Pohjola Updates Strategy and Revised Financial Targets

Pohjola has updated its strategy and revised financial targets. The updated strategy highlights the following: improving customer experience, seeking more targeted growth in order to improve return on capital, making more efficient use of OP-Pohjola Group’s competitive advantages and strengths, improving efficiency and increasing capital adequacy ratios.

PRESS RELEASE

On 31 October 2012, Pohjola’s Board of Directors adopted Pohjola Group’s updated strategy and revised financial targets.

The strategic theme is entitled “Value and efficiency through integration”. The updated strategy highlights the following: improving customer experience, seeking more targeted growth in order to improve return on capital, making more efficient use of OP-Pohjola Group’s competitive advantages and strengths, improving efficiency and increasing capital adequacy ratios.

Banking will concentrate on deepening customer relationships by focusing growth on business and products with high capital efficiency. Non-life Insurance aims to continue its successful cross-selling and improve efficiency. Within Asset Management, the key objective is to raise investment returns of OP Mutual Funds to a competitive level and to intensify OP-Pohjola Group’s integration.

Pohjola’s mission, vision and core values have remained unchanged. Pohjola’s mission is to promote the sustainable prosperity, security and wellbeing of its customers. Pohjola’s vision is to be the most preferred financial services partner and the key objectives include increasing company value and strengthening the market position profitably. Pohjola’s core values are a People-first Approach, Responsibility and Prospering Together.

Pohjola provides its corporate and institutional customers with a diverse range of top-quality banking, asset management and non-life insurance services, and private individuals with an extensive range of non-life insurance and private banking services.

Pohjola is in close interaction with its customers, knowing customer needs and risks and creating solutions ideal for customers. It builds customer relationships on a long-term basis with the aim of establishing total customer relationships.

Finland and its neighbouring regions constitute Pohjola’s key market area where Pohjola invests in the development of its service network. In other market areas, Pohjola’s service capabilities are based on cooperation with high-profile local or international partners.

As part of OP-Pohjola Group, Pohjola has the most extensive and diversified service network within the sector
and the largest clientele in Finland. OP-Pohjola Group’s logo is the most recognisable one in the Finnish financial sector. Pohjola secures business continuity by maintaining a strong capital base. Joint liability with OP-Pohjola Group’s member credit institutions strengthens Pohjola’s creditworthiness.

Highly skilled and motivated employees are a prerequisite for providing comprehensive solutions and the best service within the sector. Pohjola enhances its intellectual capital systematically as part of business development.

Revised financial targets

The Board of Directors also adopted the Group’s new financial targets aiming at higher profitability and efficiency and a stronger capital base.

Pohjola abandoned its target for the return on equity (13.0%) calculated at fair value and set a new return-on-equity target at 13.0% calculated on earnings after tax. It raised its capital adequacy target by replacing the Tier 1 ratio target of 9.5% with the Core Tier 1 ratio target of 11%. Pohjola also revised its dividend policy in such a way that it aims to distribute a minimum of 50% of its earnings for the financial year in dividends, provided that Core Tier 1 remains at least 10% (previously: Tier 1 ratio of at least 9.5%).

Pohjola set a target level for its total expenses: the Group’s total expenses at the end of 2015 will be at the same level as at the end of 2012. It also revised down the operating cost/income ratio target for Banking from 40% to 35% and for Asset Management from 50% to 45%. Pohjola revised the Non-life Insurance target for the operating combined ratio from 92% to less than 92% and for the operating expense ratio from 20% to 18%. The financial targets are set over the economic cycle, with the exception of the target for total expenses.

Financial targets over the economic cycle

Target
Group
Return on equity, % 13.0
Core Tier 1 ratio, % >= 11
Banking
Operating cost/income ratio, % < 35 Non-life Insurance Operating combined ratio, % <92.0 Operating expense ratio, % 18 Solvency ratio, % 70 Asset Management Operating cost/income ratio, % < 45 In addition, Pohjola still aims at an AA credit rating affirmed by at least two credit rating agencies or at credit ratings that are at least at the level of its main competitors. Pohjola Bank plc Carina Geber-Teir Chief Communications Officer FOR MORE INFORMATION, PLEASE CONTACT: Mikael Silvennoinen, President and CEO, tel. +358 (0)10 252 2549 Vesa Aho, CFO, tel. +358 (0)10 252 2336 Niina Pullinen, Senior Vice President, Investor Relations, tel. +358 (0)10 252 4494 DISTRIBUTION NASDAQ OMX Helsinki Ltd LSE London Stock Exchange SIX Swiss Exchange Major media op.fi and pohjola.com Pohjola Bank plc is a Finnish financial services group which provides its customers with banking, non-life insurance and asset management services. Our mission is to promote the prosperity, security and wellbeing of our customers. Profitable growth and an increase in company value form our key objectives. Pohjola Group serves corporate customers in Finland and abroad by providing an extensive range of financial, investment, cash-management and non-life insurance services. We offer non-life insurance and private banking services to private customers. Pohjola Series A shares have been listed on the Large Cap List of the NASDAQ OMX Helsinki since 1989. The number of shareholders totals around 34,000. Pohjola's consolidated earnings before tax came to 258 million euros in 2011 and the balance sheet total amounted to 41 billion euros on 31 December 2011. Pohjola is part of OP-Pohjola Group, the leading financial services group in Finland with over four million customers.