OP Financial Group’s Financial Statements Bulletin for 1 January–31 December 2022: Earnings before tax EUR 1,265 million – total income up by 2%, total expenses unchanged year on year
OP Financial Group
Financial Statements Bulletin 1 January–31 December 2022
Stock Exchange Release 8 February 2023 09.00 am EET
OP Financial Group’s Financial Statements Bulletin for 1 January–31 December 2022: Earnings before tax EUR 1,265 million – total income up by 2%, total expenses unchanged year on year
Earnings before tax totalled EUR 1,265 million (1,127).
Income from customer business increased by a total of 10% to EUR 3,512 million (3,186). Net interest income increased by 15% to EUR 1,618 million (1,409) and net insurance income by 20% to EUR 889 million (743). Net commissions and fees decreased by 3% to EUR 1,005 million (1,034).
Net investment income decreased to EUR –149 million (376). The overlay approach increased investment income by EUR 143 million (–118). Including the overlay approach, investment income decreased to EUR –5 million (257).
Total income decreased by 5% to EUR 3,426 million (3,616). Including the overlay approach, total income increased by 2% to EUR 3,570 million (3,497).
Total expenses decreased by 1% to EUR 1,981 million (2,007).
Impairment loss on receivables in the income statement decreased by EUR 43 million to EUR 115 million (158). Ratio of impairment loss on receivables to loan and guarantee portfolio was 0.11% (0.16).
OP Financial Group’s loan portfolio grew by 2% to EUR 99 billion (97) and deposits by 2% to EUR 77 billion (76).
CET1 ratio was 17.4% (18.2), which exceeds the minimum regulatory requirement by 5.5 percentage points. OP Financial Group adopted a risk-weighted assets (RWA) floor, based on the Standardised Approach, in the second quarter. On the date of transition, this decreased the CET1 ratio by one percentage point.
Retail Banking earnings before tax increased to EUR 502 million (304). Net interest income increased by 25% to EUR 1,194 million (959) and net commissions and fees by 3% to EUR 773 million (753). Impairment loss on receivables increased by EUR 12 million to EUR 96 million (84). The loan portfolio decreased by 0.3% and deposits increased by 3%.
Corporate Banking earnings before tax decreased to EUR 416 million (474). Net interest income increased by 10% to EUR 457 million (414), net commissions and fees decreased by 19% to EUR 166 million (204) and net investment income decreased by 21% to EUR 136 million (171). Impairment loss on receivables decreased by EUR 56 million to EUR 18 million (74).
Insurance earnings before tax decreased to EUR 433 million (504). Net insurance income grew by 20% to EUR 901 million (754), particularly due to the increase in the discount rate. Investment income decreased by EUR 257 million to EUR –87 million (170). Non-life Insurance recorded an operating combined ratio of 90.5% (85.5).
Group Functions earnings before tax were EUR –91 million (–109).
New OP bonuses accrued to owner-customers totalled EUR 215 million (210). OP Financial Group wants to allocate part of its profitability improvement to support its owner-customers by increasing the OP bonuses they earn for 2023 by 30%. This means an estimated additional bonus totalling more than EUR 60 million.
Interest payable for the year 2022 on Profit Shares held by owner-customers is estimated to total EUR 144 million (96).
On 30 September 2022, OP Financial Group filed an application with the European Central Bank (ECB) on the use of the Standardised Approach in capital adequacy calculation, instead of the internal models (IRBA) and the currently applied risk-weighted assets floor based on the Standardised Approach. Transfer to the Standardised Approach is estimated to have no essential effect on OP Financial Group’s capital adequacy or risk exposure.
OP Financial Group has applied IFRS 17 Insurance Contracts as of 1 January 2023. As a result of the IFRS 17 transition, OP Financial Group’s equity capital on 1 January 2022 decreased by EUR 52 million on the date of transition. At the same time, the Group ceased to apply the overlay approach.
Earnings before tax for 2023 are expected to be higher than in 2022. For more detailed information on the outlook, see “Outlook for 2023”.
OP Financial Group’s key indicators
Earnings before tax, € million
New OP bonuses accrued to owner-customers, € million
Return on equity (ROE), %
Return on equity, excluding OP bonuses, %
Return on assets (ROA), %
Return on assets, excluding OP bonuses, %
31 Dec 2022
31 Dec 2021
CET1 ratio, %
Loan portfolio, € billion
Deposits, € billion
Ratio of non-performing exposures to exposures, %
Ratio of impairment loss on receivables to loan and guarantee portfolio, %
Comparatives for the income statement are based on the corresponding figures a year ago. Unless otherwise specified, figures from 31 December 2021 are used as comparatives for balance-sheet and other cross-sectional items.
*Change in ratio
Comments by President and Group Chief Executive Officer Timo Ritakallio
In 2022, the financial sector’s operating environment was characterised by exceptional uncertainty. Russia’s war of aggression in Ukraine and strongly accelerated inflation resulted in a significant increase in market interest rates. Combined with a weakening economic outlook, this affected demand both for home loans and corporate finance, particularly towards the end of the year. During the year, stock prices fell in all major markets, which in turn reduced demand for investment services.
Despite the uncertain operating environment, OP Financial Group’s earnings before tax for 2022 improved by 12%, reaching an excellent level of EUR 1,265 million. Net interest income increased by 15% to EUR 1,618 million and net insurance income by 20% to EUR 889 million. Meanwhile, net commissions and fees decreased by 3% year on year, totalling EUR 1,005 million. Net investment income fell substantially from the previous year. Costs remained well under control, showing a decrease of 1% year on year.
All of our three business segments performed very well last year. Earnings by Retail Banking were particularly strong. In the insurance business, claims expenditure returned to its pre-pandemic level.
At around two per cent, growth in deposits and loans was clearly slower than in previous years. Despite the weaker economy, the loan repayment capacity of both personal and corporate customers remained good throughout the year, and there was no growth in non-performing exposures. Similarly, impairment loss on receivables remained low. In recent years, we have actively offered interest rate protection to our home loan customers. This has proved its worth amidst rapidly rising market interest rates. Roughly a third of our home loan customers have taken out interest rate protection. At the end of 2022, a growing number of customers benefitted from interest rate protection, which cut their loan servicing costs.
OP Financial Group’s CET1 ratio continued to be very strong, at 17.4%, exceeding the minimum regulatory requirement by 5.5 percentage points. OP Financial Group is among Europe’s strongest banks in terms of capital adequacy.
In income growth, we focused on income from customer business in line with our strategic target, achieving growth of 10% in 2022. In recent years, OP Financial Group has focused on its core business – banking and insurance – in keeping with its strategy. While the Group’s income from customer business has grown substantially, we have managed to keep our costs at the same level for several years. Our continuous strategy process, which we revised four years ago, has proven highly effective in the business environment of recent years, which has been marked by surprises and uncertainties. We have also been implementing a cultural change by adopting leaner organisational structures and an agile method based on multi-skilled teams. This new way of working promotes a better customer and employee experience, and operational efficiency.
Our customers are increasingly using digital channels for their banking and insurance matters. In 2022, we continued to focus our development efforts on our mobile channel. At the end of the year, OP-mobile had more than 1.4 million active users – an increase of almost 600,000 people compared to slightly over three years ago.
Despite the challenging investment environment, our customers have continued to make sustainable, far-reaching choices for their future through systematic investing. In 2022, OP Financial Group’s mutual funds attracted more than 55,000 new unitholders, with the total number of unitholders exceeding 1.2 million at the year end. OP Financial Group’s market share of all unitholders in Finnish mutual funds exceeded 30%. Stock investment also continued to be lively: 71,000 new book-entry and equity savings accounts were opened during the year.
In line with our strategy, we continued to increasingly embed responsibility into our investment, lending and insurance processes, and grow the share of responsible products and services in our offering. OP Financial Group’s sustainable financing commitment portfolio grew by 70% from the previous year, reaching a total of EUR 5.2 billion. At the end of December, the share of sustainable financing products in OP Corporate Bank’s exposures was around 17%, compared to 11% a year earlier.
OP Financial Group is a financial services group owned by its customers. In line with our mission, we want to support our owner-customers in these financially challenging times. We will allocate part of our profitability improvement to supporting the daily lives of our almost 2.1 million owner-customers, by increasing the OP bonuses they earn for 2023 by 30%. The value of this additional bonus is over EUR 60 million.
We will also allocate part of our strong profitability to further improving our customer service and to carrying out various corporate responsibility actions, with a particular focus on the wellbeing of children and young people. Through donations and sponsorships of nearly EUR 4.5 million, we will support young people’s hobbies and activities promoting their financial literacy and employment around Finland.
OP Financial Group is in an excellent position to provide for its customers’ banking and insurance needs today and beyond. Our leading market position, strong capital base, excellent profitability, and customers’ trust in our brand provide us with a strong foundation for continuing to coach our customers in making better financial choices, pointing the way towards futures filled with hope – together through time.
I would like to express my warmest thanks to our customers for their trust and to our employees and governing body members for their outstanding and successful work in 2022!
OP Financial Group’s earnings before tax amounted to EUR 1,265 million (1,127), up by EUR 137 million from the previous year. Income from customer business grew by a total of 10.2% to EUR 3,512 million (3,186). As regards income from customer business, net interest income and net insurance income increased. Earnings were reduced by lower investment income.
Net interest income grew by 14.8% to EUR 1,618 million, due to the significant increase in market interest rates. Net interest income reported by the Retail Banking segment increased by EUR 235 million, that by the Corporate Banking segment by EUR 43 million and that by the Group Functions segment by EUR 72 million. OP Financial Group’s loan portfolio grew by 1.6% to EUR 98.5 billion and deposits by 2.0% to EUR 77.1 billion. New loans drawn down by customers during the reporting period totalled EUR 24.5 billion (26.4).
Net insurance income increased by 19.6% to EUR 889 million. The Insurance segment’s non-life insurance premium revenue increased by 2.8% to EUR 1,598 million and claims incurred by 12.5% to EUR 1,012 million, excluding the increase in the discount rate. Claims volumes have returned to their pre-pandemic level. Large claims increased claims incurred by EUR 180 million (134). The increase in the discount rate for insurance liability improved net insurance income by EUR 283 million. Operating combined ratio reported by non-life insurance was 90.5% (85.5).
Net commissions and fees totalled EUR 1,005 million (1,034). Net commissions and fees for payment transfer services increased by EUR 8 million and those for lending and asset management by EUR 4 million. Meanwhile, net commissions and fees for mutual funds decreased by EUR 14 million and those for life insurance by EUR 17 million. Net commissions and fees for health and wellbeing services fell by EUR 8 million year on year following the sale of Pohjola Hospital that was completed on 1 February 2022.
The investment environment was challenging due to higher market interest rates and lower stock prices. Net investment income decreased by EUR 524 million to EUR –149 million. An overlay approach is applied to certain equity instruments of insurance companies. Changes in the fair value of investments within the scope of the overlay approach are presented under the fair value reserve under shareholders’ equity. The overlay approach increased investment income by EUR 143 million (–118). Total investment income decreased by EUR 262 million year on year, to EUR –5 million. On 1 January 2023, OP Financial Group adopted IFRS 17 Insurance Contracts and stopped applying the overlay approach.
Net income from financial assets at fair value through other comprehensive income totalled EUR 29 million (67), of which net capital losses accounted for EUR –10 million (14). Net capital gains on all financial instruments recognised through fair value reserve totalled EUR 16 million (144).
Net income from financial assets, recognised at fair value in net investment income through profit or loss, totalled EUR –855 million (129). Net income from financial assets held for trading decreased by a total of EUR 382 million due to changes in the fair value of derivatives. Fair values of equity instruments recognised at fair value in the income statement decreased by a total of EUR 440 million and those of notes and bonds by a total of EUR 191 million, year on year. An item related to the increase in the discount rate of the insurance liability for non-life insurance, EUR 218 million, was shown as negative value change in net investment income. Life insurance items, which include, for example, changes in technical items, increased net investment income by EUR 528 million to EUR 650 million. Net income from investment property decreased by EUR 29 million to EUR 16 million.
The combined return on investments at fair value of OP Financial Group’s insurance companies was –13.1% (1.7). The negative figure was affected by a rise in market interest rates and the fall in stock prices.
Other operating income increased to EUR 63 million (54). The sale of Pohjola Hospital increased other operating income by EUR 32 million. A year ago, the sale of Checkout Finland Ltd increased other operating income.
Total expenses decreased by 1.3% year on year to EUR 1,981 million. Personnel costs decreased by 2.2% to EUR 894 million. Depreciation/amortisation and impairment loss on PPE and intangible assets decreased by 24.4% to EUR 214 million. Other operating expenses increased by 7.9% to EUR 874 million. ICT costs totalled EUR 382 million (364). Development costs were EUR 216 million (195). Charges of financial authorities increased by 28.0%, or EUR 18 million, to EUR 82 million as a result of the EUR 15 million increase in the stability contribution paid to the Single Resolution Fund financed by the euro-area banks.
Impairment loss on loans and receivables and on investments recognised under various income statement items that reduced earnings amounted to EUR 196 million (164), of which EUR 115 million (158) concerned loans and receivables. The indirect effects of the war in Ukraine increased impairment loss on receivables in the first quarter. OP Financial Group has assessed the impact of higher electricity prices and Euribor rates on the credit risk associated with the home loan portfolio. Following this analysis, the Group made an additional provision of EUR 42 million under expected credit losses, based on management judgment. Final credit losses recognised totalled EUR 118 million (113). Loss allowance was EUR 750 million (751) at the end of the reporting period. Non-performing exposures accounted for 2.3% (2.4) of the exposures. Impairment loss on loans and receivables accounted for 0.11% (0.16) of the loan and guarantee portfolio.
OP Financial Group’s income tax amounted to EUR 242 million (224). The effective tax rate for the reporting period was 19.1% (19.8). The tax-exempt capital gain on the sale of Pohjola Hospital reduced the effective tax rate.
OP Financial Group’s equity amounted to EUR 14.3 billion (14.2). Equity included EUR 3.4 billion (3.2) in Profit Shares, terminated Profit Shares accounting for EUR 0.4 billion (0.3).
Comprehensive income after tax totalled EUR 139 million (897). Changes in the fair values of equities, derivatives and notes and bonds decreased the fair value reserve. Changes in the fair value reserve decreased comprehensive income by a total of EUR 979 million (–59). Gains from the remeasurement of defined benefit plans improved comprehensive income by EUR 96 million (40) as a result of the increase in the discount rate used in the calculation.
Outlook for 2023
Economic growth slowed down in the course of 2022 and economic surveys suggest that economic development is still likely to deteriorate. Last year, business profitability remained good and the employment situation was strong. High inflation eroded the purchasing power among households and higher interest rates and greater uncertainty cut down on home sales.
The economy is expected to sink into a moderate recession, inflation to decrease slowly while short-term interest rates are predicted to rise further. The economic outlook remains surrounded by an exceptional degree of uncertainty. In addition to economic factors, the price and availability of energy and developments in global markets together with the geopolitical situation may abruptly affect the economic outlook.
OP Financial Group’s earnings before tax for 2023 are expected to be higher than in 2022, due to an increase in market rates.
Earnings performance continues to be affected by major uncertainty. Rising inflation and the war in Ukraine, including its indirect effects, weaken the predictability associated with the economy and OP Financial Group’s profit performance.
All forward-looking statements in this Financial Statements Bulletin expressing the management’s expectations, beliefs, estimates, forecasts, projections and assumptions are based on the current view on developments in the economy, and actual results may differ materially from those expressed in the forward-looking statements.
OP Financial Group's financial performance will be presented to the media by President and Group Chief Executive Officer Timo Ritakallio via a webcast on 8 February 2023 at 11am.
Media enquiries: OP Corporate Communications, tel. +358 10 252 8719, email@example.com
OP Corporate Bank plc and OP Mortgage Bank plc will publish their own financial statements bulletins.
Time of publication of 2022 reports:
OP Financial Group's Report by the Board of Directors and Financial Statements for 2022
OP Financial Group's Corporate Governance Statement 2022
OP Financial Group's Annual Review 2022 (incl. CSR Reporting)
OP Financial Group’s Capital Adequacy and Risk Management Report 2022
OP Amalgamation Pillar III Tables 31 December 2022
Remuneration Report for Governing Bodies at OP Financial Group 2022
Remuneration Policy for Governing Bodies at OP Financial Group
Schedule for Interim Reports and Half-year Financial Report in 2023:
Interim Report Q1/2023
3 May 2023
Half-year Financial Report H1/2023
25 July 2023
Interim Report Q1−3/2023
25 October 2023
OP Amalgamation capital adequacy tables 31 March 2023
OP Amalgamation capital adequacy tables 30 June 2023
OP Amalgamation capital adequacy tables 30 September 2023
Helsinki, 8 February 2023
Board of Directors
Timo Ritakallio, President and Group Chief Executive Officer, tel. +358 (0)10 252 4500
Mikko Timonen, Chief Financial Officer, tel. +358 (0)10 252 1325
Anni Hiekkanen, Chief Communications Officer, tel. +358 (0)10 252 1989
Nasdaq Helsinki Ltd
Euronext Dublin (Irish Stock Exchange)
London Stock Exchange
OP Financial Group is Finland’s largest financial services group, with more than two million owner-customers and approximately 13,000 employees. We provide a comprehensive range of banking and insurance services for personal and corporate customers. OP Financial Group consists of OP cooperative banks, its central cooperative OP Cooperative, and the latter's subsidiaries and affiliates. Our mission is to promote the sustainable prosperity, security and wellbeing of our owner-customers and operating region. Together with our owner-customers, we have been building Finnish society and a sustainable future for 120 years now. www.op.f