Pohjola Bank plc
Company Release, 3 November 2010, 8.00 am
Release category: Interim report
Pohjola Bank plc Interim Report for 1 January-30 September 2010
January-September
- Year on year, consolidated earnings before tax improved to EUR 242 million (211). Earnings include EUR 88 million (95) in impairment charges on receivables.
- Earnings before tax at fair value amounted to EUR 273 million (424) and return on equity at fair value stood at 11.7% (21.8).
- Banking posted earnings before tax of EUR 93 million (99), with impairment charges on receivables affecting its earnings by EUR 89 million (84).
- Non-life Insurance's operating combined ratio stood at 88.6% (86.7). Within Non-life Insurance, return on investments at fair value was 5.2% (9.0).
- Asset Management reported earnings of EUR 18 million (11) and assets under management increased to EUR 35.2 billion (33.1).
- Capital gains on notes and bonds improved earnings before tax posted by the Group Functions.
- Outlook: Consolidated earnings before tax in 2010 are expected to be at the same level as or higher than in 2009 (previous estimate: at the same level). It is estimated that Non-life Insurance's operating combined ratio will vary between 89 and 92% (previous estimate: 89-93%). For more detailed information on outlook, see "Outlook towards the year end" below.
July-September
- Consolidated earnings before tax came to EUR 103 million (87). Earnings included EUR 27 million (41) in impairment charges on receivables and EUR 7 million in one-time amortisation on intangible assets.
- Earnings before tax at fair value were 165 million (196).
- Non-life Insurance's operating combined ratio stood at 82.8% (83.1). Within Non-life Insurance, return on investments at fair value was 2.6% (4.3).
- Pohjola Insurance Ltd and Pohjantähti Mutual Insurance Company are planning to merge.
President and CEO Mikael Silvennoinen:
Pohjola Group's third-quarter earnings before tax were the best ever recorded, exceeding EUR 100 million, and January-September earnings were also better than a year ago. Our earnings before tax grew by 15%. Net interest income continued its growth, thanks to the strong growth reported by Corporate Banking in particular. January-September impairment charges on receivables were almost at the same level as the year before but were markedly lower in the third quarter than a year ago. The third quarter saw favourable developments in capital markets.
With greater demand for corporate loans, the loan and guarantee portfolio has begun to grow. In line with our expectations, the trend of the rising average corporate loan margin has come to an end and tougher competition is sending the margin on new loans down. Slightly higher impairment charges year on year and the normalisation of the Markets division's financial performance were offset by the strong growth in net interest income recorded by Corporate Banking in January-September. Earnings reported by Banking in January-September were almost at the same level as in the previous year but markedly higher in the third quarter than the year before.
Within Non-life Insurance, the balance on technical account remained good despite the claims filed in the aftermath of the late summer storms. Thanks to our reinsurance cover, they did not have any major effect on the Non-life Insurance results. Insurance premium revenue grew and its growth among private customers in particular remained strong throughout January-September. We had set a strategic target in 2005 of serving 450,000 loyal customer households by the end of 2010, but reached it already in August. As early as March, we achieved the annual level of EUR 17 million in the revenue synergies resulting from growth in the number of loyal customer households.
In late September, we announced that Pohjola Insurance Ltd and Pohjantähti Mutual Insurance Company were planning to merge. The extraordinary general meetings of these insurers will decide in early December whether the merger plan will be rejected or approved. The purpose of the merger is to strengthen the competitiveness in the Finnish non-life insurance market of the new entity formed by the insurance business of Pohjola Insurance and Pohjantähti. We will provide Pohjantähti's customers with a comprehensive range of financial services and the best loyalty benefits and offer Pohjantähti staff with new career and development opportunities. In addition to the existing staff, we will hire at least another 50 people for the new service centre that will be established in Hämeenlinna. We are confident that the merger will benefit not only customers but also employees and owners.
Within Asset Management, assets under management increased to more than EUR 35 billion and earnings before tax also showed a marked year-on-year improvement. Pohjola Capital Partners Ltd, a private equity firm, will be bought by its existing management by the end of this year.
As a result of our good financial performance in January-September and a more stable operating environment, we expect to improve our full-year earnings from their previous year's level.
Press conference
Mikael Silvennoinen, Pohjola Bank plc's President and CEO, will present the financial results in a press conference, Teollisuuskatu 1 b, Vallila, Helsinki, on 3 November, starting at noon.
