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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 2012Pohjola 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 ----------------------------------------------------------------------------- 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 [HUG#1653816] |
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