Pohjola Pankki Oyj : Pohjola Bank Plc Interim Report for January-June 2013
Pohjola Bank plc
Stock exchange release 31 July 2013, 8.00 am
Pohjola Bank Plc Interim Report for January-June 2013
- Consolidated earnings before tax amounted to EUR 252 million (202) and
consolidated earnings before tax at fair value to EUR 177 million (433).
Return on equity was 14.1% (12.9). Core Tier 1 ratio was 10.6% (10.6).
- The loan portfolio held by Banking grew by 6% from its level at the turn of
the year and by 9% in the year to June. The average corporate loan portfolio
margin was 1.53% (1.52). Impairment loss on receivables totalled EUR 19
million (19) and the bank levy reduced earnings by EUR 8 million (-).
- Within Non-life Insurance, insurance premium revenue increased by 10%. The
combined ratio improved to 91.0% (94.6). Excluding changes in reserving bases
and amortisation on intangible assets arising from company acquisition, the
operating combined ratio was 89.2% (92.6). Return on investments at fair value
was 0.4% (5.5).
- Within Asset Management, assets under management increased by 6% to EUR 34.9
- Group's total expenses remained at the previous year's level despite the
bank levy of EUR 10 million. Cost savings out of the EUR 25 million estimated
for 2013 based on the efficiency-enhancement programme amounted to EUR 15
- Outlook towards the year end: Consolidated earnings before tax in 2013 are
expected to be higher than in 2012. Within Banking, the loan portfolio is
expected to grow in 2013 at the same rate as in 2012, when the growth rate was
9% (previous estimate: growth prospects on the loan portfolio are dimmer than
last year). It is estimated that the Non-life Insurance operating combined
ratio will vary between 88% and 92% (previous estimate: 89-93%). For more
detailed information on outlook, see "Outlook towards the year end" below.
- Consolidated earnings before tax amounted to EUR 121 million (99) and
consolidated earnings before tax at fair value to EUR 63 million (96). Return
on equity was 13.8% (12.2).
- Banking corporate customers showed a higher level of activity. Combined net
interest income from Corporate Banking and Baltic Banking was up by 18% year
on year. The loan portfolio increased by 4% and the average corporate loan
portfolio margin by 4 basis points.
- Within Non-life Insurance, insurance premium revenue increased by 11%.
Combined ratio was 87.9% (87.4) while operating combined ratio was 86.2%
(85.5). Return on investments at fair value was -0.6% (0.6).
- Earnings posted by the Group Functions were improved by the EUR 12-million
interest on cooperative capital from Suomen Luotto-osuuskunta.
Comparatives deriving from the income statement are based on figures reported
for the corresponding period a year ago. Unless otherwise specified,
balance-sheet and other cross-sectional figures on 31 December 2012 are used
as comparatives. As a result of change in the recognition of defined benefit
pension plans, the comparatives have been restated.
Earnings before tax, EUR H1/ H1/ Change, % Q2/ Q2/ Change, %
million 2013 2012 2013 2012 2012
Banking 112 120 -7 58 55 6 221
Non-life Insurance 99 54 82 43 39 11 92
Asset Management 11 12 -1 7 6 10 32
Group Functions 30 16 87 13 -1 27
Total 252 202 25 121 99 22 372
Change in fair value
reserve -74 231 -58 -2 418
Earnings before tax at
fair value 177 433 -59 63 96 -35 790
Earnings per share, EUR 0.61 0.48 0.29 0.24 0.89
Equity per share, EUR 8.64 7.85 8.67
Average personnel 2,612 3,419 2,569 3,432 3,421
H1/ H1/ Q2/ Q2/ 2012 Target
Financial targets 2013 2012 2013 2012
Return on equity, % 14.1 12.9 13.8 12.2 11.2 13
Core Tier 1 ratio, % 10.6 9.8 10.6 > 11
Operating cost/income ratio by Banking, % 38 34 36 34 34 < 35
Operating combined ratio by Non-life
Insurance, % 89.2 92.6 86.2 85.5 90.5 < 92
Operating expense ratio by Non-life Insurance,
% 19.5 23.1 19.1 22.4 21.5 18
Solvency ratio by Non-life Insurance, % 75 86 81 70
Operating cost/income ratio by Asset
Management, % 54 53 51 53 47 < 45
AA rating affirmed by at least two credit
rating agencies or credit ratings at least at
the main competitors' level 2 2 2 2
Dividend payout ratio at least 50%, provided
that Core Tier 1 ratio remains at least 10% 51 > 50
President and CEO Mikael Silvennoinen:
Pohjola's second-quarter business performance was in line with our
expectations. Consolidated earnings before tax were good, amounting to
slightly over EUR 120 million. Our first-half consolidated earnings before tax
exceeded EUR 250 million and the return on equity was 14%.
Banking showed lower first-half earnings than the year before due to a
decrease in trading income generated by Markets and to the bank levy. Demand
for corporate loans and the corporate bond markets perked up during the second
quarter. During the first half, the loan portfolio increased by 6% and the
Corporate Banking net interest income by 11%. Net loan losses and impairment
losses remained low, being at the level reported a year ago.
Insurance premium revenue continued to grow vigorously within Non-life
Insurance. The second-quarter operating combined ratio was 86.2%. Greater
operating efficiency manifested itself in the substantially improved expense
ratio. Q2 return on investments at fair value was lower than a year ago, due
mainly to an increase in market interest rates.
Within Asset Management, assets under management increased as a result of
growth in OP mutual fund assets and positive developments in market values.
Thanks to the efficiency-enhancement programme, total expenses, excluding the
bank levy, were 3% lower than a year ago. Cost savings out of the EUR 25
million estimated for 2013 amounted to EUR 15 million during the first half,
resulting mainly from a reduction in personnel. The programme is proceeding as
Outlook towards the year end
Within Banking, the loan portfolio is expected to grow in 2013 at the same
rate as in 2012, when the growth rate was 9% (previous estimate: growth
prospects on the loan portfolio are dimmer than last year). The operating
environment for the corporate sector will remain challenging. The greatest
uncertainties related to Banking's financial performance in 2013 are
associated with future impairment loss on the loan portfolio.
Insurance premium revenue is expected to increase at a rate above the market
average. The operating combined ratio for the full year 2013 is estimated to
vary between 88% and 92% (previous estimate: 89-93) if the number of large
claims is not much higher than in 2012. Expected investment returns are
largely dependent on developments in the investment environment. The most
significant uncertainties related to Non-life Insurance's financial
performance in 2013 pertain to the investment environment and the effect of
large claims on claims expenditure.
The greatest uncertainties related to Asset Management's financial performance
in 2013 are associated with the actual performance-based fee income tied to
the success of investments and the amount of assets under management.
The key determinants affecting the Group Functions' financial performance
include net interest income arising from assets in the liquidity buffer, any
capital gains or losses on notes and bonds and any impairment loss that may be
recognised on notes and bonds in the income statement. It is estimated that
the Group Functions' net interest income will be lower than in 2012.
Consolidated earnings before tax in 2013 are expected to be higher than in
There is still great uncertainty about the economic outlook and the operating
All forward-looking statements in this report expressing the management's
expectations, beliefs, estimates, forecasts, projections and assumptions are
based on the current view of the future development in the operating
environment and the future financial performance of Pohjola Group and its
various functions, and actual results may differ materially from those
expressed in the forward-looking statements.
Helsinki, 31 July 2013
Pohjola Bank plc
Board of Directors
This Interim Report is available at www.pohjola.com > Media > Releases, where
background information on the Report can also be found.
Analyst meeting, conference call and live webcast
Pohjola will hold a briefing in English for analysts and investors on 31 July
starting at 3.00 pm Finnish time, EET (2.00 pm CET, 1.00 pm UK time, 8am US
EST). The briefing is a combined analyst meeting, conference call and live
Analysts and investors may attend the briefing in one of the following two
1) By viewing the briefing as live webcast via the internet. The link will be
available on the IR website before the briefing begins. Questions on the
internet are welcome via a question button available in the webcast window. An
on-demand webcast of the briefing can be viewed via the IR website afterwards.
2) By dialling one of the regional conference call numbers shown below.
Questions are welcome by telephone in the Q&A session according to
instructions. To participate via a conference call, please dial in 5-10
minutes before the beginning of the event:
UK: +44 1452 555 131
FI: +358 9 23 113 289
SE: + 46 8 506 307 79
US: +1 866 682 8490
Mikael Silvennoinen, Pohjola Bank plc's President and CEO, will present the
financial results in a press conference on OP-Pohjola Group's premises
(Vääksyntie 4, Vallila, Helsinki), on 31 July, starting at noon.
Financial reporting in 2013
Schedule for Interim Reports in 2013:
Interim Report Q1-3/2013: 30 October 2013
NASDAQ OMX Helsinki Ltd
London Stock Exchange
SIX Swiss Exchange
For additional information, please contact:
Mikael Silvennoinen, President and CEO, tel. +358 (0)10 252 2549
Vesa Aho, CFO, tel. +358 (0)10 252 2336
Niina Pullinen, Senior Vice President, Investor Relations, tel. +358 (0)10 252
Pohjola Bank plc is a Finnish financial services group which provides its
customers with banking, non-life insurance and asset management services. Our
mission is to promote the prosperity, security and wellbeing of our customers.
Profitable growth and an increase in company value form our key objectives.
Pohjola Group serves corporate customers in Finland and abroad by providing an
extensive range of financial, investment, cash-management and non-life
insurance services. We offer non-life insurance and private banking services
to private customers. Pohjola Series A shares have been listed on the Large
Cap List of the NASDAQ OMX Helsinki since 1989. The number of shareholders
totals around 32,000. Pohjola's consolidated earnings before tax came to 374
million euros in 2012 and the balance sheet total amounted to 45 billion euros
on 31 December 2012. Pohjola is part of OP-Pohjola Group, the leading
financial services group in Finland with over four million customers.
Background material Q2_2013
Pohjola Bank Interim Report Q2_2013
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Source: Pohjola Pankki Oyj via Thomson Reuters ONE
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