Pohjola Pankki Oyj - Interim report (Q1 and Q3)

OP-Pohjola Group with a strong start to 2014

OP-Pohjola Group
Stock Exchange Release 29 April 2014 at 8.00 am (EEST)
Interim Report

OP-Pohjola Group with a strong start to 2014
  * OP-Pohjola Group's earnings before tax for the first quarter of 2014 were
    EUR 257 million (234). This was the second-best result reported ever for any
    quarter.
  * All three business segments improved their year-on-year earnings. Banking's
    earnings before tax increased by 64%, those of Wealth Management by 18% and
    those of Non-life Insurance by 12%.
  * Net interest income continued growing, being 17% higher than a year ago.
    Total income increased by 7%.
  * Expenses excluding direct expenses caused by the purchase of Pohjola Bank
    plc shares increased by 3.7%.
  * Common Equity Tier 1 (CET1) ratio was 15.5 %. Capital adequacy decreased as
    a result of the purchase of Pohjola Bank plc shares.
  * The Group's loan portfolio increased by 3.7% in the year to March, deposits
    by 3.5%, mutual fund assets by 12% and Non-life Insurance premium revenue by
    8%.
  * The number of joint banking and non-life insurance customers increased by
    93,000 in the year to March.
  * The number of OP-mobile users increased during the first quarter by 21% to
    368,000.
  * Earnings before tax 2014 are expected to be higher than in 2013. For more
    details, see " Outlook towards the year end" below.
  * OP-Pohjola Group Central Cooperative published a plan on 6 February 2014 to
    increase its ownership of Pohjola Bank plc shares to 98%, and reached this
    figure in late April. For more details about the purchase of Pohjola Bank
    plc shares and its effects, see "OP-Pohjola Group's tender offer for Pohjola
    Bank shares" below.

OP-Pohjola Group's key indicators
-------------------------------------------------------------------------------
                                       Q1/2014     Q1/2013 Change %  Q1-Q4/2013
-------------------------------------------------------------------------------
 Earnings before tax, EUR million          257         234     10,0         701

    Banking                                160          98     63,5         404

    Non-life Insurance                      62          56     12,3         166

    Wealth Management                       67          57     18,2         113



 Returns to owner-members and OP            49          48      2,8         193
 bonus customers



                                   31 Mar 2014 31 Mar 2013 Change % 31 Dec 2013

 Common Equity Tier 1 (CET1)              15.5        14.6                 17.3
 ratio, % / Core Tier 1**

 Ratio of capital base to minimum         2.00        1.85                 1.90
 amount of capital base (under the
 Act on the Supervision of
 Financial and Insurance
 Conglomerates)

 Ratio of receivables more than           0.41        0.51   -0.10*        0.42
 90 days overdue to loan and
 guarantee portfolio , %

 Joint banking and insurance             1,535       1,442      6.5       1,518
 customers (1,000)
-------------------------------------------------------------------------------
* Change in ratio
** The comparatives are presented based on the regulatory framework effective
before 1 January 2014.


Comments on Q1/2014 by Reijo Karhinen, Executive Chairman and CEO

OP-Pohjola Group had a very strong start to 2014. The first quarter was
historically good and eventful quarter both in terms of our earnings and the
development of our structure. Banking improved its earnings significantly and
Non-life Insurance and Wealth Management improved their earnings too. At the
same time, delisting Pohjola shares has fully proceeded as planned.

Exceptionally strong growth in our volumes reported in recent years lies behind
our good first-quarter earnings. During the last three years, growth of our
Banking has annually accounted for half of the growth in the entire sector. The
strongly increased deposit and loan portfolios are now generating better net
interest income and earnings. At the same time, however, it must be noted that
the growth rate of total loans has rapidly slowed down in the financial sector
in recent months. The caution of companies in fixed investments that has
continued for quite a long time now also spread to households during the
reporting period. The early 1990s were the last time when the home loan market
was as quiet as it is now.

Growth in expenses eroded our good earnings performance. In addition to volume
growth, the growth in expenses were affected by our active efforts in product
and service development and several structural reforms that were underway and
the resulting, mostly non-recurring expenses recognised. We will continue to
make dedicated efforts to achieve our target at Group level that requires zero-
growth in expenses. In addition, the predictable, slowing income generation as a
result of weaker demand for loans will require tight cost control.

In addition to our good earnings performance, I am extremely satisfied with our
progress in Non-life Insurance on a long-term basis. The most recent market
share figures for this spring prove that we have managed to truly increase our
market share in relation to our competitors. We have become a clear market
leader, leaving the number two player behind with five percentage points. This
is an excellent proof of the fact that rewarding our customers according to our
customer promise bears fruit, and the number of joint banking and insurance
customers is increasing.

We are now undergoing a major transformation within OP-Pohjola. Our strong
belief in the future and customer ownership lies behind our major principleddecisions made in February. Identifying our customers' changing needs and wishes
is at the core of everything. We need to have the courage to challenge the past,
structures while improving the awareness of digital technology and invest in the
availability of services. OP-Pohjola has put smooth customer service on a daily
basis and customer satisfaction at the core of all operations.

We will continue to simplify our structures, streamline our management system
and improve our operational dynamics and efficiency through several development
initiatives according to the statements that we published in early February. OP-
Pohjola's new beginning aims at a transforming financial services group where
customers have a stronger position and our competitiveness is better.

Economic and geopolitical uncertainty keeps the euro area and especially Finland
in the grip. There is no reason to downplay challenges and the ongoing
nervousness. The Finnish economy has, however, all conditions for a growth path.
Finland should turn its deep crisis awareness into trust. The persistent gloomy
mood has made consumers and companies overly cautious.

Instead of the crisis awareness justifiably created during the autumn and
winter, we now need trust and the inspiring spirit in Finland which will bring
the economy back to its growth path. Finland only has a lot of untapped
resources. The Finnish economic policy has moved in the right direction
recently. This is the course that we must stay. Together with a slight recovery
and new business initiatives, Finland can be taken on a growth path. All
constructive initiatives for growth creation are welcome. Through our efforts at
OP-Pohjola, we have proved that Finnish economic growth is not dependent on the
availability of financing.

Financial performance in the report period

OP-Pohjola Group's earnings before tax were EUR 257 million (234). This was the
second-best quarterly result of all time in the Group's history. Earnings were
improved especially because of higher net interest income and net commissions
and fees and the fact that Non-life Insurance's premiums written grew at a
higher rate than the claims expenditure. Wealth Management earnings before tax
improved as a result of an increase in net investment income and net commissions
and fees. However, the Group's performance was eroded by higher expenses.

Net interest income increased by 17% year on year as interest rates stabilised,
the average level of loan portfolio margins increased and the loan portfolio
grew. Compared with the previous quarter, the net interest income was almost 2%
higher.

The Group's expenses increased by 5.7%. A non-recurring EUR 8 million expense
related to the tender offer for Pohjola Bank plc shares was recognised under
'Other operating expenses' during the report period.  Excluding these tender
offer expenses, the Group's expenses would have risen by 3.7%.

Thanks to efficiency-enhancement measures and outsourcing of ICT services, the
Group's personnel costs decreased by 7.5%. Outsourcing and the reform of related
operating models, on the other hand, increased ICT costs.

OP-Pohjola Group's fair value reserve before tax totalled EUR 403 million (409)
at the end of the report period. Earnings before tax at fair value amounted to
EUR 251 million (209).

Bonuses to owner-members and OP bonus customers recognised in the income
statement increased by 3.2% year on year to EUR 46 million (45).

Outlook towards the year end

The world economy is expected to grow during 2014 but at a slower rate than
average. The euro area and Finnish economies are also expected to recover
slowly. The crisis in Ukraine has nevertheless made predictions less and less
reliable and increased the risk of less favourable developments. A deepening of
the crisis in Ukraine may have significant repercussions for the Finnish
economy.

As a result of the slowly recovering economy, the operating environment in the
financial sector is gradually becoming more stable although historically low
interest rates will continue to erode banks' net interest income and weaken
insurance institutions' investment income. Uncertainty about economic
development also reduces growth expectations in the financial sector. Changes in
the operating environment and the more rigorous regulatory framework will
highlight even more the role of measures to strengthen the capital base and
improve profitability.

Unless the operating environment turns out to be considerably weaker than
expected, OP-Pohjola Group's earnings before tax are expected to be higher than
in 2013. The most significant uncertainties affecting earnings in 2014 relate to
the rate of business growth, impairment loss on receivables and changes in the
investment 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 developments in the economy, and actual results may
differ materially from those expressed in the forward-looking statements.

Press conference
OP-Pohjola Group's financial performance will be presented to the media by
Executive Chairman and CEO Reijo Karhinen in a press conference on 29 April
2014 at 12 noon at Vääksyntie 4, Vallila, Helsinki.


Pohjola Bank plc will publish its own Interim Report.


Financial reporting in 2014

Schedule for Interim Reports in 2014:

Interim Report H1/2014: 6 August 2014
Interim Report Q1-3/2014: 29 October 2014

OP-Pohjola Group Central Cooperative
Executive Board


ADDITIONAL INFORMATION
Reijo Karhinen, Executive Chairman and CEO, tel. +358 (0)10
252 4500
Harri Luhtala, CFO, tel. +358 (0)10 252 2433

Carina Geber-Teir, Chief Communications Officer, tel. +358 (0)10 252 8394



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


OP-Pohjola Group is Finland's leading financial services group providing a
unique range of banking, investment and insurance services. The Group's mission
is to promote the prosperity, well-being and security of its owner-members,
customers and operating regions through its local presence. Its objective is to
offer the best and most versatile package of loyal customer benefits on the
market. OP-Pohjola Group consists of some 180 member cooperative banks and the
Group's central institution, OP-Pohjola Group Central Cooperative, with its
subsidiaries and closely-related companies, the largest of which is the listed
company Pohjola Bank plc. The Group has a staff of 12,000. OP-Pohjola Group
posted earnings before tax of EUR 705 million in 2013 and had total assets of
EUR 101 billion on 31 December 2013. The Group has 4.3 million customers.

www.op.fi

[HUG#1780719]

Attachments:

OP-Pohjola Group Q1 2014 background material.pdf

OP-Pohjola Interim Report Q1_ 2014.pdf