Pohjola Bank plc
Interim Report 1 January-30 September 2015
Stock Exchange Release 28 October 2015 at 8.00 am (EET)
Pohjola Group Interim Report for 1 January-30 September 2015
- Consolidated earnings before tax were EUR 531 million (467) and consolidated earnings before tax at fair value amounted to EUR 392 million (519). The return on equity was 16.4% (15.5).
- The Common Equity Tier 1 (CET1) ratio was 13.7% (12.4) as against the target of 15%.
- Earnings reported by Banking improved by 5% to EUR 259 million (248). The loan portfolio grew by 8% from that at the turn of the year to EUR 16.1 billion (14.9) and by 10% in the year to September. Earnings included EUR 19 million (18) in impairment loss on receivables.
- Non-life Insurance earnings rose by 18% to EUR 225 million (191). Operating combined ratio was 86.3 (89.4). Return on investments at fair value was 1.0% (4.9).
- Earnings before tax reported by Other Operations improved 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 6% in the year to September and by 2% year on year, totalling EUR 44.0 billion (43.3).
- Change in the outlook: Consolidated earnings from continuing operations before tax in 2015 are expected to be higher than in 2014 (previously: at the same level or higher than in 2014). For more detailed information on the outlook, see "Outlook towards the year end" below.
| Earnings before tax, EUR million | Q1-3/2015 | Q1-3/2014 | Change, % | 2014 |
| Banking | 259 | 248 | 5 | 303 |
| Non-life Insurance | 225 | 191 | 18 | 223 |
| Other Operations | 28 | 9 | 20 | |
| Wealth Management | 19 | 20 | -5 | 38 |
| Group total | 531 | 467 | 14 | 584 |
| Change in fair value reserve | -139 | 52 | 79 | |
| Earnings before tax at fair value | 392 | 519 | -24 | 663 |
| Equity per share, EUR | 10.99 | 10.06 | 10.38 | |
| Average personnel | 2,461 | 2,579 | 2,563 |
The above figures describe Pohjola Group as a whole without the division into continuing and discontinued operations.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.
| Financial targets | Q1-3/2015 | Q1-3/2014 | Target | 2014 | ||
| Return on equity, % | 16.4 | 15.5 | 13 | 14.3 | ||
| Common Equity Tier 1 ratio (CET1), % *) | 13.7 | 12.0 | 15 | 12.4 | ||
| Operating cost/income ratio by Banking, % | 27 | 31 | < 35 | 33 | ||
| Operating combined ratio by Non-life Insurance, % **) | 86.3 | 89.4 | < 92 | 89.4 | ||
| Operating expense ratio by Non-life Insurance, % | 17.4 | 17.4 | 18 | 18.4 | ||
| Non-life Insurance solvency ratio (under Solvency II framework), % ***) | 152.0 | 137.5 | 120 | 117.3 | ||
| Operating cost/income ratio by Wealth Management, % | 53 | 49 | < 45 | 42 | ||
| Total expenses in 2015 at the same level as at the end of 2012 | 362 | 448 | 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 CET 1 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.
**) The comparative figure has been adjusted to correspond to the change in the discount rate applied since the beginning of 2015.
***) 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
World economic growth will this year be slightly weaker than last year. Economic growth in the euro-area will recover slightly over last year but will still be sluggish. The Finnish economy is still waiting for recovery and no clear turn for the better is on the horizon. Export demand will remain weak and price competitiveness has not improved to the extent that it can help the export sector which has been suffering from structural changes. Implementing the required measures in turn strain the political situation which poses a risk on the revival of home markets.
On the whole, growth expectations in the financial sector are still more moderate than the long-term average. 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.
In spite of the weak economic environment, Pohjola Group's consolidated earnings from continuing operations before tax in 2015 are expected to be higher than in 2014 (previous estimate: at the same level as or higher than 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 and the effect of large claims on claims expenditure.
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, 28 October 2015
Pohjola Bank plc
Board of Directors
This Interim Report is available at www.pohjola.com > Media > Releases.
Financial reporting in 2016
Pohjola Bank plc publishes the following financial information pursuant to the regular disclosure obligation of a securities issuer:
Schedule for Financial Statements Bulletin for 2015 and Interim Reports in 2016:
Financial Statements Bulletin 2015 4 February 2016
Interim Report Q1/2016 27 April 2016
Interim Report H1/2016 3 August 2016
Interim Report Q1-3/2016 2 November 2016
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.
