Pohjola Pankki Oyj - Half Year financial report

OP-Pohjola Group stays on track: considerable earnings improvement, and customer business grows faster than the market average.

OP-Pohjola Group
Stock Exchange Release 31 July 2013 at 8.00 am
Interim Report

OP-Pohjola Group stays on track: considerable earnings improvement, and customer
business grows faster than the market average.

- Earnings before tax increased by 21% to EUR 398 million (329).
- Total income increased by 6.5%. The decrease in net interest income levelled
off in the report period.
- Expenses without the bank levy decreased by over 2%.
- Core Tier 1 ratio before transitional provisions was 14.6% (14.8).
- Customer business grew at a rate that was much higher than the market average.
The loan portfolio increased in the year to June by 7.2% and deposits by 8.4%.
Non-life Insurance premium revenue increased by 10%.
- The number of joint banking and non-life insurance customers increased by
109,000.
- Change in outlook: Earnings before tax for the full 2013 are expected to be
better than a year ago. For more information, see "Outlook towards the year
end".

OP-Pohjola Group's key indicators
-------------------------------------------------------------------------------
                                    Q1-Q2/2013  Q1-Q2/2012 Change %        2012
-------------------------------------------------------------------------------
 Earnings before tax, EUR million          398         329     21.0         586

    Banking                                193         247    -21.9         424

    Non-life Insurance                      99          54     81.7          92

    Wealth Management                       77          34    124.9         101



 Returns to owner-members and OP
 bonus customers                            96          96     -0.6         192

                                   30 Jun 2013 30 Jun 2012 Change % 31 Dec 2012

 Core Tier 1 ratio before the
 transition provisions, %                 14.6        14.7    -0.2*        14.8

 Core Tier 1 ratio, %                     13.7        14.7    -1.0*        14.1

 Ratio of capital base to minimum
 amount of capital base (under the
 Act on the Supervision of
 Financial and Insurance
 Conglomerates)                           1.81        2.01   -0.20*        1,90

 Ratio of non-performing
 receivables to loan and guarantee
 portfolio, %                             0.46        0.53   -0.06*        0.46

 Joint banking and
 insurance customers (1,000)             1,468       1,358      8.1       1,425
-------------------------------------------------------------------------------
* Change in ratio

Comments by Reijo Karhinen, Executive Chairman and CEO

OP-Pohjola's first half of 2013 strikes a fine balance between growth and
financial performance. We did excellently again despite the demanding
conditions. Our higher-than-expected earnings already give us cause to change
our performance guidance. We now expect our full-year earnings to be better than
last year.

The new regulations for the financial sector stress capital adequacy, just as
they should, which in turn means that earnings performance plays a key role. We
expect our second-half net interest income to be better than the first half's,
with other income continuing to grow steadily. A positive development in our
total income is supported by our steadily growing volumes. The fact that growth
in total expenses came to a halt played a key role in our improved first-half
earnings. In order to stay on track to meet our profit target, derived from our
capital adequacy target, in an environment where interest rates will remain low
and regulation will involve a new burden on earnings, we will need to pay
special attention to our cost-efficiency.

OP-Pohjola Group is a forerunner and trendsetter in the development of Finnish
financial services.  From one year to the next, we have taken systematic and
determined steps in terms of development and bold innovation. In the first half
of 2013, we again launched innovative products and services that make our
customers' lives easier, especially in the field of mobile service which is
quickly becoming the most significant channel for using daily services.
Omasairaala hospital is an example of a new service, in which traditional
practices are changed boldly on the basis of customer needs.

And innovation does not end here. We are obliged to carry on by our position as
the country's leading financial services group. Our loyalty benefits and
increased investments in Finland's most comprehensive, versatile and dynamic
service network ensure a superior customer experience in a changing competitive
situation. I am convinced that a deep understanding of our customers' needs, our
long traditions and top financial expertise enable us to be successful in the
future, too.

We have been successful in adhering to our mission and in our strategy-based
business that truly focuses on customer needs, also during times of crisis. In
the midst of major changes affecting our operating and competitive environment,
our market position has continued to strengthen, sometimes even at a
historically high rate. Our position in corporate financing has improved since
2007 by as much as 8 percentage points. Our sense of responsibility, consistent
with our values, has guided us to go against the currents that drive the markets
in both Finland and the rest of Europe.

There is a clear correlation between banks' ability and willingness for
financing on the one hand and economic growth on the other. This has again been
proven by recent figures concerning Southern and Central Europe. Both Finland
and the rest of Europe urgently need to get on a path of economic growth. Banks
play a key role in securing economic growth. The future of the economy is
largely dependent on how well banks are able to operate. In order that economic
growth can be given a boost, banks should now be offered a "peaceful work
environment". Quick decisions should now be made on the content of the
regulatory initiatives currently under preparation. Decision-makers should
refrain from imposing any new burden on banks. A public, calming promise would
rebuild an atmosphere of trust and contribute to economic growth.

The next few months will be a crucial period for Finnish economic policy
decisions. The labour market and the Government must find the means and
willingness to make the necessary decisions. We can no longer just pick the easy
way out. Many of the crisis-ridden countries in Southern Europe that have been
criticised have already taken the corrective measures that still remain
unresolved in Finland.

Financial performance in the reporting period

OP-Pohjola Group's earnings before tax were EUR 398 million (329). Earnings were
improved especially because of a solid increase in investment income of all
segments and the good financial performance of Non-life Insurance. Investment
income was improved by capital gains on securities. The good performance by Non-
life Insurance was the result of premiums written that have been increasing for
a long time and of lower operating expenses. Net commissions and fees, too, were
higher than a year ago.

Due to low interest rates, net interest income decreased by 18% year on year.
The fall in net interest income slowed down in the second quarter.

The Group's expenses were at the same level as last year despite the EUR 23
million bank levy and the growth and expansion of business. Without the effect
of the bank levy, total expenses would have decreased by more than 2%. Thanks to
measures taken in the efficiency enhancement program, the wages and salaries
decreased by more than 2%. Because other social expenses increased, personnel
costs as a whole decreased only by 0.6%. Other administrative expenses were
almost 8% lower than a year ago.

OP-Pohjola Group's fair value reserve before tax was EUR 288 million on 30 June,
reducing in the report period by EUR 160 million. Earnings before tax at fair
value amounted to EUR 238 million (703).

Bonuses to owner-members and OP bonus customers recognised in the income
statement increased by 5.4% year on year to EUR 89 million.

Outlook towards the year end

The world economy will this year grow at a rate below the average. The recession
in the euro area should recede within the next 12 months, but a turn for the
better is not yet in the horizon. The Finnish economy too contracted during the
first half and its full-year growth is expected to remain weak. As a result of
the actions taken by the ECB, financial markets have remained relatively stable.
However, the euro area has not yet overcome its debt crisis and there is still
potential for major financial market disruptions.

The operating environment in the financial sector is projected to continue to
remain challenging. Historic-low market interest rates have eroded banks' net
interest income and will weaken insurance institutions' investment income. The
weak economic situation may lower demand for financial services, and the bank
levy confirmed late last year saddled Finnish banks with major new costs.
Changes in the operating environment make measures that support profitability in
the financial sector even more urgent.

Unless the operating environment turns out to be considerably weaker than
expected, OP-Pohjola Group's earnings before tax (previous estimate: at about
the same level or somewhat lower) is expected to be better than in 2012. The
most significant factors that may affect earnings in the second half of 2013
concern changes in capital markets and impairment losses on receivables.

All forward-looking statements in this report expressing the management's
expectations, beliefs, estimates, forecasts, projections and assumptions are
based on the current view on developments in the economy, and actual results may
differ materially from those expressed in the forward-looking statements.

Press conference

OP-Pohjola Group's financial performance will be presented to the media by
Executive Chairman and CEO Reijo Karhinen in a press conference on 31 July
2013, starting at noon at Vääksyntie 4, Vallila, Helsinki.

Pohjola Bank plc will publish its own interim report.

Financial reporting in 2013
Schedule for Interim Reports in 2013:
Interim Report Q1-3/2013: 30 October 2013

OP-Pohjola Group Central Cooperative
Executive Board

ADDITIONAL INFORMATION
Executive Chairman and CEO Reijo Karhinen, tel. +358 (0)10 252 4500
Harri Luhtala, CFO, tel. +358 (0)10 252 2433
Carina Geber-Teir, Chief Communications Officer, tel. +358 (0)10 252 8394

DISTRIBUTION
NASDAQ OMX Helsinki Ltd
London Stock Exchange
SIX Swiss Exchange
Major media
op.fi and pohjola.fi

OP-Pohjola Group is Finland's leading financial services group providing a
unique range of banking, investment and insurance services. The Group has the
mission of promoting the sustainable prosperity, well-being and security of its
owner-members, customers and operating regions through its local presence. Its
objective is to offer the best and most versatile package of loyal customer
benefits on the market. OP-Pohjola Group consists of some 200 member cooperative
banks and the Group's central institution, OP-Pohjola Group Central Cooperative,
with its subsidiaries and closely-related companies, the largest of which is the
listed company Pohjola Bank plc. With a staff of 13,000 OP-Pohjola Group posted
consolidated earnings of 601 million euros before tax in 2012 and had total
assets of 99.8 billion euros on 31 December 2012. The group has over four
million customers.

[HUG#1719985]

Attachments:

OP_Pohjola Group Interim Report Q2_2013.pdf

OP_Pohjola Group background material.pdf