Owing to Danske Bank Group’s synergy benefits and local cost focus, operating expenses continued to decline. Total expenses dropped 7% from the year-earlier level.
Loan impairment charges also fell significantly from the level in Q1 2009 and were relatively low. Sampo Bank estimates that impairment charges will remain lower in 2010 than in 2009 if the economic recovery continues as expected.
Deposits exceed €13bn
Towards spring, the demand for home mortgage loans and renovation loans rose. Retail lending grew 2% over the level in Q1 2009. The demand for corporate financing also showed signs of picking up, although overall demand has been quite subdued and was down 17% from the year-earlier level.
The positive trend in deposits that started last year continued in the first quarter. Total deposits rose to €13.3bn. Both retail and corporate deposits grew 3%.
Sampo Bank Group has a strong capital base and solvency
Sampo Bank Group has a very strong capital base, with a capital buffer of €1.273bn. The solvency ratio improved to 15.6% owing to the positive result and a decline in the bank’s risk-weighted assets.
At the end of March, Sampo Bank Group’s tier 1 capital ratio was 14.4%.
Macroeconomic outlook for 2010
The global economic recovery is expected to boost Finnish exports and put the Finnish economy back on the path to moderate growth in 2010. Because of the depth of the recession, however, it is likely that unemployment will rise further this year and limit households’ financial freedom of action. Despite the unemployment trend, low interest rates and improved consumer confidence will provide positive stimuli for household consumption and the real estate market.
Ilkka Hallavo, Sampo Bank CEO:
"For Sampo Bank, the year 2010 has begun promisingly. Overall, our profit can be considered reasonably good given conditions in which historically low interest rates have predictably cut interest income. We have succeeded very well in increasing deposits without resorting to the extreme measures recently seen in the very competitive Finnish market.
“With a strong capital base and declining loan impairment charges, Sampo Bank has an excellent foundation for growth. The prospects for the Finnish economic recovery have improved with the arrival of spring, and we expect that this positive trend will support our customers’ economic activity.
“Because of falling funding costs and hard competition, home mortgage loan margins have narrowed to 0.8%-0.9% since summer 2009. We do not expect them to fall much further, however. We will not return to the margins we saw before the financial crisis, when competitive pressures reduced them to unhealthy levels.
“The new Finnish tax that encourages long-term savings took effect in April, and this bodes well for Sampo Bank. Our aim is to become a leading player in pension savings, and we have therefore launched our own PS agreement with a very transparent price and a wide product selection. We believe this will encourage consumers to start saving for retirement.”
The Sampo Bank's Press Release in PDF-format
Danske Bank Group's Press Release
The Danske Bank Group’s Interim Report – First Quarter 2010 can be viewed at www.danskebank.com/reports.