eQ CORPORATION STOCK EXCHANGE RELEASE January 31, 2007 at 10.45 a.m.
eQ's FINANCIAL STATEMENT BULLETIN JANUARY - DECEMBER 2006
(Translation of Finnish language original)
Year 2006:
- Total income EUR 48.3 million (EUR 31.0 million)
- Operating profit EUR 18.7 million (EUR 6.3 million)
- Net profit EUR 16.7 million (EUR 7.4 million)
- Earnings per share EUR 0.50 (0.23)
- Return on equity 24.5 % (13.0 %)
- Board's proposal for dividend EUR 0.40 per share (EUR 0.20)
October - December 2006:
- Total income EUR 17.1 million (EUR 8.9 million)
- Operating profit EUR 8.0 million (EUR 2.3 million)
- Earnings per share EUR 0.18 (0.11)
- Acquisition of Fides Asset Management on December 29, 2006
eQ's financial year 2006 was excellent. The consolidated net revenues increased
by 56 % and the profitability improved strongly. The Group's operating profit
increased by 196 % totalling EUR 18.7 million (EUR 6.3 million). Earnings per
share, EUR 0.50, more than doubled. Net revenues and operating profit for the
last quarter of 2006 turned out to be exceptionally good and it was clearly the
best quarter of 2006. The excellent net profit enables the Board of Directors to
propose a considerable dividend distribution.
This Financial Statement of 2006 has been prepared according to the IAS standard
34 (Interim reports). This Financial Statement of 2006 is unaudited.
eQ Group, Key figures 2006
(EUR 1 000) Change Change
Q4/06 Q4/05 y-on-y 2006 2005 y-on-y
Net revenues from
financial operations 1 624 841 93 % 5 312 3 171 68 %
Net commission income 13 388 5 906 127 % 37 233 21 771 71 %
Other income 2 066 2 145 -4 % 5 740 6 054 -5 %
Net revenues in total 17 078 8 892 92 % 48 285 30 996 56 %
Operating profit 7 979 2 339 241 % 18 720 6 331 196 %
Earnings/share EUR 0.18 0.11 64 % 0.50 0.23 117 %
Operating profit for business areas
(EUR 1 000)
Change Change
Q4/06 Q4/05 y-on-y 2006 2005 y-on-y
Securities Brokerage 851 826 3 % 3 445 861 300 %
Asset Management 1 311 624 110 % 4 755 3 909 22 %
Corporate Finance 5 699 759 651 % 10 464 1 153 808 %
Hosting 118 175 -33 % 56 468 -88 %
eQ's operating environment
The favourable economic cycle was reflected in the equity markets also during
2006. The Helsinki Stock Exchange general index, which characterises the general
equity trends, rose approximately by 18 % and the trading activity on the
Helsinki Stock Exchange increased by 18 % (+24 % during 2005). Brokerage has
grown considerably during the past few years due to the good market situation and
the globalisation of investments. An increasing amount of the trading volumes
comes from foreign investors. Domestic investors' share of trades at the Helsinki
Stock Exchange is, according to eQ's estimates, approximately 20 - 25 % of the
entire trading volume.
The increase in trading activity by Finnish retail and institutional investors
during the past few years can be seen from the clear increase in commissions paid
to eQ. At the same time the domestic investors share of the entire stock exchange
turnover has decreased during the past years, which can also be seen from eQ's
decreasing market share. Domestic investors prefer to use domestic brokers for
their trading, which according to our perception gives eQ's business a good
operating environment during the coming years. The cornerstones of eQ's
competitive advantage are the quality of the brokerage service, local knowledge,
excellent trading tools and an extensive research of Finnish companies.
The new combined Nordic OMX stock exchange list was introduced in October. The
renewal of the stock exchange list has only hade a minor impact on trading in the
Nordic countries, at least at this early stage, as we anticipated.
The asset management services continued their strong growth in 2006. According to
estimates the amount of funds available for investments in Finland will continue
to grow at a rate of 6 - 7 % per year. The increasing number of investment
alternatives together with globalisation increases also the need for competent
asset management and financial advisory services. These factors have resulted in
a strong growth of this business. Assets under management of in Finland
registered mutual funds increased during 2006 by 35.5 % to EUR 61 billion.
Exceptionally many mergers and acquisitions were done both in Europe and globally
during 2006. The number of mergers and acquisitions rose to a high level also in
Finland. Furthermore, the number of companies listed in the Helsinki Stock
Exchange increased during 2006, even though six new initial public offerings is
still a small amount compared to other Nordic countries. The activity of private
equity on both buy and sell sides and good availability of funds despite
increasing interest rates had a positive impact on the market activity.
A record number of real estate transactions were realised in Finland during 2006.
The volume growth can be explained by increased presence of foreig investors and
by the fact that the investor interest has moved from large commercial properties
and from the Helsinki metropolitan area also to other parts of Finland and to
different types of real estate.
Outsourcing of IT-services continues to grow in the future. Two trends were
characteristic for outsourcing in 2006. In blue-chip companies outsourcing was
more selective and they seek for the best provider in highly specialised
services. Additionally, the medium- and small-sized companies have begun to
purchase sophisticated IT services. Furthermore, the growing e-business sector
and the increasingly critical role of telecommunications and technology create a
demand for reliable high usability IT services.
Income and profit
All eQ Group's business areas (securities brokerage, asset management, corporate
finance and hosting services) had an increase in net revenues in 2006. The
consolidated total income increased to EUR 48.3 million (EUR 31.0 million), an
increase by 56 %. The costs increased by 19.9 % and totalled EUR 29.6 million
(EUR 24.7. million). The increase in costs is largely explained by higher bonuses
and other incentives based on the Group's profitability.
The significant increase in consolidated net revenues and the clearly slower
increase in the cost level had a substantial positive effect on the Group's
operating profit totalling EUR 18.7 (EUR 6.3 million), an increase by 196 %
compared to 2005. The net profit was EUR 16.7 million (EUR 7.4 million).
The increased number of customers, customer activity, increased amount of assets
under management and an increase in trading activity on the Helsinki Stock
Exchange has contributed the increase in net revenues during the beginning of
2006. The activity in mergers and acquisitions and large real estate transactions
in corporate finance remained in an exceptional high level during 2006.
eQ's return on equity was 24.5 % (13.0 %). Earnings per share was EUR 0.50 (EUR
0.23). Equity per share was EUR 2.18 (EUR 1.89). Cost-income ratio was 0.6 (0.8).
The number of customers had a steady increase during 2006. At the end of 2006 eQ
had some 46 200 customers, which is 9 % more than at the end of 2005.
The Group's balance sheet totalled EUR 627.1 million (EUR 540.4 million) at the
end of 2006. The total liabilities during the financial period were EUR 553.5
million (EUR 477.4 million), of which customer deposits totalled EUR 435.8
million (EUR 369.8 million). The shareholders' equity at the end of the year was
EUR 73.6 million (EUR 63.1 million) and after the proposed dividend distribution
the Group's capital adequacy ratio would be 18.9 % (17.1 %), which is more than
10 % above the required minimum of 8 per cent.
Deferred tax assets
The Group has earlier booked a deferred tax asset of EUR 3.4 million based on
unutilised tax losses carried forward. Based on the profit for financial period
2006 and the income taxes, the tax asset has been reduced by EUR 1.8 million. The
tax asset is included in the consolidated profit and loss account as a tax cost.
This booking has no effect on the consolidated cash flow.
After this reduction, the consolidated balance sheet includes an amount of EUR
1.6 million as a deferred tax asset, which corresponds to the remaining amount of
tax-deductible losses carried forward (EUR 6.2 million). Based on the board's
estimate this tax asset can be utilised in full.
Businesses
Securities Brokerage services
Key figures
(EUR 1 000)
Change Change
Q4/06 Q4/05 y-on-y 2006 2005 y-on-y
Net revenues 4 228 4 304 -2 % 16 835 14 009 20 %
Operating profit 851 826 3 % 3 445 861 300 %
Personnel 38 37 3 % 38 37 3 %
The net revenues of eQ's securities brokerage services increased to EUR 16.8
million (EUR 14.0 million), an increase of 20 % compared to 2005. The main
drivers for the increase in net revenues were the increase in number of customers
in 2006 and the increased trading activity on the stock market.
The operating profit of securities brokerage services tripled to EUR 3.4 million
(EUR 0.9 million), compared to the same period in 2005. The significant increase
in operating profit was mainly due to two factors: firm increase in consolidated
net revenues and almost unchanged cost level (+1.3 %) compared to 2005. The
moderate increase in costs was mainly due to the unexceptionally high cost level
in 2005, which included non-recurrent costs. The increased efforts in seeking
growth, especially in form of recruitments, carried out at the end of 2006 will,
however, have a moderately increasing effect on the unit's cost level going
forward.
The net revenues for the last quarter of 2006 were EUR 4.2 million, which is a
decrease of 2 % compared to the previous year. The slight decrease in the unit's
costs had a positive effect on the operating profit totalling EUR 0.9 million, an
increase by 3 % compared to the corresponding period in the previous year.
eQ's share of trades executed on the Helsinki Stock Exchange was 6.4 % (8.2 %)
and the share of the euro volume was 3.1 % (3.5 %). The corresponding market
shares for the last quarter of 2006 were 5.8 % and 2.9 %. eQ Bank was the largest
domestic stockbroker in Finland based on its share of trades executed and the
second largest based on its share of the euro volume. The internationalisation of
the equity market, which means that an increasing part of trades executed by
remote members not physically present in Finland, has had an impact on eQ's
decreasing market shares. During 2006, the euro volume in Helsinki Stock Exchange
increased by 29.6 % and the number of trades by 51.4 %.
Examples of eQ's new services are: launch of the trading for unlisted shares and
a SMS text message service, appreciated by institutional investors, produced by
eQ's Research Team. eQ continued to develop the innovative ProStreamer trading
software. By using ProStreamer, the customers are able to use the broadest
sortiment of order types in Scandinavia.
During the reporting period eQ Bank and the Association of Local Cooperative
Banks (Paikallisosuuspankkiliitto ry) have signed a co-operation agreement,
according to which eQ Bank will provide the local co-operative banks with White
Label brokerage services. The service is to be launched at the end of 2007.
eQ Bank has broadened its Research unit during 2006 and the team currently covers
some 80 domestic and scandinavian companies. According to plans, the company
coverige by the analysts will be broadened further.
During 2006 eQ Bank's research team was very succesful in the independent
benchmarking studies in terms of recommendations accuracy (AQ Publications and
StarMine).
Asset management services
Key figures
(EUR 1 000)
Change Change
Q4/06 Q4/05 y-on-y 2006 2005 y-on-y
Net revenues 4 436 2 796 59 % 14 433 12 175 19 %
Operating profit 1 311 624 110 % 4 755 3 909 22 %
Personnel 30 25 20 % 30 25 20 %
Assets under management, 995 790 26 % 995 790 26 %
eQ Bank, MEUR
Assets under management, 531 n/a n/a 531 n/a n/a
Fides AM, MEUR
Assets under management, 1526 n/a n/a 1526 n/a n/a
Total
eQ Bank and Fides, MEUR
Deposits, MEUR 437 370 18 % 437 370 18 %
Loans, MEUR 57 36 58 % 57 36 58 %
eQ Bank's assets under management include deposits, discretionary asset
management and mutual funds. Discretionary asset management and mutual funds
include partly the same funds.
The net revenues of asset management services in 2006 rose to EUR 14.4 million
(EUR 12.2 million), which is an increase of approximately 19 %. The substantial
growth of net revenues is based on the increase of assets under management and
the performance based management fees.
The operating profit of assets under management services was EUR 4.8 million (EUR
3.9 million). The good net profit was based on the strong growth in revenues (+19
%).
Investments made for growth in the asset management business during 2006,
especially through recruitments and by launching new mutual funds, can be seen as
a continuing increase in the level of costs.
During the last quarter of 2006 the net revenues rose to EUR 4.4 million and the
operating profit was EUR 1.3 million.
The assets under management increased during 2006 from EUR 790 million to EUR 995
million, of which deposits are EUR 437 million (EUR 370 million) at the end of
the fiscal year. During the last quarter of 2006 the assets under management
increased by EUR 138 million, which means growth by 17 %. Additionally, the Fides
acquisition, which was finalised at the end of 2006, increased the assets under
management by approximately EUR 530 million.
eQ launched three new equity funds during the fiscal period. eQ's and Fides
mutual fund portfolio consists all together of 37 mutual funds.
During 2006 eQ Bank arranged, together with several different issuers, altogether
seven capital-guaranteed index-linked bonds, which all utilise different
investment strategies. In total the bonds were sold for over EUR 40 million.
At the end of 2006, eQ Bank bought the entire share capital of Fides Asset
Management. Fides focuses mainly on the institutional asset management services.
The Fides Group consists of Fides Asset Management Oy and Fides Rahastoyhtiö Oy.
In December eQ Bank and an investment services company Ilmatar Asset Management
Oy agreed to launch in co-operation a new international multi-strategy hedge
fund, the Ilmatar Fund, investing in Eastern-Europe and Russia.
Corporate Finance services
Key figures
(EUR 1 000)
Change Change
Q4/06 Q4/05 y-on-y 2006 2005 y-on-y
Net revenues 7 665 1 043 635 % 14 220 2 387 496 %
Operating profit 5 699 759 651 % 10 464 1 153 808 %
Personnel 12 11 9 % 12 11 9 %
Advium acted as a financial advisor in 15 transactions, which were closed during
the financial period.
Examples of transactions published during the financial year 2006; advisory to
the Finnish Government when selling Kapiteeli to Sponda, a transaction valued at
EUR 1.3 billion. Advium also acted as an advisor to Sponsor Capital when they
sold Saunatec Group Oy to the Dutch ABN Amro Capital, an advisor to Consolis SAS
from Belgium when they sold Elematic Oy to a group of investors managed by
Sentica Partners and when Tamro Oyj sold the Tamro MedLab business unit to
Capman. Examples of important real estate transactions: advisory to Kapitaali
when selling hotel real estate to a value of EUR 306 million to Norgani ASA in
Norway, advisory to Tradeka when they sold about 270 pieces of real estate to the
funds managed by Curzon/IXIS AEW European and when Kesko sold 92 retail real
estates to Niam Retail Holding at the beginning of 2006.
M&A and real estate transaction activity in Finland continued to be strong during
the last quarter of 2006. Advium's fee income in 2006 and especially during the
last quarter of 2006 was on an exceptionally high level. Due to the fact that the
success fees play an important role in the corporate finance business, the unit's
performance can fluctuate significantly between quarters.
Hosting services
Key figures
(EUR 1 000)
Change Change
Q4/06 Q4/05 y-on-y 2006 2005 y-on-y
Net revenues 1 145 993 15 % 4 121 3 320 24 %
External revenues 746 749 0 % 2 797 2 425 15 %
Internal revenues 396 244 62 % 1 324 895 48 %
Operating profit 118 175 -33 % 56 468 -88 %
Personnel 15 16 -6 % 15 16 -6 %
For Xenetic the year 2006 was a time for significant investments and developing
its operations for the future growth. The net revenues had a strong increase to
EUR 4.1 million (EUR 3.3 million), an increase of 24 % compared to 2006 and
exceeding the general growth rate of outsourcing. The growth was due to the
increasing need for sophisticated IT-services among Xenetic's most important
customer group - middle-sized and growth companies.
Significant investments and some non-recurrent costs on expert's fees when
launching the second data center had a decreasing effect on Xenetic's
profitability. The operating profit for the unit was EUR 0.1 million.
During 2006 Xenetic made significant investments in hardware totaling EUR 1.6
million. The majority of these investments were directed to the implementation of
high availability IT-environment. After the investment stage Xenetic will be able
to market to its customers one of the most sophisticated IT-environment in
Finland. Additionally, Xenetic completed the second high-quality data center in
June 2006. These investments will have an improving effect on Xenetic as a
specialist and a managed services provider on a field of high-availability.
During the last quarter of 2006 Xenetic increased its net revenues as planned and
the business operations remained clearly profitable. The net revenues for the
period were EUR 1.1 (EUR 1.0 million) and the operating profit was EUR 0.1
million (EUR 0.2 million)
Investments
In 2006 the investments totalled EUR 12.8 million (EUR 1.5 million), of which EUR
9.5 million were directed to M&A activities and EUR 1.6 million to the
investments in the second data center of Xenetic.
Based on the agreement between eQ Corporation and Advium Partners Ltd on November
2, 2004, the sellers of Advium are entitled to an additional purchase price
during November 1, 2004 - December 31, 2007. The additional purchase price is
based on the results of the Advium's business operations.
An additional purchase price, based on the profitability Advium has achieved, has
been booked totalling EUR 2.8 million. The final additional purchase price will
be determined based on the results of Advium's business operations during 2007.
Acquired businesses
The share capital of Fides
eQ's fully owned subsidiary eQ Bank bought the entire share capital of Fides
Asset Management on December 29, 2006. Fides is a Finnish investment service
group established in 1997. The customers of Fides consist mainly of domestic
institutional investors and approximately 1 000 private investors. Fides' assets
under management are approximately EUR 531 million (December 29, 2006) including
discretionary asset management and mutual funds.
The total purchase price was EUR 6.4 million and it was paid in cash. The
acquisition cost included the purchase price, consultancty fees EUR 95 769.24 and
transfer tax EUR 102 400. The goodwill was EUR 4.9 million, which is mainly due
to synergies between eQ Banks and Fides' asset management businesses and positive
cash flow expectations.
Approximately EUR 1.0 million was allocated from the acquisition cost to the
largest customer contracts. This asset will be depreciated over 10 years.
eQ Group's net revenues would have increased by EUR 2.4 million and the net
profit would have increased by EUR 0.4 million, if Fides would have been
consolidated to the eQ Group in the beginning of 2006.
Capital adequacy
At the end of December 2006 the group capital adequacy ratio was 27.2 %. If the
dividend will be distributed according to the board's proposal, the capital
adequacy ratio will be 18.9 %.
As of 2007 the requirement of capital adequacy for banks has been changed.
The new capital adequacy requirement is divided into three pillars. Pillar I
adjusts the calculation of minimum regulatory capital and capital adequacy ratio.
Pillar II requires banks to have a process for assessing the overall capital
requirements in relation to the bank's risk profile and includes a qualitative
evaluation of internal control and risk management. Pillar III defines the
disclosure requirements regarding risk and capital adequacy. The new regulations
also set minimum capital requirements for operational risks.
The Board of Directors of eQ Corporation has approved on October 18, 2006 a new
strategic capital management plan, which outlines risk-based capital requirements
and capital adequacy. Furthermore the plan also defines the objectives for Tier 1
capital and the overall capital mix as well as sets the internal goals for the
capital adequacy ratio.
In addition to the minimum regulatory capital, the Board of Directors of eQ
Corporations has decided to maintain a risk buffer. The Board estimates that this
risk buffer will ensure that eQ Corporation will be able to continue its
operations even in exceptionally poor market conditions without major
disturbances.
Based on regulatory capital requirements and an analysis of risk-based capital
requirements, the Board has decided that the internal target for the capital
adequacy ratio of eQ Corporation is 12 per cent. The capital adequacy ratio may
temporarily vary from the target level, but it may not fall below 10 per cent.
The target level corresponds to the regulatory minimum of eight per cent plus an
additional risk buffer of 50 per cent.
Personnel
At the end of December eQ Group had 170 employees (142). The head count consists
of staff working permanently or for a fixed term of at least six months. The
average number of employees during 2006 was 150 (141).
The Board of Directors of eQ Corporation has approved a new share-based incentive
plan for the Group key personnel. The incentive plan is established to form part
of the remuneration and commitment program for the key personnel of the Company
and its subsidiaries. The aim is to combine the objectives of the owners and the
key personnel in order to increase the value of the Company, to bind the key
personnel to the Company, and to offer them a competitive reward plan based on
owning the Company shares.
The plan includes three two-year earning periods beginning 2007, 2008 and 2009.
The rewards will be paid partly in the Company's shares and partly in cash
payment in 2009, 2010 and 2011. The proportion to be paid in cash will cover
taxes and tax-related costs arising from the reward. It is prohibited to transfer
the shares within one year from the end of the earning period.
The potential reward from the plan for the earning period 2007 - 2008 will be
based on the Group's earnings before interest and taxes and on the total
shareholder return of the Company share.
The incentive plan is directed to approximately 30 key employees in the earning
period 2007 - 2008.
Under this incentive plan, the maximum performance level for the pre-defined
criteria will result in the total reward corresponding to the gross value
(including cash payment) of approximately 810,000 eQ Corporation shares.
Corporate management
Lauri Lundström was appointed eQ Bank's Head of Asset Management and member of
the Management Group as of May 1, 2006.
Decisions of the Annual General Meeting
The Annual General Meeting, held on March 29, 2006, confirmed the closing of the
books and released the members of the board and the managing director from
liability. The AGM authorised the board to decide to increase the share capital
by one or several new issues and/or to take one or several convertible loans.
Georg J.C. Ehrnrooth, Timo Everi, Johan Horelli, Antti Pankakoski, Miika
Varjovaara and Petteri Walldén were elected to the Board. KPMG Oy Ab was elected
to continue as the company's auditor. The AGM decided that a 0.20 euros dividend
per share, totaling EUR 6 679 476.80, would be distributed to shareholders for
the fiscal year of 2005. The dividend was paid on April 10, 2006.
Shares and share capital
At the end of December 2006 the consolidated shareholder's equity was EUR 73,6
million and the share capital was EUR 5 731 286.33 divided over 33 713 449
shares. The weighted average number of shares during the year was 33 559 020.
Equity per share was EUR 2.18. At the end of 2006 the company had 8 066
shareholders.
Based on the subscriptions with the option rights, the share capital of eQ
Corporation was increased by EUR 53 731.05 corresponding to 316 065 shares.
The company's shares were traded on the Helsinki Stock Exchange. During 2006 the
highest and the lowest share price on the Helsinki Stock Exchange were EUR 4.98
and EUR 2.48 respectively.
A total of 13 898 464 shares, representing 41 % of company's shares and
corresponding to a turnover of EUR 49 066 472 were traded during the year 2006.
During the last quarter of 2006 a total of 3 095 772 shares, representing about 9
% of company's shares and corresponding to a turnover of EUR 12 199 288 were
traded.
Option programmes
The company had two on-going option programmes during 2006; Option programme 2000
and Option programme 2004. The option programme 2000 was closed on June 30, 2006
and a total of 298 565 options were granted based on the programme.
The option programme 2004 is divided into two series. A total of 480 000 options
have been granted based on the programme 2004A-series (maximum dilution effect
1.4 %). Any options based on the B-series have not been granted.
The subscription period for the shares with the option programme of 2004 began on
January 1, 2007 and will end on March 31, 2008. The subscription prive for one
2004A-series option is EUR 2.60 per share.
Risks
The leading principle of risk management is to ensure that the risks inherent in
the company's activities are managed and controlled as is appropriate to the
company's core business and to ensure the adequacy of capital in relation to the
business risks. The consolidated capital adequacy ratio is well above the average
of Finnish bank groups.
The risks of eQ Corporation are categorised as credit risk, market risk, interest
rate risk and liquidity risk and operational risk.
Credit risk is limited by real time purchase power handling, counterparty limits,
well-defined process of limit granting and by granting loans secured with
collateral. During the reporting period no credit losses have been booked.
Market risk is the risk of loss in market value as a result of adverse movements
in financial market variables such as interest rates, foreign exchange rates or
equity prices. eQ Bank's Trading unit acts within the set limits and
authorisations granted to it and the risk control unit monitors the set risk
limits on a daily basis.
Asset and liability management is the main focus area of treasury operations. The
Treasury is also responsible for liquidity management and funding, as well as for
the management of credit risk, currency risk and counterparty risk. The Treasury
operates also as an internal bank and manages the group accounts and collateral.
Operational risk is defined as the risk of direct or indirect loss, or damaged
reputation resulting from inadequate or failed internal processes, people and
systems, or from external events. Development of internal processes, adequate
operational instructions and very comprehensive insurance are the tools used for
controlling operational risk. Business continuity plans are used for handling
major unexpected external events. The internal audit evaluates on a regular
basis the operative functions and processes and reports to the Board of eQ
Corporation.
In 2006 eQ Corporation didn't have any risks or legal obligations that would have
had substantial effect on the Group's financial statements.
Short-term outlook
The revenues of the eQ Group as well as the profitability are very sensitive to
the development of the equity and fixed income markets. In corporate finance
business the revenues are highly dependent on receiving success fees as well as
the timing of those. Due to these reasons the financial performance of eQ Group
may fluctuate significantly between quarters. The financial performance of eQ
Group has been exceptionally good during 2006 and especially during the last
quarter of 2006.
The business cycle seems to be strong and the development of the equity market
has been good during the beginning of 2007. This provides securities brokerage
and asset management with a strong basis for 2007. In corporate finance services,
a large portion of the mandates portfolio was finalised in 2006, which means that
the unit's fee income in the beginning of 2007 is likely to be slightly lower
compared to the first quarter of 2006.
The Board of Directors' proposal for the distribution of profit
The Board of Directors of eQ Corporation has approved a new strategic capital
management plan based on the Basel II requirements, which have become applicable
as of January 1, 2007. According to the capital management plan, the target is to
maintain a risk buffer of 50 per cent above the regulatory minimum. The target
level for the capital adequacy ratio is thus 12 per cent. The capital adequacy
ratio may temporarily fall below the target level but it is not expected to fall
below 10 per cent.
At the end of December 2006 eQ Group had a shareholder's equity of EUR 73.6
million (EUR 63.1 million). According to the current capital adequacy
requirements the consolidated capital adequacy ratio would have been 27.2 per
cent provided that no dividends were distributed, a level well above the required
minimum. The parent company's distributable funds are EUR 18.4 million or some
EUR 0.54 per share.
The Board of Directors of eQ Corporation proposes to the Annual General Meeting
that a dividend of EUR 0.40 per share would be distributed totalling EUR 13 485
379.60. Considering the Group's current capital adequacy requirements the capital
adequacy ratio after the proposed dividend distribution would be 18.9 %.
According to the Basel II framework the Group's consolidated capital adequacy
before any dividend distribution would be 19.2 %. Considering the proposed
dividend distribution, the Group's capital adequacy ratio would be 13.4 %.
The application of the Basel II framework includes factors of uncertainty.
Therefore, the Board of Directors will propose to the Annual General Meeting to
authorise the Board of Directors to decide on a share repurchase programme of
upto 1 000 000 shares (approximately 3.0 % of the equity capital). The details of
the proposal will be presented in the invitation to the Annual General Meeting.
This will give eQ a possibility of adjusting the amount of equity capital, when
the Group has more experience of the application of Basel II regulations.
eQ Corporation
The Board
For further information:
Antti Mäkinen tel. +358 9 6817 8686
CEO mobile +358 50 561 1501
eQ Corporation e-mail antti.makinen@eQ.fi
The company hosts a presentation on the Financial Statements for the press and
analysts today at 13.00 at eQ's premises, Mannerheiminaukio 1A, 4th floor,
Helsinki. During this meeting CEO Antti Mäkinen will comment the financial
statements and performance. Welcome.
Distribution:
Helsinki Stock Exchange
Main media
www.eQ.fi
EQ CORPORATION
CONSOLIDATED BALANCE SHEET (IFRS) 31.12.2006 31.12.2005
EUR 1000
ASSETS
Liquid assets 40 38
Claims on credit institutions 91 508 116 339
Financial assets held for trading 189 188 79 658
Available-for-sale financial assets 168 216 190 134
Claims on the public and public sector 54 866 35 327
entities
Investment in associates 30 77
Intangible assets 27 745 19 409
Tangible assets 4 699 2 956
Other assets 89 198 92 852
Deferred tax assets 1 661 3 625
TOTAL ASSETS 627 150 540 415
EQUITY AN LIABILITIES
LIABILITIES
Liabilities to credit institutions 90 1 768
Liabilities to the public and public 435 833 369 815
sector entities
Derivative financial instruments and 15 571 9 026
other liabilities held for trading
Other liabilities 101 018 96 044
Deferred tax liabilities 993 699
TOTAL LIABILITIES 553 505 477 351
EQUITY CAPITAL
Share capital 5 731 5 678
Share premium account 48 675 48 144
Reserve fund 2 106 2 106
Fair value reserve 0 9
Retained earnings 17 131 7 023
Total equity attributable to equity 73 644 62 960
holders of the parent company
Minority interest 0 103
TOTAL EQUITY 73 644 63 063
TOTAL EQUITY AND LIABILITIES 627 150 540 415
OFF-BALANCE SHEET COMMITMENTS
Irrevocable commitments given in favour 31.12.2006 31.12.2005
of a customer
Credit limits not in use 59 023 34 951
CONSOLIDATED PROFIT AND LOSS ACCOUNT 1.1. - 1.1. -
(IFRS) 31.12.2006 31.12.2005
EUR 1000
Interest income 14 075 8 049
Interest expence -8 762 -4 877
Net interest income 5 312 3 171
Fee and commission income 43 293 27 499
Fee and commission expence -6 059 -5 728
Net fee and commission income 37 233 21 771
Impairment of receivables 10 1
Net income from financial assets 2 393 3 182
held for trading
Net income from available-for-sale 377 412
financial assets
Net income from foreign exchange 59 34
dealing
Other operating income 2 901 2 424
Total income 48 285 30 996
Administrative expenses
Staff costs -15 893 -12 416
Other administrative expenses -9 360 -8 568
Total administrative expenses -25 252 -20 984
Depreciation and write-downs on
tangible
and intangible assets -2 349 -2 070
Other operating expenses -1 917 -1 588
Share of associated companies' -47 -23
results
Net operating profit 18 720 6 331
Income taxes -2 007 1 112
Profit for the financial year 16 713 7 442
Attributable to:
Equity holders of the parent 16 765 7 507
company
Minority interests -52 -65
Earnings per share, eur 0.50 0.23
Earnings per share, diluted, eur 0.50 0.23
CONSOLIDATED CASH FLOW 1.1. - 1.1. -
STATEMENT 31.12.2006 31.12.2005
EUR 1000
Cash flow from operating 39 082 -8 489
activities
Cash flow from investing -8 960 -1 807
activities
Cash flow from financing -6 093 4 324
activities
Change in liquid funds 24 029 -5 972
Liquid funds at Jan 1. 24 546 30 518
Liquid funds at the end of 48 575 24 546
the period
STATEMENT OF CHANGES IN
EQUITY
EUR 1000
Share Share Share Reserve
capital issue premium fund
account
Equity capital 1.1.2006 5 678 0 48 144 2 106
Subscription with the 54 531
option rights
Equity capital 31.12.2006 5 731 0 48 675 2 106
Fair Accrued Minority Total
value profit interests
reserve funds
Equity capital 1.1.2006 9 7 023 103 63 063
Subscription with the 585
option rights
Financial instruments -9 -9
Equity compensation plans 22 22
Profit for the period 16 765 -52 16 713
Distribution of dividend -6 679 -6 679
Paid minority interest -51 -51
Equity capital 31.12.2006 0 17 131 0 73 644
Share Share Share Reserve
capital issue premium fund
account
Equity capital 1.1.2005 5 306 175 44 202 2 106
Subscription with the 20 -175 154
option rights
Share issue 352 3 788
Equity capital 31.12.2005 5 678 0 48 144 2 106
Fair Accrued Minority Total
value profit interests
reserve funds
Equity capital 1.1.2005 39 -521 13 51 320
Subscription with the 0
option rights
Financial instruments -30 -30
Share issue 4 140
Equity compensation plans 37 37
Profit for the period 7 507 -65 7 442
Minority interest 155 155
Equity capital 31.12.2005 9 7 023 103 63 063
QUARTERLY FINANCIAL PERFORMANCE 10 - 7 - 4 - 1 - 10 -
12/2006 9/2006 6/2006 3/2006 12/2005
EUR 1000
Interest income 4 438 3 702 3 307 2 628 2 132
Interest expense -2 814 -2 298 -2 036 -1 615 -1 291
Net interest income 1 624 1 405 1 271 1 012 841
Net fee and commission income 13 388 5 099 9 600 9 146 5 906
Impairment of receivables 4 3 2 2 -7
Net income from financial assets 929 468 53 942 1 210
held for trading
Net income from 317 100 4 -44 181
available-for-sale financial
assets
Net income from foreign exchange 34 14 -12 23 13
dealing
Other operating income 781 697 697 726 748
Total income 17 078 7 785 11 615 11 807 8 892
Administrative expenses total -7 889 -4 802 -6 322 -6 239 -5 658
Depreciation and write-downs on
tangible
and intangible assets -635 -605 -584 -525 -467
Other operating expenses -545 -486 -463 -424 -405
Share of associated companies' -30 -10 22 -29 -23
results
Total expenses -9 099 -5 902 -7 347 -7 217 -6 553
Net operating profit 7 979 1 883 4 268 4 590 2 339
Income taxes -1 938 -12 -28 -28 1 148
Profit for the financial period 6 041 1 871 4 240 4 562 3 487
Attributable to:
Equity holders of the parent 6 040 1 893 4 257 4 574 3 484
company
Minority interests 1 -23 -17 -13 3
Earnings per share, quarterly, 0.18 0.05 0.13 0.14 0.11
eur
CAPITAL ADEQUACY
EUR 1000 31.12.2006 31.12.2005
Own funds
Original own funds 30 813 33 537
Additional funds, 0 12
gross
Deductions 0 0
Total own funds 30 813 33 549
Total risk-weighed 163 054 196 276
items
Capital adequacy 18,9 17,1
ratio (%)
LEASE OBLIGATIONS
EUR 1000
Operating leases
Irrevocable minimum lease 31.12.2006 31.12.2005
obligations
Operating lease obligations
In less than one year 456 307
Between one and five 583 575
years
Total 1 039 882
Premises lease obligations
In less than one year 1 392 1 225
Between one and five 3 936 4 806
years
Total 5 328 6 031
Financial leases
31.12.2006 31.12.2005
Minimum lease payments
In less than one year 135 43
Between one and five 203 63
years
Total 338 106
GUARANTEES AND PLEDGES 31.12.2006 31.12.2005
On own behalf
Pledged securities 106 766 89 522
Pledged claims on credit 9 325 6 700
institutions
Total 116 091 96 222
DERIVATIVES
Values of underlying
instruments
Interest rate derivatives 5 441 5 646
Equity derivatives 2 817 5 304
KEY FINANCIAL INDICATORS
31.12.2006 31.12.2005
Return on equity, % 24,5 13,0
Operating costs to earnings 0,6 0,8
Profit per share, eur 0,50 0,23
Profit per share, quarterly, 0,18 0,11
eur
Profit per share, eur 0,18 0,11
(diluted)
Profit per share trailing 0,50 0,23
12m, eur
Equity per share, eur 2,18 1,89
Equity ratio, % 11,7 11,7
The principles of calculating financial indicators
Return on equity % (net operating profit/loss - taxes) x 100
------------------------------------------
total equity
(average of the figures for the beginning
and the end of the year)
Operating costs to earnings
administrative expenses + depreciation and
write-downs on tangible and intangible assets
+ other operating expenses
---------------------------------------------
net interest income + net commission income +
impairment of receivables + net income from financial
assets held for trading + net income from available-for-
sale financial assets + net income from
exchange dealing + other operating income
+ share of associated companies' results (net)
Profit per share, eur net operating profit - taxes + minority
interest
---------------------------------------------
average weighted number of shares corrected with
share issues
Profit per share, diluted, eur
net operating profit - taxes + minority
interest
--------------------------------------------
weighted average number of shares during the
financial period (diluted)
Equity per share, eur total equity
--------------------------------------------
adjusted average number of shares on balance
sheet date
Equity ratio, % total equity x 100
-------------------------------------------
balance sheet total
eQ's FINANCIAL STATEMENT BULLETIN JANUARY - DECEMBER 2006
| Source: eQ