2012-08-01 07:00:00 CEST
2012-08-01 07:01:22 CEST
REGULATED INFORMATION
Pohjola Pankki Oyj - Half Year financial report
OP-Pohjola Group's solid performance despite deepening sovereign debt crisis
OP-Pohjola Group Stock Exchange Release 1 August 2012 at 8.00 am (EEST) Interim Report OP-Pohjola Group's solid performance despite deepening sovereign debt crisis - Earnings before tax in January-June came to EUR 337 million (366). Earnings before tax recorded by Banking improved by 17%, but Life Insurance and Non-life Insurance did not perform as well as last year. - Net interest income increased by 7%. Total income increased by almost 2%. - Investments in business growth and development were continued. Expenses increased by 10%. - Impairment charges for receivables were reduced by half to EUR 28 million. - Earnings before tax for the second quarter came to EUR 134 million (157). - The Group's Core Tier 1 ratio was 14.7% on 30 June, which is exceptionally high by European standards. - The Group's liquidity is strong and funding has experienced no problems. Deposits have grown at a good rate, the availability of short-term wholesale funding has been very good, and the Group has issued long-term bonds throughout the year to offset the amount of long-term funding reaching maturity. - Business has grown on a wide spectrum at a higher rate than the market average. Corporate loan portfolio increased in the year to June by 12%, home loans by 8% and deposit by 11%. During the report period, premium written by Non-life Insurance was 8% higher than a year ago. - OP-Pohjola Group's 2012 earnings before tax are expected to be about the same or better than in 2011. For more details, see "Outlook for the rest of 2012". OP-Pohjola Group's key indicators ------------------------------------------------------------------------------- Q1-Q2/2012 Q1-Q2/2011 Change % 2011 ------------------------------------------------------------------------------- Earnings before tax, EUR million 337 366 -8.0 525 Banking 268 228 17.3 483 Non-life Insurance 54 68 -20.1 8 Life Insurance 20 52 -62.1 10 Returns to owner-members and OP bonus customers 96 89 8.1 176 30 Jun 2012 30 Jun 2011 Change % 31 Dec 2011 Ratio of capital base to minimum amount of capital base (under the Act on the Supervision of Financial and Insurance Conglomerates) 2.01 1.61 0.4* 1.80 Core Tier 1 ratio, % 14.7 12.0 2.8* 14.0 Non-performing receivables within loan and guarantee portfolio, % 0.53 0.45 0.08* 0.47 Joint banking and insurance customers, 1,000 1,348 1,242 8.5 1,299 ------------------------------------------------------------------------------- * Change in ratio Comments by Reijo Karhinen, Executive Chairman OP-Pohjola Group's first half of 2012 can be summarised by strong growth, easy access to funding, extremely solid capital adequacy, investments into the future and steady profit performance. The value of our achievement is even better considering the deepening debt crisis in the euro area. During the financial and sovereign debt crisis, our solid capital adequacy is becoming an increasingly important competitive advantage. We have strong capital buffers, which will also benefit our customers. During the first half of 2012, this was witnessed by our strong growth. Our lending growth figures show that despite the uncertain operating environment, our customers rely on us in their financing decisions. The fact that our market position is growing well shows that our customers have faith in us. This was our second-best six-month period since the beginning of the financial crisis. It was a good achievement under the current conditions, albeit that the bottom line was not quite at the same level as a year ago. In addition to volume growth, our first-half profit performance was boosted by banking income items, that is, higher net interest income and markedly lower loan losses. On the other hand, the unstable investment environment weakened the performance of our insurance operations. Investments in sales and customer service in accordance with our bold strategy resulted in a clear rise in expenses. This expense growth will slow down during the second half of the year, but so will the growth rate of net interest income. Market interest rates that remain low, a variety of new regulations affecting the sector and external expenses will require us to pay continuous attention to our internal efficiency and to achieve better results in terms of customer margins. As stated in our Group's new strategy adopted in June, we want to be known as a reformer of the Finnish financial sector. We will continue to grow and focus even more on profitability and capital adequacy. Customers are at the core of our strategy. We will create customer experience into a new competitive advantage. We are creating a new foundation for long-term growth. We have confidence that we are doing the right things to ensure a bright future. As to our operating environment, the next few months still seem very challenging. It is alarming to see how the markets are losing trust in the euro. A broken Europe has arrived at a crossroads. It is not only a case of the future of the euro, but the continuation of the integration on our continent. With distrust between member countries, it is also difficult for the markets to have faith in the future of the euro area. The euro is a political project. To be successful, it requires strong political leadership. The euro has been and still is worth fighting for from Finland's perspective too. Financial performance in the report period The Group's earnings before tax amounted to EUR 337 million (366), down by 8.0% from the high level a year ago. This was the second best six-month result since the beginning of the financial crisis. The report period's profit performance was supported by higher net interest income, lower impairment loss on receivables and the fact that Non-life Insurance's premiums written grew at a higher rate than the claims expenditure. The rate at which net interest income increased slowed down considerably in the second quarter. Earnings were eroded by lower net investment income and asset management commissions and fees than a year earlier, as well as higher expenses. Bonuses to owner-members and OP bonus customers recognised in the income statement grew by 6.3% year on year to EUR 85 million. The Group's fair value reserve increased by EUR 375 million thanks to good capital market performance in the first quarter, while a year ago it decreased by EUR 116 million. Earnings before tax at fair value was record-high - EUR 711 million (250). Outlook for the rest of 2012 During the second quarter, growth expectations of the global economy weakened and uncertainty concerning economic predictions increased as the euro-area sovereign debt crisis got worse. Economic growth in the euro area seems to be quite moderate, as indeed in Finland. Profit performance in the latter half of the year will be affected by extremely low market rates, capital market jitters and tighter regulation in the sector. Uncertainty about economic developments and the threat of a deepening euro area sovereign debt crisis make it difficult to predict OP-Pohjola Group's performance in the latter half of 2012. OP-Pohjola Group's 2012 results are expected to be at the same or even a better level than the year before, provided that the operating environment will not deteriorate any more than expected and the management of the euro-area debt crisis will take no new turn for the worse. The greatest factor affecting performance during the rest of the year will be investment income. All forward-looking statements in this report expressing the management's expectations, beliefs, estimates, forecasts, projections and assumptions are based on the current view on 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 1 August 2012, starting at noon at Teollisuuskatu 1 b, Vallila, Helsinki. Financial reporting in 2012 Interim Report Q1-3/2012 31 October 2012 Helsinki, 1 August 2012 OP-Pohjola Group Central Cooperative Executive Board Additional information Executive Chairman and CEO Reijo Karhinen, 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.fi [HUG#1630883]
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