2009-11-03
In the first nine months of 2009, Banking Activities Finland’s profit before loan impairment charges was substantially higher than in the same period last year. As expected, the pre-tax result was negative due to high loan impairment charges. In the third quarter, quarterly loan impairment charges began to decline. The Sampo Bank Group’s solvency ratio remained excellent, and the bank was able to cut costs by 16%.
· Profit before loan impairment charges up €88m
· Deposits up 4%
· Significantly improved cost/income ratio
· Sampo Bank Group’s solvency ratio remains excellent at 14.8%
|
(€ m) |
2009 |
2008 |
09/08 |
|
Net interest income |
321 |
324 |
99 |
|
Net fee income |
110 |
95 |
116 |
|
Net trading income |
7 |
5 |
140 |
|
Other income |
38 |
30 |
127 |
|
Total income |
476 |
454 |
105 |
|
Amortisation of intangible assets |
47 |
47 |
100 |
|
Integration expenses |
23 |
64 |
36 |
|
Other operating expenses |
266 |
291 |
91 |
|
Operating expenses |
336 |
402 |
84 |
|
Profit before loan impairment charges |
140 |
52 |
269 |
|
Loan impairment charges |
246 |
16 |
- |
|
Profit before tax |
-106 |
36 |
- |
|
Loans and advances, end of period |
21,770 |
22,943 |
95 |
|
Deposits, end of period |
12,498 |
11,966 |
104 |
|
Allocated capital (avg.) |
1,012 |
1,020 |
99 |
|
Profit before loan impairment charges as % p.a. of allocated capital |
18.4 |
6.8 |
- |
|
Pre-tax profit as % p.a. of allocated capital (ROE) |
-14.0 |
4.7 |
- |
|
Cost/income ratio (%) |
70.6 |
88.5 |
- |
|
Cost/income ratio, ex total integration expenses (%) |
55.9 |
64.1 |
- |
The Finnish economy was in a deep recession in the first three quarters of the 2009. Although the markets began to show some signs of stabilisation, Sampo Bank forecasts that Finnish GDP will contract 6.2% in 2009.
Extremely low interest rates had an adverse effect on Sampo Bank’s interest margins. Because of this development, net interest income, at €321m, remained at almost the same level as in 2008. The bank was able to increase its net fee income and net trading income, however.
Profit before loan impairment charges rose from €52m to €140m. The pre-tax result was a loss of €106m because of impairment charges for loans and other receivables totalling €246m.
“We have booked high level of loan impairment charges as anticipated,” says Ilkka Hallavo, CEO of Sampo Bank. “It is, however, positive that the level of the loan impairments has begun to fall.”
“The reason for increased loan impairments was the abrupt dip in the Finnish economy,” continues Hallavo. “In the spring, the economy deteriorated even more quickly than during the recession of 1990s. Our loan impairments consisted primarily of a few large charges made against individual facilities to corporate customers.”
Upswing in deposits
Total deposits rose 4% over the level the year before. Deposits from retail customers increased 3%, and deposits from corporate customers, 6%.
“Savings became more popular during the recession,” says Hallavo. “The recent signs of improvement in the economic situation seem to have prompted our customers to invest in mutual funds and shares as well. Our position in mutual funds remains strong, at a market share of 17.12ina toiminta-ajatuksemme lähtee siitäokevat meidät hyödyllisenä pankkikumppanina. palveluita ja tuotteita%.”
Total lending declined 5% because of a 10% decrease in corporate lending. Retail lending was in line with the level a year earlier.
At the end of September, Banking Activities Finland’s market share of lending was 12.9% (against 13.8% a year before), and its share of total deposits was 12.3% (against 12.2%).
Operating expenses down €66m
In the first three quarters of 2009, Banking Activities Finland continued to reduce its operating expenses, which were €66m lower than in the same period of 2008.
“Few organisations can deliver cost cuts like these,” states Hallavo. “Being part of the Danske Bank Group brings us significant synergies, but we must also thank our employees that the bank has been able to lower costs without lowering the level of our service.”
Sampo Bank Group’s strong solvency ratio
Sampo Bank Group’s* solvency ratio improved further, as the bank’s risk-weighted assets declined and its capital base remained strong.
At the end of the period, the Sampo Bank Group's solvency ratio was 14.6% and its core (tier 1) capital ratio was 13.5%.
“Our goal is to grow in every important segment by improving the level of customer satisfaction, offering competitive products and maintaining our cost-efficient operating procedures,” concludes Hallavo.
* The Sampo Bank Group includes the Sampo Bank operations of Danske Capital Finland and Danske Markets Finland.
For further information:
Ilkka Hallavo, CEO, Sampo Bank, Tel: +358 10 546 8057
Pekka Kainulainen, CFO, Sampo Bank, Tel.: +358 10 546 7807
Timo J. Anttila, Head of Communications, Sampo Bank, Tel: +358 10 546 8002