OKO Osuuspankkien

Transcription

OKO Osuuspankkien

OKO BANK PLC
Company Release
9 August 2007 at 8.00 am
OKO BANK PLC INTERIM REPORT 1 APRIL–30 JUNE 2007 WITH PRESIDENT AND CEO'S
COMMENTS
President and CEO's comments:
"In the second quarter, consolidated earnings before tax stood at EUR 100 million. This was a
good result, a considerable improvement on the first quarter and the second quarter last year.
Consolidated earnings in the second quarter included EUR 13 million more in non-recurring capital
gains year-on-year.
In Banking and Investment Services, performance and growth remained strong. The loan and
guarantee portfolio grew by 6% in the second quarter. In the last 12 months, the growth was 15%.
The risk exposure remained favourable in the first half of the year.
The balance on technical account in Non-life Insurance was higher than the corresponding period
last year. Growth in insurance premium revenue and the number of new customers continued to
be brisk, boosted by cooperation with OP Bank Group member cooperative banks.
I am confident that the Group will achieve the target of a 10% earnings improvement set for 2007."
Helsinki, 9 August 2007
Mikael Silvennoinen
1
OKO BANK PLC INTERIM REPORT 1 APRIL–30 JUNE 2007
April–June 2007
– Earnings before tax stood at EUR 100 million (57). 1)
– Earnings per share at the end of the year stood at EUR 0.36 (0.21), while equity per share was
EUR 8.91 (8.65). 1)
– The return on equity was 12.2 per cent (2.1).
– The Group's like-for-like net income increased by 25% and like-for-like expenses by 9%.
– Insurance premium revenue increased by 9% compared with the same period in 2006. The net
number of Pohjola's loyal customers increased by 8,400 in April-June.
– The loan and guarantee portfolio of Banking and Investment Services increased by 6%, and
during the last 12 months by 15%.
– In Non-life Insurance, the combined ratio was 92.3% (94.4). The combined ratio excluding
amortisation on intangible assets arising from the corporate acquisition was 89.3.% (91.6%).
– The Arbitral Tribunal's decision of 2 May 2007 to increase the redemption price payable to
Pohjola Group plc's minority shareholders by EUR 1.00 to EUR 14.35 per share was recognised in
the second quarter. The decision had no material effect on earnings.
January–June 2007
– Earnings before tax stood at EUR 165 million (126). 1)
– Earnings per share at the end of the year stood at EUR 0.61 (0.47), while equity per share was
EUR 12.8 (5.2).
– The Group's like-for-like net income increased by 17% and like-for-like expenses by 4%.
– Insurance premium revenue increased by 9% compared with the same period in 2006. The net
number of Pohjola's loyal customers increased by 17,300 in January–June.
– The non-life insurance combined ratio was 97.9% (98.2), while the operating combined ratio was
94.9% (94.8).
The figures in this release are unaudited.
1) Year 2006 figures for the corresponding periods are used as comparative figures. Unless otherwise specified, figures
at the end of March 2007 are used when comparing balance sheet and other cross-sectional items.
2
Q2/
2007
Q2/
2006
H1/
2007
H1/
2006
2006
30 Dec
Earnings before tax, EUR million
100
57
165
126
223
Profit for the period, EUR million
Return on equity, %
73
12.2
42
2.1
123
12.8
95
5.2
180
9.5
Balance sheet total, EUR billion
Risk-weighted items, EUR billion
Loan portfolio, EUR billion
25.1
12.5
8.8
24.0
11.8
7.5
24.2
11.6
7.9
Assets under management, EUR billion
32.5
28.5
31.3
Capital adequacy, %
Tier 1 ratio, %
13.3
8.0
10.5
8.2
12.9
8.2
0.2
0.2
0.2
Key figures
Proportion of non-performing receivables
Earnings per share, EUR
0.36
0.21
0.61
0.47
0.89
Earnings per share including change in fair
value reserve
Earnings per share, diluted, EUR
Equity per share, EUR
0.27
0.36
0.05
0.21
0.57
0.61
8.91
0.23
0.47
8.37
0.89
0.89
8.99
2 800
2 320
2 583
2 969
3 094
3 030
Market capitalisation (A + K)
Average personnel
2 998
3 104
3
Earnings by quarter
EUR million
Q1
2006
Q2
Q3
Q4
2007
Q1
Q2
Net interest income
Impairment losses on receivables
Net interest income after impairment
losses
Net income from non-life insurance
Net commissions and fees
Net trading income
Net investment income
Other operating income
Total net income
Personnel costs
IT expenses
Amortisation and depreciation
Other expenses
Total expenses
Share of associates’ profits/losses
Earnings before tax
Income tax
Profit for the period
Change in fair value reserve
Earnings for the period at fair value
26
-1
25
0
22
2
23
0
26
0
32
1
27
86
26
3
20
12
173
42
11
15
37
104
0
69
16
53
-15
38
25
90
23
2
9
13
163
45
11
14
35
105
0
57
15
42
-33
9
20
68
25
6
2
11
131
36
10
14
32
92
0
40
-4
44
36
80
23
84
29
9
7
13
165
42
10
15
41
108
0
57
15
41
12
53
26
94
28
7
10
13
179
41
11
15
47
114
0
65
15
50
11
61
31
113
31
3
13
24
214
45
11
16
43
114
0
100
27
73
-18
54
Return on equity, %
8.5
2.1
18.3
11.7
13.7
12.2
Tier 1 ratio, %
8.8
8.2
8.2
8.2
8.0
8.0
CONSOLIDATED EARNINGS
April–June
OKO Bank Group's earnings before tax increased by 74% to EUR 100 million (57). Earnings
before tax at fair value rose to EUR 75 million (12). Consolidated net earnings increased by 32%
to EUR 214 million (163), while expenses rose by 9% to EUR 114 million (105). This figure
includes capital gains worth EUR 11 million (4) as one-off items for the sale of OMX shares, and
the EUR 6 million in capital gains for the sale of the marine hull insurance portfolio and EUR 1
million as interest expenses related to the redemption of Pohjola shares held by minority
shareholders.
The capital adequacy ratio at the end of the review period was 13.3% (12.7) and the Tier 1 ratio
was 8.0% (8.0).
Earnings per share at the end of the year stood at EUR 0.36 (0.21), while equity per share was
EUR 8.91 (8.65).
Annualised return on equity stood at 12.2% (2.1).
4
January–June
OKO Bank Group's earnings before tax amounted to EUR 165 million (126) in the first half of 2007.
These figures included non-recurring capital gains worth EUR 3 million more than last year for the
same period. Earnings were impaired by the liquidated damages of EUR 10 million related to the
termination of partnership between Pohjola Group plc and savings banks. Consolidated net
earnings increased by 17% to EUR 393 million (336), while expenses rose by 9% to EUR 228
million (209).
Earnings per share were EUR 0.61 (0.47).
Annualised return on equity stood at 12.8% (5.2).
EARNINGS BY BUSINESS LINE
Banking and Investment Services
Non-life insurance operations
Other Operations
Group total
Q2/2007
Q2/2006
H1/2007
H1/2006
52
52
-5
100
37
24
-4
57
97
83
-15
165
84
47
-5
126
April–June
In Banking and Investment Services, earnings before tax stood at EUR 52 million (37). The figure
included capital gains of EUR 11 million recognised on the sale of OMX shares (4). The loan
portfolio of Corporate Banking increased by 5% and stood at EUR 8.7 billion at the end of June.
The risk exposure remained good. The average level of margins remained stable and was 0.79%
at the end of the period.
Non-life Insurance showed earnings before tax of EUR 52 million (EUR 24). The figure included
EUR 6 million in capital gains on the sale of the marine hull insurance portfolio. Insurance premium
revenue grew by 9% to EUR 219 million (200). The second-quarter balance on technical account
was better than a year ago. Investment income entered in the income statement increased to EUR
41 million (28). Investment income at fair value totalled EUR 23 million (loss of EUR 10 million).
Other Operations made a pre-tax loss of EUR 5 million (4 loss). Earnings before tax from Other
Operations included EUR 1 million as interest expenses related to the redemption of Pohjola
shares held by minority shareholders.
January–June
In Banking and Investment Services, earnings before tax stood at EUR 97 million (84). The figure
included capital gains of EUR 11 million recognised on the sale of OMX shares (12). The loan
portfolio of Corporate Banking increased by 11% from the year-end and by 18% from the end of
last June.
In Non-life Insurance, earnings before tax stood at EUR 83 million (47). This figure included
capital gains worth EUR 6 million from the sale of the marine hull insurance portfolio. Insurance
premium revenue grew by 9% to EUR 423 million (388). Investment income entered in the income
statement increased to EUR 88 million (64). Investment income at fair value totalled EUR 87
million (22).
5
Other Operations made a pre-tax loss of EUR 15 million (5 loss). Earnings before tax from Other
Operations included EUR 10 million in liquidated damages ruled by the Arbitral Tribunal on 2 April
2007 related to the partnership agreement with savings banks, and EUR 1 million in interest
expenses related to the redemption of Pohjola shares held by minority shareholders. Earnings for
the same period a year ago included a capital gain of EUR 2 million recognised on the sale of
Eurocard shares.
INTEGRATION
The integration process of OKO Bank's and Pohjola's business operations proceeds according to
plan. The results so far support earlier estimates of income and cost synergies, the annual amount
of which is estimated to increase to a good EUR 50 million before tax by 2010.
Decisions made thus far result in annual savings of approximately EUR 29 million, of which
decisions worth EUR 1 million were taken in the second quarter of 2007. New cost savings are
mainly gained from ICT functions in Non-life Insurance. Of the annual cost savings of EUR 29
million, EUR 13 million were gained in 2006. The cost savings for 2007 are estimated to total EUR
27 million and the cost savings as of year 2008 EUR 29 million.
In Non-life Insurance, the number of loyal customers increased by 8,400 households, over 90% of
which was gained through cooperation within OP Bank Group. At the end of June, the number of
loyal customers was over 384,000, while the target by the end of 2010 is 500,000. The average
annual premiums written per loyal customer household are over EUR 600. Thanks to the long-term
partnership agreement between OP Bank Group and Kesko, Pohjola joined Kesko's Plussa loyal
customer programme.
Integration costs recognised for the period totalled approximately EUR 1 million. In the period from
September 2005 to June 2007, the integration expenses pertaining to the acquisition of Pohjola
totalled around EUR 22 million.
GROUP RESTRUCTURING
The Arbitral Tribunal appointed by the Central Chamber of Commerce decided on 2 May 2007 to
set the redemption price of the shares in Pohjola Group plc at EUR 14.35 per share. The Tribunal
confirmed the annual interest payable on the redemption price from 13 June to 30 June 2006 at
5.5% and from 1 July 2006 at 6.0%. The per-share redemption price set by the Tribunal is EUR
1.00 higher than the EUR 13.35 bid by OKO Bank.
On 29 June 2006, OKO Bank paid the former minority shareholders of Pohjola Group plc entitled
to redemption (15,215,137 shares) EUR 13,35 per share in redemption price and, on this amount,
an interest of 2.50% as of 13 June 2006.
The remainder of the redemption price (EUR 1.00) and interest will be paid to those entitled to it no
later than within a month from the effective date of the arbitral award. OKO Bank agreed at the
end of June 2007 with the key minority shareholders that the award will remain final between the
parties involved and that the parties will not appeal it. This agreement applies to some 66% of all
of the disputed Pohjola shares held by minority shareholders. Some other minority shareholders
and the special representative have appealed the arbitral award. For this reason, OKO Bank
decided to appeal the arbitral award, in respect of matters other than agreed, and demand that the
district court confirm the per-share redemption price at EUR 13.35. Owing to the appeal, OKO
Bank will pay the amounts of the arbitral award, plus interest, only to minority shareholders who
will notify OKO Bank of accepting the arbitral award. OKO Bank notified the minority shareholders
of this in writing in July 2007.
6
The arbitral award will have no material impact on consolidated earnings. The redemption price
was entered as an additional share acquisition cost in the second quarter.
On 19 April 2007, OKO savings banks which had a majority shareholding in Nooa Savings Bank
Ltd acquired the shareholding of OKO Bank in Nooa Savings Bank for EUR 6.3 million. OKO Bank
had a 25% shareholding in Nooa Savings Bank. OKO Bank obtained possession of Nooa Savings
Bank shares at the end of 2006 once the earlier holder of the shares, Pohjola Group plc, merged
with OKO Bank. In accordance with the Articles of Association of Nooa Savings Bank, the other
shareholders of the company, in that connection, became entitled to redeem the shares
transferred to OKO Bank. The redemption did not have any impact on OKO Bank Group's
earnings.
Pohjola Non-Life Insurance Company Ltd (Pohjola), a subsidiary of OKO Bank plc, sold its marine
hull insurance portfolio to Codan Forsikring A/S. An agreement was signed on the deal on 21
March 2007 and the transaction was carried out in the second quarter. The sale resulted in capital
gains of EUR 6 million. Premiums written for Pohjola's marine hull insurance totalled EUR 18
million in 2006.
PERSONNEL
At the end of June, the Group employed 2,995 people, up by 27 from the end of March. A total of
736 employees (734) worked for Banking and Investment Services and a total of 2 205 employees
(2 182) for Non-life Insurance. The Group Administration employed a total of 54 people (52).
CAPITAL EXPENDITURE
Gross investments totalled EUR 5 million in the second quarter, EUR 1 million allocated to
Banking and Investment Services, EUR 3 million to Non-life Insurance and EUR 1 million to Group
Administration. Investments were made in IT systems to develop network services and streamline
internal processes.
CAPITAL ADEQUACY
The capital adequacy ratio as per the Act on Credit Institutions was 13.3% (12.7), whereas the
statutory minimum requirement is 8%. The Tier 1 ratio of OKO Bank's own funds on risk-weighted
items was 8.0% (8.0). The risk-weighted items increased from EUR 12,239 million to EUR 12,465
million, i.e. 2% mainly as a result of growth in the loan portfolio.
Own funds grew from EUR 1,550 million to EUR 1,663 million mainly owing to an increase in
earnings and an issue included in upper Tier 2 own funds. Tier 1 own funds totalled EUR 999
million (975). Capital loans accounted for EUR 224 million of Tier 1 own funds, i.e. 22.4% (22.9).
The requirement of own funds related to the coverage of market risks was EUR 103 million (104).
A new set of capital adequacy requirements entered into force in the EU at the beginning of 2007.
The amended Act on Credit Institutions was approved on 9 February 2007 and entered into force
on 15 February 2007. OKO Bank will make use of the new calculation methods made available by
the transitional provisions in the capital adequacy reform. OKO Bank's capital adequacy for 2007
will be calculated under the existing requirements, i.e. the same way as in 2006. In the calculation
of capital adequacy requirements for credit risk, OKO aims to phase in the internal ratings-based
approach (IRBA), with the first items such as corporate responsibility and capital adequacy
requirements calculated using IRBA in 2008. The capital adequacy requirement of operational
risks will be calculated using the basic method from 2008 onwards.
7
RISK EXPOSURE
In Banking and Investment Services, the risk exposure remained good. Total exposure fell during
the second quarter by EUR 1.2 billion to EUR 26.8 billion. The decline was mainly caused by
repayment of credit granted to OP Mortgage Bank. Total liability rose by EUR 0.5 billion from the
beginning of the year.
The relative share of investment-grade exposure – that is, ratings 1 to 4, excluding private
customers – in total exposures remained stable at 73% (75), the share of ratings 11 to 12 was
0.2% (0.3) and that of non-rated exposure 3% (3). Of the corporate exposure, the share of
investment-grade corporate exposure rose to 52% (51). The corporate exposure of the two lowest
rating classes was EUR 58 million (64), i.e. 0.6% of the corporate exposure.
The amount of significant customer exposure remained stable at EUR 3.1 billion (3.0). The
proportion of non-performing receivables of the loan and guarantee portfolio remained very low, at
EUR 16 million (23), or 0.2% (0.2). The effect on the result by loan and guarantee losses and
impairment losses was EUR 0.5 million during the first half of the year. Market risks were kept at a
moderate level despite growth in the volume of derivatives trading. The amount of liquidity
reserves totalled EUR 5.2 billion (5.3) at the end of June. The average maturity of funding has
extended, because certificate-of-deposit funding with a term less than 12 months reduced by EUR
1.8 billion. The effect of operational risks reducing earnings was EUR 0.6 million in the first half.
The immediate risks related to American sub-prime housing loans are very small.
The capital adequacy of Non-life Insurance amounted to EUR 666 million (623) at the end of June.
The ratio of solvency capital to insurance premium revenue (solvency ratio) was 81% (77).
In Non-life Insurance, there were 53 (44) major or medium-sized losses (losses in excess of EUR
0.1 million), with the claims incurred of these losses retained for own account totalling EUR 17
million (19). During the first half, there were 106 (85) major or medium-sized losses, with the
claims incurred of these losses retained for own account totalling EUR 33 million (31).
Of the investment portfolio, bonds and bond funds accounted for 67% (72) and equities for 17%
(18). The duration of the fixed-income portfolio shortened during the first half from 4.8 to 3.6 years.
Investment income at fair value stood at 1.0% in April–June and 3.5 % in January–June.
The immediate risks related to American sub-prime housing loans are very small.
Credit ratings
OKO Bank's credit ratings are as follows:
Rating agency
Standard & Poor's
Moody's
Fitch
Short-term
debt
A-1+
P-1
F1+
Long-term
debt
AAAa1
AA-
In April, Moody's revised OKO Bank’s Long-Term Issuer Rating to Aa1 (Aa2 on 31 December
2006). Outlook has been confirmed stable by all rating agencies.
8
SHARE CAPITAL AND SHAREHOLDERS
At the end of June, a total of 159.4 million Series A shares were quoted on the Helsinki Stock
Exchange. Series A shares represented 78.4% of all shares and 42.1% of votes. The number of
Series K shares totalled around 44 million.
At the end of the review period, the Series A share price was EUR 13.77 while the share-issue
adjusted price was EUR 11.50 a year earlier. In April–June, the share price reached a high of EUR
15.28 and a low of EUR 12.62. Around 37,7 million shares changed owners during the second
quarter. In the first quarter of 2006, the corresponding number was 24.2 million.
At the end of June, OKO Bank had some 31,000 shareholders, down by 1,000 during the second
quarter. Around 95% of the shareholders were private individuals. No significant changes occurred
in the holdings of the major shareholders. The largest shareholder was the OP Bank Group
Central Cooperative, which held 30% of OKO Bank shares and 56.9% of the votes. The number of
nominee registered shares in proportion to all Series A shares increased in the second quarter
from 18.7% to 20.4%.
EVENTS AFTER THE REPORTING PERIOD
A total of 112,860 Series K shares were converted into Series K shares in July. The conversions
were entered in the Trade Register on 13 July 2007. The conversions did not affect the total
number of shares outstanding or the amount of equity capital.
OUTLOOK TOWARDS THE YEAR-END
Growth in the corporate loan market is expected to continue but at a slower rate than in the first
half. Lending margins are not expected to decrease significantly.
The corporate loan portfolio of OKO Bank's Banking and Investment Services is forecast to grow
faster than the market average. The risk exposure should remain good and impairment losses on
receivables at a lower level than normally. OKO Bank's commission income is expected to
increase further especially as a result of high demand for asset management services and
structured product and service packages.
Provided that the operating environment remains as expected, 2007 earnings before tax from
Banking and Investment Services are anticipated to be better than in 2006.
In addition to market growth, intense cooperation with OP Bank Group member cooperative banks,
which is expected to improve the market share in the household customer base in particular, will
boost insurance premium revenue in Non-life Insurance. Growth in the Group's insurance premium
revenue is expected to exceed GDP growth this year, despite the sale of the marine hull insurance
portfolio.
The unfavourable trend in major losses in the latter half of 2006 is expected to normalise. In Nonlife Insurance, the combined ratio excluding changes in reserving bases and the amortisation on
intangible assets arising from the acquisition is estimated to be less than 94.0% if the trend in
major losses is similar to that in the first half of the year. The long-term return expectation for the
investment portfolio in Non-life Insurance is 5.2%.
Earnings from Other Operations, excluding the liquidated damages of EUR 10 million ruled by the
Arbitral Tribunal, are expected to be on a par with earnings in 2006.
OKO Bank is anticipated to have every prospect of improving earnings before tax at fair value by
at least 10% in 2007, provided that no radical changes take place in equity and bond markets.
9
The main risks related to the materialisation of the near-future outlook stated above concern the
general operating environment and the development of interest rates and share prices. The
management of the Group has no influence on the general operating environment. However, the
management may influence the effects of interest rate changes and the equity market on
investments and trading by investing assets securely, by diversifying risks, by ensuring the
professional skills of its personnel, and by effective risk management. In addition, the management
may influence the appropriate pricing of customer-specific risk and consequently the financial
performance of the Group.
All the estimates presented in this report are based on the current understanding of the financial
development of the Group and its different operations; actual performance may vary significantly.
10
BUSINESS OPERATIONS
The table below presents the actual earnings of the Group and its business lines before tax, as
well as the strategic targets and their actuals. The calculation of key ratios is presented on pages
18–20.
Q2/2007
Q2/2006
H1/2007
H1/2006
2006
Target
2009
Operating return on equity (ROE), %
Operating cost/income ratio, %
52
17.7
38.2
37
14.0
43.1
97
17.7
38.6
84
16.4
40.3
163
18.2
41.5
> 18
40.0
Operating combined ratio, %
52
26.9
89.3
24
-14.4
91.6
83
30.7
94.9
47
4.5
94.8
78
20.9
95.4
> 20
< 94
-5
-4
-15
-5
-19
Other Operations
11
BANKING AND INVESTMENT SERVICES
Banking and Investment Services comprises the following divisions:
– Corporate Banking
– Markets
– Group Treasury
– Asset Management
Income statement, EUR million
Net interest income
losses
Net trading income
Total net income
Total expenses
Amortisation on intangible assets from
acquisition
Earnings before tax
Earnings before tax at fair value
Key ratios, %
Operating return on equity (ROE) p.a.
Operating cost/income ratio
Proportion of non-performing receivables to
receivables from customers and
guarantees, %
Information on volumes, EUR billion
Receivables from customers
Unused standby credit facilities
Guarantees
Assets under management
Notes and bonds
Receivables from member cooperative
banks
Liabilities to member cooperative banks
Risk-weighted items
Debt securities issued to the public
Average personnel
Average margins, %
Margin on corporate loan stock
Margin on institutional loan stock
Margin on member cooperative banks' loan
stock
Margin on member cooperative banks'
deposits
2006
Q1
Q4
2007
Q1
Q2
Q3
Q2
30
-1
28
0
27
2
29
0
29
0
34
1
30
23
3
14
7
76
29
28
22
2
8
7
67
29
25
26
6
2
4
62
27
28
29
9
6
7
79
36
29
26
7
5
7
74
30
34
30
2
13
7
86
33
1
47
-4
43
1
37
-7
30
1
35
2
37
1
43
2
45
1
45
-2
43
1
52
-8
45
18.9
37.9
14.0
43.1
16.1
40.9
19.2
44.0
17.6
39.1
17.7
38.2
0.3
0.2
0.2
0.2
0.2
0.2
31.3
30.6
30.9
31.12
31.3
30.6
7.1
2.7
1.5
28.9
4.9
7.4
3.1
1.9
28.5
4.1
7.7
3.1
1.9
29.7
5.2
7.9
3.6
1.9
31.3
4.9
8.3
3.4
1.8
31.3
5.5
8.7
3.1
2.0
32.5
3.7
4.1
1.4
9.9
11.7
4.1
1.4
10.7
12.2
4.6
1.4
11.1
12.9
4.7
1.3
11.1
13.9
3.9
1.3
11.8
15.1
4.0
1.4
12.0
13.5
730
737
747
718
734
736
0.88
0.27
0.79
0.26
0.89
0.25
0.87
0.24
0.81
0.24
0.79
0.24
0.15
0.15
0.14
0.12
0.12
0.12
0.21
0.13
0.13
0.11
0.11
0.13
12
Earnings
In Banking and Investment Services, earnings before tax stood at EUR 52 million (37).
Net interest income before impairment losses was EUR 34 million (28). Impairment losses on
receivables burdened earnings by a net sum of EUR 0.5 million (0).
Net commission income increased to EUR 30 million (22).
Net trading income was EUR 2 million (2).
Net investment income amounted to EUR 13 million (8). The income included capital gains of EUR
11 million recognised on the sale of OMX shares (4).
Operating return on equity was 17.7% (14.0) and the cost/income ratio was 38.2% (43.1).
Corporate Banking
OKO Bank's market position in Corporate Banking strengthened further.
In Corporate Banking, the aggregate amount of loans and guarantees increased in the second
quarter by 6% to EUR 10.7 billion. The annual growth was 16%. The loan portfolio of Corporate
Banking increased by 5% in April–June and stood at EUR 8.7 billion. The annual growth was EUR
1.3 billion or 18%. At the end of June, OKO Bank's market share in corporate loans went up to
17.8%, which represented growth of 0.6 percentage point from the year end.
In Corporate Banking, net interest income increased by 28% to EUR 26 million (20).
The margin level in the corporate loan portfolio remained stable and was 0.79% at the end of the
second quarter. The margins of institutional loans remained unchanged in the second quarter.
Despite long-lasting and brisk growth in the loan portfolio, the risk exposure is still considered to
be good. Net impairment losses totalled EUR 0.5 million (0).
In Corporate Banking, earnings before tax improved to EUR 23 million (19).
Markets
In Markets, earnings before tax increased to EUR 9 million (4), which is mainly explained by larger
volumes of customer trading and structured products and growth in the arrangement of debt
issues to customers.
In April–June, OKO Bank acted as the mandated lead arranger in three corporate bond issues,
worth a total of EUR 450 million. In May, OP Bank also acted as the mandated lead arranger in a
Finnish government bond issue worth four billion euros. In June, OKO Bank was the mandated
lead arranger in a covered bond issued by OP Mortgage Bank, worth over one billion euros.
OKO Bank was the mandated lead arranger in the initial public offering of Suomen Terveystalo Oyj
in April and that of SRV Yhtiöt Oyj in June.
13
Central Banking
In February, OP Mortgage Bank acquired a mortgage loan portfolio of EUR 1.3 billion from OP
Bank Group member cooperative banks, which used the proceeds from the sale to pay back loans
totalling around EUR 1.1 billion to OKO Bank. OP Mortgage Bank financed the acquisition of the
loan portfolio by taking out a temporary loan from OKO Bank, which it paid back in June. OP
Mortgage Bank financed the loan portfolio purchases mainly directly from the capital markets with
a covered bond issue in June as OKO acted as one of the mandated lead arrangers. At the end of
June, OKO Bank's net receivables from OP Bank Group member cooperative banks totalled EUR
2.6 billion, which was EUR 0.8 billion less than at the end of 2006.
In Central Banking, earnings before tax were at the same level as in the previous year, EUR 4
million (4).
Group Treasury
In June, OKO Bank prematurely called in a debenture loan classified as upper Tier 2 own funds
(EUR 50 million) and issued a new debenture loan worth GBP 100 million, also classified as upper
Tier 2 capital (approx. EUR 148 million).
Group Treasury earnings before tax rose to EUR 12 million (7), of which net investment income
totalled EUR 13 million (7.5). Earnings included a capital gain of EUR 11 million recognised on the
sale of OMX Group shares (4).
Asset Management
In Asset Management, assets under management increased by EUR 1.2 billion in April–June and
stood at EUR 32.5 billion (31,3) on 30 June. Growth in customer assets in the review period came
from net sales and an increase in market value. Of the amount, institutional customers accounted
for EUR 16.6 billion (16.8), OP mutual funds for EUR 14.2 billion (13.1) and OKO Private for EUR
1.0 billion (0.7).
In Asset Management, earnings rose to EUR 5 million (3) as a result of increased management
fees and materialised cost synergies.
January–June
In Banking and Investment Services, earnings before tax stood at EUR 97 million (84).
Net interest income before impairment losses was EUR 64 million (58). Impairment losses on
receivables burdened earnings by a net amount of EUR 0.5 million (decrease in impairment loss
provisions of EUR 0.8 million) In January–June, the loan portfolio of Corporate Banking increased
by 11% and stood at EUR 8.7 billion.
Net commission income increased to EUR 56 million (45). Commission income was evenly
distributed between Corporate Banking, Capital Markets and Asset Management.
Net trading income was EUR 9 million (5). Income increased as a result of growth in earnings
related to notes and bonds in the first quarter.
Net investment income amounted to EUR 18 million (21). The figure included capital gains of EUR
11 million recognised on the sale of OMX shares (12).
Operating return on equity was 17.7% (16.4) and the cost/income ratio was 38.6% (40.3).
14
NON-LIFE INSURANCE OPERATIONS
Non-life Insurance includes the following divisions:
– Corporate Customers
– Private Customers
– Baltic States
Insurance premium revenue
Claims incurred
Loss adjustment expenses
Operating expenses
Amortisation/adjustment of intangible
assets related to acquisition
Balance on technical account
Other income and expenses
Operating profit
Unwinding of discount
Finance costs
Earnings before tax
Earnings before tax at fair value
Key ratios, %
Operating return on equity
Loss ratio
Operating expense ratio
Operating combined ratio
Expense ratio
Combined ratio
Return on investments
Volume data, EUR billion
Insurance contract liabilities
Discounted insurance contract liabilities
Other insurance contract liabilities
Investment portfolio
Bonds
Money market investments
Equities
Investment property
Alternative investments
Average personnel
2006
Q1
Q2
Q3
Q4
2007
Q1
Q2
187
129
10
45
200
129
11
43
196
141
10
39
204
137
12
45
204
147
12
47
219
136
12
48
7
-4
36
1
33
9
1
23
-5
18
6
11
28
-4
35
9
2
24
-38
-14
6
0
23
1
24
9
3
11
46
58
6
3
28
0
32
9
2
20
14
34
6
-8
48
3
42
10
2
31
16
47
7
17
41
7
64
10
2
52
-17
35
23.8
74.3
23.8
98.2
27.9
102.2
1.5
-14.4
70.0
21.6
91.6
24.4
94.4
-0.5
44.1
76.8
19.9
96.7
23.1
99.9
2.5
27.6
73.1
22.1
95.3
25.2
98.3
1.5
35.0
78.0
22.9
100.8
25.9
103.9
2.4
26.9
67.5
21.9
89.3
24.8
92.3
1.0
31 Mar
30 Jun
30 Sep
31 Dec
31 Mar
30 Jun
1 184
914
1 194
857
1207
818
1 223
746
1 241
954
1 268
905
1 790
379
422
60
65
1 825
266
392
58
43
1802
397
378
53
75
1 752
22
447
56
87
1 697
19
489
60
133
1 697
20
471
69
166
2 099
2 134
2 204
2 154
2 182
2 205
15
April–June
Earnings
Earnings before tax stood at EUR 52 million (24). The figure included capital gains of EUR 6
million from the sale of the marine hull insurance portfolio. The operating return on equity was
26.9% (-14.4).
Insurance premium revenue grew by 9% to EUR 219 million (200).
The growth was strongest in the Private Customers division where insurance premium revenue
increased to EUR 93 million (82) as a result of cooperation within the OP Bank Group and of
upgraded service offerings. In the Corporate Customers division, premium revenue of
comprehensive motor vehicle and motor liability insurance generated the largest monetary and
proportional growth. Premium revenue generated by the Baltic business increased by 21% to EUR
14 million (11).
Claims incurred and operating expenses
The operating combined ratio was 89.3% (91.6), of which claims incurred represented 61.2
percentage points (63.6). Operating expenses and loss adjustment expenses (cost ratio)
increased to 28.1 percentage points (28.0).
Claims incurred (excluding loss adjustment expenses) increased to EUR 136 million (129), of
which major and medium-sized losses (in excess of EUR 0.1 million) accounted for EUR 17 million
(19). The number of major losses of over EUR 2 million retained for own account was 0 (2). The
unfavourable trend in motor liability and motor vehicle insurance claims continued in the second
quarter. This is explained by the greater incidence of road accidents and increases in car repair
prices markedly above those in the general price level. The current economic upswing can also be
seen in the sharp rise in traveller's insurance claims.
Operating expenses and loss adjustment expenses grew to EUR 60 million (55). Operating
expenses amounted to EUR 48 million (43) and loss adjustment expenses to EUR 12 million (11).
The higher expenses can be primarily attributed to the rising costs in insurance sales and loss
adjustment.
Investment operations
In Non-life Insurance, the fair value of investments at the end of June was EUR 2.4 billion (2.4). Of
the amount, equities accounted for 17% (18) and money market instruments for 1% (1).
Return on investments at fair value was 1.0%. Net investment income entered under earnings was
EUR 41 million (28). Net investment income at fair value was EUR 23 million.
The discount rate for the EUR 1.2 billion pension liabilities was 3.3% (3.3). The unwinding of
discount is recognised as a post-balance-on-technical-account item.
January–June
Earnings before tax stood at EUR 83 million (47).
16
Insurance premium revenue grew by 9% to EUR 423 million (388). The growth was strongest in
the Private Customers division where insurance premium revenue increased to EUR 173 million
(154) as a result of cooperation within OP Bank Group and of upgraded service offerings.
The operating combined ratio was 94.9% (94.8), of which claims incurred represented 66.0
percentage points (65.6). Operating expenses and loss adjustment expenses (cost ratio) stood at
28.9% (29.1).
Claims incurred (excluding loss adjustment expenses) increased to EUR 283 million (258), of
which major and medium-sized losses (in excess of EUR 0.1 million) accounted for EUR 33 million
(EUR 31 million in 2006). The number of major losses of over EUR 2 million retained for own
account was 2 (2).
Operating expenses and loss adjustment expenses grew to EUR 119 million (110). Operating
expenses amounted to EUR 95 million (88) and loss adjustment expenses to EUR 24 million (22).
Operating expenses include integration expenses of EUR 0.7 million (1.6)
Return on investments at fair value was 3.5% and net investment income entered under earnings
was EUR 88 million (64). Net investment income at fair value was EUR 87 million.
The operating return on equity was 30.7% (4.5).
OTHER OPERATIONS
Earnings from Other Operations consist of Group administrative expenses and funding costs of
Pohjola shares.
Net interest income
Other net income
Income
Expenses
Earnings before tax
Q1
2006
Q2
Q3
Q4
-3
19
16
17
-1
-1
15
13
17
-4
-4
8
4
12
-7
-4
6
2
8
-7
2007
Q1
-3
11
8
19
-11
Q2
-3
6
3
8
-5
April–June
Other Operations showed a loss of EUR 5 million before tax (a loss of EUR 4 million).
Earnings in the second quarter included EUR 1 million in interest expenses related to the
redemption of Pohjola shares held by minority shareholders.
January–June
Other Operations showed a loss of EUR 15 million before tax (a loss of EUR 5 million).
Earnings in the first quarter were burdened by the liquidated damages ruled by the Arbitral
Tribunal on 2 April 2007 for OKO Bank concerning the shareholder agreement dispute over Nooa
Savings Bank Ltd. The effect of this was EUR 10 million. Earnings for the same period a year ago
included a capital gain of EUR 2 million recognised on the sale of Eurocard shares.
17
FORMULAE FOR KEY RATIOS
Return on equity (ROE) at fair value
Profit for the period + Change in fair value reserve after tax x 100
Shareholders' equity (average of the beginning and end of the period)
Cost/income ratio, %
Personnel costs + Other administrative expenses + Other operating expenses x 100
Net interest income + Net income from Non-life Insurance +
Net commissions and fees + Net trading income + Net investment income +
Earnings/share (EPS)
Profit for the period attributable to parent company owners
Share-issue adjusted average number of shares during the financial period
Earnings/share (EPS), diluted
The denominator is the average share-issue adjusted number of shares during the financial period
plus the number of shares which is obtained if all stock options are converted into shares.
Subtracted from the figure thus obtained is the number of shares that can be obtained through the
exercise of all stock options multiplied by the share subscription price and divided by the average
share price during the financial period.
Earnings/share at fair value
Profit for the period attributable to parent company owners + Change in fair value reserve
Share-issue adjusted average number of shares during the financial period
Equity/share
Shareholders' equity
__________
Share-issue adjusted number of shares on the balance sheet date
Market capitalisation
Number of shares x closing price on the balance sheet date
Capital adequacy, %
Own funds
Risk-weighted items
x 100
18
Tier 1 ratio, %
Tier 1 own funds
Risk-weighted items
x 100
KEY RATIOS IN NON-LIFE INSURANCE
The key ratios for Non-life insurance have been calculated in accordance with Insurance
Supervisory Authority regulations using the corresponding IFRS sections as applicable.
The key figures have been calculated using activity-based expenses applied by non-life insurance
companies, which are not presented on the same principle as in the consolidated Income
statement.
Loss ratio (excl. unwinding of discount)
Claims and loss adjustment expenses
Net insurance premium revenue
x 100
Expense ratio
Operating expenses + amortisation/adjustment of intangible assets related to acquisition
100
x
Risk ratio (excl. unwinding of discount)
Claims excl. loss adjustment expenses x100
Cost ratio
Operating expenses and loss adjustment expenses x100
Combined ratio (excl. unwinding of discount)
Loss ratio + expense ratio
Risk ratio + cost ratio
19
OPERATING KEY RATIOS, %
Banking and Investment Services:
+ Profit for the period
+ Amortisation and write-downs on intangible assets and goodwill related to acquisition of Pohjola
Asset Management and their tax effect
+ Change in fair value reserve after tax
x 100
+ 7%of risk-weighted commitments
+ Shareholders' equity of OKO Asset Management and Pohjola Property Management
- Subordinated loans allocated to business lines
(average of the beginning and end of the financial period)
Non-life Insurance:
+ Profit for the period
+ Amortisation and write-downs on intangible assets and goodwill related to acquisition of non-life
business, and their tax effects
+ Change in fair value reserve after tax x 100
+ 70% solvency ratio
- Subordinated loans allocated to business lines
(average of the beginning and end of the financial period)
or
minimum capital required by the authorities, if this is larger
+ Personnel costs
+ Other administrative expenses
+ Other operating expenses excl. amortisation and write-downs on intangible assets and goodwill
related to Pohjola acquisition
x 100
+ Net interest income
+ Net income from Non-life Insurance
+ Net commissions and fees
+ Net trading income
+ Net investment income
+ Other operating income
Operating expenses
x100
Loss ratio + operating expense ratio
20
OKO Bank Group income statement, 1 April–30 June 2007
Q2/
2007
546
514
32
1
31
Q2/
2006
297
272
25
0
25
Net income from Non-life insurance (Note 3)
Net commissions and fees (Note 4)
Net trading income (Note 5)
Net investment income (Note 6)
Other operating income (Note 7)
Total net income
Personnel costs (Note 8)
Other administrative expenses (Note 9)
Other operating expenses (Note 10)
Total expenses
Earnings before tax
Income tax
113
31
3
13
24
214
45
39
31
114
100
27
73
90
23
2
9
13
163
45
34
27
105
57
15
42
Basic earnings per share, EUR
Series A
Series K
0.36
0.36
0.21
0.21
Diluted earnings per share, EUR
Series A
Series K
0.36
0.36
0.21
0.21
EUR million
Interest income
Interest expenses
Net interest income (Note 1)
Impairment losses on receivables (Note 2)
Net interest income after impairment losses
21
OKO Bank Group income statement, 1 January –30 June
2007
H1/
2007
983
925
58
0
58
H1/
2006
545
494
51
-1
52
Net income from Non-life Insurance(Note 3)
Net commissions and fees (Note 4)
Net trading income (Note 5)
Net investment income (Note 6)
Other operating income (Note 7)
Total net income
Personnel costs (Note 8)
Other administrative expenses (Note 9)
Other operating expenses (Note 10)
Total expenses
Earnings before tax
Income tax
208
59
10
23
36
393
86
73
69
228
165
42
123
176
48
5
29
25
336
87
66
56
209
126
31
95
Basic earnings per share, EUR
Series A
Series K
0.61
0.60
0.47
0.47
Diluted earnings per share, EUR
Series A
Series K
0.61
0.60
0.47
0.47
EUR million
Interest income
Interest expenses
Net interest income (Note 1)
Impairment losses on receivables (Note 2)
22
OKO Bank Group balance sheet
EUR million
30 Jun
2007
30 Dec
2006
Liquid assets
Receivables from financial institutions
Financial assets for trading (Note 11)
Derivative contracts
Non-life Insurance assets (Note 12)
Investment assets (Note 13)
Investments in associates
Intangible assets (Note 14)
Tangible assets
Other assets
Tax receivables
Total assets
1 719
5 127
3 567
566
8 687
2 932
194
2
1 012
95
1 207
11
25 120
907
5 546
4 801
320
7 864
2 766
225
8
1 020
95
633
12
24 196
Liabilities to financial institutions
Liabilities to customers
Non-life Insurance liabilities (Note 15)
1 929
562
2 229
2 355
2 390
331
1 994
2 099
Debt securities issued to the public (Note 16)
Provisions and other liabilities
Tax liabilities
13 418
1 467
361
13 263
1 010
355
Subordinated liabilities (Note 17)
Total liabilities
Shareholders' equity
986
23 308
924
22 368
428
790
595
1 813
25 120
428
793
607
1 828
24 196
Share of parent company's owners
Share capital
Mutual Funds
Retained earnings
Total equity capital
Total liabilities and equity capital
23
Statement of changes in shareholders'
equity, 1 January–30 June
Attributable to equity holders of the parent
EUR million
Equity capital 1 January 2006
Adjusted shareholders' equity on 1
January
Available-for-sale financial assets
Valuation gains and losses
Share transferred to the income
statement
Deferred taxes
Net income recognised under
shareholders' equity
Total income and expenses for the
period
Share issue expenses
Stock options exercised
Dividends paid
to series A share
to series K share
Acquisitions of subsidiaries
Equity capital 30 June 2006
Share
capital
Fair value
reserve
Other
reserves
Retained
earnings
Minority Total equity
interest
capital
423
48
744
549
199
1 961
423
48
744
549
199
1 961
-49
-49
-16
16
-16
16
-49
-49
-1
95
0
95
0
47
-1
2
-1
1
1
-95
-25
424
-49
95
-1
743
522
-198
0
-95
-25
-198
1 689
Attributable to equity holders of the parent
EUR million
Shareholders' equity, 1 January 2007
Adjusted shareholders' equity on 1 April
Valuation gains and losses
Share transferred to the income
statement
Deferred taxes
Net income recognised under
shareholders' equity
Total income expenses for the period
Dividends paid
Series A
Series K
Transfer of reserves
Shareholders' equity, 30 June 2007
Share
capital
Fair value
reserve
Other
reserves
Retained
earnings
428
428
47
47
747
747
607
607
0
0
1 828
1 828
-23
-23
13
3
13
3
-8
428
Minority Total equity
interest
capital
-8
0
123
123
39
-104
-27
-4
595
4
750
-8
123
115
0
0
-104
-27
0
1 813
24
Own funds and capital adequacy
30 Jun
2007
31 Mar
2007
31 Dec
2006
1 813
0
224
-854
1758
0
224
-855
1 828
1
224
-859
-122
-127
-115
-61
999
39
-25
975
57
-131
948
47
Subordinated liabilities included in upper
Tier 2 own funds
299
200
200
Subordinated liabilities included in lower
Tier 2 own funds
Tier 2 own funds**)
Investments in insurance companies
Other deduction items
Deduction items, total
Total own funds ***)
491
828
-163
-1
-164
1 663
488
745
-163
-8
-171
1 550
474
721
-157
-8
-165
1 504
8 446
1 258
1 075
1 290
7 995
1 322
1 230
1 302
7 635
1 408
1 169
1 007
396
389
407
12 465
12 239
11 627
13.3
12.7
12.9
8.0
8.0
8.2
1.16
1.12
1.13
EUR million
Own funds
Equity capital
Minority interest
Hybrid capital *)
Intangible assets
Fair value reserve, excess funding of
pension liability, change in equalisation
provision and change in fair value of
properties
Dividend distribution proposed by Board of
Directors
Planned profit distribution
Tier 1 own funds
Fair value reserve
Risk-weighted receivables, investments
and off-balance-sheet commitments
Loan and guarantee portfolio excl. intra-group items of OP
Bank Group
Binding standby credit facilities
Inter-group items of OP Bank Group
Market risk
Other items (equities incl. Pohjola, properties, other assets
etc.
Risk-weighted receivables, investments
and off-balance-sheet items, total
Capital adequacy ratio, %
Ratio of Tier 1 own funds to the aggregate
amount of risk-weighted items, %
Capital adequacy ratio under the Act on
Supervision of Financial and Insurance
Conglomerates
25
The capital adequacy ratio of the OP Bank Group as per the Credit Institutions Act was 14.3% and the Tier 1 ratio was
12.6%. The capital adequacy ratio of the OP Bank Group calculated by the consolidation method as per the Act on the
Supervision of Financial and Insurance Conglomerates was 1.57.
*) OKO has four loans under hybrid capital that can be classified as Tier 1 own funds:
Hybrid capital of 10 billion Japanese yen of which EUR 74 million has been regarded as Tier 1 funds. Interest on the
loan is fixed at 4.23% until 2034 and thereafter variable 6-month Yen LIBOR1+58.58%. If interest cannot be paid for a
given interest period, the obligation to pay interest will lapse. The loan may be called in at the earliest in 2014.
Hybrid capital of EUR 50 million, which is a perpetual loan without interest rate step-ups, but with an 8% interest rate
cap. The loan was issued on 31 March 2005, and the interest rate for the first year is 6.5%. Thereafter, the interest rate
will be CMS 10 years + 0.1%. Interest payments are annual. Subject to authorisation by the Financial Supervision
Authority, the loan may be called in at the earliest in 2010. .
Hybrid capital of EUR 60 million, which is a perpetual loan. The loan was issued on 30 November 2005, and the interest
rate is variable 3-month EURIBOR +0.65% until 2015 and thereafter variable 3-month EURIBOR 1.65%. Interest
payments are quarterly. If interest cannot be paid for a given interest period, the obligation to pay interest will lapse.
Subject to authorisation by the Financial Supervision Authority, the loan may be called in at the earliest in 2015.
Hybrid capital of EUR 40 million, which is a perpetual loan. The loan was issued on 30 November 2005, and the interest
rate is variable 3-month EURIBOR 1.25%. Interest payments are quarterly. If interest cannot be paid for a given interest
period, the obligation to pay interest will lapse. Subject to authorisation by the Financial Supervision Authority, the loan
may be called in at the earliest in 2010. The hybrid capital has been hedged against the interest rate and currency risk
by interest rate and currency swaps at the date of issue.
**) Issue and repayment of loans considered Tier 2 funds 1 April – 30 June 2007:
"A EUR 50 million upper Tier 2 funds perpetual loan was repaid 19 June 2007, authorised by the Financial Supervision
Authority. A perpetual loan of GBP 100 million, regarded as upper Tier 2 own funds was issued on 28 June 2007, with
EUR 148 million included in upper Tier 2 funds. Subject to authorisation by the Financial Supervision Authority, the loan
may be called in at the earliest in 2013.
**) The following investments in venture capital funds, totalling EUR 5 million and managed by OKO Venture Capital Ltd,
have not been deducted from own funds according to the exception provided by the Financial Supervision Authority in
line with the order in §75, clause 5 o the Act on Credit Institutions: Promotion Equity I Ky, Promotion Capital I Ky,
Promotion Rahasto II Ky and Promotion Bridge I Ky.
26
Cash flow statement
EUR million
Cash flow from operating activities
Adjustments to reconcile profit for the
period to cash used in operating activities
Increase (-) or decrease (+) in operating
assets
Financial assets held for trading
Non-life insurance assets
Investment assets
Other assets
Increase (+) or decrease (-) in operating
liabilities
Financial liabilities held for trading
Non-life Insurance liabilities
Provisions and other liabilities
Income tax paid
Dividends received
A. Total cash flow from operating
activities
Cash flow from investing activities
Acquisition of subsidiaries net of cash and
cash equivalents acquired
Disposal of subsidiaries net of cash and
cash equivalents disposed of
Acquisition of tangible and intangible
assets
Disposal of tangible and intangible assets
B. Net cash provided by (used
in)investing activities
Cash flow from financing activities
Increase in subordinated loans
Decrease in subordinated loans
Increase in debt securities issued to the
public
Decrease in debt securities issued to the
public
Increase in share capital
Dividends paid
C. Total cash flow from financing
activities
Net increase/decrease in cash and cash
equivalents (A+B+C)
Cash and cash equivalents at the
beginning of the period
Cash and cash equivalents at the end of
the period
H1/
2007
H1/
2006
123
95
212
217
31
424
1 227
-38
-835
-182
29
-594
-2 818
-151
-1 562
-21
-665
-257
-115
-47
338
-461
0
42
235
65
457
660
854
-3
33
-405
25
155
-37
39
-22
27
706
-1 841
-
-303
6
217
-12
16
-12
1
10
-97
148
-84
150
-162
16 257
17 365
-16 089
-131
-14 633
1
-120
101
2 601
817
663
1107
614
1 924
1 277
27
Interest received
Interest paid
Adjustments to profit for the period
Items not associated with payment
861
-821
466
-445
-1
-1
Unrealised net earnings in Non-life
Insurance
Change in fair value for trading
208
-6
200
8
Unrealised net gains on foreign exchange
operations
Change in fair value of investment property
Scheduled amortisation /depreciation
Share of associates’ profits
Other
-6
0
30
0
-13
-18
-1
28
0
4
0
0
212
-3
1
217
Items presented outside cash flow from
operating activities
Capital gains, share of cash flow from
investing activities
Capital losses, share of cash flow from investing activities
Adjustments, total
28
Information by segment
Financial performance April –
June
EUR million
Net interest income
losses
Net income from non-life insurance
Net trading income
Total income
of which inter-segment income
Personnel costs
IT expenses
Amortisation on intangible assets
from acquisitions
Other amortisation and depreciation
Other expenses
Total expenses
Share of associates' profits/losses
Earnings before tax *)
Corporate
Banking
Markets
Central
Banking
2007
2006
2007
2006 2007
26
1
20
0
7
4
25
20
7
10
0
0
4
39
8
1
0
3
32
-7
-2
Treasury
Asset
Management
Total
2006
2007
2006
2007
2006
2007
2006
3
3
-1
2
-1
0
34
1
28
0
4
3
3
-1
2
-1
0
34
28
8
2
0
0
17
5
2
0
0
11
0
0
0
3
6
0
0
0
0
2
6
0
0
1
13
1
13
0
0
-1
8
0
9
0
12
0
0
0
12
0
8
0
0
1
9
0
30
2
13
7
86
0
22
2
8
7
67
0
-5
-2
-4
-2
-3
-1
-1
0
0
0
0
0
0
0
-4
-1
-4
0
-16
-5
-13
-4
-4
-4
-16
-3
-4
-14
0
-2
-8
0
-2
-7
0
-1
-1
0
-1
-1
0
-1
-1
0
-1
-1
-1
0
-1
-7
-1
0
-1
-6
-1
-4
-8
-34
-1
-4
-8
-29
23
19
9
4
4
4
12
7
5
3
52
37
54
60
38
17.7
43
14.0
Income tax
Key figures, %
Return on equity at fair value
13.5
14.1
29
Financial performance, April–June
Non-life
insurance
Other
Operations
Eliminations
OKO Bank
Group
EUR million
Net interest income
Net income from Non-life insurance
Net trading income
Total income
Personnel costs
IT expenses
acquisitions
Other expenses
Total expenses
Earnings before tax
2007
-2
2006
-3
2007
-3
2006
-1
2007
2
2006
1
-2
114
2
-3
91
1
-3
-1
-27
-2
-1
5
94
0
-29
-4
0
0
0
6
3
3
-1
-4
0
0
3
12
13
9
-3
-4
2
-1
-1
1
-1
0
0
0
-11
-11
-10
0
0
-8
-1
-37
-76
0
-8
0
-29
-70
0
-1
-2
-8
0
-1
-8
-17
0
4
4
11
10
52
24
-5
-4
0
0
15
129
-4
-4
-3
0
Income tax
Key ratios, %
Non-life Insurance by division
April–June
Private
Customers
Corporate
Customers
Baltic States
2007
32
1
31
113
31
3
13
24
214
-45
-11
2006
25
0
25
90
23
2
9
13
163
-45
-11
-9
-6
-43
-114
0
-9
-5
-35
-105
0
100
57
-27
-15
73
42
12.2
2.1
Total
2007
2006
2007
2006
2007
2006
2007
2006
93
54
82
52
112
83
108
82
14
10
11
7
219
148
200
140
3
26
83
10
2
21
75
7
3
18
105
7
3
19
104
3
0
4
14
0
0
3
10
1
7
48
202
17
6
43
189
11
58.3
28.3
86.6
89.5
63.2
25.5
88.7
91.4
74.4
16.0
90.4
93.5
76.3
17.9
94.2
96.9
74.0
26.5
100.5
102.7
59.9
28.2
88.1
90.8
26.9
67.5
21.9
89.3
92.3
-14.4
70.0
21.6
91.6
94.4
Balance on technical account, EUR
million
Claims incurred
acquisitions
Operating expenses
Total expenses
Key ratios, %
Loss ratio
Combined ratio
30
Financial performance, January–
June
EUR million
Net interest income
losses
Net trading income
Total income
Personnel costs
IT expenses
Amortisation on intangible assets
from acquisitions
Other expenses
Total expenses
Earnings before tax *)
Corporate
Banking
Markets
Central
Banking
Treasury
Asset
Management
Total
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
50
0
42
-1
11
8
6
6
-2
3
-1
0
64
0
58
-1
49
42
11
8
6
6
-2
3
-1
0
63
59
20
1
1
8
80
16
1
0
6
66
14
7
0
-1
31
10
2
0
0
20
0
1
0
5
11
1
0
1
0
5
12
1
0
1
17
1
17
0
1
21
1
25
0
22
18
0
0
22
1
2
20
1
56
9
18
14
160
1
45
5
21
13
143
1
-12
-4
-10
-3
-8
-3
-6
-3
-1
0
-1
-1
-1
-1
-1
0
-8
-1
-8
-1
-30
-10
-26
-8
-7
-7
-31
-6
-8
-27
-1
-3
-15
-1
-3
-13
0
-1
-2
0
-1
-3
0
-1
-3
0
-1
-3
-1
0
-2
-13
-1
0
-3
-14
-1
-8
-15
-64
-1
-7
-17
-59
49
39
16
7
9
9
14
22
9
6
97
84
54
61
39
17.7
40
16.4
Income tax
Key ratios, %
14.7
15.0
31
Financial performance, January–June
Non-life
insurance
Other
Operations
Eliminations
OKO Bank
Group
EUR million
Net interest income
Net trading income
Total income
Personnel costs
IT expenses
acquisitions
Other expenses
Total expenses
Earnings before tax
2007
-4
2006
-4
2007
-5
2006
-4
2007
3
2006
1
-4
209
6
-4
177
5
-5
-4
-1
0
9
25
29
19
-8
-8
-8
-9
-7
1
-1
0
0
0
-22
-22
-21
-54
-6
-1
9
186
0
-53
-7
0
0
4
12
12
5
-3
-7
3
-1
-2
0
0
0
-17
-2
-69
-146
0
-17
-1
-62
-139
0
-2
-15
-27
0
-2
-16
-33
0
8
9
22
22
83
47
-15
-5
0
0
18
229
2007
58
0
58
208
59
10
23
36
393
-86
-22
2006
51
-1
52
176
48
5
29
25
336
-87
-22
-18
-12
-91
-228
0
-18
-10
-72
-209
0
165
126
Income tax
-42
-31
123
95
Key ratios, %
12.8
5.2
Non-life Insurance by division
January–June
Private
Customers
Corporate
Customers
Baltic States
Total
2007
2006
2007
2006
2007
2006
2007
2006
173
111
154
103
223
177
212
164
27
19
21
13
423
307
388
279
5
50
166
6
5
41
150
5
7
38
221
2
7
41
211
-1
1
7
26
1
1
6
19
2
13
95
414
9
13
88
380
7
64.4
28.7
93.2
96.3
66.8
26.7
93.5
97.0
79.1
17.1
96.2
99.2
77.1
19.2
96.4
99.5
69.8
25.0
94.8
97.0
60.4
27.6
87.9
90.7
30.7
72.5
22.4
94.9
97.9
4.5
72.1
22.7
94.8
98.2
Balance on technical account, EUR
million
Claims incurred
acquisitions
Operating expenses
Total expenses
Key ratios, %
Loss ratio
Combined ratio
32
Balance sheet
30 June 2007
EUR million
Corporate
Banking
Markets
Group Treasury
Banking
Non-life
Other
Eliminaand
Insurance, Operations,
tions
Investment
total
total
Services,
total
OKO
Bank
Group
Asset
Management
Central Treasury
Banking
Receivables from financial
institutions
Financial assets held for
trading and investment assets
Other assets
Total assets
Liabilities to financial
institutions
Debt securities issued to public
Subordinated liabilities
Other liabilities
Total liabilities
Equity capital
Total liabilities and equity
capital
Capital expenditure
8 619
3
59
7
173
60
5 915
700
8 688
3
6 852
53
-53
8 687
10
-15
-142
6 847
2 932
43
-11
184
290
143
-22
-241
-64
3 762
2
2 890
25 120
2 229
0
0
3 074
384
815
1 482
1 034
14
3 729
228
9 404
340
1 300
2 178
18
55
7 511
974
117
1 859
819
129
146
1 829
21 099
2 150
0
234
1 500
196
1 930
13 523
13 523
986
396
15 920
986
1 940
20 529
394
734
1 102
1 353
36
2 509
12
12
0
2
899
3 975
0
2 355
-105
40
92
2 487
390
533
-40
-32
-243
1 929
2 355
13 418
986
2 390
23 308
1 813
25 120
2
0
0
1
1
4
5
1
10
33
Balance sheet
31 December 2006
EUR million
Cor- Markets
porate
Banking
Group Treasury
Banking
and
Investment
Services,
total
Non-life
Other
Insurance, Operations,
total
total
Eliminations
OKO
Bank
Group
Asset
Management
Central Treasury
Banking
Receivables from financial
institutions
Financial assets held for
trading and investment assets
Other assets
Total assets
Liabilities to financial
institutions
Debt securities issued to public
Subordinated liabilities
Other liabilities
Total liabilities
Equity capital
Total liabilities and equity
capital
Capital expenditure
Amortisation and depreciation
during the period
Other non-cash items excl.
amortisation and depreciation
7 788
12
58
9
300
58
5 785
463
7 868
1
6 607
-4
7 864
66
-220
-58
6 453
2 766
687
7
298
1 058
140
-666
5 026
8
2 079
24 196
1 994
2 824
336
851
2 284
1 512
23
5 006
177
8 602
358
563
1 484
5
51
8 177
981
75
2 059
839
128
152
994
20 475
2 184
259
1 752
381
0
2
901
3 726
2 391
-113
-1 061
-330
-1
2 099
13 898
924
406
764
475
740
35
2 767
284
16 327
14
14
13 898
924
40
1 214
20 611
156
2 295
-635
-40
384
523
-57
-1 062
2 390
2 099
13 263
924
1 697
22 368
1 828
24 196
5
1
0
2
1
9
10
3
21
-13
-1
0
0
-3
-18
-35
-4
-57
1
4
0
0
3
8
0
0
8
34
Notes
1) Net interest income
EUR million
Q2/07
Q3/06
H1/07
H1/06
Interest income
Other
Total
68
92
386
546
40
63
194
297
132
181
670
983
74
114
357
545
Interest expenses
Other
Total
23
18
473
514
26
12
235
272
43
37
845
925
48
23
423
494
32
25
58
51
Q2/07
Q2/06
H1/07
H1/06
3
1
3
1
0
0
0
0
3
1
4
0
1
1
3
-1
Q2/07
Q2/06
H1/07
H1/06
Premiums written
Insurance premiums ceded to reinsurers
Change in provision for unearned premiums
Reinsurers' share
Total
209
-11
23
-2
219
184
-8
29
-5
200
642
-40
-193
14
423
589
-35
-177
11
388
Net Non-life Insurance claims
Claims paid
Insurance claims recovered from reinsurers
Change in provision for unpaid claims
Reinsurers' share
Total
126
-3
13
-2
136
116
5
10
-2
129
275
-4
15
-4
283
235
11
10
2
258
Net interest income
2) Impairment losses on receivables
EUR million
Receivables amortised as loan or guarantee
losses
Increase in impairment loss provisions
Decrease in impairment loss provisions
Impairment losses on receivables, total
3) Net income from Non-life Insurance
EUR million
35
Net investment income, Non-life Insurance
Interest rates
18
19
35
36
-9
10
3
1
-2
5
0
3
-28
42
3
-3
-4
9
1
5
0
2
15
39
-1
-1
7
29
0
3
33
85
-1
-1
20
65
Unwinding of discount
Other
-10
1
-9
0
-19
2
-18
0
Net income from Non-life Insurance, total
113
90
208
176
Q2/07
Q2/06
H1/07
H1/06
5
3
6
4
4
3
4
2
11
6
13
4
7
6
12
3
14
1
2
3
38
15
1
1
1
31
27
5
3
4
73
26
3
3
2
62
Commission expenses
Payment transfers
Securities brokerage
Securities issuance
1
2
2
1
2
0
1
5
3
1
4
1
Asset management and legal services
Other
Total
2
0
8
1
4
8
5
1
14
2
4
13
31
23
59
48
Net realised gains and realised fair value
gains and losses
Notes and bonds
Shares and participations
Investment property
Other
Unrealised fair value gains and losses
Notes and bonds
Other
Dividend income
Total
4) Net commissions and fees
EUR million
Commission income from
Lending
Payment transfers
Securities brokerage
Securities issuance
Asset management and legal services
Insurance operations
Guarantees
Other
Commission income, total
Net commissions and fees, total
36
5) Net trading income
EUR million
Q2/07
Q2/06
H1/07
H1/06
-9
8
-4
4
-10
7
-8
8
-10
0
11
-11
-1
12
-13
0
20
-38
0
37
3
3
2
2
6
10
6
5
Q2/07
Q2/06
H1/07
H1/06
Capital gains and losses
Dividend income
Impairment losses
Total
12
1
0
12
6
3
-1
8
15
6
0
22
21
8
-1
28
Investment properties
Net investment income, total
0
13
1
9
1
23
1
29
7) Other operating income
EUR million
Q2/07
Q2/06
H1/07
H1/06
Central bank service fee
2
2
5
4
Realisation of repossessed items
0
0
1
1
-1
22
24
3
8
13
-1
31
36
6
15
25
Q2/07
Q2/06
H1/07
H1/06
37
5
3
45
36
7
3
45
71
10
5
86
70
11
5
87
Financial assets and liabilities held for trading
Capital gains and losses and realised
changes in value
Notes and bonds
Derivatives
Unrealised changes in value
Notes and bonds
Derivatives
Net income from foreign exchange
operations
Net trading income, total
6) Net investment income
EUR million
Rental income from assets rented under
operating lease
Other
Total
8) Personnel costs
EUR million
Salaries and fees
Pension costs
Other indirect personnel costs
Personnel costs, total
37
9) Other administrative expenses
EUR million
Q2/07
Q2/06
H1/07
H1/06
15
11
3
5
6
39
12
11
3
4
4
34
30
22
5
7
9
73
23
22
6
7
8
66
Q2/07
Q2/06
H1/07
H1/06
Expenses from properties and business
premises in own use
7
6
12
12
Expenses from realisation of repossessed
items
0
1
1
1
9
6
9
31
9
5
7
27
18
12
26
69
18
10
16
56
Office expenses
IT expenses
Telecommunications expenses
Marketing expenses
Other administrative expenses
Other administrative expenses, total
10) Other operating expenses
EUR million
Scheduled amortisation and depreciation
Amortisation on intangible assets due to
acquisition
Other
Other *)
Other operating expenses, total
*) The item includes EUR 10 million in liquidated damages, with interest and expenses, paid by OKO
Bank to savings banks on the basis of an arbitral award. The liquidated damages were due to the
ceasing of cooperation between Pohjola and savings banks in consequence of combining the
operations of OP Bank Group and Pohjola.
11) Financial assets for trading
EUR million
Notes and bonds
Total
30 Jun
2007
30 Dec
2006
3 567
0
3 567
4795
6
4801
30 Jun
2007
30 Dec
2006
20
1 697
471
166
69
509
2 932
22
1 752
447
87
56
400
2 766
12) Non-life Insurance assets
EUR million
Money market investments, money market
funds and deposits
Bonds and bond funds
Alternative investments
Properties
Other
Total
38
13) Investment assets
30 Jun
2007
30 Dec
2006
95
74
26
194
94
101
29
225
30 Jun
2007
30 Dec
2006
504
179
494
179
262
67
1 012
274
73
1 020
30 Jun
2007
30 Dec
2006
Insurance contract liabilities
Provision for unearned premiums
Provision for unpaid claims
Total
467
1 705
2 172
285
1 683
1 969
Other
Total
183
2 355
130
2 099
EUR million
30 Jun
2007
30 Dec
2006
Bonds
Certificates of deposit
Other
Total
7 927
5 383
108
13 418
7 630
5 519
115
13 263
EUR million
Notes and bonds
Investment property
Total
14) Intangible assets
EUR million
Goodwill
Brands
Customer relations pertaining to insurance
contracts and policy acquisition costs
Other
Total
15) Non-life Insurance liabilities
EUR million
16) Debt securities issued to the public
39
17) Subordinated liabilities
EUR million
Hybrid capital
Other
Total
30 Jun
2007
30 Dec
2006
192
794
986
198
727
924
30 Jun
2007
1
1192
47
1240
30 Dec
2006
1
2 520
31
2 552
30 Jun
2007
30 Dec
2006
534
1 476
3 254
534
1 384
3 563
141
419
165
421
5 823
6 066
Collateral given
EUR million
Given on behalf of own liabilities and
commitments
Mortgages
Pledges
Other
Total collateral given
Off-balance-sheet items
EUR million
Guarantees
Other guarantee liabilities
Loan commitments
Commitments related to short-term sale events
Other
Off-balance-sheet items, total
Accounts receivable and payable from sale or purchase of assets on behalf of customers
EUR million
Accounts receivable
Accounts payable
30 Jun
2007
30 Dec
2006
146
160
71
70
40
Derivatives held for trading and hedging on 30 June 2007
EUR million
Interest rate derivatives
Currency derivatives
Equity and index-linked derivatives
Credit derivatives
Other derivatives
Total derivatives
Nominal values/ remaining term to
maturity
<1v year
1-5v
>5v
Total Fair values
Assets
Liabilities
43 163
8 223
24 644
1 740
9 673
1 251
77 480
11 215
459
43
410
179
31
216
131
7
26 739
28
275
131
15
89 116
46
0
1
550
0
1
8
51 425
10 953
589
Derivatives held for trading and hedging on 30 June 2006
EUR million
Interest rate derivatives
Currency derivatives
Equity and index-linked derivatives
Credit derivatives
Other derivatives
Total derivatives
Nominal values/ remaining term to
maturity
<1v year
1-5v
>5v
31 981
5 132
15 872
738
37
119
146
15
16 890
8
37 157
Total Fair values
Assets
4 384
369
4
4 757
52 237
6 238
203
31
156
150
22
58 804
20
0
1
256
Liabilities
176
74
1
251
Other contingent liabilities and commitments
On 30 June 2007, OKO Bank’s commitments to venture capital funds amounted to EUR 10 million and Pohjola NonLife's commitments to EUR 50 million. They are included in the section 'Off-balance-sheet commitments'.
Related party transactions
The related parties of the OKO Bank Group comprise its parent, associates and administrative personnel, as well as
other related party companies. The parent of the OKO Bank Group is Osuuspankkikeskus Osk (OP Bank Group Central
Cooperative).
On 30 June 2007, OKO Bank Group's associates were Autovahinkokeskus Oy and Vahinkopalvelu Oy, and on 30 June
2006 Nooa Savings Bank Ltd, Autovahinkokeskus Oy and Vahinkopalvelu Oy.
The administrative personnel of the OKO Bank Group includes the President and CEO of OKO Bank, the deputy to the
President and CEO, and the members and deputy members of the Board of Directors and their close family members.
Information on the members of the Supervisory Board and their close family members was included in the related party
transactions until 30 March 2006, when the Supervisory Board was abolished. Standard terms and conditions for credit
are applied to loans granted to the management. The loans are tied to generally applied benchmark interest rates and
the loans are repaid in accordance with the agreed repayment schedule. The loans have normal collateral.
The other related party entities include OP Pension Fund, OP Pension Foundation and sister companies in OP Bank
Group Central Cooperative Consolidated.
41
Related party transactions 30 June 2007
Parent
company
Loans
Other receivables
Deposits
Other liabilities
Interest income
Interest expenses
Dividend income
Commission income
Commission expenses
Trading income
Trading expenses
Operating expenses
Off-balance-sheet commitments
Guarantees
Irrevocable commitments
Other
27
85
3
6
1 588
71
118
44
2
3
4
29
87
34
4
14
1
1
6
6
1
8
35
102
1
1
Wages and salaries and performance-related
pay
Wages and salaries
Holdings of related parties
Number of shares
Consolidated Administrative
associates
personnel
0
0
1
60 825 897
67 778
4 220 946
Related party transactions 30 June 2006
Parent
company
Loans
Other receivables
Deposits
Other liabilities
Interest income
Interest expenses
Dividend income
Commission income from
Commission expenses
Trading expenses
Operating expenses
Off-balance-sheet commitments
Guarantees
Irrevocable commitments
Other
50
2
5
1
1 408
66
140
51
1
2
22
5
3
9
1
2
7
15
1
10
6
8
Wages and salaries and performance-related
pay
Wages and salaries
Holdings of related parties
Number of shares
Consolidated Administrative
associates
personnel
2
60 825 897
49 728
4 205 946
42
The Interim Report for 1 April to 30 June 2007 has been made according to IAS 34 (Interim
Financial Reporting) as approved by the EU.
The accounting policies and the principles of segment reporting are described in the 2006 financial
statements.
The figures in this Interim Report are unaudited.
All figures in the Report have been expressed in round numbers. Consequently, the sum of single
figures may differ from the presented total sum.
Financial reporting in 2007
The Interim Report of OKO Bank Group for July–September will be disclosed on 8 November
2007.
OKO Bank plc
Board of Directors
This Interim Report is available on the Internet at www.oko.fi/english > Press. Background
information on the release can also be found at the same address.
Meeting for analysts
A meeting for analysts will be held in Finnish on 9 August 2007 at 10 am and an English-language
telephone conference later the same day at 3.30 pm. The telephone conference number is +358
20 699121.
For more information, please contact:
Mr Mikael Silvennoinen, President and CEO, tel. +358 10 252 2549
Mr Ilkka Salonen, CFO, tel. +358 10 252 3146
Ms Marja Huhta, Senior Vice President, Head of IR, tel. +358 010 252 2037
43
(Translation)
Statement on the review of the OKO Bank interim report for the period 1 January to 30 June
2007
To the Board of Directors of OKO Bank
We have performed a review of the OKO Bank interim report for the period 1 January to 30 June
2007. The interim report has been prepared by, and is the responsibility of, the Board of Directors
and the President, as defined under chapter 2, section 5 of the Finnish Securities Markets Act.
Based on our review, and at the request of the Board of Directors, we issue our statement on the
interim report in line with chapter 2, section 5, subsection 7 of the Finnish Securities Markets Act.
Our review was conducted in accordance with practice statement “910 Review” issued by the Finnish
Institute of Authorised Public Accountants. The review was planned and conducted in order to obtain
reasonable assurance about whether the interim report is free of material misstatement. The review
was limited in scope and mainly consisted of enquiries of company personnel and analytical
procedures, and thus provides less assurance than an audit. We have not performed an audit and,
accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that would cause us to believe that the
interim report, in all material respects, would not have been prepared in accordance with relevant
rules and regulations, and that it would not fairly present the result of operations and financial
position of the OKO Bank Group, as defined in the Finnish Securities Markets Act.
KPMG OY AB
Sixten Nyman
Authorised Public Accountant
Raimo Saarikivi
Authorised Public Accountant
44

OKO Osuuspankkien

Transcription

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