Good stability in challenging times

With the support provided by the Swedish central government, the local government sector enjoyed a strong financial position at the end of 2020, despite the corona pandemic. Through the Kommuninvest partnership, access to loan financing remained favourable, even as market stress peaked. Key advances achieved in Kommuninvest’s operations included improved digital capacity, a solid capitalisation plan and developed sustainability efforts.

Profitability despite the effects of the pandemic
The economy of the local government sector coped relatively well through the pandemic in 2020. In the spring, trends and forecasts looked bleak. With substantial central government support, however, and a strong recovery in the early autumn, the situation in the second half of the year brightened. A second wave of contagion slowed the recovery. Growth is likely to gain impetus again in 2021. In many municipalities and regions, surpluses reached record levels in 2020. Despite the pandemic, the local government sector has a strong financial position.

On the investment side, the local government sector still has considerable needs. However, improved economic prospects over the year resulted in demand for loan financing slowing down. During the market turbulence in March and April, Kommuninvest had very high lending, although it subsequently returned to normal levels.

Effective response to the pandemic
In dealing with the pandemic, Kommuninvest experienced no significant problems. We remained completely stable even when the market was at its most stressed. As one of very few players maintaining good access to the credit market, we ensured that the local government sector could always borrow without interruption. As in the financial crisis of 2008–09, we provided a safe haven.

In March, Kommuninvest switched to virtually entirely digital operations. Employees worked from home. This worked well. We were able to achieve progress in the operations with full capacity. Once the pandemic has subsided, it will be possible to return to the office environment. At the same time, it is important to continue using the digital tools that have now achieved a breakthrough. Our broad contact networks should allow us to benefit greatly from the new digital formats.

Key capitalisation plan
Kommuninvest was further reinforced by the capitalisation plan for 2021–2024 adopted by the Annual General Meeting of the Society in April. We will soon commence a gradual build-up of capital, with both internal and statutory capital requirements having to be met by a good margin throughout.

Challenging risk tax proposal
In September, the Government, the Centre Party and the Liberals presented a proposal for a risk tax applicable to banks and other credit institutions, which would have highly negative consequences for Kommuninvest and for the local government sector as a whole. We are therefore arguing for an exception. In November, we submitted a consultation response together with SALAR. We are also conducting an intensive dialogue and information efforts in this area.

Promising developments in sustainability efforts
Kommuninvest’s sustainability efforts are developing rapidly. Green Loans now comprise close to 12 percent of lending. Based on clear demand from the local government sector, in the spring, we initiated a concrete process to develop a new product: Social Sustainability Loans. In the autumn, a pilot phase was initiated, with the loan product being offered to a number of pilot customers. By the end of the year, four loans had been granted. If the results of the pilot phase are favourable, the ambition is to make the new product available to all customers/members.

Net profit
At SEK 228 million, operating profit for the year was lower than for the preceding year (SEK 392 million). This was partly attributable to negative unrealised changes in market values. Because such changes (which are difficult to predict and guard against) are only an accounting phenomenon, negative values will now increase operating profit later. Operating income (that is, excluding unrealised changes in market value due to accounting practices) remained high at SEK 462 (573) million. This is higher than our long-term target. In accordance with an earlier resolution by the Annual General Meeting, we have continued to reduce the margin between our funding and lending. This will entail lower operating income in the upcoming years.

Special thanks to colleagues
The pandemic imposed considerable demands on the organisation’s adaptability. Particularly during the initial phase of the pandemic, all employees demonstrated their loyalty to our mission and were prepared to make additional efforts for Kommuninvest’s members and customers. For this, I am most grateful. That laid the foundation for a successful year.

Kommuninvest i Sverige AB

Tomas Werngren
President & CEO


About Kommuninvest

Kommuninvest is a municipal cooperation for efficient and sustainable financing of housing, infrastructure, schools, hospitals etc. Together, we get better loan terms than each one individually. Since its inception in 1986, the Kommuninvest collaboration has helped lower the local government sector’s borrowing costs by many billion kronor. Currently, 292 municipalities and regions are members of this voluntary cooperation. With total assets in excess of SEK 525 billion, Kommuninvest is the largest lender to the local government sector and the sixth largest credit institution in Sweden. The head office is located in Örebro.

Download the Annual Review 2020