Pohjola Pankki Oyj : OP-Pohjola Group stays on track: considerable earnings improvement, and customer business grows faster than the market average. OP-Pohjola Group Stock Exchange Release 31 July 2013 at 8.00 am Interim Report OP-Pohjola Group stays on track: considerable earnings improvement, and customer business grows faster than the market average. - Earnings before tax increased by 21% to EUR 398 million (329). - Total income increased by 6.5%. The decrease in net interest income levelled off in the report period. - Expenses without the bank levy decreased by over 2%. - Core Tier 1 ratio before transitional provisions was 14.6% (14.8). - Customer business grew at a rate that was much higher than the market average. The loan portfolio increased in the year to June by 7.2% and deposits by 8.4%. Non-life Insurance premium revenue increased by 10%. - The number of joint banking and non-life insurance customers increased by 109,000. - Change in outlook: Earnings before tax for the full 2013 are expected to be better than a year ago. For more information, see "Outlook towards the year end". OP-Pohjola Group's key indicators Q1-Q2/2013 Q1-Q2/2012 Change % 2012 Earnings before tax, EUR million 398 329 21.0 586 Banking 193 247 -21.9 424 Non-life Insurance 99 54 81.7 92 Wealth Management 77 34 124.9 101 Returns to owner-members and OP bonus customers 96 96 -0.6 192 30 Jun 2013 30 Jun 2012 Change % 31 Dec 2012 Core Tier 1 ratio before the transition provisions, % 14.6 14.7 -0.2* 14.8 Core Tier 1 ratio, % 13.7 14.7 -1.0* 14.1 Ratio of capital base to minimum amount of capital base (under the Act on the Supervision of Financial and Insurance Conglomerates) 1.81 2.01 -0.20* 1,90 Ratio of non-performing receivables to loan and guarantee portfolio, % 0.46 0.53 -0.06* 0.46 Joint banking and insurance customers (1,000) 1,468 1,358 8.1 1,425 * Change in ratio Comments by Reijo Karhinen, Executive Chairman and CEO OP-Pohjola's first half of 2013 strikes a fine balance between growth and financial performance. We did excellently again despite the demanding conditions. Our higher-than-expected earnings already give us cause to change our performance guidance. We now expect our full-year earnings to be better than last year. The new regulations for the financial sector stress capital adequacy, just as they should, which in turn means that earnings performance plays a key role. We expect our second-half net interest income to be better than the first half's, with other income continuing to grow steadily. A positive development in our total income is supported by our steadily growing volumes. The fact that growth in total expenses came to a halt played a key role in our improved first-half earnings. In order to stay on track to meet our profit target, derived from our capital adequacy target, in an environment where interest rates will remain low and regulation will involve a new burden on earnings, we will need to pay special attention to our cost-efficiency. OP-Pohjola Group is a forerunner and trendsetter in the development of Finnish financial services. From one year to the next, we have taken systematic and determined steps in terms of development and bold innovation. In the first half of 2013, we again launched innovative products and services that make our customers' lives easier, especially in the field of mobile service which is quickly becoming the most significant channel for using daily services. Omasairaala hospital is an example of a new service, in which traditional practices are changed boldly on the basis of customer needs. And innovation does not end here. We are obliged to carry on by our position as the country's leading financial services group. Our loyalty benefits and increased investments in Finland's most comprehensive, versatile and dynamic service network ensure a superior customer experience in a changing competitive situation. I am convinced that a deep understanding of our customers' needs, our long traditions and top financial expertise enable us to be successful in the future, too. We have been successful in adhering to our mission and in our strategy-based business that truly focuses on customer needs, also during times of crisis. In the midst of major changes affecting our operating and competitive environment, our market position has continued to strengthen, sometimes even at a historically high rate. Our position in corporate financing has improved since 2007 by as much as 8 percentage points. Our sense of responsibility, consistent with our values, has guided us to go against the currents that drive the markets in both Finland and the rest of Europe. There is a clear correlation between banks' ability and willingness for financing on the one hand and economic growth on the other. This has again been proven by recent figures concerning Southern and Central Europe. Both Finland and the rest of Europe urgently need to get on a path of economic growth. Banks play a key role in securing economic growth. The future of the economy is largely dependent on how well banks are able to operate. In order that economic growth can be given a boost, banks should now be offered a "peaceful work environment". Quick decisions should now be made on the content of the regulatory initiatives currently under preparation. Decision-makers should refrain from imposing any new burden on banks. A public, calming promise would rebuild an atmosphere of trust and contribute to economic growth. The next few months will be a crucial period for Finnish economic policy decisions. The labour market and the Government must find the means and willingness to make the necessary decisions. We can no longer just pick the easy way out. Many of the crisis-ridden countries in Southern Europe that have been criticised have already taken the corrective measures that still remain unresolved in Finland. Financial performance in the reporting period OP-Pohjola Group's earnings before tax were EUR 398 million (329). Earnings were improved especially because of a solid increase in investment income of all segments and the good financial performance of Non-life Insurance. Investment income was improved by capital gains on securities. The good performance by Non-life Insurance was the result of premiums written that have been increasing for a long time and of lower operating expenses. Net commissions and fees, too, were higher than a year ago. Due to low interest rates, net interest income decreased by 18% year on year. The fall in net interest income slowed down in the second quarter. The Group's expenses were at the same level as last year despite the EUR 23 million bank levy and the growth and expansion of business. Without the effect of the bank levy, total expenses would have decreased by more than 2%. Thanks to measures taken in the efficiency enhancement program, the wages and salaries decreased by more than 2%. Because other social expenses increased, personnel costs as a whole decreased only by 0.6%. Other administrative expenses were almost 8% lower than a year ago. OP-Pohjola Group's fair value reserve before tax was EUR 288 million on 30 June, reducing in the report period by EUR 160 million. Earnings before tax at fair value amounted to EUR 238 million (703). Bonuses to owner-members and OP bonus customers recognised in the income statement increased by 5.4% year on year to EUR 89 million. Outlook towards the year end The world economy will this year grow at a rate below the average. The recession in the euro area should recede within the next 12 months, but a turn for the better is not yet in the horizon. The Finnish economy too contracted during the first half and its full-year growth is expected to remain weak. As a result of the actions taken by the ECB, financial markets have remained relatively stable. However, the euro area has not yet overcome its debt crisis and there is still potential for major financial market disruptions. The operating environment in the financial sector is projected to continue to remain challenging. Historic-low market interest rates have eroded banks' net interest income and will weaken insurance institutions' investment income. The weak economic situation may lower demand for financial services, and the bank levy confirmed late last year saddled Finnish banks with major new costs. Changes in the operating environment make measures that support profitability in the financial sector even more urgent. Unless the operating environment turns out to be considerably weaker than expected, OP-Pohjola Group's earnings before tax (previous estimate: at about the same level or somewhat lower) is expected to be better than in 2012. The most significant factors that may affect earnings in the second half of 2013 concern changes in capital markets and impairment losses on receivables. 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. 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 31 July 2013, starting at noon at Vääksyntie 4, Vallila, Helsinki. Pohjola Bank plc will publish its own interim report. Financial reporting in 2013 Schedule for Interim Reports in 2013: Interim Report Q1-3/2013: 30 October 2013 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 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 background material OP_Pohjola Group Interim Report Q2_2013 ------------------------------------------------------------------------------ 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. Source: Pohjola Pankki Oyj via Thomson Reuters ONE HUG#1719985
Pohjola Pankki Oyj : OP-Pohjola Group stays on track: considerable earnings improvement, and customer business grows faster than
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