Pohjola Bank plc's Interim Report for 1 January-31 March 2011

Pohjola Bank plc
Company Release, 4 May 2011, 8.00 am
Release category: Interim Report

Pohjola Bank plc's Interim Report for 1 January-31 March 2011

- Consolidated earnings before tax improved to EUR 94 million (59). Earnings before tax at fair value were EUR 74 million (119) and return on equity at fair value stood at 10.0% (15.9).
- Banking earnings before tax doubled to EUR 53 million (26). These earnings included EUR 16 million (33) in impairment charges on receivables. The loan portfolio increased by 3% from its level on 31 December 2010.
- Within Non-life Insurance, insurance premium revenue rose by 8%. Earnings were eroded by higher claims incurred. Excluding amortisation on intangible assets arising from company acquisition, the operating combined ratio stood at 100.5% (95.5). Within Non-life Insurance, return on investments at fair value was 0.5% (3.2).
- Asset Management increased its earnings by 11% to EUR 6.2 million (5.6) and assets under management amounted to EUR 34.8 billion (35).
- The Group Functions reported earnings of EUR 17 million (22) before tax.
- Unchanged outlook: Consolidated earnings before tax for 2011 are expected to be higher than in 2010. For more detailed information on outlook, see "Outlook towards the year end" below.

President and CEO Mikael Silvennoinen:

"Our consolidated earnings before tax for the first quarter of 2011 were good and much better than a year ago. Our income grew at more than double the rate of our expenses. Finnish economic growth remained strong and the corporate sector has continued to experience a more favourable operating environment buttressed by brighter export prospects. As a result of the improved operating environment, our impairment charges for the reporting period were markedly lower than a year ago although they remained at the previous quarter's level. Interest rates continued their upward trend and uncertainty persisted in capital markets, with the result that our consolidated earnings before tax at fair value were lower than the record level posted a year earlier.

Banking improved its year-on-year earnings markedly, and it was gratifying to see that all our business lines developed favourably. Demand for corporate loans has gradually rebounded, and our corporate loan portfolio grew by 3% in the first quarter. This growth improved net interest income although tougher competition reduced the average margin on our corporate loan portfolio. The Markets division reported good financial performance and client trading volumes were on the rise. Baltic Banking also developed favourably.

Insurance premium revenue continued its strong growth among private customers and premium revenue from corporate customers also rebounded markedly. Higher claims expenditure, especially among corporate customers, weakened the operating combined ratio. Within private customers, our balance on technical account was almost at the previous year's level despite bad winter weather conditions and the larger number of claims.

Within Asset Management, assets under management were at their 2010-end level, and the business line showed improved operating efficiency.

The Finnish economy is expected to continue its strong growth in 2011, which will provide us with growth potential.  Accordingly, we will strengthen our customer service resources considerably during the current year. Our strong capital base and diverse range of services provide us with good opportunities to meet the growing needs of our customers."

Outlook towards the year end

The economic recovery underway has been reflected in demand for corporate loans, with the result that the corporate loan portfolio has begun to grow. The average corporate loan margin has turned down and tougher competition is expected to send the margin on new loans down. Enabled by the economic recovery, the operating environment is expected to improve in the corporate sector and impairment charges to decrease. The greatest uncertainties related to Banking's financial performance in 2011 are associated with future impairment charges on the loan portfolio.

Insurance premium revenue is expected to continue to increase at an above-the-market-average rate among private customers. Insurance premium revenue from corporate customers has rebounded. In Non-life Insurance, the operating combined ratio is estimated to vary between 89% and 94% in 2011 if the number of large claims is not much higher than in 2010. Expected long-term returns on investment within Non-life Insurance stand at 5.1%. Returns will largely depend on developments in the investment environment. The most significant uncertainties related to Non-life Insurance's financial performance in 2011 pertain to the investment environment and the effect of large claims on claims expenditure.

Within Asset Management, assets under management are expected to increase during the rest of the year, their amounts being affected by market developments and the net inflow of assets. The greatest uncertainties related to Asset Management's financial performance in 2011 are associated with the actual performance-based 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 portfolio, any capital gains or losses on notes and bonds and any impairment charges recognised on notes and bonds in the income statement. Capital gains on notes and bonds are expected to decrease in 2011.

Consolidated earnings before tax in 2011 are expected to be higher than in 2010.

There is still great uncertainty about future economic development and the overall operating environment, and these factors are beyond the Group management's control.

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, 4 May 2011

Pohjola Bank plc
Board of Directors

This Interim Report is available at www.pohjola.fi/english > Media. Background information on the Report can also be found at the same address.

Analyst meeting, conference call and live webcast

Pohjola will hold a briefing in English for analysts and investors on 4 May starting at 3.00 pm Finnish time, EET (2.00 pm CET, 1.00 pm UK time, 8am US EST). The briefing is a combined analyst meeting, conference call and live webcast.

Analysts and investors may attend the briefing in one of the following two ways:
1) By viewing the briefing as live webcast via the internet. The link will be available on the IR website before the briefing begins. Questions on the internet are welcome via a question button available in the webcast window. An on-demand webcast of the briefing can be viewed via the IR website afterwards.
2) By dialling one of the regional conference call numbers shown below. Questions are welcome by telephone in the Q&A session according to instructions. To participate via a conference call, please dial in 5-10 minutes before the beginning of the event:

UK, International +44 203 043 24 36
US +1 866 458 40 87
FIN +358 923 101 527
Password: Pohjola

Press conference

Mikael Silvennoinen, Pohjola Bank plc's President and CEO, will present the interim results in a press conference on OP-Pohjola Group's premises (Teollisuuskatu 1b, Vallila, Helsinki), on 4 May, starting at noon.

Financial reporting in 2011

Schedule for Interim Reports in 2011:
Interim Report H1/2011      3 August 2011
Interim Report Q1-3/2011  2 November 2011
 
DISTRIBUTION
NASDAQ OMX Helsinki Ltd
London Stock Exchange
Major media
www.pohjola.fi, www.op.fi

For additional information, please contact
Mikael Silvennoinen, President and CEO, tel. +358 (0)10 252 2549
Vesa Aho, CFO, tel. +358 (0)10 252 2336
Tarja Ollilainen, Senior Vice President, Investor Relations, tel. +358 (0)10 252 4494