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MuniFin Group’s Half Year Report January–June 2022: Business remained stable despite turbulent operating environment

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Municipality Finance Plc
Half Year Report
5 August 2022 at 1:00 pm (EEST)

MuniFin Group’s Half Year Report January–June 2022: Business remained stable despite turbulent operating environment

This release is a summary of MuniFin Group’s Half Year Report published on 5 August 2022. The complete Half Year Report with tables is attached to this release and available at www.munifin.fi.

MuniFin Group will publish its Pillar III Half Year Disclosure Report 2022 the week of August 8 in accordance with Regulation (EU) No 575/2013 and Directive 2013/36/EU.
In brief: MuniFin Group in the first half of 2022

  • The Group’s net operating profit excluding unrealised fair value changes amounted to EUR 74 million (EUR 108 million) in the reporting period, decreasing by 31.0% from the comparison period’s record-high result (15.6% growth). This drop was influenced by the change in credit terms applied in late 2021 and a non-recurring item related to terminated IT system implementation. In the reporting period, the Group’s net interest income was EUR 122 million (EUR 138 million). Costs in the reporting period amounted to EUR 48 million (EUR 34 million). Costs excluding non-recurring item grew and were EUR 38 million, making the figure 13.4% greater than in the comparison period. The costs peaked the most in fees collected by authorities.
  • The Group’s net operating profit amounted to EUR 91 million (EUR 127 million). Unrealised fair value changes amounted to EUR 16 million (EUR 20 million) in the reporting period.
  • The Group’s leverage ratio was 10.6% (12.8%) at the end of June. The Group redeemed its only AT1 capital loan in Tier 1 capital in April, which decreased Tier 1 capital by EUR 347 million. This explains the reduction in the leverage ratio.
  • At the end of June, the Group’s CET1 capital ratio was very strong at 83.8% (95.0%). CET1 capital ratio exceeded the total requirement of 13.2% by over six times, with capital buffers accounted for. The repayment of the AT1 capital loan decreased Tier 1 and total capital ratio to 83.8% (118.4%), bringing them currently on a par with the CET1 capital ratio.
  • Russia’s invasion of Ukraine has only had a minor effect on the Group’s financial position and operating profit. Despite the market turbulence, the Group has continued to acquire funding in the normal manner during the reporting period. Because of the uncertainty arising from the war and inflation outlook, the Group has nevertheless maintained larger than normal liquidity buffers as a precaution.
  • Long-term customer financing (long-term loans and leased assets) excluding fair value changes totalled EUR 29,807 million (EUR 29,064 million) at the end of June and saw a growth by 2.6% (2.8%). Long-term customer financing decreased by 1.3% (+2.0%) due to the unrealised fair value changes. New lending in January–June amounted to EUR 2,006 million (EUR 1,601 million). Short-term customer financing increased by 41.4% (a year earlier the growth was 13.1%) and reached EUR 1,540 million (EUR 1,089 million).
  • Of all long-term customer financing, the amount of green finance aimed at environmentally sustainable investments totalled EUR 2,700 million (EUR 2,328 million) and the amount of social finance aimed at investments promoting equality and communality EUR 1,296 million (EUR 1,161 million) at the end of June. Green and social finance have been extremely well received by customers, and the total amount of this financing increased by 14.6% (24.3%) from the end of 2021.
  • In January–June, new long-term funding reached EUR 5,962 million (EUR 6,025 million). At the end of June, the total funding was EUR 40,850 million (EUR 40,712 million), of which long-term funding made up EUR 37,315 million (EUR 36,893 million).
  • The Group’s total liquidity is very strong, and it was EUR 11,798 million (EUR 12,222 million) at the end of reporting period. The liquidity coverage ratio (LCR) stood at 292.6% (334.9%) and the net stable funding ratio (NSFR) at 129.4% (123.6%) at the end of June.
  • Outlook for the second half of 2022: In 2021, the Group decided to change the terms of its long-term customer loans for the benefit of its customers. The decision was made knowing that it would significantly decrease the Group’s net interest income in 2022. The Group expected in February and still expects its net operating profit excluding unrealised fair value changes to be significantly lower this year than in the previous year. The Group expects its capital adequacy ratio and leverage ratio to remain very strong. The valuation principles set in IFRS framework may cause significant but temporary unrealised fair value changes, some of which increase the volatility of net operating profit and make it more difficult to estimate in the short term. A more detailed outlook is presented in the section Outlook for the second half of 2022.
Comparison figures deriving from the income statement and figures describing the change during the reporting period are based on figures reported for the corresponding period in 2021. Comparison figures deriving from the balance sheet and other cross-sectional items are based on the figures of 31 December 2021 unless otherwise stated.

President and CEO of MuniFin, Esa Kallio:

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