Pohjola Bank plc
Stock exchange release 24 October 2014, 9.00 am
Interim Report
Pohjola Group Performance for January-September
- Consolidated earnings before tax amounted to EUR 467 million (384) and consolidated earnings before tax at fair value to EUR 519 million (352). The return on equity was 15.5% (13.5). The Common Equity Tier 1 (CET1) ratio was 12.0% (11.9*) as against the target of 15%.
- Strong growth in income improved Banking earnings. The loan portfolio grew by 3% to EUR 14.6 billion (14.2). The average corporate loan portfolio margin was 1.49% (1.57). Earnings included EUR 18 million (29) in impairment loss on receivables.
- Within Non-life Insurance, insurance premium revenue increased by 6% (10). The combined ratio was 91.0% (88.3). A reduction in the discount rate for pension liabilities reduced earnings by EUR 62 million (0). Excluding changes in reserving bases and amortisation on intangible assets arising from company acquisition, the operating combined ratio improved to 83.1% (86.6). Return on investments at fair value was 4.9% (2.1).
-Within Asset Management, assets under management increased by 9% to EUR 41.5 billion (37.9).
- OP-Pohjola Group Central Cooperative completed its public voluntary bid announced in February 2014 and obtained ownership of all Pohjola Bank plc shares by decision of the arbitral tribunal. Pohjola's series A shares were delisted from the Helsinki Stock Exchange on 30 September 2014. OP-Pohjola Group Central Cooperative was entered as the only shareholder in Pohjola's shareholder register on 7 October 2014.
- Outlook for the remainder of 2014: Consolidated earnings before tax in 2014 are expected to be higher than in 2013. The growth of the Banking loan portfolio is expected to fall short of that achieved in 2013 (previous estimate: at the same level as 2013). It is estimated that the Non-life Insurance combined ratio will vary between 85 and 88% (previous estimate: 87-91). For more detailed information on the outlook, see "Outlook towards the end of 2014" below.
July-September
- Consolidated earnings before tax amounted to EUR 131 million (131) and consolidated earnings before tax at fair value to EUR 126 million (173).
- Banking showed considerable improvement in its earnings before tax. Net interest income grew by 29% year on year. The loan portfolio increased slightly and the average corporate loan portfolio margin decreased by two basis points. Earnings included EUR 10 million (10) in impairment loss on receivables.
- Within Non-life Insurance, insurance premium revenue increased by 3% (10). The combined ratio was 100.6% (83.3). A reduction in the discount rate for pension liabilities reduced earnings by EUR 62 million (0). The operating combined ratio was 80.5% (81.6). Return on investments at fair value was 1.4% (1.7).
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 2013 are used as comparatives. Comparative figures have been restated as a result of the adoption of IFRS 10 Consolidated Financial Statements.
*) In accordance with the EU capital requirement regulation and directive (EU 575/2013) (CRR) entered into force on 1 January 2014.
**) According to the Solvency II draft (EU 138/2009
| Earnings before tax, € million | Q1-3/ 2014 | Q1-3/ 2013 | Change % | Q3/2014 | Q3/2013 | 2013 |
| Banking | 248 | 175 | 41 | 80 | 64 | 251 |
| Group Functions | 9 | 29 | -69 | -13 | -2 | 39 |
| Non-life Insurance | 191 | 162 | 18 | 58 | 63 | 166 |
| Asset Management | 20 | 18 | 8 | 6 | 7 | 24 |
| Group total | 467 | 384 | 22 | 131 | 131 | 479 |
| Change in fair value reserve | 52 | -32 | -5 | 42 | -16 | |
| Earnings before tax at fair value | 519 | 352 | 47 | 126 | 173 | 463 |
| Equity per share, € | 10.06 | 9.05 | 9.54 | |||
| Average personnel | 2,579 | 2,637 | 2,589 | 2,543 | 2,632 |
The above figures describe Pohjola Group as a whole without the division into continuing and discontinued operations.
| Financial targets | Q1-3 /2014 | Q1-3 /2013 | Q3/ 2014 | Q3/ 2013 | 2013 | Target |
| Return on equity, % | 15.5 | 13.5 | 12.4 | 13.4 | 14.4 | 13 |
| Common Equity Tier 1 ratio (CET1), % *) | 12.0 | 11.9 | 15 | |||
| Operating cost/income ratio by Banking, % | 31 | 36 | 29 | 33 | 36 | < 35 |
| Operating combined ratio by Non-life Insurance, % | 83.1 | 86.6 | 80.5 | 81.6 | 86.9 | < 92 |
| Operating expense ratio by Non-life Insurance, % | 17.4 | 18.4 | 16.1 | 16.2 | 18.7 | 18 |
| Non-life Insurance solvency ratio (under Solvency II framework), % **) | 135 | 132 | 125 | 120 | ||
| Operating cost/income ratio by Asset Management, % | 49 | 52 | 51 | 47 | 53 | < 45 |
| Total expenses in 2015 at the same level as at the end of 2012 | 448 | 427 | 151 | 135 | 581 | 569 |
| 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 CET 1 ratio is at least 15%. Dividend payout ratio is 30% until CET1 ratio of 15% has been achieved. | 50 | > 50 (30) |
Outlook towards the end of 2014
The growth of the Banking loan portfolio is expected to fall short of that achieved in 2013 (previous estimate: at the same level as 2013). Due to the operating environment, corporate investments are expected to remain below their normal level. The greatest uncertainties related to Banking's financial performance are associated with volume developments and future impairment loss on the loan portfolio.
Insurance premium revenue is expected to increase at a rate above the market average. In Non-life Insurance, the operating combined ratio for the full year 2013 is estimated to vary between 85% and 88% (previous estimate: 87-91%) if the number of large claims is not much higher than in 2013. Expected investment returns will largely depend on developments in the investment environment. The most significant uncertainties related to Non-life Insurance's financial performance pertain to developments in bond and investment markets and to the effect of large claims on claims expenditure.
The greatest uncertainties related to Asset Management's financial performance are associated with the actual performance-based commissions and fees 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.
Consolidated earnings before tax in 2014 are expected to be higher than in 2013.
There is still great uncertainty about the economic outlook and the operating 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 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, 24 October 2014
Pohjola Bank plc
Board of Directors
This Interim Report is available at www.pohjola.com > Media > Releases.
Financial reporting in 2015
Pohjola Bank plc publishes the following financial information pursuant to the regular disclosure obligation of a securities issuer:
Schedule for Financial Statements Bulletin for 2014 and Interim Reports in 2015:
Financial Statements Bulletin 2014: 5 February 2015
Interim Report Q1/2015: 29 April 2015
Interim Report H1/2015: 5 August 2015
Interim Report Q1-3/2015: 28 October 2015
DISTRIBUTION
NASDAQ OMX Helsinki Ltd
London Stock Exchange
SIX Swiss Exchange
Major media
www.pohjola.com, www.op.fi
For additional information, please contact
Jouko Pölönen, President and CEO, tel. +358 (0)10 253 2691
Pohjola is part of the leading Finnish customer-owned financial services group, OP-Pohjola. Pohjola provides its customers with banking, non-life insurance and asset management services. Pohjola is OP-Pohjola's central bank and is, together with OP Mortgage Bank, responsible for OP-Pohjola's funding operations on money and capital markets. As laid down in the applicable law, Pohjola, its parent company OP-Pohjola Group Central Cooperative and the member credit institutions are ultimately jointly and severally liable for each other's debts and commitments. The joint liability in OP-Pohjola is prescribed by the Act on the Amalgamation of Deposit Banks Act.
