Pohjola Pankki Oyj : OP-Pohjola Group started 2013 well, an improvement from
2012. Business growth continued to be strong.
Stock Exchange Release 29 April 2013 at 8.00 am (EEST)
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
- Expenses were lower than last year. Expenses without bank levy reduced by
- 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
31 March 2013 31 March 2012 Change % 31 Dec
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
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
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
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
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
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 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
NASDAQ OMX Helsinki Ltd
London Stock Exchange
SIX Swiss Exchange
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.
OP-Pohjola Group Interim Report Q1 _2013
OP-Pohjola Group Q1 2013 background material
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Source: Pohjola Pankki Oyj via Thomson Reuters ONE
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