Interim Review 2019

Kommuninvest i Sverige AB

Comment from the CEO

Continued low interest rates contribute to low financing costs for the municipal sector, whose loan debt grows but still remains stable and low compared to GDP. Rather, the challenge is about the skills supply and its impact on costs. At the core lies the demographic trend, with an increasing proportion of older and younger people in relation to the working-age population.

President’s statement

Significant events

Publication of the new EU banking package
In June 2019, the EU published the final legislative package on capital adequacy rules (CRD / CRR IV), including requirements for the leverage ratio. The changes entail special conditions for so-called Public Development Credit Institutions (PDCI), which Kommuninvest considers applicable. This means more reasonable capital requirements for Kommuninvest.

Strengthened market position
The trend towards an increasing number of members placing an increasing share of their total borrowing with Kommuninvest continues. Today, more than 200 members, mainly smaller and medium-sized municipalities, have more than 95 percent of their borrowing from Kommuninvest. During the period, Kommuninvest’s lending increased by 9 (7) per cent, and the estimated share of the municipal sector’s total external debt increased to 57 (55) per cent.

Green Loans
Continued good demand for Green Loans, financing for municipal investment projects that promote the transition to lower carbon dioxide emissions and sustainable growth. Over SEK 50 billion in Green Loans has been granted to 284 projects in 124 municipalities and regions. The share of Green Loans in relation to total lending increased to 9.0 (7.4) percent.

Multi-year summary, Kommun­invest i Sverige AB

  30 June 2019 30 June 2018 31 December 2018 31 December 2017 31 December 2016
Total assets, SEK million 469,297.4 430,756.9 417,202.1 356,942.6 361,725.4
Lending (recognised value), SEK million 388,448.6 331,404.9 355,710.0 310,147.3 276,982.1
Net profit for the period, SEK million 282.5 306.1 586.1 876.0 309.8
Members, total 289 288 288 288 286
of which, municipalities 277 277 277 277 275
of which, regions 12 11 11 11 11
Core Tier I capital ratio1, % 156.3 161.3 188.4 212.4 103.7
Tier I capital ratio2, % 156.3 161.3 188.4 212.4 103.7
Total capital ratio3, % 156.3 161.3 188.4 212.4 122.1
Leverage ratio according to CRR4, % 1.55 1.70 1.75 1.78 1.56

1) Core Tier I capital in relation to total risk exposure.
2) Tier I capital in relation to total risk exposure.
3) Total capital base in relation to total risk exposure.
4) Tier I capital in relation to total assets and commitments (exposures).

Lending and funding

Lending portfolio by borrower category

30 Jun 2019 (31 Dec 2018)


*) Some lending to municipalities is on-lent to municipal companies through municipal internal banks.

Kommuninvest’s largest borrower groups are municipalities and municipal housing companies. As per 30 June 2018, they accounted for 71 (71) percent of the total lending.

New funding by programme**

1 Jan–30 Jun 2019 (1 Jan–30 Jun 2018)

 

**) excl. commercial paper borrowing

Number of members and lending,
1987– 2019 (30 June)
*30 June

The principal reasons for the historical growth in lending is an increased municipal borrowing need, an increased number of members in the Society, and members choosing to place an increasingly large share of their funding with the Company.

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, 289 municipalities and regions are members of this voluntary cooperation. With total assets of around SEK 469 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.