Kommuninvest Cooperative Society Annual Report 2013

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Kommuninvest Cooperative Society Annual Report 2013 Kommuninvest Cooperative Society Annual Report 2013 Introduction Kommuninvest in brief Kommuninvest in brief 2 About Kommuninvest 4 Kommuninvest1 was founded in 1986 by Chairman’s Statement 6 Market share, President’s Statement 7 local govern ment nine municipalities and Örebro County borrowing Council to join forces in improving the Board of Directors’ Reports 31 Dec 2013 conditions in the market for local govern- Board of Directors’ Report – Group ment loan financing. Kommuninvest also Local government loan financing 8 helps increase financial stability in the Lending 9 local government sector. Funding 11 Liquidity management 12 Kommuninvest i Sverige AB, in which all Results 13 business operations are conducted, is a Equity and financial position 14 wholly-owned subsidiary of the Kommun- Borrowing via Organisation and employees 16 Kommuninvest invest Cooperative Society. Only munici- Sustainability and social responsibility 17 44 (46) % Bank funding palities and county councils that are mem- Other 18 30 (32) % bers of the Kommuninvest Cooperative Risk and capital management 20 Proprietary funding programs 26 (22) % Society, as well as companies, founda- Governance and control 34 Source: Kommuninvest’s tions and associations controlled by mem- Board of Directors’ Report – Parent society 40 assessment bers may borrow from Kommuninvest i Sverige AB. Financial statements Income statement and Statement of comprehensive income – Group 44 Kommuninvest holds the highest possible Balance sheet – Group 45 Lending portfolio credit rating, Aaa/AAA and has stable Statement of changes in equity – Group 46 31 Dec 2013 prospects. The credit rating is bolstered Cash flow statement – Group 47 by the joint and several guarantee issued Income statement and Statement of by all of the members in support of comprehensive income – Parent society 48 Kommuninvest i Sverige AB’s obligations. Balance sheet – Parent society 49 Statement of changes in equity – Kommuninvest’s vision is to be the world’s Parent society 50 best organisation for local government Cash flow statement – Parent society 51 financial administration. Municipalities Notes 52 40 (44) % 1) “Kommuninvest” refers to the Kommuninvest Group, consisting of Municipal housing Five-year summary 76 the membership organisation the Kommuninvest Cooperative companies 30 (31) % Society, the credit market company Kommuninvest i Sverige AB and Signatures 78 Other municipal Kommuninvest Fastighets AB. Prior to the formation of the Audit Report 79 companies 21 (17) % Kommuninvest Cooperative Society in 1993, the cooperation was Municipal energy coordinated within the company Kommuninvest i Örebro Län AB, which was founded in 1986 and which changed its name to Review Report 80 companies 8 (7) % Kommuninvest i Sverige AB in 1993. Our members 81 County councils 1 (1) % Multi-year summary, Kommuninvest Group 2013 2012 2011 2010 2009 Balance sheet total, SEK billion 277.5 283.3 234.1 190.3 183.2 Lending, SEK billion 208.6 201.0 168.1 133.7 123.6 Net profit, SEK million 745.8 424.8 274.6 191.6 229.6 Members, total 278 274 267 260 248 of which, municipalities 270 266 259 253 241 of which, county councils 8 8 8 7 7 Leverage ratio1, % 0.97 0.68 – – – Capitalisation, capital base as % of balance sheet total 0.91 0.47 0.63 0.75 0.42 Capital adequacy ratio2, % 56.4 23.1 35.3 60.0 34.4 Capital adequacy quota3 7.05 2.89 4.42 7.50 4.30 1) Tier 1 capital in relation to total assets and commitments (exposures). See further pages 32–33. 2) Capital basis in relation to risk-weighted assets. 3) Capital base divided by capital requirement, pillar I in accordance with Basel II regulations and the EU’s capital requirement directive. Annual Report for the Kommuninvest Cooperative Society This is the Annual Report of the Kommuninvest Cooperative Society. The annual report for the subsidiary Kommuninvest i Sverige AB, is available at www.kommuninvest.org. Cover photo: The Swedish Exhibition Centre in Gothenburg is expanding. The City of Gothenburg has been a member of the Kommuninvest Cooperative Society since 2012. When Swedish municipalities and county councils invest and undertake new construction, it is often Kommuninvest that provides the financing. Of the loans that finance Swedish local government authorities’ investments in schools, care of the elderly, infrastructure or other improvements in service to residents, Kommuninvest currently accounts for almost half. Kommuninvest is owned by the local government authorities and exists for their benefit. Ever since the start in 1986, the purpose of the operations has been the same – to offer members secure financing on the best possible terms. Today, 270 municipalities and eight county councils are members. At the close of 2013, Kommuninvest’s total lending amounted to SEK 208.6 billion. KOMMUNINVEST COOPERATIVE SOCIETY, CORP. ID NO. 716453-2074 Annual Report 2013 3 About Kommuninvest Kommuninvest finances community-building Kommuninvest acts as the Swedish local and competitive loans, advice and debt man- government debt office. In many cases, the agement tools. Kommuninvest has no vested financing for the investments needed to interest in generating profit – its purpose is ensure that society functions well comes solely to provide economic benefit to mem- from Kommuninvest. This involves critical bers. Kommuninvest also represents the social investments in day care centres, local government sector on funding issues. schools, retirement homes, health centres The basic concept of generating individual and hospitals. Additional investments are commercial benefit for municipalities and made in the areas of energy supply, street county councils remains from the earliest maintenance, water and sewage, as well as days of the cooperation. When Kommun- sports and cultural facilities. invest was founded in 1986 by nine munici- Local government sector debt has risen palities and Örebro County Council, the over time and will likely continue to grow. purpose was precisely to provide members Major investments are expected in the mainte- with cost-efficient loans. Proof that this nance and construction of housing and hospi- purpose has been fulfilled lies in the constant tals, for example. Kommuninvest plays an growth in membership – which now important role in this process, by ensuring sta- accounts for 278 of Sweden’s 310 munici- ble and advantageous borrowing in national palities and county councils. The fact that and international capital markets. Borrowed no member has, to date, left the cooperation, funds are sub sequently on-lent to the members is further proof. of the Kommuninvest Cooper ative Society and their majority-owned companies. Joint and several guarantee Membership in the Kommuninvest Coop er­­ Commercial benefit for local government ative Society, the owner of the credit market authorities company Kommuninvest i Sverige AB, is a By turning to Kommuninvest, municipalities prerequisite to obtain financing from and county councils gain access to secure Kommun invest. Against guarantees, loans 4 KOMMUNINVEST COOPERATIVE SOCIETY, CORP. ID NO. 716453-2074 annual report 2013 About Kommuninvest Pre-school programmes, residential construction, water- works, and health and medical care are some of the key social services that Kommuninvest helps finance through lending to municipalities, municipal companies and county councils. can also be offered to members’ majority- that is, to secure their access to financing owned companies, as well as local government regardless of the external situation. foundations and associations. Kommun- Through out the crisis that has pervaded invest’s lending has a zero risk weight accord- the financial markets since 2008/09, ing to current capital adequacy regulation. Kommun­­invest has fulfilled its assignment. All members provide an explicit guarantee, Kommun invest’s access to liquidity under in the form of a joint and several guarantee, for tough economic conditions builds primarily Member the commitments entered into by Kommun- on a well-diversified funding strategy and a municipalities invest i Sverige AB. The guarantee is consid- considerable liquidity reserve. In addition, 31 December 2013 ered very strong since Swedish municipalities since 2010, Kommuninvest is a monetary and county councils cannot be declared bank- counterparty to the Swedish Riksbank and rupt and cannot cease to exist other than by has been part of RIX, the Riksbank’s pay- merging. In addition, Swedish municipalities ment system. and county councils are entitled to levy their own taxes, while the ultimate responsibility Highest possible credit rating for local government sector operations lies Having the highest possible rating, Aaa/ with the central government. AAA with a stable outlook, from the two international credit rating institutes Moody’s Members’ responsibilities and Standard & Poor’s, Kommun invest is Membership also brings responsibility when perceived as one of the world’s most credit- it comes to determining the focus of the oper- worthy issuers. According to the two credit ations. Decisions are made by the Annual rating institutes, Kommuninvest’s credit rat- General Meeting of the Society. An impor- ing is motivated by the members’ joint and tant consideration for Kommun invest’s mem- several guarantee, Kommuninvest’s strong bers is ensuring that Kommun invest meets liquidity and its access to financing from the new EU regulations regarding Leverage Ratio Riksbank, the high quality of Kommun- expected to be introduced on 1 January 2018. invest’s assets,
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