2009-08-06 07:00:00 CEST
2009-08-06 07:00:15 CEST
REGULATED INFORMATION
Pohjola Pankki Oyj - Interim report (Q1 and Q3)
Pohjola Bank plc Interim Report for 1 January-30 June 2009
Pohjola Bank plc Company Release, 6 August 2009, 8.00 am Release category: Interim Report Pohjola Bank plc Interim Report for 1 January-30 June 2009 January-June - Earnings before tax improved year on year, coming to EUR 123 million (71). - Earnings before tax at fair value amounted to EUR 227 million (-28) and return on equity at fair value was 18.3% (-2.4). - Banking improved its profit performance despite higher impairment charges. - Within Asset Management, assets under management rebounded, totalling EUR 27.8 billion (25.3). - Non-life Insurance reported an excellent balance on technical account and recorded an operating combined ratio of 88.6% (95.0). Return on investment at fair value rose to 4.5% (-1.2). - Outlook: earnings before tax in 2009 are expected to be markedly higher than in 2008. The greatest uncertainty associated with the outlook for the rest of the year relates to developments in impairment charges. If our corporate customers' operating environment continues to deteriorate, impairment charges in the second half may be higher than in the first (more detailed information on outlook in" Outlook towards the year end" below). April-June - Earnings before tax amounted to EUR 87 million (54). - Earnings before tax at fair value were EUR 186 million (20). - Impairment charges on receivables burdened Banking earnings by EUR 33 million. - Within Asset Management, assets under management grew by almost EUR 3 billion. - Non-life Insurance reported an operating combined ratio of 86.0% (91.9) and return on investments of 4.9% (-0.6). - The capital base strengthened as a result of the EUR 308 million rights issue. Group financial performance and key indicators 1) -------------------------------------------------------------------------------- | Earnings before tax, | Q1-2/ | Q1-2/ | Chang | Q2/09 | Q2/08 | Chang | 2008 | | EUR million | 09 | 08 | e | | | e | | -------------------------------------------------------------------------------- | Banking | 76 | 64 | 11 | 26 | 39 | -13 | 105 | -------------------------------------------------------------------------------- | Asset Management | 6 | 7 | -1 | 4 | 4 | 0 | 17 | -------------------------------------------------------------------------------- | Non-life Insurance | 46 | 40 | 7 | 48 | 17 | 30 | 55 | -------------------------------------------------------------------------------- | Group Functions | -5 | -40 | 35 | 10 | -6 | 16 | -58 | -------------------------------------------------------------------------------- | Total | 123 | 71 | 52 | 87 | 54 | 33 | 119 | -------------------------------------------------------------------------------- | Change in fair value | 104 | -99 | 203 | 100 | -33 | 133 | -252 | | reserve | | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before | 227 | -28 | 255 | 186 | 20 | 166 | -133 | | tax at fair value | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Key indicators | Q1-2/ | Q1-2/ | Q2/09 | Q2/08 | 2008 | Targe | | | | 09 | 08 | | | | t | | -------------------------------------------------------------------------------- | Earnings before tax, | 123 | 71 | 87 | 54 | 119 | | | | EUR million | | | | | | | | -------------------------------------------------------------------------------- | Profit for the | 91 | 53 | 65 | 39 | 89 | | | | period, EUR million | | | | | | | | -------------------------------------------------------------------------------- | Return on equity, % | 18.3 | -2.4 | 30.3 | 3.4 | -5.6 | 13.0 | | -------------------------------------------------------------------------------- | Balance sheet total, | 33.6 | 28.5 | | | 32.4 | | | | EUR billion | | | | | | | | -------------------------------------------------------------------------------- | Shareholders' | 2.1 | 1.7 | | | 1.6 | | | | equity, EUR billion | | | | | | | | -------------------------------------------------------------------------------- | Tier 1 ratio, % | 11.5 | 9.8 | | | 9.4 | >9.5 | | -------------------------------------------------------------------------------- | Earnings per share, | 0.33 | 0.21 | 0.22 | 0.16 | 0.36 | | | | EUR 2) | | | | | | | | -------------------------------------------------------------------------------- | Earnings per share, | 0.62 | -0.08 | 0.47 | 0.06 | -0.40 | | | | incl. change in fair | | | | | | | | | value, EUR 2) | | | | | | | | -------------------------------------------------------------------------------- | Equity per share, | 6.45 | 6.90 | | | 6.58 | | | | EUR 2) | | | | | | | | -------------------------------------------------------------------------------- | Average personnel | 2,964 | 3,110 | 2,980 | 3,141 | 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 financial performance for January-June was markedly better than a year ago and the second-quarter results were excellent. Net interest income, net commissions and fees and net trading income developed favourably, with the result that Banking improved its first-half financial performance year on year, although impairment charges rose as expected. The loan and guarantee portfolio decreased slightly as a result of a recovery in capital markets and milder demand for loans. The average margin on corporate loans continued to rise, compensating for an increase in funding costs and costs due to credit risks. Non-life Insurance balance on technical account was excellent, reaching an all-time high. Growth in insurance premium revenue slowed down due to a decrease in premium revenue from corporate customers. However, insurance premium revenue from private customers continued its vigorous growth and the number of loyal customer households exceeded the mark of 400,000 households. Non-life Insurance return on investments at fair value developed favourably. Thanks to positive developments in capital markets and higher net assets inflow, assets under management increased by 10% from the year-start level. The Group's liquidity position is strong and funding has performed well. The EUR 308 million rights issue in the second quarter strengthened our capital base further. Our business lines' good financial performance and strong capital base will further secure our ability to provide credit to our clients during the recession too. The Group will have good potential for capitalising on any opening business opportunities and strengthening its position further as a leading financial services provider in Finland." Operating environment After its steep deterioration during the first quarter, the world economy showed some signs of stabilisation during the second quarter. Along with aggressive monetary and fiscal policy measures, growth forecasts for China and the USA in particular were revised up. Growth forecasts for Europe's and Finland's economy for this and next year were revised down. GDP in both the whole of Europe and Finland is expected to continue its downward trend, with exports, capital spending and consumer spending decreasing and unemployment rising. Extensive stimulus packages, first adopted by the United States and then by others, are forecast to improve prospects for the rest of the year. Central banks have aimed to fight the recession by relaxing their monetary policy further. In May, the European Central Bank (ECB) cut its benchmark interest rate to 1.0% and has continued to provide liquidity to the banking system. In June, the ECB granted banks 12-month loans based on its benchmark rate for the first time. These measures have calmed down financial markets. Risk premiums continued to narrow during the second quarter and short-term market rates hit an all-time low. The second quarter saw an adjustment in corporate bond markets when risk premiums fell sharply. In particular, the risk premiums of riskier companies and banks dropped when markets lowered their expectations of future payment defaults. Key factors underlying this adjustment can be seen to relate to government support for the market through stimulus packages, absence of alternative investments and companies venturing to issue debt instruments. During the second quarter, share prices rebounded strongly from their low in March. Equity markets have stabilised since their rapid rebound but are expected to remain unstable. Equity market prices predict that the economy will see a strong recovery towards the end of the year. The recession has resulted in an increase in corporate payment defaults and bankruptcies and forced companies to cut capital spending and costs, which slowed down demand for loans. Business slowdown in the corporate sector has also restrained premiums written within Non-life Insurance. On the other hand, however, this slowdown has reduced claims expenditure and thus improved Non-life Insurance profitability. Consolidated earnings -------------------------------------------------------------------------------- | Consolidated | 200 | 2008 | Chang | 2009 | 2008 | Chang | Roll | 2008 | | earnings | 9 | | e | | | e | ing | | -------------------------------------------------------------------------------- | EUR million | Q1- | Q1-2 | | Q2 | Q2 | | 12-m | | | | 2 | | | | | | onth | | -------------------------------------------------------------------------------- | | | | | | | | | | -------------------------------------------------------------------------------- | Net interest income | 119 | 75 | 44 | 67 | 40 | 27 | 218 | 174 | | | | | | | | | | | -------------------------------------------------------------------------------- | Impairments of | 54 | -3 | 57 | 33 | -1 | 34 | 85 | 28 | | receivables | | | | | | | | | -------------------------------------------------------------------------------- | Net interest income | 65 | 78 | -13 | 35 | 42 | -7 | 133 | 146 | | after impairments | | | | | | | | | -------------------------------------------------------------------------------- | Net income from | 192 | 181 | 11 | 122 | 90 | 32 | 364 | 353 | | Non-life Insurance | | | | | | | | | -------------------------------------------------------------------------------- | Net commissions and | 66 | 63 | 4 | 36 | 31 | 5 | 126 | 122 | | fees | | | | | | | | | -------------------------------------------------------------------------------- | Net trading income | 33 | -46 | 79 | 8 | -2 | 11 | -2 | -81 | -------------------------------------------------------------------------------- | Net investment | -9 | 9 | -17 | 0 | 3 | -3 | -11 | 6 | | income | | | | | | | | | -------------------------------------------------------------------------------- | Other operating | 22 | 20 | 2 | 11 | 9 | 2 | 44 | 42 | | income | | | | | | | | | -------------------------------------------------------------------------------- | Total net income | 370 | 305 | 65 | 212 | 173 | 40 | 654 | 589 | -------------------------------------------------------------------------------- | Personnel costs | 95 | 92 | 3 | 50 | 47 | 3 | 180 | 178 | -------------------------------------------------------------------------------- | IT expenses | 37 | 36 | 0 | 18 | 18 | 0 | 81 | 80 | -------------------------------------------------------------------------------- | Depreciation and | 34 | 32 | 2 | 17 | 16 | 1 | 71 | 69 | | amortisation | | | | | | | | | -------------------------------------------------------------------------------- | Other expenses | 82 | 74 | 8 | 40 | 38 | 2 | 151 | 143 | -------------------------------------------------------------------------------- | Total expenses | 247 | 234 | 13 | 125 | 119 | 6 | 483 | 470 | -------------------------------------------------------------------------------- | Earnings before tax | 123 | 71 | 52 | 87 | 54 | 33 | 171 | 119 | -------------------------------------------------------------------------------- | Change in fair | 104 | -99 | 203 | 100 | -33 | 133 | -49 | -252 | | value reserve | | | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss | 227 | -28 | 255 | 186 | 20 | 166 | 122 | -133 | | before tax at fair | | | | | | | | | | value | | | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | | | -------------------------------------------------------------------------------- | Income tax expense | 33 | 18 | 14 | 22 | 14 | 7 | 45 | 31 | -------------------------------------------------------------------------------- | Profit for the | 91 | 53 | 38 | 65 | 39 | 26 | 126 | 89 | | period | | | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | | | -------------------------------------------------------------------------------- | Tax on change in | 27 | -26 | 52 | 26 | -9 | 34 | -12 | -65 | | fair value reserve | | | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss for | 168 | -21 | 189 | 139 | 14 | 125 | 90 | -99 | | the period at fair | | | | | | | | | | value | | | | | | | | | -------------------------------------------------------------------------------- January-June earnings Consolidated net income rose by 21% to EUR 370 million (305). Net interest income came to EUR 119 million (75), up by almost 60% year on year. This improvement had its roots in the loan portfolio and lending margins of new loans that grew throughout 2008. The price difference recognised on reclassified notes and bonds increased net interest income by EUR 14 million. Impairments of receivables rose by EUR 57 million year on year, as expected, totalling EUR 54 million. Net income from Non-life Insurance rose by EUR 11 million to EUR 192 million (181), 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 66 million, up by almost EUR 4 million year on year. Net commissions and fees arising from loans and guarantees showed a strong increase whereas those from asset management and securities brokerage declined. Net trading income came to EUR 33 million (-46), or EUR 79 million higher than in the previous year. Income from derivative and bond trading increased. Negative mark-to-market valuations recognised a year ago in the income statement from liquidity reserves totalled EUR 49 million. Net investment income fell by EUR 17 million being EUR 9 million in the red, due adjustments for property acquisition costs, impairment charges for equities and lower dividend income than a year ago. Expenses rose by 5% to EUR 247 million (234). Excluding a EUR 3-million increase in deprecation on leases, expenses rose by 4%. The number of Group employees increased by 51 from 31 December 2008. Non-life Insurance agency fees and sales commissions rose by EUR 8 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. Earnings before tax amounted to EUR 123 million (71), or EUR 52 million higher than a year ago. The fair value reserve increased by EUR 104 million, whereas it decreased by EUR 99 million during the same period a year ago. Impairments recognised from the fair value reserve in the income statement totalled EUR 25 million. On 30 June, the fair value reserve after tax stood at EUR -103 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 came to EUR 227 million (-28). April-June earnings Consolidated net income increased by 23% to EUR 212 million (173). Growth in net interest income remained strong during the period. The loan and guarantee portfolio was almost EUR 1 billion larger than a year ago. Lending margins continued to rise. The price difference recognised on reclassified notes and bonds increased net interest income by EUR 6 million. Impairments of receivables rose by EUR 34 million year on year to EUR 33 million (-1). Impairment charges also increased from those recorded for the previous two quarters. Non-life Insurance net income rose thanks to the good balance on technical account and a year-on-year performance improvement in investments. Good trading performance improved net trading income. Expenses grew by 5%. Excluding an increase in deprecation on leases, expenses rose by 4%. The number of employees showed a slight decrease. Earnings before tax were EUR 87 million (54) and earnings before tax at fair value EUR 186 million (20). Group risk exposure The effects of the economic recession were reflected in customer companies' lower credit rating, and doubtful receivables and impairment charges increased in line with expectations. Despite the recession, investment-grade exposures continued to remain at good levels and the ratio of doubtful receivables to the loan and guarantee portfolio remained low. The revival of investment markets improved Non-life Insurance risk-bearing capacity. The financial position and liquidity remained strong. Short-term funding performed well and the availability of long-term funding also improved. Pohjola has also the opportunity to use Finnish State guarantee in its funding, if necessary. Pohjola Bank plc maintains OP-Pohjola Group's liquidity reserves which mainly consist of notes and bonds eligible as collateral for central bank refinancing. Liquidity reserves totalled EUR 9.6 billion (9.8) on 30 June. These liquidity reserves plus items included in OP-Pohjola Group's balance sheet comprise the liquidity reserve eligible for central bank refinancing, 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 at fair value through profit or loss included in the liquidity reserve 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 reserves during the first half totalled EUR 9 million, based on lower credit ratings for receivables. The second quarter saw no recognition of impairments from the liquidity reserves. Net credit losses and impairments for January-June totalled EUR 54 million (-3), of which impairments recognised on a collective basis accounted for 12% and those recognised on an individual basis for 88%. Doubtful receivables rose by EUR 21 million to EUR 56 million, accounting for 0.39% (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. If the operating environment for our corporate customers continues to deteriorate, doubtful receivables and impairment charges may increase during the second half. Capital adequacy The capital adequacy ratio continued to remain strong, standing at 12.2% (11.3) as against the statutory minimum requirement of 8%. The Tier 1 ratio was 11.5% (9.4). Tier 1 capital came to EUR 1,495 million (1,228) and the total capital base amounted to EUR 1,584 million (1,484). The minimum regulatory capital requirement to cover market risk amounted to EUR 33 million (47). On 30 June, risk-weighted assets totalled EUR 12,988 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 204 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 and its effect on total capital adequacy was 1.2%. By the end of June, Pohjola redeemed debt instruments worth EUR 3 million. 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 | Aa1 | -------------------------------------------------------------------------------- | 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 15 April 2009, Moody's put Pohjola on its watchlist for a possible downgrade. Financial targets and actuals -------------------------------------------------------------------------------- | Financial targets | Q1-2/09 | Q1-2/08 | 2008 | Target | -------------------------------------------------------------------------------- | Group | | | | | -------------------------------------------------------------------------------- | Return on equity, % | 18.3 | -2.4 | -5.6 | 13 | -------------------------------------------------------------------------------- | Tier 1 ratio, % | 11.5 | 9.8 | 9.4 | >9.5 | -------------------------------------------------------------------------------- | Banking | | | | | -------------------------------------------------------------------------------- | Operating cost/income ratio, % | 35 | 46 | 46 | <40 | -------------------------------------------------------------------------------- | Asset Management | | | | | -------------------------------------------------------------------------------- | Operating cost/income ratio, % | 63 | 61 | 57 | <50 | -------------------------------------------------------------------------------- | Non-life Insurance | | | | | -------------------------------------------------------------------------------- | Operating combined ratio, % | 88.6 | 95.0 | 91.5 | 92 | -------------------------------------------------------------------------------- | Operating expense ratio, % | 21.8 | 21.6 | 21.9 | <20 | -------------------------------------------------------------------------------- | Solvency ratio, % | 77 | 70 | 66 | 70 | -------------------------------------------------------------------------------- These financial targets will remain valid over the economic cycle. Business lines Banking - Earnings before tax improved by almost a fifth, to EUR 76 million (64). - Volumes of trading in bonds and derivatives increased, reporting a good result. - Due to the economic recession, impairments increased to EUR 44 million (-1). - The loan and guarantee portfolio shrank by 2% during the first half but the market share of corporate loans remained at 19%. - The average margin on corporate loans continued to rise. Banking: financial results and key figures and ratios -------------------------------------------------------------------------------- | Financial results, | Q1-2 | Q1-2 | Change | Q2/09 | Q2/08 | Change | Actual | | EUR million | /09 | /08 | | | | | | -------------------------------------------------------------------------------- | | | | | | | | 2008 | -------------------------------------------------------------------------------- | Net interest income | 87 | 74 | 14 | 45 | 38 | 8 | 158 | -------------------------------------------------------------------------------- | Impairments of | 44 | -1 | 45 | 33 | 0 | 33 | 18 | | receivables | | | | | | | | -------------------------------------------------------------------------------- | Net interest income | | | | | | | | | after | | | | | | | | -------------------------------------------------------------------------------- | impairments of | 43 | 75 | -31 | 13 | 37 | -25 | 140 | | receivables | | | | | | | | -------------------------------------------------------------------------------- | Net commissions and | 44 | 33 | 11 | 25 | 16 | 9 | 63 | | fees | | | | | | | | -------------------------------------------------------------------------------- | Net trading income | 37 | -1 | 38 | 13 | 6 | 7 | -20 | -------------------------------------------------------------------------------- | Other income | 15 | 13 | 2 | 7 | 6 | 1 | 28 | -------------------------------------------------------------------------------- | Total net income | 139 | 119 | 20 | 58 | 66 | -8 | 211 | -------------------------------------------------------------------------------- | Total expenses | 63 | 55 | 9 | 32 | 27 | 5 | 106 | -------------------------------------------------------------------------------- | Earnings before tax | 76 | 64 | 11 | 26 | 39 | -13 | 105 | -------------------------------------------------------------------------------- | Loan and guarantee | | | | | | | | | portfolio, | | | | | | | | -------------------------------------------------------------------------------- | EUR billion | 13.9 | 13.0 | 0.8 | | | | 14.1 | -------------------------------------------------------------------------------- | Margin on corporate | | | | | | | | -------------------------------------------------------------------------------- | loan portfolio, % | 1.14 | 0.86 | 0.28 | | | | 0.94 | -------------------------------------------------------------------------------- | Ratio of doubtful | | | | | | | | | receivables to | | | | | | | | -------------------------------------------------------------------------------- | loan and guarantee | 0.39 | 0.26 | 0.13 | | | | 0.25 | | portfolio, % | | | | | | | | -------------------------------------------------------------------------------- | Operating | | | | | | | | | cost/income | | | | | | | | -------------------------------------------------------------------------------- | ratio, % | 35 | 46 | -12 | 35 | 41 | -6 | 46 | -------------------------------------------------------------------------------- | Personnel | 620 | 594 | 26 | | | | 613 | -------------------------------------------------------------------------------- January-June earnings Banking reported good earnings before tax although an increase of EUR 45 million in impairment charges eroded the result. The economic recession made corporate customers decrease investments, slowing down demand for loans. The loan portfolio shrank by almost 4% from its level at the end of 2008, standing at EUR 11.1 billion on 30 June, and increased by almost EUR 0.4 billion in the year to June, or 4%. The guarantee portfolio increased by EUR 0.2 billion to EUR 2.8 billion, or by 6%, from its level at the end of 2008, and by EUR 0.5 billion, or 21%, in the year to June, due to growth in guarantees for TyEL 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 one-third higher than the year before but showed irregular developments. Commission income from loans grew by EUR 9 million and that from guarantees by EUR 4 million, while other commissions and fees remained unchanged or decreased. Customer-focused capital market operations showed a strong profit performance. The bond and derivatives business, in particular, recorded an increase in net income and income from trading for the first half was triple the amount reported a year ago. Based on a change in accounting practice at the end of 2008, some 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 7 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 2 million. Expenses increased by EUR 9 million, with depreciation on leases accounting for EUR 3 million. The cost/income ratio improved considerably. April-June earnings Second-quarter earnings before tax amounted to EUR 26 million (39), this fall being due to an increase of EUR 33 million in impairment charges. During the reporting period, the loan and guarantee portfolio decreased by EUR 0.1 billion, whereas a year ago it increased by EUR 0.4 billion. As a result of the larger loan portfolio and higher margins, net interest income was a fifth higher than a year ago. Commission income from loans grew by EUR 7 million and that from guarantees was EUR 3 million higher than a year ago. The Markets division posted earnings of EUR 16 million, or EUR 9 million higher than the year before, due particularly to trading in bond and derivative markets. Expenses increased by EUR 5 million, with depreciation on leases accounting for over one million euros. Risk exposure by Banking During January-June, total exposure decreased by EUR 0.2 billion to EUR 21.2 billion. The ratio of investment-grade exposure - that is, ratings 1-5 - to total exposure, excluding private customers, remained at a healthy level, standing at 65% (68), the share of ratings 11-12 was 1.2% (0.6) and that of non-rated exposure 1% (1). Corporate exposure (including housing corporations) accounted for 76% (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 235 million (117), accounting for 1.5% (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 June. The most significant industries included the manufacture of machinery and equipment representing 11.5% (10.0), lease and management of flats 10.9% (10.8) and trade 9.3% (10.4). Significant customer exposure fell to EUR 4.0 billion (4.4). The ratio of doubtful receivables to the loan and guarantee portfolio rose but continued to remain low, standing at EUR 55 million (34), or 0.39% (0.25). Past due payments came to EUR 19 million (32), representing 0.13% (0.22) of the loan and guarantee portfolio. Net credit losses and impairments reduced January-June results by EUR 44 million (+1). On 30 June, Baltic Banking exposures totalled EUR 119 million, accounting for less than 1% of the loan and guarantee portfolio. The Baltic Banking share of net credit losses and impairment charges for the first half amounted to EUR 4.0 million, comprising mainly impairments on receivables recognised on a collective basis. Interest rate risk exposure averaged EUR 10.6 million in the first half and EUR 8.6 million in the second quarter, based on the 1-percentage-point change in the interest rate. Asset Management - Earnings before tax amounted to EUR 6 million (7). - Assets under management increased by 10% to EUR 27.8 billion (25.3). - Net assets inflow was over one billion euros. Asset Management: financial results and key figures and ratios -------------------------------------------------------------------------------- | Financial | Q1-2/ | Q1-2/ | Change | Q2/09 | Q2/08 | Change | Actual | | results, EUR | 09 | 08 | | | | | | | million | | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | 2008 | -------------------------------------------------------------------------------- | Net | 19 | 22 | -3 | 10 | 11 | -1 | 46 | | commissions | | | | | | | | | and fees | | | | | | | | -------------------------------------------------------------------------------- | Other income | 2 | 0 | 2 | 1 | 0 | 1 | 0 | | and expenses | | | | | | | | -------------------------------------------------------------------------------- | Total income | 20 | 22 | -1 | 11 | 11 | 0 | 46 | -------------------------------------------------------------------------------- | Total expenses | 14 | 15 | 0 | 7 | 7 | 0 | 29 | -------------------------------------------------------------------------------- | Earnings | 6 | 7 | -1 | 4 | 4 | 0 | 17 | | before tax | | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | | -------------------------------------------------------------------------------- | Assets | | | | | | | | -------------------------------------------------------------------------------- | under | 27.8 | 28.8 | -1.0 | | | | 25.3 | | management, | | | | | | | | | EUR billion | | | | | | | | -------------------------------------------------------------------------------- | Operating | | | | | | | | | cost/income | | | | | | | | -------------------------------------------------------------------------------- | ratio, % | 63 | 61 | 2 | 60 | 60 | 0 | 57 | -------------------------------------------------------------------------------- | Personnel | 154 | 156 | -2 | | | | 154 | -------------------------------------------------------------------------------- January-June earnings Earnings before tax for the reporting period amounted to EUR 6 million (7). Net commissions and fees were 3% lower and personnel costs 3% lower than the year before. The operating cost/income ratio stood at 63% (61). On 30 June, assets under management totalled EUR 27.8 billion (25.3), institutional clients accounting for EUR 16.5 billion (16.0), OP mutual funds for EUR 9.5 billion (8.5) and Pohjola Private for EUR 1.8 billion (0.7). Assets under management increased by 10% from their level at the beginning of 2009. Higher net assets inflow and second-quarter market developments contributed to this increase. April-June earnings Earnings before tax amounted to EUR 4 million (4). Net commissions and fees decreased by 8% year on year. Assets under management increased by EUR 2.8 billion, as a result of higher net assets inflow and market developments. The trend of money-market fund redemptions that continued in the first quarter reversed towards subscriptions. Client assets under Pohjola Private's management soared by 134%. The operating cost/income ratio stood at 60% (60). Non-life Insurance - Earnings before tax improved to EUR 46 million (40). - The operating balance on technical account more than doubled to EUR 54 million (23), the best ever recorded in the first half. - Non-life Insurance's profitability was very good. The operating combined ratio stood at 88.6% (95.0). - Growth in insurance premium revenue slowed down to 3% (8) due to a decrease in premium revenue from corporate customers as a result of the recession. - Insurance premium revenue from private customers continued its vigorous growth and the number of loyal customer households exceeded the mark of 400,000. - Return on investments at fair value was 4.5% (-1.2). Non-life Insurance: financial results and key figures and ratios -------------------------------------------------------------------------------- | Financial results, | Q1-2/ | Q1-2/ | Chang | Q2/09 | Q2/08 | Change | Actual | | EUR million | 09 | 08 | e | | | | 2008 | -------------------------------------------------------------------------------- | Insurance premium | 471 | 456 | 15 | 240 | 236 | 4 | 923 | | revenue | | | | | | | | -------------------------------------------------------------------------------- | Claims incurred | -314 | -335 | 20 | -154 | -167 | 13 | -643 | -------------------------------------------------------------------------------- | Operating expenses | -103 | -98 | -5 | -53 | -50 | -2 | -202 | -------------------------------------------------------------------------------- | Amortisation | -12 | -14 | 2 | -6 | -7 | 1 | -30 | | adjustment of | | | | | | | | | intangible assets | | | | | | | | -------------------------------------------------------------------------------- | Balance on | 42 | 9 | 32 | 28 | 12 | 16 | 49 | | technical account | | | | | | | | -------------------------------------------------------------------------------- | Investment income | 30 | 55 | -25 | 31 | 18 | 14 | 59 | | and expenses | | | | | | | | -------------------------------------------------------------------------------- | Other income and | -25 | -25 | 0 | -11 | -13 | 1 | -53 | | expenses | | | | | | | | -------------------------------------------------------------------------------- | Earnings before | 46 | 40 | 7 | 48 | 17 | 30 | 55 | | tax | | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss | 121 | -49 | 169 | 121 | -16 | 137 | -171 | | before tax at fair | | | | | | | | | value | | | | | | | | -------------------------------------------------------------------------------- | Operating combined | 88.6 | 95.0 | | 86.0 | 91.9 | | 91.5 | | ratio, % | | | | | | | | -------------------------------------------------------------------------------- | Operating expense | 21.8 | 21.5 | | 21.9 | 21.4 | | 21.9 | | ratio, % | | | | | | | | -------------------------------------------------------------------------------- | Return on | 4.5 | -1.2 | | 4.9 | -0.6 | | -7.0 | | investments at | | | | | | | | | fair value, % | | | | | | | | -------------------------------------------------------------------------------- | Solvency ratio , % | 77 | 70 | | | | | 66 | -------------------------------------------------------------------------------- | Personnel | 2,056 | 2,292 | -236 | | | | 2,018 | -------------------------------------------------------------------------------- January-June earnings Earnings before tax came to EUR 46 million (40). Earnings before tax at fair value improved by EUR 169 million to EUR 121 million (-49). 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 54 million (23). Favourable developments in the investment market were reflected in investment performance. Net investment income amounted to EUR 30 million (55) and net investment income at fair value reached EUR 104 million (-33). On 30 June, the number of loyal customer households totalled 403,323, showing a year-on-year increase of 8%. More than 50% 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 over 425,000 insurance premiums, with 30% paid in full using bonuses. The revenue synergies resulting from growth in the number of loyal customer households by the end of the financial year reached an annual level of EUR 13 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 17% in January-June, in comparison with sales performed by Pohjola's own offices. The first half saw the sales network strengthen when an increasing number of OP-Pohjola Group member banks joined the network and began to sell policies. Insurance business Profitability improved significantly within insurance operations. The operating combined ratio stood at 88.6% (95.0). Growth in insurance premium revenue slowed down to 3% (8), premium revenue amounting to EUR 471 million (456). Growth remained vigorous within Private Customers, based on the OP-Pohjola cooperation, insurance premium revenue improving by 11% to EUR 207 million (186). The number of loyal customer households grew by 14,057 (19,681) in the first half. Within Corporate Customers, insurance premium revenue decreased by 3% due to the recession, to EUR 234 million (241). The most drastic fall was seen in statutory workers' compensation insurance, considering that payroll bills which determine insurance premiums are on the decrease. In the Baltic States, insurance premium revenue was EUR 30 million (29). 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 282 million (305) and the risk ratio stood at 59.9% (67.0). The reported number of major or medium-sized losses (in excess of EUR 0.1 million and over EUR 0.5 in pension liabilities) came to 90 (98) in the first half, with their claims incurred retained for own account totalling EUR 45 million (42). Operating expenses and loss adjustment expenses grew to EUR 135 million (128), due mainly to higher sales costs. The cost ratio was 28.7% (28.0). Investment Return on investments at fair value stood at 4.5% (-1.2). Net investment income recognised in the income statement amounted to EUR 30 million (55). Dividend income and capital gains were lower than in the previous year and impairment charges recognised from the fair value reserve in the income statement totalled EUR 21 million. On 30 June, the investment portfolio totalled EUR 2,709 million (2,415), bonds and bond funds accounting for 83% (82), listed equities for 4% (4) and unlisted capital investments, including equities, for 7% (8). The fixed-income portfolio by credit rating remained healthy, considering that 80% of the fixed-income instruments were rated at least A-. The average residual maturity of the fixed-income portfolio was 4.9 years (6.6) and the duration 3.5 years (4.3). On 30 June, the fixed-income portfolio's current interest rate was 4.5%. April-June earnings Earnings before tax came to EUR 48 million (17). Earnings before tax at fair value improved by EUR 137 million to EUR 121 million (-16). The balance on technical account before amortisation on intangible assets stood at EUR 34 million (19). Net investment income amounted to EUR 31 million (18). Insurance business Profitability was very good. The operating combined ratio stood at 86.0% (91.9). Growth in insurance premium revenue slowed down to 2%, premium revenue amounting to EUR 240 million (236). Growth remained vigorous within Private Customers, insurance premium revenue rising by 11% to EUR 110 million (99). The number of loyal customer households grew by 8,132 (10,872). Within Corporate Customers, the economic recession affected the financial performance more than before. Insurance premium revenue fell by 6% to EUR 116 million (123). In the Baltic States, insurance premium revenue was EUR 15 million (14). Favourable claims developments continued during the second quarter. Claims incurred (excl. loss adjustment expenses) amounted to EUR 138 million (151) and the risk ratio stood at 57.2% (64.2). The reported number of major or medium-sized losses (in excess of EUR 0.1 million and over EUR 0.5 in pension liabilities) came to 40 (48) in the second quarter, with their claims incurred retained for own account totalling EUR 23 million (22). Operating expenses and loss adjustment expenses were EUR 69 million (66). The development of costs followed the same pattern as in the first quarter. The slowdown in insurance premium revenue weakened the cost ratio, standing at 28.7% (27.8). Investment Net investment income amounted to EUR 31 million (18) and return on investments at fair value stood at 4.9% (-0.6). Risk exposure by Non-life Insurance On 30 June, Non-life Insurance solvency capital totalled EUR 722 million (608) and the ratio of solvency capital to insurance premium revenue (solvency ratio) stood at 77% (66). Solvency capital increased by EUR 95 million in the second 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 17 million to EUR 384 million in the second quarter. Group Functions - Pre-tax loss came to EUR 5 million (a loss of EUR 40 million), showing a year-on-year improvement of EUR 36 million. - The reclassification at 2008-end of notes and bonds reduced earnings volatility. - Impairment charges recognised on bonds totalled EUR 10 million (0) and on equities EUR 4 million. - Liquidity and the availability of funding remained at good levels. Group Functions: financial results and key figures and ratios -------------------------------------------------------------------------------- | Financial results, | Q1-2/ | Q1-2 | Change | Q2/09 | Q2/08 | Change | Actua | | EUR million | 09 | /08 | | | | | l | | | | | | | | | 2008 | -------------------------------------------------------------------------------- | Net interest income | 30 | 4 | 27 | 21 | 4 | 17 | 25 | -------------------------------------------------------------------------------- | Impairments of | 9 | -2 | 12 | 0 | -1 | 1 | 10 | | receivables | | | | | | | | -------------------------------------------------------------------------------- | Net interest income | 21 | 6 | 15 | 21 | 6 | 16 | 15 | | after impairments | | | | | | | | | of receivables | | | | | | | | -------------------------------------------------------------------------------- | Net trading income | -4 | -45 | 41 | -5 | -9 | 4 | -61 | -------------------------------------------------------------------------------- | Investment income | -9 | 9 | -17 | 0 | 3 | -3 | 6 | -------------------------------------------------------------------------------- | Other income | 7 | 11 | -4 | 4 | 4 | 0 | 21 | -------------------------------------------------------------------------------- | Total net income | 15 | -19 | 34 | 20 | 4 | 16 | -19 | -------------------------------------------------------------------------------- | Total expenses | 20 | 21 | -1 | 11 | 10 | 1 | 39 | -------------------------------------------------------------------------------- | Earnings/loss | -5 | -40 | 36 | 10 | -6 | 16 | -58 | | before tax | | | | | | | | -------------------------------------------------------------------------------- | Total liquidity | 9.6 | 5.9 | 2.7 | | | | 9.8 | | reserves, EUR | | | | | | | | | billion | | | | | | | | -------------------------------------------------------------------------------- | Receivables and | 1.1 | 0.2 | 0.9 | | | | -0.2 | | liabilities to | | | | | | | | | OP-Pohjola Group | | | | | | | | | member banks, net | | | | | | | | | position, EUR | | | | | | | | | billion | | | | | | | | -------------------------------------------------------------------------------- | Personnel | 135 | 122 | 13 | | | | 129 | -------------------------------------------------------------------------------- January-June earnings Pre-tax loss amounted to EUR 5 million (loss of EUR 40 million), but the result is EUR 36 million better than a year ago. Reported expenses grew by almost EUR 3 million on a like-for-like basis. This performance improvement was partly resulted from a change in accounting practice at the end of 2008, i.e. some notes and bonds included in liquidity reserves 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 June, the carrying amount of the reclassified notes and bonds came to EUR 3.3 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 the first half totalled EUR 13.9 million, of which EUR 12 million was recognised in the Group Functions' net interest income and EUR 2 million in Banking. The first-half results included EUR 10 million 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 at good levels. Debt instruments issued to the public increased to EUR 17 billion (14), with commercial papers and Euro Commercial Papers accounting for EUR 10 billion, equalling the amount at the end of 2008. Pohjola Bank plc's net receivables from OP-Pohjola Group member banks rose to EUR 1.1 billion (-0.2). April-June earnings Earnings before tax were EUR 10 million, or EUR 16 million higher than the year before. Net interest income from notes and bonds included in liquidity reserves and the successful management of interest rate risk position contributed to higher net income. The positive price difference between the nominal value and acquisition value of reclassified notes and bonds within liquidity reserves recognised in net interest income totalled EUR 6 million. Pohjola increased its long-term funding by issuing in May a EUR 750-euro senior bond with a maturity of five years and in June a NOK 500-million (around EUR 56 million) bond with a maturity of five years. Risk exposure by Group Functions The Group Functions exposure totalled EUR 15.2 billion (13.8), consisting of the liquidity reserve 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 in order to secure OP-Pohjola Group's liquidity. Liquidity reserves amounted to EUR 9.6 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 9.9 million in the first half and EUR 13.1 million in the second quarter, based on the 1-percentage-point change in the interest rate. Corporate management On 1 April 2009, Eva Valkama, M.Sc. (Econ. & Bus. Adm.), took up her duties as Pohjola Group's Senior Vice President, Human Resources, and an Executive Committee member. She reports to Mikael Silvennoinen, President and CEO. Shares and shareholders On 30 June 2009, the number of Pohjola Bank plc Series A shares quoted on NASDAQ OMX Helsinki Ltd totalled 251 million, accounting for 78.6% of all Pohjola shares and 42.3% of all votes. The number of Series K shares totalled around 68 million. On 30 June, one Series A share closed at EUR 5.70, as against EUR 7.88 at the end of 2008. In January-June, the share price reached a high of EUR 9.31 and a low of EUR 3.80 Roughly 104 million shares changed hands, compared with 64 million a year ago. On 30 June, Pohjola Bank had 35,705 shareholders, increasing by 5,113 from the beginning of the year, private individuals accounting for around 95% of all shareholders. The holdings of major shareholders did not undergo any significant changes. The largest shareholder was OP-Pohjola Group Central Cooperative, representing 30.0% of shares and 57.0% of votes. On 30 June, nominee-registered shares accounted for 18.3% (22.2) of all Series A shares. Pohjola held a rights issue of EUR 308 million between 7 and 24 April 2009, with the subscription level reaching 127% of Series A shares, subscriptions being made by 28,000 shareholders and covering a total of 91,179,502 new Series A shares and a total of 25,021,013 new Series K shares. Trading in the new Series A shares began on NASDAQ OMX Helsinki Ltd on 5 May 2009. The new shares include the right to dividends and other distributions as well as other shareholder rights as of the registration date of 4 May 2009. A total of 401,060 Series K shares held by OP-Pohjola Group member cooperative banks were converted into Series A shares. The number of Series K shares decreased to 68,406,725 while that of Series A shares increased to 251,144,690. Trading in the converted Series A shares began on 26 June 2009. The number of all Pohjola shares totals 319,551,415 and the number of votes 593,178,315. The number of issue-adjusted shares totalled 249,057,242 in 2008, on average 271,646,535 in 2009 and 319,551,415 at the end of the reporting period. Outlook towards the year end Measures taken by central banks and government stimulus packages have increased confidence in global financial markets and improved the performance of capital markets compared with the situation in early 2009. However, uncertainty is expected to continue in capital markets, which will maintain higher-than-average price volatility in credit risk, equity, bond, currency and commodity markets. After the speedy downturn experienced in early 2009, there are some signs of stabilisation, especially in the Chinese and US economies. Nevertheless, economic growth prospects for major EU countries and Finland still look poor, which is expected to increase corporate payment defaults, bankruptcies and unemployment. Demand for loans and guarantees within Banking slowed down in the first half relative to 2008 and the average margin on corporate loans rose as expected. On the basis of the economic outlook, demand for loans and guarantees is expected to remain weaker during the rest of the year than in 2008, with the focus on working capital and the refinancing of existing loans. It is estimated that the average corporate loan portfolio margin will rise towards the end of the year. Despite the corporate loan portfolio's good quality, payment defaults, doubtful receivables and impairment charges may increase from their first-half level, if the operating environment for our corporate customers continues to deteriorate. The greatest uncertainties related to Banking's financial performance in 2009 are associated with impairments on the loan portfolio. Within Asset Management, assets under management increased during the first half, thanks to favourable developments in investment markets and new sales. In 2009, assets under management are expected to be larger than in 2008. Asset Management's earnings before tax in 2009 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, premium revenue is expected to grow at above-the-market-average rate in 2009, thanks to the growing number of loyal customers, but to grow less than in 2008, especially with respect to corporate customers. The recession has historically slowed down growth in Non-life Insurance claims expenditure. In Non-life Insurance, the operating combined ratio is estimated to vary between 88% and 93% if the number of major losses is not much larger than in 2008. The first-half return on investments at fair value stood at 4.5%. Returns for the full year 2009 will depend on developments in investment markets. 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 liquidity reserves and any fair value changes recognised on notes and bonds through profit or loss. There is still great uncertainty about economic outlook and the operating environment. On the basis of the first-half financial performance, consolidated earnings before tax in 2009 are expected to be markedly higher than in 2008. The greatest uncertainty associated with the outlook for the rest of the year relates to developments in impairment charges. If our corporate customers' operating environment continues to deteriorate, impairment charges may increase from their first-half level. 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 | -------------------------------------------------------------------------------- | EUR million | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- | Net interest income | 35 | 40 | 45 | 54 | 52 | 67 | -------------------------------------------------------------------------------- | Impairments of receivables | -2 | -1 | 11 | 21 | 21 | 33 | -------------------------------------------------------------------------------- | Net interest income after | 37 | 42 | 34 | 33 | 31 | 35 | | impairments | | | | | | | -------------------------------------------------------------------------------- | Net income from Non-life | 91 | 90 | 98 | 74 | 70 | 122 | | Insurance | | | | | | | -------------------------------------------------------------------------------- | Net commissions and fees | 32 | 31 | 28 | 31 | 30 | 36 | -------------------------------------------------------------------------------- | Net trading income | -44 | -2 | -26 | -9 | 25 | 8 | -------------------------------------------------------------------------------- | Net investment income | 5 | 3 | 0 | -3 | -9 | 0 | -------------------------------------------------------------------------------- | Other operating income | 11 | 9 | 10 | 12 | 11 | 11 | -------------------------------------------------------------------------------- | Total net income | 133 | 173 | 145 | 139 | 158 | 212 | -------------------------------------------------------------------------------- | Personnel costs | 45 | 47 | 38 | 47 | 45 | 50 | -------------------------------------------------------------------------------- | IT expenses | 19 | 18 | 19 | 26 | 19 | 18 | -------------------------------------------------------------------------------- | Depreciation and | 16 | 16 | 17 | 20 | 17 | 17 | | amortisation | | | | | | | -------------------------------------------------------------------------------- | Other expenses | 36 | 38 | 29 | 40 | 41 | 40 | -------------------------------------------------------------------------------- | Total expenses | 115 | 119 | 102 | 134 | 122 | 125 | -------------------------------------------------------------------------------- | Earnings before tax | 17 | 54 | 43 | 5 | 36 | 87 | -------------------------------------------------------------------------------- | Change in fair value | -66 | -33 | -82 | -71 | 4 | 100 | | reserve | | | | | | |-------------------------------------------------------------------------------- | Earnings/loss before tax | -48 | 20 | -39 | -66 | 41 | 186 | | at fair value | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- | Income tax expense | 4 | 14 | 13 | -1 | 11 | 22 | -------------------------------------------------------------------------------- | Profit for the period | 13 | 39 | 30 | 6 | 25 | 65 | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- | Tax on change in fair | -17 | -9 | -21 | -18 | 1 | 26 | | value reserve | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss for the | -35 | 14 | -31 | -47 | 29 | 139 | | period at fair value | | | | | | | -------------------------------------------------------------------------------- Consolidated income statement -------------------------------------------------------------------------------- | EUR million | Q2/ | Q2/ | Q1-2/ | Q1-2/ | -------------------------------------------------------------------------------- | | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net interest income (Note 2) | 67 | 40 | 119 | 75 | -------------------------------------------------------------------------------- | Impairments of receivables (Note | 33 | -1 | 54 | -3 | | 3) | | | | | -------------------------------------------------------------------------------- | Net interest income after | 35 | 42 | 65 | 78 | | impairments | | | | | -------------------------------------------------------------------------------- | Net income from Non-life | 122 | 90 | 192 | 181 | | Insurance (Note 4) | | | | | -------------------------------------------------------------------------------- | Net commissions and fees (Note | 36 | 31 | 66 | 63 | | 5) | | | | | -------------------------------------------------------------------------------- | Net trading income (Note 6) | 8 | -2 | 33 | -46 | -------------------------------------------------------------------------------- | Net investment income (Note 7) | 0 | 3 | -9 | 9 | -------------------------------------------------------------------------------- | Other operating income (Note 8) | 11 | 9 | 22 | 20 | -------------------------------------------------------------------------------- | Total income | 212 | 173 | 370 | 305 | -------------------------------------------------------------------------------- | Personnel costs | 50 | 47 | 95 | 92 | -------------------------------------------------------------------------------- | IT expenses | 18 | 18 | 37 | 36 | -------------------------------------------------------------------------------- | Depreciation/amortisation | 17 | 16 | 34 | 32 | -------------------------------------------------------------------------------- | Other expenses | 40 | 38 | 82 | 74 | -------------------------------------------------------------------------------- | Total expenses | 125 | 119 | 247 | 234 | -------------------------------------------------------------------------------- | Share of associates' | 0 | 0 | 0 | 0 | | profits/losses | | | | | -------------------------------------------------------------------------------- | Earnings before tax | 87 | 54 | 123 | 71 | -------------------------------------------------------------------------------- | Income tax expense | 22 | 14 | 33 | 18 | -------------------------------------------------------------------------------- | Profit for the period | 65 | 39 | 91 | 53 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Attributable to owners of the | 65 | 39 | 91 | 53 | | Parent | | | | | -------------------------------------------------------------------------------- | Attributable to minority | | 0 | 0 | 0 | | interest | | | | | -------------------------------------------------------------------------------- | Total | 65 | 39 | 91 | 53 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Earnings per share (EPS), basic, | | | | | | EUR | | | | | -------------------------------------------------------------------------------- | Series A | 0.23 | 0.16 | 0.34 | 0.22 | -------------------------------------------------------------------------------- | Series K | 0.20 | 0.13 | 0.31 | 0.19 | -------------------------------------------------------------------------------- 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 | 39 | 91 | 53 | -------------------------------------------------------------------------------- | Change in fair value reserve | 100 | -33 | 104 | -99 | -------------------------------------------------------------------------------- | Translation differences | 0 | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Income tax on other | -26 | 9 | -27 | 26 | | comprehensive income | | | | | -------------------------------------------------------------------------------- | Total comprehensive income for | 139 | 14 | 168 | -21 | | the period | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total comprehensive income | 139 | 14 | 168 | -21 | | attributable to owners of the | | | | | | Parent | | | | | -------------------------------------------------------------------------------- | Total comprehensive income | | 0 | 0 | 0 | | attributable to minority | | | | | | interest | | | | | -------------------------------------------------------------------------------- | Total | 139 | 14 | 168 | -21 | -------------------------------------------------------------------------------- Consolidated balance sheet -------------------------------------------------------------------------------- | EUR million | 30 June 2009 | 31 Dec | | | | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and cash equivalents | 1,971 | 2,260 | -------------------------------------------------------------------------------- | Receivables from credit institutions | 7,023 | 6,644 | -------------------------------------------------------------------------------- | Financial assets at fair value through profit | | | | or loss | | | -------------------------------------------------------------------------------- | Financial assets held for trading | 1,562 | 3,213 | -------------------------------------------------------------------------------- | Financial assets at fair value through profit | 45 | 43 | | or loss at inception | | | -------------------------------------------------------------------------------- | Derivative contracts | 1,369 | 1,486 | -------------------------------------------------------------------------------- | Receivables from customers | 11,844 | 12,279 | -------------------------------------------------------------------------------- | Non-life Insurance assets (Note 11) | 3,117 | 2,745 | -------------------------------------------------------------------------------- | Investment assets | 4,050 | 1,285 | -------------------------------------------------------------------------------- | Investment in associates | 4 | 2 | -------------------------------------------------------------------------------- | Intangible assets (Note 12) | 980 | 987 | -------------------------------------------------------------------------------- | Property, plant and equipment (PPE) | 124 | 127 | -------------------------------------------------------------------------------- | Other assets | 1,421 | 1,281 | -------------------------------------------------------------------------------- | Tax assets | 68 | 98 | -------------------------------------------------------------------------------- | Total assets | 33,578 | 32,448 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Liabilities to credit institutions | 4,052 | 3,643 | -------------------------------------------------------------------------------- | Financial liabilities at fair value through | | | | profit or loss | | | -------------------------------------------------------------------------------- | Financial assets held for trading | 423 | 138 | -------------------------------------------------------------------------------- | Derivative contracts | 1,537 | 1,644 | -------------------------------------------------------------------------------- | Liabilities to customers | 3,048 | 3,508 | -------------------------------------------------------------------------------- | Non-life Insurance liabilities | 2,477 | 2,238 | -------------------------------------------------------------------------------- | Debt securities issued to the public (Note 13) | 16,699 | 16,425 | -------------------------------------------------------------------------------- | Provisions and other liabilities | 1,563 | 1,522 | -------------------------------------------------------------------------------- | Tax liabilities | 399 | 368 | -------------------------------------------------------------------------------- | Subordinated liabilities | 1,319 | 1,322 | -------------------------------------------------------------------------------- | Total liabilities | 31,518 | 30,808 | -------------------------------------------------------------------------------- | Shareholders' equity | | | -------------------------------------------------------------------------------- | Capital and reserves attributable to owners of | | | | the Parent | | | -------------------------------------------------------------------------------- | Share capital | 428 | 428 | -------------------------------------------------------------------------------- | Fair value reserve | -103 | -180 | -------------------------------------------------------------------------------- | Other reserves | 1,093 | 796 | -------------------------------------------------------------------------------- | Retained earnings | 642 | 597 | -------------------------------------------------------------------------------- | Minority interest | | 0 | -------------------------------------------------------------------------------- | Total shareholders' equity | 2,060 | 1,640 | -------------------------------------------------------------------------------- | Total liabilities and shareholders' equity | 33,578 | 32,448 | -------------------------------------------------------------------------------- Consolidated statement of changes in equity -------------------------------------------------------------------------------- | EUR million | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | Attributable to owners of Pohjola Group | -------------------------------------------------------------------------------- | | Share | Fair | Other | Retained | | | capital | value | reserves | earnings | | | | reserve | | | -------------------------------------------------------------------------------- | | Minorit | Total | | | y | equity | | | interes | | | | 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 | | -74 | | 53 | 0 | -21 | | income for the | | | | | | | | period | | | | | | | -------------------------------------------------------------------------------- | Other | | | | 0 | | 0 | -------------------------------------------------------------------------------- | Balance at 30 June | 428 | -67 | 795 | 561 | 0 | 1,718 | | 2008 | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | Attributable to owners of Pohjola Group | -------------------------------------------------------------------------------- | | Share | Fair | Other | Retained | | | capital | value | reserves | earnings | | | | reserve | | | -------------------------------------------------------------------------------- | | Minorit | Total | | | y | equity | | | interes | | | | 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 | | 77 | | 91 | 0 | 168 | | income for the | | | | | | | | period | | | | | | | -------------------------------------------------------------------------------- | Other | | | | 0 | | 0 | -------------------------------------------------------------------------------- | Balance at 30 June | 428 | -103 | 1,093 | 642 | | 2,060 | | 2009 | | | | | | | -------------------------------------------------------------------------------- Capital base and capital adequacy -------------------------------------------------------------------------------- | EUR million | 30 June 2009 | 31 Dec | | | | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Capital base | | | -------------------------------------------------------------------------------- | Equity capital | 2,060 | 1,640 | -------------------------------------------------------------------------------- | Elimination of insurance companies' effect in | 169 | 266 | | equity capital (equity capital and Group | | | | eliminations) | | | -------------------------------------------------------------------------------- | Minority interest | 0 | 0 | -------------------------------------------------------------------------------- | Hybrid capital | 274 | 274 | -------------------------------------------------------------------------------- | Intangible assets | -145 | -144 | -------------------------------------------------------------------------------- | Fair value reserve, excess funding of pension | -29 | -8 | | liability and change in fair value of | | | | investment property | | | -------------------------------------------------------------------------------- | Dividend distribution proposed by Board of | | -45 | | Directors | | | -------------------------------------------------------------------------------- | Planned dividend distribution | -45 | | -------------------------------------------------------------------------------- | Insurance company investments 50% | -715 | -705 | -------------------------------------------------------------------------------- | Impairments - expected losses 50% | -74 | -50 | -------------------------------------------------------------------------------- | Tier 1 capital | 1,495 | 1,228 | -------------------------------------------------------------------------------- | Fair value reserve | 0 | -22 | -------------------------------------------------------------------------------- | Subordinated liabilities included in upper | 299 | 299 | | Tier 2 | | | -------------------------------------------------------------------------------- | Subordinated liabilities included in lower | 579 | 734 | | Tier 2 | | | -------------------------------------------------------------------------------- | Insurance company investments 50% | -715 | -705 | -------------------------------------------------------------------------------- | Impairments - expected losses 50% | -74 | -50 | -------------------------------------------------------------------------------- | Tier 2 capital | 89 | 256 | -------------------------------------------------------------------------------- | Total capital base | 1,584 | 1,484 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Risk-weighted assets, excl. transitional rules | 12,988 | 12,784 | -------------------------------------------------------------------------------- | Risk-weighted assets according to transitional | 12,988 | 13,120 | | rules | | | -------------------------------------------------------------------------------- | Ratios, excl. transitional rules: | | | -------------------------------------------------------------------------------- | Capital adequacy ratio, % | 12.2 | 11.6 | -------------------------------------------------------------------------------- | Tier 1 ratio, % | 11.5 | 9.6 | -------------------------------------------------------------------------------- | Capital adequacy ratio under the Act on | 1.54 | 1.29 | | Supervision of Financial and Insurance | | | | Conglomerates | | | -------------------------------------------------------------------------------- | Ratios according to transitional rules: | | | -------------------------------------------------------------------------------- | Capital adequacy ratio, % | 12.2 | 11.3 | -------------------------------------------------------------------------------- | Tier 1 ratio, % | 11.5 | 9.4 | -------------------------------------------------------------------------------- | Capital adequacy ratio under the Act on | 1.54 | 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 12.0% and Tier 1 ratio at 12.0%. OP-Pohjola Group's capital adequacy ratio calculated using the consolidation method, under the Act on the Supervision of Financial and Insurance Conglomerates, was 1.45. Consolidated cash flow statement -------------------------------------------------------------------------------- | EUR million | Q1-2/ | Q1-2/ | -------------------------------------------------------------------------------- | | 2009 | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash flow from operating activities | | | -------------------------------------------------------------------------------- | Profit for the period | 91 | 53 | -------------------------------------------------------------------------------- | Adjustments to profit for the period | 380 | 255 | -------------------------------------------------------------------------------- | Increase (-) or decrease (+) in operating | -1,559 | -2,423 | | assets | | | -------------------------------------------------------------------------------- | Receivables from credit institutions | -301 | 1,136 | -------------------------------------------------------------------------------- | Financial assets at fair value through profit | 1,608 | -699 | | or loss | | | -------------------------------------------------------------------------------- | Derivative contracts | -22 | -33 | -------------------------------------------------------------------------------- | Receivables from customers | 402 | -1,264 | -------------------------------------------------------------------------------- | Non-life Insurance assets | -332 | -314 | -------------------------------------------------------------------------------- | Investment assets | -2,786 | -1,094 | -------------------------------------------------------------------------------- | Other assets | -129 | -155 | -------------------------------------------------------------------------------- | Increase (+) or decrease (-) in operating | 336 | 2,468 | | liabilities | | | -------------------------------------------------------------------------------- | Liabilities to credit institutions | 408 | 1,535 | -------------------------------------------------------------------------------- | Financial liabilities at fair value through | 285 | 835 | | profit or loss | | | -------------------------------------------------------------------------------- | Derivative contracts | -27 | 51 | -------------------------------------------------------------------------------- | Liabilities to customers | -460 | -179 | -------------------------------------------------------------------------------- | Non-life Insurance liabilities | 87 | 82 | -------------------------------------------------------------------------------- | Provisions and other liabilities | 42 | 145 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Income tax paid | -25 | -24 | -------------------------------------------------------------------------------- | Dividends received | 8 | 22 | -------------------------------------------------------------------------------- | A. Net cash from operating activities | -770 | 350 | -------------------------------------------------------------------------------- | Cash flow from investing activities | | | -------------------------------------------------------------------------------- | Increases in held-to-maturity financial assets | -80 | | -------------------------------------------------------------------------------- | Decreases in held-to-maturity financial assets | 146 | | -------------------------------------------------------------------------------- | Acquisition of subsidiaries and associates, net | 0 | -37 | | of cash acquired | | | -------------------------------------------------------------------------------- | Disposal of subsidiaries and associates, net of | 1 | 0 | | cash disposed | | | -------------------------------------------------------------------------------- | Purchase of PPE and intangible assets | -12 | -19 | -------------------------------------------------------------------------------- | Proceeds from sale of PPE and intangible assets | 0 | 5 | -------------------------------------------------------------------------------- | B. Net cash used in investing activities | 55 | -51 | -------------------------------------------------------------------------------- | Cash flow from financing activities | | | -------------------------------------------------------------------------------- | Increases in subordinated liabilities | 144 | 283 | -------------------------------------------------------------------------------- | Decreases in subordinated liabilities | -149 | -35 | -------------------------------------------------------------------------------- | Increases in debt securities issued to the | 26,670 | 11,693 | | public | | | -------------------------------------------------------------------------------- | Decreases in debt securities issued to the | -26,385 | -12,391 | | public | | | -------------------------------------------------------------------------------- | Increases in invested unrestricted equity | 298 | | -------------------------------------------------------------------------------- | Dividends paid | -45 | -131 | -------------------------------------------------------------------------------- | C. Net cash used in financing activities | 532 | -580 | -------------------------------------------------------------------------------- | Net increase/decrease in cash and cash | -183 | -281 | | equivalents (A+B+C) | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and cash equivalents at period-start | 2,435 | 710 | -------------------------------------------------------------------------------- | Cash and cash equivalents at period-end | 2,252 | 429 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest received | 1,183 | 1,321 | -------------------------------------------------------------------------------- | Interest paid | -1,133 | -1,265 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Adjustments to profit for the period | | | -------------------------------------------------------------------------------- | Non-cash transactions | | | -------------------------------------------------------------------------------- | Impairments of receivables | 55 | -3 | -------------------------------------------------------------------------------- | Unrealised net earnings in Non-life Insurance | 190 | 200 | -------------------------------------------------------------------------------- | Change in fair value for trading | 42 | 28 | -------------------------------------------------------------------------------- | Unrealised net gains on foreign exchange | 28 | 1 | | operations | | | -------------------------------------------------------------------------------- | Change in fair value of investment property | 7 | -1 | -------------------------------------------------------------------------------- | Planned amortisation /depreciation | 34 | 32 | -------------------------------------------------------------------------------- | Share of associates' profits | 0 | 0 | -------------------------------------------------------------------------------- | Other | 25 | -1 | -------------------------------------------------------------------------------- | Items presented outside cash flow from | | | | operating activities | | | -------------------------------------------------------------------------------- | Capital gains, share of cash flow from | 0 | -1 | | investing activities | | | -------------------------------------------------------------------------------- | Total adjustments | 380 | 255 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and cash equivalents | | | -------------------------------------------------------------------------------- | Liquid assets * | 1,979 | 243 | -------------------------------------------------------------------------------- | Receivables from credit institutions payable on | 273 | 185 | | demand | | | -------------------------------------------------------------------------------- | Total | 2,252 | 429 | -------------------------------------------------------------------------------- *Of which EUR 8 million (8) consists of Non-life Insurance cash and cash equivalents. Segment information -------------------------------------------------------------------------------- | Q2 earnings | | | | | | | -------------------------------------------------------------------------------- | EUR million | Banking | Asset | Non-life | | | | Management | Insurance | -------------------------------------------------------------------------------- | | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- | Net interest income | 45 | 38 | 0 | 0 | 0 | -2 | -------------------------------------------------------------------------------- | Impairments of | 33 | 0 | | | | | | receivables | | | | | | | -------------------------------------------------------------------------------- | Net interest income | 13 | 37 | 0 | 0 | 0 | -2 | | after impairments | | | | | | | -------------------------------------------------------------------------------- | Net income from | | | | | 121 | 90 | | Non-life Insurance | | | | | | | -------------------------------------------------------------------------------- | Net commissions and | 25 | 16 | 10 | 11 | 4 | 5 | | fees | | | | | | | -------------------------------------------------------------------------------- | Net trading income | 13 | 6 | 0 | | 0 | | -------------------------------------------------------------------------------- | Net investment income | 0 | 0 | 0 | | | | -------------------------------------------------------------------------------- | Other operating | 7 | 6 | 0 | 0 | 1 | 0 | | income | | | | | | | -------------------------------------------------------------------------------- | Total net income | 58 | 66 | 11 | 11 | 126 | 94 | -------------------------------------------------------------------------------- | Personnel costs | 14 | 10 | 4 | 4 | 29 | 30 | -------------------------------------------------------------------------------- | IT expenses | 5 | 5 | 1 | 1 | 10 | 9 | -------------------------------------------------------------------------------- | 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 | 6 | 2 | 1 | 31 | 28 | -------------------------------------------------------------------------------- | Total expenses | 32 | 27 | 7 | 7 | 78 | 76 | -------------------------------------------------------------------------------- | Earnings before tax | 26 | 39 | 4 | 4 | 48 | 17 | -------------------------------------------------------------------------------- | Change in fair value | 0 | 0 | | | 72 | -33 | | reserve | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before | 26 | 39 | 4 | 4 | 120 | -16 | | tax | | | | | | | | at fair value | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- | Capital expenditure, | 2 | 1 | 0 | 0 | 4 | 4 | | EUR million | | | | | | | -------------------------------------------------------------------------------- | | | | | | | -------------------------------------------------------------------------------- | Q2 earnings | | | | | | | -------------------------------------------------------------------------------- | EUR million | Group Functions | Eliminations | Group total | -------------------------------------------------------------------------------- | | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- | Net interest income | 21 | 4 | 0 | 1 | 67 | 40 | -------------------------------------------------------------------------------- | Impairments of | | -1 | | | 33 | -1 | | receivables | | | | | | | -------------------------------------------------------------------------------- | Net interest income | 21 | 6 | 0 | 1 | 35 | 42 | | after impairments | | | | | | | -------------------------------------------------------------------------------- | Net income from | 0 | | 1 | 0 | 122 | 90 | | Non-life Insurance | | | | | | | -------------------------------------------------------------------------------- | Net commissions and | 0 | -1 | -3 | -1 | 36 | 31 | | fees | | | | | | | -------------------------------------------------------------------------------- | Net trading income | -5 | -9 | 0 | 0 | 8 | -2 | -------------------------------------------------------------------------------- | Net investment income | 0 | 3 | | | 0 | 3 | -------------------------------------------------------------------------------- | Other operating | 4 | 4 | -1 | -2 | 11 | 9 | | income | | | | | | | -------------------------------------------------------------------------------- | Total net income | 20 | 4 | -3 | -2 | 212 | 173 | -------------------------------------------------------------------------------- | Personnel costs | 4 | 3 | | | 50 | 47 | -------------------------------------------------------------------------------- | IT expenses | 2 | 3 | | 0 | 18 | 18 | -------------------------------------------------------------------------------- | Amortisation on | | | | | 8 | 9 | | intangible assets | | | | | | | | related to company | | | | | | | | acquisitions | | | | | | | -------------------------------------------------------------------------------- | Other | 0 | 0 | | | 9 | 7 | | depreciation/amortisa | | | | | | | | tion and impairments | | | | | | | -------------------------------------------------------------------------------- | Other expenses | 5 | 4 | -3 | -2 | 40 | 38 | -------------------------------------------------------------------------------- | Total expenses | 11 | 10 | -3 | -2 | 125 | 119 | -------------------------------------------------------------------------------- | Earnings before tax | 10 | -6 | 0 | 0 | 87 | 54 | -------------------------------------------------------------------------------- | Change in fair value | 27 | 0 | | | 100 | -33 | | reserve | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before | 36 | -6 | | | 186 | 20 | | tax | | | | | | | | at fair value | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- | Capital expenditure, | 0 | 1 | | | 6 | 7 | | EUR million | | | | | | | -------------------------------------------------------------------------------- | Earnings per share, | | | | | 0.22 | 0.16 | | EUR | | | | | | | -------------------------------------------------------------------------------- | Return on equity at | | | | | 30.3 | 3.4 | | fair value, % | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Q 1-2 earnings | | | | | | | -------------------------------------------------------------------------------- | EUR million | Banking | Asset | Non-life | | | | Management | Insurance | -------------------------------------------------------------------------------- | | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- | Net interest income | 87 | 74 | 1 | -1 | -1 | -4 | -------------------------------------------------------------------------------- | Impairments of | 44 | -1 | | | | | | receivables | | | | | | | -------------------------------------------------------------------------------- | Net interest income | 43 | 75 | 1 | -1 | -1 | -4 | | after impairments | | | | | | | -------------------------------------------------------------------------------- | Net income from | | | | | 192 | 182 | | Non-life Insurance | | | | | | | -------------------------------------------------------------------------------- | Net commissions and | 44 | 33 | 19 | 22 | 8 | 10 | | fees | | | | | | | -------------------------------------------------------------------------------- | Net trading income | 37 | -1 | 0 | | 0 | | -------------------------------------------------------------------------------- | Net investment income | 0 | 0 | 0 | 0 | | | -------------------------------------------------------------------------------- | Other operating | 15 | 13 | 1 | 1 | 1 | 0 | | income | | | | | | | -------------------------------------------------------------------------------- | Total net income | 139 | 119 | 20 | 22 | 200 | 189 | -------------------------------------------------------------------------------- | Personnel costs | 26 | 22 | 8 | 8 | 55 | 56 | -------------------------------------------------------------------------------- | IT expenses | 11 | 10 | 1 | 2 | 20 | 18 | -------------------------------------------------------------------------------- | Amortisation on | | | 1 | 1 | 15 | 17 | | intangible assets | | | | | | | | related to company | | | | | | | | acquisitions | | | | | | | -------------------------------------------------------------------------------- | Other | 14 | 11 | 0 | 0 | 2 | 2 | | depreciation/amortisa | | | | | | | | tion and impairments | | | | | | | -------------------------------------------------------------------------------- | Other expenses | 13 | 12 | 3 | 3 | 62 | 56 | -------------------------------------------------------------------------------- | Total expenses | 63 | 55 | 14 | 15 | 154 | 149 | -------------------------------------------------------------------------------- | Earnings before tax | 76 | 64 | 6 | 7 | 46 | 40 | -------------------------------------------------------------------------------- | Change in fair value | 1 | -2 | | | 74 | -88 | | reserve | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before | 76 | 62 | 6 | 7 | 121 | -48 | | tax | | | | | | | | at fair value | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- | Average personnel | 620 | 594 | 154 | 156 | 2056 | 2292 | -------------------------------------------------------------------------------- | Capital expenditure, | 4 | 3 | 0 | 1 | 7 | 6 | | EUR million | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Q 1-2 earnings | | | | | | | -------------------------------------------------------------------------------- | EUR million | Group Functions | Eliminations | Group total | -------------------------------------------------------------------------------- | | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- | Net interest income | 30 | 4 | 1 | 2 | 119 | 75 | -------------------------------------------------------------------------------- | Impairments of | 9 | -2 | | | 54 | -3 | | receivables | | | | | | | -------------------------------------------------------------------------------- | Net interest income | 21 | 6 | 1 | 2 | 65 | 78 | | after impairments | | | | | | | -------------------------------------------------------------------------------- | Net income from | | | 0 | -1 | 192 | 181 | | Non-life Insurance | | | | | | | -------------------------------------------------------------------------------- | Net commissions and | 0 | 0 | -4 | -2 | 66 | 63 | | fees | | | | | | | -------------------------------------------------------------------------------- | Net trading income | -4 | -45 | | 0 | 33 | -46 | -------------------------------------------------------------------------------- | Net investment income | -9 | 9 | | | -9 | 9 | -------------------------------------------------------------------------------- | Other operating | 7 | 11 | -2 | -5 | 22 | 20 | | income | | | | | | | -------------------------------------------------------------------------------- | Total net income | 15 | -19 | -4 | -5 | 370 | 305 | -------------------------------------------------------------------------------- | Personnel costs | 6 | 5 | | | 95 | 92 | -------------------------------------------------------------------------------- | IT expenses | 5 | 7 | 0 | 0 | 37 | 36 | -------------------------------------------------------------------------------- | Amortisation on | | | | | 16 | 18 | | intangible assets | | | | | | | | related to company | | | | | | | | acquisitions | | | | | | | -------------------------------------------------------------------------------- | Other | 1 | 1 | | | 17 | 14 | | depreciation/amortisa | | | | | | | | tion and impairments | | | | | | | -------------------------------------------------------------------------------- | Other expenses | 8 | 8 | -4 | -5 | 82 | 74 | -------------------------------------------------------------------------------- | Total expenses | 20 | 21 | -4 | -5 | 247 | 234 | -------------------------------------------------------------------------------- | Earnings before tax | -5 | -40 | 0 | 0 | 123 | 71 | -------------------------------------------------------------------------------- | Change in fair value | 29 | -9 | | | 104 | -99 | | reserve | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before | 24 | -49 | | | 227 | -28 | | tax | | | | | | | | at fair value | | | | | | | -------------------------------------------------------------------------------- | Average personnel | 135 | 122 | | | 2,964 | 3,162 | -------------------------------------------------------------------------------- | Capital expenditure, | 0 | 1 | | | 12 | 12 | | EUR million | | | | | | | -------------------------------------------------------------------------------- | Earnings per share, | | | | | 0.33 | 0.21 | | EUR | | | | | | | -------------------------------------------------------------------------------- | Return on equity at | | | | | 18.3 | -2.4 | | fair value, % | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Balance sheet | | | | | | | -------------------------------------------------------------------------------- | EUR million | Banking | Asset | Non-life | | | | Management | Insurance | -------------------------------------------------------------------------------- | | 30 | 31 Dec | 30 | 31 Dec | 30 | 31 Dec | | | June | 2008 | June | 2008 | June | 2008 | | | 2 | | 2 | | 2 | | | | 009 | | 009 | | 009 | | -------------------------------------------------------------------------------- | Receivables from | 11,346 | 11,776 | 0 | | | | | customers | | | | | | | -------------------------------------------------------------------------------- | Receivables from | 392 | 427 | 3 | 7 | | | | credit institutions | | | | | | | -------------------------------------------------------------------------------- | Financial assets at | 985 | 1,375 | | | | | | fair value through | | | | | | | | profit or loss | | | | | | | -------------------------------------------------------------------------------- | Non-life Insurance | | | | | 3,192 | 2,798 | | assets | | | | | | | -------------------------------------------------------------------------------- | Investment assets | 19 | 2 | 9 | 21 | 0 | 0 | -------------------------------------------------------------------------------- | Investments in | 2 | | | | 2 | 2 | | associates | | | | | | | -------------------------------------------------------------------------------- | Other assets | 2,244 | 2,220 | 123 | 127 | 846 | 854 | -------------------------------------------------------------------------------- | Total assets | 14,987 | 15,800 | 136 | 154 | 4,040 | 3,654 | -------------------------------------------------------------------------------- | Liabilities to | 1,164 | 1,070 | | | | | | customers | | | | | | | -------------------------------------------------------------------------------- | Liabilities to credit | 985 | 590 | | | | | | institutions | | | | | | | -------------------------------------------------------------------------------- | Non-life Insurance | | | | | 2,477 | 2,238 | | liabilities | | | | | | | -------------------------------------------------------------------------------- | Debt securities | | | | | | | | issued to the public | | | | | | | -------------------------------------------------------------------------------- | Subordinated | | | | | 50 | 50 | | liabilities | | | | | | | -------------------------------------------------------------------------------- | Other liabilities | 2,503 | 2,010 | 11 | 14 | 56 | 52 | -------------------------------------------------------------------------------- | Total liabilities | 4,651 | 3,671 | 11 | 14 | 2,583 | 2,340 | -------------------------------------------------------------------------------- | Shareholders' equity | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Balance sheet | | | | | | | -------------------------------------------------------------------------------- | EUR million | Group Functions | Eliminations | Group total | -------------------------------------------------------------------------------- | | 30 | 31 Dec | 30 | 31 Dec | 30 | 31 Dec | | | June | 2008 | June | 2008 | June | 2008 | | | 2 | | 2 | | 2 | | | | 009 | | 009 | | 009 | | -------------------------------------------------------------------------------- | Receivables from | 681 | 749 | -184 | -247 | 11,844 | 12,279 | | customers | | | | | | | -------------------------------------------------------------------------------- | Receivables from | 8,621 | 8,513 | -21 | -43 | 8,995 | 8,904 | | credit institutions | | | | | | | -------------------------------------------------------------------------------- | Financial assets at | 622 | 1,880 | | | 1,606 | 3,255 | | fair value through | | | | | | | | profit or loss | | | | | | | -------------------------------------------------------------------------------- | Non-life Insurance | | | -75 | -53 | 3,117 | 2,745 | | assets | | | | | | | -------------------------------------------------------------------------------- | Investment assets | 4,022 | 1,270 | | -8 | 4,050 | 1,285 | -------------------------------------------------------------------------------- | Investments in | | | | | 4 | 2 | | associates | | | | | | | -------------------------------------------------------------------------------- | Other assets | 757 | 786 | -8 | -8 | 3,962 | 3,979 | -------------------------------------------------------------------------------- | Total assets | 14,703 | 13,199 | -288 | -358 | 33,578 | 32,448 | -------------------------------------------------------------------------------- | Liabilities to | 1,933 | 2,483 | -49 | -45 | 3,048 | 3,508 | | customers | | | | | | | -------------------------------------------------------------------------------- | Liabilities to credit | 3,252 | 3,304 | -185 | -251 | 4,052 | 3,643 | | institutions | | | | | | | -------------------------------------------------------------------------------- | Non-life Insurance | | | | | 2,477 | 2,238 | | liabilities | | | | | | | -------------------------------------------------------------------------------- | Debt securities | 16,745 | 16,481 | -46 | -56 | 16,699 | 16,425 | | issued to the public | | | | | | | -------------------------------------------------------------------------------- | Subordinated | 1,269 | 1,272 | | | 1,319 | 1,322 | | liabilities | | | | | | | -------------------------------------------------------------------------------- | Other liabilities | 1,361 | 1,603 | -8 | -7 | 3,923 | 3,672 | -------------------------------------------------------------------------------- | Total liabilities | 24,560 | 25,142 | -288 | -358 | 31,518 | 30,808 | -------------------------------------------------------------------------------- | Shareholders' equity | | | | | 2,060 | 1,640 | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- | Capital adequacy | | | | | 12.2 | 11.3 | | ratio, % | | | | | | | -------------------------------------------------------------------------------- | Tier 1 ratio, % | | | | | 11.5 | 9.4 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Banking | -------------------------------------------------------------------------------- | | -------------------------------------------------------------------------------- | | Net income | Earnings/lo | Net income | Earnings/loss | | | | ss before | | before tax | | | | tax | | | -------------------------------------------------------------------------------- | | Q2/ | Q2/ | Q2/ | Q2/ | Q1-2/ | Q1-2/ | Q1-2/ | Q1-2/ | | | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- | Corporate | 31 | 51 | 12 | 33 | 74 | 87 | 35 | 50 | | Banking | | | | | | | | | -------------------------------------------------------------------------------- | Markets | 27 | 14 | 16 | 7 | 67 | 30 | 47 | 15 | -------------------------------------------------------------------------------- | Baltic Banking | 0 | 1 | -2 | 0 | -1 | 1 | -5 | -1 | -------------------------------------------------------------------------------- | Total | 58 | 66 | 26 | 39 | 139 | 119 | 76 | 64 | -------------------------------------------------------------------------------- | | | | | | | | | | -------------------------------------------------------------------------------- | Non-life | Insurance | Balance on | Insurance | Balance on | | Insurance | premium | technical | premium | technical | | | revenue | account | revenue | account | -------------------------------------------------------------------------------- | | Q2/ | Q2/ | Q2/ | Q2/ | Q1-2/ | Q1-2/ | Q1-2/ | Q1-2/ | | | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- | Private | 110 | 99 | 17 | 12 | 207 | 186 | 26 | 14 | | Customers | | | | | | | | | -------------------------------------------------------------------------------- | Corporate | 116 | 123 | 14 | 5 | 234 | 241 | 24 | 6 | | Customers | | | | | | | | | -------------------------------------------------------------------------------- | Baltic States | 15 | 14 | 3 | 2 | 30 | 29 | 4 | 3 | -------------------------------------------------------------------------------- | Amortisation | | | -6 | -7 | | | -12 | -14 | | adjustment of | | | | | | | | | | intangible | | | | | | | | | | assets | | | | | | | | | -------------------------------------------------------------------------------- | Total | 240 | 236 | 28 | 12 | 471 | 456 | 42 | 9 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Group Functions | Q2/ | Q2/ | Q1-2/ | Q1-2/ | | | 2009 | 2008 | 20 | 20 | | | | | 09 | 08 | -------------------------------------------------------------------------------- | Central Banking earnings | 6 | 5 | 11 | 9 | | before tax, EUR million | | | | | -------------------------------------------------------------------------------- | | 30 June | 31 Dec | | | | | 2009 | 2008 | | | -------------------------------------------------------------------------------- | Receivables from OP-Pohjola | 5,109 | 4,437 | | | | Group entities, EUR million | | | | | -------------------------------------------------------------------------------- | Liabilities to OP-Pohjola | 2,807 | 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 June 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 | Q2/ | Q2/ | Q1-2/ | Q1-2/ | -------------------------------------------------------------------------------- | | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Loans and other receivables | 82 | 126 | 255 | 262 | -------------------------------------------------------------------------------- | Receivables from credit | 52 | 63 | 122 | 128 | | institutions and central banks | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 29 | 69 | 100 | 143 | -------------------------------------------------------------------------------- | Derivatives held for trading | 5 | -1 | 1 | -2 | | (net) | | | | | -------------------------------------------------------------------------------- | Liabilities to credit | -14 | -50 | -36 | -87 | | institutions | | | | | -------------------------------------------------------------------------------- | Liabilities to customers | -8 | -25 | -24 | -52 | -------------------------------------------------------------------------------- | Debt securities issued to the | -65 | -118 | -217 | -277 | | public | | | | | -------------------------------------------------------------------------------- | Subordinated debt | -9 | -10 | -19 | -20 | -------------------------------------------------------------------------------- | Hybrid capital | -5 | -2 | -9 | -4 | -------------------------------------------------------------------------------- | Financial liabilities held for | -2 | -6 | -4 | -7 | | trading | | | | | -------------------------------------------------------------------------------- | Other (net) | 0 | -1 | 0 | 0 | -------------------------------------------------------------------------------- | Net interest income before items | 65 | 44 | 168 | 84 | | under hedge accounting | | | | | -------------------------------------------------------------------------------- | Derivatives under hedge | 2 | -4 | -49 | -9 | | accounting (net) | | | | | -------------------------------------------------------------------------------- | Items under hedge accounting | 2 | -4 | -49 | -9 | | (net) | | | | | -------------------------------------------------------------------------------- | Total net interest income | 67 | 40 | 119 | 75 | -------------------------------------------------------------------------------- Note 3. Impairments of receivables -------------------------------------------------------------------------------- | EUR million | Q2/ | Q2/ | Q1-2/ | Q1-2/ | -------------------------------------------------------------------------------- | | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Receivables eliminated as loan | 0 | 1 | 1 | 1 | | or guarantee losses | | | | | -------------------------------------------------------------------------------- | Recoveries from receivables | -1 | 0 | -1 | 0 | | eliminated as loan or guarantee | | | | | | losses | | | | | -------------------------------------------------------------------------------- | Increase in impairment | 39 | 0 | 62 | 2 | | provisions | | | | | -------------------------------------------------------------------------------- | Decrease in impairment | -6 | -2 | -8 | -6 | | provisions | | | | | -------------------------------------------------------------------------------- | Total impairments of receivables | 33 | -1 | 54 | -3 | -------------------------------------------------------------------------------- Note 4. Net income from Non-life Insurance -------------------------------------------------------------------------------- | EUR million | Q2/ | Q2/ | Q1-2/ | Q1-2/ | -------------------------------------------------------------------------------- | | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net insurance premium revenue | | | | | -------------------------------------------------------------------------------- | Premiums written | 206 | 227 | 679 | 675 | -------------------------------------------------------------------------------- | Insurance premiums ceded to | -4 | -7 | -44 | -37 | | reinsurers | | | | | -------------------------------------------------------------------------------- | Change in provision for unearned | 51 | 19 | -178 | -198 | | premiums | | | | | -------------------------------------------------------------------------------- | Reinsurers' share | -12 | -3 | 14 | 16 | -------------------------------------------------------------------------------- | Total | 240 | 236 | 471 | 456 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net Non-life Insurance claims | | | | | -------------------------------------------------------------------------------- | Claims paid | 147 | 157 | 303 | 312 | -------------------------------------------------------------------------------- | Insurance claims recovered from | -3 | -3 | -4 | -8 | | reinsurers | | | | | -------------------------------------------------------------------------------- | Change in provision for unpaid | -5 | -4 | -9 | -3 | | claims | | | | | -------------------------------------------------------------------------------- | Reinsurers' share | 1 | 2 | -3 | 7 | -------------------------------------------------------------------------------- | Total | 140 | 153 | 287 | 309 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net investment income, Non-life | | | | | | Insurance | | | | | -------------------------------------------------------------------------------- | Interest income | 18 | 18 | 36 | 36 | -------------------------------------------------------------------------------- | Net realised gains and realised | | | | | | fair value gains and losses | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 2 | -6 | -8 | -10 | -------------------------------------------------------------------------------- | Shares and participations | 11 | 0 | 3 | 3 | -------------------------------------------------------------------------------- | Loans and receivables | 0 | | 0 | | -------------------------------------------------------------------------------- | Investment property | 0 | 0 | 0 | 3 | -------------------------------------------------------------------------------- | Other | -9 | -3 | 1 | 1 | -------------------------------------------------------------------------------- | Unrealised fair value gains and | | | | | | losses | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 1 | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Shares and participations | 3 | 0 | -13 | | -------------------------------------------------------------------------------- | Loans and receivables | -2 | | -2 | | -------------------------------------------------------------------------------- | Investment property | 1 | 1 | 2 | 3 | -------------------------------------------------------------------------------- | Other | 2 | 0 | 2 | 1 | -------------------------------------------------------------------------------- | Dividend income | 3 | 6 | 6 | 15 | -------------------------------------------------------------------------------- | Total | 30 | 16 | 27 | 52 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Unwinding of discount | -11 | -10 | -21 | -21 | -------------------------------------------------------------------------------- | Other | 2 | 2 | 3 | 3 | -------------------------------------------------------------------------------- | Total net income from Non-life | 122 | 90 | 192 | 181 | | Insurance | | | | | -------------------------------------------------------------------------------- Note 5. Net commissions and fees -------------------------------------------------------------------------------- | EUR million | Q2/ | Q2/ | Q1-2/ | Q1-2/ | -------------------------------------------------------------------------------- | | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Commission income | | | | | -------------------------------------------------------------------------------- | Lending | 13 | 6 | 23 | 12 | -------------------------------------------------------------------------------- | Payment transfers | 3 | 3 | 6 | 6 | -------------------------------------------------------------------------------- | Securities brokerage | 5 | 5 | 10 | 10 | -------------------------------------------------------------------------------- | Securities issuance | 1 | 1 | 2 | 1 | -------------------------------------------------------------------------------- | Asset management and legal | 11 | 11 | 20 | 23 | | services | | | | | -------------------------------------------------------------------------------- | Insurance operations | 4 | 5 | 8 | 10 | -------------------------------------------------------------------------------- | Guarantees | 5 | 2 | 8 | 4 | -------------------------------------------------------------------------------- | Other | 3 | 4 | 4 | 8 | -------------------------------------------------------------------------------- | Total commission income | 46 | 37 | 82 | 75 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Commission expenses | | | | | -------------------------------------------------------------------------------- | Payment transfers | 0 | | 0 | | -------------------------------------------------------------------------------- | Securities brokerage | 2 | 2 | 3 | 3 | -------------------------------------------------------------------------------- | Securities issuance | 5 | 2 | 6 | 3 | -------------------------------------------------------------------------------- | Asset management and legal | 2 | 2 | 3 | 4 | | services | | | | | -------------------------------------------------------------------------------- | Other | 1 | 1 | 3 | 2 | -------------------------------------------------------------------------------- | Total commission expenses | 10 | 7 | 15 | 13 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total net commissions and fees | 36 | 31 | 66 | 63 | -------------------------------------------------------------------------------- Note 6. Net trading income -------------------------------------------------------------------------------- | EUR million | Q2/ | Q2/ | Q1-2/ | Q1-2/ | -------------------------------------------------------------------------------- | | 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 | -16 | 29 | -13 | -------------------------------------------------------------------------------- | Shares and participations | 0 | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Derivatives | 72 | 20 | 95 | 29 | -------------------------------------------------------------------------------- | Unrealised changes in fair value | | | | | -------------------------------------------------------------------------------- | Notes and bonds | -4 | -14 | -21 | -19 | -------------------------------------------------------------------------------- | Shares and participations | 0 | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Derivatives | -68 | 27 | -75 | 10 | -------------------------------------------------------------------------------- | Financial assets and liabilities | | | | | | at fair value through profit or | | | | | | loss | | | | | -------------------------------------------------------------------------------- | Capital gains and losses and | | | | | | realised changes in fair value | | | | | -------------------------------------------------------------------------------- | Notes and bonds | -9 | 0 | -9 | -1 | -------------------------------------------------------------------------------- | Unrealised changes in fair value | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 9 | -20 | 8 | -56 | -------------------------------------------------------------------------------- | Net income from foreign exchange | 2 | 1 | 6 | 4 | | operations | | | | | -------------------------------------------------------------------------------- | Total net trading income | 8 | -2 | 33 | -46 | -------------------------------------------------------------------------------- Note 7. Net investment income -------------------------------------------------------------------------------- | EUR million | Q2/ | Q2/ | Q1-2/ | Q1-2/ | -------------------------------------------------------------------------------- | | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Available-for-sale financial | | | | | | assets | | | | | -------------------------------------------------------------------------------- | Capital gains and losses | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 0 | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Shares and participations | 0 | 1 | 0 | 0 | -------------------------------------------------------------------------------- | Dividend income | 0 | 2 | 2 | 7 | -------------------------------------------------------------------------------- | Impairments | 0 | | -4 | | -------------------------------------------------------------------------------- | Total | 0 | 2 | -2 | 7 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investment property | 0 | 1 | -7 | 1 | -------------------------------------------------------------------------------- | Total net investment income | 0 | 3 | -9 | 9 | -------------------------------------------------------------------------------- Note 8. Other operating income -------------------------------------------------------------------------------- | EUR million | Q2/ | Q2/ | Q1-2/ | Q1-2/ | -------------------------------------------------------------------------------- | | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Central banking service fees | 2 | 2 | 5 | 5 | -------------------------------------------------------------------------------- | Realisation of repossessed items | 0 | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Rental income from assets rented | 6 | 5 | 13 | 10 | | under operating lease | | | | | -------------------------------------------------------------------------------- | Other | 2 | 1 | 5 | 5 | -------------------------------------------------------------------------------- | Total | 11 | 9 | 22 | 20 | -------------------------------------------------------------------------------- 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 | 1,971 | | | | | 1,971 | | balances with | | | | | | | | central banks | | | | | | | -------------------------------------------------------------------------------- | Receivables | 7,023 | | | | | 7,023 | | from credit | | | | | | | | institutions | | | | | | | | and central | | | | | | | | banks | | | | | | | -------------------------------------------------------------------------------- | Derivative | | | 1,308 | | 61 | 1,369 | | contracts | | | | | | | -------------------------------------------------------------------------------- | Receivables | 11,844 | | | | | 11,844 | | from customers | | | | | | | -------------------------------------------------------------------------------- | Non-life | 875 | | 89 | 2,154 | | 3,117 | | Insurance | | | | | | | | assets** | | | | | | | -------------------------------------------------------------------------------- | Notes and | | 1,065 | 1,606 | 2,881 | | 5,552 | | bonds*** | | | | | | | -------------------------------------------------------------------------------- | Shares and | | | | 85 | | 85 | | participations | | | | | | | -------------------------------------------------------------------------------- | Other | 2,597 | | 19 | | | 2,616 | | receivables | | | | | | | -------------------------------------------------------------------------------- | Total 30 June | 24,310 | 1,065 | 3,023 | 5,120 | 61 | 33,578 | | 2009 | | | | | | | -------------------------------------------------------------------------------- | Total 31 Dec. | 24,451 | 1,103 | 4,816 | 2,036 | 43 | 32,448 | | 2008 | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million | At fair | Other | Hedging | Total | | | value | liabilit | derivati | | | | through | ies | ves | | | | profit | | | | | | or loss | | | | -------------------------------------------------------------------------------- | Liabilities | | | | | -------------------------------------------------------------------------------- | Liabilities to credit institutions | | 4,052 | | 4,052 | -------------------------------------------------------------------------------- | Financial liabilities held for | 423 | | | 423 | | trading (excl. derivatives) | | | | | -------------------------------------------------------------------------------- | Derivative conctracts | 1,388 | | 149 | 1,537 | -------------------------------------------------------------------------------- | Liabilities to customers | | 3,048 | | 3,048 | -------------------------------------------------------------------------------- | Non-life Insurance liabilities | | 2,477 | | 2,477 | -------------------------------------------------------------------------------- | Debt instruments issued to the | | 16,699 | | 16,699 | | public | | | | | -------------------------------------------------------------------------------- | Subordinated liabilities | | 1,319 | | 1,319 | -------------------------------------------------------------------------------- | Other liabilities | | 1,962 | | 1,962 | -------------------------------------------------------------------------------- | Total 30 June 2009 | 1,811 | 29,557 | 149 | 31,518 | -------------------------------------------------------------------------------- | Total 31 Dec. 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 June 2009, notes and bonds included EUR 42 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 June 2009, the fair value of these debt instruments was approximately EUR 87 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 June 2009 | Carryin | Fair | Effectiv | Impairment | | | g | value | e | s arising | | | amount | | interest | from | | | | | rate | credit | | | | | | risk | -------------------------------------------------------------------------------- | Loans and other receivables | 2,734 | 2,621 | 5.4 | 21 | -------------------------------------------------------------------------------- | Investments held to maturity | 868 | 792 | 4.5 | | -------------------------------------------------------------------------------- | Available-for-sale financial | 58 | 58 | 5.1 | | | assets | | | | | -------------------------------------------------------------------------------- | Total | 3,660 | 3,472 | | 21 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million, 31 Dec 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: -------------------------------------------------------------------------------- | | Q1-2/2009 | Q1-4/2008 | -------------------------------------------------------------------------------- | EUR million | Income | Fair | Income | Fair | | | statemen | value | statemen | value | | | t | reserve | t | reserve | -------------------------------------------------------------------------------- | Banking | -3 | -3 | -21 | -8 | -------------------------------------------------------------------------------- | Non-life Insurance | 2 | 13 | | -24 | -------------------------------------------------------------------------------- | Group Functions | 0 | 18 | -162 | -15 | -------------------------------------------------------------------------------- | Total | -2 | 28 | -183 | -47 | -------------------------------------------------------------------------------- Interest accrued on notes and bonds in January-June totalled EUR 68 million. The price difference between the nominal value and acquisition value recognised in net interest income totalled EUR 14 million. Impairments recognised on notes and bonds totalled EUR 21 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 June 2009 | 31 Dec | | | | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investments | | | -------------------------------------------------------------------------------- | Loans and other receivables | 428 | 418 | -------------------------------------------------------------------------------- | Equities | 321 | 318 | -------------------------------------------------------------------------------- | Property | 82 | 81 | -------------------------------------------------------------------------------- | Notes and bonds | 1,323 | 1,153 | -------------------------------------------------------------------------------- | Other | 516 | 419 | -------------------------------------------------------------------------------- | Total | 2,671 | 2,389 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Other assets | | | -------------------------------------------------------------------------------- | Prepayments and accrued income | 29 | 33 | -------------------------------------------------------------------------------- | Other | | | -------------------------------------------------------------------------------- | From direct insurance | 280 | 218 | -------------------------------------------------------------------------------- | From reinsurance | 129 | 100 | -------------------------------------------------------------------------------- | Cash in hand and at bank | 8 | 4 | -------------------------------------------------------------------------------- | Total | 446 | 355 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total Non-life insurance assets | 3,117 | 2,745 | -------------------------------------------------------------------------------- Note 12. Intangible assets -------------------------------------------------------------------------------- | EUR million | 30 June 2009 | 31 Dec | | | | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Goodwill | 516 | 516 | -------------------------------------------------------------------------------- | Brands | 176 | 176 | -------------------------------------------------------------------------------- | Customer relationships | 214 | 226 | -------------------------------------------------------------------------------- | Other | 73 | 68 | -------------------------------------------------------------------------------- | Total | 980 | 987 | -------------------------------------------------------------------------------- Note 13. Debt securities issued to the public -------------------------------------------------------------------------------- | EUR million | 30 June 2009 | 31 Dec | | | | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Bonds | 6,181 | 6,185 | -------------------------------------------------------------------------------- | Certificates of deposit, commercial papers and | 10,297 | 10,033 | | ECPs | | | -------------------------------------------------------------------------------- | Other | 221 | 208 | -------------------------------------------------------------------------------- | Total | 16,699 | 16,425 | -------------------------------------------------------------------------------- Note 14. Fair value reserve after income tax -------------------------------------------------------------------------------- | EUR million | 30 June 2009 | 31 Dec | | | | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Loans and other receivables | | | -------------------------------------------------------------------------------- | Reclassified notes and bonds | -10 | -11 | -------------------------------------------------------------------------------- | Available-for-sale financial assets | | | -------------------------------------------------------------------------------- | Notes and bonds | 12 | -23 | -------------------------------------------------------------------------------- | Equities and mutual funds with equity risk | -82 | -92 | -------------------------------------------------------------------------------- | Other funds | -23 | -54 | -------------------------------------------------------------------------------- | Total | -103 | -180 | -------------------------------------------------------------------------------- Notes to risk management Note 15. Risk exposure by Banking -------------------------------------------------------------------------------- | Total exposure by rating category*, EUR billion | -------------------------------------------------------------------------------- | Rating category | 30 June 2009 | 31 Dec 2008 | Change | -------------------------------------------------------------------------------- | 1-2 | 2.6 | 2.8 | -0.2 | -------------------------------------------------------------------------------- | 3-5 | 10.7 | 11.2 | -0.5 | -------------------------------------------------------------------------------- | 6-7 | 4.1 | 4.3 | -0.2 | -------------------------------------------------------------------------------- | 8-9 | 2.4 | 1.9 | 0.5 | -------------------------------------------------------------------------------- | 10 | 0.2 | 0.1 | 0.1 | -------------------------------------------------------------------------------- | 11-12 | 0.2 | 0.1 | 0.1 | -------------------------------------------------------------------------------- | Non-rated | 0.2 | 0.3 | -0.1 | -------------------------------------------------------------------------------- | Total | 20.4 | 20.6 | -0.3 | -------------------------------------------------------------------------------- | *) excl. private customers | -------------------------------------------------------------------------------- Sensitivity analysis of market risk -------------------------------------------------------------------------------- | | | 30 June 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 | 5 | 0 | 5 | 0 | | e risk | st | point | | | | | -------------------------------------------------------------------------------- | Currency | Market | 20 percentage | 3 | 0 | 4 | 0 | | risk | value | points | | | | | -------------------------------------------------------------------------------- | Volatility | | | | | | | | risk | | | | | | | -------------------------------------------------------------------------------- | Interest-rat | Volati | 20 percentage | 5 | 0 | 1 | 0 | | e volatility | lity | points | | | | | -------------------------------------------------------------------------------- | Currency | Volati | 10 percentage | 1 | 0 | 2 | 0 | | volatility | lity | points | | | | | -------------------------------------------------------------------------------- | Credit risk | Credit | 0.5 percentage | 13 | 0 | 4 | 0 | | premium *) | spread | point | | | | | -------------------------------------------------------------------------------- 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 | | | | June | | | 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*) | 109 | Up 8% | Down 1 | -9 | | | | | percentage | | | | | | point | | -------------------------------------------------------------------------------- | Expenses by function*) | 260 | Up 4% | Down 1 | -10 | | **) | | | percentage | | | | | | point | | -------------------------------------------------------------------------------- | Inflation for | 495 | Up 0.25 | Down 0.5 | -3 | | collective liability | | percentage | percentage | | | | | points | points | | -------------------------------------------------------------------------------- | Life expectancy for | 1,267 | Up 1 year | Down 3 | -29 | | discounted insurance | | | percentage | | | contract liability | | | points | | -------------------------------------------------------------------------------- | Discount rate for | 1,267 | Down 0.1 | Down 2 | -15 | | discounted insurance | | percentage | percentage | | | contract liability | | points | 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 June | | 31 Dec | | | | 2009 | | 2008 | | -------------------------------------------------------------------------------- | Money market | 276 | 10 % | 279 | 12 % | | instruments | | | | | -------------------------------------------------------------------------------- | Bonds and bond funds | 1,977 | 73 % | 1,690 | 70 % | -------------------------------------------------------------------------------- | Equities | 184 | 7 % | 190 | 8 % | -------------------------------------------------------------------------------- | Alternative | 128 | 5 % | 111 | 5 % | | investments | | | | | -------------------------------------------------------------------------------- | Real property | 144 | 5 % | 145 | 6 % | -------------------------------------------------------------------------------- | Total | 2,709 | 100 % | 2,415 | 100 % | -------------------------------------------------------------------------------- Non-life Insurance fixed-income portfolio by maturity and credit rating on 30 June 2009* -------------------------------------------------------------------------------- | EUR million | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Year( | 0-1 | 1-3 | 3-5 | 5-7 | 7-10 | 10- | Total | % | | s) | | | | | | | | | -------------------------------------------------------------------------------- | AAA | 52 | 74 | 174 | 134 | 101 | 101 | 636 | 30 % | -------------------------------------------------------------------------------- | AA | 72 | 129 | 182 | 28 | 18 | 15 | 444 | 21 % | -------------------------------------------------------------------------------- | A | 40 | 254 | 174 | 67 | 46 | 59 | 639 | 30 % | -------------------------------------------------------------------------------- | BBB | 37 | 139 | 69 | 32 | 3 | 0 | 280 | 13 % | -------------------------------------------------------------------------------- | BB+ | 59 | 16 | 21 | 17 | 4 | 1 | 118 | 6 % | | or | | | | | | | | | | lower | | | | | | | | | -------------------------------------------------------------------------------- | Inter | 13 | 3 | 2 | 1 | 0 | 2 | 21 | 1 % | | nally | | | | | | | | | | rated | | | | | | | | | -------------------------------------------------------------------------------- | Total | 272 | 615 | 622 | 280 | 172 | 177 | 2,137 | 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 June | 31 Dec | | | | | 2009 | 2008 | -------------------------------------------------------------------------------- | Bonds and bond | | Interest | | 1 percentage | 77 | 82 | | funds1) | | rate | | point | | | -------------------------------------------------------------------------------- | Equities 2) | | Market value | | 20 | 36 | 33 | | | | | | percentage | | | | | | | | points | | | -------------------------------------------------------------------------------- | Venture | | Market value | | 20 | 15 | 18 | | capital funds | | | | percentage | | | | and unquoted | | | | points | | | | equities | | | | | | | -------------------------------------------------------------------------------- | Commodities | | Market value | | 20 | 2 | 2 | | | | | | percentage | | | | | | | | points | | | -------------------------------------------------------------------------------- | Real property | | Market value | | 10 | 14 | 15 | | | | | | percentage | | | | | | | | points | | | -------------------------------------------------------------------------------- | Currency | | Value of | | 20 | 12 | 12 | | | | currency | | percentage | | | | | | | | points | | | -------------------------------------------------------------------------------- | Credit risk | | Credit | | 0.5 | 21 | 14 | | premium 3) | | spread | | percentage | | | | | | | | points | | | -------------------------------------------------------------------------------- | Derivatives 4) | | Volatility | | 20 | 1 | 0 | | | | | | percentage | | | | | | | | 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, excluding government bonds 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 June 2009 | 31 Dec 2008 | Change | -------------------------------------------------------------------------------- | 1-2 | 13.2 | 12.0 | 1.2 | -------------------------------------------------------------------------------- | 3-5 | 2.0 | 1.8 | 0.2 | -------------------------------------------------------------------------------- | 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 | 15.2 | 13.8 | 1.4 | -------------------------------------------------------------------------------- Sensitivity analysis of market risk -------------------------------------------------------------------------------- | | | | 30 June 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 | 8 | 0 | 11 | 0 | | e risk | st | point | | | | | | | rate | | | | | | -------------------------------------------------------------------------------- | Interest-rat | Volati | 20 percentage | 0 | 0 | 0 | 0 | | e volatility | lity | points | | | | | -------------------------------------------------------------------------------- | Credit risk | Credit | 0.5 percentage | 0 | 47 | 0 | 0 | | premium *) | spread | points | | | | | -------------------------------------------------------------------------------- | Price risk | | | | | | | | -------------------------------------------------------------------------------- | Equity | Market | 20 percentage | 0 | 2 | 0 | 2 | | portfolio | value | points | | | | | -------------------------------------------------------------------------------- | Private | Market | 20 percentage | 0 | 6 | 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 June 2009 -------------------------------------------------------------------------------- | EUR | | | | | | | | | | milli | | | | | | | | | | on | | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Year | 0-1 | 1-3 | 3-5 | 5-7 | 7-10 | 10- | Total | % | -------------------------------------------------------------------------------- | AAA | 1,892 | 2,144 | 1,341 | 424 | 144 | 34 | 5,979 | 62 % | -------------------------------------------------------------------------------- | AA | 1,047 | 486 | 589 | 69 | 0 | 0 | 2,191 | 23 % | -------------------------------------------------------------------------------- | A | 170 | 388 | 307 | 28 | 66 | 1 | 959 | 10 % | -------------------------------------------------------------------------------- | BBB | 21 | 30 | 37 | 20 | 27 | 0 | 135 | 1 % | -------------------------------------------------------------------------------- | BB+ | 0 | 0 | 0 | 19 | 0 | 0 | 19 | 0 % | | or | | | | | | | | | | lower | | | | | | | | | -------------------------------------------------------------------------------- | Inter | 81 | 174 | 40 | 2 | 9 | 0 | 305 | 3 % | | nally | | | | | | | | | | rated | | | | | | | | | -------------------------------------------------------------------------------- | Total | 3,210 | 3,222 | 2,313 | 563 | 246 | 35 | 9,589 | 100 % | -------------------------------------------------------------------------------- Other notes Note 18. Collateral given -------------------------------------------------------------------------------- | EUR million | 30 June 2009 | 31 Dec | | | | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Given on behalf of own liabilities and | | | | commitments | | | -------------------------------------------------------------------------------- | Mortgages | 1 | 1 | -------------------------------------------------------------------------------- | Pledges | 4,133 | 4,134 | -------------------------------------------------------------------------------- | Other | 421 | 400 | -------------------------------------------------------------------------------- | Total collateral given | 4,554 | 4,534 | -------------------------------------------------------------------------------- | Total collateralised liabilities | 1,068 | 614 | -------------------------------------------------------------------------------- Note 19. Off-balance-sheet commitments -------------------------------------------------------------------------------- | EUR million | 30 June 2009 | 31 Dec | | | | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Guarantees | 1,371 | 1,133 | -------------------------------------------------------------------------------- | Other guarantee liabilities | 1,389 | 1,476 | -------------------------------------------------------------------------------- | Loan commitments | 3,520 | 3,149 | -------------------------------------------------------------------------------- | Commitments related to short-term trade | 93 | 152 | | transactions | | | -------------------------------------------------------------------------------- | Other | 514 | 416 | -------------------------------------------------------------------------------- | Total off-balance-sheet commitments | 6,888 | 6,328 | -------------------------------------------------------------------------------- Note 20. Derivative contracts -------------------------------------------------------------------------------- | 30 June 2009 | Nominal values/residual | Total | Fair values | | | term to maturity | | | -------------------------------------------------------------------------------- | EUR million | <1 year | 1-5 | >5 | | Assets | Liabiliti | | | | years | years | | | es | -------------------------------------------------------------------------------- | Interest rate | 28,505 | 47,761 | 10,267 | 86,532 | 1,247 | 1,300 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Currency | 12,952 | 1,714 | 660 | 15,326 | 161 | 425 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Equity and | 160 | 702 | 31 | 893 | 39 | 0 | | index | | | | | | | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Credit | 108 | 188 | | 296 | 3 | 13 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Other | 3,982 | 131 | | 4,113 | 1 | 26 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Total | 45,706 | 50,496 | 10,958 | 107,161 | 1,452 | 1,764 | | derivatives | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 30 June 2008 | Nominal values/residual | Total | Fair values | | | term to maturity | | | -------------------------------------------------------------------------------- | EUR million | <1 year | 1-5 | >5 | | Assets | Liabiliti | | | | years | years | | | es | -------------------------------------------------------------------------------- | Interest rate | 46,218 | 42,980 | 10,334 | 99,532 | 712 | 688 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Currency | 13,753 | 1,490 | 1,002 | 16,245 | 142 | 464 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Equity and | 27 | 317 | 83 | 427 | 36 | | | index | | | | | | | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Credit | 157 | 205 | 20 | 383 | 3 | 5 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Other | | 16 | | 16 | 3 | | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Total | 60,155 | 45,010 | 11,439 | 116,603 | 896 | 1,157 | | derivatives | | | | | | | -------------------------------------------------------------------------------- Note 21. Other contingent liabilities and commitments On 30 June 2009, Banking commitments to venture capital funds amounted to EUR 17 million and Non-Life Insurance commitments to EUR 79 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 and Vahinkopalvelu Oy on 30 June 2009 and on 30 June 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 June 2009 -------------------------------------------------------------------------------- | EUR million | | | | -------------------------------------------------------------------------------- | | Parent | Admini-str | Others | | | company | ative | | | | | personnel | | -------------------------------------------------------------------------------- | Loans | 200 | | 2,490 | -------------------------------------------------------------------------------- | Other receivables | 70 | | 95 | -------------------------------------------------------------------------------- | Deposits | 13 | | 219 | -------------------------------------------------------------------------------- | Other liabilities | 5 | | 487 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest income | 3 | | 117 | -------------------------------------------------------------------------------- | Interest expenses | 4 | | 99 | -------------------------------------------------------------------------------- | Dividend income | 0 | | 2 | -------------------------------------------------------------------------------- | Other Non-life Insurance income | 1 | | 1 | -------------------------------------------------------------------------------- | Commission income | 0 | 0 | 9 | -------------------------------------------------------------------------------- | Commission expenses | 1 | 0 | 2 | -------------------------------------------------------------------------------- | Trading income | 0 | | 19 | -------------------------------------------------------------------------------- | Trading expenses | | | 44 | -------------------------------------------------------------------------------- | Other operating income | 1 | | 5 | -------------------------------------------------------------------------------- | Operating expenses | 40 | | 2 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Off-balance-sheet commitments | | | | -------------------------------------------------------------------------------- | Guarantees | | | 73 | -------------------------------------------------------------------------------- | Irrevocable commitments | 8 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Salaries and other short-term | | | | | benefits, and performance-based pay | | | | -------------------------------------------------------------------------------- | Salaries and short-term benefits | | 1 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Related-party holdings | | | | -------------------------------------------------------------------------------- | Number of shares | 95,798,47 | 21,508 | 6,609,338 | | | 9 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Related-party transactions by 30 June | | | | | 2008 | | | | -------------------------------------------------------------------------------- | EUR million | | | | -------------------------------------------------------------------------------- | | Parent | Admini-str | Others | | | company | ative | | | | | personnel | | -------------------------------------------------------------------------------- | Loans | 141 | | 1,435 | -------------------------------------------------------------------------------- | Other receivables | 166 | | 251 | -------------------------------------------------------------------------------- | Deposits | 8 | | 210 | -------------------------------------------------------------------------------- | Other liabilities | 3 | | 99 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest income | 1 | | 120 | -------------------------------------------------------------------------------- | Interest expenses | 3 | | 88 | -------------------------------------------------------------------------------- | Dividend income | 0 | | 5 | -------------------------------------------------------------------------------- | Other Non-life Insurance income | 1 | | | -------------------------------------------------------------------------------- | Commission income | 0 | 0 | 11 | -------------------------------------------------------------------------------- | Commission expenses | 1 | 0 | 1 | -------------------------------------------------------------------------------- | Trading income | 1 | | 32 | -------------------------------------------------------------------------------- | Trading expenses | | | 37 | -------------------------------------------------------------------------------- | Other operating income | 5 | | 7 | -------------------------------------------------------------------------------- | Operating expenses | 38 | | 4 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Off-balance-sheet commitments | | | | -------------------------------------------------------------------------------- | Guarantees | | | 55 | -------------------------------------------------------------------------------- | Irrevocable commitments | 0 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Salaries and other short-term | | | | | benefits, and performance-based pay | | | | -------------------------------------------------------------------------------- | Salaries and short-term benefits | | 1 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Related-party holdings | | | | -------------------------------------------------------------------------------- | Number of shares | 60,825,89 | 63,421 | 4,205,946 | | | 7 | | | -------------------------------------------------------------------------------- Financial reporting in 2009 Schedule for Interim Reports in 2009 Interim Report Q1-3 5 November Helsinki, 6 August 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 A meeting for analysts will be held in Finnish at 10.00 am on 6 August 2009. A conference call in English for analysts and investors will be held on the same day at 3.30 pm (Finnish time), tel +358 20 699100, PIN code 911239#. 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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