2012-10-31 07:00:00 CET
2012-10-31 07:04:02 CET
REGULATED INFORMATION
Pohjola Pankki Oyj - Interim report (Q1 and Q3)
Pohjola Bank Plc Interim Report for January-September 2012
Pohjola Bank plc
Stock exchange release 31 October 2012, 8.00 am (UT +3)
Interim Report
Pohjola Bank Plc Interim Report for January-September 2012
- Consolidated earnings before tax came to EUR 282 million (245) and
consolidated earnings before tax at fair value amounted to EUR 606 million (65).
Return on equity at fair value stood at 25.0% (2.5). Core Tier 1 ratio improved
to 10.7%.
- Earnings before tax recorded by Banking improved to EUR 163 million (135).
These included EUR 34 million (36) in impairment charges for receivables. The
loan portfolio increased by 7% from its level on 31 December 2011. The average
corporate loan portfolio margin stood at 1.48% (1.34).
- Within Non-life Insurance, insurance premium revenue rose by 9%. The combined
ratio was 97.1% (91.5). Excluding the changes in reserving bases and
amortisation on intangible assets arising from company acquisition, the
operating combined ratio stood at 89.0% (89.4). Return on investments at fair
value was 8.6% (-1.8).
- Earnings before tax posted by Asset Management amounted to EUR 17 million (19)
and assets under management were EUR 32.0 billion (31.3) at the end of the
reporting period.
- Pohjola initiated a reorganisation programme with the aim of achieving annual
cost savings of around EUR 50 million by the end of 2015.
- Pohjola revised its financial targets when it adopted its updated strategy.
More detailed information on the financial targets can be found in "Events after
the balance sheet date" in interim report.
- Outlook towards the year end: Consolidated earnings before tax for 2012 are
expected to be substantially higher than in 2011. It is estimated that the Non-
life Insurance combined ratio will vary between 89% and 92% (previous estimate:
89-94%). For more detailed information on outlook, see "Outlook towards the year
end" below.
July-September
- Consolidated earnings before tax were EUR 79 million (47). A reduction in the
discount rate for technical provisions related to pension liabilities eroded
earnings by EUR 52 million while higher-than-usual realised investment income
improved earnings. Consolidated earnings before tax at fair value came to EUR
173 million (-101) and return on equity at fair value stood at 20.4% (-13.6).
- Earnings before tax recorded by Banking totalled EUR 42 million (43). These
included EUR 15 million (1) in impairment charges on receivables. The loan
portfolio increased by 1% and the average margin of the corporate loan portfolio
rose by 5 basis points.
- Within Non-life Insurance, insurance premium revenue rose by 11%. The combined
ratio stood at 101.8% (87.2) while the operating combined ratio was 82.3%
(85.2). Return on investments at fair value was 3.0% (-2.8).
- Earnings before tax posted by Asset Management amounted to EUR 5 million (6).
Comparatives deriving from the income statement are based on figures reported
for the corresponding period a year ago. Unless otherwise specified, balance-
sheet and other cross-sectional figures on 31 December 2011 are used as
comparatives.
Earnings before Q1-3/ Q1-3/ Change Q3/ Q3/ Change
tax, EUR million 2012 2011 % 2012 2011 %
2011
-----------------------------------------------------------------------------
Banking 163 135 20 42 43 -2 198
Non-life
Insurance 82 71 16 27 3 925 8
Asset 17 19 -14 5 6 -13 27
Management
Group Functions 20 20 4 4 -4 24
Total 282 245 15 79 47 67 258
Change in fair
value reserve 324 -180 94 -148 -180
Earnings before
tax at fair value 606 65 831 173 -101 78
Earnings per
share, € 0.68 0.57 0.19 0.11 0.67
Equity per share,
€ 8.26 7.12 7.22
Average personnel 3,424 3,135 3,439 3,247 3,189
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Q1-3/ Q1-3/ Q3/ Q3/
Financial targets 2012 2011 2012 2011 2011 Target
-------------------------------------------------------------------------------
Return on equity at fair
value, % 25.0 2.5 20.4 -13.6 3.1 13.0
Tier 1 ratio, % 12.5 11.0 10.6 >9.5
Core Tier 1 ratio, % 10.7 10.2 10.3
Operating cost/income ratio by
Banking, % 35 37 38 41 35 <40
Operating combined ratio, % 89.0 89.4 82.3 85.2 89.8 92.0
Operating expense ratio, % 21.8 20.6 19.4 18.9 21.8 <20
Solvency ratio, % 85 81 77 70
Operating cost/income ratio by
Asset Management, % 54 49 54 49 49 <50
AA rating affirmed by at least
two credit rating agencies 2 3 2 > 2
Dividend payout ratio a
minimum of 50%, provided that
Tier 1 > 9.5% 60 >50
-------------------------------------------------------------------------------
President and CEO Mikael Silvennoinen:
Our business at operational level made good progress during the third quarter.
We continued to strengthen our position among customers. Non-life Insurance
experienced a record growth in the number of loyal customer households in
January-September.
Consolidated earnings before tax for both July-September and January-September
were higher than a year ago.
Within Banking, the loan portfolio continued to grow but not as fast as in the
previous two quarters. The average corporate loan margin rose to 1.48% at the
end of September. Insurance premium revenue continued to increase strongly and
Non-life Insurance showed good operating profitability. Within Asset Management,
assets under management rebounded during the third quarter in the wake of
favourable market developments.
Although the Group has this year made progress as planned, we still have reason
and scope for streamlining our operations. Low interest rates will restrict
income growth and a more rigorous financial regulatory framework and new bank
taxes will increase our costs as early as next year. In order to ensure our
competitiveness and service capabilities during the time of slow economic
growth, low interest rates and increasing costs, Pohjola initiated an
Information and Consultation process and a reorganisation programme in the third
quarter, with the aim of achieving annual cost savings of roughly EUR 50 million
by the end of 2015.
In late October, Pohjola's Board of Directors approved Pohjola's updated
strategy. The updated strategy highlights the following: improving customer
experience, seeking more targeted growth in order to improve return on capital,
making more efficient use of OP-Pohjola Group's competitive advantages and
strengths, improving efficiency and increasing capital adequacy ratios. The
Board of Directors also adopted the Group's new financial targets aiming at
higher profitability and efficiency and a stronger capital base. The revised
financial targets can be found on page 20 in interim report.
Pohjola will hold its Capital Markets Day on 21 November 2012, where it will
present its updated strategy and revised financial targets in greater detail.
Outlook towards the year end
Within Banking, the loan portfolio is expected to continue to grow during the
rest of 2012. For the year as a whole, the loan portfolio is expected to grow at
the same rate as in 2011 when the rate was 9%. The average corporate loan
portfolio margin is expected to remain at least at its current level. The
operating environment for the corporate sector will remain challenging. The
greatest uncertainties related to Banking's financial performance in 2012 are
associated with future impairment loss on the loan portfolio.
Insurance premium revenue is expected to increase at an above-the-market-average
rate. The operating combined ratio for the full year 2012 is estimated to vary
between 89% and 92% (previously 89-94) if the number of large claims is not much
higher than in 2011. Expected investment returns are largely dependent on
developments in the investment environment. The most significant uncertainties
related to Pohjola Insurance's financial performance in 2012 pertain to the
investment environment and the effect of large claims on claims expenditure.
The greatest uncertainties related to Asset Management's financial performance
in 2012 are associated with the actual performance-based fees tied to the
success of investments and the amount of assets under management.
The key determinants affecting the Group Functions' financial performance
include net interest income arising from assets in the liquidity buffer, any
capital gains or losses on notes and bonds and any impairment charges that may
be recognised on notes and bonds in the income statement.
Consolidated earnings before tax in 2012 are expected to be markedly higher than
in 2011.
The treatment of insurance company investments in capital adequacy measurement
has a major effect on Pohjola Group's capital adequacy. The related regulatory
framework, based on the CRD IV, which is currently being revised, is expected to
be specified during 2012.
There is still great uncertainty about the economic outlook and the operating
environment. A major risk that may undermine the economic outlook is the
exacerbation of the fiscal crisis in certain euro countries. The crisis with its
repercussions may have a significant impact on the entire financial sector's
operating environment.
All forward-looking statements in this report expressing the management's
expectations, beliefs, estimates, forecasts, projections and assumptions are
based on the current view of the future development in the operating environment
and the future financial performance of Pohjola Group and its various functions,
and actual results may differ materially from those expressed in the forward-
looking statements
Helsinki, 31 October 2012
Pohjola Bank plc
Board of Directors
This Interim Report is available at www.pohjola.com > Media > Releases, where
background information on the Bulletin can also be found.
Analyst meeting, conference call and live webcast
Pohjola will hold a briefing in English for analysts and investors on 31 October
starting at 3.00 pm Finnish time, EET (2.00 pm CET, 1.00 pm UK time, 8am US
EST). The briefing is a combined analyst meeting, conference call and live
webcast.
Analysts and investors may attend the briefing in one of the following two ways:
1) By viewing the briefing as live webcast via the internet. The link will be
available on the IR website before the briefing begins. Questions on the
internet are welcome via a question button available in the webcast window. An
on-demand webcast of the briefing can be viewed via the IR website afterwards.
2) By dialling one of the regional conference call numbers shown below.
Questions are welcome by telephone in the Q&A session according to instructions.
To participate via a conference call, please dial in 5-10 minutes before the
beginning of the event:
FI: 09 23 11 328
US: 1 86 6682 8490
UK: 08 445 718 957
International: +44 (0) 1452 555131
Password: Pohjola
Press conference
Mikael Silvennoinen, Pohjola Bank plc's President and CEO, will present the
financial results in a press conference on OP-Pohjola Group's premises
(Teollisuuskatu 1b, Vallila, Helsinki), on 31 October, starting at noon.
Capital Markets Day 2012
Pohjola will hold its Capital Markets Day for analysts and investors in London
on Wednesday, 21 November 2012. The event will cover Pohjola's updated strategy
and financial targets. It can also be viewed as live webcast via the internet.
More information on the CMD can be found at www.pohjola.com > Investor
Relations.
Financial reporting in 2013
Schedule for Financial Statements Bulletin for 2012 and Interim Reports in 2013:
Financial Statements Bulletin 2012 6 February 2013
Interim Report Q1/2013 2 May 2013
Interim Report H1/2013 31 July 2013
Interim Report Q1-3/2013 October 2013
DISTRIBUTION
NASDAQ OMX Helsinki Ltd
London Stock Exchange
SIX Swiss Exchange
Major media
www.pohjola.com, www.op.fi
For additional information, please contact
Mikael Silvennoinen, President and CEO, tel. +358 (0)10 252 2549
Vesa Aho, CFO, tel. +358 (0)10 252 2336
Niina Pullinen, Senior Vice President, Investor Relations, tel. +358 (0)10
252 4494
Pohjola Bank plc is a Finnish financial services group which provides its
customers with banking, non-life insurance and asset management services. Our
mission is to promote the prosperity, security and wellbeing of our customers.
Profitable growth and an increase in company value form our key objectives.
Pohjola Group serves corporate customers in Finland and abroad by providing an
extensive range of financial, investment, cash-management and non-life insurance
services. We offer non-life insurance and private banking services to private
customers. Pohjola Series A shares have been listed on the Large Cap List of the
NASDAQ OMX Helsinki since 1989. The number of shareholders totals around
34,000. Pohjola's consolidated earnings before tax came to 258 million euros in
2011 and the balance sheet total amounted to 41 billion euros on 31 December
2011. Pohjola is part of OP-Pohjola Group, the leading financial services group
in Finland with over four million customers.
www.pohjola.com
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