President's review

NIB's President and CEO, Johnny Åkerholm, sums up the Bank's challenges and achievements, clarifies NIB's position in the financial market, and previews what investors and customers can expect in 2011.    

How would you describe the economic and financial environment for 2010?

The year saw a clear improvement in the global economic situation and growth resumed in many parts of the world, including in the member area. The expansionary monetary policy implemented by many central banks created ample liquidity, which led to upward pressures on asset prices and supported a strengthening of balance sheets. However, price pressures in raw materials and in emerging economies also became discernible. This and the economic uncertainty in Europe cast a shadow over the future prospects.

How was NIB affected?

Good liquidity in the economy in combination with low investment activity was reflected in a lower demand for disbursements. In the period 2007–2009, NIB held back the granting and signing of new loans, as these were rapidly turned into disbursements and NIB had a capital constraint. In 2010, we were rebuilding the pipeline of loans; grantings and signings were running at expected volumes, while disbursements were falling behind expectations. But this is to be seen as normalisation and reflected the liquidity glut in the market.

This tendency was particularly strong in the non-member countries, many of which were experiencing large capital inflows.

NIB continued to face high demand for its bonds and was able to fund itself at attractive rates. Two benchmark loans were issued during the year. 

What are the advantages of focusing lending within certain sectors?

NIB focuses on environment, energy—including renewable energy forms and energy saving—transport and logistics, and innovation. These sectors are important for the sustainable growth of our economies. They need long-term finance, they are increasingly regional in nature and many of the projects include cooperation between the public and private sectors. Hence, the likelihood for good mandate compliance and value-added on the part of NIB is high. But this does not exclude loans to other sectors if the projects are in compliance with our requirements.

It is apparent that there were challenges in all these sectors in 2010. Environmental investments do not figure high in times of economic stress, and we could register slow progress in the implementation of the projects related to the cleaning up of the Baltic Sea.

Also, the uncertainty created by the lack of a global climate change agreement within the UN framework is still affecting investments in renewable energy.

The widening of public deficits implied that many of the projects in the transport sector faced financing problems and the financing base had to be rethought.

A decision to increase NIB's authorised capital was made in 2010. How will this affect NIB's business?

Much of the year had already passed when this positive decision was taken, and hence the effects will mainly come in the ensuing years. The capital increase is not intended to provide for any major jump in the Bank's activities, but it will allow NIB to disburse approximately EUR 2.2  billion a year, which is more or less at the volumes reached in the 2007–2009 period. This will allow the Bank to provide a significant amount of long-term finance in the region in the coming years as well.

Will customers and investors see a difference in NIB's operations due to increased attention on mandate fulfilment?

To some extent, but not in any dramatic way. The Bank has been gradually increasing its focus on mandate fulfilment, and we have already achieved a very high mandate compliance. We hope and trust that with a more focused approach we will be better equipped to support our customers. We might be asking more questions than in the past, but not any such questions to which a mindful investor would not have a ready answer.

What is NIB's outlook for 2011?

The year is full of uncertainties, but as the main scenario we expect the recovery in our member countries to continue. Despite the improved liquidity situation, there will be demand for long-term financing when investments pick up. With our additional capital we are well-equipped to fulfil our mission to strengthen our member countries' competitiveness and enhance the environment.