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2015-04-29

OP: Strong Q1 performance, new "Putting Finland on a new growth path" openings

OP Financial Group

Stock Exchange Release 29 April 2015 at 8.00 am
Interim Report

OP:
Strong Q1 performance, new "Putting Finland on a new growth path" openings

* Earnings before tax for the first quarter were EUR 320 million (257),
year-on-year improvement 24%. Total income increased by 8% while expenses
decreased by almost 3% year on year.
* Supported by the strong financial performance, the Group's CET1 ratio
improved to 16.7% (15.1).
* The strong capital base, therefore, made it possible for its part to
increase lending at a rate above the market average: * The home loan
portfolio grew by 2.7% year on year * The corporate loan portfolio
increased by 6.1% * The total loan portfolio increased by 4.4% and the
number of loans drawn down by 7.5%

* The home loan repayment grace period offered by the Group was used for
over 62,000 loans by the release date of this report.
* New customer bonuses for January-March totalled EUR 48 million

* Each of the three business segments improved its performance: * Banking
earnings before tax increased by 21% to EUR 192 million (158). The
cost/income ratio improved by 5 percentage points to 51%. The deposit
portfolio grew 2.5%. Impairment loss on receivables was at a low level of
0.12% of the loan and guarantee portfolio. * Earnings before tax by
Non-life Insurance increased by 6.5% to EUR 66 million (62). The operating
combined ratio was 87.2%. Insurance premium revenue rose by 5%. * Wealth
Management earnings before tax increased by 34% to EUR 93 million (69).
Assets under management grew by 24% to EUR 67 billion.
* Full-year earnings for 2015 are expected to equal or exceed those of 2014.
For more information, see "Outlook towards the year end".

OP Financial Group's key indicators

----------------------------------------------------------------------------------------------------------------------------------------
| Q1/2015 Q1/2014 Change, % 2014 |
| Earnings before tax, € million 320 257 24.3 915 |
| Banking 192 158 21.3 570 |
| Non-Life Insurance 66 62 6.5 223 |
| Wealth Management 93 69 34.0 167 |
| |
| New accrued customer bonuses 48 46 5.1 189 |
| |
| 31 March 2015 31 March 2014 Change, % 31 Dec. 2014 |
| Common Equity Tier 1 (CET1) ratio, % 16.7 15.5 1.2* 15.1 |
| Ratio of capital base to minimum amount of capital base (under the Act on the 167 200 -33* 189 |
|Supervision of Financial and Insurance Conglomerates), % |
| Ratio of receivables more than 90 days overdue to loan and guarantee 0.42 0.42 0.00* 0.37 |
|portfolio, % |
| Joint banking and 1,604 1,535 4.5 1,590 |
| |
|insurance customers (1,000) |
----------------------------------------------------------------------------------------------------------------------------------------
*
Change in ratio

Comments by Reijo Karhinen, President and Group Executive Chairman

OP Financial Group's performance for the first quarter of 2015 made good
progress according to our plans and targets. We have taken determined steps
to implement our reform programme that has extended to the core of our
business. At the same time, we showed excellent business performance. Our
earnings that increased to a record level strengthened our capital base. Our
solid capital base enabled us to again increase the volume of home and
corporate loans faster than our competitors. Wealth Management showed the
strongest growth, where assets under management increased by as much as a
quarter.

It was gratifying to see the significant improvement in our first-quarter
financial performance and how it was built on a steady, positive development
shown on almost every line in our income statement. Income increased and
expenses decreased in line with our strategy. Income grew at a brisk rate
although growth in net interest income slowed down as expected. The prolonged
low and an almost zero interest rate environment will present challenging
conditions for all our business segments. Slow economic growth combined with
low interest rates and the fast-spreading digitisation with new investments
will require very strict cost control in the future too.

Our return to a financial services group wholly owned by customers culminated
in our plan announced in the reporting period to change Helsinki OP Bank Plc
to a cooperative bank at the beginning of 2016 that allows customer
ownership. Our unified ownership base will create clarity, consistency and
new efficiency for our operations. The bases for our management and
goal-setting will also sharpen. In our business role we create prosperity
that we utilise in our social role for the benefit of our customer-owners and
operating environment.

Customer ownership combined with our core values obliges us to use our results
to strengthen our capital base, develop our services further and, for
example, for new "#PuttingFinland on new growth path" openings. In our social
role, we launched in the first quarter two large #PuttingFinland on new
growth path projects related to our businesses. Our launch of the home loan
repayment grace period and a single financing process model for SMEs is aimed
at increasing economic activity nationwide by providing solutions and
creating a more positive mood for economic debate. Great interest has been
shown in our new openings.

OP Financial Group's success and ability to be a strong partner with its
customers depend substantially in the long run on Finnish economic
development. In this respect, the outlook is still weak. A large number of
economic problems are, however, self-inflicted ones and, thus, Finland also
has to solve them itself.

Finland must return its economy to a sustainable growth path and rebalance its
public finances. A solution-seeking and confidence-enhancing atmosphere must
be created in the entire society. While the economy of the rest of the euro
area shows signs of slight recovery thanks to the robust monetary policy
measures taken by the ECB, our threat is a divergence from the euro area core
with potentially fatal consequences and leaving without support from the
others. Finland needs to focus the most important corrective measures on
improving its external competitiveness. This is the only way the Finnish
economy can return to the growth path. Near future will see whether our key
policymakers can show genuine responsibility and the appropriate crisis
awareness. Confidence in the future is created only through acts.

Financial performance in the report period

Earnings before tax for the first quarter were the highest ever recorded for a
quarter. Earnings before tax increased by 24% to EUR 320 million (257), this
improvement being due especially to strong growth in income. Net income from
Life Insurance and Non-life Insurance increased the most, due to better
insurance profitability and higher investment income. Net commissions and
fees also increased during the reporting period.

Total expenses decreased by 2.7%, being EUR 11 million lower than a year ago.
A non-recurring provision recognised for personnel costs of EUR 9 million
related to the reorganisation of the central cooperative consolidated
announced in February. Higher personnel costs are also explained by social
expenses rising by EUR 8 million. Statutory contributions to the Deposit
Guarantee Fund and the bank levy (EUR 18 million) plus the non-recurring
expenses incurred due to the purchase of Pohjola Bank plc shares (EUR 8
million) increased other operating expenses in the first quarter a year ago.

OP Financial Group's fair value reserve before tax totalled EUR 683 million
(531) on 31 March. Earnings before tax at fair value amounted to EUR 479
million (253).

Equity capital amounted to EUR 7.7 billion (7.2) on 31 March. The Group's
earnings and the issuance of Profit Shares added to equity capital. On 31
March, EUR 1.8 billion (1.6) in Profit Shares were included in equity.

Outlook towards the year end

There are first signs of economic recovery in Europe. Despite the ECB's
expansionary monetary policy measures, the economic growth rate is, however,
expected to remain modest this year. The Finnish economy is also expected to
remain sluggish. International political tensions will continue to cause
uncertainty to the Finnish economic development.

Weak economic growth will undermine growth expectations in the financial
sector. The continued reduction in interest rates places a further burden on
the net interest income of banks and erode the investment income of insurance
institutions. Then again, low interest rates support customers' loan
repayment capacity that has remained stable despite the prolonged period of
slow growth. Capital adequacy and profitability have come to play an
ever-increasing role because of the unstable operating environment and the
tighter regulatory framework.

In spite of the challenging operating environment, OP Financial Group expects
its earnings before tax to equal or exceed those in 2014. The most
significant uncertainties associated with the earnings estimate are related
to the effects of low interest rates, impairment loss on receivables and
unfavourable changes in the investment environment.

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 develop...

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