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OP Corporate Bank plc's Interim Report for 1 January - 31 March 2018

03.05.2018 klo 09:00

OP Corporate Bank plc
Stock Exchange Release, 3 May 2018 at 9.00 am EEST
Interim Report 1 January-31 March 2018

OP Corporate Bank plc's Interim Report for 1 January - 31 March 2018

  • Consolidated earnings before tax were EUR 150 million (133). The return on equity was 12.0% (11.1). Return on assets was 0.76% (0.70).
  • Banking earnings before tax increased to EUR 109 million (82). The loan portfolio increased by 7.8% to EUR 20.4 billion. The cost/income ratio was 30.4% (32.2).
  • Non-life Insurance earnings before tax decreased to EUR 32 million (42). The operating combined ratio was 93.2% (95.5). Net return on investments at fair value totalled EUR -13 million (50).
  • Other Operations earnings before tax were EUR 8 million (9). Liquidity and access to funding remained good.
  • The CET1 ratio was 15.8% (16.0), while the target is 15%.
  • Timo Ritakallio, LL.M., MBA and D.Sc. (Tech.), took up his duties as Chair of of the Board of Directors of OP Corporate Bank on 1 March 2018.
  • Jouko Pölönen resigned from his position as President and CEO of OP Corporate Bank plc on 30 April 2018. Hannu Jaatinen, M.Sc. (Econ. & Bus. Adm.) and eMBA, has been appointed acting President and CEO as of 1 May 2018.
  • Unchanged outlook: OP Corporate Bank Group's consolidated earnings before tax are expected to be about the same as in 2017.
Earnings before tax, EUR million Q1/2018 Q1/2017 Change, % Q1-4/2017
  Banking 109 82 32.9 344
  Non-life Insurance 32 42 -23.4 193
  Other Operations 8 9 -9.5 -2
Group total 150 133 12.1 535
Return on equity (ROE), % 12.0 11.1 0.9* 10.6
Return on assets (ROA), % 0.76 0.70 0.1* 0.67

Comparatives deriving from the income statement are based on figures reported for the corresponding period a year ago. Unless otherwise specified, balance-sheet and other cross-sectional figures on 31 December 2017 are used as comparatives. On 1 January 2018, OP Corporate Bank adopted IFRS 9 Financial Instruments. Comparatives deriving from the income statement are based on figures under IAS 39 reported for the corresponding period in 2017. Unless otherwise specified, balance sheet and other cross-sectional figures under IAS 39 on 31 December 2017 are used as comparatives.
* Change in ratio

Financial targets 31 March 2018 31 Dec. 2017 Target
Customer experience, NPS (-100-+100) 71 69 70, over time 90
CET1 ratio, % 15.8 16.0 15
Return on economic capital, % 18.1 17.8 22
Expenses of present-day business*, EUR million 538 534 Expenses in 2020 lower than in 2015
(475)
Dividend payout ratio, %   49.7 50

*Excluding expenses of the health and wellbeing business. Rolling 12-month.

Outlook towards the year end

Economic growth in the euro area is expected to have continued during the first few months of the year but at a slightly slower rate than in late last year. Inflation continued to remain moderate. The European Central Bank continued its accommodative policy although it cut asset purchases. The Finnish economy too is expected to have grown at a brisk rate during the first few months of the year. The growth has been broad-based. Employment has improved, exports have grown and confidence indicators are strong. Economic development is anticipated to remain favourable in the euro area in the near future too. Monetary policy normalisation is progressing steadily and a rise in short-term market interest rates is expected to be moderate. The largest risks in the near future are associated with greater uncertainty in financial markets and with the political environment. A longer-term risk is that economic growth will remain modest if Finland is not able to restructure its economy to a sufficient extent when the population is ageing and digitisation is proceeding.

The operating environment in the financial sector on the whole has been quite favourable. While low interest rates have retarded growth in banks' net interest income and eroded insurance institutions' income from fixed income investments, they also have improved customers' repayment capacity. Impairment losses are low. The most significant strategic risks in the financial sector are currently associated with changing customer behaviour, operating environment digitisation, competition from outside of the traditional financial sector and more complex regulation. Industry disruption is threatening to slow down growth and erode income generation in the years to come. In the next few years, the financial sector will be faced with a strong need to reinvent itself. Changes in the operating environment will emphasise the necessity of reinvention with a long-term approach as well as the role of the management of profitability and capital adequacy.

OP Corporate Bank Group's consolidated earnings before tax are expected to be about the same as in 2017. The most significant uncertainties affecting earnings relate to changes in the interest rate and investment environment, impairment loss on receivables, the rate of business growth and the effect of large claims on claims expenditure. IFRS 9 adopted at the beginning of 2018 is expected to increase short-term earnings volatility and decrease investment income soon after its adoption.

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, 3 May 2018

OP Corporate Bank plc
Board of Directors

Financial reporting in 2018

OP Corporate Bank plc publishes the following financial information pursuant to the regular disclosure obligation of a securities issuer.


Schedule for Interim Reports in 2018:                                               

Interim Report H1/2018 1 August 2018
Interim Report Q1-3/2018 31 October 2018

Distribution
Nasdaq Helsinki Oy
London Stock Exchange
SIX Swiss Exchange
Major media
www.op.fi

For additional information, please contact
Hannu Jaatinen, Acting president and CEO, tel. +358 (0)10 252 2874
Carina Geber-Teir, Executive Vice President, Corporate Communications, tel. +358 (0)10 252 8394

OP Corporate Bank plc 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.

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