OP Corporate Bank plc’s Half-year Financial Report for 1 January–30 June 2021

OP Corporate Bank plc
Half-year Financial Report 1 January–30 June 2021
Stock Exchange Release 28 July 2020 at 9.00 EEST

OP Corporate Bank plc’s Half-year Financial Report for 1 January–30 June 2021

• Consolidated earnings before tax improved to EUR 308 million (138). Total income increased by 44% to EUR 702 million (488). Investment income of EUR 157 million rose by EUR 83 million year on year. Net insurance income increased by 11% to EUR 320 million (288). A total of EUR 12 million of impairment losses on receivables were reversed whereas they weakened earnings by EUR 67 million a year ago. Total expenses increased by 10% to EUR 363 million (330). Net interest income decreased by 7% to EUR 153 million (165).

• Corporate Banking earnings before tax improved to EUR 219 million (89). Total income increased by EUR 65 million to EUR 348 million (282). Net investment income increased to EUR 94 million (59). Earnings were also strengthened by lower impairment loss on receivables. Net interest income was EUR 203 million (202). The loan portfolio decreased in the year to June by 1% to EUR 24.4 billion (24.7).

• Insurance earnings before tax improved to EUR 158 million (86). Net insurance income increased by 11% to EUR 320 million (288). Investment income rose to EUR 60 million (13). The operating combined ratio improved to 86.2% (89.3).

• Other Operations earnings before tax were EUR –69 million (–36). Liquidity remained strong.

• The Group’s CET1 ratio was 14.3% (15.1).

• On 2 July 2021, OP Corporate Bank plc’s Board of Directors approved a demerger plan whereby the shares of Pohjola Insurance Ltd, OP Corporate Bank plc’s subsidiary, will be transferred to the direct ownership of OP Cooperative. Based on the plan, the demerger would be executed by the end of 2021.

• Pohjola Insurance Ltd, OP Corporate Bank’s subsidiary, will sell Pohjola Hospital Ltd to Pihlajalinna Terveys Oy for EUR 31.8 million. As part of the transaction, Pohjola Insurance and Pihlajalinna will sign a long-term cooperation agreement on the provision of health services for customers of Pohjola Insurance. The transaction is subject to approval by the Finnish Competition and Consumer Authority.
  
  

Earnings before tax, € million	H1/2021	H1/2020	Change, %	Q1–4/2020
Corporate Banking	219	89	147.2	301
Insurance	158	86	83.2	288
Other Operations	-69	-36	-	-58
Group total	308	138	122.6	529
Return on equity (ROE), %	10.1	5.2	4.9*	9.2
Return on assets (ROA), %	0.55	0.30	0.25*	0.55
	30 Jun 2021	30 Jun 2020	Change, %	31 Dec 2020
CET1 ratio, %	14.3	13.7	0.57*	15.1
Loan portfolio, € million**	24,894	25,101	-0.8	24,485
Guarantee portfolio, € million	2,879	2,742	5.0	2,214
Other exposures, € million	5,670	5,254	7.9	5,423
Deposits, € million	13,708	13,575	1.0	13,300
Ratio of non-performing exposures to exposures, %***	2.1	2.2	-0.1*	2.2
Ratio of impairment loss on receivables to loan and guarantee portfolio, %	-0.09	0.48	-0.57	0.20

Comparatives deriving from the income statement are based on figures reported for the corresponding periods a year ago. Unless otherwise specified, balance-sheet and other cross-sectional figures on 31 December 2020 are used as comparatives.
*Change in ratio
** Data from the reference year Q2/2020 adjusted to correspond to the current monitoring.
***The name and content of the ratio were changed in Q1/2021. More detailed information on the change can be found under table Non-performing and forborne exposures in the Risk exposure section of this Half-year Financial Report.

Outlook for 2021

The number of Covid-19 cases decreased in many countries in the spring of 2021. The world economic recovery gathered momentum and spread more clearly to the service sector too. Inflation accelerated clearly in many countries. This was partly due to a poor benchmark level but also to the bottlenecks arising from the economic recovery and a rise in commodity prices.

Inflation anxiety eased in the financial market in the course of the second quarter and required bond yields went down. Mood in the stock market remained robust. Central banks continued to pursue an accommodative monetary policy and it is not expected to tighten this year

The Finnish economic recovery rate picked up in the second quarter. The financial situation of both companies and households was favourable. Bankruptcies remained at prior years’ level and unemployment decreased. Mood in the housing market was robust. The Finnish economy is expected to continue its recovery during the rest of the year.

The Covid-19 pandemic still poses the greatest direct risk to the economy although the impact of the new waves of coronavirus infections on the economy has step by step diminished with the increasing vaccinations rates. Furthermore, a stronger-than-expected risk in inflation in the longer term would worsen the economic outlook. It would weaken consumer purchasing power and would suggest problems in recovery and in the success of the economic policy.

A sudden worsening of the pandemic would affect OP Corporate Bank in three ways: economic uncertainty and uncertainty in the financial and capital markets would increase, a rise in financial difficulties among customers would increase credit risk and decrease the demand for services, and a worsening disease situation could make it more difficult for OP Corporate Bank to run its operations efficiently.

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.

Full-year earnings estimates for 2021 will only be provided at the OP Financial Group level, in its financial statements bulletin and interim and half-year financial 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 2021:

Interim Report Q1−3/2021

27 October 2021

Helsinki, 28 July 2021

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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LSE London Stock Exchange
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.