Kommuninvest annual accounts 2016: Continued capital build-up ahead of leverage ratio

The Swedish local government debt office, Kommuninvest i Sverige AB, reports an increase in lending, stable results and a strengthening of capital, according to its annual accounts for 2016. Operating profit was SEK 398 (656) million and the reported leverage ratio was 1.56 (0.87) percent. At 31 December 2016, lending amounted to SEK 277 (254) billion.

2016 in review

The local government sector’s investment and funding needs continue to increase, due to strong population growth, urbanisation and demographic trends. The growth in borrowing was however slower than expected due to solid results in municipal companies, additional migration-related state grants, increased liquidity focus due to negative interest rates and a shortage of capacity, particularly within the construction sector.

Kommuninvest’s lending rose to SEK 276,982.1 (254,421.7) million. Kommuninvest strengthened its position as the largest lender to Swedish municipalities and county councils/regions, with an estimated market share of 48 (46) percent of the local government sector’s total borrowing.

Total equity increased by SEK 2,169.7 million to SEK 6,514.0 (4,344.3) million. The increase was primarily an effect of capital contributions from members of the Kommuninvest Cooperative Society being transferred to Kommuninvest i Sverige AB as new share capital. The capital build-up is caused by forthcoming leverage ratio regulations.

Operating profit was SEK 398.2 (655.5) million.

The balance sheet total was SEK 361,725.4 (340,626.3) million and net interest income was SEK 762.0 (798.5) million.

Kommuninvest meets all of the requirements regarding risk-weighted capital adequacy. The core Tier 1 capital ratio was 103.7 (44.6) percent, the Tier 1 capital ratio was 103.7 (44.6) percent and the total capital ratio 122.1 (59.8) percent.

The leverage ratio, calculated according to the EU Capital Requirement Regulation CRR, was 1.56 (0.87) percent. Including the subordinated loan issued to Kommuninvest Cooperative Society, the leverage ratio was 1.84 (1.16) percent.[1]

Total membership in the Kommuninvest Cooperative Society was 286 (280) members at year-end, of which 275 (272) municipalities and 11 (8) county councils/regions. During the year, 6 (0) new members joined the Kommuninvest cooperation: Kävlinge municipality, Partille municipality, Sollentuna municipality, Region Jämtland Härjedalen, Region Kronoberg and Västerbotten County Council.

Comments by Tomas Werngren, President and CEO

• The local government sector is in a period of large-scale and far-reaching welfare investment. Being able to meet the investment needs in a sustainable way will be central to meet the future challenges.

• During 2016, Kommuninvest reached its target of a capitalization equivalent to a 1.5 percent leverage ratio. The capital measures undertaken by Kommuninvest’s members demonstrate their commitment to the Kommuninvest cooperation and its ability to continue to provide the Swedish local government sector with efficient and secure investment financing. High levels of customer satisfaction and solid results creates a good platform for our continued efforts, where value creation for customers is in focus.

The complete annual accounts are available for download here: Kommuninvest Annual accounts 2016

This release contains such information that Kommuninvest is required to disclose pursuant to the Swedish Securities Markets Act and/or the Swedish Financial Instruments Trading Act. The information was submitted for disclosure on 15 February 2017 at 08:00 a.m.

Comparative earnings figures relate to the same twelve-month period previous year (1 January–31 December 2015). Comparative balance sheet figures relate to 31 December 2015.