The OP bank Group’s interim report 1.1.-30.6.2018: Profit before tax of eur 425 million — the result for the whole year is estimated to be as large as in the last year

OP Group

Stock exchange release 1.8.2018 there is a 9.00

Interim report 1.1-30.6.2018

The OP bank Group’s interim report 1.1.-30.6.2018:

The result before tax of eur 425 million — the result for the whole year is estimated to be as large as in the last year

  • The result before tax was eur 425 million (560).
  • The proceeds from the kundrörelsen increases: interest and försäkringsnettot was 7 % and net commissions and fees 2 % higher than a year earlier.
  • Other income than the proceeds from the kundrörelsen decreased clearly. Investment income decreased by a total of eur 63 million and other operating income by eur 41 million. The adoption of IFRS 9 at the beginning of the year affected the returns.
  • Investments in development increased costs, which were 12% higher than a year earlier.
  • The write-downs of receivables, € 7 million (23), was very small as a result of reversals of impairment losses.
  • CET1-capital ratio was 19.8 %, i.e. approximately the same as at the end of the year before. Kärnprimärkapitalet exceeded 10 billion.
  • Banking profit before tax increased by 6 % to 333 million euros (314). Net interest income increased 3% and net commission income decreased by 5 %. Costs increased by 8 %. Lending volumes increased during the year by 5.3 % and deposits by 7 %.

  • Non-life insurance profit before tax decreased by 40 % to eur 64 million (107). Insurance premium revenue increased by 3 % and costs by 12 %. Net investment income decreased by eur 46 million from a year earlier.

  • Asset management’s profit before tax increased by 2 % to sek 94 million (93). Net commission income decreased by 3 % and expenses increased by 6 % compared with a year earlier. The managed funds increased by 2 % in one year.

  • Other operations reported a profit before tax of eur -66 million (45). The result was affected by the increased development-related costs and the decline in net investment income. In the revenue for the comparative period included non-recurring items for eur 42 million.

  • The supervisory board of the OP bank Group central cooperative decided 6.6.2018 about a new division of labor of the executive board at the group’s central institution.
  • The OP bank Group has decided to transfer the staff to the statutory arbetspensionsskydd to Ilmarinen Mutual Pension insurance company. The transfer improves the group’s capital adequacy ratio by approximately 0.4 percentage points. The transfer is estimated to take place before the end of the year and according to the current assessment improves the transfer the group’s profit by 2018 with € 240 million.
  • Change in the outlook: Earnings before tax in 2018 is estimated to be approximately the same as in 2017 (previously, less than). Detailed information about the change is available under «Outlook for the remainder of the year».

Significant investments for the customer’s best

  • OP invest in 2018 to approximately eur 400 million to develop its operations and improve the customer experience. During the period under review introduced a digital bolånetjänst where the customer can get their bolånebeslut in real-time on the net.
  • In may 2018 opened Pohjola Health its fifth hospital in Turku. Pohjola Health have begun to build up their own läkarcentralsnät. The first läkarcentralerna opened in Pori and Lappeenranta in 2018.
  • The new OP bonuses granted grew by 5 per cent to € 113 million (108).
  • The number of members of the member cooperative banks increased in the early part of the year with 32 000 to nearly 1.9 million and the number of common customers of the OP bank Group’s banking and insurance operations increased by 19 000 to over 1.8 million.

The OP bank Group key indicators

The OP bank Group took 1.1.2018 applied IFRS 9 «Financial instruments». As the comparative figures for the results have been used in centuries according to the standard IAS 39 for the corresponding periods in 2017. For when comparing balance sheet and other cross-sectional items, which figure is used, according to IAS 39 by the end of 2017, if not otherwise mentioned.

* Change in the ratio

** The ratio according to the total risk-weighted items have been calculated for the insurance companies with the transitional provisions included in the solvency rules for insurance companies.

*** 12 months. moving

**** With non-performing loans referred to over 90 days past-due receivables, other receivables with risks and exposures, with the deferment granted on the basis of the customer’s financial difficulties and related to such claims.

                                                                                                                   

Governor Timo Ritakallios comments

The OP bank Group’s earnings for the beginning of the year was still good, despite the fact that it clearly fell compared with the corresponding period of last year. The reason for the decline in earnings is significantly less revenues from investment income and the much higher operating costs. In particular, positive performance in the beginning of the year was the result of the actual kundrörelsen was held at the same level as for the corresponding period of the previous year. The proceeds from the kundrörelsen — net interest income, försäkringsnettot and commission income — rose by 5 per cent from the previous year. Our strong focus on improving the customer experience and developing our business, operating expenses increased by 12 per cent from the previous year. The write-downs of receivables were exceptionally small. The OP bank Group’s capital adequacy ratio remained healthy at the end of the reporting period. This provides a good basis for a long-term development of the business then the digital brytningsskedet in the financial services industry continues.

During the beginning of the year grew OP Group’s business is clearly faster than in the corresponding period of the previous year. The growth in lending and non-life insurance insurance premium revenue accelerated to 3 percent and the growth rate of deposits to 6 percent. Especially strong was the growth among business customers. The growth in the kundförmögenhet that we manage were in common with the general trend of the market is slower than last year, and the managed funds was at the end of June on the same level as at the end of the year.

The OP bank Group is there for its customers. The world is digitized faster and faster, but we in the OP Group, will also continue to take into account our clients ‘ different need of services. We want to provide an excellent customer experience both digitally native and for customers who do not have easy or who are not accustomed to using online. Our goal is to be a guide for easy-to-use services and at the beginning of July we launched a new, simplified and easy-to-use network service — OP is Available — for customers who for one reason or another can’t use t.ex. the service the op.fi or OP-mobile. The intention with the new service is to create the equivalent of banking services and to facilitate everyday life for all groups of customers. Also this service we have developed in cooperation with our customers.

OP Eläkekassas assembly of representatives, has decided to transfer the management of the personnel’s statutory arbetspensionsskydd to Ilmarinen Mutual Pension insurance company. The transfer of the group’s pension obligations, which still requires regulatory approval, improves both the OP bank Group’s capital adequacy ratio and earnings in the year. According to the current estimate, would the transfer result in an improvement of the non-recurring of approximately 240 million euros. The transfer of the group’s pension obligations would be done at the end of the year and the final impact on earnings depends in particular on how the fixed income market is developed for the remainder of the year. Therefore, specifying we the OP bank Group’s earnings outlook for this year so that the result for the whole year are estimated to be as large as the nearly record-breaking results in 2017.

The OP bank Group’s goal is to change as customer needs change. In the beginning of June OP Andelslags supervisory board decision on the composition of and the responsibilities of the OP bank Group’s senior management. The objective of the revision is to clarify our strategic focus, maximizing the benefits for customers and boost resultattakten in the business. And with the renewal simplified, organisations and operating models and decisions are taken faster. OPs new board began operations in 11.6.2018 and has organized itself around the privatkundsrörelsen and företagskundrörelsen. The core of the business consists continue of banking and insurance operations. With the new responsibilities and the executive board, we strive for strategic and operational agility, and to create an excellent customer experience and value for our customers. The following stages in the organisation takes place during the autumn.

At the side of the digitalisation and changes in the business environment is regulation a factor that causes substantial changes within our industry. We want to be involved with developing the finance industry and build up cooperation both in Finland and internationally. We apply for membership in the Finance in Finland from the beginning of 2019, as a more intensive cooperation will benefit all actors.

The global economic development has still been good but oenhetligare in the second quarter. In particular, the threat of a trade war has aroused the concern regarding future economic development. In Finland, the economy has continued with good intensity in the spring and especially gratifying is the development in employment. Konjunkturförfrågningarna suggest, however, that the strongest period of growth starts to be over. The economic outlook is still relatively positive, but above all the turmoil in the international politics can not be taken with a shoulder shrug.

As a whole is makrostabiliteten in the Finnish economy are relatively good. The current account shows a surplus, and there is no signs of overheating. Indebtedness of the private sector is increasing, on the whole, moderate — there is particular reason to note that household wealth is still growing faster than debt. Skuldsättningsdiskussionen will nonetheless continue, which is good. As support for the political decisions needed a precise picture also of how the household wealth increases.

January-June

The OP bank Group’s result before tax was eur 425 million (560). The result decreased by eur 134 million from the earnings for the comparative period. The reduction of the net investment income and other operating income decreased and expenses increased. The proceeds from the kundrörelsen, i.e. net interest income, försäkringsnettot and net commission income increased from the comparative period.

Net interest income rose by 6.8 percent to eur 571 million. Net interest income increased in the Banking operations of eur 18 million in the segment of Other operations by eur 22 million. Försäkringsnettot was eur 278 million (261). During the comparison period weakened the lowering of the discount rate försäkringsnettot by eur 26 million. The sharp increase in insurance premium revenue from corporate customers, supported growth in the försäkringsnettot. Net commission income was eur 444 million, i.e. eur 9 million higher than a year earlier. Premiums of investment-linked management fees increased by 6 million and commission expenses decreased by eur 20 million. Commissions from payment transactions, decreased by eur 17 million. OP Group sold in the comparative period of his contract and betalterminalbestånd for card processing services and betalterminaltjänster to the Nets. As a result of the deal, revenues from betalningsrörelseprovisioner with 10 million and commission expenses of 12 million from the comparative period.

Net investment income decreased by 16.7% to eur 206 million. On the part of the skadeförsäkringsbolagens equity instruments shall apply for a temporary exemption (overlay approach), which decreased the reported earnings by eur 22 million. Total decrease in revenues from investment income of € 63 million. The OP bank Group’s insurance companies total income from investments at fair value was 0.5 per cent (1.4).

Net income at fair value through other comprehensive income (in comparative period net income from assets available for sale) decreased from the comparative period by eur 52 million. In the beginning of 2018 was the standard with IFRS 9 in use, which meant that the amount of investments measured at fair value through other comprehensive income and profits decreased. During the period under review totalled eur 32 million (81) in capital gains. The amount of investments measured at fair value through profit or loss increased. The positive changes in the value of derivatives are credit and counterparty risk, which depends on changes in the market, in the net trading income was € 9 million less than in the comparative period. The current räntekompletteringarna in the life insurance was less than in the comparative period, and increased net investment income by eur 28 million from the comparative period.

Other operating income decreased from the comparative period by eur 41 million to eur 21 million. During the comparative year recorded bonuses of the value-added tax of non-recurring from previous years and interest on them for a total of eur 22 million. During the reporting period were recorded in addition, income of eur 24 million in operating income for the sale of the contract and betalterminalbeståndet for card processing services and betalterminaltjänster. For the transaction recorded additional depreciation of eur 3 million and other costs of eur 3 million.

Costs increased by 12.4 per cent to 956 million (851). The increase was primarily due to costs for the development of the current business, the cost of new business lines and the depreciation and impairments increased. The OP bank Group’s significant investment in the development of services increased the development costs by 13.3 per cent. The direct development costs was a total of 110 million euros (97). The new their share of the increase in total cost was 13 million euros. Depreciation according to plan increased by 18.2 per cent to eur 105 million. The increase in depreciation was due to the increased focus on development in recent years. Impairment losses increased by € 19 million from the comparative period. Costs also increased as myndighetsavgifterna increased by eur 20 million from the comparative period and staff costs increased by 5.2 per cent to 413 million euros.

Resultatförsvagande impairment losses on various items for credits and receivables, and investments were recorded for a total of 17 million euro (37), of which € 7 million (23) were recorded for credits and other receivables. The write-downs of receivables has 2018 calculated in accordance with the standard IFRS 9, so they are not fully comparable with the impairment as calculated under the previous standard, IAS 39. Non-performing loans of loans and other receivables were small, i.e. 1.2 per cent (1.2) of the loan and guarantee portfolio.

The OP bank Group’s income tax for the reporting period was eur 91 million (101). The effective tax rate was 21.3 per cent (18.0 in).

The OP bank Group’s equity amounted to eur 11.3 billion (11,1). Shareholders ‘ equity increased by the end of the results. In shareholders ‘ equity included distributing shares, reserved for 2.9 billion euros (2,9), of them consisted of eur 0.2 billion (0.3), the of redundant distributing shares denominated. The return target for the Avkastningsandelarna for 2018 is 3.25 per cent. The interest accumulated on the distributing shares denominated during the period under review is estimated at a total of eur 47 million. For 2017 to be paid the interest for a total of € 90 million in June 2018.

Prospects for the remainder of the year

The outlook for the global economy and the economy within the euro area are still favourable despite the fact that economic growth in the euro area has not quite reached up to the expectations in the second quarter. As a result of the good economic developments, the European central bank is gradually normalizing its monetary policy. In Finland, too, economic growth has been favourable. The economy has grown significantly on a broad front, employment has improved, the current account continued to show surplus and the confidence in the economy is good.

Economic development is also estimated in the near future be favorable despite the fact that the growth rate of the economy in Finland is projected to slow. The main risks in the near future has to do with the growing uncertainty in the financial markets, as well as with the political world. In the longer term, there is a risk that economic growth will be modest, unless the economy can be renewed enough when the population is ageing and the development is proceeding.

For the financial services industry has the world as a whole, been quite favourable. The low market interest rates have slowed the growth in the banks ‘net interest income and lower revenue from the insurance companies’ fixed-income investments, but also at the same time enhanced the customer kreditbetalningsförmåga. Impairment losses are very small. The most important strategic risks in the financial sector is associated currently with the change in customer behaviour, the digitalisation of the world, the competition outside of the traditional industry and the growing complexity of the regulation. Brytningsskedet in the industry threatens to in the next few years slow down the growth and break down the revenues. The financial industry stands in the next few years the face of a strong need to be renewed. Changes in the operating environment increases the importance of a long-term renewal and the importance of controlling the profitability and capital adequacy.

The OP bank Group’s earnings before tax in 2018 is estimated to be approximately the same as (previously less than) 2017. The outlook has changed as a result of the significant item of non-recurring transfer of the statutory arbetspensionsskyddet of the employees in the OP Group and whose final impact on earnings depends on the market conditions during the remainder of the year.

The largest osäkerhetsmomenten associated with changes in the interest rate and placeringsmiljön, the rate of growth in the market, changes in competitive conditions and impairments. The standard IFRS 9, which was introduced at the beginning of 2018, is expected to increase resultatvolatiliteten in the short term and immediately after the adoption reducing investment income.

All forecasts and estimates in this interim report are based on the prevailing idea of economic development. The actual results may differ significantly.

Press conference

Governor Timo Ritakallio presents OP Group’s findings at a press conference for the media 1.8.2018 there at 11.00 am at the address Gebhardsplatsen 1, vallila district of Helsinki.

OP Corporate bank Plc will publish its own interim report.

Financial information 2018

The interim reports 2018, the publication of the following days:

Interim report 1.1.-30.9.2018 31.10.2018

Helsinki 1.8.2018

OP co-operative

The executive board

Details:

Governor Timo Ritakallio, tel 010 252 4500

Chief financial officer Harri Luhtala, tel 010 252 2433

Director of communications Carina Geber-Teir, tel 010 252 8394

www.op.fi

DISTRIBUTION

Nasdaq Helsinki

Euronext Dublin (Irish Stock Exchange)

LSE the London Stock Exchange

SIX Swiss Exchange

Central media

op.fi

The OP bank Group is the largest financial group in Finland. Group assignment: is that with strong capital adequacy and efficiency to create lasting economic success, welfare and security of co-op members and the outside world. The OP bank Group is comprised of about 160 member cooperative banks and the group’s central institution, OP Cooperative, with its subsidiaries and closely related companies. The group has 12,000 employees. The group has 1.9 million members.

OP the Association kapitaltäckningsrapport Q2 2018

The OP bank Group Q2 2018 background material

The OP bank Group interim report Q2 2018

This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.

The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.

Source: OP Yrityspankki Oyj via Globenewswire

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