OMA SAVINGS BANK PLC, STOCK EXCHANGE RELEASE 11 MAY 2020 AT 8.57 A.M. EET, INTERIM REPORT Q1
Oma Savings Bank Plc’s Interim Report 1.1.-31.3.2020: Bank’s business showed strong growth during Q1 – preparations made for changes in operating environment
This release is a summary of Oma Savings Bank’s (OmaSp) January-March 2020 Interim Report, which can be read from the pdf file attached to this stock exchange release and on the company’s web pages www.omasp.fi
CEO Pasi Sydänlammi:
”Oma Savings Bank’s first quarter proceeded in line with expectations up until the exceptional circumstances caused by the coronavirus. With regard to the first quarter, we are extremely satisfied with our key sources of income, i.e. the excellent development of net interest income and the ‘Fee and commission income and expenses (net)’ item. Net interest income showed strong growth, almost 18% compared to the previous year. Our ‘Fee and commission income and expenses (net)’ item grew by more than 8% and 19% when considering the impact of the clarification of recognition principles. Fee and commission expenses and personnel expenses are clearly lower than in the previous year. Fee and commission expenses fell by more than 27% and personnel expenses by 10%.
Impairment losses on financial assets show our preparations for the changes in the operating environment caused by the coronavirus. We recorded some EUR 8.5 million in expected credit losses in the first quarter. A major part of this, some EUR 6.7 million, resulted from the preparations for the corona crisis based on the management’s estimates and the growth in the credit risks of individual customers.
In Q1, we benefitted from the good market situation and divested part of our investment portfolio. We recorded some EUR 8 million in profit. The corona crisis has had a comprehensive impact on the market value of financial assets and, as a result, we recognised some EUR –1.9 million in changes in fair value.
Profit before taxes for January–March was at a good level despite the exceptional conditions, ending up at EUR 7.2 million. The comparable profit before taxes was EUR 2.4 million. The result was affected significantly by credit loss allowance based on management judgement and changes in fair value, altogether EUR 8.7 million. The bank’s balance sheet total grew in the first quarter by more than 3%, coming to around EUR 3.5 billion.
Prompt reaction to a rapidly changing market situation
We have closely monitored the development of the corona epidemic and made the necessary changes to our operating models. The precautionary measures secure the personnel’s and customers’ well-being and bolster our financial position. At the start of April, we issued a EUR 250 million bond with which we will ensure our ability to respond to customers’ growing demand and the renegotiation of their loans.
As a bank, we are strongly committed to working on behalf of the well-being of Finnish society. Early on in the epidemic, the number of enquiries and loan amendment applications increased ten-fold and we cleared the backlog created by the exceptional situation through additional resources and opening hours on weekends. Our personnel showed excellent resilience and a get-go spirit in this situation.
Our operations are based on satisfied customers and a motivated personnel. Customer and personnel surveys carried out in Q1 confirmed that the personnel’s high level of expertise is reflected in excellent service and satisfied customers.
Strong financial position
We are well-prepared for the current changes in the operating environment and we have confidence in our competitiveness. Our strategy relies on profitable growth, a straightforward business model and efficient risk management. In these exceptional times, the bank’s societal significance is highlighted and our strong financial position ensures that we are here for our customers. Due to our flexible operating models, we can develop our business and guarantee a strong result also in a changing environment.”
January-March 2020
• Net interest income continued its strong growth, by close to 18% in January–March compared to the same period last year.
• The home mortgage portfolio grew 3.3% during Q1. Over the previous 12 months, the home mortgage portfolio grew 19.2%. At the same time, the corporate loan portfolio increased 1.2% and 15.2% respectively.
• Deposit stocks grew during the first quarter by 1.4% and growth for the previous 12 months was 10.3%.
• The ‘Fee and commission income and expenses (net)’ item increased in January–March by 8.2% compared to the same period last year. Comparability is impacted by the clarification of the fee and commission income recognition principles, the impact of which on fee and commission income was EUR -0.7 (0.0) million.
• Net income on financial assets and liabilities during January–March 2020 was EUR 5.5 (6.7) million and they included non-recurring items during the reporting and comparative period. The item includes EUR 8.0 million in profits, which consist of the sale of bonds belonging to the company’s investment portfolio.
• Total operating income grew by 9.4% in Q1 and came to a total of EUR 30.0 (27.4) million. Total operating expenses EUR 14.2 (14.3) million remained at last year’s level despite the strong growth in volume.
• Personnel expenses fell 10% on the comparative period and came to a total of EUR 3.9 (4.3) million.
• Impairment losses on financial assets were EUR 8.5 (1.2) million in January–March. A significant portion of the growth, EUR 6.7 million, is the result of a group-specific additional loss allowance based on management judgement, with which the company can pre-emptively prepare for the impacts of the corona pandemic and a loss allowance with which it prepares for individual customers’ credit risk growth.
• The cost/income ratio for Q1 improved clearly compared to the corresponding period in 2019 and was 47.5% (52.2%). The comparable cost/income ratio improved and was 56.6% (69.1%) for the period.
• The Group’s Q1 profit before taxes was EUR 7.2 (11.9) million. The comparable profit before taxes for January–March was EUR 2.4 (5.2) million. The main factor affecting the Q1 result was the additional allowance for expected credit losses based on management judgement.
| The Group’s key figures (1 000 euros) | 1-3/2020 | 1-3/2019 | Δ % | 1-12/2019 |
| Net interest income | 15,505 | 13,195 | 18% | 57,522 |
| Fee and commission income and expenses, net | 6,714 | 6,204 | 8% | 25,414 |
| Impairment losses on financial assets, net | -8,531 | -1,205 | 608% | -9,567 |
| Profit before taxes | 7,222 | 11,892 | -39% | 32,684 |
| Cost/income ratio, % | 47,5% | 52.2% | -9% | 54.4% |
| Balance sheet total | 3,526,023 | 3,351,058 | 5% | 3,416,530 |
| Equity | 317,519 | 304,486 | 4% | 319,865 |
| Return on assets (ROA) % | 0.7% | 1.4% | -51% | 0.9% |
| Return on equity (ROE) % | 7.4% | 14.5% | -49% | 9.0% |
| Earnings per share (EPS), EUR | 0.20 | 0.36 | -45% | 0.93 |
| Common Equity Tier 1 (CET1) capital ratio % | 16.6% | 17.6% | -6% | 16.8% |
| Comparable profit before taxes | 2,369 | 5,193 | -54% | 28,045 |
| Comparable cost/income ratio, % | 56.6% | 69.1% | -18% | 56.7% |
| Comparable return on equity (ROE) % | 2.5% | 5.6% | -55% | 7.4% |
Outlook 2020 (updated)
The company’s business volumes are predicted to maintain their strong growth during the 2020 accounting period. The company’s profitable growth is supported by efforts in recent years to improve the customer experience and the availability of customer service through new digital service channels and the opening of new units. At the same time, the company has adapted its branch network to correspond even better to a changing operating environment. Due to the uncertainty caused by the coronavirus, the outlook for the economy changed and rapidly weakened towards the end of the first quarter. Due to the difficulty of assessing the financial impact of the situation, the company withdrew its February earnings guidance in March.
Despite the general economic uncertainty, the company's financial position is strong and the flexible operating models allows rapid response to changes in the operating environment. The company's earning is expected to increase during the FY2020 in both key sources of income, net interest income and fee and commission income. At the same time, operating costs are projected to remain approximately at current level, so the profitability of the company's core business is expected to continue to improve in FY2020.
More detailed earnings guidance will be provided by the company as the outlook for the corona pandemic progression becomes clearer and the economic impact can be better assessed.
Oma Savings Bank Plc
Additional information:
Pasi Sydänlammi, CEO, puh +358 45 657 5506, pasi.sydanlammi@omasp.fi
Sarianna Liiri, CFO, puh. +358 40 835 6712, sarianna.liiri@omasp.fi
Additional information and interview requests for media:
Minna Sillanpää, CCO, tel. +358 50 66592, minna.sillanpaa@omasp.fi
DISTRIBUTION
Nasdaq Helsinki Ltd
Major media
www.omasp.fi
OmaSp is a growing Finnish bank and the largest savings bank in Finland based on total assets. About 300 professionals provide nationwide services through OmaSp’s 32 branch offices and digital service channels to 140,000 customers. OmaSp focuses primarily on retail banking operations and provides its clients with a broad range of banking services both through its own balance sheet as well as by acting as an intermediary for its partners’ products. The intermediated products include credit, investment and loan insurance products. OmaSp is also engaged in mortgage banking operations.
OmaSp core idea is to provide personal service and to be local and close to its customers, both in digital and traditional channels. OmaSp strives to offer premium level customer experience through personal service and easy accessibility. In addition, the development of the operations and services is customer-oriented. The personnel is committed and OmaSp seeks to support their career development with versatile tasks and continuous development. A substantial part of the personnel also own shares in OmaSp.
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