2009-11-05 07:00:00 CET
2009-11-05 07:00:10 CET
REGULATED INFORMATION
Pohjola Pankki Oyj - Interim report (Q1 and Q3)
Pohjola Bank plc Interim Report for 1 January-30 September 2009
Pohjola Bank plc Company Release, 5 November 2009, 8.00 am Release category: Interim Report Pohjola Bank plc Interim Report for 1 January-30 September 2009 January-September - Earnings before tax improved year on year to EUR 211 million (114). - Earnings before tax at fair value amounted to EUR 424 million (-67) and return on equity at fair value was 21.8% (-3.9). - Banking improved its profit performance thanks to good results in capital markets. - Within Asset Management, assets under management continue to grow, totalling EUR 31.4 billion (25.3). - Non-life Insurance reported an excellent balance on technical account and recorded an operating combined ratio of 86.7% (90.0). Return on investment at fair value rose to 9.0% (-2.8). - Outlook: Consolidated earnings for 2009 before tax are expected to be roughly double the amount compared with those in 2008. Developments in impairment charges remain the greatest uncertainty associated with the outlook (more detailed information on the outlook in the "Outlook towards the year end" section below). July-September - Earnings before tax amounted to EUR 87 million (43). - Earnings before tax at fair value were EUR 196 million (-39). - Impairment charges on receivables burdened earnings by EUR 41 million. - Within Asset Management, assets under management grew by EUR 3.6 billion. - Non-life Insurance reported an operating combined ratio of 83.1% (80.7) and return on investments of 4.3% (-1.7). Group financial performance and key indicators 1) -------------------------------------------------------------------------------- | Earnings before | Q1-3/ | Q1-3/ | Chang | Q3/09 | Q3/08 | Change | 2008 | | tax, EUR million | 09 | 08 | e | | | | | | | | | | | | | | -------------------------------------------------------------------------------- | Banking | 99 | 88 | 11 | 24 | 24 | 0 | 105 | -------------------------------------------------------------------------------- | Asset Management | 11 | 10 | 0 | 4 | 3 | 1 | 17 | -------------------------------------------------------------------------------- | Non-life Insurance | 89 | 73 | 17 | 43 | 33 | 10 | 55 | -------------------------------------------------------------------------------- | Group Functions | 11 | -57 | 68 | 16 | -17 | 33 | -58 | -------------------------------------------------------------------------------- | Total | 211 | 114 | 97 | 87 | 43 | 44 | 119 | -------------------------------------------------------------------------------- | Change in fair | 213 | -181 | 394 | 109 | -82 | 191 | -252 | | value reserve | | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss | 424 | -67 | 491 | 196 | -39 | 235 | -133 | | before tax | | | | | | | | | at fair value | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Key indicators | Q1-3/ | Q1-3/ | Q3/09 | Q3/08 | 2008 | Target | | | | 09 | 08 | | | | | | -------------------------------------------------------------------------------- | Earnings before | 211 | 114 | 87 | 43 | 119 | | | | tax, EUR million | | | | | | | | -------------------------------------------------------------------------------- | Profit for the | 155 | 82 | 65 | 30 | 89 | | | | period, EUR million | | | | | | | | -------------------------------------------------------------------------------- | Return on equity, % | 21.8 | -3.9 | 27.1 | -7.2 | -5.6 | 13.0 | | -------------------------------------------------------------------------------- | Balance sheet | 34.1 | 31.9 | | | 32.4 | | | | total, EUR billion | | | | | | | | -------------------------------------------------------------------------------- | Shareholders' | 2.2 | 1.7 | | | 1.6 | | | | equity, EUR billion | | | | | | | | -------------------------------------------------------------------------------- | Tier 1 ratio, % | 11.3 | 9.9 | | | 9.4 | >9.5 | | -------------------------------------------------------------------------------- | Earnings per share, | 0.54 | 0.33 | 0.20 | 0.12 | 0.36 | | | | EUR 2) | | | | | | | | -------------------------------------------------------------------------------- | Earnings per share, | 1.09 | -0.21 | 0.46 | -0.12 | -0.40 | | | | incl. change in | | | | | | | | | fair value, EUR 2) | | | | | | | | -------------------------------------------------------------------------------- | Equity per share, | 6.90 | 6.77 | | | 6.58 | | | | EUR 2) | | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | | -------------------------------------------------------------------------------- | Average personnel | 2,955 | 3,140 | 2,961 | 3,173 | 2,986 | | | -------------------------------------------------------------------------------- 1) Comparatives deriving from the income statement are based on figures reported for the corresponding period a year ago. Unless otherwise specified, balance-sheet and other cross-sectional figures on 31 December 2008 are used as comparatives. 2) Adjusted for the effect of the rights issue. President and CEO Mikael Silvennoinen: “The Group's third-quarter financial performance was excellent and the January-September profit was almost double the amount reported a year ago. Our strong financial performance was based on good results recorded by Markets, higher net interest income by the Group Functions and favourable developments in the balance on technical account. The economic recession dampened demand for corporate loans and tightened corporate liquidity. Impairment charges increased considerably from their previous year's level although their amount can be regarded as moderate, considering how rapidly Finland entered into the recession and how deep the recession has been. Non-life Insurance balance on technical account was excellent. Growth in insurance premium revenue remained strong among private customers, thanks to efficient insurance policy sales by OP-Pohjola Group member banks. When it comes to corporate customers, both insurance premium revenue and claims incurred decreased as a result of the recession. Non-life Insurance return on investments at fair value developed favourably. Within Asset Management, assets under management increased by 24% thanks to favourable developments in the investment market and the net assets inflow. Our business model has also proved effective in the challenging operating environment. Our financial results, capital base and liquidity position are strong and funding has performed well." Operating environment The world economy continued its gradual recovery in the third quarter and major consumer indices rose. The recession has probably bottomed out in the US, and the euro area economy is showing some signs of stabilisation and rebound. Accelerating economic growth in China is gradually spreading to the rest of Asia as a result of stronger export demand. Major uncertainties are still associated with global economic recovery because the current stabilisation of economies after a steep fall is largely due to public support. The Finnish economy saw signs of stabilisation in the third quarter with greater expectations of a favourable economic development. Nevertheless, ample idle production capacity and weakening employment will keep investment and consumer demand low. Confidence in the financial market improved and risk premiums narrowed to pre-crisis levels. Central banks have continued to pursue an expansionary monetary policy of exceptional nature by keeping their key rates at close to zero and supporting banking system liquidity through extreme measures. Market rates in the euro area hit an all-time low. During the last month, expectations of normalising the monetary policy have slightly strengthened but there are no strong signs of a key rate increase on the horizon. Stock markets continued their rally during the third quarter and risk appetite has risen among investors markedly, with higher-than-expected corporate profits and the shift of investments towards higher-risk assets lying behind these developments. Demand for corporate bond issues has been exceptionally strong and the current year has seen a record number of such issues. The recession has resulted in an increase in corporate payment defaults and bankruptcies. Companies have cut capital spending and costs, which has slowed down demand for loans. Business slowdown in the corporate sector has also restrained premiums written within Non-life Insurance and reduced claims expenditure. Consolidated earnings -------------------------------------------------------------------------------- | Consolidated | 200 | 200 | Chan | 2009 | 2008 | Chang | Rollin | 2008 | | earnings | 9 | 8 | ge | | | e | g | | -------------------------------------------------------------------------------- | EUR million | Q1- | Q1- | | Q3 | Q3 | | 12-mon | | | | 3 | 3 | | | | | th | | -------------------------------------------------------------------------------- | | | | | | | | | | -------------------------------------------------------------------------------- | Net interest income | 177 | 120 | 57 | 58 | 45 | 13 | 231 | 174 | | | | | | | | | | | -------------------------------------------------------------------------------- | Impairments of | 95 | 8 | 87 | 41 | 11 | 30 | 115 | 28 || receivables | | | | | | | | | -------------------------------------------------------------------------------- | Net interest income | 83 | 113 | -30 | 17 | 34 | -17 | 116 | 146 | | after impairments | | | | | | | | | -------------------------------------------------------------------------------- | Net income from | 307 | 280 | 27 | 114 | 98 | 16 | 380 | 353 | | Non-life Insurance | | | | | | | | | -------------------------------------------------------------------------------- | Net commissions and | 102 | 91 | 11 | 36 | 28 | 8 | 134 | 122 | | fees | | | | | | | | | -------------------------------------------------------------------------------- | Net trading income | 60 | -72 | 132 | 27 | -26 | 53 | 51 | -81 | -------------------------------------------------------------------------------- | Net investment | -8 | 9 | -17 | 1 | 0 | 0 | -11 | 6 | | income | | | | | | | | | -------------------------------------------------------------------------------- | Other operating | 33 | 30 | 3 | 11 | 10 | 1 | 44 | 42 | | income | | | | | | | | | -------------------------------------------------------------------------------- | Total net income | 576 | 450 | 126 | 206 | 145 | 61 | 715 | 589 | -------------------------------------------------------------------------------- | Personnel costs | 142 | 130 | 11 | 47 | 38 | 9 | 189 | 178 | -------------------------------------------------------------------------------- | IT expenses | 56 | 55 | 1 | 19 | 19 | 0 | 81 | 80 | -------------------------------------------------------------------------------- | Depreciation and | 50 | 49 | 2 | 17 | 17 | 0 | 71 | 69 | | amortisation | | | | | | | | | -------------------------------------------------------------------------------- | Other expenses | 118 | 103 | 15 | 36 | 29 | 7 | 158 | 143 | -------------------------------------------------------------------------------- | Total expenses | 366 | 337 | 29 | 119 | 102 | 16 | 499 | 470 | -------------------------------------------------------------------------------- | Earnings before tax | 211 | 114 | 97 | 87 | 43 | 44 | 216 | 119 | -------------------------------------------------------------------------------- | Change in fair | 213 | -18 | 394 | 109 | -82 | 191 | 142 | -252 | | value reserve | | 1 | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss | 424 | -67 | 491 | 196 | -39 | 235 | 358 | -133 | | before tax at fair | | | | | | | | | | value | | | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | | | -------------------------------------------------------------------------------- | Income tax expense | 55 | 31 | 24 | 23 | 13 | 10 | 55 | 31 | -------------------------------------------------------------------------------- | Profit for the | 155 | 82 | 73 | 65 | 30 | 35 | 161 | 89 | | period | | | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | | | -------------------------------------------------------------------------------- | Tax on change in | 55 | -47 | 102 | 28 | -21 | 50 | 37 | -65 | | fair value reserve | | | | | | | | | -------------------------------------------------------------------------------- | Profit/loss for the | 313 | -52 | 365 | 145 | -31 | 176 | 266 | -99 | | period at fair | | | | | | | | | | value | | | | | | | | | -------------------------------------------------------------------------------- January-September earnings Consolidated net income increased by 28% to EUR 576 million (450) and net income before impairments of receivables by 47% to EUR 671 million (458). Net interest income came to EUR 177 million (120), up by 47% year on year. This improvement had its roots in net interest income from the liquidity reserve portfolio, the loan portfolio that grew throughout 2008, a rise in lending margins of new loans. In addition, the price difference recognised on reclassified notes and bonds increased net interest income by EUR 20 million. Impairments on receivables rose by EUR 87 million year on year, as expected, totalling EUR 95 million (8). Companies' solvency deteriorated due to the recession, which was reflected in higher impairment charges. Net income from Non-life Insurance rose by EUR 27 million to EUR 307 million (280), as a result of the favourable development of the balance on technical account. Net investment income recognised in the income statement was lower than a year ago. Net commissions and fees came to EUR 102 million, or EUR 11 million higher than in the previous year. This growth came mainly from commission income from loans and guarantees. Net trading income totalled EUR 60 million (-72), or EUR 132 million higher than in the previous year, with income from derivative and bond trading showing an increase in particular. Negative mark-to-market valuations recognised a year ago in the income statement from the liquidity reserve portfolio totalled EUR 70 million. Net investment income fell by EUR 17 million being EUR 8 million in the red, due adjustments for property values, impairment charges for equities and lower dividend income than a year ago. Expenses rose by 9% to EUR 366 million (337). Personnel costs rose by EUR 11 million. The number of Group employees increased by 49 from 31 December 2008 and the Group recognised more provisions for performance-based bonuses than a year ago. Non-life Insurance agency fees and sales commissions rose by EUR 12 million as a result of higher sales and Pohjola's insurance field staff joining the payroll of OP-Pohjola Group member banks on 1 October 2008.Depreciation on leases grew by EUR 3 million. Excluding insurance sales commissions, provisions recognised for performance-based bonuses and growth in depreciation on leases, expenses rose by 3%. Earnings before tax came to EUR 211 million (144), showing a year-on-year improvement of EUR 97 million. The fair value reserve increased by EUR 213 million, whereas it decreased by EUR 181 million during the same period a year ago. Impairments recognised from the fair value reserve in the income statement totalled EUR 29 million. On 30 September, the fair value reserve after tax stood at EUR -22 million, as against EUR -180 million on 31 December 2008. This negative fair value reserve is mainly due to equity and mutual fund investments by Non-life Insurance, with the related fair values being lower than purchase prices. Earnings before tax at fair value amounted to EUR 424 million (-67). July-September earnings Net income improved by 42% to EUR 206 million (145) and net income before impairments of receivables rose by 58% to EUR 247 million (156). Growth in net interest income slowed down somewhat during the reporting period. The loan and guarantee portfolio remained at the same level as a year ago. However, lending margins continued to rise, with corporate loan margins averaging 1.21% as against 1.14% at the end of June. The price difference recognised on reclassified notes and bonds increased net interest income by EUR 6 million. Impairments of receivables rose by EUR 30 million year on year to EUR 41 million (11). Net income from Non-Life Insurance increased to EUR 114 million (98), as a result of a year-on-year improvement in net investment income. Net commissions and fees rose vigorously due to year-on-year growth in loans and guarantees and higher securities brokerage commissions. Good trading performance was reflected in higher net trading income, totalling EUR 27 million (-26). Expenses rose by 16% to EUR 119 million (102). Growth in the number of employees and provisions recognised for performance-based bonuses increased personnel costs by EUR 9 million. Underwriting commissions were EUR 4 million higher than a year ago. Earnings before tax were EUR 87 million (43) and earnings before tax at fair value EUR 196 million (-39). Group risk exposure The Group's risk exposure continued to remain favourable despite higher impairment charges. The Group's good financial performance strengthened the risk-bearing capacity. Despite the recession, investment-grade exposures continued to remain at good levels, the trend of corporate customers' lowering credit scores levelled out and the ratio of doubtful receivables to the loan and guarantee portfolio remained low. Impairment charges continue to increase during the third quarter as a result of the recession. The Non-life Insurance risk-bearing capacity improved as a result of good financial performance shown by Non-life Insurance and of rebounding investment markets. The financial position and liquidity remained strong. Short-term funding performed well and the availability of long-term funding also improved. Pohjola launched a EUR 750-million issue in the international market, with a maturity of three years. Pohjola has also the opportunity to use Finnish State guarantee in its funding, if necessary. Pohjola Bank plc maintains OP-Pohjola Group's liquidity reserve portfolio which mainly consists of notes and bonds eligible as collateral for central bank refinancing. The liquidity reserve portfolio totalled EUR 9.5 billion (9.8) on 30 September. This liquidity reserve portfolio plus other items included in OP-Pohjola Group's balance sheet and eligible for central bank refinancing form the liquidity reserve, which can be used to cover OP-Pohjola Group's wholesale funding maturities for some 24 months. Determining the value of the available-for-sale financial assets and at fair value through profit or loss included in the liquidity reserve portfolio is based on mark-to-market valuations. The Group has not recognised value changes at fair value for any debt securities issued. Impairments recognised from the liquidity reserve portfolio in the third quarter totalled EUR 2 million, based on lower credit ratings for receivables. Impairments recognised from the liquidity reserve portfolio during January-September came to EUR 11 million. Net loan losses and impairments had an effect of EUR 95 million (8) on January-September earnings. Final loan losses recognised for January-September totalled EUR 15 million (12) and impairment charges EUR 111 million (3). Loan loss recoveries and allowances for impairments totalled EUR 32 million (7). Impairments recognised on an individual basis accounted for over 90% of net loan losses and impairments and those on a collective basis for less than 10%. Doubtful receivables came to EUR 50 million (35), accounting for 0.36% (0.25) of the loan and guarantee portfolio. With the recession deteriorating customers' creditworthiness, Pohjola has rearranged financing of some of its corporate customers in such a way that part of company ownership has transferred to Pohjola through company shares or stock options. Pohjola considers these measures to be the best way of securing its receivables and collateral and ensuring that the customer's business survives the recession. Assessing the duration of the current recession and its effects on our corporate customers' operating conditions still involves uncertainty. Capital adequacy The capital adequacy ratio continued to remain strong, standing at 13.0% (11.3) as against the statutory minimum requirement of 8%. The Tier 1 ratio was 11.3% (9.4). Tier 1 capital came to EUR 1,488 million (1,228) and the total capital base amounted to EUR 1,719 million (1,484). The minimum regulatory capital requirement to cover market risk amounted to EUR 42 million (47). On 30 September, risk-weighted assets totalled EUR 13,185 million, as against EUR 13,120 million on 31 December 2008. When comparing risk-weighted assets with the comparable figures at the end of last year, they rose by EUR 402 million, due to downgraded corporate credit ratings. Pohjola Bank plc strengthened its capital base through the EUR 308-million rights issue held between 7 and 24 April 2009. After the deduction of the related issue expenses, Tier 1 capital increased by EUR 298 million. Pohjola was authorised in April 2009 by the Financial Supervisory Authority to redeem prematurely no more than EUR 150 million in debt instruments included in Tier 2 capital. As required by the Financial Supervisory Authority, this full amount must be deducted from the capital base. By 30 September, Pohjola had repurchased debt instruments worth EUR 7 million. In September, Pohjola informed the Financial Supervisory Authority of a partial cancellation of repurchase. The company included this cancelled amount, EUR 130 million, in Tier 2 capital at the end of September. Credit ratings Pohjola Bank plc's credit ratings are as follows: -------------------------------------------------------------------------------- | Rating agency | Short-term debt | Long-term debt | -------------------------------------------------------------------------------- | Standard & Poor's | A-1+ | AA- | -------------------------------------------------------------------------------- | Moody's | P-1 | Aa2 | -------------------------------------------------------------------------------- | Fitch | F1+ | AA- | -------------------------------------------------------------------------------- Standard & Poor's forecasts a stable credit rating outlook for Pohjola Bank plc, whereas Fitch confirmed the credit ratings on 29 July 2009, changing the outlook for long-term debt from stable to negative. On 8 September 2009, Moody's downgraded Pohjola's rating for long-term debt to Aa2 but reaffirmed the short-term rating at Aa2. The rating agency's credit rating outlook for Pohjola remained negative. Updated strategy In September, Pohjola adopted an updated strategy, focusing on intensifying integration and upgrading businesses. Pohjola's core values are a People-first Approach, Responsibility and Prospering Together. Pohjola provides its corporate and institutional customers with a diverse range of banking, asset management and non-life insurance services, and private individuals with an extensive range of non-life insurance and private banking services. Pohjola's vision is to be the most preferred financial services partner, and profitable growth and an increase in company value form its key goals. The company stands out from the competition by operating close to customers, providing them with comprehensive financial services and being part of OP-Pohjola Group in intense cooperation with the Group's member banks. Pohjola is in close interaction with its customers, knowing customer needs and risks and creating solutions ideal for customers. It builds customer relationships on a long-term basis with the aim of establishing total customer relationships. Highly skilled and motivated employees are a prerequisite for upgrading businesses and providing the best service within the sector. Pohjola enhances its intellectual capital systematically as part of business development. Finland is Pohjola's main market area. Pohjola is making dedicated efforts to further develop its service network in Finland and neighbouring regions. In other market areas, Pohjola's service capabilities are based on cooperation with high-quality local or international partners. As part of OP-Pohjola Group, Pohjola boasts the most extensive and diversified service network within the sector and the largest clientele in Finland. OP-Pohjola Group's logo is the most recognisable one in the Finnish financial sector. Pohjola secures business continuity by maintaining a strong capital base. Joint responsibility with OP-Pohjola Group's member credit institutions strengthens Pohjola's creditworthiness. Pohjola seeks growth by strengthening not only its own but also the entire OP-Pohjola Group's market position as a partner of mid-size companies in particular. Intensifying business integration involves measures to make more efficient use of OP-Pohjola Group's shared customer potential. In addition, Pohjola will develop its international partner network further and invest in its ability to reinvent itself and develop its operations further. Financial targets and actuals -------------------------------------------------------------------------------- | Financial targets | Q1-3/09 | Q1-3/08 | 2008 | Target | -------------------------------------------------------------------------------- | Group | | | | | -------------------------------------------------------------------------------- | Return on equity, % | 21.8 | -3.9 | -5.6 | 13 | -------------------------------------------------------------------------------- | Tier 1 ratio, % | 11.3 | 9.9 | 9.4 |>9.5 | -------------------------------------------------------------------------------- | Banking | | | | | -------------------------------------------------------------------------------- | Operating cost/income ratio, % | 34 | 45 | 46 | <40 | -------------------------------------------------------------------------------- | Asset Management | | | | | -------------------------------------------------------------------------------- | Operating cost/income ratio, % | 60 | 60 | 57 | <50 | -------------------------------------------------------------------------------- | Non-life Insurance | | | | | -------------------------------------------------------------------------------- | Operating combined ratio, % | 86.7 | 90.0 | 91.5 | 92 | -------------------------------------------------------------------------------- | Operating expense ratio, % | 21.7 | 20.6 | 21.9 | <20 | -------------------------------------------------------------------------------- | Solvency ratio, % | 89 | 65 | 66 | 70 | -------------------------------------------------------------------------------- | | | | | | -------------------------------------------------------------------------------- | Rating | | | | | -------------------------------------------------------------------------------- | Affirmed by at least two rating | 3 | 3 | 3 | ≥ 2 | | agencies | | | | | | AA rating | | | | | -------------------------------------------------------------------------------- | Dividend policy | | | | | -------------------------------------------------------------------------------- | Dividend payout ratio a minimum of | | | 51 | 50 | | 50% | | | | | | provided that Tier 1 is a minimum | | | | | | of 9.5% | | | | | -------------------------------------------------------------------------------- These financial targets will remain valid over the economic cycle. Performance by business line Banking - Earnings before tax improved to EUR 99 million (88). - Volumes of trading in bonds and derivatives were up, showing an excellent result. - Impairment charges rose to EUR 84 million (7), eroding earnings considerably. - The loan and guarantee portfolio shrank by 4% from its year-start level but the market share of corporate loans incresed to 19.7% (19.0). - The average margin on corporate loans continued to rise. Banking: financial results and key figures and ratios -------------------------------------------------------------------------------- | Financial | Q1-3/ | Q1-3/ | Chan | Q3/0 | Q3/0 | Chang | Rollin | Actu | | results, EUR | 09 | 08 | ge | 9 | 8 | e | g | al | | million | | | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | 12-mon | 2008 | | | | | | | | | th | | -------------------------------------------------------------------------------- | Net interest | 125 | 117 | 8 | 37 | 43 | -6 | 166 | 158 | | income | | | | | | | | | -------------------------------------------------------------------------------- | Impairments of | 84 | 7 | 77 | 39 | 8 | 31 | 95 | 18 | | receivables | | | | | | | | | -------------------------------------------------------------------------------- | Net interest | | | | | | | | | | income after | | | | | | | | | -------------------------------------------------------------------------------- | impairments of | 41 | 110 | -69 | -2 | 35 | -37 | 71 | 140 | | receivables | | | | | | | | | -------------------------------------------------------------------------------- | Net commissions | 65 | 47 | 18 | 22 | 14 | 7 | 81 | 63 | | and fees | | | | | | | | | -------------------------------------------------------------------------------- | Net trading | 64 | -11 | 75 | 27 | -10 | 37 | 55 | -20 | | income | | | | | | | | | -------------------------------------------------------------------------------- | Other income | 22 | 19 | 3 | 8 | 6 | 1 | 31 | 28 | -------------------------------------------------------------------------------- | Total net | 193 | 165 | 28 | 54 | 46 | 8 | 239 | 211 | | income | | | | | | | | | -------------------------------------------------------------------------------- | Total expenses | 94 | 77 | 17 | 30 | 22 | 8 | 123 | 106 | -------------------------------------------------------------------------------- | Earnings before | 99 | 88 | 11 | 24 | 24 | 0 | 116 | 105 | | tax | | | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | | | -------------------------------------------------------------------------------- | Loan and | 13.6 | 13.6 | 0.0 | | | | | 14.1 | | guarantee | | | | | | | | | | portfolio, EUR | | | | | | | | | | billion | | | | | | | | | -------------------------------------------------------------------------------- | Margin on | 1.21 | 0.86 | 0.35 | | | | | 0.94 | | corporate loan | | | | | | | | | | portfolio, % | | | | | | | | | -------------------------------------------------------------------------------- | Ratio of | | | | | | | | | | doubtful | | | | | | | | | | receivables to | | | | | | | | | -------------------------------------------------------------------------------- | loan and | 0.37 | 0.23 | 0.14 | | | | | 0.25 | | guarantee | | | | | | | | | | portfolio, % | | | | | | | | | -------------------------------------------------------------------------------- | Ratio of | | | | | | | | | | impairments of | 0.62 | 0.05 | 0.57 | | | | | 0.13 | | receivables to | | | | | | | | | | the loan and | | | | | | | | | | guarantee | | | | | | | | | | portfolio, % | | | | | | | | | -------------------------------------------------------------------------------- | Operating | | | | | 41 | | | | | cost/income | 34 | 45 | -11 | 32 | | -9 | 37 | 46 | | ratio, % | | | | | | | | | -------------------------------------------------------------------------------- | Personnel | 607 | 591 | 16 | | | | | 613 | -------------------------------------------------------------------------------- January-September earnings Banking reported earnings before tax that were better than a year ago although impairment charges showed a substantial increase. The economic recession made corporate customers cut capital spending, slowing down demand for loans. The loan portfolio shrank by 5% from its level at the end of 2008, standing at EUR 10.9 billion on 30 September, and decreased by almost EUR 0.4 billion in the year to September, or 3%. The guarantee portfolio increased by 2% to EUR 2.7 billion from its level at the end of 2008 and by 14% to EUR 0.3 billion in the year to September, due to growth in guarantees for TyEL (under the Employees Pensions Act) premium loans. Pohjola raised margins on new and renewed loans to cover higher funding costs, which was reflected in a considerable rise in the average corporate loan margin. Net commissions and fees were almost 40% higher than a year ago. Commission income from loans grew by EUR 13 million and that from guarantees by EUR 6 million. Similarly, net commissions and fees from payment transfers and securities brokerage were higher than the year before. Pohjola Markets has shown record strong financial performance during the current year, reporting an increase in net income from trading in bonds and derivatives in particular. Based on a change in accounting practice at the end of 2008, notes and bonds included in the liquidity reserve were reclassified in the balance sheet in such a way that they are carried at amortised cost and changes in their fair value are not recognised through profit or loss. As a result, net trading income rose by EUR 13 million year on year. The price difference between the nominal value and the acquisition value arising from the reclassification recognised in net interest income totalled EUR 3 million. Expenses increased by EUR 17 million, and excluding growth in depreciation on leases and provisions recognised for performance-based bonuses, growth in expenses was considerably smaller. However, the cost/income ratio improved considerably. July-September earnings Third-quarter earnings before tax amounted to EUR 24 million, equalling the amount a year ago despite the EUR 31 million increase in impairment charges. The loan and guarantee portfolio decreased by EUR 0.3 billion, whereas a year ago it increased by EUR 0.6 billion. Despite higher lending margins, net interest income was EUR 5 million lower than a year ago as a result of a reduction in net interest income from trading. However, net commissions and fees rose by almost EUR 7 million, commission income from loans growing by EUR 4 million and that from guarantees by EUR 2 million. The Markets division posted earnings of EUR 18 million, or EUR 22 million higher than the year before, due particularly to trading in bond and derivative markets. Risk exposure by Banking Within Banking, key risks are associated with credit risk arising from customer business, and market risks. During January-September, total exposure decreased by EUR 0.4 billion to EUR 21.1 billion. The ratio of investment-grade exposure - that is, ratings 1-5 - to total exposure, excluding households, remained at a healthy level, standing at 64% (68), the share of ratings 11-12 was 1.4% (0.6) and that of non-rated exposure 1.2% (1). Corporate exposure (including housing corporations) accounted for 77% (74) of total exposure within Banking. Of corporate exposure, the share of investment-grade exposure stood at 58% (61) and the exposure of the lowest two rating categories amounted to EUR 274 million (117), accounting for 1.7% (0.7) of the total corporate exposure. The distribution of corporate exposure by industry remained highly diversified and none of the industries represented over 12% of corporate exposure on 30 September. The most significant industries included the lease and management of flats representing 11.2% (10.8), the manufacture of machinery and equipment 10.7% (10.0) and trade 9.4% (10.4). Significant customer exposure decreased to EUR 3.5 billion (4.4). The ratio of doubtful receivables to the loan and guarantee portfolio continued to remain low, standing at EUR 49 million (34), or 0.37% (0.25). Past due payments came to EUR 22 million (32), representing 0.16% (0.22) of the loan and guarantee portfolio. Net credit losses and impairment charges reduced January-September results by EUR 84 million (7), accounting for 0.62% (0.05) of the loan and guarantee portfolio. On 30 September, Baltic Banking exposures totalled EUR 113 million, accounting for less than 1% of the loan and guarantee portfolio. The Baltic Banking share of net credit losses and impairment charges for January-September amounted to EUR 5 million, comprising mainly impairments on receivables recognised on a collective basis. Interest rate risk exposure averaged EUR 11 million in the third quarter and EUR 12 million in January-September, based on the 1-percentage-point change in the interest rate. Asset Management - Earnings before tax improved to EUR 11 million (10). - Assets under management increased by 24% to EUR 31.4 billion (25.3). Asset Management: financial results and key figures and ratios -------------------------------------------------------------------------------- | Financial | Q1-3/ | Q1-3/ | Chang | Q3/0 | Q3/0 | Chang | Rollin | Actua | | results, EUR | 09 | 08 | e | 9 | 8 | e | g | l | | million | | | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | 12-mon | 2008 | | | | | | | | | th | | -------------------------------------------------------------------------------- | Net | 29 | 32 | -2 | 11 | 10 | 1 | 44 | 46 | | commissions | | | | | | | | | | and fees | | | | | | | | | -------------------------------------------------------------------------------- | Other income | 2 | 0 | 3 | 1 | 0 | 1 | 2 | 0 | | and expenses | | | | | | | | | -------------------------------------------------------------------------------- | Total income | 32 | 31 | 0 | 11 | 10 | 2 | 47 | 46 | -------------------------------------------------------------------------------- | Total | 21 | 21 | 0 | 7 | 6 | 1 | 29 | 29 | | expenses | | | | | | | | | -------------------------------------------------------------------------------- | Earnings | 11 | 10 | 0 | 4 | 3 | 1 | 17 | 17 | | before tax | | | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | | | -------------------------------------------------------------------------------- | Assets under | | | | | | | | | | management, | 31.4 | 27.3 | 4.1 | | | | | 25.3 | | EUR billion | | | | | | | | | -------------------------------------------------------------------------------- | Operating | | | | | | | | | | cost/income | 60 | 60 | 0 | 54 | 58 | -4 | 57 | 57 | | ratio, % | | | | | | | | | -------------------------------------------------------------------------------- | Personnel | 160 | 152 | 8 | | | | | 154 | -------------------------------------------------------------------------------- January-September earnings Earnings before tax for the period improved to EUR 11 million (10), year on year. The operating cost/income ratio stood at 60% (60). Assets under management increased year on year, totalling EUR 31.4 billion (25.3) on 30 September, institutional clients accounting for EUR 18.3 billion (16.0), OP mutual funds for EUR 10.9 billion (8.5) and Pohjola Private for EUR 2.2 billion (0.7). Assets under management increased by 24% from their level at the beginning of January 2009. Higher net assets inflow and favourable market developments since the second quarter contributed to this increase. July-September earnings Earnings before tax amounted to EUR 4 million (3). Net commissions and fees increased by 10% year on year and results were markedly better. Assets under management grew by EUR 3.6 billion during July-September as a result of higher net assets inflow and favourable market developments, institutional clients accounting for EUR 1.8 billion of this growth, OP mutual funds for EUR 1.4 billion and Pohjola Private client assets for EUR 0.4 billion. The operating cost/income ratio improved to 54% (58). Non-life Insurance - Earnings before tax improved to EUR 89 million (73). - The operating balance on technical account rose to EUR 95 million (69). - Non-life Insurance recorded very good profitability. The operating combined ratio stood at 86.7% (90.0). - Developments in insurance premium revenue were characterised by dichotomy, given that growth remained vigorous within Private Customers while the recession cut revenue from corporate customers. Total insurance premium revenue was up by 2%. - The number of loyal customer households exceeded that of other customers. Over 52% of the loyal customer households are also customers of OP-Pohjola Group member cooperative banks. - Return on investments at fair value was 9.0% (-2.8). Non-life Insurance: financial results and key figures and ratios -------------------------------------------------------------------------------- | Financial | Q1-3/ | Q1-3/ | Chang | Q3/0 | Q3/0 | Change | Rolli | Actua | | results, EUR | 09 | 08 | e | 9 | 8 | | ng | l | | million | | | | | | | | 2008 | -------------------------------------------------------------------------------- | Insurance | 712 | 697 | 15 | 241 | 241 | 0 | 938 | 923 | | premium | | | | | | | | | | revenue | | | | | | | | | -------------------------------------------------------------------------------- | Claims | -463 | -484 | 21 | -149 | -149 | 0 | -623 | -643 | | incurred | | | | | | | | | -------------------------------------------------------------------------------- | Operating | -154 | -143 | -11 | -51 | -45 | -6 | -212 | -202 | | expenses | | | | | | | | | -------------------------------------------------------------------------------- | Amortisation | -19 | -20 | 1 | -6 | -6 | 0 | -28 | -30 | | adjustment of | | | | | | | | | | intangible | | | | | | | | | | assets | | | | | | | | | -------------------------------------------------------------------------------- | Balance on | 76 | 50 | 26 | 34 | 41 | -6 | 75 | 49 | | technical | | | | | | | | | | account | | | | | | | | | -------------------------------------------------------------------------------- | Investment | 48 | 61 | -13 | 19 | 6 | 13 | 46 | 59 | | income and | | | | | | | | | | expenses | | | | | | | | | -------------------------------------------------------------------------------- | Other income | -35 | -39 | 4 | -10 | -13 | 4 | -50 | -53 | | and expenses | | | | | | | | | -------------------------------------------------------------------------------- | Earnings | 89 | 73 | 17 | 43 | 33 | 10 | 72 | 55 | | before tax | | | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss | 247 | -67 | 314 | 126 | -19 | 145 | 142 | -171 | | before tax | | | | | | | | | | at fair value | | | | | | | | | -------------------------------------------------------------------------------- | Operating | 86.7 | 90.0 | | 83.1 | 80.7 | | 88.2 | 91.5 | | combined | | | | | | | | | | ratio, % | | | | | | | | | -------------------------------------------------------------------------------- | Operating | 21.7 | 20.6 | | 21.3 | 18.8 | | 23.0 | 21.9 | | expense | | | | | | | | | | ratio, % | | | | | | | | | -------------------------------------------------------------------------------- | Return on | 9.0 | -2.8 | | 4.3 | -1.7 | | 4.8 | -7.0 | | investments | | | | | | | | | | at fair | | | | | | | | | | value, % | | | | | | | | | -------------------------------------------------------------------------------- | Solvency | 89 | 65 | | | | | | 66 | | ratio , % | | | | | | | | | -------------------------------------------------------------------------------- | Personnel | 2,059 | 2,326 | -267 | | | | | 2,018 | -------------------------------------------------------------------------------- January-September earnings Earnings before tax amounted to EUR 89 million (73). Earnings before tax at fair value improved by EUR 314 million. The balance on technical account was better although growth in insurance premium revenue slowed down due to the recession. The balance on technical account before amortisation on intangible assets stood at EUR 95 million (69). Favourable developments in the investment market were reflected in return on investments at fair value. Net investment income was lower than a year income, amounting to EUR 48 million (61), and net investment income at fair value reached EUR 205 million (-78). The number of loyal customer households exceeded that of other customers for the first time in Pohjola's history. On 30 September, the number of loyal customer households totalled 412,053, showing a year-on-year increase of 8%, and that of other customers 409,246. As a whole, the number of households as customers was up. More than 52% of Pohjola's loyal customer households have also concentrated their banking transactions in OP-Pohjola Group member cooperative banks. OP-Pohjola Group member banks' and Helsinki OP Bank's customers can use their OP bonuses earned through banking transactions to pay Pohjola non-life insurance premiums. This year OP bonuses have been used to pay 664,000 insurance premiums, with 177,500 paid in full using bonuses. Insurance premiums paid using bonuses totalled EUR 42 million. The revenue synergies resulting from growth in the number of loyal customer households by the end of the reporting period reached an annual level of EUR 14 million and the management is targeting EUR 17 million by the end of 2010. Cooperation with OP-Pohjola Group member banks will remain intense. Insurance sales to private customers were transferred to Group member banks in October 2008 with promising results: year on year, non-life insurance policy sales grew by 22% in January-September, in comparison with sales recorded by Pohjola's own offices. The reporting period saw the sales network strengthen when an increasing number of OP-Pohjola Group member banks joined the insurance sales network and increased the number of their insurance salespersons. Insurance business Insurance profitability improved year on year. The operating combined ratio stood at 86.7% (90.0). Developments in insurance premium revenue were characterised by dichotomy. Growth remained strong within Private Customers, based on the OP-Pohjola cooperation, whereas insurance premium revenue from Corporate Customer decreased due to the recession. Total insurance premium revenue improved by 2% to EUR 712 million (697). Pohjola has strengthened its market position among Private Customers in particular. Within Private Customers, insurance premium revenue rose by 11% to EUR 320 million (287). The number of loyal customer households grew by 22,878 (27,087) during January-September. Within Corporate Customers, insurance premium revenue decreased by 5% to EUR 347 million (367). The most drastic fall was seen in statutory workers' compensation insurance, considering that payroll bills which determine insurance premiums were on the decrease. Falling corporate net sales and profits have also been reflected in insurance premiums. In the Baltic States, insurance premium revenue rose by 2% to EUR 44 million (44). As a result of favourable claims developments, claims incurred were lower than a year ago although strong growth in the private customer insurance portfolio added to the number of losses reported. The efficiency of claims settlement and the successful utilisation of partnerships, for instance in the form of early referral to treatment and cost control, contributed to this favourable development. Claims incurred (excl. loss adjustment expenses) amounted to EUR 414 million (441) and the risk ratio stood at 58.1% (63.4). 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 141 (144) in January-September, with their claims incurred retained for own account totalling EUR 66 million (57). Operating expenses and loss adjustment expenses grew to EUR 204 million (186), due mainly to higher sales commissions and product and system development costs. The cost ratio was 28.6% (26.7). Investment Return on investments at fair value stood at 9.0% (-2.8). Net investment income recognised in the income statement amounted to EUR 48 million (61). Dividend income and capital gains were lower than a year ago. In addition, impairment charges recognised from the fair value reserve in the income statement totalled EUR 25 million. On 30 September, the investment portfolio totalled EUR 2,813 million (2,415), bonds and bond funds accounting for 78% (82) and listed equities for 8% (4). Unlisted capital investments plus the aforementioned equities represented a total of 10% (8). The fixed-income portfolio by credit rating remained healthy, considering that 82% of the fixed-income instruments were rated at least A-. The average residual maturity of the fixed-income portfolio was 4.9 years and the duration 3.0 years (4.3). July-September earnings Earnings before tax amounted to EUR 43 million (33). Earnings before tax at fair value improved by EUR 145 million. The balance on technical account before amortisation on intangible assets stood at EUR 41 million (46). Net investment income amounted to EUR 19 million (6) and net investment income at fair value reached EUR 102 million (-46). Insurance business Profitability was very good although it was lower than the exceptionally high level reported a year ago. The operating combined ratio stood at 83.1% (80.7). Growth remained vigorous within Private Customers, the economic recession affected the financial performance within Corporate Customers more than before and a fall in insurance premium revenue became steeper. As a whole, insurance premium revenue remained at the previous year's level, amounting to EUR 241 million (241). Insurance premium revenue from Private Customers improved by 12% to EUR 113 million (101). Growth in the number of loyal customer households picked up and was greater in the third quarter than a year ago. In July-September, the number of loyal customer households increased by 8,730 (7,406) and non-life insurance policy sales by Group member banks grew by 33%, in comparison with sales recorded by Pohjola's own offices a year ago. Insurance premium revenue from Corporate Customers dropped by 9% to EUR 113 million (125). In the Baltic States, insurance premium revenue decreased by 4% to EUR 14 million (15). Favourable claims developments continued during the third quarter and claims incurred were lower than a year ago. Claims incurred (excl. loss adjustment expenses) amounted to EUR 131 million (136) and the risk ratio stood at 57.2% (56.5). 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 51 (46) in July-September, with their claims incurred retained for own account totalling EUR 22 million (15). Operating expenses and loss adjustment expenses were EUR 69 million (58). Growth in sales to private customers and higher product and system development costs revved up growth in costs. This growth coupled with a slowdown in insurance premium revenue weakened the cost ratio, standing at 28.5% (24.2). Investment Return on investments at fair value was 4.3% (-1.7) and net investment income amounted to EUR 19 million (6). Risk exposure by Non-life Insurance Major risks within Non-life Insurance include underwriting risks associated with claims developments and market risks associated with investment portfolios covering technical provisions. On 30 September, Non-life Insurance solvency capital totalled EUR 831 million (608) and the ratio of solvency capital to insurance premium revenue (solvency ratio) stood at 89% (66). Solvency capital increased by EUR 109 million in the third quarter, due to the good financial performance reported by investment and insurance business. As a result of the excellent balance on technical account, equalisation provision increased by EUR 23 million to EUR 407 million in the third quarter. Investment risks rose due to the de-hedging of equity derivatives and favourable market developments in equity investments. Pohjola maintained its interest-rate exposure lower than the long-term target. Moody's downgraded Pohjola Insurance Ltd's rating from A1 to A2 in September, due to the deterioration of the Finnish economy. Group Functions - Earnings before tax were EUR 68 million higher than in the previous year, or EUR 11 million (loss of 57). - The reclassification at 2008-end of notes and bonds reduced earnings volatility. - Impairment charges recognised on bonds totalled EUR 11 million (1) and on equities EUR 4 million. - Liquidity and the availability of funding remained at good levels and market liquidity has increased during the current year. Group Functions: financial results and key figures and ratios -------------------------------------------------------------------------------- | Financial | Q1-3/ | Q1-3/ | Chang | Q3/ | Q3/0 | Chang | Rollin | Actu | | results, EUR | 09 | 08 | e | 09 | 8 | e | g | al | | million | | | | | | | 12-mon | 2008 | | | | | | | | | th | | -------------------------------------------------------------------------------- | Net interest | 51 | 9 | 42 | 21 | 5 | 15 | 67 | 25 | | income | | | | | | | | | -------------------------------------------------------------------------------- | Impairments of | 11 | 1 | 11 | 2 | 3 | -1 | 21 | 10 | | receivables | | | | | | | | | -------------------------------------------------------------------------------- | Net interest | 40 | 9 | 31 | 19 | 3 | 16 | 46 | 15 | | income after | | | | | | | | | | impairments of | | | | | | | | | | receivables | | | | | | | | | -------------------------------------------------------------------------------- | Net trading | -4 | -61 | 57 | 0 | -16 | 16 | -4 | -61 | | income | | | | | | | | | -------------------------------------------------------------------------------- | Investment | -8 | 9 | -17 | 1 | 0 | 0 | -11 | 6 | | income | | | | | | | | | -------------------------------------------------------------------------------- | Other income | 11 | 16 | -5 | 3 | 4 | -1 | 16 | 21 | -------------------------------------------------------------------------------- | Total net | 38 | -28 | 66 | 23 | -9 | 32 | 48 | -19 | | income | | | | | | | | | -------------------------------------------------------------------------------- | Total expenses | 27 | 29 | -2 | 7 | 8 | -1 | 36 | 39 | -------------------------------------------------------------------------------- | Earnings/loss | 11 | -57 | 68 | 16 | -17 | 33 | 11 | -58 | | before tax | | | | | | | | | -------------------------------------------------------------------------------- | Liquidity | 9.5 | 7.0 | 2.4 | | | | | 9.8 | | reserves, EUR | | | | | | | | | | billion | | | | | | | | | -------------------------------------------------------------------------------- | Receivables and | 2.4 | 0.2 | 2.2 | | | | | -0.2 | | liabilities to | | | | | | | | | | OP-Pohjola | | | | | | | | | | Group member | | | | | | | | | | banks, net | | | | | | | | | | position, EUR | | | | | | | | | | billion | | | | | | | | | -------------------------------------------------------------------------------- | Personnel | 137 | 124 | 13 | | | | | 129 | -------------------------------------------------------------------------------- January-September earnings Earnings before tax totalled EUR 11 million (-57), which were EUR 68 million higher than a year ago. Reported expenses grew by EUR 1 million on a like-for-like basis. This performance improvement was partly resulted from success investment operations of the liquidity reserve portfolio and a change in accounting practice at the end of 2008, i.e. some notes and bonds included in the liquidity reserve portfolio were reclassified in such a way that they are carried at amortised cost and changes in their fair value are not recognised through profit or loss. On 30 September, the carrying amount of the reclassified notes and bonds came to EUR 3.1 billion. The reclassification was reflected in higher year-on-year net trading income and net interest income. The positive price difference between the nominal value and the acquisition value, arising from the reclassification, recognised for January-September totalled EUR 20 million, of which EUR 17 million was recognised in the Group Functions' net interest income and EUR 3 million in Banking. January-September results included EUR 11 million (1) in impairment charges on bonds. In addition, impairments recognised on shares and participations included in available-for-sale financial assets totalled EUR 4 million. Liquidity and the availability of funding remained good and market liquidity has increased during the current year. Debt instruments issued to the public increased to EUR 16 billion (14), with commercial papers and Euro Commercial Papers accounting for EUR 9 billion (10). Pohjola Bank plc's net receivables from OP-Pohjola Group member banks rose to EUR 2.4 billion (-0.2). July-September earnings Reported earnings before tax were the best quarterly earnings this year, amounting to EUR 16 million, and EUR 33 million higher than in the previous year. Net interest income from notes and bonds included in the liquidity reserve portfolio contributed to higher net income. The positive price difference between the nominal value and acquisition value of reclassified notes and bonds within the liquidity reserve portfolio recognised in net interest income totalled EUR 5 million. Impairment charges recognised on notes and bonds totalled EUR 2 million (3). Pohjola increased its long-term funding by issuing in August a EUR 750-million floating rate senior bond with a maturity of three years. Risk exposure by Group Functions Major risks within the Group Functions include those associated with the fair value change of the liquidity reserve portfolio and liquidity risks. The Group Functions exposure totalled EUR 15.8 billion (13.8), consisting of the liquidity reserve portfolio and receivables from OP-Pohjola Group member banks. Almost all of the exposure was based on investment-grade counterparties. The Group Functions maintains the liquidity reserve portfolio in order to secure OP-Pohjola Group's liquidity. The liquidity reserve portfolio amounted to EUR 9.5 billion (9.8), invested primarily in notes and bonds issued by governments, municipalities, financial institutions and companies all showing good credit ratings, and in securitised assets. Interest rate risk exposure averaged EUR 4.2 million in the third quarter and EUR 6.5 million in January-September, based on the 1-percentage-point change in the interest rate. Shares and shareholders On 30 September 2009, the number of Pohjola Bank plc shares totalled 319,551,415 and votes conferred by the shares 593,178,315. On the same date, the number of Series A shares quoted on NASDAQ OMX Helsinki Ltd totalled 251 million, representing 78.6% of all Pohjola shares and 42.3% of all votes. The number of Series K shares totalled around 68 million. In January-September, 138 million shares changed hands, as against 92 million a year ago. On 30 September, one Series A share closed at EUR 7.80, as against EUR 7.88 at the end of 2008. In January-September, the share price reached a high of EUR 9.31 and a low of EUR 3.80. On 30 September, Pohjola Bank had 35,099 shareholders, increasing by 4,507 from the beginning of 2009, private individuals accounting for 95% of all shareholders. The largest shareholder was OP-Pohjola Group Central Cooperative, representing 29.98% of shares and 57.04% of votes. On 30 September, nominee-registered shares accounted for 18.7% of all Series A shares. Events after the reporting period At its meeting on 5 November 2009, Pohjola Bank plc's Board of Directors decided to strengthen the Group's CRM organisations by adopting a CRM organisation shared by Banking and Non-life Insurance at the beginning of 2010. At the Group Executive Committee level, Reima Rytsölä will be in charge of major corporate and institutional customers and Tomi Yli-Kyyny of private customers and SMEs. The creation of the CRM organisations will not have an effect on the reporting business segments. In addition to new customers, Mr Rytsölä will remain in charge of Banking and Mr Yli-Kyyny of Non-life Insurance, both reporting to President and CEO Mikael Silvennoinen. Through the creation of these CRM organisations, Pohjola seeks more customer-focused operations in the provision of comprehensive financial services. Outlook towards the year end Stimulus measures taken by central banks and governments increased confidence in global financial markets. Capital markets also improved their performance and equity and credit risk markets in particular strengthened their performance markedly compared with the situation in early 2009. The world economy continued its gradual recovery when the Chinese and US economies rebounded, and the euro area economy is also showing some signs of stabilisation and rebound. The Finnish economy saw signs of stabilisation in the third quarter but growth prospects towards the year end still look weak. Major uncertainties are still associated with global economic growth and the gradual withdrawal of public support. Within Banking, demand for loans and guarantees contracted from its 2008 level and the average margin on corporate loans rose. On the basis of the economic outlook, demand for loans and guarantees is expected to remain subdued during the rest of the year, with the focus on working capital and the refinancing of existing loans. It is estimated that the average corporate loan portfolio margin will continue to rise during the rest of the year although the margin on new loans is anticipated to take a turn downwards. Fourth-quarter impairment charges are expected to be at the same level as in the previous quarters. Within Banking, 2009 earnings before tax are estimated to be at the same level as in 2008 if impairment charges do not rise to unexpectedly high levels during the fourth quarter. Within Asset Management, assets under management continued to increase, thanks to favourable developments in investment markets and new sales. Assets under management are expected to be considerably larger at the end of 2009 than at the end of 2008. Asset Management expects its earnings before tax in 2009 to be better than in 2008 if no major changes occur in the investment market during the fourth quarter. Asset Management's earnings before tax will be largely dependent on the amount of assets under management and the actual performance-based fees tied to the success of investments. Within Non-life Insurance, insurance premium revenue is expected to grow at above-the-market-average rate in 2009, thanks to the growing number of private customers, but to grow less than in 2008, especially with respect to corporate customers. The recession has reduced Non-life Insurance claims expenditure. In Non-life Insurance, the operating combined ratio for 2009 is estimated to vary between 87% and 91% (previously between 88% and 93%) if the number of major losses in the fourth quarter is not much larger than in the previous year. Non-life Insurance expects its earnings before tax in 2009 be markedly higher than in 2008. The most significant uncertainties associated with its financial performance pertain to investment market developments and the effect of major losses on claims expenditure. The reclassification in the second half of 2008 of long-term notes and bonds, included in liquidity reserves, will mitigate the effects of the financial crisis on the financial result of the Group Functions. The key determinants affecting the Group Functions' result include net interest income arising from the liquidity reserve portfolio and any fair value changes recognised on notes and bonds through profit or loss. Consolidated earnings for 2009 before tax are expected to be roughly double the amount compared with those in 2008. The greatest uncertainty associated with the year-end outlook relates to developments in impairment charges. All forward-looking statements in this report expressing the management's expectations, beliefs, estimates, forecasts, projections and assumptions are based on the current view of the future financial performance of Pohjola Group and its various functions, and actual results may differ materially from those expressed in the forward-looking statements. FINANCIAL STATEMENTS AND NOTES -------------------------------------------------------------------------------- | Financial performance by quarter | -------------------------------------------------------------------------------- | Consolidated income statement | -------------------------------------------------------------------------------- | Consolidated statement of comprehensive income | -------------------------------------------------------------------------------- | Consolidated balance sheet | -------------------------------------------------------------------------------- | Consolidated statement of changes in equity | -------------------------------------------------------------------------------- | Capital base and capital adequacy | -------------------------------------------------------------------------------- | Consolidated cash flow statement | -------------------------------------------------------------------------------- | Segment information | -------------------------------------------------------------------------------- | Formulae for key figures and ratios | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 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 commissions and fees | -------------------------------------------------------------------------------- | Note 6. Net trading income | -------------------------------------------------------------------------------- | Note 7. Net investment income | -------------------------------------------------------------------------------- | Note 8. Other operating income | -------------------------------------------------------------------------------- | Note 9. Classification of financial instruments | -------------------------------------------------------------------------------- | Note 10. Reclassified notes and bonds | -------------------------------------------------------------------------------- | Note 11. Non-life Insurance assets | -------------------------------------------------------------------------------- | Note 12. Intangible assets | -------------------------------------------------------------------------------- | Note 13. Debt securities issued to the public | -------------------------------------------------------------------------------- | Note 14. Fair value reserve after income tax | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Notes to risk management: | -------------------------------------------------------------------------------- | Note 15. Risk exposure by Banking | -------------------------------------------------------------------------------- | Note 16. Risk exposure by Non-life Insurance | -------------------------------------------------------------------------------- | Note 17. Risk exposure by Group Functions | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Other notes: | -------------------------------------------------------------------------------- | Note 18. Collateral given | -------------------------------------------------------------------------------- | Note 19. Off-balance-sheet commitments | -------------------------------------------------------------------------------- | Note 20. Derivative contracts | -------------------------------------------------------------------------------- | Note 21. Other contingent liabilities and commitments | -------------------------------------------------------------------------------- | Note 22. Related-party transactions | -------------------------------------------------------------------------------- Financial performance by quarter -------------------------------------------------------------------------------- | | 2008 | 2009 | 2009 | 2009 | -------------------------------------------------------------------------------- | EUR million | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net interest income | 35 | 40 | 45 | 54 | 52 | 67 | 58 | -------------------------------------------------------------------------------- | Impairments of | -2 | -1 | 11 | 21 | 21 | 33 | 41 | | receivables | | | | | | | | -------------------------------------------------------------------------------- | Net interest income | 37 | 42 | 34 | 33 | 31 | 35 | 17 | | after impairments | | | | | | | | -------------------------------------------------------------------------------- | Net income from | 91 | 90 | 98 | 74 | 70 | 122 | 114 | | Non-life Insurance | | | | | | | | -------------------------------------------------------------------------------- | Net commissions and | 32 | 31 | 28 | 31 | 30 | 36 | 36 | | fees | | | | | | | | -------------------------------------------------------------------------------- | Net trading income | -44 | -2 | -26 | -9 | 25 | 8 | 27 | -------------------------------------------------------------------------------- | Net investment income | 5 | 3 | 0 | -3 | -9 | 0 | 1 | -------------------------------------------------------------------------------- | Other operating income | 11 | 9 | 10 | 12 | 11 | 11 | 11 | -------------------------------------------------------------------------------- | Total net income | 133 | 173 | 145 | 139 | 158 | 212 | 206 | -------------------------------------------------------------------------------- | Personnel costs | 45 | 47 | 38 | 47 | 45 | 50 | 47 | -------------------------------------------------------------------------------- | IT expenses | 19 | 18 | 19 | 26 | 19 | 18 | 19 | -------------------------------------------------------------------------------- | Depreciation and | 16 | 16 | 17 | 20 | 17 | 17 | 17 | | amortisation | | | | | | | | -------------------------------------------------------------------------------- | Other expenses | 36 | 38 | 29 | 40 | 41 | 40 | 36 | -------------------------------------------------------------------------------- | Total expenses | 115 | 119 | 102 | 134 | 122 | 125 | 119 | -------------------------------------------------------------------------------- | Earnings before tax | 17 | 54 | 43 | 5 | 36 | 87 | 87 | -------------------------------------------------------------------------------- | Change in fair value | -66 | -33 | -82 | -71 | 4 | 100 | 109 | | reserve | | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before | -48 | 20 | -39 | -66 | 41 | 186 | 196 | | tax at fair value | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Income tax expense | 4 | 14 | 13 | -1 | 11 | 22 | 23 | -------------------------------------------------------------------------------- | Profit for the period | 13 | 39 | 30 | 6 | 25 | 65 | 65 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Tax on change in fair | -17 | -9 | -21 | -18 | 1 | 26 | 28 | | value reserve | | | | | | | | -------------------------------------------------------------------------------- | Profit/loss for the | -35 | 14 | -31 | -47 | 29 | 139 | 145 | | period at fair value | | | | | | | | -------------------------------------------------------------------------------- Consolidated income statement -------------------------------------------------------------------------------- | EUR million | Q3/ | Q3/ | Q1-3/ | Q1-3/ | -------------------------------------------------------------------------------- | | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net interest income (Note 2) | 58 | 45 | 177 | 120 | -------------------------------------------------------------------------------- | Impairments of receivables (Note | 41 | 11 | 95 | 8 | | 3) | | | | | -------------------------------------------------------------------------------- | Net interest income after | 17 | 34 | 83 | 113 | | impairments | | | | | -------------------------------------------------------------------------------- | Net income from Non-life | 114 | 98 | 307 | 280 | | Insurance (Note 4) | | | | | -------------------------------------------------------------------------------- | Net commissions and fees (Note | 36 | 28 | 102 | 91 | | 5) | | | | | -------------------------------------------------------------------------------- | Net trading income (Note 6) | 27 | -26 | 60 | -72 | -------------------------------------------------------------------------------- | Net investment income (Note 7) | 1 | 0 | -8 | 9 | -------------------------------------------------------------------------------- | Other operating income (Note 8) | 11 | 10 | 33 | 30 | -------------------------------------------------------------------------------- | Total income | 206 | 145 | 576 | 450 | -------------------------------------------------------------------------------- | Personnel costs | 47 | 38 | 142 | 130 | -------------------------------------------------------------------------------- | IT expenses | 19 | 19 | 56 | 55 | -------------------------------------------------------------------------------- | Depreciation/amortisation | 17 | 17 | 50 | 49 | -------------------------------------------------------------------------------- | Other expenses | 36 | 29 | 118 | 103 | -------------------------------------------------------------------------------- | Total expenses | 119 | 102 | 366 | 337 | -------------------------------------------------------------------------------- | Share of associates' | 0 | 0 | 0 | 0 | | profits/losses | | | | | -------------------------------------------------------------------------------- | Earnings before tax | 87 | 43 | 211 | 114 | -------------------------------------------------------------------------------- | Income tax expense | 23 | 13 | 55 | 31 | -------------------------------------------------------------------------------- | Profit for the period | 65 | 30 | 155 | 82 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Attributable to owners of the | 65 | 30 | 155 | 82 | | Parent | | | | | -------------------------------------------------------------------------------- | Attributable to minority | | 0 | 0 | 0 | | interest | | | | | -------------------------------------------------------------------------------- | Total | 65 | 30 | 155 | 83 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Earnings per share (EPS), basic, | | | | | | EUR | | | | | -------------------------------------------------------------------------------- | Series A | 0.21 | 0.13 | 0.55 | 0.34 | -------------------------------------------------------------------------------- | Series K | 0.18 | 0.10 | 0.52 | 0.31 | -------------------------------------------------------------------------------- Due to Pohjola Bank plc's rights issue and new shares entered in the Trade Register on 4 May 2009, the per-share ratios have been adjusted retroactively using the share issue ratio. Consolidated statement of comprehensive income -------------------------------------------------------------------------------- | EUR million | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Profit for the period | 65 | 30 | 155 | 82 | -------------------------------------------------------------------------------- | Change in fair value reserve | 109 | -82 | 213 | -181 | -------------------------------------------------------------------------------- | Translation differences | 0 | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Income tax on other | -28 | 21 | -55 | 47 | | comprehensive income | | | | | -------------------------------------------------------------------------------- | Total comprehensive income for | 146 | -31 | 314 | -52 | | the period | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total comprehensive income | 146 | -31 | 314 | -52 | | attributable to owners of the | | | | | | Parent | | | | | -------------------------------------------------------------------------------- | Total comprehensive income | | 0 | 0 | 0 | | attributable to minority | | | | | | interest | | | | | -------------------------------------------------------------------------------- | Total | 146 | -31 | 314 | -52 | -------------------------------------------------------------------------------- Consolidated balance sheet -------------------------------------------------------------------------------- | EUR million | 30 Sept 2009 | 31 Dec | | | | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and cash equivalents | 878 | 2,260 | -------------------------------------------------------------------------------- | Receivables from credit institutions | 7,725 | 6,644 | -------------------------------------------------------------------------------- | Financial assets at fair value through profit | | | | or loss | | | -------------------------------------------------------------------------------- | Financial assets held for trading | 1,608 | 3,213 | -------------------------------------------------------------------------------- | Financial assets at fair value through profit | 46 | 43 | | or loss at inception | | | -------------------------------------------------------------------------------- | Derivative contracts | 1,453 | 1,486 | -------------------------------------------------------------------------------- | Receivables from customers | 11,519 | 12,279 | -------------------------------------------------------------------------------- | Non-life Insurance assets (Note 11) | 3,161 | 2,745 | -------------------------------------------------------------------------------- | Investment assets | 5,032 | 1,285 | -------------------------------------------------------------------------------- | Investment in associates | 2 | 2 | -------------------------------------------------------------------------------- | Intangible assets (Note 12) | 970 | 987 | -------------------------------------------------------------------------------- | Property, plant and equipment (PPE) | 125 | 127 | -------------------------------------------------------------------------------- | Other assets | 1,494 | 1,281 | -------------------------------------------------------------------------------- | Tax assets | 63 | 98 | -------------------------------------------------------------------------------- | Total assets | 34,076 | 32,448 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Liabilities to credit institutions | 4,140 | 3,643 | -------------------------------------------------------------------------------- | Financial liabilities at fair value through | | | | profit or loss | | | -------------------------------------------------------------------------------- | Financial assets held for trading | 117 | 138 | -------------------------------------------------------------------------------- | Derivative contracts | 1,688 | 1,644 | -------------------------------------------------------------------------------- | Liabilities to customers | 3,670 | 3,508 | -------------------------------------------------------------------------------- | Non-life Insurance liabilities | 2,480 | 2,238 | -------------------------------------------------------------------------------- | Debt securities issued to the public (Note 13) | 16,070 | 16,425 | -------------------------------------------------------------------------------- | Provisions and other liabilities | 1,941 | 1,522 | -------------------------------------------------------------------------------- | Tax liabilities | 463 | 368 | -------------------------------------------------------------------------------- | Subordinated liabilities | 1,301 | 1,322 | -------------------------------------------------------------------------------- | Total liabilities | 31,870 | 30,808 | -------------------------------------------------------------------------------- | Shareholders' equity | | | -------------------------------------------------------------------------------- | Capital and reserves attributable to owners of | | | | the Parent | | | -------------------------------------------------------------------------------- | Share capital | 428 | 428 | -------------------------------------------------------------------------------- | Fair value reserve | -22 | -180 | -------------------------------------------------------------------------------- | Other reserves | 1,093 | 796 | -------------------------------------------------------------------------------- | Retained earnings | 707 | 597 | -------------------------------------------------------------------------------- | Minority interest | | 0 | -------------------------------------------------------------------------------- | Total shareholders' equity | 2,206 | 1,640 | -------------------------------------------------------------------------------- | Total liabilities and shareholders' equity | 34,076 | 32,448 | -------------------------------------------------------------------------------- Consolidated statement of changes in equity -------------------------------------------------------------------------------- | EUR million | | | | | | | -------------------------------------------------------------------------------- | | Attributable to owners of Pohjola Group | -------------------------------------------------------------------------------- | | Share | Fair | Other | Retaine | Minorit | Total | | | capita | value | reserv | d | y | equity || | l | reserv | es | earning | interes | | | | | e | | s | t | | -------------------------------------------------------------------------------- | Balance at 1 | 428 | 7 | 750 | 685 | 0 | 1,869 | | January 2008 | | | | | | | -------------------------------------------------------------------------------- | Transfer of | | | 45 | -45 | | | | reserves | | | | | | | -------------------------------------------------------------------------------- | Profit distribution | | | | -131 | | -131 | -------------------------------------------------------------------------------- | EUR 0.65 per Series | | | | -104 | | -104 | | A share | | | | | | | -------------------------------------------------------------------------------- | EUR 0.62 per Series | | | | -27 | | -27 | | K share | | | | | | | -------------------------------------------------------------------------------- | Total comprehensive | | -134 | | 82 | 0 | -52 | | income for the | | | | | | | | period | | | | | | | -------------------------------------------------------------------------------- | Other | | | | 0 | | 0 | -------------------------------------------------------------------------------- | Balance at 30 | 428 | -128 | 795 | 591 | 0 | 1,687 | | September 2008 | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | Attributable to owners of Pohjola Group | -------------------------------------------------------------------------------- | | Share | Fair | Other | Retaine | Minorit | Total | | | capita | value | reserv | d | y | equity | | | l | reserv | es | earning | interes | | | | | e | | s | t | | -------------------------------------------------------------------------------- | Balance at 1 | 428 | -180 | 795 | 597 | 0 | 1,640 | | January 2009 | | | | | | | -------------------------------------------------------------------------------- | Rights issue | | | 308 | | | 308 | -------------------------------------------------------------------------------- | Issue expenses | | | -10 | | | -10 | -------------------------------------------------------------------------------- | Transfer of | | | 0 | 0 | | | | reserves | | | | | | | -------------------------------------------------------------------------------- | Profit distribution | | | | -45 | | -45 | -------------------------------------------------------------------------------- | EUR 0.23 per Series | | | | -37 | | -37 | | A share | | | | | | | -------------------------------------------------------------------------------- | EUR 0.20 per Series | | | | -9 | | -9 | | K share | | | | | | | -------------------------------------------------------------------------------- | Total comprehensive | | 158 | | 155 | 0 | 314 | | income for the | | | | | | | | period | | | | | | | -------------------------------------------------------------------------------- | Other | | | | 0 | | 0 | -------------------------------------------------------------------------------- | Balance at 30 | 428 | -22 | 1,093 | 707 | | 2,206 | | September 2009 | | | | | | | -------------------------------------------------------------------------------- Capital base and capital adequacy -------------------------------------------------------------------------------- | EUR million | 30 Sept 2009 | 31 Dec | | | | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Capital base | | | -------------------------------------------------------------------------------- | Equity capital | 2,206 | 1,640 | -------------------------------------------------------------------------------- | Elimination of insurance companies' effect in | 75 | 266 | | equity capital (equity capital and Group | | | | eliminations) | | | -------------------------------------------------------------------------------- | Minority interest | 0 | 0 | -------------------------------------------------------------------------------- | Hybrid capital | 274 | 274 | -------------------------------------------------------------------------------- | Intangible assets | -144 | -144 | -------------------------------------------------------------------------------- | Fair value reserve, excess funding of pension | -49 | -8 | | liability and change in fair value of | | | | investment property | | | -------------------------------------------------------------------------------- | Dividend distribution proposed by Board of | | -45 | | Directors | | | -------------------------------------------------------------------------------- | Planned dividend distribution | -78 | | -------------------------------------------------------------------------------- | Insurance company investments 50% | -715 | -705 | -------------------------------------------------------------------------------- | Impairments - expected losses 50% | -81 | -50 | -------------------------------------------------------------------------------- | Tier 1 capital | 1,488 | 1,228 | -------------------------------------------------------------------------------- | Fair value reserve | 20 | -22 | -------------------------------------------------------------------------------- | Subordinated liabilities included in upper | 299 | 299 | | Tier 2 | | | -------------------------------------------------------------------------------- | Subordinated liabilities included in lower | 708 | 734 | | Tier 2 | | | -------------------------------------------------------------------------------- | Insurance company investments 50% | -715 | -705 | -------------------------------------------------------------------------------- | Impairments - expected losses 50% | -81 | -50 | -------------------------------------------------------------------------------- | Tier 2 capital | 230 | 256 | -------------------------------------------------------------------------------- | Total capital base | 1,719 | 1,484 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Risk-weighted assets, excl. transitional rules | 13,185 | 12,784 | -------------------------------------------------------------------------------- | Risk-weighted assets according to transitional | 13,185 | 13,120 | | rules | | | -------------------------------------------------------------------------------- | Ratios, excl. transitional rules: | | | -------------------------------------------------------------------------------- | Capital adequacy ratio, % | 13.0 | 11.6 | -------------------------------------------------------------------------------- | Tier 1 ratio, % | 11.3 | 9.6 | -------------------------------------------------------------------------------- | Capital adequacy ratio under the Act on | 1.69 | 1.29 | | Supervision of Financial and Insurance | | | | Conglomerates | | | -------------------------------------------------------------------------------- | Ratios according to transitional rules: | | | -------------------------------------------------------------------------------- | Capital adequacy ratio, % | 13.0 | 11.3 | -------------------------------------------------------------------------------- | Tier 1 ratio, % | 11.3 | 9.4 | -------------------------------------------------------------------------------- | Capital adequacy ratio under the Act on | 1.69 | 1.26 | | Supervision of Financial and Insurance | | | | Conglomerates | | | -------------------------------------------------------------------------------- Capital base and capital adequacy measurement is based on approaches under Basel II. Pohjola has used the Internal Ratings Based Approach for corporate exposures. OP-Pohjola Group's capital adequacy ratio under the Act on Credit Institutions stood at 12.3% and Tier 1 ratio at 12.3%. OP-Pohjola Group's capital adequacy ratio calculated using the consolidation method, under the Act on the Supervision of Financial and Insurance Conglomerates, was 1.54. Consolidated cash flow statement -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | -------------------------------------------------------------------------------- | | 2009 | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash flow from operating activities | | | -------------------------------------------------------------------------------- | Profit for the period | 155 | 83 | -------------------------------------------------------------------------------- | Adjustments to profit for the period | 403 | 288 | -------------------------------------------------------------------------------- | Increase (-) or decrease (+) in operating | -2,785 | -4,060 | | assets | | | -------------------------------------------------------------------------------- | Receivables from credit institutions | -907 | 892 | -------------------------------------------------------------------------------- | Financial assets at fair value through profit | 1,635 | 797 | | or loss | | | -------------------------------------------------------------------------------- | Derivative contracts | -35 | -53 | -------------------------------------------------------------------------------- | Receivables from customers | 688 | -1,924 | -------------------------------------------------------------------------------- | Non-life Insurance assets | -328 | -294 | -------------------------------------------------------------------------------- | Investment assets | -3,623 | -3,253 | -------------------------------------------------------------------------------- | Other assets | -215 | -225 | -------------------------------------------------------------------------------- | Increase (+) or decrease (-) in operating | 1,216 | 4,316 | | liabilities | | | -------------------------------------------------------------------------------- | Liabilities to credit institutions | 496 | 3,395 | -------------------------------------------------------------------------------- | Financial liabilities at fair value through | -21 | 455 | | profit or loss | | | -------------------------------------------------------------------------------- | Derivative contracts | -13 | 77 | -------------------------------------------------------------------------------- | Liabilities to customers | 162 | 75 | -------------------------------------------------------------------------------- | Non-life Insurance liabilities | 169 | 208 | -------------------------------------------------------------------------------- | Provisions and other liabilities | 423 | 105 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Income tax paid | -7 | -32 | -------------------------------------------------------------------------------- | Dividends received | 9 | 28 | -------------------------------------------------------------------------------- | A. Net cash from operating activities | -1,010 | 623 | -------------------------------------------------------------------------------- | Cash flow from investing activities | | | -------------------------------------------------------------------------------- | Increases in held-to-maturity financial assets | -170 | | -------------------------------------------------------------------------------- | Decreases in held-to-maturity financial assets | 155 | | -------------------------------------------------------------------------------- | Acquisition of subsidiaries and associates, net | 0 | -37 | | of cash acquired | | | -------------------------------------------------------------------------------- | Disposal of subsidiaries and associates, net of | 2 | 0 | | cash disposed | | | -------------------------------------------------------------------------------- | Purchase of PPE and intangible assets | -13 | -26 | -------------------------------------------------------------------------------- | Proceeds from sale of PPE and intangible assets | 0 | 5 | -------------------------------------------------------------------------------- | B. Net cash used in investing activities | -26 | -57 | -------------------------------------------------------------------------------- | Cash flow from financing activities | | | -------------------------------------------------------------------------------- | Increases in subordinated liabilities | 146 | 364 | -------------------------------------------------------------------------------- | Decreases in subordinated liabilities | -168 | -88 | -------------------------------------------------------------------------------- | Increases in debt securities issued to the | 38,672 | 26,631 | | public | | | -------------------------------------------------------------------------------- | Decreases in debt securities issued to the | -39,049 | -25,434 | | public | | | -------------------------------------------------------------------------------- | Increases in invested unrestricted equity | 298 | | -------------------------------------------------------------------------------- | Dividends paid | -45 | -131 | -------------------------------------------------------------------------------- | C. Net cash used in financing activities | -147 | 1,342 | -------------------------------------------------------------------------------- | Net increase/decrease in cash and cash | -1,183 | 1,908 | | equivalents (A+B+C) | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and cash equivalents at period-start | 2,435 | 710 | -------------------------------------------------------------------------------- | Cash and cash equivalents at period-end | 1,252 | 2,618 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest received | 1,582 | 1,980 | -------------------------------------------------------------------------------- | Interest paid | -1,495 | -1,936 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Adjustments to profit for the period | | | -------------------------------------------------------------------------------- | Non-cash transactions | | | -------------------------------------------------------------------------------- | Impairments of receivables | 97 | 8 | -------------------------------------------------------------------------------- | Unrealised net earnings in Non-life Insurance | 143 | 151 | -------------------------------------------------------------------------------- | Change in fair value for trading | 103 | -79 | -------------------------------------------------------------------------------- | Unrealised net gains on foreign exchange | -39 | 143 | | operations | | | -------------------------------------------------------------------------------- | Change in fair value of investment property | 7 | -1 | -------------------------------------------------------------------------------- | Planned amortisation /depreciation | 50 | 49 | -------------------------------------------------------------------------------- | Share of associates' profits | 0 | 0 | -------------------------------------------------------------------------------- | Other | 41 | 18 | -------------------------------------------------------------------------------- | Items presented outside cash flow from | | | | operating activities | | | -------------------------------------------------------------------------------- | Capital gains, share of cash flow from | 0 | -1 | | investing activities | | | -------------------------------------------------------------------------------- | Total adjustments | 402 | 288 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and cash equivalents | | | -------------------------------------------------------------------------------- | Liquid assets * | 884 | 2,490 | -------------------------------------------------------------------------------- | Receivables from credit institutions payable on | 368 | 128 | | demand | | | -------------------------------------------------------------------------------- | Total | 1,252 | 2,618 | -------------------------------------------------------------------------------- *Of which EUR 6 million (2) consists of Non-life Insurance cash and cash equivalents. Segment information -------------------------------------------------------------------------------- | Q3 earnings | | | | | | | -------------------------------------------------------------------------------- | EUR million | Banking | Asset | Non-life | | | | Management | Insurance | -------------------------------------------------------------------------------- | | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- | Net interest income | 37 | 43 | 0 | 0 | 0 | -4 | -------------------------------------------------------------------------------- | Impairments of | 39 | 8 | | | | | | receivables | | | | | | | -------------------------------------------------------------------------------- | Net interest income | -2 | 35 | 0 | 0 | 0 | -4 | | after impairments | | | | | | | -------------------------------------------------------------------------------- | Net income from | | | | | 115 | 98 | | Non-life Insurance | | | | | | | -------------------------------------------------------------------------------- | Net commissions and | 22 | 14 | 11 | 10 | 5 | 5 | | fees | | | | | | | -------------------------------------------------------------------------------- | Net trading income | 27 | -10 | 0 | | 0 | | -------------------------------------------------------------------------------- | Net investment income | 0 | 0 | | | | | -------------------------------------------------------------------------------- | Other operating | 8 | 6 | 0 | 0 | 1 | 1 | | income | | | | | | | -------------------------------------------------------------------------------- | Total net income | 54 | 46 | 11 | 10 | 119 | 100 | -------------------------------------------------------------------------------- | Personnel costs | 13 | 7 | 4 | 3 | 27 | 25 | -------------------------------------------------------------------------------- | IT expenses | 5 | 4 | 1 | 1 | 11 | 11 | -------------------------------------------------------------------------------- | Amortisation on | | | 1 | 1 | 8 | 8 | | intangible assets | | | | | | | | related to company | | | | | | | | acquisitions | | | | | | | -------------------------------------------------------------------------------- | Other | 7 | 6 | 0 | 0 | 1 | 1 | | depreciation/amortisa | | | | | | | | tion | | | | | | | | and impairments | | | | | | | -------------------------------------------------------------------------------- | Other expenses | 6 | 5 | 2 | 1 | 29 | 23 | -------------------------------------------------------------------------------- | Total expenses | 30 | 22 | 7 | 6 | 76 | 67 | -------------------------------------------------------------------------------- | Earnings before tax | 24 | 24 | 4 | 3 | 43 | 33 | -------------------------------------------------------------------------------- | Change in fair value | 1 | -4 | | | 83 | -52 | | reserve | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before | 25 | 20 | 4 | 3 | 126 | -19 | | tax | | | | | | | | at fair value | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- | Capital expenditure, | 0 | 2 | 0 | 0 | 0 | 3 | | EUR million | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Q3 earnings | | | | | | | -------------------------------------------------------------------------------- | EUR million | Group Functions | Eliminations | Group total | -------------------------------------------------------------------------------- | | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- | Net interest income | 21 | 5 | 1 | 1 | 58 | 45 | -------------------------------------------------------------------------------- | Impairments of | 2 | 3 | | | 41 | 11 | | receivables | | | | | | | -------------------------------------------------------------------------------- | Net interest income | 19 | 3 | 1 | 1 | 17 | 34 | | after impairments | | | | | | | -------------------------------------------------------------------------------- | Net income from | | | 0 | 0 | 114 | 98 | | Non-life Insurance | | | | | | | -------------------------------------------------------------------------------- | Net commissions and | 0 | 0 | -1 | -1 | 36 | 28 | | fees | | | | | | | -------------------------------------------------------------------------------- | Net trading income | 0 | -16 | 0 | 0 | 27 | -26 | -------------------------------------------------------------------------------- | Net investment income | 1 | 0 | | | 1 | 0 | -------------------------------------------------------------------------------- | Other operating | 3 | 4 | -1 | -2 | 11 | 10 | | income | | | | | | | -------------------------------------------------------------------------------- | Total net income | 23 | -9 | -2 | -2 | 206 | 145 | -------------------------------------------------------------------------------- | Personnel costs | 3 | 3 | | | 47 | 38 | -------------------------------------------------------------------------------- | IT expenses | 2 | 3 | 0 | 0 | 19 | 19 | -------------------------------------------------------------------------------- | Amortisation on | | | | | 8 | 9 | | intangible assets | | | | | | | | related to company | | | | | | | | acquisitions | | | | | | | -------------------------------------------------------------------------------- | Other | 0 | 0 | | | 9 | 8 | | depreciation/amortisa | | | | | | | | tion and impairments | | | | | | | -------------------------------------------------------------------------------- | Other expenses | 2 | 2 | -2 | -2 | 36 | 29 | -------------------------------------------------------------------------------- | Total expenses | 7 | 8 | -2 | -2 | 119 | 102 | -------------------------------------------------------------------------------- | Earnings before tax | 16 | -17 | 0 | 0 | 87 | 43 | -------------------------------------------------------------------------------- | Change in fair value | 25 | -26 | | | 109 | -82 | | reserve | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before | 41 | -43 | | | 196 | -39 | | tax | | | | | | | | at fair value | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- | Capital expenditure, | 0 | 1 | | | 0 | 5 | | EUR million | | | | | | | -------------------------------------------------------------------------------- | Earnings per share, | | | | | 0.20 | 0.12 | | EUR | | | | | | | -------------------------------------------------------------------------------- | Return on equity at | | | | | 27.1 | -7.2 | | fair value, % | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Q 1-3 earnings | | | | | | | -------------------------------------------------------------------------------- | EUR million | Banking | Asset | Non-life | | | | Management | Insurance | -------------------------------------------------------------------------------- | | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- | Net interest income | 125 | 117 | 1 | -1 | -1 | -7 | -------------------------------------------------------------------------------- | Impairments of | 84 | 7 | | | | | | receivables | | | | | | | -------------------------------------------------------------------------------- | Net interest income | 41 | 110 | 1 | -1 | -1 | -7 | | after impairments | | | | | | | -------------------------------------------------------------------------------- | Net income from | | | | | 306 | 280 | | Non-life Insurance | | | | | | | -------------------------------------------------------------------------------- | Net commissions and | 65 | 47 | 29 | 32 | 13 | 15 | | fees | | | | | | | -------------------------------------------------------------------------------- | Net trading income | 64 | -11 | 0 | | | | -------------------------------------------------------------------------------- | Net investment income | 0 | 0 | 0 | 0 | | | -------------------------------------------------------------------------------- | Other operating | 22 | 19 | 1 | 1 | 2 | 1 | | income | | | | | | | -------------------------------------------------------------------------------- | Total net income | 193 | 165 | 32 | 31 | 319 | 289 | -------------------------------------------------------------------------------- | Personnel costs | 39 | 29 | 12 | 12 | 81 | 81 | -------------------------------------------------------------------------------- | IT expenses | 16 | 14 | 2 | 2 | 32 | 29 | -------------------------------------------------------------------------------- | Amortisation on | | | 2 | 2 | 23 | 25 | | intangible assets | | | | | | | | related to company | | | | | | | | acquisitions | | | | | | | -------------------------------------------------------------------------------- | Other | 20 | 17 | 1 | 1 | 4 | 3 | | depreciation/amortisa | | | | | | | | tion | | | | | | | | and impairments | | | | | | | -------------------------------------------------------------------------------- | Other expenses | 19 | 17 | 5 | 4 | 91 | 79 | -------------------------------------------------------------------------------- | Total expenses | 94 | 77 | 21 | 21 | 230 | 216 | -------------------------------------------------------------------------------- | Earnings before tax | 99 | 88 | 11 | 10 | 89 | 73 | -------------------------------------------------------------------------------- | Change in fair value | 2 | -6 | | | 157 | -140 | | reserve | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before | 101 | 82 | 11 | 10 | 247 | -67 | | tax | | | | | | | | at fair value | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- | Average personnel | 607 | 591 | 160 | 152 | 2059 | 2326 | -------------------------------------------------------------------------------- | Capital expenditure, | 4 | 5 | 1 | 1 | 7 | 9 | | EUR million | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Q 1-3 earnings | | | | | | | -------------------------------------------------------------------------------- | EUR million | Group Functions | Eliminations | Group total | -------------------------------------------------------------------------------- | | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- | Net interest income | 51 | 9 | 2 | 3 | 177 | 120 | -------------------------------------------------------------------------------- | Impairments of | 11 | 1 | | | 95 | 8 | | receivables | | | | | | | -------------------------------------------------------------------------------- | Net interest income | 40 | 9 | 2 | 3 | 83 | 113 | | after impairments | | | | | | | -------------------------------------------------------------------------------- | Net income from | | | 0 | -1 | 307 | 280 | | Non-life Insurance | | | | | | | -------------------------------------------------------------------------------- | Net commissions and | -1 | 0 | -5 | -3 | 102 | 91 | | fees | | | | | | | -------------------------------------------------------------------------------- | Net trading income | -4 | -61 | 0 | 0 | 60 | -72 | -------------------------------------------------------------------------------- | Net investment income | -8 | 9 | | | -8 | 9 | -------------------------------------------------------------------------------- | Other operating | 11 | 16 | -3 | -6 | 33 | 30 | | income | | | | | | | -------------------------------------------------------------------------------- | Total net income | 38 | -28 | -6 | -7 | 576 | 450 | -------------------------------------------------------------------------------- | Personnel costs | 10 | 8 | | | 142 | 130 | -------------------------------------------------------------------------------- | IT expenses | 7 | 10 | 0 | 0 | 56 | 55 | -------------------------------------------------------------------------------- | Amortisation on | | | | | 25 | 27 | | intangible assets | | | | | | | | related to company | | | | | | | | acquisitions | | | | | | | -------------------------------------------------------------------------------- | Other | 1 | 1 | | | 26 | 22 | | depreciation/amortisa | | | | | | | | tion | | | | | | | | and impairments | | | | | | | -------------------------------------------------------------------------------- | Other expenses | 10 | 10 | -6 | -7 | 118 | 103 | -------------------------------------------------------------------------------- | Total expenses | 27 | 29 | -6 | -7 | 366 | 337 | -------------------------------------------------------------------------------- | Earnings before tax | 11 | -57 | 0 | 0 | 211 | 114 | -------------------------------------------------------------------------------- | Change in fair value | 54 | -35 | | | 213 | -181 | | reserve | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before | 66 | -92 | | | 424 | -67 | | tax | | | | | | | | at fair value | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- | Average personnel | 137 | 124 | | | 2,962 | 3,193 | -------------------------------------------------------------------------------- | Capital expenditure, | 0 | 2 | | | 12 | 17 | | EUR million | | | | | | | -------------------------------------------------------------------------------- | Earnings per share, | | | | | 0.54 | 0.33 | | EUR | | | | | | | -------------------------------------------------------------------------------- | Return on equity at | | | | | 21.8 | -3.9 | | fair value, % | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Balance sheet | | | | | | | -------------------------------------------------------------------------------- | EUR million | Banking | Asset | Non-life | | | | Management | Insurance | -------------------------------------------------------------------------------- | | 30 | 31 Dec | 30 | 31 Dec | 30 | 31 Dec | | | Sep | 2008 | Sep | 2008 | Sep | 2008 | | | 20 | | 20 | | 20 | | | | 09 | | 09 | | 09 | | -------------------------------------------------------------------------------- | Receivables from | 11,114 | 11,776 | | | | | | customers | | | | | | | -------------------------------------------------------------------------------- | Receivables from | 337 | 427 | 6 | 7 | | | | credit institutions | | | | | | | -------------------------------------------------------------------------------- | Financial assets at | 935 | 1,375 | | | | | | fair value through | | | | | | | | profit or loss | | | | | | | -------------------------------------------------------------------------------- | Non-life Insurance | | | | | 3,356 | 2,798 | | assets | | | | | | | -------------------------------------------------------------------------------- | Investment assets | 20 | 2 | 14 | 21 | 0 | 0 | -------------------------------------------------------------------------------- | Investments in | | | | | 2 | 2 | | associates | | | | | | | -------------------------------------------------------------------------------- | Other assets | 2,238 | 2,220 | 122 | 127 | 838 | 854 | -------------------------------------------------------------------------------- | Total assets | 14,644 | 15,800 | 141 | 154 | 4,196 | 3,654 | -------------------------------------------------------------------------------- | Liabilities to | 1,270 | 1,070 | | | | | | customers | | | | | | | -------------------------------------------------------------------------------- | Liabilities to credit | 1,045 | 590 | | | | | | institutions | | | | | | | -------------------------------------------------------------------------------- | Non-life Insurance | | | | | 2,480 | 2,238 | | liabilities | | | | | | | -------------------------------------------------------------------------------- | Debt securities | | | | | | | | issued to the public | | | | | | | -------------------------------------------------------------------------------- | Subordinated | | | | | 50 | 50 | | liabilities | | | | | | | -------------------------------------------------------------------------------- | Other liabilities | 2,440 | 2,010 | 13 | 14 | 62 | 52 | -------------------------------------------------------------------------------- | Total liabilities | 4,754 | 3,671 | 13 | 14 | 2,593 | 2,340 | -------------------------------------------------------------------------------- | Shareholders' equity | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Balance sheet | | | | | | | -------------------------------------------------------------------------------- | EUR million | Group Functions | Eliminations | Group total | -------------------------------------------------------------------------------- | | 30 | 31 Dec | 30 | 31 Dec | 30 | 31 Dec | | | Sep | 2008 | Sep | 2008 | Sep | 2008 | | | 20 | | 20 | | 20 | | | | 09 | | 09 | | 09 | | -------------------------------------------------------------------------------- | Receivables from | 590 | 749 | -185 | -247 | 11,519 | 12,279 | | customers | | | | | | | -------------------------------------------------------------------------------- | Receivables from | 8,297 | 8,513 | -37 | -43 | 8,603 | 8,904 | | credit institutions | | | | | | | -------------------------------------------------------------------------------- | Financial assets at | 719 | 1,880 | | | 1,654 | 3,255 | | fair value through | | | | | | | | profit or loss | | | | | | | -------------------------------------------------------------------------------- | Non-life Insurance | | | -195 | -53 | 3,161 | 2,745 | | assets | | | | | | | -------------------------------------------------------------------------------- | Investment assets | 4,998 | 1,270 | | -8 | 5,032 | 1,285 | -------------------------------------------------------------------------------- | Investments in | | | | | 2 | 2 | | associates | | | | | | | -------------------------------------------------------------------------------- | Other assets | 914 | 786 | -8 | -8 | 4,105 | 3,979 | -------------------------------------------------------------------------------- | Total assets | 15,519 | 13,199 | -425 | -358 | 34,076 | 32,448 | -------------------------------------------------------------------------------- | Liabilities to | 2,462 | 2,483 | -61 | -45 | 3,670 | 3,508 | | customers | | | | | | | -------------------------------------------------------------------------------- | Liabilities to credit | 3,283 | 3,304 | -188 | -251 | 4,140 | 3,643 | | institutions | | | | | | | -------------------------------------------------------------------------------- | Non-life Insurance | | | | | 2,480 | 2,238 | | liabilities | | | | | | | -------------------------------------------------------------------------------- | Debt securities | 16,237 | 16,481 | -167 | -56 | 16,070 | 16,425 | | issued to the public | | | | | | | -------------------------------------------------------------------------------- | Subordinated | 1,251 | 1,272 | | | 1,301 | 1,322 | | liabilities | | | | | | | -------------------------------------------------------------------------------- | Other liabilities | 1,702 | 1,603 | -8 | -7 | 4,209 | 3,672 | -------------------------------------------------------------------------------- | Total liabilities | 24,934 | 25,142 | -423 | -358 | 31,870 | 30,808 | -------------------------------------------------------------------------------- | Shareholders' equity | | | | | 2,206 | 1,640 | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- | Capital adequacy | | | | | 13.0 | 11.3 | | ratio, % | | | | | | | -------------------------------------------------------------------------------- | Tier 1 ratio, % | | | | | 11.3 | 9.4 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Banking | -------------------------------------------------------------------------------- | | -------------------------------------------------------------------------------- | | Net income | Earnings/los | Net income | Earnings/loss | | | | s | | before tax | | | | before tax | | | -------------------------------------------------------------------------------- | | Q3/ | Q3/ | Q3/ | Q3/ | Q1-3/ | Q1-3/ | Q1-3/ | Q1-3/ | | | 2 | 2008 | 2009 | 2 | 2009 | 2008 | 2009 | 2008 | | | 009 | | | 008 | | | | | -------------------------------------------------------------------------------- | Corporate | 25 | 44 | 7 | 28 | 99 | 131 | 42 | 78 | | Banking | | | | | | | | | -------------------------------------------------------------------------------- | Markets | 28 | 1 | 18 | -3 | 95 | 32 | 65 | 11 | -------------------------------------------------------------------------------- | Baltic | 0 | 0 | -2 | -1 | -1 | 2 | -7 | -2 | | Banking | | | | | | | | | -------------------------------------------------------------------------------- | Total | 54 | 46 | 24 | 24 | 193 | 165 | 99 | 88 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Non-life | Insurance | Balance on | Insurance | Balance on | | Insurance | pr | technical | prem | technical | | | emium | account | ium revenue | account | | | revenue | | | | -------------------------------------------------------------------------------- | | Q3/ | Q3/ | Q3/ | Q3/ | Q1-3/ | Q1-3/ | Q1-3/ | Q1-3/ | | | 2 | 2008 | 2009 | 2 | 2009 | 2008 | 2009 | 2008 | | | 009 | | | 008 | | | | | -------------------------------------------------------------------------------- | Private | 113 | 101 | 16 | 21 | 320 | 287 | 42 | 35 | | Customers | | | | | | | | | -------------------------------------------------------------------------------- | Corporate | 113 | 125 | 25 | 24 | 347 | 366 | 49 | 30 | | Customers | | | | | | | | | -------------------------------------------------------------------------------- | Baltic States | 14 | 15 | 0 | 2 | 44 | 43 | 3 | 5 | -------------------------------------------------------------------------------- | Amortisation | | | -6 | -6 | | | -19 | -20 | | adjustment of | | | | | | | | | | intangible | | | | | | | | | | assets | | | | | | | | | -------------------------------------------------------------------------------- | Total | 241 | 241 | 34 | 41 | 712 | 697 | 76 | 50 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Group Functions | Q3/ | Q3/ | Q1-3/ | Q1-3/ | | | 2009 | 2008 | 200 | 2008 | | | | | 9 | | -------------------------------------------------------------------------------- | Central Banking | 3 | 5 | 14 | 15 | | earnings | | | | | | before tax, EUR | | | | | | million | | | | | -------------------------------------------------------------------------------- | | 30 | 31 Dec | | | | | Sep | 2008 | | | | | 2009 | | | | -------------------------------------------------------------------------------- | Receivables from | 6,033 | 4,437 | | | | OP-Pohjola Group entities, | | | | | | EUR million | | | | | -------------------------------------------------------------------------------- | Liabilities to OP-Pohjola | 2,211 | 3,692 | | | | Group entities, EUR | | | | | | million | | | | | -------------------------------------------------------------------------------- Formulae for key ratios Return on equity (ROE) at fair value Profit for the period + Change in fair value reserve after tax / Shareholders' equity (average of the beginning and end of period) x 100 Earnings/share (EPS) Profit for the period attributable to owners of the Parent / Average share-issue adjusted number of shares during the period Earnings/share (EPS) at fair value (Profit for the period attributable to owners of the Parent + Change in fair value reserve) / Average share-issue adjusted number of shares during the period Equity/share Shareholders' equity / Share-issue adjusted number of shares at the end of the reporting period Market capitalisation Number of shares x closing price at the end of the reporting period Capital adequacy, % Capital base / Risk-weighted assets x 100 Tier 1 ratio, % Tier 1 capital / Risk-weighted assets x 100 Key ratios for Non-life Insurance The key ratio formulae for Non-life Insurance are based on regulations issued by the Insurance Supervisory Authority, using the corresponding IFRS sections to the extent applicable. The ratios are calculated using expenses by function applied by non-life insurance companies, which are not presented on the same principle as in the Consolidated Income Statement. Loss ratio 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 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 Combined ratio Loss ratio + expense ratio Risk ratio + cost ratio Operating key ratios Operating cost/income ratio (+ Personnel costs + Other administrative expenses + Other operating expenses excl. amortisation and write-downs on intangible assets and goodwill related to Pohjola acquisition) / (+ Net interest income + Net income from Non-life Insurance + Net commissions and fees + Net trading income + Net investment income + Other operating income) x 100 Operating loss ratio Claims incurred, excl. changes in reserving bases/ Insurance premium revenue, excl. net changes in reserving bases x 100 Operating expense ratio Operating expenses / Insurance premium revenue, excl. net changes in reserving bases x 100 Operating combined ratio Operating loss ratio + operating expense ratio Solvency ratio (+ Non-life Insurance net assets + Subordinated loans + Net tax liability for the period - Deferred tax to be realised in the near future and other items deducted from the solvency margin - Intangible assets)/ Insurance premium revenue Notes Note 1. Accounting policies This Interim Report for 1 January-30 September 2009 has been prepared in accordance with IAS 34 (Interim Financial Reporting), as approved by the EU. The Financial Statements 2008 contain a description of the accounting policies applied by Pohjola Group. In 2009, Pohjola Group adopted the revised IAS 1 according to which the Group presents the statement of comprehensive income and the statement of changes in equity. The Interim Report is based on unaudited information. Since all figures in this report are rounded off, the sum of single figures may differ from the presented sum total. 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, change in provision for | | Insurance | 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, central banking | | | service fee | -------------------------------------------------------------------------------- | Personnel costs | Wages and salaries, pension costs, social | | | expenses | -------------------------------------------------------------------------------- | Other administrative | Office expenses, IT costs, other | | expenses | administrative expenses | -------------------------------------------------------------------------------- | Other operating expenses | Depreciation/amortisation, other Non-life | | | Insurance expenses, rents | -------------------------------------------------------------------------------- Notes to the income statement and balance sheet Note 2. Net interest income -------------------------------------------------------------------------------- | EUR million | Q3/ | Q3/ | Q1-3/ | Q1-3/ | -------------------------------------------------------------------------------- | | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Loans and other receivables | 86 | 166 | 341 | 428 | -------------------------------------------------------------------------------- | Receivables from credit | 43 | 59 | 165 | 187 | | institutions and central banks | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 70 | 106 | 170 | 250 | -------------------------------------------------------------------------------- | Derivatives held for trading | 24 | -5 | 25 | -7 | | (net) | | | | | -------------------------------------------------------------------------------- | Liabilities to credit | -11 | -46 | -47 | -133 | | institutions | | | | | -------------------------------------------------------------------------------- | Liabilities to customers | -4 | -25 | -28 | -77 | -------------------------------------------------------------------------------- | Debt securities issued to the | -82 | -181 | -299 | -458 | | public | | | | | -------------------------------------------------------------------------------- | Subordinated debt | -9 | -11 | -28 | -30 | -------------------------------------------------------------------------------- | Hybrid capital | -2 | -4 | -12 | -8 | -------------------------------------------------------------------------------- | Financial liabilities held for | -1 | -7 | -4 | -14 | | trading | | | | | -------------------------------------------------------------------------------- | Other (net) | 0 | -1 | 0 | -1 | -------------------------------------------------------------------------------- | Net interest income before items | 114 | 53 | 282 | 137 | | under hedge accounting | | | | | -------------------------------------------------------------------------------- | Derivatives under hedge | -56 | -8 | -105 | -16 | | accounting (net) | | | | | -------------------------------------------------------------------------------- | Items under hedge accounting | -56 | -8 | -105 | -16 | | (net) | | | | | -------------------------------------------------------------------------------- | Total net interest income | 58 | 45 | 177 | 120 | -------------------------------------------------------------------------------- Note 3. Impairments of receivables -------------------------------------------------------------------------------- | EUR million | Q3/ | Q3/ | Q1-3/ | Q1-3/ | -------------------------------------------------------------------------------- | | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Receivables eliminated as loan | 14 | 2 | 15 | 3 | | or guarantee losses | | | | | -------------------------------------------------------------------------------- | Recoveries from receivables | -1 | 0 | -2 | 0 | | eliminated as loan or guarantee | | | | | | losses | | | | | -------------------------------------------------------------------------------- | Increase in impairment | 50 | 10 | 111 | 12 | | provisions | | | | | -------------------------------------------------------------------------------- | Decrease in impairment | -22 | -1 | -29 | -7 | | provisions | | | | | -------------------------------------------------------------------------------- | Total impairments of receivables | 41 | 11 | 95 | 8 | -------------------------------------------------------------------------------- Note 4. Net income from Non-life Insurance -------------------------------------------------------------------------------- | EUR million | Q3/ | Q3/ | Q1-3/ | Q1-3/ | -------------------------------------------------------------------------------- | | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net insurance premium revenue | | | | | -------------------------------------------------------------------------------- | Premiums written | 160 | 172 | 839 | 847 | -------------------------------------------------------------------------------- | Insurance premiums ceded to | 2 | -4 | -42 | -41 | | reinsurers | | | | | -------------------------------------------------------------------------------- | Change in provision for unearned | 87 | 79 | -91 | -119 | | premiums | | | | | -------------------------------------------------------------------------------- | Reinsurers' share | -8 | -7 | 6 | 9 | -------------------------------------------------------------------------------- | Total | 241 | 241 | 712 | 696 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net Non-life Insurance claims | | | | | -------------------------------------------------------------------------------- | Claims paid | 140 | 134 | 443 | 446 | -------------------------------------------------------------------------------- | Insurance claims recovered from | -5 | -1 | -9 | -9 | | reinsurers | | | | | -------------------------------------------------------------------------------- | Change in provision for unpaid | -8 | 31 | -17 | 28 | | claims | | | | | -------------------------------------------------------------------------------- | Reinsurers' share | 6 | -25 | 4 | -18 | -------------------------------------------------------------------------------- | Total | 134 | 138 | 421 | 447 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net investment income, Non-life | | | | | | Insurance | | | | | -------------------------------------------------------------------------------- | Interest income | 17 | 19 | 54 | 55 | -------------------------------------------------------------------------------- | Net realised gains and realised | | | | | | fair value gains and losses | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 3 | -7 | -5 | -17 | -------------------------------------------------------------------------------- | Shares and participations | 16 | -4 | 19 | -1 | -------------------------------------------------------------------------------- | Loans and receivables | | | 0 | | -------------------------------------------------------------------------------- | Investment property | | 0 | 0 | 3 | -------------------------------------------------------------------------------- | Other | -15 | -5 | -14 | -4 | -------------------------------------------------------------------------------- | Unrealised fair value gains and | | | | | | losses | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 1 | -2 | 1 | -2 | -------------------------------------------------------------------------------- | Shares and participations | 4 | -1 | -10 | -1 | -------------------------------------------------------------------------------- | Loans and receivables | -1 | | -2 | | -------------------------------------------------------------------------------- | Investment property | -1 | -2 | 1 | 1 | -------------------------------------------------------------------------------- | Other | -5 | 0 | -3 | 1 | -------------------------------------------------------------------------------- | Dividend income | 1 | 6 | 7 | 21 | -------------------------------------------------------------------------------- | Total | 19 | 4 | 46 | 56 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Unwinding of discount | -11 | -10 | -32 | -31 | -------------------------------------------------------------------------------- | Other | 0 | 2 | 2 | 5 | -------------------------------------------------------------------------------- | Total net income from Non-life | 114 | 98 | 307 | 280 | | Insurance | | | | | -------------------------------------------------------------------------------- Note 5. Net commissions and fees -------------------------------------------------------------------------------- | EUR million | Q3/ | Q3/ | Q1-3/ | Q1-3/ | -------------------------------------------------------------------------------- | | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Commission income | | | | | -------------------------------------------------------------------------------- | Lending | 10 | 6 | 32 | 18 | -------------------------------------------------------------------------------- | Payment transfers | 3 | 3 | 9 | 10 | -------------------------------------------------------------------------------- | Securities brokerage | 6 | 4 | 16 | 14 | -------------------------------------------------------------------------------- | Securities issuance | 1 | 0 | 3 | 2 | -------------------------------------------------------------------------------- | Asset management and legal | 12 | 12 | 32 | 35 | | services | | | | | -------------------------------------------------------------------------------- | Insurance operations | 5 | 5 | 13 | 15 | -------------------------------------------------------------------------------- | Guarantees | 4 | 2 | 12 | 6 | -------------------------------------------------------------------------------- | Other | 1 | 0 | 6 | 8 | -------------------------------------------------------------------------------- | Total commission income | 42 | 33 | 124 | 108 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Commission expenses | | | | | -------------------------------------------------------------------------------- | Payment transfers | 1 | 1 | 2 | 2 | -------------------------------------------------------------------------------- | Securities brokerage | 2 | 1 | 6 | 5 | -------------------------------------------------------------------------------- | Securities issuance | 1 | 0 | 7 | 3 | -------------------------------------------------------------------------------- | Asset management and legal | 2 | 1 | 5 | 5 | | services | | | | | -------------------------------------------------------------------------------- | Other | 1 | 1 | 2 | 2 | -------------------------------------------------------------------------------- | Total commission expenses | 6 | 5 | 21 | 17 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total net commissions and fees | 36 | 28 | 102 | 91 | -------------------------------------------------------------------------------- Note 6. Net trading income -------------------------------------------------------------------------------- | EUR million | Q3/ | Q3/ | Q1-3/ | Q1-3/ | -------------------------------------------------------------------------------- | | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Financial assets and liabilities | | | | | | held for trading | | | | | -------------------------------------------------------------------------------- | Capital gains and losses and | | | | | | realised changes in fair value | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 6 | 1 | 35 | -12 | -------------------------------------------------------------------------------- | Shares and participations | 0 | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Derivatives | 19 | -10 | 115 | 19 | -------------------------------------------------------------------------------- | Unrealised changes in fair value | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 6 | 18 | -15 | -1 | -------------------------------------------------------------------------------- | Shares and participations | 0 | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Derivatives | -9 | -11 | -84 | -2 | -------------------------------------------------------------------------------- | Financial assets and liabilities | | | | | | at fair value through profit or | | | | | | loss | | | | | -------------------------------------------------------------------------------- | Capital gains and losses and | | | | | | realised changes in fair value | | | | | -------------------------------------------------------------------------------- | Notes and bonds | | -4 | -9 | -5 | -------------------------------------------------------------------------------- | Unrealised changes in fair value | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 1 | -13 | 9 | -69 | -------------------------------------------------------------------------------- | Net income from foreign exchange | 3 | -7 | 9 | -3 | | operations | | | | | -------------------------------------------------------------------------------- | Total net trading income | 27 | -26 | 60 | -72 | -------------------------------------------------------------------------------- Note 7. Net investment income -------------------------------------------------------------------------------- | EUR million | Q3/ | Q3/ | Q1-3/ | Q1-3/ | -------------------------------------------------------------------------------- | | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Available-for-sale financial | | | | | | assets | | | | | -------------------------------------------------------------------------------- | Capital gains and losses | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 0 | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Shares and participations | 1 | 0 | 0 | 1 | -------------------------------------------------------------------------------- | Dividend income | 0 | 0 | 2 | 7 | -------------------------------------------------------------------------------- | Impairments | | | -4 | | -------------------------------------------------------------------------------- | Total | 1 | 0 | -1 | 7 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investment property | 0 | 0 | -7 | 2 | -------------------------------------------------------------------------------- | Total net investment income | 1 | 0 | -8 | 9 | -------------------------------------------------------------------------------- Note 8. Other operating income -------------------------------------------------------------------------------- | EUR million | Q3/ | Q3/ | Q1-3/ | Q1-3/ | -------------------------------------------------------------------------------- | | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Central banking service fees | 2 | 2 | 7 | 7 | -------------------------------------------------------------------------------- | Realisation of repossessed items | 0 | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Rental income from assets rented | 6 | 6 | 19 | 16 | | under operating lease | | | | | -------------------------------------------------------------------------------- | Other | 2 | 2 | 7 | 7 | -------------------------------------------------------------------------------- | Total | 11 | 10 | 33 | 30 | -------------------------------------------------------------------------------- Note 9. Classification of financial instruments -------------------------------------------------------------------------------- | EUR million | Loans | Held to | At fair | Availabl | Hedging | Total | | | and | maturit | value | e for | derivati | | | | receiva | y | through | sale | ves | | | | bles | | profit | | | | | | | | or | | | | | | | | loss* | | | | -------------------------------------------------------------------------------- | Assets | | | | | | | -------------------------------------------------------------------------------- | Cash and | 878 | | | | | 878 | | balances with | | | | | | | | central banks | | | | | | | -------------------------------------------------------------------------------- | Receivables | 7,725 | | | | | 7,725 | | from credit | | | | | | | | institutions | | | | | | | | and central | | | | | | | | banks | | | | | | | -------------------------------------------------------------------------------- | Derivative | | | 1,393 | | 60 | 1,453 | | contracts | | | | | | | -------------------------------------------------------------------------------- | Receivables | 11,519 | | | | | 11,519 | | from customers | | | | | | | -------------------------------------------------------------------------------- | Non-life | 810 | | 88 | 2,263 | | 3,161 | | Insurance | | | | | | | | assets** | | | | | | | -------------------------------------------------------------------------------- | Notes and | | 1,148 | 1,654 | 3,779 | | 6,580 | | bonds*** | | | | | | | -------------------------------------------------------------------------------- | Shares and | | | | 86 | | 86 | | participations | | | | | | | -------------------------------------------------------------------------------- | Other | 2,654 | | 19 | | | 2,673 | | receivables | | | | | | | -------------------------------------------------------------------------------- | Total 30 | 23,585 | 1,148 | 3,154 | 6,128 | 60 | 34,076 | | September 2009 | | | | | | | -------------------------------------------------------------------------------- | Total 31 | 24,451 | 1,103 | 4,816 | 2,036 | 43 | 32,448 | | December 2008 | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million | At fair | Other | Hedging | Total | | | value | liabilit | derivati | | | | through | ies | ves | | | | profit | | | | | | or loss | | | | -------------------------------------------------------------------------------- | Liabilities | | | | | -------------------------------------------------------------------------------- | Liabilities to credit institutions | | 4,140 | | 4,140 | -------------------------------------------------------------------------------- | Financial liabilities held for | 117 | | | 117 | | trading (excl. derivatives) | | | | | -------------------------------------------------------------------------------- | Derivative conctracts | 1,519 | | 169 | 1,688 | -------------------------------------------------------------------------------- | Liabilities to customers | | 3,670 | | 3,670 | -------------------------------------------------------------------------------- | Non-life Insurance liabilities | | 2,480 | | 2,480 | -------------------------------------------------------------------------------- | Debt instruments issued to the | | 16,070 | | 16,070 | | public | | | | | -------------------------------------------------------------------------------- | Subordinated liabilities | | 1,301 | | 1,301 | -------------------------------------------------------------------------------- | Other liabilities | | 2,404 | | 2,404 | -------------------------------------------------------------------------------- | Total 30 September 2009 | 1,636 | 30,065 | 169 | 31,870 | -------------------------------------------------------------------------------- | Total 31 December 2008 | 1,670 | 29,026 | 111 | 30,808 | -------------------------------------------------------------------------------- *Assets at fair value through profit or loss include financial assets held for trading, financial assets at fair value through profit or loss at inception and investment property. ** Non-life Insurance assets are specified in Note 11. *** On 30 September 2009, notes and bonds included EUR 46 million (43) in notes and bonds recognised using the fair value option. Debt securities issued to the public are carried at amortised cost. On 30 September 2009, the fair value of these debt instruments was approximately EUR 20 million lower 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 substantilly lower than their carrying amount, but determining fair values realiably is difficult in the current market situation. Note 10. Reclassified notes and bonds The table below shows the carrying amounts and fair values of the reclassified notes and bonds. -------------------------------------------------------------------------------- | EUR million, 30 September 2009 | Carryin | Fair | Effectiv | Impairment | | | g | value | e | s arising | | | amount | | interest | from | | | | | rate | credit | | | | | | risk | -------------------------------------------------------------------------------- | Loans and other receivables | 2,577 | 2,578 | 5.4 | 49 | -------------------------------------------------------------------------------- | Investments held to maturity | 860 | 818 | 4.5 | | -------------------------------------------------------------------------------- | Available-for-sale financial | 60 | 60 | 5.1 | | | assets | | | | | -------------------------------------------------------------------------------- | Total | 3,497 | 3,456 | | 49 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million, 31 December 2008 | Carryin | Fair | Effectiv | Impairment | | | g | value | e | s arising | | | amount | | interest | from | | | | | rate | credit | | | | | | risk | -------------------------------------------------------------------------------- | Loans and other receivables | 3,177 | 3,032 | 5.4 | 9 | -------------------------------------------------------------------------------- | Investments held to maturity | 946 | 864 | 4.5 | | -------------------------------------------------------------------------------- | Available-for-sale financial | 55 | 55 | 5.1 | | | assets | | | | | -------------------------------------------------------------------------------- | Total | 4,177 | 3,951 | | 9 | -------------------------------------------------------------------------------- If notes and bonds were not reclassified and had been measured using fair values available in the market: -------------------------------------------------------------------------------- | | Q1-3/2009 | Q1-4/2008 | -------------------------------------------------------------------------------- | EUR million | Income | Fair | Income | Fair | | | statemen | value | statemen | value | | | t | reserve | t | reserve | -------------------------------------------------------------------------------- | Banking | 4 | | -21 | -8 | -------------------------------------------------------------------------------- | Non-life Insurance | | 26 | | -24 | -------------------------------------------------------------------------------- | Group Functions | 74 | 40 | -162 | -15 | -------------------------------------------------------------------------------- | Total | 78 | 66 | -183 | -47 | -------------------------------------------------------------------------------- Interest accrued on notes and bonds in January-September totalled EUR 92 million. The price difference between the nominal value and acquisition value recognised in net interest income totalled EUR 22 million. Impairments recognised on notes and bonds totalled EUR 40 million. The Group used derivatives to hedge against interest rate risks, applying hedge accounting from 1 October 2008. Note 11. Non-life Insurance assets -------------------------------------------------------------------------------- | EUR million | 30 Sept 2009 | 31 Dec | | | | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investments | | | -------------------------------------------------------------------------------- | Loans and other receivables | 431 | 418 | -------------------------------------------------------------------------------- | Equities | 356 | 318 | -------------------------------------------------------------------------------- | Property | 81 | 81 | -------------------------------------------------------------------------------- | Notes and bonds | 1,390 | 1,153 | -------------------------------------------------------------------------------- | Other | 526 | 419 | -------------------------------------------------------------------------------- | Total | 2,784 | 2,389 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Other assets | | | -------------------------------------------------------------------------------- | Prepayments and accrued income | 29 | 33 | -------------------------------------------------------------------------------- | Other | | | -------------------------------------------------------------------------------- | From direct insurance | 243 | 218 | -------------------------------------------------------------------------------- | From reinsurance | 99 | 100 | -------------------------------------------------------------------------------- | Cash in hand and at bank | 6 | 4 | -------------------------------------------------------------------------------- | Total | 378 | 355 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total Non-life insurance assets | 3,161 | 2,745 | -------------------------------------------------------------------------------- Note 12. Intangible assets -------------------------------------------------------------------------------- | EUR million | 30 Sept 2009 | 31 Dec | | | | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Goodwill | 516 | 516 | -------------------------------------------------------------------------------- | Brands | 176 | 176 | -------------------------------------------------------------------------------- | Customer relationships | 208 | 226 | -------------------------------------------------------------------------------- | Other | 69 | 68 | -------------------------------------------------------------------------------- | Total | 970 | 987 | -------------------------------------------------------------------------------- Note 13. Debt securities issued to the public -------------------------------------------------------------------------------- | EUR million | 30 Sept 2009 | 31 Dec | | | | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Bonds | 6,737 | 6,185 | -------------------------------------------------------------------------------- | Certificates of deposit, commercial papers and | 9,105 | 10,033 | | ECPs | | | -------------------------------------------------------------------------------- | Other | 228 | 208 | -------------------------------------------------------------------------------- | Total | 16,070 | 16,425 | -------------------------------------------------------------------------------- Note 14. Fair value reserve after income tax -------------------------------------------------------------------------------- | EUR million | 30 Sept 2009 | 31 Dec | | | | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Loans and other receivables | | | -------------------------------------------------------------------------------- | Reclassified notes and bonds | -10 | -11 | -------------------------------------------------------------------------------- | Available-for-sale financial assets | | | -------------------------------------------------------------------------------- | Notes and bonds | 58 | -23 | -------------------------------------------------------------------------------- | Equities and mutual funds with equity risk | -62 | -92 | -------------------------------------------------------------------------------- | Other funds | -8 | -54 | -------------------------------------------------------------------------------- | Total | -22 | -180 | -------------------------------------------------------------------------------- Notes to risk management Note 15. Risk exposure by Banking -------------------------------------------------------------------------------- | Total exposure by rating category*, EUR billion | -------------------------------------------------------------------------------- | Rating category | 30 Sept 2009 | 31 Dec 2008 | Change | -------------------------------------------------------------------------------- | 1-2 | 2.4 | 2.8 | -0.4 | -------------------------------------------------------------------------------- | 3-5 | 10.8 | 11.2 | -0.4 | -------------------------------------------------------------------------------- | 6-7 | 4.3 | 4.3 | 0.0 | -------------------------------------------------------------------------------- | 8-9 | 2.2 | 1.9 | 0.3 | -------------------------------------------------------------------------------- | 10 | 0.2 | 0.1 | 0.1 | -------------------------------------------------------------------------------- | 11-12 | 0.3 | 0.1 | 0.2 | -------------------------------------------------------------------------------- | Non-rated | 0.3 | 0.3 | 0.0 | -------------------------------------------------------------------------------- | Total | 20.4 | 20.6 | -0.2 | -------------------------------------------------------------------------------- | *) excl. private customers | -------------------------------------------------------------------------------- Sensitivity analysis of market risk -------------------------------------------------------------------------------- | | | 30 Sept 2009 | 31 Dec 2008 | -------------------------------------------------------------------------------- | Banking, EUR | Risk | Change | Effect | Effect | Effect | Effect | | million | parame | | on | on | on | on | | | ter | | result | share-h | result | share- | | | | | s | olders' | s | holder | | | | | | equity | | s' | | | | | | | | equity | -------------------------------------------------------------------------------- | Interest-rat | Intere | 1 percentage | 6 | 0 | 5 | 0 | | e risk | st | point | | | | | -------------------------------------------------------------------------------- | Currency | Market | 20 percentage | 1 | 0 | 4 | 0 | | risk | value | points | | | | | -------------------------------------------------------------------------------- | Volatility | | | | | | | | risk | | | | | | | -------------------------------------------------------------------------------- | Interest-rat | Volati | 20 percentage | 4 | 0 | 1 | 0 | | e volatility | lity | points | | | | | -------------------------------------------------------------------------------- | Currency | Volati | 10 percentage | 0 | 0 | 2 | 0 | | volatility | lity | points | | | | | -------------------------------------------------------------------------------- | Credit risk | Credit | 0.5 percentage | 16 | 0 | 20 | 0 | | premium *) | spread | points | | | | | -------------------------------------------------------------------------------- Sensitivity figures have been calculated as the sum of the currencies' intrinsic value. *) The credit risk premium has been calculated on notes and bonds at fair value through profit or loss and available for sale, included in liquidity reserves. Note 16. Risk exposure by Non-life Insurance -------------------------------------------------------------------------------- | Risk | | Total | Change in risk | Effect on | Effect | | parameter | | amount | parameter | combined ratio | on | | | | 30 | | | share-h | | | | Sept | | | olders' | | | | 2009, | | | equity, | | | | EUR | | | EUR | | | | million | | | million | -------------------------------------------------------------------------------- | Insurance portfolio or | 938 | Up 1% | Up 1 | 9 | | insurance premium | | | percentage | | | revenue*) | | | point | | -------------------------------------------------------------------------------- | Claims incurred*) | 623 | Up 1% | Down 0.5 | -6 | | | | | percentage | | | | | | points | | -------------------------------------------------------------------------------- | Major loss of over EUR | | 1 loss | Down 0.5 | -5 | | 5 million | | | percentage | | | | | | points | | -------------------------------------------------------------------------------- | Personnel costs*) | 111 | Up 8% | Down 1 | -9 | | | | | percentage | | | | | | point | | -------------------------------------------------------------------------------- | Expenses by function*) | 270 | Up 4% | Down 1 | -11 | | **) | | | percentage | | | | | | point | | -------------------------------------------------------------------------------- | Inflation for | 493 | Up 0.25 | Down 0.5 | -3 | | collective liability | | percentage | percentage | | | | | points | points | | -------------------------------------------------------------------------------- | Life expectancy for | 1,309 | Up 1 year | Down 3 | -30 | | discounted insurance | | | percentage | | | contract liability | | | points | | -------------------------------------------------------------------------------- | Discount rate for | 1,309 | Down 0.1 | Down 2 | -16 | | discounted insurance | | percentage | percentage | | | contract liability | | point | points | | -------------------------------------------------------------------------------- *) Moving 12-month **) Expenses by function in Non-life Insurance excluding expenses for investment management and expenses for other services rendered Non-life Insurance investment portfolio by allocation -------------------------------------------------------------------------------- | EUR million | | | | -------------------------------------------------------------------------------- | Portfolio allocation | Fair value | % | Fair value | % | | | 30 Sept | | 31 Dec | | | | 2009 | | 2008 | | -------------------------------------------------------------------------------- | Money market | 162 | 6 % | 279 | 12 % | | instruments | | | | | -------------------------------------------------------------------------------- | Bonds and bond funds | 2,057 | 73 % | 1,690 | 70 % | -------------------------------------------------------------------------------- | Equities | 290 | 10 % | 190 | 8 % | -------------------------------------------------------------------------------- | Alternative | 177 | 6 % | 111 | 5 % | | investments | | | | | -------------------------------------------------------------------------------- | Real property | 146 | 5 % | 145 | 6 % | -------------------------------------------------------------------------------- | Total | 2,831 | 100 % | 2,415 | 100 % | -------------------------------------------------------------------------------- Non-life Insurance fixed-income portfolio by maturity and credit rating on 30 September 2009* -------------------------------------------------------------------------------- | EUR million | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Year( | 0-1 | 1-3 | 3-5 | 5-7 | 7-10 | 10- | Total | % | | s) | | | | | | | | | -------------------------------------------------------------------------------- | AAA | 9 | 101 | 210 | 78 | 82 | 94 | 574 | 26 % | -------------------------------------------------------------------------------- | AA | 60 | 183 | 163 | 26 | 14 | 17 | 463 | 21 % | -------------------------------------------------------------------------------- | A | 55 | 252 | 245 | 73 | 77 | 61 | 763 | 35 % | -------------------------------------------------------------------------------- | BBB | 34 | 108 | 94 | 32 | 3 | 0 | 270 | 12 % | -------------------------------------------------------------------------------- | BB+ | 44 | 15 | 20 | 14 | 3 | 0 | 97 | 4 % | | or | | | | | | | | | | lower | | | | | | | | | -------------------------------------------------------------------------------- | Inter | 9 | 4 | 2 | 1 | 0 | 1 | 16 | 1 % | | nally | | | | | | | | | | rated | | | | | | | | | -------------------------------------------------------------------------------- | Total | 211 | 662 | 733 | 224 | 179 | 174 | 2,183 | 100 % | -------------------------------------------------------------------------------- * Excludes credit derivatives. The table below shows the sensitivity of investment risks and their effect on shareholders' equity: -------------------------------------------------------------------------------- | Non-life | Risk parameter | Change | Effect on | | Insurance | | | shareholders' | | | | | equity, EUR million | -------------------------------------------------------------------------------- | | | | 30 Sept | 31 Dec | | | | | 2009 | 2008 | -------------------------------------------------------------------------------- | Bonds and bond | Interest rate | 1 percentage | 69 | 82 | | funds1) | | point | | | -------------------------------------------------------------------------------- | Equities 2) | Market value | 20 percentage | 57 | 33 | | | | points | | | -------------------------------------------------------------------------------- | Venture capital | Market value | 20 percentage | 15 | 18 | | funds and | | points | | | | unquoted | | | | | | equities | | | | | -------------------------------------------------------------------------------- | Commodities | Market value | 20 percentage | 2 | 2 | | | | points | | | -------------------------------------------------------------------------------- | Real property | Market value | 10 percentage | 15 | 15 | | | | points | | | -------------------------------------------------------------------------------- | Currency | Value of | 20 percentage | 10 | 12 | | | currency | points | | | -------------------------------------------------------------------------------- | Credit risk | Credit spread | 0.5 percentage | 37 | 43 | | premium 3) | | points | | | -------------------------------------------------------------------------------- | Derivatives 4) | Volatility | 20 percentage | 1 | 0 | | | | points | | | -------------------------------------------------------------------------------- 1) Include money-market investments, convertible bonds and interest-rate derivatives 2) Include hedge funds and equity derivatives 3) Includes bonds and money-market investments, including government bonds and interest-rate derivatives issued by developed countries 4) 20 percentage points for equity derivatives, 10 percentage points for interest-rate derivatives and 5 percentage points for currency derivatives. Note 17. Risk exposure by Group Function -------------------------------------------------------------------------------- | Total exposure by rating category*, EUR billion | -------------------------------------------------------------------------------- | Rating category | 30 Sept 2009 | 31 Dec 2008 | Change | -------------------------------------------------------------------------------- | 1-2 | 12.8 | 12.0 | 0.8 | -------------------------------------------------------------------------------- | 3-5 | 3.1 | 1.8 | 1.3 | -------------------------------------------------------------------------------- | 6-7 | 0.0 | 0.0 | 0.0 | -------------------------------------------------------------------------------- | 8-9 | 0.0 | 0.0 | 0.0 | -------------------------------------------------------------------------------- | 10 | 0.0 | 0.0 | 0.0 | -------------------------------------------------------------------------------- | 11-12 | 0.0 | 0.0 | 0.0 | -------------------------------------------------------------------------------- | Non-rated | 0.0 | 0.0 | 0.0 | -------------------------------------------------------------------------------- | Total | 15.9 | 13.8 | 2.1 | -------------------------------------------------------------------------------- Sensitivity analysis of market risk -------------------------------------------------------------------------------- | | | | 30 Sept 2009 | 31 Dec 2008 | -------------------------------------------------------------------------------- | Group | Risk | Change | Effect | Effect | Effect | Effect | | Functions, | parame | | on | on | on | on | | E | ter | | result | share-h | result | share- | | UR million | | | s | olders' | s | holder | | | | | | equity | | s' | | | | | | | | equity | -------------------------------------------------------------------------------- | Interest-rat | Intere | 1 percentage | 5 | 0 | 11 | 0 | | e risk | st | point | | | | | | | rate | | | | | | -------------------------------------------------------------------------------- | Interest-rat | Volati | 20 percentage | 1 | 0 | 0 | 0 | | e volatility | lity | points | | | | | -------------------------------------------------------------------------------- | Credit risk | Credit | 0.5 percentage | 0 | 61 | 0 | 0 | | premium *) | spread | points | | | | | -------------------------------------------------------------------------------- | Price risk | | | | | | | -------------------------------------------------------------------------------- | Equity | Market | 20 percentage | 0 | 2 | 0 | 2 | | portfolio | value | points | | | | | -------------------------------------------------------------------------------- | Private | Market | 20 percentage | 0 | 7 | 0 | 7 | | equity funds | value | points | | | | | -------------------------------------------------------------------------------- | Property | Market | 10 percentage | 0 | 3 | 0 | 2 | | risk | value | points | | | | | -------------------------------------------------------------------------------- Sensitivity figures have been calculated as the sum of the currencies' intrinsic value. *) The credit risk premium has been calculated on notes and bonds at fair value through profit or loss and available for sale, included in liquidity reserves. Financial assets included in liquidity reserve by maturity and credit rating on 30 September 2009 -------------------------------------------------------------------------------- | EUR | | | | | | | | | | milli | | | | | | | | | | on | | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Year | 0-1 | 1-3 | 3-5 | 5-7 | 7-10 | 10- | Total | % | -------------------------------------------------------------------------------- | AAA | 1,091 | 1,777 | 1,620 | 470 | 286 | 102 | 5,346 | 56 % | -------------------------------------------------------------------------------- | AA | 1,260 | 562 | 558 | 68 | 30 | 22 | 2,501 | 26 % | -------------------------------------------------------------------------------- | A | 173 | 544 | 196 | 80 | 7 | 11 | 1,011 | 11 % | -------------------------------------------------------------------------------- | BBB | 35 | 57 | 48 | 17 | 18 | 0 | 174 | 2 % | -------------------------------------------------------------------------------- | BB+ | 0 | 0 | 15 | 10 | 0 | 0 | 25 | 0 % | | or | | | | | | | | | | lower | | | | | | | | | -------------------------------------------------------------------------------- | Inter | 104 | 155 | 137 | 3 | 10 | 0 | 408 | 4 % | | nally | | | | | | | | | | rated | | | | | | | | | -------------------------------------------------------------------------------- | Total | 2,663 | 3,095 | 2,575 | 648 | 351 | 135 | 9,467 | 100 % | -------------------------------------------------------------------------------- The residual maturity of liquidity reserves averages 3 years. Other notes Note 18. Collateral given -------------------------------------------------------------------------------- | EUR million | 30 Sept 2009 | 31 Dec | | | | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Given on behalf of own liabilities and | | | | commitments | | | -------------------------------------------------------------------------------- | Mortgages | 1 | 1 | -------------------------------------------------------------------------------- | Pledges | 5,271 | 4,134 | -------------------------------------------------------------------------------- | Other | 1,104 | 400 | -------------------------------------------------------------------------------- | Total collateral given | 6,376 | 4,534 | -------------------------------------------------------------------------------- | Total collateralised liabilities | 1,133 | 614 | -------------------------------------------------------------------------------- Note 19. Off-balance-sheet commitments -------------------------------------------------------------------------------- | EUR million | 30 Sept 2009 | 31 Dec | | | | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Guarantees | 1,315 | 1,133 | -------------------------------------------------------------------------------- | Other guarantee liabilities | 1,346 | 1,476 | -------------------------------------------------------------------------------- | Loan commitments | 3,918 | 3,149 | -------------------------------------------------------------------------------- | Commitments related to short-term trade | 118 | 152 | | transactions | | | -------------------------------------------------------------------------------- | Other | 431 | 416 | -------------------------------------------------------------------------------- | Total off-balance-sheet commitments | 7,129 | 6,328 | -------------------------------------------------------------------------------- Note 20. Derivative contracts --------------------------------------------------------------------------------| 30 Sept 2009 | Nominal values/residual | Total | Fair values | | | term to maturity | | | -------------------------------------------------------------------------------- | EUR million | <1 year | 1-5 | >5 | | Assets | Liabiliti | | | | years | years | | | es | -------------------------------------------------------------------------------- | Interest rate | 45,722 | 45,390 | 11,956 | 103,068 | 1,273 | 1,370 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Currency | 13,202 | 1,821 | 583 | 15,607 | 172 | 533 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Equity and | 99 | 744 | 38 | 881 | 69 | 0 | | index | | | | | | | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Credit | 138 | 178 | | 316 | 3 | 5 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Other | 3,929 | 131 | | 4,060 | 1 | 22 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Total | 63,091 | 48,264 | 12,578 | 123,932 | 1,518 | 1,931 | | derivatives | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 30 Sept 2008 | Nominal values/residual | Total | Fair values | | | term to maturity | | | -------------------------------------------------------------------------------- | EUR million | <1 year | 1-5 | >5 | | Assets | Liabiliti | | | | years | years | | | es | -------------------------------------------------------------------------------- | Interest rate | 59,075 | 43,663 | 11,349 | 114,088 | 588 | 523 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Currency | 13,938 | 1,706 | 1,037 | 16,681 | 260 | 376 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Equity and | 28 | 358 | 73 | 459 | 22 | | | index | | | | | | | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Credit | 147 | 238 | | 385 | 4 | 4 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Other | | 16 | | 16 | 1 | | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Total | 73,188 | 45,982 | 12,459 | 131,629 | 875 | 903 | | derivatives | | | | | | | -------------------------------------------------------------------------------- Note 21. Other contingent liabilities and commitments On 30 September 2009, Banking commitments to venture capital funds amounted to EUR 17 million and Non-Life Insurance commitments to EUR 75 million. They are included in the section 'Off-balance-sheet commitments'. Note 22. Related-party transactions Pohjola Group's related parties comprise its parent company, associates and administrative personnel and other related-party companies. Pohjola Group's Parent Company is OP-Pohjola Group Central Cooperative. Pohjola Group's associates were Autovahinkokeskus Oy on 30 September 2009 and Autovahinkokeskus Oy and Vahinkopalvelu Oy on 30 September 2008. Pohjola Group's administrative personnel comprises Pohjola Bank plc's President and CEO, members of the Board of Directors and their close family members. Normal loan terms and conditions apply to loans granted to the management. Tied to generally used reference rates, these loans with normal collateral are repaid according to the agreed repayment schedule. Other related-party entities include OP Pension Fund, OP Pension Foundation and sister companies within OP-Pohjola Group Central Cooperative Consolidated. Related-party transactions by 30 September 2009 -------------------------------------------------------------------------------- | EUR million | | | | -------------------------------------------------------------------------------- | | Parent | Admini-str | Others | | | company | ative | | | | | personnel | | -------------------------------------------------------------------------------- | Loans | 200 | | 2,734 | -------------------------------------------------------------------------------- | Other receivables | 72 | | 149 | -------------------------------------------------------------------------------- | Deposits | 6 | | 252 | -------------------------------------------------------------------------------- | Other liabilities | 6 | | 281 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest income | 4 | | 154 | -------------------------------------------------------------------------------- | Interest expenses | 5 | | 136 | -------------------------------------------------------------------------------- | Dividend income | 0 | | 2 | -------------------------------------------------------------------------------- | Other Non-life Insurance income | 2 | | 3 | -------------------------------------------------------------------------------- | Commission income | 0 | 0 | 15 | -------------------------------------------------------------------------------- | Commission expenses | 1 | 0 | 3 | -------------------------------------------------------------------------------- | Net trading income | 0 | | -19 | -------------------------------------------------------------------------------- | Other operating income | 1 | | 5 | -------------------------------------------------------------------------------- | Operating expenses | 58 | | 3 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Off-balance-sheet commitments | | | | -------------------------------------------------------------------------------- | Guarantees | | | 75 | -------------------------------------------------------------------------------- | Irrevocable commitments | 17 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Salaries and other short-term | | | | | benefits, and performance-based pay | | | | -------------------------------------------------------------------------------- | Salaries and short-term benefits | | 1 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Related-party holdings | | | | -------------------------------------------------------------------------------- | Number of shares | 95,798,479 | 21,508 | 6,711,422 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Related-party transactions by 30 September 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million | | | | -------------------------------------------------------------------------------- | | Parent | Admini-str | Others | | | company | ative | | | | | personnel | | -------------------------------------------------------------------------------- | Loans | 133 | | 1,612 | -------------------------------------------------------------------------------- | Other receivables | 129 | | 241 | -------------------------------------------------------------------------------- | Deposits | 11 | | 270 | -------------------------------------------------------------------------------- | Other liabilities | 5 | | 154 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest income | 4 | | 203 | -------------------------------------------------------------------------------- | Interest expenses | 7 | | 151 | -------------------------------------------------------------------------------- | Dividend income | 0 | | 5 | -------------------------------------------------------------------------------- | Other Non-life Insurance income | 2 | | | -------------------------------------------------------------------------------- | Commission income | 1 | 0 | 16 | -------------------------------------------------------------------------------- | Commission expenses | 1 | 0 | 2 | -------------------------------------------------------------------------------- | Net trading income | 1 | | 5 | -------------------------------------------------------------------------------- | Other operating income | 8 | | 11 | -------------------------------------------------------------------------------- | Operating expenses | 60 | | 6 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Off-balance-sheet commitments | | | | -------------------------------------------------------------------------------- | Guarantees | | | 66 | -------------------------------------------------------------------------------- | Irrevocable commitments | 8 | | 136 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Salaries and other short-term | | | | | benefits, and performance-based pay | | | | -------------------------------------------------------------------------------- | Salaries and short-term benefits | | 1 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Related-party holdings | | | | -------------------------------------------------------------------------------- | Number of shares | 60,825,897 | 63,421 | 4,205,946 | -------------------------------------------------------------------------------- Helsinki, 5 November 2009 Pohjola Bank plc Board of Directors This Interim Report is available at www.pohjola.fi/english > Media. Background information on the report can also be found at the same address. Meeting for analysts and the media Pohjola will hold a meeting for analysts in Finnish on 5 November 2009, starting at 10.00 am, and a conference call for analyst and investors in English, starting at 3.30 pm (Finnish time), tel. +358 (0)20 699 100, PIN code 911239#. Mikael Silvennoinen, Pohjola Bank plc's President and CEO, will present the financial results at a press conference in the OP-Pohjola Group Central Cooperative Auditorium (Teollisuuskatu 1 b, Vallila, Helsinki), on 5 November, starting at noon. Pohjola Bank plc Carina Geber-Teir Senior Vice President, Corporate Communications DISTRIBUTION NASDAQ OMX Helsinki Ltd London Stock Exchange SWX Swiss Exchange Major media www.pohjola.fi For additional information, please contact Mikael Silvennoinen, President and CEO, tel. +358 (0)10 252 2549 Jouko Pölönen, CFO, tel. +358 (0)10 252 3405 Tarja Ollilainen, Senior Vice President, Investor Relations, tel. +358 (0)10 252 4494
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