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2014-10-24 08:00:00 CEST 2014-10-24 08:02:20 CEST REGULATED INFORMATION Pohjola Pankki Oyj - Interim report (Q1 and Q3)OP-Pohjola Group earnings continue on strong growth trackOP-Pohjola Group Stock Exchange Release 24 October 2014 at 9.00 am (EEST) Interim Report OP-Pohjola Group earnings continue on strong growth track * The Group's earnings for January-September before tax were EUR 739 (610) million, that is, up by more than one-fifth year on year. * Group total income grew by 8%. Net interest income continued on a good growth path and was 16%. * Expenses rose by 2.8%. Expenses without non-recurring items affecting comparability grew by 1%. Impairment losses on receivables remained at the same low level as last year, EUR 50 million (49). * Each of the three business segments improved its performance markedly. * Banking earnings before tax increased by 48% to EUR 468 million (317). The cost/income ratio improved by six percentage points to 55%. The loan portfolio grew by 3.4% and deposits by 2.2% in the year to September. * Earnings before tax by Non-life Insurance increased by 18% to EUR 190 million (162). The operating combined ratio reached a record level of 83.1%. Premiums written increased in the report period by 6%. * Wealth Management earnings before tax increased by 43% to EUR 140 million (98). Mutual fund assets increased in the year to September by 19% and unit-linked insurance savings by 21%. * The number of joint banking and non-life insurance customers increased by 78,000 in the year to September. * On 30 September 2014, the Group was granted title to all Pohjola Bank shares, and the shares of Pohjola were removed from the Helsinki Stock Exchange. * Despite the purchase of Pohjola Bank plc shares, the Group's capital adequacy is strong. On 30 September, the Group's CET1 was 13.6% (17.1). A total of EUR 1,230 million in Profit shares supporting CET1 has been issued by this report's date of publication. * Earnings in 2014 are estimated to be clearly higher than in 2013. For more details, see "Outlook towards the year end" below. * In October, OP-Pohjola Group decided to change its name. From 1 January 2015, the Group will be known as OP. OP-Pohjola Group's key indicators Q1-Q3/2014 Q1-Q3/2013 Change, % Q1-Q4/2013 ------------------------------------------------------------------------------- Earnings before tax, € million 739 610 21.1 701 Banking 468 317 47.5 404 Non-life Insurance 190 162 17.7 166 Wealth Management 140 98 43.0 113 Returns to owner-members and OP bonus customers 147 145 1.5 193 30 Sep 2014 31 Dec 2013 Change, % Common Equity Tier 1 (CET1) ratio, % / Core Tier 1 ratio** 13.6 17.1 -3.5 Ratio of capital base to minimum amount of capital base (under the Act on the Supervision of Financial and Insurance Conglomerates)** 1.79 2.19 -0.40 Ratio of receivables more than 90 days overdue to loan and guarantee portfolio, % 0.46 0.42 0.04* Joint banking and insurance customers (1,000) 1,570 1,518 3.4 ------------------------------------------------------------------------------- * Change in ratio ** The comparatives are presented based on the regulatory framework effective before 1 January 2014. Comments by Reijo Karhinen, Executive Chairman and CEO OP-Pohjola Group's key figures for this year show that we have performed well. We have managed to maintain our course in an extremely challenging operating environment. All quarters this year have been better that those a year ago, and this past quarter was also our best-ever third quarter of all times. During these three quarters, our earnings are already better than in the whole of 2013. We therefore predict that the full-year result for 2014 will be considerably better than it was in 2013. Despite the serious challenges we are faced with in Finland, the outlook is positive from OP-Pohjola Group's point of view - we offer our customers a strong and long-term partner that is ready to act. The reason for our good profit development is that both our customers and ourselves were well prepared for poor economic conditions. We performed well in relation to our moderate cost development. The fact that our problem loans and credit losses have been low also shows that our customers have been financially strong and better prepared than during previous recessions. On the whole, the Finnish private sector's crisis awareness and corrective measures have been much more determined and successful than those of the public sector. General social indecision and poor implementation of decisions erode the opportunities of private actors in the long run, unfortunately also postponing any hopes of an economic upturn. As a cooperative, we have two clear roles: business role on the one hand and a social role dictated by our basic mission on the other. In our business role, we have managed to maintain good results in a way that translates to better capital adequacy, which will contribute to our continued success and especially to our ability to carry our responsibility for providing financing to our customers. It is also important that we not only maintain good capital adequacy but do our utmost to keep our cost-efficiency competitive. Our basic mission includes a promise to promote the prosperity, security and wellbeing of our owner-members, customers and operating environment. Due to this role, the customer bonuses we pay out continue to increase, the new Profit shares are becoming a hit product among our owner-members, as are the Omasairaala hospital we own and the Pivo mobile wallet. Our business growth that is clearly better than the operating environment average is clear indication of responsibility attached to our social role. Our market position is solid and getting better. So far this year, our growth has clearly hinged on wealth management products and services. We have also grown at a high rate in non-life insurance. However, loan markets have been considerably slower, which has also affected us. As a result of general uncertainty, customers' investment and purchase decisions have been all but frozen. Right now, we at OP-Pohjola Group are setting our sights long into the future, being in the process of implementing one of the Group's biggest reforms ever. Our programme is bold with a clear goal. We have been a pathfinder in building a new type of financial services group in the Finnish market, and now we want to solidify our position as the country's most competitive financial services group. We will create digital services that will be our next success story. We will rely on a collective approach and customer-ownership. Respecting the customer lies at the core of our customer-focused approach. Our new brand, OP in short, will have new content as of the beginning of 2015. Financial performance in the report period OP-Pohjola Group's earnings before tax increased by 21% to EUR 739 million (610), exceeding the full-year earnings of 2013 by 5%. Earnings were boosted especially by an increase in net interest income and Non-life Insurance's investment income. Net commissions and fees and Life Insurance's net income also increased. However, the Group's earnings were eroded by higher non-recurring expenses. Net interest income increased by 16%. The increase in net interest income can be attributed to an increase in average loan portfolio margins and to growth in the balance sheet. The favourable development of net interest income from capital market products and the decrease of deposit funding costs also promoted the growth of net interest income. The Group's expenses increased by 2.8% year on year. Other operating expenses were increased in the report period by non-recurring expenses incurred by the purchase of Pohjola Bank plc shares and a tax penalty payment, amounting to a total of EUR 21 million. Without these non-recurring items' effect on comparability, the growth in expenses equalled 1%. OP-Pohjola Group's fair value reserve before tax totalled EUR 477 million (409) at the end of the report period. Earnings before tax at fair value amounted to EUR 843 million (536). Equity capital amounted to EUR 6.7 billion (7.7) on 30 September. The purchase of Pohjola Bank plc shares in the report period reduced the Group's equity capital by EUR 2.4 billion. Equity capital was also decreased by profit distribution outside the Group. On the other hand, equity capital was increased by the Group's earnings and the issuance of Profit shares. Outlook towards the year end The growth of the world economy has been weak, and there is no clear upturn in sight. The eurozone economy has failed to start growing, despite the gentle financial policy of the European Central Bank and other measures taken to support economic growth. The growth of Finland's economy has remained weak, regardless of an increase in the number of new industrial orders. The crisis in Ukraine is still a significant factor of uncertainty for the Finnish economy, slowing Finland's recovery from recession. Modest economic development combined with the tensions of international politics are weakening growth prospects in the financial sector. Historically low interest rates will erode banks' net interest income and weaken insurance institutions' investment income The significance of measures that support capital adequacy and profitability is heightened by changes in the operating environment and the tightening of regulation. Unless the operating environment turns out to be considerably weaker than expected, OP-Pohjola Group's earnings before tax are expected to be clearly higher than in 2013. The most significant factors of uncertainty with regard to earnings development relate to fast and unanticipated 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 24 October 2014 at 12 noon at Vääksyntie 4, Vallila, Helsinki. Pohjola Bank plc will publish its own Interim Report. Financial reporting in 2015 Schedule for Financial Statements Bulletin for 2014 and Interim Reports in 2015: Financial Statements Bulletin 2014 5 February 2015 Interim Report Q1/2015 29 April 2015 Interim Report H1/2015 5 August 2015 Interim Report Q1-3/2015 28 October 2015 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 is Finland's leading financial services group providing a unique range of banking, wealth management and insurance services. OP-Pohjola's mission is to promote the sustainable prosperity, security and wellbeing of its customer-owners, customers and operating regions. Its objective is to offer the best and most versatile package of loyal customer benefits on the market. OP- Pohjola Group consists of about 180 member cooperative banks, its central institution OP-Pohjola Group Central Cooperative, and the latter's subsidiaries and affiliates. The Group has a staff of 12,000. As laid down in the applicable law, OP-Pohjola Group Central Cooperative and its member credit institutions are ultimately jointly and severally liable for each other's debts and commitments. The joint liability in the OP-Pohjola Group is prescribed by the Act on the Amalgamation of Deposit Banks Act. Pohjola Bank plc and OP Mortgage Bank are responsible for OP-Pohjola's funding operations on money and capital markets. Financial services provider OP-Pohjola is continuing its revamp - this time the focus is on its brand. The changes under way form part of the creation of a new financial services group fully owned by its customers. OP-Pohjola's name is OP as of 1 January 2015. www.op.fi [HUG#1865390] |
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