OP Corporate Bank plc
Half-year Financial Report 1 January–30 June 2020
Stock Exchange Release 21 July 2020 at 9.00am EEST
OP Corporate Bank plc's Half-year Financial Report for 1 January–30 June 2020
- Consolidated earnings before tax were EUR 138 million (187). Total income decreased by 14% to EUR 488 million (568). Including the overlay approach, total income increased by 3% to EUR 537 million (524). Net interest income increased by 21% to EUR 165 million (136) and net insurance income by 8% to EUR 288 million (267). Impairment loss on receivables, EUR 67 million, increased by EUR 53 million year on year. The effects of the COVID-19 pandemic on capital market developments weakened investment income particularly in the first quarter. Investment income fell by 30% year on year, to EUR 75 million (106).
- Corporate Banking earnings before tax fell by 27% to EUR 89 million (121). Impairment loss on receivables increased by EUR 54 million to EUR 68 million (14). Net interest income increased by 9% to EUR 202 million (185) and net investment income by 17% to EUR 59 million (50). The loan portfolio grew in the year to June by 7% to EUR 24.7 billion (23.2).
- Insurance earnings before tax weakened by 11% to EUR 86 million (97). Net insurance income increased by EUR 21 million to EUR 288 million. Investment income fell by 71% to EUR 13 million (44). The operating combined ratio was 89.3% (92.5).
- Other Operations earnings before tax were EUR –36 million (–31). Liquidity remained good despite the COVID-19 crisis.
- The Group's CET1 ratio was 13.7% (14.9). The lower ratio was affected by the increase in the loan portfolio and the adoption of the new definition of default in the first quarter.
| Earnings before tax, € million | H1/2020 | H1/2019 | Change, % | Q1–4/2019 |
| Corporate Banking | 89 | 121 | -26.8 | 262 |
| Insurance | 86 | 97 | -11.2 | 200 |
| Other Operations | -36 | -31 | - | -50 |
| Group total | 138 | 187 | -26.3 | 412 |
| Return on equity (ROE), % | 5.2 | 7.4 | -2.3* | 7.8 |
| Return on assets (ROA), % | 0.30 | 0.46 | -0.17* | 0.49 |
| 30 Jun 2020 | 30 Jun 2019 | Change, % | 31 Dec 2019 | |
| CET1 ratio, % | 13.7 | 13.6 | 0.2* | 14.9 |
| Loan portfolio, € billion | 24.7 | 23.2 | 6.8 | 23.7 |
| Deposits, € billion | 13.6 | 10.4 | 30.1 | 11.1 |
| Ratio of non-performing receivables to loan and guarantee portfolio, % | 1.1 | 0.5 | 0.6* | 0.5 |
| Ratio of impairment loss on receivables to loan and guarantee portfolio, % | 0.48 | 0.11 | 0.38* | 0.19 |
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 2019 are used as comparatives.
*Change in ratio
Outlook towards the year end
Due to the COVID-19 pandemic, the global economy declined sharply in the second quarter. However, it began to recover already in early summer as restrictions were eased. The financial market picked up during the second quarter as well, helped by central banks’ sizeable support measures. While the Finnish economy directly suffered less from restrictions than the economies of many other countries, Finnish GDP also plunged in the spring.
The economic outlook is still exceptionally uncertain in spite of the tentative recovery. Uncertainties in the financial market may increase rapidly if the pandemic outbreak worsens again. Recession in the export markets may also affect the Finnish economy with a lag, even if the direct effects of the pandemic gradually waned. A recession caused by the pandemic may have lagged effects on banks and insurance companies, if customers’ financial difficulties persist.
The most significant uncertainties affecting earnings performance due to the COVID-19 crisis relate to changes in the interest rate and investment environment and to the developments in impairment losses. In addition, future earnings performance will be affected by the market growth rate, change in the competitive situation and the effect of large claims on claims expenditure.
In 2020, full-year earnings estimates will only be provided at the OP Financial Group level, in its financial statements bulletin and interim reports.
All forward-looking statements in this Half-year Financial Report expressing the management's expectations, beliefs, estimates, forecasts, projections and assumptions are based on the current view of the future development in the business 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.
Schedule for Interim Reports in 2020:
| Interim Report Q1−3/2020 | 22 October 2020 |
Helsinki, 21 July 2020
OP Corporate Bank plc
Board of Directors
For additional information, please contact:
Katja Keitaanniemi, President and CEO, tel. +358 (0)10 252 1387
Tuuli Kousa, Chief Communications and Corporate Responsibility Officer, tel. +358 (0)10 252 2957
DISTRIBUTION
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Major media
op.fi
OP Corporate Bank plc is part of 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.