2010-08-04 07:00:00 CEST
2010-08-04 07:00:11 CEST
REGULATED INFORMATION
Pohjola Pankki Oyj - Interim report (Q1 and Q3)
OP-Pohjola Group's January-June 2010
OP-Pohjola Group Central Cooperative
Company Release 4 August 2010 at 8.00 am 1(42)
Release category: Interim Report
OP-Pohjola Group's January-June 2010
-OP-Pohjola Group continued to deliver steady financial performance, with
earnings before tax at EUR 266 million (281). Second-quarter earnings showed an
increase of 7% on the previous year.
-The fall in net interest income bottomed out in the second quarter. The strong
20% growth of Other income compensated for the lower net interest income year on
year. Expenses were at last year's level.
-Credit losses, standing at EUR 77 million, were at the same level as in the
first half of 2009 but clearly lower than in the latter half.
- OP-Pohjola Group's market share improved in life insurance and credit and
mutual funds, but declined in deposits. Strong growth of private customers'
premiums written continued in non-life insurance.
- OP-Pohjola Group's capital base is very strong. According to stress tests
carried out by EU's supervisory authorities, OP-Pohjola Group is one of Europe's
strongest players.
- Full-year earnings for 2010 are expected to equal or exceed those of 2009,
while the greatest uncertainty is related to developments in the investment
environment, credit losses and interest rates.
Comments by Reijo Karhinen, Executive Chairman
Our earnings for the first half of 2010 were as expected. The different factors
that contributed to this result include many positive elements that bode well
for our future outlook. Loan losses took a turn for the better, the falling
trend of net interest income is bottoming out, other income improved markedly
and expenses grew moderately.
The first half has required more than the normal amount of adjustment between
short-term growth and long-term profitability, and I think we have struck a good
balance. We have not entered headlong into the somewhat unhealthy price
competition especially in deposits and home mortgages. More strict financial
regulation taking effect in the next few years and resulting in higher costs
will not favour attempts at quick profit but emphasises the value of the kind of
long-termism we are already known for.
It will be five years this September since the acquisition of Pohjola insurance
operations. Combining banking and non-life insurance operations has given our
market position a strong boost. It has in fact been our greatest success story
which we have created together with our customers, so we have shown in practice
that concentrating your banking and insurance matters with us can bring clear
financial benefits. The bonuses we offer to customers who both use us as their
main bank and take out insurance from us continues to be the foundation for
continued success. Our growth potential enabled by the integration is this
immense.
The stress test carried out by the Committee of the European Banking Supervisors
provided strong recognition of our work, proving that we in excellent financial
condition and rank among the best banks in Europe. Our high capital adequacy
provides us with an excellent growth platform at a time when the economic
outlook is improving and the economy is gathering momentum.
OP-Pohjola Group's Interim Report for 1 January-31 June 2010
OP-Pohjola Group's key indicators
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| | Q1-Q2/20 | Q1-Q2/200 | Change* | 2009 |
| | 10 | 9 | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Earnings before tax, € | 266 | 281 | -5.5 | 464 |
| million | | | | |
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| Banking and Investment | 163 | 270 | -39.8 | 471 |
| Services | | | | |
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| Non-life Insurance | 42 | 46 | -8.3 | 102 |
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| Life insurance | 20 | -41 | | -159 |
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| Bonuses paid to customers, € | 74 | 70 | 6.0 | 142 |
| million | | | | |
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| Return on equity (ROE), % | 6.3 | 7.4 | -1.1* | 5.9 |
--------------------------------------------------------------------------------
| Return on equity at fair | 8.1 | 12.3 | -4.2* | 14.7 |
| value, % | | | | |
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| Cost/income ratio, % (Banking | 59 | 53 | 6 | 53 |
| and Investment Services) | | | | |
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| Average personnel | 12,482 | 12,713 | -1.8 | 12,632 |
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| | 30 Jun | 30 Jun | Change* | 31 Dec |
| | 2010 | 2009 | | 2009 |
--------------------------------------------------------------------------------
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| Total assets, € million | 84.5 | 77.6 | 8.9 | 80.4 |
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| Capital adequacy, %** | 12.4 | 12.0 | 0.4 | 12.6 |
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| Tier 1 ratio, %** | 12.4 | 12.0 | 0.4 | 12.6 |
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| Ratio of capital base to | 1.60 | 1.45 | 0.15 | 1.58 |
| minimum amount of capital | | | | |
| base*** | | | | |
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| Non-performing loan losses | 0.4 | 0.5 | -0.1 | 0.4 |
| within loan and guarantee | | | | |
| portfolio, % | | | | |
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| Market share, % | | | | |
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| Total loans | 32.7 | 32.3 | 0.4 | 32.7 |
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| Total deposits | 32.3 | 33.2 | -0.9 | 33.2 |
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| Capital invested in mutual | 23.3 | 23.0 | 0.3 | 23.4 |
| funds | | | | |
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| Of insurance savings through | 20.6**** | 19.6 | 1.0**** | 20.0 |
| life and pension insurance | | | | |
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| | Q1-Q2/20 | Q1-Q2/200 | Change* | 2009 |
| | 10 | 9 | | |
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| Of premiums written in life | 39.3 | 23.2 | 16.1 | 25.2 |
| and pension insurance, % | | | | |
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* The change is presented as a percentage point, except for earnings before tax,
customer bonuses, total assets and average number of personnel, for which the
change is stated in percentages, as well as the ratio of capital resources to
the minimum amount of capital resources, for which the change is stated as a
change in the ratio.
** Pursuant to the Act on Credit Institutions.
*** Pursuant to the Act on the Supervision of Financial and Insurance
Conglomerates.
**** Preliminary information
Operating environment
The world economy continued to recover in the second quarter of 2010, but
recovery has been uneven and strongest in emerging economies. The US economy is
experiencing clear growth and the labour market is stabilising, whereas European
economic growth has been tardier, with major differences from country to
country. The economic outlook in the euro area is overshadowed by a government
debt crisis, which has reflected as uncertainty in the financial market.
The Finnish economy, too, is gradually recovering, although economic indicators
for the early part of the year were somewhat poor partly owing to exceptional
factors. Both consumers and businesses showed improving confidence in the second
quarter. As the world economy is picking up and the euro is becoming weaker,
export is given a boost. Growth is also supported by higher household spending
and increasing housing spending. Unemployment is not as bad as feared.
Central banks' benchmark interest rates are still extremely low, and the
European Central Bank is not expected to raise benchmark rates until 2011. The
ECB is gradually reducing stimulus packages that supported the banking system's
liquidity, which will increase short-term market rates somewhat, although they
still remain record low. As part of the EU's and the International Monetary
Fund's rescue package, the ECB aims to support Greece and other heavily indebted
countries by buying their government bonds. Stress tests on banks in the EU
countries show that the majority of banks would survive future economic shocks.
This will help to dispel uncertainty in interbank markets.
The gradual recovery of the loan portfolio continued in the second quarter.
Corporate loans began to climb early this year, and growth remained steady in
the second quarter. The growth rate of loans to households, which has been
growing steadily by over 5% annually, accelerated a fraction as summer
approached, thanks to interest rates that remained low. The housing trade
continued to be lively.
In capital markets, however, the second quarter was marred by uncertainty caused
by concerns over government bonds and economic growth. The global upward trend
in the equity market ended, resulting in Finland with the weighted index of the
OMX Helsinki CAP falling by almost 9% during the second quarter. Uncertainty in
the market also turned net subscriptions of mutual funds negative, while fund
assets decreased by 5% in the second quarter. Deposits, on the other hand, grew
at a higher rate. The decline in current accounts in the first quarter turned
positive during the spring, whereas term deposits continued to grow slowly but
steadily. Life insurance savings continued to grow thanks to unit-linked
products, but the insurance savings of products based on technical interest rate
contracted.
The growth rate of non-life insurance premiums written slowed down because the
recession reduced company payrolls. Owing to greater economic activity, the rate
of claims paid out increased faster than premiums written in the second quarter,
but the claims volume is nevertheless lower than normal.
OP-Pohjola Group's earnings and total assets
January-June
Earnings before tax came to EUR 266 million (281)*. After the one-off items,
earnings were practically at the same level as last year. Although interest
rates remained low and contracted net interest income, the financial services
group's total income was at the same level as a year ago, thanks to the
continued growth of Other income. Expenses, too, were at last year's level. The
challenging investment environment in the second quarter eroded the Group's
earnings at fair value. Earnings before tax at fair value came to EUR 341
million (459).
The Banking pre-tax earnings contracted year on year by 40% mainly as a result
of lower net interest income. Non-life Insurance earnings, thanks to higher
investment income, were at the same level as a year ago, although the operating
combined ratio** weakened somewhat from the exceptionally strong level in the
previous year. The operating combined ratio was nevertheless still good at 91.6%
(88.6). Life Insurance earnings made it into the black thanks to improved
investment performance, coming to EUR 20 million (- 41). Life Insurance's
investment income at fair value was 4.3% (1.7).
Net interest income was EUR 452 million (568), or down by 20% year on year.
Other income continued to increase substantially, reaching EUR 615 million
(510), up by 20% year on year. Banking investment and net trading income
remained unchanged. Net commissions and fees, totalling EUR 283 million (251),
were higher than last year thanks particularly to higher asset management fees.
Expenses were practically the same as a year ago, EUR 643 million (640). The
financial services group's wages and salaries were at the same level as in the
previous year as staff numbers reduced, but personnel costs as a whole increased
by 2.6% because of higher pension costs. Other expenses shrank by 1.9%.
Bonuses paid to owner-members and OP bonus customers rose by 6% and totalled EUR
74 million (70).
Impairments and fair value changes reducing earnings were recognised to an
amount of EUR 175 million in the report period (198). EUR 27 million of these
were recorded under Non-life Insurance net income, EUR 55 million under Life
Insurance net income, EUR 77 under impairments of receivables, and EUR 15
million under other income. Net impairment losses on loans and receivables
amounted to EUR 77 million (75). Impairment losses on receivables remained very
low, at 0.27% of the loan and guarantee portfolio (0.28%). The final credit
losses were recognised to an amount of EUR 42 million EUR (11) and impairment
losses to EUR 78 million (93). The majority of credit losses derived from
corporate exposure. Value readjustments and reversal of impairment losses
totalled EUR 42 million (29).
* Comparatives for 2009 are given in brackets. For income-statement and other
aggregated figures, January-June 2009 figures serve as comparatives. For
balance-sheet and other cross-sectional figures, figures at the end of the
previous reporting period (31 December 2009) serve as comparatives.
**The combined cost ratio excluding amortisation on intangible assets arising
from the Pohjola acquisition and allocated to the business segment without the
effect of changes in calculation bases.
Earnings analysis
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| € million | Q1-Q2/2 | Q1-Q2/2 | Change, | Change, | 2009 |
| | 010 | 009 | € | % | |
| | | | million | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Earnings/loss before tax | 266 | 281 | -16 | -5.5 | 464 |
--------------------------------------------------------------------------------
| Gross change in fair | 75 | 177 | -102 | -57.7 | 677 |
| value reserve | | | | | |
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| Earnings/loss before tax | 341 | 459 | -118 | -25.7 | 1,140 |
| at fair value | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Return on equity (ROE), | 6.3 | 7.4 | | -1.1* | 5.9 |
| % | | | | | |
--------------------------------------------------------------------------------
| Return on equity at fair | 8.1 | 12.3 | | -4.2* | 14.7 |
| value, % | | | | | |
--------------------------------------------------------------------------------
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| Income | | | | | |
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| Net interest income | 452 | 568 | -116 | -20.4 | 1,070 |
--------------------------------------------------------------------------------
| Net income from Non-life | 190 | 189 | 2 | 0.8 | 396 |
| Insurance | | | | | |
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| Net income from Life | 46 | -29 | 75 | | -120 |
| Insurance | | | | | |
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| Net commissions and fees | 283 | 251 | 32 | 12.6 | 496 |
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| Net trading and | 46 | 46 | 0 | 0.2 | 103 |
| investment income | | | | | |
| | | | | | |
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| Other operating income | 48 | 52 | -4 | -7.9 | 104 |
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| Share of associates' | 1 | 0 | 1 | | 1 |
| profits/losses | | | | | |
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| Other income, total | 615 | 510 | 105 | 20.5 | 981 |
--------------------------------------------------------------------------------
| Total income | 1,067 | 1,079 | -11 | -1.1 | 2,051 |
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| Expenses | | | | | |
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| Personnel costs | 335 | 327 | 9 | 2.6 | 622 |
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| Other administrative | 154 | 156 | -2 | -1.2 | 310 |
| expenses | | | | | |
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| Other operating expenses | 153 | 157 | -3 | -2.2 | 316 |
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| Total expenses | 643 | 640 | 3 | 0.5 | 1,248 |
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| Impairment losses on | 77 | 75 | 2 | 2.8 | 179 |
| receivables | | | | | |
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| Returns to owner-members | | | | | |
| and | | | | | |
| OP bonus customers | | | | | |
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| Bonuses | 74 | 70 | 4 | 6.0 | 142 |
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| Interest on ordinary and | 7 | 12 | -5 | -43.7 | 18 |
| supplementary | | | | | |
| cooperative capital | | | | | |
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| Total returns | 81 | 82 | -1 | -1.5 | 160 |
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* Percentage points
OP-Pohjola Group's total assets amounted to EUR 84.5 billion (80.4) on 30 June
2010. Receivables from customers stood at EUR 54.9 billion (53.0) and deposits
at EUR 35.4 billion (34.6). Debt securities issued to the public rose by 0.9% to
EUR 20.1 billion (19.9). In addition to a five-year mortgage-backed covered bond
worth EUR 1 billion issued by OP Mortgage Bank, Pohjola Bank plc issued two
senior bonds during the report period, with maturities of three and five years,
worth a total of EUR 1.5 billion.
The Group's capital base increased by 3% to EUR 6.4 billion (6.2) mainly owing
to the report period's performance and an increase in the value of various
assets.
The fair value reserve, adjusted for deferred tax, was EUR 1 million (-54). The
fair value reserve shrank by over EUR 100 million in the second quarter mainly
because the market values of investments declined. The reserve's growth in the
report period was also significantly affected by recognised impairments. Only
the fair value changes in the fair value reserve have been recognised which the
management have deemed to fulfil the relevant requirements. Impairments of EUR
88 million (116) were recognised in the report period.
On 30 June, the cooperative capital investments and supplementary cooperative
capital investments of the member cooperative banks' owner-members totalled EUR
794 million (750).
The Annual General Meeting of Pohjola Bank plc decided on 26 March 2010 that the
company will pay a dividend of EUR 0.34 for each Series A and EUR 0.31 for each
Series K share for 2009, totalling EUR 107 million (45).
April-June
Earnings before tax for the second quarter came to EUR 137 million against EUR
157 million year on year. Earnings for Q2/2009 include a EUR 10 million one-off
net commission. Total income fell by 4.2% owing mainly to lower net interest and
trading income. Net income from Life Insurance totalled EUR 32 million (-8).
Reported expenses grew by EUR 4.7 million. Personnel costs increased by 4.5%, or
by EUR 7.3 million from Q2/2009. Impairment losses on receivables came to EUR
40 million, or EUR 6.6 million lower than a year earlier. The fair value reserve
(gross) shrank by EUR 137 million, while a year ago it increased by EUR 217
million. Recognised impairments totalled EUR 26.
Net interest income contracted by EUR 3.9 million from Q1/2010. Impairments of
receivables were EUR 1.6 million higher than in January-March. Net income from
Life Insurance went up from the previous quarter mainly owing to better
investment performance. Pre-tax earnings were EUR 9.1 million higher than in the
previous quarter. Pre-tax earnings at fair value came to zero as opposed to EUR
340 million in the preceding quarter.
Second-quarter earnings analysis
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| € million | Q2/ | Q2/ | Change, | Q1/ | Change, |
| | 2010 | 2009 | % | 2010 | % |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Earnings/loss before tax | 137 | 157 | -12.4 | 128 | 7.1 |
--------------------------------------------------------------------------------
| Gross change in fair | -137 | 217 | | 212 | |
| value reserve | | | | | |
--------------------------------------------------------------------------------
| Earnings/loss before tax | 0 | 374 | | 340 | |
| at fair value | | | | | |
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| Return on equity (ROE), % | 6.4 | 10.1 | -3.7* | 6.2 | 0.2' |
--------------------------------------------------------------------------------
| Return on equity at fair | 0.0 | 22.0 | -21.9* | 16.2 | -16.2* |
| value, % | | | | | |
--------------------------------------------------------------------------------
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| Income | | | | | |
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| Net interest income | 228 | 282 | -19.0 | 224 | 1.7 |
--------------------------------------------------------------------------------
| Net income from Non-life | 113 | 120 | -6.4 | 78 | 45.2 |
| Insurance | | | | | |
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| Net income from Life | 32 | -8 | | 14 | |
| Insurance | | | | | |
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| Net commissions and fees | 139 | 121 | 14.7 | 143 | -3.0 |
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| Net trading and | 10 | 26 | -63.0 | 37 | -74.1 |
| investment income | | | | | |
| | | | | | |
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| Other operating income | 23 | 27 | -17.1 | 26 | -11.5 |
--------------------------------------------------------------------------------
| Share of associates' | 0 | 0 | 33.8 | 1 | -37.3 |
| profits/losses | | | | | |
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| Other income, total | 316 | 287 | 10.2 | 298 | 6.0 |
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| Total income | 545 | 569 | -4.2 | 523 | 4.2 |
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| Expenses | | | | | |
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| Personnel costs | 171 | 163 | 4.5 | 164 | 3.9 |
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| Other administrative | 80 | 76 | 4.3 | 75 | 6.6 |
| expenses | | | | | |
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| Other operating expenses | 75 | 81 | -7.2 | 78 | -3.6 |
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| Total expenses | 326 | 321 | 1.5 | 317 | 2.7 |
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| Impairment losses on | 40 | 46 | -14.4 | 38 | 4.4 |
| receivables | | | | | |
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| Returns to owner-members | | | | | |
| and | | | | | |
| OP bonus customers | | | | | |
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| Bonuses | 37 | 35 | 6.0 | 37 | 1.8 |
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| Interest on ordinary and | 4 | 9 | -51.6 | 3 | 73.6 |
| supplementary cooperative | | | | | |
| capital | | | | | |
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| Total returns | 42 | 44 | -5.8 | 39 | 6.5 |
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* percentage points
Capital adequacy
Two sets of capital adequacy ratios are calculated for OP-Pohjola Group. The
Group's operations are based on Act no. 599/2010 on the amalgamation of deposit
banks which became effective as of 1 July 2010. During the report period, the
Group was still operating under the principles of the Act on Cooperative Banks
and other Cooperative Institutions. This law change had no significant effect on
the Group's operations.
Owing to the regulations on joint responsibility and security conditions
prescribed in the Act, a minimum amount of capital resources has been set for
the amalgamation of the cooperative banks calculated according to the
regulations for capital adequacy specified in the Act on Credit Institutions.
The amalgamation of the cooperative banks comprises its central institution
(OP-Pohjola Group Central Cooperative), the central institution's member credit
institutions and companies belonging to their consolidation groups. Although
OP-Pohjola Group's insurance companies do not belong to the amalgamation of the
cooperative banks, investments made in them have a major impact on capital
adequacy calculated in accordance with the capital adequacy regulations for
credit institutions. This capital adequacy figure is called the amalgamation of
cooperative banks' capital adequacy.
OP-Pohjola Group is also a financial and insurance conglomerate, pursuant to the
Act on the Supervision of Financial and Insurance Conglomerates. The
conglomerate is governed by specific provisions of the capital adequacy
requirement.
In view of both capital adequacy requirements, OP-Pohjola Group's risk-bearing
capacity is strong.
In its calculation of capital requirement for credit risk, OP-Pohjola Group will
phase in the Internal Rating-based Approach (IRBA). OP-Pohjola Group uses the
Internal Ratings Based Approach (IRBA) in its capital adequacy measurement for
Pohjola Bank plc's corporate and institutional customers' credit risks. IRBA
will probably be adopted for all other liabilities in September 2011, but until
then the capital requirement for credit risk such items will be calculated using
the Standardised Approach. The use of internal ratings reduces the Group's
capital requirement, but makes it more susceptible to market fluctuations. As to
market risks, OP-Pohjola Group will continue to use the Standardised Approach,
whereas the introduction of the Standardised Approach is scheduled for 2010 in
terms of operational risks.
As a result of the financial crisis, banks' capital adequacy requirements will
become tighter, in a effort to improve the quality of their capital base and to
reduce the cyclic nature of capital requirements and to set quantitative limits
to liquidity risk. These changes are only in their preparation stage, planned to
be effective between 2012 and 2018, and it is too early to predict precisely
what their effects will be. The changes under preparation may create
considerable needs for adjustment in the sector, raise the expenses of arranging
finance and indirectly slow down the growth of the entire economy.
Capital adequacy of the amalgamation of cooperative banks
On 30 June, OP-Pohjola Group's capital adequacy ratio under the Credit
Institutions Act and the Tier 1 ratio stood at 12.4%, that is, somewhat lower
than on 31 December 2009. The statutory minimum for capital adequacy ratio is
8%, and for Tier 1 ratio 4%.
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| Capital structure | | | | | |
| and capital | | | | | |
| adequacy | | | | | |
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| € million | 30 Jun | 31 Dec | Change, | Change, | 30 Jun |
| | 2010 | 2009 | € million | % | 2009 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Capital base | | | | | |
--------------------------------------------------------------------------------
| Tier 1 capital | 5,264 | 5,227 | 37 | 0.7 | 4,836 |
--------------------------------------------------------------------------------
| Tier 2 capital | - | - | | | - |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total capital base | 5,264 | 5,227 | 37 | 0.7 | 4,836 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Risk-weighted | 42,483 | 41,480 | 1,004 | 2.4 | 40,401 |
| assets, total | | | | | |
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| Minimum capital | | | | | |
| requirement | | | | | |
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| Credit and | 3,079 | 3,005 | 73 | 2.4 | 2,922 |
| counterparty risk | | | | | |
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| Market risk | 38 | 36 | 2 | 5.4 | 33 |
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| Operational risk | 282 | 277 | 5 | 1.8 | 277 |
--------------------------------------------------------------------------------
| Total | 3,399 | 3,318 | 80 | 2.4 | 3,232 |
--------------------------------------------------------------------------------
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| Capital adequacy | 12.4 | 12.6 | | -0.2* | 12.0 |
| ratio, % | | | | | |
--------------------------------------------------------------------------------
| Tier 1 ratio, % | 12.4 | 12.6 | | -0.2* | 12.0 |
--------------------------------------------------------------------------------
* Percentage points.
June-end Tier 1 capital totalled EUR 5,264 million (5,227). Net profit for the
period, less estimated profit distribution, is included in Tier 1 capital.
OP-Pohjola Group's Tier 1 capital increased by 0.7% during the report period. On
30 June, the ratio of hybrid capital to Tier 1 capital before adjustments was
3.1% (3.2). Tier 1 capital does not include equity capital growth resulting from
the IFRS-compliant measurement of pension liabilities and the assets covering
them, and from the measurement at fair value of investment property.
Tier 2 capital came to zero following deductions from the item at the end of the
report period and actually exceeded them by EUR 278 million (251), which were
deducted from Tier 1 capital. Any deductions in excess of Tier 2 capital were
made from Tier 1 capital. At the end of the report period, capital resources
were reduced by the consolidation group's fair value reserve that was EUR 26
million in the red (14).
At the end of the report period, insurance company investments, deducted in
equal proportions from Tier 1 and 2 capital, came to EUR 2,316 million (2,341).
EUR 175 million have been deducted from equity capital as a shortfall of
expected losses and impairments. On the basis of the exemptions granted by the
Financial Supervisory Authority, investments by OP-Pohjola Group entities in
venture capital funds, managed by Pohjola Capital Partners Ltd, are treated in
the capital adequacy calculation in the same way as investments in shares in
business or industrial corporations.
The minimum capital requirement was EUR 3,399 million on 30 June (3,318),
increasing by 2.4% in the report period. The most significant factor that
contributed to this growth was the higher capital requirement concerning the
loan and guarantee portfolio.
Capital adequacy under the Act on the Supervision of Financial and Insurance
Conglomerates
OP-Pohjola Group's capital adequacy pursuant to the Act on the Supervision of
Financial and Insurance Conglomerates is calculated using the consolidation
method, whereby assets included in capital resources but not included in equity
capital, under the regulations for the banking or insurance industry, are added
to the equity capital in the conglomerate's balance sheet. Capital resources may
not include items not available for covering the losses of other companies
belonging to the conglomerate.
The financial and insurance conglomerate's minimum capital requirement consists
of the credit institutions' consolidated minimum capital requirement and the
insurance companies' joint minimum operating capital.
On 30 June, OP-Pohjola Group's capital base, calculated according to the Act on
the Supervision of Financial and Insurance Conglomerates, exceeded the minimum
amount specified in the Act by EUR 2,241 million (2,121).
The insurance companies' equalisation provision is not included in the financial
and insurance conglomerate's capital resources. On 30 June 2010, the combined
equalisation provision less the non-life and life insurance tax liabilities
stood at EUR 534 million (527). The equalisation provision acts as a buffer for
insurance companies in case of years with heavy losses and is therefore part of
the financial services group's actual buffer against losses.
Capital adequacy under the Act on the Supervision of Financial and Insurance
Conglomerates:
--------------------------------------------------------------------------------
| € million | 30 Jun | 31 Dec | Change, | Change, | 30 Jun |
| | 2010 | 2009 | € million | % | 2009 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| OP-Pohjola Group's | 6,370 | 6,187 | 183 | 3.0 | 5,682 |
| equity capital | | | | | |
--------------------------------------------------------------------------------
| Business-segment-spec | 1,867 | 1,843 | 24 | 1.3 | 1,683 |
| ific items | | | | | |
--------------------------------------------------------------------------------
| Goodwill and | -1,075 | -1,084 | 9 | -0.9 | -1,100 |
| intangible assets | | | | | |
--------------------------------------------------------------------------------
| Equalisation | -534 | -527 | -7 | 1.3 | -500 |
| provision | | | | | |
--------------------------------------------------------------------------------
| Other items included | -622 | -627 | 5 | -0.7 | -579 |
| in equity capital and | | | | | |
| business-segment-spec | | | | | |
| ific items, but not | | | | | |
| included in the | | | | | |
| conglomerate's | | | | | |
| capital resources | | | | | |
--------------------------------------------------------------------------------
| Conglomerate's | 6,005 | 5,792 | 214 | 3.7 | 5,186 |
| capital base, total | | | | | |
--------------------------------------------------------------------------------
| Regulatory capital | 3,381 | 3,300 | 81 | 2.5 | 3,217 |
| requirement for | | | | | |
| credit institutions | | | | | |
--------------------------------------------------------------------------------
| Regulatory capital | 384 | 371 | 13 | 3.5 | 363 |
| requirement for | | | | | |
| insurance operations | | | | | |
--------------------------------------------------------------------------------
| Total minimum amount | 3,765 | 3,671 | 94 | 2.6 | 3,580 |
| of conglomerate's | | | | | |
| capital base | | | | | |
--------------------------------------------------------------------------------
| Conglomerate's | 2,241 | 2,121 | 120 | 5.7 | 1,606 |
| capital adequacy | | | | | |
--------------------------------------------------------------------------------
| Conglomerate's | 1.60 | 1.58 | | 0.02* | 1.45 |
| capital adequacy | | | | | |
| ratio (capital | | | | | |
| resources/minimum of | | | | | |
| capital resources) | | | | | |
--------------------------------------------------------------------------------
* Change in ratio
Risk exposure
OP-Pohjola Group retained its strong risk-bearing capacity. Changes in credit
risk exposure were minor and the Group's liquidity remained good. The
uncertainty that started with the Greek debt crisis eroded investment income in
the second quarter.
OP-Pohjola Group retained a stable credit risk status. Both impairment charges
and non-performing and zero-interest loans were still rather low in relation to
the loan and guarantee portfolio. Net impairment losses in the report period,
converted into annual figures, accounted for 0.27% of the loan and guarantee
portfolio (0.28). The gross ratio of impairment losses to the loan and guarantee
portfolio was 0.41% in the report period (0.38). OP-Pohjola Group's
non-performing and zero-interest receivables came to EUR 251 million (223) on 30
June, which was 0.4% (0.4) of the loan and guarantee portfolio. Of OP-Pohjola
Group's exposures, 49% (49) fell into the top five credit portfolio categories
(out of 12 categories), also known as investment grade.
OP-Pohjola Group's exposure to public corporation bonds is relatively low, with
Banking's exposure to government bonds amounting to EUR 1 billion on 30 June, of
which the Finnish government accounted for EUR 492 million. The next-biggest
investments were in bonds issued by Germany, Belgium and Sweden, totalling EUR
465 million. Direct investments by Insurance operations in government bonds
totalled EUR 0.9 billion, of which Finland accounted for EUR 182 million. The
next-biggest investments were in bonds issued by Germany and France, totalling
EUR 369 million.
The financial market was at times in a state of disturbance during the report
period. The short-term money market performed well as a rule, but concerns over
mounting government debt eroded bond markets. Issuers with a good credit rating,
such as Pohjola that operates as OP-Pohjola Group's central financing
institution and the Group's OP Mortgage Bank, managed to acquire long-term
funding.
OP-Pohjola Group's financial and liquidity position remained solid throughout
the report period. OP-Pohjola Group's financial position was improved in the
report period by the two senior bonds with a maturity of three and five years
worth a total of EUR 1.5 billion that Pohjola issued in the first quarter, and
by OP Mortgage Bank's EUR 1.0 billion issue in June with a maturity of five
years. OP-Pohjola Group's assets included in the liquidity reserve amounted to
EUR 14.6 billion (13.9) on 30 June 2010. The liquidity reserve and the
contingency plan tools included in OP-Pohjola Group's liquidity management
strategy ensure the Group's liquidity in a threat scenario for at least 24
months.
Market risk within non-life and life insurance is composed of the price,
interest rate and currency risk. When market risks are assessed, we focus on
those related to investments and technical provisions, primarily interest rate
risk. On 30 June, Non-life Insurance's investment assets totalled EUR 2.9
billion (2.9) and that of Life Insurance EUR 4.4 billion EUR (4.1). Insurance
operations' technical provisions and the distribution of and profits from
investment assets are covered in more detail in the sections dealing with
individual business segments.
The Committee of the European Banking Supervisors (CEBS), in cooperation with
the European Central Bank, the European Commission and national supervisory
authorities, coordinated the EU-wide forward-looking stress test of 91 banks in
June-July. In Finland, the Financial Supervisory Authority coordinated the
implementation of the test in cooperation with the Bank of Finland.
Of the Finnish banks, OP-Pohjola Group was included in the stress test exercise.
OP-Pohjola Group's banking earnings and capital base would remain strong despite
higher credit losses if the assumptions of economic deterioration used in the
Europe-wide bank stress test were to materialise. At its lowest, Tier 1 ratio
would drop, following the consideration of the sovereign risk shock, to 12.3% at
the end of 2011, against the minimum of 4% used in the test and the minimum
regulatory requirement of 6%. Of all the banks that were tested, OP-Pohjola
Group's capital adequacy and risk-bearing capacity ranked among the best.
The credit ratings are as follows:
--------------------------------------------------------------------------------
| Rating agency | Short-term debt | Long-term debt |
--------------------------------------------------------------------------------
| Fitch Ratings | F1+ | AA- |
| (OP-Pohjola Group and Pohjola | | |
| Bank plc) | | |
--------------------------------------------------------------------------------
| Standard & Poor's (Pohjola | A-1+ | AA- |
| Bank plc) | | |
--------------------------------------------------------------------------------
| Moody's (Pohjola Bank plc) | P-1 | Aa2 |
--------------------------------------------------------------------------------
Fitch Ratings issues a rating for both OP-Pohjola Group and Pohjola Bank plc.
OP-Pohjola Group's financial position also has a considerable impact on credit
ratings issued for Pohjola Bank plc alone.
Pohjola's credit rating outlook issued by Standard & Poor's is stable. Fitch
Rating has issued a negative outlook for the long-term debt ratings of Pohjola
and Moody's Investor Service has affirmed negative outlook on Pohjola's credit
rating.
The main reason for the negative outlook is the rapid deterioration of the
Finnish economy and its potential effects on Pohjola and OP-Pohjola Group mainly
operating in Finland.
OP-Pohjola Group's long-term financial targets
At Group level, targets have been set for long-term risk-bearing capacity,
profitability and efficiency. OP-Pohjola Group's long-term financial targets
have been defined so as to ensure the Group's operational capacity. These have
not been adapted to the existing operating environment
The targets for capital adequacy and operational efficiency were achieved in the
report period. The Group's profitability is below the long-term target, owing to
an unusually difficult operating environment.
OP-Pohjola Group's success indicators:
--------------------------------------------------------------------------------
| | 30 June/2010 | 30 June/2009 | Target |
--------------------------------------------------------------------------------
| Capital adequacy ratio (under | 1.60 | 1.45 | 1.5 |
| the Act on the Supervision of | | | |
| Financial and Insurance | | | |
| Conglomerates) | | | |
--------------------------------------------------------------------------------
| Return on economic capital, % | 11.8 | 9.6 | 17 |
| (12-month rolling) | | | |
--------------------------------------------------------------------------------
| Growth differential between | 7.0 | -15.1 | > 0 |
| income and expenses, | | | |
| percentage points | | | |
| (12-month rolling) | | | |
--------------------------------------------------------------------------------
Changes in OP-Pohjola Group's structure
OP-Pohjola Group's consolidated financial statements include the accounts of 218
member cooperative banks (220), OP-Pohjola Group Central Cooperative
Consolidated and OP Bank Group Mutual Insurance Company.
Kiukaisten Osuuspankki and Hinnerjoen Osuuspankki merged with Euran Osuuspankki
on 31 May 2010.
Kuopion Osuuspankki, Iisalmen Osuuspankki and Varkauden Osuuspankki will merge
on 31 December 2010 to create Pohjois-Savon Osuuspankki.In another combination
merger, Nilsiän Osuuspankki and Koillis-Savon Osuuspankki will become
Koillis-Savon Osuuspankki on 30 November 2010. Kestilän Osuuspankki and
Rantsilan Osuuspankki will merge on 31 March 2011 to create Siikalatvan
Osuuspankki, and Pälkäneen Osuuspankki and Kuhmalahden Osuuspankki have decided
to merge with Kangasalan Osuuspankki on 31 December 2010.
On 14 June 2010, the Supervisory Board of OP-Pohjola Group Central Cooperative
took a decision in principle on the reorganisation the Central Cooperative
acting as the Group's central institution. This reorganisation involves
establishing a new service company separate from the central institution, which
will be responsible for the development and provision of centralised services
for OP-Pohjola Group and its member cooperative banks as of 1 January 2011.This
change simplifies the central organisation's role as a provider of centralised
services, on the one hand, and as an organisation in charge of Group control and
supervision, on the other.
At the same time the Central Cooperative's Supervisory Board made a preliminary
decision to return extra Central Cooperative capital in the form of an extra
interest in the autumn of 2010 paid on Group member banks' cooperative capital
and supplementary cooperative capital. The interest would run up to EUR 65
million, but the final decision will be made by an extraordinary cooperative
meeting in October.
Owner-members and customers
On 30 June, the cooperative member banks had 1,284,000 owner-members, which is
36,388 more than a year earlier, and Helsinki OP Bank Plc, which operates in the
Helsinki Metropolitan Area, had a total of 1,111,000 OP bonus customers.
Loyal customer bonuses earned by OP bonus customers totalled EUR 74 million, up
by 6% on the previous year. Bonuses earned by owner-members are stated in
OP-Pohjola Group's income statement under 'Returns to owner-members'. In the
first half, OP bonus customers used a total of EUR 39 million (35) of bonuses to
pay for banking services and EUR 27 million (31) for Pohjola non-life insurance
premiums. Bonuses were used for the payment of over 526,000 insurance premium
bills, and 17% of these were paid using solely OP bonuses.
OP-Pohjola Group had 4,141,000 customers in Finland at the end of June. The
number of private customers totalled 3,723,000 and that of corporate customers
418,000. In the year to June, the number of joint banking and non-life insurance
customers in Finland increased by 100,100 to 1,116,000 as a result of
cross-selling.
At the end of June, Pohjola's loyal customer households numbered 443,000,
increasing in the past twelve months by 39,300. More than half of Pohjola's
loyal customer households also use OP-Pohjola Group member cooperative banks as
their main bank.
Personnel and incentive system
At the end of June, the Group had 12,468 employees (12,504). About 94 of the
Group's personnel are members of the Group's Personnel Fund. A long-term
management incentive scheme is also in place within the Group.
Central Cooperative's corporate governance
OP-Pohjola Group Central Cooperative is the central institution of the
amalgamation of the cooperative banks, the parent company of OP-Pohjola Group
Central Cooperative Consolidated and the company heading the financial and
insurance conglomerate formed by OP-Pohjola Group. Acting as OP-Pohjola Group's
development and service centre and strategic owner institution, the Central
Cooperative is also the central institution in charge of Group control and
supervision.
The Annual Cooperative Meeting of OP-Pohjola Group Central Cooperative was held
on 26 March 2010,re-electing the following Supervisory Board members, who were
due to resign, for the term ending in 2013: Pekka Ahvenjärvi, Attorney; Ola
Eklund, Product Director; Paavo Haapakoski, liikuntaneuvos (Finnish honorary
title); and Bo Storsjö, farmer. The new members elected to the Supervisory Board
were as follows: Hannu Simi, planner; and Mervi Väisänen, Senior Lecturer. In
addition, the Meeting elected Matti Pulkkinen, Director of the Northern Savo
Hospital District, for the term ending in 2012. Managing Director Olli Lehtilä
resignd from the Board having been appointed as Managing Director of Helsinki OP
Bank Plc, a subsidiary of OP-Pohjola Group Central Cooperative.The Supervisory
Board comprises 32 members.
At is first meeting after the Annual Cooperative Meeting, the Supervisory Board
re-elected Paavo Haapakoski Chairman. Professor Jaakko Pehkonen and President
Jukka Hulkkonen were elected Vice Chairmen.
The Annual Cooperative Meeting re-elected KPMG Oy Ab, a firm of authorised
public accountants, the auditor of OP-Pohjola Group Central Cooperative and
OP-Pohjola Group for the financial year 2010.
On 14 June 2010, the Central Cooperative's Supervisory Board made changes in the
Central Cooperative's Executive Board, with Chief Communications Officer Carina
Geber-Teir, Chief Strategy Officer Tom Dahlström and Chief Risk Officer Erik
Palmén as new members, the last two beginning as deputy members and becoming
regular members on 1 January 2011 following a Central Cooperative rule change.
Harri Nummela, who will become the Managing Director of the new service company,
will leave the Board at the turn of the year. Board member Erkki Böös became a
Board member of the service company on 14 June 2010. Heikki Vitie will remain in
the Executive Board as Administrative Director until his retirement at the end
of February 2012, according to his plan.
Capital expenditure and service development
The Central Cooperative and its subsidiaries are responsible for developing
OP-Pohjola Group's services. ICT investments and related specifications make up
a significant portion of costs of developing these services. EUR 19 million (22)
of these expenses consisted of ICT procurement capitalised in the balance sheet
in the report period. Of these investments, EUR 14 million (12) was allocated to
banking and investment operations, EUR 3 million (5) to non-life insurance
operations and EUR 2 million (4) to life insurance operations.
Joint responsibility and joint security
Under Act no. 599/2010 on the amalgamation of deposit banks, the amalgamation of
the cooperative banks comprises the organisation's central institution
(OP-Pohjola Group Central Cooperative), the Central Cooperative's member credit
institutions and the companies belonging to their consolidation groups. This
amalgamation is supervised on a consolidated basis. The Central Cooperative and
its member banks are ultimately responsible for each other's liabilities and
commitments. The Central Cooperative's members at the end of the report period
comprised OP-Pohjola Group's 218 member banks as well as Pohjola Bank plc,
Helsinki OP Bank Plc, OP Mortgage Bank and OP-Kotipankki Oyj. OP-Pohjola Group's
insurance companies do not fall within the scope of joint responsibility.
Deposit banks belonging to OP-Pohjola Group, i.e. its member cooperative banks,
Pohjola Bank plc, Helsinki OP Bank Plc and OP-Kotipankki Oyj, are regarded as a
single bank with respect to deposit protection. Under legislation governing the
Investors' Compensation Fund, OP-Pohjola Group is also considered a single
entity for purposes of compensation protection.
Outlook towards the year end
The Finnish economy was experiencing slow growth during the report period. This
growth is expected to continue in the second half but to be more moderate than
in the period before the financial crisis. The economic fundamentals have
improved but are still rather fragile and to a large extent rely on public
stimulus measures. Proposed changes to banks' capital adequacy and other
regulation are expected to gradually affect banking business and increase
uncertainty about economic development. The economy may have turned for the
better and the financial markets stabilised, but predicting economic development
is still difficult.
Profit performance in the financial sector in 2010 will be weakened by
exceptionally low interest rates and persistently high credit losses. OP-Pohjola
Group's 2010 earnings before taxes are expected to be at about the same level as
or better than in 2009. The greatest uncertainty in these estimates is related
to changes in the investment environment, credit losses and interest rates.
All forward-looking statements in this Interim Report expressing the
management's expectations, beliefs, estimates, forecasts, projections and
assumptions are based on the current view of the future financial performance of
OP-Pohjola Group and its various functions, and actual results may differ
materially from those expressed in the forward-looking statements.
Operations and earnings by business segment
OP-Pohjola Group's business segments are Banking and Investment Services,
Non-life Insurance and Life Insurance. Non-segment operations are presented in
'Other Operations'. OP-Pohjola Group's segment reporting is based on accounting
policies applied in its financial statements.
Companies within the Banking and Investment Services segment are the member
banks, Helsinki OP Bank Plc, OP-Kotipankki Oyj, OP Mortgage Bank, OP Fund
Management Company Ltd, Pohjola Asset Management Limited, Pohjola Corporate
Finance Ltd, Pohjola Capital Partners Ltd, as well as certain smaller companies
supporting banking and investment services in their entirety. Pohjola Group's
Banking and Asset Management segments are also included in the Banking and
Investment Services segment as are the operations of OP-Pohjola Group Mutual
Insurance Company, because most of the company's business consists of credit
insurance granted to the Group's retail banks.
The Non-life Insurance segment encompasses the operations of OP-Pohjola Group's
non-life insurance companies, i.e. Pohjola Insurance Ltd, Eurooppalainen
Insurance Company Ltd, A-Insurance Ltd, the Seesam companies operating in the
Baltic countries, as well as the operations of service companies supporting
non-life insurance.
The Life Insurance segment comprises OP Life Assurance Company Ltd engaged in
the Group's life and pension insurance business.
Other Operations includes operations that support all business segments,
particularly the operations of OP-Pohjola Group Central Cooperative and
Pohjola's Group management. Costs of the services for the business segments are
allocated to the segments in the form of internal service charges. The
allocation of equity capital to the business segments is carried out through an
internal bank under Other Operations, which means that any positive results in
excess of the target level will be shown under Other Operations.
Summary of performance by business segment
--------------------------------------------------------------------------------
| € million | Income | Expense | Other | Earnings/lo | Earnings/lo |
| | | s | items | ss before | ss before |
| | | | | tax | tax |
| | | | | Q1-Q2/2010 | Q1-Q2/2009 |
--------------------------------------------------------------------------------
| Banking and | 785 | 463 | -159 | 163 | 270 |
| Investment | | | | | |
| Services | | | | | |
--------------------------------------------------------------------------------
| Non-life Insurance | 200 | 157 | 0 | 42 | 46 |
--------------------------------------------------------------------------------
| Life insurance | 60 | 41 | 0 | 20 | -41 |
--------------------------------------------------------------------------------
| Other Operations | 214 | 169 | 0 | 45 | 4 |
--------------------------------------------------------------------------------
| Eliminations | -192 | -188 | 0 | -4 | 1 |
--------------------------------------------------------------------------------
| Total | 1,067 | 643 | -159 | 266 | 281 |
--------------------------------------------------------------------------------
Banking and Investment Services
- Mutual fund assets increased by 24.4%. The Group's market share of the value
of mutual funds rose by 0.3 percentage points to 23.3%.
- The Group's market share of loans increased by 0.4 percentage points to 32.7%
but as to deposits fell by 0.9 percentage points to 32.3%.
- Earnings before tax narrowed from EUR 270 million to EUR 163 million as a
result of lower net interest income, but the fall bottomed out in the second
quarter.
- Credit losses began to diminish during the report period. Compared with the
second half of 2009, credit losses were reduced by 23%.
Thanks to the economic recovery, impairments made on loans took a turn
downwards. The biggest credit losses suffered during the recession took place in
the second half of 2009. The growth of credit and deposits intensified during
the report period but remained moderate. The extremely low interest rates sent
net interest income on a steep downward trend vis-à-vis the corresponding period
a year ago. Capital markets continued to recover despite the Greek debt crisis
that rocked the euro area. Investment volumes and demand for asset management
services increased.
According to the sector's official statistics published in April, OP-Pohjola
Group solidified its position further as Finland's leading bank in 2009.
Compared with June 2009, the Group's market share in credits and mutual fund
assets improved further, but contracted in deposits.
On 30 June, OP-Pohjola Group's loan portfolio stood at EUR 54.6 billion (52.6)
and the guarantee portfolio at EUR 3 billion (3), the former growing by 5.2%
(7.0) in the year to June and by 3.7% in the report period. The market share of
the loan portfolio increased year on year by 0.4 percentage points to 32.7%.
The home mortgage portfolio totalled EUR 26.4 billion (25.7) at the end of June.
In the year to June, home mortgages increased by 6.2% (7.8). OP-Pohjola Group
held 35.8% of the home mortgage portfolio on 30 June 2009, down by 0.2
percentage points year on year.
The housing market improved clearly year on year. Housing brokered by
OP-Kiinteistökeskus was up by 20.5% on a year earlier, and the volume of new
home mortgages was 11% higher than a year ago.
The margin on new home mortgages fell further somewhat. The average margin on
new home mortgages taken out in January-June was 0.03 percentage points higher
than a year ago. Compared with Q1/2010, the margin on new home mortgages fell by
0.07 percentage points in Q2/2010.
On 30 June, the consumer credit portfolio amounted to EUR 4.0 billion (3.7),
showing an increase of 6.7% in the year to June (5.8).
On 30 June, the corporate loan portfolio stood at EUR 13.8 billion (13.4), and
the guarantee portfolio at EUR 2.8 billion (2.7). The corporate loan portfolio
expanded by 0.5% (9) in the year to June and by 3.0% in the report period. The
market share of corporate loans on 30 June was 28.4%, or 0.8 percentage points
higher than a year earlier. The average margin on new corporate loans during the
report period was somewhat lower than at the end of 2009.
On 30 June, deposits totalled EUR 35.4 billion (34.6), an increase of 1.6% year
on year and 2.3% in the report period. Competition continued to be tough for
customer deposits in the report period. The fact that assets were channelled to
emerging capital markets contributed to higher deposits. Investment deposits
shrank by 7.3% in the year to June (7.2), while current accounts increased by
11.2% (10.2). The Group held a 32.3% market share of deposits on 30 June, down
by 0.9 percentage points year on year.
Capital invested in OP-Pohjola Group's mutual funds totalled EUR 13 billion
(12.7), showing an increase of 24.4% in line with the general market trends in
the year to June, and in increase of 2.6% in the report period. On 30 June,
OP-Pohjola Group held a 23.3% market share of the capital of mutual funds
registered in Finland, up by 0.3 percentage points year on year. Net
subscriptions to OP-Pohjola Group's mutual funds totalled EUR 7 million (606).
On 30 June, assets managed by Pohjola Bank's Asset Management were worth EUR
33.6 billion (33.1), of which EUR 11.1 billion (11.4) was invested in OP-Pohjola
Group's mutual funds. OP-Pohjola Group companies accounted for EUR 8.4 billion
of assets managed by Pohjola Bank.
Assets managed in accordance with the OP-Private operating model totalled EUR
3.9 billion (3.6). Stockbroking for households totalled some 567,000 in the year
to June, or up by 24.9% year on year.
Earnings and risk exposure
Banking and Investment Services reported earnings before tax of EUR 163 million
for January-June, down by 40% year on year (270). Customer bonuses recognised in
the income statement during the report period rose by 6% to EUR 74 million (70).
Net interest income decreased by 21% to EUR 418 million (531). Net commissions
and fees increased by 12% to EUR 301 million (268) especially owing to higher
asset management fees. The fall in net interest income was caused by
exceptionally low interest rates. Net trading and investment income totalled EUR
38 million (52). Net trading income decreased because exceptionally high trading
income that realised a year ago had normalised. Personnel costs increased by
1.8% and other expenses shrank by 2.5%. The cost/income ratio stood at 59% (53).
Impairments on receivables came to EUR 77 million (66). Impairment losses
increased by EUR 12 million year on year, but compared with Q3 and Q4 of 2009
they shrank by 23%. The amount of impairment losses was fairly low considering
the business volume and the current economic cycle.
The Group's non-performing and zero-interest receivables shrank but remained
low, totalling EUR 251 million on 30 June, down by 12% year on year.
Non-performing and zero-interest receivables are stated net of impairment losses
assessed on an individual and collective basis, which amounted to EUR 124
million (131). The ratio of non-performing and zero-interest receivables to the
loan and guarantee portfolio was 0.4%, that is, a fraction lower than last year.
Banking and Investment Services, key figures
--------------------------------------------------------------------------------
| € million | Q1-Q2/201 | Q1-Q2/2009 | Change, % | 2009 |
| | 0 | | | |
--------------------------------------------------------------------------------
| Net interest income | 418 | 531 | -21.3 | 981 |
--------------------------------------------------------------------------------
| Impairment losses on | 77 | 66 | 17.7 | 167 |
| receivables | | | | |
--------------------------------------------------------------------------------
| Other income | 367 | 354 | 3.8 | 720 |
--------------------------------------------------------------------------------
| Personnel costs | 211 | 207 | 1.8 | 396 |
--------------------------------------------------------------------------------
| Other expenses | 252 | 259 | -2.5 | 507 |
--------------------------------------------------------------------------------
| Returns to owner-members | 81 | 82 | -1.5 | 160 |
| and OP bonus customers | | | | |
--------------------------------------------------------------------------------
| Earnings/loss before tax | 163 | 270 | -39.8 | 471 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| € million | Q1-Q2/2010 | Q1-Q2/2009 | Change, % | 2009 |
--------------------------------------------------------------------------------
| Home mortgages drawn | 3,146 | 2,835 | 11.0 | 5,723 |
| down | | | | |
--------------------------------------------------------------------------------
| Corporate loans drawn | 3,406 | 3,612 | -5.7 | 6,325 |
| down | | | | |
--------------------------------------------------------------------------------
| Net subscriptions to | 7 | 606 | -98.8 | 1,618 |
| mutual funds | | | | |
--------------------------------------------------------------------------------
| No. of brokered property | 8,321 | 6,908 | 20.5 | 15,303 |
| transactions | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| € billion | 30 Jun | 30 Jun | Change, % | 31 Dec |
| | 2010 | 2009 | | 2009 |
--------------------------------------------------------------------------------
| Outstanding credit | | | | |
--------------------------------------------------------------------------------
| Home loans | 26 | 25 | 6.2 | 26 |
--------------------------------------------------------------------------------
| Other loans to | 10 | 10 | 4.4 | 10 |
| households | | | | |
--------------------------------------------------------------------------------
| Corporate loans | 14 | 14 | 0.5 | 13 |
--------------------------------------------------------------------------------
| Other loans | 4 | 3 | 20.2 | 4 |
--------------------------------------------------------------------------------
| Total | 55 | 52 | 5.2 | 53 |
--------------------------------------------------------------------------------
| Guarantee portfolio | 3 | 3 | -1.8 | 3 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Deposits | | | | |
--------------------------------------------------------------------------------
| Total current and | | | | |
| payment transfer | | | | |
--------------------------------------------------------------------------------
| Households | 12 | 11 | 10.7 | 12 |
--------------------------------------------------------------------------------
| Companies | 4 | 4 | 7.3 | 4 |
--------------------------------------------------------------------------------
| Others | 3 | 2 | 19.9 | 2 |
--------------------------------------------------------------------------------
| Total current and | 19 | 17 | 11.2 | 18 |
| payment transfer | | | | |
| | | | | |
--------------------------------------------------------------------------------
| Investment deposits | 17 | 18 | -7.3 | 17 |
--------------------------------------------------------------------------------
| Total deposits | 35 | 35 | 1.6 | 35 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Mutual funds | | | | |
--------------------------------------------------------------------------------
| Equity and hedge funds | 4.0 | 2.7 | 48.1 | 3.9 |
--------------------------------------------------------------------------------
| Balanced funds | 1.5 | 1.4 | 8.3 | 1.5 |
--------------------------------------------------------------------------------
| Long-term bond funds | 5.4 | 4.7 | 14.4 | 5.0 |
--------------------------------------------------------------------------------
| Money market funds | 2.1 | 1.7 | 27.7 | 2.3 |
--------------------------------------------------------------------------------
| Total value of mutual | 13.0 | 10.5 | 24.4 | 12.7 |
| funds | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Market share, % | 30 Jun | 30 Jun | Change, | 31 Dec |
| | 2010 | 2009 | percentage | 2009 |
| | | | points | |
--------------------------------------------------------------------------------
| Total loans | 32.7 | 32.3 | 0.4 | 32.7 |
--------------------------------------------------------------------------------
| Home mortgages | 35.8 | 36.0 | -0.2 | 35.9 |
--------------------------------------------------------------------------------
| Corporate loans | 28.4 | 27.6 | 0.8 | 28.7 |--------------------------------------------------------------------------------
| Total deposits | 32.3 | 33.2 | -0.9 | 33.2 |
--------------------------------------------------------------------------------
| Capital invested in | 23.3 | 23.0 | 0.3 | 23.4 |
| mutual funds | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| € million | | | | |
--------------------------------------------------------------------------------
| Non-performing and | | | Change, % | |
| zero-interest receivables | | | | |
--------------------------------------------------------------------------------
| Households | 186 | 215 | -13.5 | 175 |
--------------------------------------------------------------------------------
| Companies and housing | 104 | 100 | 3.9 | 92 |
| associations | | | | |
--------------------------------------------------------------------------------
| Others | 5 | 15 | -69.5 | 3 |
--------------------------------------------------------------------------------
| Collectively assessed | -43 | -45 | -4.4 | -47 |
| impairments | | | | |
--------------------------------------------------------------------------------
| Total non-performing and | 251 | 285 | -11.7 | 223 |
| zero-interest receivables | | | | |
--------------------------------------------------------------------------------
| Non-performing and | 0.4 | 0.5 | -0.1* | 0.4 |
| zero-interest receivables | | | | |
| within loan and guarantee | | | | |
| portfolio, % | | | | |
--------------------------------------------------------------------------------
* Percentage points
Non-life Insurance
- Premium revenue from private customers increased by 11%. Private Customers
became the largest business division. Total insurance premium revenue increased
by 0.5%.
- The number of loyal customer households increased by 4%, reaching 443,000 on
30 June.
- Pre-tax earnings from Non-life Insurance amounted to EUR 42 million (46).
The balance on technical account developed as expected and remained good. The
operating combined ratio stood at 91.6% (88.6),
- Return on investments at fair value was 2.6% (4.5).
The non-life insurance customer business improved well in the report period, as
expected. The recession continued to affect the corporate sector, reducing
insurance premiums based on companies' payroll bills, net sales and operating
profit, with the result that insurance premiums were down within Corporate
Customers and the Baltic States. Growth remained strong within Private
Customers, becoming the largest division within Non-life Insurance. Total
insurance premium revenue increased by 0.5%, reaching EUR 473 million (471).
Insurance premium revenue from Private Customers increased by 11% to EUR 229
million (207). The number of loyal customer households increased in January-June
by 17,867 (14,057). On 30 June, the number of loyal customer households within
the Non-life Insurance segment totalled 443,000, showing an increase of 4% from
31 December 2009. Up to 57% of these loyal customer households also use
OP-Pohjola Group member cooperative banks as their main bank. OP bonuses
obtained through bank transactions were used for the payment of insurance
premiums to a total of EUR 27 million in the report period (31). Bonuses were
used for the payment of 526,600 insurance bills, with 88,100 bills paid with
bonuses alone.
Insurance premium revenue from Corporate Customers dropped by 6% to EUR 219
million (234). Pohjola reduced the level of premiums for the current year within
statutory workers' compensation insurance. As a result of the recession, payroll
bills which determine insurance premiums continued their downward trend.
In the Baltic States, insurance premium revenue decreased by 19% to EUR 24
million (30). The economic recession has strongly affected the insurance market
in the Baltic region with the result that the total market in the region shrank
by over one quarter during the reporting period.
Pohjola Insurance is the non-life insurance market leader in Finland in terms of
premiums written.
Earnings and risk exposure
Pre-tax earnings from Non-life Insurance amounted to EUR 42 million (46).
Balance on technical account fell as expected from last year's record-high
level. The operating combined ratio stood at 91.6% (88.6), which was the
second-best result for January-June ever. Insurance premium revenue totalled EUR
473 million (471) and indemnities EUR 300 million (287). Earnings before tax at
fair value came to EUR 71 million (121). Net investment income recognised in the
income statement came to EUR 42 million (30), or EUR 12 million higher year on
year. Impairment charges recognised from the fair value reserve in the income
statement totalled EUR 25 million (21).
Claims incurred rose due to growth in the private customer insurance portfolio
and the large number of losses reported within motor liability and motor vehicle
insurance during the first half. Claims incurred increased to EUR 329 million
(314), or by 5%. The loss ratio deteriorated to 69.6% (66.7) and the risk ratio
(excl. loss adjustment expenses) stood at 62.2% (55.9). The reported number of
major or medium-sized losses (in excess of EUR 0.1 million and over EUR 0.5
million in pension liabilities) came to 103 (90) in January-June, with their
claims incurred retained for own account totalling EUR 51 million (45).
The non-life insurance segment's expenses grew by 2.2% to EUR 157 million (154).
Personnel costs increased by 3.6% and other expenses by 1.5%.
Operating expenses as specified in the insurance company's profit and loss
account were EUR 104 million (103). The expense ratio stood at 22.0% (21.8) and
the cost ratio (incl. loss adjustment expenses) at 29.4 (28.7).
On 30 June, Non-life Insurance solvency capital rose to EUR 857 million (827)
and the ratio of solvency capital to insurance premium revenue (solvency ratio)
stood at 91% (88). Equalisation provisions rose to EUR 422 million (417).
On 30 June, the investment portfolio of Non-life Insurance totalled EUR 2.9
billion (2.9), while return on investments at fair value was 2.6% (4.5). Of the
investment portfolio, fixed-income investments accounted for 75% (76) and listed
equities for 10% (10). The fixed-income portfolio by credit rating was healthy,
with investment-grade exposure accounting for 89% (94), and 75% of the exposure
being receivables in at least category A-. The average residual term to maturity
of the fixed-income portfolio was 5 years and the duration 3.7 years (3.4).
Non-life Insurance: key figures
--------------------------------------------------------------------------------
| € million | Q1-Q2/201 | Q1-Q2/200 | Change, % | 2009 |
| | 0 | 9 | | |
--------------------------------------------------------------------------------
| Insurance premium revenue | 473 | 471 | 0.5 | 943 |
--------------------------------------------------------------------------------
| Insurance claims and | 300 | 287 | 4.5 | 560 |
| benefits | | | | |
--------------------------------------------------------------------------------
| Net investment income | 42 | 30 | 41.3 | 61 |
--------------------------------------------------------------------------------
| Unwinding of discount and | -23 | -22 | -5.2 | -44 |
| other items included in | | | | |
| net income | | | | |
--------------------------------------------------------------------------------
| Net income from Non-life | 192 | 192 | 0.2 | 400 |
| Insurance | | | | |
--------------------------------------------------------------------------------
| Other net income | 7 | 8 | -9.3 | 20 |
--------------------------------------------------------------------------------
| Personnel costs | 57 | 55 | 3.6 | 110 |
--------------------------------------------------------------------------------
| Other expenses | 101 | 99 | 1.5 | 207 |
--------------------------------------------------------------------------------
| Earnings/loss before tax | 42 | 46 | -8.3 | 102 |
--------------------------------------------------------------------------------
| Gross change in fair value | 28 | 74 | -61.8 | 188 |
| reserve | | | | |
--------------------------------------------------------------------------------
| Earnings/loss before tax | 71 | 121 | -41.4 | 291 |
| at fair value | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| € million | Q1-Q2/201 | Q1-Q2/200 | Change, % | 2009 |
| | 0 | 9 | | |
--------------------------------------------------------------------------------
| Insurance premium revenue | | | | |
--------------------------------------------------------------------------------
| Private customers | 229 | 207 | 10.8 | 424 |
--------------------------------------------------------------------------------
| Corporate Customers | 219 | 234 | -6.2 | 461 |
--------------------------------------------------------------------------------
| Baltic States | 24 | 30 | -18.8 | 57 |
--------------------------------------------------------------------------------
| Total insurance premium | 473 | 471 | 0.5 | 943 |
| revenue | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| € billion | 30 Jun | 30 Jun | Change, % | 31 Dec |
| | 2010 | 2009 | | 2009 |
--------------------------------------------------------------------------------
| Insurance contract | | | | |
| liabilities | | | | |
--------------------------------------------------------------------------------
| Discounted insurance | 1.3 | 1.3 | 5.3 | 1.3 |
| contract liabilities | | | | |
--------------------------------------------------------------------------------
| Other insurance contract | 1.0 | 1.0 | -6.1 | 0.8 |
| liabilities | | | | |
--------------------------------------------------------------------------------
| Total | 2.3 | 2.3 | 0.3 | 2.1 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Investments portfolio | | | | |
--------------------------------------------------------------------------------
| Bonds and bond funds | 2.1 | 2.0 | 6.1 | 2.1 |
--------------------------------------------------------------------------------
| Money market instruments | 0.1 | 0.3 | -54.6 | 0.1 |
--------------------------------------------------------------------------------
| Equities and equity funds | 0.4 | 0.2 | 95.5 | 0.4 |
--------------------------------------------------------------------------------
| Real property investment | 0.2 | 0.1 | 26.4 | 0.2 |
| *) | | | | |
--------------------------------------------------------------------------------
| Alternative investments | 0.2 | 0.1 | 41.5 | 0.2 |
--------------------------------------------------------------------------------
| Total investments | 2.9 | 2.7 | 8.7 | 2.9 |
--------------------------------------------------------------------------------
*) Includes real estate funds
Life insurance
- The market share of premiums written in life and pension insurance rose to
39.3%.
- Premiums written increased according to the strategy especially in unit-linked
products.
- The segment's earnings turned positive, and earnings before tax at fair value
improved to EUR 123 million (11).
- The solvency margin was 3.3-fold compared with the required minimum.
- Return on investments at fair value was 4.3% (1.7).
Life Insurance's volumes continued to grow in the report period, with the market
position improving. Premiums written increased particularly well within
corporate group pension insurance schemes. Insurance contract premiums written
increased by 130% and came to EUR 679 million (295). Unit-linked premiums
written increased by 73% to EUR 249 million (144). Investment contracts were
made in the report period worth EUR 276 million, When calculating market share,
investment contracts are considered equivalent to premiums written, most of them
having to do with an individual group pension insurance arrangement. Another
group pension insurance arrangement was published towards the end of the report
period that will increase premiums written considerably in the second half of
the year.
OP-Pohjola Group boosted its market position further in terms of life and
pension insurance. In terms of premiums written, OP-Pohjola Group is the clear
market leader. The Group's market share of premiums written was 39.3% (23.2)
and, according to preliminary information, 20.6% (20.0) of insurance savings.
Earnings and risk exposure
Life Insurance's earnings at fair value were EUR 112 million better than a year
ago. Earnings before tax at fair value came to EUR 123 million (11). The change
in the fair value reserve before tax was EUR 104 million (52) and earnings
before tax EUR 20 million (-41). Net investment income without the income from
unit-linked insurance came to EUR 66 million (4). Investment income was improved
particularly by higher capital gains.
Life insurance investment assets, excluding assets covering unit-linked
insurance, amounted to EUR 4.4 billion (4.1). Fixed-income investments accounted
for 59% (58), equity investments 15% (17), property investments 8.0% (8) and
alternative investments 18% (17) of the portfolio. Investments under the
'investment grade' accounted for approximately 72% (77) of the fixed-income
portfolio. The portfolio's modified duration was 3.8 years (3.6) on 30 June.
Return on investments at fair value was 4.3% (1.7).
Life Insurance's operating efficiency remained good. The cost ratio, in which
sales channel fees are excluded and in which all income to cover business
expenses are included as income, came to 30.9% (35.3). Thanks to higher sales
volumes, sales commissions included in Other expenses increased to EUR 21
million (13).
Life Insurance's solvency improved in the report period. The solvency ratio,
meaning the ratio of solvency capital to weighted technical provisions, was
15.1% (13.3). Technical provisions increased by 7.8% and came to EUR 6.4 billion
(6.0). Unit-linked technical provisions accounted for 41% (33).
--------------------------------------------------------------------------------
| € million | Q1-Q2/201 | Q1-Q2/200 | Change, % | 2009 |
| | 0 | 9 | | |
--------------------------------------------------------------------------------
| Premiums written | 679 | 295 | 129.9 | 678 |
--------------------------------------------------------------------------------
| Unit-linked | 249 | 144 | 73.0 | 368 |
--------------------------------------------------------------------------------
| Net investment income | 152 | 154 | -0.9 | 371 |
--------------------------------------------------------------------------------
| Unit-linked | 87 | 150 | -42.3 | 433 |
--------------------------------------------------------------------------------
| Change in insurance | 460 | 216 | 113.3 | 653 |
| contract liabilities | | | | |
--------------------------------------------------------------------------------
| Unit-linked | 293 | 233 | 25.7 | 761 |
--------------------------------------------------------------------------------
| Claims incurred | 318 | 251 | 27.0 | 499 |
--------------------------------------------------------------------------------
| Other items | -3 | -2 | -64.0 | -7 |
--------------------------------------------------------------------------------
| Net income from Life | 50 | -19 | 361.2 | -110 |
| Insurance | | | | |
--------------------------------------------------------------------------------
| Other income | 11 | 9 | 13.4 | 16 |
--------------------------------------------------------------------------------
| Personnel costs | 5 | 5 | 9.4 | 9 |
--------------------------------------------------------------------------------
| Other expenses | 36 | 26 | 37.0 | 57 |
--------------------------------------------------------------------------------
| Earnings/loss before tax | 20 | -41 | 148.1 | -159 |
--------------------------------------------------------------------------------
| Gross change in fair value | 104 | 52 | 100.8 | 354 |
| reserve | | | | |
--------------------------------------------------------------------------------
| Earnings/loss before tax at | 123 | 11 | | 194 |
| fair value | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| € billion | 30 Jun | 30 Jun | Change, % | 31 Dec |
| | 2010 | 2009 | | 2009 |
--------------------------------------------------------------------------------
| Assets (excluding assets | | | | |
| covering unit-linked | | | | |
| insurance) | | | | |
--------------------------------------------------------------------------------
| Bonds and bond funds | 2.1 | 2.0 | 4.2 | 2.2 |
--------------------------------------------------------------------------------
| Money market instruments | 0.5 | 0.5 | -8.2 | 0.2 |
--------------------------------------------------------------------------------
| Equities and equity funds | 0.7 | 0.3 | 117.1 | 0.7 |
--------------------------------------------------------------------------------
| Real property investment | 0.4 | 0.3 | 6.5 | 0.3 |
| **) | | | | |
--------------------------------------------------------------------------------
| Alternative investments | 0.8 | 0.8 | 3.6 | 0.7 |
--------------------------------------------------------------------------------
| Total investment portfolio | 4.4 | 4.0 | 11.3 | 4.1 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| € million | Q1-Q2/20 | Q1-Q2/200 | Change, % | 2009 |
| | 10 | 9 | | |
--------------------------------------------------------------------------------
| Premiums written, FAS | | | | |
--------------------------------------------------------------------------------
| Endowment insurance, | 206 | 101 | 104.6 | 270 |
| unit-linked | | | | |
--------------------------------------------------------------------------------
| Endowment insurance, | 35 | 73 | -52.1 | 116 |
| interest-bearing | | | | |
--------------------------------------------------------------------------------
| Pension insurance | 404 | 88 | 358.9 | 235 |
--------------------------------------------------------------------------------
| Term life insurance | 48 | 45 | 6.3 | 83 |
--------------------------------------------------------------------------------
| Others | 277 | 3 | | 69 |
--------------------------------------------------------------------------------
| Total premiums written, FAS | 969 | 310 | 212.4 | 771 |
--------------------------------------------------------------------------------
| Unit-linked | 256 | 147 | 74.4 | 377 |
--------------------------------------------------------------------------------
| | , | , | , | , |
--------------------------------------------------------------------------------
| Market share of premiums | 39.3 | 23.2 | 16.1 | 25.2 |
| written in life and pension | | | | |
| insurance, % | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| € billion | 30 Jun | 30 Jun | Change, % | 31 Dec |
| | 2010 | 2009 | | 2009 |
--------------------------------------------------------------------------------
| Insurance savings | | | | |
--------------------------------------------------------------------------------
| Endowment insurance, | 1.9 | 1.3 | 46.8 | 1.7 |
| unit-linked | | | | |
--------------------------------------------------------------------------------
| Endowment insurance, | 2.2 | 2.5 | -13.6 | 2.3 |
| interest-bearing | | | | |
--------------------------------------------------------------------------------
| Pension insurance | 2.3 | 1.7 | 37.3 | 1.9 |
--------------------------------------------------------------------------------
| Others | 0.1 | 0.1 | -3.8 | 0.2 |
--------------------------------------------------------------------------------
| Total insurance savings | 6.5 | 5.6 | 16.1 | 6.1 |
--------------------------------------------------------------------------------
| Unit-linked | 2.7 | 1.8 | 45.0 | 2.4 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Market share of insurance | 20.6*** | 19.6 | 1.0*** | 20.0 |
| savings in life and pension | | | | |
| insurance, % | | | | |
--------------------------------------------------------------------------------
* Percentage points
** Includes real estate funds
*** Preliminary information
Other Operations
Other Operations' pre-tax earnings for January-June were EUR 45 million, that
is, EUR 41 million better than a year earlier (4).
Net interest income was EUR 33 million (28), net trading losses EUR 9 million
(loss of EUR 4 million) and net investment income EUR 20 million (loss of EUR 4
million). Investment operations within the liquidity reserve improved net
interest income. Investment income included EUR 16 million (0) in capital gains
on notes and bonds. A year ago, investment income was eroded by a EUR 5 million
negative valuation concerning real property investments. Impairments recognised
on shares and participations categorised under available-for-sale financial
assets totalled EUR 4 million (4), while a year ago impairments recognised on
bonds totalled EUR 9 million.
Most of the other income in Other Operations came from within the Group as
internal service charges, which are recorded as business segment expenses. Of
the Other Operations expenses, EUR 62 million (60) were personnel costs and EUR
107 million (116) other costs.
The Group's liquidity and availability of funding remained good. Pohjola Bank
plc issued two senior bonds in the capital market during the report period, each
worth EUR 750 million.
Other Operations: key figures
--------------------------------------------------------------------------------
| € million | Q1-Q2/2010 | Q1-Q2/2009 | Change, % | 2009 |
--------------------------------------------------------------------------------
| Net interest income | 33 | 28 | 18.2 | 72 |
--------------------------------------------------------------------------------
| Net trading income | -9 | -4 | -114.9 | -7 |
--------------------------------------------------------------------------------
| Net investment income | 20 | -4 | 590.5 | -5 |
--------------------------------------------------------------------------------
| Other income | 170 | 169 | 0.2 | 336 |
--------------------------------------------------------------------------------
| Expenses | 169 | 175 | -3.5 | 333 |
--------------------------------------------------------------------------------
| Impairment losses on | 0 | 9 | -100.0 | 12 |
| receivables | | | | |
--------------------------------------------------------------------------------
| Earnings/loss before tax | 45 | 4 | 995.0 | 51 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| € billion | 30 Jun | 30 Jun | Change, % | 31 Dec |
| | 2010 | 2009 | | 2009 |
--------------------------------------------------------------------------------
| Receivables from | 7.5 | 6.7 | 12.8 | 7.4 |
| financial institutions | | | | |
--------------------------------------------------------------------------------
| Financial assets held | 0.4 | 0.6 | -39.3 | 0.4 |
| for trading | | | | |
--------------------------------------------------------------------------------
| Investment assets | 7.7 | 5.0 | 53.1 | 6.5 |
--------------------------------------------------------------------------------
| | , | , | , | , |
--------------------------------------------------------------------------------
| Liabilities to credit | 5.1 | 3.5 | 48.7 | 4.6 |
| institutions | | | | |
--------------------------------------------------------------------------------
| Debt securities issued | 17.6 | 16.9 | 4.0 | 17.5 |
| to the public | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| FINANCIAL STATEMENTS AND NOTES |
--------------------------------------------------------------------------------
| Income statement |
--------------------------------------------------------------------------------
| Statement of comprehensive income |
--------------------------------------------------------------------------------
| Key figures, ratios and definitions |
--------------------------------------------------------------------------------
| Financial performance by quarter |
--------------------------------------------------------------------------------
| Balance sheet |
--------------------------------------------------------------------------------
| Statement of changes in equity |
--------------------------------------------------------------------------------
| Cash flow statement |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Notes: |
--------------------------------------------------------------------------------
| Note 1. Accounting policies |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Notes to the income statement and balance sheet: |
--------------------------------------------------------------------------------
| Note 2. Net interest income |
--------------------------------------------------------------------------------
| Note 3. Impairments of receivables |
--------------------------------------------------------------------------------
| Note 4. Net income from Non-life Insurance |
--------------------------------------------------------------------------------
| Note 5. Net income from Life Insurance |
--------------------------------------------------------------------------------
| Note 6. Net commissions and fees |
--------------------------------------------------------------------------------
| Note 7. Net trading income |
--------------------------------------------------------------------------------
| Note 8. Net investment income |
--------------------------------------------------------------------------------
| Note 9. Other operating income |
--------------------------------------------------------------------------------
| Note 10. Personnel costs |
--------------------------------------------------------------------------------
| Note 11. Other administrative expenses |
--------------------------------------------------------------------------------
| Note 12. Other operating expenses |
--------------------------------------------------------------------------------
| Note 13. Returns to owner-members |
--------------------------------------------------------------------------------
| Note 14. Classification of financial instruments |
--------------------------------------------------------------------------------
| Note 15. Balance sheet classification according to valuation technique |
--------------------------------------------------------------------------------
| Note 16. Reclassified notes and bonds |
--------------------------------------------------------------------------------
| Note 17. Non-life Insurance assets |
--------------------------------------------------------------------------------
| Note 18. Life Insurance assets |
--------------------------------------------------------------------------------
| Note 19. Non-life Insurance liabilities |
--------------------------------------------------------------------------------
| Note 20. Life Insurance liabilities |
--------------------------------------------------------------------------------
| Note 21. Debt securities issued to the public |
--------------------------------------------------------------------------------
| Note 22. Fair value reserve after income tax |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Other notes: |
--------------------------------------------------------------------------------
| Note 23. Collateral given |
--------------------------------------------------------------------------------
| Note 24. Off-balance-sheet commitments |
--------------------------------------------------------------------------------
| Note 25. Derivative contracts |
--------------------------------------------------------------------------------
| Note 26. Related-party transactions |
--------------------------------------------------------------------------------
OP-Pohjola Group income statement
--------------------------------------------------------------------------------
| EUR million | Q1-2/ | Q1-2/ | Change, % | 2009 |
| | 201 | 200 | | |
| | 0 | 9 | | |
--------------------------------------------------------------------------------
| Interest income | 1,165 | 1,797 | -35 | 3,072 |
--------------------------------------------------------------------------------
| Interest expenses | 713 | 1,229 | -42 | 2,002 |
--------------------------------------------------------------------------------
| Net interest income (Note | 452 | 568 | -20 | 1,070 |
| 2) | | | | |
--------------------------------------------------------------------------------
| Impairments of receivables | 77 | 75 | 3 | 179 |
| (Note 3) | | | | |
--------------------------------------------------------------------------------
| Net interest income after | 375 | 493 | -24 | 891 |
| impairments | | | | |
--------------------------------------------------------------------------------
| Net income from Non-life | 190 | 189 | 1 | 396 |
| Insurance operations | | | | |
| (Note | | | | |
| 4) | | | | |
--------------------------------------------------------------------------------
| Net income from Life | 46 | -29 | | -120 |
| Insurance operations (Note | | | | |
| 5) | | | | |
--------------------------------------------------------------------------------
| Net commissions and fees | 283 | 251 | 13 | 496 |
| (Note 6) | | | | |
--------------------------------------------------------------------------------
| Net trading income (Note 7) | 13 | 54 | -77 | 112 |
--------------------------------------------------------------------------------
| Net investment income (Note | 34 | -8 | | -9 |
| 8) | | | | |
--------------------------------------------------------------------------------
| Other operating income | 48 | 52 | -8 | 104 |
| (Note 9) | | | | |
--------------------------------------------------------------------------------
| Personnel costs (Note 10) | 335 | 327 | 3 | 622 |
--------------------------------------------------------------------------------
| Other administrative | 154 | 156 | -1 | 310 |
| expenses (Note 11) | | | | |
--------------------------------------------------------------------------------
| Other operating expenses | 153 | 157 | -2 | 316 |
| (Note 12) | | | | |
--------------------------------------------------------------------------------
| Returns to owner-members | 81 | 82 | -1 | 160 |
| (Note 13) | | | | |
--------------------------------------------------------------------------------
| Share of associates' | 1 | 0 | | 1 |
| profits/losses | | | | |
--------------------------------------------------------------------------------
| Earnings before tax for the | 266 | 281 | -6 | 464 |
| period | | | | |
--------------------------------------------------------------------------------
| Income tax expense | 69 | 81 | -14 | 126 |
--------------------------------------------------------------------------------
| Profit for the period | 197 | 201 | -2 | 338 |
--------------------------------------------------------------------------------
OP-Pohjola Group statement of comprehensive income
--------------------------------------------------------------------------------
| EUR million | Q1-2/ | Q1-2/ | Change, % | 2009 |
| | 20 | 20 | | |
| | 10 | 09 | | |
--------------------------------------------------------------------------------
| Profit for the period | 197 | 201 | -2 | 338 |
--------------------------------------------------------------------------------
| Change in fair value reserve | 75 | 177 | -58 | 677 |
--------------------------------------------------------------------------------
| Translation differences | 0 | 0 | | 0 |
--------------------------------------------------------------------------------
| Income tax on other | 20 | 46 | -57 | 175 |
| comprehensive income | | | | |
--------------------------------------------------------------------------------
| Total comprehensive income for | 252 | 332 | -24 | 839 |
| the period | | | | |
--------------------------------------------------------------------------------
Key figures and ratios
--------------------------------------------------------------------------------
| | Q1-2/ | Q1-2/ | | 2009 |
| | 201 | 200 | | |
| | 0 | 9 | | |
--------------------------------------------------------------------------------
| Return on equity, % | 6.3 | 7.4 | | 5.9 |
--------------------------------------------------------------------------------
| Return on equity at fair | 8.1 | 12.3 | | 14.7 |
| value, % | | | | |
--------------------------------------------------------------------------------
| Return on assets, % | 0.48 | 0.53 | | 0.43 |
--------------------------------------------------------------------------------
| Cost/income ratio, % | 60 | 59 | | 61 |
--------------------------------------------------------------------------------
| Average personnel | 12,482 | 12,713 | | 12,632 |
--------------------------------------------------------------------------------
| Full-time | 11,404 | 11,571 | | 11,520 |
--------------------------------------------------------------------------------
| Part-time | 1,078 | 1,142 | | 1,112 |
--------------------------------------------------------------------------------
Definition of key figures and ratios
Return on equity, %
Profit for the period /
Equity capital (average of the beginning and end of the period) x 100
Return on equity at fair value, %
Profit for the period + change in fair value reserve less deferred tax liability
/
equity capital (average of the beginning and end of the period) x 100
Return on assets, %
Profit for the period /
Statement of financial position total (average of the beginning and end of the
period) x 100
Cost/income ratio, %
(Personnel costs + other administrative expenses + other operating expenses) /
(Net interest income + net income from Non-life Insurance operations + net
income from Life Insurance operations + net commissions and fees + net trading
income + net investment income + other operating income + share of associates'
profits/losses) x 100
Combined ratio (excl. unwinding of discount), %
Loss ratio+expense ratio
Risk ratio+cost ratio
Loss ratio (exc. unwinding of discount), %
Claims and loss adjustment expenses /
Net insurance premium revenue x 100
Expense ratio, %
Operating expenses + Amortisation/adjustment of intangible assets related to
company acquisition /
Net insurance premium revenue x 100
Risk ratio (excl. unwinding of discount), %
Claims excl. loss adjustment expenses /
Net insurance premium revenue x 100
Cost ratio, %
Operating expenses and loss adjustment expenses /
Net insurance premium revenue x 100
Operating cost ratio, %
Operating expenses before change in deferred acquisitions costs + loss
adjustment expenses/
Expense loading x 100
OP-Pohjola Group quarterly performance
--------------------------------------------------------------------------------
| | 2009 | 2010 |
--------------------------------------------------------------------------------
| EUR million | Q2 | Q3 | Q4 | Q1 | Q2 |
--------------------------------------------------------------------------------
| Interest income | 794 | 670 | 605 | 573 | 592 |
--------------------------------------------------------------------------------
| Interest expenses | 512 | 414 | 359 | 349 | 364 |
--------------------------------------------------------------------------------
| Net interest income | 282 | 256 | 245 | 224 | 228 |
--------------------------------------------------------------------------------
| Impairments of | 46 | 52 | 52 | 38 | 40 |
| receivables | | | | | |
--------------------------------------------------------------------------------
| Net interest income | 235 | 204 | 194 | 186 | 189 |
| after impairments | | | | | |
--------------------------------------------------------------------------------
| Net income from | 120 | 113 | 94 | 78 | 113 |
| Non-life Insurance | | | | | |
| operations | | | | | |
--------------------------------------------------------------------------------
| Net income from Life | -8 | -60 | -31 | 14 | 32 |
| Insurance operations | | | | | |
--------------------------------------------------------------------------------
| Net commissions and | 121 | 120 | 125 | 143 | 139 |
| fees | | | | | |
--------------------------------------------------------------------------------
| Net trading income | 26 | 33 | 25 | 6 | 6 |
--------------------------------------------------------------------------------
| Net investment income | 0 | -3 | 2 | 31 | 3 |
--------------------------------------------------------------------------------
| Other operating income | 27 | 23 | 28 | 26 | 23 |
--------------------------------------------------------------------------------
| Personnel costs | 163 | 142 | 154 | 164 | 171 |
--------------------------------------------------------------------------------
| Other administrative | 76 | 67 | 87 | 75 | 80 |
| expenses | | | | | |
--------------------------------------------------------------------------------
| Other operating | 81 | 71 | 88 | 78 | 75 |
| expenses | | | | | |
--------------------------------------------------------------------------------
| Returns to | 44 | 39 | 39 | 39 | 42 |
| owner-members | | | | | |
--------------------------------------------------------------------------------
| Share of associates' | 0 | 1 | 0 | 1 | 0 |
| profits/losses | | | | | |
--------------------------------------------------------------------------------
| Earnings before tax | 157 | 112 | 70 | 128 | 137 |
| for the period | | | | | |
--------------------------------------------------------------------------------
| Income tax expense | 20 | 27 | 18 | 33 | 36 |
--------------------------------------------------------------------------------
| Profit for the period | 137 | 85 | 52 | 95 | 101 |
--------------------------------------------------------------------------------
| Other comprehensive | | | | | |
| income | | | | | |
--------------------------------------------------------------------------------
| Change in fair value | 217 | 368 | 131 | 212 | -137 |
| reserve | | | | | |
--------------------------------------------------------------------------------
| Translation | 0 | 0 | 0 | 0 | 0 |
| differences | | | | | |
--------------------------------------------------------------------------------
| Income tax on other | 56 | 95 | 34 | 56 | -36 |
| comprehensive income | | | | | |
--------------------------------------------------------------------------------
| Total comprehensive | 298 | 358 | 149 | 252 | 0 |
| income for the period | | | | | |
--------------------------------------------------------------------------------
OP-Pohjola Group balance sheet
--------------------------------------------------------------------------------
| EUR million | 30 June | 30 June | Change, % | 2009 |
| | 2010 | 2009 | | |
--------------------------------------------------------------------------------
| Cash and cash equivalents | 3,907 | 2,102 | 86 | 3,235 |
--------------------------------------------------------------------------------
| Receivables from credit | 1,304 | 2,199 | -41 | 1,982 |
| institutions | | | | |
--------------------------------------------------------------------------------
| Financial assets at fair | 1,136 | 1,646 | -31 | 1,263 |
| value through profit or | | | | |
| loss | | | | |
--------------------------------------------------------------------------------
| Derivative contracts | 2,168 | 1,357 | 60 | 1,423 |
--------------------------------------------------------------------------------
| Receivables from customers | 54,882 | 52,384 | 5 | 52,992 |
--------------------------------------------------------------------------------
| Non-life Insurance assets | 3,259 | 3,038 | 7 | 3,101 |
| (Note 17) | | | | |
--------------------------------------------------------------------------------
| Life Insurance assets (Note | 6,489 | 5,418 | 20 | 6,331 |
| 18) | | | | |
--------------------------------------------------------------------------------
| Investment assets | 7,741 | 5,232 | 48 | 6,468 |
--------------------------------------------------------------------------------
| Investments in associates | 16 | 18 | -12 | 17 |
--------------------------------------------------------------------------------
| Intangible assets | 1,165 | 1,200 | -3 | 1,179 |
--------------------------------------------------------------------------------
| Property, plant and | 754 | 767 | -2 | 761 |
| equipment (PPE) | | | | |
--------------------------------------------------------------------------------
| Other assets | 1,611 | 1,947 | -17 | 1,572 |
--------------------------------------------------------------------------------
| Tax assets | 91 | 337 | -73 | 108 |
--------------------------------------------------------------------------------
| Total assets | 84,524 | 77,643 | 9 | 80,430 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Liabilities to credit | 3,408 | 1,960 | 74 | 2,174 |
| institutions | | | | |
--------------------------------------------------------------------------------
| Financial liabilities at | 34 | 423 | -92 | 71 |
| fair value through profit | | | | |
| or loss | | | | |
--------------------------------------------------------------------------------
| Derivative contracts | 1,991 | 1,419 | 40 | 1,360 |
--------------------------------------------------------------------------------
| Liabilities to customers | 38,438 | 36,750 | 5 | 37,606 |
--------------------------------------------------------------------------------
| Non-life Insurance | 2,484 | 2,477 | 0 | 2,279 |
| liabilities | | | | |
--------------------------------------------------------------------------------
| Life Insurance liabilities | 6,545 | 5,626 | 16 | 6,179 |
--------------------------------------------------------------------------------
| Debt securities issued to | 20,128 | 18,212 | 11 | 19,945 |
| the public (Note 21) | | | | |
--------------------------------------------------------------------------------
| Provisions and other | 2,214 | 2,182 | 1 | 1,832 |
| liabilities | | | | |
--------------------------------------------------------------------------------
| Tax liabilities | 948 | 1,002 | -5 | 925 |
--------------------------------------------------------------------------------
| Cooperative capital | 664 | 617 | 8 | 622 |
--------------------------------------------------------------------------------
| Subordinated liabilities | 1,300 | 1,293 | 1 | 1,250 |
--------------------------------------------------------------------------------
| Total liabilities | 78,154 | 71,961 | 9 | 74,243 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Equity capital | | | | |
--------------------------------------------------------------------------------
| Share of OP-Pohjola Group's | | | | |
| owners | | | | |
--------------------------------------------------------------------------------
| Share and cooperative | 357 | 356 | 0 | 358 |
| capital | | | | |
--------------------------------------------------------------------------------
| Fair value reserve (Note | 1 | -424 | | -54 |
| 22) | | | | |
--------------------------------------------------------------------------------
| Other reserves | 2,663 | 2,605 | 2 | 2,604 |
--------------------------------------------------------------------------------
| Retained earnings | 3,349 | 3,146 | 6 | 3,280 |
--------------------------------------------------------------------------------
| Total equity capital | 6,370 | 5,682 | 12 | 6,187 |
--------------------------------------------------------------------------------
| Total liabilities and | 84,524 | 77,643 | 9 | 80,430 |
| equity capital | | | | |
--------------------------------------------------------------------------------
Statement of changes in equity capital
--------------------------------------------------------------------------------
| EUR million | Share | Fair | Other | Retained | Total |
| | and | value | reserves | earnings | equity |
| | coopera | reserve | | | capital |
| | tive | | | | |
| | capital | | | | |
--------------------------------------------------------------------------------
| Balance at 1 January | 362 | -556 | 2,375 | 3,034 | 5,215 |
| 2009 | | | | | |
--------------------------------------------------------------------------------
| Increase of share | 0 | - | 170 | 0 | 170 |
| capital | | | | | |
--------------------------------------------------------------------------------
| Transfer of | 2 | - | - | - | 2 |
| cooperative capital to | | | | | |
| equity capital | | | | | |
--------------------------------------------------------------------------------
| Transfer of reserves | 0 | - | 62 | -62 | 0 |
--------------------------------------------------------------------------------
| Profit distribution | 0 | - | 0 | -31 | -31 |
--------------------------------------------------------------------------------
| Total comprehensive | 0 | 132 | 0 | 201 | 332 |
| income for the period | | | | | |
--------------------------------------------------------------------------------
| Equity-settled | | | | | |
| share-based | | | | | |
| transactions | | | | | |
--------------------------------------------------------------------------------
| Other | -8 | - | -1 | 3 | -5 |
--------------------------------------------------------------------------------
| Balance at 30 June | 356 | -424 | 2,605 | 3,146 | 5,682 |
| 2009 | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Balance at 1 January | 358 | -54 | 2,604 | 3,280 | 6,187 |
| 2010 | | | | | |
--------------------------------------------------------------------------------
| Increase of share | 0 | - | 0 | 0 | 0 |
| capital | | | | | |
--------------------------------------------------------------------------------
| Transfer of | 2 | - | 0 | 0 | 2 |
| cooperative capital to | | | | | |
| equity capital | | | | | |
--------------------------------------------------------------------------------
| Transfer of reserves | 0 | - | 59 | -60 | -1 |
--------------------------------------------------------------------------------
| Profit distribution | 0 | - | 0 | -62 | -62 |
--------------------------------------------------------------------------------
| Total comprehensive | 0 | 55 | 0 | 197 | 252 |
| income for the period | | | | | |
--------------------------------------------------------------------------------
| Equity-settled | - | - | - | 0 | 0 |
| share-based | | | | | |
| transactions | | | | | |
--------------------------------------------------------------------------------
| Other | -3 | - | 0 | -6 | -9 |
--------------------------------------------------------------------------------
| Balance at 30 June | 357 | 1 | 2,663 | 3,349 | 6,370 |
| 2010 | | | | | |
--------------------------------------------------------------------------------
Cash flow statement
--------------------------------------------------------------------------------
| EUR million | Q1-2/ | Q1-2/ |
| | 201 | 200 |
| | 0 | 9 |
--------------------------------------------------------------------------------
| Cash flow from operating activities | | |
--------------------------------------------------------------------------------
| Profit for the period | 197 | 201 |
--------------------------------------------------------------------------------
| Adjustments to profit for the period | 847 | 659 |
--------------------------------------------------------------------------------
| Increase (-) or decrease (+) in operating assets | -2,809 | -2,444 |
--------------------------------------------------------------------------------
| Receivables from credit institutions | 732 | 208 |
--------------------------------------------------------------------------------
| Financial assets at fair value through profit or | 25 | 1,626 |
| loss | | |
--------------------------------------------------------------------------------
| Derivative contracts | -36 | -23 |
--------------------------------------------------------------------------------
| Receivables from customers | -1,988 | -732 |
--------------------------------------------------------------------------------
| Non-life Insurance assets | -175 | -327 |
--------------------------------------------------------------------------------
| Life Insurance assets | -24 | -354 |
--------------------------------------------------------------------------------
| Investment assets | -1,303 | -2,702 |
--------------------------------------------------------------------------------
| Other assets | -40 | -140 |
--------------------------------------------------------------------------------
| Increase (+) or decrease (-) in operating | 2,310 | 1,050 |
| liabilities | | |
--------------------------------------------------------------------------------
| Liabilities to credit institutions | 1,224 | 1,267 |
--------------------------------------------------------------------------------
| Financial liabilities at fair value through profit | -37 | 285 |
| or loss | | |
--------------------------------------------------------------------------------
| Derivative contracts | 34 | -55 |
--------------------------------------------------------------------------------
| Liabilities to customers | 833 | -332 |
--------------------------------------------------------------------------------
| Non-life Insurance liabilities | 53 | 87 |
--------------------------------------------------------------------------------
| Life Insurance liabilities | -93 | -2 |
--------------------------------------------------------------------------------
| Provisions and other liabilities | 297 | -200 |
--------------------------------------------------------------------------------
| Income tax paid | -48 | -107 |
--------------------------------------------------------------------------------
| Dividends received | 74 | 49 |
--------------------------------------------------------------------------------
| A. Net cash from operating activities | 570 | -592 |
--------------------------------------------------------------------------------
| Cash flow from investing activities | | |
--------------------------------------------------------------------------------
| Increases in held-to-maturity financial assets | -14 | -132 |
--------------------------------------------------------------------------------
| Decreases in held-to-maturity financial assets | 100 | 201 |
--------------------------------------------------------------------------------
| Acquisition of subsidiaries, net of cash acquired | 0 | 0 |
--------------------------------------------------------------------------------
| Disposal of subsidiaries, net of cash disposed | 0 | 1 |
--------------------------------------------------------------------------------
| Purchase of PPE and intangible assets | -47 | -46 |
--------------------------------------------------------------------------------
| Proceeds from sale of PPE and intangible assets | 0 | 0 |
--------------------------------------------------------------------------------
| B. Net cash used in investing activities | 39 | 24 |
--------------------------------------------------------------------------------
| Cash flow from financing activities | | |
--------------------------------------------------------------------------------
| Increases in subordinated liabilities | 68 | 179 |
--------------------------------------------------------------------------------
| Decreases in subordinated liabilities | -18 | -192 |
--------------------------------------------------------------------------------
| Increases in debt securities issued to the public | 24,139 | 27,658 |
--------------------------------------------------------------------------------
| Decreases in debt securities issued to the public | -24,041 | -27,599 |
--------------------------------------------------------------------------------
| Increases in cooperative and share capital | 123 | 133 |
--------------------------------------------------------------------------------
| Decreases in cooperative and share capital | -79 | -84 |
--------------------------------------------------------------------------------
| Dividends paid and interest on cooperative capital | -75 | -52 |
--------------------------------------------------------------------------------
| Returns to owner-members | -1 | -3 |
--------------------------------------------------------------------------------
| Increases in invested unrestricted equity | 0 | 171 |
--------------------------------------------------------------------------------
| Other | 0 | 0 |
--------------------------------------------------------------------------------
| C. Net cash from financing activities | 117 | 210 |
--------------------------------------------------------------------------------
| Net change in cash and cash equivalents (A+B+C) | 727 | -358 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash and cash equivalents at period-start | 3,282 | 2,538 |
--------------------------------------------------------------------------------
| Cash and cash equivalents at period-end | 4,009 | 2,180 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Interest received | 1,194 | 1,870 |
--------------------------------------------------------------------------------
| Interest paid | -753 | -1,563 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Adjustments to profit for the period | | |
--------------------------------------------------------------------------------
| Non-cash transactions and other adjustments | | |
--------------------------------------------------------------------------------
| Impairments of receivables | 82 | 79 |
--------------------------------------------------------------------------------
| Unrealised net earnings in Non-life Insurance | 196 | 190 |
--------------------------------------------------------------------------------
| Unrealised net earnings in Life Insurance | 432 | 139 |
--------------------------------------------------------------------------------
| Change in fair value for trading | 107 | 59 |
--------------------------------------------------------------------------------
| Unrealised net gains on foreign exchange operations | -9 | -10 |
--------------------------------------------------------------------------------
| Change in fair value of investment property | 5 | 8 |
--------------------------------------------------------------------------------
| Depreciation and amortisation | 64 | 64 |
--------------------------------------------------------------------------------
| Share of associates' profits/losses | 1 | 1 |
--------------------------------------------------------------------------------
| Other | -36 | 114 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Items presented outside cash flow from operating | | |
| activities | | |
--------------------------------------------------------------------------------
| Capital gains, share of cash flow from investing | -1 | -1 |
| activities | | |
--------------------------------------------------------------------------------
| Interest on cooperative capital | 7 | 12 |
--------------------------------------------------------------------------------
| Other returns to owner-members | 1 | 3 |
--------------------------------------------------------------------------------
| Total adjustments | 847 | 659 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash and cash equivalents | | |
--------------------------------------------------------------------------------
| Liquid assets | 134 | 133 |
--------------------------------------------------------------------------------
| Receivables from credit institutions payable on | 3,875 | 2,047 |
| demand | | |
--------------------------------------------------------------------------------
| Total | 4,009 | 2,180 |
--------------------------------------------------------------------------------
Notes
Note 1. Accounting policies
The Interim Report for 1 January-30 June 2010 was prepared according to IAS 34
(Interim Financial Reporting), as approved by the EU.
In the preparation of its Interim Report, OP-Pohjola Group applied the same
accounting policies as in the preparation of its Financial Statements 2009.
During the current period, the Group has also applied cash flow hedging when
hedging future cash flows from variable-rate debt or other variable-rate assets
and liabilities. Interest rate swaps are used as hedging instruments. Derivative
contracts documented as cash flow hedges and provide effective hedges are
measured at fair value. The portion of the gain or loss on the hedging
instrument that is determined to be an effective hedge is recognised in other
comprehensive income. Fair value changes recognised in shareholders' equity are
included in the income statement in the period when hedged items affect net
income.
The Interim Report is based on unaudited figures. Given that all figures in the
Interim Report have been rounded off, the sum total of individual figures may
deviate from the presented sums.
Summary of presentation of income statement:
--------------------------------------------------------------------------------
| Net interest income | Received and paid interest on fixed-income |
| | instruments, the recognised difference between |
| | the nominal value and acquisition value, |
| | interest on interest-rate derivatives and fair |
| | value change in fair value hedging |
--------------------------------------------------------------------------------
| Net income from Non-life | Premiums written, claims unpaid, change in |
| Insurance operations | provision for unearned premiums and for unpaid |
| | claims, investment income, expenses (interest, |
| | dividends, realised capital gains and losses) |
| | and impairments |
--------------------------------------------------------------------------------
| Net income from Life | Premiums written, claims unpaid, change in |
| Insurance operations | provision for unearned premiums and for unpaid |
| | claims, investment income, expenses (interest, |
| | dividends, realised capital gains and losses) |
| | and impairments |
--------------------------------------------------------------------------------
| Net commissions and fees | Commission income and expenses, and the |
| | recognition of Day 1 profit related to |
| | illiquid derivatives |
--------------------------------------------------------------------------------
| Net trading income | Fair value changes in financial instruments at |
| | fair value through profit or loss, excluding |
| | accrued interest, and capital gains and |
| | losses, as well as dividends |
--------------------------------------------------------------------------------
| Net investment income | Realised capital gains and losses on |
| | available-for-sale financial assets, |
| | impairments, dividends as well as fair value |
| | changes in investment property, capital gains |
| | and losses, rents and other property-related |
| | expenses |
--------------------------------------------------------------------------------
| Other operating income | Other operating income |
--------------------------------------------------------------------------------
| Personnel costs | Wages and salaries, pension costs, social |
| | expenses |
--------------------------------------------------------------------------------
| Other administrative | Office expenses, IT costs, other |
| expenses | administrative expenses |
--------------------------------------------------------------------------------
| Other operating expenses | Depreciation/amortisation, rents and other |
| | operating expenses |
--------------------------------------------------------------------------------
Notes to the income statement and balance sheet
Note 2 Net interest income
--------------------------------------------------------------------------------
| EUR million | Q1-2/ | Q1-2/ | Change, % | 2009 |
| | 201 | 200 | | |
| | 0 | 9 | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Loans and other receivables | 628 | 1,005 | -38 | 1,718 |
--------------------------------------------------------------------------------
| Receivables from credit | 30 | 55 | -46 | 93 |
| institutions and central | | | | |
| banks | | | | |
--------------------------------------------------------------------------------
| Notes and bonds | 243 | 118 | | 238 |
--------------------------------------------------------------------------------
| Derivatives held for | 30 | 19 | 54 | 79 |
| trading (net) | | | | |
--------------------------------------------------------------------------------
| Liabilities to credit | -8 | -6 | 32 | -13 |
| institutions | | | | |
--------------------------------------------------------------------------------
| Liabilities to customers | -126 | -310 | -60 | -472 |
--------------------------------------------------------------------------------
| Debt securities issued to | -247 | -277 | -11 | -430 |
| the public | | | | |
--------------------------------------------------------------------------------
| Subordinated debt | -16 | -20 | -20 | -36 |
--------------------------------------------------------------------------------
| Hybrid capital | -4 | -8 | -55 | -11 |
--------------------------------------------------------------------------------
| Financial liabilities held | -1 | -4 | -81 | -5 |
| for trading | | | | |
--------------------------------------------------------------------------------
| Other (net) | -1 | 6 | | 4 |
--------------------------------------------------------------------------------
| Net interest income before | 528 | 579 | -9 | 1,165 |
| items under hedge | | | | |
| accounting | | | | |
--------------------------------------------------------------------------------
| Derivatives under hedge | -75 | -11 | | -95 |
| accounting (net) | | | | |
--------------------------------------------------------------------------------
| Total net interest income | 452 | 568 | -20 | 1,070 |
--------------------------------------------------------------------------------
Note 3 Impairments of receivables
--------------------------------------------------------------------------------
| EUR million | Q1-2/ | Q1-2/ | Change, % | 2009 |
| | 201 | 200 | | |
| | 0 | 9 | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Impairments of receivables | 151 | 92 | 64 | 199 |
--------------------------------------------------------------------------------
| Reversals of impairments | -68 | -25 | | -22 |
--------------------------------------------------------------------------------
| Payments on impaired | -4 | -4 | -5 | -11 |
| receivables | | | | |
| amortised from | | | | |
| statement of financial | | | | |
| position | | | | |
--------------------------------------------------------------------------------
| Net change in group-specific | -2 | 12 | | 12 |
| impairments | | | | |
--------------------------------------------------------------------------------
| Total | 77 | 75 | 3 | 179 |
--------------------------------------------------------------------------------
Note 4 Net income from Non-life Insurance
--------------------------------------------------------------------------------
| EUR million | Q1-2/ | Q1-2/ | Change, % | 2009 |
| | 201 | 200 | | |
| | 0 | 9 | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net insurance premium | | | | |
| revenue | | | | |
--------------------------------------------------------------------------------
| Premiums written | 665 | 679 | -2 | 1,005 |
--------------------------------------------------------------------------------
| Insurance premiums ceded to | -34 | -44 | 23 | -51 |
| reinsurers | | | | |
--------------------------------------------------------------------------------
| Change in provision for | -169 | -178 | 5 | -15 |
| unearned premiums | | | | |
--------------------------------------------------------------------------------
| Reinsurers' share | 12 | 14 | -17 | 4 |
--------------------------------------------------------------------------------
| Total | 473 | 471 | 0 | 943 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net Non-life Insurance | | | | |
| claims | | | | |
--------------------------------------------------------------------------------
| Claims paid | 324 | 303 | 7 | 595 |
--------------------------------------------------------------------------------
| Insurance claims recovered | -17 | -4 | | -20 |
| from reinsurers | | | | |
--------------------------------------------------------------------------------
| Change in provision for | -28 | -9 | | -30 |
| unpaid claims | | | | |
--------------------------------------------------------------------------------
| Reinsurers' share | 21 | -3 | | 15 |
--------------------------------------------------------------------------------
| Total | 300 | 287 | 5 | 560 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net investment income, | | | | |
| Non-life Insurance | | | | |
--------------------------------------------------------------------------------
| Interest income | 32 | 35 | -10 | 68 |
--------------------------------------------------------------------------------
| Dividend income | 18 | 6 | | 7 |
--------------------------------------------------------------------------------
| Property | 2 | 1 | 34 | 4 |
--------------------------------------------------------------------------------
| Realised changes in fair | | | | |
| value | | | | |
--------------------------------------------------------------------------------
| Notes and bonds | 35 | -8 | | 7 |
--------------------------------------------------------------------------------
| Shares and participations | -5 | 3 | | 15 |
--------------------------------------------------------------------------------
| Loans and receivables | -1 | - | | - |
--------------------------------------------------------------------------------
| Property | 2 | 0 | | 1 |
--------------------------------------------------------------------------------
| Derivatives | -25 | 1 | | -21 |
--------------------------------------------------------------------------------
| Unrealised changes in fair | | | | 0 |
| value | | | | |
--------------------------------------------------------------------------------
| Notes and bonds | 1 | 0 | | 1 |
--------------------------------------------------------------------------------
| Shares and participations | -16 | -13 | -21 | -20 |
--------------------------------------------------------------------------------
| Loans and receivables | -1 | -2 | 0 | -3 |
--------------------------------------------------------------------------------
| Property | 0 | 2 | | 1 |
--------------------------------------------------------------------------------
| Derivatives | 0 | 2 | -75 | -2 |
--------------------------------------------------------------------------------
| Other | -1 | 0 | | 0 |
--------------------------------------------------------------------------------
| Total | 40 | 27 | 50 | 58 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Unwinding of discount | -22 | -21 | -5 | -43 |
--------------------------------------------------------------------------------
| Other | 0 | 0 | -12 | -1 |
--------------------------------------------------------------------------------
| Net income from Non-life | 190 | 189 | 1 | 396 |
| Insurance | | | | |
--------------------------------------------------------------------------------
Note 5 Net income from Life Insurance
--------------------------------------------------------------------------------
| EUR million | Q1-2/ | Q1-2/ | Change, % | 2009 |
| | 201 | 200 | | |
| | 0 | 9 | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Premiums written | 692 | 307 | | 703 |
--------------------------------------------------------------------------------
| Reinsurers' share | -14 | -11 | -19 | -25 |
--------------------------------------------------------------------------------
| Total | 679 | 295 | | 678 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Claims incurred | | | | |
--------------------------------------------------------------------------------
| Benefits paid | -321 | -253 | -27 | -504 |
--------------------------------------------------------------------------------
| Change in provision for | -22 | -9 | | -13 |
| unpaid claims | | | | |
--------------------------------------------------------------------------------
| Reinsurers' share | 3 | 3 | 5 | 5 |
--------------------------------------------------------------------------------
| Change in insurance | | | | |
| contract liabilities | | | | |
--------------------------------------------------------------------------------
| Change in life insurance | -450 | -212 | | -640 |
| provision | | | | |
--------------------------------------------------------------------------------
| Reinsurers' share | 6 | 5 | 34 | 11 |
--------------------------------------------------------------------------------
| Total | -785 | -466 | -68 | -1,140 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Other | 3 | -2 | | -19 |
--------------------------------------------------------------------------------
| Total | -102 | -173 | -41 | -481 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net investment income, | | | | |
| Llife Insurance | | | | |
--------------------------------------------------------------------------------
| Interest income | 23 | 25 | -10 | 53 |
--------------------------------------------------------------------------------
| Dividend income | 41 | 35 | 17 | 40 |
--------------------------------------------------------------------------------
| Property | 2 | 0 | | 0 |
--------------------------------------------------------------------------------
| Realised changes in fair | | | | |
| value | | | | |
--------------------------------------------------------------------------------
| Notes and bonds | 2 | -4 | | -8 |
--------------------------------------------------------------------------------
| Shares and participations | 44 | -4 | | 28 |
--------------------------------------------------------------------------------
| Loans and receivables | 1 | -8 | | -8 |
--------------------------------------------------------------------------------
| Property | 0 | 0 | | 0 |
--------------------------------------------------------------------------------
| Derivatives | -47 | 0 | | -12 |
--------------------------------------------------------------------------------
| Unrealised changes in fair | | | | |
| value | | | | |
--------------------------------------------------------------------------------
| Notes and bonds | 3 | 17 | -80 | -3 |
--------------------------------------------------------------------------------
| Shares and participations | -15 | -63 | 76 | -150 |
--------------------------------------------------------------------------------
| Loans and receivables | 1 | - | | - |
--------------------------------------------------------------------------------
| Property | -1 | 0 | | -1 |
--------------------------------------------------------------------------------
| Derivatives | 3 | -6 | | -15 |
--------------------------------------------------------------------------------
| Other | 5 | 2 | | 6 |
--------------------------------------------------------------------------------
| Assets serving as cover for | | | | |
| unit-linked policies | | | | |
--------------------------------------------------------------------------------
| Shares and participations | | | | |
--------------------------------------------------------------------------------
| Capital gains and losses | 28 | 1 | | 65 |
--------------------------------------------------------------------------------
| Fair value gains and losses | 48 | 142 | -66 | 353 |
--------------------------------------------------------------------------------
| Other | 11 | 7 | 58 | 15 |
--------------------------------------------------------------------------------
| Total | 149 | 144 | 3 | 362 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net income from Non-life | 46 | -29 | | -120 |
| Insurance | | | | |
--------------------------------------------------------------------------------
Note 6 Commissions and fees
--------------------------------------------------------------------------------
| EUR million | Q1-2/ | Q1-2/ | Change, % | 2009 |
| | 201 | 200 | | |
| | 0 | 9 | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Commission income | | | | |
--------------------------------------------------------------------------------
| Lending | 78 | 72 | 8 | 139 |
--------------------------------------------------------------------------------
| Deposits | 2 | 3 | -7 | 5 |
--------------------------------------------------------------------------------
| Payment transfers | 72 | 62 | 16 | 132 |
--------------------------------------------------------------------------------
| Securities brokerage | 16 | 10 | 49 | 22 |
--------------------------------------------------------------------------------
| Securities issuance | 9 | 4 | | 13 |
--------------------------------------------------------------------------------
| Mutual funds brokerage | 43 | 25 | 72 | 60 |
--------------------------------------------------------------------------------
| Asset management and legal | 31 | 25 | 26 | 54 |
| services | | | | |
--------------------------------------------------------------------------------
| Insurance brokerage | 33 | 50 | -35 | 73 |
--------------------------------------------------------------------------------
| Guarantees | 11 | 10 | 7 | 21 |
--------------------------------------------------------------------------------
| Other | 20 | 21 | -8 | 48 |
--------------------------------------------------------------------------------
| Total | 314 | 283 | 11 | 567 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Commission expenses | | | | |
--------------------------------------------------------------------------------
| Total | 31 | 32 | -1 | 71 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net commissions and fees | 283 | 251 | 13 | 496 |
--------------------------------------------------------------------------------
Note 7 Net trading income
--------------------------------------------------------------------------------
| EUR million | Q1-2/ | Q1-2/ | Change, % | 2009 |
| | 201 | 200 | | |
| | 0 | 9 | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Capital gains and losses | | | | |
--------------------------------------------------------------------------------
| Notes and bonds | 14 | 21 | -35 | 37 |
--------------------------------------------------------------------------------
| Shares and participations | 1 | -3 | | -3 |
--------------------------------------------------------------------------------
| Derivatives | -24 | 101 | | 123 |
--------------------------------------------------------------------------------
| Changes in fair value | | | | |
--------------------------------------------------------------------------------
| Notes and bonds | 6 | -9 | | -9 |
--------------------------------------------------------------------------------
| Shares and participations | 0 | 9 | | 17 |
--------------------------------------------------------------------------------
| Derivatives | 5 | -72 | | -66 |
--------------------------------------------------------------------------------
| Financial assets and | | | | |
| liabilities amortised at | | | | |
| cost | | | | |
--------------------------------------------------------------------------------
| Capital gains and losses | | | | |
--------------------------------------------------------------------------------
| Loans and other receivables | - | - | | - |
--------------------------------------------------------------------------------
| Dividend income | 1 | 0 | 36 | 0 |
--------------------------------------------------------------------------------
| Net income from foreign | 11 | 6 | 87 | 12 |
| exchange operations | | | | |
--------------------------------------------------------------------------------
| Total | 13 | 54 | -77 | 112 |
--------------------------------------------------------------------------------
Note 8 Net investment income
--------------------------------------------------------------------------------
| EUR million | Q1-2/ | Q1-2/ | Change, % | 2009 |
| | 201 | 200 | | |
| | 0 | 9 | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Available-for-sale | | | | |
| financial assets | | | | |
--------------------------------------------------------------------------------
| Capital gains and losses | | | | |
--------------------------------------------------------------------------------
| Notes and bonds | 19 | 0 | | 2 |
--------------------------------------------------------------------------------
| Shares and participations | 5 | -5 | | 0 |
--------------------------------------------------------------------------------
| Financial assets and | | | | |
| liabilities amortised at | | | | |
| cost | | | | |
--------------------------------------------------------------------------------
| Capital gains and losses | | | | |
--------------------------------------------------------------------------------
| Loans and other receivables | 0 | - | | - |
--------------------------------------------------------------------------------
| Other | - | - | | - |
--------------------------------------------------------------------------------
| Dividend income | 13 | 8 | 61 | 9 |
--------------------------------------------------------------------------------
| Impairment losses | -7 | -12 | -45 | -28 |
--------------------------------------------------------------------------------
| Total | 30 | -9 | | -16 |
--------------------------------------------------------------------------------
| Investment property | | | | |
--------------------------------------------------------------------------------
| Rental income | 23 | 24 | -4 | 48 |
--------------------------------------------------------------------------------
| Maintenance charges and | -15 | -15 | 1 | -30 |
| expenses | | | | |
--------------------------------------------------------------------------------
| Changes in fair value, | -5 | -8 | -41 | -11 |
| capital gains and losses | | | | |
--------------------------------------------------------------------------------
| Other | 0 | 0 | -45 | 1 |
--------------------------------------------------------------------------------
| Total | 4 | 2 | | 8 |
--------------------------------------------------------------------------------
| Other | - | 0 | -100 | 0 |
--------------------------------------------------------------------------------
| Net investment income | 34 | -8 | | -9 |
--------------------------------------------------------------------------------
Note 9 Other operating income
--------------------------------------------------------------------------------
| EUR million | Q1-2/ | Q1-2/ | Change, % | 2009 |
| | 201 | 200 | | |
| | 0 | 9 | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Income from property and | 8 | 7 | 20 | 14 |
| business | | | | |
| premises in own | | | | |
| use | | | | |
--------------------------------------------------------------------------------
| Other | 41 | 46 | -12 | 90 |
--------------------------------------------------------------------------------
| Total | 48 | 52 | -8 | 104 |
--------------------------------------------------------------------------------
Note 10 Personnel costs
--------------------------------------------------------------------------------
| EUR million | Q1-2/ | Q1-2/ | Change, % | 2009 |
| | 201 | 200 | | |
| | 0 | 9 | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Wages and salaries | 278 | 277 | 0 | 534 |
--------------------------------------------------------------------------------
| Pension costs | 45 | 33 | 34 | 58 |
--------------------------------------------------------------------------------
| Other social expenses | 12 | 16 | -25 | 31 |
--------------------------------------------------------------------------------
| Total | 335 | 327 | 3 | 622 |
--------------------------------------------------------------------------------
Note 11 Other administrative expenses
--------------------------------------------------------------------------------
| EUR million | Q1-2/ | Q1-2/ | Change, % | 2009 |
| | 201 | 200 | | |
| | 0 | 9 | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Office expenses | 32 | 33 | -2 | 66 |
--------------------------------------------------------------------------------
| IT expenses | 52 | 50 | 5 | 101 |
--------------------------------------------------------------------------------
| Telecommunications expenses | 19 | 18 | 2 | 37 |
--------------------------------------------------------------------------------
| Marketing expenses | 24 | 26 | -7 | 53 |
--------------------------------------------------------------------------------
| Other administrative | 27 | 29 | -7 | 54 |
| expenses | | | | |
--------------------------------------------------------------------------------
| Total | 154 | 156 | -1 | 310 |
--------------------------------------------------------------------------------
Note 12 Other operating expenses
--------------------------------------------------------------------------------
| EUR million | Q1-2/ | Q1-2/ | Change, % | 2009 |
| | 201 | 200 | | |
| | 0 | 9 | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Expenses for property and | 37 | 36 | 2 | 73 |
| business | | | | |
| premises in own | | | | |
| use | | | | |
--------------------------------------------------------------------------------
| Depreciation | 64 | 64 | -1 | 135 |
--------------------------------------------------------------------------------
| Other | 52 | 56 | -7 | 107 |
--------------------------------------------------------------------------------
| Total | 153 | 157 | -2 | 316 |
--------------------------------------------------------------------------------
Note 13 Returns to owner-members
--------------------------------------------------------------------------------
| EUR million | Q1-2/ | Q1-2/ | Change, % | 2009 |
| | 201 | 200 | | |
| | 0 | 9 | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Bonuses | 74 | 70 | 6 | 142 |
--------------------------------------------------------------------------------
| Interest on cooperative | 7 | 12 | -44 | 18 |
| capital | | | | |
--------------------------------------------------------------------------------
| Total | 81 | 82 | -1 | 160 |
--------------------------------------------------------------------------------
Note 14. Classification of financial instruments
--------------------------------------------------------------------------------
| EUR million | Loans | Investm | Financi | Availa | Hedging | Total |
| | and | ents | al | ble-fo | derivati | |
| | other | held to | assets | r-sale | ves | |
| | receiva | maturit | at fair | financ | | |
| | bles | y | value | ial | | |
| | | | through | assets | | |
| | | | profit | | | |
| | | | or | | | |
| | | | loss* | | | |
--------------------------------------------------------------------------------
| Assets | | | | | | |
--------------------------------------------------------------------------------
| Cash and balances | 3,907 | - | - | - | - | 3,907 |
| with central | | | | | | |
| banks | | | | | | |
--------------------------------------------------------------------------------
| Receivables from | 1,304 | - | - | - | - | 1,304 |
| credit | | | | | | |
| institutions and | | | | | | |
| central banks | | | | | | |
--------------------------------------------------------------------------------
| Derivative | - | - | 1,922 | - | 246 | 2,168 |
| contracts | | | | | | |
--------------------------------------------------------------------------------
| Receivables from | 54,882 | - | - | - | - | 54,882 |
| customers | | | | | | |
--------------------------------------------------------------------------------
| Non-life | 710 | - | 86 | 2,463 | - | 3,259 |
| Insurance | | | | | | |
| assets** | | | | | | |
--------------------------------------------------------------------------------
| Life Insurance | 383 | - | 2,937 | 3,168 | - | 6,489 |
| assets*** | | | | | | |
--------------------------------------------------------------------------------
| Notes and bonds | - | 1,080 | 1,073 | 5,821 | - | 7,974 |
--------------------------------------------------------------------------------
| Shares and | - | - | 63 | 410 | - | 473 |
| participations | | | | | | |
--------------------------------------------------------------------------------
| Other receivables | 3,637 | - | 430 | - | - | 4,067 |
--------------------------------------------------------------------------------
| Total 30 June | 64,824 | 1,080 | 6,512 | 11,862 | 246 | 84,524 |
| 2010 | | | | | | |
--------------------------------------------------------------------------------
| Total 30 June | 62,280 | 1,157 | 5,515 | 8,512 | 180 | 77,643 |
| 2009 | | | | | | |
--------------------------------------------------------------------------------
| Total 31 December | 63,125 | 1,163 | 5,757 | 10,229 | 156 | 80,430 |
| 2009 | | | | | | |
--------------------------------------------------------------------------------
| EUR million | | Financial | Other | Hedging | Total |
| | | liabilities at | liabil | derivati | |
| | | fair value | ities | ves | |
| | | through profit or | | | |
| | | loss****** | | | |
--------------------------------------------------------------------------------
| Liabilities | | | | | | |
--------------------------------------------------------------------------------
| Liabilities to | - | - | - | 3,408 | - | 3,408 |
| credit | | | | | | |
| institutions | | | | | | |
--------------------------------------------------------------------------------
| Financial | - | - | 34 | - | - | 34 |
| liabilities held | | | | | | |
| for trading | | | | | | |
| (excl. | | | | | | |
| derivatives) | | | | | | |
--------------------------------------------------------------------------------
| Derivative | - | - | 1,716 | - | 275 | 1,991 |
| contracts | | | | | | |
--------------------------------------------------------------------------------
| Liabilities to | - | - | - | 38,438 | - | 38,438 |
| customers | | | | | | |
--------------------------------------------------------------------------------
| Non-life | - | - | 1 | 2,483 | - | 2,484 |
| Insurance | | | | | | |
| liabilities*** | | | | | | |
--------------------------------------------------------------------------------
| Life Insurance | - | - | 2,628 | 3,917 | - | 6,545 |
| liabilities**** | | | | | | |
--------------------------------------------------------------------------------
| Debt securities | - | - | - | 20,128 | - | 20,128 |
| issued to the | | | | | | |
| public | | | | | | |
--------------------------------------------------------------------------------
| Subordinated | - | - | - | 1,300 | - | 1,300 |
| loans | | | | | | |
--------------------------------------------------------------------------------
| Other liabilities | - | - | - | 3,826 | - | 3,826 |
--------------------------------------------------------------------------------
| Total 30 June | - | - | 4,379 | 73,500 | 275 | 78,154 |
| 2010 | | | | | | |
--------------------------------------------------------------------------------
| Total 30 June | - | - | 3,488 | 68,312 | 161 | 71,961 |
| 2009 | | | | | | |
--------------------------------------------------------------------------------
| Total 31 December | - | - | 3,601 | 70,476 | 166 | 74,243 |
| 2009 | | | | | | |
--------------------------------------------------------------------------------
*Assets at fair value through profit or loss include financial assets for
trading, financial assets at fair value through profit or loss at inception, and
investments and investment property covering unit-linked insurance policies.
**Non-life Insurance assets are specified in Note 17.
***Life Insurance assets are specified in Note 18.
****Non-life Insurance liabilities are specified in Note 19.
*****Life Insurance liabilities are specified in Note 20.
******Includes the balance sheet value of technical provisions related to
unit-linked insurance policies.
Debt securities issued to the public are carried at amortised cost.
On 30 June 2010, the fair value of these debt instruments was approximately EUR
176 million higher than their carrying amount, based on information available in
markets and employing commonly used valuation techniques.
Subordinated liabilities are carried at amortised cost. Their fair value are
substantially lower than their carrying amount, but determining fair values
reliably is difficult in the current market situation.
Note 15. Balance sheet classification according to valuation technique
--------------------------------------------------------------------------------
| Fair value of assets in EUR | Level 1* | Level 2* | Level 3* | Total |
| million on 30June 2010 | | | | |
--------------------------------------------------------------------------------
| Recognised at fair value through profit | | | |
| or loss | | | |
--------------------------------------------------------------------------------
| Banking | 428 | 692 | 16 | 1,136 |
--------------------------------------------------------------------------------
| Non-life Insurance | - | - | 8 | 8 |
--------------------------------------------------------------------------------
| Life Insurance | - | - | 141 | 141 |
--------------------------------------------------------------------------------
| Derivative financial | | | | |
| instruments | | | | |
--------------------------------------------------------------------------------
| Banking | 5 | 2,036 | 127 | 2,168 |
--------------------------------------------------------------------------------
| Non-life Insurance | 1 | 0 | - | 2 |
--------------------------------------------------------------------------------
| Life Insurance | - | 0 | - | 0 |
--------------------------------------------------------------------------------
| Available-for-sale | | | | |
--------------------------------------------------------------------------------
| Banking | 5,691 | 473 | 66 | 6,231 |
--------------------------------------------------------------------------------
| Non-life Insurance | 1,611 | 640 | 212 | 2,463 |
--------------------------------------------------------------------------------
| Life Insurance | 2,156 | 223 | 789 | 3,168 |
--------------------------------------------------------------------------------
| Total | 9,892 | 4,064 | 1,360 | 15,316 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Fair value of assets in EUR | Level 1* | Level 2* | Level 3* | Total |
| million on 31December 2009 | | | | |
--------------------------------------------------------------------------------
| Recognised at fair value through profit | | | |
| or loss | | | |
--------------------------------------------------------------------------------
| Banking | 536 | 706 | 21 | 1,263 |
--------------------------------------------------------------------------------
| Non-life Insurance | - | - | 8 | 8 |
--------------------------------------------------------------------------------
| Life Insurance | - | - | 182 | 182 |
--------------------------------------------------------------------------------
| Derivative financial | | | | |
| instruments | | | | |
--------------------------------------------------------------------------------
| Banking | 6 | 1,336 | 81 | 1,423 |
--------------------------------------------------------------------------------
| Non-life Insurance | 0 | 0 | - | 0 |
--------------------------------------------------------------------------------
| Life Insurance | - | - | - | - |
--------------------------------------------------------------------------------
| Available-for-sale | | | | |
--------------------------------------------------------------------------------
| Banking | 4,447 | 337 | 65 | 4,849 |
--------------------------------------------------------------------------------
| Non-life Insurance | 1,544 | 552 | 193 | 2,290 |
--------------------------------------------------------------------------------
| Life Insurance | 2,209 | 251 | 631 | 3,091 |
--------------------------------------------------------------------------------
| Total | 8,742 | 3,182 | 1,181 | 13,106 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Fair value of liabilities | Level 1* | Level 2* | Level 3* | Total |
| in EUR million on 30June | | | | |
| 2010 | | | | |
--------------------------------------------------------------------------------
| Recognised at fair value through profit | | | |
| or loss | | | |
--------------------------------------------------------------------------------
| Banking | 34 | - | - | 34 |
--------------------------------------------------------------------------------
| Non-life Insurance | - | - | - | - |
--------------------------------------------------------------------------------
| Life Insurance | - | - | - | - |
--------------------------------------------------------------------------------
| Derivative financial | | | | |
| instruments | | | | |
--------------------------------------------------------------------------------
| Banking | 6 | 1,940 | 45 | 1,991 |
--------------------------------------------------------------------------------
| Non-life Insurance | 0 | 0 | - | 1 |
--------------------------------------------------------------------------------
| Life Insurance | - | - | - | - |
--------------------------------------------------------------------------------
| Total | 41 | 1,940 | 45 | 2,026 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Fair value of liabilities | Level 1* | Level 2* | Level 3* | Total |
| in EUR million on | | | | |
| 31December 2009 | | | | |
--------------------------------------------------------------------------------
| Recognised at fair value through profit | | | |
| or loss | | | |
--------------------------------------------------------------------------------
| Banking | 71 | - | - | 71 |
--------------------------------------------------------------------------------
| Non-life Insurance | - | - | - | - |
--------------------------------------------------------------------------------
| Life Insurance | - | - | - | - |
--------------------------------------------------------------------------------
| Derivative financial | | | | |
| instruments | | | | |
--------------------------------------------------------------------------------
| Banking | 1 | 1,327 | 33 | 1,360 |
--------------------------------------------------------------------------------
| Non-life Insurance | - | 0 | - | 0 |
--------------------------------------------------------------------------------
| Life Insurance | - | 0 | - | 0 |
--------------------------------------------------------------------------------
| Total | 72 | 1,327 | 33 | 1,431 |
--------------------------------------------------------------------------------
* This level includes equities listed on major stock exchanges, quoted corporate
debt instruments, bonds issued by governments and financial institutions with
credit rating of at least A-, and exchange-traded derivatives. The fair value of
these instruments is determined on the basis of market quotes.
** Valuation techniques based on observable input parameters. The fair value of
the instruments included within this level means value derived from the market
price of a financial instrument's components or similar financial instruments;
or value which can be determined using commonly used valuation models and
techniques if the inputs significant to the fair value measurement are based on
observable market data. The fair value hierarchy level at Pohjola Group
includes OTC derivatives, treasury bills/notes, debt instruments issued by
companies and financial institutions, repo agreements, and securities lent or
borrowed.
*** Valuation techniques whose input parameters involve special uncertainty. The
fair value determination of the financial instruments included within this level
contains inputs not based on observable market data (unobservable inputs). This
level includes the most complex OTC derivatives, certain private equity
investments, and illiquid bonds, structured bonds, including securitised bonds
and structured debt securities, and hedge funds.
Note 16. Reclassified notes and bonds
The table below shows the carrying amounts and fair values of the reclassified
notes and bonds:
--------------------------------------------------------------------------------
| 30 June 2010, EUR million | Carrying | Fair | Effective | Impairment |
| | amount | value | interest | s arising |
| | | | rate | from |
| | | | | credit |
| | | | | risk |
--------------------------------------------------------------------------------
| Loans and other receivables | 1,842 | 1,846 | 4,9 | 93 |
--------------------------------------------------------------------------------
| Investments held to | 728 | 685 | 4,2 | - |
| maturity | | | | |
--------------------------------------------------------------------------------
| Available-for-sale | - | - | - | - |
| financial assets | | | | |
--------------------------------------------------------------------------------
| Total | 2,570 | 2,531 | 0 | 93 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 31 December 2009, EUR | Carrying | Fair | Effective | Impairment |
| million | amount | value | interest | s arising |
| | | | rate | from |
| | | | | credit |
| | | | | risk |
--------------------------------------------------------------------------------
| Loans and other receivables | 2,838 | 2,856 | 5,1 | 71 |
--------------------------------------------------------------------------------
| Investments held to | 798 | 761 | 4,2 | - |
| maturity | | | | |
--------------------------------------------------------------------------------
| Available-for-sale | - | - | - | - |
| financial assets | | | | |
--------------------------------------------------------------------------------
| Total | 3,636 | 3,617 | | 71 |
--------------------------------------------------------------------------------
Note 17 Non-life Insurance assets
--------------------------------------------------------------------------------
| EUR million | 30 June | 30 June | Change, % | 2009 |
| | 2010 | 2009 | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Investments | | | | |
--------------------------------------------------------------------------------
| Loan and other receivables | 255 | 384 | -34 | 379 |
--------------------------------------------------------------------------------
| Shares and participations | 414 | 321 | 29 | 391 |
--------------------------------------------------------------------------------
| Property | 77 | 82 | -7 | 78 |
--------------------------------------------------------------------------------
| Notes and bonds | 1,490 | 1,288 | 16 | 1,381 |
--------------------------------------------------------------------------------
| Derivatives | 2 | | | |
--------------------------------------------------------------------------------
| Other | 567 | 516 | 10 | 526 |
--------------------------------------------------------------------------------
| Total | 2,805 | 2,592 | 8 | 2,755 |
--------------------------------------------------------------------------------
| Other assets | | | | |
--------------------------------------------------------------------------------
| Prepayments and accrued | 31 | 29 | 6 | 38 |
| income | | | | |
--------------------------------------------------------------------------------
| Other | | | | |
--------------------------------------------------------------------------------
| Arising from direct | 281 | 280 | 1 | 214 |
| insurance operations | | | | |
--------------------------------------------------------------------------------
| Arising from reinsurance | 84 | 129 | -35 | 89 |
| operations | | | | |
--------------------------------------------------------------------------------
| Cash in hand and at bank | 5 | 8 | -42 | 4 |
--------------------------------------------------------------------------------
| Other receivables | 54 | - | - | - |
--------------------------------------------------------------------------------
| Total | 455 | 446 | 2 | 346 |
--------------------------------------------------------------------------------
| Non-life Insurance assets | 3,259 | 3,038 | 7 | 3,101 |
--------------------------------------------------------------------------------
Note 18 Life Insurance assets
--------------------------------------------------------------------------------
| EUR million | 30 June | 30 June | Change, % | 2009 |
| | 2010 | 2009 | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Investments | | | | |
--------------------------------------------------------------------------------
| Loan and other receivables | 296 | 434 | -32 | 446 |
--------------------------------------------------------------------------------
| Shares and participations | 2,629 | 2,291 | 15 | 2,777 |
--------------------------------------------------------------------------------
| Property | 119 | 123 | -3 | 122 |
--------------------------------------------------------------------------------
| Notes and bonds | 680 | 659 | 3 | 496 |
--------------------------------------------------------------------------------
| Other | 0 | 0 | -100 | 0 |
--------------------------------------------------------------------------------
| Total | 3,725 | 3,507 | 6 | 3,841 |
--------------------------------------------------------------------------------
| Assets covering unit-linked | | | | |
| insurance contracts | | | | |
--------------------------------------------------------------------------------
| Shares and participations | 2,677 | 1,848 | 45 | 2,381 |
--------------------------------------------------------------------------------
| Other assets | | | | |
--------------------------------------------------------------------------------
| Prepayments and accrued | 25 | 24 | 5 | 25 |
| income | | | | |
--------------------------------------------------------------------------------
| Other | | | | |
--------------------------------------------------------------------------------
| Arising from direct | 6 | 3 | | 33 |
| insurance operations | | | | |
--------------------------------------------------------------------------------
| Arising from reinsurance | 56 | 43 | 29 | 50 |
| operations | | | | |
--------------------------------------------------------------------------------
| Cash in hand and at bank | 0 | -7 | | 1 |
--------------------------------------------------------------------------------
| Total | 88 | 63 | 40 | 108 |
--------------------------------------------------------------------------------
| Life Insurance assets | 6,489 | 5,418 | 20 | 6,331 |
--------------------------------------------------------------------------------
Note 19 Non-life Insurance liabilities
--------------------------------------------------------------------------------
| EUR million | 30 June | 30 June | Change, % | 2009 |
| | 2010 | 2009 | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Provision for unpaid claims | | | | |
--------------------------------------------------------------------------------
| Provision for unpaid claims | 1,071 | 1,051 | 2 | 1,057 |
| for annuities | | | | |
--------------------------------------------------------------------------------
| Other provision for unpaid | 707 | 728 | -3 | 726 |
| claims | | | | |
--------------------------------------------------------------------------------
| Total | 1,778 | 1,780 | 0 | 1,783 |
--------------------------------------------------------------------------------
| Provisions for unearned | 531 | 524 | | 362 |
| premiums | | | | |
--------------------------------------------------------------------------------
| Other liabilities | 175 | 174 | | 133 |
--------------------------------------------------------------------------------
| Total | 2,484 | 2,477 | 0 | 2,279 |
--------------------------------------------------------------------------------
Note 20. Life Insurance liabilities
--------------------------------------------------------------------------------
| EUR million | 30 June | 30 June | Change, % | 2009 |
| | 2010 | 2009 | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Technical provisions | 3,822 | 3,733 | 2 | 3,649 |
--------------------------------------------------------------------------------
| Insurance contract | 2,628 | 1,807 | 45 | 2,335 |
| liabilities for unit-linked | | | | |
| insurance policies | | | | |
--------------------------------------------------------------------------------
| Other liabilities | 95 | 86 | 11 | 194 |
--------------------------------------------------------------------------------
| Total | 6,545 | 5,626 | 16 | 6,179 |
--------------------------------------------------------------------------------
Note 21 Debt securities issued to the public
--------------------------------------------------------------------------------
| EUR million | 30 June | 30 June | Change, % | 2009 |
| | 2010 | 2009 | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Bonds | 10,031 | 7,723 | 30 | 9,168 |
--------------------------------------------------------------------------------
| Certificates of deposit, | 9,838 | 10,462 | -6 | 10,549 |
| commercial papers and ECPs | | | | |
--------------------------------------------------------------------------------
| Other | 258 | 27 | | 227 |
--------------------------------------------------------------------------------
| Total | 20,128 | 18,212 | 11 | 19,945 |
--------------------------------------------------------------------------------
Note 22 Fair value reserve after income tax
--------------------------------------------------------------------------------
| EUR million | 30 June | 30 June | Change, % | 2009 |
| | 2010 | 2009 | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Notes and bonds | -40 | -38 | 6 | 24 |
--------------------------------------------------------------------------------
| Shares and participations | 41 | -387 | | -79 |
--------------------------------------------------------------------------------
| Other | 0 | - | | - |
--------------------------------------------------------------------------------
| Total | 1 | -424 | | -54 |
--------------------------------------------------------------------------------
The negative fair value reserve may recover by means of asset appreciation and
recognised impairments. Only the value changes in the fair value reserve are
recognised which the management deem to fulfil the relevant requirements.
The fair value reserve before tax amounted to EUR 1.1 million (-74) and the
related deferred tax liability to EUR 0.1 million (deferred tax asset EUR 19
million). On 30 June, positive mark-to-market valuations of equity instruments
in the fair value reserve totalled EUR 250 million (180) million and negative
mark-to-market valuations EUR 179 million (265). During 2007-10, impairment
charges recognised from the fair value reserve in the income statement totalled
EUR 455 million, of which EUR 88 million were recognised in 2010.
Other notes
Note 23 Collateral given
--------------------------------------------------------------------------------
| EUR million | 30 June | 30 June | Change, % | 2009 |
| | 2010 | 2009 | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Given on behalf of own | | | | |
| liabilities and commitments | | | | |
--------------------------------------------------------------------------------
| Mortgages | 1 | 1 | 0 | 1 |
--------------------------------------------------------------------------------
| Pledges | 5,978 | 4,133 | 45 | 5,839 |
--------------------------------------------------------------------------------
| Other | 256 | 421 | -39 | 600 |
--------------------------------------------------------------------------------
| Total | 6,234 | 4,554 | 37 | 6,440 |
--------------------------------------------------------------------------------
Note 24 Off-balance-sheet items
--------------------------------------------------------------------------------
| EUR million | 30 June | 30 June | Change, % | 2009 |
| | 2010 | 2009 | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Guarantees | 1,362 | 1,446 | -6 | 1,391 |
--------------------------------------------------------------------------------
| Other guarantee liabilities | 1,690 | 1,663 | 2 | 1,548 |
--------------------------------------------------------------------------------
| Pledges | 1 | 1 | 0 | 1 |
--------------------------------------------------------------------------------
| Loan commitments | 9,089 | 8,303 | 9 | 8,789 |
--------------------------------------------------------------------------------
| Commitments related to | 144 | 115 | 26 | 131 |
| short-term | | | | |
| trade | | | | |
| transactions | | | | |
--------------------------------------------------------------------------------
| Other | 875 | 582 | 50 | 785 |
--------------------------------------------------------------------------------
| Total off-balance-sheet | 13,161 | 12,109 | 9 | 12,644 |
| items | | | | |
--------------------------------------------------------------------------------
Note 25 Derivative contracts
30 June 2010
--------------------------------------------------------------------------------
| EUR million | Nominal values / remaining term to | Fair values |
| | maturity | |
--------------------------------------------------------------------------------
| | <1 year | 1-5 | >5 | Total | Assets | Liabil |
| | | years | years | | | ities |
--------------------------------------------------------------------------------
| Interest rate | 47,342 | 50,756 | 18,660 | 116,758 | 1,646 | 1,631 |
| derivatives | | | | | | |
--------------------------------------------------------------------------------
| Currency | 13,856 | 2,139 | 517 | 16,512 | 558 | 390 |
| derivatives | | | | | | |
--------------------------------------------------------------------------------
| Equity and | 112 | 932 | 24 | 1,068 | 88 | 0 |
| index-linked | | | | | | |
| derivatives | | | | | | |
--------------------------------------------------------------------------------
| Credit derivatives | 30 | 157 | - | 187 | 4 | 0 |
--------------------------------------------------------------------------------
| Other derivatives | 3,864 | 264 | - | 4,128 | 7 | 20 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total derivatives | 65,205 | 54,247 | 19,202 | 138,653 | 2,302 | 2,041 |
--------------------------------------------------------------------------------
30 June 2009
--------------------------------------------------------------------------------
| EUR million | Nominal values / remaining term to | Fair values |
| | maturity | |
--------------------------------------------------------------------------------
| | <1 year | 1-5 | >5 | Total | Assets | Liabil |
| | | years | years | | | ities |
--------------------------------------------------------------------------------
| Interest rate | 26,488 | 44,929 | 10,248 | 81,665 | 1,235 | 1,201 |
| derivatives | | | | | | |
--------------------------------------------------------------------------------
| Currency | 12,718 | 1,714 | 660 | 15,093 | 161 | 419 |
| derivatives | | | | | | |
--------------------------------------------------------------------------------
| Equity and | 160 | 702 | 31 | 893 | 39 | 0 |
| index-linked | | | | | | |
| derivatives | | | | | | |
--------------------------------------------------------------------------------
| Credit derivatives | 108 | 167 | - | 275 | 3 | 13 |
--------------------------------------------------------------------------------
| Other derivatives | 3,982 | 131 | - | 4,113 | 1 | 26 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total derivatives | 43,456 | 47,643 | 10,939 | 102,038 | 1,440 | 1,659 |
--------------------------------------------------------------------------------
Note 26 Related-party transactions
The related parties of OP-Pohjola Group include associates, administrative
personnel and other related party companies. The administrative personnel
comprise OP-Pohjola Group's Executive Chairman (Chairman of the Executive Board
of OP-Pohjola Group Central Cooperative), President of OP-Pohjola Group Central
Cooperative, members and deputy members of the Executive and Supervisory Boards
and their close relatives. Related parties also include companies over which a
person among administrative personnel or his close family member exercises
significant influence. Other communities considered as related parties include
OP Bank Group Pension Fund and OP Bank Group Pension Foundation.
Standard terms and conditions for credit are applied to loans granted to the
related parties. Loans are tied to generally used reference rates.
Related-party transactions have not undergone any substantial changes since 31
December 2009.
The Interim Report for 1 January-30 June 2010 have been prepared in accordance
with IAS 30 (Interim Financial Reporting) as approved by the EU.
The Financial Statements 2009 contain a description of the accounting policies
applied. OP-Pohjola Group has also applied future cash flow hedging in the
report period. This Interim Report is based on unaudited figures. Given that all
figures have been rounded off, the sum total of individual figures may deviate
from the presented sums.
Pohjola Bank plc will publish its own interim report.
The third-quarter interim report will be published on 3 November 2010.
OP-Pohjola Group's financial performance will be presented to the media by
Executive Chairman Reijo Karhinen in a press conference on 4 August 2010 at 12
noon at Teollisuuskatu 1 b, Vallila, Helsinki.
Helsinki, 4 August 2010
OP-Pohjola Group Central Cooperative
Executive Board
ADDITIONAL INFORMATION
Executive Chairman Reijo Karhinen, tel. +358 (0)10 252 4500
Tony Vepsäläinen, Chief Executive Officer, tel. +358 (0)10 252 4020
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
Major media
op.fi and pohjola.fi
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