January June 2018 acting CEO Juha Hammarn The outlook for the - - PowerPoint PPT Presentation

7 August 2018:

January–June 2018

acting CEO Juha Hammarén

2

The outlook for the Finnish economy remains good

Year-on-year change in Finnish GDP (%)

Source: Aktia and Macrobond

3

Interest rate environment still challenging

ECB interest rates, 3- and 12 month Euribor

ECB interest rate Euribor 12 month Euribor 3 month Deposit rate

Source: Aktia and Macrobond

4

January–June 2018:

The transformation progressed well with several positive changes

Smoother customer experiences and better customer service

• Focus on personal service and financial advice.
• Customer satisfaction improved from 59.1 in

December 2017 to 63.2 in June 2018.

• Automation, robotics and data support

development of smooth digital solutions that increasingly benefit our customers. Competence development

• Artificial Intelligence training for our personnel

supports Aktia’s digital transformation.

Aktia's NPS* improved to

63.2

*NPS: Net Promoter Score measures customer satisfaction (<50 excellent)

April–June 2018 in short

5

The transformation is proceeding well. Increased net commission income and cost savings are leading to results. New products, customer concepts and digitalisation initiatives are introduced. New CEO appointed 6 August 2018.

Strategy implementation

• Issue of 5 year EUR 500 million

covered bond at good terms.

• Upgraded credit rating by

Moody’s.

• Decreased holdings in Aktias’

Real Estate Agent business*

• Insurance agency for Folksam

Non-Life Insurance ended*

New digital solutions

• Automated authority queries

and credit decisions.

• A new CRM implemented.
• Launches in autumn 2018: New

digital marketing platform, Wealth Path (robotised advicory platform); Aktia's code app; Aktia’s mutual funds and consumer credits through new web portals.

*Events after the end of the period.

Personal and Corporate Banking

• New customer concepts and

relationship models introduced.

• Continued development of the

product offering.

• Successful launch of a new loan

corridor product.

• Demand for mortgage loans

remain high.

Wealth Management

• Good sales and record high level
• f mutual fund capital.
• The cooperation with Universal

Investment in Europe proceeds well.

• KANTAR SIFO Prospera: Aktia’s

institutional asset management

• n third place in ”External Asset

Management Finland 2018”

6

Outlook for 2018 (unchanged):

• The continued low interest rate environment and decreased income from

previously unwound interest-rate hedges (2012) will have a negative impact on the total net interest income for 2018.

• Commission income is expected to increase in 2018. Furthermore, the cost savings

measures taken in 2017 are expected to affect profitability in a more favourable way than previously estimated.

• Impairments of credits are expected to remain low in 2018.

The comparable operating profit for 2018 is expected to be somewhat higher than the comparable operating profit for 2017.

7

15,6 11,3 8,9 0,3 0,6 36,6 35,9 11,7 12,4 7,7 0,3 0,6 32,8 30,8

5 10 15 20 25 30 35 40

1-6/2018 1-6/2017

Comparable operating profit by segment:

A strong result despite lower net income from life insurance in Wealth Management

+33%

Net income from life insurance in Wealth Management decreased by 20 % to EUR 9 million due to unrealised value changes in the investment portfolio (IFRS 9)

+15% +11% +16%

• 9%

Personal & Corporate Banking Wealth Management Other Group functions Elimi- nations Operating profit Comparable

• perating

profit

Personal & Corporate Banking: Financing, insurance, savings and investment products and services. Wealth Management: Asset Management, Private Banking and Life Insurance. Group functions: Treasury as well as support and staff functions.

EUR million

• 10%
• 11%

8

January–June 2018:

Higher net commission income and lower costs contributed to 11 % higher comparable operating profit

*Excl. items affecting comparability, mainly costs for restructuring.

EUR million 2Q2018 2Q2017

, %

Total operating income 55.8 54.2 3 % Net interest income 23.5 22.9 3 % Net commission income 26.2 24.6 7 % Net income from life insurance 5.0 5.8

• 14 %

Other income 1.1 1.0 13 % Total operating expenses

• 38.3
• 39.7
• 4 %

Operating profit 18.2 14.4 26 % Comparable operating profit* 18.5 16.9 10 % Earnings Per Share (EPS) 0.21 0.16 32 % Return on Equity (ROE) % 10.1 7.4 37 % Cost-to-income ratio (comparable) 0.68 0.69

• 1 %

Common Equity Tier 1 capital ratio 16.3 18.0

• 10 %

1–6/ 2018 1–6/ 2017

, %

107.0 107.3 0 % 44.2 46.2

• 4 %

50.1 45.7 9 % 10.8 12.8

• 16 %

2.0 2.6

• 23 %
• 71.8
• 77.0
• 7 %

35.9 30.8 16 % 36.6 32.8 11 % 0.43 0.36 21 % 10.2 8.2 25 % 0.66 0.70

• 5 %

16.3 18.0

• 10 %

9

Financial objectives 2018–2022

Comparable

• perating profit to a
• c. EUR 80 million

Return on Equity ROE to 9.7 % Common Equity Tier 1 capital ratio CET1 to 1.5–3 % units over regulatory requirements Comparable cost-to- income ratio to 0.61

1–6/2018: EUR 36.6 million 1–6/2018: 6 percentage points higher than the minimum capital requirement* or 16.3 % 1–6/2018: 10.2 % 1-6/2018 (comparable): 0.66

*Regulatory requirement: 10.3 %

10 44,2 50,1 10,8 2,0 107,0 46,2 45,7 12,8 2,6 107,3 20 40 60 80 100

Net interest income Net commision income Net income from life insurance Other income Total operating income

1-6/2018 1-6/2017

• 4 %

+9 %

• 16 %
• 23 %

0 %

Income mix:

Total operating income supported by strong net commission income growth

EUR million

11 60,7 31,5 15,4

• 0,5

107,0 58,2 31,5 17,8

• 0,2

107,3

• 20

20 40 60 80 100 120

Personal & Corporate Banking Wealth management Group functions Other & Eliminations Total operating income

1-6/2018 1-6/2017

+4 % 0 %

• 14 %

0 %

Operating income by segment:

New customer concepts and product offering supported growth in Personal & Corporate Banking

EUR million

• Net commission income

increased in P & C Banking and Wealth Management

• Net interest income

decreased in all three segments

12

Operating expenses:

Cost efficiency has improved

• 34,3
• 12,0
• 6,3
• 19,2
• 71,8
• 39,1
• 15,7
• 3,4
• 18,9
• 77,0
• 80
• 70
• 60
• 50
• 40
• 30
• 20
• 10

1-6/2018 1-6/2017

• 12 %
• 24 %

+87 % +2 %

• 7 %

EUR million

Staff costs IT expenses Depreciations Other operating expenses The Group's total expenses

• Personnel and IT

expenses decreased.

• Depreciations including

depreciation for the for the core banking platform EUR 3.0 million (-) due to implementation of the core banking platform.

• Other operating expenses

include the EU statutory fee of the period for the fund for financial stability.

13

Net interest income mix per quarter:

“Deposits and lending” remain strong, income from hedging measures and the liquidity portfolio decreasing

• All income from the

liquidity portfolio is reported together (previously in Miscellaneous and Protective Measures)

• 2Q2018 net interest

income include interest income from Aktia’s TLTRO refinancing program (EUR 2.6 million)

10,0 9,6 11,2 10,2 11,5 12,4 13,0 14,6 14,1 14,3 14,4 14,8 15,3 15,8 14,8 17,1 17,9 16,9 17,3 16,9 17,4 8,9 9,3 9,2 8,9 9,3 8,8 8,6 8,0 7,7 7,3 6,9 6,5 5,9 5,4 5,7 4,6 3,8 3,4 3,1 2,4 2,2

7,9 8,0 7,6 6,2 5,7 5,1 4,4 4,0 4,0 4,0 4,0 4,0 4,0 4,0 4,0 3,9 3,6 3,5 3,4 3,3 3,3

1,6 0,0

• 0,6

0,1

• 0,5
• 0,3
• 0,7
• 1,1
• 1,5
• 1,8
• 1,6
• 0,7
• 1,0
• 1,3
• 1,6
• 2,2
• 2,4
• 2,3
• 1,9
• 1,9

0,7

28,3 26,9 27,3 25,4 25,9 26,1 25,3 25,5 24,3 23,8 23,7 24,6 24,1 23,9 23,0 23,4 22,9 21,5 21,8 20,7 23,5

• 10

10 20 30 40 50

4-6/13 7-9/13 10-12/13 1-3/14 4-6/14 7-9/14 10-12/14 1-3/15 4-6/15 7-9/15 10-12/15 1-3/16 4-6/16 7-9/16 10-12/16 1-3/17 4-6/17 6-9/17 10-12/17 1-3/18 4-6/18

Liquidity portfolio Other, incl. funding from wholesale market Hedging measures through interest rate derivatives Deposits and lending

EUR million

14

Net commission income mix:

The strong growth of ”Saving” contributed to a 9 % increase in net commission income

1,1 1,4 27,8 23,6 5,3 5,8

2,4 2,6

3,8 4,1 9,7 8,3

10 20 30 40 50

1-6/2018 1-6/2017 Other Saving Lending Insurance services Real estate agency Card and payment services

50.1 45.7 ”Saving” includes mutual funds, asset management and securities brokerage

EUR million

15

5 192 5 525 5 788 6 523 7 962 8 970

1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000 9 000 10 000

2013 2014 2015 2016 2017 30.6.2018

Customer assets of Wealth Management, excluding shares in custody:

Assets under management increased during the first six months

EUR million

16

Capital adequacy:

CET1 still on a good level

• Aktia’s Common Equity Tier 1 Capital is at a good level at

16.3 % (18.0 % on 31 December 2017)

• Aktia’s Common Equity Tier 1 Capital decreased due to:
• The introduction of the risk weight floor of 15% for

housing loans increased risk-weighted commitments by EUR 168 million.

• The corporate lending also increased the risk-weighted

commitments.

CET1 % 31 December 2017 18.0% Introduction of the risk weight floor

• 1.3 percentage

points Other increase in risk- weighted commitments

• 0.5 percentage

points Increase in CET1 capital base +0.1 percentage points CET1 % 30 June 2018 16.3%

Change in CET1%

Courageously. Skilfully. Together.