Eksportfinans, originally named ”Forretningsbankenes Finansierings- og Eksportkreditt- Institutt”, was founded on March 2, 1962 following an initiative from the Norwegian Ministry of Finance, the Central Bank of Norway and the Norwegian commercial banks. The background was a lack of suitable longterm financing schemes for the Norwegian export industry and export contracts at that time.
In 1978, Eksportfinans entered into an agreement with the Norwegian government to manage the OECD scheme for subsidized export financing on their behalf. Throughout the years, Eksportfinans has financed Norwegian export contracts from exporters in all the counties in Norway and to clients in all parts of the world.
Having built sound financial viability and high creditworthiness during the first 15 years of operations, Eksportfinans issued its first international bond transaction in 1978. In 1980, Eksportfinans obtained the highest possible credit rating, triple A, from Moody’s and Standard & Poor’s. Norwegian savings banks were invited to become owners of Eksportfinans in 1990, following the merger of two of the largest owner banks. Currently, 25 Norwegian and foreign banks operating in Norway own shares in Eksportfinans.
From around 1985 and throughout the 1990s, Eksportfinans cooperated closely with the Norwegian Development Aid Agency, NORAD. Together, the two institutions offered so-called mixed credits to finance Norwegian export contracts to developing countries. A combination of development aid and competitive financing provided a sensible solution for the clients. From 2001 the political climate in Norway changed, and development aid tied to Norwegian commercial interests was no longer a priority for the Norwegian authorities.
Innovation
Eksportfinans has maintained an innovative approach to funding and has been proactive in creating the necessary infrastructure to follow developments in financial instruments and structures. The first interest rate and currency swap was entered into in 1984. This revolutionized the possibilities of borrowing risk-free in foreign currencies. Eksportfinans is a leading borrower in the international capital markets. From 2003 the company adopted a proactive funding strategy, including extensive marketing activity directed at investors and arranger banks world-wide. For this Eksportfinans received the Borrower of the Year Award and Supra/Sovereign/Agency/Regional Borrower of the Year Award in 2006 from the International Finance Review (IFR). From mtn-i, Eksportfinans received the Global Borrower of the Year Award for 2006 as well as for 2007. In both 2008 and 2009, Eksportfinans received the mtni’s Editor’s award as well as the mtn-i’s Landmark deal award. In 2010, Eksportfinans received the mtn-i’s Americas award. Both mtn-i and IFR are among the leaders in their fields.
In June 2006 Eksportfinans launched eFunding, a proprietary web-based tool for the issuance and documentation of structuredbond transactions. eFunding enables arranger banks to issue bonds in Eksportfinans’ name at all times.
Kommunekreditt
In 1999, Eksportfinans bought the municipal lending institution Kommunekreditt Norge AS from Christiania Bank (now Nordea).
The rationale was that lending to Norwegian municipalities and counties is associated with low risk and low margins, as is Eksportfinans’ lending activities. Both require favorable funding. Total lending from Kommunekreditt increased from NOK 5 billion in 1999 to a peak of around NOK 70 billion in the spring of 2008. As a consequence of the international financial crisis in the autumn of 2008, a strategic decision was made to look for alternative solutions for Kommunekreditt. As a result of this process, Kommunekreditt was sold to Kommunal Landspensjonskasse (KLP) in the spring of 2009.
Government ownership
In 2001, the Kingdom of Norway became owner of Eksportfinans by taking a 15 percent stake in the institution. This was regarded as very positive both by Eksportfinans itself, and by other important stakeholders such as investors and rating agencies.
The global financial crisis
The financial crisis in 2007-2009 created challenges for companies globally, including Eksportfinans. The so-called sub-prime crisis started in the United States in the summer of 2007, and led to substantial credit-spread widening in the market in the autumn of 2007. At that time Eksportfinans had a liquidity portfolio, and had implemented the new international accounting standard IFRS. This combination led to increasing unrealized losses in Eksportfinans’ accounts, reaching NOK 1.1 billion at the end of November 2007 with a negative impact on the company’s core capital. Based on this, Eksportfinans’ board of directors decided an issuance of new share capital of NOK 1.2 billion in January 2008.
The negative developments in the capital markets continued in the first quarter of 2008, and the board initiated a portfolio guarantee with the shareholders to cover losses in the liquidity portfolio. This portfolio hedge agreement was signed on March 13, 2008 with a limit of NOK 5 billion.
The Lehman Brothers’ bankruptcy in September 2008 initiated an international liquidity crisis. Norwegian exporters were in serious need of long-term financing for on-going projects. Eksportfinans was not able to obtain sufficient funding at competitive levels in that situation, and entered into an agreement with the Norwegian government in November 2008 whereby the government could provide funding to Eksportfinans in 2009 and 2010 in order to finance export credits. Eksportfinans did not need to issue loans under this agreement, but it proved to be an important safety net.
Several financial institutions have experienced rating downgrades since the financial crisis. In this context Eksportfinans still has comparably high ratings and its funding levels are only modestly affected by the downgrades. Eksportfinans’ international long-term foreign currency credit ratings are Aa1/AA.
Solid foundation going forward
Eksportfinans is currently one of the largest lending institutions in Norway, and experiences the highest lending volume in its history. In all, Eksportfinans disbursed NOK 33.7 billion in new export related loans in 2010. Results from the core business also show record high levels in 2010, and the order book for new lending projects is solid.
In the period following the financial crisis Eksportfinans has focused on implementing the business strategy for the period 2010 – 2012, including entering into new areas of financing such as renewable energy, environmental protection and infrastructure. Focus on risk management is strengthened along with a proactive approach to all the regulatory changes that is under implementation in the financial sector worldwide.