2014-08-06 07:00:00 CEST
2014-08-06 07:01:21 CEST
REGULATED INFORMATION
Pohjola Pankki Oyj - Interim report (Q1 and Q3)
Pohjola Group Performance for January-June
Pohjola Bank plc
Stock exchange release 6 August 2014, 8.00 am
Interim Report
Pohjola Group Performance for January-June
- Consolidated earnings before tax amounted to EUR 336 million (254) and
consolidated earnings before tax at fair value to EUR 393 million (179). The
return on equity was 17.2% (13.9). The Common Equity Tier 1 (CET1) ratio was
11.9% (11.9*) as against the target of 15%.
- Strong growth in income improved Banking earnings. The loan portfolio grew by
2% to EUR 14.5 billion (14.2). The average margin on the corporate loan
portfolio was 1.51% (1.57). Earnings included EUR 8 million (19) in impairment
loss on receivables.
- Within Non-life Insurance, insurance premium revenue increased by 7% (10). The
combined ratio improved to 86.1% (91.0). Excluding changes in reserving bases
and amortisation on intangible assets arising from company acquisition, the
operating combined ratio was 84.5% (89.2). Return on investments at fair value
was 3.4% (0.4).
- Within Asset Management, assets under management increased by 7% to EUR 40.6
billion (37.9).
- OP-Pohjola Group Central Cooperative executed a public voluntary bid for
Pohjola Bank plc shares. It holds 98.41% of the shares and 99.14% of the votes
conferred by the shares. OP-Pohjola Group Central Cooperative initiated a
squeeze-out procedure for the remaining shares in Pohjola under the Limited
Liability Companies Act.
- Events after the reporting period: The reduction in the discount rate for Non-
life Insurance pension liabilities from 2.8% to 2.5% will reduce Q3 consolidated
earnings by roughly EUR 62 million.
- Unchanged outlook: Consolidated earnings before tax in 2014 are expected to be
higher than in 2013. For more detailed information on the outlook, see "Outlook
towards the end of 2014" below.
April-June
- Consolidated earnings before tax amounted to EUR 177 million (122) and
consolidated earnings before tax at fair value to EUR 230 million (65).
- Banking showed considerable improvement in its earnings before tax. Net
interest income grew by 30% year on year. The loan portfolio increased by 2% and
the average corporate loan portfolio margin decreased by 3 basis points.
Earnings included EUR 4 million (13) in impairment loss on receivables.
- Within Non-life Insurance, insurance premium revenue increased by 6%. The
combined ratio was 81.4% (87.9) while the operating combined ratio was 79.8%
(86.2). Return on investments at fair value was 2% (-0.6).
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 2013 are used as
comparatives. Comparative figures have been restated as a result of the
adoption of IFRS 10 Consolidated Financial Statements.
*) In accordance with the EU capital requirement regulation and directive (EU
575/2013) (CRR) entered into force on 1 January 2014.
**) According to the Solvency II draft (EU 138/2009)
Earnings before tax, EUR H1/2014 H1/2013 Change, % Q2/ Q2/ 2013
million 2014 2013
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Banking 167 112 50 85 58 251
Group Functions 22 32 -30 15 14 39
Non-life Insurance 133 99 34 71 43 166
Asset Management 14 11 21 7 7 24
Group total 336 254 33 177 122 479
Change in fair value reserve 57 -75 53 -57 -16
Earnings before tax at fair value 393 179 230 65 463
Earnings per share, EUR 0.84 0.61 0.45 0.30 1.33
Equity per share, EUR 9.81 8.65 9.54
Average personnel 2,592 2,657 2,591 2,625 2,632
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The above figures describe Pohjola Group as a whole without the division into
continuing and discontinued operations.
Financial targets H1/2014 H1/2013 Q2/ Q2/ 2013 Target
2014 2013
-------------------------------------------------------------------------------
Return on equity, % 17.2 13.9 18.6 13.6 14.4 13
Common Equity Tier 1 ratio (CET1),
% *) 11.9 11.9 15
Operating cost/income ratio by
Banking, % 32 38 31 36 36 < 35
Operating combined ratio by Non-
life Insurance, % 84.5 89.2 79.8 86.2 86.9 < 92
Operating expense ratio by Non-life
Insurance, % 18.1 19.5 17.7 19.1 18.7 18
Non-life Insurance solvency ratio
(under Solvency II framework), %
**) 137 127 125 120
Operating cost/income ratio by
Asset Management, % 49 54 47 51 53 < 45
Total expenses in 2015 at the same
level as at the end of 2012 297 291 146 146 581 569
AA rating affirmed by at least two
credit rating agencies or credit
ratings at least at the main
competitors' level 2 2 2 2
Dividend payout ratio at least
50%, provided that CET 1 ratio is
at least 15%. Dividend payout ratio
is 30% until CET1 ratio of 15% has
been achieved. 50 > 50 (30)
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President and CEO Jouko Pölönen:
Our consolidated earnings before tax improved in the second quarter by EUR 55
million to EUR 177 million. Strong growth in income reported by Banking and Non-
life Insurance and controlling costs at the level a year ago lay behind these
all-time high quarterly results.
Demand for loans within Banking remained sluggish. Growth in the loan portfolio
remained weak and, as a result of fiercer competition, the average corporate
loan portfolio margin decreased by a few basis points. Income from Banking
increased as a result of higher net interest income and net trading income. The
quality of the loan portfolio remained good and impairment losses on receivables
were low.
Insurance premium revenue continued to grow vigorously within Non-life
Insurance. The balance on technical account improved as claims incurred
increased more slowly than insurance premium revenue as a result of favourable
developments in frequency claims and of changes related to prior years' claims.
A reduction in the main refinancing rate performed by the ECB, a negative
deposit rate and the ECB's exceptional liquidity-provided operations sent market
interest rates to a record low level. As a result of lower interest rates,
return on investment a fair value was good but the low interest rates will
present challenges to reinvestment.
As a result of exceptionally low interest rates, the Group decided to reduce the
Non-life Insurance discount rate, which will affect third-quarter earnings.
Assets under management by Asset Management increased and Asset Management
earnings before tax improved as a result of higher net commissions and fees.
Major uncertainty is still associated with the operating environment due to the
Ukraine crisis and related sanctions. The new regulatory framework and
supervision will set ever-tightening requirements for the financial sector.
Pohjola Group's businesses are in good condition. Following the bid executed by
OP-Pohjola Group Central Cooperative, Pohjola's businesses will be more closely
integrated with a more efficient and competitive OP-Pohjola Group wholly owned
by its customers. This will create excellent opportunities to provide the entire
OP-Pohjola Group's resources for our customers.
Outlook towards the end of 2014
In Banking, the loan portfolio is expected to be at the same level as in 2013.
Due to the operating environment, corporate investments are expected to remain
below their normal level. The greatest uncertainties related to Banking's
financial performance are associated with volume developments and future
impairment loss on the loan portfolio. Banking earnings before tax in 2014 are
expected to be at the same level as or higher than in 2013.
Insurance premium revenue is expected to increase at a rate above the market
average. It is estimated that the Non-life Insurance operating combined ratio
for the full year will vary between 87 and 91%, if the number of large claims is
not much higher than in 2013. Expected investment returns are largely dependent
on developments in the investment environment. The most significant
uncertainties related to Non-life Insurance's financial performance pertain to
developments in bond and capital markets and to the effect of large claims on
claims expenditure. Non-life Insurance earnings before tax in 2014 are expected
to be higher than in 2013.
The greatest uncertainties related to Asset Management's financial performance
are associated with the actual performance-based commissions and fees tied to
the success of investments and the amount of assets under management. Asset
Management earnings before tax in 2014 are expected to be at the same level as
or higher than in 2013.
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 loss that may be
recognised on notes and bonds in the income statement. Group Functions earnings
before tax in 2014 are expected to be lower than in 2013 due to low interest
rates and tighter liquidity regulation.
Consolidated earnings before tax in 2014 are expected to be higher than in 2013.
There is still great uncertainty about the economic outlook and the 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, 6 August 2014
Pohjola Bank plc
Board of Directors
This Interim Report is available at www.pohjola.com > Media > Releases, where
background information on the Report can also be found.
Financial reporting in 2014
Schedule for Interim Reports in 2014:
Interim Report Q1-3/2014: 29 October 2014
DISTRIBUTION
NASDAQ OMX Helsinki Ltd
London Stock Exchange
SIX Swiss Exchange
Major media
www.pohjola.com, www.op.fi
For additional information, please contact
Jouko Pölönen, President and CEO, tel. +358 (0)10 253 2691
Vesa Aho, CFO, tel. +358 (0)10 252 2336
Niina Pullinen, Senior Vice President, Investor Relations, tel. +358 (0)10
252 4494
Pohjola is a Finnish financial services group that offers its customers banking,
non-life insurance and asset management services. Pohjola's mission is to
promote the prosperity, security and wellbeing of its customers. Key targets
include profitable growth and increasing the company's value. Pohjola Group
serves corporate customers in Finland and abroad by providing an extensive range
of financial, investment, cash management and non-life insurance services. For
private customers, the Group provides non-life insurance and private banking
services. Pohjola's consolidated earnings before tax amounted to 473 million
euros in 2013 and the balance sheet total amounted to 44 billion euros on 31
December 2013. Pohjola is part of OP-Pohjola Group, the leading financial
services group in Finland with 4.3 million customers. www.pohjola.com
[HUG#1846721]
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