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2014-04-29

Pohjola Pankki Oyj: Pohjola Group Performance for January-March 2014

Pohjola Bank plc

Stock exchange release 29 April 2014, at 8.00 am
Interim Report

Pohjola Group Performance for January-March 2014
- Consolidated earnings before tax amounted to EUR 159 million (132) and
consolidated earnings before tax at fair value to EUR 163 million (114). The
return on equity was 16.5% (14.5).
-The Common Equity Tier 1 (CET1) ratio was 12.0% (11.9*).
-Strong growth in income improved Banking earnings. The loan portfolio
remained at the year-end level and increased by 3% in the year to March. The
average margin on the corporate loan portfolio was 1.54% (1.57). Earnings
included EUR 4 million (6) in impairment loss on receivables.
- Within Non-life Insurance, insurance premium revenue increased by 8% (10).
The combined ratio improved to 91.0% (94.2). Excluding changes in reserving
bases and amortisation on intangible assets arising from company acquisition,
the operating combined ratio was 89.3% (92.4). Return on investments at fair
value was 1.4% (1.1).
- Within Asset Management, assets under management increased by 3% from their
year-end level, amounting to EUR 39.2 billion (37.9).
- Total income increased by 11% and expenses by 4%. Cost savings out of the
EUR 12 million estimated for 2014 based on the efficiency-enhancement
programme amounted to EUR 1 million.
-Pohjola's Board of Directors confirmed Pohjola Group's updated financial
targets on 17 March 2014. It increased the capital adequacy target from 11%
(Core Tier 1) to 15% (Common Equity Tier 1) as a result of tightening
regulation and decreased the dividend payout ratio from 50% to 30% until
Pohjola has achieved its new CET1 target.
-OP-Pohjola Group Central Cooperative Consolidated executed a public voluntary
bid for Pohjola Bank plc shares. After the end of the extra offer period,
OP-Pohjola Group Central Cooperative's ownership increased to approximately
98.41% of the shares and to approximately 99.14% of the votes conferred by
the shares. On 11 April 2014, OP-Pohjola Group Central Cooperative initiated
a squeeze-out procedure under the Limited Liability Companies Act for the
remaining shares in Pohjola.
- Unchanged outlook: Consolidated earnings before tax for 2014 are expected to
be higher than in 2013. For more detailed information on the outlook, see
"Outlook towards the year end" below.

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 2013 are used as comparatives.

Comparative figures have been restated as a result of the adoption of IFRS 10
Consolidated Financial Statements.
*) In accordance with the EU capital requirements regulation (EU 575/2013)
(CRR) that entered into force on 1 January 2014.

**) Estimate; Solvency II regulations are still in progress.

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|Earnings before tax, € million Q1/2014 Q1/2013 Change, % 2013 |
|Banking 83 54 55 251 |
|Non-life Insurance 62 56 12 166 |
|Asset Management 6 5 31 24 |
|Group Functions 8 18 -58 39 |
|Total 159 132 21 479 |
|Change in fair value reserve 4 -18 -16 |
|Earnings before tax at fair value 163 114 41 463 |
| |
|Earnings per share, € 0.39 0.31 1.33 |
|Equity per share, € 9.25 8.48 9.54 |
|Average personnel 2 593 2 688 2 632 |
| |
|Financial targets Q1/2014 Q1/2013 2013 Target |
|Return on equity, % 16.5 14.5 14.4 13 |
|Common Equity Tier 1 ratio (CET1), % *) 12.0 11.9 15 |
|Operating cost/income ratio by Banking, % 33 40 36 <35 |
|Operating combined ratio by Non-life Insurance, % 89.3 92.4 86.9 <92 |
|Operating expense ratio by Non-life Insurance, % 18.5 19.9 18.7 18 |
|Non-life Insurance solvency ratio (under Solvency II framework), % **) 134 115 125 120 |
|Operating cost/income ratio by Asset Management, % 51 58 53 <45 |
|Total expenses in 2015 at the same level as at the end of 2012 151 145 581 569 |
|AA rating affirmed by at least two credit rating agencies or credit ratings at 2 2 2 2 |
|least at the main competitors' level |
|Dividend payout ratio at least 50%, provided that CET 1 ratio is at least 15%. 50 >50 (30) |
|Dividend payout ratio is 30% until CET1 ratio of 15% has been achieved. |
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President and CEO Jouko Pölönen:

Consolidated earnings before tax improved by EUR 27 million to EUR 159 million
and the return on equity was 16.5%. Banking and Non-life Insurance, in
particular, improved their earnings.

The Banking loan portfolio increased year on year. During the reporting
period, demand for loans was weak and the loan portfolio remained at the
2013-end level. Income from Banking increased as a result of higher net
interest income, net commissions and fees as well as net trading income. The
quality of the loan portfolio remained good and impairment loss on
receivables was lower than a year ago.

Within Non-life Insurance, insurance premium revenue continued to grow
strongly. As a result of the unusually mild winter, claims incurred increased
more slowly than insurance premium revenue, and the balance on technical
account improved. Return on investments at fair value was better than a year
ago due to lower interest rates.

Within Asset Management, assets under management increased from their 2013-end
level. Asset Management earnings improved as a result of higher net
commissions and fees.

Total income increased by 11% and expenses by 4%. Our expenses were above the
target and we will have to improve our operational efficiency further.

Pohjola Bank plc's Board of Directors confirmed updated financial targets for
Pohjola Group. It increased the Common Equity Tier 1 (CET1) ratio target to
15% as a result of tightening regulation and decreased the dividend payout
ratio to 30% until Pohjola has achieved its new CET1 target.

OP-Pohjola Group Central Cooperative, Pohjola's parent company, executed the
bid for Pohjola shares announced on 6 February 2014. As a result, its holding
in Pohjola shares has increased to approximately 98.41%. OP-Pohjola Group
Central Cooperative has initiated a squeeze-out procedure under the Limited
Liability Companies Act for the remaining shares in Pohjola.

The planned reorganisation following the bid will make Pohjola's business
lines integrate more closely with the more efficient and more competitive
OP-Pohjola Group wholly owned by its customers. This will create excellent
opportunities for us to provide the entire OP-Pohjola Group's resources for
our customers and to continue to promote their sustainable prosperity,
security and wellbeing more effectively.

Outlook towards the year end

Within Banking, the loan portfolio is expected to grow at the same rate as in
2013. Due to the operating environment, corporate investments are expected to
remain below their normal level. The greatest uncertainties related to
Banking's financial performance are associated with volume developments and
future impairment loss on the loan portfolio. Banking earnings before tax in
2014 are expected to be at the same level as or higher than in 2013.

Insurance premium revenue is expected to increase at a rate above the market
average. The operating combined ratio is estimated to vary between 87% and
91% if the number of large claims is not much higher than in 2013. Expected
investment returns are largely dependent on developments in the investment
environment. The most significant uncertainties related to Non-life
Insurance's financial performance pertain to developments in bond and capital
markets and to the effect of large claims on claims expenditure. Non-life
Insurance earnings before tax in 2014 are expected to be higher than in 2013.

The greatest uncertainties related to Asset Management's financial performance
are associated with the actual performance-based commissions and fees tied to
the success of investments and the amount of assets under management. Asset
Management earnings before tax in 2014 are expected to be at the same level
as or higher than in 2013.

The key determinants affecting the Group Functions' financial performance
include net interest income arising from assets in the liquidity buffer, any
capital gains or losses on notes and bonds and any impairment loss that may
be recognised on notes and bonds in the income statement. Group Functions
earnings before tax in 2014 are expected to be lower than in 2013 due to low
interest rates and tighter liquidity regulation.

Consolidated earnings before tax in 2014 are expected to be higher than in
2013.

There is still great uncertainty about the economic outlook and the operating
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 the future development in the operating
environment and the future financial performance of Pohjola Group and its
various functions, and actual results may differ materially from those
expressed in the forward-looking statements.

Helsinki, 29 April 2014
Pohjola Bank plc
Board of Directors...

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