Pohjola Bank plc
Stock Exchange Release 5 August 2015 at 8.00 am
Interim Report
Pohjola Group performance for January-June 2015
- Consolidated earnings before tax were EUR 361 million (336) and consolidated earnings before tax at fair value amounted to EUR 306 million (393). The return on equity was 17.0% (17.2).
- The Common Equity Tier 1 (CET1) ratio was 13.8% (12.4) as against the target of 15%.
- Earnings reported by Banking improved by 4% year on year. The loan portfolio grew by 7% to EUR 15.9 billion (14.9). Earnings included EUR 18 million (8) in impairment loss on receivables.
- Non-life Insurance earnings improved by 9% year on year as a result of an increase in investment income. Insurance premium revenue rose by 5% (7). Combined ratio was 89.4 (86.1). Operating combined ratio*) was 87.8% (84.5). Return on investments at fair value was 1.3% (3.4).
- Earnings before tax reported by Other Operations improved by 25% year on year thanks to higher net investment income and lower expenses in Other Operations.
- Within Wealth Management, earnings remained at the previous year's level. Assets under management increased by 7% to EUR 46.3 billion (43.3).
- Change in the outlook: Consolidated earnings from continuing operations before tax in 2015 are expected to be at the same level as or higher than in 2014 (previous estimate: "at the same level as in 2014"). For more detailed information on the outlook, see "Outlook towards the year end" below.
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 2014 are used as comparatives.
Earnings before tax, € million | H1/2015 | H1/2014 | Change, % | 2014 |
Banking | 175 | 167 | 4 | 303 |
Non-life Insurance | 145 | 133 | 9 | 223 |
Other Operations | 28 | 22 | 25 | 20 |
Wealth Management | 14 | 14 | 2 | 38 |
Group total | 361 | 336 | 7 | 584 |
Change in fair value reserve | -55 | 57 | 79 | |
Earnings before tax at fair value | 306 | 393 | -22 | 663 |
Equity per share, € | 10.80 | 9.81 | 10.38 | |
Average personnel | 2,485 | 2,592 | 2,563 |
The above figures describe Pohjola Group as a whole without the division into continuing and discontinued operations.
Financial targets | H1/2015 | H1/2014 | Target | 2014 |
Return on equity, % | 17.0 | 17.2 | 13 | 14.3 |
Common Equity Tier 1 ratio (CET1), % *) | 13.8 | 11.9 | 15 | 12.4 |
Operating cost/income ratio by Banking, % | 26 | 32 | < 35 | 33 |
Operating combined ratio by Non-life Insurance, % | 87.8 | 84.5 | < 92 | 84.7 |
Operating expense ratio by Non-life Insurance, % | 18.2 | 18.1 | 18 | 18.4 |
Non-life Insurance solvency ratio (under Solvency II framework), %**) | 137 | 137 | 120 | 117 |
Operating cost/income ratio by Wealth Management, % | 49 | 49 | < 45 | 42 |
Total expenses in 2015 at the same level as at the end of 2012 | 249 | 267 | 514***) | 531 |
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 CET1 ratio is at least 15%. Dividend payout ratio is 30% until CET1 ratio of 15% has been achieved. | > 50 (30) | 30 |
*) Operating ratios exclude changes in reserving bases and amortisation on intangible assets arising from the corporate acquisition.
**) Excluding the effect of transitional provisions.
***) The expense target for 2012 has been adjusted to correspond to the change in the accounting policies applied as of 1 January 2015 (see Note 1. Accounting policies).
Outlook towards the year end
The euro-area economy has continued to grow at a moderate rate supported by the ECB's expansionary monetary policy measures. The fragile economic growth is expected to continue during the second half too. Economic development in Finland is expected to remain weak. Structural problems in the Finnish economy, international political tensions, the Greek debt crisis that has escalated again and poorer prospects for the emerging economies will cause major uncertainty to the economic rebound in Finland.
Growth expectations are still moderate in the financial sector. Low interest rates will erode banks' net interest income and weaken insurance institutions' investment income. Then again, low interest rates support customers' loan repayment capacity that has remained stable despite the prolonged period of slow growth. Capital adequacy and profitability in the financial sector have come to play an ever-increasing role because of the unstable operating environment and the tighter regulatory framework.
Despite the uncertainty involved in the operating environment, Pohjola Group's consolidated earnings from continuing operations before tax in 2015 are expected to be at the same level as or higher than in 2014 (previous estimate: at the same level as in 2014). The most significant uncertainties affecting earnings in 2015 relate to the rate of business growth, impairment loss on receivables, developments in bond and capital markets, the effect of large claims on claims expenditure and to the discount rate applied to insurance liabilities.
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, 5 August 2015
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 Interim Reports in 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
Carina Geber-Teir, Executive Vice President, Corporate Communications, tel. +358 (0)10 252 8394
Pohjola is part of the leading Finnish customer-owned financial services group, OP Financial Group. Pohjola provides its customers with banking, non-life insurance and wealth management services. Pohjola is OP Financial Group's central bank and is, together with OP Mortgage Bank, responsible for OP Financial Group's funding operations on money and capital markets. As laid down in the applicable law, Pohjola, its parent company OP Cooperative and the member credit institutions are ultimately jointly and severally liable for each other's debts and commitments. The joint liability in OP is prescribed by the Act on the Amalgamation of Deposit Banks Act.