2008-11-06 07:00:00 CET
2008-11-06 07:00:04 CET
REGULATED INFORMATION
Pohjola Pankki Oyj - Interim report (Q1 and Q3)
Pohjola Bank plc Interim Report 1 January-30 September 2008
Pohjola Bank plc Interim Report 6 November 2008, 8.00 am 1(45) Pohjola Bank plc Interim Report 1 January-30 September 2008 with President and CEO's Comments President and CEO's comments: The Group's customer business continued to make good progress during the third quarter too. Banking showed strong growth in terms of the credit portfolio and net interest income, while Non-life Insurance recorded an accelerating growth rate of insurance premium revenue and the combined ratio improved markedly year on year. The balance on technical account was excellent. The global financial crisis came to a head in September as a result of Lehman Brothers filing for Chapter 11 bankruptcy protection. At Pohjola Group, the effects of the financial crisis were felt in the mark-to-market valuations of the Group's liquidity reserves and Non-life Insurance investment operations. Consequently, we reported lower earnings than a year ago, both in the third quarter and in January-September. The Group has strong capital adequacy and good liquidity and funding operations have remained almost normal despite the difficult market situation. The past few weeks have seen added uncertainty associated with the economic development. The Group's doubtful receivables are at a low level but if the economy takes a turn for the worse, their amounts may increase. Within Non-life Insurance, the economic slowdown will probably be reflected in slower growth in claims incurred. Helsinki, 6 November 2008 Mikael Silvennoinen President and CEO Pohjola Bank plc Interim Report for 1 January-30 September 2008 January-September 2008 1) - Earnings before tax amounted to EUR 114 million (220). - Earnings per share stood at EUR 0.41 (0.80), while equity per share was EUR 8.29 (9.19). - Return on equity at fair value was -3.9% (10.8). - The corporate loan portfolio and loan margins within Banking showed sustained growth and the division posted good earnings. - Owing to money-market fund redemptions and bearish equity markets, assets under management within Asset Management fell to EUR 27.3 billion (31.5). - Non-life Insurance improved its profitability and reported a combined ratio of 92.9% (96.0). The operating combined ratio, excluding amortisation on intangible assets arising from the corporate acquisition, stood at 90.0% (93.0). Insurance premium revenue continued to grow, showing an increase of 9% (10). As a result of higher interest rates and lower share prices, Non-life Insurance return on investment at fair value stood at -2.8 (4.6). - The negative mark-to-market valuations of OP-Pohjola Group's liquidity reserves, managed by Pohjola Bank plc, recognised in the income statement during the period totalled EUR 70 million (-25). The fair value reserve reduced by EUR 34 million (-3). - Consolidated net income decreased by 18% to EUR 450 million and expenses increased by 2% to EUR 337 million. - The Financial Supervision Authority granted permission to OP-Pohjola Group to use the Internal Ratings Based Approach in its capital adequacy measurement for credit risks as of 30 September 2008, applying to exposures to corporate and institutional customers. - Tier 1 ratio stood at 9.3%. July-September 2008 1) - Earnings before tax amounted to EUR 43 million (56). - Earnings per share were EUR 0.15 (0.20). - Return on equity at fair value was -7.2% (7.1). - Negative mark-to-market valuations recognised in the income statement came to EUR 21 million (-26) and the fair value reserve reduced by EUR 29 million (-3). - Non-life Insurance reported a combined ratio of 83.1% (92.4) and an operating combined ratio of 80.7% (89.5). Insurance premium revenue showed an increase of 11% (10). Non-life Insurance return on investment at fair value stood at -1.7% (1.1). 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 2007 are used as comparatives. -------------------------------------------------------------------------------- | Key indicators | Q3/ | Q3/ | Q1-3/ | Q1-3/ | 2007 | | | 200 | 2007 | 20 | 20 | | | | 8 | | 08 | 07 | | -------------------------------------------------------------------------------- | | | | | | | -------------------------------------------------------------------------------- | Earnings before tax, | 43 | 56 | 114 | 220 | 288 | | EUR million | | | | | | -------------------------------------------------------------------------------- | Profit for the period, | 30 | 40 | 83 | 163 | 212 | | EUR million | | | | | | -------------------------------------------------------------------------------- | Return on equity, % | -7.2 | 7.1 | -3.9 | 10.8 | 9.3 | -------------------------------------------------------------------------------- | | | | | | | -------------------------------------------------------------------------------- | Balance sheet total, | | | 31.9 | 25.8 | 25.9 | | EUR billion | | | | | | -------------------------------------------------------------------------------- | Risk-weighted items, | | | 13.0 | 12.8* | 11.7 | | EUR billion | | | | | | -------------------------------------------------------------------------------- | Loan portfolio, EUR | | | 11.4 | 9.0 | 9.4 | | billion | | | | | | -------------------------------------------------------------------------------- | Assets under | | | 27.3 | 32.5 | 31.5 | | management, EUR billion | | | | | | -------------------------------------------------------------------------------- | | | | | | | -------------------------------------------------------------------------------- | Capital adequacy, % | | | 11.4 | 13.0* | 11.8 | -------------------------------------------------------------------------------- | Tier 1 ratio, % | | | 9.3 | 7.9* | 9.9 | -------------------------------------------------------------------------------- | Proportion of doubtful | | | 0.2 | 0.2 | 0.1 | | receivables, % | | | | | | -------------------------------------------------------------------------------- | | | | | | | -------------------------------------------------------------------------------- | | | | | | | -------------------------------------------------------------------------------- | Earnings per share, EUR | 0.15 | 0.20 | 0.41 | 0.80 | 1.04 | | | | | | | | -------------------------------------------------------------------------------- | Earnings per share, | -0.25 | 0.16 | -0.15 | 0.73 | 0.85 | | incl. change in fair | | | | | | | value, EUR | | | | | | -------------------------------------------------------------------------------- | Equity per share, EUR | | | 8.29 | 9.07 | 9.19 | -------------------------------------------------------------------------------- | Market capitalisation | | | 2,062 | 2,950 | 2,658 | | (A+K shares), EUR | | | | | | | million | | | | | | -------------------------------------------------------------------------------- | | | | | | | -------------------------------------------------------------------------------- | Average personnel | 3,173 | 3,021 | 3,140 | 2,987 | 3,006 | -------------------------------------------------------------------------------- *) The previous approach in accordance with Basel I Consolidated earnings -------------------------------------------------------------------------------- | Consolidated earnings | 2008 | 2007 | 2008 | 2007 | Rollin | 2007 | | | | | | | g | | -------------------------------------------------------------------------------- | EUR million | Q3 | Q3 | Q1-3 | Q1-3 | 12 | | | | | | | | mnth | | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- | Net interest income | 45 | 27 | 120 | 85 | 150 | 115 | -------------------------------------------------------------------------------- | Impairments of receivables | 11 | 1 | 8 | 2 | 7 | 1 | -------------------------------------------------------------------------------- | Net interest income after | 34 | 26 | 113 | 83 | 143 | 114 | | impairments | | | | | | | -------------------------------------------------------------------------------- | Net income from Non-life | 98 | 103 | 280 | 310 | 403 | 433 | | Insurance | | | | | | | -------------------------------------------------------------------------------- | Net commissions and fees | 24 | 24 | 79 | 83 | 111 | 115 | -------------------------------------------------------------------------------- | Net trading income | -26 | -16 | -72 | -7 | -99 | -34 | -------------------------------------------------------------------------------- | Net investment income | 0 | 5 | 9 | 28 | 10 | 28 | -------------------------------------------------------------------------------- | Other operating income | 14 | 15 | 42 | 51 | 62 | 71 | -------------------------------------------------------------------------------- | Total net income | 145 | 156 | 450 | 549 | 629 | 728 | -------------------------------------------------------------------------------- | Personnel costs | 38 | 37 | 130 | 123 | 173 | 166 | -------------------------------------------------------------------------------- | IT expenses | 9 | 10 | 33 | 32 | 44 | 43 | -------------------------------------------------------------------------------- | Depreciation and | 17 | 15 | 49 | 45 | 65 | 61 | | amortisation | | | | | | | -------------------------------------------------------------------------------- | Other expenses | 38 | 38 | 125 | 129 | 166 | 170 | -------------------------------------------------------------------------------- | Total expenses | 102 | 100 | 337 | 328 | 448 | 440 | -------------------------------------------------------------------------------- | Earnings before tax | 43 | 56 | 114 | 220 | 181 | 288 | -------------------------------------------------------------------------------- | Change in fair value | -82 | -10 | -181 | -20 | -215 | -54 | | reserve | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before tax | -39 | 46 | -67 | 200 | -34 | 234 | | at fair value | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- | Income tax expense | 13 | 16 | 31 | 58 | 50 | 76 | -------------------------------------------------------------------------------- | Profit for the period | 30 | 40 | 82 | 163 | 132 | 212 | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- | Tax on change in fair | -21 | -2 | -47 | -5 | -56 | -14 | | value reserve | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss for the | -31 | 33 | -52 | 148 | -28 | 172 | | period at fair value | | | | | | | -------------------------------------------------------------------------------- January-September Pohjola Bank Group's (Pohjola Bank) earnings before tax decreased to EUR 114 million (220). Consolidated net income fell by 18% to EUR 450 million (549), due to negative mark-to-market valuation of liquidity reserves, while expenses rose by 2% to EUR 337 million (328). Lehman Brothers Holdings Inc.'s bankruptcy filing weakened earnings by EUR 16 million. The figure for Q1-3/2007 includes EUR 10 million in liquidated damages resulting from the cancellation of the partnership agreement with savings banks. On 30 September, the capital adequacy ratio stood at 11.4% (11.8) and Tier 1 ratio at 9.3% (9.9). Earnings per share were EUR 0.41 (0.80), while equity per share was EUR 8.29 (9.19). As a result of higher interest rates and lower equity prices, the fair value reserve before tax decreased by EUR 181 million. The Group reported EUR 67 million in loss before tax at fair value (earnings of EUR 200 million) and annualised return on equity stood at -3.9% (10.8). July-September The Group reported earnings of EUR 43 million (56) before tax, with Lehman Brothers Holdings Inc.'s bankruptcy filing weakening earnings by EUR 16 million. Earnings per share were EUR 0.15 (0.20). The Group reported EUR 39 million in loss before tax at fair value (earnings of EUR 46 million) and annualised return on equity stood at -7.2% (7.1). Operating environment The continued uncertain mood in financial markets intensified during the third quarter. Interbank funding markets were severely hit by Lehman Brothers Holdings Inc.'s filing for Chapter 11 in mid-September, causing financial market liquidity to plunge. The rapidly increasingly lack of confidence in financial markets made short-term market rates, liquidity and risk premiums and the volatility of equity, foreign exchange and commodity markets rise sharply. In order to secure financial-market stability, central banks around the world boosted liquidity and several governments jointly and severally announced large-scale efforts to bail out the banking sector. The global financial crisis has led to a number of restructuring measures within the US and European financial sectors and many financial institutions have had to rely on government bailout programmes. In October, the Finnish government alongside the other EU governments agreed to guarantee interbank lending, if necessary, and make fixed-term capital investments in banks. However, Finnish banks have announced that they are in no need of financial aid in the current situation. Measures taken by central banks and governments to bail out the financial sector are gradually reflected in reviving interbank trading and falling short-term market rates although it is still difficult to assess the ultimate effects of these measures on the financial markets. This global financial crisis has resulted in much bleaker outlook for the world economy. The crisis originating in the US housing market has spread across other sectors with the result that the US economy is heading into recession. The economic situation within the EU has also worsened considerably and several member states expect their output to shrink. Emerging economies too are experiencing slowing growth, for weaker export prospects will be only partly offset by domestic demand. The financial crisis has weakened Finland's economic outlook further, with economic forecasts predicting a downward trend. Of the main sectors, manufacturing industries expect lower output and construction output is on the wane, whereas business conditions in the service sector are still favourable. Consumer confidence with respect to developments in the economy and employment has also weakened considerably during the autumn. Bleaker economic prospects have not been reflected in growth in non-life insurance premiums written, but there are early signs of a slowdown in growth in claims expenditure. The current predicament in financial markets has been reflected in Non-life Insurance in terms of weak developments in investment income. Integration The integration process related to the OKO Bank's acquisition of Non-life Insurance operations in 2005 is proceeding according to plan. The results so far support earlier estimates of annual revenue synergies coming to EUR 17 million by the end of 2010 and cost synergies reaching 35 million by the end of 2009. Savings based on decisions on streamlining measures underway during 2005-08 will amount to an estimated EUR 33 million in 2008. From 2009, savings from the integration will reach an annual level of EUR 36 million. The revenue synergies resulting from growth in the number of loyal customer households by the end of the reporting period have reached an annual level of EUR 11 million and the aim is to reach EUR 17 million by the end of 2010. Integration costs related to the Pohjola acquisition totalled EUR 26 million between September 2005 and June 2008. In May, Pohjola Bank's parent institution, OP-Pohjola Group Central Cooperative, and TietoEnator signed an agreement to integrate and reorganise OP-Pohjola Group's ICT services. Integrating all of Pohjola Bank Group's ICT services within this joint venture will result in major efficiency gains of an annual estimated EUR 3 million from 2009. The related integration costs will come to approximately EUR 6 million. The number of loyal customer households within Non-life Insurance increased by 7,400 during July-September and by 27,000 during January-September, totalling more than 382,000 on 30 September 2008. The Group's strategic aim is to increase this number to 450,000 by the end of 2010. Customer service took a major step in November 2007 when OP-Pohjola Group enhanced loyal customer benefits, related to the Pohjola integration, in such a way that customers have also been able to use OP bonuses earned through banking transactions to pay Pohjola insurance premiums. This represents a major benefit to the 964,000 OP-Pohjola Group loyal customers who have concentrated their purchases of banking and insurance services. During January-September, bonuses used to pay insurance premiums totalled EUR 16 million. During the reporting period, Pohjola Insurance Ltd and a number of OP-Pohjola Group member cooperative banks built up a new operating model for banking and non-life insurance product sales to private customers. According to this plan, Pohjola Insurance's field staff for private customers (around 250 employees) joined the payroll of local cooperative banks on 1 October 2008. This new operating model enables improved customer service, especially in the field of cross-selling banking and non-life insurance services. The majority of these employees have worked on the premises of the cooperative bank branches, bearing in mind that these branches and Pohjola Insurance has operated under the same roof almost everywhere in Finland. This reorganisation did not involve any staff reductions. Agency operations, corporate and institutional customer sales or the operations of other Pohjola Insurance's service channels did not undergo any changes. Group restructuring OKO Bank plc's Extraordinary General Meeting made the decision on changing the company's corporate name to Pohjola Bank plc as of 1 March 2008. In marketing communication and when used together with the logo, 'Pohjola' is used for short. As of the same date, the corporate names of subsidiaries with the OKO prefix also changed to begin with 'Pohjola'. The parent company Pohjola Bank plc and its subsidiaries together form Pohjola Bank Group. Based on an agreement signed by Pohjola Bank plc and Kesko Corporation on 21 December 2007, Pohjola Bank plc bought all of the shares in K-Finance Ltd, a Kesko Corporation subsidiary, for around EUR 30 million, of which goodwill accounted for roughly EUR 12 million. On 31 January 2008, Pohjola Bank plc became the owner of all of K-Finance Ltd shares and the company was renamed Pohjola Finance Ltd. The Boards of Directors of Pohjola Bank plc and Pohjola Finance Ltd have approved a plan whereby Pohjola Finance Ltd is expected to merge with its parent company by 31 December 2008.This merger is aimed at simplifying the Group's corporate structure, streamlining operations and reducing administrative costs. Since the transaction represents a subsidiary merger, no merger consideration will be paid. On 22 August 2008, the Helsinki District Court issued its verdict in the redemption dispute between Pohjola Bank plc's and Pohjola Group plc's minority shareholders, confirming the redemption price of one Pohjola Group plc share at EUR 13.35. This concerned some 2.1% of the company's shares (about 3.4 million shares). The legal process began with an Arbitral Tribunal in 2006 once the Bank had acquired over 90% of Pohjola Group plc's shares. The redemption price bid by Pohjola Bank plc for Pohjola Group plc's shares held by minority shareholders was EUR 13.35. In May 2007, the Arbitral Tribunal set the redemption price at EUR 14.35, after which the case - following appeals by the parties - has been processed in the District Court. Personnel On 30 September, the Group had a staff of 3,193, up by 135 from 31 December 2007. As a result of the K-Finance Ltd's acquisition, 21 employees joined the Group's payroll. A total of 591 employees (549) worked for Banking, 152 (154) for Asset Management, 2,060 employees (2,023) for Non-life Insurance in Finland and 266 (224) abroad, and 124 employees (108) for the Group Functions. Capital expenditure Gross capital expenditure for the period totalled EUR 15 million (13), EUR 3 million allocated to Banking, EUR 1 million to Asset Management, EUR 9 million to Non-life Insurance and EUR 2 million to the Group Functions. Investments in IT systems accounted for EUR 12 million of all capital expenditure. Capital adequacy The Financial Supervision Authority granted permission to OP-Pohjola Group to use the Internal Ratings Based Approach (IRBA) in its capital adequacy measurement for credit risks as of 30 September 2008. This applies to exposures to corporate and institutional customers, accounting for around two-thirds of Pohjola Bank's minimum capital requirement. With respect to other exposure classes, Pohjola Bank aims to phase in the Internal Ratings Based Approach in such a way that the approach will next apply to retail exposures. The adoption of IRBA for credit risk lowered the minimum capital requirement by 14.9%, without taking account of transitional provisions. Due to the transitional provisions, the minimum capital requirement may decrease by a maximum of 10% in 2008 and by a maximum of 20% in 2009 in comparison with the previous approach in accordance with Basel I. The Financial Statements 2007 figures have been converted into comparable ones. Since 1 January 2008, Pohjola Bank's own funds have been calculated by deducting the total carrying amount of insurance company investment from its own funds, half from Tier 1 and half from Tier 2. Since the same date, the capital adequacy requirement for operational risks has been calculated using the Basic Indicator Approach (BIA) and that for market risks using the Standard Approach (SA). The capital adequacy ratio continued to remain strong, despite vigorous growth in the loan portfolio and the financial-market turbulence. The first quarter saw a particularly vigorous growth in the loan portfolio, which levelled off slightly during the second and third quarter. The capital adequacy ratio stood at 12.1% (12.8), without taking account of transitional provisions, and at 11.4% (11.8) adjusted for the transitional provisions, as against the statutory minimum requirement of 8%. The ratio of Tier 1 to risk-weighted items stood at 9.8% (10.7), without taking account of the transitional provisions, and at 9.3% (9.9) adjusted for the transitional provisions. In March, Pohjola Bank plc issued a EUR 170-million debenture loan, classified as lower Tier 2 capital, with a maturity of ten years, and in June a EUR 50-million subordinated bond, of which a total of EUR 40 million is included in Tier 1 capital and EUR 10 million in upper Tier 2 capital. With the Finnish Financial Supervision Authority's permission, the loan may be called in at the earliest in June 2013. In June, Pohjola Insurance Ltd issued a perpetual capital bond of EUR 50 million, which may be called in at the earliest in June 2013 with the Insurance Supervisory Authority's permission. The bond will not be taken into account in the capital adequacy measurement under the Act on Credit Institutions but the bond, included in the solvency margin, can be fully utilised in the capital adequacy measurement of the insurance company. Own funds increased from EUR 1,378 million to EUR 1,482 million, due to the reported earnings and the abovementioned bonds issued by Pohjola Bank plc. Tier 1 capital came to EUR 1,203 million (1,153), hybrid capital accounting for EUR 264 million, or 15% (13). The minimum capital requirement to cover market risk amounted to EUR 42 million (46). On 30 September, the fair value reserve stood at EUR -128 million (7). On 30 September, risk-weighted items totalled EUR 12,217, without taking account of transitional provisions, as against EUR 10,745 a year earlier. This change was due mainly to the larger loan and guarantee portfolio. Adjusted for transitional provisions, risk-weighted commitments came to EUR 12,976 (11,705). Risk exposure The effects of the financial crisis were mainly felt in the mark-to-market valuations of the Group's liquidity reserves and investment income generated by Non-life Insurance. Because of this market disruption, determining the fair value of assets reliably has become a problem on a global scale. Notes and bonds worth EUR 2.2 billion, included in OP-Pohjola Group's liquidity reserves, were reclassified as of 1 July 2008, in accordance with Commission Regulation (EC). 'Change in accounting policies' on page 16 provides a more detailed description of this reclassification. Determining the value of financial assets is based on mark-to-market quotes and the Group has not applied own valuation models, despite the illiquid market. Nor has the Group measured any debt securities issued to the public at fair value. The negative mark-to-market valuations of liquidity reserves recognised in the income statement during the third quarter totalled EUR 50 million, EUR 21 million recognised in the income statement and EUR 29 million in the fair value reserve. The negative mark-to-market valuations for Q1-3 totalled EUR 104 million, EUR 701 million recognised in the income statement and EUR 34 million in the fair value reserve. Negative value changes will be reversed during the remaining term to maturity if the notes and bonds are not sold before their maturity and their issuer is not declared insolvent. Sharply falling equity prices, rising interest rates and widening credit spreads affected Non-life Insurance investment income, with the related return at fair value standing at -1.7% during the third quarter. Despite the financial crisis, the financial position and liquidity remained at a healthy level, because the financial position was boosted by the EUR 1-billion bond issued in August by Pohjola Bank plc and growth in OP-Pohjola Group member banks' deposit portfolio. Pohjola Bank plc maintains OP-Pohjola Group's liquidity reserves which mainly consist of notes and bonds eligible as collateral for central bank refinancing. 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. The Group's credit risk exposure continued to remain on a sound basis although impairments increased as a result of the failure of Lehman Brothers. Lehman Brothers' failure eroded Group earnings by EUR 16 million as a consequence of the EUR 10-million change in the value of bond receivables and the close-out of derivative contracts. Pohjola Bank Group has no exposure to the Icelandic government, financial institutions or companies. Despite the highly exceptional market situation, the Group's risk exposure remained favourable. A prolonged uncertainty in the global financial markets and its implications for the real economy will probably increase doubtful receivables and impairments from their current, exceptionally low levels. Risk exposure by Banking Despite the greater financial-market uncertainty and strong growth in total exposure, risk exposure by Banking continued to remain favourable. Total exposures for January-September grew by EUR 3.0 billion to EUR 20.3 billion. The ratio of investment-grade exposure - i.e. ratings 1-5, excluding private customers - to total exposure remained at a healthy level, standing at 66% (69), the share of ratings 11-12 was 0.2% (0.4) and that of non-rated exposure 3% (3). Of corporate exposure, the share of investment-grade corporate exposure came to 61% (65). The corporate exposure of the two lowest rating categories amounted to EUR 45 million (70), accounting for 0.3% of total corporate exposure. Significant customer exposure rose to EUR 4.6 billion (3.6). The ratio of doubtful receivables to the loan and guarantee portfolio continued to remain low, standing at EUR 32 million (16), or 0.2% (0.1). Net credit losses and impairments reduced January-September results by EUR 7 million, of which the failure of Lehman Brothers represented EUR 6 million. As a result of the financial crisis, the differences between the cash and derivatives market prices widened strongly, credit risk margins widened and the volatility was high. Pohjola Bank continued to keep market risks at a moderate level in the volatile markets. Risk exposure by Asset Management Weaker investment markets reduced assets managed by Asset Management, which is partly reflected in accrued net commissions and fees. In other respects, risk exposure by Asset Management remained favourable. Risk exposure by Non-life Insurance On 30 September, Non-life Insurance solvency capital came to EUR 590 million (613) and the ratio of solvency capital to insurance premium revenue (solvency ratio) stood at 65% (72). Due to the financial crisis, the solvency ratio fell below the Group's internal target level of 70%, which is why Pohjola Bank plc capitalised its non-life insurance subsidiaries by EUR 65 million in October. In Non-life Insurance, January-June saw 142 (167) major or medium-sized losses (in excess of EUR 0.1 million), with their claims incurred retained for own account totalling EUR 56.8 million (62.3), while their third-quarter number came to 47 (49) and their claims incurred retained for own account totalled EUR 15.4 million (21.5). On 30 September, the investment portfolio stood at EUR 2,536 million (2,511), bonds and bond funds accounting for 76% (71) and equities for 14% (16). The fixed-income portfolio by credit rating remained healthy, considering that 85% of the fixed-income instruments were rated at least A-. The average remaining maturity of the fixed-income portfolio was 5.3 years and the duration 3.6 years (3.8). Due to rising interest rates and the bearish stock market, return on investment at fair value stood at -1.7% (1.1) in Q3 and -2.8% (4.6) in Q1-3. Risk exposure by Group Functions The Group Functions exposure totalled EUR 13.4 billion, 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 7.2 billion (6.1), invested primarily in notes and bonds issued by governments, municipalities, financial institutions and companies all showing good credit ratings, and in securitised receivables. Net credit losses and negative mark-to-market valuations for January-September totalled EUR 53 million (-25), of which Lehman Brothers accounted for EUR 10 million. Credit ratings Pohjola Bank'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- | -------------------------------------------------------------------------------- All of the credit rating agencies have confirmed a stable rating outlook for Pohjola Bank. Shares and shareholders On 30 September, the number of Pohjola Bank's Series A shares quoted on NASDAQ OMX Helsinki totalled 159.6 million, accounting for 78.5% of all Pohjola Bank shares and 42.2% of votes. The number of Series K shares totalled around 43.8 million. Series A share closed at EUR 10.14 against EUR 14.50 a year earlier. In January-September, the share price reached a high of EUR 14.15 and a low of EUR 9.34 while roughly 91 million shares changed hands, compared with 112 million a year ago. On 30 September, Pohjola Bank had 30,573 shareholders, increasing by 301 from the beginning of the year. Around 95% of the shareholders were private individuals. The holdings of major shareholders did not undergo any significant changes. The largest shareholder was OP-Pohjola Group Central Cooperative, representing 29.9% of Pohjola Bank shares and 56.9% of votes. On 30 September, nominee registered shares accounted for 18.0% (18.0) of all Series A shares. Governance and management At its meeting held on 6 May 2008, Pohjola Bank plc's Board of Directors decided to reorganise the Group into three business segments and the Group Functions. The three business segments comprise Banking, Asset Management and Non-life Insurance. Reima Rytsölä, Master of Social Sciences, was appointed Executive Vice President, Banking, and member of the Group Executive Committee. Previously, he acted as Head of Corporate Banking. Mikko Koskimies, M.Sc. (Econ. & Bus. Adm.), was appointed Executive Vice President, Asset Management. He sits on the Group Executive Committee and previously acted as Head of Asset Management. Tomi Yli-Kyyny, M.Sc. (Tech.), will continue as Executive Vice President, Non-life Insurance, and as President of Pohjola Insurance Ltd. The Group Functions comprise Finance, Risk Management, Corporate Communications and HR Services. A new area of responsibility specified for Ilkka Salonen, CFO and M.Sc. (Econ. & Bus. Adm.), covers Finance, Actuarial Function, Corporate Planning, Central Banking and Group Treasury, and Investor Relations. He has also acted as Deputy CEO since 1 June 2008. CRO Jouko Pölönen, M.Sc. (Econ. & Bus. Adm.) and eMBA, was appointed member of the Group Executive Committee, with risk management within his remit. He reports to the President and CEO. Timo Ritakallio, Deputy CEO of the Group, joined another company's payroll on 1 August 2008. From 1 January 2009, Pohjola Insurance Ltd will adopt a modernised organisational structure that better meets the needs of its current business model. As part of this change, Helena Walldén, Senior Executive Vice President of Corporate Customers and member of Pohjola Bank plc's Group Executive Committee, submitted a letter of resignation on 23 September 2008. Her service contract with the company will terminate in the spring of 2009. As a result, the Group Executive Committee comprises President and CEO Mikael Silvennoinen (Chairman), Mikko Koskimies, Jouko Pölönen, Reima Rytsölä, Ilkka Salonen and Tomi Yli-Kyyny. Events after the reporting period The seven European banks that make up the Unico Banking Group (Crédit Agricole, DZ BANK, ICCREA Holding, Pohjola Bank plc, Rabobank, Raiffeisen Zentralbank (RZB) and Raiffeisen Switzerland) have announced to jointly help stabilise and restore confidence in the European interbank funding market. The banks have agreed on reciprocal unsecured interbank credit lines of up to three months, with the total funding volume expected to range from 10 to 15 and billion euros. The redemption dispute over Pohjola Group plc shares has been submitted to the Court of Appeal. The special representative of Pohjola Group plc's minority shareholders and some individual minority shareholders have appealed against the Helsinki District Court's decision of 22 August 2008 on the redemption price of Pohjola Group plc shares. Based on the District Court's decision, the pre-share redemption price of EUR 13.35 remained the same as previously bid by Pohjola Bank plc. The dispute applies to around 2.1% of the company's shares (about 3.4 million shares). Pohjola Bank plc has also appealed against this decision, pertaining to legal expenses sentenced to be paid by the adverse parties, interest confirmed on the redemption price and some matters related to legal proceedings. Outlook towards the end of the year Demand for corporate loans is expected to grow vigorously during the fourth quarter, because companies find it much harder to raise capital directly from capital markets. Margins for new loans are expected to continue rising and, consequently, improve net interest income. However, the recent capital-market uncertainty has increased the risk of Banking not being able to achieve the same earnings level as a year ago. Accordingly, the division's earnings before tax are expected to be at the same level as a year ago or lower (previous forecast: at the same level as in 2007). Risk exposure is projected to remain favourable. As a result of unusually weak developments in investment markets, assets managed by Asset Management continued their reduction during the third quarter, decreasing from the June-end EUR 28.8 billion to the September-end EUR 27.3 billion. As a result, Asset Management expects its earnings before tax to be at the same level as in the previous year or lower (previous forecast: at the same level as in 2007). Non-life Insurance recorded a lower operating combined ratio during the third quarter than a year ago. The trend in major losses during the third quarter appeared more favourable than a year earlier. Enabled by strong growth, the expense ratio continued to improve in the third quarter, with the result that the operating combined ratio for January-September was better than a year ago. In Non-life Insurance, the operating combined ratio is estimated to vary between 90% and 94% (previous forecast: 91-95%) if the number of major losses is not unusually large during the fourth quarter. Due to the weak developments in investment markets, investment income from Non-life Insurance is anticipated to remain considerably lower than in the previous year. Following the reclassification of bonds and notes, results will not change as dramatically as before, which is why the Group Functions expects its earnings to be at the same level as in 2007 (previous forecast: better than in 2007). Due to lower investment income, the Group expects to record lower earnings for 2008 than the year before. Uncertainty associated with the operating environment has grown further. Should the forward-looking statements and assumptions about the near-term outlook come true, the main risks involved are associated with developments in credit spreads, interest rates, share prices and impairments, as well as the general operating environment. Although developments in the general operating environment are beyond the Group management's control, the management may contribute to the effects of interest-rate changes and the equity market on investment and trading by investing assets securely, diversifying risks, promoting its personnel's professional skills and managing risks effectively. In addition, the management may contribute to the appropriate selection and pricing of customer-specific risk and, consequently, the Group's financial performance. All forward-looking statements in this Interim Report expressing the management's expectations, beliefs, estimates, forecasts, projections and assumptions are based on the current view of the future financial performance of Pohjola Bank Group and its various functions, and actual results may differ materially from those expressed in the forward-looking statements. Earnings by business line The Group adopted a new organisational structure in May with the result that its financial reporting follows the new business segments. Its organisation currently comprises the following three business segments and the Group Functions: Banking, Asset Management and Non-life Insurance. Pohjola Bank Group's comparatives for the four quarters of 2007 and the first quarter of 2008, based on the new segment reporting presentation, were published in June and can be found under Media>Releases>Company releases on the company's website. The Group will modify the financial targets set for its business segments in 2007 based on the new segments and publish these targets by the end of the current year. -------------------------------------------------------------------------------- | Earnings before | 2008 | 2007 | 2008 | 2007 | Rolling | 2007 | | tax, EUR | | | | | | | -------------------------------------------------------------------------------- | | | Q3 | Q3 | Q1-3 | Q1-3 | 12 mnth | | -------------------------------------------------------------------------------- | | | | | | | | | -------------------------------------------------------------------------------- | Banking | 24 | 32 | 88 | 97 | 127 | 136 | -------------------------------------------------------------------------------- | Asset Management | 3 | 5 | 10 | 14 | 17 | 21 | -------------------------------------------------------------------------------- | Non-life | 33 | 42 | 73 | 125 | 129 | 181 | | Insurance | | | | | | | -------------------------------------------------------------------------------- | Group Functions | -17 | -23 | -57 | -15 | -92 | -50 | -------------------------------------------------------------------------------- | Total | | 43 | 56 | 114 | 220 | 182 | 288 | -------------------------------------------------------------------------------- More detailed segment information can be found in the table section below. Banking Banking consists of Corporate Banking, Markets and Baltic Banking. January-September Banking recorded earnings of EUR 88 million (97) before tax and increased its loan portfolio by almost EUR 2.4 billion, or 26%, from the level of 30 September a year ago. In customer business, this good performance was particularly reflected in growth of EUR 28 million, or 31%, in net interest income. However, the segment's earnings performance was eroded by the financial-market instability, which was reflected in the decrease of EUR 2 million in securities brokerage fees and that of over EUR 4 million in issuance fees. As a result of the weaker market liquidity, income from trading fell during the third quarter in particular. In the meantime, however, margins generated by customer trading in fixed-income, derivative and foreign exchange products rose by EUR 1 million year on year. Banking earnings were also eroded by the credit loss of EUR 6 million resulting from Lehman Brothers Holdings Inc.'s derivative receivable. Financial-market instability considerably widened the credit spreads of bonds issued by Finnish companies, causing the Group to recognise EUR 10 million in negative mark-to-market valuations in the income statement. Earnings excluding these negative value changes in domestic corporate bonds came to EUR 98 million, which is at the previous year's level. Operating return on equity stood at 10.9% (15.0) and the cost/income ratio at 44.8% (40.0). Without the negative value changes in notes and bonds, operating return on equity would have reached 12.2% and the cost/income ratio 39.9%. The loan portfolio grew by 21% from the year-start level, standing at EUR 11.3 billion (9.4). The acquisition of Pohjola Finance increased the portfolio by EUR 240 million. Year on year, net interest income rose by 31% to EUR 117 million (89). Net impairments of receivables were EUR 7 million (2). Despite the vigorous growth in the loan portfolio, the Group's risk exposure remained favourable. On 30 September, the average level of corporate loan portfolio's margins stood at 0.86% (0.80). At the end of August, the market share of euro-denominated corporate loans was 17.8%, which is 0.5 percentage points higher than at the end of December 2007. Net commissions and fees recorded by Banking remained at the same level as a year ago, totalling EUR 47 million. Net commissions and fees related to loans and guarantees improved by a total of EUR 6 million. Other operating income increased to EUR 19 million (13), stemming from higher lease income. Expenses rose to EUR 77 million (66). Year on year, the number of Banking employees rose by 48 and personnel costs by less than EUR 1 million. Personnel costs accounted for 38% (43) of total operating expenses. IT costs and depreciation/amortisation grew by almost EUR 9 million, due mainly to heavy investments in the development of systems for finance company products and growth of over EUR 5 million in depreciation on leases. The Baltic Banking performance was in line with expectations. The integration of Pohjola Bank plc and its Baltic units' operations has proceeded as planned. July-September Banking recorded earnings of EUR 24 million before tax (32). Fair value changes in domestic corporate bonds weakened third-quarter earnings by less than 3 million. As a result of the weaker market liquidity, income from trading fell during the third quarter. In addition, Banking recognised a credit loss of EUR 6 million resulting from Lehman Brothers Holdings Inc.'s derivative receivable. Operating return on equity stood 8.1% (14.1) and the cost/income ratio at 41% (39). Without the negative value changes in domestic corporate bonds, operating return on equity would have reached 9.1% and the cost/income ratio 39.5%. The loan portfolio grew at a faster rate than in the previous quarter, showing an increase of over 5% against 3% reported during the second quarter. The corporate loan portfolio's margins were higher than in the second quarter. Year on year, net interest income rose by 53% to EUR 43 million (28). Net commissions and fees were at the same level as in the previous year. Commission income from loans and guarantees grew by EUR 2 million whereas income from securities brokerage and issuance declined by EUR 2 million. Other operating income increased to EUR 6 million (5), due largely to higher lease income. Expenses rose by 5% to EUR 22 million (21), with EUR 2 million attributable to growth in depreciation on leases. Asset Management January-September Earnings before tax for the period amounted to EUR 10 million (14). The operating cost/income ratio stood at 60% (54). Owing to money-market fund redemptions and bearish equity markets, assets under management on 30 September totalled EUR 27.3 billion (31.5), institutional customers accounting for EUR 16.4 billion (17.5), OP mutual funds for EUR 10.1 billion (13.1) and Pohjola Private for EUR 0.8 billion (0.9). The State Pension Fund (VER) will outsource its investment portfolio management service and systems management to Pohjola Asset Management, based on a competitive tender procedure in the spring, and this service will be up and running by the end of 2008. July-September Earnings before tax amounted to EUR 3 million (5). The operating cost/income ratio stood at 58% (50). Assets under management diminished by EUR 1.5 billion as a result of market value changes and fund redemptions. Non-life Insurance January-September Earnings Earnings before tax came to EUR 73 million (125). The balance on technical account before amortisation on intangible assets stood at EUR 69 million (45) and net investment income was EUR 61 million (126). Other income reported a year ago included EUR 6 million in capital gains on the sale of the marine hull insurance portfolio. Operating return on equity was -9.1% (27.7). Insurance operations Insurance premium revenue rose by 9% to EUR 697 million (639). Growth remained strong within the Private Customers division, based on cooperation within OP-Pohjola Group. The number of loyal customer households increased by 27,087. Like-for-like insurance premium revenue from Private Customers improved by 12% to EUR 287 million. Within the Corporate Customers division, insurance premium revenue amounted to EUR 366 million, up by 7% on a like-for-like basis. Premium revenue generated by the Baltic business increased by 6% to EUR 44 million. Claims incurred increased moderately although strong growth in the insurance portfolio added to the number of losses. Claims incurred (excl. loss adjustment expenses) rose by 5% to EUR 441 million (419) and the risk ratio stood at 63.4 (65.5). In particular, developments in the claims incurred due to severe traffic and industrial accidents were favourable. The number of major losses in excess of EUR 0.1 million (EUR 0.5 million in pension liabilities) totalled 142 (167), accounting for EUR 57 million (62) of total claims incurred. Operating expenses and loss adjustment expenses showed controlled growth, totalling EUR 186 million (176). The cost ratio developed favourably, standing at 26.7% (27.6). Insurance profitability improved as a result of vigorous growth, favourable claims developments and controlled growth in expenses. The operating combined ratio was 90.0% (93.0). Investment operations On September 30, the fair value of Non-life Insurance investments amounted to EUR 2.5 billion (2.5), with equities accounting for 14% (16), bonds and bond funds for 69% (69), money market instruments for 7% (2) and other investments for 11% (12). Net investment income recognised in the income statement amounted to EUR 61 million (126). Due to the market situation, net investment income at fair value reached EUR -78 million (119). Return on these investments at fair value stood at -2.8% (4.6). July-September Earnings Earnings before tax came to EUR 33 million (42). The balance on technical account before amortisation on intangible assets stood at EUR 46 million (23) and net investment income was EUR 6 million (38). Operating return on equity was -7.3% (24.1). Insurance operations Insurance premium revenue rose by 11% to EUR 241 million (217). Growth remained steady within Private Customers, like-for-like insurance premium revenue improving by 12% to EUR 101 million. The number of loyal customer households increased by 7,406. Like-for-like insurance premium revenue from Corporate Customers rose by 11% to EUR 125 million. The periodisation of foreign reinsurance differing from that a year ago contributed to this improvement. Insurance premium revenue reported by the Baltic business increased by 5% to EUR 15 million. Claims incurred (excl. loss adjustment expenses) fell by 3% to EUR 136 million (140) and the risk ratio stood at 56.5 (64.5). Claims incurred due to major losses were lower than a year earlier. The number of major losses in excess of EUR 0.1 million (EUR 0.5 million in pension liabilities) totalled 47 (49), accounting for EUR 15 million (22) of total claims incurred. Operating expenses and loss adjustment expenses were EUR 58 million (54) and the loss ratio stood at 24.2 (25.0). The operating combined ratio was 80.7 (89.5). Investment operations Net investment income recognised in the income statement amounted to EUR 6 million (38). Net investment income at fair value reached EUR -46 million (32). Return on these investments at fair value stood at -1.7% (1.1). Group Functions The Group Functions comprise Finance, Risk Management, Corporate Communications and HR Services. January-September Pre-tax loss was EUR 57 million (loss of EUR 15 million). The earnings performance was eroded by an impairment of EUR 7 million recognised on bond receivables from Lehman Brothers Holdings Inc., a credit loss of EUR 3 million recognised on guarantee receivables and the EUR 53-million negative mark-to-market valuations (-25) of liquidity reserves. The one-billion-euro mortgage-backed bond, issued by OP Mortgage Bank, was sold to European investors in May, strengthening the mortgage bank's position as the financier of OP-Pohjola Group retail banks. For this reason and due to growth in deposits with the OP-Pohjola Group retail banks, the need for financing from Pohjola Bank plc decreased, with the result that Pohjola Bank plc's net receivables from the OP-Pohjola Group retail banks totalled EUR 0.4 billion on 30 September, which was EUR 1.9 billion less than on 31 December 2007. Growth in the loan portfolio was mainly funded from debt markets and the liquidity position strengthened by EUR 1.2 billion in July-September. During the period, notes and bonds generated EUR 1.4 million in capital. In addition, in March Pohjola Bank plc issued a EUR 170-million debenture loan, classified as lower Tier 2 capital, which will mature in 2018. Debt securities issued to the public totalled EUR 14.1 billion (12.9). In June, Pohjola Bank plc issued a perpetual capital bond of EUR 50 million, subscribed by OP-Pohjola Group Central Cooperative in its entirety. Earnings in the first quarter a year ago were burdened by the liquidated damages ruled by the Arbitral Tribunal concerning the shareholder agreement dispute over Nooa Savings Bank Ltd. This lowering effect amounted to EUR 10 million. July-September Pre-tax loss was EUR 17 million (loss of EUR 23 million). The earnings performance was eroded by an impairment of EUR 7 million recognised on bond receivables from Lehman Brothers Holdings Inc. and by a credit loss of EUR 3 million recognised on guarantee receivables. In addition, negative mark-to-market valuations of EUR 11 million (24) in liquidity reserves were recognised in the Group Functions results and the fair value reserve diminished by EUR 25 million (-3). Changes in accounting policies Pohjola Bank Group prepared this Interim Report in accordance with IAS 34. Since 1 January 2008, Pohjola Bank Group has applied IFRS 8 Operating Segments. The definition of operating segments under IFRS 8 is based on financial information regularly monitored by the decision-maker in charge of the segment's operations. The Group has adopted segment reporting in accordance with the new organisation, based on the decision made by Pohjola Bank plc's Board of Directors on 6 May 2008, the new operating segments being Banking, Asset Management, Non-life Insurance and the Group Functions. As a result of the IFRS 8 adoption, the Group discloses information on its operating segments as required by the standard. In accordance with management reporting, as supplementary information the Group discloses the key indicators of its business divisions under the operating segments. Comparatives have been changed correspondingly. Pohjola Bank plc is tasked with maintaining OP-Pohjola Group's liquidity reserve. During the third quarter, Pohjola Bank reclassified some of the notes included in this liquidity reserve, with a view to providing a clearer picture of the actual purpose of notes. This reclassification was enabled by Commission Regulation (EC) No. 1004/2008 of 15 October 2008 applying to IAS 39 and IFRS 7 and the Regulation is aimed at making it easier to reclassify certain financial instruments in rare circumstances. The underlying reason for adopting this Regulation lay in the current financial turmoil which is why reliable market prices were not available to all financial instruments on 30 September. Companies have been allowed to reclassify certain financial instruments since 1 July 2008. Reclassifying financial instruments is based on their fair values on 1 July 2008. The carrying amount of the reclassified notes totalled EUR 2.2 billion andthey were upon initial recognition classified as financial assets held for trading. With a view to providing clearer financial statements information, in the financial statements for 2007 these notes were reclassified out of the financial assets held for trading category into the Financial assets at fair value through profit or loss at inception category, under which they have been presented in the interim reports published thereafter. The reclassification was implemented in such a way that EUR 0.1 billion in financial assets held for trading was reclassified into the Loans and other receivables category, EUR 1.2 billion into the Available-for-sale financial assets category and EUR 1.0 billion into the Financial assets held to maturity category. Financial assets held to maturity comprise notes and the Group has the intention and ability to hold them until maturity. Notes reclassified as Loans and other receivables comprise other long-term debt instruments with fixed or determinable cash flows and any fair value is not available to them in an active market. Notes classified as Loans and other receivables or Financial assets held to maturity are recognised at cost. Available-for-sale financial assets are recognised at fair value in the balance sheet, and any subsequent changes in the fair value are recognised in the fair value reserve under shareholders' equity. If there is objective evidence of an impaired note, the reclassified note must be tested for impairment in accordance with Pohjola Bank Group's risk management principles. If the Group were not allowed to reclassify these financial assets, its fair value reserve would have been around EUR 7 million higher and its earnings after tax would have been some EUR 30-40 million lower. The parent company has complied with the aforementioned accounting policies in its financial statements. The reclassification has no effect on the results recorded for previous periods. Further amendments to IAS 39 and IFRS 7 are pending, which the Group is following closely. Formulae for key figures and 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 Cost/income ratio, % Personnel costs + Other administrative expenses + Other operating expenses / (Net interest income + Net income from Non-life Insurance + Net commissions and fees + Net trading income + Net investment income + Other operating income) x 100 Earnings/share (EPS) Profit for the period attributable to equity holders of the Parent / Average share-issue adjusted number of shares during the period Earnings/share (EPS), diluted The denominator is the average share-issue adjusted number of shares during the financial period plus the number of shares which will be obtained if all stock options are converted into shares, less the number of shares obtained through the exercise of all stock options multiplied by the share subscription price and divided by the average share price during the financial period. Earnings/share (EPS) at fair value (Profit for the period attributable to equity holders 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 on the balance sheet date Market capitalisation Number of shares x closing price on the balance sheet date Capital adequacy, % Own funds / Risk-weighted items x 100 Tier 1 ratio, % Tier 1 capital / Risk-weighted items 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 (excl. unwinding of discount) Claims and loss adjustment expenses / Net insurance premium revenue x 100 Expense ratio Operating expenses + Amortisation/adjustment of intangible assets related to company acquisition / Net insurance premium revenue x 100 Risk ratio (excl. unwinding of discount) Claims excl. loss adjustment expenses / Net insurance premium revenue x 100 Cost ratio Operating expenses and loss adjustment expenses / Net insurance premium revenue x 100 Combined ratio (excl. unwinding of discount) Loss ratio + expense ratio Risk ratio + cost ratio Operating key ratios Operating return on equity (ROE), % Banking: (+ Profit for the period + Change in fair value reserve after tax) / (+ 7% of risk-weighted commitments - Subordinated loans allocated to the business line (average of the beginning and end of period) x 100 Non-life Insurance: (+ Profit for the period + Amortisation and write-downs on intangible assets and goodwill related to the acquisition of non-life insurance business, and their tax effect + Change in fair value reserve after tax) / (+ 70% solvency ratio - Subordinated loans allocated to the business line (average of the beginning and end of period) or minimum capital required by the authorities, if this is larger) x 100 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 / Net insurance premium revenue x 100 Operating combined ratio Loss ratio + operating expense ratio Earnings performance by quarter -------------------------------------------------------------------------------- | | 2007 | 2008 | -------------------------------------------------------------------------------- | EUR million | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | -------------------------------------------------------------------------------- | | | | | | | | | -------------------------------------------------------------------------------- | Net interest income | 26 | 32 | 27 | 30 | 35 | 40 | 45 | -------------------------------------------------------------------------------- | Impairments of | 0 | 1 | 1 | -1 | -2 | -1 | 11 | | receivables | | | | | | | | -------------------------------------------------------------------------------- | Net interest income | 26 | 31 | 26 | 31 | 37 | 42 | 34 | | after impairments | | | | | | | | -------------------------------------------------------------------------------- | Net income from | 94 | 113 | 103 | 123 | 91 | 90 | 98 | | Non-life Insurance | | | | | | | | -------------------------------------------------------------------------------- | Net commissions and | 28 | 31 | 24 | 32 | 28 | 27 | 24 | | fees | | | | | | | | -------------------------------------------------------------------------------- | Net trading income | 7 | 3 | -16 | -27 | -44 | -2 | -26 | -------------------------------------------------------------------------------- | Net investment income | 10 | 13 | 5 | 1 | 5 | 3 | 0 | -------------------------------------------------------------------------------- | Other operating income | 13 | 24 | 15 | 20 | 15 | 13 | 14 | -------------------------------------------------------------------------------- | Total net income | 179 | 214 | 156 | 179 | 133 | 173 | 145 | -------------------------------------------------------------------------------- | Personnel costs | 41 | 45 | 37 | 43 | 45 | 47 | 38 | -------------------------------------------------------------------------------- | IT expenses | 11 | 11 | 10 | 11 | 12 | 12 | 9 | -------------------------------------------------------------------------------- | Depreciation and | 15 | 16 | 15 | 16 | 16 | 16 | 17 | | amortisation | | | | | | | | -------------------------------------------------------------------------------- | Other expenses | 47 | 43 | 38 | 41 | 42 | 44 | 38 | -------------------------------------------------------------------------------- | Total expenses | 114 | 114 | 100 | 112 | 115 | 119 | 102 | -------------------------------------------------------------------------------- | Earnings before tax | 65 | 100 | 56 | 67 | 17 | 54 | 43 | -------------------------------------------------------------------------------- | Change in fair value | 14 | -25 | -10 | -34 | -66 | -33 | -82 | | reserve | | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before | 79 | 75 | 46 | 33 | -48 | 20 | -39 | | tax at fair value | | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | | -------------------------------------------------------------------------------- | Income tax expense | 15 | 27 | 16 | 18 | 4 | 14 | 13 | -------------------------------------------------------------------------------- | Profit for the period | 50 | 73 | 40 | 49 | 13 | 39 | 30 | -------------------------------------------------------------------------------- | | | | | | | | | -------------------------------------------------------------------------------- | Tax on change in fair | 4 | -7 | -2 | -9 | -17 | -9 | -21 | | value reserve | | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss for the | 61 | 54 | 33 | 24 | -35 | 14 | -31 | | period at fair value | | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | | -------------------------------------------------------------------------------- | Return on equity, % | 13.7 | 12.2 | 7.1 | 5.1 | -8.0 | 3.4 | -7.2 | -------------------------------------------------------------------------------- | | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Segment information | | | | | | | -------------------------------------------------------------------------------- | Q3 earnings | | | | | | | -------------------------------------------------------------------------------- | EUR million | Banking | Asset | Non-life | | | | Management | Insurance | -------------------------------------------------------------------------------- | | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | -------------------------------------------------------------------------------- | Net interest income | 43 | 28 | 0 | -1 | -4 | -1 | -------------------------------------------------------------------------------- | Impairments of | 8 | 1 | | | | | | receivables | | | | | | | -------------------------------------------------------------------------------- | Net interest income | 35 | 27 | 0 | -1 | -4 | -1 | | after impairments | | | | | | | -------------------------------------------------------------------------------- | Net income from | | | | | 98 | 103 | | Non-life Insurance | | | | | | | -------------------------------------------------------------------------------- | Net commissions and | 14 | 14 | 10 | 12 | 1 | -1 | | fees | | | | | | | -------------------------------------------------------------------------------- | Net trading income | -10 | 7 | | | | | -------------------------------------------------------------------------------- | Net investment | 0 | 0 | | | | | | income | | | | | | | -------------------------------------------------------------------------------- | Other operating | 6 | 5 | 0 | 0 | 5 | 6 | | income | | | | | | | -------------------------------------------------------------------------------- | Total net income | 46 | 53 | 10 | 11 | 100 | 107 | -------------------------------------------------------------------------------- | Personnel costs | 7 | 9 | 3 | 4 | 25 | 23 | -------------------------------------------------------------------------------- | Amortisation on | | | 1 | 1 | 8 | 8 | | intangible assets | | | | | | | | related to company | | | | | | | | acquisitions | | | | | | | -------------------------------------------------------------------------------- | Other | 6 | 4 | 0 | 0 | 1 | 1 | | depreciation/amortis | | | | | | | | ation | | | | | | | | and | | | | | | | | impairments | | | | | | | -------------------------------------------------------------------------------- | Other expenses | 9 | 8 | 2 | 2 | 34 | 33 | -------------------------------------------------------------------------------- | Total expenses | 22 | 21 | 6 | 6 | 67 | 65 | -------------------------------------------------------------------------------- | Earnings before tax | 24 | 32 | 3 | 5 | 33 | 42 | -------------------------------------------------------------------------------- | Change in fair value | -4 | 0 | | | -52 | -6 | | reserve | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before | 20 | 32 | 3 | 5 | -19 | 35 | | tax | | | | | | | | at fair value | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- | Capital expenditure, | 1 | 1 | 0 | 0 | 3 | 2 | | EUR million | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Q3 earnings | | | | | | | -------------------------------------------------------------------------------- | EUR million | Group | Eliminations | Group total | | | Functions | | | -------------------------------------------------------------------------------- | | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | -------------------------------------------------------------------------------- | Net interest | 5 | 1 | 1 | 0 | 45 | 27 | | income | | | | | | | -------------------------------------------------------------------------------- | Impairments of | 3 | | | | 11 | 1 | | receivables | | | | | | | -------------------------------------------------------------------------------- | Net interest | 3 | 1 | 1 | 0 | 34 | 26 | | income after | | | | | | | | impairments | | | | | | | -------------------------------------------------------------------------------- | Net income from | | -2 | 0 | 1 | 98 | 103 | | Non-life Insurance | | | | | | | -------------------------------------------------------------------------------- | Net commissions | 0 | 0 | -1 | -1 | 24 | 24 | | and fees | | | | | | | -------------------------------------------------------------------------------- | Net trading income | -16 | -24 | 0 | | -26 | -16 | -------------------------------------------------------------------------------- | Net investment | 0 | 5 | | | 0 | 5 | | income | | | | | | | -------------------------------------------------------------------------------- | Other operating | 4 | 7 | -2 | -3 | 14 | 15 | | income | | | | | | | -------------------------------------------------------------------------------- | Total net income | -9 | -13 | -2 | -3 | 145 | 156 | -------------------------------------------------------------------------------- | Personnel costs | 3 | 2 | | | 38 | 37 | -------------------------------------------------------------------------------- | Amortisation on | | | | | 9 | 9 | | intangible assets | | | | | | | | related to company | | | | | | | | acquisitions | | | | | | | -------------------------------------------------------------------------------- | Other | 0 | 1 | | | 8 | 6 | | depreciation/amort | | | | | | | | isation | | | | | | | | and | | | | | | | | impairments | | | | | | | -------------------------------------------------------------------------------- | Other expenses | 5 | 8 | -2 | -3 | 48 | 48 | -------------------------------------------------------------------------------- | Total expenses | 8 | 10 | -2 | -3 | 102 | 100 | -------------------------------------------------------------------------------- | Earnings before | -17 | -23 | 0 | 0 | 43 | 56 | | tax | | | | | | | -------------------------------------------------------------------------------- | Change in fair | -26 | -3 | | | -82 | -10 | | value reserve | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss | -43 | -26 | | | -39 | 46 | | before tax | | | | | | | | at | | | | | | | | fair value | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- | Capital | 1 | 1 | | | 5 | 3 | | expenditure, EUR | | | | | | | | million | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- | Earnings per | | | | | 0.15 | 0.20 | | share, EUR | | | | | | | -------------------------------------------------------------------------------- | Return on equity | | | | | -7.2 | 7.1 | | at fair value, % | | | | | | | -------------------------------------------------------------------------------- | Q1-3 earnings | | | | | | | -------------------------------------------------------------------------------- | EUR million | Banking | Asset | Non-life Insurance | | | | Management | | -------------------------------------------------------------------------------- | | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | -------------------------------------------------------------------------------- | Net interest | 117 | 89 | -1 | -2 | -7 | -5 | | income | | | | | | | -------------------------------------------------------------------------------- | Impairments of | 7 | 2 | | | | | | receivables | | | | | | | -------------------------------------------------------------------------------- | Net interest | 110 | 87 | -1 | -2 | -7 | -5 | | income after | | | | | | | | impairments | | | | | | | -------------------------------------------------------------------------------- | Net income from | | | | | 280 | 312 | | Non-life Insurance | | | | | | | -------------------------------------------------------------------------------- | Net commissions | 47 | 47 | 32 | 35 | 3 | 5 | | and fees | | | | | | | -------------------------------------------------------------------------------- | Net trading income | -11 | 15 | | | | | -------------------------------------------------------------------------------- | Net investment | 0 | 1 | 0 | 0 | | | | income | | | | | | | -------------------------------------------------------------------------------- | Other operating | 19 | 13 | 1 | 1 | 12 | 24 | | income | | | | | | | -------------------------------------------------------------------------------- | Total net income | 165 | 163 | 31 | 34 | 289 | 336 | -------------------------------------------------------------------------------- | Personnel costs | 29 | 29 | 12 | 12 | 81 | 76 | -------------------------------------------------------------------------------- | Amortisation on | | | 2 | 2 | 25 | 25 | | intangible assets | | | | | | | | related to company | | | | | | | | acquisitions | | | | | | | -------------------------------------------------------------------------------- | Other | 17 | 12 | 1 | 0 | 2 | 2 | | depreciation/amort | | | | | | | | isation | | | | | | | | and | | | | | | | | impairments | | | | | | | -------------------------------------------------------------------------------- | Other expenses | 30 | 25 | 6 | 6 | 108 | 108 | -------------------------------------------------------------------------------- | Total expenses | 77 | 66 | 21 | 20 | 216 | 212 | -------------------------------------------------------------------------------- | Earnings before | 88 | 97 | 10 | 14 | 73 | 125 | | tax | | | | | | | -------------------------------------------------------------------------------- | Change in fair | -6 | -1 | | | -140 | -8 | | value reserve | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss | 82 | 97 | 10 | 14 | -67 | 117 | | before tax | | | | | | | | at | | | | | | | | fair value | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- | Average personnel | 591 | 544 | 152 | 146 | 2,326 | 2,248 | -------------------------------------------------------------------------------- | Capital | 3 | 3 | 1 | 1 | 9 | 7 | | expenditure, EUR | | | | | | | | million | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Q1-3 earnings | | | | | | | -------------------------------------------------------------------------------- | EUR million | Group Functions | Eliminations | Group total | -------------------------------------------------------------------------------- | | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | -------------------------------------------------------------------------------- | Net interest income | 9 | 0 | 3 | 3 | 120 | 85 | -------------------------------------------------------------------------------- | Impairments of | 1 | | | | 8 | 2 | | receivables | | | | | | | -------------------------------------------------------------------------------- | Net interest income | 9 | 0 | 3 | 3 | 113 | 83 | | after impairments | | | | | | | -------------------------------------------------------------------------------- | Net income from | | -2 | -1 | 0 | 280 | 310 | | Non-life Insurance | | | | | | | -------------------------------------------------------------------------------- | Net commissions and | 0 | 0 | -3 | -4 | 79 | 83 | | fees | | | | | | | -------------------------------------------------------------------------------- | Net trading income | -61 | -21 | 0 | | -72 | -7 | -------------------------------------------------------------------------------- | Net investment | 9 | 27 | | | 9 | 28 | | income | | | | | | | -------------------------------------------------------------------------------- | Other operating | 16 | 24 | -6 | -11 | 42 | 51 | | income | | | | | | | -------------------------------------------------------------------------------- | Total net income | -28 | 27 | -7 | -12 | 450 | 549 | -------------------------------------------------------------------------------- | Personnel costs | 8 | 6 | | | 130 | 123 | -------------------------------------------------------------------------------- | Amortisation on | | | | | 27 | 27 | | intangible assets | | | | | | | | related to company | | | | | | | | acquisitions | | | | | | | -------------------------------------------------------------------------------- | Other | 1 | 3 | | | 22 | 18 | | depreciation/amortis | | | | | | | | ation | | | | | | | | and | | | | | | | | impairments | | | | | | | -------------------------------------------------------------------------------- | Other expenses | 20 | 33 | -7 | -12 | 158 | 160 | -------------------------------------------------------------------------------- | Total expenses | 29 | 42 | -7 | -12 | 337 | 328 | -------------------------------------------------------------------------------- | Earnings before tax | -57 | -15 | 0 | 0 | 114 | 220 | -------------------------------------------------------------------------------- | Change in fair value | -35 | -12 | | | -181 | -20 | | reserve | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before | -92 | -28 | | | -67 | 200 | | tax | | | | | | | | at fair value | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- | Average personnel | 124 | 108 | | | 3,193 | 3,046 | -------------------------------------------------------------------------------- | Capital expenditure, | 2 | 3 | | | 15 | 13 | | EUR million | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- | Earnings per share, | | | | | 0.41 | 0.80 | | EUR | | | | | | | -------------------------------------------------------------------------------- | Return on equity at | | | | | -3.9 | 10.8 | | fair value, % | | | | | | | -------------------------------------------------------------------------------- | Balance sheet | | | | | | | -------------------------------------------------------------------------------- | EUR million | Banking | Asset | Non-life | | | | Management | Insurance | -------------------------------------------------------------------------------- | | 30 | 31 Dec | 30 | 31 Dec | 30 | 31 | | | Sept | 2007 | Sept | 2007 | Sept | Dec | | | 2 | | 2 | | 20 | 200 | | | 008 | | 008 | | 08 | 7 | -------------------------------------------------------------------------------- | Receivables from | 11,184 | 9,253 | 0 | | | | | customers | | | | | | | -------------------------------------------------------------------------------- | Receivables from | 524 | 270 | 6 | 6 | | | | financial | | | | | | | | institutions | | | | | | | -------------------------------------------------------------------------------- | Financial assets at | 1,412 | 1,352 | | | | | | fair value through | | | | | | | | profit or loss | | | | | | | -------------------------------------------------------------------------------- | Non-life Insurance | | | | | 3,084 | 2,842 | | assets | | | | | | | -------------------------------------------------------------------------------- | Investment assets | 359 | 25 | 17 | 23 | 0 | 0 | -------------------------------------------------------------------------------- | Investments in | | | | | 2 | 2 | | associates | | | | | | | -------------------------------------------------------------------------------- | Other assets | 1,748 | 1,486 | 125 | 134 | 863 | 875 | -------------------------------------------------------------------------------- | Total assets | 15,227 | 12,385 | 149 | 163 | 3,950 | 3,719 | -------------------------------------------------------------------------------- | Liabilities to | 653 | 462 | | | | | | customers | | | | | | | -------------------------------------------------------------------------------- | Liabilities to | 568 | 261 | | | 0 | | | financial | | | | | | | | institutions | | | | | | | -------------------------------------------------------------------------------- | Non-life Insurance | | | | | 2,469 | 2,140 | | liabilities | | | | | | | -------------------------------------------------------------------------------- | Debt securities | | | | | | | | issued to the public | | | | | | | -------------------------------------------------------------------------------- | Subordinated | | | | | 50 | | | liabilities | | | | | | | -------------------------------------------------------------------------------- | Other liabilities | 2,085 | 1,578 | 13 | 17 | 77 | 100 | -------------------------------------------------------------------------------- | Total liabilities | 3,305 | 2,301 | 13 | 17 | 2,597 | 2,241 | -------------------------------------------------------------------------------- | Shareholders' equity | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Balance sheet | | | | | | | -------------------------------------------------------------------------------- | EUR million | Group Functions | Eliminations | Group total | -------------------------------------------------------------------------------- | | 30 | 31 | 30 | 31 | 30 | 31 | | | Sept | Dec | Sept | Dec | Sept | Dec | | | 2 | 20 | 2 | 20 | 20 | 200 | | | 008 | 07 | 008 | 07 | 08 | 7 | -------------------------------------------------------------------------------- | Receivables from | 236 | 48 | | -13 | 11,420 | 9,288 | | customers | | | | | | | -------------------------------------------------------------------------------- | Receivables from | 6,462 | 5,409 | -302 | -19 | 6,691 | 5,665 | | financial | | | | | | | | institutions | | | | | | | -------------------------------------------------------------------------------- | Financial assets at | 2,280 | 3,349 | | | 3,691 | 4,701 | | fair value through | | | | | | | | profit or loss | | | | | | | -------------------------------------------------------------------------------- | Non-life Insurance | | | -162 | -33 | 2,922 | 2,809 | | assets | | | | | | | -------------------------------------------------------------------------------- | Investment assets | 3,575 | 685 | -5 | -8 | 3,945 | 725 | -------------------------------------------------------------------------------- | Investments in | | | | | 2 | 2 | | associates | | | | | | | -------------------------------------------------------------------------------- | Other assets | 553 | 301 | -27 | -63 | 3,262 | 2,732 | -------------------------------------------------------------------------------- | Total assets | 13,105 | 9,792 | -496 | -137 | 31,934 | 25,922 | -------------------------------------------------------------------------------- | Liabilities to | 2,202 | 2,324 | -44 | -48 | 2,811 | 2,738 | | customers | | | | | | | -------------------------------------------------------------------------------- | Liabilities to | 6,027 | 2,480 | -280 | -2 | 6,314 | 2,739 | | financial | | | | | | | | institutions | | | | | | | -------------------------------------------------------------------------------- | Non-life Insurance | | | | | 2,469 | 2,140 | | liabilities | | | | | | | -------------------------------------------------------------------------------- | Debt securities | 14,150 | 12,879 | -144 | -24 | 14,005 | 12,856 | | issued to the public | | | | | | | -------------------------------------------------------------------------------- | Subordinated | 1,174 | 950 | | | 1,224 | 950 | | liabilities | | | | | | | -------------------------------------------------------------------------------- | Other liabilities | 1,276 | 998 | -27 | -63 | 3,424 | 2,630 | -------------------------------------------------------------------------------- | Total liabilities | 24,828 | 19,631 | -496 | -137 | 30,247 | 24,053 | -------------------------------------------------------------------------------- | Shareholders' equity | | | | | 1,687 | 1,869 | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- | Capital adequacy | | | | | 11.4 | 11.8 | | ratio, % | | | | | | | -------------------------------------------------------------------------------- | Tier 1 ratio, % | | | | | 9.3 | 9.9 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Banking | -------------------------------------------------------------------------------- | | -------------------------------------------------------------------------------- | | Net income | Earnings | Net income | Earnings/loss | | | | before tax | | before tax | -------------------------------------------------------------------------------- | | Q3/ | Q3/ | Q3/ | Q3/ | Q1-3 | Q1-3/ | Q1-3/ | Q1-3/ | | | 2008 | 2007 | 2008 | 2007 | / | 2007 | 2008 | 2007 | | | | | | | 20 | | | | | | | | | | 08 | | | | -------------------------------------------------------------------------------- | Corporate Banking | 44 | 38 | 28 | 24 | 131 | 116 | 78 | 72 | -------------------------------------------------------------------------------- | Markets | 1 | 16 | -3 | 9 | 32 | 47 | 11 | 25 | -------------------------------------------------------------------------------- | Baltic Banking | 0 | 0 | -1 | 0 | 2 | 0 | -2 | 0 | -------------------------------------------------------------------------------- | Total | 46 | 53 | 24 | 32 | 165 | 163 | 88 | 97 | -------------------------------------------------------------------------------- | | | | | | | | | | -------------------------------------------------------------------------------- | | Q3/ | Q3/ | Q1-3 | Q1-3 | | | | | | | 2008 | 2007 | / | / | | | | | | | | | 20 | 20 | | | | | | | | | 08 | 07 | | | | | -------------------------------------------------------------------------------- | Operating return | 8.1 | 14.1 | 10.9 | 15.0 | | | | | | on | | | | | | | | | | equity (ROE) | | | | | | | | | | p.a., % | | | | | | | | | -------------------------------------------------------------------------------- | Operating | 41.4 | 38.8 | 44.8 | 40.0 | | | | | | cost/income | | | | | | | | | | ratio, % | | | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | | | -------------------------------------------------------------------------------- | | 30 | 31 | | | | | | | | | Sept | Dec | | | | | | | | | 200 | 200 | | | | | | | | | 8 | 7 | | | | | | | -------------------------------------------------------------------------------- | Receivables from | 11.5 | 9.3 | | | | | | | | customers, | | | | | | | | | | EUR | | | | | | | | | | billion | | | | | | | | | -------------------------------------------------------------------------------- | Market share of | 17,8 | 17.3 | | | | | | | | corporate loans, | *) | | | | | | | | | % | | | | | | | | | -------------------------------------------------------------------------------- | Proportion of | 0.2 | 0.1 | | | | | | | | doubtful | | | | | | | | | | receivables to | | | | | | | | | | receivables from | | | | | | | | | | customers and | | | | | | | | | | guarantees, % | | | | | | | | | -------------------------------------------------------------------------------- | Margin on | 0.86 | 0.81 | | | | | | | | corporate loan | | | | | | | | | | portfolio, % | | | | | | | | | -------------------------------------------------------------------------------- | Margin on | 0.24 | 0.23 | | | | | | | | institutional | | | | | | | | | | loan portfolio, % | | | | | | | | | -------------------------------------------------------------------------------- *) August -------------------------------------------------------------------------------- | Asset Management | | | -------------------------------------------------------------------------------- | | 30 Sept | 31 Dec | | | 2008 | 2007 | -------------------------------------------------------------------------------- | | | | -------------------------------------------------------------------------------- | Assets under management, | 27.3 | 31.5 | | EUR billion | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Non-life | Earnings before tax | | | | | | Insurance, EUR | | | | | | | million | | | | | | -------------------------------------------------------------------------------- | | Q3/ | Q3/ | Q1-3 | Q1-3 | | | | | | | 2008 | 2007 | / | / | | | | | | | | | 20 | 20 | | | | | | | | | 08 | 07 | | | | | -------------------------------------------------------------------------------- | Insurance premium | 241 | 217 | 697 | 639 | | | | | | revenue | | | | | | | | | -------------------------------------------------------------------------------- | Claims incurred | -149 | -152 | -484 | -458 | | | | | -------------------------------------------------------------------------------- | Operating expenses | -45 | -42 | -143 | -137 | | | | | -------------------------------------------------------------------------------- | Amortisation | -6 | -6 | -20 | -19 | | | | | | adjustment of | | | | | | | | | | intangible assets | | | | | | | | | -------------------------------------------------------------------------------- | Balance on | 41 | 16 | 50 | 25 | | | | | | technical account | | | | | | | | | -------------------------------------------------------------------------------- | Investment | 6 | 38 | 61 | 126 | | | | | | income/expenses | | | | | | | | | -------------------------------------------------------------------------------- | Other income and | -13 | -13 | -39 | -27 | | | | | | expenses | | | | | | | | | -------------------------------------------------------------------------------- | Earnings before | 33 | 42 | 73 | 125 | | | | | | tax | | | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | -------------------------------------------------------------------------------- | | -------------------------------------------------------------------------------- | | Insurance | Balance on | Insurance | Balance on | | | p | technical | p | technical | | | remium | account | remium | account | | | revenue | | revenue | | -------------------------------------------------------------------------------- | | Q3/ | Q3/ | Q3/ | Q3/ | Q1-3 | Q1-3 | Q1-3/ | Q1-3/ | | | 2008 | 2007 | 2008 | 2007 | / | / | 2008 | 2007 | | | | | | | 20 | 20 | | | | | | | | | 08 | 07 | | | -------------------------------------------------------------------------------- | Private Customers | 101 | 94 | 21 | 8 | 287 | 266 | 35 | 20 | -------------------------------------------------------------------------------- | Corporate | 125 | 109 | 24 | 13 | 366 | 332 | 30 | 21 | | Customers | | | | | | | | | -------------------------------------------------------------------------------- | Baltic States | 15 | 14 | 2 | 2 | 43 | 41 | 5 | 3 | -------------------------------------------------------------------------------- | Amortisation | | | -6 | -6 | | | -20 | -19 | | adjustment of | | | | | | | | | | intangible assets | | | | | | | | | -------------------------------------------------------------------------------- | Total | 241 | 217 | 41 | 17 | 697 | 639 | 50 | 25 | -------------------------------------------------------------------------------- | | | | | | | | | | -------------------------------------------------------------------------------- | | Q3/ | Q3/ | Q1-3 | Q1-3 | | | | | | | 2008 | 2007 | / | / | | | | | | | | | 20 | 20 | | | | | | | | | 08 | 07 | | | | | -------------------------------------------------------------------------------- | Operating return | -7.3 | 23.7 | -9.1 | 27.7 | | | | | | on equity (ROE), % | | | | | | | | | -------------------------------------------------------------------------------- | Operating loss | 61.9 | 70.0 | 69.4 | 71.7 | | | | | | ratio, % | | | | | | | | | -------------------------------------------------------------------------------- | Operating expense | 18.8 | 19.4 | 20.6 | 21.4 | | | | | | ratio, % | | | | | | | | | -------------------------------------------------------------------------------- | Operating combined | 80.7 | 89.5 | 90.0 | 93.0 | | | | | | ratio, % | | | | | | | | | -------------------------------------------------------------------------------- | Return on | -1.7 | 1.1 | -2.8 | 4.6 | | | | | | investment, % | | | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | | | -------------------------------------------------------------------------------- | No. of losses in | 15 | 22 | 57 | 62 | | | | | | excess | | | | | | | | | | of EUR 0.1 | | | | | | | | | | million | | | | | | | | | -------------------------------------------------------------------------------- | | 30 | 31 | | | | | | | | | Sept | Dec | | | | | | | | | 200 | 200 | | | | | | | | | 8 | 7 | | | | | | | -------------------------------------------------------------------------------- | No. of loyal | 382 | 355 | | | | | | | | customer | | | | | | | | | | household | | | | | | | | | | s, 1,000 | | | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | | | -------------------------------------------------------------------------------- | Discounted | 1,26 | 1,24 | | | | | | | | insurance | 3 | 4 | | | | | | | | contract | | | | | | | | | | liabilities | | | | | | | | | -------------------------------------------------------------------------------- | Other insurance | 936 | 773 | | | | | | | | contract | | | | | | | | | | liabilities | | | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Line of insurance | -------------------------------------------------------------------------------- | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | Insurance | Balance on | | | | p | technical | | | | remium | account | | | | revenue | | | -------------------------------------------------------------------------------- | | Q3/ | Q3/ | Q1-3 | Q1-3 | | | | | | | 2008 | 2007 | / | / | | | | | | | | | 20 | 20 | | | | | | | | | 08 | 07 | | | | | -------------------------------------------------------------------------------- | Statutory workers' | 140 | 140 | 24 | 11 | | | | | | compensation | | | | | | | | | | insurance | | | | | | | | | -------------------------------------------------------------------------------- | Other accident and | 62 | 49 | 0 | -6 | | | | | | health insurance | | | | | | | | | -------------------------------------------------------------------------------- | Liability | 26 | 23 | 3 | 1 | | | | | -------------------------------------------------------------------------------- | Motor vehicle | 129 | 123 | 13 | 14 | | | | | | liability | | | | | | | | | | insurance | | | | | | | | | -------------------------------------------------------------------------------- | Ground vehicles | 107 | 101 | 1 | 3 | | | | | -------------------------------------------------------------------------------- | Cargo | 21 | 22 | 6 | 5 | | | | | -------------------------------------------------------------------------------- | Fire and property | 120 | 100 | 21 | 5 | | | | | -------------------------------------------------------------------------------- | Other | 27 | 23 | 8 | 1 | | | | | -------------------------------------------------------------------------------- | Total domestic | 631 | 581 | 76 | 35 | | | | | | direct insurance | | | | | | | | | -------------------------------------------------------------------------------- | Foreign insurance | 65 | 57 | -6 | 9 | | | | | -------------------------------------------------------------------------------- | Domestic | 1 | 1 | 0 | 0 | | | | | | reinsurance | | | | | | | | | -------------------------------------------------------------------------------- | Total other | 66 | 58 | -6 | 9 | | | | | -------------------------------------------------------------------------------- | Total | 697 | 639 | 69 | 44 | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Group Functions | Q3/ | Q3/ | Q1-3/ | Q1-3/ | | | 200 | 2007 | 20 | 20 | | | 8 | | 08 | 07 | -------------------------------------------------------------------------------- | Central Banking earnings | 5 | 5 | 15 | 14 | | before | | | | | | tax, EUR million | | | | | -------------------------------------------------------------------------------- | | 30 Sept | 31 Dec | | | | | 2008 | 2007 | | | -------------------------------------------------------------------------------- | Receivables from OP-Pohjola | 4,217 | 5,072 | | | | Group entities, EUR million | | | | | -------------------------------------------------------------------------------- | Liabilities to OP-Pohjola Group | 2,713 | 2,217 | | | | entities, EUR million | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Consolidated income | | | | | | | | statement | | | | | | | -------------------------------------------------------------------------------- | EUR million | | | Q3/ | Q3/ | Q1-3/ | Q1-3/ | | -------------------------------------------------------------------------------- | | | | | 08 | 07 | 08 | 07 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest income | | | 814 | 583 | 2,260 | 1,566 | | -------------------------------------------------------------------------------- | Interest expenses | | | 769 | 556 | 2,140 | 1,481 | | -------------------------------------------------------------------------------- | Net interest income | | 45 | 27 | 120 | 85 | | | (Note 1) | | | | | | | -------------------------------------------------------------------------------- | Impairments of | | 11 | 1 | 8 | 2 | | | receivables (Note 2) | | | | | | | -------------------------------------------------------------------------------- | Net interest income after | 34 | 26 | 113 | 83 | | | impairments | | | | | | -------------------------------------------------------------------------------- | Net income from Non-life | 98 | 103 | 280 | 310 | | | Insurance (Note 3) | | | | | | -------------------------------------------------------------------------------- | Net commissions and | | 24 | 24 | 79 | 83 | | | fees (Note 4) | | | | | | | -------------------------------------------------------------------------------- | Net trading income | | -26 | -16 | -72 | -7 | | | (Note 5) | | | | | | | -------------------------------------------------------------------------------- | Net investment income | | 0 | 5 | 9 | 28 | | | (Note 6) | | | | | | | -------------------------------------------------------------------------------- | Other operating income | | 14 | 15 | 42 | 51 | | | (Note 7) | | | | | | | -------------------------------------------------------------------------------- | Total income | | | 145 | 156 | 450 | 549 | | -------------------------------------------------------------------------------- | Personnel costs (Note | | 38 | 37 | 130 | 123 | | | 8) | | | | | | | -------------------------------------------------------------------------------- | Other administrative expenses | 20 | 34 | 99 | 107 | | | (Note 9) | | | | | | -------------------------------------------------------------------------------- | Other operating | | 44 | 29 | 107 | 99 | | | expenses (Note 10) | | | | | | | -------------------------------------------------------------------------------- | Total expenses | | | 102 | 100 | 337 | 328 | | -------------------------------------------------------------------------------- | Earnings before tax | | | 43 | 56 | 114 | 220 | | -------------------------------------------------------------------------------- | Income tax expense | | | 13 | 16 | 31 | 58 | | -------------------------------------------------------------------------------- | Profit for the | | | 30 | 40 | 83 | 163 | | | period | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Basic earnings per | | | | | | | | share (EPS), EUR | | | | | | | -------------------------------------------------------------------------------- | Series A | | | | 0.15 | 0.20 | 0.41 | 0.80 | | -------------------------------------------------------------------------------- | Series K | | | | 0.15 | 0.19 | 0.40 | 0.79 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Consolidated balance | | | | | | | | sheet | | | | | | | -------------------------------------------------------------------------------- | EUR million | | | 30 | 31 Dec | | | | | | | | Sept | 2007 | | | | | | | | 2008 | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Liquid assets | | | 2,488 | 448 | | | | -------------------------------------------------------------------------------- | Receivables from financial | 4,203 | 5,217 | | | | | institutions | | | | | | -------------------------------------------------------------------------------- | Financial assets at fair value | | | | | | | through profit or loss (Note | | | | | | | 11) | | | | | | -------------------------------------------------------------------------------- | Financial assets held | | 3,569 | 2,220 | | | | | for trading | | | | | | | -------------------------------------------------------------------------------- | Financial assets at fair value | 122 | 2,481 | | | | | through profit or loss at | | | | | | | inception | | | | | | -------------------------------------------------------------------------------- | Derivative | | | 808 | 528 | | | | | contracts | | | | | | | | -------------------------------------------------------------------------------- | Receivables from | | 11,420 | 9,288 | | | | | customers | | | | | | | -------------------------------------------------------------------------------- | Non-life Insurance | | 2,922 | 2,809 | | | | | assets (Note 12) | | | | | | | -------------------------------------------------------------------------------- | Investment assets | | 3,945 | 725 | | | | | (Note 13) | | | | | | | -------------------------------------------------------------------------------- | Investment in | | 2 | 2 | | | | | associates | | | | | | | -------------------------------------------------------------------------------- | Intangible assets | | 994 | 999 | | | | | (Note 14) | | | | | | | -------------------------------------------------------------------------------- | Property, plant and | | 129 | 97 | | | | | equipment (PPE) | | | | | | | -------------------------------------------------------------------------------- | Other assets | | | 1,267 | 1,090 | | | | -------------------------------------------------------------------------------- | Tax assets | | | | 65 | 18 | | | | -------------------------------------------------------------------------------- | Total assets | | | 31,934 | 25,922 | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Liabilities to | | 6,314 | 2,739 | | | | | financial institutions | | | | | | | -------------------------------------------------------------------------------- | Financial liabilities at fair | | | | | | | value through profit or loss | | | | | | -------------------------------------------------------------------------------- | Financial assets held | | 506 | 52 | | | | | for trading | | | | | | | -------------------------------------------------------------------------------- | Derivative | | | 767 | 548 | | | | | contracts | | | | | | | | -------------------------------------------------------------------------------- | Liabilities to | | | 2,811 | 2,738 | | | | | customers | | | | | | | | -------------------------------------------------------------------------------- | Non-life Insurance liabilities | 2,469 | 2,140 | | | | | (Note 15) | | | | | | -------------------------------------------------------------------------------- | Debt securities issued to the | 14,005 | 12,856 | | | | | public (Note 16) | | | | | | -------------------------------------------------------------------------------- | Provisions and other | | 1,791 | 1,659 | | | | | liabilities | | | | | | | -------------------------------------------------------------------------------- | Tax liabilities | | | 360 | 371 | | | | -------------------------------------------------------------------------------- | Subordinated | | 1,224 | 950 | | | | | liabilities (Note 17) | | | | | | | -------------------------------------------------------------------------------- | Total liabilities | | | 30,247 | 24,053 | | | | -------------------------------------------------------------------------------- | Shareholders' | | | | | | | | | equity | | | | | | | | -------------------------------------------------------------------------------- | Capital and reserves | | | | | | | attributable to equity holders | | | | | | | of the Parent | | | | | | -------------------------------------------------------------------------------- | Share capital | | | 428 | 428 | | | | -------------------------------------------------------------------------------- | Reserves | | | 668 | 757 | | | | -------------------------------------------------------------------------------- | Retained earnings | | | 591 | 685 | | | | -------------------------------------------------------------------------------- | Total shareholders' | | 1,687 | 1,869 | | | | | equity | | | | | | | -------------------------------------------------------------------------------- | Total liabilities and | 31,934 | 25,922 | | | | | shareholders' equity | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Consolidated statement of | | | | | | | changes in equity | | | | | | -------------------------------------------------------------------------------- | EUR million | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | | | Attributable to equity holders of Pohjola Bank | | | | | Group | -------------------------------------------------------------------------------- | | | | Share | Fair | Other | Retained | | | | | capital | value | reserves | earnings | | | | | | reserve | | | -------------------------------------------------------------------------------- | | Minori | Total | | | ty | equity | | | intere | | | | st | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Balance at 1 January | 428 | 47 | 747 | 607 | 0 | 1,828 | | 2007 | | | | | | | -------------------------------------------------------------------------------- | Available-for-sale | | | | | | | | financial assets | | | | | | | -------------------------------------------------------------------------------- | Fair value gains and | | 17 | | | | 17 | | losses | | | | | | | -------------------------------------------------------------------------------- | Amount transferred | | -38 | | | | -38 | | to income statement | | | | | | | -------------------------------------------------------------------------------- | Deferred taxes | | | 5 | | | | 5 | -------------------------------------------------------------------------------- | Net income | | -15 | | | | -15 | | recognised in | | | | | | | | shareholders' equity | | | | | | | -------------------------------------------------------------------------------- | Profit for the | | | | | 163 | 0 | 163 | | period | | | | | | | | -------------------------------------------------------------------------------- | Total recognised | | -15 | | 163 | 0 | 148 | | income and expenses | | | | | | | | for the period | | | | | | | -------------------------------------------------------------------------------- | Dividends paid | | | | | | | | | on | | | | | | | | -------------------------------------------------------------------------------- | Series A share | | | | | -104 | | -104 | -------------------------------------------------------------------------------- | Series K share | | | | | -27 | | -27 | -------------------------------------------------------------------------------- | Transfer of | | | | 4 | -4 | | | | reserves | | | | | | | | -------------------------------------------------------------------------------- | Balance at 30 | 428 | 32 | 750 | 635 | 0 | 1,845 | | September 2007 | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | | | Attributable to equity holders of Pohjola | | | | | Bank Group | -------------------------------------------------------------------------------- | | | | Share | Fair | Other | Retained | | | | | capital | value | reserves | earnings | | | | | | reserve | | | -------------------------------------------------------------------------------- | | Minori | Total | | | ty | equity | | | intere | | | | st | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Balance at 1 January | 428 | 7 | 750 | 685 | 0 | 1,869 | | 2008 | | | | | | | -------------------------------------------------------------------------------- | Available-for-sale | | | | | | | | financial assets | | | | | | | -------------------------------------------------------------------------------- | Fair value gains and | | -192 | | | | -192 | | losses | | | | | | | -------------------------------------------------------------------------------- | Amount transferred to | | 11 | | | | 11 | | income statement | | | | | | | -------------------------------------------------------------------------------- | Deferred | | | 47 | | | | 47 | | taxes | | | | | | | | -------------------------------------------------------------------------------- | Net income recognised | | -134 | | | | -134 | | in shareholders' | | | | | | | | equity | | | | | | | -------------------------------------------------------------------------------- | Profit for | | | | | 83 | 0 | 82 | | the period | | | | | | | | -------------------------------------------------------------------------------- | Total recognised | | -134 | | 82 | 0 | -52 | | income and expenses | | | | | | | | for the period | | | | | | | -------------------------------------------------------------------------------- | Dividends | | | | | | | | | paid on | | | | | | | | -------------------------------------------------------------------------------- | Series A | | | | | -104 | | -104 | | share | | | | | | | | -------------------------------------------------------------------------------- | Series K | | | | | -27 | | -27 | | share | | | | | | | | -------------------------------------------------------------------------------- | Transfer of | | | | 45 | -45 | | | | reserves | | | | | | | | -------------------------------------------------------------------------------- | Equity-settled | | | | 0 | | 0 | | share-based | | | | | | | | transactions | | | | | | | -------------------------------------------------------------------------------- | Balance at 30 | 428 | -128 | 795 | 591 | 0 | 1,687 | | September 2008 | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Own funds and capital | | | | | | | adequacy | | | | | | -------------------------------------------------------------------------------- | EUR million | | | 30 Sept | 30 June | 31 | 31 Dec | | | | | 2008 | 2008 | March | 2007 | | | | | | | 2008 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Own funds | | | | | | | | -------------------------------------------------------------------------------- | Equity capital | | | 1,687 | 1,718 | 1,703 | 1,869 | -------------------------------------------------------------------------------- | Minority interest | | | 0 | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Hybrid capital *) | | | 264 | 265 | 224 | 224 | -------------------------------------------------------------------------------- | Intangible assets | | | -143 | -143 | -141 | -129 | -------------------------------------------------------------------------------- | Fair value reserve, excess funding | -6 | -46 | -63 | -114 | | of pension liability, change in | | | | | | equalisation provision and change in | | | | | | fair value of investment property | | | | | -------------------------------------------------------------------------------- | Dividend distribution proposed by | | | | -131 | | Board of Directors | | | | | -------------------------------------------------------------------------------- | Planned dividend | | -41 | -26 | -7 | | | distribution | | | | | | -------------------------------------------------------------------------------- | Insurance company investments 50% | -522 | -535 | -535 | -535 | -------------------------------------------------------------------------------- | Impairments - expected losses 50% | -36 | -39 | -33 | -33 | -------------------------------------------------------------------------------- | Tier 1 capital | | | 1,203 | 1,194 | 1,149 | 1,153 | -------------------------------------------------------------------------------- | Fair value reserve | | | -128 | -67 | -42 | 7 | -------------------------------------------------------------------------------- | Subordinated liabilities included in | 308 | 307 | 299 | 299 | | upper Tier 2 | | | | | -------------------------------------------------------------------------------- | Subordinated liabilities included in | 656 | 657 | 657 | 488 | | lower Tier 2 | | | | | -------------------------------------------------------------------------------- | Insurance company investments 50% | -522 | -535 | -535 | -535 | -------------------------------------------------------------------------------- | Impairments - expected losses 50% | -36 | -39 | -33 | -33 | -------------------------------------------------------------------------------- | Tier 2 capital**) | | | 279 | 323 | 346 | 226 | -------------------------------------------------------------------------------- | Total own funds ***) | | | 1,482 | 1,517 | 1,494 | 1,378 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Risk-weighted commitments, excl. | 12,217 | 11,939 | 11,755 | 10,745 | | transitional provisions | | | | | -------------------------------------------------------------------------------- | Risk-weighted commitments according | 12,976 | 12,198 | 12,147 | 11,705 | | to transitional provisions | | | | | -------------------------------------------------------------------------------- | Ratios, excl. transitonal | | | | | | provisions: | | | | | -------------------------------------------------------------------------------- | Capital adequacy ratio, % | 12.1 | 12.7 | 12.7 | 12.8 | -------------------------------------------------------------------------------- | Ratio of Tier 1 to total | 9.8 | 10.0 | 9.8 | 10.7 | | risk-weighted items, % | | | | | -------------------------------------------------------------------------------- | Capital adequacy ratio under the Act | 1.38 | 1.46 | 1.40 | 1.49 | | on Supervision of Financial and | | | | | | Insurance Conglomerates | | | | | -------------------------------------------------------------------------------- | Ratios according to transitional | | | | | | provisions: | | | | | -------------------------------------------------------------------------------- | Capital adequacy ratio, % | | 11.4 | 12.4 | 12.3 | 11.8 | -------------------------------------------------------------------------------- | Ratio of Tier 1 to total | 9.3 | 9.8 | 9.5 | 9.9 | | risk-weighted items, % | | | | | -------------------------------------------------------------------------------- | Capital adequacy ratio under the Act | 1.31 | 1.43 | 1.36 | 1.38 | | on Supervision of Financial and | | | | | | Insurance Conglomerates | | | | | -------------------------------------------------------------------------------- Own funds and capital adequacy measurement is based on approaches under Basel II. Pohjola Bank has used the Internal Ratings Based Approach for corporate exposures. Figures for previous periods have been converted into comparable ones. OP-Pohjola Group's capital adequacy ratio under the Act on Credit Institutions stood at 12.4% and the ratio of Tier 1 to total risk-weighted items at 12.4%. OP-Pohjola Group's capital adequacy ratio calculated using the consolidation method, under the Act on the Supervision of Financial and Insurance Conglomerates, was 1.48. *) Pohjola Bank plc has five loans under hybrid capital classified as Tier 1 capital: Hybrid capital of 10 billion Japanese yen of which EUR 74 million has been classified as Tier 1 capital. The loan carries a fixed interest rate of 4.23% until 2034 and thereafter a variable 6-month Yen LIBOR + 1.58%. If interest cannot be paid for a given interest period, the obligation to pay interest will lapse. The loan may be called in at the earliest in 2014. Hybrid capital of EUR 50 million, which is a perpetual loan without interest rate step-ups, but with an 8% interest rate cap. Issued on 31 March 2005, the loan carries an interest rate of 6.5% for the first year. Thereafter, the interest rate will be CMS 10 years + 0.1%, payable on an annual basis. If interest cannot be paid for a given interest period, the obligation to pay interest will lapse. Subject to authorisation by the Financial Supervision Authority, the loan may be called in at the earliest in 2010. Hybrid capital of EUR 60 million, which is a perpetual loan. Issued on 30 November 2005, the loan carries a variable interest rate based on 3-month Euribor + 0.65% until 2015 and thereafter variable 3-month Euribor + 1.65%, payable on a quarterly basis. If interest cannot be paid for a given interest period, the obligation to pay interest will lapse. Subject to authorisation by the Financial Supervision Authority, the loan may be called in at the earliest in 2015. Hybrid capital of EUR 40 million, which is a perpetual loan. Issued on 30 November 2005, the loan carries a variable interest rate based on 3-month Euribor + 1.25%, payable on a quarterly basis. If interest cannot be paid for a given interest period, the obligation to pay interest will lapse. Subject to authorisation by the Financial Supervision Authority, the loan may be called in at the earliest in 2010. Tier 1 perpetual bond of EUR 50 million. Issued on 17 June 2008, the bond carries a variable interest rate based on 3-month Euribor + 3.05%, payable on a quarterly basis. If interest cannot be paid for a given interest period, the obligation to pay interest will lapse. Subject to authorisation by the Financial Supervision Authority, the bond may be called in at the earliest in 2013. A total of EUR 40 million of the bond is included in Tier 1 capital and EUR 10 million in upper Tier 2 capital. Pohjola Insurance Ltd's perpetual capital bond of EUR 50 million. Issued on 17 June 2008, the bond carries a variable interest rate based on 3-month Euribor + 3.05%, payable on a quarterly basis. Interest which cannot be paid on the interest payment date and interest which Pohjola Insurance Ltd could not have paid for previous interest payment dates constitute 'Unpaid interest'. Interest will accrue on unpaid interest in accordance with the interest rate applicable to the bonds and this additional interest accrued until each interest payment date will be added to unpaid interest on the interest payment date in question. The issuer agrees not to distribute dividends or other profit or to buy back own shares until unpaid interest has been paid in its entirety. The bond may be called in at the earliest in 2013 and its principal can be paid back only if the statutory terms and conditions are fulfilled. The bond will not be taken into account in the capital adequacy measurement under the Act on Credit Institutions but can be fully utilised in the capital adequacy measurement of the insurance company. **) On 25 March 2008, the Group issued a 10-year debenture loan worth EUR 170 million classified as Tier 2 capital. The loan carries a variable interest based on 3-month Euribor + 1.90% until 2013 and thereafter 3-month Euribor + 1.50%. Subject to authorisation by the Financial Supervision Authority, the loan may be called in at the earliest in 2013. **) On 3 March 2008, the Group issued a 5-year debenture loan worth EUR 3.5 million classified as Tier 2 capital and its subscription period expired on 25 April 2008. The loan is subject to equal annual payments and will expire on 3 March 2013. The loan carries a fixed interest of 4.10%. ***) Based on special permission given by the Financial Supervision Authority in accordance with subsection 5, section 75 of the Credit Institutions Act, the following investments in venture capital funds, totalling EUR 5 million and managed by Pohjola Capital Partners Ltd, have not been deducted from own funds: Promotion Equity I Ky, Promotion Capital I Ky, Promotion Bridge I Ky, Suomi Välirahoitusrahasto I Ky and Suomi Yritysjärjestelyrahasto I Ky. -------------------------------------------------------------------------------- | Risk exposure by Banking | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total exposure by rating category*, EUR billion | | -------------------------------------------------------------------------------- | Rating | 30 Sept 2008 | 31 Dec 2007 | Change | | | category | | | | | -------------------------------------------------------------------------------- | 1-2 | 2.9 | 2.8 | 0.1 | | -------------------------------------------------------------------------------- | 3-5 | 10.5 | 9.2 | 1.3 | | -------------------------------------------------------------------------------- | 6-7 | 4.4 | 3.2 | 1.2 | | -------------------------------------------------------------------------------- | 8-9 | 1.8 | 1.6 | 0.1 | | -------------------------------------------------------------------------------- | 10 | 0.1 | 0.0 | 0.1 | | -------------------------------------------------------------------------------- | 11-12 | 0.0 | 0.1 | 0.0 | | -------------------------------------------------------------------------------- | Non-rated | 0.7 | 0.6 | 0.1 | | -------------------------------------------------------------------------------- | Total | 20.3 | 17.3 | 3.0 | | -------------------------------------------------------------------------------- | *) excl. private customers | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Sensitivity analysis of | | | | | | | market risk | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Banking, EUR | Risk parameter | Change | 30 Sept | 31 Dec | | million | | | 2008 | 2007 | -------------------------------------------------------------------------------- | Interest-rate | Interest | 1 percentage | 2 | 3 | | risk | | point | | | -------------------------------------------------------------------------------- | Currency risk | Market value | 20 percentage | 1 | 1 | | | | points | | | -------------------------------------------------------------------------------- | Volatility risk | | | | | | -------------------------------------------------------------------------------- | Interest-rate | Volatility | 20 percentage | 5 | 2 | | volatility | | points | | | -------------------------------------------------------------------------------- | Currency | Volatility | 10 percentage | 1 | 1 | | volatility | | points | | | -------------------------------------------------------------------------------- | Credit risk | Credit risk | 0.1 percentage | 1 | 1 | | premium *) | margin | 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. | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Risk exposure by Non-life | | | | | | Insurance | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Risk | | Total amount | Change in | Effect on combined | Effect on | | parameter | | 30 Sept 2008, | risk | ratio | shareholder | | | | EUR million | parameter | | s' equity, | | | | | | | EUR million | -------------------------------------------------------------------------------- | Insurance | 907 | Up 1% | Up 1 percentage | 9 | | portfolio or | | | point | | | insurance | | | | | | premium | | | | | | revenue | | | | | -------------------------------------------------------------------------------- | Growth in | 608 | Up 1% | Down 1 percentage | -6 | | claims | | | point | | | incurred | | | | | -------------------------------------------------------------------------------- | Major loss of | | 1 loss | Down 1 percentage | -5 | | over EUR 5 | | | point | | | million | | | | | -------------------------------------------------------------------------------- | Personnel | 108 | Up 8% | Down 1 percentage | -9 | | costs | | | point | | -------------------------------------------------------------------------------- | Expenses by | 260 | Up 4% | Down 1 percentage | -10 | | function*) | | | point | | -------------------------------------------------------------------------------- *) Expenses by function in Non-life Insurance excluding expenses for investment management and expenses for other services rendered -------------------------------------------------------------------------------- | Risk parameter | Change in risk | Effect on gross | Effect on | | | parameter | contract | shareholders' | | | | liabilities, EUR | equity, EUR million | | | | million | | -------------------------------------------------------------------------------- | Inflation rate | +0.25 | | 2 | | -2 | | | percentage | | | | | | | points | | | | | -------------------------------------------------------------------------------- | Life expectancy | + 1 year | | 29 | | -29 | -------------------------------------------------------------------------------- | Discount rate | -0.1 percentage | | 15 | | -15 | | | point | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Non-life Insurance investment portfolio by allocation | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR, million | | | | | -------------------------------------------------------------------------------- | Portfolio allocation | Fair value | % | Fair value 31 | % | | | 30 Sept 2008 | | Dec 2007 | | -------------------------------------------------------------------------------- | Money market | 170 | 7 | 51 | 2 | | instruments | | | | | -------------------------------------------------------------------------------- | Bonds and bond funds | 1,749 | 69 | 1,722 | 69 | -------------------------------------------------------------------------------- | Equities | | 343 | 14 | 413 | 16 | -------------------------------------------------------------------------------- | Alternative | 134 | 5 | 188 | 7 | | investments | | | | | -------------------------------------------------------------------------------- | Real property | 140 | 6 | 138 | 5 | -------------------------------------------------------------------------------- | Total | | 2,536 | 100 | 2,511 | 100 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Non-life Insurance fixed-income portfolio by maturity and credit | | | rating on 30 September 2008 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR, million | | | | | | | | -------------------------------------------------------------------------------- | Year(s) | 0-1 | 1-3 | 3-5 | 5-7 | 7-10 | 10- | Total | % | -------------------------------------------------------------------------------- | AAA | 52 | 153 | 84 | 67 | 87 | 100 | 543 | 28 | -------------------------------------------------------------------------------- | AA | 98 | 136 | 116 | 15 | 35 | 26 | 426 | 22 | -------------------------------------------------------------------------------- | A | 37 | 183 | 245 | 65 | 42 | 84 | 654 | 34 | -------------------------------------------------------------------------------- | BBB | 48 | 61 | 29 | 18 | 4 | 6 | 166 | 9 | -------------------------------------------------------------------------------- | BB+ or lower | 36 | 30 | 3 | 13 | 11 | 13 | 106 | 6 | -------------------------------------------------------------------------------- | Internally | 6 | 8 | 2 | 3 | 0 | 1 | 20 | 1 | | rated | | | | | | | | | -------------------------------------------------------------------------------- | Total | 277 | 570 | 479 | 181 | 179 | 230 | 1,915 | 100 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | The table below shows the sensitivity of investment risks and their effect | | on shareholders' equity: | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Non-life | Risk | | Change | Effect on shareholders' equity, | | Insurance | parameter | | | EUR million | -------------------------------------------------------------------------------- | | | | | | | 30 Sept | 31 Dec | | | | | | | | 2008 | 2007 | -------------------------------------------------------------------------------- | Bonds and | | Intere | | 1 | 71 | 69 | | bond | | st | | percent | | | | funds1) | | rate | | age | | | | | | | | point | | | -------------------------------------------------------------------------------- | Equitie | | | Market | | 20 | 63 | 78 | | s 2) | | | value | | percent | | | | | | | | | age | | | | | | | | | points | | | -------------------------------------------------------------------------------- | Venture | | Market | | 20 | 21 | 23 | | capital | | value | | percent | | | | funds and | | | | age | | | | unquoted | | | | points | | | | equities | | | | | | | -------------------------------------------------------------------------------- | Commoditie | | Market | | 20 | 4 | 5 | | s | | value | | percent | | | | | | | | age | | | | | | | | points | | | --------------------------------------------------------------------------------| Real | | Market | | 10 | 14 | 14 | | property | | value | | percent | | | | | | | | age | | | | | | | | points | | | -------------------------------------------------------------------------------- | Currenc | | | Value | | 20 | 21 | 20 | | y | | | of | | percent | | | | | | | curren | | age | | | | | | | cy | | points | | | -------------------------------------------------------------------------------- | Credit | | Credit | | 0.1 | 3 | 4 | | risk | | risk | | percent | | | | premium 3) | | margin | | age | | | | | | | | point | | | -------------------------------------------------------------------------------- | Derivative | | Volati | | 20 | 0 | 0 | | s 4) | | lity | | percent | | | | | | | | age | | | | | | | | 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. | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Risk exposure by Group Function | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total exposure by rating category*, EUR billion | -------------------------------------------------------------------------------- | Rating category | 30 Sept 2008 | 31 Dec 2007 | Change | -------------------------------------------------------------------------------- | 1-2 | 11.7 | 9.2 | 2.5 | -------------------------------------------------------------------------------- | 3-5 | 1.7 | 1.2 | 0.5 | -------------------------------------------------------------------------------- | 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 | 13.4 | 10.4 | 3.0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Sensitivity analysis of | | | | | | | market risk | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Group | Risk parameter | Change | 30 Sept | 31 Dec | | Functions, | | | 2008 | 2007 | | EUR | | | | | | million | | | | | -------------------------------------------------------------------------------- | Interest-rate | Interest rate | 1 percentage | 9 | 15 | | risk | | point | | | -------------------------------------------------------------------------------- | Interest-rate | Volatility | 20 percentage | 0 | 0 | | volatility | | points | | | -------------------------------------------------------------------------------- | Credit risk | Credit risk | 0.1 percentage | 11 | 10 | | premium *) | margin | point | | | -------------------------------------------------------------------------------- | Price risk | | | | | | -------------------------------------------------------------------------------- | Equity portfolio | Market value | 20 percentage | 2 | 3 | | | | points | | | -------------------------------------------------------------------------------- | Private equity | Market value | 20 percentage | 6 | 6 | | funds | | points | | | -------------------------------------------------------------------------------- | Property risk | Market value | 10 percentage | 3 | 3 | | | | points | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Sensitivity figures have been calculated as the sum of the | | | currencies' intrinsic value. | | -------------------------------------------------------------------------------- | *) The credit risk premium has been calculated on notes and bonds at fair | | value through profit or loss and available for sale, included in liquidity | | reserves. | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Financial assets included in liquidity reserve by maturity and credit rating | | on 30 September 2008 | -------------------------------------------------------------------------------- | EUR | | | | | | | | | | milli | | | | | | | | | | on | | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Year | 0-1 | 1-3 | 3-5 | 5-7 | 7-10 | 10- | Total | % | -------------------------------------------------------------------------------- | AAA | 225 | 522 | 607 | 256 | 387 | 81 | 2,078 | 29 | -------------------------------------------------------------------------------- | AA | 2,459 | 987 | 437 | 92 | 10 | 1 | 3,986 | 55 | -------------------------------------------------------------------------------- | A | 165 | 155 | 130 | 9 | 80 | 0 | 539 | 7 | -------------------------------------------------------------------------------- | BBB | 33 | 61 | 38 | 21 | 0 | 0 | 152 | 2 | -------------------------------------------------------------------------------- | BB+ | 6 | 2 | 0 | 1 | 16 | 0 | 26 | 0 | | or | | | | | | | | | | lower | | | | | | | | | -------------------------------------------------------------------------------- | Inter | 202 | 181 | 54 | 19 | 11 | 0 | 467 | 6 | | nally | | | | | | | | | | rated | | | | | | | | | -------------------------------------------------------------------------------- | Total | 3,091 | 1,908 | 1,266 | 398 | 503 | 82 | 7,247 | 100 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Consolidated cash flow statement | | | | -------------------------------------------------------------------------------- | EUR million | | | Q1-3/ | Q1-3/ | -------------------------------------------------------------------------------- | | | | | 08 | 07 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash flow from operating activities | | | | -------------------------------------------------------------------------------- | Profit for the period | | | 83 | 163 | -------------------------------------------------------------------------------- | Adjustments to profit for the period | | 288 | 157 | -------------------------------------------------------------------------------- | Increase (-) or decrease (+) in operating assets | -4,060 | -1,406 | -------------------------------------------------------------------------------- | Receivables from financial institutions | 892 | 276 | -------------------------------------------------------------------------------- | Financial assets at fair value through profit or | 797 | 555 | | loss | | | -------------------------------------------------------------------------------- | Derivative contracts | | | -53 | -60 | -------------------------------------------------------------------------------- | Receivables from customers | | -1,924 | -1,036 | -------------------------------------------------------------------------------- | Non-life Insurance assets | | -294 | -152 | -------------------------------------------------------------------------------- | Investment assets | | | -3,253 | -210 | -------------------------------------------------------------------------------- | Other assets | | | -225 | -777 | -------------------------------------------------------------------------------- | Increase (+) or decrease (-) in operating | 4,316 | 875 | | liabilities | | | -------------------------------------------------------------------------------- | Liabilities to financial | | 3,395 | -71 | | institutions | | | | -------------------------------------------------------------------------------- | Financial liabilities at fair value through profit | 455 | 6 | | or loss | | | -------------------------------------------------------------------------------- | Derivative contracts | | | 77 | 63 | -------------------------------------------------------------------------------- | Liabilities to customers | | | 75 | 130 | -------------------------------------------------------------------------------- | Non-life Insurance liabilities | | 208 | 166 | -------------------------------------------------------------------------------- | Provisions and other liabilities | | 105 | 581 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Income tax paid | | | -32 | -43 | -------------------------------------------------------------------------------- | Dividends received | | | 28 | 56 | -------------------------------------------------------------------------------- | A. Net cash from operating activities | 623 | -198 | -------------------------------------------------------------------------------- | Cash flow from investing activities | | | | -------------------------------------------------------------------------------- | Acquisition of subsidiaries, net of cash acquired | -37 | -10 | -------------------------------------------------------------------------------- | Disposal of subsidiaries, net of cash disposed | 0 | 12 | -------------------------------------------------------------------------------- | Purchase of PPE and intangible assets | -26 | -13 | -------------------------------------------------------------------------------- | Proceeds from sale of PPE and intangible assets | 5 | 16 | -------------------------------------------------------------------------------- | B. Net cash used in investing activities | -57 | 5 | -------------------------------------------------------------------------------- | Cash flow from financing activities | | | | -------------------------------------------------------------------------------- | Increases in subordinated | | 364 | 151 | | liabilities | | | | -------------------------------------------------------------------------------- | Decreases in subordinated liabilities | -88 | -108 | -------------------------------------------------------------------------------- | Increases in debt securities issued to the public | 26,631 | 22,243 | -------------------------------------------------------------------------------- | Decreases in debt securities issued to the public | -25,434 | -21,886 | -------------------------------------------------------------------------------- | Dividends paid | | | -131 | -131 | -------------------------------------------------------------------------------- | C. Net cash used in financing activities | 1,342 | 270 | -------------------------------------------------------------------------------- | Net increase/decrease in cash and cash equivalents | 1,908 | 77 | | (A+B+C) | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and cash equivalents at period-start | 710 | 1,107 | -------------------------------------------------------------------------------- | Cash and cash equivalents at period-end | 2,618 | 1,184 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest received | | | 1,980 | 1,324 | -------------------------------------------------------------------------------- | Interest paid | | | -1,936 | -1,266 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Adjustments to profit for the period | | | | -------------------------------------------------------------------------------- | Non-cash transactions | | | | -------------------------------------------------------------------------------- | Impairments of receivables | | 8 | 2 | -------------------------------------------------------------------------------- | Unrealised net earnings in Non-life Insurance | 151 | 138 | -------------------------------------------------------------------------------- | Change in fair value for trading | | -79 | 28 | -------------------------------------------------------------------------------- | Unrealised net gains on foreign exchange | 143 | -43 | | operations | | | -------------------------------------------------------------------------------- | Change in fair value of investment property | 1 | -14 | -------------------------------------------------------------------------------- | Planned amortisation /depreciation | 49 | 45 | -------------------------------------------------------------------------------- | Share of associates' profits | | 0 | | -------------------------------------------------------------------------------- | Other | | | | 16 | 3 | -------------------------------------------------------------------------------- | Items presented outside cash flow from operating | | | | activities | | | -------------------------------------------------------------------------------- | Capital gains, share of cash flow from investing | -1 | -2 | | activities | | | -------------------------------------------------------------------------------- | Capital losses, share of cash flow from investing | | -1 | | activities | | | -------------------------------------------------------------------------------- | Total adjustments | | | 288 | 157 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Notes | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 1) Net interest | | | | | | | | income | | | | | | | -------------------------------------------------------------------------------- | EUR million | | | Q3/ | Q3/ | Q1-3/ | Q1-3/ | -------------------------------------------------------------------------------- | | | | | 08 | 07 | 08 | 07 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest income | | | | | | | -------------------------------------------------------------------------------- | Receivables from financial | 59 | 69 | 187 | 201 | | institutions | | | | | -------------------------------------------------------------------------------- | Receivables from customers | | 166 | 113 | 428 | 294 | -------------------------------------------------------------------------------- | Other | | | | 589 | 401 | 1,645 | 1,071 | -------------------------------------------------------------------------------- | Total | | | | 814 | 583 | 2,260 | 1,566 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest expenses | | | | | | | -------------------------------------------------------------------------------- | Liabilities to financial | | 46 | 21 | 133 | 63 | | institutions | | | | | | -------------------------------------------------------------------------------- | Liabilities to customers | | 25 | 22 | 77 | 59 | -------------------------------------------------------------------------------- | Other | | | | 698 | 514 | 1,930 | 1,359 | -------------------------------------------------------------------------------- | Total | | | | 769 | 556 | 2,140 | 1,481 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total net interest income | | 45 | 27 | 120 | 85 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 2) Impairments of | | | | | | | receivables | | | | | | -------------------------------------------------------------------------------- | EUR million | | | Q3/ | Q3/ | Q1-3/ | Q1-3/ | -------------------------------------------------------------------------------- | | | | | 08 | 07 | 08 | 07 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Receivables eliminated as loan or | 2 | 1 | 3 | 4 | | guarantee losses | | | | | -------------------------------------------------------------------------------- | Recoveries from receivables | 0 | | 0 | | | eliminated as loan or guarantee | | | | | | losses | | | | | -------------------------------------------------------------------------------- | Increase in impairment | | 10 | 1 | 12 | 3 | | provisions | | | | | | -------------------------------------------------------------------------------- | Decrease in impairment | | -1 | -1 | -7 | -5 | | provisions | | | | | | -------------------------------------------------------------------------------- | Total impairments of | | 11 | 1 | 8 | 2 | | receivables | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 3) Net income from Non-life | | | | | | Insurance | | | | | -------------------------------------------------------------------------------- | EUR million | | | Q3/ | Q3/ | Q1-3/ | Q1-3/ | -------------------------------------------------------------------------------- | | | | | 08 | 07 | 08 | 07 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net insurance premium | | | | | | | revenue | | | | | | -------------------------------------------------------------------------------- | Premiums written | | | 172 | 156 | 847 | 798 | -------------------------------------------------------------------------------- | Insurance premiums ceded to | -4 | -5 | -41 | -45 | | reinsurers | | | | | -------------------------------------------------------------------------------- | Change in provision for unearned | 79 | 75 | -119 | -118 | | premiums | | | | | -------------------------------------------------------------------------------- | Reinsurers' share | | | -7 | -10 | 9 | 4 | -------------------------------------------------------------------------------- | Total | | | | 241 | 217 | 696 | 639 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net Non-life Insurance | | | | | | | claims | | | | | | -------------------------------------------------------------------------------- | Claims paid | | | 134 | 132 | 446 | 407 | -------------------------------------------------------------------------------- | Insurance claims recovered from | -1 | -3 | -9 | -7 | | reinsurers | | | | | -------------------------------------------------------------------------------- | Change in provision for unpaid | 31 | 9 | 28 | 24 | | claims | | | | | -------------------------------------------------------------------------------- | Reinsurers' share | | | -25 | 3 | -18 | -1 | -------------------------------------------------------------------------------- | Total | | | | 138 | 141 | 447 | 424 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net investment income, Non-life | | | | | | Insurance | | | | | -------------------------------------------------------------------------------- | Interest income | | | 19 | 17 | 55 | 52 | -------------------------------------------------------------------------------- | Net realised gains and realised fair | | | | | | value gains and losses | | | | | -------------------------------------------------------------------------------- | Notes and bonds | | | -7 | -67 | -17 | -95 | -------------------------------------------------------------------------------- | Shares and participations | | -4 | 64 | -1 | 105 | -------------------------------------------------------------------------------- | Investment | | | 0 | 0 | 3 | 3 | | property | | | | | | | -------------------------------------------------------------------------------- | Other | | | | -5 | 5 | -4 | 3 | -------------------------------------------------------------------------------- | Unrealised fair value gains and | | | | | | losses | | | | | -------------------------------------------------------------------------------- | Notes and bonds | | | -2 | 0 | -2 | 0 | -------------------------------------------------------------------------------- | Shares and participations | | -1 | | -1 | | -------------------------------------------------------------------------------- | Investment | | | -2 | 1 | 1 | 0 | | property | | | | | | | -------------------------------------------------------------------------------- | Other | | | | 0 | 0 | 1 | 3 | -------------------------------------------------------------------------------- | Dividend income | | | 6 | 15 | 21 | 47 | -------------------------------------------------------------------------------- | Total | | | | 4 | 34 | 56 | 119 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Unwinding of | | | -10 | -10 | -31 | -29 | | discount | | | | | | | -------------------------------------------------------------------------------- | Other | | | | 2 | 3 | 5 | 4 | -------------------------------------------------------------------------------- | Total net income from Non-life | 98 | 103 | 280 | 310 | | Insurance | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 4) Net commissions and fees | | | | | | -------------------------------------------------------------------------------- | EUR million | | | Q3/ | Q3/ | Q1-3/ | Q1-3/ | -------------------------------------------------------------------------------- | | | | | 08 | 07 | 08 | 07 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Commission income | | | | | | | -------------------------------------------------------------------------------- | Lending | | | | 6 | 4 | 18 | 15 | -------------------------------------------------------------------------------- | Payment transfers | | | 3 | 3 | 10 | 9 | -------------------------------------------------------------------------------- | Securities | | | 4 | 6 | 14 | 19 | | brokerage | | | | | | | -------------------------------------------------------------------------------- | Securities | | | 0 | 1 | 2 | 5 | | issuance | | | | | | | -------------------------------------------------------------------------------- | Asset management and legal services | 12 | 12 | 35 | 39 | -------------------------------------------------------------------------------- | Insurance | | | 1 | 0 | 4 | 5 | | operations | | | | | | | -------------------------------------------------------------------------------- | Guarantees | | | 2 | 1 | 6 | 5 | -------------------------------------------------------------------------------- | Other | | | | 0 | 2 | 8 | 7 | -------------------------------------------------------------------------------- | Total commission income | | 29 | 30 | 96 | 103 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Commission | | | | | | | | expenses | | | | | | | -------------------------------------------------------------------------------- | Payment transfers | | | | 1 | | 2 | -------------------------------------------------------------------------------- | Securities | | | 1 | 2 | 5 | 7 | | brokerage | | | | | | | -------------------------------------------------------------------------------- | Securities | | | 0 | 0 | 3 | 3 | | issuance | | | | | | | -------------------------------------------------------------------------------- | Asset management and legal services | 1 | 2 | 5 | 7 | -------------------------------------------------------------------------------- | Other | | | | 1 | 0 | 4 | 1 | -------------------------------------------------------------------------------- | Total commission expenses | | 5 | 6 | 17 | 20 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total net commissions and | | 24 | 24 | 79 | 83 | | fees | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 5) Net trading | | | | | | | | income | | | | | | | -------------------------------------------------------------------------------- | EUR million | | | Q3/ | Q3/ | Q1-3/ | Q1-3/ | -------------------------------------------------------------------------------- | | | | | 08 | 07 | 08 | 07 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Financial assets and liabilities | | | | | | held for trading | | | | | -------------------------------------------------------------------------------- | Capital gains and losses and | | | | | | realised changes in fair value | | | | | -------------------------------------------------------------------------------- | Notes and bonds | | | 1 | 1 | -12 | -8 | -------------------------------------------------------------------------------- | Shares and participations | | 0 | | 0 | | -------------------------------------------------------------------------------- | Derivatives | | | -10 | -5 | 19 | 2 | -------------------------------------------------------------------------------- | Unrealised changes in fair | | | | | | | value | | | | | | -------------------------------------------------------------------------------- | Notes and bonds | | | 18 | 1 | -1 | 2 | -------------------------------------------------------------------------------- | Shares and participations | | 0 | | 0 | | -------------------------------------------------------------------------------- | Derivatives | | | -11 | 3 | -2 | 23 | -------------------------------------------------------------------------------- | Financial assets and liabilities at | | | | | | fair value through profit or loss | | | | | -------------------------------------------------------------------------------- | Capital gains and losses and | | | | | | realised changes in fair value | | | | | -------------------------------------------------------------------------------- | Notes and bonds | | | -4 | | -5 | | -------------------------------------------------------------------------------- | Unrealised changes in fair | | | | | | | value | | | | | | -------------------------------------------------------------------------------- | Notes and bonds | | | -13 | -22 | -69 | -36 | -------------------------------------------------------------------------------- | Net income from foreign exchange | | | | | | operations | | | | | -------------------------------------------------------------------------------- | Currency swaps | | | -144 | 36 | -149 | 42 | -------------------------------------------------------------------------------- | Other | | | | 137 | -32 | 146 | -32 | -------------------------------------------------------------------------------- | Total net trading income | | -26 | -16 | -72 | -7 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 6) Net investment income | | | | | | -------------------------------------------------------------------------------- | EUR million | | | Q3/ | Q3/ | Q1-3/ | Q1-3/ | -------------------------------------------------------------------------------- | | | | | 08 | 07 | 08 | 07 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Available-for-sale | | | | | | | financial assets | | | | | | -------------------------------------------------------------------------------- | Capital gains and losses | | | | | | -------------------------------------------------------------------------------- | Notes and bonds | | | 0 | | 0 | | -------------------------------------------------------------------------------- | Shares and participations | | 0 | 1 | 1 | 16 | -------------------------------------------------------------------------------- | Dividend income | | | 0 | 3 | 7 | 9 | -------------------------------------------------------------------------------- | Total | | | | 0 | 4 | 7 | 25 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investment | | | 0 | 1 | 2 | 3 | | property | | | | | | | -------------------------------------------------------------------------------- | Total net investment income | | 0 | 5 | 9 | 28 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 7) Other operating income | | | | | | -------------------------------------------------------------------------------- | EUR million | | | Q3/ | Q3/ | Q1-3/ | Q1-3/ | -------------------------------------------------------------------------------- | | | | | 08 | 07 | 08 | 07 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Central banking service | | 2 | 2 | 7 | 7 | | fees | | | | | | -------------------------------------------------------------------------------- | Realisation of repossessed | | 0 | 0 | 0 | 1 | | items | | | | | | -------------------------------------------------------------------------------- | Rental income from assets rented | 6 | 4 | 16 | 10 | | under operating lease | | | | | -------------------------------------------------------------------------------- | Other | | | | 6 | 8 | 19 | 34 | -------------------------------------------------------------------------------- | Total | | | | 14 | 15 | 42 | 51 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 8) Personnel costs | | | | | | | -------------------------------------------------------------------------------- | EUR million | | | Q3/ | Q3/ | Q1-3/ | Q1-3/ | -------------------------------------------------------------------------------- | | | | | 08 | 07 | 08 | 07 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Wages and salaries | | | 31 | 30 | 106 | 101 | -------------------------------------------------------------------------------- | Pension costs | | | 5 | 5 | 17 | 14 | -------------------------------------------------------------------------------- | Other social | | | 3 | 2 | 8 | 7 | | expenses | | | | | | | -------------------------------------------------------------------------------- | Total personnel | | | 38 | 37 | 130 | 123 | | costs | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 9) Other administrative | | | | | | | expenses | | | | | | -------------------------------------------------------------------------------- | EUR million | | | Q3/ | Q3/ | Q1-3/ | Q1-3/ | -------------------------------------------------------------------------------- | | | | | 08 | 07 | 08 | 07 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Office expenses | | | 2 | 15 | 35 | 45 | -------------------------------------------------------------------------------- | IT expenses | | | 9 | 10 | 33 | 32 | -------------------------------------------------------------------------------- | Telecommunication expenses | | 2 | 3 | 8 | 7 | -------------------------------------------------------------------------------- | Marketing expenses | | | 3 | 3 | 10 | 10 | -------------------------------------------------------------------------------- | Other administrative | | 4 | 3 | 13 | 13 | | expenses | | | | | | -------------------------------------------------------------------------------- | Total other administrative expenses | 20 | 34 | 99 | 107 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 10) Other operating | | | | | | | expenses | | | | | | -------------------------------------------------------------------------------- | EUR million | | | Q3/ | Q3/ | Q1-3/ | Q1-3/ | -------------------------------------------------------------------------------- | | | | | 08 | 07 | 08 | 07 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Expenses for property and business | 6 | 7 | 19 | 19 | | premises in own use | | | | | -------------------------------------------------------------------------------- | Expenses from realisation of | 0 | 1 | 0 | 1 | | repossessed items | | | | | -------------------------------------------------------------------------------- | Non-life Insurance credit | | 1 | 2 | 5 | 7 | | losses | | | | | | -------------------------------------------------------------------------------- | Planned amortisation and | | | | | | depreciation | | | | | -------------------------------------------------------------------------------- | Amortisation on intangible assets | 9 | 9 | 27 | 27 | | related to company acquisition | | | | | -------------------------------------------------------------------------------- | Other | | | | 8 | 6 | 22 | 18 | -------------------------------------------------------------------------------- | Other*) | | | | 20 | 5 | 33 | 27 | -------------------------------------------------------------------------------- | Total other operating | | 44 | 29 | 107 | 99 | | expenses | | | | | | -------------------------------------------------------------------------------- *) The item includes EUR 10 million in liquidated damages, including interest and expenses, paid by OKO to savings banks on the basis of an arbitral award. The liquidated damages were due to the termination of cooperation between Pohjola and savings banks as a result of combining the operations of OP Bank Group and Pohjola. -------------------------------------------------------------------------------- | 11) Financial assets at fair value through profit or loss | | -------------------------------------------------------------------------------- | EUR million | | | 30 Sept | 31 | | | | | 2008 | Dec | | | | | | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Financial assets held for trading | | | | -------------------------------------------------------------------------------- | Notes and bonds | | | 3,569 | 2,220 | -------------------------------------------------------------------------------- | Shares and participations | | 0 | 0 | -------------------------------------------------------------------------------- | Financial assets at fair value through profit | | | | or loss at inception | | | -------------------------------------------------------------------------------- | Notes and bonds | | | 122 | 2,481 | -------------------------------------------------------------------------------- | Total | | | | 3,691 | 4,701 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 12) Non-life Insurance assets | | | | -------------------------------------------------------------------------------- | EUR million | | | 30 Sept | 31 | | | | | 2008 | Dec | | | | | | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investments | | | | | -------------------------------------------------------------------------------- | Loans and other receivables | | 66 | 57 | -------------------------------------------------------------------------------- | Equities | | | | 369 | 444 | -------------------------------------------------------------------------------- | Property | | | | 81 | 85 | -------------------------------------------------------------------------------- | Notes and bonds | | | 1,523 | 1,447 | -------------------------------------------------------------------------------- | Other | | | | 488 | 451 | -------------------------------------------------------------------------------- | Total | | | | 2,526 | 2,485 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Other assets | | | | | -------------------------------------------------------------------------------- | Prepayments and accrued income | 25 | 28 | -------------------------------------------------------------------------------- | Other | | | | | | -------------------------------------------------------------------------------- | From direct insurance | | 260 | 210 | -------------------------------------------------------------------------------- | From reinsurance | | | 109 | 74 | -------------------------------------------------------------------------------- | Cash in hand and at bank | | 2 | 12 | -------------------------------------------------------------------------------- | Total | | | | 396 | 325 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total Non-life insurance assets | | 2,922 | 2,809 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 13) Investment property | | | | | -------------------------------------------------------------------------------- | EUR million | | | 30 Sept | 31 | | | | | 2008 | Dec | | | | | | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Available-for-sale financial | | | | | assets | | | | -------------------------------------------------------------------------------- | Notes and bonds | | | 2,851 | 618 | -------------------------------------------------------------------------------- | Shares and participations | | 89 | 83 | -------------------------------------------------------------------------------- | Investments held to maturity | | 980 | | -------------------------------------------------------------------------------- | Investment property | | | 25 | 24 | -------------------------------------------------------------------------------- | Total | 3,945 | 725 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 14) Intangible assets | | | | | -------------------------------------------------------------------------------- | EUR million | | | 30 Sept 2008 | 31 | | | | | | Dec | | | | | | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Goodwill | | | | 516 | 504 | -------------------------------------------------------------------------------- | Brands | | | | 179 | 179 | -------------------------------------------------------------------------------- | Customer relationships | | | 232 | 250 | -------------------------------------------------------------------------------- | Other | | | | 66 | 66 | -------------------------------------------------------------------------------- | Total | | | | 994 | 999 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 15) Non-life Insurance liabilities | | | | -------------------------------------------------------------------------------- | EUR million | | | 30 Sept | 31 | | | | | 2008 | Dec | | | | | | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Insurance contract liabilities | | | | -------------------------------------------------------------------------------- | Provision for unearned premiums | | 440 | 318 | -------------------------------------------------------------------------------- | Provision for unpaid claims | | 1,759 | 1,699 | -------------------------------------------------------------------------------- | Total | | | | 2,199 | 2,017 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Other | | | | 271 | 123 | -------------------------------------------------------------------------------- | Total | | | | 2,469 | 2,140 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 16) Debt securities issued to the public | | | -------------------------------------------------------------------------------- | EUR million | | | 30 Sept | 31 | | | | | 2008 | Dec | | | | | | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Bonds | | | | 6,716 | 7,107 | -------------------------------------------------------------------------------- | Certificates of deposit | | | 7,123 | 5,640 | -------------------------------------------------------------------------------- | Other | | | | 166 | 109 | -------------------------------------------------------------------------------- | Total | | | | 14,005 | 12,856 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 17) Subordinated liabilities | | | | -------------------------------------------------------------------------------- | EUR million | | | 30 Sept | 31 | | | | | 2008 | Dec | | | | | | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Subordinated loans | | | 297 | 193 | -------------------------------------------------------------------------------- | Other | | | | 927 | 757 | -------------------------------------------------------------------------------- | Total | | | | 1,224 | 950 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Collateral given | | | | | -------------------------------------------------------------------------------- | EUR million | | | 30 Sept | 31 | | | | | 2008 | Dec | | | | | | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Given on behalf of own liabilities and | | | | commitments | | | -------------------------------------------------------------------------------- | Mortgages | | | 1 | 1 | -------------------------------------------------------------------------------- | Pledges | | | | 4,203 | 2,631 | -------------------------------------------------------------------------------- | Other | | | | 350 | 123 | -------------------------------------------------------------------------------- | Total collateral given | | | 4,554 | 2,755 | -------------------------------------------------------------------------------- | Total collateralised liabilities | | 2,752 | 564 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Off-balance-sheet commitments | | | | -------------------------------------------------------------------------------- | EUR million | | | 30 Sept | 31 | | | | | 2008 | Dec | | | | | | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Guarantees | | | 753 | 570 | -------------------------------------------------------------------------------- | Other guarantee liabilities | | 1,584 | 1,489 | -------------------------------------------------------------------------------- | Loan commitments | | | 3,318 | 3,456 | -------------------------------------------------------------------------------- | Commitments related to short-term trade | 165 | 145 | | transactions | | | -------------------------------------------------------------------------------- | Other | | | | 439 | 506 | -------------------------------------------------------------------------------- | Total off-balance-sheet commitments | 6,259 | 6,167 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Accounts receivable and payable from sale or purchase of assets on behalf of | | customers | -------------------------------------------------------------------------------- | EUR million | | | 30 Sept | 31 | | | | | 2008 | Dec | | | | | | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Accounts receivable | | | 106 | 86 | -------------------------------------------------------------------------------- | Accounts payable | | | 131 | 88 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Derivative | | | | | | | | contracts | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Derivatives held for trading and hedging on 30 September | | | | 2008 | | | -------------------------------------------------------------------------------- | EUR million | | | | | | | -------------------------------------------------------------------------------- | | | Nominal values/remaining | Total | Fair values | | | | term to maturity | | | -------------------------------------------------------------------------------- | | | <1 year | 1-5 | >5 | | Assets | Liabili | | | | | years | years | | | ties | -------------------------------------------------------------------------------- | Interest rate | 59,075 | 43,663 | 11,349 | 114,088 | 588 | 523 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Currency | 13,938 | 1,706 | 1,037 | 16,681 | 260 | 373 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Equity and index | 28 | 358 | 73 | 459 | 22 | | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Credit | 147 | 238 | | 385 | 4 | 4 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Other | | 16 | | 16 | 1 | | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Total | 73,188 | 45,982 | 12,459 | 131,629 | 875 | 900 | | derivatives | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Derivatives held for trading and hedging on 30 September | | | | 2007 | | | -------------------------------------------------------------------------------- | EUR million | | | | | | | -------------------------------------------------------------------------------- | | | Nominal values/remaining term | Total | Fair values | | | | to maturity | | | -------------------------------------------------------------------------------- | | | <1 year | 1-5 | >5 years | | Assets | Liabili | | | | | years | | | | ties | -------------------------------------------------------------------------------- | Interest rate | 72,853 | 30,106 | 9,350 | 112,309 | 419 | 355 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Currency | 8,702 | 1,780 | 1,158 | 11,640 | 94 | 293 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Equity and | 11 | 238 | 28 | 277 | 48 | 0 | | index | | | | | | | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Credit | 40 | 131 | 0 | 171 | 0 | 0 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Other | 8 | 7 | 0 | 15 | 1 | 0 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Total | 81,614 | 32,261 | 10,536 | 124,412 | 563 | 648 | | derivatives | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Other contingent liabilities and | | | | | | commitments | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | On 30 September 2008, Pohjola Bank's commitments to venture capital funds | | amounted to EUR 20 million and Pohjola Non-Life's commitments to EUR 63 | | million. They are included in the section 'Off-balance-sheet commitments'. | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Related-party | | | | | | | transactions | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Pohjola Bank Group's related parties comprise its parent company, associates | | and administrative personnel and other related-party companies. Pohjola Bank | | Group's Parent Company is OP-Pohjola Group Central Cooperative. | -------------------------------------------------------------------------------- Pohjola Bank Group's associates were Autovahinkokeskus Oy and Vahinkopalvelu Oy on 30 September 2008 and on 30 September 2007. Pohjola Bank Group's administrative personnel comprise Pohjola Bank's President and CEO, his deputy, members and deputy members of the Board of Directors and their close family members. Normal loan terms and conditions apply to loans granted to the management. Tied to generally used reference rates, these loans with normal collateral are repaid according to the agreed repayment schedule. Other related-party entities include OP Pension Fund, OP Pension Foundation and sister companies within OP-Pohjola Group Central Cooperative Consolidated. -------------------------------------------------------------------------------- | Related-party transactions by 30 September 2008 | | | -------------------------------------------------------------------------------- | EUR million | | | | | | -------------------------------------------------------------------------------- | | | | Parent | Consoli- | Admini-st | Others | | | | | company | dated | rative | | | | | | | associa | personnel | | | | | | | tes | | | -------------------------------------------------------------------------------- | Loans | | | 133 | | | 1,612 | -------------------------------------------------------------------------------- | Other receivables | | 129 | | | 241 | -------------------------------------------------------------------------------- | Deposits | | | 11 | | | 270 | -------------------------------------------------------------------------------- | Other liabilities | | 5 | | | 154 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest income | | 4 | | | 203 | -------------------------------------------------------------------------------- | Interest expenses | | 7 | | | 151 | -------------------------------------------------------------------------------- | Dividend income | | 0 | | | 5 | -------------------------------------------------------------------------------- | Other Non-life Insurance | 2 | | | | | income | | | | | -------------------------------------------------------------------------------- | Commission income | | 1 | | 22 | 16 | -------------------------------------------------------------------------------- | Commission expenses | | 1 | | 63 | 2 | -------------------------------------------------------------------------------- | Trading income | | | | | 8 | -------------------------------------------------------------------------------- | Trading expenses | | | | | 3 | -------------------------------------------------------------------------------- | Other operating | | 8 | | | 11 | | income | | | | | | -------------------------------------------------------------------------------- | Operating expenses | | 60 | | | 6 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Off-balance-sheet commitments | | | | | -------------------------------------------------------------------------------- | Guarantees | | | | | 66 | -------------------------------------------------------------------------------- | Irrevocable commitments | 8 | | | 136 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Salaries and other short-term | | | | | | benefits, and | | | | | | performance-based pay | | | | | -------------------------------------------------------------------------------- | Salaries and short-term | | | 1 | | | benefits | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Related-party | | | | | | | holdings | | | | | | -------------------------------------------------------------------------------- | Number of shares | 60,825,8 | | 63,421 | 4,205,946 | | | 97 | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Related-party transactions by 30 September 2007 | | | -------------------------------------------------------------------------------- | EUR million | | | | | | -------------------------------------------------------------------------------- | | | | Parent | Consoli- | Admini-st | Others | | | | | company | dated | rative | | | | | | | associa | personnel | | | | | | | tes | | | -------------------------------------------------------------------------------- | Loans | | | 27 | | | 1,593 | -------------------------------------------------------------------------------- | Other receivables | | 63 | | | 49 | -------------------------------------------------------------------------------- | Deposits | | | 0 | | | 136 | -------------------------------------------------------------------------------- | Other liabilities | | 4 | | | 60 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest income | | 2 | | | 123 | -------------------------------------------------------------------------------- | Interest expenses | | 4 | | | 66 | -------------------------------------------------------------------------------- | Dividend income | | 0 | | | 4 | -------------------------------------------------------------------------------- | Other Non-life Insurance | 2 | | | 2 | | income | | | | | -------------------------------------------------------------------------------- | Commission income | | 1 | | | 20 | -------------------------------------------------------------------------------- | Commission expenses | | 1 | | | 2 | -------------------------------------------------------------------------------- | Trading income | | 0 | | | 1 | -------------------------------------------------------------------------------- | Trading expenses | | 0 | | | 4 | -------------------------------------------------------------------------------- | Other operating | | 5 | | | 8 | | income | | | | | | -------------------------------------------------------------------------------- | Operating expenses | | 44 | | | 2 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Off-balance-sheet commitments | | | | | -------------------------------------------------------------------------------- | Guarantees | | 0 | | | 37 | -------------------------------------------------------------------------------- | Irrevocable commitments | 8 | | | 73 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Salaries and other short-term | | | | | | benefits, and | | | | | | performance-based pay | | | | | -------------------------------------------------------------------------------- | Salaries and short-term | | | 1 | | | benefits | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Related-party | | | | | | | holdings | | | | | | -------------------------------------------------------------------------------- | Number of shares | | 60,825,8 | | 67,778 | 4,220,946 | | | | 97 | | | | -------------------------------------------------------------------------------- The Interim Report for 1 January-30 September 2008 was prepared according to IAS 34 (Interim Financial Reporting), as approved by the EU. The Financial Statements 2007 contain a description of the accounting policies applied by Pohjola Bank Group. The Interim Report has been reviewed by the auditor. Since all figures in this Interim Report are rounded off, the sum of single figures may differ from the presented sum total. Financial reporting in 2008 Pohjola Bank will publish its financial statements for October-December 2008 on 12 February 2009. Schedule for Interim Reports in 2009 Interim Report Q1 7 May Interim Report Q2 6 August Interim Report Q3 5 November Helsinki, 6 November 2008 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 November 2008 and a conference call in English on the same day at 3.30 pm, telephone +358 20 699100, PIN-code 911239#. Pohjola Bank plc Markku Koponen Senior Vice President DISTRIBUTION NASDAQ OMX Helsinki Ltd London Stock Exchange SWX Swiss Exchange Major media www.pohjola.fi For additional information, please contact Mr Mikael Silvennoinen, President and CEO, tel. +358 (0)10 252 2549 Mr Ilkka Salonen, CFO, tel. +358 (0)10 252 3146 Report on review of Pohjola Bank plc's Interim Report for the period 1 January-30 September 2008 To Pohjola Bank plc's Board of Directors Introduction We have reviewed the consolidated balance sheet as of 30 September 2008, the income statement, the statement of changes in equity and the cash flow statement of Pohjola Bank plc for the nine-month period then ended, as well as a summary of significant accounting policies and other explanatory notes to the financial statements. The Board of Directors and the President and CEO are responsible for the preparation and fair presentation of this interim financial information in accordance with the International Financial Reporting Standards (IFRS), as adopted by the EU, and other Finnish rules and regulations governing the preparation of interim reports. Based on our review we express an opinion on this interim report in accordance with chapter 2, section 5a, subsection 7 of the Finnish Securities Markets Act. Scope of review We conducted our review in accordance with the Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the standards on auditing and other generally accepted auditing practices and therefore the procedures performed in a review do not enable to obtain a level of assurance that would make us aware of all significant matters that might be identified in an audit. Accordinly, we do not express an audit opinion. Opinion Based on our review, nothing has come to our attention that causes us to believe that the Interim Report does not give a true and fair view of the entity's financial position as of 30 September 2008 and the result of its operations and cash flows for the nine-month period then ended, in accordance with the International Financial Reporting Standards (IFRS), as adopted by the EU, and other applicable rules and regulations governing interim financial reporting preparation in Finland. Helsinki, 6 November 2008 KPMG OY AB Sixten Nyman Raimo Saarikivi Authorised Public Accountant Authorised Public Accountant
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