2010-11-03 07:00:00 CET
2010-11-03 07:01:44 CET
REGULATED INFORMATION
Pohjola Pankki Oyj - Interim report (Q1 and Q3)
Pohjola Bank plc Interim Report for 1 January-30 September 2010
Pohjola Bank plc
Company Release, 3 November 2010, 8.00 am
Release category: Interim report
Pohjola Bank plc Interim Report for 1 January-30 September 2010
January-September
- Year on year, consolidated earnings before tax improved to EUR 242 million
(211). Earnings include EUR 88 million (95) in impairment charges on
receivables.
- Earnings before tax at fair value amounted to EUR 273 million (424) and return
on equity at fair value stood at 11.7% (21.8).
- Banking posted earnings before tax of EUR 93 million (99), with impairment
charges on receivables affecting its earnings by EUR 89 million (84).
- Non-life Insurance's operating combined ratio stood at 88.6% (86.7). Within
Non-life Insurance, return on investments at fair value was 5.2% (9.0).
- Asset Management reported earnings of EUR 18 million (11) and assets under
management increased to EUR 35.2 billion (33.1).
- Capital gains on notes and bonds improved earnings before tax posted by the
Group Functions.
- Outlook: Consolidated earnings before tax in 2010 are expected to be at the
same level as or higher than in 2009 (previous estimate: at the same level). It
is estimated that Non-life Insurance's operating combined ratio will vary
between 89 and 92% (previous estimate: 89-93%). For more detailed information on
outlook, see "Outlook towards the year end" below.
July-September
- Consolidated earnings before tax came to EUR 103 million (87). Earnings
included EUR 27 million (41) in impairment charges on receivables and EUR 7
million in one-time amortisation on intangible assets.
- Earnings before tax at fair value were 165 million (196).
- Non-life Insurance's operating combined ratio stood at 82.8% (83.1). Within
Non-life Insurance, return on investments at fair value was 2.6% (4.3).
- Pohjola Insurance Ltd and Pohjantähti Mutual Insurance Company are planning to
merge.
+-------------------------------+-----+-----+---------+----+----+---------+----+
|Consolidated earnings before |Q1-3/|Q1-3/| |Q3/ | Q3/| | |
|tax, € million1) |2010 |2009 |Change, %|2010|2009|Change, %|2009|
+-------------------------------+-----+-----+---------+----+----+---------+----+
| Banking | 93| 99| -6| 38| 24| 61| 117|
| | | | | | | | |
| Non-life Insurance | 84| 89| -6| 42| 43| -3| 102|
| | | | | | | | |
| Asset Management | 18| 11| 68| 6| 4| 25| 21|
| | | | | | | | |
| Group Functions | 48| 11| 320 | 18| 16| 12| 25|
+-------------------------------+-----+-----+---------+----+----+---------+----+
|Total | 242| 211| 15| 103| 87| 18| 265|
| | | | | | | | |
|Change in fair value reserve | 31| 213| -86| 62| 109| -44| 243|
+-------------------------------+-----+-----+---------+----+----+---------+----+
|Earnings before tax at fair | | | | | | | |
|value | 273| 424| -36| 165| 196| -16| 508|
+-------------------------------+-----+-----+---------+----+----+---------+----+
+-----------------------------------------+-----+-----+-----+-----+-----+------+
| |Q1-3/|Q1-3/| Q3/ | Q3/ | | |
|Key indicators1) |2010 |2009 |2010 |2009 |2009 |Target|
+-----------------------------------------+-----+-----+-----+-----+-----+------+
|Earnings before tax, € million | 242| 211| 103| 87| 265| |
| | | | | | | |
|Profit for the period, € million | 179| 155| 76| 65| 194| |
| | | | | | | |
|Return on equity, % | 11.7| 21.8| 21.1| 27.1| 19.2| 13.0|
| | | | | | | |
|Balance sheet total, € billion | 35.9| 34.1| | | 35.5| |
| | | | | | | |
|Shareholders' equity, € billion | 2.4| 2.2| | | 2.3| |
| | | | | | | |
|Tier 1 ratio, % | 12.3| 11.3| | | 11.8| >9.5|
| | | | | | | |
|Earnings per share, € | 0.56| 0.54| 0.24| 0.20| 0.66| |
| | | | | | | |
|Earnings per share, incl. change in fair | | | | | | |
|value, € | 0.63| 1.09| 0.38| 0.46| 1.27| |
| | | | | | | |
|Equity per share, € | 7.39| 6.90| | | 7.09| |
| | | | | | | |
|Average personnel |2,996|2,955|3,007|2,961|2,966| |
+-----------------------------------------+-----+-----+-----+-----+-----+------+
1) 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 2009 are used as
comparatives.
President and CEO Mikael Silvennoinen:
Pohjola Group's third-quarter earnings before tax were the best ever recorded,
exceeding EUR 100 million, and January-September earnings were also better than
a year ago. Our earnings before tax grew by 15%. Net interest income continued
its growth, thanks to the strong growth reported by Corporate Banking in
particular. January-September impairment charges on receivables were almost at
the same level as the year before but were markedly lower in the third quarter
than a year ago. The third quarter saw favourable developments in capital
markets.
With greater demand for corporate loans, the loan and guarantee portfolio has
begun to grow. In line with our expectations, the trend of the rising average
corporate loan margin has come to an end and tougher competition is sending the
margin on new loans down. Slightly higher impairment charges year on year and
the normalisation of the Markets division's financial performance were offset by
the strong growth in net interest income recorded by Corporate Banking in
January-September. Earnings reported by Banking in January-September were almost
at the same level as in the previous year but markedly higher in the third
quarter than the year before.
Within Non-life Insurance, the balance on technical account remained good
despite the claims filed in the aftermath of the late summer storms. Thanks to
our reinsurance cover, they did not have any major effect on the Non-life
Insurance results. Insurance premium revenue grew and its growth among private
customers in particular remained strong throughout January-September. We had set
a strategic target in 2005 of serving 450,000 loyal customer households by the
end of 2010, but reached it already in August. As early as March, we achieved
the annual level of EUR 17 million in the revenue synergies resulting from
growth in the number of loyal customer households.
In late September, we announced that Pohjola Insurance Ltd and Pohjantähti
Mutual Insurance Company were planning to merge. The extraordinary general
meetings of these insurers will decide in early December whether the merger plan
will be rejected or approved. The purpose of the merger is to strengthen the
competitiveness in the Finnish non-life insurance market of the new entity
formed by the insurance business of Pohjola Insurance and Pohjantähti. We will
provide Pohjantähti's customers with a comprehensive range of financial services
and the best loyalty benefits and offer Pohjantähti staff with new career and
development opportunities. In addition to the existing staff, we will hire at
least another 50 people for the new service centre that will be established in
Hämeenlinna. We are confident that the merger will benefit not only customers
but also employees and owners.
Within Asset Management, assets under management increased to more than EUR 35
billion and earnings before tax also showed a marked year-on-year improvement.
Pohjola Capital Partners Ltd, a private equity firm, will be bought by its
existing management by the end of this year.
As a result of our good financial performance in January-September and a more
stable operating environment, we expect to improve our full-year earnings from
their previous year's level.
Operating environment
On the whole, global economic recovery slowed down somewhat in the third
quarter. The recovery has been uneven from region to region and every region
faces its own challenges. In the US, growth is shadowed by weak housing markets
and persistently high unemployment figures. In the euro area, on the other hand,
the economic outlook is brighter, but growth is nevertheless expected to remain
slow owing, for example, to high unemployment and a stronger euro. Emerging
economies, such as China, are enjoying brisk growth.
The Finnish economy has continued on a clear upward trend in the second half of
the year and next year looks relatively good. Business confidence was relatively
high in the early autumn and consumer confidence is record-high. Growth is
supported particularly by livelier exports and higher housing investment. The
improved economic outlook is also manifested in that the number of people
employed rebounded in the third quarter.
There is no pressure in the near future to raise the main refinancing rate,
which has remained low. The European Central Bank is expected to keep its main
refinancing rate at the current level at least towards the end of 2011. Trust in
the interbank markets has improved, which has reduced the need for central bank
refinancing. This has raised short-term market rates by a fraction. The ECB aims
to ensure sufficient liquidity in the market, for example by buying government
debt instruments from countries struggling with heavy debts.
Growth in the corporate loan portfolio that began in the first half of 2010
evened out towards the autumn. Loans to households continued to grow steadily in
the third quarter, while the housing market was still lively.
Capital market jitters caused by concerns over government bonds and economic
growth eased off at the end of the report period. Corporate bond markets
operated in a positive mood. Risk premiums narrowed particularly in the banking
sector. The global decline in equity markets that started in the spring bottomed
out, with the weight capped OMX Helsinki CAP index in Finland rising by almost
14% during the third quarter.
An increase in non-life insurance premiums written has settled at around 1%.
Claims paid out are growing at a higher rate than premiums written. The higher
claims have been caused by exceptional weather conditions, on the one hand, and
a higher number of reported losses owing to greater economic activity, on the
other hand.
Consolidated earnings
+----------------------+----+----+------+----+----+------+----------------+----+
|Earnings analysis |2010|2009|Change|2010|2009|Change| |2009|
| | | | | | | | | |
|€ million |Q1-3|Q1-3| % | Q3| Q3| % |Rolling 12-month| |
+----------------------+----+----+------+----+----+------+----------------+----+
|Net interest income | | | | | | | | |
| | | | | | | | | |
| Corporate Banking | 128| 101| 26| 43| 36| 21| 165| 138|
| | | | | | | | | |
| Markets | 13| 24| -44| 3| 2| 93| 17| 27|
| | | | | | | | | |
| Other operations | 48| 53| -8| 16| 21| -25| 71| 75|
| | | | | | | | | |
| Total | 189| 177| 7| 62| 58| 7| 253| 241|
| | | | | | | | | |
|Net commissions and | | | | | | | | |
|fees | 118| 102| 15| 37| 36| 3| 159| 143|
| | | | | | | | | |
|Net trading income | 34| 60| -44| 18| 27| -32| 45| 71|
| | | | | | | | | |
|Net investment income | 21| -8| | 6| 1| | 17| -13|
| | | | | | | | | |
|Net income from Non- | | | | | | | | |
|life Insurance | | | | | | | 0| |
| | | | | | | | | |
| Insurance operations| 279| 291| -4| 106| 107| 0| 371| 382|
| | | | | | | | | |
| Investment | | | | | | | | |
|operations | 69| 48| 41| 26| 19| 37| 84| 64|
| | | | | | | | | |
| Other items | -34| -32| 5| -11| -11| 4| -45| -44|
| | | | | | | | | |
| Total | 314| 307| 2| 120| 114| 5| 410| 402|
| | | | | | | | | |
|Other operating income| 32| 33| -3| 11| 11| 0| 49| 50|
| | | | | | | | | |
|Total income | 708| 671| 6| 255| 247| 3| 932| 895|
| | | | | | | | | |
|Personnel costs | 144| 142| 1| 44| 47| -5| 192| 190|
| | | | | | | | | |
|IT expenses | 56| 56| 1| 18| 19| -5| 76| 75|
| | | | | | | | | |
|Depreciation and | | | | | | | | |
|amortisation | 57| 50| 13| 23| 17| 35| 78| 72|
| | | | | | | | | |
|Other expenses | 121| 118| 3| 40| 36| 9| 167| 164|
| | | | | | | | | |
|Total expenses | 378| 366| 3| 125| 119| 5| 513| 501|
| | | | | | | | | |
|Earnings before | | | | | | | | |
|impairments of | | | | | | | | |
|receivables | 330| 305| 8| 130| 128| 1| 419| 394|
| | | | | | | | | |
|Impairments of | | | | | | | | |
|receivables | 88| 95| -7| 27| 41| -35| 122| 129|
| | | | | | | | | |
|Earnings before tax | 242| 211| 15| 103| 87| 18| 297| 265|
| | | | | | | | | |
|Change in fair value | | | | | | | | |
|reserve | 31| 213| | 62| 109| | 60| 243|
| | | | | | | | | |
|Earnings before tax at| | | | | | | | |
|fair value | 273| 424| -36| 165| 196| -16| 357| 508|
+----------------------+----+----+------+----+----+------+----------------+----+
January-September earnings
Earnings before tax amounted to EUR 242 million (211), up by 15% on a year
earlier.
Earnings before impairment charges on receivables totalled EUR 330 million
(305), or 8% higher than a year ago. Impairment charges on receivables were EUR
7 million lower than a year ago, amounting to EUR 88 million (95).
With slightly more active capital markets in the third quarter, earnings before
tax at fair value came to EUR 273 million (424).
Total income increased by 6% to EUR 708 million (671) and expenses by 3% to EUR
378 million (366).
Net interest income rose to EUR 189 million (177), up by 7% year on year. Net
interest income from Corporate Banking showed strong growth, thanks to growth in
the loan portfolio and a rise in the average margin.
Net commissions and fees increased to EUR 118 million (102), up by 15% year on
year, due mainly to higher net commissions and fees reported by Asset
Management. The report period also saw an increase in net commissions and fees
from securities issuance and brokerage.
Net trading income amounted to EUR 34 million (60). Income reported a year ago
was exceptionally high because of the market situation.
Net investment income totalled EUR 21 million (-8). This figure includes
realised capital gains of EUR 22 million recognised on the notes and bonds.
Adjustments for real property acquisition costs reduced net investment income a
year ago.
Total net income from Non-life Insurance totalled EUR 314 million (307), or 2%
higher than in the previous year. Non-life Insurance showed favourable
developments in net income although it was slightly lower than a year ago.
Realised capital gains contributed to higher income from investment operations.
Expenses rose by 3% to EUR 378 million (366), due mainly to the EUR 7 million
one-time amortisation on insurance systems. Excluding this item, expenses grew
by 1%. Personnel costs rose by EUR 2 million year on year. Provisions recognised
for performance-based bonuses were down. The number of Group employees increased
by 28 from their level on 31 December 2009.
The fair value reserve before tax grew by EUR 23 million (158) from its level on
31 December 2009. On 30 September, the fair value reserve after tax stood at EUR
23 million, as against EUR 0 million on 31 December 2009.
July-September earnings
Earnings before tax amounted to EUR 103 million (87), up by 18% on a year
earlier.
Earnings before impairments of receivables were at the previous year's level,
coming to EUR 130 million (128). Impairments of receivables decreased by EUR 14
million year on year to EUR 27 million (41).
Earnings before tax at fair value were EUR 165 million (196). Capital markets
perked up slightly and the fair value reserve grew markedly during the third
quarter.
Total income rose by 3% to EUR 255 million (247) and expenses by 5% to EUR 125
million (119). Excluding one-time amortisation on insurance systems, expenses
were at the previous year's level.
Consolidated net interest income was slightly higher a year ago, amounting to
EUR 62 million (58). Within Corporate Banking, net interest income increased by
one-fifth on a year earlier, thanks to higher margins.
Net commissions and fees amounted to EUR 37 million (36). Asset Management
showed strong growth during the third quarter too.
Net investment income totalled EUR 6 million (1). This figure includes realised
capital gains of EUR 6 million recognised on the notes and bonds within the
liquidity buffer.
Net trading income was one-third lower than a year ago, or EUR 18 million (27).
Net income from Non-life Insurance amounted to EUR 120 million (114). Growth in
insurance premium revenue accelerated in the third quarter and insurance
profitability was excellent.
+------------------------------------------+---------------+-----------+
|Earnings analysis by quarter | 2009 | 2010 |
| | | |
|€ million | Q1 Q2 Q3 Q4| Q1 Q2 Q3|
+------------------------------------------+---+---+---+---+---+---+---+
|Net interest income | | | | | | | |
| | | | | | | | |
| Corporate Banking | 32| 33| 36| 37| 40| 44| 43|
| | | | | | | | |
| Markets | 10| 12| 2| 4| 6| 4| 3|
| | | | | | | | |
| Other operations | 10| 22| 21| 23| 14| 19| 16|
| | | | | | | | |
| Total | 52| 67| 58| 63| 60| 67| 62|
| | | | | | | | |
|Net commissions and fees | 30| 36| 36| 41| 40| 41| 37|
| | | | | | | | |
|Net trading income | 25| 8| 27| 11| 7| 8| 18|
| | | | | | | | |
|Net investment income | -9| 0| 1| -5| 18| -3| 6|
| | | | | | | | |
|Net income from Non-life Insurance | | | | | | | |
| | | | | | | | |
| Insurance operations | 83|101|107| 92| 74| 99|106|
| | | | | | | | |
| Investment operations | -2| 32| 19| 15| 17| 26| 26|
| | | | | | | | |
| Other items |-11|-11|-11|-11|-11|-11|-11|
| | | | | | | | |
| Total | 70|122|114| 96| 79|114|120|
| | | | | | | | |
|Other operating income | 11| 11| 11| 17| 11| 10| 11|
| | | | | | | | |
|Total income |179|245|247|224|215|239|255|
| | | | | | | | |
|Personnel costs | 45| 50| 47| 48| 47| 52| 44|
| | | | | | | | |
|IT expenses | 19| 18| 19| 20| 19| 19| 18|
| | | | | | | | |
|Depreciation and amortisation | 17| 17| 17| 21| 18| 16| 23|
| | | | | | | | |
|Other expenses | 41| 40| 36| 45| 39| 43| 40|
| | | | | | | | |
|Total expenses |122|125|119|135|123|130|125|
| | | | | | | | |
|Earnings before impairments of receivables| 57|119|128| 89| 92|109|130|
| | | | | | | | |
|Impairments of receivables | 21| 33| 41| 34| 33| 29| 27|
| | | | | | | | |
|Earnings before tax | 36| 87| 87| 55| 59| 80|103|
| | | | | | | | |
|Change in fair value reserve | 4|100|109| 30| 61|-92| 62|
| | | | | | | | |
|Earnings/loss before tax at fair value | 41|186|196| 84|119|-11|165|
+------------------------------------------+---+---+---+---+---+---+---+
Group risk exposure
The Group's risk exposure remained favourable as impairment charges continued to
decrease and investment-grade exposures remained high. The improved economic
situation was reflected in higher creditworthiness among corporate customers
although some corporate customers continued to feel the effects of the economic
crisis. Doubtful receivables decreased further and remained low relative to the
loan and guarantee portfolio.
The financial and liquidity position remained strong. Both short-term and long-
term funding performed well.
Pohjola strengthened its financial position by issuing in early September senior
bonds with a maturity of seven years and worth EUR 750 million.
Pohjola Bank plc maintains OP-Pohjola Group's liquidity portfolio, which mainly
consists of notes and bonds eligible as collateral for central bank refinancing.
The liquidity portfolio totalled EUR 9.7 billion (11.7) on 30 September 2010.
This liquidity portfolio plus other items included in OP-Pohjola Group's balance
sheet and eligible for central bank refinancing constitute the total liquidity
buffer, which can be used to cover OP-Pohjola Group's wholesale funding
maturities for some 24 months.
Determining the value of the available-for-sale financial assets at fair value
through profit or loss and included in the liquidity portfolio is based on mark-
to-market valuations. Pohjola did not recognise any impairment charges on the
liquidity portfolio during the period. Pohjola kept market risks moderate during
the period.
Net loan losses and impairment losses recognised for January-September reduced
earnings by EUR 88 million (95), accounting for 0.63% (0.68) of the loan and
guarantee portfolio. Final loan losses recognised for the period totalled EUR
41 million (15) and impairment charges EUR 98 million (111). Loan loss
recoveries and allowances for impairments totalled EUR 51 million (32). The
majority of the impairments were those recognised on an individual basis.
Doubtful receivables fell by EUR 9 million to EUR 29 million in the third
quarter and were at a low level, accounting for 0.21% (0.32) of the loan and
guarantee portfolio. Past due payments came to EUR 20 million (70), representing
0.14% (0.51) of the loan and guarantee portfolio.
Despite the economic recovery and lower impairment charges and doubtful
receivables, some of our corporate customers still face a challenging operating
environment.
Capital adequacy
Capital adequacy under the Act on Credit Institutions showed a marked
improvement. The capital adequacy ratio stood at 13.9% (13.5) as against the
statutory minimum requirement of 8%. Tier 1 ratio was 12.3% (11.8). Pohjola
Group's Tier 1 target ratio stands at a minimum 9.5% over the economic cycle.
Excluding hybrid capital, Tier 1 ratio stood at 10.2% (9.7).
Tier 1 capital came to EUR 1,601 million (1,541) and the total capital base
amounted to EUR 1,806 million
(1,753). Hybrid capital accounted for EUR 274 million of Tier 1 capital. The
minimum regulatory capital requirement to cover credit risk amounted to EUR 942
million (957), that to cover market risk EUR 34 million (36) and that to cover
operational risks EUR 61 million (49).
On 30 September 2010, risk-weighted assets totalled EUR 12,960 million, as
against EUR 13,024 million on 31 December 2009.
Pohjola Group belongs to OP-Pohjola Group whose capital adequacy is supervised
in accordance with the Act on the Supervision of Financial and Insurance
Conglomerates. Pohjola Group's capital adequacy ratio under the Act, measured
using the consolidation method, stood at 1.84 (1.73). Accordingly, the capital
base totalled EUR 2,230 million (2,103) and the minimum capital requirement EUR
1,213 million (1,213), i.e. the total capital base exceeded the minimum
regulatory requirement by EUR 1,017 million (890).
As a result of the financial crisis, the regulatory framework for banks' capital
requirements is becoming more rigorous in an effort to improve the quality of
their capital base, to reduce the cyclic nature of capital requirements and to
set quantitative limits to liquidity risk. These changes are still under
preparation, due to be effective between 2012 and 2018, and it is too early to
predict precisely what their effects will be. From Pohjola Group's viewpoint,
the most significant changes in the new regulations are related to allowances
for insurance company holdings and liquidity risk requirements whose treatment
will most likely be finalised only in national legislation.
Credit ratings
Pohjola Bank plc's credit ratings remained unchanged, as follows:
Rating agency Short-term debt Long-term debt
Standard & Poor's A-1+ AA-
Moody's P-1 Aa2
Fitch F1+ AA-
Pohjola's credit rating outlook issued by Standard & Poor's is stable. Moody's
Investor Service has affirmed negative outlook on Pohjola's credit rating. Fitch
Rating has issued a negative outlook for the long-term debt ratings of Pohjola
but the outlook for the short-term debt ratings is stable. The main reason for
the negative outlook is the rapid deterioration of the Finnish economy last year
and its potential effects on Pohjola and OP-Pohjola Group mainly operating in
Finland.
Financial targets and actuals
+------------------------------------------------------+-----+-----+----+------+
| |Q1-3/|Q1-3/| | |
|Financial targets |2010 |2009 |2009|Target|
+------------------------------------------------------+-----+-----+----+------+
|Group | | | | |
| | | | | |
| Return on equity, % | 11.7| 21.8|19.2| 13|
| | | | | |
| Tier 1 ratio, % | 12.3| 11.3|11.8| >9.5|
| | | | | |
|Banking | | | | |
| | | | | |
| Operating cost/income ratio, % | 35| 34| 35| <40|
| | | | | |
|Non-life Insurance | | | | |
| | | | | |
| Operating combined ratio, % | 88.6| 86.7|87.7| 92|
| | | | | |
| Operating expense ratio, % | 21.3| 21.7|22.2| <20|
| | | | | |
| Solvency ratio, % | 99| 89| 88| 70|
| | | | | |
|Asset Management | | | | |
| | | | | |
| Operating cost/income ratio, % | 52| 60| 53| <50|
| | | | | |
|Rating | | | | |
| | | | | |
| AA rating affirmed by at least two credit rating | | | | |
|agencies | 3| 3| 3| ≥2|
| | | | | |
|Dividend policy | | | | |
| | | | | |
| Dividend payout ratio a minimum of 50%, provided | | | | |
|that Tier 1 a minimum of 9.5%. | | | 51| >50|
+------------------------------------------------------+-----+-----+----+------+
The financial targets are set over the economic cycle.
Performance by business line
Banking
- Earnings before tax amounted to EUR 93 million (99), affected by EUR 89
million (84) in impairment charges on receivables. Earnings before these
impairments were at the level reported a year ago.
- The average corporate loan margin was 17 basis points higher than the year
before but this upward trend came to an end after the first quarter.
- Thanks to higher margins, Corporate Banking net interest income rose by 26%.
The loan portfolio grew by 6% from the level of 30 December 2009 and by 4% in
the year to September.
- The Markets division's financial performance remained good although it
weakened from the exceptionally good level posted a year ago.
- Operating cost/income ratio stood at 34% (34).
Banking: financial results and key figures and ratios
+-------------------------------+-----+-----+---------+----+----+---------+----+
|Financial results, € million |Q1-3/|Q1-3/|Change, %|Q3/ |Q3/ |Change, %|2009|
| |2010 |2009 | |2010|2009| | |
+-------------------------------+-----+-----+---------+----+----+---------+----+
|Net interest income | | | | | | | |
| | | | | | | | |
| Corporate Banking | 128| 101| 26| 43| 36| 21| 138|
| | | | | | | | |
| Markets | 13| 24| -44| 3| 2| 95| 27|
| | | | | | | | |
| Total | 141| 125| 13| 46| 37| 24| 165|
| | | | | | | | |
|Net commissions and fees | 69| 65| 5| 21| 22| -1| 85|
| | | | | | | | |
|Net trading income | 45| 64| -29| 21| 27| -22| 78|
| | | | | | | | |
|Other income | 22| 22| -1| 8| 8| 9| 30|
+-------------------------------+-----+-----+---------+----+----+---------+----+
|Total income | 277| 276| 0| 97| 93| 4| 358|
| | | | | | | | |
|Expenses | | | | | | | |
| | | | | | | | |
| Personnel costs | 39| 39| 0| 12| 13| -4| 50|
| | | | | | | | |
| IT expenses | 17| 16| 11| 5| 5| 9| 21|
| | | | | | | | |
| Depreciation and amortisation| 19| 20| -6| 6| 7| -5| 28|
| | | | | | | | |
| Other expenses | 20| 19| 6| 7| 6| 29| 25|
| | | | | | | | |
|Total expenses | 95| 94| 2| 31| 30| 4| 125|
| | | | | | | | |
|Earnings before impairments of | | | | | | | |
|receivables | 182| 183| 0| 65| 63| 4| 234|
| | | | | | | | |
|Impairments of receivables | 89| 84| 7| 28| 39| -30| 117|
+-------------------------------+-----+-----+---------+----+----+---------+----+
|Earnings before tax | 93| 99| -6| 38| 24| 61| 117|
+-------------------------------+-----+-----+---------+----+----+---------+----+
|Earnings before tax at fair | | | | | | | |
|value | 92| 101| -8| 38| 25| 54| 120|
+-------------------------------+-----+-----+---------+----+----+---------+----+
|Loan and guarantee portfolio, €| | | | | | | |
|billion | 14.0| 13.6| 3| | | |13.3|
| | | | | | | | |
|Margin on corporate loan | | | | | | | |
|portfolio, % | 1.38| 1.21| | | | |1.33|
| | | | | | | | |
|Ratio of doubtful receivables | | | | | | | |
|to | | | | | | | |
| | | | | | | | |
|loan and guarantee portfolio, %| 0.21| 0.37| | | | |0.32|
| | | | | | | | |
|Ratio of impairments of | | | | | | | |
|receivables to | | | | | | | |
| | | | | | | | |
|loan and guarantee portfolio, %| 0.64| 0.62| | | | |0.88|
| | | | | | | | |
|Operating cost/income | | | | | | | |
| | | | | | | | |
|ratio, % | 34| 34| | 33| 32| | 35|
| | | | | | | | |
|Personnel | 654| 607| 8| | | | 607|
+-------------------------------+-----+-----+---------+----+----+---------+----+
January-September earnings
Earnings before tax amounted to EUR 93 million (99), affected by EUR 89 million
(84) in impairment charges on receivables. Earnings before these impairments
were at the same level as a year ago.
Lending took off, with the loan portfolio growing by 6% from its year-end level
to over EUR 11.3 billion. The loan portfolio grew by 4% in the year to
September. The market share of corporate loans in late September was at the same
level as at the beginning of 2010. The guarantee portfolio decreased by less
than EUR 0.1 billion to EUR 2.6 billion from its year-end level, being EUR 0.2
billion lower than a year earlier.
The average corporate loan margin of 1.38% was 17 basis points higher on 30
September than the year before and rose by 5 basis points from its level on 31
December 2009. Thanks to the higher average margin, Corporate Banking net
interest income improved by 26%. Due to fiercer competition, margins stopped
rising.
Net commissions and fees were 5% higher than a year ago. Pohjola holds a strong
position as an arranger of new issues and a securities broker. Net commissions
from securities issuance and securities brokerage rose by a total of EUR 7
million. Tougher price competition was reflected in lower commission income from
loans.
The Markets division's earnings performance normalised from its exceptionally
high level a year ago. Companies increased their hedging measures due to jittery
markets and customer trading volumes grew over the previous year in fixed-income
and foreign exchange products.
The cost/income ratio remained good, standing at 34%. Total expenses were on a
par with those in the previous year.
July-September earnings
Earnings before tax were EUR 38 million, or EUR 14 million higher than the year
before. Income increased by EUR 4 million and expenses by EUR 2 million.
Impairment charges on receivables were EUR 11 million lower than a year ago. On
30 September, the loan and guarantee portfolio was at the same level as on 30
June.
As a result of higher margins, Corporate Banking net interest income was a fifth
higher than a year ago. The average margin on loans remained at the same level
as in the previous quarter.
Risk exposure by Banking
Within Banking, key risks are associated with credit risk arising from customer
business, and market risks.
During January-September, total exposure grew by EUR 0.5 billion to EUR 21.6
billion. The ratio of investment-grade exposure - i.e. ratings 1-5 - to total
exposure, excluding households, remained at a healthy level, standing at 67%
(64). The share of ratings 11-12 was 1.8% (1.6) and that of non-rated exposure
0.8% (0.8).
Corporate exposure (including housing corporations) accounted for 75% (78) of
total exposure within Banking. Of corporate exposure, the share of investment-
grade exposure stood at 60% (57) and the exposure of the lowest two rating
categories amounted to EUR 368 million (321), accounting for 2.3% (2.0) of the
total corporate exposure.
Significant corporate customer exposure totalled EUR 3.1 billion (2.9). The
distribution of corporate exposure by industry remained highly diversified. The
most significant industries included Letting and Operation of Dwelling
representing 11.9% (11.2), Trade 9.6% (10.9) and Manufacture of Machinery and
Equipment 8.7% (9.7).
January-September net loan losses and impairment losses within Banking came to
EUR 89 million (84), accounting for 0.64% (0.61) of the loan and guarantee
portfolio.
On 30 September, Baltic Banking exposures totalled EUR 110 million (89),
accounting for less than 1% of the loan and guarantee portfolio. The Baltic
Banking net loan losses and impairment losses for January-September amounted to
EUR 1.5 million (4.7).
Third-quarter interest rate risk exposure averaged EUR 4.5 million (6.6), based
on the 1-percentage-point change in the interest rate.
Non-life Insurance
- Earnings before tax amounted to EUR 84 million (89).
- Non-life Insurance recorded very good profitability. The operating combined
ratio stood at 88.6% (86.7).
- Insurance premium revenue grew at a higher rate, increasing by 2% in January-
September and by 4% in July-September.
- The period saw the achievement of the strategic target of 450,000 loyal
customer households.
- Return on investments at fair value was 5.2% (9.0).
Non-life Insurance: financial results and key figures and ratios
+------------------------------+-----+-----+---------+----+----+---------+-----+
|Financial results, € million |Q1-3/|Q1-3/|Change, %|Q3/ |Q3/ |Change, %|2009 |
| |2010 |2009 | |2010|2009| | |
+------------------------------+-----+-----+---------+----+----+---------+-----+
|Insurance premium revenue | 723| 712| 2| 250| 241| 4| 943|
| | | | | | | | |
|Claims incurred | -486| -463| 5|-157|-149| 5| -617|
| | | | | | | | |
|Operating expenses | -154| -154| 0| -50| -51| -3| -210|
| | | | | | | | |
|Amortisation adjustment of | | | 34| | | | -28|
|intangible assets | -25| -19| | -12| -6| 102| |
+------------------------------+-----+-----+---------+----+----+---------+-----+
|Balance on technical account | 58| 76| -24| 30| 34| -12| 88|
+------------------------------+-----+-----+---------+----+----+---------+-----+
|Net investment income | 65| 48| 34| 23| 19| 22| 61|
| | | | | | | | |
|Other income and expenses | -38| -35| 10| -11| -10| 15| -46|
+------------------------------+-----+-----+---------+----+----+---------+-----+
|Earnings before tax | 84| 89| -6| 42| 43| -3| 102|
+------------------------------+-----+-----+---------+----+----+---------+-----+
|Earnings before tax at fair | | | | | | | |
|value | 164| 247| -33 | 94| 126| -26| 291|
+------------------------------+-----+-----+---------+----+----+---------+-----+
|Operating combined ratio, % | 88.6| 86.7| |82.8|83.1| | 87.7|
| | | | | | | | |
|Operating expense ratio, % | 21.3| 21.7| |20.0|21.3| | 22.2|
| | | | | | | | |
|Return on investments at fair | | | | | | | |
|value, % | 5.2| 9.0| | 2.6| 4.3| | 10.7|
| | | | | | | | |
|Solvency ratio , % | 99| 89| | | | | 88|
| | | | | | | | |
|Personnel |2,059|2,059| | | | |2,070|
+------------------------------+-----+-----+---------+----+----+---------+-----+
January-September earnings
Earnings before tax amounted to EUR 84 million (89).
Insurance profitability was excellent, although the high volume of traffic
accidents and vehicle damage in the winter and storm damage in late summer
increased claims. Growth remained strong within Private Customers and the
decline in insurance premium revenue from Corporate Customers levelled off. The
balance on technical account before amortisation on intangible assets stood at
EUR 83 million (95).
This year has been volatile for capital markets. Net investment income amounted
to EUR 65 million (48) and net investment income at fair value reached EUR 145
million (205).
When the non-life insurance business was acquired, Pohjola set a strategic
target to have 450,000 loyal customer households by the end of 2010. This target
was already reached in August. By 30 September, Pohjola's loyal insurance
customer households numbered 454,651.
Up to 57% of these loyal customer households also use OP-Pohjola Group member
cooperative banks as their main bank. OP-Pohjola Group member banks' and
Helsinki OP Bank's customers can use their OP bonuses earned through banking
transactions to pay Pohjola non-life insurance premiums. During January-
September, OP bonuses were used to pay 801,300 insurance premiums, with 142,250
paid in full using bonuses. Insurance premiums paid using bonuses totalled
EUR 40 million. In 2005, Pohjola set a target of achieving annual revenue
synergies of EUR 17 million by the end of 2010, resulting from growth in the
number of loyal customer households, which Pohjola already achieved in March.
Insurance business
Profitability was excellent and the operating combined ratio, excluding
amortisation on intangible assets arising from the corporate acquisition, stood
at 88.6% (86.7%).
Insurance premium revenue increased by 2% to EUR 723 million (712).
Insurance premium revenue from Private Customers improved by 11% to EUR 355
million (320). The number of loyal customer households grew by 29,937 (22,782)
during January-September. Insurance policies sold well both in OP-Pohjola Group
member banks and at car dealerships. Private Customers strengthened its position
as the largest division within Non-life Insurance.
Insurance premium revenue from Corporate Customers dropped by 5% to EUR 331
million (347). The recession affected the corporate sector, reducing insurance
premiums based on companies' payroll bills, net sales and operating profit.
Statutory workers' compensation insurance was affected the most, with the level
of premiums being lowered for 2010. Premium revenue continued to fall but at a
slower rate as the year progressed. The impact of the recession on premium
revenue was not properly felt until the second quarter onwards.
In the Baltic States, insurance premium revenue decreased by 16% to EUR 37
million (44). The economic recession has strongly affected the insurance market
in the Baltic region with the result that the total market in the region shrank
by almost one fifth during January-September.
Claims incurred increased to EUR 486 million (463), or by 5%, owing to growth in
the private customer insurance portfolio, the large number of losses reported
within motor liability and motor vehicle insurance in the winter and storm
damage in late summer. The loss ratio deteriorated to 67.2% (65.1) and the risk
ratio (excl. loss adjustment expenses) stood at 61.3% (59.2). The reported
number of major or medium-sized losses (in excess of EUR 0.1 million and over
EUR 0.5 million in pension liabilities) came to 157 (141) in January-September,
with their claims incurred retained for own account totalling EUR 79 million
(66).
Operating expenses amounted to EUR 154 million (154). The expense ratio was
21.3% (21.7). The cost ratio (incl. loss adjustment expenses) stood at 27.2%
(27.6).
The operating balance on technical account within Private Customers improved to
EUR 62 million (42) because growth in claims incurred was lower than that in
insurance premium revenue. The operating balance on technical account within
Corporate Customers fell to EUR 22 million (49) as a result of lower insurance
premium revenue and the normalisation of claims developments with respect to the
exceptionally favourable developments a year ago. The balance on technical
account recorded by the Baltic States stood at EUR -1 million (3).
Investment
Return on investments at fair value was 5.2% (9.0). Net investment income
recognised in the income statement amounted to EUR 65 million (48) and net
investment income at fair value was EUR 145 million (205). Impairment charges
recognised in the income statement totalled EUR 29 million.
On 30 September, the investment portfolio totalled EUR 2,971 million (2,851),
bonds and bond funds accounting for 77% (76) and listed equities for 7% (10).
Unlisted equity investments plus the aforementioned equities represented a total
of 10% (13). The fixed-income portfolio by credit rating remained healthy,
considering that investments under "investment-grade" represented 89% (94) and
75% of the investments were rated at least A-. The average residual term to
maturity of the fixed-income portfolio was 5.1 years and the duration 3.9 years
(3.4).
July-September earnings
Earnings before tax amounted to EUR 42 million (43).
The balance on technical account before amortisation on intangible assets stood
at EUR 43 million (41). Favourable developments in the capital market during the
third quarter were reflected in investment performance. Net investment income
amounted to EUR 23 million (18) and net investment income at fair value came to
EUR 75 million (102). Earnings were eroded by the EUR 7 million one-time
amortisation performed on insurance systems purchased in connection with the
Pohjola acquisition.
Insurance business
Third-quarter profitability was excellent and the operating combined ratio,
excluding amortisation on intangible assets arising from the corporate
acquisition, stood at 82.8% (83.1%).
Growth in insurance premium revenue accelerated in the third quarter, increasing
by 4% to EUR 250 million (241).
Growth in insurance premium revenue continued to remain strong among Private
Customers, rising by 11% to EUR 125 million (113). The growth rate of the number
of loyal customer households accelerated, their number increasing by 12,070
(8,730) in July-September.
The decline in insurance premium revenue from Corporate Customers decelerated
and insurance premium revenue decreased by 2% to EUR 111 million (113). With the
exception of statutory workers' compensation insurance, all lines of insurance
recorded premium revenue that was already at the level reported a year ago.
In the Baltic States, insurance premium revenue decreased by 11% to EUR 13
million (14).
Claims incurred rose by 5% to EUR 157 million (149). The loss ratio stood at
62.8% (61.8) and the risk ratio (excl. loss adjustment expenses) was 58.3%
(57.2). Excess of loss reinsurance protecting from loss accumulation reduced
claims incurred retained for own account resulting from storm damage and other
major losses in the third quarter. The reported number of major or medium-sized
losses (in excess of EUR 0.1 million and over EUR 0.5 million in pension
liabilities) came to 54 (54) in July-September, with their claims incurred
retained for own account totalling EUR 28 million (23).
Operating expenses amounted to EUR 50 million (51). The expense ratio was 20.0%
(21.3). The cost ratio (incl. loss adjustment expenses) stood at 26.6% (28.5).
The operating balance on technical account within Private Customers improved to
EUR 30 million (16) because claims incurred were lower than a year ago. The
operating balance on technical account within Corporate Customers decreased to
EUR 15 million (25) as a result of the normalisation of claims developments with
respect to the exceptionally favourable developments a year ago. This fall
combined with lower premium income weakened the balance on technical account. In
the Baltic States, the balance on technical account was EUR -3 million (0), this
fall being due to a single large claim.
Investment
Return on investments at fair value was 2.6% (4.3). Net investment income
recognised in the income statement amounted to EUR 23 million (19) and net
investment income at fair value was EUR 75 million (102). Impairment charges
recognised in the income statement totalled EUR 2 million.
Risk exposure by Non-life Insurance
Major risks within Non-life Insurance include underwriting risks associated with
claims developments and market risks associated with investment portfolios
covering technical provisions.
In their joint actuarial project, the Federation of Accident Insurance
Institutions and the Finnish Motor Insurers' Centre assess whether the mortality
model applied to motor liability insurance and statutory workers' compensation
insurance is up to date considering that the average life expectancy has
increased. This project is due for completion by the summer of 2011. A one-year
increase in the average life expectancy would increase technical provisions by
EUR 31 million.
On 30 September, Non-life Insurance solvency capital came to EUR 943 million
(827) and the ratio of solvency capital to insurance premium revenue (solvency
ratio) stood at 99% (88). Equalisation provisions rose to EUR 443 million (417).
Pohjola Insurance Ltd's credit ratings have remained unchanged: A2 by Moody's
and A+ by Standard & Poor's.
No major changes occurred in investment risk exposure. Pohjola reduced equity
risk and interest rate risk increased slightly.
Asset Management
- Earnings before tax improved by 68% to EUR 18 million (11).
- Assets under management increased by 6% to EUR 35.2 billion (33.1) from their
end-2009 level.
- Operating cost/income ratio improved to 52% (63).
Asset Management: financial results and key figures and ratios
+-------------------------------+-----+-----+---------+----+----+---------+----+
|Financial results, € million |Q1-3/|Q1-3/|Change, %|Q3/ |Q3/ |Change, %|2009|
| |2010 |2009 | |2010|2009| | |
+-------------------------------+-----+-----+---------+----+----+---------+----+
|Net commissions and fees | 39| 29| 34| 12| 11| 14| 50|
| | | | | | | | |
|Other income | 2| 2| -14| 1| 1| 15| 2|
| | | | | | | | |
|Total income | 41| 32| 30| 13| 11| 14| 52|
| | | | | | | | |
| Personnel costs | 14| 12| 18| 4| 4| 11| 17|
| | | | | | | | |
| Other expenses | 10| 10| 5| 3| 3| 2| 13|
| | | | | | | | |
|Total expenses | 24| 21| 12| 7| 7| 7| 30|
+-------------------------------+-----+-----+---------+----+----+---------+----+
|Earnings before tax | 18| 11| 68| 6| 4| 25| 21|
+-------------------------------+-----+-----+---------+----+----+---------+----+
|Earnings before tax at fair | | | | | | | |
|value | 18| 11| 68| 6| 4| 25| 21|
+-------------------------------+-----+-----+---------+----+----+---------+----+
|Assets under management, € | | | | | | | |
|billion | 35.2| 31.4| 12| | | |33.1|
+-------------------------------+-----+-----+---------+----+----+---------+----+
|Operating cost/income ratio, % | 52| 60| | 51| 54| -6| 53|
+-------------------------------+-----+-----+---------+----+----+---------+----+
|Personnel | 168| 160| 5| | | | 162|
+-------------------------------+-----+-----+---------+----+----+---------+----+
January-September earnings
Earnings before tax increased by 68% to EUR 18 million (11) year on year and the
operating cost/income ratio stood at 52% (60).
Year on year, assets under management increased by 12%, standing at EUR 35.2
billion (33.1) at the end of the reporting period. A good net assets inflow and
favourable market developments contributed to this increase. Of the assets under
management, institutional clients accounted for EUR 20.1 billion (19.2), OP
mutual funds for EUR 11.8 billion (11.4) and Pohjola Private for EUR 3.2 billion
(2.5).
Of the assets under management, money-market investments represented 14% (11),
bonds 40% (42), equities 27% (27) and other investments 20% (20).
July-September earnings
Earnings before tax amounted to EUR 6 million (4). Year on year, net commissions
and fees increased by 14% and earnings improved by 25%. The operating
cost/income ratio improved to 51% (60).
Assets under management increased by around 5%.
All of the share capital of Pohjola Capital Partners Ltd within Asset Management
was bought by the existing management. The transaction should be finalised in
December 2010. This management buyout will have no major effect on Asset
Management's financial results.
Group Functions
- Earnings before tax totalled EUR 48 million (11). Capital gains on notes and
bonds and lower impairment charges year on year contributed to this improvement.
- Earnings before tax at fair value fell by EUR 67 million year on year.
- Liquidity and the availability of funding remained good.
- Long-term funding increased by EUR 2.3 billion aimed at strengthening the
financial position.
Group Functions: financial results and key figures and ratios
+-------------------------------+-----+-----+---------+----+----+---------+----+
|Financial results, € million |Q1-3/|Q1-3/|Change, %|Q3/ |Q3/ |Change, %|2009|
| |2010 |2009 | |2010|2009| | |
+-------------------------------+-----+-----+---------+----+----+---------+----+
|Net interest income | 51| 51| 0| 17| 21| -17| 75|
| | | | | | | | |
|Net trading income | -9| -4| | 0| 0| | -7|
| | | | | | | | |
|Net investment income | 21| -8| | 6| 1| | -13|
| | | | | | | | |
|Other income | 9| 10| -14| 2| 3| -41| 17|
+-------------------------------+-----+-----+---------+----+----+---------+----+
|Total income | 72| 49| 46 | 25| 25| 0| 72|
| | | | | | | | |
| Personnel costs | 10| 10| 7| 4| 3| 16| 13|
| | | | | | | | |
| Other expenses | 15| 17| -15| 4| 4| 2| 23|
| | | | | | | | |
|Total expenses | 25| 27| -7| 8| 7| 8| 36|
| | | | | | | | |
|Earnings before impairments of | 47| 22| 109| 17| 18| -3| 36|
|receivables | | | | | | | |
| | | | | | | | |
|Impairments of receivables | -1| 11| | -1| 2| | 12|
+-------------------------------+-----+-----+---------+----+----+---------+----+
|Earnings before tax | 48| 11| 320 | 18| 16| 12 | 25|
+-------------------------------+-----+-----+---------+----+----+---------+----+
|Earnings/loss before tax at | -1| 66| | 28| 41| -31| 76|
|fair value | | | | | | | |
+-------------------------------+-----+-----+---------+----+----+---------+----+
|Liquidity portfolio, € billion | 9.7| 9.5| 3| | | |11.7|
| | | | | | | | |
|Receivables and liabilities | | | | | | | |
|from/to OP-Pohjola Group | | | | | | | |
|entities, net position, € | | | | | | | |
|billion | 3.7| 3.8| -2.6| | | | 2.9|
| | | | | | | | |
|Personnel | 121| 137| -12| | | | 136|
+-------------------------------+-----+-----+---------+----+----+---------+----+
January-September earnings
Earnings before tax rose by EUR 37 million year on year. Net interest income
from the liquidity portfolio has continued its strong upward trend during the
current year too. Net investment income included EUR 22 million in capital gains
on notes and bonds. Impairments recognised on shares and participations included
in available-for-sale financial assets totalled EUR 4 million (4). Impairments
recognised on bonds amounted to EUR -1 million (11), or EUR 12 million lower
than a year ago.
The availability of funding remained good. During the period, Pohjola increased
its long-term funding by issuing bonds totalling EUR 2.3 million in
international capital markets. Debt instruments issued to the public totalled
EUR 17 billion on September 30, equalling the amount at the end of 2009.
Average funding costs will rise when maturing long-term debt is renewed at
higher market rates. At the end of the reporting period, the average wholesale
funding margin was 17 basis points (14).
Pohjola Bank plc's net receivables from OP-Pohjola Group retail banks and
entities increased to EUR 3.7 billion. On 31 December 2009, the net position
amounted to EUR 2.9 billion.
Earnings before tax at fair value fell by EUR 67 million year on year from their
exceptionally good level reported a year ago.
July-September earnings
Earnings before tax were EUR 18 million, or EUR 2 million higher than the year
before. Net investment income included EUR 6 million in capital gains on notes
and bonds within the liquidity buffer. Year on year, impairment charges went
down by EUR 3 million.
Uncertainty over the euro-area economic development was reflected in widening
credit spreads and shrinking market liquidity. As a result, the fair value of
bonds and notes fell year on year and earnings before tax at fair value declined
to EUR 28 million (41) over the previous year.
Risk exposure by Group Functions
Major risks within the Group Functions include those associated with the fair
value change of assets included in the liquidity portfolio, and liquidity risks.
The Group Functions exposure totalled EUR 17.4 billion (18.3), consisting of
assets held in the liquidity portfolio to secure OP-Pohjola Group's liquidity
and of receivables from OP-Pohjola Group member banks. The liquidity portfolio
amounted to EUR 9.7 billion (11.7), comprising primarily investments in notes
and bonds issued by governments, municipalities, financial institutions and
companies all showing good credit ratings, and in securitised assets.
Interest rate risk exposure averaged EUR 10.3 million (11.9) in the third
quarter, based on the 1-percentage-point change in the interest rate.
Shares and shareholders
On 30 December 2010, the number of Pohjola Bank plc shares totalled 319,551,415
and votes conferred by the shares 593,077,995. On the same date, the number of
Series A shares listed on NASDAQ OMX Helsinki Ltd totalled 251,169,770,
representing 78.6% of all Pohjola shares and 42.4% of all votes. The number of
unlisted Series K shares totalled 68,381,645.
On 30 September, one Series A share closed at EUR 8.93, as against EUR 7.55 on
31 December 2009. In January-September, the share price reached a high of EUR
9.79 (3 August 2010) and a low of EUR 6.97 (7 May 2010).
In January-September, trading in Pohjola shares in euro terms increased by 16%
year on year, from EUR 885 million a year ago to EUR 1,028 million. In volume
terms, share trading decreased from 138 million shares reported a year ago to
123 million.
On 30 September, Pohjola Bank plc had 35,270 shareholders, down by 1,730 from
the beginning of the year, private individuals accounting for 95% of all
shareholders. The largest shareholder was OP-Pohjola Group Central Cooperative,
representing 29.98% of all shares and 57.05% of all votes. The number of
nominee-registered shares increased by 11.5 million and they accounted for
20.2% of Series A shares on 30 September (15.6% on 31 December 2009). On 23
August 2010, the proportion of Pohjola shares held by Suomi Mutual Life
Assurance Company fell below one-tenth and that of the votes conferred by all
shares fell below one twentieth.
Management
Jouko Pölönen, CFO of Pohjola Group, has been appointed a new President of
Pohjola Insurance Ltd, a Pohjola Bank plc subsidiary. He will succeed Tomi Yli-
Kyyny who announced on 8 September 2010 that he would leave the company. Jouko
Pölönen will take up his duties on 1 January 2011. Until that date, Tomi Yli-
Kyyny will act as the President.
Group restructuring
Pohjola Insurance Ltd and Pohjantähti Mutual Insurance Company are planning to
merge
At the meeting of 28 September 2010, the Board of Directors of both companies
have approved a merger plan whereby Pohjantähti Mutual Insurance Company will
merge into Pohjola Insurance. If both companies' extraordinary general meetings
adopt the merger plan, the companies will merge according to the proposal to be
submitted to the general meetings.
The merger plan specifies the amount of the merger consideration offered to
Pohjantähti's shareholders, its distribution and other terms and conditions
governing the merger. The aggregate amount of the merger consideration comes to
EUR 80 million, comprising the amount payable to the policyholder/shareholders
and the owner of the guarantee capital. The consideration will be paid in cash
in its entirety.
In the merger, Pohjantähti's insurance portfolio and agreements as such would
transfer to Pohjola and Pohjantähti's customers would become those of Pohjola
Insurance.
Pohjola was the initiator of the merger. According to Pohjantähti's Board of
Directors, the merger bid is financially justified and its terms and conditions
are in the interests of both customers and personnel.
The extraordinary general meetings of both companies will decide whether the
merger plan will be rejected or approved. In addition to approval by the general
meetings, the merger will require regulatory approval from relevant authorities.
Policyholder/shareholders and Ilmarinen Mutual Pension Insurance Company, the
owner of the guarantee capital, exercise voting rights at the general meeting of
Pohjantähti. The extraordinary general meeting will be held on 8 December 2010.
The purpose of the merger is to strengthen the competitiveness in the Finnish
non-life insurance market of the new entity formed by the insurance business of
Pohjola Insurance and Pohjantähti. The merger is aimed at enhancing growth
potential and profitability of the combined insurance businesses. The new entity
will be able to more efficiently manage product and service development, ICT
development, staff recruitment and training, and capital, given the increasingly
demanding operating and regulatory environment.
Pohjantähti is currently headquartered in Hämeenlinna. Pohjola aims to increase
the number of insurance experts in Hämeenlinna and establish a Pohjola Insurance
service centre in the town. According to the merger plan, the merger should be
executed in the spring of 2011. Post-merger business development measures are
now only under preparation. However, based on a decision already made, further
plans will not involve any redundancies, changing full-time employment contracts
to part-time contracts or layoffs.
If implemented, the merger will have no major effect on Pohjola Group's
financial results.
Management buyout of Pohjola Capital Partners Ltd
The existing management of Pohjola Capital Partners Ltd and its present majority
shareholder, Pohjola Bank plc, have agreed on a management buyout whereby the
existing management acquires all of the company's shares.
Pohjola Capital Partners Ltd will continue its investments as before but it will
be renamed Vaaka Partners after the transaction. The transaction should be
finalised in December 2010.
The management buyout will have no major effect on Pohjola Bank plc's financial
results.
Events after the balance sheet date
Pohjola Bank plc to redeem Lower Tier 2 subordinated notes of EUR 70 million
Pohjola Bank plc will redeem Lower Tier 2 subordinated notes of EUR 70 million
which it issued in November 2004. According to the terms and conditions, the
notes will mature in 2015 but with the Finnish Financial Supervisory Authority's
permission the issuer has the right to call in the notes prematurely in November
2010. The notes are quoted on the London Stock Exchange. This redemption will
have no effect on Pohjola's Tier 1 ratio but will reduce the capital adequacy
ratio by 0.5 percentage points.
Removing a provision for the guarantee scheme under statutory workers'
compensation insurance and motor liability insurance
The joint guarantee scheme for statutory accident insurance was introduced in
1997. In accordance with the Insurance Companies Act, insurers providing
statutory insurance policies are jointly liable for claims paid out under these
lines of insurance which would remain unpaid to claimants as a result of an
insurer's liquidation or bankruptcy. Insurers have prepared for this by
including a provision for the guarantee scheme in their balance sheet. A
Government bill to amend the Insurance Companies Act was presented before
Parliament on 1 October 2010. Accordingly, insurers will not need to make such a
provision in their balance sheet. The amended Act will should come into force on
31 December 2010. Removing this provision will improve Pohjola Group's earnings
by EUR 16 million on a non-recurring basis and the amount is expected to be
recognised in the fourth quarter income statement.
Life expectancy in accounting for technical provisions
In their joint actuarial project launched in the spring of 2010, the Federation
of Accident Insurance Institutions and the Finnish Motor Insurers' Centre
examine whether the mortality model commonly used by Finnish insurers and
applied to motor liability insurance and statutory workers' compensation
insurance is up to date. The preliminary findings based on the first stage of
the project reveals that life expectancy has increased in Finland and the
commonly used mortality model needs some update. This project is due for
completion by the summer of 2011. A one-year increase in the average life
expectancy would increase Pohjola's technical provisions by EUR 31 million. The
effect on Pohjola's technical provisions will be specified in the spring of
2011, but Pohjola is prepared to recognise a non-recurring increase of EUR
30-40 million in its technical provisions as early as the fourth quarter.
Outlook towards the year end
The economic recovery underway has been reflected in demand for corporate loans,
with the result that the corporate loan portfolio has begun to grow. The trend
of the rising average corporate loan margin has come to an end and tougher
competition is sending the margin on new loans down. Given that the business
environment is still challenging for companies, it is estimated that impairment
charges will remain higher than usual. Enabled by the economic recovery,
impairment charges are, however, expected to remain lower than a year ago. The
greatest uncertainties related to Banking's financial performance in 2010 are
associated with impairment charges on the loan portfolio.
Insurance premium revenue is expected to continue to increase at an above-the-
market-average rate among private customers. The downward trend in insurance
premium revenue from corporate customers is expected to come to a halt during
the rest of the year. In Non-life Insurance, the operating combined ratio is
estimated to vary between 89% and 92% (previous estimate: 89-93%) in 2010 if the
number of large claims is not much higher than in 2009. Expected long-term
returns on investment within Non-life Insurance stand at 5.4%. Returns will
largely depend on developments in the investment environment. The most
significant uncertainties related to Non-life Insurance's financial performance
in 2010 pertain to the investment environment and the effect of large claims on
claims expenditure as well as the non-recurring items arising from changes in
the joint guarantee provision and the mortality model. These non-recurring items
will have no impact on the operating combined ratio.
Within Asset Management, the upward trend in assets under management is expected
to continue, their amounts being affected by market developments and the net
inflow of assets. The greatest uncertainties related to Asset Management's
financial performance in 2010 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' result include net interest
income arising from assets in the liquidity portfolio and impairment charges
recognised on notes and bonds in the income statement.
Pohjola estimates that it will recognise non-recurring items in its fourth
quarter income statement resulting from the removal of the joint guarantee
provision and the effects of increased life expectancy. Despite these non-
recurring items, consolidated earnings before tax in 2010 are expected to be at
the same level as or higher than (previous estimate: at the same level) in 2009.
There is still great uncertainty about future economic development and the
overall operating environment, and these factors are beyond the Group
management's control.
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.
FINANCIAL STATEMENTS AND NOTES
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equityCapital base and capital adequacy
Capital adequacy under the Act on the Supervision of Financial
and Insurance Conglomerates
Consolidated cash flow statement
Segment information
Formulae for key figures and ratios
Notes:
Note 1. Accounting policies
Notes to the income statement and balance sheet:
Note 2. Net interest income
Note 3. Impairments of receivables
Note 4. Net income from Non-life Insurance
Note 5. Net commissions and fees
Note 6. Net trading income
Note 7. Net investment income
Note 8. Other operating income
Note 9. Classification of financial instruments
Note 10. Non-life Insurance assets
Note 11. Intangible assets
Note 12. Non-life Insurance liabilities
Note 13. Debt securities issued to the public
Note 14. Fair value reserve after income tax
Notes to risk management:
Note 15. Risk exposure by Banking
Note 16. Risk exposure by Non-life Insurance
Note 17. Risk exposure by Group Functions
Other notes:
Note 18. Collateral given
Note 19. Off-balance-sheet commitments
Note 20. Derivative contracts
Note 21. Other contingent liabilities and commitments
Note 22. Related-party transactions
Consolidated income statement
EUR million Q3/ Q3/ Q1-3/ Q1-3/
2010 2009 2010 2009
Net interest income (Note 2) 62 58 189 177
Impairments of receivables (Note 3) 27 41 88 95
Net interest income after impairments 36 17 101 83
Net income from Non-life Insurance (Note 4) 120 114 314 307
Net commissions and fees (Note 5) 37 36 118 102
Net trading income (Note 6) 18 27 34 60
Net investment income (Note 7) 6 1 21 -8
Other operating income (Note 8) 11 11 32 33
Total income 228 206 620 576
Personnel costs 44 47 144 142
IT expenses 18 19 56 56
Depreciation/amortisation 23 17 57 50
Other expenses 40 36 121 118
Total expenses 125 119 378 366
Share of associates' profits/losses 0 0 0 0
Earnings before tax 103 87 242 211
Income tax expense 27 23 63 55
Profit for the period 76 65 179 155
Attributable to owners of the Parent 76 65 179 155
Attributable to minority interest 0
Total 76 65 179 155
Earnings per share (EPS), basic, EUR
Series A 0.25 0.21 0.57 0.55
Series K 0.22 0.18 0.54 0.52
Consolidated statement of comprehensive income
EUR million
Profit for the period 76 65 179 155
Change in fair value reserve 62 109 31 213
Translation differences 0 0 0 0
Income tax on other comprehensive income 16 28 8 55
Total comprehensive income for the period 122 146 201 314
Total comprehensive income attributable to
owners of the Parent 122 146 201 314
Total comprehensive income attributable to
minority interest 0
Total 122 146 201 314
Consolidated balance sheet
30 Sept 31 Dec
EUR million 2010 2009
Cash and cash equivalents 968 3,102
Receivables from credit institutions 7,723 7,630
Financial assets at fair value through profit or loss
Financial assets held for trading 971 1,224
Financial assets at fair value through profit or
loss at inception 12 55
Derivative contracts 2,120 1,443
Receivables from customers 11,771 11,323
Non-life Insurance assets (Note 10) 3,316 3,156
Investment assets 6,481 5,415
Investment in associates 2 2
Intangible assets (Note 11) 930 960
Property, plant and equipment (PPE) 101 117
Other assets 1,486 1,068
Tax assets 31 15
Total assets 35,910 35,510
Liabilities to credit institutions 4,013 4,984
Financial liabilities at fair value through profit or loss
Financial assets held for trading 0 71
Derivative contracts 2,483 1,456
Liabilities to customers 4,430 4,133
Non-life Insurance liabilities (Note 12) 2,518 2,279
Debt securities issued to the public (Note 13) 16,598 17,295
Provisions and other liabilities 1,723 1,291
Tax liabilities 468 434
Subordinated liabilities 1,315 1,300
Total liabilities 33,549 33,244
Shareholders' equity
Capital and reserves attributable to owners
of the Parent
Share capital 428 428
Fair value reserve (Note 14) 23 0
Other reserves 1,093 1,093
Retained earnings 818 746
Minority interest
Total shareholders' equity 2,361 2,267
Total liabilities and shareholders' equity 35,910 35,510
Consolidated statement of changes in equity
EUR million
Attributable to owners of
Pohjola Group
Share Fair value Other Retained Total
capital reserve reserves earnings equity
Balance at
1 January 2009 428 -180 795 597 1,640
Rights issue 308 308
Issue expenses -10 -10
Transfer of reserves 0 0
Profit distribution -45 -45
EUR 0.23 per Series A share* -37 -37
EUR 0.20 per Series K share* -9 -9
Total comprehensive income for
the period 158 155 314
Equity-settled share-based
transactions 0 0
Other 0 0
Balance at
30 September 2009 428 -22 1,093 707 2,206
Attributable to owners of
Pohjola Group
Share Fair value Other Retained Total
capital reserve reserves earnings equity
Balance at
1 January 2010 428 0 1,093 746 2,267
Profit distribution -107 -107
EUR 0.34 per Series A share -85 -85
EUR 0.31 per Series K share -21 -21
Total comprehensive income for
the period 23 178 201
Equity-settled share-based
transactions 0 0
Other 0 0
Balance at
30 September 2010 428 23 1,093 818 2,361
*Due to Pohjola Bank plc's rights issue and new shares entered in the Trade
Register on 4 May 2009, the number of shares has been adjusted in such a way
that the adjusted dividend per share is as follows: 2009: EUR 0.19 per Series A
share and EUR 0.16 per Series K share.
Capital base and capital adequacy
30 Sept 31 Dec
EUR million 2010 2009
Capital base
Equity capital 2,361 2,267
Elimination of insurance companies' effect in
equity capital (equity capital and Group
eliminations) -15 92
Minority interest 0
Hybrid capital 274 274
Intangible assets -145 -145
Fair value reserve, excess funding of pension
liability and change in fair value of investment property -14 -49
Dividend distribution proposed by Board of Directors -107
Planned dividend distribution -89
Insurance company investments 50% -703 -715
Investments in other credit and
financial institutions 50% -2
Impairments - expected losses 50% -66 -76
Tier 1 capital 1,601 1,541
Fair value reserve -17 18
Subordinated liabilities included in upper Tier 2 299 299
Subordinated liabilities included in lower Tier 2 696 687
Insurance company investments 50% -703 -715
Investments in other credit and
financial institutions 50% -2
Impairments - expected losses 50% -66 -76
Tier 2 capital 206 212
Total capital base 1,806 1,753
Risk-weighted assets, excl. transitional rules 12,960 13,024
Risk-weighted assets according to
transitional rules 12,960 13,024
Ratios, excl. transitional rules:
Capital adequacy ratio, % 13.9 13.5
Tier 1 ratio, % 12.3 11.8
Ratios according to transitional rules:
Capital adequacy ratio, % 13.9 13.5
Tier 1 ratio, % 12.3 11.8
Capital base and capital adequacy measurement is based on approaches under Basel
II. Pohjola has used the Internal Ratings Based Approach for corporate
exposures.
Capital adequacy under the Act on the Supervision of Financial and Insurance
Conglomerates
30 Sept 31 Dec
EUR million 2010 2009
Pohjola Group's equity capital 2,361 2,267
Business-segment-specific items 1,318 1,309
Goodwill and intangible assets -844 -869
Equalisation provision -327 -309
Other items included in equity capital and
business-segment-specific items, but not
included in the conglomerate's capital resources -277 -296
Conglomerate's capital base, total 2,230 2,103
Regulatory capital requirement for credit institutions 1,037 1,042
Regulatory capital requirement for insurance operations 177 171
Total minimum amount of conglomerate's capital base 1,213 1,213
Conglomerate's capital adequacy 1,017 890
Conglomerate's capital adequacy ratio (capital
resources/minimum of capital resources) 1.84 1.73
OP-Pohjola Group's capital adequacy ratio under the Act on Credit Institutions
stood at 12.7% and Tier 1 ratio at 12.7%. OP-Pohjola Group's capital adequacy
ratio calculated using the consolidation method, under the Act on the
Supervision of Financial and Insurance Conglomerates, was 1.70.
Consolidated cash flow statement
EUR million Q1-3/ Q1-3/
2010 2009
Cash flow from operating activities
Profit for the period 179 155
Adjustments to profit for the period 301 403
Increase (-) or decrease (+) in operating assets -1,444 -2,785
Receivables from credit institutions 206 -907
Financial assets at fair value through profit or loss 635 1,635
Derivative contracts -49 -35
Receivables from customers -566 688
Non-life Insurance assets -154 -328
Investment assets -1,100 -3,623
Other assets -416 -215
Increase (+) or decrease (-) in operating liabilities -104 1,216
Liabilities to credit institutions -982 496
Financial liabilities at fair value through profit or loss -71 -21
Derivative contracts 55 -13
Liabilities to customers 297 162
Non-life Insurance liabilities 163 169
Provisions and other liabilities 434 423
Income tax paid -54 -7
Dividends received 23 9
A. Net cash from operating activities -1,099 -1,010
Cash flow from investing activities
Increases in held-to-maturity financial assets -170
Decreases in held-to-maturity financial assets 110 155
Acquisition of subsidiaries and associates, net
of cash acquired 0 0
Disposal of subsidiaries and associates, net
of cash disposed 2
Proceeds from sale of investment securities 2
Purchase of PPE and intangible assets -10 -13
Proceeds from sale of PPE and intangible assets 0 0
B. Net cash used in investing activities 101 -26
Cash flow from financing activities
Increases in subordinated liabilities 77 146
Decreases in subordinated liabilities -60 -168
Increases in debt securities issued to the public 33,933 38,672
Decreases in debt securities issued to the public -34,678 -39,049
Increases in invested unrestricted equity 298
Dividends paid -107 -45
C. Net cash used in financing activities -835 -147
Net increase/decrease in cash and cash
equivalents (A+B+C) -1,833 -1,183
Cash and cash equivalents at period-start 3,250 2,435
Cash and cash equivalents at period-end 1,417 1,252
Interest received 1,196 1,582
Interest paid -896 -1,495
Adjustments to profit for the period
Non-cash transactions
Impairments of receivables 89 97
Unrealised net earnings in Non-life Insurance 151 143
Change in fair value for trading 419 103
Unrealised net gains on foreign exchange operations -336 -39
Change in fair value of investment property 7
Planned amortisation /depreciation 57 50
Share of associates' profits 0 0
Other -78 41
Items presented outside cash flow from
operating activities
Capital gains, share of cash flow from
investing activities 0 0
Total adjustments 301 402
Cash and cash equivalents
Liquid assets * 974 884
Receivables from credit institutions payable on demand 444 368
Total 1,417 1,252
*Of which EUR 6 million (6) consists of Non-life Insurance cash and cash
equivalents.
Segment information
+---------------------------------+---------+-----------------+----------------+
| | | Non-life | |
|Q3 earnings | Banking | Insurance |Asset Management|
| | | | |
|EUR million |2010 2009|2010 2009|2010 2009|
+---------------------------------+---------+-----------------+----------------+
|Net interest income | | | |
| | | | |
| From Corporate Banking | 43 36| | |
| | | | |
| From Markets | 3 2| | |
| | | | |
| From other operations | | -2 0| 0 0|
| | | | |
| Total | 46 37| -2 0| 0 0|
| | | | |
|Net commissions and fees | 21 22| 5 5| 12 11|
| | | | |
|Net trading income | 21 27| 0| 0 0|
| | | | |
|Net investment income | 0| | |
| | | | |
|Net income from Non-life | | | |
|Insurance | | | |
| | | | |
| From insurance operations | | 106 107| |
| | | | |
| From investment operations | | 23 19| |
| | | | |
| From other items | | -11 -11| |
| | | | |
| Total | | 118 115| |
| | | | |
|Other operating income | 8 8| 1 1| 0 0|
| | | | |
|Total income | 97 93| 122 119| 13 11|
| | | | |
|Personnel costs | 12 13| 24 27| 4 4|
| | | | |
|IT expenses | 5 5| 10 11| 1 1|
| | | | |
|Amortisation on intangible assets| | | |
|related to company acquisitions | | 7 8| 1 1|
| | | | |
|Other depreciation/amortisation | | | |
|and impairments | 6 7| 8 1| 0 0|
| | | | |
|Other expenses | 7 6| 30 29| 2 2|
| | | | |
|Total expenses | 31 30| 80 76| 7 7|
| | | | |
|Earnings/loss before | | | |
|impairment of receivables | 65 63| 42 43| 6 4|
| | | | |
| Impairments of receivables | 28 39| | |
| | | | |
|Earnings before tax | 38 24| 42 43| 6 4|
| | | | |
|Change in fair value reserve | 0 1| 52 83| 0 |
| | | | |
|Earnings/loss before tax | | | |
|at fair value | 38 25| 94 126| 6 4|
+---------------------------------+---------+-----------------+----------------+
+----------------------------------+---------------+------------+-----------+
|Q3 earnings |Group Functions|Eliminations|Group total|
| | | | |
|EUR million |2010 2009|2010 2009|2010 2009|
+----------------------------------+---------------+------------+-----------+
|Net interest income | | | |
| | | | |
| From Corporate Banking | | | 43 36|
| | | | |
| From Markets | | | 3 2|
| | | | |
| From other operations | 17 21| 0 1| 16 21|
| | | | |
| Total | 17 21| 0 1| 62 58|
| | | | |
|Net commissions and fees | 0 0| -1 -1| 37 36|
| | | | |
|Net trading income | 0 0| -2 0| 18 27|
| | | | |
|Net investment income | 6 1| | 6 1|
| | | | |
|Net income from Non-life Insurance| | | |
| | | | |
| From insurance operations | | | 106 107|
| | | | |
| From investment operations | | 3 0| 26 19|
| | | | |
| From other items | | | -11 -11|
| | | | |
| Total | | 3 0| 120 114|
| | | | |
|Other operating income | 2 3| -1 -1| 11 11|
| | | | |
|Total income | 25 25| -1 -2| 255 247|
| | | | |
|Personnel costs | 4 3| | 44 47|
| | | | |
|IT expenses | 2 2| 0 0| 18 19|
| | | | |
|Amortisation on intangible assets | | | |
|related to company acquisitions | | | 8 8|
| | | | |
|Other depreciation/amortisation | | | |
|and impairments | 0 0| | 15 9|
| | | | |
|Other expenses | 2 2| -1 -2| 40 36|
| | | | |
|Total expenses | 8 7| -1 -2| 125 119|
| | | | |
|Earnings/loss before | | | |
|impairment of receivables | 17 18| 0 0| 130 128|
| | | | |
| Impairments of receivables | -1 2| | 27 41|
| | | | |
|Earnings before tax | 18 16| 0 0| 103 87|
| | | | |
|Change in fair value reserve | 10 25| 0 | 62 109|
| | | | |
|Earnings/loss before tax | | | |
|at fair value | 28 41| 0 | 165 196|
+----------------------------------+---------------+------------+-----------+
+---------------------------------+---------+-----------------+----------------+
| | | Non-life | |
|Q 1-3 earnings | Banking | Insurance |Asset Management|
| | | | |
|EUR million |2010 2009|2010 2009|2010 2009|
+---------------------------------+---------+-----------------+----------------+
|Net interest income | | | |
| | | | |
| From Corporate Banking | 128 101| | |
| | | | |
| From Markets | 13 24| | |
| | | | |
| From other operations | | -4 -1| 1 1|
| | | | |
| Total | 141 125| -4 -1| 1 1|
| | | | |
|Net commissions and fees | 69 65| 14 13| 39 29|
| | | | |
|Net trading income | 45 64| | 0 0|
| | | | |
|Net investment income | 0 0| | 0 0|
| | | | |
|Net income from Non-life | | | |
|Insurance | | | |
| | | | |
| From insurance operations | | 279 291| |
| | | | |
| From investment operations | | 65 48| |
| | | | |
| From other items | | -34 -32| |
| | | | |
| Total | | 310 306| |
| | | | |
|Other operating income | 22 22| 2 2| 1 1|
| | | | |
|Total income | 277 276| 321 319| 41 32|
| | | | |
|Personnel costs | 39 39| 81 81| 14 12|
| | | | |
|IT expenses | 17 16| 32 32| 2 2|
| | | | |
|Amortisation on intangible assets| | | |
|related to company acquisitions | | 22 23| 2 2|
| | | | |
|Other depreciation/amortisation | | | |
|and impairments | 19 20| 11 4| 1 1|
| | | | |
|Other expenses | 20 19| 91 91| 5 5|
| | | | |
|Total expenses | 95 94| 237 230| 24 21|
| | | | |
|Earnings/loss before | | | |
|impairment of receivables | 182 183| 84 89| 18 11|
| | | | |
| Impairments of receivables | 89 84| 0 | |
| | | | |
|Earnings before tax | 93 99| 84 89| 18 11|
| | | | |
|Change in fair value reserve | 0 2| 80 157| 0 |
| | | | |
|Earnings/loss before tax | | | |
|at fair value | 92 101| 164 247| 18 11|
+---------------------------------+---------+-----------------+----------------+
+----------------------------------+---------------+------------+-----------+
|Q 1-3 earnings |Group Functions|Eliminations|Group total|
| | | | |
|EUR million |2010 2009|2010 2009|2010 2009|
+----------------------------------+---------------+------------+-----------+
|Net interest income | | | |
| | | | |
| From Corporate Banking | | | 128 101|
| | | | |
| From Markets | | | 13 24|
| | | | |
| From other operations | 51 51| 1 2| 48 53|
| | | | |
| Total | 51 51| 1 2| 189 177|
| | | | |
|Net commissions and fees | -1 -1| -3 -5| 118 102|
| | | | |
|Net trading income | -9 -4| -2 0| 34 60|
| | | | |
|Net investment income | 21 -8| | 21 -8|
| | | | |
|Net income from Non-life Insurance| | | |
| | | | |
| From insurance operations | | | 279 291|
| | | | |
| From investment operations | | 4 0| 69 48|
| | | | |
| From other items | | | -34 -32|
| | | | |
| Total | | 4 0| 314 307|
| | | | |
|Other operating income | 10 11| -3 -3| 32 33|
| | | | |
|Total income | 72 49| -4 -6| 708 671|
|Personnel costs | 10 10| 0 |144 142|
| | | | |
|IT expenses | 5 7| 0 0| 56 56|
| | | | |
|Amortisation on intangible assets| | | |
|related to company acquisitions | | | 24 25|
| | | | |
|Other depreciation/amortisation | | | |
|and impairments | 1 1| | 32 26|
| | | | |
|Other expenses | 8 10|-4 -6|121 118|
| | | | |
|Total expenses | 25 27|-4 -6|378 366|
| | | | |
|Earnings/loss before | | | |
|impairment of receivables | 47 22| 0 0|330 305|
| | | | |
| Impairments of receivables | -1 11| | 88 95|
| | | | |
|Earnings before tax | 48 11| 0 0|242 211|
| | | | |
|Change in fair value reserve |-49 54|-1 | 31 213|
| | | | |
|Earnings/loss before tax | | | |
|at fair value | -1 66|-1 |273 424|
+---------------------------------+------+-----+-------+
+---------------------------+--------------+------------------+----------------+
|Balance sheet | Banking |Non-life Insurance|Asset Management|
| | | | |
| |30 Sept 31 Dec|30 Sept 31 Dec|30 Sept 31 Dec|
|EUR million | 2010 2009| 2010 2009| 2010 2009|
+---------------------------+--------------+------------------+----------------+
|Receivables from customers | 11,523 10,880| | |
| | | | |
|Receivables from credit | | | |
|institutions | 184 278| 2 | 7 5|
| | | | |
|Financial assets at fair | | | |
|value | | | |
|through profit or loss | 581 932| | |
| | | | |
|Non-life Insurance assets | | 3,578 3,202| |
| | | | |
|Investment assets | 62 18| 16 0| 17 17|
| | | | |
|Investments in associates | | 2 2| |
| | | | |
|Other assets | 2,797 2,012| 800 829| 124 131|
| | | | |
|Total assets | 15,147 14,119| 4,399 4,033| 148 153|
| | | | |
|Liabilities to customers | 1,288 1,263| | |
| | | | |
|Liabilities to credit | | | |
|institutions | 1,017 747| | |
| | | | |
|Non-life Insurance | | | |
|liabilities | | 2,518 2,279| |
| | | | |
|Debt securities issued to | | | |
|the public | | | |
| | | | |
|Subordinated liabilities | | 50 50| |
| | | | |
|Other liabilities | 3,355 1,872| 134 108| 15 15|
| | | | |
|Total liabilities | 5,659 3,882| 2,703 2,437| 15 15|
| | | | |
|Shareholders' equity | | | |
| | | | |
|Average personnel | 654 607| 2,059 2,070| 168 162|
| | | | |
|Capital expenditure, EUR | | | |
|million | 4 7| 6 9| 0 1|
+---------------------------+--------------+------------------+----------------+
+-------------------------------+---------------+---------------+--------------+
|Balance sheet |Group Functions| Eliminations | Group total |
| | | | |
| |30 Sept 31 Dec|30 Sept 31 Dec|30 Sept 31 Dec|
|EUR million | 2010 2009| 2010 2009| 2010 2009|
+-------------------------------+---------------+---------------+--------------+
|Receivables from customers | 334 527| -87 -84| 11,771 11,323|
| | | | |
|Receivables from credit | | | |
|institutions | 8,519 10,468| -22 -20| 8,691 10,732|
| | | | |
|Financial assets at fair value | | | |
|through profit or loss | 402 347| | 984 1,279|
| | | | |
|Non-life Insurance assets | | -263 -47| 3,316 3,156|
| | | | |
|Investment assets | 6,396 5,387| -11 -6| 6,481 5,415|
| | | | |
|Investments in associates | | | 2 2|
| | | | |
|Other assets | 1,033 691| -87 -58| 4,667 3,604|
| | | | |
|Total assets | 16,685 17,421| -469 -215| 35,910 35,510|
| | | | |
|Liabilities to customers | 3,170 2,915| -28 -45| 4,430 4,133|
| | | | |
|Liabilities to credit | | | |
|institutions | 3,083 4,320| -87 -84| 4,013 4,984|
| | | | |
|Non-life Insurance liabilities | | | 2,518 2,279|
| | | | |
|Debt securities issued to the | | | |
|public | 16,781 17,323| -183 -28| 16,598 17,295|
| | | | |
|Subordinated liabilities | 1,265 1,250| | 1,315 1,300|
| | | | |
|Other liabilities | 1,341 1,318| -171 -59| 4,674 3,253|
| | | | |
|Total liabilities | 25,641 27,126| -469 -216| 33,549 33,244|
| | | | |
|Shareholders' equity | | | 2,361 2,267|
| | | | |
|Average personnel | 121 136| | 3,002 2,975|
| | | | |
|Capital expenditure, EUR | | | |
|million | 0 1| | 11 18|
+-------------------------------+---------------+---------------+--------------+
+-----------------+---------+-------------+-----------+-------------+
| | |Earnings/loss| |Earnings/loss|
|Banking | Income | before tax | Income | before tax |
+-----------------+----+----+----+--------+-----+-----+-----+-------+
| | Q3/| Q3/| Q3/| Q3/|Q1-3/|Q1-3/|Q1-3/| Q1-3/|
| |2010|2009|2010| 2009| 2010| 2009| 2010| 2009|
+-----------------+----+----+----+--------+-----+-----+-----+-------+
|Corporate Banking| 66 64| 20 7| 196 178| 50 42|
| | | | | |
|Markets | 29 28| 19 18| 77 95| 46 65|
| | | | | |
|Baltic Banking | 2 1| -1 -2| 4 3| -4 -7|
+-----------------+---------+-------------+-----------+-------------+
|Total | 97 93| 38 24| 277 276| 93 99|
+-----------------+---------+-------------+-----------+-------------+
+-----------------+--------------+--------------+---------------+--------------+
| | Insurance | Balance on | | Balance on |
|Non-life | premium | technical | Insurance | technical |
|Insurance | revenue | account |premium revenue| account |
| +----+---------+----+---------+-----+---------+-----+--------+
| | Q3/| Q3/| Q3/| Q3/|Q1-3/| Q1-3/|Q1-3/| Q1-3/|
| |2010| 2009|2010| 2009| 2010| 2009| 2010| 2009|
+-----------------+----+---------+----+---------+-----+---------+-----+--------+
|Private Customers| 125 113| 31 16| 355 320| 62 42|
| | | | | |
|Corporate | | | | |
|Customers | 111 113| 15 25| 331 347| 22 49|
| | | | | |
|Baltic States | 13 14| -3 0| 37 44| -1 3|
| | | | | |
|Amortisation | | | | |
|adjustment | | | | |
|of intangible | | | | |
|assets | | -12 -6| | -25 -19|
+-----------------+--------------+--------------+---------------+--------------+
|Total | 250 241| 30 34| 723 712| 58 76|
+-----------------+--------------+--------------+---------------+--------------+
+-----------------------------------------+-------+------+-----+-----+
| | Q3/| Q3/|Q1-3/|Q1-3/|
|Group Functions | 2010| 2009| 2010| 2009|
+-----------------------------------------+-------+------+-----+-----+
|Central Banking earnings | | |
|before tax, EUR million | 2 3| 9 14|
| +-------+------+-----------+
| |30 Sept|31 Dec|
| | 2010| 2009|
| +-------+------+
|Receivables from OP-Pohjola Group | |
|entities, EUR million | 6,958 6,314|
| | |
|Liabilities to OP-Pohjola Group entities,| |
|EUR million | 3,238 3,412|
+-----------------------------------------+--------------+
FORMULAS FOR KEY FIGURES AND RATIOS
Return on equity (ROE) at fair value, %
Profit for the period + Change in fair value reserve after tax /
Shareholders' equity (average of the beginning and end of period) x 100
Earnings/share (EPS)
Profit for the period attributable to owners of the Parent / Average share-issue
adjusted number of shares during the period
Earnings/share (EPS) at fair value
(Profit for the period attributable to owners of the Parent + Change in fair
value reserve) /
Average share-issue adjusted number of shares during the period
Equity/share
Shareholders' equity / Share-issue adjusted number of shares on the balance
sheet date
Dividend per share (DPS)
Dividends paid for the financial year/ Share-issue adjusted number of shares on
the balance sheet date
Market capitalisation
Number of shares x closing price on the balance sheet date
Capital adequacy ratio under the Act on the Supervision of Financial and
Insurance Conglomerates
Conglomerate's total capital / Conglomerate's total minimum capital requirement
Capital adequacy ratio, %
Total capital / Total minimum capital requirement x 8
Tier 1 ratio, %
Total Tier 1 capital / Total minimum capital requirement x 8
KEY RATIOS FOR NON-LIFE INSURANCE
The key ratio formulas for Non-life Insurance are based on regulations issued by
the Finnish Financial Supervisory Authority, using the corresponding IFRS
sections to the extent applicable. The ratios are calculated using expenses by
function applied by non-life insurance companies, which are not presented on the
same principle as in the Consolidated Income Statement.
Loss ratio
Claims and loss adjustment expenses / Net insurance premium revenue x 100
Expense ratio
Operating expenses + Amortisation/adjustment of intangible assets related to
company acquisition /
Net insurance premium revenue x 100
Risk ratio
Claims excl. loss adjustment expenses / Net insurance premium revenue x 100
Cost ratio
Operating expenses and loss adjustment expenses / Net insurance premium revenue
x 100
Combined ratio (excl. unwinding of discount)
Loss ratio + expense ratio
Risk ratio + cost ratio
Solvency ratio
(+ Non-life Insurance net assets
+ Subordinated loans
+ Net tax liability for the period
- Deferred tax to be realised in the near future and other items deducted from
the solvency margin
- Intangible assets)/
Insurance premium revenue x 100
OPERATING KEY RATIOS
Operating cost/income ratio
(+ Personnel costs
+ Other administrative expenses
+ Other operating expenses excl. amortisation on intangible assets and goodwill
related to Pohjola acquisition) /
(+ Net interest income
+ Net income from Non-life Insurance
+ Net commissions and fees
+ Net trading income
+ Net investment income
+ Other operating income) x 100
Operating loss ratio, %
Claims incurred, excl. changes in reserving bases/
Insurance premium revenue, excl. net changes in reserving bases x 100
Operating expense ratio
Operating expenses / Net insurance premium revenue x 100
Operating combined ratio, %
Operating loss ratio + Operating expense ratio
Values used in calculating the ratios
(€ million) 30 Sep 2010 31 Dec 2009
--------------------------------------------------------------------------------
Non-life Insurance
Net tax liabilities for the period -24 -14
Own subordinated loans 50 50
Deferred tax to be realised in the near future and other 7 6
items
deducted from the solvency margin of the companies
Intangible assets 772 800
Notes
Note 1. Accounting policies
The Interim Report for 1 January-30 September 2010 has been prepared in
accordance with IAS 34 (Interim Financial Reporting), as approved by the EU.
In the preparation of its Interim Report, Pohjola Group applied the same
accounting policies as in the preparation of its Financial Statements 2009.
During the current period, the Group has also applied cash flow hedging when
hedging future cash flows from variable-rate debt or other variable-rate assets
and liabilities. Interest rate swaps are used as hedging instruments. Derivative
contracts documented as cash flow hedges and provide effective hedges are
measured at fair value. The portion of the gain or loss on the hedging
instrument that is determined to be an effective hedge is recognised in other
comprehensive income. Fair value changes recognised in shareholders' equity are
included in the income statement in the period when hedged items affect net
income.
The Interim Report is based on unaudited information. Since all figures in the
Report have been rounded off, the sum of single figures may differ from the
presented sum total.
Summary of presentation of income statement:
+------------------------+-----------------------------------------------------+
|Net interest income |Received and paid interest on fixed-income |
| |instruments, the |
| |recognised difference between the nominal value and |
| |acquisition value, interest on interest-rate |
| |derivatives |
| |and fair value change in fair value hedging |
+------------------------+-----------------------------------------------------+
|Net income from |Premiums written, claims paid, change in provision |
|Non-life Insurance |for |
| |unearned premiums and for unpaid claims, investment |
| |income, expenses (interest, dividends, realised |
| |capital |
| |gains and losses) and impairments |
+------------------------+-----------------------------------------------------+
|Net commissions and fees|Commission income and expenses, and the recognition |
| |of |
| |Day 1 profit related to illiquid derivatives |
+------------------------+-----------------------------------------------------+
|Net trading income |Fair value changes in financial instruments at fair |
| |value |
| |through profit or loss, excluding accrued interest, |
| |and capital gains and losses, as well as dividends |
+------------------------+-----------------------------------------------------+
|Net investment income |Realised capital gains and losses on available-for- |
| |sale |
| |financial assets, impairments, dividends as well as |
| |fair value changes in investment property, capital |
| |gains |
| |and losses, rents and other property-related expenses|
+------------------------+-----------------------------------------------------+
|Other operating income |Other operating income, central banking service fee |
+------------------------+-----------------------------------------------------+
|Personnel costs |Wages and salaries, pension costs, social expenses |
+------------------------+-----------------------------------------------------+
|Other administrative |Office expenses, IT costs, other administrative |
|expenses |expenses |
+------------------------+-----------------------------------------------------+
|Other operating expenses|Depreciation/amortisation, other Non-life Insurance |
| |expenses, rents |
+------------------------+-----------------------------------------------------+
Notes to the income statement and balance sheet
Note 2. Net interest income
EUR million Q3/ Q3/ Q1-3/ Q1-3/
2010 2009 2010 2009
Loans and other receivables 75 86 221 341
Receivables from credit institutions and
central banks 29 43 93 165
Notes and bonds 67 70 300 170
Derivatives held for trading (net) 32 24 29 25
Liabilities to credit institutions -13 -11 -40 -47
Liabilities to customers -4 -4 -10 -28
Debt securities issued to the public -49 -82 -211 -299
Subordinated debt -8 -9 -24 -28
Hybrid capital -1 -2 -6 -12
Financial liabilities held for trading 0 -1 -1 -4
Other (net) 0 0 -2 0
Net interest income, excluding derivatives for hedging
purposes 127 114 349 282
Derivatives under hedge accounting (net) -64 -56 -160 -105
Total net interest income 62 58 189 177
Note 3. Impairments of receivables
EUR million Q3/ Q3/ Q1-3/ Q1-3/
2010 2009 2010 2009
Receivables eliminated as loan or guarantee losses 2 14 41 15
Recoveries from receivables eliminated as loan
or guarantee losses 0 -1 0 -2
Increase in impairment provisions 29 50 98 111
Decrease in impairment provisions -4 -22 -50 -29
Total impairments of receivables 27 41 88 95
Note 4. Net income from Non-life Insurance
EUR million Q3/ Q3/ Q1-3/ Q1-3/
2010 2009 2010 2009
Net insurance premium revenue
Premiums written 186 160 850 839
Insurance premiums ceded to reinsurers -4 2 -38 -42
Change in provision for unearned premiums 75 87 -94 -91
Reinsurers' share -7 -8 4 6
Total 250 241 723 712
Net Non-life Insurance claims
Claims paid 153 140 477 443
Insurance claims recovered from reinsurers -2 -5 -19 -9
Change in provision for unpaid claims 9 -8 -19 -17
Reinsurers' share -17 6 4 4
Total 144 134 443 421
Net investment income, Non-life Insurance
Interest income 16 17 48 54
Dividend income 1 1 19 7
Investment property 2 1 4 3
Realised fair value gains and losses
Notes and bonds 18 3 53 -5
Shares and participations -11 16 -16 19
Loans and receivables 0 -1 0
Investment property 0 2 0
Derivatives 2 -18 -22 -17
Unrealised fair value gains and losses
Notes and bonds 0 1 0 1
Shares and participations -7 4 -23 -10
Loans and receivables -1 -2 -3 -3
Investment property 1 -1 1 1
Derivatives 4 -5 4 -3
Other 1 2 3 2
Total 26 19 69 48
Unwinding of discount -11 -11 -34 -32
Other 0 0 -1 -1
Total net income from Non-life Insurance 120 114 314 307
Note 5. Net commissions and fees
EUR million Q3/ Q3/ Q1-3/ Q1-3/
2010 2009 2010 2009
Commission income
Lending 8 10 26 32
Payment transfers 4 3 10 9
Securities brokerage 6 6 21 16
Securities issuance 1 1 8 3
Asset management and legal services 14 12 44 32
Insurance operations 5 5 14 13
Guarantees 4 4 12 12
Other 1 1 4 6
Total commission income 43 42 139 124
Commission expenses
Payment transfers 0 1 2 2
Securities brokerage 2 2 8 6
Securities issuance 2 1 4 7
Asset management and legal services 0 2 5 5
Other 1 1 2 2
Total commission expenses 6 6 21 21
Total net commissions and fees 37 36 118 102
Note 6. Net trading income
EUR million Q3/ Q3/ Q1-3/ Q1-3/
2010 2009 2010 2009
Financial assets and liabilities held for trading
Realised changes in fair value
Notes and bonds 7 6 19 35
Shares and participations 0 0 0 0
Derivatives 4 19 -13 115
Unrealised changes in fair value
Notes and bonds -1 6 2 -15
Shares and participations 0 0 0 0
Derivatives 3 -9 10 -84
Financial assets and liabilities at fair value
through profit or loss Realised changes in fair value
Notes and bonds 0 -9
Unrealised changes in fair value
Notes and bonds 0 1 2 9
Net income from foreign exchange operations 5 3 14 9
Total net trading income 18 27 34 60
Note 7. Net investment income
EUR million Q3/ Q3/ Q1-3/ Q1-3/
2010 2009 2010 2009
Available-for-sale financial assets
Capital gains and losses
Notes and bonds 5 0 22 0
Shares and participations 0 1 1 0
Dividend income 0 0 3 2
Impairments 0 -4 -4
Carried at amortised cost
Capital gains and losses
Loans and other receivables 1 0
Total 6 1 21 -1
Investment property 0 0 0 -7
Total net investment income 6 1 21 -8
Note 8. Other operating income
EUR million Q3/ Q3/ Q1-3/ Q1-3/
2010 2009 2010 2009
Central banking service fees 2 2 7 7
Realisation of repossessed items 0 0 1 0
Rental income from assets rented under
operating lease 6 6 18 19
Other 2 2 6 7
Total 11 11 32 33
Note 9. Classification of financial instruments
At fair
value
Loans through
and Held to profit or Available Hedging
receivables maturity loss* for sale derivatives Total
Assets, EUR million
Cash and balances
with
central banks 968 968
Receivables from
credit
institutions and
central
banks 7,723 7,723
Derivative contracts 1,995 125 2,120
Receivables from
customers 11,771 11,771
Non-life Insurance
assets** 706 88 2,521 3,316
Notes and bonds*** 982 984 5,392 7,357
Shares and
participations 83 83
Other receivables 2,549 24 2,573
Total 30 September
2010 23,716 982 3,092 7,996 125 35,910
Total 31 December
2009 24,986 1,086 2,767 6,613 59 35,510
At fair
value
through
profit or Other Hedging
loss liabilities derivatives Total
Liabilities, EUR million
Liabilities to credit institutions 4,013 4,013
Financial liabilities held for trading
(excl. derivatives) 0 0
Derivative conctracts 2,205 278 2,483
Liabilities to customers 4,430 4,430
Non-life Insurance liabilities 1 2,517 2,518
Debt instruments issued to the public 16,598 16,598
Subordinated liabilities 1,315 1,315
Other liabilities 2,191 2,191
Total 30 September
2010 2,206 31,064 278 33,549
Total 31 December
2009 1,377 31,716 150 33,244
*Assets at fair value through profit or loss include financial assets held for
trading, financial assets at fair value through profit or loss at inception and
investment property.
** Non-life Insurance assets are specified in Note 10.
*** On 30 September 2010, notes and bonds included EUR 12 million (55) in notes
and bonds recognised using the fair value option.
Debt securities issued to the public are carried at amortised cost. On 30
September 2010, the fair value of these debt instruments was EUR 76 million
higher than their carrying amount, based on information available in markets and
employing commonly used valuation techniques. Subordinated liabilities are
carried at amortised cost. Their fair value are substantially lower than their
carrying amount, but determining fair values reliably is difficult in the
current market situation.
Note 10. Non-life Insurance assets
30 Sept 31 Dec
EUR million 2010 2009
Investments
Loans and other receivables 270 424
Shares and participations 362 387
Property 75 78
Notes and bonds 1,544 1,392
Derivatives 5 1
Other participations 623 530
Total 2,880 2,811
Other assets
Prepayments and accrued income 33 37
Other
From direct insurance 251 214
From reinsurance 87 89
Cash in hand and at bank 6 4
Other receivables 58 44
Total 436 389
Total Non-life insurance assets 3,316 3,200
Note 11. Intangible assets
30 Sept 31 Dec
EUR million 2010 2009
Goodwill 516 516
Brands 173 173
Customer relationships 185 203
Other 55 68
Total 930 960
Note 12. Non-life Insurance liabilities
30 Sept 31 Dec
EUR million 2010 2009
Provision for unpaid claims
Provision for unpaid claims for annuities 1,066 1,058
Other provision for unpaid claims 732 726
Total 1,798 1,784
Provision for unearned premiums 457 361
Derivatives 1 0
Other liabilities 263 134
Total 2,518 2,279
Note 13. Debt securities issued to the public
30 Sept 31 Dec
EUR million 2010 2009
Bonds 6,858 6,549
Certificates of deposit, commercial papers
and ECPs 9,487 10,519
Other 252 227
Total 16,598 17,295
Note 14. Fair value reserve after income tax
30 Sept 31 Dec
EUR million 2010 2009
Loans and other receivables
Reclassified notes and bonds -10 -17
Available-for-sale financial assets
Notes and bonds -6 53
Equities and mutual funds with equity risk 44 -35
Other funds -4 0
Other -1
Total 23 0
The negative fair value reserve may recover by means of asset appreciation and
recognised impairments. Only the value changes in the fair value reserve are
recognised which the management deem to fulfil the relevant requirements.
The fair value reserve before tax totalled EUR 30 million (-0) and the related
deferred tax liability amounted to EUR 8 million (0). On 30 September, positive
mark-to-market valuations of equity instruments before tax in the fair value
reserve totalled EUR 73 million and negative mark-to-market valuations EUR 22
million. In Q1-3, impairments recognised from the fair value reserve in the
income statement totalled EUR 33 million.
Notes to risk management
Note 15. Risk exposure by Banking
Total exposure by rating category*, EUR billion
Rating 30 Sept 31 Dec
category 2010 2009 Change
1-2 2.6 2.2 0.5
3-5 11.3 10.9 0.4
6-7 4.1 4.2 -0.1
8-9 2.2 2.4 -0.2
10 0.1 0.1 0.0
11-12 0.4 0.3 0.0
Non-rated 0.2 0.2 0.0
Total 20.8 20.3 0.5
*) excl. private customers
Sensitivity analysis of market risk
30 Sept 2010 31 Dec 2009
Effect on Effect on
share- share-
Banking, Risk Effect on holders' Effect on holders'
EUR million parameter Change results equity results equity
Interest-rate 1 percen-
risk Interest tage point 5 5
Currency Market 20 percen-
risk value tage points 1 1
Volatility risk
Interest-rate 20 percen-
volatility Volatility tage points 6 4
Currency 10 percen-
volatility Volatility tage points 0 0
Credit risk Credit 0.5 percen-
premium *) spread tage points 9 1 12
Sensitivity figures have been calculated as the sum of the currencies' intrinsic
value.
*) The credit risk premium has been calculated on notes and bonds at fair value
through profit or loss and available for sale, included in liquidity reserves.
Note 16. Risk exposure by Non-life Insurance
Total Effect on
amount share-
30 Sept Change Effect on holders'
2010, in risk combined equity,
Risk parameter EUR million parameter ratio EUR million
Insurance portfolio or
insurance Up 0.9
premium revenue*) 954 Up 1% percentage point 10
Down 0.7
Claims incurred*) 641 Up 1% percentage points -6
Major loss of over EUR 5 Down 0.5
million 1 loss percentage points -5
Down 0.9
Personnel costs*) 106 Up 8% percentage points -9
Down 1.1
Expenses by function*) **) 267 Up 4% percentage points -11
Up 0.25
Inflation for collective percentage Down 0.3
liability 492 points percentage points -3
Life expectancy for
discounted
insurance contract Down 3.2
liability 1,337 Up 1 year percentage points -31
Discount rate for
discounted Down 0.1
insurance contract percentage Down 1.7
liability 1,337 point percentage points -16
*) Moving 12-month
**) Expenses by function in Non-life Insurance excluding expenses for investment
management and expenses for other services rendered
Non-life Insurance investment portfolio by allocation
EUR million
Fair value Fair value
30 Sept 31 Dec
Portfolio allocation 2010 % 2009 %
Money market
instruments 81 3 % 101 4 %
Bonds and bond funds 2,221 75 % 2,067 72 %
Equities 284 10 % 364 13 %
Alternative investments 199 7 % 155 5 %
Real property 186 6 % 164 6 %
Total 2,971 100 % 2,851 100 %
Non-life Insurance fixed-income portfolio by maturity and credit rating on 30
September 2010*
EUR million
Year(s) 0-1 1-3 3-5 5-7 7-10 10- Total %
Aaa 20 121 208 73 56 73 551 24 %
Aa1−Aa3 51 117 137 44 47 33 429 19 %
A1−A3 83 212 211 71 74 58 708 31 %
Baa1−Baa3 24 104 90 37 53 0 308 14 %
Ba1 or lower 58 59 59 29 6 13 225 10 %
Internally rated 5 4 12 1 0 7 28 1 %
Total 242 618 716 255 235 184 2,250 100 %
* Excludes credit derivatives.
The table below shows the sensitivity of investment risks and their effect on
shareholders' equity:
Effect on
Risk shareholders' equity,
Non-life Insurance parameter Change EUR million
30 Sept 31 Dec
2010 2009
Interest 1 percentage
Bonds and bond funds1) rate point 92 73
Market 20 percentage
Equities 2) value points 55 73
Venture capital funds Market 20 percentage
and unquoted equities value points 16 14
Market 20 percentage
Commodities value points 5 5
Market 10 percentage
Real property value points 19 16
Value of 20 percentage
Currency currency points 48 21
0.5 percentage
Credit risk premium 3) Credit spread points 47 39
10 percentage
Derivatives 4) Volatility points 1 0
1) Include money-market investments, convertible bonds and interest-rate
derivatives
2) Include hedge funds and equity derivatives
3) Includes bonds and money-market investments, including government bonds and
interest-rate derivatives issued by developed countries
4) 20 percentage points for equity derivatives, 10 percentage points for
interest-rate derivatives and 5 percentage points for currency derivatives.
Note 17. Risk exposure by Group Function
Total exposure by rating category*, EUR billion
Rating 30 Sept 31 Dec
category 2010 2009 Change
1-2 12.5 13.6 -1.1
3-5 4.8 4.6 0.2
6-7 0.1 0.0 0.1
8-9 0.0 0.0 0.0
10 0.0 0.0 0.0
11-12
Non-rated 0.0 0.0 0.0
Total 17.4 18.3 -0.8
Sensitivity analysis of market risk
30 Sept 2010 31 Dec 2009
Effect on Effect on
Group share- share-
Functions, Effect on holders' Effect on holders'
EUR million Risk parameter Change results equity results equity
Interest-rate Interest 1 percen-
risk rate tage point 18 0 2 3
20 percen-
Interest-rate tage
volatility Volatility points 0 1
0.5
percen-
Credit risk Credit tage
premium *) spread points 0 115 0 68
Price risk
20 percen-
Equity Market tage
portfolio value points 2 2
20 percen-
Private Market tage
equity funds value points 6 6
10 percen-
Property Market tage
risk value points 3 3
Sensitivity figures have been calculated as the sum of the currencies' intrinsic
value.
*) The credit risk premium has been calculated on notes and bonds at fair value
through profit or loss and available for sale, included in liquidity reserves.
Financial assets included in liquidity reserve by maturity and credit rating on
30 September 2010
EUR million
Year 0-1 1-3 3-5 5-7 7-10 10- Total %
Aaa 1,162 948 1,973 853 663 11 5,609 58 %
Aa1−Aa3 635 1,094 599 132 124 105 2,689 28 %
A1−A3 100 650 222 18 2 0 991 10 %
Baa1−Baa3 55 61 48 5 4 171 2 %
Ba1 or lower 0 20 27 27 5 80 1 %
Internally rated 88 51 42 26 208 2 %
Total 2,039 2,824 2,911 1,060 798 116 9,748 100 %
The residual maturity of liquidity reserves averages 3.7 years.
Other notes
Note 18. Collateral given
30 Sept 31 Dec
EUR million 2010 2009
Given on behalf of own liabilities and commitments
Mortgages 1 1
Pledges 5,987 5,839
Other 512 308
Total collateral given 6,500 6,147
Total collateralised liabilities 662 1,023
Note 19. Off-balance-sheet commitments
30 Sept 31 Dec
EUR million 2010 2009
Guarantees 1,165 1,296
Other guarantee liabilities 1,335 1,283
Loan commitments 3,654 4,140
Commitments related to short-term trade transactions 116 98
Other 465 447
Total off-balance-sheet commitments 6,735 7,264
Note 20. Derivative contracts
Nominal values/residual term
30 Sept 2010 to maturity Total Fair values
EUR million <1 year 1-5 years >5 years Assets Liabilities
Interest rate
derivatives 47,553 62,720 24,751 135,023 1,832 1,952
Currency derivatives 13,475 1,797 499 15,771 268 592
Equity and index
derivatives 156 919 27 1,101 116 0
Credit derivatives 157 100 257 4 3
Other derivatives 3,836 343 4,179 8 21
Total derivatives 65,020 65,935 25,376 156,331 2,228 2,569
Nominal values/residual term
31 Dec 2009 to maturity Total Fair values
EUR million <1 year 1-5 years >5 years Assets Liabilities
Interest rate
derivatives 44,063 51,231 13,013 108,307 1,167 1,235
Currency derivatives 11,513 1,959 489 13,962 243 338
Equity and index
derivatives 177 814 41 1,032 87
Credit derivatives 56 178 234 4 2
Other derivatives 3,850 252 4,102 3 24
Total derivatives 59,660 54,435 13,543 127,638 1,505 1,599
Note 21. Other contingent liabilities and commitments
On 30 September 2010, Banking commitments to venture capital funds amounted to
EUR 14 million and Non-Life Insurance commitments to EUR 115 million. They are
included in the section 'Off-balance-sheet commitments'.
Note 22. Related-party transactions
Pohjola Group's related parties comprise its parent company OP-Pohjola Group
Central Cooperative, subsidiaries consolidated into the Group, associates and
administrative personnel and other related-party entities. Pohjola Group's
administrative personnel comprises Pohjola Bank plc's President and CEO, members
of the Board of Directors and their close family members. Related parties also
include companies over which a person among administrative personnel or his
close family member exercises significant influence. Other related-party
entities include OP Pension Fund, OP Pension Foundation and sister companies
within OP-Pohjola Group Central Cooperative Consolidated.
Normal loan terms and conditions apply to loans granted to related parties.
These loans are tied to generally used reference rates.
Related-party transactions have not undergone any substantial changes since 31
December 2009.
Helsinki, 3 November 2010
Pohjola Bank plc
Board of Directors
This Interim Report is available at www.pohjola.fi/english > Media. Background
information on the Report can also be found at the same address.
Analyst meeting, conference call and live webcast
As an exception to our previous practice, we will hold a collective briefing in
English for analysts and investors on Pohjola Asset Management Ltd premises on
November 3 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, Teollisuuskatu 1 b, Vallila, Helsinki,
on 3 November, starting at noon.
Financial reporting in 2011
Schedule for Financial Statements Bulletin for 2010 and Interim Reports in 2011:
Financial Statements Bulletin 2010 9 February 2011
Interim Report Q1/2011 4 May 2011
Interim Report H1/2011 3 August 2011
Interim Report Q1−3/2011 2 November 2011
DISTRIBUTION
NASDAQ OMX Helsinki Ltd
London Stock Exchange
Major media
www.pohjola.fi, www.op.fi
For additional information, please contact
Mikael Silvennoinen, President and CEO,
tel. +358 (0)10 252 2549
Jouko Pölönen, CFO,
tel. +358 (0)10 252 3405
Tarja Ollilainen, Senior Vice President, Investor Relations, tel. +358 (0)10
252 4494
[HUG#1458246]
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