Kommuninvest i Sverige AB interim report 2018: Municipal investments increase demand for credit

The Swedish local government debt office, Kommuninvest i Sverige AB, increased its lending volumes by 9 (7) percent during the first six months, according to its interim report. This was an effect both of increased municipal borrowing and Kommuninvest advancing its share of the sector's loan debt. Operating profit was SEK 359.4 (391.3) million.

1 January – 30 June 2019 in review

The Swedish local government sector’s investment and borrowing needs continue to increase, due to strong population growth, urbanisation and demographic changes with an increasing share of elderly and young people. Kommuninvest estimates that total outstanding local government borrowing increased to SEK 679 (644) billion during the period, corresponding to 13.9 (13.4) percent of GDP.

Kommuninvest’s lending (recognised value) increased to SEK 388,448.6 (355,710.0) million. Kommuninvest is the largest lender to Swedish municipalities and regions, with an estimated market share of 57 (55) percent of the local government sector’s total borrowing. The volume of committed Green Loans grew to SEK 52,334.8 (39,503.3) million, with reference to 284 (232) investment projects and 124 (109) municipalities and regions.

Operating profit amounted to SEK 359.4 million (391.3), where the decrease is mainly explained by lower interest rate margins in accordance with the established pricing strategy.

The balance sheet total was SEK 469,297.4million (417,202.1), mainly due to increased lending and a larger liquidity reserve. Net interest income amounted to SEK 435.9 million (453.7).

Kommuninvest meets all requirements regarding risk-weighted capital. The capital base consists exclusively of core Tier 1 capital, with the effect that both the core Tier 1 capital ratio, the Tier 1 capital ratio and the total capital ratio amounted to 156.3 (188.4) percent.

On June 7, 2019, the EU published its final legislative package in which the leverage ratio requirement has been set at 3 percent of gross exposures. The new rules will enter into force as of June 28, 2021. Calculated in accordance with the Capital Requirements Regulation CRR, Kommuninvest's leverage ratio was 1.55 (1.75) percent. Calculated according to the regulation's special conditions for so-called Public Development Credit Institutions (PDCI), where all lending to Kommuninvest members and their companies can be excluded from the exposure amount, the leverage ratio was 8.55 (11.30) percent.

Kommuninvest Cooperative Society had a total of 289 (288) members at the end of the year, of which 277 (277) municipalities and 12 (11) county councils/regions. During the period, Region Blekinge became a new member.

Comments by Tomas Werngren, President and CEO

- The trend towards an increasing number of members having an increased share of their total borrowing with Kommuninvest continues. Today, over 200 members have more than 95 percent of their borrowing from Kommuninvest.

- Low interest rates contribute to the fact that financing costs today constitute a small part of the municipal sector's expenditure. Rather, the challenge is about the competence supply and its impact on costs. Municipal debt is still low and stable in relation to GDP.

The complete interim report is available for download as an attachment to this release.

This release contains such information that Kommuninvest is required to disclose pursuant to the Swedish Securities Markets Ac and/or the Swedish Financial Instruments Trading Act. The information was submitted for disclosure on 27 August 2018 at 16:00 hrs.

Comparative earnings figures relate to the same twelve-month period previous year (1 January–30 June 2018). Comparative balance sheet figures relate to 31 December 2018.

Contact persons for enquiries

President & CEO Tomas Werngren, tel. +46 70 645 06 69

CFO Patrick Nimander, tel +46 72 254 94 60

Head of Media Relations Björn Bergstrand, tel. +46 70 886 94 76 or bjorn.bergstrand@kommuninvest.se