Pohjola Pankki Oyj : OP-Pohjola Group started 2013 well, an improvement from 2012. Business growth continued to be strong.
Pohjola Pankki Oyj : OP-Pohjola Group started 2013 well, an improvement from 2012. Business growth continued to be strong. OP-Pohjola Group Stock Exchange Release 29 April 2013 at 8.00 am (EEST) Interim Report OP-Pohjola Group started 2013 well, an improvement from 2012.Business growth continued to be strong. - Earnings before tax rose by 17% to EUR 234 million (199). - Earnings by Non-life Insurance were record-high in the first quarter, and investment income rose significantly. - Performance by Banking was lower than in the first quarter of 2012, but 25% higher than in the fourth quarter of 2012. - A solid increase in Other Income compensated a major drop in net interest income. - Expenses were lower than last year. Expenses without bank levy reduced by 3.1%. - Core Tier 1 ratio before the transition provisions was 14.6% (14.8). - The loan portfolio grew by 7.5% and deposits by 10% in the year to March. Non-life Insurance grew by 10%. - 2013 earnings before tax are expected to be about the same or slightly lower than in 2012. For more details, see "Outlook for the rest of 2013". OP-Pohjola Group's key indicators Q1/2013 Q1/2012 Change % 2012 Earnings before tax, € million 234 199 17,5 586 Banking 99 144 -31.4 424 Non-life Insurance 55 15 92 Wealth Management 57 26 101 Returns to owner-members and OP 48 44 7.2 192 bonus customers 31 March 2013 31 March 2012 Change % 31 Dec 2012 Ratio of capital base to minimum 1.85 2.02 -0.17* 1.90 amount of capital base (under the Act on the Supervision of Financial and Insurance Conglomerates) Core Tier 1 ratio, % 14.1 15.1 -1.1* 14.1 Core Tier 1 ratio before the transition provisions 14.6 15.2 -0.6* 14.8 Ratio of non-performing receivables to loan and guarantee portfolio, % 0.51 0.53 -0.02* 0.46 Joint banking and 1,442 1,329 8.5 1,425 insurance customers (1,000) * Change in ratio Comments by Reijo Karhinen, Executive Chairman and CEO OP-Pohjola Group got off to a positive start in 2013. The operating model of our financial services group proved again its strength and its capacity to even out earnings volatility. Record-high earnings by Non-life Insurance, a considerable increase in investment income and the fact that we have been able to stop expenses from growing contributed to a better first-quarter result than expected. The positive earnings development in the Group was shadowed by lower earnings by Banking than a year ago caused by lower net interest income and the new bank levy. Nevertheless, compared with the last quarter of 2012, Banking's performance improved by 25 per cent. What is descriptive of the change in our revenue model is that the amount of 'Other income' more than doubled in the report period relative to the net interest income. The results of the efficiency-enhancement programme started last year can be seen as lower expenses at Group level, regardless of the bank levy. The downward trend of net interest income will even out substantially during the rest of the year. However, the revenue model of retail banking is changing permanently, and the requirement for higher efficiency is here to stay. The volume of our business continued to grow strongly despite the market conditions and in comparison with the entire sector. Our balance sheet total exceeded the EUR 100 billion mark. We have been operating in accordance with our mission and values by responding to our customers' needs for loans. Our market shares are on a steep rise both in terms of corporate and home loans. To be successful in this challenging market situation, we have had to make some bold long-term decisions and to understand our customers well. Following the acquisition of Pohjola, we have considerably strengthened our market position in our key business segments. Our latest achievement is to be the biggest provider of bank financing to businesses. We are at the forefront in developing a new type of financial services group model in Finland. We have been supported in this by our firm foundation in cooperative principles and the bonus system that rewards loyal customers financially. We will continue, in line with our strategy, to provide our customers with the best overall solutions and loyalty benefits in the sector. Although the global economy is still frail and Europe's protracted debt crisis casts a nasty shadow on the economy, OP-Pohjola Group's outlook for the rest of 2013 is stable. Our capital base is strong, our risk exposure is good and our growth rate is in line with our strategy. The financial sector will still experience years of uncertainty as major changes are taking place. We will come under considerable pressure, both in terms of political decisions and in the form of new regulations. Economic development, which continues to be poor, and the uncertainty caused by regulatory changes will increase risks, which in itself requires bigger financial buffers in our sector, thereby creating pressure to push prices up. The financial crisis, an imported one from Finland's point of view, is making itself felt with a delay in the form of tighter regulation and as an impediment to economic growth. Financial performance in the report period OP-Pohjola Group's earnings before tax came to EUR 234 million (199). Earnings were improved by record-level earnings by Non-life Insurance in January-March, the levelling off of expense growth and higher investment income. The strong profit performance by Non-life Insurance was caused by prolonged growth of premiums written and exceptionally low claims expenditure during a traditionally challenging first quarter. The Group's expenses were slightly lower than a year ago despite the higher expenses caused by the bank levy. Efficiency was considerably improved thanks to the efficiency-enhancing programme that started in late 2012. Investment income was improved by front-load realisation of capital gains in the first quarter. Expenses were below last year's level despite the bank levy that became effective on 1 January 2013. A total of EUR 12 million of bank levy was recognised in the first quarter. Without the bank levy, expenses would have contracted by over 3%. OP-Pohjola Group's fair value reserve was EUR 425 million on 31 March, reducing in the first quarter by EUR 24 million. Earnings before tax at fair value came to EUR 210 million (577). Bonuses to owner-members and OP bonus customers recognised in the income statement grew by 6.1% year on year to EUR 45 million. Outlook for the rest of 2013 Growth prospects for the world economy are still dim, and economic growth in the euro area will be only modest at best. Finnish economic growth is also expected to remain weak. Although the situation in financial markets has remained relatively stable as a result of actions taken by the European Central Bank, the debt crisis within the euro area has not been solved yet. A deepening debt crisis could have significant implications for the entire financial sector. The operating environment in the financial sector is projected to remain relatively difficult. Historically low market interest rates are eroding banks' net interest income and weakening insurance companies' investment income, while the weak market conditions will reduce demand for financial services and the bank levy confirmed in late 2012 will cause major costs to Finnish banks. As financial regulation is becoming tighter, measures that support profitability are becoming more and more important. Unless the operating environment turns out to be considerably weaker than expected, OP-Pohjola Group's financial performance is expected to be at about the same level as in 2012, or somewhat lower. The primary uncertainties affecting the financial performance in 2013 relate to the rate of business growth, impairment loss on receivables and changes in the investment environment. All forward-looking statements in this report expressing the management's expectations, beliefs, estimates, forecasts, projections and assumptions are based on the current view on developments in the economy, and actual results may differ materially from those expressed in the forward-looking statements. Financial reporting in 2013 Schedule for Interim Reports in 2013: Interim Report H1/2013: 31 July 2013 Interim Report Q1-3/2013: 30 October 2013 Press conference OP-Pohjola Group's financial performance will be presented to the media by Executive Chairman and CEO Reijo Karhinen in a press conference on 29 April 2013, starting at noon at Vääksyntie 4, Vallila, Helsinki. Pohjola Bank plc will publish its own interim report. OP-Pohjola Group Central Cooperative Executive Board Additional information Executive Chairman and CEO Reijo Karhinen, tel. +358 (0)10 252 4500 Harri Luhtala, CFO, tel. +358 (0)10 252 2433 Carina Geber-Teir, Chief Communications Officer, tel. +358 (0)10 252 8394 Distribution NASDAQ OMX Helsinki Ltd London Stock Exchange SIX Swiss Exchange Major media op.fi and pohjola.fi OP-Pohjola Group is Finland's leading financial services group providing a unique range of banking, investment and insurance services. The Group has the mission of promoting the sustainable prosperity, well-being and security of its owner-members, customers and operating regions through its local presence. Its objective is to offer the best and most versatile package of loyal customer benefits on the market. OP-Pohjola Group consists of some 200 member cooperative banks and the Group's central institution, OP-Pohjola Group Central Cooperative, with its subsidiaries and closely-related companies, the largest of which is the listed company Pohjola Bank plc.With a staff of more than 13,000 OP-Pohjola Group posted consolidated earnings of 601 million euros before tax in 2012 and had total assets of 99.8 billion euros on 31 December 2012. The group has over four million customers. www.op.fi OP-Pohjola Group Interim Report Q1 _2013 OP-Pohjola Group Q1 2013 background material ------------------------------------------------------------------------------ This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. The owner of this announcement warrants that: (i) the releases contained herein are protected by copyright and other applicable laws; and (ii) they are solely responsible for the content, accuracy and originality of the information contained therein. 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