Pohjola Bank : Group in 2014*

05.02.2015 klo 08:02

Pohjola Bank plc
Stock Exchange Release 5 February 2015 at 8.00 am
Financial Statements Bulletin

Pohjola Group in 2014
- Consolidated earnings before tax amounted to EUR 584 million (479) and consolidated earnings before tax at fair value to EUR 663 million (464). Return on equity was 14.3% (14.4). The Core Tier 1 ratio was 12.4% (11.9*) as against the target of 15%.
- Strong growth in income improved Banking earnings. The loan portfolio grew by 5% to EUR 14.9 billion (14.2). The average margin on the corporate loan portfolio was 1.44% (1.57). Earnings included EUR 25 million (35) in impairment loss on receivables.
- Within Non-life Insurance, insurance premium revenue increased by 5% (11). The combined ratio was 91.0% (91.6). A reduction in the discount rate for pension liabilities decreased earnings by EUR 62 million (38). Excluding changes in reserving bases and amortisation on intangible assets arising from company acquisition, the operating combined ratio improved to 84.7% (86.9). Return on investments at fair value was 6.7% (3.5).
- Asset Management earnings improved due to higher performance-based management fees. Assets under management increased by 14% to EUR 43.3 billion (37.9).
- The Board of Directors proposes a dividend per share of EUR 0.43. This means a dividend payout ratio of 30%.
- OP Cooperative completed its public voluntary bid announced in February 2014 and obtained ownership of all Pohjola Bank plc shares by decision of the Arbitral Tribunal. Pohjola's series A shares were delisted from the Helsinki Stock Exchange on 30 September 2014. OP Cooperative was entered as the only shareholder in Pohjola's shareholder register on 7 October 2014.
- Outlook for 2015: Consolidated earnings from continuing operations before tax in 2015 are expected to be at the same level as in 2014. For more detailed information on the outlook, see "Outlook for 2015" below.

October-December
- Consolidated earnings before tax were EUR 117 million (95) and consolidated earnings before tax at fair value amounted to EUR 144 million (112).
- Banking earnings before tax decreased by 27% due to lower net trading income. Net interest income grew by 17% year on year. The loan portfolio increased by 2% and the average margin on the corporate loan portfolio decreased by 5 basis points. Earnings included EUR 7 million (5) in impairment loss on receivables.
- Within Non-life Insurance, insurance premium revenue increased by 2% (13). The combined ratio was 91.1% (101.4). A reduction in the discount rate for pension liabilities reduced earnings a year earlier by EUR 38 million. The operating combined ratio was 89.5% (87.7). Return on investments at fair value was 1.7% (1.4).

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 2013 are used as comparatives.  Comparative figures have been restated as a result of the adoption of IFRS 10 Consolidated Financial Statements.
*) In accordance with the Capital Requirements Regulation (EU 575/2013) (CRR) since 1 January 2014.
**) According to the Solvency II draft (EU 138/2009).           
***) Board proposal

Earnings before tax, EUR million	2014	2013	Change %	Q4/2014	Q4/2013	Change %
Banking	303	251	21	55	75	-27
Non-life Insurance	223	166	34	32	4
Group Functions	20	39	-48	11	10	14
Asset Management	38	24	59	18	5
Group total	584	479	22	117	95	23
Change in fair value reserve	79	-15		28	17	63
Earnings before tax at fair value	663	464	43	144	112	29
Equity per share, ?	10.38	9.54
Average personnel	2,563	2,632		2,516	2,553

The above figures describe Pohjola Group as a whole without the division into continuing and discontinued operations.

Financial targets	2014	2013	Q4/2014	Q4/2013	Target
Return on equity, %	14.3	14.4	11.3	17.5	13
Common Equity Tier 1 ratio (CET1), % *)	12.4	11.9			15
Operating cost/income ratio by Banking, %	33	36	40	34
Operating combined ratio by Non-life Insurance, %	84.7	86.9	89.5	87.7
Operating expense ratio by Non-life Insurance, %	18.4	18.7	21.5	19.9	18
Non-life Insurance solvency ratio (under Solvency II framework), % **)	117	125			120
Operating cost/income ratio by Asset Management, %	42	53	30	56
Total expenses in 2015 at the same level as at the end of 2012	598	581	152	155	569
AA rating affirmed by at least two credit rating agencies or credit ratings at least at the main competitors' level	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.	30***)	50			> 50 (30)

Outlook for 2015

The euro area economy will continue to grow at a slow rate and remains prone to disturbances despite the loose financial policy of the European Central Bank and other measures taken to support economic growth. Similarly, economic growth in Finland is expected to remain weak, although exports have begun to grow slowly.  The tension in international politics will continue to cause uncertainty for the Finnish economy, slowing the country's recovery from recession.

Modest economic development combined with the tensions of international politics are weakening growth prospects in the financial sector. Historically low interest rates will erode banks' net interest income and weaken insurance institutions' investment income. The significance of measures that support capital adequacy and profitability is heightened by changes in the operating environment and the tightening of regulation.   

Despite the challenging operating environment, Pohjola Group's consolidated earnings from continuing operations before tax in 2015 are expected to be 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 February 2015
Pohjola Bank plc
Board of Directors

This Financial Bulletin 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 Q1/2015: 29 April 2015
Interim Report H1/2015: 5 August 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. [phone]
Carina Geber-Teir, Chief Communications Officer, tel. [phone]

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 asset 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.