Download Heikki Vitie

How is the financial crisis affecting OP-Pohjola
Group?
Finnish Cooperative Movement Conference: The
Competitiveness of Cooperatives in Changing Business
Environment
24 September 2009
Heikki Vitie
Structure of the OP-Pohjola Group
Owner-members
221 member cooperative banks
OP-POHJOLA GROUP CENTRAL COOPERATIVE
POHJOLA BANK PLC
OP Fund Management
Company Ltd
Helsinki OP Bank
Plc
OP Life Assurance
Company Ltd
Other subsidiaries
Banking Services
Investment Services
SUBSIDIARIES
Non-life Insurance
Non-Group
shareholders
Business volumes in Finland
350 € Bn.
300
250
100
50
158
160
66
41
46
30
28
28
127
114
200
150
141
82
16
20
92
22
22
101
31
24
45
61
27
29
83
95
107
108
2006
2007
2008
6/2009
68
72
76
81
2002
2003
2004
2005
0
Deposits
Life insurance savings
Mutual fund savings
Loans
The OP-Pohjola Group’s core values
People-first
approach
Responsibility
Prospering
together
OP-Pohjola Group is for people. A genuine concern for
customers and co-workers is the starting point of our
operations.
We operate locally, regionally and nationally as an
exemplary and ethically responsible company. Bolstered by
our strong professional skills, we bear responsibility for the
high quality and reliability of our services.
Prospering together with our customers both points the
way to the development of our operations and services.
Operating as a unified group gives our customers greater
security and improves our service capabilities.
Best loyal customer
benefits
Cooperative
basis
OP-Pohjola Group’s
competitive advantages
Finnish
origin
Close to
customers
Total financial
services offering
Effects of the Financial Crisis on the Banking
and Insurance
Sector
1st phase: Shock (August 2007–2008)
• Materialisation of market risk: stock market crash
• Lack of confidence reflected in strong growth in risk premiums (funding price)
• Insurance companies record plummeting investment income, decreasing
solvency and more expensive reinsurance
2nd phase: Economic recession (2009–10)
• Materialisation of interest-rate risk: monetary policy easing, governments are
launching large-scale support measures to revive the economy and banks are
facing narrowing interest margins
• Banks are providing for loan losses
• Transient improvement in insurance profitability as a result of a reduction in the
incidence of loss
3rd phase: Economic recovery (from 2010)
• Materialisation of credit risk: growing unemployment, increasing bankruptcies,
and loan losses materialise with a lagging effect
• Weaker insurance profitability due to falling premiums written
7 000 Ind.
OMX Helsinki CAP
6 000
5 000
4 000
3 000
2 000
2005
Source: Reuters Ecowin
2006
2007
2008
2009
Spread between secured and unsecured interest rates
2007- 2009
2,4 %
2,2
euribor-eurepo (12 m)
2,0
1,8
1,6
1,4
1,2
1,0
0,8
0,6
0,4
euribor-eurepo (3 m)
0,2
0,0
1/07 4/07 7/07 10/07 1/08 4/08 7/08 10/08 1/09 4/09 7/09
Source: Reuters EcoWin
Euribor rates
6,0 %
5,0
4,0
12-month euribor
3,0
2,0
3-month euribor
1,0
0,0
99
00
Source: Reuters EcoWin
01
02
03
04
05
06
07
08
09
Unemployment rate
12-month moving average
18 %
16
14
12
10
8
6
4
2
0
89
90
91
92
Source: Statistics Finland
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09f
10f
Stability through Operating on a Cooperative
Basis
•
•
•
The strong capital base of cooperative banks serves as a strong buffer against
the financial crisis.
• Long-term view does not require doing business with the minimum possible
level of capital, but maintaining higher capital adequacy is acceptable.
• Drastic economic downturns affect bank's earnings performance and capital
adequacy.
• During the crisis, OP-Pohjola Group's capital base has remained strong and
earnings power at least satisfactory.
Funding based on deposits to a great extent provides business stability, and
customer confidence has also been reflected in growth in deposits.
We have continued customer financing and in this way borne responsibility for
developments in our operating environment.
Total lending
12-month change
18 %
16
14
OP-Pohjola Group
12
10
8
6
4
Other MFIs
2
2007
Source: Bank of Finland
2008
2009
Corporate lending
12-month change
30 %
OP-Pohjola Group
25
20
15
10
Other MFIs
5
0
2007
Source: Bank of Finland
2008
2009
Housing loans
12-month change
17 %
16
15
14
13
12
11
10
9
8
7
6
5
4
OP-Pohjola Group
Other MFIs
2007
Source: Bank of Finland
2008
2009
Total deposits
12-month change
25 %
OP-Pohjola Group
20
15
10
Other MFIs
5
0
2007
Source: Bank of Finland
2008
2009
OP-Pohjola Group: ROA
1,4 %
1,2
1,0
0,8
0,6
0,4
0,2
0,0
2004
2005
2006
2007
2008
1-6/2009
OP-Pohjola Group: Tier 1 capital
(Basel II from 2008)
6 000 EUR m
5 000
4 000
3 000
2 000
1 000
0
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 6/09
Change in GDP volume
6 %
Finland
4
2
0
-2
-4
-6
-8
98
99
00
01
Source: Reuters EcoWin, OP-Pohjola Group
02
03
04
05
06
07
08
09f
10f
Loan losses for banks in Finland
4 000 EUR m
3 500
% 8
7
3 000
6
2 500
5
2 000
4
1 500
3
1 000
2
500
1
0
0
-500
-1
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 1-6
/09
Loan losses
Loan losses as % of lending
Source: Bank of Finland, The Finnish Financial Supervision Authority, company data
The data in the time series are not fully comparable. Loan loss % 1-6/2009 converted to full-year figure.
Loan losses as % of lending
5,0 %
4,0
3,0
2,0
1,0
0,0
-1,0
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 1-6/
09
OP-Pohjola Group
Finnish banking sector, total
Source: Finnish Financial Supervisory Authority, OP-Pohjola Group
Data in the time series are not fully comparable.
Total operating profit for banks in Finland
3,0 EUR bn
2,0
1,0
0,0
-1,0
-2,0
-3,0
-4,0
88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 16/09
Source: Company data