2008-08-07 07:00:00 CEST
2008-08-07 07:00:03 CEST
REGULATED INFORMATION
Pohjola Pankki Oyj - Interim report (Q1 and Q3)
Pohjola Bank plc Interim Report 1 January-30 June 2008 with President and CEO's Comments
Pohjola Bank plc Company Release 7 August 2008, at 8.00 am 1 (40)
Release category: Interim Report
Pohjola Bank plc Interim Report 1 January-30 June 2008 with President and CEO's
Comments
President and CEO's comments:
Pohjola Group recorded lower January-June earnings than a year ago, due to a
fall in market values of liquidity reserves during the reporting period and
clearly lower investment income year on year. These developments resulting from
difficult investment market conditions eroded earnings posted by Non-life
Insurance and Group functions in particular. First-half earnings reported by
Banking and Assets Management were at the previous year's level.
The fact that second-quarter consolidated earnings before tax were markedly
higher than those in the first quarter was gratifying. The market price
fluctuations of liquidity reserves did not erode earnings, which was the main
reason for improved earnings performance.
The Group's customer business also continued to develop favourably during the
second quarter, which was reflected in sustained strong growth in net interest
income and insurance premium revenue. With asset management and securities
brokerage facing challenging market conditions, commissions and fees remained
slightly lower than a year ago.
The second quarter continued to see an unfavourable economic development on a
global scale, which had some repercussions on the Finnish economy. We can
therefore expect the sustained, fast volume growth to level off.
The Group's risk exposure has remained favourable.
Helsinki, 7 August 2008
Mikael Silvennoinen
President and CEO
Pohjola Bank plc Interim Report for 1 January-30 June 2008
January-June 2008 1)
- Earnings before tax amounted to EUR 71 million (165).
- Earnings per share stood at EUR 0.26 (0.61), while equity per share was EUR
8.45 (9.19).
- Return on equity at fair value was -2.4% (12.8).
- The corporate loan portfolio within Banking showed sustained strong growth and
the division posted good earnings.
- Owing to money-market fund redemptions and bearish equity markets, assets
under management fell to EUR 28.8 billion (31.5).
- The trend of strongly widening credit spreads continuing in international
financial markets reduced the market value of liquidity reserves by EUR 54
million, of which EUR 49 million was recognised in the income statement and EUR
5 million in the fair value reserve.
- Non-life Insurance reported an 8% (9) increase in insurance premium revenue
and a combined ratio of 98.0% (97.9). The operating combined ratio, excluding
amortisation on intangible assets arising from the corporate acquisition, stood
at 95.0% (94.9%).
- As a result of rising interest rates and falling equity prices, Non-life
Insurance return on investment at fair value stood at -1.2% (3.5).
- Consolidated net income decreased by 22% to EUR 305 million and expenses
increased by 2% to EUR 234 million.
- Tier 1 ratio stood at 8.5%.
- OKO Bank plc was renamed Pohjola Bank plc on 1 March 2008. The Group adopted a
new organisational structure in May with the result that its financial reporting
follows the new business segments.
April-June 2008 1)
- Earnings before tax amounted to EUR 54 million (100).
- Earnings per share were EUR 0.19 (0.36).
- Return on equity at fair value was 3.4% (12.2).
- Liquidity reserves' market values did not generate changes recognised in the
income statement. Growth of EUR 5 million in market values was recognised in the
fair value reserve.
- Non-life Insurance reported an 8% (9) increase in insurance premium revenue
and a combined ratio of 94.9% (92.3). The operating combined ratio, excluding
amortisation on intangible assets arising from the corporate acquisition, stood
at 91.9% (89.3%).
- Non-life Insurance return on investment at fair value stood at -0.6% (1.0).
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 2007 are used as
comparatives.
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| Key indicators | Q2/ | Q2/ | Q1-2/ | Q1-2/ | 2007 |
| | 200 | 2007 | 20 | 20 | |
| | 8 | | 08 | 07 | |
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| | | | | | |
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| Earnings before tax, | 54 | 100 | 71 | 165 | 288 |
| EUR million | | | | | |
--------------------------------------------------------------------------------
| Profit for the period, | 39 | 73 | 53 | 123 | 212 |
| EUR million | | | | | |
--------------------------------------------------------------------------------
| Return on equity, % | 3.4 | 12.2 | -2.4 | 12.8 | 9.3 |
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| | | | | | |
--------------------------------------------------------------------------------
| Balance sheet total, | | | 28.5 | 25.1 | 25.9 |
| EUR billion | | | | | |
--------------------------------------------------------------------------------
| Risk-weighted items, | | | 14.6 | 12.5* | 13.2 |
| EUR billion | | | | | |
--------------------------------------------------------------------------------
| Loan portfolio, EUR | | | 10.9 | 8.8 | 9.4 |
| billion | | | | | |
--------------------------------------------------------------------------------
| Assets under | | | 28.8 | 32.6 | 31.5 |
| management, EUR billion | | | | | |
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| | | | | | |
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| Capital adequacy, % | | | 10.9 | 13.3* | 10.9 |
--------------------------------------------------------------------------------
| Tier 1 ratio, % | | | 8.5 | 8.0* | 9.0 |
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| Proportion of doubtful | | | 0.3 | 0.2 | 0.1 |
| receivables, % | | | | | |
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| | | | | | |
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| | | | | | |
--------------------------------------------------------------------------------
| Earnings per share, EUR | 0.19 | 0.36 | 0.26 | 0.61 | 1.04 |
--------------------------------------------------------------------------------
| Earnings per share, | 0.07 | 0.27 | -0.10 | 0.57 | 0.85 |
| incl. change in fair | | | | | |
| value | | | | | |
--------------------------------------------------------------------------------
| Equity per share, EUR | | | 8.45 | 8.91 | 9.19 |
--------------------------------------------------------------------------------
| Market capitalisation | | | 2,241 | 2,800 | 2,658 |
| (A+K shares), EUR | | | | | |
| million | | | | | |
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| | | | | | |
--------------------------------------------------------------------------------
| Average personnel | 3,141 | 2,998 | 3,110 | 2,969 | 3,006 |
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*) The previous approach in accordance with Basel I
Consolidated earnings
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| | 2008 | 2007 | 2008 | 2007 | Rollin | 2007 |
| | | | | | g | |
--------------------------------------------------------------------------------
| EUR million | Q2 | Q2 | Q1-2 | Q1-2 | 12 | Q1-4 |
| | | | | | mnth | |
--------------------------------------------------------------------------------
| | | | | | | |
--------------------------------------------------------------------------------
| Net interest income | 40 | 32 | 75 | 58 | 132 | 115 |
--------------------------------------------------------------------------------
| Impairments of receivables | -1 | 1 | -3 | 1 | -3 | 1 |
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| Net interest income after | 42 | 31 | 78 | 58 | 135 | 114 |
| impairments | | | | | | |
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| Net income from Non-life | 90 | 113 | 181 | 208 | 407 | 433 |
| Insurance | | | | | | |
--------------------------------------------------------------------------------
| Net commissions and fees | 27 | 31 | 55 | 59 | 111 | 115 |
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| Net trading income | -2 | 3 | -46 | 10 | -90 | -34 |
--------------------------------------------------------------------------------
| Net investment income | 3 | 13 | 9 | 23 | 14 | 28 |
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| Other operating income | 13 | 24 | 28 | 36 | 63 | 71 |
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| Total net income | 173 | 214 | 305 | 393 | 640 | 728 |
--------------------------------------------------------------------------------
| Personnel costs | 47 | 45 | 92 | 86 | 172 | 166 |
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| IT expenses | 12 | 11 | 24 | 22 | 45 | 43 |
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| Depreciation and | 16 | 16 | 32 | 30 | 63 | 61 |
| amortisation | | | | | | |
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| Other expenses | 44 | 43 | 87 | 91 | 166 | 170 |
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| Total expenses | 119 | 114 | 234 | 228 | 446 | 440 |
--------------------------------------------------------------------------------
| Share of associates' | 0 | 0 | 0 | 0 | 0 | 0 |
| profits/losses | | | | | | |
--------------------------------------------------------------------------------
| Earnings before tax | 54 | 100 | 71 | 165 | 194 | 288 |
--------------------------------------------------------------------------------
| Change in fair value | -33 | -25 | -99 | -11 | -143 | -54 |
| reserve | | | | | | |
--------------------------------------------------------------------------------
| Earnings/loss before tax | 20 | 75 | -28 | 154 | 51 | 234 |
| at fair value | | | | | | |
--------------------------------------------------------------------------------
| | | | | | | |
--------------------------------------------------------------------------------
| Income tax expense | 14 | 27 | 18 | 42 | 53 | 76 |
--------------------------------------------------------------------------------
| Profit for the period | 39 | 73 | 53 | 123 | 142 | 212 |
--------------------------------------------------------------------------------
| | | | | | | |
--------------------------------------------------------------------------------
| Tax on change in fair | -9 | -7 | -26 | -3 | -37 | -14 |
| value reserve | | | | | | |
--------------------------------------------------------------------------------
| Earnings/loss for the | 14 | 54 | -21 | 115 | 36 | 172 |
| period at fair value | | | | | | |
--------------------------------------------------------------------------------
January-June
Pohjola Bank Group's (Pohjola Bank) earnings before tax decreased to EUR 71
million (165). Consolidated net income fell by 22% to EUR 305 million (393), due
to negative mark-to-market valuation of liquidity reserves, while expenses rose
by 2% to EUR 234 million (228). The figure for Q1-2/2007 includes EUR 10 million
in liquidated damages resulting from the cancellation of the partnership
agreement with savings banks.
On 30 June, the capital adequacy ratio stood at 10.9% (10.9) and Tier 1 ratio at
8.5% (9.0).
Earnings per share were EUR 0.26 (0.61), while equity per share was EUR 8.45
(9.19).
As a result of rising interest rates and falling equity prices, the fair value
reserve decreased by EUR 99 million. The Group reported EUR 28 million in loss
before tax at fair value (earnings of EUR 154 million) and annualised return on
equity stood at -2.4% (12.8).
April-June
Earnings before tax amounted to EUR 54 million (100).
Earnings per share were EUR 0.19 (0.36).
The Group reported EUR 20 million in earnings before tax at fair value (75
million) and annualised return on equity stood at 3.4% (12.2).
Operating environment
The global economy has continued to show unfavourable developments. Higher
energy costs and difficulties in the housing market will weaken the US economic
outlook, restraining bank lending and growth in consumer spending. Economic
growth in the euro zone is slowing down because domestic demand is mild and the
strong euro makes exports more difficult. On the other hand, growth in emerging
markets, such as Russia and Asia, has slowed only a little since exports have
been offset by brisk domestic demand.
Higher energy and food prices in particular have accelerated inflation. In order
to dampen euro-area price pressures, in July the ECB raised its benchmark
interest rate to 4.25%. In addition to the tighter monetary policy, uncertainty
still maintained by the international loan crisis has led to higher market
interest rates.
The Finnish economic outlook has also become gradually weaker. Manufacturing
output expectations are more cautious than before. Although the capacity
utilisation rate is high, order books have become smaller and stocks have become
larger. The construction sector is facing a downward trend but the number of
people employed in the service sector is still on the rise.
Consumer confidence in Finland is weak and consumers also feel less optimistic
about their personal finances. However, expectations look contradictory
considering that people still expect good employment prospects and savings
opportunities.
Despite higher interest rates, demand for bank loans actually became stronger
during the first half. Growth in corporate loans sped up whereas household
demand for loans became slightly milder. During the current year, home prices in
real terms began to show a slight fall.
The prolonged uncertainty in the equity market has been reflected in a marked
fall in equity prices. This uncertainty has also affected mutual funds, with all
types of funds experiencing a fall in their capital. However, deposits have
continued to grow at an extremely rapid rate, focusing on term deposits.
The economic slowdown will have delayed effect on premiums written by Non-life
Insurance. Premiums written within direct insurance during the current year are
expected to rise in Finland by around 5% as in the previous year. Premiums
written in the Baltic countries will continue to grow but will slow down
considerably vis-à-vis the double-digit growth figures witnessed in the last few
years.
Integration
The integration process related to the OKO Bank's acquisition of Pohjola in 2005
is proceeding according to plan. The results so far support earlier estimates of
annual revenue synergies coming to EUR 17 million by the end of 2010 and cost
synergies reaching EUR 35 million by the end of 2009. Cost synergies based on
decisions on streamlining measures underway during 2005-08 will amount to an
estimated EUR 33 million in 2008. From 2009, cost synergies will reach an annual
level of EUR 36 million. The revenue synergies resulting from growth in the
number of loyal customer households by the end of the reporting period have
reached an annual level of EUR 11 million.
One-off integration costs related to the Pohjola acquisition totalled EUR 26
million between September 2005 and June 2008.
Pohjola Bank's parent institutions, OP-Pohjola Group Central Cooperative, and
TietoEnator signed an agreement to integrate and reorganise OP-Pohjola Group's
ICT services. Integrating all of Pohjola Bank Group's ICT services within this
joint venture will result in major efficiency gains of an annual estimated EUR 3
million from 2009. The related integration costs will come to approximately EUR
6 million.
The number of loyal customer households within Non-life Insurance increased by
19,700 during the reporting period, totalling almost 375,000 on 30 June 2008.
The Group's strategic aim is to increase this number to 450,000 by the end of
2010.
Customer service took a major step in November 2007 when OP-Pohjola Group
enhanced loyal customer benefits, related to the Pohjola integration, in such a
way that customers can also use OP bonuses earned through banking transactions
to pay Pohjola insurance premiums. This represents a major benefit to the
948,000 OP-Pohjola Group loyal customers who have concentrated their purchases
of banking and insurance services. During January-June, bonuses used to pay
insurance premiums totalled EUR 13 million.
During the reporting period, Pohjola Insurance Ltd and a number of OP-Pohjola
Group member cooperative banks began to build up a new operating model for
banking and non-life insurance product sales to private customers. According to
this plan, Pohjola Insurance's field staff for private customers (around 250
employees) will join the payroll of local cooperative banks.
Once completed, this new operating model will provide the opportunity to improve
customer service, especially in the field of cross-selling banking and non-life
insurance services. The majority of these employees currently work on the
premises of the cooperative bank branches, bearing in mind that these branches
and Pohjola Insurance already operate under the same roof almost everywhere in
Finland. The change will not involve any staff reductions.
This reorganisation will not involve any changes in agency operations, corporate
and institutional customer sales or the operations of other Pohjola Insurance's
service channels. Final decisions on this matter will be made next autumn at the
latest and
Group restructuring
OKO Bank plc's Extraordinary General Meeting made the decision on changing the
company's corporate name to Pohjola Bank plc as of 1 March 2008. In marketing
communication and when used together with the logo, 'Pohjola' is used for short.
As of the same date, the corporate names of subsidiaries with the OKO prefix
also changed to begin with 'Pohjola'. The parent company Pohjola Bank plc and
its subsidiaries together form Pohjola Bank Group.
Based on an agreement signed by Pohjola Bank plc and Kesko Corporation on 21
December 2007, Pohjola Bank plc bought all of the shares in K-Finance Ltd, a
Kesko Corporation subsidiary, for around EUR 30 million, of which goodwill
accounted for roughly EUR 12 million. On 31 January 2008, Pohjola Bank plc
became the owner of all of K-Finance Ltd shares and the company was renamed
Pohjola Finance Ltd. The Boards of Directors of Pohjola Bank plc and Pohjola
Finance Ltd have approved a plan, whereby Pohjola Finance Ltd is anticipated to
merge with its parent company by 30 September 2008 at the earliest. This merger
is aimed at simplifying the Group's corporate structure, streamlining operations
and reducing administrative costs. Since the transaction represents a subsidiary
merger, no merger consideration will be paid.
Personnel
On 30 June, the Group had a staff of 3,162, up by 104 from 31 December 2007. As
a result of the K-Finance Ltd's acquisition, 21 employees joined the Group's
payroll. A total of 594 employees (549) worked for Banking, 156 (154) for Asset
Management, 2,035 employees (2023) for Non-life Insurance in Finland and 257
(224) abroad, and 120 employees (108) for Group functions.
Capital expenditure
First-half gross capital expenditure totalled EUR 11 million (10), EUR 2 million
allocated to Banking, EUR 1 million to Asset Management, EUR 7 million to
Non-life Insurance and EUR 1 million to Group functions. Investments in IT
systems accounted for EUR 9 million of all capital expenditure.
Capital adequacy
The capital adequacy ratio under the Credit Institutions Act continued to remain
strong, despite vigorous growth in the loan portfolio and the financial-market
turbulence. The first quarter saw a particularly vigorous growth, which levelled
off slightly during the second quarter. The capital adequacy ratio stood at
10.9% (10.9) as against the statutory minimum requirement of 8%. The ratio of
Tier 1 to risk-weighted items was 8.5% (9.0). The Group has calculated its
capital adequacy in compliance with the new capital adequacy framework, which
had an effect on calculating own funds and risk-weighted items.
Since 1 January 2008, Pohjola Bank's own funds have been calculated by deducting
the total carrying amount of insurance company investment from its own funds,
half from Tier 1 and half from Tier 2. Since the same date, the minimum capital
adequacy requirement (Pillar I) for credit risks has been calculated using the
Standardised Approach (SA). In the calculation of capital adequacy requirements
for credit risks, Pohjola Bank aims to phase in the Internal Ratings-based
Approach (IRBA) in such a way that the capital adequacy requirement for the
first exposure classes, such as corporate exposure, will be calculated using
IRBA from the second half of 2008. Since 1 January 2008, the capital adequacy
requirement for operational risks has been calculated using the Basic Indicator
Approach (BIA) and that for market risks using SA.
In March, Pohjola Bank plc issued a EUR 170-million debenture loan, classified
as lower Tier 2 capital, with a maturity of ten years, and in June a EUR
50-million subordinated bond, of which a total of EUR 42 million is included in
Tier 1 capital and EUR 8 million in upper Tier 2 capital. With the Finnish
Financial Supervision Authority's permission, the bond may be called in at the
earliest in June 2013.
In June, Pohjola Insurance Ltd issued a perpetual capital bond of EUR 50
million, which may be called in at the earliest in June 2013 with the Insurance
Supervisory Authority's permission. The bond will not be taken into account in
the capital adequacy measurement under the Act on Credit Institutions but the
bond, included in the solvency margin, can be fully utilised in the capital
adequacy measurement of the insurance company.
Own funds increased from EUR 1,443 million to EUR 1,595, due to the reported
earnings and the abovementioned bonds issued by Pohjola Bank plc. Tier 1 capital
came to EUR 1,233 million (1,185), hybrid capital accounting for EUR 265
million, or 15% (13). The minimum own funds requirement to cover market risk
amounted to EUR 48 million (46). On 30 June, the fair value reserve stood at EUR
-67 million (7).
During the reporting period, risk-weighted items increased from EUR 13,209
million to EUR 14,591 million, or by 10%, due mainly to the larger loan and
guarantee portfolio and the new minimum capital requirement for operational
risks set by the new capital adequacy framework.
The adoption of IRBA for credit risk is expected to lower the minimum
requirement for owns funds. Due to transitional provisions, the minimum
requirement for own funds may decrease by a maximum of 10% in 2008 and by a
maximum of 20% in 2009 in comparison with the previous approach in accordance
with Basel I.
Risk exposure
Uncertainty continued in financial markets. The bearish stock market, rising
interest rates and widening credit spreads affected the investment portfolio
managed by Non-life Insurance and the liquidity reserve maintained by Group
functions. The money-market situation mainly affected Banking through growth in
demand for companies' on-balance sheet financing. The Group's risk exposure
continued to remain favourable. However, if the unfavourable economic situation
drags on, this may increase doubtful receivables from their current,
exceptionally low levels.
Risk exposure by Banking
Despite the greater financial-market uncertainty and vigorous growth in total
exposure, risk exposure of Banking continued to remain favourable. Total
exposure for January-June grew by EUR 3.1 billion to EUR 20.9 billion.
The ratio of investment-grade exposure - i.e. ratings 1-5, excluding private
customers - to total exposure remained at a healthy level, standing at 69% (69),
the share of ratings 11-12 was 0.3% (0.3) and that of non-rated exposure 2% (2).
Of corporate exposure, the share of investment-grade corporate exposure came to
63% (65). The corporate exposure of the two lowest rating categories amounted to
EUR 53 million (70), accounting for 0.4% of total corporate exposure.
Significant customer exposure rose to EUR 4.3 billion (3.6). The ratio of
doubtful receivables to the loan and guarantee portfolio continued to remain
low, standing at EUR 34 million (16), or 0.3% (0.1).
Net credit losses and impairments contributed EUR 0.9 million to profit for the
first quarter. Pohjola Bank kept market risks at a moderate level.
Risk exposure by Asset Management
Risk exposure by Asset Management remained favourable.
Risk exposure by Non-life Insurance
On 30 June, Non-life Insurance solvency capital came to EUR 619 million (613)
and the ratio of solvency capital to insurance premium revenue (solvency ratio)
stood at 70% (72).
In Non-life Insurance, January-June saw 101 (103) major or medium-sized losses
(in excess of EUR 0.1 million), with their claims incurred retained for own
account totalling EUR 44.9 million (32.6), while their second-quarter number
came to 50 (50) and their claims incurred retained for own account totalled EUR
23.9 million (15.8).
On 30 June, the investment portfolio stood at EUR 2,587 million (2,511), bonds
and bond funds accounting for 74% (71) and equities for 14% (16). The
fixed-income portfolio by credit rating remained healthy, considering that 83%
of the fixed-income instruments were rated at least A-.
The average remaining maturity of the fixed-income portfolio was 4.9 years and
the duration 4.5 years (3.8). Due to rising interest rates and the bearish stock
market, return on investment at fair value stood at -0.6% (1.0) during the
second quarter and -1.2% (3.5) during the first half of the year.
Risk exposure by Group functions
The Group functions exposure totalled EUR 9.8 billion, consisting of the
liquidity reserve and receivables from OP-Pohjola Group member banks. Almost all
of the exposure was based on investment-grade counterparties.
Group functions maintains the liquidity reserve in order to secure OP-Pohjola
Group's liquidity. Liquidity reserves amounted to EUR 6.0 billion (6.1),
invested primarily in notes and bonds issued by governments, municipalities,
financial institutions and companies all showing good credit ratings, and in
securitised receivables. The remaining maturity of liquidity reserves averaged
3.0 years (2.7).
Strongly widening credit spreads that continued in international financial
markets resulted in the negative EUR 54 million mark-to-market valuation during
January-June. Of this amount, EUR 42 million was recognised in the income
statement of Group functions, EUR 7 million in the income statement of Banking
and EUR 5 million in the fair value reserve. Negative value changes will be
reversed during the remaining term to maturity if the notes and bonds are not
sold before their maturity and their issuer is not declared insolvent. The
second quarter saw a positive value change of EUR 5 million in liquidity
reserves recognised in the fair value reserve.
Liquidity reserves do not contain any direct investments in US sub-prime home
loans, and indirect investments amount only to roughly EUR 0.2 million.
The greater uncertainty in financial markets has not had any effect on the
availability of Pohjola Bank's short-term or long-term funding, and the Bank's
liquidity position has remained strong.
Net credit losses and impairments contributed EUR 2.2 million to profit for the
first half of the year.
Credit ratings
Pohjola Bank's credit ratings are as follows:
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| Rating agency | Short-term debt | Long-term debt |
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| Standard & Poor's | A-1+ | AA- |
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| Moody's | P-1 | Aa1 |
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| Fitch | F1+ | AA- |
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All of the credit rating agencies have confirmed a stable rating outlook for
Pohjola Bank.
Shares and shareholders
On 30 June, the number of Pohjola Bank's Series A shares quoted on the OMX
Nordic Exchange Helsinki totalled 159.6 million, accounting for 78.5% of all
Pohjola Bank shares and 42.2% of votes. The number of Series K shares totalled
around 43.8 million.
Series A share closed at EUR 11.02 against EUR 13.77 a year earlier. In
January-June, the share price reached a high of EUR 14.15 and a low of EUR 10.82
while roughly 64.1 million shares changed hands, compared with 75.4 million a
year ago.
On June, Pohjola Bank had 30,526 shareholders, increasing by 254 from the
beginning of the year. Around 95% of the shareholders were private individuals.
The holdings of major shareholders did not undergo any significant changes. The
largest shareholder was OP-Pohjola Group Central Cooperative, representing 29.9%
of Pohjola Bank shares and 56.9% of votes. On 30 June, nominee registered shares
accounted for 18.0% (18) of all Series A shares.
Governance and management
At its meeting held on 6 May 2008, Pohjola Bank plc's Board of Directors decided
to reorganise the Group into three business segments and Group functions. The
three business segments comprise Banking, Asset Management and Non-life
Insurance.
Reima Rytsölä, Master of Social Sciences, was appointed Executive Vice
President, Banking, and member of the Group Executive Board. Previously, he
acted as Head of Corporate Banking. Mikko Koskimies, M.Sc. (Econ. & Bus. Adm.),
was appointed Executive Vice President, Asset Management. He sits on the Group
Executive Board and previously acted as Head of Asset Management. Tomi
Yli-Kyyny, M.Sc. (Tech.), will continue as Executive Vice President, Non-life
Insurance, and as President of Pohjola Insurance Ltd.
The Group functions comprise Finance, Risk Management, Corporate Communications
and HR Services. A new area of responsibility specified for Ilkka Salonen, CFO
and M.Sc. (Econ. & Bus. Adm.), covers Finance, Actuarial Function, Corporate
Planning, Central Banking and Group Treasury, and Investor Relations. He has
also acted as Deputy CEO since 1 June 2008. CRO Jouko Pölönen, M.Sc. (Econ. &
Bus. Adm.) and eMBA, was appointed member of the Group Executive Board, with
risk management within his remit. He reports to the President and CEO.
As a result of these appointments, the Group Executive Board comprises President
and CEO Mikael Silvennoinen (Chairman), Mikko Koskimies, Jouko Pölönen, Reima
Rytsölä, Ilkka Salonen, Helena Walldén and Tomi Yli-Kyyny.
Timo Ritakallio, Deputy CEO of the Group, joined another company's payroll on 1
August 2008.
Events after the reporting period
No major events have been reported since the end of the reporting period.
Outlook towards the end of the year
In 2008, economic growth is expected to slow down and the corporate loan market
is anticipated to continue its growth at a slower rate than in the first half of
2008. Recent developments in the corporate loan market herald widening lending
margins.
Net interest income from Banking is anticipated to increase as a result of
growth in the loan portfolio and the corporate loan margin. Net trading income
is expected to remain lower than in the previous year and costs are anticipated
to grow at a rate faster than in previous years. Accordingly, earnings before
tax in 2008 are expected to be at the previous year's level. Risk exposure is
projected to remain favourable.
As a result of a reduction in assets under management, Asset Management expects
its earnings before tax reach the same level as in 2007.
In addition to market growth, intense cooperation with OP-Pohjola Group member
cooperative banks and the adoption of bonus benefits for joint banking and
insurance customers, which are expected to strengthen the market share among
private customers in particular, will contribute to insurance premium revenue
within Non-life Insurance.
In Non-life Insurance, the operating combined ratio is estimated to vary between
91% and 95%% if the number of major losses is not unusually large during the
second half. Due to the investment market situation, investment income is
anticipated to remain lower than in the previous year. Non-life Insurance's
expected long-term return on investment is 5.4%.
The Group functions results for 2007 included EUR 11 million in non-recurring
expenses. Since the Group does not expect to incur these expenses in 2008,
results are anticipated to be better than in 2007, provided that the negative
mark-to-market valuations of liquidity reserves will not increase considerably
during the rest of the year.
In May, Pohjola Bank reorganised its segments to be in line with its new Group
structure. If the outlook for the rest of the year presented above had been
presented according to the previous segment structure, the forward-looking
statements would not have differed from those presented in the Q1 Interim
Report.
Uncertainty associated with the operating environment has grown. Should the
forward-looking statements and assumptions about the near-term outlook come
true, the main risks involved are associated with developments in credit
spreads, interest rates, share prices and impairments, as well as the general
operating environment. Although developments in the general operating
environment are beyond the Group management's control, the management may
contribute to the effects of interest-rate changes and the equity market on
investment and trading by investing assets securely, diversifying risks,
promoting its personnel's professional skills and managing risks effectively. In
addition, the management may contribute to the appropriate selection and pricing
of customer-specific risk and, consequently, the Group's financial performance.
All forward-looking statements in this Interim Report expressing the
management's expectations, beliefs, estimates, forecasts, projections and
assumptions are based on the current view of the future financial performance of
Pohjola Bank Group and its various functions, and actual results may differ
materially from those expressed in the forward-looking statements.
Earnings by business line
The Group adopted a new organisational structure in May with the result that its
financial reporting follows the new business segments. Its organisation
currently comprises the following three business segments and Group functions:
Banking, Asset Management and Non-life Insurance. Pohjola Bank Group's
comparatives for the four quarters of 2007 and the first quarter of 2008, based
on the new segment reporting presentation, were published in June and can be
found under Releases at the company's website.
The Group will publish its financial targets based on the new segments in the
autumn of 2008.
Segment information can be found on pages 18-22.
Banking
Banking consists of Corporate Banking, Markets and Baltic Banking Services.
January-June
Banking recorded earnings of EUR 64 million before tax (65). Its customer
business made good progress, but the segment's earnings performance was eroded
by the continued instability in the financial market, which was reflected in the
negative EUR 7 million valuation of domestic corporate bonds. Earnings excluding
the negative value changes in domestic corporate bonds came to EUR 71 million, a
year-on-year increase of EUR 6 million.
Operating return on equity stood at 12.8% (15.3) and the cost/income ratio at
46.4% (40.6). Without the negative value changes in notes and bonds, operating
return on equity would have stood at 14.3% and the cost/income ratio at 43.7%.
The loan portfolio grew by 15% from the year-start level, standing at EUR 10.7
billion (9.4). The acquisition of Pohjola Finance increased the portfolio by EUR
240 million.
Year on year, net interest income rose by 21% to EUR 74 million (61).
Impairments of receivables improved earnings by a net amount of EUR 1 million
(0).
Despite the vigorous growth in the loan portfolio, the Group's risk exposure
remained favourable. On 30 June, the average level of corporate loan portfolio's
margins stood at 0.86% (0.81).
At the end of June, the market share of euro-denominated corporate loans was
17.9%, which is 0.6 percentage points higher than at the end of December 2007.
The Markets division's performance continued to develop favourably despite the
difficult market situation. Turnover generated by customer trading in
fixed-income, derivative and currency products increased by 34% during
January-June. In particular, turnover generated by derivative products rose
because of companies' greater needs to hedge against risks.
Net commissions and fees recorded by Banking remained at the same level as a
year ago, totalling EUR 33 million. Net commissions and fees related to loans
and guarantees improved by a total of EUR 3 million, whereas those related to
securities brokerage fell by a total of EUR 1 million and securities issuance
fees by EUR 3 million.
Other operating income increased to EUR 13 million (8), a significant part of
this growth stemming from higher lease income.
Expenses rose to EUR 55 million (45). Year on year, the number of employees
within Banking rose by 59 and personnel costs by EUR 2 million. Personnel costs
accounted for 41% (44) of total operating expenses. IT costs and
depreciation/amortisation grew by a total of EUR 6 million, due mainly to heavy
investments in the development of systems for finance company products and
growth of over EUR 3 million in depreciation on leases.
The Baltic business performance was in line with expectations. The integration
of Pohjola Bank and its Baltic units' operations has proceeded as planned. The
Baltic business division's first-half loss was less than one million euros.
April-June
Banking recorded earnings of EUR 39 million before tax (32). Fair value changes
in domestic corporate bonds improved second-quarter earnings by less than 5
million whereas they weakened first-quarter earnings by EUR 12 million.
Operating return on equity stood at 15.8% (14.5) and the cost/income ratio at
41% (42). Without the positive value changes in domestic corporate bonds,
operating return on equity would have stood at 14.0% and the cost/income ratio
at 44%.
Growth in the loan portfolio slowed down during the second quarter, showing an
increase of 3% against 11% reported during the first quarter. The corporate loan
portfolio's margins were slightly higher than in the first quarter.
Year on year, net interest income rose by 15% to EUR 38 million (33).
Net commissions and fees decreased by 8% to EUR 16 million (18). Commission
income from loans and guarantees rose by EUR 2 million whereas income from
securities brokerage and issuance declined by EUR 5 million.
Other operating income increased to EUR 6 million (4), due mainly to higher
lease income.
Expenses rose by 14.8% to EUR 27 million (24), with EUR 2 million attributable
to growth in depreciation on leases.
Asset Management
January-June
Earnings before tax for the period amounted to EUR 7 million (9).
The operating cost/income ratio was 61% (55).
Owing to money-market fund redemptions and bearish equity markets, assets under
management on 30 June totalled EUR 28.8 billion (31.5), institutional customers
accounting for EUR 16.9 billion (17.5), OP mutual funds for EUR 11.0 billion
(13.1) and Pohjola Private for EUR 0.9 billion (0.9).
April-June
Earnings before tax came to EUR 4 million (5).
The operating cost/income ratio stood at 60% (55).
Assets under management diminished by EUR 0.8 billion due mainly to market value
changes.
Non-life Insurance
January-June
Earnings
Earnings before tax came to EUR 40 million (83).
The balance on technical account before amortisation on intangible assets stood
at EUR 23 million (22) and investment income was EUR 56 million (88). Other
income reported a year ago included EUR 6 million in capital gains on the sale
of the marine hull insurance portfolio.
Operating return on equity was -14.1% (30.7).
Insurance operations
Insurance premium revenue grew by 8% to EUR 456 million (423).
Growth remained strong within the Private Customers division, based on
cooperation within OP-Pohjola Group. The number of loyal customer households
continued to grow steadily, totalling 19,700. Like-for-like insurance premium
revenue from Private Customers improved by 12% to EUR 186 million.
Within the Corporate Customers division, insurance premium revenue amounted to
EUR 241 million, up by 5% on a like-for-like basis.
Premium revenue generated by the Baltic business increased by 6% to EUR 29
million (27).
Claims incurred (excl. loss adjustment expenses) amounted to EUR 305 million
(279) and the risk ratio stood at 67.0 (66.0). Claims incurred due to major
losses were higher than a year earlier. The number of major losses in excess of
EUR 0.1 million (EUR 0.5 million in pension liabilities) totalled 101 (103),
accounting for EUR 45 million (33) of total claims incurred.
Operating expenses and loss adjustment expenses showed a moderate development,
totalling EUR 128 million (122). The cost ratio developed favourably, standing
at 28.0% (28.9).
The operating combined ratio was 95.0% (94.9).
Investment operations
On June 30, the fair value of Non-life Insurance investments amounted to EUR 2.6
billion (2.5), with equities accounting for 14% (16) and money market
instruments for 7% (2).
Net investment income recognised in earnings amounted to EUR 56 million (88).
Due to the market situation, net investment income at fair value reached EUR -33
million (87). Return on these investments at fair value stood at -1.2% (3.5).
April-June
Earnings
Earnings before tax came to EUR 17 million (52).
The balance on technical account before amortisation on intangible assets stood
at EUR 19 million (23) and investment income was EUR 18 million (41).
Operating return on equity was -13.0% (26.9).
Insurance operations
Insurance premium revenue rose by 8% to EUR 236 million (219).
Like-for-like insurance premium revenue from Private Customers improved by 11%
to EUR 99 million. The number of loyal customer households increased by 10,900.
Like-for-like insurance premium revenue from Corporate Customers rose by 6% to
EUR 123 million.
Premium revenue reported by the Baltic business came to EUR 14 million (14).
Claims incurred (excl. loss adjustment expenses) amounted to EUR 151 million
(134) and the risk ratio stood at 64.2 (61.2). The reported number of major
losses in excess of EUR 0.1 million (EUR 0.5 million in pension liabilities)
totalled 50 (50), accounting for EUR 24 million (16) of total claims incurred.
Operating expenses and loss adjustment expenses were EUR 66 million (61) and the
loss ratio stood at 27.8 (28.1).
The operating combined ratio was 91.9% (89.3).
Investment operations
Net investment income recognised in earnings amounted to EUR 18 million (41).
Net investment income at fair value reached EUR -16 million (23). Return on
these investments at fair value stood at -0.6% (1.0).
Group functions
The Group functions comprise Finance, Risk Management, Corporate Communications
and HR Services.
January-June
Group functions showed a loss of EUR 40 million before tax (loss of EUR 8
million).
The trend of strongly widening credit spreads continuing in international
financial markets reduced the market value of liquidity reserves by EUR 54
million, of which EUR 42 million was recognised in the Group functions results
and EUR 5 million in the fair value reserve.
The one-billion-euro mortgage-backed bond, issued by OP Mortgage Bank, was sold
to European investors in May, strengthening the mortgage bank's position as the
financier of OP-Pohjola Group retail banks. For this reason and due to growth in
deposits with the OP-Pohjola Group retail banks, the need for financing from
Pohjola Bank decreased, with the result that Pohjola Bank's net receivables from
the OP-Pohjola Group retail banks totalled EUR 0.1 billion on 30 June, which was
EUR 2 billion less than on 31 December 2007.
Growth in the loan portfolio was mainly funded from debt markets. During the
reporting period, notes and bonds generated EUR 250 million in assets. In
addition, in March Pohjola Bank issued a EUR 170-million debenture loan,
classified as lower Tier 2 capital, which will mature in 2018. Debt securities
issued to the public totalled EUR 12.1 billion (12.9). In June, Pohjola Bank
issued a perpetual capital bond of EUR 50 million, subscribed by OP-Pohjola
Group Central Cooperative in its entirety.
Earnings in the first quarter a year ago were burdened by the liquidated damages
ruled by the Arbitral Tribunal concerning the shareholder agreement dispute over
Nooa Savings Bank Ltd. This lowering effect amounted to EUR 10 million.
April-June
Group functions showed a loss of EUR 6 million before tax (loss of EUR 11
million).
Negative mark-to-market valuations of EUR 5 million in liquidity reserves were
recognised in the Group functions results. The fair value reserve grew by EUR 5
million.
Changes in accounting policies
Since 1 January 2008, Pohjola Bank Group has applied IFRS 8 Operating Segments.
The definition of operating segments under IFRS 8 is based on financial
information regularly monitored by the decision-maker in charge of the segment's
operations.
The Group has adopted segment reporting in accordance with the new organisation,
based on the decision made by Pohjola Bank plc's Board of Directors on 6 May
2008, the new operating segments being Banking, Asset Management, Non-life
Insurance and Group functions.
As a result of the IFRS 8 adoption, the Group will disclose information on its
operating segments as required by the standard. In accordance with management
reporting, as supplementary information the Group will disclose the key
indicators of its business divisions under the operating segments. Comparatives
have been changed correspondingly.
Formulae 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
Cost/income ratio, %
Personnel costs + Other administrative expenses + Other operating expenses /
(Net interest income + Net income from Non-life Insurance + Net commissions and
fees + Net trading income + Net investment income + Other operating income) x
100
Earnings/share (EPS)
Profit for the period attributable to equity holders of the Parent /
Average share-issue adjusted number of shares during the period
Earnings/share (EPS), diluted
The denominator is the average share-issue adjusted number of shares during the
financial period plus the number of shares which will be obtained if all stock
options are converted into shares, less the number of shares obtained through
the exercise of all stock options multiplied by the share subscription price and
divided by the average share price during the financial period.
Earnings/share (EPS) at fair value
(Profit for the period attributable to equity holders 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
Market capitalisation
Number of shares x closing price on the balance sheet date
Capital adequacy, %
Own funds /
Risk-weighted items x 100
Tier 1 ratio, %
Tier 1 capital /
Risk-weighted items x 100
Key ratios for Non-life Insurance
The key ratio formulae for Non-life Insurance are based on regulations issued by
the Insurance 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 (excl. unwinding of discount)
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 (excl. unwinding of discount)
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
Operating key ratios
Operating return on equity (ROE), %
Banking:
(+ Profit for the period
+ Change in fair value reserve after tax) /
(+ 7% of risk-weighted commitments
- Subordinated loans allocated to the business line (average of the beginning
and end of period) x 100
Non-life Insurance:
(+ Profit for the period
+ Amortisation and write-downs on intangible assets and goodwill
related to the acquisition of non-life insurance business, and their tax effect
+ Change in fair value reserve after tax) /
(+ 70% solvency ratio
- Subordinated loans allocated to the business line (average of the beginning
and end of period) or
minimum capital required by the authorities, if this is larger) x 100
Operating cost/income ratio
(+ Personnel costs
+ Other administrative expenses
+ Other operating expenses excl. amortisation and write-downs 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
Loss ratio + operating expense ratio
--------------------------------------------------------------------------------
| Earnings | | | | | | | |
| performance by | | | | | | | |
| quarter | | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| | 2007 | 2008 | |
--------------------------------------------------------------------------------
| EUR million | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | |
--------------------------------------------------------------------------------
| | | | | | | | |
--------------------------------------------------------------------------------
| Net interest | 26 | 32 | 27 | 30 | 35 | 40 | |
| income | | | | | | | |
--------------------------------------------------------------------------------
| Impairments of | 0 | 1 | 1 | -1 | -2 | -1 | |
| receivables | | | | | | | |
--------------------------------------------------------------------------------
| Net interest | 26 | 31 | 26 | 31 | 37 | 42 | |
| income after | | | | | | | |
| impairments | | | | | | | |
--------------------------------------------------------------------------------
| Net income from | 94 | 11 | 103 | 123 | 91 | 90 | |
| Non-life | | 3 | | | | | |
| Insurance | | | | | | | |
--------------------------------------------------------------------------------
| Net commissions | 28 | 31 | 24 | 32 | 28 | 27 | |
| and fees | | | | | | | |
--------------------------------------------------------------------------------
| Net trading | 7 | 3 | -16 | -27 | -44 | -2 | |
| income | | | | | | | |
--------------------------------------------------------------------------------
| Net investment | 10 | 13 | 5 | 1 | 5 | 3 | |
| income | | | | | | | |
--------------------------------------------------------------------------------
| Other operating | 13 | 24 | 15 | 20 | 15 | 13 | |
| income | | | | | | | |
--------------------------------------------------------------------------------
| Total net income | 179 | 21 | 156 | 179 | 133 | 173 | |
| | | 4 | | | | | |
--------------------------------------------------------------------------------
| Personnel costs | 41 | 45 | 37 | 43 | 45 | 47 | |
--------------------------------------------------------------------------------
| IT expenses | 11 | 11 | 10 | 11 | 12 | 12 | |
--------------------------------------------------------------------------------
| Depreciation and | 15 | 16 | 15 | 16 | 16 | 16 | |
| amortisation | | | | | | | |
--------------------------------------------------------------------------------
| Other expenses | 47 | 43 | 38 | 41 | 42 | 44 | |
--------------------------------------------------------------------------------
| Total expenses | 114 | 11 | 100 | 112 | 115 | 119 | |
| | | 4 | | | | | |
--------------------------------------------------------------------------------
| Share of | 0 | 0 | 0 | 0 | 0 | 0 | |
| associates' | | | | | | | |
| profits/losses | | | | | | | |
--------------------------------------------------------------------------------
| Earnings before | 65 | 10 | 56 | 67 | 17 | 54 | |
| tax | | 0 | | | | | |
--------------------------------------------------------------------------------
| Change in fair | 14 | -2 | -10 | -34 | -66 | -33 | |
| value reserve | | 5 | | | | | |
--------------------------------------------------------------------------------
| Earnings/loss | 79 | 75 | 46 | 33 | -48 | 20 | |
| before tax at | | | | | | | |
| fair value | | | | | | | |
--------------------------------------------------------------------------------
| | | | | | | | |
--------------------------------------------------------------------------------
| Income tax | 15 | 27 | 16 | 18 | 4 | 14 | |
| expense | | | | | | | |
--------------------------------------------------------------------------------
| Profit for the | 50 | 73 | 40 | 49 | 13 | 39 | |
| period | | | | | | | |
--------------------------------------------------------------------------------
| | | | | | | | |
--------------------------------------------------------------------------------
| Tax on change in | 4 | -7 | -2 | -9 | -17 | -9 | |
| fair value | | | | | | | |
| reserve | | | | | | | |
--------------------------------------------------------------------------------
| Earnings/loss | 61 | 54 | 33 | 24 | -35 | 14 | |
| for the period | | | | | | | |
| at fair value | | | | | | | |
--------------------------------------------------------------------------------
| | | | | | | | |
--------------------------------------------------------------------------------
| Return on | 13.7 | 12 | 7.1 | 5.1 | -8. | 3.4 | |
| equity, % | | .2 | | | 0 | | |
--------------------------------------------------------------------------------
| | | | | | | | |
--------------------------------------------------------------------------------
| Segment | | | | | | |
| information | | | | | | |
--------------------------------------------------------------------------------
| Q2 earnings | | | | | | |
--------------------------------------------------------------------------------
| EUR million | Banking | Asset Management | Non-life |
| | | | Insurance |
--------------------------------------------------------------------------------
| | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 |
--------------------------------------------------------------------------------
| Net interest | 38 | 33 | 0 | -1 | -2 | -2 |
| income | | | | | | |
--------------------------------------------------------------------------------
| Impairments | 0 | 1 | | | | |
| of | | | | | | |
| receivables | | | | | | |
--------------------------------------------------------------------------------
| Net interest | 37 | 32 | 0 | -1 | -2 | -2 |
| income after | | | | | | |
| impairments | | | | | | |
--------------------------------------------------------------------------------
| Net income | | | | | 90 | 114 |
| from | | | | | | |
| Non-life | | | | | | |
| Insurance | | | | | | |
--------------------------------------------------------------------------------
| Net | 16 | 18 | 11 | 12 | 1 | 2 |
| commissions | | | | | | |
| and fees | | | | | | |
--------------------------------------------------------------------------------
| Net trading | 6 | 1 | | | | |
| income | | | | | | |
--------------------------------------------------------------------------------
| Net | 0 | 0 | | | | |
| investment | | | | | | |
| income | | | | | | |
--------------------------------------------------------------------------------
| Other | 6 | 4 | 0 | 0 | 4 | 15 |
| operating | | | | | | |
| income | | | | | | |
--------------------------------------------------------------------------------
| Total net | 66 | 55 | 11 | 12 | 94 | 129 |
| income | | | | | | |
--------------------------------------------------------------------------------
| Personnel | 10 | 11 | 4 | 4 | 30 | 27 |
| costs | | | | | | |
--------------------------------------------------------------------------------
| Amortisation | | | 1 | 1 | 8 | 8 |
| on | | | | | | |
| intangible | | | | | | |
| assets | | | | | | |
| related to | | | | | | |
| company | | | | | | |
| acquisitions | | | | | | |
--------------------------------------------------------------------------------
| Other | 6 | 4 | 0 | 0 | 1 | 1 |
| depreciation | | | | | | |
| /amortisatio | | | | | | |
| n and | | | | | | |
| impairments | | | | | | |
--------------------------------------------------------------------------------
| Other | 11 | 9 | 2 | 2 | 37 | 40 |
| expenses | | | | | | |
--------------------------------------------------------------------------------
| Total | 27 | 24 | 7 | 7 | 76 | 76 |
| expenses | | | | | | |
--------------------------------------------------------------------------------
| Earnings | 39 | 32 | 4 | 5 | 17 | 52 |
| before tax | | | | | | |
--------------------------------------------------------------------------------
| Change in | 0 | 0 | | | -33 | -17 |
| fair value | | | | | | |
| reserve | | | | | | |
--------------------------------------------------------------------------------
| Earnings/los | 39 | 31 | 4 | 5 | -16 | 35 |
| s before tax | | | | | | |
| at fair | | | | | | |
| value | | | | | | |
--------------------------------------------------------------------------------
| | | | | | | |
--------------------------------------------------------------------------------
| Capital | 1 | 1 | 0 | 0 | 4 | 3 |
| expenditure, | | | | | | |
| EUR million | | | | | | |
--------------------------------------------------------------------------------
| | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Q2 earnings | | | | | | |
--------------------------------------------------------------------------------
| EUR million | Group functions | Eliminations | Group total |
--------------------------------------------------------------------------------
| | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 |
--------------------------------------------------------------------------------
| Net interest | 4 | 0 | 1 | 2 | 40 | 32 |
| income | | | | | | |
--------------------------------------------------------------------------------
| Impairments | -1 | | | | -1 | 1 |
| of | | | | | | |
| receivables | | | | | | |
--------------------------------------------------------------------------------
| Net interest | 6 | 0 | 1 | 2 | 42 | 31 |
| income after | | | | | | |
| impairments | | | | | | |
--------------------------------------------------------------------------------
| Net income | | | 0 | -1 | 90 | 113 |
| from | | | | | | |
| Non-life | | | | | | |
| Insurance | | | | | | |
--------------------------------------------------------------------------------
| Net | -1 | 0 | -1 | -1 | 27 | 31 |
| commissions | | | | | | |
| and fees | | | | | | |
--------------------------------------------------------------------------------
| Net trading | -9 | 1 | 0 | | -2 | 3 |
| income | | | | | | |
--------------------------------------------------------------------------------
| Net | 3 | 13 | | | 3 | 13 |
| investment | | | | | | |
| income | | | | | | |
--------------------------------------------------------------------------------
| Other | 4 | 9 | -2 | -4 | 13 | 24 |
| operating | | | | | | |
| income | | | | | | |
--------------------------------------------------------------------------------
| Total net | 4 | 22 | -2 | -4 | 173 | 214 |
| income | | | | | | |
--------------------------------------------------------------------------------
| Personnel | 3 | 2 | | | 47 | 45 |
| costs | | | | | | |
--------------------------------------------------------------------------------
| Amortisation | | | | | 9 | 9 |
| on | | | | | | |
| intangible | | | | | | |
| assets | | | | | | |
| related to | | | | | | |
| company | | | | | | |
| acquisitions | | | | | | |
--------------------------------------------------------------------------------
| Other | 0 | 1 | | | 7 | 6 |
| depreciation | | | | | | |
| /amortisatio | | | | | | |
| n and | | | | | | |
| impairments | | | | | | |
--------------------------------------------------------------------------------
| Other | 7 | 8 | -2 | -4 | 56 | 54 |
| expenses | | | | | | |
--------------------------------------------------------------------------------
| Total | 10 | 11 | -2 | -4 | 119 | 114 |
| expenses | | | | | | |
--------------------------------------------------------------------------------
| Earnings | -6 | 11 | 0 | 0 | 54 | 100 |
| before tax | | | | | | |
--------------------------------------------------------------------------------
| Change in | 0 | -7 | | | -33 | -25 |
| fair value | | | | | | |
| reserve | | | | | | |
--------------------------------------------------------------------------------
| Earnings/los | -6 | 4 | | | 20 | 75 |
| s before tax | | | | | | |
| at fair | | | | | | |
| value | | | | | | |
--------------------------------------------------------------------------------
| | | | | | | |
--------------------------------------------------------------------------------
| Capital | 1 | 1 | | | 6 | 5 |
| expenditure, | | | | | | |
| EUR million | | | | | | |
--------------------------------------------------------------------------------
| | | | | | | |
--------------------------------------------------------------------------------
| Earnings per | | | | | 0.19 | 0.36 |
| share, EUR | | | | | | |
--------------------------------------------------------------------------------
| Return on | | | | | 3.4 | 12.2 |
| equity at | | | | | | |
| fair value, | | | | | | |
| % | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Q1-2 earnings | | | | | | |
--------------------------------------------------------------------------------
| EUR million | Banking | Asset | Non-life |
| | | Management | Insurance |
--------------------------------------------------------------------------------
| | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 |
--------------------------------------------------------------------------------
| Net interest income | 74 | 61 | -1 | -1 | -4 | -4 |
--------------------------------------------------------------------------------
| Impairments of | -1 | 0 | | | | |
| receivables | | | | | | |
--------------------------------------------------------------------------------
| Net interest income | 75 | 60 | -1 | -1 | -4 | -4 |
| after impairments | | | | | | |
--------------------------------------------------------------------------------
| Net income from | | | | | 182 | 209 |
| Non-life Insurance | | | | | | |
--------------------------------------------------------------------------------
| Net commissions and | 33 | 33 | 22 | 23 | 2 | 6 |
| fees | | | | | | |
--------------------------------------------------------------------------------
| Net trading income | -1 | 8 | | | | |
--------------------------------------------------------------------------------
| Net investment | 0 | 1 | 0 | 0 | | |
| income | | | | | | |
--------------------------------------------------------------------------------
| Other operating | 13 | 8 | 1 | 0 | 8 | 18 |
| income | | | | | | |
--------------------------------------------------------------------------------
| Total net income | 119 | 110 | 22 | 23 | 189 | 229 |
--------------------------------------------------------------------------------
| Personnel costs | 22 | 20 | 8 | 8 | 56 | 54 |
--------------------------------------------------------------------------------
| Amortisation on | | | 1 | 1 | 17 | 17 |
| intangible assets | | | | | | |
| related to company | | | | | | |
| acquisitions | | | | | | |
--------------------------------------------------------------------------------
| Other | 11 | 8 | 0 | 0 | 2 | 2 |
| depreciation/amorti | | | | | | |
| sation and | | | | | | |
| impairments | | | | | | |
--------------------------------------------------------------------------------
| Other expenses | 21 | 17 | 4 | 4 | 75 | 75 |
--------------------------------------------------------------------------------
| Total expenses | 55 | 45 | 15 | 14 | 149 | 146 |
--------------------------------------------------------------------------------
| Earnings before tax | 64 | 65 | 7 | 9 | 40 | 83 |
--------------------------------------------------------------------------------
| Change in fair | -2 | 0 | | | -88 | -1 |
| value reserve | | | | | | |
--------------------------------------------------------------------------------
| Earnings/loss | 62 | 65 | 7 | 9 | -48 | 82 |
| before tax at fair | | | | | | |
| value | | | | | | |
--------------------------------------------------------------------------------
| | | | | | | |
--------------------------------------------------------------------------------
| Average personnel | 594 | 536 | 156 | 147 | 2,292 | 2,205 |
--------------------------------------------------------------------------------
| Capital | 2 | 2 | 1 | 1 | 7 | 5 |
| expenditure, EUR | | | | | | |
| million | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Q1-2 earnings | | | | | | |
--------------------------------------------------------------------------------
| EUR million | Group functions | Eliminations | Group total |
--------------------------------------------------------------------------------
| | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 |
--------------------------------------------------------------------------------
| Net interest income | 4 | -1 | 2 | 3 | 75 | 58 |
--------------------------------------------------------------------------------
| Impairments of | -2 | | | | -3 | 0 |
| receivables | | | | | | |
--------------------------------------------------------------------------------
| Net interest income | 6 | -1 | 2 | 3 | 78 | 58 |
| after impairments | | | | | | |
--------------------------------------------------------------------------------
| Net income from | | | -1 | -1 | 181 | 208 |
| Non-life Insurance | | | | | | |
--------------------------------------------------------------------------------
| Net commissions and | 0 | 0 | -2 | -2 | 55 | 59 |
| fees | | | | | | |
--------------------------------------------------------------------------------
| Net trading income | -45 | 2 | 0 | | -46 | 10 |
--------------------------------------------------------------------------------
| Net investment | 9 | 22 | | | 9 | 23 |
| income | | | | | | |
--------------------------------------------------------------------------------
| Other operating | 11 | 18 | -5 | -8 | 28 | 36 |
| income | | | | | | |
--------------------------------------------------------------------------------
| Total net income | -19 | 40 | -5 | -9 | 305 | 393 |
--------------------------------------------------------------------------------
| Personnel costs | 5 | 4 | | | 92 | 86 |
--------------------------------------------------------------------------------
| Amortisation on | | | | | 18 | 18 |
| intangible assets | | | | | | |
| related to company | | | | | | |
| acquisitions | | | | | | |
--------------------------------------------------------------------------------
| Other | 1 | 2 | | | 14 | 12 |
| depreciation/amorti | | | | | | |
| sation and | | | | | | |
| impairments | | | | | | |
--------------------------------------------------------------------------------
| Other expenses | 15 | 25 | -5 | -9 | 110 | 112 |
--------------------------------------------------------------------------------
| Total expenses | 21 | 32 | -5 | -9 | 234 | 228 |
--------------------------------------------------------------------------------
| Earnings/loss | -40 | 8 | 0 | 0 | 71 | 165 |
| before tax | | | | | | |
--------------------------------------------------------------------------------
| Change in fair | -9 | -9 | | | -99 | -11 |
| value reserve | | | | | | |
--------------------------------------------------------------------------------
| Earnings/loss | -49 | -1 | | | -28 | 154 |
| before tax at fair | | | | | | |
| value | | | | | | |
--------------------------------------------------------------------------------
| | | | | | | |
--------------------------------------------------------------------------------
| Average personnel | 121 | 107 | | | 3,162 | 2,995 |
--------------------------------------------------------------------------------
| Capital | 1 | 2 | | | 11 | 10 |
| expenditure, EUR | | | | | | |
| million | | | | | | |
--------------------------------------------------------------------------------
| | | | | | | |
--------------------------------------------------------------------------------
| Earnings per share, | | | | | 0.26 | 0.61 |
| EUR | | | | | | |
--------------------------------------------------------------------------------
| Return on equity at | | | | | -2.4 | 12.8 |
| fair value, % | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Balance sheet | | | | | | |
--------------------------------------------------------------------------------
| EUR million | Banking | Asset | Non-life |
| | | Management | Insurance |
--------------------------------------------------------------------------------
| | 30 | 31 Dec | 30 | 31 Dec | 30 June | 31 Dec |
| | June | 2007 | June | 2007 | 2008 | 2007 |
| | 2008 | | 2008 | | | |
--------------------------------------------------------------------------------
| Receivables from | 10,608 | 9,253 | 1 | | | |
| customers | | | | | | |
--------------------------------------------------------------------------------
| Receivables from | 597 | 270 | 4 | 6 | | |
| financial | | | | | | |
| institutions | | | | | | |
--------------------------------------------------------------------------------
| Financial assets at | 2,206 | 1,352 | | | | |
| fair value through | | | | | | |
| profit or loss | | | | | | |
--------------------------------------------------------------------------------
| Non-life Insurance | | | | | 3,053 | 2,842 |
| assets | | | | | | |
--------------------------------------------------------------------------------
| Investment assets | 20 | 25 | 13 | 23 | 0 | 0 |
--------------------------------------------------------------------------------
| Investments in | | | | | 2 | 2 |
| associates | | | | | | |
--------------------------------------------------------------------------------
| Other assets | 1,800 | 1,486 | 129 | 134 | 869 | 875 |
--------------------------------------------------------------------------------
| Total assets | 15,231 | 12,385 | 146 | 163 | 3,924 | 3,719 |
--------------------------------------------------------------------------------
| Liabilities to | 579 | 462 | | | | |
| customers | | | | | | |
--------------------------------------------------------------------------------
| Liabilities to | 848 | 261 | | | | |
| financial | | | | | | |
| institutions | | | | | | |
--------------------------------------------------------------------------------
| Non-life Insurance | | | | | 2,409 | 2,140 |
| liabilities | | | | | | |
--------------------------------------------------------------------------------
| Debt securities | | | | | | |
| issued to the | | | | | | |
| public | | | | | | |
--------------------------------------------------------------------------------
| Subordinated | | | | | 50 | |
| liabilities | | | | | | |
--------------------------------------------------------------------------------
| Other liabilities | 2,728 | 1,578 | 12 | 17 | 63 | 100 |
--------------------------------------------------------------------------------
| Total liabilities | 4,155 | 2,301 | 12 | 17 | 2,522 | 2,241 |
--------------------------------------------------------------------------------
| Shareholders' | | | | | | |
| equity | | | | | | |
--------------------------------------------------------------------------------
| | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Balance sheet | | | | | | |
--------------------------------------------------------------------------------
| EUR million | Group functions | Eliminations | Group total |
--------------------------------------------------------------------------------
| | 30 | 31 Dec | 30 | 31 Dec | 30 June | 31 Dec |
| | June | 2007 | June | 2007 | 2008 | 2007 |
| | 2008 | | 2008 | | | |
--------------------------------------------------------------------------------
| Receivables from | 148 | 48 | | -13 | 10,756 | 9,288 |
| customers | | | | | | |
--------------------------------------------------------------------------------
| Receivables from | 3,945 | 5,409 | -293 | -19 | 4,253 | 5,665 |
| financial | | | | | | |
| institutions | | | | | | |
--------------------------------------------------------------------------------
| Financial assets at | 3,118 | 3,349 | | | 5,324 | 4,701 |
| fair value through | | | | | | |
| profit or loss | | | | | | |
--------------------------------------------------------------------------------
| Non-life Insurance | | | -35 | -33 | 3,018 | 2,809 |
| assets | | | | | | |
--------------------------------------------------------------------------------
| Investment assets | 1,793 | 685 | -5 | -8 | 1,821 | 725 |
--------------------------------------------------------------------------------
| Investments in | | | | | 2 | 2 |
| associates | | | | | | |
--------------------------------------------------------------------------------
| Other assets | 514 | 301 | -13 | -63 | 3,299 | 2,732 |
--------------------------------------------------------------------------------
| Total assets | 9,519 | 9,792 | -346 | -137 | 28,473 | 25,922 |
--------------------------------------------------------------------------------
| Liabilities to | 2,031 | 2,324 | -50 | -48 | 2,559 | 2,738 |
| customers | | | | | | |
--------------------------------------------------------------------------------
| Liabilities to | 3,877 | 2,480 | -272 | -2 | 4,453 | 2,739 |
| financial | | | | | | |
| institutions | | | | | | |
--------------------------------------------------------------------------------
| Non-life Insurance | | | | | 2,409 | 2,140 |
| liabilities | | | | | | |
--------------------------------------------------------------------------------
| Debt securities | 12,116 | 12,879 | -11 | -24 | 12,105 | 12,856 |
| issued to the | | | | | | |
| public | | | | | | |
--------------------------------------------------------------------------------
| Subordinated | 1,147 | 950 | | | 1,197 | 950 |
| liabilities | | | | | | |
--------------------------------------------------------------------------------
| Other liabilities | 1,242 | 998 | -13 | -63 | 4,032 | 2,630 |
--------------------------------------------------------------------------------
| Total liabilities | 20,412 | 19,631 | -346 | -137 | 26,755 | 24,053 |
--------------------------------------------------------------------------------
| Shareholders' | | | | | 1,718 | 1,869 |
| equity | | | | | | |
--------------------------------------------------------------------------------
| | | | | | | |
--------------------------------------------------------------------------------
| Capital adequacy | | | | | 10.9 | 10.9 |
| ratio, % | | | | | | |
--------------------------------------------------------------------------------
| Tier 1 ratio, % | | | | | 8.5 | 9.0 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Banking |
--------------------------------------------------------------------------------
| |
--------------------------------------------------------------------------------
| | Net income | Earnings | Net income | Earnings/lo |
| | | before tax | | ss before |
| | | | | tax |
--------------------------------------------------------------------------------
| | Q2/ | Q2/ | Q2/ | Q2/ | Q1- | Q1-2/ | Q1-2 | Q1-2 |
| | 200 | 2007 | 2008 | 200 | 2/ | 2007 | / | / |
| | 8 | | | 7 | 200 | | 2008 | 2007 |
| | | | | | 8 | | | |
--------------------------------------------------------------------------------
| Corporate | 51 | 39 | 33 | 23 | 87 | 79 | 50 | 49 |
| Banking | | | | | | | | |
--------------------------------------------------------------------------------
| Markets | 14 | 17 | 7 | 9 | 30 | 31 | 15 | 16 |
--------------------------------------------------------------------------------
| Baltic Banking | 1 | 0 | 0 | 0 | 1 | 0 | -1 | 0 |
| Services | | | | | | | | |
--------------------------------------------------------------------------------
| Total | 66 | 55 | 39 | 32 | 119 | 110 | 64 | 65 |
--------------------------------------------------------------------------------
| | | | | | |
--------------------------------------------------------------------------------
| | Q2/ | Q2/ | Q1-2/ | Q1-2/ | |
| | 2008 | 2007 | 2008 | 2007 | |
--------------------------------------------------------------------------------
| Operating | 15.8 | 14.5 | 12.8 | 15.3 | |
| return on | | | | | |
| equity (ROE) | | | | | |
| p.a., % | | | | | |
--------------------------------------------------------------------------------
| Operating | 41.0 | 42.4 | 46.4 | 40.6 | |
| cost/income | | | | | |
| ratio, % | | | | | |
--------------------------------------------------------------------------------
| | | | | | |
--------------------------------------------------------------------------------
| | 30 June | 31 Dec | | | |
| | 2008 | 2007 | | | |
--------------------------------------------------------------------------------
| Receivables | 10.6 | 9.3 | | | |
| from customers, | | | | | |
| EUR billion | | | | | |
--------------------------------------------------------------------------------
| Market share of | 17.9 | 17.3 | | | |
| corporate | | | | | |
| loans, % | | | | | |
--------------------------------------------------------------------------------
| Proportion of | 0.3 | 0.1 | | | |
| doubtful | | | | | |
| receivables to | | | | | |
| receivables | | | | | |
| from customers | | | | | |
| and guarantees, | | | | | |
| % | | | | | |
--------------------------------------------------------------------------------
| | | | | | |
--------------------------------------------------------------------------------
| Margin on | 0.86 | 0.81 | | | |
| corporate loan | | | | | |
| portfolio, % | | | | | |
--------------------------------------------------------------------------------
| Margin on | 0.24 | 0.23 | | | |
| institutional | | | | | |
| loan portfolio, | | | | | |
| % | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Asset Management | | |
--------------------------------------------------------------------------------
| | 30 June 2008 | 31 Dec 2007 |
--------------------------------------------------------------------------------
| | | |
--------------------------------------------------------------------------------
| Assets under management, EUR billion | 28.8 | 31.5 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Non-life | Earnings before tax | |
| Insurance, | | |
| EUR million | | |
--------------------------------------------------------------------------------
| | Q2/ | Q2/ | Q1-2/ | Q1-2/ | |
| | 2008 | 2007 | 2008 | 2007 | |
--------------------------------------------------------------------------------
| Insurance | 236 | 219 | 456 | 423 | |
| premium | | | | | |
| revenue | | | | | |
--------------------------------------------------------------------------------
| Claims | -167 | -148 | -335 | -307 | |
| incurred | | | | | |
--------------------------------------------------------------------------------
| Operating | -50 | -48 | -98 | -95 | |
| expenses | | | | | |
--------------------------------------------------------------------------------
| Amortisation | -7 | -7 | -14 | -13 | |
| adjustment | | | | | |
| of | | | | | |
| intangible | | | | | |
| assets | | | | | |
--------------------------------------------------------------------------------
| Balance on | 12 | 17 | 9 | 9 | |
| technical | | | | | |
| account | | | | | |
--------------------------------------------------------------------------------
| Investment | 18 | 41 | 55 | 88 | |
| income/expen | | | | | |
| ses | | | | | |
--------------------------------------------------------------------------------
| Other income | -13 | -5 | -25 | -14 | |
| and expenses | | | | | |
--------------------------------------------------------------------------------
| Earnings | 17 | 52 | 40 | 83 | |
| before tax | | | | | |
--------------------------------------------------------------------------------
| | | | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| |
--------------------------------------------------------------------------------
| |
--------------------------------------------------------------------------------
| | Insurance | Balance on | Insurance premium | Balance on |
| | premium | technical | revenue | technical |
| | revenue | account | | account |
| | | | | |
--------------------------------------------------------------------------------
| | Q2 | Q2/ | Q2/ | Q2/ | Q1-2 | Q1-2/ | Q1- | Q1-2 |
| | / | 2007 | 2008 | 2007 | / | 2007 | 2/ | / |
| | 20 | | | | 2008 | | 200 | 2007 |
| | 08 | | | | | | 8 | |
--------------------------------------------------------------------------------
| Private | 99 | 93 | 12 | 13 | 186 | 173 | 14 | 12 |
| Customers | | | | | | | | |
--------------------------------------------------------------------------------
| Corporate | 12 | 112 | 5 | 11 | 241 | 223 | 6 | 8 |
| Customers | 3 | | | | | | | |
--------------------------------------------------------------------------------
| Baltic | 14 | 14 | 2 | 0 | 29 | 27 | 3 | 1 |
| States | | | | | | | | |
--------------------------------------------------------------------------------
| Amortisation | | | -7 | -7 | | | -14 | -13 |
| adjustment | | | | | | | | |
| of | | | | | | | | |
| intangible | | | | | | | | |
| assets | | | | | | | | |
--------------------------------------------------------------------------------
| Total | 23 | 219 | 12 | 17 | 456 | 423 | 9 | 9 |
| | 6 | | | | | | | |
--------------------------------------------------------------------------------
| | | | | | |
--------------------------------------------------------------------------------
| | Q2/ | Q2/ | Q1-2/ | Q1-2/ | |
| | 2008 | 2007 | 2008 | 2007 | |
--------------------------------------------------------------------------------
| Operating | -13.0 | 26.9 | -14.1 | 30.7 | |
| return on | | | | | |
| equity | | | | | |
| (ROE), % | | | | | |
--------------------------------------------------------------------------------
| Operating | 70.6 | 67.5 | 73.4 | 72.5 | |
| loss ratio, | | | | | |
| % | | | | | |
--------------------------------------------------------------------------------
| Operating | 21.4 | 21.9 | 21.6 | 22.4 | |
| expense | | | | | |
| ratio, % | | | | | |
--------------------------------------------------------------------------------
| Operating | 91.9 | 89.3 | 95.0 | 94.9 | |
| combined | | | | | |
| ratio, % | | | | | |
--------------------------------------------------------------------------------
| Return on | -0.6 | 1.0 | -1.2 | 3.5 | |
| investment, | | | | | |
| % | | | | | |
--------------------------------------------------------------------------------
| | | | | | |
--------------------------------------------------------------------------------
| No. of | 24 | 16 | 45 | 33 | |
| losses in | | | | | |
| excess of | | | | | |
| EUR 0.1 | | | | | |
| million | | | | | |
--------------------------------------------------------------------------------
| | 30 | 31 Dec | | | |
| | June | 2007 | | | |
| | 2008 | | | | |
--------------------------------------------------------------------------------
| No. of loyal | 375 | 355 | | | |
| customer | | | | | |
| households, | | | | | |
| 1,000 | | | | | |
--------------------------------------------------------------------------------
| | | | | | |
--------------------------------------------------------------------------------
| Discounted | 1,251 | 1,244 | | | |
| insurance | | | | | |
| contract | | | | | |
| liabilities | | | | | |
--------------------------------------------------------------------------------
| Other | 986 | 773 | | | |
| insurance | | | | | |
| contract | | | | | |
| liabilities | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Line of insurance |
--------------------------------------------------------------------------------
| |
--------------------------------------------------------------------------------
| | Insurance premium | Balance on technical |
| | revenue | account |
--------------------------------------------------------------------------------
| | Q1-2/ | Q1-2/ | Q1-2/ | Q1-2/ |
| | 2008 | 2007 | 2008 | 2007 |
--------------------------------------------------------------------------------
| Statutory workers' | 92 | 91 | 12 | 4 |
| compensation insurance | | | | |
--------------------------------------------------------------------------------
| Other accident and health | 44 | 34 | -3 | -3 |
| insurance | | | | |
--------------------------------------------------------------------------------
| Motor vehicle liability | 19 | 16 | 0 | 1 |
| insurance | | | | |
--------------------------------------------------------------------------------
| Ground vehicles | 90 | 86 | 5 | 6 |
--------------------------------------------------------------------------------
| Cargo | 82 | 80 | -1 | -1 |
--------------------------------------------------------------------------------
| Fire and property | 14 | 16 | 4 | 1 |
--------------------------------------------------------------------------------
| Liability | 85 | 72 | 15 | 7 |
--------------------------------------------------------------------------------
| Other | 17 | 16 | 3 | 1 |
--------------------------------------------------------------------------------
| Total domestic direct | 443 | 410 | 35 | 17 |
| insurance | | | | |
--------------------------------------------------------------------------------
| Foreign insurance | 12 | 11 | -12 | 5 |
--------------------------------------------------------------------------------
| Domestic reinsurance | 1 | 1 | 0 | 0 |
--------------------------------------------------------------------------------
| Total other | 13 | 12 | -12 | 5 |
--------------------------------------------------------------------------------
| Total | 456 | 423 | 23 | 22 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Group functions | | | | |
--------------------------------------------------------------------------------
| | Q2/ | Q2/ | Q1-2/ | Q1-2/ |
| | 2008 | 2007 | 2008 | 2007 |
--------------------------------------------------------------------------------
| Central Banking earnings | 5 | 4 | 9 | 9 |
| before tax, EUR million | | | | |
--------------------------------------------------------------------------------
| | 30 June | 31 Dec | | |
| | 2008 | 2007 | | |
--------------------------------------------------------------------------------
| Receivables from OP-Pohjola | 4,000 | 5,072 | | |
| Group entities, EUR million | | | | |
--------------------------------------------------------------------------------
| Liabilities to OP-Pohjola | 2,424 | 2,217 | | |
| Group entities, EUR million | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Consolidated income | | | | | |
| statement | | | | | |
--------------------------------------------------------------------------------
| EUR million | | | Q2/ | Q2/ | Q1-Q2/ | Q1-Q2/ |
| | | | 2008 | 2007 | 2008 | 2007 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Interest income | | | 726 | 546 | 1,446 | 983 |
--------------------------------------------------------------------------------
| Interest expenses | | | 686 | 514 | 1,370 | 925 |
--------------------------------------------------------------------------------
| Net interest income (Note | | 40 | 32 | 75 | 58 |
| 1) | | | | | |
--------------------------------------------------------------------------------
| Impairments of receivables | | -1 | 1 | -3 | 0 |
| (Note 2) | | | | | |
--------------------------------------------------------------------------------
| Net interest income after | 42 | 31 | 78 | 58 |
| impairments | | | | |
--------------------------------------------------------------------------------
| Net income from Non-life Insurance | 90 | 113 | 181 | 208 |
| (Note 3) | | | | |
--------------------------------------------------------------------------------
| Net commissions and fees | | 27 | 31 | 55 | 59 |
| (Note 4) | | | | | |
--------------------------------------------------------------------------------
| Net trading income (Note | | -2 | 3 | -46 | 10 |
| 5) | | | | | |
--------------------------------------------------------------------------------
| Net investment income | | 3 | 13 | 9 | 23 |
| (Note 6) | | | | | |
--------------------------------------------------------------------------------
| Other operating income | | 13 | 24 | 28 | 36 |
| (Note 7) | | | | | |
--------------------------------------------------------------------------------
| Total income | | | 173 | 214 | 305 | 393 |
--------------------------------------------------------------------------------
| Personnel costs (Note 8) | | 47 | 45 | 92 | 86 |
--------------------------------------------------------------------------------
| Other administrative expenses (Note | 41 | 39 | 79 | 73 |
| 9) | | | | |
--------------------------------------------------------------------------------
| Other operating expenses | | 31 | 31 | 63 | 69 |
| (Note 10) | | | | | |
--------------------------------------------------------------------------------
| Total expenses | | | 119 | 114 | 234 | 228 |
--------------------------------------------------------------------------------
| Earnings before tax | | | 54 | 100 | 71 | 165 |
--------------------------------------------------------------------------------
| Income tax expense | | | 14 | 27 | 18 | 42 |
--------------------------------------------------------------------------------
| Profit for the period | | | 39 | 73 | 53 | 123 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Basic earnings per share, | | | | | |
| EUR | | | | | |
--------------------------------------------------------------------------------
| Series A | | | | 0.19 | 0.36 | 0.26 | 0.61 |
--------------------------------------------------------------------------------
| Series K | | | | 0.19 | 0.36 | 0.26 | 0.60 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Consolidated balance sheet | | | |
--------------------------------------------------------------------------------
| EUR million | | | 31 June | 31 Dec 2007 |
| | | | 2008 | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Liquid assets | | | 236 | 448 |
--------------------------------------------------------------------------------
| Receivables from financial institutions | 4,017 | 5,217 |
--------------------------------------------------------------------------------
| Financial assets at fair value through profit or | | |
| loss (Note 11) | | |
--------------------------------------------------------------------------------
| Financial assets held for trading | | 2,974 | 2,220 |
--------------------------------------------------------------------------------
| Financial assets at fair value through profit or | 2,350 | 2,481 |
| loss at inception | | |
--------------------------------------------------------------------------------
| Derivative contracts | | | 926 | 528 |
--------------------------------------------------------------------------------
| Receivables from customers | | 10,756 | 9,288 |
--------------------------------------------------------------------------------
| Non-life Insurance assets (Note 12) | | 3,018 | 2,809 |
--------------------------------------------------------------------------------
| Investment assets (Note 13) | | 1,821 | 725 |
--------------------------------------------------------------------------------
| Investment in associates | | 2 | 2 |
--------------------------------------------------------------------------------
| Intangible assets (Note 14) | | 1,002 | 999 |
--------------------------------------------------------------------------------
| Property, plant and equipment (PPE) | | 121 | 97 |
--------------------------------------------------------------------------------
| Other assets | | | 1,210 | 1,090 |
--------------------------------------------------------------------------------
| Tax assets | | | | 40 | 18 |
--------------------------------------------------------------------------------
| Total assets | | | 28,473 | 25,922 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Liabilities to financial | | 4,453 | 2,739 |
| institutions | | | |
--------------------------------------------------------------------------------
| Financial liabilities at fair value through | | |
| profit or loss | | |
--------------------------------------------------------------------------------
| Financial assets held for trading | | 887 | 52 |
--------------------------------------------------------------------------------
| Financial liabilities at fair value through | | |
| profit or loss at inception | | |
--------------------------------------------------------------------------------
| Derivative contracts | | | 964 | 548 |
--------------------------------------------------------------------------------
| Liabilities to customers | | | 2,559 | 2,738 |
--------------------------------------------------------------------------------
| Non-life Insurance liabilities (Note 15) | 2,409 | 2,140 |
--------------------------------------------------------------------------------
| Debt securities issued to the public (Note 16) | 12,105 | 12,856 |
--------------------------------------------------------------------------------
| Provisions and other liabilities | | 1,830 | 1,659 |
--------------------------------------------------------------------------------
| Tax liabilities | | | 351 | 371 |
--------------------------------------------------------------------------------
| Subordinated liabilities (Note 17) | | 1,197 | 950 |
--------------------------------------------------------------------------------
| Total liabilities | | | 26,755 | 24,053 |
--------------------------------------------------------------------------------
| Shareholders' equity | | | | |
--------------------------------------------------------------------------------
| Capital and reserves attributable to equity | | |
| holders of the Parent | | |
--------------------------------------------------------------------------------
| Share capital | | | 428 | 428 |
--------------------------------------------------------------------------------
| Reserves | | | 729 | 757 |
--------------------------------------------------------------------------------
| Retained earnings | | | 561 | 685 |
--------------------------------------------------------------------------------
| Total shareholders' equity | | 1,718 | 1,869 |
--------------------------------------------------------------------------------
| Total liabilities and shareholders' equity | 28,473 | 25,922 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Consolidated statement of | | | | |
| changes in equity | | | | |
--------------------------------------------------------------------------------
| EUR million | | | | | | |
--------------------------------------------------------------------------------
| | | | Attributable to equity holders of the Parent | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| | | | Share | Fair | Other | Retained |
| | | | capital | value | reserves | earnings |
| | | | | reserve | | |
--------------------------------------------------------------------------------
| | Minor | Total |
| | ity | equit |
| | inter | y |
| | est | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Balance at 1 January | 428 | 47 | 747 | 607 | 0 | 1,828 |
| 2007 | | | | | | |
--------------------------------------------------------------------------------
| Available-for-sale | | | | | | |
| financial assets | | | | | | |
--------------------------------------------------------------------------------
| Fair value gains and | | -23 | | | | -23 |
| losses | | | | | | |
--------------------------------------------------------------------------------
| Amount transferred to | | 13 | | | | 13 |
| income statement | | | | | | |
--------------------------------------------------------------------------------
| Deferred | | | 3 | | | | 3 |
| taxes | | | | | | | |
--------------------------------------------------------------------------------
| Net income recognised | | -8 | | 0 | | -8 |
| in shareholders' | | | | | | |
| equity | | | | | | |
--------------------------------------------------------------------------------
| Profit for | | | | | 123 | 0 | 123 |
| the period | | | | | | | |
--------------------------------------------------------------------------------
| Total recognised | | -8 | | 123 | 0 | 115 |
| income and expenses | | | | | | |
| for the period | | | | | | |
--------------------------------------------------------------------------------
| Dividends | | | | | | | |
| paid on | | | | | | | |
--------------------------------------------------------------------------------
| Series A | | | | | -104 | | -104 |
| share | | | | | | | |
--------------------------------------------------------------------------------
| Series K | | | | | -27 | | -27 |
| share | | | | | | | |
--------------------------------------------------------------------------------
| Transfer of | | | | 4 | -4 | | 0 |
| reserves | | | | | | | |
--------------------------------------------------------------------------------
| Equity-settled | | | | | | |
| share-based | | | | | | |
| transactions | | | | | | |
--------------------------------------------------------------------------------
| Balance at 30 June | 428 | 39 | 750 | 595 | 0 | 1,813 |
| 2007 | | | | | | |
--------------------------------------------------------------------------------
Attributable to equity holders of the Parent
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| | | | Share | Fair | Other | Retained |
| | | | capital | value | reserves | earnings |
| | | | | reserve | | |
--------------------------------------------------------------------------------
| | Minori | Total |
| | ty | equity |
| | intere | |
| | st | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Balance at 1 January | 428 | 7 | 750 | 685 | 0 | 1,869 |
| 2008 | | | | | | |
--------------------------------------------------------------------------------
| Available-for-sale | | | | | | |
| financial assets | | | | | | |
--------------------------------------------------------------------------------
| Fair value gains and | | -108 | | | | -108 |
| losses | | | | | | |
--------------------------------------------------------------------------------
| Amount transferred to | | 9 | | | | 9 |
| income statement | | | | | | |
--------------------------------------------------------------------------------
| Deferred taxes | | | 26 | | | | 26 |
--------------------------------------------------------------------------------
| Net income recognised in | | -74 | | | | -74 |
| shareholders' equity | | | | | | |
--------------------------------------------------------------------------------
| Profit for the | | | | | 53 | 0 | 53 |
| period | | | | | | | |
--------------------------------------------------------------------------------
| Total recognised income | | -74 | | 53 | 0 | -21 |
| and expenses for the | | | | | | |
| period | | | | | | |
--------------------------------------------------------------------------------
| Dividends paid | | | | | | | |
| on | | | | | | | |
--------------------------------------------------------------------------------
| Series A share | | | | | -104 | | -104 |
--------------------------------------------------------------------------------
| Series K share | | | | | -27 | | -27 |
--------------------------------------------------------------------------------
| Transfer of | | | | 45 | -45 | | 0 |
| reserves | | | | | | | |
--------------------------------------------------------------------------------
| Equity-settled | | | | | | |
| share-based transactions | | | | | | |
--------------------------------------------------------------------------------
| Balance at 30 June 2008 | 428 | -67 | 795 | 561 | 0 | 1,718 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Own funds and capital adequacy | | | | |
--------------------------------------------------------------------------------
| EUR million | | | 31 June | 31 March | 31 Dec |
| | | | 2008 | 2008 | 2007 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Own funds | | | | | | |
--------------------------------------------------------------------------------
| Equity capital | | | 1,718 | 1,703 | 1,869 |
--------------------------------------------------------------------------------
| Minority interest | | | 0 | 0 | 0 |
--------------------------------------------------------------------------------
| Hybrid capital *) | | | 265 | 224 | 224 |
--------------------------------------------------------------------------------
| Intangible assets | | | -143 | -141 | -129 |
--------------------------------------------------------------------------------
| Fair value reserve, excess funding | -46 | -63 | -114 |
| ofpension liability, change in | | | |
| equalisation provision and change in fair | | | |
| value of investment property | | | |
--------------------------------------------------------------------------------
| Dividend distribution proposed by Board | | | -131 |
| of Directors | | | |
--------------------------------------------------------------------------------
| Planned dividend distribution | | -26 | -7 | |
--------------------------------------------------------------------------------
| Insurance company investments 50% | -535 | -535 | -535 |
--------------------------------------------------------------------------------
| Tier 1 capital | | | 1,233 | 1,181 | 1,185 |
--------------------------------------------------------------------------------
| Fair value reserve | | | -67 | -42 | 7 |
--------------------------------------------------------------------------------
| Subordinated liabilities included in | 307 | 299 | 299 |
| upper Tier 2 | | | |
--------------------------------------------------------------------------------
| Subordinated liabilities included in | 657 | 657 | 488 |
| lower Tier 2 | | | |
--------------------------------------------------------------------------------
| Insurance company investments 50% | -535 | -535 | -535 |
--------------------------------------------------------------------------------
| Tier 2 capital**) | | | 362 | 378 | 258 |
--------------------------------------------------------------------------------
| Total own funds ***) | | | 1,595 | 1,559 | 1,443 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Risk-weighted receivables, investments | 14,591 | 14,430 | 13,209 |
| and off-balance-sheet commitments | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Capital adequacy ratio, % | | 10.9 | 10.8 | 10.9 |
--------------------------------------------------------------------------------
| Ratio of Tier 1 to total risk-weighted | 8.5 | 8.2 | 9.0 |
| items, % | | | |
--------------------------------------------------------------------------------
| Capital adequacy ratio under the Act on | 1.31 | 1.24 | 1.30 |
| Supervision of Financial and Insurance | | | |
| Conglomerates | | | |
--------------------------------------------------------------------------------
The Group has calculated its own funds and capital adequacy in compliance with
the new capital adequacy framework, which had an effect on calculating own funds
and risk-weighted items. Comparatives are also presented applying the new
framework.
OP-Pohjola Group's capital adequacy ratio under the Credit Institutions Act
stood at 12.3% and the ratio of Tier 1 to total risk-weighted items at 12.3%.
OP-Pohjola Group's capital adequacy ratio calculated using the consolidation
method, under the Act on the Supervision of Financial and Insurance
Conglomerates, was 1.48.
*) Pohjola Bank plc has five loans under hybrid capital classified as Tier I
capital:
Hybrid capital of 10 billion Japanese yen of which EUR 74 million has been
classified as Tier 1 capital. The loan carries a fixed interest rate of 4.23%
until 2034 and thereafter a variable 6-month Yen LIBOR + 1.58%. If interest
cannot be paid for a given interest period, the obligation to pay interest will
lapse. The loan may be called in at the earliest in 2014.
Hybrid capital of EUR 50 million, which is a perpetual loan without interest
rate step-ups, but with an 8% interest rate cap. Issued on 31 March 2005, the
loan carries an interest rate of 6.5% for the first year. Thereafter, the
interest rate will be CMS 10 years + 0.1%, payable on an annual basis. If
interest cannot be paid for a given interest period, the obligation to pay
interest will lapse. Subject to authorisation by the Financial Supervision
Authority, the loan may be called in at the earliest in 2010.
Hybrid capital of EUR 60 million, which is a perpetual loan. Issued on 30
November 2005, the loan carries a variable interest rate based on 3-month
Euribor + 0.65% until 2015 and thereafter variable 3-month Euribor + 1.65%,
payable on a quarterly basis. If interest cannot be paid for a given interest
period, the obligation to pay interest will lapse. Subject to authorisation by
the Financial Supervision Authority, the loan may be called in at the earliest
in 2015.
Hybrid capital of EUR 40 million, which is a perpetual loan. Issued on 30
November 2005, the loan carries a variable interest rate based on 3-month
Euribor + 1.25%, payable on a quarterly basis. If interest cannot be paid for a
given interest period, the obligation to pay interest will lapse. Subject to
authorisation by the Financial Supervision Authority, the loan may be called in
at the earliest in 2010.
Tier 1 perpetual bond of EUR 50 million. Issued on 17 June 2008, the bond
carries a variable interest rate based on 3-month Euribor + 3.05%, payable on a
quarterly basis. If interest cannot be paid for a given interest period, the
obligation to pay interest will lapse. Subject to authorisation by the Financial
Supervision Authority, the bond may be called in at the earliest in 2013. A
total of EUR 42 million of the bond is included in Tier 1 capital and EUR 8
million in upper Tier 2 capital.
Pohjola Insurance Ltd's perpetual capital bond of EUR 50 million. Issued on 17
June 2008, the bond carries a variable interest rate based on 3-month Euribor +
3.05%, payable on a quarterly basis. Interest which cannot be paid on the
interest payment date and interest which Pohjola Insurance Ltd could not have
paid for previous interest payment dates constitute 'Unpaid interest'. Interest
will accrue on unpaid interest in accordance with the interest rate applicable
to the bonds and this additional interest accrued until each interest payment
date will be added to unpaid interest on the interest payment date in question.
The issuer agrees not to distribute dividends or other profit or to buy back own
shares until unpaid interest has been paid in its entirety. The bond may be
called in at the earliest in 2013 and its principal can be paid back only if the
statutory terms and conditions are fulfilled. The bond will not be taken into
account in the capital adequacy measurement under the Act on Credit Institutions
but can be fully utilised in the capital adequacy measurement of the insurance
company.
**) On 25 March 2008, the Group issued a 10-year debenture loan worth EUR 170
million classified as Tier 2 capital. The loan carries a variable interest based
on 3-month Euribor + 1.90% until 2013 and thereafter 3-month Euribor + 1.50%.
Subject to authorisation by the Financial Supervision Authority, the loan may be
called in at the earliest in 2013.
**) On 3 March 2008, the Group issued a 5-year debenture loan classified as Tier
2 capital and its subscription period expired on 25 April 2008. The loan is
subject to equal annual payments and will expire on 3 March 2013. The loan
carries a fixed interest of 4.10%.
***) Based on special permission given by the Financial Supervision Authority in
accordance with subsection 5, section 75 of the Credit Institutions Act, the
following investments in venture capital funds, totalling EUR 5 million and
managed by Pohjola Capital Partners Ltd, have not been deducted from own funds:
Promotion Equity I Ky, Promotion Capital I Ky, Promotion Bridge I Ky, Suomi
Välirahoitusrahasto I Ky and Suomi Yritysjärjestelyrahasto I Ky.
--------------------------------------------------------------------------------
| Risk exposure by Banking Services |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total exposure by rating category*, EUR billion |
--------------------------------------------------------------------------------
| Rating category | 30 June 2008 | 31 Dec 2007 | Change |
--------------------------------------------------------------------------------
| 1-2 | 4.2 | 3.3 | 0.9 |
--------------------------------------------------------------------------------
| 3-4 | 6.5 | 6.9 | -0.4 |
--------------------------------------------------------------------------------
| 5-6 | 5.3 | 3.1 | 2.2 |
--------------------------------------------------------------------------------
| 7-8 | 3.2 | 3.0 | 0.2 |
--------------------------------------------------------------------------------
| 9-10 | 0.4 | 0.4 | 0.0 |
--------------------------------------------------------------------------------
| 11-12 | 0.1 | 0.1 | 0.0 |
--------------------------------------------------------------------------------
| Non-rated | 0.7 | 0.6 | 0.1 |
--------------------------------------------------------------------------------
| Total | 20.4 | 17.3 | 3.0 |
--------------------------------------------------------------------------------
| *) excl. private customers | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Sensitivity analysis of | | | | | |
| market risk | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Banking, EUR | Risk parameter | Change | 30 June | 31 Dec |
| million | | | 2008 | 2007 |
--------------------------------------------------------------------------------
| Interest-rate | Interest | 1 percentage | 7 | 3 |
| risk | | point | | |
--------------------------------------------------------------------------------
| Currency risk | Market value | 20 percentage | 5 | 1 |
| | | points | | |
--------------------------------------------------------------------------------
| Volatility risk | | | | |
--------------------------------------------------------------------------------
| Interest-rate | Volatility | 20 percentage | 5 | 2 |
| volatility | | points | | |
--------------------------------------------------------------------------------
| Currency | Volatility | 10 percentage | 3 | 1 |
| volatility | | points | | |
--------------------------------------------------------------------------------
| Credit risk | Credit risk | 0.1 percentage | 1 | 1 |
| premium *) | margin | point | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 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. |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Risk exposure by Non-life Insurance | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Risk | | Total amount | Change | Effect on | Effect |
| parameter | | 30 June 2008, | in | combined ratio | on |
| | | EUR million | risk | | share- |
| | | | parame | | holders |
| | | | ter | | ' |
| | | | | | equity, |
| | | | | | EUR |
| | | | | | million |
--------------------------------------------------------------------------------
| Insurance portfolio | 883 | Up 1% | Up 1 percentage | 9 |
| or insurance premium | | | point | |
| revenue | | | | |
--------------------------------------------------------------------------------
| Growth in claims | 611 | Up 1% | Down 1 percentage | -6 |
| incurred | | | point | |
--------------------------------------------------------------------------------
| Major loss of over | | 1 loss | Down 1 percentage | -5 |
| EUR 5 million | | | point | |
--------------------------------------------------------------------------------
| Personnel costs | 106 | Up 8% | Down 1 percentage | -8 |
| | | | point | |
--------------------------------------------------------------------------------
| Expenses by | 257 | Up 4% | Down 1 percentage | -10 |
| function*) | | | point | |
--------------------------------------------------------------------------------
*) Expenses by function in Non-life Insurance excluding expenses for investment
management and expenses for other services rendered
--------------------------------------------------------------------------------
| Risk parameter | Change in risk | Effect on gross | Effect on |
| | parameter | contract | shareholders' |
| | | liabilities, EUR | equity, EUR million |
| | | million | |
--------------------------------------------------------------------------------
| Inflation rate | +0.25 | | 2 | | -2 |
| | percentage | | | | |
| | points | | | | |
--------------------------------------------------------------------------------
| Life expectancy | + 1 year | | 29 | | -29 |
--------------------------------------------------------------------------------
| Discount rate | -0.1 percentage | | 15 | | -15 |
| | point | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Non-life Insurance investment portfolio by allocation | |
--------------------------------------------------------------------------------
| EUR, million | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Portfolio allocation | Fair value | % | Fair value | % |
| | 30 June | | 31 Dec 2007 | |
| | 2008 | | | |
--------------------------------------------------------------------------------
| Money market | 193 | 7 | 51 | 2 |
| instruments | | | | |
--------------------------------------------------------------------------------
| Bonds and bond funds | 1,745 | 67 | 1,722 | 69 |
--------------------------------------------------------------------------------
| Equities | | 367 | 14 | 413 | 16 |
--------------------------------------------------------------------------------
| Alternative | 147 | 6 | 188 | 7 |
| investments | | | | |
--------------------------------------------------------------------------------
| Real property | 136 | 5 | 138 | 5 |
--------------------------------------------------------------------------------
| Total | | 2,587 | 100 | 2,511 | 100 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Non-life Insurance fixed-income portfolio by maturity and credit | |
| rating on 30 June 2008 | |
--------------------------------------------------------------------------------
| EUR, million | | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Year(s) | 0-1 | 1- | 3-5 | 5-7 | 7-10 | 10- | Total | % |
| | | 3 | | | | | | |
--------------------------------------------------------------------------------
| AAA | 66 | 11 | 107 | 55 | 93 | 91 | 526 | 27 % |
| | | 4 | | | | | | |
--------------------------------------------------------------------------------
| AA | 93 | 12 | 86 | 14 | 36 | 24 | 382 | 20 % |
| | | 9 | | | | | | |
--------------------------------------------------------------------------------
| A | 63 | 16 | 256 | 55 | 79 | 80 | 702 | 36 % |
| | | 9 | | | | | | |
--------------------------------------------------------------------------------
| BBB | 46 | 48 | 49 | 20 | 20 | 7 | 191 | 10 % |
--------------------------------------------------------------------------------
| BB+ or lower | 28 | 21 | 9 | 8 | 10 | 17 | 93 | 5 % |
--------------------------------------------------------------------------------
| Internally | 30 | 9 | 3 | 2 | 1 | 1 | 44 | 2 % |
| rated | | | | | | | | |
--------------------------------------------------------------------------------
| Total | 327 | 48 | 510 | 154 | 239 | 220 | 1,938 | 100 |
| | | 9 | | | | | | % |
--------------------------------------------------------------------------------
| The table below shows the sensitivity of investment risks and their | |
| effect of on shareholders' equity: | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Non-life | Risk parameter | | Change | Effect on | |
| Insuranc | | | | shareholders' | |
| e | | | | equity, EUR | |
| | | | | million | |
--------------------------------------------------------------------------------
| | | | | | | 30 June | 31 | |
| | | | | | | 2008 | Dec | |
| | | | | | | | 200 | |
| | | | | | | | 7 | |
--------------------------------------------------------------------------------
| Bonds | | Interest | | 1 percentage | 90 | 69 | |
| and bond | | rate | | point | | | |
| funds1) | | | | | | | |
--------------------------------------------------------------------------------
| Equit | | | Market | | 20 percentage | 67 | 78 | |
| ies | | | value | | points | | | |
| 2) | | | | | | | | |
--------------------------------------------------------------------------------
| Venture | | Market | | 20 percentage | 22 | 23 | |
| capital | | value | | points | | | |
| funds | | | | | | | |
| and | | | | | | | |
| unquoted | | | | | | | |
| equities | | | | | | | |
--------------------------------------------------------------------------------
| Commodit | | Market | | 20 percentage | 5 | 5 | |
| ies | | value | | points | | | |
--------------------------------------------------------------------------------
| Real | | Market | | 10 percentage | 14 | 14 | |
| property | | value | | points | | | |
--------------------------------------------------------------------------------
| Curre | | | Value of | | 20 percentage | 26 | 20 | |
| ncy | | | currency | | points | | | |
--------------------------------------------------------------------------------
| Credit | | Credit | | 0.1 percentage | 3 | 4 | |
| risk | | risk | | points | | | |
| premium | | margin | | | | | |
| 3) | | | | | | | |
--------------------------------------------------------------------------------
| Derivati | | Volatilit | | 20 percentage | 1 | 0 | |
| ves 4) | | y | | points | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 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, excluding government bonds |
| 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. |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Risk exposure by Group function | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total exposure by rating category, EUR billion |
--------------------------------------------------------------------------------
| Rating category | 30 June 2008 | 31 Dec 2007 | Change |
--------------------------------------------------------------------------------
| 1 - 2 | 9.7 | 10.3 | -0.6 |
--------------------------------------------------------------------------------
| 3 - 4 | 0.0 | 0.0 | 0.0 |
--------------------------------------------------------------------------------
| 5 - 6 | 0.0 | 0.0 | 0.0 |
--------------------------------------------------------------------------------
| 7 - 8 | 0.0 | 0.0 | 0.0 |
--------------------------------------------------------------------------------
| 9 - 10 | 0.0 | 0.0 | 0.0 |
--------------------------------------------------------------------------------
| 11 - 12 | 0.0 | 0.0 | 0.0 |
--------------------------------------------------------------------------------
| Non-rated | 0.1 | 0.0 | 0.1 |
--------------------------------------------------------------------------------
| Total | 9.8 | 10.4 | -0.6 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Sensitivity analysis | | | | | | |
| of market risk | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Group | Risk parameter | Change | 30 | 31 Dec | |
| functions, | | | June | 2007 | |
| EU | | | 2008 | | |
| R million | | | | | |
--------------------------------------------------------------------------------
| Interest-rate | Interest rate | 1 percentage | 9 | 15 | |
| risk | | point | | | |
--------------------------------------------------------------------------------
| Interest-rate | Volatility | 20 percentage | 0 | 0 | |
| volatility | | points | | | |
--------------------------------------------------------------------------------
| Credit risk | Credit risk | 0.1 percentage | 11 | 10 | |
| premium *) | margin | points | | | |
--------------------------------------------------------------------------------
| Price risk | | | | | | |
--------------------------------------------------------------------------------
| Equity | Market value | 20 percentage | 3 | 3 | |
| portfolio | | points | | | |
--------------------------------------------------------------------------------
| Private | Market value | 20 percentage | 7 | 6 | |
| equity funds | | points | | | |
--------------------------------------------------------------------------------
| Property risk | Market value | 10 percentage | 2 | 3 | |
| | | points | | | |
--------------------------------------------------------------------------------
| 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 June 2008 | |
--------------------------------------------------------------------------------
| Milj. | | | | | | | | |
| e | | | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Year | 0 - 1 | 1 - 3 | 3 - 5 | 5 - 7 | 7 - 10 | 10 - | Total | % |
--------------------------------------------------------------------------------
| AAA | 240 | 421 | 452 | 189 | 429 | 13 | 1,744 | 29 % |
--------------------------------------------------------------------------------
| AA | 1,633 | 964 | 448 | 129 | 45 | 2 | 3,221 | 54 % |
--------------------------------------------------------------------------------
| A | 184 | 141 | 132 | 9 | 55 | 28 | 549 | 9 % |
--------------------------------------------------------------------------------
| BBB | 0 | 19 | 18 | 0 | 0 | 0 | 37 | 1 % |
--------------------------------------------------------------------------------
| BB+ | 0 | 0 | 0 | 1 | 18 | 0 | 19 | 0 % |
| or | | | | | | | | |
| lower | | | | | | | | |
--------------------------------------------------------------------------------
| Inter | 74 | 187 | 103 | 41 | 11 | 0 | 416 | 7 % |
| nally | | | | | | | | |
| rated | | | | | | | | |
--------------------------------------------------------------------------------
| Total | 2,131 | 1,732 | 1,153 | 369 | 558 | 43 | 5,986 | 100 % |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Consolidated cash flow statement | | | |
--------------------------------------------------------------------------------
| EUR million | | | Q1-Q2/ | Q1-Q2/ |
| | | | 2008 | 2007 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash flow from operating activities | | | |
--------------------------------------------------------------------------------
| Profit for the period | | | 53 | 123 |
--------------------------------------------------------------------------------
| Adjustments to profit for the period | | 255 | 212 |
--------------------------------------------------------------------------------
| Increase (-) or decrease (+) in operating assets | -2,423 | 31 |
--------------------------------------------------------------------------------
| Receivables from financial institutions | 1,136 | 424 |
--------------------------------------------------------------------------------
| Financial assets at fair value through profit or | -699 | 1,227 |
| loss | | |
--------------------------------------------------------------------------------
| Derivative contracts | | | -33 | -38 |
--------------------------------------------------------------------------------
| Receivables from customers | | -1,264 | -835 |
--------------------------------------------------------------------------------
| Non-life Insurance assets | | -314 | -182 |
--------------------------------------------------------------------------------
| Investment assets | | | -1,094 | 29 |
--------------------------------------------------------------------------------
| Other assets | | | -155 | -594 |
--------------------------------------------------------------------------------
| Increase (+) or decrease (-) in operating | 2,468 | 338 |
| liabilities | | |
--------------------------------------------------------------------------------
| Liabilities to financial | | 1,535 | -461 |
| institutions | | | |
--------------------------------------------------------------------------------
| Financial liabilities at fair value through profit | 835 | 0 |
| or loss | | |
--------------------------------------------------------------------------------
| Derivative contracts | | | 51 | 42 |
--------------------------------------------------------------------------------
| Liabilities to customers | | | -179 | 235 |
--------------------------------------------------------------------------------
| Non-life Insurance liabilities | | 82 | 65 |
--------------------------------------------------------------------------------
| Provisions and other liabilities | | 145 | 457 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Income tax paid | | | -24 | -37 |
--------------------------------------------------------------------------------
| Dividends received | | | 22 | 39 |
--------------------------------------------------------------------------------
| A. Net cash from operating activities | 350 | 706 |
--------------------------------------------------------------------------------
| Cash flow from investing activities | | | |
--------------------------------------------------------------------------------
| Acquisition of subsidiaries, net of cash acquired | -37 | |
--------------------------------------------------------------------------------
| Disposal of subsidiaries, net of cash disposed | 0 | 6 |
--------------------------------------------------------------------------------
| Purchase of PPE and intangible assets | -19 | -12 |
--------------------------------------------------------------------------------
| Proceeds from sale of PPE and intangible assets | 5 | 16 |
--------------------------------------------------------------------------------
| B. Net cash used in investing activities | -51 | 10 |
--------------------------------------------------------------------------------
| Cash flow from financing activities | | | |
--------------------------------------------------------------------------------
| Increases in subordinated | | 283 | 148 |
| liabilities | | | |
--------------------------------------------------------------------------------
| Decreases in subordinated liabilities | -35 | -84 |
--------------------------------------------------------------------------------
| Increases in debt securities issued to the public | 11,693 | 16,257 |
--------------------------------------------------------------------------------
| Decreases in debt securities issued to the public | -12,391 | -16,089 |
--------------------------------------------------------------------------------
| Dividends paid | | | -131 | -131 |
--------------------------------------------------------------------------------
| C. Net cash used in financing activities | -580 | 101 |
--------------------------------------------------------------------------------
| Net increase/decrease in cash and cash equivalents | -281 | 817 |
| (A+B+C) | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash and cash equivalents at period-start | 710 | 1,107 |
--------------------------------------------------------------------------------
| Cash and cash equivalents at period-end | 429 | 1,924 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Interest received | | | 1,321 | 861 |
--------------------------------------------------------------------------------
| Interest paid | | | -1,265 | -821 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Adjustments to profit for the period | | | |
--------------------------------------------------------------------------------
| Non-cash transactions | | | |
--------------------------------------------------------------------------------
| Impairments of receivables | | -3 | -1 |
--------------------------------------------------------------------------------
| Unrealised net earnings in Non-life Insurance | 200 | 208 |
--------------------------------------------------------------------------------
| Change in fair value for trading | | 28 | -6 |
--------------------------------------------------------------------------------
| Unrealised net gains on foreign exchange | 1 | -6 |
| operations | | |
--------------------------------------------------------------------------------
| Change in fair value of investment property | -2 | 0 |
--------------------------------------------------------------------------------
| Planned amortisation /depreciation | 32 | 30 |
--------------------------------------------------------------------------------
| Share of associates' profits | | 0 | 0 |
--------------------------------------------------------------------------------
| Other | | | | 0 | -13 |
--------------------------------------------------------------------------------
| Items presented outside cash flow from operating | | |
| activities | | |
--------------------------------------------------------------------------------
| Capital gains, share of cash flow from investing | -1 | 0 |
| activities | | |
--------------------------------------------------------------------------------
| Capital losses, share of cash flow from investing | | 0 |
| activities | | |
--------------------------------------------------------------------------------
| Total adjustments | | | 255 | 212 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Notes | | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 1) Net interest | | | | | | |
| income | | | | | | |
--------------------------------------------------------------------------------
| EUR million | | | Q2/ | Q2/ | Q1-Q2/ | Q1-Q2/ |
| | | | 2008 | 2007 | 2008 | 2007 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Interest income | | | | | | |
--------------------------------------------------------------------------------
| Receivables from financial | 63 | 68 | 128 | 132 |
| institutions | | | | |
--------------------------------------------------------------------------------
| Receivables from customers | | 126 | 92 | 262 | 181 |
--------------------------------------------------------------------------------
| Other | | | | 538 | 386 | 1,056 | 670 |
--------------------------------------------------------------------------------
| Total | | | | 726 | 546 | 1,446 | 983 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Interest | | | | | | |
| expenses | | | | | | |
--------------------------------------------------------------------------------
| Liabilities to financial | | 50 | 23 | 87 | 43 |
| institutions | | | | | |
--------------------------------------------------------------------------------
| Liabilities to customers | | 25 | 18 | 52 | 37 |
--------------------------------------------------------------------------------
| Other | | | | 611 | 473 | 1,232 | 845 |
--------------------------------------------------------------------------------
| Total | | | | 686 | 514 | 1,370 | 925 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total net interest income | | 40 | 32 | 75 | 58 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 2) Impairments of | | | | | |
| receivables | | | | | |
--------------------------------------------------------------------------------
| EUR million | | | Q2/ | Q2/ | Q1-Q2/ | Q1-Q2/ |
| | | | 2008 | 2007 | 2008 | 2007 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Receivables eliminated as loan or | 1 | 3 | 1 | 3 |
| guarantee losses | | | | |
--------------------------------------------------------------------------------
| Recoveries from receivables | 0 | | 0 | |
| eliminated as loan or guarantee | | | | |
| losses | | | | |
--------------------------------------------------------------------------------
| Increase in impairment | | 0 | 1 | 2 | 1 |
| provisions | | | | | |
--------------------------------------------------------------------------------
| Decrease in impairment | | -2 | 3 | -6 | 4 |
| provisions | | | | | |
--------------------------------------------------------------------------------
| Total impairments of | | -1 | 1 | -3 | 0 |
| receivables | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 3) Net income from Non-life | | | | |
| Insurance | | | | |
--------------------------------------------------------------------------------
| EUR million | | | Q2/ | Q2/ | Q1-Q2/ | Q1-Q2/ |
| | | | 2008 | 2007 | 2008 | 2007 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net insurance premium revenue | | | | | |
--------------------------------------------------------------------------------
| Premiums written | | | 227 | 209 | 675 | 642 |
--------------------------------------------------------------------------------
| Insurance premiums ceded to | -7 | -11 | -37 | -40 |
| reinsurers | | | | |
--------------------------------------------------------------------------------
| Change in provision for unearned | 19 | 23 | -198 | -193 |
| premiums | | | | |
--------------------------------------------------------------------------------
| Reinsurers' share | | | -3 | -2 | 16 | 14 |
--------------------------------------------------------------------------------
| Total | | | | 236 | 219 | 456 | 423 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net Non-life Insurance claims | | | | | |
--------------------------------------------------------------------------------
| Claims paid | | | 157 | 126 | 312 | 275 |
--------------------------------------------------------------------------------
| Insurance claims recovered from | -3 | -3 | -8 | -4 |
| reinsurers | | | | |
--------------------------------------------------------------------------------
| Change in provision for unpaid | -4 | 13 | -3 | 15 |
| claims | | | | |
--------------------------------------------------------------------------------
| Reinsurers' share | | | 2 | -2 | 7 | -4 |
--------------------------------------------------------------------------------
| Total | | | | 153 | 136 | 309 | 283 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net investment income, Non-life | | | | |
| Insurance | | | | |
--------------------------------------------------------------------------------
| Interest income | | | 18 | 18 | 36 | 35 |
--------------------------------------------------------------------------------
| Net realised gains and realised fair | | | | |
| value gains and losses | | | | |
--------------------------------------------------------------------------------
| Notes and bonds | | | -6 | -9 | -10 | -28 |
--------------------------------------------------------------------------------
| Shares and participations | | 0 | 10 | 3 | 42 |
--------------------------------------------------------------------------------
| Investment property | | | 0 | 3 | 3 | 3 |
--------------------------------------------------------------------------------
| Other | | | | -3 | 1 | 1 | -3 |
--------------------------------------------------------------------------------
| Unrealised fair value gains and | | | | |
| losses | | | | |
--------------------------------------------------------------------------------
| Investment property | | | 1 | | 3 | |
--------------------------------------------------------------------------------
| Other | | | | 0 | 2 | 1 | 3 |
--------------------------------------------------------------------------------
| Dividend income | | | 6 | 15 | 15 | 33 |
--------------------------------------------------------------------------------
| Total | | | | 16 | 39 | 52 | 85 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Unwinding of discount | | | -10 | -10 | -21 | -19 |
--------------------------------------------------------------------------------
| Other | | | | 2 | 1 | 4 | 2 |
--------------------------------------------------------------------------------
| Total net income from Non-life | 90 | 113 | 181 | 208 |
| Insurance | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 4) Net commissions and | | | | | |
| fees | | | | | |
--------------------------------------------------------------------------------
| EUR million | | | Q2/ | Q2/ | Q1-Q2/ | Q1-Q2/ |
| | | | 2008 | 2007 | 2008 | 2007 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Commission income | | | | | | |
--------------------------------------------------------------------------------
| Lending | | | | 6 | 5 | 12 | 11 |
--------------------------------------------------------------------------------
| Payment transfers | | | 3 | 3 | 6 | 6 |
--------------------------------------------------------------------------------
| Securities brokerage | | | 5 | 6 | 10 | 13 |
--------------------------------------------------------------------------------
| Securities issuance | | | 1 | 4 | 1 | 4 |
--------------------------------------------------------------------------------
| Asset management and legal services | 11 | 14 | 23 | 27 |
--------------------------------------------------------------------------------
| Insurance operations | | | 1 | 1 | 3 | 5 |
--------------------------------------------------------------------------------
| Guarantees | | | 2 | 2 | 4 | 3 |
--------------------------------------------------------------------------------
| Other | | | | 4 | 3 | 8 | 4 |
--------------------------------------------------------------------------------
| Total commission income | | 34 | 38 | 67 | 73 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Commission expenses | | | | | | |
--------------------------------------------------------------------------------
| Payment transfers | | | 0 | 1 | 0 | 1 |
--------------------------------------------------------------------------------
| Securities brokerage | | | 2 | 2 | 3 | 5 |
--------------------------------------------------------------------------------
| Securities issuance | | | 2 | 2 | 3 | 3 |
--------------------------------------------------------------------------------
| Asset management and legal services | 2 | 2 | 4 | 5 |
--------------------------------------------------------------------------------
| Other | | | | 1 | 0 | 2 | 1 |
--------------------------------------------------------------------------------
| Total commission expenses | | 7 | 8 | 13 | 14 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total net commissions and | | 27 | 31 | 55 | 59 |
| fees | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 5) Net trading | | | | | | |
| income | | | | | | |
--------------------------------------------------------------------------------
| EUR million | | | Q2/ | Q2/ | Q1-Q2/ | Q1-Q2/ |
| | | | 2008 | 2007 | 2008 | 2007 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Financial assets and liabilities | | | | |
| held for trading | | | | |
--------------------------------------------------------------------------------
| Capital gains and losses and | | | | |
| realised changes in fair value | | | | |
--------------------------------------------------------------------------------
| Notes and bonds | | | -16 | -9 | -13 | -10 |
--------------------------------------------------------------------------------
| Derivatives | | | 20 | 8 | 29 | 7 |
--------------------------------------------------------------------------------
| Unrealised changes in fair | | | | | |
| value | | | | | |
--------------------------------------------------------------------------------
| Notes and bonds | | | -14 | 2 | -19 | 1 |
--------------------------------------------------------------------------------
| Derivatives | | | 27 | 11 | 10 | 20 |
--------------------------------------------------------------------------------
| Financial assets and liabilities at | | | | |
| fair value through profit or loss | | | | |
--------------------------------------------------------------------------------
| Capital gains and losses and | | | | |
| realised changes in fair value | | | | |
--------------------------------------------------------------------------------
| Notes and bonds | | | 0 | 0 | -1 | 0 |
--------------------------------------------------------------------------------
| Unrealised changes in fair | | | | | |
| value | | | | | |
--------------------------------------------------------------------------------
| Notes and bonds | | | -20 | -12 | -56 | -14 |
--------------------------------------------------------------------------------
| Derivatives | | | 0 | | 0 | |
--------------------------------------------------------------------------------
| Net income from foreign exchange | | | | |
| operations | | | | |
--------------------------------------------------------------------------------
| Currency swaps | | | -42 | -6 | -5 | 6 |
--------------------------------------------------------------------------------
| Other | | | | 43 | 9 | 9 | 0 |
--------------------------------------------------------------------------------
| Total net trading income | | -2 | 3 | -46 | 10 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 6) Net investment income | | | | | |
--------------------------------------------------------------------------------
| EUR million | | | Q2/ | Q2/ | Q1-Q2/ | Q1-Q2/ |
| | | | 2008 | 2007 | 2008 | 2007 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Available-for-sale | | | | | |
| financial assets | | | | | |
--------------------------------------------------------------------------------
| Capital gains and losses | | | | | |
--------------------------------------------------------------------------------
| Shares and participations | | 1 | 12 | 0 | 15 |
--------------------------------------------------------------------------------
| Dividend income | | | 2 | 1 | 7 | 6 |
--------------------------------------------------------------------------------
| Total | | | | 2 | 12 | 7 | 22 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Investment property | | | 1 | 0 | 1 | 1 |
--------------------------------------------------------------------------------
| Total net investment | | 3 | 13 | 9 | 23 |
| income | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 7) Other operating income | | | | | |
--------------------------------------------------------------------------------
| EUR million | | | Q2/ | Q2/ | Q1-Q2/ | Q1-Q2/ |
| | | | 2008 | 2007 | 2008 | 2007 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Central banking service | | 2 | 2 | 5 | 5 |
| fees | | | | | |
--------------------------------------------------------------------------------
| Realisation of repossessed | | 0 | 0 | 0 | 1 |
| items | | | | | |
--------------------------------------------------------------------------------
| Rental income from assets rented | 5 | 3 | 10 | 6 |
| under operating lease | | | | |
--------------------------------------------------------------------------------
| Other | | | | 5 | 19 | 13 | 24 |
--------------------------------------------------------------------------------
| Total | | | | 13 | 24 | 28 | 36 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 8) Personnel | | | | | | |
| costs | | | | | | |
--------------------------------------------------------------------------------
| EUR million | | | Q2/ | Q2/ | Q1-Q2/ | Q1-Q2/ |
| | | | 2008 | 2007 | 2008 | 2007 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Wages and | | | 39 | 37 | 76 | 71 |
| salaries | | | | | | |
--------------------------------------------------------------------------------
| Pension costs | | | 6 | 5 | 12 | 10 |
--------------------------------------------------------------------------------
| Other social | | | 2 | 3 | 5 | 5 |
| expenses | | | | | | |
--------------------------------------------------------------------------------
| Total personnel | | | 47 | 45 | 92 | 86 |
| costs | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 9) Other administrative | | | | | |
| expenses | | | | | |
--------------------------------------------------------------------------------
| EUR million | | | Q2/ | Q2/ | Q1-Q2/ | Q1-Q2/ |
| | | | 2008 | 2007 | 2008 | 2007 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Office expenses | | | 17 | 15 | 33 | 30 |
--------------------------------------------------------------------------------
| IT expenses | | | 12 | 11 | 24 | 22 |
--------------------------------------------------------------------------------
| Telecommunication expenses | | 3 | 3 | 6 | 5 |
--------------------------------------------------------------------------------
| Marketing | | | 4 | 5 | 7 | 7 |
| expenses | | | | | | |
--------------------------------------------------------------------------------
| Other administrative | | 5 | 6 | 10 | 9 |
| expenses | | | | | |
--------------------------------------------------------------------------------
| Total other administrative expenses | 41 | 39 | 79 | 73 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 10) Other operating | | | | | |
| expenses | | | | | |
--------------------------------------------------------------------------------
| EUR million | | | Q2/ | Q2/ | Q1-Q2/ | Q1-Q2/ |
| | | | 2008 | 2007 | 2008 | 2007 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Expenses for property and business | 6 | 7 | 13 | 12 |
| premises in own use | | | | |
--------------------------------------------------------------------------------
| Expenses from realisation of | 0 | 0 | 0 | 1 |
| repossessed items | | | | |
--------------------------------------------------------------------------------
| Non-life Insurance credit | | 2 | 2 | 4 | 5 |
| losses | | | | | |
--------------------------------------------------------------------------------
| Planned amortisation and | | | | |
| depreciation | | | | |
--------------------------------------------------------------------------------
| Amortisation on intangible assets | 9 | 9 | 18 | 18 |
| related to company acquisition | | | | |
--------------------------------------------------------------------------------
| Other | | | | 7 | 6 | 14 | 12 |
--------------------------------------------------------------------------------
| Other*) | | | | 7 | 7 | 13 | 21 |
--------------------------------------------------------------------------------
| Total other operating | | 31 | 31 | 63 | 69 |
| expenses | | | | | |
--------------------------------------------------------------------------------
*) The item includes EUR 10 million in liquidated damages, including interest
and expenses, paid by OKO to savings banks on the basis of an arbitral award.
The liquidated damages were due to the termination of cooperation between
Pohjola and savings banks as a result of combining the operations of OP Bank
Group and Pohjola.
--------------------------------------------------------------------------------
| 11) Financial assets at fair value through profit or loss | |
--------------------------------------------------------------------------------
| EUR million | | | 30 June | 31 |
| | | | 2008 | Dec |
| | | | | 2007 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Financial assets held for | | | |
| trading | | | |
--------------------------------------------------------------------------------
| Notes and bonds | | | 2,974 | 2,220 |
--------------------------------------------------------------------------------
| Shares and participations | | 0 | 0 |
--------------------------------------------------------------------------------
| Financial assets at fair value through profit | | |
| or loss at inception | | |
--------------------------------------------------------------------------------
| Notes and bonds | | | 2,350 | 2,481 |
--------------------------------------------------------------------------------
| Total | | | | 5,324 | 4,701 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 12) Non-life Insurance assets | | | |
--------------------------------------------------------------------------------
| EUR million | | | 30 | 31 Dec |
| | | | June | 2007 |
| | | | 2008 | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Investments | | | | |
--------------------------------------------------------------------------------
| Loans and other receivables | | 78 | 57 |
--------------------------------------------------------------------------------
| Equities | | | | 390 | 444 |
--------------------------------------------------------------------------------
| Property | | | | 83 | 85 |
--------------------------------------------------------------------------------
| Notes and bonds | | | 1,493 | 1,447 |
--------------------------------------------------------------------------------
| Other | | | | 553 | 451 |
--------------------------------------------------------------------------------
| Total | | | | 2,597 | 2,485 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Other assets | | | | |
--------------------------------------------------------------------------------
| Prepayments and accrued income | 26 | 28 |
--------------------------------------------------------------------------------
| Other | | | | | |
--------------------------------------------------------------------------------
| From direct insurance | | 289 | 210 |
--------------------------------------------------------------------------------
| From reinsurance | | | 99 | 74 |
--------------------------------------------------------------------------------
| Cash in hand and at bank | | 8 | 12 |
--------------------------------------------------------------------------------
| Total | | | | 421 | 325 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total Non-life insurance assets | | 3,018 | 2,809 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 13) Investment property | | | | |
--------------------------------------------------------------------------------
| EUR million | | | 30 | 31 Dec |
| | | | June | 2007 |
| | | | 2008 | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Available-for-sale financial assets | | | |
--------------------------------------------------------------------------------
| Notes and bonds | | | 1,706 | 618 |
--------------------------------------------------------------------------------
| Shares and participations | | 89 | 83 |
--------------------------------------------------------------------------------
| Investment property | | | 25 | 24 |
--------------------------------------------------------------------------------
| Total | 1,821 | 725 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 14) Intangible assets | | | | |
--------------------------------------------------------------------------------
| EUR million | | | 30 | 31 Dec |
| | | | June | 2007 |
| | | | 2008 | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Goodwill | | | | 519 | 504 |
--------------------------------------------------------------------------------
| Brands | | | | 179 | 179 |
--------------------------------------------------------------------------------
| Customer relationships | | | 238 | 250 |
--------------------------------------------------------------------------------
| Other | | | | 65 | 66 |
--------------------------------------------------------------------------------
| Total | | | | 1,002 | 999 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 15) Non-life Insurance liabilities | | | |
--------------------------------------------------------------------------------
| EUR million | | | 30 | 31 Dec |
| | | | June | 2007 |
| | | | 2008 | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Insurance contract liabilities | | | |
--------------------------------------------------------------------------------
| Provision for unearned premiums | | 519 | 318 |
--------------------------------------------------------------------------------
| Provision for unpaid claims | | 1,718 | 1,699 |
--------------------------------------------------------------------------------
| Total | | | | 2,237 | 2,017 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Other | | | | 172 | 123 |
--------------------------------------------------------------------------------
| Total | | | | 2,409 | 2,140 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 16) Debt securities issued to the public | | |
--------------------------------------------------------------------------------
| EUR million | | | 30 | 31 Dec |
| | | | June | 2007 |
| | | | 2008 | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Bonds | | | | 5,994 | 7,107 |
--------------------------------------------------------------------------------
| Certificates of | | | 5,960 | 5,640 |
| deposit | | | | |
--------------------------------------------------------------------------------
| Other | | | | 151 | 109 |
--------------------------------------------------------------------------------
| Total | | | | 12,105 | 12,856 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 17) Subordinated liabilities | | | |
--------------------------------------------------------------------------------
| EUR million | | | 30 | 31 Dec |
| | | | June | 2007 |
| | | | 2008 | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Subordinated loans | | | 291 | 193 |
--------------------------------------------------------------------------------
| Other | | | | 906 | 757 |
--------------------------------------------------------------------------------
| Total | | | | 1,197 | 950 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Collateral given | | | | |
--------------------------------------------------------------------------------
| EUR million | | | 30 | 31 Dec |
| | | | June | 2007 |
| | | | 2008 | |
--------------------------------------------------------------------------------
| Given on behalf of own liabilities and | | |
| commitments | | |
--------------------------------------------------------------------------------
| Mortgages | | | 1 | 1 |
--------------------------------------------------------------------------------
| Pledges | | | | 3,180 | 2,631 |
--------------------------------------------------------------------------------
| Other | | | | 388 | 123 |
--------------------------------------------------------------------------------
| Total collateral given | | | 3,569 | 2,755 |
--------------------------------------------------------------------------------
| Total collateralised liabilities | | 1,970 | 564 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Off-balance-sheet commitments | | | |
--------------------------------------------------------------------------------
| EUR million | | | 30 | 31 Dec |
| | | | June | 2007 |
| | | | 2008 | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Guarantees | | | 678 | 570 |
--------------------------------------------------------------------------------
| Other guarantee liabilities | | 1,612 | 1,489 |
--------------------------------------------------------------------------------
| Loan commitments | | | 3,426 | 3,456 |
--------------------------------------------------------------------------------
| Commitments related to short-term trade | 151 | 145 |
| transactions | | |
--------------------------------------------------------------------------------
| Other | | | | 491 | 506 |
--------------------------------------------------------------------------------
| Total off-balance-sheet commitments | 6,359 | 6,167 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Accounts receivable and payable from sale or purchase of assets on behalf of |
| customers |
--------------------------------------------------------------------------------
| EUR million | | | 30 June | 31 Dec | | |
| | | | 2008 | 2007 | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Accounts | | | 70 | 86 | | |
| receivable | | | | | | |
--------------------------------------------------------------------------------
| Accounts | | | 85 | 88 | | |
| payable | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Derivative | | | | | | |
| contracts | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Derivatives held for trading and hedging on 30 | | | |
| June 2008 | | | |
--------------------------------------------------------------------------------
| EUR million | | | | | | |
--------------------------------------------------------------------------------
| | | Nominal values/remaining | Total | Fair values |
| | | term to maturity | | |
--------------------------------------------------------------------------------
| | | <1 year | 1-5 | >5 | | Assets | Liabili |
| | | | years | years | | | ties |
--------------------------------------------------------------------------------
| Interest rate | 46,218 | 42,980 | 10,334 | 99,532 | 712 | 688 |
| derivatives | | | | | | |
--------------------------------------------------------------------------------
| Currency | 13,753 | 1,490 | 1,002 | 16,245 | 142 | 464 |
| derivatives | | | | | | |
--------------------------------------------------------------------------------
| Equity and index | 27 | 317 | 83 | 427 | 36 | 0 |
| derivatives | | | | | | |
--------------------------------------------------------------------------------
| Credit | 157 | 205 | 20 | 383 | 3 | 5 |
| derivatives | | | | | | |
--------------------------------------------------------------------------------
| Other | 0 | 16 | 0 | 16 | 3 | 0 |
| derivatives | | | | | | |
--------------------------------------------------------------------------------
| Total | 60,155 | 45,010 | 11,439 | 116,603 | 896 | 1,157 |
| derivatives | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Derivatives held for trading and hedging on 30 | | | |
| June 2007 | | | |
--------------------------------------------------------------------------------
| EUR million | | | | | | |
--------------------------------------------------------------------------------
| | | Nominal values/remaining term | Total | Fair values |
| | | to maturity | | |
--------------------------------------------------------------------------------
| | | <1 year | 1-5 years | >5 years | | Assets | Liabili |
| | | | | | | | ties |
--------------------------------------------------------------------------------
| Interest rate | 43,163 | 24,644 | 9,673 | 77,480 | 459 | 410 |
| derivatives | | | | | | |
--------------------------------------------------------------------------------
| Currency | 8,223 | 1,740 | 1,251 | 11,215 | 43 | 179 |
| derivatives | | | | | | |
--------------------------------------------------------------------------------
| Equity and | 31 | 216 | 28 | 275 | 46 | 0 |
| index | | | | | | |
| derivatives | | | | | | |
--------------------------------------------------------------------------------
| Credit | | 131 | | 131 | 0 | 1 |
| derivatives | | | | | | |
--------------------------------------------------------------------------------
| Other | 8 | 7 | | 15 | 1 | |
| derivatives | | | | | | |
--------------------------------------------------------------------------------
| Total | 51,425 | 26,739 | 10,953 | 89,116 | 550 | 589 |
| derivatives | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Other contingent liabilities and | | | | |
| commitments | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| On 30 June 2008, Pohjola Bank's commitments to venture capital funds |
| amounted to EUR 22 million and Pohjola Non-Life's commitments to EUR 62 |
| million. They are included in the section 'Off-balance-sheet commitments'. |
--------------------------------------------------------------------------------
| Related-party transactions | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Pohjola Bank Group's related parties comprise its parent company, associates |
| and administrative personnel and other related-party companies. Pohjola Bank |
| Group's Parent Company is OP-Pohjola Group Central Cooperative. |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Pohjola Bank Group's associates were Autovahinkokeskus Oy and Vahinkopalvelu |
| Oy on 30 June 2008 and on 30 June 2007. |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Pohjola Bank Group's administrative personnel comprises Pohjola Bank's |
| President and CEO, his deputy, members and deputy members of the Board of |
| Directors and their close family members. |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Normal loan terms and conditions apply to loans granted to the management. |
| Tied to generally used reference rates, these loans with normal collateral |
| are repaid according to the agreed repayment schedule. |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Other related-party entities include OP Pension Fund, OP Pension Foundation |
| and sister companies within OP-Pohjola Group Central Cooperative |
| Consolidated. |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Related-party transactions by 30 June | | | |
| 2008 | | | |
--------------------------------------------------------------------------------
| EUR million | | | | | |
--------------------------------------------------------------------------------
| | | | Parent | Consoli- | Admini-st | Others |
| | | | company | dated | rative | |
| | | | | associa | personnel | |
| | | | | tes | | |
--------------------------------------------------------------------------------
| Loans | | | 141 | | | 1,435 |
--------------------------------------------------------------------------------
| Other receivables | | 166 | | | 251 |
--------------------------------------------------------------------------------
| Deposits | | | 8 | | | 210 |
--------------------------------------------------------------------------------
| Other liabilities | | 3 | | | 99 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Interest income | | 1 | | | 120 |
--------------------------------------------------------------------------------
| Interest expenses | | 3 | | | 88 |
--------------------------------------------------------------------------------
| Dividend income | | 0 | | | 5 |
--------------------------------------------------------------------------------
| Other Non-life Insurance | 1 | | | |
| income | | | | |
--------------------------------------------------------------------------------
| Commission income | | 0 | | 0 | 11 |
--------------------------------------------------------------------------------
| Commission expenses | | 1 | | 0 | 1 |
--------------------------------------------------------------------------------
| Trading income | | | | | 32 |
--------------------------------------------------------------------------------
| Trading expenses | | | | | 37 |
--------------------------------------------------------------------------------
| Other operating | | 5 | | | 7 |
| income | | | | | |
--------------------------------------------------------------------------------
| Operating expenses | | 38 | | | 4 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Off-balance-sheet commitments | | | | |
--------------------------------------------------------------------------------
| Guarantees | | | | | 55 |
--------------------------------------------------------------------------------
| Irrevocable commitments | 0 | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Salaries and other short-term | | | | |
| benefits, and | | | | |
| performance-based pay | | | | |
--------------------------------------------------------------------------------
| Salaries and short-term | | | 1 | |
| benefits | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Related-party | | | | | |
| holdings | | | | | |
--------------------------------------------------------------------------------
| Number of shares | 60,825,8 | | 63,421 | 4,205,946 |
| | 97 | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Related-party transactions by 30 June | | | |
| 2007 | | | |
--------------------------------------------------------------------------------
| EUR million | | | | | |
--------------------------------------------------------------------------------
| | | | Parent | Consoli- | Admini-st | Others |
| | | | company | dated | rative | |
| | | | | associa | personnel | |
| | | | | tes | | |
--------------------------------------------------------------------------------
| Loans | | | 27 | | | 1,588 |
--------------------------------------------------------------------------------
| Other receivables | | 85 | | | 71 |
--------------------------------------------------------------------------------
| Deposits | | | 3 | | | 118 |
--------------------------------------------------------------------------------
| Other liabilities | | 6 | | | 44 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Interest income | | 2 | | | 87 |
--------------------------------------------------------------------------------
| Interest expenses | | 3 | | | 34 |
--------------------------------------------------------------------------------
| Dividend income | | | | | 4 |
--------------------------------------------------------------------------------
| Commission income | | 1 | | 0 | 14 |
--------------------------------------------------------------------------------
| Commission expenses | | 1 | | 0 | 1 |
--------------------------------------------------------------------------------
| Trading income | | | | | 1 |
--------------------------------------------------------------------------------
| Trading expenses | | | | | 6 |
--------------------------------------------------------------------------------
| Other operating | | 4 | | | 6 |
| income | | | | | |
--------------------------------------------------------------------------------
| Operating expenses | | 29 | | | 1 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Off-balance-sheet commitments | | | | |
--------------------------------------------------------------------------------
| Guarantees | | | | | 35 |
--------------------------------------------------------------------------------
| Irrevocable commitments | 8 | | | 102 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Salaries and other short-term | | | | |
| benefits, and | | | | |
| performance-based pay | | | | |
--------------------------------------------------------------------------------
| Salaries and short-term | | | 1 | |
| benefits | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Related-party | | | | | |
| holdings | | | | | |
--------------------------------------------------------------------------------
| Number of shares | | 60,825,8 | | 67,778 | 4,220,946 |
| | | 97 | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| The Interim Report for 1 January-30 June 2008 was prepared according to IAS |
| 34 (Interim Financial Reporting), as approved by the EU. |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| The Financial Statements 2007 contain a description of the accounting |
| policies applied by Pohjola Bank Group. |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| The Interim Report has been reviewed by the auditors. Since all figures in |
| this Interim Report are rounded off, the sum of single figures may differ |
| from the presented sum total. |
--------------------------------------------------------------------------------
Financial reporting in 2008
Pohjola Bank will publish its Interim Report Q3 at around 8.00 am on 6 November
2008.
Helsinki, 7 August 2008
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.
Meeting for analysts
A meeting for analysts will be held in Finnish at 10.00 am on 7 August 2008 and
a conference call in English on the same day at 3.30 pm, telephone +358 20
699100, PIN-code 911239#.
Pohjola Bank plc
Markku Koponen
Senior Vice President
DISTRIBUTION
OMX Nordic Exchange Helsinki
London Stock Exchange
SWX Swiss Exchange
Major media
www.pohjola.fi
For additional information, please contact
Mr Mikael Silvennoinen, President and CEO, tel. +358 10 252 2549
Mr Ilkka Salonen, CFO, tel. +358 10 252 3146
Pasi Laaksonen, Senior Vice President, Corporate Planning and IR, tel. +358 010
252 2217
Report on review of Pohjola Bank plc's Interim Report for the period 1
January-30 June 2008
To Pohjola Bank plc's Board of Directors
Introduction
We have reviewed the consolidated balance sheet as of 30 June 2008, the income
statement, the statement of changes in equity and the cash flow statement of
Pohjola Bank plc for the six-month period then ended, as well as a summary of
significant accounting policies and other explanatory notes to the financial
statements. The Board of Directors and the President and CEO are responsible for
the preparation and fair presentation of this interim financial information in
accordance with the International Financial Reporting Standards (IFRS), as
adopted by the EU, and other Finnish rules and regulations governing the
preparation of interim reports. Based on our review, we express an opinion on
this half-year interim report in accordance with chapter 2, section 5a,
subsection 7 of the Finnish Securities Markets Act.
Scope of review
We conducted our review in accordance with the Standard on Review Engagements
2410, Review of Interim Financial Information Performed by the Independent
Auditor of the Entity. A review of interim financial information consists of
making inquiries, primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with the
standards on auditing and other generally accepted auditing practices, and
therefore the procedures performed in a review do not enable to obtain a level
of assurance that would make us aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.
Opinion
Based on our review, nothing has been come to our attention that causes us to
believe that the half-year Interim Report does not give a true and fair view of
the entity's financial position as of 30 June 2008 and the result of its
operations and cash flows for the six-month period then ended, in accordance
with the International Financial Reporting Standards (IFRS), as adopted by the
EU, and other applicable rules and regulations governing interim financial
reporting preparation in Finland.
Helsinki, 7 August 2008
KPMG OY AB
Sixten Nyman
Authorised Public Accountant
Raimo Saarikivi
Authorised Public Accountant
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