2008-08-07 07:00:00 CEST
2008-08-07 07:00:04 CEST
REGULATED INFORMATION
Pohjola Pankki Oyj - Interim report (Q1 and Q3)
OP-Pohjola Group's January-June 2008
OP-Pohjola Group Central Cooperative Company Release 1(35) 7 August 2008 at 8 am Finnish time (GMT +3) Release category: Interim Report OP-Pohjola Group's January-June 2008 Growth continued at above-market rate - position as leading mortgage lender receives strong boost* - Deposits with financial institutions grew by over 18% and investment deposits by 40%. - Loan portfolio growth slowed down but was still at 14%, while home mortgages grew by 14% and corporate loans by 18%. - In the challenging market situation, assets invested in mutual funds decreased by 21%. - Non-life insurance premium revenue rose by 8% and those from private customers by 12%. - The number of joint banking and non-life insurance customers increased by 94,000 to almost 948,000. Earnings before tax EUR 359 million - strong earnings performance by Banking and Investment Services - Pre-tax earnings totalled EUR 359 million, as against EUR 523 million a year earlier. - Banking and Investment Services' earnings (EUR 320 million) were on the previous year's level, but the instability of investment markets cut results of Life and Non-Life Insurance operations and Other Operations. - Net interest income was up by 12%. Total income shrank by 9% as a result of falling investment income. - Expenses rose by 5%. - Bonuses charged to expenses and paid to customers grew by almost 60% to EUR 64 million. Strong risk-bearing capacity and a stable risk exposure - Own funds were EUR 1.7 billion above the statutory minimum. - Impairments receivables and non-performing receivables increased, but their proportion of the loan and guarantee portfolio remained as low as in the previous years. - The financial market instability reduced the market value of assets, but had little other effect on the Group's operations, earnings and capital adequacy. Year 2008 - Owing to uncertainty in the operating environment and to investment market instability, 2008 earnings before tax will fall below those of 2007. * Changes are based on a year-on-year comparison. Executive Chairman's comments The core of OP-Pohjola Group's strategy is to grow above the market rate, something in which we were again successful in the first half of 2008. Our growth was particularly strong in deposits, housing loans and non-life insurance, further strengthening our position as the leading financial services group in Finland, with our housing loan market share having risen by as much as 0.8 percentage points within a year. I see three main factors for the success we have had with our customer business: our renewed bonus scheme which is much more rewarding to our customers; successful integration of banking and non-life insurance operations; and our strong Finnish background. The Group's earnings fell short of last year's record level but were nevertheless satisfactory. The banking business earnings were still close to record figures. Non-life and life insurance income was reduced by a significantly weakened investment environment. Our customers' financial standing is still solid. The Group's non-performing and zero-interest receivables increased but remained exceptionally low. Our Group's business growth prospects and risk-bearing capacity—the latter a key ingredient to endure the current unstable market situation—are supported by our high capital adequacy, which, measured in terms of Tier 1 capital, is about double the Nordic average. Protracted problems in the international financial market are also beginning to display symptoms in the Finnish real economy. Our economy will slow down clearly compared with the recent years, but fears of a recession are premature. Our national economy stands on a solid foundation. In the second half of the year, business growth will slow down somewhat and most of savings will be in the form of investment deposits. Because of the unstable investment markets, 2008 is becoming a record year in terms of deposits. Reijo Karhinen OP-Pohjola Group's Interim Report for 1 January-30 June 2008 Earnings before tax in January-June came to EUR 359 million (523). Prior to the payout of much higher customer bonuses than previously, earnings by Banking and Investment Services were at the previous year's record level. The instability of the financial markets affected the result of other business segments, and therefore the Group's result fell short of last year's figures. The financial services group's business continued on its strong growth path with its market position further strengthened. The Group's capital adequacy and financial position continued to be solid. Own funds were 1.7 billion euros over the statutory minimum. OP-Pohjola Group's key indicators -------------------------------------------------------------------------------- | | Q1-2/ | Q1-2/ | Change* | 2007 | | | 2008 | 2007 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Earnings before tax, EUR | 359 | 523 | -31 | 1,005 | | million | | | | | -------------------------------------------------------------------------------- | Banking and Investment | 320 | 345 | -7 | 706 | | Services | | | | | -------------------------------------------------------------------------------- | Non-life Insurance | 40 | 83 | -52 | 181 | -------------------------------------------------------------------------------- | Life Insurance | 34 | 77 | -55 | 129 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Bonuses paid to customers | 64 | 40 | 59 | 83 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Return on equity (ROE),% | 9.4 | 14.7 | -5.3 | 13.7 | -------------------------------------------------------------------------------- | Return on equity at fair | -0.2 | 13.4 | -13.6 | 10.9 | | value,% | | | | | -------------------------------------------------------------------------------- | Cost/income,% | 51 | 50 | 2 | 49 | | (Banking and Investment | | | | | | Services) | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Average personnel | 12,569 | 12,307 | 2.1 | 12,378 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | 30 Jun | 30 Jun | Change* | 31 Dec | | | 2008 | 2007 | | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total assets, EUR billion | 71.5 | 63.4 | 12.8 | 65.7 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Capital adequacy ** | 12.3 | 14.3 | -2.0 | 13.8 | -------------------------------------------------------------------------------- | Tier 1 ratio,%** | 12.3 | 12.6 | -0.3 | 12.6 | -------------------------------------------------------------------------------- | Ratio of own funds to | 1.48 | 1.57 | -0.09 | 1.52 | | minimum amount of own | | | | | | funds*** | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Non-performing loan losses | 0.4 | 0.4 | 0.0 | 0.3 | | within loan and guarantee | | | | | | portfolio,% | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Market share,% | | | | | -------------------------------------------------------------------------------- | Of loan portfolio | 31.5 | 31.4 | 0.1 | 31.1 | -------------------------------------------------------------------------------- | Of total deposits | 32.8 | 32.8 | 0.0 | 32.3 | -------------------------------------------------------------------------------- | Of capital invested in | 21.4 | 21.5 | -0.1 | 21.4 | | mutual funds | | | | | -------------------------------------------------------------------------------- | Of insurance savings through | 19.7 | 19.7 | 0.0 | 19.9 | | life and | | | | | | pension insurance;% | | | | | -------------------------------------------------------------------------------- | | Q1-2/ | Q1-2/ | Change* | 2007 | | | 2008 | 2007 | | | -------------------------------------------------------------------------------- | Of premiums written in life | 33.5 | 28.8 | 4.7 | 30.8 | | and pension insurance,% | | | | | -------------------------------------------------------------------------------- * Percentage point change, except for earnings before tax, customer bonuses, total assets and average number of personnel, for which the change is stated in percentages, as well as the ratio of own funds to the minimum amount of own funds, for which the change is stated as a change in the ratio. ** Pursuant to the Credit Institutions Act. *** Pursuant to the Act on the Supervision of Financial and Insurance Conglomerates. Operating environment The global economy has continued to show unfavourable developments. Higher energy costs and difficulties in the housing market will weaken the US economic outlook. Economic growth in the euro zone is slowing down because domestic demand is mild and the strong euro makes exports more difficult. On the other hand, growth in emerging markets, such as Russia and Asia, has slowed only a little since exports have been offset by brisk domestic demand. Higher energy and food prices in particular have accelerated inflation. In order to dampen euro-area price pressures, the European Central Bank raised its benchmark interest rate to 4.25% in July. In addition to the tighter monetary policy, uncertainty still maintained by the international financial crisis has led to higher market interest rates. The Finnish economic outlook has also become gradually weaker. Expectations for manufacturing output are more cautious than before. Although the capacity utilisation rate is high, order books have become smaller and stocks have become larger. The construction sector is facing a downward trend but the number of people employed in the service sector is still on the rise. Consumer confidence in Finland is weak and consumers also feel less optimistic about their personal finances, although people still expect good employment and savings prospects. Despite higher interest rates, demand for bank loans actually increased during the first half. Growth in corporate loans sped up whereas household demand for loans became slightly milder. It is projected that growth in the home mortgage portfolio will continue to slow down somewhat. During the current year, home prices in real terms began to show a slight fall. The prolonged uncertainty in the equity market has been reflected in a marked fall in equity prices. This uncertainty has also affected mutual funds, with all types of funds experiencing a fall in their capital. Likewise, premiums written in life insurance in the first months of the year fell short of the previous year. However, deposits have continued to grow at an rapid rate, focusing on term deposits. Delayed effects are expected on Non-life Insurance premiums written because of the economic slowdown. Premiums written within direct insurance are expected to rise in Finland by around 5% in 2008, the same as in 2007. Premiums written in the Baltic countries will continue to grow but will slow down considerably vis-à-vis the double-digit growth figures witnessed in the last few years. OP-Pohjola Group's earnings and total assets January-June Pre-tax earnings totalled EUR 359 million, as against EUR 523 million a year earlier. Earnings by the Banking and Investment Services before tax and before the 59% increase in OP bonuses comparable to surplus refunds were stable and at the previous year's record level. Nevertheless, financial market instability and the market value depreciation of financial instruments during the report period diminished the result made by the Non-Life and Life Insurance segments and other non-business segment operations to such an extent that the Group's earnings before tax were 31% smaller that the January-June 2007 record result. Return on equity stood at 9.4% from 14.7% a year ago. Earnings before tax at fair value was EUR 0 million (480)* as a result of a fall in market values of available-for-sale securities. * Comparatives for 2007 are given in brackets. For income-statement and other aggregated figures, January-June 2007 figures serve as comparatives. For balance-sheet and other cross-sectional figures, figures on the previous balance sheet date (31 December 2007) serve as comparatives. Net interest income rose by 12% to EUR 568 million (509). As other income contracted, total income fell by 9.3% year on year. Other income declined by 26%, or EUR 167, to EUR 484 million (652); this is primarily explained by the contraction of life and non-life insurance net investment income and by market value changes in the Group's liquidity reserve recognised in the income statement. These changes account for a total of 75%, or EUR 126 million, of the fall of other returns. The net investment income during the comparison period contained EUR 11 million in non-recurring items, whereas such income was not included in the report period profits. Net commissions totalled EUR 223 million (226), which is about the same as last year, despite diminished asset management commissions. Net income from Non-life Insurance amounted to EUR 178 million (206) and that of Life Insurance to EUR 47 million (97). Net trading and investment income decreased by EUR 84 million from last year's figure and was EUR 18 million in the red. Net trading income was eroded by EUR 49 million impairment losses of the financial services group's liquidity reserve, the result of wider credit spreads. Expenses stood at EUR 606 million (579), up by 4.7% on the previous year. A significant part of this increase was due to higher personnel costs. The 8.9% rise in personnel costs resulted not only from an increase in staff numbers and the payroll bill but also by pension costs which had risen at a much higher rate than wages and salaries. ICT expenses accounted for EUR 7.9 million of the total of EUR 22 million other administrative costs. Other operating expenses year on year included a non-recurring expense of EUR 10 million. Bonuses paid to owner-members and OP bonus customers rose by 59% and totalled to EUR 64 million (40). Net impairment losses on receivables increased to EUR 9.0 million (5.7). New impairment losses in gross terms totalled EUR 28 million, or 68% more than the year before. Reversals and recoveries of impairment losses totalled EUR 19 million, or 73% more than the year before. Impairment losses on receivables remained extremely low. Banking and Investment Services reported a profit of EUR 320 million (345) before tax. This was as much as a year earlier if you eliminate the effect of higher bonuses to owner-members and OP bonus customers. Non-life Insurance earnings before tax were EUR 40 million (83), showing a 52% year-on-year decrease. Non-life Insurance reported a combined ratio of 98.0% (97.9) and operating combined ratio** of 95.0% (94.9). Earnings before tax from Life Insurance were EUR 34 million (77). The results of both life and non-life insurance operations were weakened by falling net investment income. In the autumn of 2005 in connection with the Pohjola acquisition, the then OP Bank Group announced that it would seek income and cost synergies of about EUR 91 million by the end of 2010. It is estimated that the decisions made by the end of the reporting period will yield cost savings of over EUR 55 million in 2008. In 2010 the cost savings are estimated to rise to over EUR 65 million. Profit synergies achieved to date are estimated to amount to almost EUR 30 million per year. Estimates of the total amount of synergy benefits already achieved or to be achieved by the end of the report period will therefore exceed the target set in 2005. Immediate integration costs concerning the report period totalled EUR 3 million (13). Project expenses related to information system integration, including internal personnel costs, totalled a good EUR 7 million. During the reporting period, OP-Pohjola Group Central Cooperative and TietoEnator signed an agreement to integrate and reorganise OP-Pohjola Group's ICT services. Major efficiency benefits will be achieved through the integration of OP-Pohjola Group's datacentre services. **The combined cost ratio excluding amortisation on intangible assets arising from the Pohjola acquisition and allocated to the business segment without the effect of changes in calculation bases. Earnings analysis -------------------------------------------------------------------------------- | EUR million | Q1-2 | Q1-2 | Change, | Change, | 2007 | | | 2008 | 2007 | EUR | % | | | | | | million | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Earnings before tax | 359 | 523 | -164 | -31.4 | 1,005 | -------------------------------------------------------------------------------- | Gross change in fair | -359 | -43 | -316 | | -207 | | value reserve | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before tax | 0 | 480 | -480 | | 798 | | at fair value | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Return on equity (ROE),% | 9.4 | 14.7 | | -5.3* | 13.7 | -------------------------------------------------------------------------------- | Return on equity at fair | -0.2 | 13.4 | | -13.6* | 10.9 | | value,% | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total income | | | | | | -------------------------------------------------------------------------------- | Net interest income | 568 | 509 | 59 | 11.6 | 1,048 | -------------------------------------------------------------------------------- | Net income from Non-life | 178 | 206 | -29 | -13.9 | 427 | | Insurance | | | | | | -------------------------------------------------------------------------------- | Net income from Life | 47 | 97 | -50 | -51.4 | 172 | | Insurance | | | | | | -------------------------------------------------------------------------------- | Net commissions and fees | 223 | 226 | -3 | -1.4 | 430 | -------------------------------------------------------------------------------- | Net trading and | -18 | 66 | -84 | | 65 | | investment | | | | | | | income | | | | | | -------------------------------------------------------------------------------- | Other operating income | 54 | 54 | 0 | -0.3 | 109 | -------------------------------------------------------------------------------- | Share of associates' | 0 | 2 | -2 | | 3 | | profits/losses | | | | | | -------------------------------------------------------------------------------- | Other income, total | 484 | 652 | -167 | -25.7 | 1 206 | -------------------------------------------------------------------------------- | Total income | 1,052 | 1,160 | -108 | -9.3 | 2,254 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Expenses | | | | | | -------------------------------------------------------------------------------- | Personnel costs | 310 | 285 | 25 | 8.9 | 553 | -------------------------------------------------------------------------------- | Other administrative | 169 | 147 | 22 | 15.0 | 303 | | expenses | | | | | | -------------------------------------------------------------------------------- | Other operating expenses | 127 | 148 | -20 | -13.6 | 273 | -------------------------------------------------------------------------------- | Total expenses | 606 | 579 | 27 | 4.7 | 1,129 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Impairment losses on | 9 | 6 | 3 | 58.1 | 13 | | receivables | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Returns to owner-members | | | | | | | and | | | | | | | OP bonus customers | | | | | | -------------------------------------------------------------------------------- | Bonuses | 64 | 40 | 24 | 58.7 | 83 | -------------------------------------------------------------------------------- | Interest on ordinary and | 14 | 12 | 1 | 11.4 | 24 | | supplementary cooperative | | | | | | | capital | | | | | | -------------------------------------------------------------------------------- | Total returns | 77 | 52 | 25 | 47.7 | 107 | -------------------------------------------------------------------------------- * Percentage point(s) On June 30, OP-Pohjola Group's total assets stood at EUR 71.5 billion (65.7), up by 8.8% from those on 31 December 2007. During this reporting period, receivables from customers increased by 8.2% to EUR 48.5 billion (44.8), deposits by 11% to EUR 32.1 billion (29.0), while debt securities issued to the public decreased by 1.0% to EUR 13.9 billion. Equity capital decreased by 1.7% to EUR 5.5 billion (5.6) owing to the lower fair value reserve. The fair value reserve, adjusted for deferred tax assets, totalled EUR -277 million (-10). The main reason for the decrease in the fair value reserve during the reporting period was a dip in the market value of securities. On 30 June, the cooperative capital investments and supplementary cooperative capital investments of the member cooperative banks' owner-members totalled EUR 719 million (689). Member banks paid a total of EUR 25 million in interest on the ordinary and supplementary cooperative capital for the financial year 2007. The Annual General Meeting of Pohjola Bank plc (OKO Bank plc until 29 February 2008) resolved that the company will pay a dividend of EUR 0.65 for each Series A share and EUR 0.62 for each Series K share for 2007, totalling EUR 131 million (131). April-June Earnings before tax for the second quarter were EUR 163 million, a EUR 114 million year-on-year decrease, mainly attributable to lower market values of investment instruments and the consequences for insurance institutions' net investment income. Other operating income did not include any non-recurring capital gains, while a year ago the figure was EUR 6 million. Reported expenses grew by EUR 20 million. Year on year, second-quarter personnel costs increased by 8.9%, accounting for EUR 13 million of growth in total expenses. Returns to owner-members grew by EUR 12 million. Impairment losses on receivables came to EUR 7 million, or EUR 2 million higher than a year earlier. The fair value reserve (gross) shrank by EUR 108 million, while a year ago it increased by EUR 63 million. Earnings before tax in the second quarter were EUR 32 million higher than in the first. Second-quarter earnings analysis -------------------------------------------------------------------------------- | EUR million | Q2 | Q2 | Change, | Q1 | Change, | | | 2008 | 2007 | % | 2008 | % | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Earnings before tax | 163 | 278 | -41.1 | 196 | -16.6 | -------------------------------------------------------------------------------- | Gross change in fair | -108 | -63 | 71.9 | -252 | -57.2 | | value reserve | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before tax | 56 | 215 | -74.1 | -56 | | | at fair value | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Return on equity (ROE),% | 8.6 | 15.1 | -6.5* | 10.4 | -1.9* | -------------------------------------------------------------------------------- | Return on equity at fair | 2.8 | 11.4 | -8.6* | -3.2 | 5.9* | | value,% | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total income | | | | | | -------------------------------------------------------------------------------- | Net interest income | 296 | 264 | 12.0 | 272 | 8.8 | -------------------------------------------------------------------------------- | Net income from Non-life | 89 | 112 | -21.2 | 89 | -0.6 | | Insurance | | | | | | -------------------------------------------------------------------------------- | Net income from Life | -6 | 50 | | 53 | | | Insurance | | | | | | -------------------------------------------------------------------------------- | Net commissions and fees | 103 | 104 | -1.4 | 120 | -14.2 | -------------------------------------------------------------------------------- | Net trading and | 12 | 38 | -67.9 | -30 | | | investment | | | | | | | income | | | | | | -------------------------------------------------------------------------------- | Other operating income | 27 | 33 | -18.6 | 27 | -1.9 | -------------------------------------------------------------------------------- | Share of associates' | 0 | 0 | | 0 | | | profits/losses | | | | | | -------------------------------------------------------------------------------- | Other income, total | 225 | 337 | -33.3 | 260 | -13.5 | -------------------------------------------------------------------------------- | Total income | 520 | 601 | -13.4 | 532 | -2.1 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Expenses | | | | | | -------------------------------------------------------------------------------- | Personnel costs | 158 | 145 | 8.9 | 152 | 3.9 | -------------------------------------------------------------------------------- | Other administrative | 86 | 76 | 14.3 | 82 | 4.8 | | expenses | | | | | | -------------------------------------------------------------------------------- | Other operating expenses | 66 | 70 | -5.9 | 62 | 6.0 | -------------------------------------------------------------------------------- | Total expenses | 310 | 290 | 6.7 | 296 | 4.6 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Impairment losses on | 7 | 5 | 39.7 | 2 | | | receivables | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Returns to owner-members | | | | | | | and | | | | | | | OP bonus customers | | | | | | -------------------------------------------------------------------------------- | Bonuses | 33 | 21 | 55.0 | 31 | 4.7 | -------------------------------------------------------------------------------- | Interest on ordinary and | 8 | 7 | 7.1 | 6 | 24.9 | | supplementary cooperative | | | | | | | capital | | | | | | -------------------------------------------------------------------------------- | Total returns | 40 | 28 | 42.9 | 37 | 8.0 | -------------------------------------------------------------------------------- Capital adequacy Two sets of capital adequacy regulations Two sets of capital adequacy ratios are calculated for OP-Pohjola Group. OP-Pohjola Group operates in compliance with the Act on Cooperative Banks and other Cooperative Institutions. Owing to the regulations on joint responsibility and security conditions prescribed in the Act, a minimum amount of own funds has been set for the amalgamation of the cooperative banks calculated according to the regulations for capital adequacy specified in the Credit Institutions Act. The amalgamation of the cooperative banks comprises its central institution (OP-Pohjola Group Central Cooperative), the central institution's member credit institutions and companies belonging to their consolidation groups. Although OP-Pohjola Group's insurance companies do not belong to the amalgamation of the cooperative banks, investments made in them nonetheless have a major impact on capital adequacy calculated in accordance with the capital adequacy regulations for credit institutions. This capital adequacy figure is called the amalgamation of cooperative banks' capital adequacy. OP-Pohjola Group is also a financial and insurance conglomerate, pursuant to the Act on the Supervision of Financial and Insurance Conglomerates. The conglomerate is governed by specific provisions of the capital adequacy requirement. In view of both capital adequacy requirements, OP-Pohjola Group's risk-bearing capacity is strong. Transition to the capital adequacy calculation measurement in accordance with Basel II OP-Pohjola Group Central Cooperative will publish annually, as part of the financial statements, the full information required by Pillar III of the capital adequacy framework and the Financial Supervision Authority standards. Since the beginning of 2008, OP-Pohjola Group has calculated its capital adequacy in compliance with Basel II. In the first stage, the capital requirement for the financial group's credit risk is calculated using the Standardised Approach (SA). In its calculation of capital requirement for credit risk, OP-Pohjola Group will phase in the Internal Rating-based Approach (IRBA), with the aim of using this approach for the first exposure classes in 2008. The adoption of IRBA is expected to reduce OP-Pohjola Group's capital requirement. The use of internal ratings, however, makes the capital requirement more susceptible to market fluctuations. As to market risks, OP-Pohjola Group will continue to use the Standardised Approach. The capital requirement for operational risks will be calculated using the Basic Indicator Approach (BIA), with the objective of adopting the Standardised Approach in 2010. Capital adequacy of the amalgamation of cooperative banks On 30 June, OP-Pohjola Group's capital adequacy ratio under the Credit Institutions Act stood at 12.3% (13.8) and Tier 1 capital adequacy ratio at 12.3% (12.6). -------------------------------------------------------------------------------- | Own funds | Basel | Basel | | | Reported | Reported | | | II | II* | | | | | -------------------------------------------------------------------------------- | EUR million | 30 | 31 Dec | Change, | Change, | 30 Jun | 31 Dec | | | June | 2007 | EUR | % | 2007 | 2007 | | | 2008 | | million | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Own funds | | | | | | | -------------------------------------------------------------------------------- | Tier 1 capital | 4,888 | 4,846 | 42 | 0.9 | 4,543 | 4,826 | -------------------------------------------------------------------------------- | Tier 2 capital | 0 | 44 | -44 | | 976 | 802 | | | | | | | | | -------------------------------------------------------------------------------- | Deduction items | - | - | | | -351 | -360 | | from combined | | | | | | | | Tier 1 and Tier | | | | | | | | 2 capital | | | | | | | -------------------------------------------------------------------------------- | Total own funds | 4,888 | 4,890 | -3 | -0.0 | 5,168 | 5,268 | -------------------------------------------------------------------------------- * Converted into comparable figures On 1 January 2008, OP-Pohjola Group adopted a method recommended by the Financial Supervision Authority to include insurance company investments in the calculation of capital adequacy as referred to in the Act on Credit Institutions. After this change, the balance sheet value of the insurance company investments will be deducted from the company's own funds. The investments will be deducted from Tier 1 and 2 capital in equal proportions in accordance with the Basel II Capital Accords. As a result of this change, the company's own funds on 31 December 2007 converted into comparable figures were reduced by some EUR 378 million, which lowered the capital adequacy ratio by about 0.99 percentage points to 12.99%. The change had no major effect on the amount of Tier 1 capital. The actual adoption of capital adequacy calculation according to Basel II did not affect the financial group's own funds. Tier 1 own funds amounted to EUR 4,888 million on 30 June. Comparable Tier 1 own funds stood at EUR 4,846 million on 31 December 2007. The result for the reporting period less the estimated dividend payout is included in Tier 1 own funds. OP-Pohjola Group's Tier 1 own funds increased by 0.9% during the report period. The amount of Tier 2 funds were reduced to zero following deductions from the item during the report period. Deductions in excess of the Tier 2 funds were made from the Tier 1 own funds. Comparable Tier 2 funds stood at EUR 44 million on 31 December 2007. At the end of the report period, own funds were reduced by a fair value reserve that was EUR -277 million in the red (-10). In March, Pohjola Bank plc issued a EUR 170 million debenture loan, classified as lower Tier 2 funds, with a maturity of ten years. Tier 2 funds without the fair value reserve grew to EUR 179 million (54). On 30 June, insurance company investments, deducted in equal proportions from Tier 1 and 2 funds, came to EUR 1,160 million (1,511). On the basis of the exemptions granted by the Financial Supervision Authority, investments by OP-Pohjola Group entities in venture capital funds, administered by OKO Venture Capital (Pohjola Capital Partners since 1 March 2008), are treated in the capital adequacy calculation in the same way as investments in shares in business or industrial corporations. On June 30, the ratio of hybrid capital to Tier 1 own funds was 3.8% (4.6). Tier 1 own funds do not include equity capital growth resulting from the IFRS-compliant measurement of pension liabilities and the assets covering them, or from the measurement at fair value of investment property. -------------------------------------------------------------------------------- | Capital adequacy | Basel | Basel I | | | Reporte | Reporte | | | II | | | | d | d | -------------------------------------------------------------------------------- | EUR million | 30 | 30 June | Change | Change | 30 June | 31 Dec | | | June | 2008 | , | , | 2007 | 2007 | | | 2008 | | EUR | % | | | | | | | millio | | | | | | | | n | | | | -------------------------------------------------------------------------------- | Risk-weighted | | | | | | | | receivables, | | | | | | | | investments and | | | | | | | | off-balance-sheet | | | | | | | | commitments | | | | | | | -------------------------------------------------------------------------------- | Receivables and | 36,490 | 40,661 | -4,171 | -10.3 | 30,788 | 33,306 | | investments* | | | | | | | -------------------------------------------------------------------------------- | Off-balance-sheet | | | | | 4,102 | 4,328 | | items | | | | | | | -------------------------------------------------------------------------------- | Market risk | 595 | 832 | -237 | -28.4 | 1,290 | 611 | -------------------------------------------------------------------------------- | Operational risks | 2,765 | - | 2,765 | | - | - | -------------------------------------------------------------------------------- | Total | 39,851 | 41,494 | -1,643 | -4.0 | 36,180 | 38,245 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Capital adequacy | 12.3 | 11.8 | | | 14.3 | 13.8 | | ratio, % | | | | | | | -------------------------------------------------------------------------------- | Ratio of Tier 1 to | 12.3 | 11.8 | | | 12.6 | 12.6 | | total risk-weighted | | | | | | | | items, % (Tier 1 | | | | | | | | ratio) | | | | | | | -------------------------------------------------------------------------------- * Credit and counterparty risk June 2008 Capital adequacy under the Act on the Supervision of Financial and Insurance Conglomerates OP-Pohjola Group's capital adequacy pursuant to the Act on the Supervision of Financial and Insurance Conglomerates is calculated using the consolidation method, whereby assets included in own funds but not included in equity capital, under the regulations for the banking or insurance industry, are added to the equity capital in the conglomerate's balance sheet. Own funds may not include items not available for covering the losses of other companies belonging to the conglomerate. Based on its interpretation issued on 31 March 2008, the Finnish Financial Supervision Authority altered the manner in which OP-Pohjola Group Mutual Insurance Company's equalisation provision is to be applied in capital adequacy calculation. As a result of this change, the capital adequacy referred to in the Act on the Supervision of Financial and Insurance Conglomerates was reduced by EUR 196 million on 31 March. However, this has no material effect on the Group's actual risk-bearing capacity. On 30 June, OP-Pohjola Group's own funds, calculated according to the Act on the Supervision of Financial and Insurance Conglomerates, exceeded the minimum amount specified in the Act by EUR 1,718 million (1,753). Changes in the capital adequacy calculation as specified in the Act on Credit Institutions increased the possibilities of using Tier 2 funds, which in effect compensates for the negative effect of the interpretation concerning OP-Pohjola Group Mutual Insurance Company. Capital adequacy under the Act on the Supervision of Financial and Insurance Conglomerates -------------------------------------------------------------------------------- | EUR million | 30 June | 30 June | Change, | Change, | 31 Dec | | | 2008 | 2007 | EUR | % | 2007 | | | | | million | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | OP-Pohjola Group's | 5,542 | 5,415 | 127 | 2.3 | 5,638 | | equity capital | | | | | | -------------------------------------------------------------------------------- | Business | 1,778 | 1,691 | 87 | 5.1 | 1,607 | | segment-specific | | | | | | | items | | | | | | -------------------------------------------------------------------------------- | Goodwill and | -1,118 | -1,130 | 12 | -1.1 | -1,116 | | intangible assets | | | | | | -------------------------------------------------------------------------------- | Equalisation | -458 | -233 | -225 | | -256 | | provision | | | | | | -------------------------------------------------------------------------------- | Other items included | -449 | -688 | 239 | -34.8 | -728 | | in equity capital and | | | | | | | business-segment-spec | | | | | | | ific items, but not | | | | | | | included in the | | | | | | | conglomerate's own | | | | | | | funds | | | | | | -------------------------------------------------------------------------------- | Conglomerate's own | 5,295 | 5,054 | 241 | 4.8 | 5,145 | | funds, total | | | | | | -------------------------------------------------------------------------------- | Own funds | 3,216 | 2,869 | 347 | 12.1 | 3,037 | | requirement, for | | | | | | | credit institutions | | | | | | -------------------------------------------------------------------------------- | Own funds requirement | 360 | 347 | 13 | 3.8 | 355 | | for insurance | | | | | | | operations | | | | | | -------------------------------------------------------------------------------- | Total minimum amount | 3,577 | 3,216 | 361 | 11.2 | 3,392 | | of conglomerate's own | | | | | | | funds | | | | | | -------------------------------------------------------------------------------- | Conglomerate's | 1,718 | 1,838 | -120 | -6.5 | 1,753 | | capital adequacy | | | | | | -------------------------------------------------------------------------------- | Conglomerate's | 1.48 | 1.57 | | -0.09* | 1.52 | | capital adequacy | | | | | | | ratio (own | | | | | | | funds/minimum of own | | | | | | | funds) | | | | | | -------------------------------------------------------------------------------- * Change in ratio. Risk exposure OP-Pohjola Group's credit risk status has remained stable and credit risks low despite the strong growth of the loan and guarantee portfolio. Non-performing and zero-interest receivables came to EUR 204 million (147) on 30 June, which was 0.4% (0.3) of the loan and guarantee portfolio. The ratio of non-performing and zero-interest loans to the loan and guarantee portfolio remained low, although they rose by 22% from June 2007. Impairments losses on receivables were also low. Gross impairment losses were recorded in the first half to the amount of EUR 28 million (17), which was 0.11% (0.07) of the loan and guarantee portfolio. OP-Pohjola Group's liquidity has remained good during the report period. The continuing uncertainty of the financial markets has not affected the availability of the Group's short- or long-term funding. Deposit funding has continued to increase its share of funding. The financial services group's mortgage bank, OP Mortgage Bank, issued another covered bond to the international financial market in May. The bond was well received and heavily oversubscribed. The amount of liquidity reserves totalled EUR 5.9 billion (5.7) at the end of June. Noticeably widening credit spreads resulted in the negative EUR 54 million mark-to-market valuation through a fall in the market value of notes and bonds included in liquidity reserves. Of this amount, EUR 49 million was recognised in the income statement and EUR 5 million in the fair value reserve. Negative value changes will be reversed during the remaining term to maturity if the notes and bonds are not sold before their maturity and their issuer is not declared insolvent. OP-Pohjola Group's interest-rate risk exposure remained almost unchanged. In Non-life Insurance, January-June saw 101 (103) major or medium-sized losses, with their claims incurred retained for own account totalling EUR 45 million (33). On 30 June, the investment portfolio of Non-life Insurance totalled EUR 2.6 billion (2.5), with bonds and bond funds accounting for 74% (71) and equities for 14% (16). The fixed-income portfolio's credit rating distribution was still good, as 83% of the fixed-income investments were in the top three rating categories (AAA-A). Owing to the disadvantageous investment environment, the January-June result on investment was -1.2% (3.5). On 30 June, life insurance investment assets amounted to EUR 4.0 billion (4.2). The allocation of investments in Non-life Insurance has remained almost unchanged during the first half of the year. Fixed-income instruments accounted for 63% (64%) of the investment assets. Some 73% (75) of fixed-income investments belonged the top three rating categories. The return on investments for January-June came to -3.3% (1.9). The rising interest rates lowered fixed-income investment profits, and at the same time return on equity investments were hit by falling share performance. Credit ratings Of the international credit rating agencies, Fitch Ratings provides a rating for both OP-Pohjola Group and its central bank, Pohjola Bank plc. OP-Pohjola Group's financial position also has a considerable impact on credit ratings issued for Pohjola Bank plc alone. The credit ratings are as follows: -------------------------------------------------------------------------------- | Rating agency | Short-term debt | Long-term debt | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Fitch Rating | F1+ | AA- | | (OP-Pohjola Group and | | | | Pohjola Bank plc) | | | -------------------------------------------------------------------------------- | Standard & Poor's (Pohjola | A-1+ | AA- | | Bank) | | | -------------------------------------------------------------------------------- | Moody's (Pohjola Bank) | P-1 | Aa1 | -------------------------------------------------------------------------------- All of the credit rating agencies have confirmed a stable rating outlook for Pohjola Bank. OP-Pohjola Group's long-term financial targets OP-Pohjola Group's business strategy adopted in June 2006 describes the Group's long-term financial targets set for risk-bearing capacity, profitability, risk appetite and efficiency. Due to the fall in financial instruments' market values, the financial services group's profitability did not reach the long-term target. The cost/income efficiency weakened from last year's 50% to 51%. The values for risk-bearing capacity and risk appetite were higher than the target levels. Long-term performance indicators -------------------------------------------------------------------------------- | | Indicator | Target | 30 Jun | 30 Jun | 31 Dec | | | | | 2008 | 2007 | 2007 | -------------------------------------------------------------------------------- | Risk-bearing | Non-current | Min. | 1.09 | 1.11 | 1.14 | | capacity | own | 1.0 | | | | | | funds/econom | | | | | | | ic | | | | | | | capital | | | | | -------------------------------------------------------------------------------- | | Indicator | Target | Q1-2/ | Q1-2/ | 2007 | | | | | 2008 | 2007 | | -------------------------------------------------------------------------------- | Profitabilit | Return on | Min. | 15.9% | 24.2% | 22.5% | | y | economic | 17% | | | | | | capital | | | | | -------------------------------------------------------------------------------- | Risk | Impairments | Max. | 0.04% | 0.03% | 0.03% | | appetite | on | 0.25% | | | | | | receivables/ | | | | | | | loan and | | | | | | | guarantee | | | | | | | portfolio | | | | | -------------------------------------------------------------------------------- | Efficiency | Cost/income | Max. | 51% | 50% | 49% | | (Banking and | | 50% | | | | | Investment | | | | | | | Services) | | | | | | -------------------------------------------------------------------------------- Changes in OP-Pohjola Group's structure OP-Pohjola Group's consolidated financial statements include 229 member cooperative banks, OP-Pohjola Group Central Cooperative Consolidated and OP Bank Group Mutual Insurance Company as well as six subsidiaries of the member banks. Karunan Osuuspankki has decided to merge with Sauvon Osuuspankki. In addition, the member banks Joensuun Osuuspankki and Kontiolahden Osuuspankki have decided to merge and establish a new member bank, Joensuun Seudun Osuuspankki. In accordance with the agreement between Pohjola Bank plc and Kesko Corporation, the share capital of K-Finance Ltd was transferred to Pohjola Bank plc and the company was renamed Pohjola Finance Ltd. The boards of directors of Pohjola Bank plc and Pohjola Finance Ltd have approved a plan whereby Pohjola Finance Ltd will merge with its parent company by no earlier than 30 September 2008. As part of the agreement between OP-Pohjola Group Central Cooperative and TietoEnator on datacentre services, the former sold TietoEnator and Ilmarinen Mutual Pension Insurance Company 34% of its FD Finanssidata Oy shares in May. As a result, FD Finanssidata Oy is no longer consolidated in OP-Pohjola Group's financial statements as a subsidiary. This structural change has no material effect on the Group's result. Pohjola Insurance Ltd and 52 Group member banks announced in March that they are preparing a new operating model to have personnel working in insurance field operations to become employed by the local member banks. These plans concern some 250 people, most of which are already working in joint offices. Pohjola Insurance's Board approved of the plan in June, with the final decisions to be made this autumn. Owner-members and customers On 30 June, the cooperative member banks had 1,229,000 owner-members, which is 47,000 more than a year earlier, and Helsinki OP Bank Plc, which operates in the Helsinki Metropolitan Area, had a total of 1,028,000 OP bonus customers. Loyal customer bonuses earned by OP bonus customers totalled EUR 64 million, up by 59% on the previous year, this growth stemming particularly from the nearly 40% increase in the value of accumulated bonuses as of the beginning of 2008. As of May, bonus customers also began to receive bonuses for OP-Visa purchases. Bonuses earned by owner-members are stated in OP-Pohjola Group's income statement under 'Returns to owner-members'. OP bonus customers used a total of EUR 26 million (24) in bonuses for banking services during the first half, and since the autumn of 2007 bonuses can also have been used to pay for Pohjola's non-life insurance products. In January-June, bonuses worth EUR 12 million were used to pay insurance premiums. OP-Pohjola Group had a total of 4,115,000 customers in Finland at the end of June, or 48,000 more than a year earlier. There were 3,715,000 private customers, up by 38,000 year on year, and 400,000 corporate customers, up by 9,600. In addition, OP-Pohjola Group has approximately 200,000 non-life insurance customers in the Baltic countries. In the year to June, the number of joint banking and non-life insurance customers in Finland increased by 94,000 to 948,000 as a result of cross-selling. OP-Pohjola Group aims at increasing the number of joint customers to one million by the end of 2008. On 30 June, the number of Pohjola's loyal customer households totalled 375,000, up by 19,700 from the level of 31 December 2007. Personnel and incentive system On 30 June, OP-Pohjola Group had a staff of 12,611, or 140 more than on 31 December 2007 and 208 more than a year ago. About 95% of OP-Pohjola Group's personnel are members in the Group's Personnel Fund. A management incentive scheme is also in place within the Group. Central Cooperative's corporate governance OP-Pohjola Group Central Cooperative is the central institution of the amalgamation of the cooperative banks, the parent company of OP-Pohjola Group Central Cooperative Consolidated and the company heading the financial and insurance conglomerate formed by OP-Pohjola Group. Acting as a development and service centre for OP-Pohjola Group and as a strategic owner institution, Central Cooperative plays a pivotal role in developing and steering OP-Pohjola Group's business. OP-Pohjola Group Central Cooperative's Annual Cooperative Meeting of 27 March 2008 re-elected the following members due to resign to the Cooperative's Supervisory Board for a term ending in 2011: Mr Jari Laaksonen, Managing Director; Mr Olli Lehtilä, Managing Director; Mr Juhani Leminen, Managing Director; and Ms Marita Marttila, Senior Nursing Officer. Jaakko Pehkonen, Professor, and Timo Parmasuo, Chairman of the Board of Directors, were appointed as new Supervisory Board members. In addition, the Meeting elected Mr Jussi Ruuhela, Managing Director, for the term ending in 2009. The Supervisory Board comprises 34 members. At its first meeting following election, the Supervisory Board re-elected Mr Seppo Penttinen Chairman and Mr Paavo Haapakoski and Mr Jukka Hulkkonen Vice Chairmen. The Annual Cooperative Meeting re-elected KPMG Oy Ab, a firm of authorised public accountants, the auditor of OP-Pohjola Group Central Cooperative and OP-Pohjola Group for the financial year 2008. As proposed by Central Cooperative's Executive Board, the Meeting decided to change the corporate name of OP Bank Group Central Cooperative to OP-Pohjola Group Central Cooperative. The new name was registered in the Trade Register on 21 April 2008. Capital expenditure The Central Cooperative, together with its subsidiaries, is responsible for developing OP-Pohjola Group's services. ICT investments and related specifications make up a significant portion of costs of developing these services. ICT procurement capitalised in the balance sheet totals EUR 21 million. Of these investments, EUR 12 million was allocated to banking and investment operations, EUR 5 million to non-life insurance operations and EUR 4 million to life insurance operations. The integration of banking and insurance operations information systems resulted in some EUR 7 million in expenses during the report period. Joint responsibility and joint security Under the Act on Cooperative Banks and Other Cooperative Credit Institutions, the amalgamation of the cooperative banks comprises the organisation's central institution (OP-Pohjola Group Central Cooperative), the Central Cooperative's member credit institutions and the companies belonging to their consolidation groups. This amalgamation is monitored on a consolidated basis. Central Cooperative and its 233 member banks are ultimately responsible for each other's liabilities and commitments. Central Cooperative's members at the end of the reporting period comprised OP-Pohjola Group's 229 member banks as well as Pohjola Bank plc, Helsinki OP Bank Plc, OP Mortgage Bank and OP-Kotipankki Oyj. OP-Pohjola Group's insurance companies do not fall within the scope of joint responsibility. Deposit banks belonging to OP-Pohjola Group, i.e. its member cooperative banks, Pohjola Bank plc, Helsinki OP Bank Plc and OP-Kotipankki Oyj, are regarded as a single bank with respect to deposit protection. Under legislation governing the Investor Compensation Fund, OP-Pohjola Group is also considered a single entity for purposes of compensation protection. Outlook for the rest of the year The favourable operating environment which the financial sector has enjoyed for many years has now reached a turning point. Considerable uncertainty and increasing investment-market instability in the sector may slow down growth and undermine prospects for profit performance. OP-Pohjola Group's aim is still to exceed the market growth rate in accordance with its strategy. 2008 earnings before tax will fall below the record figures of 2007. All forward-looking statements in this bulletin expressing the management's expectations, beliefs, estimates, forecasts, projections and assumptions are based on the current view of the future financial performance of OP-Pohjola Group and its various functions, and actual results may differ materially from those expressed in the forward-looking statements. Operations and earnings by business segment OP-Pohjola Group's business segments are Banking and Investment Services, Non-life Insurance and Life Insurance. Non-segment operations are presented in 'Other Operations'. OP-Pohjola Group's segment reporting is based on accounting policies applied in its financial statements. Amortisation on intangible assets arising from the Pohjola acquisition is allocated to the business segments. OP-Pohjola Group's business segment reporting was changed as of the second quarter of 2008: Pohjola Bank Group's asset management and central bank operations which used to be included in Banking and Investment Services will from now on be reported as part of the non-business-segment Other Operations. The comparison period figures for 2007 have been changed to correspond to the new segment division. The changes concern the Banking and Investment Services and Other Operations. Companies within the Banking and Investment Services segment are the member banks, Helsinki OP Bank Plc, OP Kotipankki Oyj, OP Mortgage Bank, OP Fund Management Company Ltd, Pohjola Asset Management Limited, Pohjola Corporate Finance Ltd*, Pohjola Capital Partners Ltd**, as well as certain smaller companies supporting banking and investment services in their entirety. Pohjola Bank plc's*** banking and asset management segments are also included in the Banking and Investment Services segment as are the operations of OP-Pohjola Group Mutual Insurance Company, because most of the company's business consists of credit insurance granted to the Group's retail banks. The Non-life Insurance segment encompasses the operations of OP-Pohjola Group's non-life insurance companies, i.e. Pohjola Insurance Ltd****, Eurooppalainen Insurance Company Ltd, A-Insurance Ltd, the Seesam companies operating in the Baltic countries, as well as the operations of service companies supporting non-life insurance. The Life Insurance segment comprises OP Life Assurance Company Ltd engaged in the Group's life and pension insurance business. As a result of the new division into segments, Other Operations, which does not fall under any segment, grew in size. Pohjola Bank Group's central bank and asset management, which are now included under Other Operations, include the financial services group's EUR 6 billion liquidity reserve, Pohjola Bank Group's capital market asset management and the central bank operations offered to Group member banks by Pohjola Bank. Other Operations already included operations that supported all business segments, particularly the operations of OP-Pohjola Group Central Cooperative and FD Finanssidata Oy (up to May 2008) and Pohjola's Group management. Costs of the services which Central Cooperative and FD provide for the business segments are allocated to the segments in the form of internal service charges. The allocation of equity to the business segments is done by means of an internal bank, which means that any capital exceeding the target will be reflected in the Other Operations earnings. Summary of performance by business segment -------------------------------------------------------------------------------- | EUR million | Total | Expenses | Other | Earnings | Earnings | | | income | | items | before | before | | | | | | tax | tax | | | | | | Q1- 2/ | Q1-2/ | | | | | | 2008 | 2007 | -------------------------------------------------------------------------------- | Banking and | 842 | 433 | 88 | 320 | 345 | | Investment Services | | | | | | -------------------------------------------------------------------------------- | Non-life Insurance | 192 | 153 | 0 | 40 | 83 | -------------------------------------------------------------------------------- | Life Insurance | 63 | 28 | 0 | 34 | 77 | -------------------------------------------------------------------------------- | Other Operations | 138 | 172 | -2 | -32 | 18 | -------------------------------------------------------------------------------- | Eliminations | -183 | -180 | 0 | -3 | 0 | -------------------------------------------------------------------------------- | Total | 1,052 | 606 | 86 | 359 | 523 | -------------------------------------------------------------------------------- * OKO Corporate Finance Ltd until 29 February 2008 ** OKO Venture Capital Ltd until 29 February 2008 *** OKO Bank Group until 29 February 2008 **** Pohjola Non-Life Insurance Company Ltd, until 29 February 2008 Banking and Investment Services During the first half of 2007, the Banking and Investment Services operating environment had both its ups and downs: OP-Pohjola Group's market position improved despite the difficult operating environment. Moreover, credits and deposits continued to grow, whereas mutual fund capital declined along with the mutual fund markets. On 30 June, OP-Pohjola Group's loan portfolio stood at EUR 48.5 billion (44.8) and the guarantee portfolio at EUR 2.6 billion (2.4), the former growing by 8.2% from the year-start level. The acquisition on K-Finance accounted for some 0.5 percentage points of the increase. The loan portfolio grew by 14.4% (13.6) in the year to June. The market share of the loan portfolio grew by 0.1 percentage points to 31.5% over the previous year. The home mortgage portfolio totalled EUR 23.1 billion (21.5) at the end of June. During the report period, home mortgages increased by 7.2% (6.8) and in the year to June by 14.1% (14.8). At the end of June, the market share of home mortgages was 35.4%, or 0.8 percentage points higher year on year. The average margin on new home mortgages was 0.01 percentage points lower than in the first quarter of 2008. Fixed-rate home mortgages accounted for a low share of all home mortgages at 2.3% (0.6). The financial services group's mortgage Bank, OP Mortgage Bank issued in May a EUR 1.0 billion covered bond, which will continue to improve OP-Pohjola Group's already strong competitiveness and position in the home mortgage market. On 30 June, the consumer credit portfolio amounted to EUR 3.5 billion (3.3), showing an increase of 7.0% from 31 December 2007 and 11% from 30 June 2007. On 30 June, the Group's corporate loan portfolio stood at EUR 12.6 billion (11.3), and the guarantee portfolio at EUR 2.3 billion (2.1). The corporate loan portfolio grew by 11.7% during the report period and by 18.4% in the year to June. The increase in corporate loans is partly explained by capital market instability, which has increased the popularity of bank financing in proportion to companies' direct funding from the capital markets. The market share of corporate loans was 25.9% on 30 June, or 0.5 percentage points higher than a year earlier. On 30 June, deposits totalled EUR 32.1 billion (29.0), or 18.2% higher than a year ago and 10.6% more than on 31 December 2007. The growth took place mainly in investment deposits, which grew by 40% to EUR 16.9 billion (14.0). The market share of corporate loans of deposit was 32.8% on 30 June, that is, at the same level as a year earlier. On 30 June, OP-Pohjola Group customers had 1.7 million (1.6) international OP-Visa, OP-Visa Electron, OP-Visa Debit or OP-MasterCard cards. By the end of July, over 500,000 cards had the K-Group's Plussa bonus point feature following the card cooperation started with the K-Group in 2007. Capital invested in OP-Pohjola Group's mutual funds stood at EUR 11.9 billion (14.1) billion. The amount of capital fell with the market trends by 15.3% during the report period and by 20.7% since June 2007. On 30 June, OP-Pohjola Group held a 21.4% market share of the capital of mutual funds registered in Finland, or 0.1 percentage points lower than a year earlier. Net subscriptions to OP-Pohjola Group's mutual funds totalled EUR -1,268 million (1,232). On 30 June, assets managed by Pohjola Bank's asset management were worth EUR 28.8 billion (31.3), EUR 11 billion (13.1) of which was invested in OP-Pohjola Group's mutual funds. OP-Pohjola Group companies accounted for EUR 6.4 billion of assets managed by Pohjola Bank. Assets managed in accordance with the OP-Private operating model totalled EUR 3.0 billion (2.9). Stockbroking for households totalled 252,000 trades during the reporting period, or down by 12.8% on the previous year. Earnings and risk exposure Banking and Investment Services reported earnings of EUR 320 million (345) before tax for the first half of 2008, down by 7.2% on a year earlier. The decline was caused by the higher bonuses paid to customers, totalling EUR 64 million (40) in the report period. Without these higher payouts to owner-members and loyal customers, the Banking and Investment Services result would have been at the same level as a year ago. Net interest income increased by 5.8% to EUR 527 million and net commissions and fees by 5.2% to EUR 239 million, the increase mainly stemming from business growth. Personnel costs rose by 6.4% and other expenses by 8.1%. The cost/income ratio stood at 51% (50). Impairment losses on receivables almost doubled from the year-ago figures to EUR 11 million (6), but are still very low considering the volume of the business. The Group's non-performing and zero-interest receivables increased but remained at low levels, totalling EUR 204 million on June 2008, or 22.5% more than a year ago. Non-performing and zero-interest loans are stated net of impairments of specific receivables and groups of receivables, which amounted to EUR 88 million (87). The ratio of non-performing and zero-interest receivables to the loan and guarantee portfolio was 0.4, the same as a year ago. Banking and Investment Services: key figures -------------------------------------------------------------------------------- | EUR million | Q1-2/ | Q1-2/ | Change, | 2007 | | | 2008 | 2007 | % | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net interest income | 527 | 498 | 5.8 | 1 030 | -------------------------------------------------------------------------------- | Impairments on receivables | 11 | 6 | 95.1 | 13 | -------------------------------------------------------------------------------- | Other income | 315 | 303 | 3.8 | 609 | -------------------------------------------------------------------------------- | Personnel costs | 190 | 177 | 7.5 | 346 | -------------------------------------------------------------------------------- | Other expenses | 243 | 221 | 9.7 | 450 | -------------------------------------------------------------------------------- | Returns to owner-members | 77 | 52 | 47.7 | 107 | | and OP bonus customers | | | | | -------------------------------------------------------------------------------- | Earnings before tax | 320 | 345 | -7.2 | 722 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million | Q1-2/ | Q1-2/ | Change, | 2007 | | | 2008 | 2007 | % | | -------------------------------------------------------------------------------- | Home mortgages drawn down | 3,998 | 3,653 | 9.4 | 7,226 | -------------------------------------------------------------------------------- | Corporate loans drawn down | 4,042 | 3,662 | 10.4 | 6,797 | -------------------------------------------------------------------------------- | Net subscriptions to | -1,268 | 1,232 | | 595 | | mutual funds | | | | | -------------------------------------------------------------------------------- | No. of brokered property | 8,323 | 8,195 | 1.6 | 16,263 | | transactions | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR billion | 30 Jun | 30 Jun | Change, | 31 Dec | | | 2008 | 2007 | % | 2007 | -------------------------------------------------------------------------------- | Loan portfolio | | | | | -------------------------------------------------------------------------------- | Home mortgages | 23 | 20 | 14.1 | 22 | -------------------------------------------------------------------------------- | Other loans to households | 9 | 9 | 7.4 | 9 | -------------------------------------------------------------------------------- | Corporate loans | 13 | 11 | 18.4 | 11 | -------------------------------------------------------------------------------- | Other loans | 3 | 3 | 24.1 | 3 | -------------------------------------------------------------------------------- | Total | 48 | 42 | 14.4 | 45 | -------------------------------------------------------------------------------- | Guarantee portfolio | 2.6 | 2.4 | 11.3 | 2.4 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Deposits | | | | | -------------------------------------------------------------------------------- | Total current and payment | | | | | | transfer | | | | | -------------------------------------------------------------------------------- | Households | 10 | 11 | -3.2 | 10 | -------------------------------------------------------------------------------- | Companies | 3 | 3 | 11.0 | 3 | -------------------------------------------------------------------------------- | Others | 2 | 2 | 5.9 | 2 | -------------------------------------------------------------------------------- | Total current and payment | 15 | 15 | 0.5 | 15 | | transfer | | | | | -------------------------------------------------------------------------------- | Investment deposits | 17 | 12 | 40.5 | 14 | -------------------------------------------------------------------------------- | Total deposits | 32 | 27 | 18.2 | 29 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Mutual funds | | | | | -------------------------------------------------------------------------------- | Equity and hedge funds | 3.3 | 4.7 | -28.9 | 4.2 | -------------------------------------------------------------------------------- | Balanced funds | 1.7 | 2.3 | -25.6 | 2.1 | -------------------------------------------------------------------------------- | Bond funds | 3.8 | 3.6 | 7.3 | 3.9 | -------------------------------------------------------------------------------- | Money market funds | 3.1 | 4.5 | -31.7 | 4.0 | -------------------------------------------------------------------------------- | Total value of mutual | 11.9 | 15.1 | -20.7 | 14.1 | | funds | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Market share, % | 30 Jun | 30 Jun | Change, | 31 Dec | | | 2008 | 2007 | % points | 2007 | -------------------------------------------------------------------------------- | Total loans | 31.5 | 31.4 | 0.1 | 31.1 | -------------------------------------------------------------------------------- | Home mortgages | 35.4 | 34.6 | 0.8 | 34.8 | -------------------------------------------------------------------------------- | Corporate loans | 25.9 | 26.4 | -0.5 | 25.7 | -------------------------------------------------------------------------------- | Total deposits | 32.8 | 32.8 | 0.0 | 32.3 | -------------------------------------------------------------------------------- | Capital invested in mutual | 21.4 | 21.5 | -0.1 | 21.4 | | funds | | | | | -------------------------------------------------------------------------------- | EUR million | | | | | -------------------------------------------------------------------------------- | Non-performing and | | | Change, % | | | zero-interest receivables | | | | | -------------------------------------------------------------------------------- | Households | 125 | 102 | 23.0 | 92 | -------------------------------------------------------------------------------- | Non-banking corporate | 63 | 61 | 4.0 | 52 | | sector | | | | | -------------------------------------------------------------------------------- | Condominiums and others | 16 | 4 | | 3 | -------------------------------------------------------------------------------- | Total non-performing and | 204 | 166 | 22.5 | 147 | | zero-interest receivables | | | | | -------------------------------------------------------------------------------- | Non-performing and | 0.4 | 0.4 | 0.03* | 0.3 | | zero-interest receivables | | | | | | within loan and guarantee | | | | | | portfolio, % | | | | | -------------------------------------------------------------------------------- * Percentage point(s) Non-life Insurance On 30 June, the number of loyal customer households within the Non-life Insurance segment totalled 375,000, showing an increase of 19,700 from 31 December 2007. Since the autumn of 2007, it has been possible to use OP bonuses earned through banking transactions to pay insurance premiums. In January-June, bonuses worth EUR 13 million were used to pay insurance premiums. Bonuses were used to pay almost 220,000 bills and some 50,000 bills were paid using bonuses alone. Insurance premium revenue rose by 7.8% to EUR 456 million (423). Growth remained strong within the Private Customers division because of closer cooperation between Group member banks and the non-life insurance operations, and because of the increase in the number of loyal customer households. Insurance premium revenue from Private Customers improved by 12% to EUR 186 million. Within the Corporate Customers division, insurance premium revenue amounted to EUR 241 million, up by 5%. The increase of earnings in statutory accident insurance in the latter part of the period under review boosted growth. Premium revenue generated by the Baltic business increased by 6.4% to EUR 29 million (27). Pohjola Insurance Ltd's market share of premiums written in non-life insurance in 2007 was 26.9%, against 26.3% a year earlier. In 2007, Pohjola Insurance became the market leader in non-life insurance. Market share data on premiums written in non-life insurance come in only once a year. Earnings and risk exposure Earnings before tax from Non-life Insurance amounted to EUR 40 million (83) in the first half of 2008. However, as to the balance on technical account, the first part of 2008 was somewhat better than that of 2007. Net investment income recognised under earnings came to EUR 55 million, or EUR 33 million higher year on year (88). Net investment income at fair value was EUR -33 million (87). Results for the same period a year ago included EUR 6 million in capital gains on the sale of the marine hull insurance business. Insurance premium revenue came to EUR 456 million (423). Customer indemnities totalled EUR 309 million (283). The risk ratio was 67.0 (66.0). The indemnifications paid for major losses were higher than a year ago. The number of major or medium-sized losses in excess of EUR 0.1 million (EUR 0.5 million in pension liabilities) totalled 101 (103), accounting for EUR 45 million (33) of total claims incurred. Another factor that contributed to higher indemnifications paid out was caused by the growing insurance portfolio. Operating expenses and loss adjustment expenses showed a moderate development, totalling EUR 128 million (122). The cost ratio developed favourably, standing at 28.0 (28.9). The operating combined ratio was 95.0 (94.9). On 30 June, the investment portfolio of Non-life Insurance totalled EUR 2.6 billion (2.4), with bonds and bond funds accounting for 74% (71) and equities for 14% (16). The average remaining maturity of the fixed-income portfolio was 4.9 years and the duration 4.5 years (3.8). Due to unfavourable developments in the equity market, return on investment at fair value stood at -1.2% (3.5). Non-life Insurance: key figures -------------------------------------------------------------------------------- | EUR million | Q1-2/ | Q1-2/ | Change, | 2007 | | | 2008 | 2007 | % | | -------------------------------------------------------------------------------- | | | | | | -------------------------------------------------------------------------------- | Insurance premium revenue | 456 | 423 | 7.8 | 850 | -------------------------------------------------------------------------------- | Insurance claims and | 309 | 283 | 9.3 | 536 | | benefits | | | | | -------------------------------------------------------------------------------- | Net investment income | 55 | 88 | -37.1 | 160 | -------------------------------------------------------------------------------- | Unwinding of discount and | -20 | -19 | 6.1 | -39 | | other items included in net | | | | | | income | | | | | -------------------------------------------------------------------------------- | Net income from Non-life | 182 | 209 | -13.0 | 435 | | Insurance | | | | | -------------------------------------------------------------------------------- | Other income | 11 | 25 | -57.0 | 37 | -------------------------------------------------------------------------------- | Personnel costs | 56 | 54 | 5.2 | 103 | -------------------------------------------------------------------------------- | Other expenses | 97 | 97 | -0.5 | 188 | -------------------------------------------------------------------------------- | Earnings/loss before tax | 40 | 83 | -52.3 | 181 | -------------------------------------------------------------------------------- | Gross change in fair value | -88 | -1 | | -39 | | reserve | | | | | -------------------------------------------------------------------------------- | Earnings/loss before tax at | -48 | 82 | | 142 | | fair value | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million | Q1-2/ | Q1-2/ | Change, | 2007 | | | 2008 | 2007 | % | | -------------------------------------------------------------------------------- | Insurance premium revenue | | | | | -------------------------------------------------------------------------------- | Private Customers | 186 | 173 | 7,8 | 345 | -------------------------------------------------------------------------------- | Corporate Customers | 241 | 223 | 8,0 | 449 | -------------------------------------------------------------------------------- | Baltic States | 29 | 27 | 6,4 | 56 | -------------------------------------------------------------------------------- | Total insurance premium | 456 | 423 | 7,8 | 850 | | revenue | | | | | -------------------------------------------------------------------------------- | | | | | | -------------------------------------------------------------------------------- | EUR billion | 30 Jun | 30 Jun | Change, | 31 Dec | | | 2008 | 2007 | % | 2007 | -------------------------------------------------------------------------------- | | | | | | -------------------------------------------------------------------------------- | Insurance contract | | | | | | liabilities | | | | | -------------------------------------------------------------------------------- | Discounted insurance | 1.3 | 1.3 | -1.3 | 1.3 | | contract liabilities | | | | | -------------------------------------------------------------------------------- | Other insurance contract | 1.0 | 0.9 | 8.9 | 0.8 | | liabilities | | | | | -------------------------------------------------------------------------------- | Total | 2.2 | 2.2 | 3.0 | 2.0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investment portfolio | | | | | -------------------------------------------------------------------------------- | Bonds and bond funds | 1.7 | 1.7 | 2.8 | 1.7 | -------------------------------------------------------------------------------- | Money market instruments | 0.2 | 0.0 | | 0.1 | -------------------------------------------------------------------------------- | Equities and equity funds | 0.4 | 0.5 | -22.1 | 0.4 | -------------------------------------------------------------------------------- | Real property investment *) | 0.1 | 0.1 | 96.8 | 0.1 | -------------------------------------------------------------------------------- | Alternative investments | 0.1 | 0.2 | -11.3 | 0.2 | -------------------------------------------------------------------------------- | Total | 2.6 | 2.4 | 6.8 | 2.5 | -------------------------------------------------------------------------------- *) Includes real estate funds Life Insurance The operating environment was unfavourable for the life insurance business in the first part of 2008. Negative developments in the investment market limited life insurance companies' investment activities and weakened demand for unit-linked products. Premiums written in the domestic life insurance market were 14.2% lower than a year ago, mainly due to a fall in premiums written in endowment insurance policies. Year on year, OP-Pohjola Group's premiums written in life and pension insurance decreased by 7.2% to EUR 391 million (422). Despite this reduction, OP-Pohjola Group increased its market share in premiums written in life insurance, as evidenced by the June-end market share of 33.5%, or 4.7 percentage points higher than a year earlier. Premiums written in endowment insurance declined by 22.1%. Premiums written in pension insurance grew by 36,4%, while those written in personal pension insurance increased by 5.2%. Premiums written in unit-linked policies accounted for 55.2% of those written in endowment insurance and personal pension insurance. Life insurance claims paid by OP-Pohjola Group totalled EUR 324 million (279), of which surrenders accounted for EUR 169 million (111). Reported pension payout came to EUR 23 million (17). OP-Pohjola Group's market share of insurance savings through life and pension insurance policies increased by 0.2 percentage points to 19.7% since year-end 2007. Unit-linked policies accounted for 36% (41) of insurance savings in life and pension insurance. Earnings and risk exposure Earnings before tax from Life Insurance for the first part of 2008 were EUR 34 million, that is, less than half of the previous year's figure (77). Owing particularly to the fall in equity markets, a loss of EUR 190 million before tax at fair value (178) was recorded. The fair value reserve change before tax stood at EUR -224 million (-8). Net income from Life Insurance was EUR 53 million (99). Net income from investment assets other than those covering unit-linked insurance stood at EUR 78 million (110). The provision worth EUR 10 million for future supplementary benefits made at the end of 2007 was reversed during the reporting period. Personnel costs increased to EUR 4 million (3) and other administrative expenses by 9.5 to EUR 24 million (27). Other expenses include EUR 13 million (11) in commissions paid to the sales network. On 30 June, total insurance contract liabilities within OP-Pohjola Group's life insurance operations stood at EUR 5.7 billion (6.1), down by 3.2% from 31 December 2007. Interest-bearing contract liabilities accounted for 64% and unit-linked for 36%. Life insurance investment assets, excluding assets covering unit-linked insurance, amounted to EUR 4.0 billion (4.2). The reporting period saw no major changes in the structure of the investment portfolio. The investment environment was particularly difficult in the first half of 2008 and therefore the return on investment at fair value stood at 3.3% (1.9). Life Insurance: key figures -------------------------------------------------------------------------------- | EUR million | Q1-2/ | Q1-2/ | Change, | 2007 | | | 2008 | 2007 | % | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Premiums written, IFRS | 391 | 422 | -7.2 | 794 | -------------------------------------------------------------------------------- | Unit-linked | 170 | 239 | -28.7 | 451 | -------------------------------------------------------------------------------- | Other | 221 | 183 | 20.8 | 343 | -------------------------------------------------------------------------------- | Net investment income | -170 | 290 | | 303 | -------------------------------------------------------------------------------- | Unit-linked | -248 | 180 | | 97 | -------------------------------------------------------------------------------- | Other | 78 | 110 | -29.4 | 206 | -------------------------------------------------------------------------------- | Change in insurance | -149 | 316 | | 409 | | contract liabilities | | | | | -------------------------------------------------------------------------------- | Unit-linked | -286 | 318 | | 282 | -------------------------------------------------------------------------------- | Other | 137 | -2 | | 127 | -------------------------------------------------------------------------------- | Claims incurred | 324 | 279 | 16.2 | 507 | -------------------------------------------------------------------------------- | Other items | 6 | -17 | | -4 | -------------------------------------------------------------------------------- | Net income from Life | 53 | 99 | -47.1 | 177 | | Insurance | | | | | -------------------------------------------------------------------------------- | Other income | 10 | 7 | 38.6 | 12 | -------------------------------------------------------------------------------- | Personnel costs | 4 | 3 | 38.5 | 7 | -------------------------------------------------------------------------------- | Other expenses | 24 | 27 | -9.5 | 53 | -------------------------------------------------------------------------------- | Earnings before tax | 34 | 77 | -55.4 | 129 | -------------------------------------------------------------------------------- | Gross change in fair value | -224 | -8 | | -132 | | reserve | | | | | -------------------------------------------------------------------------------- | Earnings/loss before tax at | -190 | 69 | | -3 | | fair value | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million | Q1-2/2008 | Q1-2/2007 | Change, % | 2007 | -------------------------------------------------------------------------------- | Premiums written | | | | | -------------------------------------------------------------------------------- | Endowment insurance | 236 | 303 | -22.1 | 530 | -------------------------------------------------------------------------------- | Pension insurance | 118 | 86 | 36.4 | 218 | -------------------------------------------------------------------------------- | Term life insurance | 42 | 13 | | 50 | -------------------------------------------------------------------------------- | Other | 9 | 3 | | 61 | -------------------------------------------------------------------------------- | Total premiums written | 405 | 406 | -0.1 | 859 | -------------------------------------------------------------------------------- | of which unit-linked | 178 | 242 | -26.4 | 462 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Market share of premiums | 33.5 | 28.8 | 4.7 | 30.8 | | written in life and pension | | | | | | insurance, % | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR billion | 30 Jun | 30 Jun | Change, | 31 Dec | | | 2008 | 2007 | % | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Insurance savings | | | | | -------------------------------------------------------------------------------- | Endowment insurance | 4.1 | 4.3 | -3.4 | 4.3 | -------------------------------------------------------------------------------- | Pension insurance | 1.6 | 1.5 | 5.6 | 1.6 | -------------------------------------------------------------------------------- | Capital redemption | 0.1 | 0.1 | -22.4 | 0.2 | | contracts | | | | | -------------------------------------------------------------------------------- | Total insurance savings | 5.8 | 5.9 | -1.5 | 6.0 | -------------------------------------------------------------------------------- | of which unit-linked | 2.1 | 2.4 | -12.7 | 2.4 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investment portfolio | | | | | -------------------------------------------------------------------------------- | Bonds and bond funds | 2.4 | 2.7 | -11.9 | 2.6 | -------------------------------------------------------------------------------- | Money market instruments | 0.0 | 0.0 | | 0.1 | -------------------------------------------------------------------------------- | Equities and equity funds | 0.6 | 0.7 | -3.8 | 0.7 | -------------------------------------------------------------------------------- | Real property investment *) | 0.3 | 0.2 | 50.2 | 0.3 | -------------------------------------------------------------------------------- | Alternative investments | 0.6 | 0.5 | 17.3 | 0.5 | -------------------------------------------------------------------------------- | Total investment portfolio | 4.0 | 4.1 | -2.7 | 4.2 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Market share of insurance | 19,7 | 19,7 | 0,0 | 19,9 | | savings in life and pension | | | | | | insurance, % | | | | | -------------------------------------------------------------------------------- * Percentage point(s) ** Includes real estate funds Other Operations Earnings before tax from Other Operations in January-June fell EUR 50 million short of the previous year, coming to EUR 32 million in the negative (18), the main reason being impairment losses affecting the Group's liquidity reserve. These accounted for EUR 42 million in the report period. Therefore the net trading income fell to EUR -45 million. The net interest income was EUR 15 million (11) and net investment income EUR 7 million (20). Most of the other income in Other Operations came from within the Group as internal service charges, which are recorded as business segment expenses. Of the Other Operations expenses, EUR 59 million (51) were personnel costs and EUR 113 million (111) other costs. Earnings were burdened by the liquidated damages ruled by the Arbitral Tribunal concerning the shareholder agreement dispute over Nooa Savings Bank Ltd. This affected other costs by EUR 10 million. Other Operations: key figures -------------------------------------------------------------------------------- | EUR million | Q1-2/ | Q1-2/ | Change, | 2007 | | | 2008 | 2007 | % | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net trading income | -45 | 2 | | -52 | -------------------------------------------------------------------------------- | Other income | 183 | 178 | 2.9 | 339 | -------------------------------------------------------------------------------- | Expenses | 172 | 162 | 6.5 | 313 | -------------------------------------------------------------------------------- | Other items | -2 | 0 | 0.0 | 0 | -------------------------------------------------------------------------------- | Earnings before tax | -32 | 18 | | -27 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR billion | 30 Jun | 30 Jun | Change, | 31 Dec | | | 2008 | 2007 | % | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Receivables from financial | 3.7 | 4.9 | -24.3 | 5.0 | | institutions | | | | | -------------------------------------------------------------------------------- | Financial assets held for | 3.1 | 2.4 | 30.8 | 3.4 | | trading | | | | | -------------------------------------------------------------------------------- | Investment assets | 3.1 | 1.3 | 139.2 | 1.8 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Liabilities to financial | 4.0 | 1.7 | 136.5 | 2.5 | | institutions | | | | | -------------------------------------------------------------------------------- | Debt securities issued to | 12.5 | 13.8 | -9.6 | 13.2 | | the public | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | OP-Pohjola Group income statement 1 | | | | | January-30 June 2008 | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million | Q1-2/ | Q1-2/ | Change, | 2007 | | | 2008 | 2007 | % | | -------------------------------------------------------------------------------- | Interest income | 2,253 | 1,638 | 38 | 3,630 | -------------------------------------------------------------------------------- | Interest expenses | 1,685 | 1,129 | 49 | 2,583 | -------------------------------------------------------------------------------- | Net interest income (Note 1) | 568 | 509 | 12 | 1,048 | -------------------------------------------------------------------------------- | Impairments of receivables | 9 | 6 | 58 | 13 | | (Note 2) | | | | | -------------------------------------------------------------------------------- | Net interest income after | 559 | 503 | 11 | 1,035 | | impairments | | | | | -------------------------------------------------------------------------------- | Net income from Non-life | 178 | 206 | -14 | 427 | | Insurance operations | | | | | | (Note 3) | | | | | -------------------------------------------------------------------------------- | Net income from Life Insurance | 47 | 97 | -51 | 172 | | operations (Note 4) | | | | | -------------------------------------------------------------------------------- | Net commissions and fees (Note | 223 | 226 | -1 | 430 | | 5) | | | | | -------------------------------------------------------------------------------- | Net trading income (Note 6) | -49 | 15 | | -30 | -------------------------------------------------------------------------------- | Net investment income (Note 7) | 31 | 51 | -39 | 95 | -------------------------------------------------------------------------------- | Other operating income (Note | 54 | 54 | 0 | 109 | | 8) | | | | | -------------------------------------------------------------------------------- | Personnel costs (Note 9) | 310 | 285 | 9 | 553 | -------------------------------------------------------------------------------- | Other administrative expenses | 169 | 147 | 15 | 303 | | (Note 10) | | | | | -------------------------------------------------------------------------------- | Other operating expenses (Note | 127 | 148 | -14 | 273 | | 11) | | | | | -------------------------------------------------------------------------------- | Returns to owner-members (Note | 77 | 52 | 48 | 107 | | 12) | | | | | -------------------------------------------------------------------------------- | Share of associates' | 0 | 2 | | 3 | | profits/losses | | | | | -------------------------------------------------------------------------------- | Earnings before tax for the | 359 | 523 | -31 | 1,005 | | period | | | | | -------------------------------------------------------------------------------- | Income tax expense | 98 | 138 | -29 | 266 | -------------------------------------------------------------------------------- | Profit for the period | 261 | 385 | -32 | 738 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Attributable to: | | | | | -------------------------------------------------------------------------------- | OP-Pohjola Group's owners | 261 | 385 | -32 | 738 | -------------------------------------------------------------------------------- | Minority interest | 0 | 0 | -57 | 0 | -------------------------------------------------------------------------------- | Total | 261 | 385 | -32 | 739 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Key figures and ratios | Q1-2/ | Q1-2/ | | 2007 | | | 2008 | 2007 | | | -------------------------------------------------------------------------------- | Return on equity, % | 9.4 | 14.7 | | 13.7 | -------------------------------------------------------------------------------- | Return on equity at fair value, | -0.2 | 13.4 | | 10.9 | | % | | | | | -------------------------------------------------------------------------------- | Return on assets, % | 0.77 | 1.26 | | 1.18 | -------------------------------------------------------------------------------- | Cost/income ratio, % | 58 | 50 | | 50 | -------------------------------------------------------------------------------- | Average personnel | 12,569 | 12,307 | | 12,378 | -------------------------------------------------------------------------------- | Full-time | 11,418 | 11,161 | | 11,226 | -------------------------------------------------------------------------------- | Part-time | 1,151 | 1,146 | | 1,152 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Definition of key figures and ratios | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Return on equity (ROE) = | -------------------------------------------------------------------------------- | Profit for the period / | -------------------------------------------------------------------------------- | Equity capital (average of the beginning and end of the period) x 100 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Return on equity at fair value, % = | -------------------------------------------------------------------------------- | Profit for the period + change in fair value reserve less deferred tax | | liability / | -------------------------------------------------------------------------------- | equity capital (average of the beginning and end of the period) x 100 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Return on assets (ROA) = | -------------------------------------------------------------------------------- | Profit for the period / | -------------------------------------------------------------------------------- | Balance sheet total (average of the beginning and end of the period) x 100 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cost/income ratio, % = | | | | -------------------------------------------------------------------------------- | (Personnel costs + other administrative expenses + other operating expenses) | | / | -------------------------------------------------------------------------------- | (Net interest income + net income from Non-life Insurance operations + net | | income from Life Insurance operations + net commissions and fees + net | | trading income + net investment income + other operating income + share of | | associates' profits/losses) x 100 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Combined ratio (excl. unwinding of discount) | -------------------------------------------------------------------------------- | Loss ratio+expense ratio | -------------------------------------------------------------------------------- | Risk ratio+cost ratio | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Loss ratio (exc. unwinding of discount) | -------------------------------------------------------------------------------- | Claims and loss adjustment expenses / | -------------------------------------------------------------------------------- | Net insurance premium revenue x 100 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Expense ratio | -------------------------------------------------------------------------------- | Operating expenses + Amortisation/adjustment of intangible assets related to | | company acquisition / | -------------------------------------------------------------------------------- | Net insurance premium revenue x 100 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Risk ratio (excl. unwinding fo discount) | -------------------------------------------------------------------------------- | Claims excl. loss adjustment expenses / | -------------------------------------------------------------------------------- | Net insurance premium revenue x 100 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cost ratio | -------------------------------------------------------------------------------- | Operating expenses and loss adjustments expenses / | -------------------------------------------------------------------------------- | Net insurance premium revenue x 100 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | OP-Pohjola Group quarterly | | | | | | | performance | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | 2007 | 2008 | -------------------------------------------------------------------------------- | EUR million | Q2 | Q3 | Q4 | Q1 | Q2 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest income | 882 | 943 | 1,050 | 1,113 | 1,140 | -------------------------------------------------------------------------------- | Interest expenses | 618 | 680 | 773 | 841 | 844 | -------------------------------------------------------------------------------- | Net interest income | 264 | 263 | 277 | 272 | 296 | -------------------------------------------------------------------------------- | Impairments of receivables | 5 | 4 | 4 | 2 | 7 | -------------------------------------------------------------------------------- | Net interest income after | 259 | 259 | 273 | 270 | 289 | | impairments | | | | | | -------------------------------------------------------------------------------- | Net income from Non-life | 112 | 100 | 121 | 89 | 89 | | Insurance operations | | | | | | -------------------------------------------------------------------------------- | Net income from Life | 50 | 20 | 54 | 53 | -6 | | Insurance operations | | | | | | -------------------------------------------------------------------------------- | Net commissions and fees | 104 | 98 | 106 | 120 | 103 | -------------------------------------------------------------------------------- | Net trading income | 6 | -16 | -30 | -48 | -1 | -------------------------------------------------------------------------------- | Net investment income | 32 | 22 | 22 | 18 | 13 | -------------------------------------------------------------------------------- | Other operating income | 33 | 24 | 31 | 27 | 27 | -------------------------------------------------------------------------------- | Personnel costs | 145 | 122 | 146 | 152 | 158 | -------------------------------------------------------------------------------- | Other administrative | 76 | 64 | 93 | 82 | 86 | | expenses | | | | | | -------------------------------------------------------------------------------- | Other operating expenses | 70 | 61 | 65 | 62 | 66 | -------------------------------------------------------------------------------- | Returns to owner-members | 28 | 27 | 28 | 37 | 40 | -------------------------------------------------------------------------------- | Share of associates' | 0 | 1 | 0 | 0 | 0 | | profits/losses | | | | | | -------------------------------------------------------------------------------- | Earnings before tax for the | 278 | 234 | 247 | 196 | 163 | | period | | | | | | -------------------------------------------------------------------------------- | Income tax expense | 77 | 59 | 69 | 53 | 45 | -------------------------------------------------------------------------------- | Profit for the period | 201 | 175 | 179 | 143 | 118 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | OP-Pohjola Group balance sheet | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million | 30 June | 30 June | Change, | 31 Dec | | | 2008 | 2007 | % | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Liquid assets | 371 | 1,844 | -80 | 589 | -------------------------------------------------------------------------------- | Receivables from financial | 632 | 384 | 65 | 285 | | institutions | | | | | -------------------------------------------------------------------------------- | Financial assets at fair value | 5,294 | 3,599 | 47 | 4,791 | | through profit or loss (Note | | | | | | 13) | | | | | -------------------------------------------------------------------------------- | Derivative contracts | 892 | 555 | 61 | 526 | -------------------------------------------------------------------------------- | Receivables from customers | 48,453 | 42,344 | 14 | 44,776 | -------------------------------------------------------------------------------- | Non-life Insurance assets (Note | 2,943 | 2,873 | 2 | 2,750 | | 14) | | | | | -------------------------------------------------------------------------------- | Life Insurance assets (Note 15) | 6,026 | 6,437 | -6 | 6,361 | -------------------------------------------------------------------------------- | Investment assets (Note 16) | 2,914 | 1,477 | 97 | 1,970 | -------------------------------------------------------------------------------- | Investments in associates | 28 | 29 | -6 | 26 | -------------------------------------------------------------------------------- | Intangible assets | 1,227 | 1,250 | -2 | 1,230 | -------------------------------------------------------------------------------- | Property, plant and equipment | 746 | 706 | 6 | 715 | | (PPE) | | | | | -------------------------------------------------------------------------------- | Other assets | 1,767 | 1,711 | 3 | 1,579 | -------------------------------------------------------------------------------- | Tax assets | 221 | 205 | 8 | 117 | -------------------------------------------------------------------------------- | Total assets | 71,514 | 63,415 | 13 | 65,716 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Liabilities to financial | 2,433 | 565 | | 949 | | institutions | | | | | -------------------------------------------------------------------------------- | Financial liabilities at fair | 887 | 0 | | 52 | | value through profit or loss | | | | | -------------------------------------------------------------------------------- | Derivative contracts | 959 | 568 | 69 | 554 | -------------------------------------------------------------------------------- | Liabilities to customers | 34,259 | 29,221 | 17 | 31,224 | -------------------------------------------------------------------------------- | Non-life Insurance liabilities | 2,409 | 2,355 | 2 | 2,140 | | (Note 17) | | | | | -------------------------------------------------------------------------------- | Life Insurance liabilities | 5,859 | 5,972 | -2 | 6,099 | | (Note 18) | | | | | -------------------------------------------------------------------------------- | Debt securities issued to the | 13,935 | 14,624 | -5 | 14,074 | | public (Note 19) | | | | | -------------------------------------------------------------------------------- | Provisions and other | 2,545 | 2,006 | 27 | 2,480 | | liabilities | | | | | -------------------------------------------------------------------------------- | Tax liabilities | 906 | 975 | -7 | 893 | -------------------------------------------------------------------------------- | Cooperative capital | 600 | 603 | 0 | 571 | -------------------------------------------------------------------------------- | Subordinated liabilities (Note | 1,181 | 1,112 | 6 | 1,042 | | 20) | | | | | -------------------------------------------------------------------------------- | Total liabilities | 65,972 | 58,000 | 14 | 60,078 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Equity capital | | | | | -------------------------------------------------------------------------------- | Share of OP-Pohjola Group's | | | | | | owners | | | | | -------------------------------------------------------------------------------- | Share and cooperative capital | 358 | 357 | 0 | 359 | -------------------------------------------------------------------------------- | Share issue account | 0 | 0 | | - | -------------------------------------------------------------------------------- | Translation differences | 0 | 0 | | 0 | -------------------------------------------------------------------------------- | Reserves | 2,098 | 2,338 | -10 | 2,224 | -------------------------------------------------------------------------------- | Retained earnings | 3,086 | 2,718 | 14 | 3,052 | -------------------------------------------------------------------------------- | Minority interest | 0 | 3 | -96 | 3 | -------------------------------------------------------------------------------- | Total equity capital | 5,542 | 5,415 | 2 | 5,638 | -------------------------------------------------------------------------------- | Total liabilities and equity | 71,514 | 63,415 | 13 | 65,716 | | capital | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Statement of changes in | | | | | | | equity capital | | | | | | -------------------------------------------------------------------------------- | EUR million | Share | Reserve | Retaine | Minorit | Total | | | and | s | d | y | equity | | | coopera | | earning | interes | capital | | | tive | | s | t | | | | capital | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Balance at 1 January 2007 | 344 | 2,295 | 2,483 | 2 | 5,124 | -------------------------------------------------------------------------------- | Increase of share capital | 0 | - | - | - | 0 | -------------------------------------------------------------------------------- | Transfer of cooperative | 11 | - | - | - | 11 | | capital to equity capital | | | | | | -------------------------------------------------------------------------------- | Fair value reserve | - | -35 | - | - | -35 | -------------------------------------------------------------------------------- | Transfer of reserves | - | 78 | -78 | - | - | -------------------------------------------------------------------------------- | Profit distribution | - | - | -76 | - | -76 | -------------------------------------------------------------------------------- | Profit for the period | - | - | 385 | 0 | 385 | -------------------------------------------------------------------------------- | Other | 2 | 0 | 4 | 0 | 6 | -------------------------------------------------------------------------------- | Balance at 30 June 2007 | 357 | 2,338 | 2,718 | 3 | 5,415 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Balance at 1 January 2008 | 359 | 2,224 | 3,052 | 3 | 5,638 | -------------------------------------------------------------------------------- | Increase of share capital | 0 | - | - | - | 0 | -------------------------------------------------------------------------------- | Transfer of cooperative | 1 | - | - | - | 1 | | capital to equity capital | | | | | | -------------------------------------------------------------------------------- | Fair value reserve | - | -266 | - | - | -266 | -------------------------------------------------------------------------------- | Transfer of reserves | - | 138 | -138 | - | - | -------------------------------------------------------------------------------- | Profit distribution | - | - | -77 | - | -77 | -------------------------------------------------------------------------------- | Profit for the period | - | - | 261 | 0 | 261 | -------------------------------------------------------------------------------- | Other | -2 | 2 | -12 | -2 | -15 | -------------------------------------------------------------------------------- | Balance at 30 June 2008 | 358 | 2,098 | 3,086 | 0 | 5,542 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash flow statement | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million | Q1-2/ | Q1-2/ | | | 2008 | 2007 | -------------------------------------------------------------------------------- | Cash flow from operating activities | | | -------------------------------------------------------------------------------- | Profit for the period | 261 | 385 | -------------------------------------------------------------------------------- | Adjustments to profit for the period | 536 | 501 | -------------------------------------------------------------------------------- | Increase (-) or decrease (+) in operating | -6,138 | -2,699 | | assets | | | -------------------------------------------------------------------------------- | Receivables from financial institutions | -374 | -14 | -------------------------------------------------------------------------------- | Financial assets at fair value through profit | -579 | 1,212 | | or loss | | | -------------------------------------------------------------------------------- | Derivative contracts | -46 | -28 | -------------------------------------------------------------------------------- | Receivables from customers | -3,476 | -2,770 | -------------------------------------------------------------------------------- | Non-life Insurance assets | -299 | -127 | -------------------------------------------------------------------------------- | Life Insurance assets | -105 | -238 | -------------------------------------------------------------------------------- | Investment assets | -1,050 | -97 | -------------------------------------------------------------------------------- | Other assets | -207 | -637 | -------------------------------------------------------------------------------- | Increase (+) or decrease (-) in operating | 5,213 | 1,560 | | liabilities | | | -------------------------------------------------------------------------------- | Liabilities to financial institutions | 1,307 | -523 | -------------------------------------------------------------------------------- | Financial liabilities at fair value through | 835 | 0 | | profit or loss | | | -------------------------------------------------------------------------------- | Derivative contracts | 81 | 40 | -------------------------------------------------------------------------------- | Liabilities to customers | 3,036 | 1,505 | -------------------------------------------------------------------------------- | Non-life Insurance liabilities | 82 | 65 | -------------------------------------------------------------------------------- | Life Insurance liabilities | -93 | 2 | -------------------------------------------------------------------------------- | Provisions and other liabilities | -34 | 471 | -------------------------------------------------------------------------------- | Income tax paid | -96 | -91 | -------------------------------------------------------------------------------- | Dividends received | 57 | 78 | -------------------------------------------------------------------------------- | A. Net cash from operating activities | -167 | -266 | -------------------------------------------------------------------------------- | Cash flow from investing activities | | | -------------------------------------------------------------------------------- | Increases in held-to-maturity financial | -18 | -127 | | assets | | | -------------------------------------------------------------------------------- | Decreases in held-to-maturity financial | 34 | 138 | | assets | | | -------------------------------------------------------------------------------- | Acquisition of subsidiaries, net of cash | -33 | -1 | | acquired | | | -------------------------------------------------------------------------------- | Disposal of subsidiaries, net of cash | 2 | 10 | | disposed | | | -------------------------------------------------------------------------------- | Purchase of PPE and intangible assets | -53 | -47 | -------------------------------------------------------------------------------- | Proceeds from sale of PPE and intangible | 2 | 13 | | assets | | | -------------------------------------------------------------------------------- | B. Net cash used in investing activities | -67 | -14 | -------------------------------------------------------------------------------- | Cash flow from financing activities | 0 | | -------------------------------------------------------------------------------- | Increases in subordinated liabilities | 193 | 212 | -------------------------------------------------------------------------------- | Decreases in subordinated liabilities | -54 | -161 | -------------------------------------------------------------------------------- | Increases in debt securities issued to the | 13,439 | 20,415 | | public | | | -------------------------------------------------------------------------------- | Decreases in debt securities issued to the | -13,525 | -19,278 | | public | | | -------------------------------------------------------------------------------- | Increases in cooperative and share capital | 76 | 97 | -------------------------------------------------------------------------------- | Decreases in cooperative and share capital | -45 | -80 | -------------------------------------------------------------------------------- | Dividends paid and interest on cooperative | -101 | -97 | | capital | | | -------------------------------------------------------------------------------- | Returns to owner-members | 0 | -7 | -------------------------------------------------------------------------------- | Monetary increases in other equity items | 0 | 0 | -------------------------------------------------------------------------------- | Other | 0 | 0 | -------------------------------------------------------------------------------- | C. Net cash from financing activities | -18 | 1,101 | -------------------------------------------------------------------------------- | Net change in cash and cash equivalents | -252 | 820 | | (A+B+C) | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and cash equivalents at period-start | 700 | 1,098 | -------------------------------------------------------------------------------- | Cash and cash equivalents at period-end | 448 | 1,918 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest received | 2,110 | 1,489 | -------------------------------------------------------------------------------- | Interest paid | -1,570 | -989 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Adjustments to profit for the period | | | -------------------------------------------------------------------------------- | Non-cash transactions and other adjustments | | | -------------------------------------------------------------------------------- | Impairments of receivables | 12 | 9 | -------------------------------------------------------------------------------- | Unrealised net earnings in Non-life Insurance | 200 | 208 | -------------------------------------------------------------------------------- | Unrealised net earnings in Life Insurance | 126 | 156 | -------------------------------------------------------------------------------- | Change in fair value for trading | 35 | -11 | -------------------------------------------------------------------------------- | Unrealised net gains on foreign exchange | -10 | -7 | | operations | | | -------------------------------------------------------------------------------- | Change in fair value of investment property | -7 | -8 | -------------------------------------------------------------------------------- | Depreciation and amortisation | 65 | 65 | -------------------------------------------------------------------------------- | Share of associates' profits/losses | 1 | -1 | -------------------------------------------------------------------------------- | Other | 101 | 73 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Items presented outside cash flow from | | | | operating activities | | | -------------------------------------------------------------------------------- | Capital gains, share of cash flow from | -1 | -2 | | investing activities | | | -------------------------------------------------------------------------------- | Interest on cooperative capital | 14 | 12 | -------------------------------------------------------------------------------- | Other returns to owner-members | 0 | 7 | -------------------------------------------------------------------------------- | Total adjustments | 536 | 501 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and cash equivalents | | | -------------------------------------------------------------------------------- | Liquid assets | 145 | 131 | -------------------------------------------------------------------------------- | Receivables from financial institutions | 303 | 1,787 | | payable on demand | | | -------------------------------------------------------------------------------- | Total | 448 | 1,918 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Notes | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 1 Net interest income | | | | | -------------------------------------------------------------------------------- | EUR million | Q1-2/ | Q1-2/ | Change, | 2007 | | | 2008 | 2007 | % | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest income | | | | | -------------------------------------------------------------------------------- | Receivables from financial | 26 | 26 | -2 | 53 | | institutions | | | | | -------------------------------------------------------------------------------- | Receivables from customers | 1,227 | 952 | 29 | 2,087 | -------------------------------------------------------------------------------- | Other | 1,000 | 659 | 52 | 1,490 | -------------------------------------------------------------------------------- | Total | 2,253 | 1,638 | 38 | 3,630 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest expenses | | | | | -------------------------------------------------------------------------------- | Liabilities to financial | 47 | 19 | | 37 | | institutions | | | | | -------------------------------------------------------------------------------- | Liabilities to customers | 459 | 285 | 61 | 657 | -------------------------------------------------------------------------------- | Other | 1,180 | 825 | 43 | 1,888 | -------------------------------------------------------------------------------- | Total | 1,685 | 1,129 | 49 | 2,583 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net interest income | 568 | 509 | 12 | 1,048 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 2 Impairments of | | | | | | receivables | | | | | -------------------------------------------------------------------------------- | EUR million | Q1-2/ | Q1-2/ | Change, | 2007 | | | 2008 | 2007 | % | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Impairments of receivables | 20 | 14 | 48 | 39 | -------------------------------------------------------------------------------- | Reversals of impairments | -17 | -8 | | -20 | -------------------------------------------------------------------------------- | Payments on impaired | -3 | -3 | 18 | -9 | | receivables | | | | | | amortised from | | | | | | balance sheet | | | | | -------------------------------------------------------------------------------- | Net change in group-specific | 8 | 3 | | 4 | | impairments | | | | | -------------------------------------------------------------------------------- | Total | 9 | 6 | 58 | 13 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 3 Net income from Non-life | | | | | | Insurance | | | | | -------------------------------------------------------------------------------- | EUR million | Q1-2/ | Q1-2/ | Change, | 2007 | | | 2008 | 2007 | % | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net insurance premium revenue | | | | | -------------------------------------------------------------------------------- | Premiums written | 675 | 642 | 5 | 944 | -------------------------------------------------------------------------------- | Insurance premiums ceded to | -37 | -40 | 6 | -49 | | reinsurers | | | | | -------------------------------------------------------------------------------- | Change in provision for | -198 | -193 | -2 | -43 | | unearned premiums | | | | | -------------------------------------------------------------------------------- | Reinsurers' share | 16 | 14 | 16 | -2 | -------------------------------------------------------------------------------- | Total | 456 | 423 | 8 | 850 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net Non-life Insurance claims | | | | | -------------------------------------------------------------------------------- | Claims paid | -312 | -275 | -13 | -556 | -------------------------------------------------------------------------------- | Insurance claims recovered from | 8 | 4 | | 14 | | reinsurers | | | | | -------------------------------------------------------------------------------- | Change in provision for unpaid | 3 | -15 | | 10 | | claims | | | | | -------------------------------------------------------------------------------- | Reinsurers' share | -7 | 4 | | -5 | -------------------------------------------------------------------------------- | Total | -309 | -283 | -9 | -536 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net investment income, Non-life | | | | | | Insurance | | | | | -------------------------------------------------------------------------------- | Interest income | 35 | 35 | 0 | 68 | -------------------------------------------------------------------------------- | Capital gains and losses and | | | | | | realised changes in fair value | | | | | -------------------------------------------------------------------------------- | Notes and bonds | -10 | -28 | 64 | -39 | -------------------------------------------------------------------------------- | Shares and participations | 3 | 41 | -93 | 47 | -------------------------------------------------------------------------------- | Property | 3 | 3 | -26 | 3 | -------------------------------------------------------------------------------- | Other | 1 | -2 | | 13 | -------------------------------------------------------------------------------- | Unrealised changes in fair | | | | | | value | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 0 | 0 | 100 | 0 | -------------------------------------------------------------------------------- | Shares and participations | 0 | 0 | | -1 | -------------------------------------------------------------------------------- | Property | 3 | 0 | | 2 | -------------------------------------------------------------------------------- | Other | 1 | 3 | -55 | 0 | -------------------------------------------------------------------------------- | Dividend income | 15 | 33 | -54 | 61 | -------------------------------------------------------------------------------- | Other | 0 | 0 | -60 | 0 | -------------------------------------------------------------------------------- | Total | 51 | 85 | -40 | 153 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Unwinding of discount | -21 | -19 | -8 | -39 | -------------------------------------------------------------------------------- | Other | 0 | 0 | | 0 | -------------------------------------------------------------------------------- | Net income from Non-life | 178 | 206 | -14 | 427 | | Insurance | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 4 Net income from Life | | | | | | Insurance | | | | | -------------------------------------------------------------------------------- | EUR million | Q1-2/ | Q1-2/ | Change, | 2007 | | | 2008 | 2007 | % | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Premiums written | 408 | 425 | -4 | 809 | -------------------------------------------------------------------------------- | Reinsurers' share | -17 | -1 | | -15 | -------------------------------------------------------------------------------- | Net investment income | -175 | 295 | | 297 | -------------------------------------------------------------------------------- | Claims incurred | | | | | -------------------------------------------------------------------------------- | Benefits paid | -325 | -311 | -5 | -507 | -------------------------------------------------------------------------------- | Change in provision for unpaid | 0 | -11 | | -40 | | claims | | | | | -------------------------------------------------------------------------------- | Reinsurers' share | 1 | 0 | | 0 | -------------------------------------------------------------------------------- | Change in insurance contract | | | | | | liabilities | | | | | -------------------------------------------------------------------------------- | Change in life insurance | 125 | -299 | | -373 | | provision | | | | | -------------------------------------------------------------------------------- | Reinsurers' share | 14 | 0 | | 12 | -------------------------------------------------------------------------------- | Other | 16 | 0 | | -11 | -------------------------------------------------------------------------------- | Net income from Life Insurance | 47 | 97 | -51 | 172 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 5 Commissions and fees | | | | | -------------------------------------------------------------------------------- | EUR million | Q1-2/ | Q1-2/ | Change, | 2007 | | | 2008 | 2007 | % | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Commission income | | | | | -------------------------------------------------------------------------------- | Lending | 55 | 52 | 5 | 103 | -------------------------------------------------------------------------------- | Deposits | 3 | 3 | -9 | 6 | -------------------------------------------------------------------------------- | Payment transfers | 58 | 55 | 5 | 112 | -------------------------------------------------------------------------------- | Securities brokerage | 11 | 14 | -24 | 27 | -------------------------------------------------------------------------------- | Securities issuance | 2 | 4 | -48 | 7 | -------------------------------------------------------------------------------- | Mutual funds brokerage | 40 | 47 | -14 | 95 | -------------------------------------------------------------------------------- | Asset management and legal | 25 | 25 | -1 | 53 | | services | | | | | -------------------------------------------------------------------------------- | Insurance brokerage | 32 | 35 | -9 | 49 | -------------------------------------------------------------------------------- | Guarantees | 6 | 6 | 11 | 11 | -------------------------------------------------------------------------------- | Other | 24 | 20 | 19 | 39 | -------------------------------------------------------------------------------- | Total | 256 | 261 | -2 | 502 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Commission expenses | | | | | -------------------------------------------------------------------------------- | Total | 33 | 35 | -7 | 72 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net commissions and fees | 223 | 226 | -1 | 430 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 6 Net trading income | | | | | -------------------------------------------------------------------------------- | EUR million | Q1-2/ | Q1-2/ | Change, | 2007 | | | 2008 | 2007 | % | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Capital gains and losses | | | | | -------------------------------------------------------------------------------- | Notes and bonds | -13 | -10 | 36 | -8 | -------------------------------------------------------------------------------- | Shares and participations | 0 | 4 | | 6 | -------------------------------------------------------------------------------- | Derivatives | 28 | 6 | | 3 | -------------------------------------------------------------------------------- | Changes in fair value | | | | | -------------------------------------------------------------------------------- | Notes and bonds | -77 | -13 | | -65 | -------------------------------------------------------------------------------- | Shares and participations | -7 | 1 | | -5 | -------------------------------------------------------------------------------- | Derivatives | 14 | 20 | -30 | 24 | -------------------------------------------------------------------------------- | Dividend income | 1 | 1 | 5 | 1 | -------------------------------------------------------------------------------- | Net income from foreign | 6 | 6 | -5 | 16 | | exchange operations | | | | | -------------------------------------------------------------------------------- | Total | -49 | 15 | | -30 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 7 Net investment income | | | | | -------------------------------------------------------------------------------- | EUR million | Q1-2/ | Q1-2/ | Change, | 2007 | | | 2008 | 2007 | % | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Available-for-sale financial | | | | | | assets | | | | | -------------------------------------------------------------------------------- | Capital gains and losses | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 0 | 0 | | -5 | -------------------------------------------------------------------------------- | Shares and participations | 3 | 21 | -88 | 32 | -------------------------------------------------------------------------------- | Other | - | - | | - | -------------------------------------------------------------------------------- | Dividend income | 10 | 9 | 6 | 24 | -------------------------------------------------------------------------------- | Impairment losses | 0 | 0 | -96 | -1 | -------------------------------------------------------------------------------- | Total | 13 | 30 | -58 | 50 | -------------------------------------------------------------------------------- | Investment property | | | | | -------------------------------------------------------------------------------- | Rental income | 25 | 27 | -7 | 53 | -------------------------------------------------------------------------------- | Maintenance charges and | -15 | -15 | 2 | -31 | | expenses | | | | | -------------------------------------------------------------------------------- | Changes in fair value, capital | 7 | 8 | -10 | 20 | | gains and losses | | | | | -------------------------------------------------------------------------------- | Other | 0 | 0 | 19 | 4 | -------------------------------------------------------------------------------- | Total | 18 | 21 | -11 | 45 | -------------------------------------------------------------------------------- | Other | - | - | | - | -------------------------------------------------------------------------------- | Net investment income | 31 | 51 | -39 | 95 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 8 Other operating income | | | | | -------------------------------------------------------------------------------- | EUR million | Q1-2/ | Q1-2/ | Change, | 2007 | | | 2008 | 2007 | % | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Income from property and | 6 | 8 | -21 | 13 | | business | | | | | | premises in own use | | | | | -------------------------------------------------------------------------------- | Other | 48 | 47 | 3 | 97 | -------------------------------------------------------------------------------- | Total | 54 | 54 | 0 | 109 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 9 Personnel costs | | | | | -------------------------------------------------------------------------------- | EUR million | Q1-2/ | Q1-2/ | Change, | 2007 | | | 2008 | 2007 | % | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Wages and salaries | 265 | 250 | 6 | 482 | -------------------------------------------------------------------------------- | Pension costs | 31 | 18 | 66 | 39 | -------------------------------------------------------------------------------- | Other social expenses | 15 | 17 | -12 | 31 | -------------------------------------------------------------------------------- | Total | 310 | 285 | 9 | 553 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 10 Other administrative | | | | | | expenses | | | | | -------------------------------------------------------------------------------- | EUR million | Q1-2/ | Q1-2/ | Change, | 2007 | | | 2008 | 2007 | % | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Office expenses | 34 | 23 | 50 | 48 | -------------------------------------------------------------------------------- | IT expenses | 50 | 42 | 19 | 86 | -------------------------------------------------------------------------------- | Telecommunications expenses | 19 | 19 | 1 | 38 | -------------------------------------------------------------------------------- | Marketing expenses | 31 | 31 | 0 | 63 | -------------------------------------------------------------------------------- | Other administrative expenses | 35 | 32 | 9 | 68 | -------------------------------------------------------------------------------- | Total | 169 | 147 | 15 | 303 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 11 Other operating | | | | | | expenses | | | | | -------------------------------------------------------------------------------- | EUR million | Q1-2/ | Q1-2/ | Change, | 2007 | | | 2008 | 2007 | % | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Expenses for property and | 36 | 35 | 2 | 77 | | business | | | | | | premises in own use | | | | | -------------------------------------------------------------------------------- | Depreciation | 65 | 65 | 0 | 129 | -------------------------------------------------------------------------------- | Other | 27 | 48 | -43 | 67 | -------------------------------------------------------------------------------- | Total | 127 | 148 | -14 | 273 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 12 Returns to | | | | | | owner-members | | | | | -------------------------------------------------------------------------------- | EUR million | Q1-2/ | Q1-2/ | Change, | 2007 | | | 2008 | 2007 | % | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Bonuses | 64 | 40 | 59 | 83 | -------------------------------------------------------------------------------- | Interest on cooperative capital | 14 | 12 | 11 | 24 | -------------------------------------------------------------------------------- | Total | 77 | 52 | 48 | 107 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 13 Financial assets at fair value | | | | | through profit or loss | | | | -------------------------------------------------------------------------------- | EUR million | 30 June | 30 June | Change, | 31 Dec | | | 2008 | 2007 | % | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Notes and bonds | 5,234 | 3,515 | 49 | 4,721 | -------------------------------------------------------------------------------- | Shares and participations | 60 | 84 | -28 | 69 | -------------------------------------------------------------------------------- | Purchased loans and other | - | - | | - | | receivables | | | | | -------------------------------------------------------------------------------- | Total | 5,294 | 3,599 | 47 | 4,791 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 14 Non-life Insurance | | | | | | assets | | | | | -------------------------------------------------------------------------------- | EUR million | 30 June | 30 June | Change, | 31 Dec | | | 2008 | 2007 | % | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investments | | | | | -------------------------------------------------------------------------------- | Loan and other receivables | 78 | 82 | -5 | 57 | -------------------------------------------------------------------------------- | Shares and participations | 944 | 772 | 22 | 894 | -------------------------------------------------------------------------------- | Property | 83 | 67 | 24 | 85 | -------------------------------------------------------------------------------- | Notes and bonds | 1,414 | 1,523 | -7 | 1,387 | -------------------------------------------------------------------------------- | Other | 4 | 4 | 10 | 1 | -------------------------------------------------------------------------------- | Total | 2,522 | 2,448 | 3 | 2,425 | -------------------------------------------------------------------------------- | Other assets | | | | | -------------------------------------------------------------------------------- | Prepayments and accrued income | 26 | -12 | | 28 | -------------------------------------------------------------------------------- | Other | | | | | -------------------------------------------------------------------------------- | Arising from direct insurance | 289 | 320 | -10 | 210 | | operations | | | | | -------------------------------------------------------------------------------- | Arising from reinsurance | 99 | 113 | -13 | 74 | | operations | | | | | -------------------------------------------------------------------------------- | Cash in hand and at bank | 8 | 4 | 75 | 12 | -------------------------------------------------------------------------------- | Total | 421 | 425 | -1 | 325 | -------------------------------------------------------------------------------- | Non-life Insurance assets | 2,943 | 2,873 | 2 | 2,750 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 15 Life Insurance assets | | | | | -------------------------------------------------------------------------------- | EUR million | 30 June | 30 June | Change, | 31 Dec | | | 2008 | 2007 | % | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investments | | | | | -------------------------------------------------------------------------------- | Loan and other receivables | 55 | 11 | | 16 | -------------------------------------------------------------------------------- | Shares and participations | 2,625 | 2,508 | 5 | 2,525 | -------------------------------------------------------------------------------- | Property | 123 | 105 | 17 | 121 | -------------------------------------------------------------------------------- | Notes and bonds | 1,047 | 1,367 | -23 | 1,263 | -------------------------------------------------------------------------------- | Other | 0 | 5 | -100 | 1 | -------------------------------------------------------------------------------- | Total | 3,850 | 3,996 | -4 | 3,926 | -------------------------------------------------------------------------------- | Assets covering unit-linked | | | | | | insurance contracts | | | | | -------------------------------------------------------------------------------- | Shares and participations | 2,095 | 2,401 | -13 | 2,374 | -------------------------------------------------------------------------------- | Other assets | | | | | -------------------------------------------------------------------------------- | Prepayments and accrued income | 45 | 28 | 64 | 36 | -------------------------------------------------------------------------------- | Other | | | | | -------------------------------------------------------------------------------- | Arising from direct insurance | 8 | 11 | -23 | 9 | | operations | | | | | -------------------------------------------------------------------------------- | Arising from reinsurance | 27 | 1 | | 14 | | operations | | | | | -------------------------------------------------------------------------------- | Cash in hand and at bank | 0 | 1 | -25 | 2 | -------------------------------------------------------------------------------- | Total | 81 | 40 | | 61 | -------------------------------------------------------------------------------- | Life Insurance assets | 6,026 | 6,437 | -6 | 6,361 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 16 Investment assets | | | | | -------------------------------------------------------------------------------- | EUR million | 30 June | 30 June | Change, | 31 Dec | | | 2008 | 2007 | % | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Available-for-sale financial | | | | | | assets | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 1,947 | 460 | | 979 | -------------------------------------------------------------------------------- | Shares and participations | 357 | 387 | -8 | 368 | -------------------------------------------------------------------------------- | Other | - | - | | - | -------------------------------------------------------------------------------- | Held-to-maturity financial | 101 | 123 | -18 | 116 | | assets | | | | | -------------------------------------------------------------------------------- | Investment property | 494 | 498 | -1 | 496 | -------------------------------------------------------------------------------- | Subsidiaries and associates not | 15 | 9 | 65 | 11 | | consolidated | | | | | -------------------------------------------------------------------------------- | Total | 2,914 | 1,477 | 97 | 1,970 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 17 Non-life Insurance | | | | | | liabilities | | | | | -------------------------------------------------------------------------------- | EUR million | 30 June | 30 June | Change, | 31 Dec | | | 2008 | 2007 | % | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Insurance contract liabilities | | | | | -------------------------------------------------------------------------------- | Provision for unearned premiums | 519 | 467 | 11 | 318 | -------------------------------------------------------------------------------- | Provision for unpaid claims | 1,718 | 1,705 | 1 | 1,699 | -------------------------------------------------------------------------------- | Total | 2,237 | 2,172 | 3 | 2,017 | -------------------------------------------------------------------------------- | Other liabilities | | | | | -------------------------------------------------------------------------------- | Accrued expenses and deferred | - | - | 0 | - | | income | | | | | -------------------------------------------------------------------------------- | Other | | | | | -------------------------------------------------------------------------------- | Arising from direct insurance | 102 | 103 | -1 | 71 | | operations | | | | | -------------------------------------------------------------------------------- | Arising from reinsurance | 29 | 42 | -31 | 15 | | operations | | | | | -------------------------------------------------------------------------------- | Other | 41 | 37 | 8 | 38 | -------------------------------------------------------------------------------- | Total | 172 | 183 | -6 | 123 | -------------------------------------------------------------------------------- | Non-life Insurance liabilities | 2,409 | 2,355 | 2 | 2,140 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 18 Life Insurance | | | | | | liabilities | | | | | -------------------------------------------------------------------------------- | EUR million | 30 June | 30 June | Change, | 31 Dec | | | 2008 | 2007 | % | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Insurance contract liabilities | 3,703 | 3,564 | 4 | 3,605 | -------------------------------------------------------------------------------- | Provisions for unit-linked | 2,047 | 2,384 | -14 | 2,333 | | policies | | | | | -------------------------------------------------------------------------------- | Other liabilities | | | | | -------------------------------------------------------------------------------- | Accrued expenses and deferred | 5 | 2 | | 1 | | income | | | | | -------------------------------------------------------------------------------- | Other | | | | | -------------------------------------------------------------------------------- | Arising from direct insurance | 1 | 2 | -55 | 1 | | operations | | | | | -------------------------------------------------------------------------------- | Arising from reinsurance | 6 | 1 | | 2 | | operations | | | | | -------------------------------------------------------------------------------- | Other | 97 | 18 | | 156 | -------------------------------------------------------------------------------- | Total | 109 | 23 | | 161 | -------------------------------------------------------------------------------- | Life Insurance liabilities | 5,859 | 5,972 | -2 | 6,099 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 19 Debt securities issued | | | | | | to the public | | | | | -------------------------------------------------------------------------------- | EUR million | 30 June | 30 June | Change, | 31 Dec | | | 2008 | 2007 | % | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Bonds | 7,651 | 8,911 | -14 | 8,107 | -------------------------------------------------------------------------------- | Certificates of deposit | 6,157 | 5,605 | 10 | 5,859 | -------------------------------------------------------------------------------- | Other | 126 | 108 | 17 | 109 | -------------------------------------------------------------------------------- | Total | 13,935 | 14,624 | -5 | 14,074 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 20 Subordinated | | | | | | liabilities | | | | | -------------------------------------------------------------------------------- | EUR million | 30 June | 30 June | Change, | 31 Dec | | | 2008 | 2007 | % | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Subordinated loans | 202 | 203 | 0 | 204 | -------------------------------------------------------------------------------- | Other | 979 | 909 | 8 | 839 | -------------------------------------------------------------------------------- | Total | 1,181 | 1,112 | 6 | 1,042 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Collateral given | | | | | -------------------------------------------------------------------------------- | EUR million | 30 June | 30 June | Change, | 31 Dec | | | 2008 | 2007 | % | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Given on behalf of own | | | | | | liabilities and commitments | | | | | -------------------------------------------------------------------------------- | Mortgages | - | 1 | -100 | 1 | -------------------------------------------------------------------------------- | Pledges | 3,180 | 1,194 | | 2,633 | -------------------------------------------------------------------------------- | Other | 388 | 47 | | 123 | -------------------------------------------------------------------------------- | Total | 3,569 | 1,241 | | 2,756 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Off-balance-sheet items | | | | | -------------------------------------------------------------------------------- | EUR million | 30 June | 30 June | Change, | 31 Dec | | | 2008 | 2007 | % | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Guarantees | 721 | 585 | 23 | 613 | -------------------------------------------------------------------------------- | Other guarantee liabilities | 1,905 | 1,774 | 7 | 1,785 | -------------------------------------------------------------------------------- | Pledges | 1 | 1 | 0 | 1 | -------------------------------------------------------------------------------- | Loan commitments | 8,235 | 7,593 | 8 | 7,708 | -------------------------------------------------------------------------------- | Commitments related to | 172 | 161 | 7 | 171 | | short-term | | | | | | trade transactions | | | | | -------------------------------------------------------------------------------- | Other | 570 | 454 | 26 | 568 | -------------------------------------------------------------------------------- | Total off-balance-sheet items | 11,604 | 10,568 | 10 | 10,847 | -------------------------------------------------------------------------------- Derivative contracts Total trading and hedging derivatives, 30 June 2008 -------------------------------------------------------------------------------- | EUR million | Nominal values / | | Fair values | | | remaining term to | | | | | maturity | | | -------------------------------------------------------------------------------- | | <1 year | 1-5 | >5 | Total | Assets | Liabilit | | | | years | years | | | ies | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest rate | 46,132 | 38,210 | 10,313 | 94,655 | 676 | -683 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Currency | 13,369 | 1,490 | 1,002 | 15,861 | 142 | -456 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Equity and | 27 | 317 | 83 | 427 | 36 | - | | index-linked | | | | | | | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Credit | 157 | 205 | 20 | 383 | 3 | -5 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Other | - | 16 | - | 16 | 3 | - | | derivatives | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total | 59,685 | 40,239 | 11,418 | 111,34 | 861 | -1,143 | | derivatives | | | | 2 | | | -------------------------------------------------------------------------------- Total trading and hedging derivatives, 30 June 2007 -------------------------------------------------------------------------------- | EUR million | Nominal values / | | Fair values | | | remaining term to | | | | | maturity | | | -------------------------------------------------------------------------------- | | <1 year | 1-5 | >5 | Total | Assets | Liabilit | | | | years | years | | | ies | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest rate | 43,023 | 23,541 | 8,186 | 74,750 | 446 | -407 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Currency | 7,870 | 1,740 | 1,251 | 10,861 | 43 | -173 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Equity and | 31 | 216 | 28 | 275 | 46 | 0 | | index-linked | | | | | | | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Credit | - | 131 | - | 131 | 0 | -1 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Other | 8 | 7 | - | 15 | 1 | - | | derivatives | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total | 50,931 | 25,636 | 9,465 | 86,032 | 537 | -580 | | derivatives | | | | | | | -------------------------------------------------------------------------------- Related-party transactions 30 June 2008 OP-Pohjola Group's related parties comprise associates, administrative personnel and other related-party companies. The administrative personnel comprises OP-Pohjola Group's Executive Chairman (Chairman of the Executive Board of OP-Pohjola Group Central Cooperative), President of OP-Pohjola Group Central Cooperative, members and deputy members of the Executive and Supervisory Boards and their family members. Other organisations considered as related parties include OP Bank Group Pension Fund and OP Bank Group Pension Foundation. With respect to loans granted to the management, OP-Pohjola Group applies standard terms and conditions for credit. Loans are tied to generally used reference rates. -------------------------------------------------------------------------------- | EUR million | Associate | Management | Others | | | s | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Loans | 104 | 4 | - | -------------------------------------------------------------------------------- | Other receivables | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Deposits | 32 | 9 | 27 | -------------------------------------------------------------------------------- | Other liabilities | - | - | - | -------------------------------------------------------------------------------- | Interest income | 0 | 0 | - | -------------------------------------------------------------------------------- | Interest expenses | 1 | 0 | 0 | -------------------------------------------------------------------------------- | Dividend income | 1 | - | - | -------------------------------------------------------------------------------- | Commission income | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Commission expenses | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Other operating income | - | - | - | -------------------------------------------------------------------------------- | Impairments of loans | - | - | - | -------------------------------------------------------------------------------- | Impairments of loans at the end of the | - | - | - | | period | | | | -------------------------------------------------------------------------------- | Off-balance-sheet items | | | | -------------------------------------------------------------------------------- | Guarantees | - | - | - | -------------------------------------------------------------------------------- | Irrevocable commitments | - | - | - | -------------------------------------------------------------------------------- | Other off-balance-sheet commitments | - | 0 | - | -------------------------------------------------------------------------------- | Wages and salaries | | | | | and | | | | | performance-based pay | | | | -------------------------------------------------------------------------------- | Wages and salaries | - | 2 | - | -------------------------------------------------------------------------------- | Performance-based pay | - | - | - | -------------------------------------------------------------------------------- | Holdings of related parties | | | | -------------------------------------------------------------------------------- | Number of share options | - | - | - | -------------------------------------------------------------------------------- | Number of shares | - | 99,144 | 3,680,793 | -------------------------------------------------------------------------------- | Number of participations | - | 5,509 | - | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Related-party transactions 30 June | | | | | 2007 | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million | Associate | Management | Others | | | s | | | -------------------------------------------------------------------------------- | Loans | 102 | 4 | - | -------------------------------------------------------------------------------- | Other receivables | 0 | 0 | - | -------------------------------------------------------------------------------- | Deposits | 0 | 4 | 29 | -------------------------------------------------------------------------------- | Other liabilities | - | - | - | -------------------------------------------------------------------------------- | Interest income | 0 | 0 | - | -------------------------------------------------------------------------------- | Interest expenses | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Dividend income | 1 | - | - | -------------------------------------------------------------------------------- | Commission income | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Commission expenses | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Other operating income | - | - | - | -------------------------------------------------------------------------------- | Impairments of loans | - | - | - | -------------------------------------------------------------------------------- | Impairments of loans at the end of the | - | - | - | | period | | | | -------------------------------------------------------------------------------- | Off-balance-sheet items | | | | -------------------------------------------------------------------------------- | Guarantees | - | - | - | -------------------------------------------------------------------------------- | Irrevocable commitments | - | - | - | -------------------------------------------------------------------------------- | Other off-balance-sheet commitments | - | - | - | -------------------------------------------------------------------------------- | Wages and salaries and | | | | | performance-based pay | | | | -------------------------------------------------------------------------------- | Wages and salaries | - | 2 | - | -------------------------------------------------------------------------------- | Performance-based pay | - | - | - | -------------------------------------------------------------------------------- | Holdings of related parties | | | | -------------------------------------------------------------------------------- | Number of share options | - | - | - | -------------------------------------------------------------------------------- | Number of shares | - | 82,314 | 3,680,793 | -------------------------------------------------------------------------------- | Number of participations | - | 5,541 | - | -------------------------------------------------------------------------------- The Interim Report for 1 January-30 June 2008 was prepared in accordance with IAS 34 (Interim Financial Reporting). The accounting policies applied are described in the 2007 financial statements. Applying the new IFRSs and interpretations adopted by OP-Pohjola Group in 2008 did not have any material effect on the content of its financial statements. This Interim Report is based on unaudited figures. Pohjola Bank plc (OKO Bank plc until 29 February 2008) will publish its own Interim Report. The third-quarter interim report will be published on 6 November 2008. Helsinki, 7 August 2008 OP-Pohjola Group Central Cooperative Executive Board OP-Pohjola Group Central Cooperative Markku Koponen Senior Vice President DISTRIBUTION OMX Nordic Exchange Helsinki London Stock Exchange SWX Swiss Exchange Major media FURTHER INFORMATION Reijo Karhinen, Executive Chairman, tel. +358 (0)10 252 4500 Tony Vepsäläinen, President, tel. +358 (0)10 252 4020 Harri Luhtala, CFO, tel. +358 (0)10 252 2433
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