2012-08-01 07:00:00 CEST
2012-08-01 07:01:10 CEST
REGULATED INFORMATION
Pohjola Pankki Oyj - Half Year financial report
Pohjola Bank Plc Interim Report for January-June 2012
Pohjola Bank plc
Stock exchange release 1 August 2012, 8.00 am (UT +3)
Interim Report
Pohjola Bank Plc Interim Report for January-June 2012
January-June
- Consolidated earnings before tax came to EUR 203 million (198) and earnings
before tax at fair value were EUR 433 million (166). Return on equity at fair
value stood at 27.7% (10.4).
- Earnings before tax recorded by Banking improved to EUR 121 million (92).
These included EUR 19 million (36) in impairment charges for receivables. The
loan portfolio increased by 6% from its level on 31 December 2011 and by 10% in
the year to June. The average corporate loan portfolio margin stood at 1.43%
(1.34).
- Within Non-life Insurance, insurance premium revenue rose by 8%. The combined
ratio was 94.5% (93.7). Excluding the changes in reserving bases and
amortisation on intangible assets arising from company acquisition, the
operating combined ratio stood at 92.5% (91.6). Return on investments at fair
value was 5.5% (1.0).
- Earnings before tax posted by Asset Management amounted to EUR 12 million (13)
and assets under management were EUR 31.1 billion (31.3) at the end of the
reporting period.
- Earnings before tax recorded by the Group Functions amounted to EUR 16 million
(24).
- Unchanged outlook: Consolidated earnings before tax for 2012 are expected to
be markedly higher than in 2011. For more detailed information on outlook, see"Outlook towards the year end" below.
April-June
- Consolidated earnings before tax came to EUR 99 million (103). Earnings before
tax at fair value were EUR 97 million (92) and return on equity at fair value
stood at 11.8% (11.1).
- Banking improved its earning to EUR 55 million (40) before tax. These included
EUR 11 million (20) in impairment charges on receivables.
- Within Non-life Insurance, insurance premium revenue rose by 7%. The combined
ratio stood at 87.3% (85.3) while the operating combined ratio was 85.4% (83.3).
Return on investments at fair value was 0.6% (0.6).
- Earnings before tax recorded by Asset Management amounted to EUR 6 million
(7).
- The Group Functions reported a loss of EUR 1 million (earnings of 7) before
tax.
Comparatives deriving from the income statement are based on figures reported
for the corresponding period a year ago. Unless otherwise specified, balance-
sheet and other cross-sectional figures on 31 December 2011 are used as
comparatives. As a result of change in the recognition of defined benefit
pension plans, the comparatives have been restated.
Earnings before tax, H1/ H1/ Change, % Q2/ Q2/ Change, %
EUR million 2012 2011 2012 2011 FY2011
-------------------------------------------------------------------------------
Banking 121 92 31 55 40 39 198
Non-life Insurance 54 68 -20 39 49 -20 8
Asset Management 12 13 -15 6 7 -19 27
Group Functions 16 24 -32 -1 7 24
Total 203 198 3 99 103 -4 258
Change in fair value
reserve 231 -32 -2 -11 -180
Earnings before tax at
fair value 433 166 161 97 92 5 78
Earnings per share,
EUR 0.49 0.46 0.24 0.23 0.67
Equity per share, EUR 7.85 7.37 7.22
Average personnel 3,419 3,083 3,432 3,141 3,189
-------------------------------------------------------------------------------
H1/ H1/ Q2/ Q2/
Financial targets 2012 2011 2012 2011 FY2011 Target
-------------------------------------------------------------------------
Return on equity at
fair value, % 27.7 10.4 11.8 11.1 3.1 13.0
Tier 1 ratio, % 11.6 12.2 10.6 >9.5
Core Tier 1 ratio, % 9.8 10.4 10.3
Operating cost/income
ratio by Banking, % 34 35 34 38 35 <40
Operating combined
ratio, % 92.5 91.6 85.4 83.3 89.8 92.0
Operating expense
ratio, % 23.1 21.5 22.3 21.1 21.8 <20
Solvency ratio, % 86 86 77 70
Operating cost/income
ratio by Asset
Management, % 53 49 53 48 49 <50
AA rating affirmed by
at least two credit
rating agencies 2 3 2 > 2
Dividend payout ratio
a minimum of 50%,
provided that Tier 1 >
9.5% 60 >50
-------------------------------------------------------------------------
President and CEO Mikael Silvennoinen:
Pohjola's second-quarter business performance was in line with our expectations.
Consolidated earnings before tax were good, amounting to almost EUR 100 million.
Our first-half consolidated earnings before tax exceeded EUR 200 million.
Lower interest rates and narrower credit spreads improved the fair value reserve
by over EUR 200 million. With the greater market uncertainty during the second
quarter, the fair value reserve remained at the first-quarter level.
Banking reported excellent financial results once again. The loan portfolio grew
by 6% from its level at the turn of the year and the average margin of the
corporate loan portfolio improved by 9 basis points to 1.43%. The profit
improvement was due to a strong increase in net interest income, good financial
performance shown by Markets, and a reduction in impairment charges.
Within Non-life Insurance, growth in insurance premium revenue remained strong,
showing a growth rate above the market average. During the first half, the
number of loyal customer households increased by almost 24,000. The second-
quarter operating combined ratio stood at 85.4%, which was almost at the same
level as the year before. Growth in expenses slowed down slightly during the
second quarter and we expect this growth rate to continue to slow towards the
end of the year. During the second quarter, return on investments at fair value
flattened out after the strong first quarter. Investment income at fair value
for January-June was notably higher than a year ago, although income recognised
in the income statement was somewhat lower than a year earlier.
Despite the uncertain operating environment, we believe that our operations will
continue to perform well during the rest of the year.
Events after the balance sheet date
Pohjola Group will reduce the discount rate for technical provisions related to
Non-life Insurance pension liabilities by 0.3 percentage points from 3.3% to
3.0% as a result of low interest rates. This non-cash-flow-based change in the
technical basis will lower consolidated earnings by roughly EUR 50 million in
the third quarter.
Outlook for the rest of 2012
Within Banking, the loan portfolio is expected to continue to grow during the
rest of 2012. For the year as a whole, the loan portfolio is expected to grow at
least at the same rate as in 2011 when the rate was 9%. The average corporate
loan portfolio margin is expected to remain at least at its current level. The
operating environment for the corporate sector will remain challenging. The
greatest uncertainties related to Banking's financial performance in 2012 are
associated with future impairment loss on the loan portfolio.
Insurance premium revenue is expected to increase at an above-the-market-average
rate. The operating combined ratio for the full year 2012 is estimated to vary
between 89% and 94% if the number of large claims is not much higher than in
2011. Expected investment returns are largely dependent on developments in the
investment environment. The most significant uncertainties related to Pohjola
Insurance's financial performance in 2012 pertain to the investment environment
and the effect of large claims on claims expenditure.
The greatest uncertainties related to Asset Management's financial performance
in 2012 are associated with the actual performance-based fees tied to the
success of investments and the amount of assets under management.
The key determinants affecting the Group Functions' financial performance
include net interest income arising from assets in the liquidity buffer, any
capital gains or losses on notes and bonds and any impairment charges that may
be recognised on notes and bonds in the income statement.
Consolidated earnings before tax in 2012 are expected to be markedly higher than
in 2011.This estimate includes the earnings effect arising from a reduction of
the discount rate decided after the balance sheet date.
The treatment of insurance company investments in capital adequacy measurement
has a major effect on Pohjola Group's capital adequacy. The related regulatory
framework, based on the CRD IV, which is currently being revised, is expected to
be specified during 2012.
There is still great uncertainty about the economic outlook and the operating
environment. A major risk that may undermine the economic outlook is the
exacerbation of the fiscal crisis in certain euro countries. The crisis with its
repercussions may have a significant impact on the entire financial sector's
operating environment.
All forward-looking statements in this report expressing the management's
expectations, beliefs, estimates, forecasts, projections and assumptions are
based on the current view of the future development in the operating environment
and the future financial performance of Pohjola Group and its various functions,
and actual results may differ materially from those expressed in the forward-
looking statements.
Helsinki, 1 August 2012
Pohjola Bank plc
Board of Directors
This Interim Report is available at www.pohjola.com > Media > Releases, where
background information on the Bulletin can also be found.
Analyst meeting, conference call and live webcast
Pohjola will hold a briefing in English for analysts and investors on 1 August
starting at 3.00 pm Finnish time, EET (2.00 pm CET, 1.00 pm UK time, 8am US
EST). The briefing is a combined analyst meeting, conference call and live
webcast.
Analysts and investors may attend the briefing in one of the following two ways:
1) By viewing the briefing as live webcast via the internet. The link will be
available on the IR website before the briefing begins. Questions on the
internet are welcome via a question button available in the webcast window. An
on-demand webcast of the briefing can be viewed via the IR website afterwards.
2) By dialling one of the regional conference call numbers shown below.
Questions are welcome by telephone in the Q&A session according to instructions.
To participate via a conference call, please dial in 5-10 minutes before the
beginning of the event:
UK, International +44 203 043 24 36
US +1 866 458 40 87
FIN +358 923 101 527
Password: Pohjola
Press conference
Mikael Silvennoinen, Pohjola Bank plc's President and CEO, will present the
financial results in a press conference on OP-Pohjola Group's premises
(Teollisuuskatu 1b, Vallila, Helsinki), on 1 August, starting at noon.
Financial reporting in 2012
Schedule for Interim Reports in 2012:
Interim Report Q1-3/2012: 31 October
DISTRIBUTION
NASDAQ OMX Helsinki Ltd
London Stock Exchange
SIX Swiss Exchange
Major media
www.pohjola.com, www.op.fi
For additional information, please contact
Mikael Silvennoinen, President and CEO, tel. +358 (0)10 252 2549
Vesa Aho, CFO, tel. +358 (0)10 252 2336
Niina Pullinen, Senior Vice President, Investor Relations, tel. +358 (0)10
252 4494
Pohjola Bank plc is a Finnish financial services group which provides its
customers with banking, non-life insurance and asset management services. Our
mission is to promote the prosperity, security and wellbeing of our customers.
Profitable growth and an increase in company value form our key objectives.
Pohjola Group serves corporate customers in Finland and abroad by providing an
extensive range of financial, investment, cash-management and non-life insurance
services. We offer non-life insurance and private banking services to private
customers. Pohjola Series A shares have been listed on the Large Cap List of the
NASDAQ OMX Helsinki since 1989. The number of shareholders totals around
34,000. Pohjola's consolidated earnings before tax came to 258 million euros in
2011 and the balance sheet total amounted to 41 billion euros on 31 December
2011. Pohjola is part of OP-Pohjola Group, the leading financial services group
in Finland with over four million customers.
www.pohjola.com
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