OP-Pohjola Group's Earnings and Total Assets

Earnings analysis


€ million 1-12/2011 1-12/2010 Change, % 10-12/2011 10-12/2010 Change, % 7-9/2011
Banking 478 367 30.0 121 100 20.7 131
Non-life Insurance 8 83 -90.5 -63 -2 3
Life Insurance 10 43 -76.4 -25 20 -17
Earnings before tax 518 575 -9.9 35 137 -74.2 120
Gross change in fair value reserve -400 225
55 -31 -340
Earnings/loss before tax at fair value 117 800 -85.3 91 106 -14.3 -220

Return on economic capital, % *) 13.6 14.4 -0.8*



Return on economic capital at fair value, % *) 6.2 18.7 -12.6*




Income
Net interest income 1,030 917 12.3 275 238 15.5 261

Net income from Non-life Insurance 312 382 -18.5 20 73 -71.9 75

Net income from Life Insurance 72 100 -28.7 -6 39 0

Net commissions and fees 574 563 1.9 138 146 -5.1 138

Net trading and investment income 80 109 -26.5 38 37 3.4 -19

Other operating income 93 101 -7.7 25 32 -22.5 20
Other income, total 1,131 1,256 -10.0 215 326 -34.0 214
Total income 2,160 2,172 -0.6 490 564 -13.1 476

Expenses
Personnel costs 696 643 8.2 181 166 9.3 149
Other administrative expenses 351 319 10.0 104 94 9.9 79
Other operating expenses 318 324 -1.8 88 85 4.6 75
Total expenses 1,365 1,286 6.1 374 345 8.3 303

Impairment losses on receivables 101 149 -31.7 37 41 -8.3 10

Returns to owner-members and OP bonus customers
Bonuses 163 151 7.4 42 39 6.6 41
Interest on ordinary and supplementary cooperative capital 14 12 16.9 2 3 -0.5 2
Total returns 176 163 8.1 44 42 6.2 43
*) 12-month rolling, change in percentage points









 


Other key figures


€ million 31 Dec 2011 31 Dec 2010 Change, %
Receivables from customers 60,331 56,834 6.2
Life Insurance assets 7,006 7,544 -7.1
Non-life Insurance assets 3,205 3,164 1.3
Liabilities to customers 45,974 39,205 17.3
Debt securities issued to the public 20,005 19,577 2.2
Equity capital 6,531 6,726 -2.9
Balance sheet total 92,287 83,969 9.9

Tier 1 capital 4,753 5,454 -12.8




 

January–December

The Group's earnings before tax amounted to EUR 518 million (575). In 2011, the changes in reservation bases recorded in non-life and life insurance weakened the Group’s earnings by EUR 74 million. In 2010, similar changes in reservation bases were recorded by EUR 50 million in net terms. Pre-tax earnings adjusted for changes in reserving bases contracted in the challenging operating environment by 5.3% year on year.

The result made in the report period was boosted by increased net interest income and net commissions and fees in Banking as well as by decreased impairment losses on receivables. Earnings were eroded by falling investment income and the changes in reserving bases referred to above. Bonuses to owner-members and OP bonus customers that were recognised in the profit and loss grew by 7.4% year on year to EUR 163 million.

Earnings before tax at fair value were eroded by falling market prices owing to the uncertainty in the investment market.

Pre-tax earnings by Banking went up by 30% and income by 6.9%. Net commissions and fees increased by 1.7% year on year owing to the favourable development of commissions and fees related to lending and payment transfer services in the first half of the year.

Earnings before taxes for the Group’s non-life insurance segment were eroded as a result of increased life expectancy among policyholders and a technical provision of EUR 59 million (35) made due to the lower discount rate used for calculation of technical provisions and also as a result of lower investment income than the year before. The operating combined ratio of Non-life Insurance was 89.8% (89.7). Earnings for the life insurance segment were eroded by EUR 15 million owing to increased life expectancy among policyholders.

Expenses increased year on year by 6.1% mainly because of higher ICT and personnel costs. The personnel increased by some 700, increasing personnel costs considerably.

Impairment losses recognised under various income statement items that eroded the report period's performance amounted to EUR 178 million (298), of which EUR 101 million (149) concerned loans and other receivables. The greatest single impairment, EUR 45 million, concerned the Group’s direct Greek government exposure. At the end of the year, the Group’s balance sheet contained a total of EUR 16 million in direct Greek government exposure. Net impairment losses on loans and other receivables were 0.16% (0.25) of the loan and guarantee portfolio.

Equity capital stood at EUR 6,531 million on 31 December. Equity capital was on the one hand boosted by the report period's performance but on the other hand eroded by a shrunken fair value reserve, a higher percentage of ownership by the central institution in Pohjola Bank plc, and dividend payments.

On 31 December, the cooperative capital investments and supplementary cooperative capital investments of the member cooperative banks’ owner-members totalled EUR 756 million (778).

The Board of Directors of Pohjola Bank plc proposes that a per-share dividend of EUR 0.41 (0.40) be paid on Series A shares and EUR 0.38 (0.37) on Series K shares, which would total EUR 129 million (126), of which the Group's internal divided would account for 52%.

OP-Pohjola Group had 4,163,000 customers in Finland at the end of December. Private customers totalled 3,733,000 and corporate customers 430,000. Year on year, the number of joint banking and non-life insurance customers in Finland increased by 102,000 to 1,299,000 as a result of cross-selling.

 

Key income statement items by quarter



2011 2011 2010 Change
€ million Q1 Q2 Q3 Q4 %
Net interest income 238 255 261 275 1,030 917 12.3
Net income from Non-life Insurance 92 124 75 20 312 382 -18.5
Net income from Life Insurance 50 28 0 -6 72 100 -28.7
Net commissions and fees 156 141 138 138 574 563 1.9
Other income 73 37 1 62 173 210 -17.4
Total income 609 585 476 490 2,160 2,172 -0.6
Personnel costs 178 188 149 181 696 643 8.2
Other administrative expenses 80 88 79 104 351 319 10.0
Other operating expenses 78 76 75 88 318 324 -1.8
Total expenses 336 352 303 374 1,365 1,286 6.1
Impairments of receivables 23 31 10 37 101 149 -31.7
Returns to owner-members 42 47 43 44 176 163 8.1
Earnings before tax 208 155 120 35 518 575 -9.9








 

OP-Pohjola Group's long-term financial targets



12/2011 12/2010 Target
Capital adequacy under the Act on the Supervision of Financial and Insurance Conglomerates 1.80 1.70 1.5
Return on economic capital (12-month rolling) 13.6 14.4 17
Growth differential between income and expenses, percentage points (12-month rolling) -6.7 2.9 >0




 
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