2010-08-04 07:00:00 CEST
2010-08-04 07:00:10 CEST
REGULATED INFORMATION
Pohjola Pankki Oyj - Interim report (Q1 and Q3)
Pohjola Bank plc Interim Report for 1 January-30 June 2010
Pohjola Bank plc Company Release, 4 August 2010, 8.00 am Release category: Interim Report Pohjola Bank plc Interim Report for 1 January-30 June 2010 January-June - Year on year, consolidated earnings before tax improved to EUR 139 million (123). Earnings include EUR 62 million (54) in impairment charges on receivables. - Earnings before tax at fair value fell to EUR 108 million (227) and return on equity at fair value stood at 7.1% (18.3). - Banking posted earnings before tax of EUR 55 million (76), with impairment charges on receivables affecting its earnings by EUR 62 million (44). - Non-life Insurance's operating combined ratio stood at 91.6% (88.6). Within Non-life Insurance, return on investments at fair value was 2.6% (4.5). - Asset Management doubled its year-on-year earnings before tax to EUR 12 million (6). Assets under management totalled EUR 33.6 billion (33.1). - Capital gains on notes and bonds improved earnings before tax posted by the Group Functions. - Outlook: Consolidated earnings before tax in 2010 are expected to be at the same level as in 2009. It is estimated that Non-life Insurance's operating combined ratio will vary between 89 and 93% (previous estimate: 89-94%). For more detailed information on outlook, see "Outlook towards the year end" below. April-June - Consolidated earnings before tax amounted to EUR 80 million (87). - Financial market jitters in the euro area weakened earnings before tax at fair value, amounting to EUR -11 million (186). - Earnings include EUR 29 million (33) in impairment charges on receivables. - Non-life Insurance's operating combined ratio stood at 88.0% (86.0). Within Non-life Insurance, return on investments at fair value was -0.6% (4.9). Group financial performance and key indicators 1) -------------------------------------------------------------------------------- | Earnings before | H1/ | H1/ | Change | Q2/ | Q2/ | Change, | 2009 | | tax, € million | 2010 | 2009 | , % | 2010 | 2 | % | | | | | | | | 009 | | | -------------------------------------------------------------------------------- | Banking | 55 | 76 | -28 | 29 | 26 | 12 | 117 | -------------------------------------------------------------------------------- | Non-life Insurance | 42 | 46 | -8 | 37 | 48 | -23 | 102 | -------------------------------------------------------------------------------- | Asset Management | 12 | 6 | 98 | 6 | 4 | 70 | 21 | -------------------------------------------------------------------------------- | Group Functions | 30 | -5 | | 8 | 10 | -15 | 25 | -------------------------------------------------------------------------------- | Total | 139 | 123 | 13 | 80 | 87 | -8 | 265 | -------------------------------------------------------------------------------- | Change in fair | -31 | 104 | | -92 | 100 | | 243 | | value reserve | | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss | 108 | 227 | -53 | -11 | 186 | | 508 | | before tax at fair | | | | | | | | | value | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Key indicators | H1/ | H1/ | Q2/ | Q2/ | 2009 | Target | | | | 2010 | 2009 | 20 | 2009 | | | | | | | | 10 | | | | | -------------------------------------------------------------------------------- | Earnings before | 139 | 123 | 80 | 87 | 265 | | | | tax, € million | | | | | | | | -------------------------------------------------------------------------------- | Profit for the | 102 | 91 | 59 | 65 | 194 | | | | period, € million | | | | | | | | -------------------------------------------------------------------------------- | Return on equity, | 7.1 | 18.3 | -1.6 | 30.3 | 19.2 | 13.0 | | | % | | | | | | | | -------------------------------------------------------------------------------- | Balance sheet | 38.6 | 33.6 | | | 35.5 | | | | total, € billion | | | | | | | | -------------------------------------------------------------------------------- | Shareholders' | 2.2 | 2.1 | | | 2.3 | | | | equity, € billion | | | | | | | | -------------------------------------------------------------------------------- | Tier 1 ratio, % | 12.0 | 11.5 | | | 11.8 | >9.5 | | -------------------------------------------------------------------------------- | Earnings per | 0.32 | 0.33 | 0.19 | 0.22 | 0.66 | | | | share, € | | | | | | | | -------------------------------------------------------------------------------- | Earnings per | 0.25 | 0.62 | -0.03 | 0.47 | 1.27 | | | | share, incl. | | | | | | | | | change in fair | | | | | | | | | value, € | | | | | | | | -------------------------------------------------------------------------------- | Equity per share, | 7.01 | 6.45 | | | 7.09 | | | | € | | | | | | | | -------------------------------------------------------------------------------- | Average personnel | 2,99 | 2,96 | 3,007 | 2,98 | 2,966 | | | | | 9 | 4 | | 0 | | | | -------------------------------------------------------------------------------- 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 2009 are used as comparatives. President and CEO Mikael Silvennoinen: Pohjola Group's financial performance in the first half was better than a year ago. Our earnings before tax grew by 13%. In particular, net interest income from Corporate Banking and net commissions and fees developed favourably and we managed well to keep our expenses in check. Our second-quarter financial results were good too, although we slightly lagged behind the excellent results that we reported a year ago. First-half impairment charges on receivables were slightly higher than in the previous year whereas in the second quarter they were already lower than a year ago. Favourable developments in capital markets in the first quarter turned into uncertainty in the second quarter, with the result that our earnings before tax at fair value declined markedly year on year. With greater demand for corporate loans, the loan and guarantee portfolio has begun to grow. In line with our expectations, the trend of the rising average corporate loan margin has, however, come to an end and tougher competition is sending the margin on new loans down. Higher impairment charges year on year and the normalisation of the Markets division's financial performance weakened Banking earnings for the first half from their previous year's level. Second-quarter earnings were already higher than the year before. Non-life insurance recorded a good balance on technical account. In the second quarter, insurance premium revenue rebounded and its growth among private customers in particular remained strong throughout the first half. Capital market uncertainty was reflected in the Non-life Insurance return on investments at fair value. Asset Management reported slight growth in assets under management and doubled its year-on-year earnings before tax. A new CRM organisation for Banking and Non-life Insurance adopted at the beginning of this year has got off to a good start. Through this organisational model, we aim to seek more customer-focused operations in the provision of comprehensive financial services and to support OP-Pohjola Group's strategic goal of being Finland's leading financial services group in business for corporate customers. The EU-wide stress test results published in July proved that OP-Pohjola Group's capital base is strong and would also withstand financial and economic shocks well under the adverse scenarios. As part of OP-Pohjola Group operating under the principle of joint responsibility, Pohjola was included in the Group's test results. Thanks to our strong capitalisation, we will have excellent opportunities to grow and strengthen our market position profitably as specified in our strategy. Operating environment The world economy continued to recover in the second quarter of 2010, but recovery has been uneven and strongest in emerging economies. The US economy is experiencing clear growth and the labour market is stabilising, whereas European economic growth has been tardier, with major differences from country to country. The economic outlook in the euro area is overshadowed by a government debt crisis, which has been reflected as uncertainty in the financial market. The Finnish economy, too, is gradually recovering, although economic indicators for the early part of the year were somewhat poor partly owing to exceptional factors. Both consumers and businesses showed improving confidence in the second quarter. As the world economy is picking up and the euro is becoming weaker, export is given a boost. Growth is also supported by higher household spending and increasing housing spending. Unemployment is not as bad as feared. Central banks' benchmark interest rates are still extremely low, and the European Central Bank (ECB) is not expected to raise its benchmark rate until 2011. The ECB is gradually reducing stimulus packages that supported the banking system's liquidity, which will increase short-term market rates somewhat, although they still remain record low. As part of the EU's and the International Monetary Fund's rescue package, the ECB aims to support Greece and other heavily indebted countries by buying their government bonds. Stress tests on banks in the EU countries show that the majority of banks would survive future economic shocks. This will help to dispel uncertainty in interbank markets. In Finland, the gradual recovery of the loan portfolio continued in the second quarter. Corporate loans began to rebound early this year, and growth remained steady in the second quarter. In capital markets, however, the second quarter was marred by uncertainty caused by concerns over government bonds and economic growth. The global upward trend in equity markets ended, with the weighted index of the OMX Helsinki CAP in Finland falling by almost 9% during the second quarter. Market uncertainty also turned net asset inflows of mutual funds negative, and fund asset declined by 5% in the second quarter. Within Non-life Insurance, lower payroll bills of companies as a result of the recession slowed down the development of premiums written. As a result of greater economic activity, claims paid out began to increase faster than premiums written during the second quarter. However, claims incurred are still below their normal level. Consolidated earnings -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Consolidated earnings | 2010 | 2009 | Change | 2010 | 2009 | Change | | analysis | | | | | | | -------------------------------------------------------------------------------- | € million | H1 | H1 | % | Q2 | Q2 | % | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 2009 | -------------------------------------------------------------------------------- | | -------------------------------------------------------------------------------- | | Rollin | | | | g | | | | 12-mon | | | | th | | -------------------------------------------------------------------------------- | Net interest | | | | | | | | | | income | | | | | | | | | -------------------------------------------------------------------------------- | Corporate Banking | 84 | 65 | 29 | 44 | 33 | 32 | 157 | 138 | -------------------------------------------------------------------------------- | Markets | 10 | 22 | -54 | 4 | 12 | -64 | 15 | 27 | -------------------------------------------------------------------------------- | Other operations | 32 | 31 | 4 | 19 | 22 | -13 | 77 | 75 | -------------------------------------------------------------------------------- | Total | 127 | 119 | 7 | 67 | 67 | 0 | 249 | 241 | -------------------------------------------------------------------------------- | Net commissions | 81 | 66 | 22 | 41 | 36 | 14 | 158 | 143 | | and fees | | | | | | | | | -------------------------------------------------------------------------------- | Net trading | 15 | 33 | -53 | 8 | 8 | 0 | 54 | 71 | | income | | | | | | | | | -------------------------------------------------------------------------------- | Net investment | 15 | -9 | | -3 | 0 | | 11 | -13 | | income | | | | | | | | | -------------------------------------------------------------------------------- | Net income from | | | | | | | | | | Non-life | | | | | | | | | | Insurance | | | | | | | | | -------------------------------------------------------------------------------- | Insurance | 173 | 184 | -6 | 99 | 101 | -1 | 372 | 382 | | operations | | | | | | | | | -------------------------------------------------------------------------------- | Investment | 43 | 30 | 44 | 26 | 32 | -18 | 77 | 64 | | operations | | | | | | | | | -------------------------------------------------------------------------------- | Other items | -23 | -22 | 5 | -11 | -11 | 8 | -45 | -44 | -------------------------------------------------------------------------------- | Total | 193 | 192 | 1 | 114 | 122 | -6 | 403 | 402 | -------------------------------------------------------------------------------- | Other operating | 21 | 22 | -5 | 10 | 11 | -4 | 49 | 50 | | income | | | | | | | | | -------------------------------------------------------------------------------- | Total income | 453 | 424 | 7 | 239 | 245 | -3 | 924 | 895 | -------------------------------------------------------------------------------- | Personnel costs | 99 | 95 | 4 | 52 | 50 | 4 | 194 | 190 | -------------------------------------------------------------------------------- | IT expenses | 38 | 37 | 4 | 19 | 18 | 6 | 77 | 75 | -------------------------------------------------------------------------------- | Depreciation and | 34 | 34 | 1 | 16 | 17 | -3 | 72 | 72 | | amortisation | | | | | | | | | -------------------------------------------------------------------------------- | Other expenses | 82 | 82 | 0 | 43 | 40 | 5 | 163 | 164 | -------------------------------------------------------------------------------- | Total expenses | 253 | 247 | 2 | 130 | 125 | 4 | 506 | 501 | -------------------------------------------------------------------------------- | Earnings before | 200 | 177 | 13 | 109 | 119 | -9 | 417 | 394 | | impairments of | | | | | | | | | | receivables | | | | | | | | | -------------------------------------------------------------------------------- | Impairments of | 62 | 54 | 15 | 29 | 33 | -12 | 137 | 129 | | receivables | | | | | | | | | -------------------------------------------------------------------------------- | Earnings before | 139 | 123 | 13 | 80 | 87 | -7 | 281 | 265 | | tax | | | | | | | | | -------------------------------------------------------------------------------- | Change in fair | -31 | 104 | | -92 | 100 | | 108 | 243 | | value reserve | | | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss | 108 | 227 | | -11 | 186 | | 389 | 508 | | before tax at | | | | | | | | | | fair value | | | | | | | | | -------------------------------------------------------------------------------- January-June earnings Earnings before tax amounted to EUR 139 million (123), up by 13% on a year earlier. Earnings before impairment charges on receivables totalled EUR 200 million (177), or 13% higher than a year ago. Impairments of receivables rose by EUR 8 million year on year to EUR 62 million (54). Uncertainty in the market became greater towards the end of the period, and earnings before tax at fair value fell to EUR 108 million (227). Total income increased by 7% to EUR 453 million (424) and expenses by 2% to EUR 253 million (247). Net interest income came to EUR 127 million (119), up by 7% year on year. Net interest income from Corporate Banking showed strong growth, thanks to growth in the loan portfolio and a rise in the average margin. Net commissions and fees increased to EUR 81 million (66), up by 22% year on year. Almost all areas showed growth in commissions and fees, with asset management, brokerage and securities issuance reporting the greatest growth. Net trading income amounted to EUR 15 million (33). The combined net interest income and net trading income from Markets dropped by 44% to EUR 33 million. Income reported a year ago was exceptionally high because of the market situation. Net investment income totalled EUR 15 million (-9). This figure includes realised capital gains of EUR 16 million recognised on the notes and bonds. Adjustments for real property acquisition costs reduced net investment income a year ago. Net investment income from Non-life Insurance remained at the previous year's level, EUR 193 million (192). Net income from insurance operations was good although decreasing slightly from the exceptionally high level a year ago. Expenses rose by 2% to EUR 253 million (247). Personnel costs increased by 4%. The number of Group employees increased by 37 from 31 December 2009. The fair value reserve before tax diminished by EUR 31 million (growth of 104) and impairments recognised from the fair value reserve in the income statement totalled EUR 29 million. On 30 June, the fair value reserve after tax stood at EUR -23 million, as against EUR 0 million on 31 December 2009. April-June earnings Earnings before tax amounted to EUR 80 million (87), down by 7% on a year earlier. Earnings before impairments of receivables came to EUR 109 million (119). Impairments of receivables decreased by EUR 4 million year on year to EUR 29 million (33). Earnings before tax at fair value amounted to EUR -11 million (186). Capital market uncertainty reduced this figure in the second quarter. Earnings before tax at fair value were exceptionally good a year earlier. Total income went down by 3% to EUR 239 million (245). Consolidated net interest income stood at the level reported a year ago, EUR 67 million (67). Within Corporate Banking, net interest income continued to grow but the rise in the average margin on loans came to a standstill. Net commissions and fees amounted to EUR 41 million (36), with asset management, securities issuance and brokerage showing the strongest growth during the second quarter. Net trading income was at the previous year's level, EUR 8 million (8). Net income recorded by Markets combined with net trading income totalled EUR 16 million (23). Net income from Non-life Insurance totalled EUR 114 million (122). Expenses rose by 4% to EUR 130 million (125). -------------------------------------------------------------------------------- | Earnings analysis by | 2009 | 2010 | | quarter | | | -------------------------------------------------------------------------------- | € million | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | -------------------------------------------------------------------------------- | Net interest income | | | | | | | -------------------------------------------------------------------------------- | Corporate Banking | 32 | 33 | 36 | 37 | 40 | 44 | -------------------------------------------------------------------------------- | Markets | 10 | 12 | 2 | 4 | 6 | 4 | -------------------------------------------------------------------------------- | Other operations | 10 | 22 | 21 | 23 | 14 | 19 | -------------------------------------------------------------------------------- | Total | 52 | 67 | 58 | 63 | 60 | 67 | -------------------------------------------------------------------------------- | Net commissions and fees | 30 | 36 | 36 | 41 | 40 | 41 | -------------------------------------------------------------------------------- | Net trading income | 25 | 8 | 27 | 11 | 7 | 8 | -------------------------------------------------------------------------------- | Net investment income | -9 | 0 | 1 | -5 | 18 | -3 | -------------------------------------------------------------------------------- | Net income from Non-life | | | | | | | | Insurance | | | | | | | -------------------------------------------------------------------------------- | Insurance operations | 83 | 101 | 107 | 92 | 74 | 99 | -------------------------------------------------------------------------------- | Investment operations | -2 | 32 | 19 | 15 | 17 | 26 | -------------------------------------------------------------------------------- | Other items | -11 | -11 | -11 | -11 | -11 | -11 | -------------------------------------------------------------------------------- | Total | 70 | 122 | 114 | 96 | 79 | 114 | -------------------------------------------------------------------------------- | Other operating income | 11 | 11 | 11 | 17 | 11 | 10 | -------------------------------------------------------------------------------- | Total income | 179 | 245 | 247 | 224 | 215 | 239 | -------------------------------------------------------------------------------- | Personnel costs | 45 | 50 | 47 | 48 | 47 | 52 | -------------------------------------------------------------------------------- | IT expenses | 19 | 18 | 19 | 20 | 19 | 19 | -------------------------------------------------------------------------------- | Depreciation and | 17 | 17 | 17 | 21 | 18 | 16 | | amortisation | | | | | | | -------------------------------------------------------------------------------- | Other expenses | 41 | 40 | 36 | 45 | 39 | 43 | -------------------------------------------------------------------------------- | Total expenses | 122 | 125 | 119 | 135 | 123 | 130 | -------------------------------------------------------------------------------- | Earnings before | 57 | 119 | 128 | 89 | 92 | 109 | | impairments of | | | | | | | | receivables | | | | | | | -------------------------------------------------------------------------------- | Impairments of | 21 | 33 | 41 | 34 | 33 | 29 | | receivables | | | | | | | -------------------------------------------------------------------------------- | Earnings before tax | 36 | 87 | 87 | 55 | 59 | 80 | -------------------------------------------------------------------------------- | Change in fair value | 4 | 100 | 109 | 30 | 61 | -92 | | reserve | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before tax | 41 | 186 | 196 | 84 | 119 | -11 | | at fair value | | | | | | | -------------------------------------------------------------------------------- Group risk exposure The Group's risk exposure remained favourable. Impairment charges in the second quarter were lower than in the previous quarter. Investment-grade exposures remained high and creditworthiness among corporate customers did not undergo any major changes. Doubtful receivables decreased during the second quarter and remained low relative to the loan and guarantee portfolio. The financial and liquidity position remained strong. Short-term funding performed well and issuers with a strong credit rating managed to acquire long-term funding too although worries about governments' indebtedness undermined the performance of debt capital markets. Pohjola Bank plc maintains OP-Pohjola Group's liquidity portfolio, which mainly consists of notes and bonds eligible as collateral for central bank refinancing. The liquidity portfolio totalled EUR 12.5 billion (11.7) on 30 June 2010. This liquidity portfolio plus other items included in OP-Pohjola Group's balance sheet and eligible for central bank refinancing constitute the total liquidity buffer, which can be used to cover OP-Pohjola Group's wholesale funding maturities for some 24 months. Determining the value of the available-for-sale financial assets at fair value through profit or loss and included in the liquidity portfolio is based on mark-to-market valuations. Pohjola did not recognise any impairment charges on the liquidity portfolio during the first half. Pohjola kept market risks moderate during the period. Net loan losses and impairment losses recognised for January-June reduced earnings by EUR 62 million (54), accounting for 0.43% (0.38) of the loan and guarantee portfolio. Final loan losses recognised for the period totalled EUR 40 million (1) and impairment charges EUR 69 million (62). Loan loss recoveries and allowances for impairments totalled EUR 47 million (9). The majority of the impairments were those recognised on an individual basis. Doubtful receivables decreased by EUR 32 million to EUR 39 million in the first quarter and were at the 31 December 2009 level, accounting for 0.27% (0.32) of the loan and guarantee portfolio. Past due payments came to EUR 16 million (70), representing 0.11% (0.51) of the loan and guarantee portfolio. Despite the economic recovery and lower impairment charges and doubtful receivables, some of our corporate customers still face a challenging operating environment. The greatest uncertainty related to the Group's risk exposure is still associated with future impairment charges on the loan portfolio. Capital adequacy Capital adequacy under the Act on Credit Institutions remained strong. The capital adequacy ratio stood at 13.4% (13.5) as against the statutory minimum requirement of 8%. Tier 1 ratio was 12.0% (11.8). Pohjola Group's Tier 1 target ratio stands at a minimum of 9.5% over the economic cycle. Tier 1 capital came to EUR 1,579 million (1,541) and the total capital base amounted to EUR 1,764 million (1,753). Hybrid capital accounted for EUR 274 million of Tier 1 capital. The minimum regulatory capital requirement to cover credit risk amounted to EUR 955 million (957), that to cover market risk EUR 38 million (36) and that to cover operational risks EUR 61 million (49). On 30 June 2010, risk-weighted assets totalled EUR 13,168 million, as against EUR 13,024 million on 31 December 2009. Pohjola Group belongs to OP-Pohjola Group whose capital adequacy is supervised in accordance with the Act on the Supervision of Financial and Insurance Conglomerates. Pohjola Group's capital adequacy ratio under the Act, measured using the consolidation method, stood at 1.73 (1.73). Accordingly, the capital base totalled EUR 2,133 million (2,103) and the minimum capital requirement EUR 1,230 million (1,213), i.e. the total capital base exceeded the minimum regulatory requirement by EUR 903 million (890). As a result of the financial crisis, the regulatory framework for banks' capital requirements is becoming more rigorous in an effort to improve the quality of their capital base, to reduce the cyclic nature of capital requirements and to set quantitative limits to liquidity risk. These changes are only in their preparation stage, planned to become effective between 2012 and 2018, and it is too early to predict precisely what their effects will be. Credit ratings Pohjola Bank plc's credit ratings remained unchanged, as follows: -------------------------------------------------------------------------------- | Rating agency | Short-term debt | Long-term debt | -------------------------------------------------------------------------------- | Standard & Poor's | A-1+ | AA- | -------------------------------------------------------------------------------- | Moody's | P-1 | Aa2 | -------------------------------------------------------------------------------- | Fitch | F1+ | AA- | -------------------------------------------------------------------------------- Pohjola's credit rating outlook issued by Standard & Poor's is stable. Fitch Rating has issued a negative outlook for the long-term debt ratings of Pohjola, and Moody's Investor Service has affirmed negative outlook on Pohjola's credit rating. The main reason for the negative outlook is the rapid deterioration of the Finnish economy and its potential effects on Pohjola and OP-Pohjola Group mainly operating in Finland. Financial targets and actuals -------------------------------------------------------------------------------- | Financial targets | H1/ | H1/ | 2009 | Target | | | 201 | 2009 | | | | | 0 | | | | -------------------------------------------------------------------------------- | Group | | | | | -------------------------------------------------------------------------------- | Return on equity, % | 7.1 | 18.3 | 19.2 | 13 | -------------------------------------------------------------------------------- | Tier 1 ratio, % | 12.0 | 11.5 | 11.8 | >9.5 | -------------------------------------------------------------------------------- | Banking | | | | | -------------------------------------------------------------------------------- | Operating cost/income ratio, % | 35 | 35 | 35 | <40 | -------------------------------------------------------------------------------- | Non-life Insurance | | | | | -------------------------------------------------------------------------------- | Operating combined ratio, % | 91.6 | 88.6 | 87.7 | 92 | -------------------------------------------------------------------------------- | Operating expense ratio, % | 22.0 | 21.8 | 22.2 | <20 | -------------------------------------------------------------------------------- | Solvency ratio, % | 91 | 77 | 88 | 70 | -------------------------------------------------------------------------------- | Asset Management | | | | | -------------------------------------------------------------------------------- | Operating cost/income ratio, % | 53 | 63 | 53 | <50 | -------------------------------------------------------------------------------- | Rating | | | | | -------------------------------------------------------------------------------- | AA rating affirmed by at least | 3 | 3 | 3 | ≥ 2 | | two credit rating agencies | | | | | -------------------------------------------------------------------------------- | Dividend policy | | | | | -------------------------------------------------------------------------------- | Dividend payout ratio a minimum | | | 51 | >50 | | of 50%, provided that Tier 1 a | | | | | | minimum of 9.5%. | | | | | -------------------------------------------------------------------------------- The financial targets are set over the economic cycle. Performance by business line Banking - Earnings before tax amounted to EUR 55 million (76), affected by EUR 62 million (44) in impairment charges on receivables. Earnings before these impairments were at the level reported a year ago. - The average corporate loan margin was 24 basis points higher than the year before but this upward trend is coming to an end. - Thanks to higher margins, Corporate Banking net interest income rose by 29%. The loan portfolio grew by 5% from the level of 31 December 2009 and by 1% in the year to June. - The Markets division's financial performance remained good although it weakened from the exceptionally good level posted a year ago. - Operating cost/income ratio stood at 35%, which is clearly below the long-term target of 40%. Banking: financial results and key figures and ratios -------------------------------------------------------------------------------- | Financial results, | H1/ | H1/ | Change | Q2/ | Q2/ | Change, | 2009 | | € million | 2010 | 2009 | , % | 2 | 2 | % | | | | | | | 010 | 009 | | | -------------------------------------------------------------------------------- | Net interest income | | | | | | | | -------------------------------------------------------------------------------- | Corporate Banking | 84 | 65 | 29 | 44 | 33 | 32 | 138 | -------------------------------------------------------------------------------- | Markets | 10 | 22 | -54 | 4 | 12 | -64 | 27 | -------------------------------------------------------------------------------- | Total | 95 | 87 | 8 | 48 | 45 | 7 | 165 | -------------------------------------------------------------------------------- | Net commissions and | 47 | 44 | 8 | 23 | 25 | -6 | 85 | | fees | | | | | | | | -------------------------------------------------------------------------------- | Net trading income | 24 | 37 | -34 | 12 | 13 | -12 | 78 | -------------------------------------------------------------------------------- | Other income | 14 | 15 | -6 | 7 | 7 | -6 | 30 | -------------------------------------------------------------------------------- | Total income | 180 | 183 | -2 | 90 | 91 | -1 | 358 | -------------------------------------------------------------------------------- | Expenses | | | | | | | | -------------------------------------------------------------------------------- | Personnel costs | 26 | 26 | 1 | 14 | 14 | 3 | 50 | -------------------------------------------------------------------------------- | IT expenses | 12 | 11 | 12 | 6 | 5 | 19 | 21 | -------------------------------------------------------------------------------- | Depreciation and | 13 | 14 | -6 | 6 | 7 | -15 | 28 | | amortisation | | | | | | | | -------------------------------------------------------------------------------- | Other expenses | 13 | 13 | -4 | 6 | 7 | -3 | 25 | -------------------------------------------------------------------------------- | Total expenses | 64 | 64 | 1 | 32 | 32 | 1 | 125 | -------------------------------------------------------------------------------- | Earnings before | 116 | 120 | -3 | 58 | 58 | -1 | 234 | | impairments of | | | | | | | | | receivables | | | | | | | | -------------------------------------------------------------------------------- | Impairments of | 62 | 44 | 40 | 29 | 32 | -11 | 117 | | receivables | | | | | | | | -------------------------------------------------------------------------------- | Earnings before tax | 55 | 76 | -28 | 29 | 26 | 12 | 117 | -------------------------------------------------------------------------------- | Earnings before tax | 55 | 76 | -27 | 29 | 26 | 9 | 120 | | at fair value | | | | | | | | -------------------------------------------------------------------------------- | Loan and guarantee | 13.9 | 13.9 | 0 | | | | 13.3 | | portfolio, € | | | | | | | | | billion | | | | | | | | -------------------------------------------------------------------------------- | Margin on corporate | 1.38 | 1.14 | 21 | | | | 1.33 | | loan portfolio, % | | | | | | | | -------------------------------------------------------------------------------- | Ratio of doubtful | | | | | | | | | receivables to | | | | | | | | -------------------------------------------------------------------------------- | loan and guarantee | 0.28 | 0.39 | -30 | | | | 0.32 | | portfolio, % | | | | | | | | -------------------------------------------------------------------------------- | Ratio of | | | | | | | | | impairments of | | | | | | | | | receivables | | | | | | | | -------------------------------------------------------------------------------- | to loan and | 0.44 | 0.32 | 38 | | | | 0.88 | | guarantee | | | | | | | | | portfolio, % | | | | | | | | -------------------------------------------------------------------------------- | Operating | | | | | | | | | cost/income | | | | | | | | -------------------------------------------------------------------------------- | ratio, % | 35 | 35 | 2 | 36 | 36 | 1 | 35 | -------------------------------------------------------------------------------- | Personnel | 647 | 620 | 3 | | | | 607 | -------------------------------------------------------------------------------- January-June earnings Earnings before tax amounted to EUR 55 million (76), affected by EUR 62 million (44) in impairment charges on receivables. Earnings before these impairments were at the same level as a year ago. Lending rebounded during the first half, with the loan portfolio growing by 5% from its year-end level to over EUR 11.2 billion. The loan portfolio grew by 1% in the year to June. The market share of corporate loans in June was at the same level as at the beginning of 2010. The guarantee portfolio increased by EUR 0.1 billion to EUR 2.7 billion from its year-end level, but was EUR 0.1 billion lower than a year earlier. The average corporate loan margin of 1.38% was 24 basis points higher on 30 June than the year before and rose by 5 basis points from its level on 31 December 2009. Thanks to the higher average margin, Corporate Banking net interest income improved by 29%. Due to fiercer competition, margins have stopped rising in recent months. Pohjola holds a strong position as an arranger of issues and a securities broker. The report period saw a marked increase in net commissions and fees from securities issuance and brokerage. The Markets division has also shown good financial performance during the current year although its earnings decreased from their level a year ago when total net income was exceptionally high because of the market situation. The division's combined net interest income and net trading income fell by 44% to EUR 33 million year on year. Customer trading volumes grew over the previous year, especially in fixed-income and foreign exchange products, as companies needed to increase their hedging measures due to jittery markets. The cost/income ratio remained good, standing at 35%. Total expenses were on a par with those in the previous year. April-June earnings Earnings before tax were EUR 29 million, or EUR 3 million higher than the year before. Income and expenses were on a par with those in the previous year. Impairment charges on receivables were EUR 4 million lower than a year ago. The loan and guarantee portfolio increased by EUR 0.4 billion whereas a year ago it decreased by EUR 0.1 billion. As a result of higher margins, Corporate Banking net interest income was a third higher than a year ago. The average margin on loans did not rise any longer during the second quarter. The Markets division posted earnings of EUR 11 million before tax (16). The combined net interest income and net trading income diminished from EUR 23 million to EUR 16 million, whereas net commissions and fees from securities brokerage and issuance increased by EUR 3 million. Risk exposure by Banking Within Banking, key risks are associated with credit risk arising from customer business, and market risks. During January-June, total exposure grew by EUR 1.0 billion to EUR 22.1 billion. The ratio of investment-grade exposure - i.e. ratings 1-5 - to total exposure, excluding households, remained at a healthy level, standing at 67% (64). The share of ratings 11-12 was 2.0% (1.6) and that of non-rated exposure 0.7% (0.8). Corporate exposure (including housing corporations) accounted for 75% (78) of total exposure within Banking. Of corporate exposure, the share of investment-grade exposure stood at 60% (57) and the exposure of the lowest two rating categories amounted to EUR 416 million (321), accounting for 2.5% (2.0) of the total corporate exposure. Significant corporate customer exposure totalled EUR 3.4 billion (2.9). The distribution of corporate exposure by industry remained highly diversified and none of the industries represented over 12% of corporate exposure on 30 June 2010. The most significant industries included Letting and Operation of Dwellings representing 11.4% (11.2), Manufacture of Machinery and Equipment 9.6% (9.7) and Trade 9.3% (10.9). January-June net loan losses and impairment charges within Banking came to EUR 62 million (44), accounting for 0.44% (0.32) of the loan and guarantee portfolio. On 30 June, Baltic Banking exposures totalled EUR 82 million, accounting for less than 1% of the loan and guarantee portfolio. The Baltic Banking net loan losses and impairment charges for the first half amounted to EUR 0.8 million. Second-quarter interest rate risk exposure averaged EUR 4.1 million (7.6), based on the 1-percentage-point change in the interest rate. Non-life Insurance - Earnings before tax amounted to EUR 42 million (46). - The balance on technical account developed as expected. The operating combined ratio stood at 91.6% (88.6). - Insurance premium revenue rebounded during the second quarter. Private Customers became the largest business division. - Return on investments at fair value was 2.6% (4.5). Non-life Insurance: financial results and key figures and ratios -------------------------------------------------------------------------------- | Financial | H1/ | H1/ | Chang | Q2/ | Q2/ | Change | 2009 | | results, € | 2 | 2 | e, % | 20 | 2 | , % | | | million | 010 | 009 | | 10 | 009 | | | -------------------------------------------------------------------------------- | Insurance | 473 | 471 | 0 | 246 | 240 | 2 | 943 | | premium revenue | | | | | | | | -------------------------------------------------------------------------------- | Claims incurred | -329 | -314 | 5 | -162 | -154 | 5 | -617 | -------------------------------------------------------------------------------- | Operating | -104 | -103 | 1 | -55 | -53 | 4 | -210 | | expenses | | | | | | | | -------------------------------------------------------------------------------- | Amortisation | -12 | -12 | 0 | -6 | -6 | 0 | -28 | | adjustment of | | | | | | | | | intangible | | | | | | | | | assets | | | | | | | | -------------------------------------------------------------------------------- | Balance on | 27 | 42 | -34 | 23 | 28 | -15 | 88 | | technical | | | | | | | | | account | | | | | | | | -------------------------------------------------------------------------------- | Net investment | 42 | 30 | 41 | 26 | 31 | -18 | 61 | | income | | | | | | | | -------------------------------------------------------------------------------- | Other income and | -27 | -25 | 8 | -12 | -11 | 10 | -46 | | expenses | | | | | | | | -------------------------------------------------------------------------------- | Earnings before | 42 | 46 | -8 | 37 | 48 | -23 | 102 | | tax | | | | | | | | -------------------------------------------------------------------------------- | Earnings before | 71 | 121 | | -4 | 120 | | 291 | | tax at fair | | | | | | | | | value | | | | | | | | -------------------------------------------------------------------------------- | Operating | 91.6 | 88.6 | | 88.0 | 86.0 | | 87.7 | | combined ratio, | | | | | | | | | % | | | | | | | | -------------------------------------------------------------------------------- | Operating | 22.0 | 21.8 | | 22.2 | 21.9 | | 22.2 | | expense ratio, % | | | | | | | | -------------------------------------------------------------------------------- | Return on | 2.6 | 4.5 | | -0.6 | 4.9 | | 10.7 | | investments at | | | | | | | | | fair value, % | | | | | | | | -------------------------------------------------------------------------------- | Solvency ratio , | 91 | 77 | | | | | 88 | | % | | | | | | | | -------------------------------------------------------------------------------- | Personnel | 2,073 | 2,056 | | | | | 2,070 | -------------------------------------------------------------------------------- January-June earnings Earnings before tax amounted to EUR 42 million (46). Profitability remained good. The recession continued to affect the corporate sector, reducing insurance premiums paid by corporate customers. Growth remained strong within private customers. The balance on technical account before amortisation on intangible assets stood at EUR 40 million (54). Uncertainty in capital markets was reflected in investment performance during the second quarter. Net investment income amounted to EUR 42 million (30) and net investment income at fair value came to EUR 70 million (104). The number of loyal customer non-life insurance households totalled 442,581 on 30 June 2010. The Group's strategic aim is to increase this number to 450,000 by the end of this year. The current growth rate suggests that Pohjola will achieve this target during the third quarter. Up to 57% of these loyal customer households also use OP-Pohjola Group member cooperative banks as their main bank. OP-Pohjola Group member banks' and Helsinki OP Bank's customers can use their OP bonuses earned through banking transactions to pay Pohjola non-life insurance premiums. During January-June, OP bonuses were used to pay 526,600 insurance premiums, with 88,100 paid in full using bonuses. Insurance premiums paid using bonuses totalled EUR 27 million. In 2005, Pohjola set a target of achieving annual revenue synergies of EUR 17 million by the end of 2010, resulting from growth in the number of loyal customer households, which Pohjola already achieved in March. Insurance business First-half profitability was in line with expectations. The operating combined ratio, excluding amortisation on intangible assets arising from the corporate acquisition, stood at 91.6% (88.6%). Profitability a year ago was exceptionally good. Insurance premium revenue increased to EUR 473 million (471). Growth remained strong within Private Customers, which became the largest division within Non-life Insurance. The recession continued to affect the corporate sector, reducing insurance premiums based on companies' payroll bills, net sales and operating profit, with the result that insurance premiums were down within Corporate Customers and the Baltic States. Insurance premium revenue from Private Customers improved by 11% to EUR 229 million (207). The number of loyal customer households grew by 17,867 (14,057) during the first half. Insurance premium revenue from Corporate Customers dropped by 6% to EUR 219 million (234). Pohjola reduced the level of premiums for the current year within statutory workers' compensation insurance. As a result of the recession, payroll bills which determine insurance premiums continued their downward trend. In the Baltic States, insurance premium revenue decreased by 19% to EUR 24 million (30). The economic recession has strongly affected the insurance market in the Baltic region with the result that the total market in the region shrank by over one quarter during the reporting period. Claims incurred rose due to growth in the private customer insurance portfolio and the large number of losses reported within motor liability and motor vehicle insurance during the first half. Claims incurred increased to EUR 329 million (314), or by 5%. The loss ratio deteriorated to 69.6% (66.7) and the risk ratio (excl. loss adjustment expenses) stood at 62.2% (55.9). The reported number of major or medium-sized losses (in excess of EUR 0.1 million and over EUR 0.5 million in pension liabilities) came to 103 (90) in January-June, with their claims incurred retained for own account totalling EUR 51 million (45). Operating expenses increased to EUR 104 million (103), or by 1%. The expense ratio was 22.0% (21.8). The cost ratio (incl. loss adjustment expenses) stood at 29.4% (28.7). The operating balance on technical account within Private Customers improved to EUR 31 million (26) because claims incurred were lower than insurance premium revenue. The operating balance on technical account within Corporate Customers fell to EUR 7 million (24) as a result of lower insurance premium revenue and the normalisation of claims developments with respect to the exceptionally favourable developments a year ago. The balance on technical account recorded by the Baltic States stood at EUR 2 million (4). Investment Return on investments at fair value stood at 2.6% (4.5). Net investment income recognised in the income statement amounted to EUR 42 million (30) and net investment income at fair value was EUR 70 million (104). Impairment charges recognised from the fair value reserve in the income statement totalled EUR 25 million. On 30 June, the investment portfolio totalled EUR 2,946 million (2,851), bonds and bond funds accounting for 75% (76) and listed equities for 10% (10). Unlisted equity investments plus the aforementioned equities represented a total of 12% (13). The fixed-income portfolio by credit rating remained healthy, considering that investments under "investment-grade" represented 89% (94) and 75% of the investments were rated at least A-. The average residual term to maturity of the fixed-income portfolio was 5.0 years and the duration 3.7 years (3.4). April-June earnings Earnings before tax amounted to EUR 37 million (48). The balance on technical account before amortisation on intangible assets stood at EUR 30 million (34). Uncertainty in capital markets was reflected in investment performance. Net investment income amounted to EUR 26 million (31) and net investment income at fair value came to EUR -15 million (105). Insurance business Profitability remained good during the second quarter. The operating combined ratio, excluding amortisation on intangible assets arising from the corporate acquisition, stood at 88.0% (86.0%). Insurance premium revenue rebounded during the period, increasing by 2% to EUR 246 million (240). Growth in insurance premium revenue remained strong among private customers during the period, improving by 12% to EUR 123 million (110). The number of loyal customer households grew by 9,187 (8,132) in the second quarter. The decline in insurance premium revenue from corporate customers decelerated and premium revenue dropped by 4% to EUR 111 million (116). The effect of the recession began to be more visible in the previous year's premium revenue only after the second quarter. In the Baltic States, insurance premium revenue decreased by 21% to EUR 12 million (15). Claims incurred increased to EUR 162 million (154), or by 5%. The loss ratio deteriorated to 65.8% (64.1) and the risk ratio (excl. loss adjustment expenses) stood at 58.3% (57.2). The reported number of major or medium-sized losses (in excess of EUR 0.1 million and over EUR 0.5 million in pension liabilities) came to 52 (40) in April-June, with their claims incurred retained for own account totalling EUR 25 million (23). Operating expenses increased by 4% to EUR 55 million (53). The expense ratio stood at 22.2% (21.9) and the cost ratio (incl. loss adjustment expenses) at 29.7% (28.7). The operating balance on technical account within Private Customers improved to EUR 25 million (17) because claims developments normalised after the large number of losses reported in the winter within motor liability and motor vehicle insurance. Growth in claims incurred remained in a par with that in the insurance portfolio. The operating balance on technical account within Corporate Customers fell to EUR 2 million (14) as a result of the normalisation of claims developments with respect to the exceptionally favourable developments a year ago. This fall combined with lower premium income weakened the balance on technical account. The balance on technical account recorded by the Baltic States stood at EUR 2 million (3). Investment Return on investments at fair value was -0.6% (4.9). Net investment income recognised in the income statement amounted to EUR 26 million (31). As a result of capital market uncertainty, net investment income at fair value fell markedly from its exceptionally high level a year ago, amounting to EUR -15 million (105). Impairment charges recognised from the fair value reserve in the income statement totalled EUR 9 million. Risk exposure by Non-life Insurance Major risks within Non-life Insurance include underwriting risks associated with claims developments and market risks associated with investment portfolios covering technical provisions. On 30 June, Non-life Insurance solvency capital came to EUR 857 million (827) and the ratio of solvency capital to insurance premium revenue (solvency ratio) stood at 91% (88). Equalisation provisions rose to EUR 422 million (417). Pohjola Insurance Ltd's credit ratings have remained unchanged: A2 by Moody's and A+ by Standard & Poor's. No major changes occurred in investment risk exposure and Pohjola remained its interest risk exposure unchanged. Asset Management - Earnings before tax doubled to EUR 12 million (6). - Assets under management increased to EUR 33.6 billion (33.1) from their end-2009 level. - Operating cost/income ratio improved to 53% (63). Asset Management: financial results and key figures and ratios -------------------------------------------------------------------------------- | Financial | H1/ | H1/ | Change | Q2/ | Q2/ | Change | 2009 | | results, € | 2 | 2 | , % | 20 | 2 | , % | | | million | 010 | 009 | | 10 | 009 | | | -------------------------------------------------------------------------------- | Net commissions | 27 | 19 | 45 | 14 | 10 | 38 | 50 | | and fees | | | | | | | | -------------------------------------------------------------------------------- | Other income | 1 | 2 | -23 | 1 | 1 | -14 | 2 | -------------------------------------------------------------------------------- | Total income | 28 | 20 | 39 | 15 | 11 | 34 | 52 | -------------------------------------------------------------------------------- | Personnel costs | 10 | 8 | 20 | 5 | 4 | 21 | 17 | -------------------------------------------------------------------------------- | Other expenses | 7 | 6 | 8 | 4 | 3 | 10 | 13 | -------------------------------------------------------------------------------- | Total expenses | 17 | 14 | 15 | 8 | 7 | 16 | 30 | -------------------------------------------------------------------------------- | Earnings before | 12 | 6 | 98 | 6 | 4 | 70 | 21 | | tax | | | | | | | | -------------------------------------------------------------------------------- | Earnings before | 12 | 6 | 98 | 6 | 4 | 70 | 21 | | tax at fair | | | | | | | | | value | | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | | -------------------------------------------------------------------------------- | Assets under | 33.6 | 27.5 | 22 | 33.6 | 27.5 | 22 | 33.1 | | management, € | | | | | | | | | billion | | | | | | | | -------------------------------------------------------------------------------- | Operating | 53 | 63 | -16 | 52 | 60 | -13 | 53 | | cost/income | | | | | | | | | ratio, % | | | | | | | | -------------------------------------------------------------------------------- | Personnel | 170 | 154 | 10 | | | | 162 | -------------------------------------------------------------------------------- January-June earnings January-June earnings before tax increased by 98% to EUR 12 million (6) year on year and the operating cost/income ratio stood at 53% (63). Year on year, assets under management increased by 22%, standing at EUR 33.6 billion (33.1) at the end of the reporting period. A good net assets inflow and favourable market developments contributed to this increase. Of the assets under management, institutional clients accounted for EUR 19.6 billion (19.2), OP mutual funds for EUR 11.1 billion (11.4) and Pohjola Private for EUR 2.9 billion (2.5). Of the assets under management, money-market investments represented 14% (11), bonds 39% (42), equities 27% (27) and other investments 21% (20). April-June earnings Earnings before tax amounted to EUR 6 million (4). Year on year, net commissions and fees increased by 38% and results improved by 70%. The operating cost/income ratio improved to 52% (60). Capital market uncertainty was reflected in assets under management which shrank by EUR 1.3 billion during the period. Group Functions Earnings before tax amounted to EUR 30 million (loss of EUR 5 million). Capital gains on notes and bonds contributed to this improvement. Earnings before tax at fair value fell by EUR 54 million year on year. Impairment charges on receivables and investments were down. Liquidity and the availability of funding remained good. Long-term funding increased by EUR 1.5 billion aimed at strengthening the financial position. Group Functions: financial results and key figures and ratios -------------------------------------------------------------------------------- | Financial results, | H1/ | H1/ | Change | Q2/ | Q2/ | Change | 2009 | | € million | 2010 | 2009 | , % | 20 | 2 | , % | | | | | | | 10 | 009 | | | -------------------------------------------------------------------------------- | Net interest | 34 | 30 | 12 | 20 | 21 | -8 | 75 | | income | | | | | | | | -------------------------------------------------------------------------------- | Net trading income | -9 | -4 | | -3 | -5 | | -7 | -------------------------------------------------------------------------------- | Net investment | 15 | -9 | | -3 | 0 | | -13 | | income | | | | | | | | -------------------------------------------------------------------------------- | Other income | 7 | 7 | -2 | 4 | 4 | -17 | 17 | -------------------------------------------------------------------------------- | Total income | 47 | 25 | | 17 | 20 | -13 | 72 | -------------------------------------------------------------------------------- | Personnel costs | 7 | 6 | 3 | 4 | 4 | -12 | 13 | -------------------------------------------------------------------------------- | Other expenses | 11 | 13 | | 6 | 7 | -19 | 23 | -------------------------------------------------------------------------------- | Total expenses | 17 | 20 | -13 | 9 | 11 | -17 | 36 | -------------------------------------------------------------------------------- | Earnings before | 30 | 5 | 511 | 8 | 9 | -9 | 36 | | impairments of | | | | | | | | | receivables | | | | | | | | -------------------------------------------------------------------------------- | Impairments of | | 9 | | | | | 12 | | receivables | | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss | 30 | -5 | | 8 | 10 | | 25 | | before tax | | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss | -29 | 24 | | -43 | 36 | | 76 | | before tax at fair | | | | | | | | | value | | | | | | | | -------------------------------------------------------------------------------- | Liquidity | 12.5 | 9.6 | 30 | | | | 11.7 | | portfolio, € | | | | | | | | | billion | | | | | | | | -------------------------------------------------------------------------------- | Receivables and | 3.3 | 2.3 | 44 | | | | 2.9 | | liabilities | | | | | | | | | from/to OP-Pohjola | | | | | | | | | Group entities, | | | | | | | | | net position, € | | | | | | | | | billion | | | | | | | | -------------------------------------------------------------------------------- | Personnel | 123 | 135 | -9 | | | | 136 | -------------------------------------------------------------------------------- January-June earnings Earnings before tax were EUR 30 million, as against a loss of EUR 5 million reported a year ago. Successful investment operations within the liquidity portfolio improved net interest income. Net investment income included EUR 16 million in capital gains on notes and bonds. Impairments recognised on shares and participations included in available-for-sale financial assets totalled EUR 4 million (4), while a year ago impairments recognised on bonds totalled EUR 9 million. Liquidity and the availability of funding remained good and Pohjola's reputation is strong in the funding market. During the period, Pohjola increased its long-term funding by issuing two senior bonds each worth EUR 750 million in international capital markets. Debt instruments issued to the public remained at the previous year's level, totalling EUR 17 billion (17). Average funding costs will rise when maturing long-term debt is renewed at higher market rates. Pohjola Bank plc's net receivables from OP-Pohjola Group retails banks and entities increased to EUR 3.3 billion. On 31 December 2009, the net position amounted to EUR 2.9 billion. Unrest in the euro-area financial market deteriorated earnings before tax at fair value. April-June earnings Earnings before tax were EUR 8 million, or EUR 2 million lower than the year before. Uncertainty over the euro-area economic development was reflected in widening credit spreads and shrinking market liquidity, as a result of which the fair value of bonds and notes fell year on year and earnings before tax at fair value declined by EUR 80 million over the previous year. Risk exposure by Group Functions Major risks within the Group Functions include those associated with the fair value change of assets included in the liquidity portfolio, and liquidity risks. The Group Functions exposure totalled EUR 20.2 billion (18.3), consisting of assets in the liquidity portfolio and receivables from OP-Pohjola Group member banks. Almost all of the exposure was based on investment-grade counterparties. The Group Functions maintains the liquidity portfolio in order to secure OP-Pohjola Group's liquidity. The liquidity portfolio amounted to EUR 12.5 billion (11.7), comprising primarily investments in notes and bonds issued by governments, municipalities, financial institutions and companies all showing good credit ratings, and in securitised assets. Interest rate risk exposure averaged EUR 9.7 million (12.9) in the second quarter, based on the 1-percentage-point change in the interest rate. Shares and shareholders On 30 June 2010, the number of Pohjola Bank plc shares totalled 319,551,415 and votes conferred by the shares 593,077,995. On the same date, the number of Series A shares listed on NASDAQ OMX Helsinki Ltd totalled 251,169,770, representing 78.6% of all Pohjola shares and 42.4% of all votes. The number of unlisted Series K shares totalled 68,381,645. On 30 June 2010, one Series A share closed at EUR 8.39, as against EUR 7.55 at the end of 2009. Pohjola paid a dividend of EUR 0.34 for each Series A share and EUR 0.31 for each Series K share for 2009. In January-June, the share price reached a high of EUR 8.91 (21 June 2010) and a low of EUR 6.97 (7 May 2010). During the first half, Pohjola's share trading increased in euro terms from EUR 637 million a year ago to EUR 647 million, whereas in volume terms it decreased to 80 million shares (104). On 30 June, Pohjola Bank plc had 35,295 shareholders, down by 1,705 from the beginning of the year, private individuals accounting for 95% of all shareholders. The largest shareholder was OP-Pohjola Group Central Cooperative, representing 29.98% of all shares and 57.05% of all votes. The proportion of nominee registered shares of Series A shares rose markedly from 31 December 2009 (15.6%), accounting for 18.8% on 30 June 2010. On 27 May 2010, the Court of Appeal of Helsinki issued its ruling in the redemption dispute between Pohjola Bank plc's and Pohjola Group plc's minority shareholders. The Court of Appeal did not amend the ruling issued by the Helsinki District Court in August 2008, whereby the redemption price of one Pohjola Group plc share is EUR 13.35. The redemption price confirmed by the Court of Appeal is the same as that initially bid by OKO Bank plc for Pohjola Group plc shares held by minority shareholders. The Court of Appeal confirmed the annual interest payable on the redemption price at 5.50% as of 13 June 2006. The parties concerned have not filed a petition for leave to appeal with the Supreme Court. The ruling issued by the Court of Appeal gained legal force at the end of July. Group restructuring On 1 March 2010, Pohjola Bank plc sold its Seesam non-life insurers to its subsidiary Pohjola Insurance Ltd in order to streamline the corporate structure. This had no effect on the Group's financial results. Events after the balance sheet date The Committee of the European Banking Supervisors (CEBS), in cooperation with the European Central Bank, the European Commission and national supervisory authorities, coordinated the EU-wide forward-looking stress test of 91 banks in June-July. In Finland, the Financial Supervisory Authority coordinated the implementation of the test in cooperation with the Bank of Finland. Of the Finnish banks, OP-Pohjola Group was included in the stress test exercise. Given that Pohjola Bank plc is part of OP-Pohjola Group operating under the principle of joint responsibility, its data are included in the test results. OP-Pohjola Group's banking earnings and capital base would remain strong even if the assumptions of economic deterioration used in the Europe-wide bank stress test were to materialise. At its lowest, the Tier 1 ratio would drop to 12.3% at the end of 2011, against the minimum of 6% used in the test and the minimum regulatory requirement of 4%. Conducted by the CEBS, the stress test gave a clean bill of health to OP-Pohjola Group, as expected. Outlook towards the year end The economic recovery underway has been reflected in demand for corporate loans, with the result that the corporate loan portfolio has begun to grow. The trend of the rising average corporate loan margin is coming to an end and tougher competition is sending the margin on new loans down. Given that the business environment is still challenging for companies, it is estimated that impairment charges will remain higher than usual. Enabled by the economic recovery, impairment charges are, however, expected to remain lower than a year ago. The greatest uncertainties related to Banking's financial performance in 2010 are associated with impairment charges on the loan portfolio. Insurance premium revenue is expected to continue to increase at an above-the-market-average rate among private customers. The downward trend in insurance premium revenue from corporate customers is expected to slow down during the rest of the year. In Non-life Insurance, the operating combined ratio is estimated to vary between 89-93% (previous estimate: 89-94%) in 2010 if the number of large claims is not much higher than in 2009. Expected long-term returns on investment within Non-life Insurance stand at 5.4%. Returns will largely depend on developments in the investment environment. The most significant uncertainties related to Non-life Insurance's financial performance in 2010 pertain to the investment environment and the effect of large claims on claims expenditure. Within Asset Management, the upward trend in assets under management is expected to continue, their amounts being affected by market developments and the net inflow of assets. The greatest uncertainties related to Asset Management's financial performance in 2010 are associated with the actual performance-based fees tied to the success of investments and the amount of assets under management. The key determinants affecting the Group Functions' result include net interest income arising from assets in the liquidity portfolio and any impairment charges recognised on notes and bonds in the income statement. Consolidated earnings before tax in 2010 are expected to be at the same level as in 2009. When it comes to the outlook for 2010 as a whole, the greatest uncertainty is related to developments in impairment charges, large claims and the investment environment. There is still great uncertainty about future economic development and the overall operating environment, and these factors are beyond the Group management's control. All forward-looking statements in this report expressing the management's expectations, beliefs, estimates, forecasts, projections and assumptions are based on the current view of the future development in the operating environment and the future financial performance of Pohjola Group and its various functions, and actual results may differ materially from those expressed in the forward-looking statements. FINANCIAL STATEMENTS AND NOTES -------------------------------------------------------------------------------- | Consolidated income statement | -------------------------------------------------------------------------------- | Consolidated statement of comprehensive income | -------------------------------------------------------------------------------- | Consolidated balance sheet | -------------------------------------------------------------------------------- | Consolidated statement of changes in equity | -------------------------------------------------------------------------------- | Capital base and capital adequacy | -------------------------------------------------------------------------------- | Capital adequacy under the Act on the Supervision of Financial and Insurance | | Conglomerates | -------------------------------------------------------------------------------- | Consolidated cash flow statement | -------------------------------------------------------------------------------- | Segment information | -------------------------------------------------------------------------------- | Formulae for key figures and ratios | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Notes: | -------------------------------------------------------------------------------- | Note 1. Accounting policies | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Notes to the income statement and balance sheet: | -------------------------------------------------------------------------------- | Note 2. Net interest income | -------------------------------------------------------------------------------- | Note 3. Impairments of receivables | -------------------------------------------------------------------------------- | Note 4. Net income from Non-life Insurance | -------------------------------------------------------------------------------- | Note 5. Net commissions and fees | -------------------------------------------------------------------------------- | Note 6. Net trading income | -------------------------------------------------------------------------------- | Note 7. Net investment income | -------------------------------------------------------------------------------- | Note 8. Other operating income | -------------------------------------------------------------------------------- | Note 9. Classification of financial instruments | -------------------------------------------------------------------------------- | Note 10. Non-life Insurance assets | -------------------------------------------------------------------------------- | Note 11. Intangible assets | -------------------------------------------------------------------------------- | Note 12. Non-life Insurance liabilities | -------------------------------------------------------------------------------- | Note 13. Debt securities issued to the public | -------------------------------------------------------------------------------- | Note 14. Fair value reserve after income tax | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Notes to risk management: | -------------------------------------------------------------------------------- | Note 15. Risk exposure by Banking | -------------------------------------------------------------------------------- | Note 16. Risk exposure by Non-life Insurance | -------------------------------------------------------------------------------- | Note 17. Risk exposure by Group Functions | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Other notes: | -------------------------------------------------------------------------------- | Note 18. Collateral given | -------------------------------------------------------------------------------- | Note 19. Off-balance-sheet commitments | -------------------------------------------------------------------------------- | Note 20. Derivative contracts | -------------------------------------------------------------------------------- | Note 21. Other contingent liabilities and commitments | -------------------------------------------------------------------------------- | Note 22. Related-party transactions | -------------------------------------------------------------------------------- Consolidated income statement -------------------------------------------------------------------------------- | EUR million | Q2/ | Q2/ | Q1-2/ | Q1-2/ | -------------------------------------------------------------------------------- | | 2010 | 2009 | 2010 | 2009 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net interest income (Note 2) | 67 | 67 | 127 | 119 | -------------------------------------------------------------------------------- | Impairments of receivables (Note | 29 | 33 | 62 | 54 | | 3) | | | | | -------------------------------------------------------------------------------- | Net interest income after | 38 | 35 | 65 | 65 | | impairments | | | | | -------------------------------------------------------------------------------- | Net income from Non-life | 114 | 122 | 193 | 192 | | Insurance (Note 4) | | | | | -------------------------------------------------------------------------------- | Net commissions and fees (Note | 41 | 36 | 81 | 66 | | 5) | | | | | -------------------------------------------------------------------------------- | Net trading income (Note 6) | 8 | 8 | 15 | 33 | -------------------------------------------------------------------------------- | Net investment income (Note 7) | -3 | 0 | 15 | -9 | -------------------------------------------------------------------------------- | Other operating income (Note 8) | 10 | 11 | 21 | 22 | -------------------------------------------------------------------------------- | Total income | 210 | 212 | 392 | 370 | -------------------------------------------------------------------------------- | Personnel costs | 52 | 50 | 99 | 95 | -------------------------------------------------------------------------------- | IT expenses | 19 | 18 | 38 | 37 | -------------------------------------------------------------------------------- | Depreciation/amortisation | 16 | 17 | 34 | 34 | -------------------------------------------------------------------------------- | Other expenses | 43 | 40 | 82 | 82 | -------------------------------------------------------------------------------- | Total expenses | 130 | 125 | 253 | 247 | -------------------------------------------------------------------------------- | Share of associates' | 0 | 0 | 0 | 0 | | profits/losses | | | | | -------------------------------------------------------------------------------- | Earnings before tax | 80 | 87 | 139 | 123 | -------------------------------------------------------------------------------- | Income tax expense | 21 | 22 | 36 | 33 | -------------------------------------------------------------------------------- | Profit for the period | 59 | 65 | 102 | 91 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Attributable to owners of the | 59 | 65 | 102 | 91 | | Parent | | | | | -------------------------------------------------------------------------------- | Attributable to minority | | | | 0 | | interest | | | | | -------------------------------------------------------------------------------- | Total | 59 | 65 | 102 | 91 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Earnings per share (EPS), basic, | | | | | | EUR | | | | | -------------------------------------------------------------------------------- | Series A | 0.19 | 0.23 | 0.33 | 0.34 | -------------------------------------------------------------------------------- | Series K | 0.16 | 0.20 | 0.30 | 0.31 | -------------------------------------------------------------------------------- Due to Pohjola Bank plc's rights issue and new shares entered in the Trade Register on 4 May 2009, the per-share ratios have been adjusted retroactively using the share issue ratio. Consolidated statement of comprehensive income -------------------------------------------------------------------------------- | EUR million | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Profit for the period | 59 | 65 | 102 | 91 | -------------------------------------------------------------------------------- | Change in fair value reserve | -92 | 100 | -31 | 104 | -------------------------------------------------------------------------------- | Translation differences | 0 | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Income tax on other | -24 | 26 | -8 | 27 | | comprehensive income | | | | | --------------------------------------------------------------------------------| Total comprehensive income for | -9 | 139 | 79 | 168 | | the period | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total comprehensive income | -9 | 139 | 79 | 168 | | attributable to owners of the | | | | | | Parent | | | | | -------------------------------------------------------------------------------- | Total comprehensive income | | | | 0 | | attributable to minority | | | | | | interest | | | | | -------------------------------------------------------------------------------- | Total | -9 | 139 | 79 | 168 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Consolidated balance sheet | | | -------------------------------------------------------------------------------- | EUR million | 30 | 31 Dec | | | June | 2009 | | | 2010 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and cash equivalents | 3,779 | 3,102 | -------------------------------------------------------------------------------- | Receivables from credit institutions | 7,733 | 7,630 | -------------------------------------------------------------------------------- | Financial assets at fair value through profit or | | | | loss | | | -------------------------------------------------------------------------------- | Financial assets held for trading | 1,048 | 1,224 | -------------------------------------------------------------------------------- | Financial assets at fair value through profit or | 10 | 55 | | loss at inception | | | -------------------------------------------------------------------------------- | Derivative contracts | 2,187 | 1,443 | -------------------------------------------------------------------------------- | Receivables from customers | 11,680 | 11,323 | -------------------------------------------------------------------------------- | Non-life Insurance assets (Note 10) | 3,294 | 3,156 | -------------------------------------------------------------------------------- | Investment assets | 6,712 | 5,415 | -------------------------------------------------------------------------------- | Investment in associates | 2 | 2 | -------------------------------------------------------------------------------- | Intangible assets (Note 11) | 943 | 960 | -------------------------------------------------------------------------------- | Property, plant and equipment (PPE) | 106 | 117 | -------------------------------------------------------------------------------- | Other assets | 1,082 | 1,068 | -------------------------------------------------------------------------------- | Tax assets | 31 | 15 | -------------------------------------------------------------------------------- | Total assets | 38,609 | 35,510 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Liabilities to credit institutions | 6,069 | 4,984 | -------------------------------------------------------------------------------- | Financial liabilities at fair value through | | | | profit or loss | | | -------------------------------------------------------------------------------- | Financial assets held for trading | 34 | 71 | -------------------------------------------------------------------------------- | Derivative contracts | 2,110 | 1,456 | -------------------------------------------------------------------------------- | Liabilities to customers | 4,932 | 4,133 | -------------------------------------------------------------------------------- | Non-life Insurance liabilities (Note 12) | 2,484 | 2,279 | -------------------------------------------------------------------------------- | Debt securities issued to the public (Note 13) | 17,222 | 17,295 | -------------------------------------------------------------------------------- | Provisions and other liabilities | 1,715 | 1,291 | -------------------------------------------------------------------------------- | Tax liabilities | 446 | 434 | -------------------------------------------------------------------------------- | Subordinated liabilities | 1,358 | 1,300 | -------------------------------------------------------------------------------- | Total liabilities | 36,369 | 33,244 | -------------------------------------------------------------------------------- | Shareholders' equity | | | -------------------------------------------------------------------------------- | Capital and reserves attributable to owners of | | | | the Parent | | | -------------------------------------------------------------------------------- | Share capital | 428 | 428 | -------------------------------------------------------------------------------- | Fair value reserve (Note 14) | -23 | 0 | -------------------------------------------------------------------------------- | Other reserves | 1,093 | 1,093 | -------------------------------------------------------------------------------- | Retained earnings | 742 | 746 | -------------------------------------------------------------------------------- | Total shareholders' equity | 2,239 | 2,267 | -------------------------------------------------------------------------------- | Total liabilities and shareholders' equity | 38,609 | 35,510 | -------------------------------------------------------------------------------- Consolidated statement of changes in equity -------------------------------------------------------------------------------- | EUR million | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | Attributable to owners of Pohjola Group | -------------------------------------------------------------------------------- | | Share | Fair | Other | Retained | | | capital | value | reserves | earnings | | | | reserve | | | -------------------------------------------------------------------------------- | | Total | | | equity | -------------------------------------------------------------------------------- | Balance at 1 January | 428 | -180 | 795 | 597 | 1,640 | | 2009 | | | | | | -------------------------------------------------------------------------------- | Rights issue | | | 308 | | 308 | -------------------------------------------------------------------------------- | Issue expenses | | | -10 | | -10 | -------------------------------------------------------------------------------- | Transfer of reserves | | | 0 | 0 | | -------------------------------------------------------------------------------- | Profit distribution | | | | -45 | -45 | -------------------------------------------------------------------------------- | EUR 0.23 per Series A | | | | -37 | -37 | | share* | | | | | | -------------------------------------------------------------------------------- | EUR 0.20 per Series K | | | | -9 | -9 | | share* | | | | | | -------------------------------------------------------------------------------- | Total comprehensive | | 77 | | 91 | 168 | | income for the period | | | | | | -------------------------------------------------------------------------------- | Equity-settled | | | | 0 | 0 | | share-based | | | | | | | transactions | | | | | | -------------------------------------------------------------------------------- | Other | | | | 0 | 0 | -------------------------------------------------------------------------------- | Balance at 30 June 2009 | 428 | -103 | 1,093 | 642 | 2,060 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | Attributable to owners of Pohjola Group | -------------------------------------------------------------------------------- | | Share | Fair | Other | Retained | | | capital | value | reserves | earnings | | | | reserve | | | -------------------------------------------------------------------------------- | | Total | | | equity | -------------------------------------------------------------------------------- | Balance at 1 January | 428 | 0 | 1,093 | 746 | 2,267 | | 2010 | | | | | | -------------------------------------------------------------------------------- | Profit distribution | | | | -107 | -107 | -------------------------------------------------------------------------------- | EUR 0.34 per Series A | | | | -85 | -85 | | share | | | | | | -------------------------------------------------------------------------------- | EUR 0.31 per Series K | | | | -21 | -21 | | share | | | | | | -------------------------------------------------------------------------------- | Total comprehensive | | -23 | | 102 | 79 | | income for the period | | | | | | -------------------------------------------------------------------------------- | Equity-settled | | | | 0 | 0 | | share-based | | | | | | | transactions | | | | | | -------------------------------------------------------------------------------- | Other | | | | 0 | 0 | -------------------------------------------------------------------------------- | Balance at 30 June 2010 | 428 | -23 | 1,093 | 742 | 2,239 | -------------------------------------------------------------------------------- * Due to Pohjola Bank plc's rights issue and new shares entered in the Trade Register on 4 May 2009, the number of shares has been adjusted in such a way that the adjusted dividend per share is as follows 2009: EUR 0.19 per Series A share and EUR 0.16 per Series K share. -------------------------------------------------------------------------------- | Capital base and capital adequacy | | | -------------------------------------------------------------------------------- | EUR million | 30 | 31 Dec | | | June | 2009 | | | 2010 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Capital base | | | -------------------------------------------------------------------------------- | Equity capital | 2,239 | 2,267 | -------------------------------------------------------------------------------- | Elimination of insurance companies' effect in | 55 | 92 | | equity capital (equity capital and Group | | | | eliminations) | | | -------------------------------------------------------------------------------- | Minority interest | | 0 | -------------------------------------------------------------------------------- | Hybrid capital | 274 | 274 | -------------------------------------------------------------------------------- | Intangible assets | -145 | -145 | -------------------------------------------------------------------------------- | Fair value reserve, excess funding of pension | -6 | -49 | | liability and change in fair value of investment | | | | property | | | -------------------------------------------------------------------------------- | Dividend distribution proposed by Board of | | -107 | | Directors | | | -------------------------------------------------------------------------------- | Planned dividend distribution | -51 | | -------------------------------------------------------------------------------- | Insurance company investments 50% | -703 | -715 | -------------------------------------------------------------------------------- | Impairments - expected losses 50% | -83 | -76 | -------------------------------------------------------------------------------- | Tier 1 capital | 1,579 | 1,541 | -------------------------------------------------------------------------------- | Fair value reserve | -25 | 18 | -------------------------------------------------------------------------------- | Subordinated liabilities included in upper Tier 2 | 299 | 299 | -------------------------------------------------------------------------------- | Subordinated liabilities included in lower Tier 2 | 698 | 687 | -------------------------------------------------------------------------------- | Insurance company investments 50% | -703 | -715 | -------------------------------------------------------------------------------- | Impairments - expected losses 50% | -83 | -76 | -------------------------------------------------------------------------------- | Tier 2 capital | 185 | 212 | -------------------------------------------------------------------------------- | Total capital base | 1,764 | 1,753 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Risk-weighted assets, excl. transitional rules | 13,168 | 13,024 | -------------------------------------------------------------------------------- | Risk-weighted assets according to transitional | 13,168 | 13,024 | | rules | | | -------------------------------------------------------------------------------- | Ratios, excl. transitional rules: | | | -------------------------------------------------------------------------------- | Capital adequacy ratio, % | 13.4 | 13.5 | -------------------------------------------------------------------------------- | Tier 1 ratio, % | 12.0 | 11.8 | -------------------------------------------------------------------------------- | Ratios according to transitional rules: | | | -------------------------------------------------------------------------------- | Capital adequacy ratio, % | 13.4 | 13.5 | -------------------------------------------------------------------------------- | Tier 1 ratio, % | 12.0 | 11.8 | -------------------------------------------------------------------------------- Capital base and capital adequacy measurement is based on approaches under Basel II. Pohjola has used the Internal Ratings Based Approach for corporate exposures. Capital adequacy under the Act on the Supervision of Financial and Insurance Conglomerates -------------------------------------------------------------------------------- | EUR | | | | 30 | 31 | | million | | | | June | Dec | | | | | | 201 | 2009 | | | | | | 0 | | -------------------------------------------------------------------------------- | Pohjola Group's equity capital | | 2,239 | 2,267 | -------------------------------------------------------------------------------- | Business-segment-specific items | | 1,320 | 1,309 | -------------------------------------------------------------------------------- | Goodwill and intangible assets | | -856 | -869 | -------------------------------------------------------------------------------- | Equalisation provision | | | -312 | -309 | -------------------------------------------------------------------------------- | Other items included in equity capital and | -259 | -296 | | business-segment-specific items, but not included in | | | | the conglomerate's capital resources | | | -------------------------------------------------------------------------------- | Conglomerate's capital base, total | | 2,133 | 2,103 | -------------------------------------------------------------------------------- | Regulatory capital requirement for credit institutions | 1,053 | 1,042 | -------------------------------------------------------------------------------- | Regulatory capital requirement for insurance | 177 | 171 | | operations | | | -------------------------------------------------------------------------------- | Total minimum amount of conglomerate's capital base | 1,230 | 1,213 | -------------------------------------------------------------------------------- | Conglomerate's capital adequacy | | 903 | 890 | -------------------------------------------------------------------------------- | Conglomerate's capital adequacy ratio (capital | 1.73 | 1.73 || resources/minimum of capital resources) | | | -------------------------------------------------------------------------------- OP-Pohjola Group's capital adequacy ratio under the Act on Credit Institutions stood at 12.4% and Tier 1 ratio 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 1.60. -------------------------------------------------------------------------------- | Consolidated cash flow statement | | | -------------------------------------------------------------------------------- | EUR million | Q1-2/ | Q1-2/ | -------------------------------------------------------------------------------- | | 2010 | 2009 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash flow from operating activities | | | -------------------------------------------------------------------------------- | Profit for the period | 102 | 91 | -------------------------------------------------------------------------------- | Adjustments to profit for the period | 294 | 380 | -------------------------------------------------------------------------------- | Increase (-) or decrease (+) in operating assets | -1,664 | -1,559 | -------------------------------------------------------------------------------- | Receivables from credit institutions | 183 | -301 | -------------------------------------------------------------------------------- | Financial assets at fair value through profit or | 118 | 1,608 | | loss | | | -------------------------------------------------------------------------------- | Derivative contracts | -37 | -22 | -------------------------------------------------------------------------------- | Receivables from customers | -442 | 402 | -------------------------------------------------------------------------------- | Non-life Insurance assets | -154 | -332 | -------------------------------------------------------------------------------- | Investment assets | -1,327 | -2,786 | -------------------------------------------------------------------------------- | Other assets | -7 | -129 | -------------------------------------------------------------------------------- | Increase (+) or decrease (-) in operating | 2,345 | 336 | | liabilities | | | -------------------------------------------------------------------------------- | Liabilities to credit institutions | 1,075 | 408 | -------------------------------------------------------------------------------- | Financial liabilities at fair value through | -37 | 285 | | profit or loss | | | -------------------------------------------------------------------------------- | Derivative contracts | 34 | -27 | -------------------------------------------------------------------------------- | Liabilities to customers | 799 | -460 | -------------------------------------------------------------------------------- | Non-life Insurance liabilities | 53 | 87 | -------------------------------------------------------------------------------- | Provisions and other liabilities | 421 | 42 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Income tax paid | -33 | -25 | -------------------------------------------------------------------------------- | Dividends received | 22 | 8 | -------------------------------------------------------------------------------- | A. Net cash from operating activities | 1,066 | -770 | -------------------------------------------------------------------------------- | Cash flow from investing activities | | | -------------------------------------------------------------------------------- | Increases in held-to-maturity financial assets | | -80 | -------------------------------------------------------------------------------- | Decreases in held-to-maturity financial assets | 82 | 146 | -------------------------------------------------------------------------------- | Acquisition of subsidiaries and associates, net | 0 | 0 | | of cash acquired | | | -------------------------------------------------------------------------------- | Disposal of subsidiaries and associates, net of | | 1 | | cash disposed | | | -------------------------------------------------------------------------------- | Purchase of PPE and intangible assets | -6 | -12 | -------------------------------------------------------------------------------- | Proceeds from sale of PPE and intangible assets | 0 | 0 | -------------------------------------------------------------------------------- | B. Net cash used in investing activities | 76 | 55 | -------------------------------------------------------------------------------- | Cash flow from financing activities | | | -------------------------------------------------------------------------------- | Increases in subordinated liabilities | 69 | 144 | -------------------------------------------------------------------------------- | Decreases in subordinated liabilities | -10 | -149 | -------------------------------------------------------------------------------- | Increases in debt securities issued to the public | 22,535 | 26,670 | -------------------------------------------------------------------------------- | Decreases in debt securities issued to the public | -22,664 | -26,385 | -------------------------------------------------------------------------------- | Increases in invested unrestricted equity | | 298 | -------------------------------------------------------------------------------- | Dividends paid | -107 | -45 | -------------------------------------------------------------------------------- | C. Net cash used in financing activities | -178 | 532 | -------------------------------------------------------------------------------- | Net increase/decrease in cash and cash | 964 | -183 | | equivalents (A+B+C) | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and cash equivalents at period-start | 3,250 | 2,435 | -------------------------------------------------------------------------------- | Cash and cash equivalents at period-end | 4,214 | 2,252 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest received | 804 | 1,183 | -------------------------------------------------------------------------------- | Interest paid | -636 | -1,133 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Adjustments to profit for the period | | | -------------------------------------------------------------------------------- | Non-cash transactions | | | -------------------------------------------------------------------------------- | Impairments of receivables | 62 | 55 | -------------------------------------------------------------------------------- | Unrealised net earnings in Non-life Insurance | 195 | 190 | -------------------------------------------------------------------------------- | Change in fair value for trading | -14 | 42 | -------------------------------------------------------------------------------- | Unrealised net gains on foreign exchange | 107 | 28 | | operations | | | -------------------------------------------------------------------------------- | Change in fair value of investment property | | 7 | -------------------------------------------------------------------------------- | Planned amortisation /depreciation | 34 | 34 | -------------------------------------------------------------------------------- | Share of associates' profits | 0 | 0 | -------------------------------------------------------------------------------- | Other | -91 | 25 | -------------------------------------------------------------------------------- | Items presented outside cash flow from operating | | | | activities | | | -------------------------------------------------------------------------------- | Capital gains, share of cash flow from investing | 0 | 0 | | activities | | | -------------------------------------------------------------------------------- | Total adjustments | 294 | 380 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and cash equivalents | | | -------------------------------------------------------------------------------- | Liquid assets * | 3,784 | 1,979 | -------------------------------------------------------------------------------- | Receivables from credit institutions payable on | 430 | 273 | | demand | | | -------------------------------------------------------------------------------- | Total | 4,214 | 2,252 | -------------------------------------------------------------------------------- *Of which EUR 5 million (8) consists of Non-life Insurance cash and cash equivalents. Segment information -------------------------------------------------------------------------------- | Q2 earnings | Banking | Non-life | Asset | | | | Insurance | Management | -------------------------------------------------------------------------------- | EUR million | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | -------------------------------------------------------------------------------- | Net interest income | | | | | | | -------------------------------------------------------------------------------- | From Corporate Banking | 44 | 33 | | | | | -------------------------------------------------------------------------------- | From Markets | 4 | 12 | | | | | -------------------------------------------------------------------------------- | From other operations | | | -1 | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Total | 48 | 45 | -1 | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Net commissions and fees | 23 | 25 | 5 | 4 | 14 | 10 | -------------------------------------------------------------------------------- | Net trading income | 12 | 13 | | | 0 | 0 | -------------------------------------------------------------------------------- | Net investment income | 0 | 0 | | | 0 | 0 | -------------------------------------------------------------------------------- | Net income from Non-life | | | | | | | | Insurance | | | | | | | -------------------------------------------------------------------------------- | From insurance operations | | | 99 | 101 | | | -------------------------------------------------------------------------------- | From investment operations | | | 26 | 31 | | | -------------------------------------------------------------------------------- | From other items | | | -11 | -11 | | | -------------------------------------------------------------------------------- | Total | | | 114 | 121 | | | -------------------------------------------------------------------------------- | Other operating income | 7 | 7 | 1 | 1 | 1 | 0 | -------------------------------------------------------------------------------- | Total income | 90 | 91 | 118 | 126 | 15 | 11 | -------------------------------------------------------------------------------- | Personnel costs | 14 | 14 | 30 | 29 | 5 | 4 | -------------------------------------------------------------------------------- | IT expenses | 6 | 5 | 10 | 10 | 1 | 1 | -------------------------------------------------------------------------------- | Amortisation on intangible | | | 8 | 8 | 1 | 1 | | assets related to company | | | | | | | | acquisitions | | | | | | | -------------------------------------------------------------------------------- | Other | 6 | 7 | 2 | 1 | 0 | 0 | | depreciation/amortisation | | | | | | | | and impairments | | | | | | | -------------------------------------------------------------------------------- | Other expenses | 6 | 7 | 32 | 31 | 2 | 2 | -------------------------------------------------------------------------------- | Total expenses | 32 | 32 | 81 | 78 | 8 | 7 | -------------------------------------------------------------------------------- | Earnings/loss before | 58 | 58 | 37 | 48 | 6 | 4 | | impairment of receivables | | | | | | | -------------------------------------------------------------------------------- | Impairments of receivables | 29 | 32 | | | | | -------------------------------------------------------------------------------- | Earnings before tax | 29 | 26 | 37 | 48 | 6 | 4 | -------------------------------------------------------------------------------- | Change in fair value | 0 | 0 | -41 | 72 | 0 | | | reserve | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before tax at | 29 | 26 | -4 | 120 | 6 | 4 | | fair value | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Q2 earnings | Group Functions | Eliminations | Group total | -------------------------------------------------------------------------------- | EUR million | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | -------------------------------------------------------------------------------- | Net interest income | | | | | | | -------------------------------------------------------------------------------- | From Corporate Banking | | | | | 44 | 33 | -------------------------------------------------------------------------------- | From Markets | | | | | 4 | 12 | -------------------------------------------------------------------------------- | From other operations | 20 | 21 | 0 | 0 | 19 | 22 | -------------------------------------------------------------------------------- | Total | 20 | 21 | 0 | 0 | 67 | 67 | -------------------------------------------------------------------------------- | Net commissions and | 0 | 0 | -1 | -3 | 41 | 36 | | fees | | | | | | | -------------------------------------------------------------------------------- | Net trading income | -3 | -5 | | 0 | 8 | 8 | -------------------------------------------------------------------------------- | Net investment income | -3 | 0 | | | -3 | 0 | -------------------------------------------------------------------------------- | Net income from | | | | | | | | Non-life Insurance | | | | | | | -------------------------------------------------------------------------------- | From insurance | | | | | 99 | 101 | | operations | | | | | | | -------------------------------------------------------------------------------- | From investment | | | 1 | 1 | 26 | 32 | | operations | | | | | | | -------------------------------------------------------------------------------- | From other items | | | | | -11 | -11 | -------------------------------------------------------------------------------- | Total | | | 1 | 1 | 114 | 122 | -------------------------------------------------------------------------------- | Other operating income | 4 | 4 | -1 | -1 | 10 | 11 | -------------------------------------------------------------------------------- | Total income | 17 | 20 | -1 | -3 | 239 | 245 | -------------------------------------------------------------------------------- | Personnel costs | 4 | 4 | 0 | | 52 | 50 | -------------------------------------------------------------------------------- | IT expenses | 2 | 2 | 0 | | 19 | 18 | -------------------------------------------------------------------------------- | Amortisation on | | | | | 8 | 8 | | intangible assets | | | | | | | | related to company | | | | | | | | acquisitions | | | | | | | -------------------------------------------------------------------------------- | Other | 0 | 0 | | | 8 | 9 | | depreciation/amortisat | | | | | | | | ion and impairments | | | | | | | -------------------------------------------------------------------------------- | Other expenses | 4 | 5 | -1 | -3 | 43 | 41 | -------------------------------------------------------------------------------- | Total expenses | 9 | 11 | -1 | -3 | 130 | 126 | -------------------------------------------------------------------------------- | Earnings/loss before | 8 | 10 | 0 | 0 | 109 | 119 | | impairment of | | | | | | | | receivables | | | | | | | -------------------------------------------------------------------------------- | Impairments of | | | | | 29 | 32 | | receivables | | | | | | | -------------------------------------------------------------------------------- | Earnings before tax | 8 | 10 | 0 | 0 | 80 | 87 | -------------------------------------------------------------------------------- | Change in fair value | -51 | 27 | 0 | | -92 | 100 | | reserve | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before | -43 | 36 | 0 | | -11 | 186 | | tax at fair value | | | | | | | -------------------------------------------------------------------------------- | Q 1-2 earnings | Banking | Non-life | Asset Management | | | | Insurance | | -------------------------------------------------------------------------------- | EUR million | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | -------------------------------------------------------------------------------- | Net interest income | | | | | | | -------------------------------------------------------------------------------- | From Corporate | 84 | 65 | | | | | | Banking | | | | | | | -------------------------------------------------------------------------------- | From Markets | 10 | 22 | | | | | -------------------------------------------------------------------------------- | From other | | | -3 | -1 | 0 | 1 | | operations | | | | | | | -------------------------------------------------------------------------------- | Total | 95 | 87 | -3 | -1 | 0 | 1 | -------------------------------------------------------------------------------- | Net commissions and | 47 | 44 | 9 | 8 | 27 | 19 | | fees | | | | | | | -------------------------------------------------------------------------------- | Net trading income | 24 | 37 | | | 0 | 0 | -------------------------------------------------------------------------------- | Net investment | 0 | 0 | | | 0 | 0 | | income | | | | | | | -------------------------------------------------------------------------------- | Net income from | | | | | | | | Non-life Insurance | | | | | | | -------------------------------------------------------------------------------- | From insurance | | | 173 | 184 | | | | operations | | | | | | | -------------------------------------------------------------------------------- | From investment | | | 42 | 30 | | | | operations | | | | | | | -------------------------------------------------------------------------------- | From other items | | | -23 | -22 | | | -------------------------------------------------------------------------------- | Total | | | 192 | 192 | | | -------------------------------------------------------------------------------- | Other operating | 14 | 15 | 1 | 1 | 1 | 1 | | income | | | | | | | -------------------------------------------------------------------------------- | Total income | 180 | 183 | 200 | 200 | 28 | 20 | -------------------------------------------------------------------------------- | Personnel costs | 26 | 26 | 57 | 55 | 10 | 8 | -------------------------------------------------------------------------------- | IT expenses | 12 | 11 | 21 | 20 | 1 | 1 | -------------------------------------------------------------------------------- | Amortisation on | | | 15 | 15 | 1 | 1 | | intangible assets | | | | | | | | related to company | | | | | | | | acquisitions | | | | | | | -------------------------------------------------------------------------------- | Other | 13 | 14 | 3 | 2 | 1 | 0 | | depreciation/amorti | | | | | | | | sation and | | | | | | | | impairments | | | | | | | -------------------------------------------------------------------------------- | Other expenses | 13 | 13 | 61 | 62 | 4 | 3 | -------------------------------------------------------------------------------- | Total expenses | 64 | 64 | 157 | 154 | 17 | 14 | -------------------------------------------------------------------------------- | Earnings/loss | 116 | 120 | 42 | 46 | 12 | 6 | | before impairment | | | | | | | | of receivables | | | | | | | -------------------------------------------------------------------------------- | Impairments of | 62 | 44 | 0 | | | | | receivables | | | | | | | -------------------------------------------------------------------------------- | Earnings before tax | 55 | 76 | 42 | 46 | 12 | 6 | -------------------------------------------------------------------------------- | Change in fair | 0 | 1 | 28 | 74 | 0 | | | value reserve | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss | 55 | 76 | 71 | 121 | 12 | 6 | | before tax at fair | | | | | | | | value | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Q 1-2 earnings | Group | Eliminations | Group total | | | Functions | | | -------------------------------------------------------------------------------- | EUR million | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | -------------------------------------------------------------------------------- | Net interest income | | | | | | | -------------------------------------------------------------------------------- | From Corporate Banking | | | | | 84 | 65 | -------------------------------------------------------------------------------- | From Markets | | | | | 10 | 22 | -------------------------------------------------------------------------------- | From other operations | 34 | 30 | 1 | 1 | 32 | 31 | -------------------------------------------------------------------------------- | Total | 34 | 30 | 1 | 1 | 127 | 119 | -------------------------------------------------------------------------------- | Net commissions and fees | -1 | 0 | -2 | -4 | 81 | 66 | -------------------------------------------------------------------------------- | Net trading income | -9 | -4 | | | 15 | 33 | -------------------------------------------------------------------------------- | Net investment income | 15 | -9 | | | 15 | -9 | -------------------------------------------------------------------------------- | Net income from Non-life | | | | | | | | Insurance | | | | | | | -------------------------------------------------------------------------------- | From insurance operations | | | | | 173 | 184 | -------------------------------------------------------------------------------- | From investment operations | | | 1 | 0 | 43 | 30 | -------------------------------------------------------------------------------- | From other items | | | | | -23 | -22 | -------------------------------------------------------------------------------- | Total | | | 1 | 0 | 193 | 192 | -------------------------------------------------------------------------------- | Other operating income | 8 | 7 | -2 | -2 | 21 | 22 | -------------------------------------------------------------------------------- | Total income | 47 | 25 | -2 | -4 | 453 | 424 | -------------------------------------------------------------------------------- | Personnel costs | 7 | 6 | 0 | | 99 | 95 | -------------------------------------------------------------------------------- | IT expenses | 4 | 5 | 0 | 0 | 38 | 37 | -------------------------------------------------------------------------------- | Amortisation on intangible | | | | | 17 | 16 | | assets related to company | | | | | | | | acquisitions | | | | | | | -------------------------------------------------------------------------------- | Other | 1 | 1 | | | 17 | 17 | | depreciation/amortisation | | | | | | | | and impairments | | | | | | | -------------------------------------------------------------------------------- | Other expenses | 6 | 8 | -2 | -4 | 82 | 82 | -------------------------------------------------------------------------------- | Total expenses | 17 | 20 | -2 | -4 | 253 | 247 | -------------------------------------------------------------------------------- | Earnings/loss before | 30 | 5 | 0 | 0 | 200 | 177 | | impairment of receivables | | | | | | | -------------------------------------------------------------------------------- | Impairments of receivables | | 9 | | | 62 | 54 | -------------------------------------------------------------------------------- | Earnings before tax | 30 | -5 | 0 | 0 | 139 | 123 | -------------------------------------------------------------------------------- | Change in fair value | -59 | 29 | 0 | | -31 | 104 | | reserve | | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before tax | -29 | 24 | 0 | | 108 | 227 | | at fair value | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Balance sheet | Banking | Non-life | Asset Management | | | | Insurance | | -------------------------------------------------------------------------------- | EUR million | 30 | 31 Dec | 30 | 31 Dec | 30 | 31 Dec | | | June | 2009 | June | 2009 | June | 2009 | | | 2 | | 2 | | 20 | | | | 010 | | 010 | | 10 | | -------------------------------------------------------------------------------- | Receivables from | 11,423 | 10,880 | | | 0 | | | customers | | | | | | | -------------------------------------------------------------------------------- | Receivables from | 247 | 278 | | | 4 | 5 | | credit institutions | | | | | | | -------------------------------------------------------------------------------- | Financial assets at | 679 | 932 | | | | | | fair value through | | | | | | | | profit or loss | | | | | | | -------------------------------------------------------------------------------- | Non-life Insurance | | | 3,370 | 3,202 | | | | assets | | | | | | | -------------------------------------------------------------------------------- | Investment assets | 53 | 18 | 16 | 0 | 15 | 17 | -------------------------------------------------------------------------------- | Investments in | | | 2 | 2 | | | | associates | | | | | | | -------------------------------------------------------------------------------- | Other assets | 2,676 | 2,012 | 811 | 829 | 123 | 131 | -------------------------------------------------------------------------------- | Total assets | 15,078 | 14,119 | 4,198 | 4,033 | 142 | 153 | -------------------------------------------------------------------------------- | Liabilities to | 1,620 | 1,263 | | | | | | customers | | | | | | | -------------------------------------------------------------------------------- | Liabilities to | 1,114 | 747 | | | | | | credit institutions | | | | | | | -------------------------------------------------------------------------------- | Non-life Insurance | | | 2,484 | 2,279 | | | | liabilities | | | | | | | -------------------------------------------------------------------------------- | Debt securities | | | | | | | | issued to the public | | | | | | | -------------------------------------------------------------------------------- | Subordinated | | | 50 | 50 | | | | liabilities | | | | | | | -------------------------------------------------------------------------------- | Other liabilities | 2,849 | 1,872 | 49 | 108 | 13 | 15 | -------------------------------------------------------------------------------- | Total liabilities | 5,583 | 3,882 | 2,583 | 2,437 | 13 | 15 | -------------------------------------------------------------------------------- | Shareholders' equity | | | | | | | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- | Average personnel | 647 | 607 | 2,073 | 2,070 | 170 | 162 | -------------------------------------------------------------------------------- | Capital expenditure, | 3 | 7 | 4 | 9 | 0 | 1 | | EUR million | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Balance sheet | Group Functions | Eliminations | Group total | -------------------------------------------------------------------------------- | EUR million | 30 | 31 Dec | 30 | 31 Dec | 30 | 31 Dec | | | June | 2009 | June | 2009 | June | 2009 | | | 2 | | 2 | | 20 | | | | 010 | | 010 | | 10 | | -------------------------------------------------------------------------------- | Receivables from | 335 | 527 | -78 | -84 | 11,680 | 11,323 | | customers | | | | | | | -------------------------------------------------------------------------------- | Receivables from | 11,279 | 10,468 | -17 | -20 | 11,512 | 10,732 | | credit institutions | | | | | | | -------------------------------------------------------------------------------- | Financial assets at | 379 | 347 | | | 1,058 | 1,279 | | fair value through | | | | | | | | profit or loss | | | | | | | -------------------------------------------------------------------------------- | Non-life Insurance | | | -76 | -47 | 3,294 | 3,156 | | assets | | | | | | | -------------------------------------------------------------------------------- | Investment assets | 6,638 | 5,387 | -10 | -6 | 6,712 | 5,415 | -------------------------------------------------------------------------------- | Investments in | | | | | 2 | 2 | | associates | | | | | | | -------------------------------------------------------------------------------- | Other assets | 746 | 691 | -5 | -58 | 4,350 | 3,604 | -------------------------------------------------------------------------------- | Total assets | 19,376 | 17,421 | -187 | -215 | 38,609 | 35,510 | -------------------------------------------------------------------------------- | Liabilities to | 3,360 | 2,915 | -48 | -45 | 4,932 | 4,133 | | customers | | | | | | | -------------------------------------------------------------------------------- | Liabilities to | 5,033 | 4,320 | -78 | -84 | 6,069 | 4,984 | | credit institutions | | | | | | | -------------------------------------------------------------------------------- | Non-life Insurance | | | | | 2,484 | 2,279 | | liabilities | | | | | | | -------------------------------------------------------------------------------- | Debt securities | 17,276 | 17,323 | -54 | -28 | 17,222 | 17,295 | | issued to the public | | | | | | | -------------------------------------------------------------------------------- | Subordinated | 1,308 | 1,250 | | | 1,358 | 1,300 | | liabilities | | | | | | | -------------------------------------------------------------------------------- | Other liabilities | 1,399 | 1,318 | -6 | -59 | 4,304 | 3,253 | -------------------------------------------------------------------------------- | Total liabilities | 28,377 | 27,126 | -187 | -216 | 36,369 | 33,244 | -------------------------------------------------------------------------------- | Shareholders' equity | | | | | 2,239 | 2,267 | -------------------------------------------------------------------------------- | | | | | | | | -------------------------------------------------------------------------------- | Average personnel | 123 | 136 | | | 3,012 | 2,975 | -------------------------------------------------------------------------------- | Capital expenditure, | 0 | 1 | | | 7 | 18 | | EUR million | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Banking | Income | Earnings/loss | Income | Earnings/loss | | | | before tax | | before tax | -------------------------------------------------------------------------------- | | Q2/ | Q2/ | Q2/ | Q2/ | Q1-2/ | Q1-2/ | Q1-2/ | Q1-2/ | | | 2010 | 2 | 2 | 2 | 2010 | 2009 | 2010 | 2009 | | | | 009 | 010 | 009 | | | | |-------------------------------------------------------------------------------- | Corporate | 67 | 63 | 21 | 12 | 130 | 114 | 30 | 35 | | Banking | | | | | | | | | -------------------------------------------------------------------------------- | Markets | 22 | 27 | 11 | 16 | 48 | 67 | 28 | 47 | -------------------------------------------------------------------------------- | Baltic | 1 | 1 | -3 | -2 | 3 | 2 | -3 | -5 | | Banking | | | | | | | | | -------------------------------------------------------------------------------- | Total | 90 | 91 | 29 | 26 | 180 | 183 | 55 | 76 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Non-life | Insurance | Balance on | Insurance | Balance on | | Insurance | pr | technical | pre | technical | | | emium | account | mium revenue | account | | | revenue | | | | -------------------------------------------------------------------------------- | | Q2/ | Q2/ | Q2/ | Q2/ | Q1-2/ | Q1-2/ | Q1-2/ | Q1-2/ | | | 2010 | 2 | 2 | 2 | 2010 | 2009 | 2010 | 2009 | | | | 009 | 010 | 009 | | | | | -------------------------------------------------------------------------------- | Private | 123 | 110 | 25 | 17 | 229 | 207 | 31 | 26 | | Customers | | | | | | | | | -------------------------------------------------------------------------------- | Corporate | 111 | 116 | 2 | 14 | 219 | 234 | 7 | 24 | | Customers | | | | | | | | | -------------------------------------------------------------------------------- | Baltic States | 12 | 15 | 2 | 3 | 24 | 30 | 2 | 4 | -------------------------------------------------------------------------------- | Amortisation | | | -6 | -6 | | | -12 | -12 | | adjustment of | | | | | | | | | | intangible | | | | | | | | | | assets | | | | | | | | | -------------------------------------------------------------------------------- | Total | 246 | 240 | 23 | 28 | 473 | 471 | 27 | 42 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Group Functions | Q2/ | Q2/ | Q1-2/ | Q1-2/ | | | 2010 | 2009 | 201 | 20 | | | | | 0 | 09 | -------------------------------------------------------------------------------- | Central Banking | 3 | 6 | 7 | 11 | | earnings | | | | | | before tax, EUR | | | | | | million | | | | | -------------------------------------------------------------------------------- | | 30 | 31 Dec | | | | | June | 2009 | | | | | 2010 | | | | -------------------------------------------------------------------------------- | Receivables from OP-Pohjola | 6,814 | 6,314 | | | | Group entities, EUR million | | | | | -------------------------------------------------------------------------------- | Liabilities to OP-Pohjola | 3,488 | 3,412 | | | | Group entities, EUR million | | | | | -------------------------------------------------------------------------------- FORMULAS 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 Earnings/share (EPS) Profit for the period attributable to owners of the Parent / Average share-issue adjusted number of shares during the period Earnings/share (EPS) at fair value (Profit for the period attributable to owners of the Parent + Change in fair value reserve) / Average share-issue adjusted number of shares during the period Equity/share Shareholders' equity / Share-issue adjusted number of shares on the balance sheet date Dividend per share (DPS) Dividends paid for the financial year/ 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 ratio under the Act on the Supervision of Financial and Insurance Conglomerates Conglomerate's total capital / Conglomerate's total minimum capital requirement Capital adequacy ratio, % Total capital / Total minimum capital requirement x 8 Tier 1 ratio, % Total Tier 1 capital / Total minimum capital requirement x 8 KEY RATIOS FOR NON-LIFE INSURANCE The key ratio formulas for Non-life Insurance are based on regulations issued by the Finnish Financial Supervisory Authority, using the corresponding IFRS sections to the extent applicable. The ratios are calculated using expenses by function applied by non-life insurance companies, which are not presented on the same principle as in the Consolidated Income Statement. Loss ratio Claims and loss adjustment expenses / Net insurance premium revenue x 100 Expense ratio Operating expenses + Amortisation/adjustment of intangible assets related to company acquisition / Net insurance premium revenue x 100 Risk ratio Claims excl. loss adjustment expenses / Net insurance premium revenue x 100 Cost ratio Operating expenses and loss adjustment expenses / Net insurance premium revenue x 100 Combined ratio (excl. unwinding of discount) Loss ratio + expense ratio Risk ratio + cost ratio Solvency ratio (+ Non-life Insurance net assets + Subordinated loans + Net tax liability for the period - Deferred tax to be realised in the near future and other items deducted from the solvency margin - Intangible assets)/ Insurance premium revenue x 100 OPERATING KEY RATIOS Operating cost/income ratio (+ Personnel costs + Other administrative expenses + Other operating expenses excl. amortisation 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 excl. net changes in reserving bases x 100 Operating combined ratio, % Operating loss ratio + Operating expense ratio Values used in calculating the ratios -------------------------------------------------------------------------------- | (€ million) | 30 June 2010 | 31 Dec 2009 | -------------------------------------------------------------------------------- | Non-life Insurance | | | -------------------------------------------------------------------------------- | Net tax liabilities for the period | -20 | -14 | -------------------------------------------------------------------------------- | Own subordinated loans | 50 | 50 | -------------------------------------------------------------------------------- | Deferred tax to be realised in the near future | 4 | 6 | | and other items deducted from the solvency | | | | margin of the companies | | | -------------------------------------------------------------------------------- | Intangible assets | 785 | 800 | -------------------------------------------------------------------------------- Notes Note 1. Accounting policies The Interim Report for 1 January-30 June 2010 has been prepared in accordance with IAS 34 (Interim Financial Reporting), as approved by the EU. In the preparation of its Interim Report, Pohjola Group applied the same accounting policies as in the preparation of its Financial Statements 2009. During the current period, the Group has also applied cash flow hedging when hedging future cash flows from variable-rate debt or other variable-rate assets and liabilities. Interest rate swaps are used as hedging instruments. Derivative contracts documented as cash flow hedges and provide effective hedges are measured at fair value. The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income. Fair value changes recognised in shareholders' equity are included in the income statement in the period when hedged items affect net income. The Interim Report is based on unaudited information. Since all figures in the Report have been rounded off, the sum of single figures may differ from the presented sum total. Summary of presentation of income statement: -------------------------------------------------------------------------------- | Net interest income | Received and paid interest on fixed-income | | | instruments, the recognised difference between | | | the nominal value and acquisition value, | | | interest on interest-rate derivatives and fair | | | value change in fair value hedging | -------------------------------------------------------------------------------- | Net income from Non-life | Premiums written, claims paid, change in | | Insurance | provision for unearned premiums and for unpaid | | | claims, investment income, expenses (interest, | | | dividends, realised capital gains and losses) | | | and impairments | -------------------------------------------------------------------------------- | Net commissions and fees | Commission income and expenses, and the | | | recognition of Day 1 profit related to illiquid | | | derivatives | -------------------------------------------------------------------------------- | Net trading income | Fair value changes in financial instruments at | | | fair value through profit or loss, excluding | | | accrued interest, and capital gains and losses, | | | as well as dividends | -------------------------------------------------------------------------------- | Net investment income | Realised capital gains and losses on | | | available-for-sale financial assets, | | | impairments, dividends as well as fair value | | | changes in investment property, capital gains | | | and losses, rents and other property-related | | | expenses | -------------------------------------------------------------------------------- | Other operating income | Other operating income, central banking service | | | fee | -------------------------------------------------------------------------------- | Personnel costs | Wages and salaries, pension costs, social | | | expenses | -------------------------------------------------------------------------------- | Other administrative | Office expenses, IT costs, other administrative | | expenses | expenses | -------------------------------------------------------------------------------- | Other operating expenses | Depreciation/amortisation, other Non-life | | | Insurance expenses, rents | -------------------------------------------------------------------------------- Notes to the income statement and balance sheet -------------------------------------------------------------------------------- | Note 2. Net interest income | | | | | -------------------------------------------------------------------------------- | EUR million | Q2/ | Q2/ | Q1-2/ | Q1-2/ | -------------------------------------------------------------------------------- | | 2010 | 2009 | 2010 | 2009 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Loans and other receivables | 75 | 82 | 146 | 255 | -------------------------------------------------------------------------------- | Receivables from credit institutions | 31 | 52 | 63 | 122 | | and central banks | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 119 | 29 | 233 | 100 | -------------------------------------------------------------------------------- | Derivatives held for trading (net) | -21 | 5 | -3 | 1 | -------------------------------------------------------------------------------- | Liabilities to credit institutions | -14 | -14 | -27 | -36 | -------------------------------------------------------------------------------- | Liabilities to customers | -3 | -8 | -6 | -24 | -------------------------------------------------------------------------------- | Debt securities issued to the public | -79 | -65 | -162 | -217 | -------------------------------------------------------------------------------- | Subordinated debt | -8 | -9 | -16 | -19 | -------------------------------------------------------------------------------- | Hybrid capital | -3 | -5 | -5 | -9 | -------------------------------------------------------------------------------- | Financial liabilities held for trading | 0 | -2 | -1 | -4 | -------------------------------------------------------------------------------- | Other (net) | -1 | 0 | -1 | 0 | -------------------------------------------------------------------------------- | Net interest income before items under | 95 | 65 | 222 | 168 | | hedge accounting | | | | | -------------------------------------------------------------------------------- | Derivatives under hedge accounting | -28 | 2 | -95 | -49 | | (net) | | | | | -------------------------------------------------------------------------------- | Items under hedge accounting (net) | -28 | 2 | -95 | -49 | -------------------------------------------------------------------------------- | Total net interest income | 67 | 67 | 127 | 119 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 3. Impairments of receivables | | | | | -------------------------------------------------------------------------------- | EUR million | Q2/ | Q2/ | Q1-2/ | Q1-2/ | -------------------------------------------------------------------------------- | | 2010 | 2009 | 2010 | 2009 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Receivables eliminated as loan or | 15 | 0 | 40 | 1 | | guarantee losses | | | | | -------------------------------------------------------------------------------- | Recoveries from receivables eliminated as | 0 | -1 | 0 | -1 | | loan or guarantee losses | | | | | -------------------------------------------------------------------------------- | Increase in impairment provisions | 28 | 39 | 69 | 62 | -------------------------------------------------------------------------------- | Decrease in impairment provisions | -14 | -6 | -47 | -8 | -------------------------------------------------------------------------------- | Total impairments of receivables | 29 | 33 | 62 | 54 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 4. Net income from Non-life | | | | | | Insurance | | | | | -------------------------------------------------------------------------------- | EUR million | Q2/ | Q2/ | Q1-2/ | Q1-2/ | -------------------------------------------------------------------------------- | | 2010 | 2009 | 2010 | 2009 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net insurance premium revenue | | | | | -------------------------------------------------------------------------------- | Premiums written | 218 | 206 | 665 | 679 | -------------------------------------------------------------------------------- | Insurance premiums ceded to | -6 | -4 | -34 | -44 | | reinsurers | | | | | -------------------------------------------------------------------------------- | Change in provision for unearned | 39 | 51 | -169 | -178 | | premiums | | | | | -------------------------------------------------------------------------------- | Reinsurers' share | -6 | -12 | 12 | 14 | -------------------------------------------------------------------------------- | Total | 246 | 240 | 473 | 471 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net Non-life Insurance claims | | | | | -------------------------------------------------------------------------------- | Claims paid | 147 | 147 | 324 | 303 | -------------------------------------------------------------------------------- | Insurance claims recovered from | -2 | -3 | -17 | -4 | | reinsurers | | | | | -------------------------------------------------------------------------------- | Change in provision for unpaid | 1 | -5 | -28 | -9 | | claims | | | | | -------------------------------------------------------------------------------- | Reinsurers' share | 0 | 1 | 21 | -3 | -------------------------------------------------------------------------------- | Total | 146 | 140 | 300 | 287 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net investment income, Non-life | | | | | | Insurance | | | | | -------------------------------------------------------------------------------- | Interest income | 16 | 18 | 32 | 36 | -------------------------------------------------------------------------------- | Dividend income | 2 | 3 | 18 | 6 | -------------------------------------------------------------------------------- | Investment property | 1 | 1 | 3 | 2 | -------------------------------------------------------------------------------- | Realised fair value gains and | | | | | | losses | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 4 | 2 | 35 | -8 | -------------------------------------------------------------------------------- | Shares and participations | 15 | 5 | -5 | 3 | -------------------------------------------------------------------------------- | Loans and receivables | -1 | 0 | -1 | 0 | -------------------------------------------------------------------------------- | Investment property | 2 | 0 | 2 | 0 | -------------------------------------------------------------------------------- | Derivatives | -17 | -9 | -25 | 1 | -------------------------------------------------------------------------------- | Unrealised fair value gains and | | | | | | losses | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 0 | 1 | 1 | 0 | -------------------------------------------------------------------------------- | Shares and participations | 0 | 10 | -16 | -13 | -------------------------------------------------------------------------------- | Loans and receivables | -1 | -2 | -1 | -2 | -------------------------------------------------------------------------------- | Investment property | 0 | 1 | 0 | 2 | -------------------------------------------------------------------------------- | Derivatives | 4 | 2 | 0 | 2 | -------------------------------------------------------------------------------- | Other | 1 | 0 | 1 | 1 | -------------------------------------------------------------------------------- | Total | 26 | 32 | 43 | 30 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Unwinding of discount | -11 | -11 | -22 | -21 | -------------------------------------------------------------------------------- | Other | 0 | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Total net income from Non-life | 114 | 122 | 193 | 192 | | Insurance | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 5. Net commissions and fees | | | | | -------------------------------------------------------------------------------- | EUR million | Q2/ | Q2/ | Q1-2/ | Q1-2/ | -------------------------------------------------------------------------------- | | 2010 | 2009 | 2010 | 2009 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Commission income | | | | | -------------------------------------------------------------------------------- | Lending | 10 | 13 | 18 | 23 | -------------------------------------------------------------------------------- | Payment transfers | 3 | 3 | 6 | 6 | -------------------------------------------------------------------------------- | Securities brokerage | 8 | 5 | 15 | 10 | -------------------------------------------------------------------------------- | Securities issuance | 3 | 1 | 7 | 2 | -------------------------------------------------------------------------------- | Asset management and legal | 16 | 11 | 30 | 20 | | services | | | | | -------------------------------------------------------------------------------- | Insurance operations | 5 | 4 | 9 | 8 | -------------------------------------------------------------------------------- | Guarantees | 4 | 5 | 8 | 8 | -------------------------------------------------------------------------------- | Other | 1 | 3 | 3 | 4 | -------------------------------------------------------------------------------- | Total commission income | 50 | 46 | 96 | 82 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Commission expenses | | | | | -------------------------------------------------------------------------------- | Payment transfers | 1 | 1 | 1 | 1 | -------------------------------------------------------------------------------- | Securities brokerage | 3 | 2 | 5 | 3 | -------------------------------------------------------------------------------- | Securities issuance | 1 | 5 | 2 | 6 | -------------------------------------------------------------------------------- | Asset management and legal | 4 | 2 | 5 | 3 | | services | | | | | -------------------------------------------------------------------------------- | Other | 1 | 1 | 1 | 2 | -------------------------------------------------------------------------------- | Total commission expenses | 9 | 10 | 15 | 15 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total net commissions and fees | 41 | 36 | 81 | 66 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 6. Net trading income | | | | | -------------------------------------------------------------------------------- | EUR million | Q2/ | Q2/ | Q1-2/ | Q1-2/ | -------------------------------------------------------------------------------- | | 2010 | 2009 | 2010 | 2009 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Financial assets and liabilities | | | | | | held for trading | | | | | -------------------------------------------------------------------------------- | Realised changes in fair value | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 8 | 6 | 13 | 29 | -------------------------------------------------------------------------------- | Shares and participations | 0 | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Derivatives | -5 | 72 | -17 | 95 | -------------------------------------------------------------------------------- | Unrealised changes in fair value | | | | | -------------------------------------------------------------------------------- | Notes and bonds | -1 | -4 | 3 | -21 | -------------------------------------------------------------------------------- | Shares and participations | 0 | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Derivatives | 0 | -68 | 7 | -75 | -------------------------------------------------------------------------------- | Financial assets and liabilities | | | | | | at fair value through profit or | | | | | | loss | | | | | -------------------------------------------------------------------------------- | Realised changes in fair value | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 0 | -9 | 0 | -9 | -------------------------------------------------------------------------------- | Unrealised changes in fair value | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 1 | 9 | 1 | 8 | -------------------------------------------------------------------------------- | Net income from foreign exchange | 5 | 2 | 9 | 6 | | operations | | | | | -------------------------------------------------------------------------------- | Total net trading income | 8 | 8 | 15 | 33 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 7. Net investment income | | | | | -------------------------------------------------------------------------------- | EUR million | Q2/ | Q2/ | Q1-2/ | Q1-2/ | -------------------------------------------------------------------------------- | | 2010 | 2009 | 2010 | 2009 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Available-for-sale financial | | | | | | assets | | | | | -------------------------------------------------------------------------------- | Capital gains and losses | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 3 | 0 | 16 | 0 | -------------------------------------------------------------------------------- | Shares and participations | 0 | 0 | 1 | 0 | -------------------------------------------------------------------------------- | Dividend income | 0 | 0 | 3 | 2 | -------------------------------------------------------------------------------- | Impairments | -1 | 0 | -4 | -4 | -------------------------------------------------------------------------------- | Carried at amortised cost | | | | | -------------------------------------------------------------------------------- | Capital gains and losses | | | | | -------------------------------------------------------------------------------- | Loans and other receivables | -5 | | -1 | | -------------------------------------------------------------------------------- | Total | -3 | 0 | 15 | -2 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investment property | 0 | 0 | 0 | -7 | -------------------------------------------------------------------------------- | Total net investment income | -3 | 0 | 15 | -9 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 8. Other operating income | | | | | -------------------------------------------------------------------------------- | EUR million | Q2/ | Q2/ | Q1-2/ | Q1-2/ | -------------------------------------------------------------------------------- | | 2010 | 2009 | 2010 | 2009 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Central banking service fees | 2 | 2 | 5 | 5 | -------------------------------------------------------------------------------- | Realisation of repossessed items | 0 | 0 | 1 | 0 | -------------------------------------------------------------------------------- | Rental income from assets rented | 6 | 6 | 12 | 13 | | under operating lease | | | | | -------------------------------------------------------------------------------- | Other | 2 | 2 | 4 | 5 | -------------------------------------------------------------------------------- | Total | 10 | 11 | 21 | 22 | -------------------------------------------------------------------------------- Note 9. Classification of financial instruments -------------------------------------------------------------------------------- | EUR million | Loans | Held | At fair | Availab | Hedging | Total | | | and | to | value | le for | derivati | | | | receiva | maturi | through | sale | ves | | | | bles | ty | profit | | | | | | | | or loss* | | | | -------------------------------------------------------------------------------- | Assets | | | | | | | -------------------------------------------------------------------------------- | Cash and balances | 3,779 | | | | | 3,779 | | with central | | | | | | | | banks | | | | | | | -------------------------------------------------------------------------------- | Receivables from | 7,733 | | | | | 7,733 | | credit | | | | | | | | institutions and | | | | | | | | central banks | | | | | | | -------------------------------------------------------------------------------- | Derivative | | | 2,060 | | 127 | 2,187 | | contracts | | | | | | | -------------------------------------------------------------------------------- | Receivables from | 11,680 | | | | | 11,68 | | customers | | | | | | 0 | -------------------------------------------------------------------------------- | Non-life | 735 | | 86 | 2,473 | | 3,294 | | Insurance | | | | | | | | assets** | | | | | | | -------------------------------------------------------------------------------- | Notes and | | 1,007 | 1,058 | 5,601 | | 7,667 | | bonds*** | | | | | | | -------------------------------------------------------------------------------- | Shares and | | | | 84 | | 84 | | participations | | | | | | | -------------------------------------------------------------------------------- | Other receivables | 2,165 | | 20 | | | 2,184 | -------------------------------------------------------------------------------- | Total 30 June | 26,092 | 1,007 | 3,224 | 8,158 | 127 | 38,60 | | 2010 | | | | | | 9 | -------------------------------------------------------------------------------- | Total 31 December | 24,986 | 1,086 | 2,767 | 6,613 | 59 | 35,51 | | 2009 | | | | | | 0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million | At fair | Other | Hedging | Total | | | value | liabiliti | derivative | | | | through | es | s | | | | profit | | | | | | or loss | | | | -------------------------------------------------------------------------------- | Liabilities | | | | | -------------------------------------------------------------------------------- | Liabilities to credit | | 6,069 | | 6,069 | | institutions | | | | | -------------------------------------------------------------------------------- | Financial liabilities held | 34 | | | 34 | | for trading (excl. | | | | | | derivatives) | | | | | -------------------------------------------------------------------------------- | Derivative conctracts | 1,852 | | 258 | 2,110 | -------------------------------------------------------------------------------- | Liabilities to customers | | 4,932 | | 4,932 | -------------------------------------------------------------------------------- | Non-life Insurance | 1 | 2,483 | | 2,484 | | liabilities | | | | | -------------------------------------------------------------------------------- | Debt instruments issued to | | 17,222 | | 17,222 | | the public | | | | | -------------------------------------------------------------------------------- | Subordinated liabilities | | 1,358 | | 1,358 | -------------------------------------------------------------------------------- | Other liabilities | | 2,161 | | 2,161 | -------------------------------------------------------------------------------- | Total 30 June 2010 | 1,886 | 34,225 | 258 | 36,369 | -------------------------------------------------------------------------------- | Total 31 December 2009 | 1,377 | 31,716 | 150 | 33,244 | -------------------------------------------------------------------------------- * Assets at fair value through profit or loss include financial assets held for trading, financial assets at fair value through profit or loss at inception and investment property. ** Non-life Insurance assets are specified in Note 10. *** On 30 June 2010, notes and bonds included EUR 10 million (55) in notes and bonds recognised using the fair value option. Debt securities issued to the public are carried at amortised cost. On 30 June 2010, the fair value of these debt instruments was EUR 78 million higher than their carrying amount, based on information available in markets and employing commonly used valuation techniques. Subordinated liabilities are carried at amortised cost. Their fair value was EUR 52 million lower than their carrying amount. -------------------------------------------------------------------------------- | Note 10. Non-life Insurance assets | | | -------------------------------------------------------------------------------- | EUR million | 30 | 31 Dec | | | June | 2009 | | | 2010 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investments | | | -------------------------------------------------------------------------------- | Loans and other receivables | 280 | 380 | -------------------------------------------------------------------------------- | Equities | 414 | 387 | -------------------------------------------------------------------------------- | Property | 77 | 78 | -------------------------------------------------------------------------------- | Notes and bonds | 1,500 | 1,392 | -------------------------------------------------------------------------------- | Derivatives | | | 2 | 1 | -------------------------------------------------------------------------------- | Other | 567 | 530 | -------------------------------------------------------------------------------- | Total | 2,839 | 2,766 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Other assets | | | -------------------------------------------------------------------------------- | Prepayments and accrued income | 31 | 37 | -------------------------------------------------------------------------------- | Other | | | -------------------------------------------------------------------------------- | From direct insurance | 281 | 214 | -------------------------------------------------------------------------------- | From reinsurance | 84 | 89 | -------------------------------------------------------------------------------- | Cash in hand and at bank | 5 | 4 | -------------------------------------------------------------------------------- | Other receivables | | | 54 | 44 | -------------------------------------------------------------------------------- | Total | 455 | 389 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total Non-life insurance assets | 3,294 | 3,156 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 11. Intangible assets | | | -------------------------------------------------------------------------------- | EUR million | 30 | 31 Dec | | | June | 2009 | | | 2010 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Goodwill | 516 | 516 | -------------------------------------------------------------------------------- | Brands | 173 | 173 | -------------------------------------------------------------------------------- | Customer relationships | 191 | 203 | -------------------------------------------------------------------------------- | Other | 63 | 68 | -------------------------------------------------------------------------------- | Total | 943 | 960 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 12. Non-life Insurance liabilities | | | | -------------------------------------------------------------------------------- | EUR million | | | | 30 | 31 | | | | | | June | Dec | | | | | | 2010 | 2009 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Provision for unpaid claims | | | | -------------------------------------------------------------------------------- | Provision for unpaid claims for annuities | 1,071 | 1,058 | -------------------------------------------------------------------------------- | Other provision for unpaid | | 707 | 726 | | claims | | | | -------------------------------------------------------------------------------- | Total | | | | 1,778 | 1,784 | -------------------------------------------------------------------------------- | Provision for unearned | | 531 | 361 | | premiums | | | | -------------------------------------------------------------------------------- | Derivatives | | | | 1 | 0 | -------------------------------------------------------------------------------- | Other liabilities | | | 174 | 134 | -------------------------------------------------------------------------------- | Total | 2,484 | 2,279 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 13. Debt securities issued to the public | | | -------------------------------------------------------------------------------- | EUR million | 30 | 31 Dec | | | June | 2009 | | | 2010 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Bonds | 7,184 | 6,549 | -------------------------------------------------------------------------------- | Certificates of deposit, commercial papers and | 9,780 | 10,519 | | ECPs | | | -------------------------------------------------------------------------------- | Other | 258 | 227 | -------------------------------------------------------------------------------- | Total | 17,222 | 17,295 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 14. Fair value reserve after income tax | | | -------------------------------------------------------------------------------- | EUR million | 30 | 31 Dec | | | June | 2009 | | | 2010 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Loans and other receivables | | | -------------------------------------------------------------------------------- | Reclassified notes and bonds | -11 | -17 | -------------------------------------------------------------------------------- | Available-for-sale financial assets | | | --------------------------------------------------------------------------------| Notes and bonds | -18 | 53 | -------------------------------------------------------------------------------- | Equities and mutual funds with equity risk | 14 | -35 | -------------------------------------------------------------------------------- | Other funds | -7 | 0 | -------------------------------------------------------------------------------- | Other | | | | 0 | | -------------------------------------------------------------------------------- | Total | -23 | 0 | -------------------------------------------------------------------------------- The negative fair value reserve may recover by means of asset appreciation and recognised impairments. Only the value changes in the fair value reserve are recognised which the management deem to fulfil the relevant requirements. The fair value reserve before tax totalled EUR -31 million (-0) and the related deferred tax asset amounted to EUR 8 million (0). On 30 June 2010, positive mark-to-market valuations of equity instruments before tax in the fair value reserve totalled EUR 52 million and negative mark-to-market valuations EUR 47 million. In Q1-2/2010, impairments recognised from the fair value reserve in the income statement totalled EUR 31 million. Notes to risk management Note 15. Risk exposure by Banking -------------------------------------------------------------------------------- | Total exposure by rating category*, EUR billion | -------------------------------------------------------------------------------- | Rating category | 30 June | 31 Dec | Change | | | 2010 | 2009 | | -------------------------------------------------------------------------------- | 1-2 | 2.6 | 2.2 | 0.4 | -------------------------------------------------------------------------------- | 3-5 | 11.8 | 10.9 | 0.8 | -------------------------------------------------------------------------------- | 6-7 | 4.1 | 4.2 | -0.1 | -------------------------------------------------------------------------------- | 8-9 | 2.2 | 2.4 | -0.2 | -------------------------------------------------------------------------------- | 10 | 0.1 | 0.1 | 0.0 | -------------------------------------------------------------------------------- | 11-12 | 0.4 | 0.3 | 0.1 | -------------------------------------------------------------------------------- | Internally rated | 0.1 | 0.2 | 0.0 | -------------------------------------------------------------------------------- | Total | 21.3 | 20.3 | 1.0 | -------------------------------------------------------------------------------- | *) excl. private customers | -------------------------------------------------------------------------------- Sensitivity analysis of market risk -------------------------------------------------------------------------------- | | 30 June 2010 | 31 Dec 2009 | -------------------------------------------------------------------------------- | Banking, EUR | Risk | Change | Effect | Effect | Effect | Effect | | million | paramet | | on | on | on | on | | | er | | result | share-h | results | share-h | | | | | s | olders' | | olders' | | | | | | equity | | equity | -------------------------------------------------------------------------------- | Interest-rat | Interes | 1 percentage | 4 | | 5 | | | e risk | t | point | | | | | -------------------------------------------------------------------------------- | Currency | Market | 20 | 1 | | 1 | | | risk | value | percentage | | | | | | | | points | | | | | -------------------------------------------------------------------------------- | Volatility | | | | | | | | risk | | | | | | | -------------------------------------------------------------------------------- | Interest-rat | Volatil | 20 | 6 | | 4 | | | e volatility | ity | percentage | | | | | | | | points | | | | | -------------------------------------------------------------------------------- | Currency | Volatil | 10 | 0 | | 0 | | | volatility | ity | percentage | | | | | | | | points | | | | | -------------------------------------------------------------------------------- | Credit risk | Credit | 0.5 | 12 | 1 | 12 | | | premium *) | spread | percentage | | | | | | | | points | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Sensitivity figures have been calculated as the sum of the currencies' | | intrinsic value. | -------------------------------------------------------------------------------- | *) The credit risk premium has been calculated on notes and bonds at fair | | value through profit or loss and available for sale, included in liquidity | | reserves. | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 16. Risk exposure by Non-life Insurance | -------------------------------------------------------------------------------- | Risk parameter | | Total | Change | Effect on | Effect | | | | amount | in | combined ratio | on | | | | 30 June | risk | | share-ho | | | | 2010, | parameter | | lders' | | | | EUR | | | equity, | | | | million | | | EUR | | | | | | | million | -------------------------------------------------------------------------------- | Insurance portfolio | 945 | Up 1% | Up 0.9 percentage | 9 | | or insurance premium | | | point | | | revenue*) | | | | | -------------------------------------------------------------------------------- | Claims incurred*) | 632 | Up 1% | Down 0.7 | -6 | | | | | percentage points | | -------------------------------------------------------------------------------- | Major loss of over | | 1 loss | Down 0.5 | -5 | | EUR 5 million | | | percentage points | | -------------------------------------------------------------------------------- | Personnel costs*) | 110 | Up 8% | Down 0.9 | -9 | | | | | percentage point | | -------------------------------------------------------------------------------- | Expenses by | 270 | Up 4% | Down 1.1 | -11 | | function*) **) | | | percentage point | | -------------------------------------------------------------------------------- | Inflation for | 488 | Up 0.25 | Down 0.3 | -3 | | collective liability | | percentage | percentage points | | | | | points | | | -------------------------------------------------------------------------------- | Life expectancy for | 1 341 | Up 1 year | Down 3.3 | -31 | | discounted insurance | | | percentage points | | | contract liability | | | | | -------------------------------------------------------------------------------- | Discount rate for | 1 341 | Down 0.1 | Down 1.7 | -16 | | discounted insurance | | percentage | percentage points | | | contract liability | | point | | | -------------------------------------------------------------------------------- *) Moving 12-month **) Expenses by function in Non-life Insurance excluding expenses for investment management and expenses for other services rendered. Non-life Insurance investment portfolio by allocation -------------------------------------------------------------------------------- | EUR million | | | | -------------------------------------------------------------------------------- | Portfolio allocation | Fair value | % | Fair value | % | | | 30 June 2010 | | 31 Dec 2009 | | -------------------------------------------------------------------------------- | Money market | 125 | 4 % | 101 | 4 % | | instruments | | | | | -------------------------------------------------------------------------------- | Bonds and bond funds | 2,097 | 71 % | 2,067 | 72 % | -------------------------------------------------------------------------------- | Equities | 360 | 12 % | 364 | 13 % | -------------------------------------------------------------------------------- | Alternative | 182 | 6 % | 155 | 5 % | | investments | | | | | -------------------------------------------------------------------------------- | Real property | 182 | 6 % | 164 | 6 % | -------------------------------------------------------------------------------- | Total | 2,946 | 100 % | 2,851 | 100 % | -------------------------------------------------------------------------------- Non-life Insurance fixed-income portfolio by maturity and credit rating on 30 June 2010* -------------------------------------------------------------------------------- | EUR million | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Year(s) | 0-1 | 1-3 | 3-5 | 5-7 | 7-10 | 10- | Total | % | -------------------------------------------------------------------------------- | Aaa | 12 | 134 | 158 | 102 | 55 | 93 | 554 | 25 % | -------------------------------------------------------------------------------- | Aa1−Aa3 | 100 | 134 | 100 | 26 | 42 | 39 | 440 | 20 % | -------------------------------------------------------------------------------- | A1−A3 | 67 | 215 | 185 | 64 | 73 | 53 | 656 | 30 % | -------------------------------------------------------------------------------- | Baa1−Baa3 | 27 | 137 | 83 | 25 | 38 | 0 | 310 | 14 % | -------------------------------------------------------------------------------- | Ba1 or | 59 | 51 | 63 | 26 | 8 | 12 | 218 | 10 % | | lower | | | | | | | | | -------------------------------------------------------------------------------- | Internall | 5 | 4 | 6 | 1 | 2 | 6 | 24 | 1 % | | y rated | | | | | | | | | -------------------------------------------------------------------------------- | Total | 270 | 675 | 594 | 244 | 217 | 203 | 2,202 | 100 % | -------------------------------------------------------------------------------- * Excludes credit derivatives. The table below shows the sensitivity of investment risks and their effect on shareholders' equity: -------------------------------------------------------------------------------- | Non-life Insurance | Risk | Change | Effect on | | | parameter | | shareholders' | | | | | equity, EUR million | -------------------------------------------------------------------------------- | | | | 30 | 31 Dec | | | | | June | 2009 | | | | | 2010 | | -------------------------------------------------------------------------------- | Bonds and bond | Interest | 1 percentage | 84 | 73 | | funds1) | rate | point | | | -------------------------------------------------------------------------------- | Equities 2) | Market | 20 percentage | 70 | 73 | | | value | points | | | -------------------------------------------------------------------------------- | Venture capital funds | Market | 20 percentage | 15 | 14 | | and unquoted equities | value | points | | | -------------------------------------------------------------------------------- | Commodities | Market | 20 percentage | 4 | 5 | | | value | points | | | -------------------------------------------------------------------------------- | Real property | Market | 10 percentage | 18 | 16 | | | value | points | | | -------------------------------------------------------------------------------- | Currency | Value of | 20 percentage | 55 | 21 | | | currency | points | | | -------------------------------------------------------------------------------- | Credit risk premium | Credit | 0.5 percentage | 44 | 39 | | 3) | spread | points | | | -------------------------------------------------------------------------------- | Derivatives 4) | Volatility | 20 percentage | 0 | 0 | | | | points | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 1) Include money-market investments, convertible bonds and interest-rate | | derivatives | -------------------------------------------------------------------------------- | 2) Include hedge funds and equity derivatives | -------------------------------------------------------------------------------- | 3) Includes bonds and money-market investments, including government bonds | | and interest-rate derivatives issued by developed countries | -------------------------------------------------------------------------------- | 4) 20 percentage points for equity derivatives, 10 percentage points for | | interest-rate derivatives and 5 percentage points for currency derivatives. | -------------------------------------------------------------------------------- Note 17. Risk exposure by Group Function -------------------------------------------------------------------------------- | Total exposure by rating category*, EUR billion | -------------------------------------------------------------------------------- | Rating category | 30 June | 31 Dec | Change | | | 2010 | 2009 | | -------------------------------------------------------------------------------- | 1-2 | 15.3 | 13.6 | 1.7 | -------------------------------------------------------------------------------- | 3-5 | 4.8 | 4.6 | 0.1 | -------------------------------------------------------------------------------- | 6-7 | 0.1 | 0.0 | 0.1 | -------------------------------------------------------------------------------- | 8-9 | 0.0 | 0.0 | 0.0 | -------------------------------------------------------------------------------- | 10 | 0.0 | 0.0 | 0.0 | -------------------------------------------------------------------------------- | 11-12 | 0.0 | | | -------------------------------------------------------------------------------- | Internally rated | 0.0 | 0.0 | 0.0 | -------------------------------------------------------------------------------- | Total | 20.2 | 18.3 | 1.9 | -------------------------------------------------------------------------------- Sensitivity analysis of market risk -------------------------------------------------------------------------------- | | | 30 June 2010 | 31 Dec 2009 | -------------------------------------------------------------------------------- | Group | Risk | Change | Effect | Effect | Effect | Effect | | Functions, | paramet | | on | on | on | on | | E | er | | results | share-h | results | share-h | | UR million | | | | olders' | | olders' | | | | | | equity | | equity | -------------------------------------------------------------------------------- | Interest-rat | Interes | 1 | 11 | 0 | 2 | 3 | | e risk | t rate | percentage | | | | | | | | point | | | | | -------------------------------------------------------------------------------- | Interest-rat | Volatil | 20 | 0 | | 1 | | | e volatility | ity | percentage | | | | | | | | points | | | | | -------------------------------------------------------------------------------- | Credit risk | Credit | 0.5 | 0 | 113 | 0 | 68 | | premium *) | spread | percentage | | | | | | | | points | | | | | -------------------------------------------------------------------------------- | Price risk | | | | | | | -------------------------------------------------------------------------------- | Equity | Market | 20 | | 2 | | 2 | | portfolio | value | percentage | | | | | | | | points | | | | | -------------------------------------------------------------------------------- | Private | Market | 20 | | 6 | | 6 | | equity funds | value | percentage | | | | | | | | points | | | | | -------------------------------------------------------------------------------- | Property | Market | 10 | 4 | | 3 | | | risk | value | percentage | | | | | | | | points | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Sensitivity figures have been calculated as the sum of the currencies' | | intrinsic value. | | *) The credit risk premium has been calculated on notes and bonds at fair | | value through profit or loss and available for sale, included in liquidity | | reserves. | -------------------------------------------------------------------------------- Financial assets included in liquidity reserve by maturity and credit rating on 30 June 2010 -------------------------------------------------------------------------------- | EUR | | | | | | | | | | million | | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Year | 0-1 | 1-3 | 3-5 | 5-7 | 7-10 | 10- | Total | % | -------------------------------------------------------------------------------- | Aaa | 4,380 | 955 | 1,929 | 955 | 615 | 33 | 8,868 | 71 % | -------------------------------------------------------------------------------- | Aa1−Aa3 | 191 | 1,091 | 607 | 93 | 110 | 103 | 2,194 | 18 % | -------------------------------------------------------------------------------- | A1−A3 | 128 | 587 | 205 | 19 | 2 | | 942 | 8 % | -------------------------------------------------------------------------------- | Baa1−Baa | 0 | 76 | 31 | 5 | | | 111 | 1 % | | 3 | | | | | | | | |-------------------------------------------------------------------------------- | Ba1 or | 0 | 20 | 44 | 33 | 12 | | 110 | 1 % | | lower | | | | | | | | | -------------------------------------------------------------------------------- | Internal | 89 | 70 | 85 | 26 | | | 270 | 2 % | | ly rated | | | | | | | | | -------------------------------------------------------------------------------- | Total | 4,789 | 2,800 | 2,900 | 1,131 | 739 | 135 | 12,494 | 100 % | -------------------------------------------------------------------------------- The residual maturity of liquidity reserves averages 3.7 years. Other notes -------------------------------------------------------------------------------- | Note 18. Collateral given | | | -------------------------------------------------------------------------------- | EUR million | 30 June | 31 Dec | | | 2010 | 2009 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Given on behalf of own liabilities and | | | | commitments | | | -------------------------------------------------------------------------------- | Mortgages | 1 | 1 | -------------------------------------------------------------------------------- | Pledges | 5,977 | 5,839 | -------------------------------------------------------------------------------- | Other | 256 | 308 | -------------------------------------------------------------------------------- | Total collateral given | 6,233 | 6,147 | -------------------------------------------------------------------------------- | Total collateralised liabilities | 1,467 | 1,023 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 19. Off-balance-sheet commitments | | | -------------------------------------------------------------------------------- | EUR million | 30 June | 31 Dec | | | 2010 | 2009 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Guarantees | 1,263 | 1,296 | -------------------------------------------------------------------------------- | Other guarantee liabilities | 1,409 | 1,283 | -------------------------------------------------------------------------------- | Loan commitments | 3,978 | 4,140 | -------------------------------------------------------------------------------- | Commitments related to short-term trade | 114 | 98 | | transactions | | | -------------------------------------------------------------------------------- | Other | 494 | 447 | -------------------------------------------------------------------------------- | Total off-balance-sheet commitments | 7,258 | 7,264 | -------------------------------------------------------------------------------- Note 20. Derivative contracts -------------------------------------------------------------------------------- | 30 June 2010 | Nominal values/residual | Total | Fair values | | | term to maturity | | | -------------------------------------------------------------------------------- | EUR million | <1 year | 1-5 | >5 | | Assets | Liabiliti | | | | years | years | | | es | -------------------------------------------------------------------------------- | Interest rate | 47,405 | 59,600 | 18,715 | 125,720 | 1,662 | 1,762 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Currency | 14,096 | 2,139 | 517 | 16,752 | 559 | 390 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Equity and | 112 | 932 | 24 | 1,068 | 88 | 0 | | index | | | | | | | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Credit | 30 | 157 | | 187 | 4 | 0 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Other | 3,864 | 264 | | 4,128 | 7 | 20 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Total | 65,508 | 63,091 | 19,256 | 147,855 | 2,318 | 2,173 | | derivatives | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 30 June 2009 | Nominal values/residual | Total | Fair values | | | term to maturity | | | -------------------------------------------------------------------------------- | EUR million | <1 year | 1-5 | >5 | | Assets | Liabiliti | | | | years | years | | | es | -------------------------------------------------------------------------------- | Interest rate | 28,505 | 47,761 | 10,267 | 86,532 | 1,247 | 1,300 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Currency | 12,952 | 1,714 | 660 | 15,326 | 161 | 425 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Equity and | 160 | 702 | 31 | 893 | 39 | 0 | | index | | | | | | | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Credit | 108 | 188 | | 296 | 3 | 13 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Other | 3,982 | 131 | | 4,113 | 1 | 26 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Total | 45,706 | 50,496 | 10,958 | 107,161 | 1,452 | 1,764 | | derivatives | | | | | | | -------------------------------------------------------------------------------- Note 21. Other contingent liabilities and commitments On 30 June 2010, Banking commitments to venture capital funds amounted to EUR 14 million and Non-Life Insurance commitments to EUR 125 million. They are included in the section 'Off-balance-sheet commitments'. Note 22. Related-party transactions Pohjola Group's related parties comprise its parent company OP-Pohjola Group Central Cooperative, subsidiaries consolidated into the Group, associates and administrative personnel and other related-party entities. Pohjola Group's administrative personnel comprises Pohjola Bank plc's President and CEO, members of the Board of Directors and their close family members. Related parties also include companies over which a person among administrative personnel or his close family member exercises significant influence. Other related-party entities include OP Pension Fund, OP Pension Foundation and sister companies within OP-Pohjola Group Central Cooperative Consolidated. Normal loan terms and conditions apply to loans granted to related parties. These loans are tied to generally used reference rates. Related-party transactions have not undergone any substantial changes since 31 December 2009. Helsinki, 4 August 2010 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 on 4 August 2010, starting at 10.30 am. A conference call for analysts and investors will be held in English on the same day starting at 3.30 pm (Finnish time) (1.30 pm UK time), tel +358 (0)20 699121, PIN code 845143#. Mikael Silvennoinen, Pohjola Bank plc's President and CEO, will present the financial results in a press conference at OP-Pohjola Group Central Cooperative (Teollisuuskatu 1 b, Vallila, Helsinki), on 4 August, starting at noon. Financial reporting in 2010 Schedule for Interim Reports in 2010: -------------------------------------------------------------------------------- | Interim Report Q1-3 | 3 November | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | DISTRIBUTION | -------------------------------------------------------------------------------- | NASDAQ OMX Helsinki Ltd | -------------------------------------------------------------------------------- | London Stock Exchange | -------------------------------------------------------------------------------- | Major media | -------------------------------------------------------------------------------- | www.pohjola.fi, www.op.fi | -------------------------------------------------------------------------------- For additional information, please contact -------------------------------------------------------------------------------- | Mikael Silvennoinen, President and CEO, tel. +358 (0)10 252 2549 | -------------------------------------------------------------------------------- | Jouko Pölönen, CFO, tel. +358 (0)10 252 3405 | -------------------------------------------------------------------------------- | Tarja Ollilainen, Senior Vice President, Investor Relations, tel. +358 (0)10 | | 252 4494 | --------------------------------------------------------------------------------
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