Final Results

SAMPO BANK PLC              STOCK EXCHANGE RELEASE

13 February 2007, at 9:30

 

 

 

 

 

 

Net interest income                                           EUR m          374               343        31   

Net income from financial transactions                EUR m            89                 63        26

Net fee and commission income                         EUR m       260       154      106

Impairment losses on loans and receivables        EUR m                      -2          3        -5

Total operating expenses                                   EUR m                    461      394       -67

Profit before taxes                                             EUR m           354              252      102

 

 

Cost to income ratio                                                 %       56.5      61.2 

Return on equity (at fair value)                                   %       24.5      18.5

Capital adequacy                                                     %       11.9      10.6

Deposits                                                          EUR m   12,598  11,442  1,156

Lending                                                            EUR m   21,084  18,484  2,600

Average number of staff                                         FTE     4,429    4,201     228

 

The figures in this report are unaudited.

Sampo Bank Group has prepared the consolidated financial statements for 2006 in compliance with International Financial Reporting Standards (IFRS) as adopted by the EU and effective at 31 December 2006.

 

 

Sampo Bank Group performed well and profit before taxes for the year 2006 improved to EUR 354 million (252). Profit for the year rose to EUR 274 million (191). The comparison figures do not include the investment services companies transferred to Sampo Bank Group at the end of 2005. Their impact on the profit for the year was EUR 28 million. Return on equity amounted to 24.5 per cent (18.5), clearly above the target RoE of 20 per cent.

 

Total operating costs amounted to EUR 461 million (394). Growth in costs derives largely from the aforementioned transfer of investment services companies to Sampo Bank Group and strong growth in the Baltic operations. On top of that costs in the fourth quarter include EUR 18 million in various bonus and incentive scheme costs, largely due to the sale of Sampo Bank.  Cost-to-income-ratio continued to improve and was 56.5 per cent (61.2).

 

Net interest income rose to EUR 374 million (343) mainly driven by strong growth of lending. Interest margins narrowed in retail lending. Net fee and commission income grew to EUR 260 million (154) largely due to the transfer of investment services companies, but also fees and commission unrelated to investment services grew.

 

 

Loans and advances to customers increased by 14 per cent from year-end 2005 and totalled EUR 21,084 million (18,484). Growth in mortgages continued and the stock rose year-on-year 19 per cent to EUR 9,685 million. At the end of the year loans to private customers represented 59 per cent and loans to corporate customers 41 per cent of the total loan portfolio. Corporate lending increased to EUR 8,743 million.

 

Geographically the Baltic countries continued to provide the fastest growth in both lending and deposits. The Baltic loan stock rose to 2.4 billion euros (1.4).

 

Credit quality remained firm and net impairment on loans and receivables was EUR 2 million (-3).

 

Deposits amounted to EUR 12,598 million increasing 10 per cent from year end 2005 (11,442).

 

 

Sampo Bank plc bought on 16 August 2006 Industry and Finance Bank (ZAO Profibank) in St. Petersburg, Russia.

 

The following persons have been members of the Board of Sampo Bank plc during the entire accounting year: Björn Wahlroos (chairman), Patrick Lapveteläinen (vice chairman), Ilkka Hallavo, Mika Ihamuotila and Maarit Näkyvä.

 

Mika Ihamuotila acted as managing director of Sampo Bank in the accounting year 2006 and Ilkka Hallavo as his deputy.

 

After the acquisition of all shares of Sampo Bank plc by Danske Bank A/S,  Peter Straarup (chairman), Sven Erik Lystbæk (vice chairman), Ilkka Hallavo, Lars Stensgaard Mørch, Thomas Mitchell and Maarit Näkyvä were elected as Board members in an extraordinary general meeting on 1 February 2007. The Board nominated Ilkka Hallavo as managing director for the Bank on 1 February 2007 and Maarit Näkyvä as his deputy.

 

Raili Ikonen and Juhani Nyyssönen as her deputy have been staff representatives in the Board. Staff representatives are not members of the Board but have a right to be present and speak at the Board meetings.

 

The firm of authorised public accountants, Ernst & Young Oy, has acted as Auditor for Sampo Bank plc with Tomi Englund, APA, as responsible auditor.

 

 

Sampo Bank Group's number of full-time equivalent staff increased by 339 employees to 4,602 employees at 31 December 2006. The increase was caused mainly by growth in the Baltic subsidiaries. Of the staff, 74 per cent worked Finland and 26 per cent abroad. The average number of employees during 2006 was 4,429, compared with 4,201 during 2005.

 

 

Positive business performance and Danske Bank's acquisition of Sampo Bank announced on 9 November 2006 had an impact on rating agencies' assessment. Moody's raised AS Sampo Pank Financial Strength Rating (FSR) from D to D+ with stable outlook on 3 April 2006. Moody's placed Sampo Bank plc's A1 and AS Sampo Pank's A2 ratings under review for possible upgrade and AS Sampo Pank's FSR on positive outlook on 9 November 2006. Standard & Poor's placed Sampo Bank plc's A/A-1 ratings under CreditWatch with positive implications on 9 November 2006. Moody's raised Sampo Bank plc's A1 (long-term currency debt/deposit rating) to Aa2 with stable outlook on 2 February 2007. At the same time Moody's raised AS Sampo Pank's rating from A2 to A1 with positive outlook. Standard & Poor's raised Sampo Bank plc's ratings to AA-/A-1+ with stable outlook on 7 February 2007.

 

 

Sampo Bank Group's capital adequacy was 11.9 per cent at the end of 2006 and the tier 1 ratio was 8.3 per cent. At the end of 2005 capital adequacy was 10.6 per cent and the tier 1 ratio was 7.6 per cent. Total own funds amounted to EUR 2,123.9 million (1,742.5). Risk-weighted assets on 31 December 2006 were EUR 17,847.3 million (16,466.2).

 

In addition to the profit for the year, the most significant change in own funds from the end of 2005 was a tier 2 debenture loan issued in May 2006 of EUR 200 million. Equity rose to EUR 1,196.9 million (1,017.7), which includes also cash flow hedging derivatives not included in the own funds of capital adequacy calculation. As stipulated by the agreement with Danske Bank A/S, in addition to the EUR 50 million dividend paid earlier in 2006, Sampo Bank plc paid an additional dividend of EUR 25 million to Sampo plc in connection with the transaction. Risk-weighted assets grew mainly because of the growth in lending.

 

 

The main objective of risk management is to ensure that the capital base is adequate in relation to the risks arising from business activities. In addition to statutory capital adequacy calculation, risks in Sampo Bank Group are described and aggregated internally through economic capital, which describes the amount of capital needed to bear different kinds of risks. The requirement is well covered by equity and capital securities. The major risks associated with Sampo Bank Group's activities are credit risk, the interest rate and liquidity risks of banking book, operational risks and various business risks such as changes in competition or customer behaviour. The perceived risks in the businesses and operating environment did not change significantly during 2006. Risk management is described in detail in the financial statements according to IFRS.

 

 

 

Operating profitability of Sampo Bank Group is expected to remain good in 2007.

 

The integration of Sampo Bank's activities into Danske Bank Group is expected to cost approximately EUR 200 million, of which around EUR 70 million is estimated to occur in 2007.

 

 

Parent company's distributable capital and reserves totalled EUR 660.3 million, of which the profit for the year is EUR 274.2 million.

 

Sampo Bank's Board of Directors proposes to the Annual General Meeting the distributable capital and reserves are used as follows:

No dividend will be issued for the financial year 2006. Retained earnings are left in the equity capital.

 

Helsinki, 13 February 2007

Sampo Bank plc

Board of Directors

 

Sampo Bank plc's Financial Statements and Board of Directors' report for year 2006 will be published on Sampo Bank plc's Internet pages at http://www.sampopankki.fi at week 13.

 

Further information:

Head of Communication Hannu Vuola, +358 (0)10 516 0040

 

 

Sampo Bank Group has prepared the financial statements in compliance with International Financial Reporting Standards (IFRSs) as adopted by the EU.                                         

Interim financial reports have been prepared in compliance with IAS 34 Standard of Interim Financial Reporting.                                        

The segment reporting in Sampo Bank Group is based on internal business areas and organisation structure.                                          

The segment results are reported as they are reported to the management. The segment reporting based on business areas represents the Group activities also geographically, because the East European banking is one of the business areas.                                             

The inter-segment pricing is based on market prices.                                         

                                             

In consolidated financial statements the inter-segment transactions, assets and liabilities have been eliminated.