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2016-02-04

OP Financial Group's Financial Statements Bulletin for 1 January-31 December 2015: Record year - customer ownership bears fruit

OP Financial Group

Stock Exchange Release 4 February 2016 at 9.00 am EET
Financial Statements Bulletin

OP Financial Group's Financial Statements Bulletin for 1 January-31 December
2015:

Record year -
customer ownership bears fruit

* The Group's earnings before tax increased by 20% to EUR 1,101 million
(915). This figure is OP Financial Group's all-time high.
* Total income increased by 5% and expenses decreased by 2% year on year.
* The CET1 ratio improved by 4 percentage points to 19.5% (15.1), supported
by strong earnings, which, for its part, enabled strong growth in lending:
* The home loan portfolio grew by 3.9% in the year to December * The
corporate loan portfolio increased by 9.3% * The total loan portfolio
increased by 6.4% and the number of loans drawn down by 8.7%
* New customer bonuses totalled EUR 197 million, up 4.5% year on year.
* Contributions made by owner-customers to cooperative capital increased to
EUR 2.8 billion (1.9). OP Financial Group anticipates paying interest of
3.25% on Profit Shares for 2015. Interest payable totals about EUR 66
million.
* Each of the three business segments improved its performance markedly: *
Banking earnings before tax increased by 12% to EUR 642 million (571). The
cost/income ratio improved by 2 percentage points to 54%. The deposit
portfolio grew by 6.5%. Impairment loss on receivables remained low at
0.10% of the loan and guarantee portfolio. * Non-life Insurance earnings
before tax increased by 16% to EUR 259 million (223). The operating
combined ratio of 87.3% was the best ever recorded. Insurance premium
revenue rose by 7%. * Wealth Management earnings before tax increased by
28% to EUR 213 million (167). Assets under management grew by 12% to EUR 68
billion.
* Full-year earnings for 2016 are expected to be about the same as in 2015.
For more detailed information on the outlook, see "Outlook for 2016".

OP Financial Group's key indicators

------------------------------------------------------------------------------------------------------------------------
| Q1-4/2015 Q1-4/2014 Change, % |
| Earnings before tax, € million 1,101 915 20.4 |
| Banking 642 571 12.5 |
| Non-life Insurance 259 223 16.0 |
| Wealth Management 213 167 27.6 |
| |
| New accrued customer bonuses 197 189 4.5 |
| |
| 31 Dec. 2015 31 Dec. 2014 Change, % |
| Common Equity Tier 1 (CET1) ratio, % 19.5 15.1 4.4* |
| Ratio of capital base to minimum amount of capital base (under the Act on the 207 189 18* |
|Supervision of Financial and Insurance Conglomerates), % |
| Ratio of receivables more than 90 days past due to loan and guarantee 0.42 0.37 0.05* |
|portfolio, % |
| Joint banking and 1,656 1,590 4.2 |
| |
|insurance customers (1,000) |
------------------------------------------------------------------------------------------------------------------------
Comparatives deriving from the income statement are based on figures reported
for the corresponding period in 2014. Unless otherwise specified,
balance-sheet and other cross-sectional figures on 31 December 2014 are used
as comparatives.

* Change in ratio.

Comments by Reijo Karhinen, President and Group Executive Chairman

Our long-standing success and determined transformation measures continued in
2015 as well. Our earnings and capital base increased to new record levels. A
6% growth in our loan portfolio and an almost 10% increase in our corporate
loan portfolio, in particular, convey a message of our ability to provide our
customers with opportunities for success today and tomorrow. Emphasis on
growth - our strategic basis - at the same time maintains the required
competition in the Finnish financial market.

We made strong progress in our business role. I am as happy with our efforts
in our social role. As a company owned by customers, our duty is to promote
the success of our owner-customers and operating region. By means of growth
faster than that of our competitors and several #Suominousuun (Putting
Finland on a new growth path) initiatives, we created positive mood both
among our large clientele and in the Finnish economy as a whole. This is the
course we will continue to stay. Community spirit as a value is a rising
trend and, in my view, the cooperative system is more attractive than ever
before.

The financial services sector is faced by one of the largest transformations
of all time. Digitisation, cross-border competition and quickening changes in
customer behaviour are challenging industry players in a new way. At OP
Financial Group, we have made determined efforts to sharpen our vision.
Cooperative ideology will continue to be our strategic basis. Maximising
benefits for our owner-customers guide our choices and business. Our strong
capital base combined with superior customer experience will guarantee our
unique success story.

In 2008, we promised to help our customers to go through the financial crisis.
Now we promise to make our customers go through the digital transformation -
on their own terms. The greater power of customers resulting from
digitisation is a big asset and source of inspiration for us. When this is
combined with a real customer ownership, a series of opportunities will open
to us. In the future of the connecting world, only those financial services
providers will succeed that can serve their customers and interact with them
irrespective of time, place or service channel.

Enhancing digital expertise is an important competitive weapon to OP Financial
Group. Investments in digitisation are traditionally seen as investments in
technology. But for us at OP, they first of all mean investments in customer
experience and service design. We have continued to make bold investments in
future service capabilities and in our Oulu mobile development unit already
established in 2011. We have now already taken the next steps. In addition to
digital experts, we have hired dozens of service designers to arise to the
challenge of digital business and to enable more customer-driven development
work. We represent Finnish pioneership in service design in the financial
sector.

We are making efforts to reinvent ourselves but we are concerned about
stagnation in the Finnish economy and, on a broader basis, in Finnish
society. Disagreement is now the last thing we need. In the digitising world,
Finland must respond to the pressures for change at a pace that is completely
different from before, or otherwise the Finnish foundations renowned as
strong will wobble. What we need most now is an atmosphere of renewal and
trust as well as agile decision-making and decision implementation.

Financial performance in the report period

Earnings before tax increased by 20.4% to EUR 1,101 million (915), being
almost 10% higher than the previous record figure for 2007. This improvement
was due especially to a 9% increase in other income. Net income posted by
Life Insurance and Non-life Insurance increased as a result of improved
insurance profitability. Net commissions and fees were at the level reported
a year ago. Estate agent fees and lending fees were lower than a year ago
whereas fees related to mutual funds and payment transaction fees increased.
Net trading income rose due to income from derivatives trading. Capital
gains on securities added to net investment income.

Net interest income decreased by 1.7% to EUR 1,026 million. Net interest
income from retail and corporate banking increased but that from Markets and
the liquidity buffer decreased. Net interest income from the liquidity buffer
was reduced by narrower credit spreads of bonds and the Group's preparation
for tighter liquidity regulation. The reduced net interest income from
Markets was compensated by an increase in its other income.

Total expenses decreased by 2.3%, being EUR 35 million lower than a year ago.
Higher personnel costs were explained by a EUR 40-million increase in pension
costs and a non-recurring EUR 9 million in expenses related to the
reorganisation of the central cooperative consolidated. Higher pension costs
were explained, among other things, by amended pension laws adopted at the
end of the year. Wages and salaries were at the previous year's level. In
addition to business expansion, the non-recurring expenses of EUR 18 million
related to intra-Group ownership reorganisation and the reconstruction of the
Vallila premises increased other expenses. ICT costs increased by 5.7%,
being EUR 11 million higher than in the previous year. A year ago, statutory
contributions to the Deposit Guarantee Fund and the bank levy, totalling EUR
72 million, and non-recurring expenses of EUR 12 million, related to the
purchase of Pohjola Bank plc shares, increased other expenses.

Impairment losses recognised under various income statement items that reduced
earnings amounted to EUR 114 million (113), of which EUR 78 million (88)
concerned loans and receivables. Net impairment loss on loans and receivables
were low, at 0.10% (0.12) of the loan and guarantee portfolio.

Earnings before tax at fair value amounted to EUR 883 million (1,067). OP
Financial Group's fair value reserve before tax totalled EUR 302 million
(531) on 31 December.

Equity capital amounted to EUR 9.3 billion (7.2) on 31 December. This increase
was due to both Group earnings and the issues of Profit Shares. On December
31, EUR 2.5 billion (1.6) in Profit Shares were included in equity,
terminated Profit Shares accounting for EUR 0.3 billion. In March 2015, the
central cooperative's Executive Board decided to raise the target ...

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