Comment from the CEO

This unusual spring, showed once again the strength of Kommuninvest’s business model. It was designed to hold up come rain or shine – and particularly to withstand the worst of storms. And that is what it does. Precisely as in the financial crisis of 2008–2009, we provided a safe haven during the first phase of the corona pandemic. We were one of very few players with consistently favourable access to the credit market. We ensured that the local government sector always received the loans it needed. We were there to help municipalities and regions just as we should.

At the same time, it must be stated that the crisis is not over. Most of the greatest difficulties remain ahead of us. Following the most acute initial phase and the wobbly intermediate phase now in progress, there will be a third phase, in which the local government sector must navigate into a new normality. This will be a major challenge, not least in financial terms. Even before the pandemic, many municipalities and regions were experiencing difficulties. Their circumstances are likely to be even tougher now.

Kommuninvest stands very well equipped for this third phase. Its liquidity remained strong and stable throughout the spring. In April, following thorough preparations, the Annual General Meeting of the Society, reached an important and highly positive resolution on an aggressive long-term capitalisation plan for the period until 2024. In June, to further enhance our comprehension of the pandemic’s consequences, we initiated an independent expert group, “The Welfare Economists”, to analyse municipal and regional economies in the wake of the corona crisis.

The net loss for the first half of the year was SEK 159.6 million. The negative outcome is primarily associated with unrealised negative changes in market values of SEK 405.6 million. These have primarily been attributable to funding in USD having become cheaper relative to funding in SEK. However, since we intend to hold assets and liabilities to maturity, such values are not normally realised. Operating income ended up at SEK 239.0 million. This indicates substantial stability. Following the approval of a new pricing strategy by the 2018 Annual General Meeting, we are pushing down prices on our lending by reducing the margin between borrowing and lending rates. One effect of this, which strengthens as highermargin loans mature, is that we now generally work at lower profit levels than previously.

Kommuninvest’s sustainability efforts are now expanding rapidly. Progress in the local government sector is impressive. Many municipalities and regions hold very advanced positions in the sustainability trend. Volumes continue to grow for our Green Loans, which celebrated their fifth anniversary in June. With regard to the social perspective, in the spring, we commenced the practical process of designing a new product and prepare for its launch: Social Sustainability Loans. Initially, this loan product will be introduced to a number of pilot customers in the autumn of 2020.

Tomas Werngren
President and CEO