017, Kommuninvest passed SEK 300 billion in lending for the first time. At the end of the year, the lending volume was SEK 310 billion, corresponding to 50 percent of the local government sector’s total external borrowing.
Market shares, local government loan financing1
31 Dec 2017
|Borrowing via Kommuninvest 50 (48) %||50|
|Bank borrowing 18 (20) %||18|
|Borrowing via proprietary funding programmes 32 (32) %||32|
1) Forecast for total outstanding borrowing.
Kommuninvest’s lending portfolio
31 Dec 2017
|Municipalities 41 (40) %||41|
|Municipal housing companies 30 (30) %||30|
|Other municipal companies 22 (22) %||22|
|Municipal energy companies 6 (7) %||6|
|County councils/regions 1 (1) %||1|
Borrowing portfolio by borrowing programme
31 Dec 2017 (excl. commercial paper borrowing)
|Swedish benchmark programme 49 (47) %||49|
|Benchmark borrowing, other currencies 25 (29) %||25|
|Private Placements 8 (9) %||8|
|Public Bonds 3 (4) %||3|
|ECP, Euro-Commercial Paper Programme 10 (4) %||10|
|Uridashi 1 (3) %||1|
|Green Bonds 4 (3) %||4|
|Other 0 (1) %||0|
In 2017, shareholders’ equity rose by SEK 1,096.8 (2,169.7) million to SEK 7,610.8 (6,514.0) million, mainly attributable to new issues of shares to the Society. The total capital base was SEK 6,359.2 (6,641.1) million, which gave a total capital ratio of 212.4 (122.1) percent.
|Total assets||Lending|||Equity (Right axis)|
Operating profit/loss before tax
Multi-year summary, Kommuninvest i Sverige AB
|Balance sheet total, SEK billion||356.9||361.7||340.6||312.1||277.5|
|Lending, SEK billion||310.1||277||254.4||222.8||208.6|
|Net profit, SEK. million||876||309.8||561.3||568.4||590.7|
|of which municipalities||277||275||272||272||270|
|of which county councils/regions||11||11||8||8||8|
|Core Tier 1 capital ratio1. %||212.4||103.7||44.6||34.6||37.0|
|Tier 1 capital ratio2, %||212.4||103.7||44.6||34.6||37.0|
|Total capital ratio3, %||212.4||122.1||59.8||49.3||59.5|
|Leverage ratio according to CRR4, %||1.78||1.56||0.87||0.75||0.57|
1) Core Tier 1 capital in relation to total risk exposure.
2) Tier 1 capital in relation to total risk exposure.
3) Total capital base in relation to total risk exposure.
4) Tier 1 capital in relation to total assets and commitments (exposures). The key ratio ”Leverage ratio including debenture loan” is no longer used.