OP Corporate Bank plc Interim Report for 1 January-30 September 2016 Stock Exchange Release, 2 November 2016 at 9.00 am EET
OP Corporate Bank plc's Interim Report for 1 January-30 September 2016
- Consolidated earnings before tax were EUR 400 million (514). The return on equity was 11.1% (16.4).
- Banking earnings before tax decreased to EUR 189 million (259) due to lower net investment income. The loan portfolio grew in the reporting period by 6.4% to EUR 17.4 billion (16.4). Earnings included EUR 13 million (19) in impairment loss on receivables.
- Non-life Insurance earnings before tax decreased to EUR 199 million (225) due to lower net investment income. Operating combined ratio was 86.5% (86.3).
- Other Operations earnings before tax were EUR 11 million (28). Liquidity and access to funding remained good.
- The CET1 ratio was 14.5% (14.1) as against the target of 15%.
- Unchanged outlook: OP Corporate Bank Group's consolidated earnings before tax are expected to be clearly lower than earnings from continuing operations in 2015.
| Q1-3/2016 | Q1-3/2015 | Change, % | Q1-4/2015 | |
| Earnings before tax, EUR million | ||||
| Banking | 189 | 259 | -27.0 | 334 |
| Non-life Insurance | 199 | 225 | -11.5 | 267 |
| Other Operations | 11 | 28 | -60.3 | 23 |
| Group total | 400 | 514 | -22.2 | 625 |
Comparatives deriving from the income statement are based on figures reported for continuing operations for the corresponding period a year ago. Unless otherwise specified, balance-sheet and other cross-sectional figures on 31 December 2015 are used as comparatives.
| Financial targets* | Q1-3/2016 | Q1-3/2015 | Q1-4/2015 | Target |
| Return on equity, % | 11.1 | 16.4 | 14.8 | 13 |
| CET1 ratio, % | 14.5 | 13.7 | 14.1 | 15 |
| Cost/income ratio by Banking, % | 34.6 | 26.7 | 27.0 | < 35 |
| Operating combined ratio by Non-life Insurance, % ** | 86.5 | 86.3 | 87.3 | < 92 |
| Operating expense ratio by Non-life Insurance, % | 17.6 | 17.4 | 17.7 | 18 |
| Non-life Insurance solvency ratio (under Solvency II), % including the effect of transitional provisions | 162 | 158 | ||
| Non-life Insurance solvency ratio (under Solvency II), % excluding the effect of transitional provisions | 146 | 152 | 139 | 120 |
| AA rating affirmed by two credit rating agencies or credit ratings at least at the main competitors' level | 2 | 2 | 2 | 2 |
| Dividend payout ratio at least 50%, provided that CET 1 ratio is at least 15%. Dividend payout ratio is 30% until CET1 ratio of 15% has been achieved. | 30 | > 50 (30) |
* OP Corporate Bank plc's financial targets will be updated by the end of the year. ** Operating ratios exclude changes in reserving bases and amortisation on intangible assets arising from the corporate acquisition.
Outlook towards the year end
Supported by the domestic market, the Finnish economy has recovered slowly during the current year. Consumer spending and construction, in particular, have contributed to economic growth but export performance has remained sluggish. Unemployment has decreased and confidence improved. The world economy is expected to continue its slow growth and exports should not see any quick recovery. The Finnish economy is expected to continue its fairly slow growth, supported in the first place by domestic demand. Unrest in financial markets caused by the UK EU membership referendum eased off at the end of the reporting period but Brexit and many other political and economic risks are still casting a shadow over the outlook. In Finland, the faltering implementation of the economic policy measures already decided may threaten recovery.
Market interest rates that have in part turned negative places a burden on the net interest income of banks and erodes the investment income of insurance institutions. Then again, low interest rates support customers' loan repayment capacity, which has kept banking impairment loss low despite the prolonged period of slow economic growth. Digitisation in the financial sector, upgrading fragmented information system infrastructures and change in customer behaviour will require significant development investments in the sector in the next few years, which will increase expenses and weaken profitability in the short term. Changes in the operating environment will highlight the role of operational efficiency and profitability as well as a strong capital base.
OP Corporate Bank Group's consolidated earnings before tax are expected to be clearly lower than earnings from continuing operations in 2015. The most significant uncertainties affecting earnings relate to the rate of business growth, impairment loss on receivables, developments in bond and capital markets, the effect of large claims on claims expenditure and to the discount rate applied to insurance liabilities.
All forward-looking statements in this report expressing the management's expectations, beliefs, estimates, forecasts, projections and assumptions are based on the current view of the future development in the operating environment and the future financial performance of OP Corporate Bank Group and its various functions, and actual results may differ materially from those expressed in the forward-looking statements.
Helsinki, 2 November 2016
OP Corporate Bank plc Board of Directors
Financial reporting in 2017
OP Corporate Bank plc publishes the following financial information pursuant to the regular disclosure obligation of a securities issuer:
Schedule for Financial Statements Bulletin for 2016 and Interim Reports in 2017:
Financial Statements Bulletin 2016 2 February 2017 Interim Report Q1/2017 27 April 2017 Interim Report H1/2017 2 August 2017 Interim Report Q1-Q3/2017 1 November 2017
DISTRIBUTION Nasdaq Helsinki Ltd London Stock Exchange SIX Swiss Exchange Major media www.op.fi, www.pohjola.com
For additional information, please contact Jouko Pölönen, President and CEO, tel. +358 (0)10 253 2691 Carina Geber-Teir, Executive Vice President, Corporate Communications, tel. +358 (0)10 252 8394
OP Corporate Bank is part of the leading Finnish customer-owned financial services group, OP Financial Group. OP Corporate Bank and OP Mortgage Bank are responsible for OP's funding in money and capital markets. As laid down in the applicable law, OP Corporate Bank, OP Mortgage Bank and their parent company OP Cooperative and other OP Financial Group member credit institutions are ultimately jointly and severally liable for each other's debts and commitments. OP Corporate Bank acts as OP's central bank.
