Annual Report • Mar 17, 2009
Annual Report
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Annual Report
Aktia publishes the following financial information in 2009
Thursday 12 February 2009
Tuesday 12 May
Monday 9 November
Annual and interim reports for Aktia Group are published in Finnish, Swedish, and English. All reports are available from Aktia's website www.aktia.com as soon as they are public. They are also available from all Aktia branch offices and may be ordered from Aktia Plc, Financial Publications, P.O.Box 207, 00101 Helsinki, or by e-mail at [email protected].
Shareholders are requested to inform change of address to the branch office where they have their book-entry account.
| (EUR,1,000) | 2008 | 2007 |
|---|---|---|
| Operating profit – Aktia Group |
6,606 | 66,295 |
| Cost-to-income ratio (banking business) Life insurance group's |
0.65 | 0.67 |
| cost ratio, % Earnings/share, EUR |
99.0 0.09 |
110.0 0.87 |
| Equity per share, EUR Dividend/share, EUR |
4.85 0.17 |
5.39 0.33 |
| Return on equity (ROE), % | 1.8 | 17.9 |
| Mutual fund capital Borrowing from the public Lending to the public Balance sheet total |
1,511,752 3,098,336 5,425,654 9,540,073 |
2,012,919 2,801,378 4,573,746 7,952,813 |
| Life insurance business: - investments at fair value - provisions for interest linked policies |
804,559 627,592 |
965,555 654,316 |
| - provisions for unit-linked policies |
149,583 | 200,527 |
| Average number |
of shares **) 60,167,835 59,812,898
**) Number of shares adjusted for share issue
In January, Aktia informed that Chief Executive Officer Mikael Ingberg and the company's Board of Directors have agreed that he will resign from his post after serving as the company's CEO for six years. Jussi Laitinen, M.Sc. Econ, was appointed to be the Group's new CEO. He took up his new position on 4 April 2008.
In February, Aktia lowered its prime rate to 4.25 per cent and raised it to 4.50 per cent in May and to 5.00 per cent in July. In November, the prime rate was lowered to 4.50 per cent and in December to 3.25 per cent.
In April, Aktia's Annual General Meeting decided on creation of a new share series, series R, and that the bank's old shares should be named series A. All shareholders included in the bank's shareholder register the record date 4 April 2008 received one new R share for every two old shares (series A). Every R share entitles the holder to 20 votes and every A share to one vote at the Annual General Meeting.
At the beginning of April, the Boards of Directors of Aktia and Veritas Non-Life Insurance signed a merger plan. At the beginning of June, Aktia's Extraordinary General Meeting approved the transfer of business from Aktia Savings Bank plc to Aktia Bank plc. In addition, the AGM also approved the plan to merger with Veritas Non-Life Insurance. The merger of Aktia and Veritas Non-Life Insurance was implemented on 1 January 2009. At the same time Veritas Non-Life Insurance changes its name to Aktia Non-Life Insurance.
The Board of Directors of Aktia appointed Deputy CEO Stefan Björkman CFO of the Aktia Group in mid-August.
At the end of September, Aktia Savings Bank plc transferred banking operations to Aktia Bank plc. Aktia Savings Bank plc, which owned all shares in Aktia Bank plc, ceased to conduct banking operations and continues as a parent company in the Aktia Group under the name Aktia plc.
Moody's Investors Service Ltd has assigned Aktia Bank plc the credit ratings A1 for long term borrowing, P-1 for short-term borrowing, and C for financial strength, all with stable outlook. The credit ratings are the same as Aktia Savings Bank had previously.
Aktia transferred its shareholding in relation to the real estate companies Mannerheimvägen 14, Silvertärnan and Mercator to Fastighetskapitalfonden Forum Fastighets Kb in October. For Aktia, this means a capital gain amounting to more than EUR 6 million in the last quarter of 2008. The transaction was a step in the bank's efforts to improve the efficiency of real estate management and increase the liquidity of its holdings.
In December, Aktia Bank informed that the bank had bought Kaupthing's asset management operations in Finland. The acquisition of Kaupthing's asset management business is a complement to Aktia's asset management services.
Aktia offers a broad range of products, services and solutions in banking, asset management, insurance and real estate agencies. Aktia operates mainly in coastal areas, in the Helsinki region, and in inland growth areas.
Aktia's roots date back to 1825, when Finland's first, now existing deposit bank saw the light of day. Business operations started the following year. Aktia Savings Bank was created some 15 years ago when Helsinki Savings Bank merged with a number of savings banks based in the coastal areas. Aktia was converted into a limited company in 1993. The Group was restructured in 2008 in order to better comply with the extended range of products and services. In the Autumn 2008, the name of the bank was changed into Aktia Bank plc and the name of the Group's parent company to Aktia plc.
Aktia has about 300,000 customers who are served about 90 branch offices and via comprehensive Internet and telephone services. With its partners, savings banks and local co-operative banks, Aktia operates an extensive network of about 430 branch offices for certain finance services. Following an agreement with Automatia Oy, our customers are served by a network of about 1,700 ATM:s throughout the country.
Aktia is owned by Finnish savings bank foundations, institutions and private individuals. Aktia has published plans to be listed on the stock exchange. There are no decisions on the time of listing.
Aktia's main business operations are divided into five segments: Banking Business, Asset Management, Life Insurance, Non-Life Insurance and Miscellaneous.
Banking Business includes Aktia Bank plc, Aktia Real Estate Mortgage Bank plc, Aktia Card & Finance, Aktia Corporate Finance and Aktia real estate agencies.
Asset Management includes Private Banking operations as well as the subsidiaries Aktia Fund Management Company Ltd, Aktia Asset Management Oy Ab and Aktia Institutional Investment Services.
The life insurance segment entails Aktia Life Insurance.
The non-life insurance segment entails Aktia Non-Life Insurance.
During 2008, Aktia reported for the segments Retail Banking, Asset Management, Corporate Banking & Treasury and Life Insurance as well as the segment Miscellaneous.
Aktia's mission and vision are based on our roots, of which we are very proud. From being an amalgamation of local savings banks, Aktia has developed into the country's second-largest Finnish-owned financial group. The Group offers complete banking, insurance and real estate agency services to private individuals and corporate customers in both national languages.
We develop and sell customer-oriented banking and insurance solutions and create added value for our customers, owners and the local community.
We are the leading bank in helping our customers to improve and safeguard their finances and are the customers' first choice in the areas in which we operate.
Our core values form the heart of what we consider to be right and where our priorities must lie. They also govern our actions.
We bear a responsibility to our customers, owners and the local community by acting profitably, reliably and ethically.
The staff at our local offices provide personal customer service in a respectful manner.
We provide our customers with security and, through controlled risk taking, we ensure that the company is a secure employer and partner.
We respect every individual, both customer and colleague. Togetherness, competence and job satisfaction are important cornerstones of One Aktia.
We are modern and active, and we are committed.
We have chosen a centralised Group control model in order to integrate our subsidiaries under one brand, create synergy effects and develop a joint way of responding to our customers. Local decision making will be our strength from now on.
Our area of activity covers the bilingual coastal area of Finland as well as certain selected towns.
We will achieve growth both by cross-selling and additional selling to current customers of the Group and by sales efforts in the larger towns (Helsinki, Tampere, Oulu and Turku).
Aktia's competitive advantage is founded on the dialogue between customer and staff as well as optimal accessibility. Our ambition is to be the leader in providing a service to our customers in both national languages. We aim for relationship-driven sales based on the needs of the customer.
We have a deep, cost-saving collaboration with the savings and local co-operative banks. The Veritas Pension Insurance Company is also a major partner in corporate insurance distribution. We also engage other partners in the distribution of the Group's products in order to achieve economies of scale.
Listing on the stock exchange is the aim in order to create a liquid marketplace for our owners.
The strategic objectives of the Aktia Group are based on our mission and vision and the strategic choices:
Through an active dividend policy, Aktia aims to pay out 30–50% of net income in dividends.
The uncertainty on the financial market makes forecasting economic development difficult, and 2009 will pose many challenges to the financial industry. In 2009, Aktia will focus on the successful integration of the Aktia Non-Life Insurance Company into the Group, cost-effectiveness, investments in the Internet and managing the consequences of the financial crisis on the business.
2008 was a turbulent and difficult year for financial markets in general. The economic outlook in the country went from cautious optimism to deep pessimism as global equity markets reacted sharply to the worsening outlook.
The Aktia Group had much to be pleased about during 2008, even if we did encounter some setbacks. The banking business achieved good results thanks to improved net interest income in both the private and corporate markets. Market shares increased in all key segments.
Our services portfolio was further developed as a result of the merger with Veritas Non-Life Insurance Company. Towards the end of the year we also succeeded in acquiring the institutional asset management arm of Kaupthing Bank, which nearly doubled our total fund market share. The unit, which is called Aktia Institutional Investment Services, focuses its services on professional investors. We hope that the acquisition will provide us with deeper knowledge of and insight into asset management and that this can be translated into practical benefits for our private customers. Our extended range of services provides us with a fantastic opportunity to offer our customers a long-term relationship which encompasses savings, housing and security.
Results from the Group's investment activities, particularly from our life insurance company, were very disappointing. Despite the fact that the life insurance company started the year with a relatively cautious allocation of shares in its investment portfolio, the result turned out to be very negative. This significantly reduces the Group's operating profit and compromises our ability to distribute profits at levels similar to those seen last year. For me personally, this is very disappointing. The general downturn in demand on the housing market has also affected our real estate agency operations.
Aktia has a unique ownership structure which comprises independent non-profit foundations, 24 savings bank foundations, companies and private individuals. The vast majority of our owners expect to see stable and growing dividends from us. We have not been able to fulfil this expectation in 2008. In connection with the merger with Veritas Skadeförsäkring, now Aktia Skadeförsäkring, we are welcoming over 70 000 new shareholders to the Group in 2009. We hope to be able to make their ownership satisfying during the coming years.
Aktia has grown rapidly in recent years. From being a local bank with a geographically widespread branch network in the growing regions of the country at the beginning of the century, we have become one of the largest Finnish-owned finance groups in Finland. Significant life insurance operations are integrated into the Group and from the beginning of 2009 also prominent accident insurance operations. We have also developed our asset management activities, private banking, corporate financing, credit card and real estate agency operations. Our role as a central financial institution and our new payment transaction operations for independent local savings and cooperative banks is very important for us.
We have an impressive range of products, and to be able to offer the customer the products that are most suitable for them we have developed the new tool Aktia Dialog. Through a general discussion of the customer's life situation, dreams, preferences and concerns, this dialogue helps our customer advisors to ensure that Aktia can help the customer safeguard and develop his finances in the best way possible. We have over 300 000 customers that use our services. This puts us under the obligation to continue with the same focus – the best for the customer!
Aktia's local branches are the heart of our operations. We have over 70 individual branches and our banking and insurance directors have far-reaching authority to look after our customer's banking and insurance needs quickly and close to the customers. To guarantee the best customer service, our central units and our product companies help the branches by providing highquality products and support services. In addition, the branches work in close cooperation with our local savings bank and Aktia foundations which return a large part of their profits from Aktia dividends to the local community through grants and donations.
The economic downturn that started last year looks set to continue. General sentiment is characterised by continued pessimism and caution amongst both private individuals and companies. This often means lower incomes and increasing loan losses for the banks. Due to the fact that a large proportion of Aktia's lending is household-related, we expect to be spared from major loan losses. But when things get worse for customers, due to the economic situation, the banks usually don't get on well either.
This year, we are taking a small break from our longterm growth strategy. We have a wide product base, tens of thousands of potential new customers and a Group with several subsidiaries. Our investments in recent years have increased costs. To ensure that we can continue to offer competitive products and services even in worse economic conditions we have been looking for an effective joint way of working. Under the motto 'One Aktia', our hope is that all the companies in the Group will work so as to be as integrated as possible, thereby creating an efficient organisation of high quality. When the economic situation improves, we will then be ready to continue with our ambitions for growth.
The role of personnel in a company is crucial. Without motivated staff members we cannot provide our customers with good services or create finance and security products that the customers find competitive. Without motivated staff members we are also unable to maintain an internal decision-making infrastructure which helps our customers, our product companies and our account managers in their day-to-day jobs. Our rapid growth over recent years, with mergers and new company start-ups has required a great deal from everyone. The economic slump that has unfortunately led to deteriorating profitability in many units has also created much anxiety. This is natural and also difficult to set right with words. During 2009, one of the greatest challenges for both Aktia and myself personally will be to keep personnel motivated to continue providing good customer service in increasingly difficult economic times.
My predecessor Mikael Ingberg deserves thanks for his efforts to develop Aktia from a regional savings bank to the financial group we are today.
I would like to thank the entire staff for all the work you have done over the last year and I am sure that, by working together, we will succeed in securing Aktia's future.
Helsinki, March 2009 Jussi Laitinen
| 1-12 2008 | 1-9 2008 | 1-6 2008 | 1-3 2008 | 1-12 2007 | |
|---|---|---|---|---|---|
| Earnings per share, EUR | 0.09 | 0.47 | 0.37 | 0.17 | 0.87 |
| Equity per share, EUR | 4.85 | 4.28 | 4.55 | 5.26 | 5.39 |
| Return on equity (ROE), % | 1.8 | 12.5 | 14.6 | 12.7 | 17.9 |
| Cost-to-income ratio (banking business) | 0.65 | 0.66 | 0.69 | 0.70 | 0.67 |
| Life insurance business cost ratio, % | 99.0 | 99.1 | 104.1 | 97.7 | 110.0 |
| Mutual fund capital, EUR million | 1,512 | 1,709 | 1,858 | 1,884 | 2,013 |
| Borrowing from the public, EUR million | 3,098 | 3,072 | 3,069 | 2,908 | 2,801 |
| Lending to the public, EUR million | 5,426 | 5,287 | 5,082 | 4,797 | 4,574 |
| Risk-weighted commitments, EUR million | 3,313 | 3,247 | 3,229 | 3,052 | 2,875 |
| Capital adequacy ratio, % (banking business) | 13.7 | 12.0 | 12.8 | 14.2 | 15.4 |
| Tier 1 capital ratio, % (banking business) | 9.3 | 9.9 | 10.1 | 10.5 | 10.9 |
| Solvency ratio, % (life insurance business) | 8.5 | 8.4 | 12.5 | 14.6 | 18.1 |
| Capital adequacy ratio, % (conglomerate) | 135.2 | 113.8 | 115.1 | 129.3 | 138.6 |
| Life insurance business: | |||||
| - investments at fair value, EUR million | 804.6 | 879.0 | 921.8 | 941.3 | 965.6 |
| - provisions for interest-linked policies, EUR million | 627.6 | 654.9 | 655.8 | 653.2 | 654.3 |
| - provisions for unit-linked policies, EUR million | 149.6 | 171.9 | 191.7 | 189.2 | 200.5 |
| Earnings per share excl. negative goodwill recorded as income, EUR | 0.09 | 0.47 | 0.37 | 0.17 | 0.67 |
| Return on equity (ROE), excl. negative goodwill recorded as goodwill, % | 1.8 | 12.5 | 14.6 | 12.7 | 13.8 |
| Earnings per share excluding negative goodwill recorded as income and including the fund at fair value, EUR |
-0.22 | -0.79 | -0.54 | -0.14 | 0.39 |
| Average number of shares, million *) | 60.2 | 60.2 | 60.2 | 60.2 | 59.8 |
| Number of shares at end of period, million | 60.2 | 60.2 | 60.2 | 60.2 | 60.2 |
| Personnel (FTEs), average number | 1,009 | 993 | 972 | 956 | 940 |
*) Number of shares adjusted for share issue
Operating profit for Retail Banking fell slightly as a result of reduced margins during the first six months and increased costs in relation to new branch offices and investments in an extended service portfolio. Corporate Banking & Treasury achieved improved operating profit through growth in the credit stock and also by exploiting the good liquidity position. Asset management suffered as a result of the situation in the investment market and returned a reduced operating profit, despite improving its market share. The contribution of the life insurance sector to the Group's operating profit was reduced by developments in the investment portfolio. The operating result from associated companies of EUR 0.2 million (0.2) was at the same level as 2007.
Profit for the fiscal period was EUR 5.8 million (52.8).
The Group's total income fell by 27.1% to EUR 202.9 million (278.5). The biggest individual change in income compared with 2007 was investment income from Life Insurance, which was negative due to capital losses and write-downs.
Net interest income increased to EUR 101.0 million (88.9). The derivatives used by Aktia to limit its interest rate risk had an impact on net interest income of EUR -8.3 million (-4.1) during the period.
Net commission income totalled EUR 41.0 million (47.3). Commission income from funds, asset management and brokerage fell in a challenging environment and totalled EUR 22.9 million (30.0). Card and payment services commissions rose to EUR 11.0 million (10.6). Income from real estate brokerage commissions dropped to EUR 7.1 million (7.4). Within commission costs, commissions to savings banks and local co-operative banks for mortgages increased to EUR 3.2 million (2.1) with the increased credit stock.
The life insurance business' income totalled EUR 41.9 million (134.9). Insurance premium income was EUR 91.0 million (99.8). Net income from investments for interest-linked policies decreased to EUR -49.1 million (35.1).
Other operating income totalled EUR 19.0 million (7.3). The majority of the EUR 11.7 million improvement is attributable to capital gains from divestments of the Bank's real estate holdings during the period.
The Group's total expenditure fell by 7.4% to EUR 196.6 million (212.2).
This total expenditure includes claims paid and change in provisions. The biggest change in total expenditure is due to a change in provisions.
Operating expenses for the year were EUR 120.9 million (110.4), representing an increase of 9.5%. The effect of the negative goodwill recorded has been excluded. Expense ratio for life insurance improved to 99.0% (110.0) due to rationalization measures taken during the year.
Staff costs totalled EUR 60.6 million (57.3). Other administration costs amounted to EUR 38.4 million (35.5). The EUR 2.9 million increase in costs is primarily attributable to the cost items of marketing, communications and IT.
Total depreciation and write-downs on tangible and intangible assets increased to EUR 5.7 million (5.1). Of these, depreciation of customer-related intangible assets totalled EUR 1.3 million (1.3) for the period. These related to the acquisition of Aktia Life Insurance.
The Group's balance sheet total increased by 20.0% from 2007 and amounted to EUR 9,540 million (7,953 at 31 December 2007) at the end of the period. The increase in the balance sheet total is primarily due to a growth in the credit stock and an increase in those assets available for sale acting as the bank's liquidity reserve. Borrowing has increased, both from the public and from savings banks and local co-operative banks.
The Group's total lending to the public amounted to EUR 5,426 million at the end of the period (4,574 at 31 December 2007), representing an increase of EUR 852 million (+18.6%). Private housholds share of the total credit stock amounts to EUR 4,343 million or 80%. 86,5% of loans to private households are secured by housing collateral (in accordance with Basel 2). The Group's lending, excluding mortgage loans sold and capitalized by savings banks and local co-operative banks increased by 15.4%.
Housing loan stock amounted to EUR 4,036 million (3,476 at 31 December 2007), of which mortgages granted by Aktia Real Estate Mortgage Bank plc represented EUR 1,968 million (1,573 at 31 December 2007), which is an increase of 16.1% from 2007. Of the EUR 458 million increase in mortgage loans, EUR 262 million came from loans sold by savings banks and local co-operative banks. Lending to companies grew in line with the corporate customer strategy to EUR 783 million (557 at 31 December 2007). During the latter half of the year, growth has been actively reduced.
Interest-bearing assets available for sale increased to EUR 2,808 million (2,072 at 31 December 2007). These assets mainly consist of the banking business' liquidity reserve and can be used as security for transactions involving binding repurchase terms, known as repurchase agreements. Aktia has not made use of any of the relaxations in the IFRS rules in the valuation of assets.
Deposits from the public and public sector entities increased by 10.6% from 2007 to a total of EUR 3,098 million. This growth in deposits strengthened Aktia's liquidity in a volatile market.
Outstanding Aktia certificates of deposit amounted to EUR 262 million at the end of the period, which represents a decrease of EUR 118 million during the period. Aktia also issued new debentures and indexlinked loans with a total value of EUR 80 million.
Life insurance provisions fell to EUR 777 million (855 at 31 December 2007).
Off-balance sheet commitments decreased by EUR 101 million from the year-end and amounted to EUR 529 million (630 at 31 December 2007). The decrease is mainly due to that credit equivalents for derivatives are not included in off-balance sheet commitments as of 31 December 2008 as their market value is entered in the balance.
The Group's equity amounted to EUR 317 million at the end of the financial period (339 at 31 December 2007). The fund at fair value amounted to EUR -36 million compared to EUR -18 million at 31 December 2007.
Capital adequacy was strengthened by EUR 45 million when Aktia Bank issued a perpetual loan (Upper Tier-2) in November. In addition, Aktia renegotiated the terms and conditions of the shareholder agreement of Aktia Real Estate Mortgage Bank so that the minority interest's share of the Mortgage Bank's equity could also be counted as Group equity in accordance with IFRS rules.
The banking group's capital adequacy amounted to 13.7% compared with 15.4% at the year-end.
The Tier 1 capital ratio was 9.3% (10.9% at 31 December 2007). Despite the effects of the ongoing financial crisis, the new Group structure and the growth of the credit stock over the course of the year, capital adequacy is good, exceeding the capital adequacy target and the requirements of the authorities.
The solvency of the life insurance company was 8.5% (18.1%). The risk level of the investment portfolio has been reduced through substantial reallocations. Aktia is prepared to increase the equity of Aktia Life Insurance by up to EUR 20 million if necessary.
Capital adequacy for the financial and insurance conglomerate amounted to 135.2% (138.6%). The statutory minimum stipulated in the act governing financial and insurance conglomerates is 100%.
Aktia Bank plc's credit rating by the international credit rating agency Moody's Investors Service was at the best classification, P-1, for short-term borrowing. The credit ratings for long-term borrowing and financial strength were the same, at A1 and C respectively, both of which Aktia Savings Bank plc had before the restructuring.
The subsidiary Aktia Real Estate Mortgage Bank Plc has issued long-term covered bonds with the highest credit rating of Aaa from Moody's Investors Service.
Negative value changes in interest-bearing securities where the issuer has not noted an inability to pay and negative value changes in shares and participations which are not deemed to be long-term or significant are reported in the fund at fair value, which for the Group, taking cash flow hedging into consideration, amounted to EUR -36 million after deferred tax, compared with EUR -18 million at 31 December 2007.
EUR 44 million of the negative development in the fund per 31 December 2008 is attributable to interestbearing securities and the change in value is mainly due to continued poor liquidity and investors' demands for high returns as a result of the general uncertainty in the money market. The negative value changes in interestbearing securities are off-set during the maturity of the debt instrument if it is held to maturity, assuming that the issuer does not become unable to pay.
Specification of the fund at fair value
| EUR million | 31.12.2008 | 31.12.2007 | Change 1–12 2008 |
|---|---|---|---|
| Shares and participations | |||
| Banking business | -1.5 | 5.7 | -7.2 |
| Insurance business | -2.9 | 3.3 | -6.2 |
| Direct interest-bearing securities | |||
| Banking business | -26.2 | -17.4 | -8.8 |
| Insurance business | -18.2 | -8.7 | -9.5 |
| Cash flow hedging | 12.4 | -0.9 | 13.3 |
| Fund at fair value, total | -36.4 | -18.0 | -18.4 |
Write-downs stood at EUR -39.2 million and are a result of significant or long-term negative value changes in shares and share funds and in interest-bearing securities where the issuer has noted an inability to pay. The limit for significant falls varies between 25% and 45%, depending on the volatility of the shares, while a long-term fall is noted if the share price remains continuously below the acquisition value for 18 months. As at 31 December 2008, write-downs were recorded against the value of investments in shares and participations as above totalling EUR -30.4 million, of which EUR -29.4 million is attributable to the life insurance company's investments. The write-down amount in the life insurance company is significant, despite a conservative investment policy, portfolio diversification and active hedging. The share weighting was reduced significantly during the autumn, standing at approximately EUR 40 million at year-end.
Write-downs of interest-bearing securities totalled EUR -8.8 million, of which EUR -5.4 million is attributable to claims on, and agreements with, the bankrupt Lehman Brothers.
Write-downs of financial assets
| EUR million | 1–12 2008 |
|---|---|
| Interest-bearing securities | |
| Banking business | 3.6 |
| Life insurance business | 5.1 |
| Shares and participations | |
| Banking business | 1.0 |
| Life insurance business | 29.4 |
Total 39.2
Write-downs based on individual examination of loan and guarantee claims amounted to EUR -1.2 million (-0.8). Reversals of losses from previous years came to EUR 0.5 million (0.6) so that the cost effect on the profit for the period was -0.7 (-0.2). In addition to individual write-downs, group write-downs were made where there were objective reasons to believe there was uncertainty in relation to the repayment of claims in underlying credit portfolios. In connection with the specification of principles for group write-downs to apply in future only to households and small companies, individual write-downs totalling EUR -4.1 million were carried out against six large corporate exposures. Group write-downs for households and small companies at 31 December 2008 stood at EUR 7.4 million, and are based on anticipated losses in relation to the market situation.
During 2008, Aktia reported for five segments. The main business operations are divided into four segments: Retail Banking, Corporate Banking & Treasury, Asset Management and Life Insurance. The segment Miscellaneous includes the Group administration of Aktia plc, certain administrative functions for Aktia Bank plc, the Group's real estate holdings and return on equity.
Operating profit for Retail Banking was EUR 13.6 million (23.0).
Operating income totalled EUR 97.1 million (95.1). The continued reduction in lending margins has resulted in net interest income remaining at the same level as last year despite an increase in volume and growth in deposits. Retail Banking's net interest income is reference rate neutral, i.e. an increase in interest rate levels does not affect the net interest income. Fixed rate deposits are credited with an internal rate of 3.5%. Aktia's market share in home loans was 4.2% and the market share for borrowing was 2.9%. Commission income fell by 1.7%. Retail Banking has acquired some 21,000 new customers during the year.
Operating expenses rose to EUR 82.8 million (71.9). The investment in the branch office network and real estate agency operations, focusing particularly on new areas, has contributed towards an increase in operating expenses. A large part of the costs for investments in the branch office network was not recorded until 2008.The continued development of the business operations through investments in IT also contributed towards increased costs.
The mortgage brokerage business achieved total growth of 28.3% from the beginning of the year. Excluding mortgage loans brokered by other savings banks and local co-operative banks, Aktia increased lending to households by 10.0% during the period to EUR 3,353 million (3,048 at 31 December 2007). Mortgage loans brokered by Aktia's branch offices rose to EUR 1,069 million (873 at 31 December 2007).
The outflow from share funds and mixed funds during the period was compensated for by an increase in alternative forms of saving, such as time deposits and life insurance policies. Total savings by households was EUR 2,907 million (3,152 at 31 December 2007), of which household deposits were EUR 2,359 million (2,156 at 31 December 2007) and savings by households in mutual funds stood at EUR 548 million (997 at 31 December 2007).
The turnover of the real estate agency business dropped by 4.5% to EUR 7.1 million. The operations did not reach last year's profitability level.
During the year the number of Internet banking agreements increased by 11.9% to 107,135.
Operating profit for Corporate Banking & Treasury amounted to EUR 17.6 million (11.3). Corporate Banking & Treasury showed an increase in profit compared with the previous year.
Operating income totalled EUR 29.6 million (23.2). Operating expense increased by EUR 0.2 million to EUR 12.1 million (11.9).
Corporate Banking's proportion of earnings from general customers who use a wide range of services has increased significantly. Aktia Corporate Finance has grown by serving Aktia's and the savings banks' and local co-operative banks' customers.
Throughout 2008, a more restrictive credit policy has applied to Corporate Banking in consideration of the situation in the financial market.
ACH Finland Abp was founded and the company applied for concession in 2008. The company, which was founded in cooperation with the local banks and other partners, has the goal of ensuring competitive clearing and settlement services for payment traffic within the SEPA region. Aktia's shares amount to 25.8% of the ownership and Aktia has made an agreement on providing services for ACH Finland. ACH Finland will begin operations on 1 March 2009.
Treasury was able to improve net interest income despite the profit for the period being negatively affected by costs from hedging the bank's interest rate risk to the amount of EUR -8.3 million (-4.1). A good liquidity position enabled refinancing to take place on favourable terms. In a challenging market, the liquidity reserve showed a return before changes in value and write-downs of 4.7%, or 4.1% taking changes in value and write-downs into account. The average size of the liquidity reserve was EUR 2.0 billion, with a market value at 31 December 2008 of EUR 2.3 billion.
Aktia Real Estate Mortgage Bank plc showed continued growth. The total credit stock was EUR 2,072 million, an increase of 28.3% from 2007. The savings banks and local co-operative banks represented EUR 1,003 million of the mortgages brokered. Of the EUR 458 million growth in credit stock, 42.8% was brokered by Aktia.
In August, Aktia Real Estate Mortgage Bank plc issued a covered bond worth EUR 250 million with housing loans as collateral. The loan has a floating interest rate and a two year maturity.
Operating profit for Aktia's asset management business fell to EUR 3.2 million (6.7). The market was extremely tough, particularly during the autumn. Aktia coped relatively well in this tough market, and succeeded in strengthening its market position.
The competitiveness of the asset management segment was boosted, particularly in terms of institutional investors, when Aktia acquired Kaupthing's Finnish asset management business in December. This acquisition strengthens Aktia's service portfolio, representing expertise which has been very much appreciated by institutional investors in Finland. The acquired unit having 16 employees was consolidated into the Aktia Group with effect from 1 December 2008 and is now operating under the name Aktia Invest.
Operating income, i.e. income after reversals to the Group's other units and business partners, was EUR 12.5 million (16.2). The business environment was very challenging for the whole of the period. Operating expenses fell by EUR 0.3 million to EUR 9.3 million, of which staff costs constituted EUR 4.8 million.
The volume of funds managed and brokered by Aktia was EUR 1,512 million (2,013 at 31 December 2007). Aktia's market share was 3.7% (3.0%) at the end of the period. The assets managed by Aktia, consisting of Asset Management and Aktia Invest (acquisition of Kaupthing), increased by 23.2% and totalled EUR 4,538 million (3,684 at 31 December 2007). Private Banking's customer assets totalled EUR 738 million (1,181 at 31 December 2007). The number of customers in Private Banking increased by approximately 16% over the course of the year.
The contribution of the life insurance business to the Group's operating profit was EUR -47.7 million (5.3).
Despite the significant difference between the profit for the year and the profit for the previous year, the segment's operating profitability was at the same level as during the previous year. The segment's operating result for both years include substantial items complicating comparison. Such items include write-downs of the investment portfolio, sales profits from real estate holding divestments and changes in the discount rate for the interest-based provisions.
Premium income was EUR 91.0 million (99.8). Premium income rose for risk insurance, pension insurance and savings insurance. Premium income for investment insurance showed good volumes during the first six months, but sales slowed particularly for large one-off investments during the second half of the year as a result of the unfavourable market conditions. The company was able to increase its market share for unitlinked insurance policies to 4.3% (3.2%).
Insurance benefits totalled EUR 86.7 million (64.5). The increased payments of insurance benefits resulted primarily from an increase in policy surrenders and increased pension and life insurance payments. There was also an increase in sickness benefits. The loss ratio for risk insurance was unchanged at 81%.
Operating expenses totalled EUR 13.4 million (15.1). The life insurance segment succeeded in its efforts to improve its cost-effectiveness. The cost ratio came down by 11.0% percentage points to 99.0% (110.0%). The savings achieved by reorganising distribution and the conscious drive towards reduced administration costs are the main reasons for this improved efficiency. In order to improve operational efficiency, the company decided to withdraw from Joensuu, Jyväskylä and Pori, which are not part of the Aktia Group's strategic market. These offices were closed in December.
The year was dominated by a turbulent investment market. The return on the company's investments based on fair value was -9.5% (6.2%).
Provisions totalled EUR 777.2 million (854.8 at 31 December 2007), of which unit-linked insurance policies represented EUR 149.6 million (200.5 at 31 December 2007). Interest-based provisions totalled EUR 627.6 million (654.3). The discount rate for certain elements of these provisions was increased, resulting in an average discount rate for all interest-bearing provisions of 3.2%. This increase cut provisions by EUR 20.2 million. EUR 0.8 million of provisions for payments to customers in the future were dissolved, leaving EUR 3.7 million (4.5) at the end of the year.
The company's solvency stood at 8.5% at the year-end, compared with 18.1% the year before. As a result of the weakened solvency situation, the company's Board of Directors decided only to make payments to pension insurance customers for those policies with entitlement to additional benefits.
Operating profit for the segment Miscellaneous improved from EUR 10.4 million to EUR 20.3 million. The segment Miscellaneous includes the Group's real estate holdings. Investments in, or ownership of, real estate property is not part of Aktia's core business. In accordance with this strategy, most of the real estate holdings have been sold and the remainder of the real estate holdings has been reclassified as fixed assets held for sales.
By means of its share transfer agreement, and in accordance with the May 2008 fund agreement, Aktia transferred its shareholding in relation to the real estate companies Mannerheimvägen 14, Silvertärnan and Mercator to Fastighetskapitalfonden Forum Fastighets Kb. The other shareholders in the Forum block also transferred their real estate holdings to the fund. The transfer was carried out on 1 October 2008. For Aktia, this means a capital gain amounting to more than EUR 6 million. Aktia disposed of its share in the fund in December.
The merger with Veritas Non-Life Insurance was completed in 1 January 2009 in accordance with the merger plan approved by the Extraordinary General Meeting in June 2008. From 1 January 2009 onwards, the merged non-life insurance business will be operated by the 100% Aktia plc-owned subsidiary Aktia Non-Life Insurance Ab.
Aktia Non-Life Insurance has been insuring private customers and companies since 1925, and currently has approximately 90,000 customers. The customer segment mainly consists of private households, entrepreneurs and small and medium-sized companies. Aktia Non-Life Insurance has its largest market share in bilingual coastal regions.
In 2008 and in previous years, Aktia Non-Life Insurance has prepared its financial statements in accordance with Finnish accounting principles (FAS). The effects of the company's transition to IFRS accounting principles and the IFRS opening balance as at 1 January 2009 will be notified during the first quarter.
The result for the financial year (FAS) for 2008 was negative, EUR -6.8 million (4.1), primarily as a result of investment value trends and significant write-downs on shares and other share-related instruments. Income from premiums in 2008 was EUR 63.6 million (62.6), while claims expenditure was EUR 50.7 million (45.5). The company's total cost ratio weakened from 98% to 111%, partly due to a change in the accounting principles in 2007. A comparable total cost ratio would be 102%. The risk coverage capacity fell from 136% to 105%. The balance sheet total for 2008 was EUR 146.1 million (149.8).
The segments will be divided up so that business areas with similar business operations will be included in the same segment. The current Retail Banking and Corporate Banking & Treasury segments will therefore be combined to form the Banking Business segment. From 1 January 2009 onwards, Aktia Non-Life Insurance is also part of the Group, and the new segment reporting will be published for the first time in the 1 January–31 March 2009 interim report.
The reporting segments from 1 January 2009 onwards are:
Comparative figures for 2008 relating to the new segmentation will be published in advance of the 1 January–31 March 2009 interim report.
Risks make up a significant proportion of Aktia's operating environment and business activities. The Group has a conservative risk policy, and the most significant risk areas within the banking business are credit, interest and liquidity risks and, within the life insurance business, market and interest risks. All operations are exposed to business and operational risks. Business risks are reduced through diversifying operations and cross-selling.
The aim of risk management is to ensure that the capital base is sufficient in relation to risk exposure, that fluctuations in financial results and valuations remain within the goals and limits set, and that risk pricing is correct in order to achieve profitablility in the long run. All risk-taking is based on sufficient competence, appropriate risk management and control processes, adequate capital allocation and risk pricing.
All risk-taking is steered by the Group's strategy and the Board of Directors is ultimately responsible for the Group's appropriate risk management and control. Each year, the Board sets instructions for managing business activities including detailed principles, rules and limits for risk-taking and reporting requirements. Risk items and limits are reported to the Board on a quarterly basis.
The executive management is responsible for organising and monitoring the risk-management process. The executive management has appointed committees for managing, monitoring and developing risk management in terms of credit and market risks. Further, a committee has been appointed to handle matters concerning the Group's risk-bearing capacity and capital allocation. The committees have been tasked with making risk-management decisions, preparing matters for decision-making by higher bodies and developing wholesale risk management processes, all within set limits. The committees are made up of Executive Committee members with line management responsibilities, the risk control function and other experts. The risk control function does not take part in decision-making involving taking risks.
The risk management process is divided into two functions that are independent from one another, i.e. risk control and risk management. The risk control function decides on principles, compiles instructions and limits for risk-taking, measures and analyses risk items, estimates the need of economic capital, handles capital allocation and monitors how risk management is realised in the line organisation. The line managers are responsible for building up processes and competence for risk management and internal control, identifying and analysing risks and making decisions, on a commercial basis, as to how risk will be dealt with through pricing, covenants, pledges or other risk deducting policies.
Group administration has an independent risk control function which reports directly to the Managing Director.
The Banking Business includes Retail Banking (including financing company operations), Corporate Banking, Treasury and Asset Management. Life insurance operations are carried out by the Veritas Life Insurance Group (Aktia Life Insurance from 1 January 2009 onwards).
There have been no significant changes to the composition of the credit portfolio during 2008. The share of household loans decreased slightly to 80.0% (82.7%) of the total credit stock. Housing loans accounted for 74.4% (76.0%) of the total credit stock. 86.5% of these loans have adequate security (according to Basel 2). Mortgage lending totalled EUR 2,072 million at the end of the year (1,614 at 31 December 2007), of which EUR 1,003 million was brokered by savings banks and local co-operative banks.
In line with the corporate customer strategy, the share of corporate financing increased to 14.4% (12.0%). Aktia does not intend to keep increasing the corporate financing share of lending. Lending to the public secured by collateral objects or unsecured within the framework of the financing companies Aktia Corporate Finance and Aktia Card & Finance totalled EUR 54.2 million, representing 1% of total lending.
| EUR million |
31.12.2008 | 31.12.2007 | Change | % |
|---|---|---|---|---|
| Corporate | 804 | 558 | 246 | 14.8% |
| Housing associations |
220 | 185 | 35 | 4.1% |
| Public sector entities |
12 | 10 | 2 | 0.2% |
| Non-profit organisations |
47 | 38 | 9 | 0.9% |
| Households | 4,343 | 3,782 | 561 | 80.0% |
| Total | 5,426 | 4,574 | 853 | 100.0% |
Loans with payments 1-30 days overdue rose during the year from 3.2% to 3.4% of the credit stock, including off-balance sheet bank guarantee commitments. Loans with payments 31-89 days overdue rose from 0.60% to 0.88%, totalling approximately EUR 48 million. Non-performing loans more than 90 days overdue, including those in collection, totalled approximately EUR 26 million, corresponding to 0.48% (0.38% at 31 December 2007) of the entire credit stock plus bank guarantees.
| Days | 31.12.2008 EUR million |
% of stock |
31.12.2007 EUR million |
% of stock |
|---|---|---|---|---|
| 1–30 | 186.6 | 3.44 | 145.5 | 3.18 |
| 31–89 | 47.8 | 0.88 | 27.6 | 0.60 |
| 90– | 26.2 | 0.48 | 17.8 | 0.38 |
Within the banking business, financing and liquidity risks are defined as the availability of refinancing plus the differences in maturity between assets and liabilities. The financing and liquidity risks are dealt with at legal company level, and there is no financing connection between the banking group and the life insurance company. The aim within the banking group is to cover one year's worth of refinancing needs with existing liquidity (liquid assets plus investments which fall due). Despite considerable uncertainty in the financial markets, the liquidity status is good and this aim was achieved.
Within the life insurance business, liquidity risks are defined as the availability of financing for paying out claims, savings sums and surrenders, and pensions. The need for liquidity is satisfied mainly through the inward flow of cash and a portfolio of investment certificates which has been adapted in line with varying needs, while any unforeseen significant need for liquidity is taken care of through the liquid portfolio of bonds and shares.
At the end of the year, the banking business' liquidity portfolio – which is managed by Group Treasury – stood at EUR 2,290.4 million (1,656.0). Counterparty risks arising in relation to liquidity management operations and entry into derivative contracts are managed through the requirement for high-level external ratings (minimum A3 rating from Moody's or equivalent) and the conservative allocation and active selection of investment assets and by rules concerning the maximal exposure for each counterparty and asset category.
Of the financial assets available for sale, 49% (57% at 31 December 2007) were investments in covered bonds, 45% (38% at 31 December 2007) were investments in banks, 3% (0) were investmenst in state guaranteed covered bonds and around 3% (5% at 31 December 2007) were investments in public sector entities and companies. Of the financial assets, 0.9% did not meet the internal rating requirements, while six securities with a total market value of EUR 25 million were no longer eligible for refinancing with the central bank.
Losses realised over the course of the year as a result of counter parties' reduced creditworthiness totalled EUR -3.6 million.
| 31.12.2008 | 31.12.2007 | |
|---|---|---|
| Aaa | 49.4% | 50.5% |
| Aa1-Aa3 | 42.3% | 42.6% |
| A1-A3 | 4.9% | 4.9% |
| Baa1-Baa3 | 0.9% | 0.7% |
| Ba1-Ba3 | 0.0% | 0.0% |
| B1-B3 | 0.0% | 0.0% |
| Caa1 or lower | 0.0% | 0.0% |
| No rating | 2.5% | 1.4% |
| Total | 100.0% | 100.0% |
The direct interest investments in the life insurance company's investments rose as a result of reallocation (mainly shares and real estate), totalling EUR 449 (352) million at the year-end. Counterparty risks arising in connection with the life insurance company's investments are managed by the requirement for at least "Investment grade" external rating (rating class Baa3 from Moody's or equivalent) and by rules concerning the maximal exposure for each counterparty and asset category.
Particularly during the latter part of the year, there was significant reallocation primarily from share investments to direct interest rate investments, mainly within the public sector. At the end of the year, 48% (18% at 31 December 2007) of these direct interest rate investments were claims on public sector entities, 20% (34% at 31 December 2007) were claims on companies and 32% (48% at 31 December 2007) were claims on banks and covered bonds.
1.0% of the direct interest rate investments did not meet the internal rating requirements at the year-end.
Losses realised over the course of the year as a result of counterparties' reduced creditworthiness totalled EUR -5.1 million.
| 31.12.2008 | 31.12.2007 | |
|---|---|---|
| Aaa | 53.7% | 26.7% |
| Aa1-Aa3 | 17.3% | 29.4% |
| A1-A3 | 14.8% | 25.1% |
| Baa1-Baa3 | 5.7% | 10.2% |
| Ba1-Ba3 | 0.8% | 0.3% |
| B1-B3 | 0.2% | 0.0% |
| Caa1 or lower | 0.0% | 0.0% |
| No rating | 7.6% | 8.3% |
| Total | 100.0% | 100.0% |
The Group has a counterpart whose total exposure exceeds 10% of the financial conglomerate's equity calculated in compliance with the official directives.
Both the financial assets within the banking business and the investment assets within the life insurance business are invested in securities with access to market prices on an active market, and are valued in accordance with official quoted prices. In accordance with the accounting principles for financial assets defined during the last quarter in relation to shares and share funds, significant or long-term negative differences between acquisition value and market value are reported under income, while price fluctuations are reported under the fair value reserve after the deduction of deferred tax.
Market value interest rate risk refers to changes in value as a result of interest rate fluctuations in financial assets available for sale. The net change in the fair value fund relating to market value interest rate risk posted during the period totalled EUR -8.8 million after the deduction of deferred tax. With an interest rate increase of one percentage point for financial assets available for sale, the net change of the fund at fair value at 31 December 2008 would be EUR -27.2 million (-23 at 31 December 2007) after the deduction of deferred tax. Structural interest rate risk arises as a result of an imbalance between interest rate ties and the re-pricing of assets and liabilities, and affects net interest income. To reduce the volatility in the net interest income, structural interest rate risk is primarily contained through the use of hedging derivative instruments.
An upward parallel shift in the interest rate curve of one percentage point would reduce the net interest income of the banking business for the next 12 months by -5.4% (-4.3% at 31 December 2007), where the target for structural interest rate risk management is a maximum of -6%. For the next 12-24 months, the net interest income of the banking business would reduce by -6% (0.0% at 31 December 2007), where the target for structural interest rate risk management is a maximum of -8%.
A downward parallel shift in the interest rate curve of one percentage point would increase the net interest income of the banking business for the next 12 months by +6.3% (+4.4% at 31 December 2007), where the target for structural interest rate risk management is a maximum of -6%. For the next 12-24 months, the net interest income of the banking business would increase by +7.9% (-1.7% at 31 December 2007), where the target for structural interest rate risk management is a maximum of -8%.
No equity trading or investments in, or ownership of, real estate property is carried out in the banking business, including the parent company. The divestment of the real estate portfolio continued according to plan, with real estate holdings standing at EUR 4.6 million at year-end. The necessary or strategic investments in shares and funds of the business totalled around EUR 21.9 million. The net change in the fair value fund relating to other share investments and funds investments during the period totalled EUR -7.2 million after the deduction of deferred tax, while write-downs for long-term or significant falls in shares and participations totalled EUR -1 million.
The policyholder bears the investment risk of the investments providing cover for unit-linked insurance policies. These investments are evaluated on an ongoing basis at fair value and any changes in value are posted to provisions for unit-linked insurance policies.
The investment portfolio covering the technical provisions is measured on an ongoing basis at fair value. Temporary price fluctuations are reported under the fair value reserve, while significant or long-term value changes are reported under income. During the reporting period, write-downs affecting profit attributable to shares and participations totalling EUR -29.4 million were posted, while the net change in the fair value fund after acquisition eliminations posted during the period totalled EUR 6.2 million after the deduction of deferred tax.
The risks of the investment portfolio, such as credit risks, interest rate risks, currency risks, share risks and real estate risks, are measured and contained using a VaR (Value at Risk) model, assuming maximum loss for 12 months and applying a probability level of 97.5%.
Allocation of holdings in the life insurance company's investment portfolio
| EUR million | 31.12.2008 | 31.12.2008 | 31.12.2007 |
|---|---|---|---|
| Shares | 37.8 | 5.5% | 20.6% |
| Bonds - total | 480.6 | 69.4% | 51.4% |
| Money market | 85.3 | 12.3% | 9.0% |
| Real estate | 42.8 | 6.2% | 9.9% |
| Other | 46.1 | 6.6% | 9.2% |
Operational risks refer to loss risks arising as a result of unclear or incomplete instructions, activities carried out contrary to instructions, unreliable information, deficient systems or actions taken by staff members. If an operational risk is realised, this can result in direct or indirect financial losses or tarnish the corporate image to the extent that the bank's credibility in the market place suffers. No significant incidents were registered during the year.
When converted into full-time employees, the number employed by the Group increased by 69 to 1,052 (983) at the end of the reporting period. The average number of full-time employees during the year was 1,009 (940).
No profit-sharing will be realised for Aktia's personnel fund for 2008. The CEO and other members of the Group's Executive Committee are also members of the Group's personnel fund.
A bonus system has been created for the CEO and other members of the Group's Executive Committee, which is based partly on results and partly on the performance of the fund at fair value and which may provide a maximum annual bonus of three months' salary. Based on the income for the year, no bonuses will be paid to the Executive Committee.
In 2008, the Executive Committee is also included in a share-based incentive scheme that offers the members of the Executive Committee the opportunity to subscribe for a maximum of 24,980 shares. The outcome of these is dependent on separate targets whose performance conditions have been decided on by the Board of Directors. The share-based incentive scheme increased staff costs by EUR 0.1 million during the period.
Aktia Bank's deposit customers are still protected through the statutory Deposit Guarantee Fund. Membership in the Deposit Guarantee Fund, which was established in 1998 and safeguards deposits by private investors up to EUR 50,000, is obligatory for all banks. During 2008, the Finnish government decided to increase protected deposits from EUR 25,000 to EUR 50,000. The change entered into force on 8 October 2008. Aktia's total contribution to the fund in 2008 was EUR 1.2 million (1.5). At the end of the year, the total assets of the fund stood at EUR 548.9 million.
The banks and brokerage firms are members of the Investors' Compensation Fund. The purpose of the fund is to safeguard the interests of small investors in the event that a bank or brokerage firm becomes insolvent. Individual investors may receive compensation up to EUR 20,000. By the end of the year, the total assets of the fund were EUR 5.3 million.
The transfer of business that was approved by the AGM of Aktia Savings Bank plc on 5 June 2008 was implemented on 30 September 2008. The transfer involved transferring the banking business of Aktia Savings Bank plc to Aktia Bank plc, which was simultaneously converted into a public limited liability company.
Aktia Savings Bank plc, which owns 100 per cent of the shares in Aktia Bank plc, ceased to conduct banking operations and has continued as a parent company in the Aktia Group under the name Aktia plc.
The members of the Board of Directors for Aktia Bank plc are Kaj-Gustaf Bergh (Chairman), Dag Wallgren (Vice Chairman), Hans Franz, Lars-Olof Hammarén, Lars-Erik Kvist, Kjell Sundström, Marina Vahtola and Nina Wilkman, all of whom will also continue as the Board members of Aktia plc. Jussi Laitinen is the CEO of Aktia Bank plc and Jarl Sved will act as his deputy. Both will also continue to hold the same positions in Aktia plc.
Aktia plc's shares are divided into two share series. Shares in series A entitle the holder to one vote and shares in series R to twenty votes at the Annual General Meeting. On 31 December 2008, the number of A shares was 40,124,418 and the number of R shares 20,050,850. In connection with the merger between Veritas Mutual Non-Life Insurance Company and Aktia on 1 January 2009, 6,800,000 new A shares were registered to be given as compensation for the merger to the non-life insurance company's owners, probably during the first quarter of 2009. Each share entitles to an equal part of the company's assets and profits.
Aktia plc's share capital per 31 December 2008 amounted to EUR 80,248,836. The share capital increased by EU 13,600,000 to EUR 93,848,836 after the registration 1 January 2009 of the above mentioned 6,800,000 shares issued as compensation for the merger.
The Board of Directors has valid authority to issue a maximum of 938,498 A shares. No rights of option have been issued.
Aktia's Board of Directors decided on 30 April 2008, supported by the authorisations given by the bank's AGM on 21 December 2006 regarding the establishment of share-based incentives for the Group's key personnel and in accordance with the terms approved of by the Board in 2007 regarding an incentive programme for the senior executive management, on a directed share issue to named persons in the bank's senior executive management. As a result of the issue, 22,482 new A shares were issued at a subscription price of EUR 8.67 per share. The shares were registered on 27 June 2008.
At the end of 2008, Aktia plc had 659 shareholders. The largest group of shareholders consists of local Aktia and Savings Bank Foundations with a total ownership of 48.2 per cent of shares and 48.5 per cent of all votes in the company. This group also includes the single largest shareholder in Aktia, Helsinki Savings Bank Foundation, with an ownership of 19.0 per cent of shares and 19.0 per cent of votes in the company. Finnish insitutions owned 14.2 per cent of shares and 14.2 per cent of votes and Finnish savings banks 4.7 per cent of shares and 4.7 of votes. The ownership of private persons was 1.7 per cent of shares and 1.5 per cent of votes. The distribution of shares will be somewhat changed when A series shares are given to the earlier owners of Veritas Mutual Non-Life Insurance Company as compensation for the merger. This will probably take place during the first quarter of 2009.
Aktia plc has learnt that there is a shareholders' agreement between shareholders with a combined holding of more than two thirds of the company's shares and votes. The agreement includes an arrangement whereby any party wishing to sell shares in series R, or subscription rights which bring entitlement to such shares, shall offer them to another contracting party first. In accordance with the agreement, the parties strive to represent a unanimous equity interest.
| Tammisaari Aktia Foundation | Oravainen Savings Bank Foundation |
|---|---|
| Pietarsaari District Aktia Foundation | Petolahti Savings Bank Foundation |
| Kokkola District Aktia Foundation | Pirttikylä Aktia Savings Bank Founda tion |
| Kemiönsaari Aktia Foundation | Sipoo Savings Bank Foundation |
| Mustasaari Aktia Foundation | Siuntio Savings Bank Foundation |
| Keski-Uusimaa Aktia Foundation | Tenhola Savings Bank Foundation |
| Sulva-Sundom Aktia Foundation | Vantaa Savings Bank Foundation |
| Vallgrund Aktia Foundation | Turunmaa Savings Bank Foundation |
| Vaasa Aktia Foundation | Itä-Uusimaa Savings Bank Foundation |
Bromarv Savings Bank Foundation Svenska litteratursällskapet
Espoo-Kauniainen Savings Bank Foundation
Helsinki Savings Bank Foundation Ab Kelonia Oy Inkoo Savings Bank Foundation Svenska folkskolans vänner r.f. Karjaa-Pohja Savings Bank Foundation
Kirkkonummi Savings Bank Foundation
Maalahti Aktia Savings Bank Foundation
Porvoo Savings Bank Foundation Life Annuity Institution Hereditas i Finland r.f.
Åbo Akademi Foundation
Hanko Savings Bank Foundation Föreningen Konstsamfundet r.f. Wintros Oy Ab
Samfundet Folkhälsan i svenska Finland r.f.
Kolster Oy Ab
Details of this agreement have been previously published, including on 19 December 1996 – see http:// www.aktia.com/fi/konsernitieto/corporategovernanceosakassopimukset.shtml
At the end of 2008, the members of the Board of Supervisors, Board of Directors, the Managing Director and the Deputy Managing Director of Aktia plc held a total of 1,958,617 series A shares and 978,122 series R shares (both directly and through organisations where authoritative influence is reported), which is equivalent to 4.9 per cent of total shares and votes.
The shares of Aktia plc are not publicly quoted. Listing of Aktia's share on the stock exchange is planned. Aktia's share is subjected to contract based trading with stockbrokers such as Aktia Private Banking, eQ and Privanet and the share is listed on lists for brokered shares kept by these stockbrokers.
Return on capital after taxes should exceed risk-free interest by an average of 3 to 5 per cent during an economic cycle. Capital adequacy must be at least 12 per cent and the proportion of Tier 1 capital ratio should be at least 9 per cent.
Equity investement in Aktia should prove to be a sound investment in the long term. The aim is to distribute 30 to 50 per cent of after-tax profits as dividends, without, however, jeopardising expansion.
At its meeting held on 8 December 2008, the Board of Supervisors of Aktia plc re-elected the current Board in its entirety for 2009. In addition, Marcus H. Borgström was elected as a new Board member. Kaj-Gustaf Bergh will continue as Chairman and Dag Wallgren as Vice Chairman of the Board of Directors.
The composition of Aktia's Board of Directors for the term of office 1 January–31 December 2009 is:
Aktia's Board of Directors appointed Jussi Laitinen, M.Sc. (Econ), as new Managing Director 13 January 2008. He acceded the position 4 April 2008 and Mikael Ingberg continued as Managing Director until then. Since 19 August 2008, Aktia's Deputy CEO Stefan Björkman has acted as CFO of the Aktia Group. He was also head of the Corporate Banking & Treasury segment up until 31 December 2008.
Veritas Mutual Non-Life Insurance Company has been merged with Aktia plc in accordance with the merger plan approved by both company's Annual General Meetings and registered in the Trade Register on 1 January 2009. At the same time, the name of the non-life insurance company was changed to Aktia Non-Life Insurance Ab. In connection with this, 6,800,000 new A shares in Aktia plc were registered, and the company's share capital was thus increased by EUR 13,600,000. The total number of A shares in Aktia plc therefore rose to 46,924,418, increasing the company's total share capital to EUR 93,848,836. The final number of shares issued as compensation for the merger may be less as a result of uncertain shareholding in Veritas Mutual Non-Life Insurance Company. Aktia Non-Life Insurance Ab owned a total of 536,287 shares in Aktia at the time of the merger. Thus the Group has a 0.9%ownerhip of own shares at present.
In accordance with the merger plan, the new shares issued as compensation for the merger will be registered to the shareholders' book-entry accounts as soon as practically possible and probably during the first quarter of 2009.
Aktia Non-Life Insurance's Managing Director Anders Nordman was appointed as a member of Aktia plc's Executive Committee on 1 January 2009 with responsibility for Aktia Bank's Corporate Banking and Aktia Non-Life Insurance.
Aktia Bank plc intends to sell its entire shareholding in Aktia Life Insurance to the Group parent company Aktia plc during the first quarter of 2009.
The real estate agencies and insurance distribution have started cost-saving programs.
The Group's operating profitability during 2009 is expected to remain at a stable level, unless the risk of loan losses and risks in connection with individual investments are increased.
A sustained good credit rating and the strengthened capital base are expected to enable moderate growth and refinancing even in the current market situation. Decisions may be considered on any use of state refinancing guarantees on commercial grounds.
The importance of cost effectiveness will further increase in the current economic and competitive situation.
An escalation of the financial unrest could lead to permanent drops of value in individual investments that are currently deemed to be of good quality. This would have a negative effect on the Group's result. In addition, a requirement for higher returns among investors may lead to a general price decrease in financial assets, which would have a negative effect on Aktia's capital adequacy.
The merger with Aktia Non-Life Insurance does not cause substantial non-recurring items with an effect on the financial result.
Distributable equity in the parent company, Aktia plc, stands at EUR 136,964,210.98, of which profit for the reporting period is EUR 22,600,427.21. The total number of dividend-entitled shares is 66,975,268, also including the new shares issued as compensation for the merger with non-life insurance.
The Board of Directors proposes to the Annual General Meeting of the shareholders of Aktia plc that EUR 0.15 per share be distributed to shareholders, or a total of EUR 10,046,290.20. The record date for the dividends will be 10 April, and the dividends are proposed to be paid out on 9 April 2008.
Aktia Plc The Board of Directors
| (EUR 1,000) | 2004 | 2005 | 2006 | 2006 | 2007 | 2008 |
|---|---|---|---|---|---|---|
| (FAS) | (FAS) | (FAS) | (IFRS) | (IFRS) | (IFRS) | |
| Turnover | ||||||
| - banking business | 159,859 | 186,697 | 234,982 | 233,639 | 327,094 | 154,948 |
| - life insurance business | - | - | - | - | 192,507 | 103,815 |
| + / - elimination items with an effect on the financial result | -54,125 | -62,713 | ||||
| Group | 159,859 | 186,697 | 234,982 | 233,639 | 465,477 | 196,050 |
| Net interest income | 73,928 | 79,698 | 84,238 | 84,134 | 88,877 | 100,953 |
| Net commission income | 30,298 | 32,553 | 40,061 | 40,061 | 47,346 | 41,034 |
| Income from life insurance business | - | - | - | - | 134,936 | 41,906 |
| Other operating income | 8,961 | 20,091 | 13,751 | 12,271 | 7,345 | 19,004 |
| Total operating income | 113,187 | 132,341 | 138,050 | 136,466 | 278,504 | 202,897 |
| Claims paid and change in provisions for insurance business, net |
- | - | - | - | -113,857 | -75,664 |
| Other operating expenses | -75,530 | -75,698 | -83,952 | -83,947 | -98,329 | -120,891 |
| Total operating expenses | -75,530 | -75,698 | -83,952 | -83,947 | -212,186 | -196,554 |
| Impairments and write downs, net | -1,970 | -8,535 | 1,590 | 1,590 | -218 | 34 |
| Share of profit from associated companies | 151 | 1,030 | 711 | 711 | 195 | 230 |
| Operating profit | 35,839 | 49,138 | 56,399 | 54,820 | 66,295 | 6,606 |
| Cost-to-income ratio (banking business) | 0.67 | 0.57 | 0.61 | 0.62 | 0.67 | 0.65 |
| Life insurance group's expense ratio, % | - | - | - | - | 110.0 | 99.0 |
| Profit per share, EUR | 0.40 | 0.67 | 0.76 | 0.74 | 0.87 | 0.09 |
| Equity per share, EUR | 3.74 | 4.39 | 4.55 | 4.49 | 5.39 | 4.85 |
| Dividend per share, EUR | 0.16 | 0.45 | 0.26 | 0.26 | 0.33 | 0.17 |
| Dividend per profit, % | 39.7 | 66.8 | 35.1 | 36.0 | 38.6 | 194.3 |
| Return on equity (ROE), % | 11.2 | 16.3 | 16.8 | 16.8 | 17.9 | 1.8 |
| Capital adequacy, % | 5.10 | 5.48 | 4.77 | 4.97 | 5.04 | 3.62 |
| Capital adequacy ratio, % (banking business) | 14.1 | 15.1 | 13.8 | 13.8 | 15.4 | 13.7 |
| Tier 1 capital ratio, % (banking business) | 9.4 | 9.8 | 9.2 | 9.2 | 10.9 | 9.3 |
| Solvency ratio, % (life insurance business) | - | - | - | - | 18.1 | 8.5 |
| Capital adequacy ratio, % (conglomerate) | - | - | - | - | 138.6 | 135.2 |
| Mutual fund capital | 776,635 | 945,365 | 1,419,800 | 1,419,800 | 2,012,919 | 1,511,752 |
| Borrowing from the public | 2,195,768 | 2,308,567 | 2,552,787 | 2,544,161 | 2,801,378 | 3,098,336 |
| Lending to the public | 2,891,994 | 3,249,522 | 3,760,754 | 3,763,175 | 4,573,746 | 5,425,654 |
| Risk-weighted commitments (banking business) *) | 2,082,360 | 2,285,710 | 2,654,800 | 2,654,800 | 2,875,192 | 3,313,174 |
| Balance sheet total | 4,076,206 | 4,553,469 | 5,490,380 | 5,491,668 | 7,952,813 | 9,540,073 |
| Life insurance business: | ||||||
| - investments at fair value | - | - | - | - | 965,555 | 804,559 |
| - provisions for interest-linked policies | - | - | - | - | 654,316 | 627,592 |
| - provisions for unit-linked policies | - | - | - | - | 200,527 | 149,583 |
| Earnings per share excl. negative goodwill recorded as income, EUR |
0.40 | 0.67 | 0.76 | 0.74 | 0.67 | 0.09 |
| Return on equity (ROE), excl. negative goodwill recorded as | ||||||
| income, % | 11.2 | 16.3 | 16.8 | 16.8 | 13.8 | 1.8 |
| Earnings per share excluding negative goodwill recorded as income | ||||||
| and including the fund at fair value, EUR | 0.40 | 0.81 | 0.61 | 0.59 | 0.39 | -0.22 |
| Average number of shares **) | 55,348,900 | 55,348,900 | 55,506,842 | 55,506,842 | 59,812,898 | 60,167,835 |
| Number of shares at the end of the period | 55,348,900 | 55,348,900 | 55,348,900 | 55,348,900 | 60,152,786 | 60,175,268 |
| Staff (FTEs), average number | 675 | 677 | 741 | 741 | 940 | 1,009 |
*) Risk-weighted commitments 2004-2006 according to Basel 1, whereas risk-weighted commitments 2007-2008 according to Basel 2.
**) Number of shares adjusted for share issue
Banking business turnover + life insurance business turnover +/- elimination items
Banking business turnover= Interest income + dividends + net commission income + net income from financial transactions + net income from investment properties + other operating income
Life insurance business turnover = Premium revenues before deduction of re-insurers' share + net income from investment business + other income
Total operating expenses Total operating income
(Operating costs before the change in capitalised insurance acquisition costs + cost of claims paid) x 100 Total expense loadings
Total expense loadings are a position which, according to actuarial calculations, should cover the costs. The operating costs do not include the re-insurers' provisions. The total expense loadings include all payment positions.
Profit for the year after taxes attributable to the shareholders of Aktia plc Average number of shares over the period (adjusted for share issue)
Equity attributable to the shareholders of Aktia plc Number of shares at the end of the period
Profit for the period – taxes (on annual basis) x 100 Average equity
Equity x 100 Average balance sheet total
Capital base (Tier 1 capital + Tier 2 capital) x 100 Risk-weighted commitments
The capital base is calculated in accordance with regulation 4.3a issued by the Finnish Financial Supervisory Authority.
Tier 1 capital x 100 Risk-weighted commitments
Assets in the balance sheet plus off-balance sheet items including derivatives valued and risk-weighted n accordance with the standard method set out in regulation 4.3 issued by the Finnish Financial Supervision Authority.
The capital requirements for operative risks have been calculated in accordance with regulation 4.3i issued by the Finnish Financial Supervisory Authority.
Solvency capital x 100
Technical provision – 75% of provisions for unit-linked insurance
The technical provision is calculated after deduction of the re-insurers' share.
The total capital base of the conglomerate (equity including sector-specific assets and deductions) x 100 Minimum requirement for the conglomerate's own assets (credit institution + insurance business)
The capital adequacy of the conglomerate is regulated by section 3 of the act governing financial and insurance conglomerates and its related decree.
Aktia plc has announced its intention to list the company's shares on the stock exchange and has undertaken to follow the stock exchange's rules on publication of information. Therefore, the company follows the Finnish Corporate Governance Code for listed companies published by the Securities Market Association regarding disclosure of information (available on the site www.cgfinland.fi).
Aktia complies with the Corporate Governance Code in all other parts except that Aktia's Board of Supervisors elects the Board of Directors and decides on matters that are related to the significant restriction or expansion of operations. The reason for noncompliance is that this decision-making process has been approved by the owners in the currently valid Articles of Association. Separate bodies dealing with audit, nomination and remuneration issues have also not yet been established as board committees. This is due to the fact that the Board of Supervisors includes presiding officers who prepare nomination and other matters to be dealt with by the Board of Supervisors and a Controlling Committee which monitors the work of the Board in closer detail.
The presentation below includes the information about Aktia to be published according to the Corporate Governance Code.
In order to secure correctness in the financial reporting process, both a system-based internal control and duality as well as balancing have been built-in in all important information-registering processes. The Groups internal audit verifies that information is correct through spot checks. On Group level, there is a risk control function independent of business operations which decides on principles, compiles instructions and limits for risk-taking, measures and analyses risk items, alternatively validates the risk analyses made by business units, handles capital allocation and monitors how risk management is realised in the line organisation. The independent risk control funktion reports directly to the Managing Director and does not take part in making business decisions. Internal control and balancing is also included in the financial reporting process. The Executive Committee member responsible for internal and external financial reporting does not participate in making direct business decisions and his incentives are mainly neutral with respect to factors in business operations. Interim reports and annual reports are scrutinised by the Group's external auditors. The independent risk control function does also regularly give reports on the Group's risk items to the executive management and Board of Directors.
The Board of Supervisors is responsible for monitoring the administration of the bank and shall report on the bank's financial statements, the report by the Board of Directors and the audit report to the company's Ordinary Annual General Meeting. The Board of Supervisors makes decisions on matters that are related to the significant restriction or expansion of operations. The Board of Supervisors also appoints the Board of Directors and can advise the Board of Directors in matters that are of special importance.
The Board of Supervisors, which consists of no more than thirty six members, is appointed by the company's Ordinary Annual General Meeting for a term of office of three years. No person who has turned 67 years before the beginning of the term can be elected to serve on the Board of Supervisors.
The Board of Supervisors has the following thirty members:
• Christoffer Grönholm (2009), Chief Secretary, D.Sc. (Pol)
• Peter Heinström (2010), Honorary Consul
The Board of Supervisors includes presiding officers and a Controlling Committee. In 2008, the Board of Supervisors met 4 times, its presiding officers met 5 times and its Controlling Committee met once. Presiding officers are Henry Wiklund (Chairman), Johan Bardy, Christina Gestrin, Henrik Sundbäck, Lorenz Uthardt and Bo-Gustav Wilson. Members of the Controlling Committee of the Board of Supervisors are Henry Wiklund (Chairman), Roger Broo, Agneta Eriksson, Håkan Fagerström, Peter Heinström, Erik Karls, Sture Söderholm, Lars Wallin and Marianne Österberg.
The average meeting attendance of members of the Board of Supervisors in the year 2008 was 83%.
The Board of Directors is responsible for the management of the comapany in accordance with the provisions of the applicable laws, the Articles of Association and the instructions issued by the Board of Supervisors. Apart from assignments given by the Board of Directors to its members in individual cases, Board members do not have individual duties related to the governance of the bank.
The members of the Board of Directors are appointed by the company's Board of Supervisors for one calendar year at a time. No person who has turned 67 years before the beginning of the term can be elected to serve on the Board of Directors.
In 2008, the Board of Directors had the following eight members:
All members of the Board or Directors were re-elected for the year 2009. In addition, Marcus H. Borgström, M.Sc. (Agriculture and Forestry), Honorary Counsellor, was elected as the new ninth member of the Board.
During the year 2008, the Board of Directors held 15 meetings, with an average attendance of 93%. Further, the Board of Directors made 16 individual decisions in matters to be dealt with by the Board.
As per the Board's evaluation, all Board members, as referred to in the Security Market Association's Corporate Governance Code for listed companies, are independent in relation to the company. When surveying the dependent relationships with major shareholders as referred to inte the Corporate Governance Code, it has been noted that the Board members Dag Wallgren and Nina Wilkman are board members of the Savings Bank Foundation in Helsinki, ant that the Board member Lars Hammarén is a board member of the Life Annuity Institution Hereditas.
The Managing Director of the company is Jussi Laitinen, M.Sc. (Econ).
The Managing Director sees to the executive management of the company in accordance with the instructions issued by the Board of Directors.
Transfer of business that was approved by the Annual General Meeting of Aktia Savings Bank plc on 5 June 2008 was implemented on 30 September 2008. The transfer involved transferring the banking business of Aktia Savings Bank plc to Aktia Bank, which was simultaneously converted into a public limited liability company. Aktia Savings Bank plc, which owns 100 % of the shares in Aktia plc, ceased to conduct banking business and has continued as a parent company in the Aktia Group under the name Aktia plc.
Other companies directly included in the Aktia Group are Aktia Non-Life Insurance Ltd (from 1 january 2009) 13 real estate agencies, Vasp-Invest Ab, HSp-Rahoitus Oy, Robur Invest Oy (dormant) as well as associated companies mentioned in note 55.
| Consolidated income statement26 | ||
|---|---|---|
| Consolidated balance sheet27 | ||
| Consolidated off-balance-sheet commitments 28 | ||
| Consolidated cash flow statement28 | ||
| Consolidated statement of changes in equity30 | ||
| Quarterly trends 31 | ||
| Notes to consolidated financial statements32 | ||
| Note 1. Overview of significant consolidated accounting principles 2008 32 |
||
| Note 2. The Group's risk management41 | ||
| Note 3. Group segment-based reporting61 | ||
| Note 4. Businesses acquired 63 | ||
| Notes to the consolidated income statement64 | ||
| Note 5. | Interest income and expenses64 | |
| Note 6. | Dividends64 | |
| Note 7. | Commission income and expenses64 | |
| Note 8. | Premium income from the life insurance business65 |
|
| Note 9. | Net income from investments65 | |
| Note 10. Net income from financial transactions66 | ||
| Note 11. Net income from investment properties68 | ||
| Note 12. Other operating income68 | ||
| Note 13. Insurance claims paid68 | ||
| Note 14. Change in provisions, interest-linked | ||
| policies69 | ||
| Note 15. Net change in provisions, unit-linked | ||
| policies69 | ||
| Note 16. Staff costs69 | ||
| Note 17. Other administration expenses70 | ||
| Note 18. Depreciations of intangible and tangible assets70 |
||
| Note 19. Other operating expenses70 | ||
| Note 20. Impairment and reversal of impairment on | ||
| intangible and tangible assets70 | ||
| Note 21. Taxes70 | ||
| Note 22. Earnings per share 71 |
| consolidated notes 71 | |
|---|---|
| Note 23. Cash and balances with central banks71 | |
| Note 24. Financial assets valuated through income | |
| statement71 | |
| Note 25. Financial assets available for sale71 | |
| Note 26. Loans and other receivables72 | |
| Note 27. Financial assets held until maturity73 | |
| Note 28. Intangible assets74 | |
| Note 29. Tangible assets74 | |
| Note 30. Investments in associated companies76 | |
| Note 31. Other assets total77 | |
| Note 32. Deferred taxes77 | |
| Note 33. Assets and liabilities classified as held for | |
| sale78 | |
| Note 34. Breakdown of maturity of financial assets | |
| by balance sheet item78 | |
| Note 35. The financial assets fair value79 | |
| Note 36. Deposits80 | |
| Note 37. Debt securities issued80 | |
| Note 38. Subordinated liabilities80 | |
| Note 39. Other liabilities to credit institutes81 | |
| Note 40. Other liabilities to the public and public | |
| sector entities81 | |
| Note 41. Technical provisions81 | |
| Note 42. Provisions83 | |
| Note 43. Other liabilities total84 | |
| Note 44. Breakdown by maturity of liabilities by | |
| balance sheet item84 | |
| Note 45. Financial liabilities fair value85 | |
| Note 46. Share capital and unrestricted equity | |
| reserve85 | |
| Note 47. Fund at fair value 86 | |
| Note 48. Distributable assets86 | |
| Note 49. Dividend to shareholders87 | |
| Note 50. Derivative instruments87 | |
| Note 51. Collateral assets and liabilities89 | |
| Note 52. Breakdown of off-balance sheet | |
| commitments90 | |
| Note 53. Rent commitments91 | |
| Note 54. Number of employees 31 december 91 | |
| Note 55. Close relations92 | |
| Note 56. The customer assets being managed95 | |
| Note 57. Events after the end of the financial year95 |
Cash flow statement for the parent company – Aktia Plc............ 9 8
| Notes to the parent company's financial | |||
|---|---|---|---|
| -- | -- | ----------------------------------------- | -- |
statements – Aktia Plc ........................................................................ 9 9
| statement – Aktia Plc 10 1 |
|---|
| Note 102. Interest income and expenses10 1 |
| Note 103. Income from equity instruments10 2 |
| Note 104. Commission income and expenses10 2 |
| Note 105. Net income from securities and currency |
| trading10 2 |
| Note 106. Net income from financial assets |
| available for sale10 3 |
| Note 107. Net income from investment properties10 3 |
| Note 108. Other operating income 10 3 |
| Note 109. Staff costs10 4 |
| Note 110. Other administrative expenses10 4 |
| Note 111. Depreciation and impairment of tangible |
| and intangible assets10 4 |
| Note 112. Other operating expenses10 4 |
| Note 113. Write-downs of credits and other |
| commitments10 4 |
| Note 114. Income by business area10 5 |
| notes to the parent company's accounts – Aktia Plc 10 | 5 |
|---|---|
| Note 116. Bonds that are eligible for refinancing | |
| with central banks10 | 5 |
| Note 117. Claims on credit institutions10 | 5 |
| Note 118. Reveivables from the public and public | |
| sector entities10 | 6 |
| Note 119. Bonds grouped by financial instrument10 | 6 |
| Note 120. Shares and participations10 | 7 |
| Note 121. Intangible assets10 | 7 |
| Note 122. Tangible assets10 | 8 |
| Note 123. Other assets11 | 0 |
| Note 124. Accrued expenses and advance | |
| payments11 | 0 |
| Note 125. Deferred tax receivables11 | 0 |
| Note 126. Breakdown of maturity of assets by | |
| balance sheet item11 | 0 |
| Note 127. Property items in euros and in foreign | |
| currency11 | 1 |
| Note 128. Financial assets fair values11 | 1 |
| Note 129. Total assets by business area11 | 2 |
| Note 130. Breakdown of subordinated claims11 | 2 |
| Note 131. Liabilities to credit institutions11 | 2 |
| Note 132. Liabilities to the public and public sector | |
| entities11 | 2 |
| Note 133. Debt securities issued to the public11 | 2 |
| Note 134. Other liabilities11 | 3 |
| Note 135. Accrued expenses and income received | |
| in advance11 | 3 |
| Note 136. Subordinated liabilities11 | 3 |
| Note 137. Deferred tax liabilities11 | 3 |
| Note 138. Breakdown by maturity of liabilities by | |
| balance sheet item11 | 4 |
| Note 139. Liabilities in euros and in foreign | |
| currency11 | 4 |
| Note 140. Financial liabilities fair value 11 | 5 |
| Note 141. Total liabilities by business area 11 | 5 |
| Note 142. Specification of equity11 | 5 |
| Note 144. Shareholders 31 december 200811 | 6 |
| Note 145. Collateral liabilities11 | 7 |
| Note 146. Pension commitments11 | 7 |
| Note 147. Breakdown of off-balance sheet | |
| commitments11 | 8 |
| Note 148. Rental commitments11 | 8 |
| Note 149. Number of employees 31 december11 | 8 |
| Note 150. The customer assets being managed11 | 8 |
| Note 151. Derivatives11 | 9 |
| Note 152. Companies included in consolidated | |
| accounts12 | 0 |
| Note 153. Close relations12 | 1 |
| (EUR 1,000) | Note | 2008 | 2007 |
|---|---|---|---|
| Interest income | 5 | 386,129 | 272,404 |
| Interest expenses | 5 | -285,176 | -183,526 |
| Net interest income | 100,953 | 88,877 | |
| Dividends | 6 | 1,395 | 1,541 |
| Interest income | 7 | 50,809 | 57,182 |
| Interest expenses | 7 | -9,775 | -9,836 |
| Net commission income | 41,034 | 47,346 | |
| Insurance premium income | 8 | 91,037 | 99,817 |
| Net income from investments | 9 | -49,131 | 35,119 |
| Income from life insurance business | 41,906 | 134,936 | |
| Net income from financial transactions | 10 | -3,359 | 2,257 |
| Net income from investment properties | 11 | 6,010 | 480 |
| Other operating income | 12 | 14,958 | 3,067 |
| Total operating income | 202,897 | 278,504 | |
| Insurance claims paid | 13 | -86,702 | -64,479 |
| Change in provisions, interest-linked policies | 14 | 26,724 | -20,160 |
| Change in provisions, unit-linked policies | 15 | -15,686 | -29,219 |
| Claims paid and change in provisions for insurance business, net | -75,664 | -113,857 | |
| Staff costs | 16 | -60,605 | -57,325 |
| Other administrative expenses | 17 | -38,419 | -35,501 |
| Negative goodwill recorded as income | 4 | - | 12,082 |
| Depreciation of tangible and intangible assets | 18 | -5,682 | -5,121 |
| Other operating expenses | 19 | -16,186 | -12,464 |
| Total operating expenses | -196,554 | -212,186 | |
| Impariment and reversal of impairment on tangible and intangible assets | 20 | 743 | - |
| Write-downs of credits and other commitments | 26 | -708 | -218 |
| Share of profit from associated companies | 230 | 195 | |
| Operating profit | 6,606 | 66,295 | |
| Taxes | 21 | -812 | -13,450 |
| Profit for the reporting period | 5,795 | 52,845 | |
| Attributable to: | |||
| Shareholders in Aktia plc | 5,170 | 51,951 | |
| Minority interest | 624 | 894 | |
| Total | 5,795 | 52,845 | |
| Earnings per share, EUR, attributable to shareholders in Aktia plc | 22 | 0.09 | 0.87 |
There is no dilution effect to earnings per share.
| Assets Cash and balances with central banks 23 506,311 Financial assets valued through income statement 24 19,492 Interest-bearing securities 25 2,808,472 Shares and participations 25 228,856 Financial assets available for sale 3,037,328 Lending to credit institutions 26 100,540 Lending to the public and public sector entities 26 5,425,654 Loans and other receivables 5,526,194 Financial assets held until maturity 27 35,885 Derivative instruments 50 137,014 Investments for unit-linked provisions 148,119 Intangible assets 28 10,406 Tangible assets 29 9,769 Investments in associated undertaking 30 4,497 Accrued income and advance payments 31 79,124 Other assets 31 7,189 Total other assets 86,312 Income tax receivables 2,389 Deferred tax receivables 32 15,597 Tax receivables 17,986 Assets classified as held for sale 33 761 Total assets 9,540,073 Liabilities Financial liabilities valued through income statement 4,586 Liabilities to credit institutions 36 1,916,941 928,614 Liabilities to the public and public sector entities 36 3,098,336 2,801,378 Deposits 5,015,277 3,729,991 Debt securities issued 37 2,118,733 1,980,478 Subordinated liabilities 38 246,851 190,637 Other liabilities to credit institutes 39 502,138 429,124 Other liabilities to the public and public sector entities 40 262,761 Other financial liabilities 3,130,482 Derivative instruments 50 84,725 Provisions for interest-related insurances 41 627,592 Provisions for unit-linked insurances 41 149,583 Provisions 42 936 Accured expenses and income received in advance 43 81,179 Other liabilities 43 87,797 Total other liabilities 168,977 Income tax liability 2,964 Deferred tax liabilities 32 37,970 Tax liabilities 40,934 Liabilities for assets classified as held for sale 33 204 Total liabilities 9,223,298 Equity Restricted equity 54,277 72,211 Unrestricted equity 237,541 Shareholders' share of equity 291,818 324,510 Minority interest's share of equity 24,957 14,499 Equity 316,775 339,009 |
(EUR 1,000) | Note | 2008 | 2007 |
|---|---|---|---|---|
| 235,273 | ||||
| - | ||||
| 2,072,235 | ||||
| 406,484 | ||||
| 2,478,719 | ||||
| 183,265 | ||||
| 4,573,746 | ||||
| 4,757,011 | ||||
| 45,840 | ||||
| 35,648 | ||||
| 203,134 | ||||
| 7,426 | ||||
| 111,184 | ||||
| 3,556 | ||||
| 52,191 | ||||
| 13,236 | ||||
| 65,427 | ||||
| 3,738 | ||||
| 5,857 | ||||
| 9,594 | ||||
| - | ||||
| 7,952,813 | ||||
| - | ||||
| 140,653 | ||||
| 2,740,892 | ||||
| 35,181 | ||||
| 654,316 | ||||
| 200,527 | ||||
| 259 | ||||
| 67,205 | ||||
| 130,920 | ||||
| 198,125 | ||||
| 8,602 | ||||
| 45,911 | ||||
| 54,513 | ||||
| - | ||||
| 7,613,804 | ||||
| 252,298 | ||||
| Total liabilities and equity | 9,540,073 | 7,952,813 |
27
| (EUR 1,000) | Note | 2008 | 2007 |
|---|---|---|---|
| Off-balance sheet commitments | 52 | ||
| Guarantees | 54,843 | 57,232 | |
| Other commitments | 7,450 | 27,060 | |
| Commitments provided to a third party on behalf of the customers | 62,293 | 84,292 | |
| Unused credit arrangements | 454,489 | 418,254 | |
| Other commitments | 12,050 | 127,064 | |
| Irrevocable commitments given in favour of customers | 466,539 | 545,318 | |
| Total off-balance sheet commitments | 528,833 | 629,610 |
| (EUR 1,000) | 2008 | 2007 |
|---|---|---|
| Cash flow from operating activities | ||
| Operating profit | 6,606 | 66,295 |
| Adjustment items not included in cash flow for the period: | ||
| Impairment of financial receivables | 39,203 | - |
| Write-downs of credits and other commitments | 708 | 243 |
| Change in fair values | 1,953 | 1,136 |
| Depreciation and impairment of intangible and tangible assets | 5,955 | 5,171 |
| Share of profit from associated companies | -167 | -195 |
| Sales gains and losses from intangible and tangible assets | -12,458 | -463 |
| Negative goodwill recorded as income | - | -12,082 |
| Other adjustments | -985 | -80 |
| Paid income taxes | -16,129 | -20,055 |
| Cash flow from operating activities before change in operating receivables and liabilities | 24,687 | 39,969 |
| Increase (-) or decrease (+) in receivables from operating activities | -1,331,029 | -1,592,650 |
| Financial assets valued through income statement | 2,909 | 7,777 |
| Financial assets available for sale | -663,227 | -635,390 |
| Assets of the insurance business | 64,503 | 67,426 |
| Loans and other receivables | -769,344 | -956,565 |
| Investments for unit-linked provisions | 55,015 | -37,515 |
| Other assets | -20,885 | -38,382 |
| Increase (+) or decrease (-) in liabilities from operating activities | 1,514,973 | 1,518,791 |
| Financial liabilities valued through income statement | 4,586 | - |
| Deposits | 1,268,355 | 389,535 |
| Debt securities issued | 119,326 | 659,221 |
| Other financial liabilities | 195,122 | 355,814 |
| Provision for insurance contracts | -77,667 | 51,074 |
| Other liabilities | 5,251 | 63,147 |
| Cash flow from investing activities | ||
|---|---|---|
| Financial assets held until maturity, increase | 10,000 | 2,000 |
| Investments in group companies and associated undertakings *) | -28,219 | -30,008 |
| Investment in tangible and intangible assets | -24,377 | -13,416 |
| Disposal of tangible and intangible assets | 66,313 | 1,479 |
| Real Estate Mortgage Bank's issue to minority | 3,803 | 10,524 |
| Total cash flow from investing activities | 27,519 | -29,421 |
| Cash flow from financing activities | ||
| Subordinated liabilities, increase | 113,508 | 59,089 |
| Subordinated liabilities, decrease | -58,218 | -61,943 |
| Increase in share capital | 45 | 3,608 |
| Increase in unrestricted equity reserve | 150 | 12,254 |
| Paid dividends | -20,051 | -25,415 |
| Total cash flow from financing activities | 35,434 | -12,407 |
| Change in cash and cash equivalents | 271,585 | -75,717 |
| Cash and cash equivalents at the beginning of the year | 240,766 | 316,484 |
| Cash and cash equivalents at the end of the year | 512,351 | 240,766 |
| Cash and cash equivalents in the cash flow statement consist of the following items: | ||
| Cash in hand | 9,970 | 10,866 |
| Insurance operation's cash and bank | 3,708 | 6,864 |
| Bank of Finland current account | 492,632 | 217,543 |
| Repayable on demand claims on credit institutes | 6,040 | 5,493 |
| Total | 512,351 | 240,766 |
*) Figures for 2008 include additional purchase price for the acquisition of Aktia Life Insurance
| g | q | y | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (EUR 1,000) | Share capital |
Legal reserve |
Share premium account |
Other restricted equity |
Fund at fair value |
Fund for share-based payments |
Unrestricted equity reserve |
Retained earnings |
Shareholders' share of equity |
Minority interest's share of equity |
Total equity |
| Equity at 1 January 2007 | 70,596 | 8,079 | 1,893 | 0 | -1,697 | 0 | 0 | 169,919 | 248,790 | 1,090 | 249,880 |
| Change in valuation of fair value for financial assets | |||||||||||
| available for sale | -21,358 | -21,358 | -21,358 | ||||||||
| Change in valuation of fair value for cash flow | |||||||||||
| Transferred to the income statement for hedging |
-100 | -100 | -100 | ||||||||
| financial assets available for sale | -889 | -889 | -889 | ||||||||
| Transferred to the income statement for | |||||||||||
| cash flow hedging | 0 | 0 | |||||||||
| Share of deferred taxes direct to equity | 6,079 | 6,079 | 6,079 | ||||||||
| Share issue expenses | -530 | -530 | -530 | ||||||||
| Income and expenses recognised directly in equity |
- | - | - | - | -16,268 | - | -530 | - | -16,797 | - | -16,797 |
| Profit for the reporting period | 51,951 | 51,951 | 894 | 52,845 | |||||||
| Total income and expenses | - | - | - | - | -16,268 | - | -530 | 51,951 | 35,154 | 894 | 36,048 |
| Share issue | 9,608 | 45,783 | 55,391 | 55,391 | |||||||
| Dividends to shareholders | -14,825 | -14,825 | -14,825 | ||||||||
| Other change in equity | 0 | 12,515 | 12,515 | ||||||||
| Equity at 1 January 2008 | 80,204 | 8,079 | 1,893 | 0 | -17,965 | 0 | 45,254 | 207,045 | 324,510 | 14,499 | 339,009 |
| Change in valuation of fair value for | |||||||||||
| financial assets | |||||||||||
| available for sale | -77,327 | -77,327 | -77,327 | ||||||||
| Change in valuation of fair value for cash flow |
|||||||||||
| hedging | 18,339 | 18,339 | 18,339 | ||||||||
| Transferred to the income statement for | |||||||||||
| financial assets available for sale | 34,314 | 34,314 | 34,314 | ||||||||
| Transferred to the income statement for | |||||||||||
| cash flow hedging | -379 | -379 | -379 | ||||||||
| Share of deferred taxes direct to equity | 6,653 | 6,653 | 6,653 | ||||||||
| Income and expenses recognised directly in Share issue expenses |
0 | 0 | |||||||||
| equity | - | - | - | - | -18,400 | - | - | - | -18,400 | - | -18,400 |
| Profit for the reporting period | 5,170 | 5,170 | 624 | 5,795 | |||||||
| Total income and expenses | - | - | - | - | -18,400 | - | - | 5,170 | -13,229 | 624 | -12,605 |
| Share issue | 45 | 150 | 195 | 195 | |||||||
| Dividends to shareholders | -20,051 | -20,051 | -20,051 | ||||||||
| Other change in equity | 317 317 |
103 103 |
-26 | 394 | 9,833 | 10,227 | |||||
| Equity at 31 December 2008 | 80,249 | 8,079 | 1,893 | -36,365 | 45,404 | 192,138 | 291,818 | 24,957 | 316,775 |
Of the change in shareholders' equity 8,969 (12,456 in 2007) thousand is applicable to minority interest for capitalisation of Aktia Real Estate Mortgage Bank according to owners agreement.
| (EUR 1,000) | Q4 2008 | Q3 2008 | Q2 2008 | Q1 2008 | Q4 2007 |
|---|---|---|---|---|---|
| Net interest income | 26,655 | 25,179 | 25,265 | 23,854 | 23,760 |
| Dividends | 53 | 9 | 1,275 | 57 | 375 |
| Net commission income | 9,303 | 9,362 | 11,763 | 10,607 | 12,636 |
| Income from life insurance business | -37,981 | 17,243 | 30,428 | 32,215 | 42,819 |
| Net income from financial transactions | -3,172 | -3,043 | 1,681 | 1,174 | -362 |
| Net income from investment properties | 3,073 | 1,316 | 356 | 1,265 | 62 |
| Other operating income | 7,994 | 3,049 | 2,107 | 1,809 | 1,009 |
| Total operating income | 5,924 | 53,116 | 72,875 | 70,982 | 80,298 |
| Claims paid and change in provisions for insurance business, net | -4,947 | -19,230 | -25,309 | -26,178 | -40,874 |
| Staff costs | -15,207 | -12,703 | -16,729 | -15,965 | -15,748 |
| Other administrative expenses | -10,128 | -8,801 | -10,236 | -9,254 | -10,249 |
| Negative goodwill recorded as income | - | - | - | - | -1,921 |
| Depreciation of tangible and intangible assets | -1,276 | -1,604 | -1,456 | -1,346 | -1,205 |
| Other operating expenses | -4,385 | -3,633 | -4,432 | -3,736 | -3,156 |
| Total operating expenses | -35,943 | -45,970 | -58,162 | -56,479 | -73,154 |
| Impairment and reversal of impairment on tangible and intangible assets | -260 | 250 | 752 | - | - |
| Write-downs of credits and other commitments | -438 | -267 | 45 | -48 | -213 |
| Share of profit from associated companies | 6 | 299 | 143 | -218 | -290 |
| Operating profit | -30,711 | 7,428 | 15,653 | 14,237 | 6,640 |
The consolidated financial statements for the financial year ending 31 December 2008 were approved by the Board of Directors on 27 February 2009, and will be adopted by the Annual General Meeting on 30 March 2009. The annual report will be published on 16 March 2009.
The Group's parent company is Aktia plc, domiciled in Helsinki. A copy of the Group's financial statement is available at Aktia plc, Mannerheimintie 14, 00100 Helsinki, Finland.
Aktia's consolidated financial statement is prepared in accordance with the EU-approved International Financial Reporting Standards (IFRS), as adopted by the EU. In preparing the notes to the consolidated accounts, the applicable Finnish accounting and corporate legislation and official regulations have also been taken into account. The consolidated accounts are presented in thousands of euros, unless otherwise indicated. The consolidated accounts have been prepared in accordance with original acquisition values, unless otherwise indicated in the accounting principles.
Aktia has not applied the concessions which allowed retroactive reclassification of financial assets as at 1 July 2008 (Reclassification Amendments to IAS 39 and IFRS 7).
This standard has been revised in order to provide better information for analysing and comparing companies. The Group will report in accordance with the revised IAS 1 for the financial year beginning 1 January 2009. This may mean that the Group reports both an income statement and an expanded income statement.
This interpretation deals with reporting on customer loyalty programmes. The application of this standard does not have any significant impact on the Group's result or financial position. The Group has one bonus programme, Aktia Kortbonus, and the Group will apply this standard for the financial year beginning 1 January 2009.
The Group currently has no borrowing costs for longterm investments. The Group will apply this standard for the financial year beginning 1 January 2009.
Business combinations from 1 January 2010 onwards will be reported in accordance with the revised standard IFRS 3. Company acquisitions from 1 January 2010 onwards involve greater volatility in the income statement as well as in shareholders' equity.
This revised standard deals with accounting principles in relation to minority interest. The application of this standard does not have any significant impact on the Group's results or financial position.
The consolidated financial statements cover the parent company, Aktia plc, and all the subsidiaries over which the parent company has authority. The Group is deemed to have authoritative influence if its shareholding brings entitlement to more than 50% of the votes (including potential votes), or if it is otherwise entitled to influence the company's financial position and operating strategies in order to gain benefit from its operations. Subsidiaries are consolidated from the acquisition date until the date of disposal. Subsidiaries acquired before 1 January 2004 are consolidated in accordance with the originally applied consolidation principles, with reference to exceptions in IFRS 1 the first time IFRS is applied. Subsidiaries acquired after 1 January 2004 are consolidated in accordance with IFRS 3 Business Combinations.
The consolidated accounts cover those subsidiaries in which the company directly or indirectly owns over 50% of the votes, or otherwise has authority (over 50% of the shares with voting rights). The acquisition method has been applied to acquisition eliminations. The acquisition method involves the assets, liabilities, contingent assets and contingent liabilities of the acquired company at the time of acquisition being assessed at fair value. Following assessment at fair value, either goodwill or negative goodwill arises. If goodwill arises, this is examined at least once every reporting period. If negative goodwill arises, this is charged to income in total at the time of acquisition.
The consolidated accounts cover those associated companies in which the Group owns 20-50% of the votes or otherwise has considerable influence. On consolidating associated companies, the equity method has been applied. The equity method involves the Group's share of the associated company's equity and results increasing or decreasing the value of the shares reported on the balance sheet date.
All internal business transactions, receivables, liabilities, dividends and profits are eliminated within the consolidated accounts.
Minority interest is shown separately under consolidated shareholders' equity. The share of minority interest which cannot be reported as shareholders' equity is reported as other liabilities.
The Group follows IFRS 8 Operating Segments for segment reporting. The Group's operations are divided into four business areas. The business areas are Retail Banking, Corporate Banking & Treasury, Asset Management and Life Insurance. The segments will be divided up so that business areas with similar business operations will be included in the same segment. The current Retail Banking and Corporate Banking & Treasury segments will therefore be combined to form the Banking Business segment with effect from 1 January 2009. From 1 January 2009 onwards, Veritas Non-Life Insurance will also be part of the Group and will then form a separate segment, Non-Life Insurance. Each business area has its own manager with responsibility for the business's profits.
The Retail Banking includes Aktia Bank plc's branch office operations, mortgage loans arranged by Aktia via Aktia Real Estate Mortgage Bank plc, Aktia Kort & Finans Ab and the real estate agencies.
Corporate Banking & Treasury includes Aktia Bank plc's Corporate Banking and Treasury and the subsidiaries Aktia Real Estate Mortgage Bank plc (with the exception of Aktia's own loans arranged via the mortgage bank) and Aktia Corporate Finance Ab.
Asset Management includes Aktia Bank plc's private bank in Helsinki, Aktia Bank plc's institutional sales and the subsidiaries Aktia Fund Management Ltd and Aktia Asset Management Ab.
Life Insurance includes Aktia Life Insurance.
Miscellaneous includes Aktia plc, Aktia Bank plc's real estate operations and certain administrative functions which are not allocated to the different business areas. This business area also includes the subsidiary Vasp-Invest Ab.
Net interest income in the various segments, particularly in retail banking, includes the margins on volumes of borrowing and lending. Reference interest rates for borrowing and lending and the interest rate risk that arises because of new pricing being out of step are transferred to Treasury in accordance with the Group's internal pricing. Treasury assumes responsibility for the Group's interest rate risk, liquidity and hedging of the balance sheet for which management has issued authority. The costs of central support functions are allocated to the business areas in accordance with various allocation rules.
Until further notice, Aktia plc and Aktia Bank plc are not allocating equity to the various business areas. Miscellaneous consists of any items in the income statement and balance sheet which are not allocated to the various business areas.
Internal Group transactions between legal entities are eliminated and reported within each business area if the legal entities are in the same business area. Internal Group transactions between legal entities in different segments are included in the eliminations.
The share of profits in associated companies, acquisition eliminations, the minority interest's share and other group adjustments are included in eliminations
Pricing between the segments is based on market prices.
Assets and liabilities denominated in foreign currencies outside the Eurozone have been converted into euros using the European Central Bank's average rate of exchange on the day the accounts were closed. The exchange rate differences that have arisen on valuation have been reported in the income statement as net income from currency trading. The exchange rate differences that have arisen from the insurance business are included under Net income from investments.
Interest income and expenses are allocated over the lifetime of the agreement by using the effective interest rate method. This method recognises income and expenses from the instrument evenly in proportion to the amounts outstanding over the period until maturity. Interest income and expenses attributable to Financial assets held for trading are reported in the income statement under Net income from financial transactions.
When a financial asset is written down due to a reduction in value, the original effective interest rate is used thereafter as interest income.
Dividends paid on shares and participations are reported as income for the reporting period during which the right to receive payment is noted.
The basic principle for commission income and commission expenses is that they are reported in accordance with the accrual basis of accounting. The cost of acquiring new insurance policies or renewing existing policies is dealt with within the insurance business as commission expenses, and is included in other administrative expenses.
Premium income received is reported in the income statement. Premiums are reported under premium income depending on the line of insurance in accordance with the debiting or payment principle. A premium receivable is reported only if there is insurance coverage on the balance sheet date, but so that the portion of the insurance premiums which according to experience remains unpaid is deducted from premium income.
Unit-linked agreements are reported in accordance with national accounting rules, based on the assessment of the insurance risk included in the agreement or based on the policyholder's entitlement to transfer the return from the unit-linked savings to guaranteed interest with a discretionary element.
Claims paid is recognised as claims incurred in the income statement.
Income from derivatives for hedge accounting issued to other savings banks and local co-operative banks has, from the second quarter of 2008 onwards, been entered directly. This income was previously allocated in line with the derivative instruments' maturity. The total effect for 2008 of this change is EUR 1.3 million, of which EUR 1.2 million is attributable to 2007 and previous years.
Tangible and intangible assets are subject to linear planned depreciation at acquisition value, according to the financial lifetime of the assets. As a rule, the residual value of these tangible and intangible assets is assumed to be zero. There is no depreciation of land. The estimated financial lifetimes for each asset category are as follows:
| Buildings | 40 years |
|---|---|
| Basic repairs to buildings | 5–10 years |
| Other tangible assets | 3–5 years |
| Intangible assets (IT licenses) | 3–5 years |
| Intangible assets (customer stock | |
| acquired, Aktia Life Insurance) | 2 years |
If fixed assets are classified according to IFRS 5 Noncurrent Assets Held for Sale and Discontinued Operations, depreciation ceases.
The Group reports all pension plans as defined-contribution plans. For defined-contribution pension plans, the Group makes fixed payments to pension insurance companies. After this, the Group has no legal or actual obligation to make further payments in case the pension insurance company does not have sufficient assets to pay the employees' pensions for current or preceding periods. According to the Employees' Pensions Act, basic insurance coverage is the most important defined-contribution pension plan. Independent pension insurance companies are responsible for this form of pension protection within the Group companies. The pension insurance premiums for those arrangements which are classified as defined-contribution plans have been allocated to correspond to performance pay in the financial statements.
The Group also has voluntary defined-benefit plans. For defined-benefit plans, the Group still has obligations after payments have been made for the accounting period, and bears the actuarial risk and/or the investment risk. The Group's defined-benefit plans are internal group plans, and are included in the insurance business' provisions. These plans have no significant impact on the Group's result or financial position.
Share-based payments relate to the transfer of equity instruments which are paid to employees as remuneration for work carried out. Within the Group, there is a three-year incentive agreement with key personnel in management positions whereby certain targets must be met in order for the incentives to be issued in full. The Group continuously evaluates the likely outcome of this incentive agreement, booking a periodised increase in shareholders' equity on an ongoing basis (fund for share-based payments). The change in shareholders' equity is entered in the income statement under Staff costs.
Taxes in the income statement consist of direct taxes for the year and previous years and deferred taxes. The tax cost is reported in the income statement, except where this relates to items which are reported directly against shareholders' equity, where the tax effect is also reported as part of shareholders' equity. Income taxes are reported on the basis of estimated taxable income for the year. Deferred tax is recognised for differences between the book value of assets and liabilities, compared with their taxation value. A deferred tax asset is reported where it is likely that future taxable income will arise against which the temporary difference can be utilised.
Debt certificates (debt securities), claims on credit institutions, claims on the public and public sector entities, shares and participations are entered under financial assets. For these financial assets, Aktia applies the IFRS rules which entered into force on 1 January 2005 whereby financial assets are divided into four valuation categories.
Financial assets valued at fair value through the income statement include financial assets which are held for trading. This category includes certificates of claim and other publicly-quoted Finnish and foreign securities that are actively traded in and that have been acquired for the short term with the intent to earn revenue. They have been entered at actual value with changes in value being currently entered in the income statement. From the second quarter of 2008, structured bonds, investments with embedded derivatives, are classified as financial assets held for trading, which means that changes in value is recognised directly in the income statement.
The insurance business classifies investments providing cover for unit-linked agreements as financial assets valued at fair value through the income statement, and these are reported separately in the balance sheet.
Debt securities, shares and participations that have neither been held for active trading nor retained until maturity are classified as Financial assets available for sale. The unrealised value change is recognised in equity under Fund at fair value with deduction for deferred tax until sold or written down. When sold or written down, the accumulated unrealised profit or loss is transferred to the income statement and included under the item Net income from financial assets available for sale. The insurance business recognises the above gains and losses under Net income from investments.
Debt certificates to be held until maturity are entered under Financial assets held until maturity. These securities are entered at accrued acquisition cost. If there is objective evidence to suggest that full repayment will not be received on such a security at the end of the accounting period, the difference compared with the acquisition price is entered as an expense. The difference between the acquisition price and the nominal value has been allocated as interest income or the loss thereof.
If securities classified as Financial assets held until maturity are sold prior to maturity, these securities are reclassified as Financial assets available for sale. The reason for this reclassification is that the intention or ability in relation to the investments (a significant amount) changes so that the conditions for the use of this category are no longer met. After any such reclassification, these securities are reported under Financial assets available for sale for at least two consecutive reporting periods.
Claims on credit institutions and claims on the public and public sector entities are reported under this category. These receivables are entered at accrued acquisition value.
Fair value for listed shares and financial market instruments is the latest listed purchase price at the end of the accounting period. For those instruments for which there is no listed buying rate at the end of the accounting period, the latest listed purchase price is used. If the market for a financial instrument is inactive, the fair value is established through the use of valuation techniques used among market players for pricing instruments.
These valuation techniques incorporate factors taken into consideration by market players when setting prices, and are based on generally-accepted financial methods for pricing financial instruments.
The impairment of financial assets available for sale is recognised through the income statement if the financial position of the company in which the investment has been made has deteriorated significantly. The criteria are as follows:
If any of the above criteria are met, an impairment is recognised through the income statement. The impairment reported is the difference between the market value and the acquisition value at the time of reporting. If no market value is available, or if there are specific reasons for assuming that the market value does not represent the fair value of the security, or if the Group holds a controlling stake in the company, a decision is made on reporting an impairment in accordance with a separate assessment made by the Board of Directors.
For shares and share fund investments, an impairment is also recognised if there has been a significant or long-term drop in the value of the investment. A significant drop has occurred if the difference between the average rate for ten banking days around the time of valuation (five banking days before and five banking days after) and the acquisition value exceeds certain volatility-based limits.
Volatility is quantified using betas which measure the riskiness of the shares in relation to the market (a comparison index). For share funds, this index is the same as the share fund's ascribed comparison index. For individual shares, the index is a combination of an industry index and a geographic exposure index. The weighting for these two indices is calculated separately for each share by applying the change in value for historic data and maximising the share-index correlation. The same method is used for the Group's Value-at-Risk calculation.
A long-term drop has occurred if the average rate for ten banking days around the time of valuation (five banking days before and five banking days after) has been continuously below the acquisition value for 18 months.
If any of the above criteria are met, an impairment is recognised through the income statement. The impairment reported is the difference between the market value at the time of reporting and the acquisition value.
When acquiring or selling financial assets, these are entered in accordance with the trade date.
Debt securities are included in all three categories (Financial assets valued at fair value through the income statement, Financial assets available for sale and Financial assets held until maturity), and these are classified based on their purpose on acquisition. The classification is not subsequently changed.
Other financial liabilities are included in the balance sheet at their acquisition value on entering into the agreement, and subsequently at their accrued acquisition value. Issued debts are deemed to belong to the bank's core operations, and are included in operating activities, whilst subordinated liabilities are deemed to belong to financing activities.
All derivative instruments are reported in the balance sheet and are valued at fair value. Derivatives with a positive fair value are reported as assets under Derivative instruments. Derivatives with a negative fair value are reported as liabilities under Derivative instruments.
IAS 39 includes principles and rules for reporting hedge instruments and underlying hedge items, known as hedge accounting. Through the introduction of IAS 39, all derivatives are valued at fair value. In accordance with the IFRS rules, Aktia has documented hedge accounting either as fair value hedges or cash flow hedges. Aktia applies the "carve out" version of IAS 39 as approved by the European Union, which also allows hedge accounting to be applied to Balance items repayable on demand and portfolio hedging of both assets and liabilities. The aim is to neutralise the potential change in fair value.
Aktia's hedge accounting policy has been drawn up in order to comply with the requirements detailed in IAS 39. The hedging relationship between the hedging instrument and the hedged item, along with the risk management aim and the strategy, are documented when hedging. In order to apply hedge accounting, the hedge must be highly efficient. A hedge is deemed to be highly efficient if, at the time of hedging and throughout the entire hedging period, it can be expected that changes in the fair value of the hedge item will be significantly neutralised by changes in the fair value of the hedging instrument. The outcome should be within range of 80-125%. When subsequently assessing the efficiency of the hedging, Aktia values the hedging instrument at fair value and compares the change in this value with the change in the fair value of the hedged item. The efficiency is measured on a cumulative basis.
If the hedging relationship fails to meet the requirements, the hedge accounting ceases. The change in the unrealised value of the derivative is reported at fair value under net interest income in the income statement from the most recent occasion when the hedging was deemed to be efficient.
Fair value hedging is applied for derivatives which are used in order to hedge changes in fair value for a reported asset or liability which is attributable to a specific risk. The risk of changes in fair value for assets and liabilities reported by Aktia relates primarily to loans, securities and fixed-interest borrowing, giving rise to interest rate risk. Changes in the fair value of derivatives are, like changes in the fair value of the hedged item, reported separately in the income statement under Net income from financial transactions. If the hedging is efficient, both changes in fair value mostly cancel each other out, which means that the net result is virtually zero. Interest rate swaps and forward rate agreements are used as hedging instruments.
Cash flow hedging is applied in order to hedge future interest streams, such as future interest payments on assets or liabilities with variable interest rate. The efficient element of the change in fair value is reported in the Fund at fair value under shareholders' equity, with the inefficient element being reported in the income statement under Net income from financial transactions. The accumulated change in fair value is transferred from shareholders' equity, and is reported in the income statement during the same period as the hedged cash flows have an impact on the income statement. Interest rate swaps, forward rate agreements and interest rate options are used as hedging instruments. In terms of interest rate options, the accounting principles from 2007 have changed in relation to reporting the time value. The change in time value for interest rate options has been reported through the income statement from the 2008 financial statement onwards. This has had a positive effect on earnings for 2008 of EUR 0.4 million.
Other derivative instruments consist primarily of interest-rate derivatives issued to local banks, which are hedged back-to-back with third parties. These interestrate derivatives are valued at fair value, and the change in result is recognised under Net income from financial transactions. The counterparty risk arising in these derivative agreements has been limited via mutual pledging agreements with local banks, and individual security arrangements are made with third parties in accordance with the terms and conditions of ISDA/ CSA (Credit Support Annex).
Derivatives which are not classified as hedging instruments and which are not efficient as such are classified as derivatives valued at fair value through the income statement.
Financial derivatives which are valued at fair value through the income statement are initially valued at fair value, but the transaction costs are reported directly in the income statement and are revalued thereafter at fair value. Derivatives are entered in the balance sheet as assets when the fair value is positive, and as liabilities when the fair value is negative. Changes in fair value together with profits and losses realised are reported in the income statement. The insurance business' derivatives which are valued at fair value through the income statement are included under Net income from investments, interest-linked policies, while the banking business' derivatives are included under Net income from financial transactions.
Repurchase agreements relate to agreements where the parties have reached an agreement on selling securities and the subsequent repurchase of corresponding assets at a set price. For repurchase agreements, sold securities are still reported in the balance sheet, and the payment received is reported as a financial liability. Sold securities are also reported as collateral pledged. The payment made for acquired securities is reported as lending to the vendor.
Cash and balances with central banks consist of cash, bank balances, a current account held with the Bank of Finland and short-term deposits with a duration of less than three months. Loans to credit institutions repayable on demand are included in Loans and other receivables. Cash and cash equivalents in the cash flow statement include cash and balances with central banks, and loans to credit institutions repayable on demand.
The Group's real estate property and shares and participations in real estate corporations have been divided up into commercial properties and investment properties according to how they are used. Commercial properties are properties used by the Group. Investment properties are properties which are held in order to generate rental income and to obtain an increase in the value of capital. If only part of the premises is used by the Group, the division has been made according to the square metres reserved for their respective purposes. Both commercial properties and investment properties have been included at their acquisition price. Buildings are depreciated linearly according to their financial lifetime over 40 years. Land is not depreciated.
Estimation of fair value for investment properties was carried out by external property valuators using the cash flow method or through an internal valuation based on the rental income that could be earned at market rates. If the probable assignment value of the property or shares ans participations is essentially or permanently lower than the acquisition price, a writedown is entered as expense in the income statement. If there is a likely objective indication that there will be a need for a write-down, the value of the asset is examined.
A fixed asset, or a disposal group, is reported under Assets classified as held for sale if the asset is available for immediate sale and where only such conditions as are normal and customary when selling such assets are taken into consideration. It must also be extremely likely that a sale will take place. In order for a sale to be extremely likely, a decision must have been taken by the Executive Committee and the Board of Directors on a plan for selling the asset, and active work must have been started to find a buyer and accomplish the plan.
A provision is reported where the Group has an existing legal or informal obligation due to an event which has occurred, and it is likely that the obligation will be realised and the Group can reliably estimate the amount of the obligation. If it is possible to obtain remuneration from a third party for part of the obligation, this remuneration is reported as a separate asset item when it is certain in practice that remuneration will be received. The provisions are assessed each balance sheet date and are adjusted if appropriate. The provision is valued at the currently value of the amount which is expected to be required in order to regulate the obligation.
The leasing of assets where the financial risks and advantages associated with the ownership of an object are essentially transferred from the Group to the lessee is classified as finance lease, and the assets are entered in the lessee's balance sheet. At the beginning of the leasing period, a receivable on the lessee arises in the Group which is repaid in line with the length of the leasing period. Each leasing payment is allocated between interest and repayment of the receivable. The interest income is allocated over the leasing period, so that every reporting period is allocated an amount which corresponds to a fixed interest rate for the receivable reported for each reporting period.
Where a lessor in all significant respects bears the financial risks and advantages associated with the ownership of an object, this is classified as operating lease and the assets are entered in the lessor's balance sheet. Leasing rents on operating lease agreements are reported in the income statement as rental expenses.
Insurance agreements are reported in accordance with IFRS 4, and are classified either as insurance agreements or investment agreements. Insurance agreements are agreements whereby significant insurance risks are transferred from the policyholder to the insurer. If the risk transferred under the agreement has the characteristics of a financing risk and not a significant insurance risk, the agreement is classified as an investment agreement. For investment agreements with the right to discretionary benefits (customer compensation) or which can be changed to such agreements, the opportunity in IFRS 4 to report these as insurance agreements is applied. Capitalisation agreements do not involve any insurance risk, so they are classified as investment agreements.
In unit-linked agreements, the policyholder chooses the investment objects connected with the agreement.
Reinsurance agreements are agreements which meet the requirements for insurance agreements in accordance with IFRS 4. Reinsurance agreements are agreements in accordance with which the insurance business can receive remuneration from another insurance company if it is liable to pay remuneration itself as a result of insurance agreements entered into. Premiums paid to reinsurers or premiums received for reinsurance are reported under premium income and costs attributable to the remuneration under claims paid. Remuneration which will be received through reinsurance agreements is reported in the balance sheet under assets. Unpaid premiums to reinsurers are reported in the balance sheet under liabilities. Receivables and liabilities which relate to reinsurance agreements are valued consistently with receivables and liabilities attributable to reinsured insurance agreements.
Liabilities arising from insurance agreements are dealt with in the first phase of the IFRS 4 standard in accordance with previous national accounting rules, with the exception of reporting the equalisation provision and those agreements which are classified as investment agreements. The equalisation provision, which is set aside for equalising annual deviations in claims incurred, may not be reported as liabilities in accordance with IFRS. In the IFRS consolidated financial statements, the equalisation provision has been transferred to shareholders' equity and deferred tax liabilities. The annual change in the equalisation provision is reported as share in profits and change in deferred tax.
Liabilities arising from capitalisation agreements are not reported as technical provisions, but are reported under financial liabilities.
In the financial statements, the term provision is used synonymously with insurance agreement and investment agreement liabilities. The provision for insurance agreements with a discretionary element is called provision for interest-linked policies. The provision for unit-linked policies consists of the provision for fundlinked insurance agreements.
Provisions are calculated partly by discounting future benefits at current value with deductions for future premiums and partly so that paid premiums are credited with computation interest rates and different compensations and debited with costs and risk premiums. When making these calculations, the assumptions for technical rate of interest, mortality and illness are used, along with factors mentioned in the calculation basis for the product in question. For certain products a more secure interest rate and mortality assumption is used in accordance with the basis established for the financial statements. Provisions for known and unknown damage are made in potential compensation claims. Established customer compensation is included in total in the provisions.
For unit-linked policies, the provision is calculated on the basis of the market value for those funds which are associated with the insurance policy.
The insurance amount for risk insurance which exceed the company's excess are reinsured.
An assessment is carried out at the balance sheet date of whether the provision included in the balance sheet is sufficient. If this assessment shows that the provision included is insufficient, the provision is increased.
In accordance with chapter 13, § 3 of the Insurance Companies Act, the equity principle should be followed when it comes to insurance for policies which, according to the insurance agreement, bring entitlement to additional benefits.
The insurance business strives to ensure that the sum of the technical rate of interest and the annually set customer compensation on the interest-linked pension insurance savings is higher than the return on the Finnish state ten-year bond, and on the interest-linked saving and investment insurance savings is at the same level as the Finnish state five-year bond. The solvency of the company should also be kept at a level which allows customer compensation payments and profits to be paid to the shareholders.
The Board of Directors of the Aktia Life Insurance decides on customer compensation on an annual basis.
Future costs which are directly attributable to the issue of new shares or to the acquisition of new operations are included under shareholders' equity as a deduction from the balance within the fund for unrestricted equity.
Dividend payments to shareholders are reported under shareholders' equity when these are decided on by the annual general meeting.
During December 2008, the agreement with Aktia Real Estate Mortgage Bank plc's minority shareholders was renegotiated so that their entire minority interest share is reported as part of the Group's equity. The subsidiaries Aktia Kort & Finans Ab, Aktia Corporate Finance Ab and Aktia Asset Management Oy Ab have certain redemption clauses in their minority interest agreements, and their minority interest shares have been transferred to liabilities in accordance with IAS 32.25(a) as at 31 December 2008. This change in liabilities has been reported in the income statement as personnel costs from the reclassification date onwards.
When preparing reports in accordance with the IFRS standards certain estimates are required by the management, which have an impact on income, expenses, assets and liabilities presented in the report.
The group's central assumption relates to the future and key uncertainty factors in connection with balance date estimations, and depends on factors such as fair value estimations, write-down of financial assets, write-down of loans and other receivables, impairment of tangible and intangible assets, and assumptions made in actuarial calculations.
Valuation of unquoted financial assets or other financial assets where access to market information is limited requires management estimation. The principles of valuation at fair value are described under Definition of valuation at fair value. The actual value of financial assets held until maturity is also sensitive to both changes in interest rate levels and the liquidity and risk premiums of the instrument.
The Group performs an impairment test for every balance sheet date to see whether there is objective evidence of a need to carry out impairments on financial assets, except for financial assets that are valued at fair value through the income statement. The principles are described under Impairment of financial assets.
Write-down of loans and other receivables are entered individually and in by group. A write-down is entered individually if there is objective evidence that the customer's ability to pay has been weakened after the claim was originally entered in the balance sheet. The objective evidence are significant financial difficulties on the part of the debtor, granting concessions for financial or legal reasons which the lender had not otherwise considered, or the bankruptcy or other financial restructuring of the debtor.
The value of the claim has been weakened if the estimated incoming cash flow from the claim – with regard to the fair value of the security – is less than the sum of the book value of the credit and the unpaid interest on the credit. The estimated incoming cash flow is discounted by the credit's original effective interest rate. If the credit has a variable rate of interest, the agreed rate of interest at the time of review is used as the discount rate. The write-down is entered as the difference between the lower current value of the recoverable cash flow and the book value of the credit.
A write-down by group is carried out where there is objective evidence for there being uncertainty in connection with repayment of the claims in the underlying credit portfolio. The analysis is based on a historic analysis of the probability of and loss in the event of bankruptcy in view of macroeconomic and microeconomic events and an experience-based assessment. The assessment of anticipated losses as a basis for deciding on write-down by group is carried out over a 12-month time horizon. Write-downs of customer receivables within the bank's corporate business are only carried out at individual level where there is a limited number of customers with specific operations.
The calculation of provisions always includes uncertainties as the provisions are based on assumptions of future interest rates, mortality, illness and cost levels. This is described in more detail under Insurance and investment agreement liabilities.
| 1. General 42 | |
|---|---|
| 2. Risk management 42 | |
| 3. The Group's capital management and capacity to bear risk 42 | |
| 3.1 Regulatory capital requirement and solvency 42 | |
| 3.2 Comprehensive capital assessment 43 | |
| 3.3 Effects on the regulatory capital adequacy in unfavourable market conditions 44 | |
| 3.4 Preliminary internal assessment of capital requirement (economic capital) 44 | |
| 3.5 Comprehensive risk and capital assessment including risks excluded in the regulatory minimum capital requirement 44 | |
| 3.6 Targets for capital adequacy 44 | |
| 4. Credit and counterparty risks 44 | |
| 4.1 Managing credit and counterparty risks and reporting routines 45 | |
| 4.1.1 Credit risks in banking45 | |
| 4.1.2 Lending to households45 | |
| 4.1.3 Corporate lending46 4.1.4 Concentration risks in lending47 |
|
| 4.1.5 Past due payments47 | |
| 4.1.6 Write-downs of loan and guarantee claims48 | |
| 4.1.7 Lending to local banks48 | |
| 4.2 Counterparty risk in the banking Group's investment activities 48 | |
| 4.3 Counterparty risk in the life insurance company's investment activities 49 | |
| 4.4 Country risks 50 | |
| 5. Management of financing and liquidity risks 50 | |
| 5.1 Financing and liquidity risks within banking operations 50 | |
| 5.2 Liquidity risks in the life insurance business 51 | |
| 6. Managing market risks 51 | |
| 6.1 Market risks within the banking business 52 | |
| 6.1.1 Market value interest rate risk52 | |
| 6.1.2 Structural interest rate risk52 6.1.3 Foreign exchange rate risk52 |
|
| 6.1.4 Equity price risk53 | |
| 6.1.5 Real estate risk53 | |
| 6.2 Market risks in the life insurance business 53 | |
| 6.2.1 Interest rate risk in technical provisions53 | |
| 6.2.2 Equity price risk54 | |
| 6.2.3 Real estate risk54 6.2.4 Foreign exchange rate risk54 |
|
| 7. Actuarial risk 54 | |
| 8. Managing operational risks 55 | |
| 8.1 Legal risks 55 |
| Consolidated capital adequacy and exposures for banking business 56–60 | ||||||
|---|---|---|---|---|---|---|
| -- | -- | -- | -- | ------------------------------------------------------------------------- | -- | -- |
Risk refers to a calculated or unexpected event which has a negative impact on results (loss). The term embraces both the probability that an event will take place and the impact that the event would have.
The Group primarily focuses on banking, capital market and life insurance operations and, as a result, both exposure to risk and active risk management are central to our activities. Credit risks associated with banking operations and market risks associated with life insurance operations constitute the largest risks in terms of the Group's activities. All areas of the Group face operational risks and business risks. The structural interest rate risk within the banking and insurance operations and the liquidity risks in the banking operations are also of significance. In general, the risk policy pursued by the Group is conservative in nature.
The result of banking operations is primarily affected by business volumes, deposit and lending margins, the balance sheet structure, the general level of interest rates, write-downs and cost efficiency. Fluctuations in results from banking operations may occur as a result of sudden credit or operational risk outcomes. Business risks in the form of volume and changes in interest rate margins change slowly and are managed through diversification and adjustment measures.
Results from capital market operations are mainly affected by negative trends in the growth of business volumes, commission levels and cost efficiency. Opportunities to improve, adjust and develop alternative products and processes reduce the business risks associated with capital market operations.
Life insurance operations are based on bearing and managing the risk of accidents and the financial risks involved in assets and liabilities. Volatility in results from life insurance operations can primarily be attributed to market risks in investment operations and the interest rate risk in provisions. The policyholder bears the market risk of the investments that provide cover for unit-linked policies, while the company bears the risk of that part of the investment portfolio which is to cover technical provisions for interest-linked policies.
The Group strategy governs all risk-taking and the Group's Board of Directors is ultimately responsible for ensuring that the Group's risks are managed and monitored correctly. Each year, the Group's Board lays down instructions for managing the business encompassing detailed principles, rules and limits for risktaking and requirements for reporting routines. Risk exposures and limits are reported to the Group's Board on a quarterly basis.
The aim of risk management is to ensure that the capital base is adequate in relation to risk exposure, that fluctuations in financial results and market valuations are kept within fixed targets and limits and that risks are priced correctly so as to achieve profitability in the longterm. All risk-taking is based on adequate know-how and relevant processes for managing and controlling risk, adequate capital allocation and pricing of the risk.
Executive management is responsible for organising and monitoring the risk management process. The executive management team has appointed a committee to manage, monitor and develop the risk management of credit and market risks. A committee has also been appointed to focus on matters concerning the Group's capacity to bear risk and capital allocation. Within the limits set down, the role of the committees is to take risk management-related decisions, prepare matters to be decided upon by higher bodies and develop the risk management process overall. Committees are made up of Executive Committee members with line management responsibilities, Risk Control and other experts. Risk Control does not take part in decisions involving risk-taking.
The risk management process comprises risk control and risk management functions that are independent from one another. The remit of Risk Control includes drawing up principles, instructions and limits for risktaking, measuring and analysing risk exposures, assessing the need for economic capital, handling capital allocation and monitoring how risk management is carried out in the line organisation. The role of the line manager is to build up processes and know-how concerning risk management and internal control, to identify and analyse risks and take decisions, on a sound commercial basis, as to how the risks are to be managed through pricing, covenants, securities or other protective measures.
A unit operates within Group administration focusing on independent risk control, which reports directly to the Managing Director.
The assessment of the Group's capital requirements, including that of its legal subsidiaries, starts from rules for calculating the regulatory capital adequacy, taking into account the effects of so-called 'Pillar 2' risks i.e. risks that are not included in the minimum capital requirement. The effects of different economic situations are also considered, including deviations from assumed market growth and financial crisis scenarios.
When calculating the capital adequacy of the banking Group, the standardised approach is used for credit risks and the basic indicator approach for operational risks. Capital requirements are not calculated to market risks because of the small trading book and small currency positions. The solvency of the life insurance company is calculated in accordance with the provisions set down in the Insurance Companies Act. The company's accounts are prepared in accordance with national reporting rules (Finnish Accounting Standards). The capital adequacy of the financial and insurance conglomerate is calculated using the consolidation approach. When calculating the own funds for the banking Group, the minimum operating capital requirement of the life insurance company is deducted while the difference between the book value of the investment and the minimum operating capital is included in risk-weighted assets.
Following the changes made to the Group's structure, the banking Group's equity amounts to EUR 452 (443) million of which EUR 309 (313) million is Tier 1 capital. During the last quarter, the capital base was strengthened by a so-called perpetual loan of EUR 45 million which is taken into account in upper Tier 2 capital. During the year, Aktia Bank issued debenture loans of EUR 53 million and Aktia Real Estate Mortgage Bank issued debenture loans of EUR 10 million, taken into account as lower Tier 2 capital which is also affected by the negative development in the fund at fair value of EUR -48.8 million, when cash flow hedging is disregarded. In total, the Tier 2 capital that can be taken into account in the capital adequacy calculation amounted to EUR 143 million. The banking Group's capital adequacy ratio amounted to 13.7% compared to 15.4% a year ago. The Tier 1 capital ratio was 9.3% (10.9% at 31 December 2007). The write-downs of financial assets and the change in the fund at fair value, totalling -70 million from the start of the year, the growth of the credit stock during the first half of the year and the changes in the new banking Group's own funds due to spinning off certain operations, have resulted in capital adequacy decreasing. Despite the effects of the ongoing financial crisis, the banking
Conglomerate's capital assessment
Group's capital adequacy remains at a good level, exceeding the capital adequacy targets and requirements of the regulators.
During 2008, provisions concerning the proactive supervision of a life insurance company's solvency position have been incorporated into the Insurance Companies Act over and above the previous provisions concerning solvency. The risk position of the life insurance company is assessed in the course of such proactive supervision by measuring whether the company's expanded operating capital is adequate. These measurements are to take account of the company's actuarial risks, the market risks associated with the investments and provisions and the company's counterparty and operational risks. The proactive supervision is a step towards Solvency II. The company's calculations show that, as of the balance sheet date, the capital requirements have been met in accordance with the insurance companies' provisions on proactive supervision.
The life insurance company's operating capital totalled EUR 50.4 (121.7) million and its minimum operating capital requirement EUR 34.2 (35.4) million. Solvency capital totalled EUR 56.6(127.7) million and the solvency was 8.5% at the year-end compared to 18.1% the year before. The risk level of the investment portfolio has been reduced through substantial reallocations to interest rate instruments. The solvency ratio is monitored regularly and Aktia is prepared to increase the operating capital of the company by up to EUR 20 million in the event that the financial crisis compromises the value of the investment assets further.
Capital adequacy for the financial and insurance conglomerate (the conglomerate's capital base in relation to the minimum requirement) was 135.2% compared to 138.6% at the end of the previous year. The statutory minimum stipulated in the act governing financial and insurance conglomerates is 100%. The capital adequacy level remains strong and acts as a buffer against unexpected losses, without restricting selective growth in the business.
The aim of the capital assessment process (ICAAP) is to comprehensively identify and assess the relevant risks and the capital requirements these presuppose and to develop a systematic approach to capital allocation and risk pricing. The capital assessment process comprises ex ante capital planning based on an 3-4 year strategic plan, recurring on an annual basis, whose figures draw on one market scenario, taking into account planned investments and growth targets and culminating in an assessment of the most important key figures for profitability and results, the effects on the own funds, the capacity to distribute dividends and capital adequacy.
Apart from considering the impact of planned growth and investments on the regulatory capital requirement, n Total own funds n Own funds in accordance with the regulatory rules the effects are also assessed of market conditions which are unfavourable in relation to those on which the strategic planning is based. An assessment of the capital requirements for risks which fall outside the minimum regulatory capital requirements is also carried out and an assessment of total capital requirements based on internal models.
The results of the capital assessment process for 2008 indicate that further worsening of market conditions would not weaken the capital adequacy to such an extent that it would affect the Group's refinancing and other operations. By implementing adjustment measures and an active dividend policy, capital adequacy can be retained at a level well above the minimum required.
The assessment of capital requirements for all risks within the Group is aggregated further by the term economic capital based on preliminary internal methods for measuring risk and indicates the total losses which are incurred during a serious macroeconomic crisis equivalent to the financial crisis faced by Finland at the start of the 1990s. The outcomes of the risks are aggregated over a 5-year period and totalled without taking into account diversification effects or prospective adjustment measures taken by the management. Internal capital allocation and risk-based pricing are based on this economic capital.
The present own funds, calculated in accordance with the rules for financial conglomerates, provides a buffer to the economic capital of approximately 30 percentage points and, compared to the Group's total own funds, of approximately 60 percentage points. The process of developing and improving the internal methods used for measuring risk is ongoing. The internal method provides a lower estimate of capital requirements for household loans in particular, which mainly explains why the estimate for economic capital comprising all risks is lower than the minimum requirement stipulated by the regulators plus Pillar 2 risks.
The capital adequacy required by the regulators takes into account capital requirements for credit and counterparty risks, operational risks associated with banking operations and a standardised capital requirement for life insurance operations. The other risks relevant to the Group which are not taken into account in the capital adequacy required by the regulators comprise, in terms of banking operation, concentration risks associated with lending as well as structural and market value interest rate risk. In addition, the capital adequacy required by the regulators undervalues the capital requirements for market risks (equities, real estate). No separate capital requirements are taken into account for liquidity risks and, for strategic risks and business risks a conservative assessment of the present value of future profits is used in the calculations. No diversification effects have been taken into account in the assessment. For life insurance operations, an internal method is used for market and interest rate risks as the regulatory model for calculating minimum operating capital is clearly underestimating the risks. Risks which are not included in the regulatory capital requirement are quantified using different scenario models which reflect substantial adverse changes in market conditions.
Assessing the risk as set out above increases the capital requirement by approximately 25 percentage points, giving the actual buffer against the Group's own funds according to the rules for the financial conglomerate in the range 10–15 percentage points and, in relation to the total own funds at approximately 50 percentage points. The increased capital requirement can primarily be attributed to the market risks in life insurance operations.
The Group's Board of Directors has set targets for the banking Group's capital adequacy of 12% over an economic cycle and 9% for Tier 1 capital adequacy. No separate targets are set for the conglomerate in terms of capital adequacy but the starting point is that the companies which are covered by the rules for calculating the conglomerate's capital adequacy comply with the targets or minimum requirements in their own right. When the capital adequacy targets are set, investments and growth targets as well as effects on external ratings are taken into account alongside the adopted risk profile and business strategy.
Credit risk is defined as the fluctuations in results brought about by a debtor failing to fulfil its obligations while counterparty risk is defined as fluctuations in results or negative valuation differences that are caused by the counterparty's creditworthiness having weakened. Credit and counterparty risks are measured by assessing the probability of default and losses in such an event. The probability of default is measured by using scoring or rating models and the loss in the event of default is measured by taking into account the realisation value of securities and anticipated recovery. Each year, the Group's Board of Directors lays down a strategy and detailed instructions, including limits, for credit and counterparty risks.
The table below sets out the Group's exposure by operation. The details include accrued interest, internal Group receivables and liabilities are eliminated and no deductions for eligible collaterals have been made. Investments that provide cover for unit-linked provisions are not included.
The Group's maximum exposure by operation as at 31.12.2008
| EUR million | Banking business |
Life insurance business |
Total Group |
|---|---|---|---|
| Cash and | |||
| money market | 1,019 | 39 | 1,058 |
| Bonds | 2,022 | 415 | 2,437 |
| Public sector | 20 | 216 | 236 |
| Banks | 817 | 78 | 894 |
| Covered bonds | 1,125 | 31 | 1,156 |
| Corporate | 61 | 91 | 151 |
| Other | 0 | 0 | 0 |
| Shares and mutual funds |
41 | 207 | 248 |
| Loans and claims | 5,449 | 0 | 5,449 |
| Public sector entities | 12 | 0 | 12 |
| Housing associations | 222 | 0 | 222 |
| Corporate | 811 | 0 | 811 |
| Households | 4,357 | 0 | 4,357 |
| Non-profit organisations | 47 | 0 | 4 |
| Tangible assets | 8 | 1 | 9 |
| Bank guarantees | 62 | 0 | 62 |
| Unused facilities and unused limits |
455 | 12 | 467 |
| Derivatives (credit equivalents) |
197 | 1 | 198 |
| Other assets | 36 | 9 | 45 |
| Total | 9,289 | 684 | 9,973 |
Credit risks occur in banking operations, while counterparty risks occur in both banking and insurance operations.
The limit structure contains credit and counterparty risks in both banking and insurance operations individually and at conglomerate level by imposing restrictions on total exposure to individual counter-parties.
The conglomerate has one client group, whose commitments exceed 10% of the own funds calculated according to regulatory directives.
The line organisation is responsible for risk management and assesses the economical relevance of the various exposures on an ongoing basis, taking corrective decisions as needed. The Group's Risk Control unit analyses the risk exposure and monitors how risk management is being practised.
The risk position of the loan stock is reported to the Group's Board of Directors each quarter and to the executive credit committee each month.
Within banking operations, loans are provided to households - the majority of which are adequately secured against real estate collateral (86%). These loans are partly undertaken directly from the bank's balance sheet and partly through the brokerage of Aktia Real Estate Mortgage Bank loans. Local cooperative banks and savings banks also broker Aktia Real Estate Mortgage Bank loans. A separate subsidiary has been established for the financing of household consumption and instalment purchases, Aktia Kort & Finans (Aktia Card & Finance). All branches offer financing solutions for their local corporate customers while financing arrangements that require specialist expertise are handled by Corporate Banking. Similarly, a separate subsidiary has also been established for the financing of corporate instalment purchases, leasing and working capital, Aktia Företagsfinans (Aktia Corporate Finance). Risk capital is financed on a very small scale, either via the part-owned risk capital financing company Unicus or via Corporate Banking.
| EUR million | 31.12.2008 | 31.12.2007 | Change | Percentage |
|---|---|---|---|---|
| Corporate | 783 | 547 | 236 | 14.4% |
| Housing associations |
220 | 185 | 35 | 4.1% |
| Finance and insurance |
21 | 10 | 10 | 0.4% |
| Public sector entities |
12 | 10 | 2 | 0.2% |
| Non-profit organisations |
47 | 38 | 9 | 0.9% |
| Households | 4,343 | 3,782 | 561 | 80.0% |
| Total | 5,426 | 4,574 | 714 | 100.0% |
Aktia pursues a low-risk lending policy which means that risk-taking is always based on sound, commercial principles, that the majority of the loan portfolio comprises household loans, that large individual risk concentrations are avoided and that adequate diversification within the portfolio is achieved.
There have been no significant changes to the composition of the loan portfolio during 2008. The percentage of the portfolio accounted for by household loans decreased somewhat, constituting 80.0% (82.7) of the total credit stock. Housing loans accounted for 74.4% (76.0%) of the total loan stock. Of these housing loans, 86% are secured against adequate collateral (under Basel 2). Mortgage lending totalled EUR 2,072 million in 2008 (1,614 at 31 December 2007), of which EUR 1,003 million was brokered by savings and local cooperative banks.
Lending is undertaken provided that the customer's ability to repay the loan is adequate. Loans are generally secured against collateral. When assessing a customer's ability to repay a loan, the effects of a higher possible interest rate are also taken into account. A statistical credit scoring model is used to guide the decisions made in this respect and as a basis for measuring the probability of default. Prices are set by taking into account the total customer revenues in relation to the risk-adjusted capital requirement (economic capital). To develop risk-based loan pricing, the branches have access to a pricing model.
Consumer lending against collateral (instalment purchases and leasing) and without collateral (unsecured loans and card loans) under Aktia Card & Finance totalled EUR 9.6 million.
60% of receivables from households are accounted for by the two scoring classes with the lowest probability of default. The relatively significant proportion of receivables which are without a scoring class is accounted for by loans granted prior to 2007 when the scoring model was brought into use.
| Scoring class | Proportion of household loan stock |
|---|---|
| AA | 40% |
| A | 20% |
| BB | 9% |
| B | 7% |
| C | 2% |
| D | 1% |
| None | 21% |
| Total | 100% |
Valuation and administration of collaterals is very important for managing credit risk. Rules and authorisations concerning the valuation of collaterals and the updating of collateral values have been established. When calculating risk items, a secure value which is lower than the collateral's market value is taken into account, in keeping with the principle of prudence. The extent to which this value is lower reflects the volatility in the collateral's market value and the collateral's liquidity. Only real estate collateral, certain guarantees and financial securities are taken into account in the capital adequacy calculation.
| Security according to Basel 2 | Proportion of household loan stock 2008 |
|---|---|
| Central government, local government and financial securities with 0% risk weight |
3.7% |
| Deposit securities, risk weight 20% | 0.2% |
| Real estate collateral, risk weight 35% | 86.2% |
| Receivables where collateral is not taken into account in the capital adequacy calculation |
9.9% |
The risk weight under the Basel 2 regulations determines the capital requirement for an exposure according to counterparty and collateral. Loans secured against real estate collateral in the 35% risk weight class have a loan to value ratio of a maximum of 70% of the collateral's fair value i.e. the value of the real estate is to fall by more than 30% before a real credit loss risk arises.
Loans to households are mainly granted against adequate collateral which means that any reduction in real values (real estate prices) does not directly increase the risk exposure. Of the total claims on households, approximately 4% are secured by central government or by deposit while approximately 86% are secured against real estate collateral under the Basel 2 regulations. This means that only 10% of these claims are secured by non-eligible collateral under Basel 2 rules (e.g. the proportion of real estate exceeding 70% which is deemed secure or is without security).
The share of corporate financing increased to 14.4% (12.0). During 2007, a new business strategy was implemented for the bank's operations focusing on corporate customers. During 2007 – 2008, volumes and earnings rose thanks to a broader product range, crossselling and in particular specialisation and increasing expertise. In the prevailing market conditions, Aktia does not intend to keep increasing the corporate financing share of its lending but intends to focus on developing its current customer base further.
Throughout the branch network, traditional corporate financing operations take place which are mainly intended for the self-employed, traders and small and medium-sized enterprises. High levels of expertise are maintained through local corporate offices and local corporate specialists and with the support of Corporate Banking's specialist organisation. At the same time, customer and local knowledge is one of the key cornerstones in this business.
Corporate Banking offers comprehensive financing and payment transaction services but also investment and asset management services for both companies and their owners. Expertise and the range of services have also been broadened concerning insurance and pension matters.
Within corporate financing, specialist expertise has been built up with regard to the construction and real estate industry in particular and with regard to restructuring. Services and expertise with respect to instalment purchases, leasing and financing working capital have been built up under Aktia Corporate Finance which operates in close collaboration with both Corporate Banking and Retail Banking. Financing decisions involving Aktia Corporate Finance are made by taking into account both project-specific risk and customer's total exposure to the.Group.
Customers are assessed for corporate financing purposes on the basis of financial accounts analysis and creditworthiness ratings. Cash flow, the competitive situation, the impact of previous investment and other forecasts are also examined. The development of credit rating models is ongoing.
Distribution of ratings 31.12.2008 (Suomen Asiakastieto)
| Rating | Share of corporate loan stock 2008 |
|---|---|
| AAA | 10% |
| AA+ | 26% |
| AA | 13% |
| A+ | 31% |
| A | 14% |
| B | 3% |
| C | 2% |
| None | 1% |
| Total | 100% |
Approximately 50% of claims on corporations are accounted for by the three groups with the lowest probability of default, while 5% of claims involve the two lowest credit rating classes.
Collaterals are valued for corporate financing purposes in accordance with separate rules and also taking into account a down-valued buffer specific to the collateral for determining the secured value. Particularly when valuing fixed assets relating to a business, the interaction between the value of the fixed assets and the company's business opportunities is taken into account. Company-specific collaterals are not taken into account in the capital adequacy calculation.
31.12.2008
| Securities according to Basel 2 | Share of corporate loan stock 2008 including housing companies and organisations |
|---|---|
| Central government, local govern ment and financial securities with 0% risk weight |
12.0% |
| Deposit securities, risk weight 20% | 1.7% |
| Real estate collateral, risk weight 35% |
24.6% |
| Receivables where collateral is not taken into account in the capital adequacy calculation |
61.8% |
Just under 15% of claims on corporations are guaranteed by a collateral furnished by central government, local government or by deposit while approximately 25% are secured against real estate collateral. A remaining 60% are granted against collateral which are not eligible in the capital adequacy calculation (including corporate real estate), different company-specific securities or against the company's operations and cash flow. For Retail Banking purposes, loans are generally secured against collateral while claims under Corporate Banking operations are largely granted against company-specific collaterals and cash flow.
A bank operating locally cannot avoid exposure to certain concentration risks. Thus, good knowledge of the customers and the market through local operations (right choice of customer and assessment of collateral) and rules and methods for assessing risk and avoiding large individual exposures are crucial. In addition, rules have been drawn up which limit concentration risks by imposing restrictions on maximum exposure, risk-taking, sector distribution and industry concentration.
Approximately 80% of the loan portfolio comprises loans to Finnish households, secured against real estate collateral for the most part. Loans against other property-based collaterals total approximately EUR 550 million. Aktia's level of credit risk is therefore sensitive to changes in domestic employment and housing prices. In addition, Aktia enjoys a strong market position in some areas which generates a certain geographical concentration risk. However, as the volumes in these branches are small in relation to the portfolio overall and as Aktia does not operate in locations which a highly dependent on a small number of employers, the effects of these geographical concentration risks have proved insignificant in household lending. In relation to Aktia's total corporate portfolio, exposure with respect to construction and property financing constitutes a concentration risk which is founded in the strategic decision to create a value chain through specialist expertise which includes brokerage services, insurance and financing for end customers alongside property and corporate financing.
| Branch | 31.12.2008 | 31.12.2007 |
|---|---|---|
| Basic industries, fisheries and | ||
| mining | 1.4% | 1.6% |
| Industry, energy | 10.6% | 8.4% |
| Construction | 8.1% | 8.9% |
| Trade | 16.3% | 18.5% |
| Hotels and restaurants | 2.9% | 2.1% |
| Transport | 3.7% | 4.3% |
| Financing | 8.8% | 11.0% |
| Property | 31.8% | 25.5% |
| Research, consultation, services | 10.9% | 14.1% |
| Other services | 5.5% | 5.6% |
| Total | 100.0% | 100.0% |
Claims on housing companies are not included in the table above
Loans with payments 1-30 days past due rose during the year from 3.2% to 3.4% of the credit stock, including off-balance sheet bank guarantee commitments. Loans with payments 31-89 days past due rose from 0.60% to 0.88%, totalling approximately EUR 48 million. Non-performing loans more than 90 days overdue, including loans for collection, totalled approximately EUR 26 million, corresponding to 0.48% (0.38% at 31 December 2007) of the entire credit stock plus bank guarantees.
| Days | 31.12.2008 (EUR million) |
% of the credit stock |
31.12.2007 (EUR million) |
% of the credit stock |
|---|---|---|---|---|
| 1–30 | 187 | 3.4 | 146 | 3.2 |
| 31–89 | 48 | 0.9 | 28 | 0.6 |
| 90– | 26 | 0.6 | 18 | 0.4 |
Write-downs based on individual examination of loan and guarantee claims totalled EUR -1.2 (-0.8) million. Reversals of losses from previous years came to EUR 0.5 (0.6) million so that the cost effect on the profit for the period was EUR -0.7 (-0.2) million.. In addition to individual write-downs, write-downs by group were made where there were objective reasons to believe there was uncertainty in relation to the repayment of claims in underlying credit portfolios. In connection with defining principles for write-downs by group so that they only apply in future to households and small companies, individual write-downs totalling EUR -4.1 million were carried out against six large corporate exposures. Write-downs by group for households and small companies at 31 December 2008 stood at EUR 7.4 million, and are based on anticipated losses in relation to the market situation.
Financing is provided to banks on the basis of individual credit ratings and case-by case decisions. Each year, the Group's Board of Directors sets separate limits for the short- and long-term financing of local banks which are based on the capital adequacy of the local bank and any collateral provided. At the year-end, committed facilities for liquidity financing amounted to a total of EUR 258.4 (150) million, divided between 49 individual savings and local cooperative banks while outstanding liquidity financing totalled EUR 36 (11) million.
Within the limits set, other instruments with counterparty risk (particularly derivatives) can also be used. The risks associated with derivative contracts are reduced through mutual agreement on the provision of additional collateral. The requirement for additional collateral is determined on the basis of the local bank's capital adequacy and own funds.
The banking Group's own investment activities are handled by the Treasury unit. Investments are pursued with the aim of securing the bank's liquidity. As well as in conjunction with liquidity investments, counterparty risks also arise in relation to entering into derivative contracts for hedging purposes. Alongside counterparty risk, country and settlement risks are also regulated and managed. By imposing a requirement for high external credit ratings (at least Moody's A3 or equivalent), conservative allocation, active selection of investment assets and rules for maximum exposure to one counterparty or asset type, the aim is to minimise the counterparty risk. Each year, the Group's Board of Directors sets the limits for the banking Group's investment activities, based on the own funds of the counterparty or the banking Group. The market value of these items is determined and monitored on a daily basis.
Investments are mainly made in liquid securities involving low risk and high creditworthiness. They are also to be eligible for refinancing with the central bank. As at 31 December 2008, the market value of these investments totalled EUR 2,290.4 (1,656) million. Of the financial assets available for sale, 49% (57% at 31 December 2007) were investments in covered bonds, 45% (38% at 31 December 2007) were investments in banks, 3% (0% at 31 December 2007) were investments in state-guaranteed bonds and approximately 3% (5% at 31 December 2007) were investments in public sector entities and companies. Of the financial assets, 0.9% did not meet the internal rating requirements, while six securities with a market value of EUR 25 million were no longer eligible for refinancing with the central bank.
Losses realised over the course of the year as a result of counterparties' reduced creditworthiness totalled EUR -3.6 million.
| 31.12.2008 EUR 2,290 million |
31.12.2007 EUR 1,643 million |
|
|---|---|---|
| Banks | 44% | 38% |
| Covered bonds | 49% | 57% |
| State-guaranteed bonds | 3% | 0% |
| Corporate | 3% | 4% |
| Public sector | 1% | 1% |
| 31.12.2008 EUR 1,089 million |
31.12.2007 EUR 627 million |
|
|---|---|---|
| Eurozone | 64% | 78% |
| North America | 1% | 2% |
| Oceania | 1% | 2% |
| Other European countries | 34% | 18% |
| 31.12.2008 EUR 1,121 million |
31.12.2007 EUR 943 million |
|
|---|---|---|
| Eurozone | 74% | 77% |
| North America | 4% | 2% |
| Other European countries | 22% | 21% |
Investments in commercial papers and bonds issued by the public sector have only been made within the Euro zone.
Hedging derivatives are also used to reduce the volatility of net interest income. As well as securing the net interest income from banking operations, derivatives are also brokered to the local banks with the aim of helping them manage volatility in their own net interest income.
So as to limit the counterparty risks that arise when entering into derivative contracts, only counterparties with high credit ratings (Moody's A3 or equivalent) are used. The Group's Risk Control unit defines, amongst other things, the derivative products' credit risk equivalent value and measures and controls the counterparty risks.
To reduce the counterparty risks, individual collateral procedures are used in accordance with ISDA/CSA (Credit Support Annex) conditions. At the year-end, securities totalling EUR 93.3 million had been received as collateral for the derivative contracts' positive market value. At the same time, no securities had been provided as collateral for the derivative contracts' negative market value. The collaterals received amounted to approximately 87% of the derivative contracts' positive market value of a total of EUR 107.3 million.
The investment strategy of the life insurance business is based on the portfolio theory of diversification between different markets, types of assets and counterparties. The weight of interest-bearing investments in terms of neutral and actual allocation is relatively high and, alongside risk and yield, possibilities to match the interest risk in provisions with interest-linked investments are also taken into account. Interest-based investments are therefore exposed to counterparty risk which means that the entire value of the security is at risk if the counterparty is unable to meet its obligations. So as to control the counterparty risks, the limit structure takes into account the need for an adequate external credit rating (Moody's Baa3 or equivalent), total exposure to one counterparty for each asset type and overall to one counterparty. The market value of these items is determined and monitored on a daily basis.
At the year-end, 48% (18% at 31 December 2007) of these direct interest rate investments were claims on public sector entities, 20% (34% at 31 December 2007) were claims on companies and 32% (48% at 31 December 2007) were claims on banks and covered bonds. 1.0% of the direct interest rate investments did not meet the internal rating requirements at the end of 2008.
Losses realised over the course of the year as a result of counter parties' reduced creditworthiness totalled EUR -5.1 million.
Rating distribution of investment portfolio of direct interest rate investments for the life insurance business
| Moody's rating | 31.12.2008 | 31.12.2007 |
|---|---|---|
| Aaa | 53.7% | 26.7% |
| Aa1–Aa3 | 17.3% | 29.4% |
| A1–A3 | 14.8% | 25.1% |
| Baa1–Baa3 | 5.7% | 10.2% |
| Ba1–Ba3 | 0.8% | 0.3% |
| B1–B3 | 0.2% | 0.0% |
| Caa1 or lower | 0.0% | 0.0% |
| No rating | 7.6% | 8.3% |
| Total | 100.0% | 100.0% |
Investment portfolio's sectoral distribution of direct interest rate investments - life insurance business
| 31.12.2008 EUR 449 million |
31.12.2007 EUR 352 million |
|
|---|---|---|
| Public sector | 48% | 18% |
| Banks and covered bonds | 20% | 48% |
| Corporate | 32% | 34% |
Investment portfolio's regional distribution, banks and covered bonds – life insurance business
| 31.12.2008 EUR 144 million |
31.12.2007 EUR 168 million |
|
|---|---|---|
| Eurozone | 76% | 70% |
| Other European countries | 24% | 30% |
Investment portfolio's regional distribution, public sector – life insurance business
| 31.12.2008 EUR 216 million |
31.12.2007 EUR 64 million |
|
|---|---|---|
| Eurozone | 98% | 88% |
| Other European countries | 2% | 12% |
Investment portfolio's regional distribution, corporate – life insurance business
| 31.12.2008 EUR 89 million |
31.12.2007 EUR 120 million |
|
|---|---|---|
| Eurozone | 78% | 70% |
| Other European countries | 20% | 29% |
| Other countries | 2% | 1% |
In banking operations, lending is only undertaken in Finland in practice. In managing the banking Group's liquidity, investments can only be made in commitments that have been issued by counterparties based in countries which have been rated as at least A3 by Moody's.
The life insurance company's assets are mainly invested in OECD countries. Taking into account the rules for covering provisions, a limited quantity of assets can be invested in countries which do not belong to the OECD. This is done via instruments which are quoted in a country that does belong to the OECD.
Financing and liquidity risks are defined as the availability and cost of refinancing plus the differences in maturity between assets and liabilities. Financing risk also occurs if funding has been largely concentrated in individual counterparties, instruments or markets. Management of refinancing risks ensures that the Group can honour its financial obligations.
The financing and liquidity risks are dealt with at legal company level, and there are no commitments between the banking group and the life insurance company.
A stable borrowing and deposit stock from households, the Aktia Real Estate Mortgage Bank's issues, deposits received under operations as a central financial institution and an adequate liquidity buffer constitute the cornerstones of the banking operation's liquidity management.
The bank's lending is refinanced both by deposits and investments from the public and borrowing from the money and capital markets. To cover short-term liquidity requirements, the bank also has the option of issuing certificates of deposit on the domestic money markets.
Deposits from the public have risen steadily and still constitute a significant share of total financing. Deposits totalled EUR 3 098 million as at 31 December 2008, growing by EUR 297 million during the year.
In managing the risks associated with refinancing, Aktia takes into account both its own lending activities and its obligations with respect to savings and local cooperative banks, for which Aktia serves as the central financial institution. This also constitutes an important source of financing for Aktia. Deposits by local banks also increased, at a time when households preferred traditional bank deposits in the main.
The Finance Committee is responsible for managing the refinancing risks. The Group's Risk Control unit, which continuously monitors liquidity risks and associated limits, reports to the Finance Committee. The Treasury unit takes practical measures to change the liquidity position under the instruction of the Finance Committee. The Treasury unit is also responsible for maintaining the bank's day-to-day liquidity and constantly monitors how assets and liabilities mature on the capital market. Growth in the deposit stock and pricing is also followed closely. From 2009, the Group's Capital Management Committee takes over from the Finance Committee as the body responsible for supervising and managing refinancing and liquidity risks.
As for market-related refinancing, a diverse range of sources of funding and an adequate diversification on various markets is to be maintained. Aktia Real Estate Mortgage Bank plc is a strategically important channel for competitive and long-term funding and a significant proportion of long-term refinancing is accounted for by covered bonds secured by real estate issued by Aktia Real Estate Mortgage Bank plc. Within the issuing programme of EUR 4 billion, covered bonds secured by real estate have been issued for EUR 1 750 million. In addition, Aktia has a bond programme amounting to EUR 500 million under which it has issued EUR 336.6 million. To cover short-term financing requirements, the bank can also issue certificates of deposit on the domestic money markets. Outstanding certificates totalled just under EUR 270 million at 31 December 2008.
A liquidity portfolio comprising high-quality securities has been built up to hedge against short-term fluctuations in liquidity by realisation or using repurchase agreements. These securities can also be used as a buffer through central bank refinancing in the event of market disruption. The structure of the liquidity portfolio is set out in more detail under point 4.2 on counterparty risks in the bank's investment activities.
To secure access to funding from the capital market, a rating from an internationally recognised rating institute is used. The Aktia Group has used Moody's as its ratings institute since 1999. During the autumn of 2007, the rating was set as A1/P1/C stable while the Mortgage Bank's most recent issue received the highest Aaa rating.
The objective in the banking Group is to be able to cover one year's financing requirements using existing liquidity. Despite considerable uncertainty in the financial markets, the liquidity status was good and the objective was achieved.
Within the life insurance business, liquidity risk is defined as the availability of financing for paying out insurance claims from the different risk insurance types, savings sums, surrenders from savings policies and surrenders and pensions from voluntary pension policies. Availability of liquidity is planned on the basis of these needs and on the basis of the liquidity needed for investment activities to manage the investment portfolio effectively and optimally. For the most part, liquidity can be satisfied through the inward flow of cash and a portfolio of certificates of deposits adjusted to the varying requirements. Unexpected significant need for liquidity is taken care of through the liquid portfolio of bonds and shares.
Market risk refers to the impact caused by fluctuations in interest rates, exchange rates and equity prices on the Group's financial performance. By managing the market risk, the bank seeks to ensure steady long-term development of net interest income and results. Limits and principles for market risk management have been established by the Group's Board of Directors. Market risks are either related to banking operations (structural interest rate risk), individual transactions or the life insurance company's investment activities. The bank does not actively take market risks in its operations but risk-taking is a central element in the life insurance company's investment activities.
The policyholder bears the investment risk of the investments that provide cover for unit-linked insurance policies. The investment portfolio covering the technical provisions for interest-linked policies is measured on an ongoing basis at fair value. Temporary price fluctuations are reported under the fund at fair value, while significant or long-term value changes are reported in P&L. Within the life insurance business, the aim is to build up the assets that provide cover for provisions in view of the capacity of the insurance operation to bear risk, the need for returns and opportunities to convert the assets into cash. A reduction in the market value of assets and inadequate returns in relation to the requirements for provisions are the greatest risks associated with the investment activities within the life insurance company. These risks are reduced and managed through portfolio diversification in terms of asset type, markets and individual counterparties.
| Risk | |||||
|---|---|---|---|---|---|
| EUR million | Interest rate | Spread | Equity | Real estate | |
| 1% parallel shift downwards |
1% parallel shift upwards |
0.1% change upwards |
10% price drop | 10% price drop | |
| Banking business | 26.0 | -27.2 | -4.4 | -1.7 | -0.3 |
| Life insurance business | 20.2 | -22.3 | -2.2 | -6.1 | -3.2 |
| Total | 46.2 | -49.5 | -6.6 | -7.8 | -3.5 |
Sensitivity analysis for market risks (EUR million)
The table above shows the market value sensitivity of financial assets in various market risk scenarios. The impact on equity or P&L is given after tax. A parallel downward shift in the interest rate level gives a positive change in the value of interest-bearing securities while a rate increase gives a negative change. The spread risk describes the impact if the general requirements on returns were to increase by 0.1 percentage point. The equity risk describes the impact of a 10% drop in the price of equities and equity funds while real estate risk describes a 10% fall in property prices.
Executive management is responsible for managing market risks within the banking business with the authorisation of the Group's Board of Directors. A special Finance Committee has been appointed to manage the market value price risk and the structural interest rate risks within the framework of limits set by the Board. From 2009, the Group's Investment Committee will be responsible for administering and managing the risk associated with Group investment assets. The Group's Risk Control unit supervises risk exposures and limits.
Market value interest rate risk is defined as changes in the market value of interest-bearing financial assets caused by interest rate fluctuations. These changes are reported against the fund at fair value under equity after deductions for deferred tax. The market value interest rate risk is measured by simulating the impact of a one percentage point change in the interest rate. The change in the market value of the financial assets available for sale may amount to a maximum of 10% of the banking Group's own funds in the event of a parallel shift in interest rates of one percentage point, where deferred tax liabilities or claims are deducted. The Finance Committee sets more precise limits within the frameworks established by the Board.
The net change in the fair value fund relating to market value interest rate risk posted during the period totalled EUR -8.8 million after the deductions for deferred tax. With an interest rate increase of one percentage point for financial assets available for sale, the net change of the fund at fair value at 31 December 2008 would be EUR -27.2 million (-23 at 31 December 2007) after deductions for deferred tax.
Structural interest rate risk refers to a risk in the development of net interest income due to imbalances between the reference rates and the re-pricing of assets and liabilities within the banking business.
Structural interest rate risk is managed by taking active hedging measures by using derivative contracts and liquidity investments, with the aim of keeping net interest income at a stable level and hedging results against a low interest rate. The bank's Treasury unit carries out the transactions necessary to cover the structural interest rate risk in accordance with the limits and guidelines imposed by the Group's Board and executive management. Derivative contracts made to hedge against the bank's structural interest rate risk are reported in more detail in Note 50.
The impact of different interest rate scenarios on net interest income is modelled using a dynamic asset and liability management model, taking into account changes to the balance sheet and product structure. The structural interest rate risk is measured using various stress scenarios.
The limit for structural interest rate risk has been set in relation to the net interest income budgeted for and the net interest income forecasted for the two subsequent years. The negative change in net interest income calculated which would be caused by a parallel shift in interest rates of one percentage point may result in a maximum 8% calculated worsening in the net interest income budgeted for in the reporting period in question (fixed target) and may worsen the net interest income forecast for the next 12 months by a maximum of 6% and by a maximum of 8% (variable target) for the next 12-24 months.
At the year-end, an upward parallel shift in the interest rate curve of one percentage point would have reduced the net interest income of the banking business for the next 12 months by -5.4% (-4.3% at 31 December 2007) (target maximum -6%). For the next 12-24 months, the net interest income of the banking business would have reduced by -6% (0.0% at 31 December 2007) (target maximum -8%).
An downward parallel shift in the interest rate curve by one percentage point would have increased the net interest income of the banking business for the following 12 months by 6.3% (4.4% at 31 December 2007) (target maximum -6%). For the next 12-24 months, the net interest income of the banking business would have increased by 7.9% (-1.7% at 31 December 2007) (target maximum -8%).
Foreign exchange rate risk refers to a negative change in value of the banking Group's currency positions caused by fluctuations in exchange rates.
Within the banking business, currency dealings are based on customer requirements, which is why most of this activity involves Nordic currencies and the US dollar. Exchange rate risks are primarily managed by means of matching. The Treasury unit is responsible for managing the bank's daily currency position within the framework of the authorisations given by the Financial Committee. Operations are governed by the limits set by the bank's executive management. The risk limits have been determined in relation to the bank's own funds.
At the year-end, total net currency exposure for the banking Group amounted to EUR 0.2 million.
Equity price price risk refers to changes in value due to fluctuations in equity prices. Limits have been set for equity price risks in relation to the banking Group's own funds.
No equity trading is carried out in the banking operation, including in the parent company. The investments in equities and mutual funds which are necessary or strategic to the business totalled EUR 21.9 million. The net change in the fair value fund relating to other equity investments and mutual funds during the period totalled EUR -7.2 million after the deduction of deferred tax, while write-downs for long-term or significant decreases in value for equities and mutual funds totalled EUR -1 million.
Real estate risk refers to risk that arises from a fall in the market value of real estate assets. Investments in or ownership of real estate is not part of the Group's core business. To reduce exposure to real estate risk, real estate assets have been actively reduced during the year and efforts have been made to improve the use of and increase returns on properties in use. Total real estate holdings within the banking business amounted to EUR 4.6 million at the year-end. Most of the properties are insured for their full value.
Aktia's executive management and the operational management team in the life insurance company are responsible for managing market risks within the authorisation given by both the Group's Board of Directors and the company's own Board. Each year, the Board of the life insurance company sets out an investment plan which includes limits for neutral allocation, limits for instrument allocation, issues authorisations and organises investment activities. The Group's executive management has appointed a special investment committee to manage market risks within the framework of the limits imposed. From 2009, the Group's Investment Committee will be responsible for administering and managing the risk associated with internal Group investment assets. The Group's Risk Control unit supervises risk exposures and limits.
The policyholder bears the market risk of the investments that provide cover for unit-linked insurance policies. These investments are valued on an ongoing basis at fair value and any changes in value are posted to provisions for unit-linked insurance policies.
The part of the investment portfolio that has to cover the technical provisions for interest-linked policies is valued on an ongoing basis at fair value. Temporary price fluctuations are reported under the fund at fair value, while significant or long-term value changes are reported in P&L. During the reporting period, writedowns in P&L attributable to shares and mutual funds totalling EUR -29.4 million were posted, while the net change in the fair value fund after acquisition eliminations posted during the period totalled EUR -6.2 million after the deduction of deferred tax.
The risks of the investment portfolio, such as credit risk, interest rate risk, foreign exchange rate risk, share risk and real estate risk, are measured and limited using a VaR (Value at Risk) model, assuming a maximum loss for 12 months and applying a probability level of 97.5%.
Allocation of assets in the investment portfolio – life insurance business
| 31.12.2008 (EUR million) |
31.12.2008 | 31.12.2007 | |
|---|---|---|---|
| Equities | 38 | 5.5% | 20.6% |
| Interest rate investments | 481 | 69.4% | 51.4% |
| Money market | 85 | 12.3% | 9.0% |
| Real estate | 43 | 6.2% | 9.9% |
| Alternative | 46 | 6.6% | 9.2% |
The most significant risk associated with technical provisions is the interest rate risk with respect to the guaranteed interest rate. This is due to differences between the guaranteed interest rates and the corresponding risk-free interest rates. If the interest rate guaranteed to the customer exceeds the risk-free interest rate, a higher degree of risk-taking is required in investment activities. In connection with the transition to new solvency rules for insurance companies, there will be also a need to determine the market value of technical provisions, which, in a low interest rate environment, would have an unfavourable impact on the company's finances. As a step towards incorporating the new solvency rules, certain hedging measures have been taken at Group level to manage the interest rate risk in technical provisions.
| 31.12.2008 EUR million |
% | 31.12.2007 EUR million |
% | |
|---|---|---|---|---|
| 4.50% | 133 | 21% | 130 | 20% |
| 3.50% | 157 | 25% | 104 | 16% |
| 2.75% | 214 | 34% | 0 | 0% |
| 2.50% | 109 | 17% | 174 | 27% |
| 2.20% | 0.0 | 0% | 230 | 35% |
| 0.00% | 15 | 2% | 16 | 2% |
| Total | 628 | 100% | 654 | 100% |
| Average rate | 3.2% | 2.9% |
Over the year, the technical rate of interest was increased to dissolve rate reserves for approximately EUR 20 million.
Limits, specified in geographical terms, have been set for equity risks in relation to the size of the company's total investment portfolio. The equity risk is also diversified through the allocation of equity holdings in different sectors. Equity risk was the single largest risk realised during 2008, despite diversification and conservative allocation. The valuation of equities and equity funds in the financial statements is based on the Group's acquisition value i.e. 1.1.2007 when Aktia acquired the life insurance company. Of the total writedowns of the life insurance company's equity holdings, EUR 21.3 million are accounted for by shares and EUR 8.1 million by equity funds.
| EUR million | Direct holdings of equities Market value |
Equity funds Market value |
Total Market value |
|---|---|---|---|
| Finland | 12.9 | 0.3 | 13.1 |
| Europe | 13.4 | 2.7 | 16.1 |
| USA | 0.6 | 2.6 | 3.2 |
| Emerging markets | 0.9 | 2.1 | 3.0 |
| Japan | 0.0 | 3.1 | 3.1 |
| Total | 27.8 | 10.7 | 38.5 |
Exposure to equity risk in the life insurance company has clearly been reduced, totalling approximately EUR 38.5 million at the year-end.
The market sensitivity of the portfolio is measured, amongst other things, using the sensitivity factor beta, which indicates the relationship between the volatility of a single share or equity fund and the volatility of the market. Each share has been compared against an individual reference index that reflects the market which categorises the share most closely. Beta has been calculated on this basis for each share and equity fund. At the year-end 31 December 2008, it can be said that the portfolio is well-diversified and it largely follows the general market movements.
Real estate risk is managed in the life insurance company by making diverse investments in different types of real estate in both domestic and foreign property, primarily using indirect real estate instruments such as publically quoted and unquoted real estate funds and shares in real estate companies. Real estate risk is contained geographically and through limits set for total counterparty risk.
Viewed overall, technical provisions comprise, in practical terms, liabilities in Euro which is why currency investments are not needed to cover them. Under the Insurance Companies Act, an insurance company that provides direct insurance can cover technical provisions in a certain currency with investments in another currency to a maximum of 20%. Foreign exchange rate risk mainly occurs via the share market and total currency exposure in the different currencies is limited by the company's Board.
Investments carried out by the life insurance business are mainly Euro-based and the foreign exchange rate risks are regulated by both internal limits and limits imposed by the authorities. Currency exposure has clearly reduced compared to 2007, mainly as a result of the clearly lower weight of equities in the investment portfolio.
| EUR million | 2008 | 2007 | ||
|---|---|---|---|---|
| Open item |
5% drop in price against Euro |
Open item |
5% drop in price against Euro |
|
| SEK | 2.5 | -0.1 | 12.0 | -0.6 |
| USD | 3.2 | -0.2 | 11.1 | -0.6 |
| NOK | 1.8 | -0.1 | 28.4 | -1.4 |
| CHF | 0.9 | 0.0 | 4.2 | -0.2 |
| GBP | 0.2 | 0.0 | 0.3 | 0.0 |
| JPY | 3.3 | -0.2 | 5.0 | -0.3 |
| Other | 2.7 | -0.1 | 23.6 | -1.2 |
| Total | 14.4 | -0.7 | 84.6 | -4.2 |
Aktia Life Insurance provides voluntary pension insurance, life insurance and savings insurance. Due to the legal rules concerning insurance contracts, the company is very limited in its ability to influence premiums and terms and conditions for old policies that have already come into effect. The adequacy of the premiums is monitored on an annual basis. For new policies, the company is free to set the premium levels itself. This is done by the Board, at the proposal of the head actuary.
Reinsurance is a tool used to limit compensation liabilities for the company's own account so that its solvency capital is adequate and results do not fluctuate too much. The life insurance company's Board has set limits for those risks which the company itself can bear without subscribing to reinsurance.
The principal risk concerning savings and pension insurance with discretionary aspects is interest rate risk i.e. that returns on the investments will not be sufficient for the policies interest rate requirement, which is at least equivalent to the calculation rate (the guaranteed rate) on the policy. At 31 December 2008, the average calculation rate on the life insurance company's technical provisions, excluding provisions for unit-linked insurance, was approximately 3.2%. An increase in life expectancy is also a risk, particularly in pension insurance with a lifelong pension duration.
With regard to unit-linked insurance, insurance savings increase or decrease on the basis of the change in the value of the investment funds which the policyholder has chosen to link his saving to. The life insurance company buys corresponding fund participations to provide cover for the unit-linked part of provisions and thus protects itself against that part of the change in the unit-linked provisions which is attributed to changes in the value of those funds which customers have linked their saving to.
The main risks associated with risk insurance are risks connected to mortality, compensation for healthcare costs, long-term inability to work and daily compensation in the event of illness. The most important methods used to manage risk associated with risk insurance are risk selection, tariff classification, reinsuring of risks and the monitoring of compensation costs. With respect to health insurance, the life insurance company can increase policy premiums, within certain limits, to cover the increasing compensation paid out in the event of ill health. The table below shows the risk compensation paid out during 2008 for the risk groups mentioned above and what a 50% increase in compensation costs would mean for additional compensation costs.
Technical provision's sensitivity to actuarial risks – life insurance business
| EUR million | 2008 | +50% |
|---|---|---|
| Mortality | 3.0 | 1.5 |
| Healthcare costs | 7.3 | 3.6 |
| Long-term inability to work | 0.3 | 0.2 |
| Daily compensation etc. | 0.7 | 0.3 |
| Total | 11.3 | 5.6 |
Operational risk refers to loss risks arising as a result of unclear or incomplete instructions, activities carried out contrary to instructions, unreliable information, deficient systems or actions taken by staff members. The losses incurred due to these risks may be direct or indirect financial losses, or ones that tarnish the corporate image to the extent that the Group's credibility in the market place suffers.
The Group's policy on managing operational risks has been established by the Board of Directors. According to the policy, the essential functions in the Group, including delegated functions shall be regularly mapped for risks. The risk mapping concludes with a probability and consequence evaluation, after which the competent decision-making body decides how the risks will be managed. In addition to regular risk mapping, adequate instructions shall also be drawn up as a preventive measure in order to reduce operational risks in the central and risky areas. The instructions should include legal risks, personnel risks, principles for a continuity plan, etc.
In order to verify the reliability of risk mappings and to follow how the risk level develops, all important incidents must be registered and reported in a systematic fashion.
The responsibility for managing the operational risks is borne by the business areas and the line organisation. Risk management includes continual development in the quality of the internal processes and internal control of the whole organisation. The management of each business area is responsible for ensuring that the processes and procedures are adapted to the goals established by the bank's executive management and that the instructions are sufficient. Special process descriptions are drawn up if necessary.
Each unit manager is responsible for full compliance with the instructions. Internal Audit analyses the processes at regular intervals and evaluates the reliability of the units' internal controls. Internal Audit reports directly to the Board of Directors.
In addition to the preventive work for avoidance of operational risks, efforts are also made within the Group to maintain adequate insurance cover for damage that occurs as a result of irregularities, hacking and other criminal activities, etc.
During the year, losses due to operational risks totalling EUR 0.5 million have been recorded in the Group. In relation to the scope of operations (the Group's balance sheet total), the losses recorded due to operational risks were at the same level in 2008 as in the years 2005, 2006 and 2007.
Legal risk refers to risk of loss due to an invalid contract or incomplete documentation and the risk of sanctions and loss of goodwill due to a law or official regulations being violated. The Group seeks to manage the risk of poor agreement documentation by establishing contractual relationships relating to day-to-day activities that are based on standard terms worked out jointly by the banking and insurance industry. When finalising non-standardised agreements, branch offices and business units must consult the Group's Legal Services unit. External experts are relied upon when necessary. The Group has special expert resources allocated to support the Group's compliance, especially in the provision of investment services.
| (EUR 1,000) | |||||
|---|---|---|---|---|---|
| Summary | 12/2008 | 9/2008 | 6/2008 | 3/2008 | 12/2007 |
| Tier 1 capital | 308,959 | 319,846 | 327,268 | 319,816 | 312,744 |
| Tier 2 capital | 143,438 | 68,908 | 84,653 | 114,825 | 130,474 |
| Capital base | 452,396 | 388,754 | 411,922 | 434,641 | 443,217 |
| Risk-weighted amount for credit and counterpart risks | 3,040,519 | 2,983,465 | 2,965,226 | 2,788,835 | 2,611,799 |
| Risk-weighted amount for market risks | - | - | - | - | - |
| Risk-weighted amount for operative risks | 272,655 | 263,393 | 263,393 | 263,393 | 263,393 |
| Risk-weighted commitments | 3,313,174 | 3,246,858 | 3,228,620 | 3,052,228 | 2,875,192 |
| Capital adequacy ratio, % | 13,7 | 12,0 | 12,8 | 14,2 | 15,4 |
| Tier 1 Capital ratio, % | 9,3 | 9,9 | 10,1 | 10,5 | 10,9 |
| Minimum capital requirement | 265,054 | 259,749 | 258,290 | 244,178 | 230,015 |
| Capital buffer (difference between capital base and minimi requirement) | 187,343 | 129,005 | 153,632 | 190,463 | 213,202 |
1) No capital requirement due to minor trading book and when total of net currency positions are less than 2% of capital base.
2) Capital requirement of 15% is calculated according to definition of average gross income during the last three years (140 EUR millions) x riskweighted factor of 12.5.
| Capital base | 12/2008 | 9/2008 | 6/2008 | 3/2008 | 12/2007 |
|---|---|---|---|---|---|
| Share capital | 163,000 | 163,000 | 80,249 | 80,204 | 80,204 |
| Funds | 44,570 | 44,838 | 59,390 | 55,226 | 55,226 |
| Minority share | 24,934 | 14,414 | 14,287 | 14,608 | 14,499 |
| Retained earnings | 93,520 | 118,622 | 184,845 | 186,994 | 155,094 |
| Profit for the reporting period attributable to shareholders in Aktia plc | 9,244 | 3,503 | 22,196 | 11,131 | 50,671 |
| Provision for dividends to shareholders | -611 | - | -10,031 | -5,013 | -20,138 |
| Total | 334,657 | 344,376 | 350,936 | 343,150 | 335,556 |
| Intangible assets | -8,598 | -6,831 | -5,918 | -5,634 | -5,162 |
| Shares in insurance companies | -17,100 | -17,700 | -17,750 | -17,700 | -17,650 |
| Tier 1 capital | 308,959 | 319,846 | 327,268 | 319,816 | 312,744 |
| Fund at fair value | -47,492 | -94,325 | -70,106 | -36,232 | -17,073 |
| Other Tier 2 capital | 45,000 | 12,160 | - | - | - |
| Risk debebtures | 163,029 | 168,773 | 172,509 | 168,758 | 165,197 |
| Shares in insurance companies | -17,100 | -17,700 | -17,750 | -17,700 | -17,650 |
| Tier 2 capital | 143,438 | 68,908 | 84,653 | 114,825 | 130,474 |
| Total capital base | 452,396 | 388,754 | 411,922 | 434,641 | 443,217 |
| Off | ||||||||
|---|---|---|---|---|---|---|---|---|
| Balance assets |
balance sheet items |
Total | Risk-weighted commitments | |||||
| Risk-weight | 12/2008 | 9/2008 | 6/2008 | 3/2008 | 12/2007 | |||
| 0% | 908,353 | 26,120 | 934,473 | - | - | - | - | - |
| 10% | 803,488 | - | 803,488 | 80,349 | 80,654 | 78,239 | 66,718 | 67,812 |
| 20% | 1,627,687 | 237,821 | 1,865,507 | 335,341 | 271,519 | 296,318 | 294,413 | 251,390 |
| 35% | 4,027,665 | 84,504 | 4,112,170 | 1,421,429 | 1,379,726 | 1,343,648 | 1,274,000 | 1,232,151 |
| 50% | 4,850 | 192 | 5,042 | 2,473 | 2,935 | 2,863 | 3,404 | 1,889 |
| 75% | 537,993 | 65,102 | 603,095 | 426,716 | 424,305 | 420,273 | 410,930 | 391,497 |
| 100% | 666,012 | 106,524 | 772,536 | 720,800 | 780,735 | 783,155 | 702,594 | 631,252 |
| 150% | 6,933 | 1,158 | 8,091 | 11,268 | 16,584 | 15,888 | 15,468 | 15,608 |
| Total | 8,582,981 | 521,421 | 9,104,402 | 2,998,376 | 2,956,457 | 2,940,383 | 2,767,527 | 2,591,598 |
| Derivatives *) | - | 197,005 | 197,005 | 42,142 | 27,007 | 24,843 | 21,308 | 20,200 |
| Total | 8,582,981 | 718,426 | 9,301,408 | 3,040,519 | 2,983,465 | 2,965,226 | 2,788,835 | 2,611,799 |
*) derivative agreements credit conversion factor
| Risk-weighted amount for operative risks | Risk-weighted amount | |||||||
|---|---|---|---|---|---|---|---|---|
| Year | 2006 | 2007 | 2008 | 12/2008 | 9/2008 | 6/2008 | 3/2008 | 12/2007 |
| Gross income | 140,581 | 145,150 | 150,517 | |||||
| - average 3 years | 145,416 | |||||||
| Indicator 15 % | 21,812 | |||||||
| Capital requirement for operative risk | 21,812 | 272,655 | 263,393 | 263,393 | 263,393 | 263,393 |
| Summary | 12/2008 | 9/2008 | 6/2008 | 3/2008 | 12/2007 |
|---|---|---|---|---|---|
| Tier 1 capital for the group | 359,711 | 344,535 | 365,811 | 373,103 | 360,890 |
| Sector-specific assets | 161,361 | 103,184 | 101,850 | 134,280 | 149,357 |
| Intangible assets and other specific reductions | -101,922 | -84,281 | -104,433 | -119,164 | -114,809 |
| Other sector-specific not transferrable assets | - | -14,414 | -14,287 | -14,608 | -14,499 |
| Conglomerate´s total capital base | 419,150 | 349,024 | 348,941 | 373,611 | 380,939 |
| Capital requirement for banking business | 266,588 | 261,915 | 258,289 | 244,178 | 230,015 |
| Capital requirement for insurance business | 43,505 | 44,705 | 44,805 | 44,705 | 44,912 |
| Minimum amount for capital base | 310,093 | 306,620 | 303,094 | 288,883 | 274,927 |
| Conglomerate´s capital adequacy | 109,057 | 42,404 | 45,847 | 84,728 | 106,012 |
| Capital adequacy ratio, % | 135.2 % | 113.8 % | 115.1 % | 129.3 % | 138.6 % |
The congolerate´s capital adequacy is based on consolidaiton method and is calcuated according to FICO rules and the standards of Financial Supervision Authority.
| Total liabilities by liability class before and after the effect of risk reduction techniques. | |
|---|---|
| Balance sheet items and off-balance sheet items including derivatives by credit counter value. | |
| Liability class | liability Contractual |
Impairment | Net liability | Financial guaran- tees and other substitutions |
Liability after substitution |
Financing collaterals |
Liability after collateral |
amount Risk weighted |
Capital claim | |
|---|---|---|---|---|---|---|---|---|---|---|
| 1 | States and central banks | 586,531 | - | 586,531 | 187,817 | 774,348 | - | 774,348 | - | - |
| 2 | Regional administrations and local authorities | 23,540 | - | 23,540 | 15,348 | 38,888 | - | 38,888 | - | - |
| 3 | Public corporations | 6,168 | - | 6,168 | 2,351 | 8,519 | - | 8,519 | 505 | 40 |
| 4 | International development banks | - | - | - | - | - | - | - | - | - |
| 5 | International organisations | - | - | - | - | - | - | - | - | - |
| 6 | Credit institutions | 1,997,101 | - | 1,997,101 | 19,629 | 2,016,730 | - | 2,016,730 | 364,007 | 29,121 |
| 7 | Enterprises | 846,727 | -2,146 | 844,581 | -41,663 | 802,918 | -65,249 | 737,669 | 679,207 | 54,337 |
| 8 | Households | 816,423 | -1,913 | 814,510 | -181,873 | 632,637 | -29,477 | 603,160 | 426,764 | 34,141 |
| 9 | Real estate collateralised | 4,112,212 | - | 4,112,212 | - | 4,112,212 | - | 4,112,212 | 1,421,450 | 113,716 |
| 10 | Expired receivables | 40,650 | -18,090 | 22,560 | -1,609 | 20,951 | -262 | 20,689 | 23,132 | 1,851 |
| 11 | High-risk items | 3,171 | - | 3,171 | - | 3,171 | - | 3,171 | 3,897 | 312 |
| 12 | Covered bonds | 804,200 | - | 804,200 | - | 804,200 | - | 804,200 | 80,349 | 6,428 |
| 13 | Securitised items | 30,084 | - | 30,084 | - | 30,084 | - | 30,084 | 6,017 | 481 |
| 14 | Short-term enterprise receivables | - | - | - | - | - | - | - | - | - |
| 15 | Mutual fund investments | 18,636 | - | 18,636 | - | 18,636 | - | 18,636 | 11,562 | 925 |
| 16 | Other items | 85,644 | -47,528 | 38,116 | - | 38,116 | - | 38,116 | 23,629 | 1,890 |
| 9,371,087 | -69,677 | 9,301,410 | 0 | 9,301,410 | -94,988 | 9,206,422 | 3,040,519 | 243,242 |
Accounting netting of liabilities has not been carried out.
The impairment principles for liabilities are indicated in a separate table, Impairment of receivables.
The class of receivables Real Estate Collateralised describes receivables that have comprehensive home equity pursuant to the regulations (Standard 4.3c of the Finnish Financial Supervision Authority).
Financial guarantees and other substitution refers to acceptable risk reduction measures (Standard 4.3e of the Finnish Financial Supervision Authority), using which a liability from a contractual liability class is transferred (outflow -) into a liability class with a lower risk weighting and capital claim (inflow +).
Financing collateral is taken into account through a comprehensive method, persuant to how collateral is defined in the regulations (Standard 4.3e of the Finnish Financial Supervision Authority).
Average total exposures before the effect of credit risk reduction techniques
| Liability class | 31.3 | 30.6 | 30.9 | 31.12 | Average 2008 |
|
|---|---|---|---|---|---|---|
| 1 | States and central banks | 302,790 | 269,075 | 362,868 | 586,531 | 380,316 |
| 2 | Regional administrations and local authorities | 15,273 | 16,847 | 16,108 | 23,540 | 17,942 |
| 3 | Public corporations | 179 | 234 | 214 | 6,168 | 1,699 |
| 4 | International development banks | - | - | - | - | - |
| 5 | International organisations | - | - | - | - | - |
| 6 | Credit institutions | 1,647,518 | 1,727,537 | 1,584,730 | 1,997,101 | 1,739,222 |
| 7 | Enterprises | 765,547 | 842,534 | 881,483 | 844,581 | 833,536 |
| 8 | Households | 779,072 | 791,215 | 797,387 | 814,510 | 795,546 |
| 9 | Real estate collateralised | 3,709,631 | 3,911,071 | 4,004,497 | 4,112,212 | 3,934,353 |
| 10 | Expired receivables | 20,525 | 18,651 | 20,843 | 22,560 | 20,645 |
| 11 | High-risk items | 3,171 | 3,170 | 3,171 | 3,171 | 3,171 |
| 12 | Covered bonds | 667,184 | 782,388 | 806,536 | 804,200 | 765,077 |
| 13 | Securitised items | 34,909 | 33,430 | 32,315 | 30,084 | 32,685 |
| 14 | Short-term enterprise receivables | - | - | - | - | - |
| 15 | Mutual fund investments | 21,594 | 21,342 | 20,405 | 18,636 | 20,494 |
| 16 | Other items | 164,105 | 182,288 | 136,783 | 38,116 | 130,323 |
| 8,131,498 | 8,599,782 | 8,667,340 | 9,301,410 | 8,675,008 |
Average total exposures before the effect of risk reduction techniques
Balance sheet items that cover the amounts and off-balance sheet items including derivatives by credit countre value
Total exposures before the effect of credit risk reduction techniques, broken down by maturity
| Liability class | under 3 months |
3–12 months |
1–5 years | 5–10 years | over 10 years |
Total | |
|---|---|---|---|---|---|---|---|
| 1 | States and central banks | 505,847 | 1,566 | 72,507 | 3,004 | 3,606 | 586,531 |
| 2 | Regional administrations and local authorities | 6,996 | - | 2,584 | 2,757 | 11,204 | 23,540 |
| 3 | Public corporations | 5,995 | 52 | - | 32 | 88 | 6,168 |
| 4 | International development banks | - | - | - | - | - | - |
| 5 | International organisations | - | - | - | - | - | - |
| 6 | Credit institutions | 520,783 | 373,256 | 896,460 | 177,150 | 29,451 | 1,997,101 |
| 7 | Enterprises | 66,493 | 108,331 | 173,344 | 155,879 | 340,534 | 844,581 |
| 8 | Households | 24,253 | 33,659 | 118,614 | 133,611 | 504,373 | 814,510 |
| 9 | Real estate collateralised | 48,588 | 79,358 | 249,261 | 483,321 | 3,251,684 | 4,112,212 |
| 10 | Expired receivables | 2,583 | 1,123 | 3,354 | 2,172 | 13,328 | 22,560 |
| 11 | High-risk items | - | - | 3,171 | - | - | 3,171 |
| 12 | Covered bonds | 10,247 | 61,500 | 602,661 | 129,792 | - | 804,200 |
| 13 | Securitised items | - | - | 17,202 | 9,333 | 3,549 | 30,084 |
| 14 | Short-term enterprise receivables | - | - | - | - | - | - |
| 15 | Mutual fund investments | - | - | - | - | 18,636 | 18,636 |
| 16 | Other items | 4,913 | - | 60 | - | 33,142 | 38,116 |
| 1,196,699 | 658,846 | 2,139,218 | 1,097,050 | 4,209,596 | 9,301,410 |
Balance sheet items that cover the amounts and off-balance sheet items including derivatives by credit countre value
Total liabilities before the effect of risk reduction techniques, broken down by region
| Other Nordic |
Other European |
|||||
|---|---|---|---|---|---|---|
| Liability class | Finland | countries | countries | Other | Total | |
| 1 | States and central banks | 516,029 | 10,121 | 60,382 | - | 586,531 |
| 2 | Regional administrations and local authorities | 23,540 | - | - | - | 23,540 |
| 3 | Public corporations | 6,168 | - | - | - | 6,168 |
| 4 | International development banks | - | - | - | - | - |
| 5 | International organisations | - | - | - | - | - |
| 6 | Credit institutions | 735,896 | 255,943 | 942,479 | 62,784 | 1,997,101 |
| 7 | Enterprises | 844,168 | 103 | 311 | - | 844,581 |
| 8 | Households | 814,186 | 141 | 107 | 76 | 814,510 |
| 9 | Real estate collateralised | 4,107,815 | 788 | 3,327 | 283 | 4,112,212 |
| 10 | Expired receivables | 22,560 | - | - | - | 22,560 |
| 11 | High-risk items | 3,171 | - | - | - | 3,171 |
| 12 | Covered bonds | 6,694 | 107,114 | 690,392 | - | 804,200 |
| 13 | Securitised items | - | - | 30,084 | - | 30,084 |
| 14 | Short-term enterprise receivables | - | - | - | - | - |
| 15 | Mutual fund investments | 1,686 | 1,676 | 13,039 | 2,235 | 18,636 |
| 16 | Other items | 32,665 | 1,186 | 3,792 | 473 | 38,116 |
| 7,114,575 | 377,072 | 1,743,913 | 65,851 | 9,301,410 |
Balance sheet items that cover the amounts and off-balance sheet items including derivatives by credit countre value
| Impairment of receivables | Outstand ing debt before im pairment |
Individual impair ments |
Group specific im pairments |
Outstand ing debt after im pairments |
Impair ments in 2008 |
Refunds in 2008 |
Expired receiva bles |
|---|---|---|---|---|---|---|---|
| Households | 4,349,056 | 2,954 | 3,000 | 4,343,102 | - | - | 17,178 |
| Enterprises | 823,579 | 15,351 | 4,435 | 803,793 | - | - | 5,278 |
| Housing corporations | 220,367 | 196 | - | 220,171 | - | - | 104 |
| Non-profit corporations | 46,863 | - | - | 46,863 | - | - | |
| Public corporations | 11,724 | - | - | 11,724 | - | - | - |
| Total | 5,451,590 | 18,501 | 7,435 | 5,425,654 | 0 | 0 | 22,560 |
Final credit losses, recognised before 2007, are not included in historical impairment amounts.
During 2007, only individual impairments were recognised.
Expired receivables are receivables that have been unpaid for over 90 days.
The Retail Banking segment includes Aktia Bank plc's branch office operation, loans arranged by Aktia via Aktia Real Estate Mortgage Bank plc, Aktia Card & Finance and the real estate agencies. Asset Management includes Aktia Bank plc's private bank in Helsinki and the subsidiaries Aktia Fund Management Ltd and Aktia Asset Management Ab. Corporate Banking & Treasury includes Aktia Bank plc's Corporate Banking and Treasury and the subsidiary Aktia Real Estate Mortgage Bank plc , with the exeption of Aktia's own loans arranged via the mortgage bank, and the subsidiary Aktia Corporate Finance. Life Insurance includes the acquired Veritas Life Insurance Group. Miscellaneous includes Aktia plc's real estate business and certain administrative functions that are not allocated to the various business areas. This segment also includes Vasp-Invest Ab.
Net interest income in the varioius segments, especially in retail banking, includes the margins on volumes of borrowing and lending. Reference interests for borrowing and lending and the interest rate risk that arises because of new pricing being out of step are transferred to Treasury in accordance with the Group's internal pricing. Treasury assumes responsibility for the Group's interest rate risk, liquidity and balance protection measures for which management has issued authority. The various segments receive, or are charged with, internal interest based on the average surplus or deficit in liquidity during the period. The costs of central support functions are allocated to the segments in accordance with various allocation rules. Aktia is not allocating equity to the various segments. Miscellaneous consists of any items in the income statement and balance sheet that are not allocated to the various segments. Internal Group transactions between legal entities are eliminated and reported within each segment if the legal entities are in the same segment. Internal Group transactions between legal entities in different segments are included in the elimination. The share of profits in associated undertakings and the minority interest's share are included in the elimination.
The reported segments are:
Comparative figures for 2008 concerning the new division into segments will be published before the interim report for 1 January – 31 March 2009.
| ment-based reporting | |
|---|---|
| Group seg | |
| Income statement 31.12 | Retail Banking | Corp. Banking & Treasury |
Asset Management | Life Insurance | Miscellaneous | Eliminations | Total Group | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (EUR 1,000) | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 |
| Net interest income | 62,673 | 61,985 | 34,525 | 24,178 | 1,777 | 1,728 | - | - | 5,058 | 3,579 | -3,079 | -2,593 | 100,953 | 88,877 |
| Dividends | 112 | 15 | 228 | 426 | 119 | 89 | - | - | 2,331 | 3,475 | -1,395 | -2,464 | 1,395 | 1,541 |
| Net commission income | 30,615 | 31,288 | -4,800 | -3,589 | 11,053 | 13,699 | - | - | 3,292 | 4,501 | 874 | 1,448 | 41,034 | 47,346 |
| Income from life insurance business | - | - | - | - | - | - | 103,501 | 189,157 | - | - | -61,596 | -54,221 | 41,906 | 134,936 |
| Net income from financial transactions | 0 | 0 | -2,852 | 552 | -624 | 441 | - | - | 117 | 1,834 | - | -569 | -3,359 | 2,257 |
| Net income from investment properties | 50 | 10 | - | - | - | - | - | - | 6,176 | 551 | -216 | -81 | 6,010 | 480 |
| Other operating income | 3,604 | 1,809 | 2,546 | 1,607 | 142 | 223 | - | - | 12,351 | 5,473 | -3,685 | -6,046 | 14,958 | 3,067 |
| Total operating income | 97,053 | 95,107 | 29,647 | 23,174 | 12,467 | 16,180 | 103,501 | 189,157 | 29,325 | 19,413 | -69,097 | -64,526 | 202,897 | 278,504 |
| Claims paid and change in provisions for | ||||||||||||||
| insurance business | - | - | - | - | - | - | -75,664 | -133,757 | - | - | - | 19,900 | -75,664 | -113,857 |
| Staff costs | -30,142 | -28,113 | -4,523 | -4,508 | -4,755 | -4,863 | -7,129 | -7,794 | -12,855 | -12,047 | -1,200 | - | -60,605 | -57,325 |
| Other administrative expenses | -43,272 | -37,337 | -6,003 | -6,101 | -3,466 | -3,658 | -5,833 | -6,653 | 11,282 | 9,777 | 8,874 | 8,471 | -38,419 | -35,501 |
| Negative goodwill recorded as income | - | - | - | - | - | - | - | - | - | - | - | 12,082 | - | 12,082 |
| Depreciation | -1,642 | -1,398 | -319 | -250 | -430 | -401 | -433 | -641 | -1,577 | -954 | -1,280 | -1,478 | -5,682 | -5,121 |
| Other operating expenses | -7,731 | -5,077 | -1,226 | -1,013 | -607 | -603 | - | - | -6,862 | -5,852 | 240 | 81 | -16,186 | -12,464 |
| Total operating expenses | -82,788 | -71,924 | -12,071 | -11,872 | -9,258 | -9,525 | -89,059 | -148,846 | -10,012 | -9,076 | 6,634 | 39,057 | -196,554 | -212,186 |
| Impariment and reversal of | ||||||||||||||
| impairment on tangible and | ||||||||||||||
| intangible assets | - | - | - | - | - | - | - | - | 1,002 | - | -260 | - | 743 | - |
| Write-downs on credits and other | ||||||||||||||
| commitments | -708 | -231 | - | -33 | - | - | - | - | - | 46 | - | - | -708 | -218 |
| Share of profit from associated companies | - | - | - | - | - | - | - | 191 | - | - | 230 | 5 | 230 | 195 |
| Operating profit | 13,557 | 22,951 | 17,576 | 11,269 | 3,209 | 6,655 | 14,442 | 40,502 | 20,316 | 10,383 | -62,493 | -25,465 | 6,606 | 66,295 |
| Contribution from insurance business to groups' | ||||||||||||||
| operating profit | -47,669 | 5,258 | ||||||||||||
| Balance sheet | Retail Banking | Corp. Banking & Treasury |
Asset Management | Life Insurance | Miscellaneous | Eliminations | Total Group | |||||||
| (EUR 1,000) | 31.12.2008 | 31.12.2007 | 31.12.2008 | 31.12.2007 | 31.12.2008 | 31.12.2007 | 31.12.2008 | 31.12.2007 | 31.12.2008 | 31.12.2007 | 31.12.2008 | 31.12.2007 | 31.12.2008 | 31.12.2007 |
| Cash and balances with central banks | 9,138 | 10,054 | 493,365 | 218,286 | 100 | 69 | 13,406 | 6,864 | - | - | -9,698 | - | 506,311 | 235,273 |
| Financial assets valued through | ||||||||||||||
| income statement | - | - | 4,547 | - | - | - | 14,946 | - | - | - | - | - | 19,492 | - |
| Financial assets available for sale | 914 | 878 | 2,354,039 | 1,716,199 | 13,235 | 13,295 | 648,601 | 713,004 | 36,957 | 51,024 | -16,419 | -15,680 | 3,037,328 | 2,478,719 |
| Loans and other receivables | 3,868,684 | 3,353,811 | 1,660,905 | 1,396,172 | 17,644 | 18,223 | - | - | 86 | 478 | -21,124 | -11,674 | 5,526,194 | 4,757,011 |
| Investments for unit-linked provisions | - | - | - | - | - | - | 148,119 | 203,134 | - | - | - | - | 148,119 | 203,134 |
| Other assets | 20,256 | 16,854 | 445,926 | 245,299 | 7,164 | 3,645 | 21,530 | 58,104 | 120,398 | 66,370 | -312,646 | -111,597 | 302,629 | 278,675 |
| Total assets | 3,898,993 | 3,381,597 | 4,958,781 | 3,575,957 | 38,142 | 35,232 | 846,602 | 981,106 | 157,442 | 117,872 | -359,887 | -138,951 | 9,540,073 | 7,952,813 |
Deposits 2,805,024 2,464,938 2,103,157 1,136,759 130,126 135,886 - - 1,592 - -24,622 -7,593 5,015,277 3,729,991 Debt securities issued - - 2,134,057 1,994,664 - - - - - - -15,324 -14,185 2,118,733 1,980,478 Provisions for life insurance business - - - - - - 777,176 854,843 - - - - 777,176 854,843 Other liabilities 31,196 25,979 1,143,635 881,566 15,930 6,742 11,143 31,964 227,971 183,334 -117,763 -81,093 1,312,112 1,048,492 Total liabilities 2,836,220 2,490,917 5,380,849 4,012,989 146,056 142,628 788,319 886,806 229,562 183,334 -157,709 -102,871 9,223,298 7,613,804
62
Aktia Bank plc acquired AUM operations of Kaupthing 1 December 2008. Transfer of business operations does not include acquisition of shares. At the time of acquisition, immaterial rights were examined and the following items, to be depreciated during the next five years, were identified:
| Intangible assets | 1 December 2008 |
|---|---|
| IT application concerning portfolio management, quantitative and quality analysis. | 700 |
| Customer relations, Finnish institutional investors | 800 |
| Acquisition price, paid in cash | 1,500 |
The merger with Veritas Non-Life Insurance was completed 1 January 2009 in accordance with the merger plan approved
From 1 jJanuary 2009 onwards, non-life insurance business is operated by the 100 % Aktia plc-owned subsidiary Aktia Non-Life Insurance Ltd.
| 1 January 2009 | |||
|---|---|---|---|
| Assets | Veritas Mutual Non-Life Insurance Company |
Fair value adjustments |
Veritas Mutual Non Life Insurances' acquisition balance sheet |
| Cash and bank balances | 12,979 | 12,979 | |
| Investments | 134,424 | 134,424 | |
| Intangible assets | 1,488 | 1,400 | 2,888 |
| Tangible assets | 793 | 793 | |
| Other assets | 14,127 | 14,127 | |
| Total assets | 163,811 | 1,400 | 165,211 |
| Liabilities | |||
| Provisions for life insurance business | 94,031 | 11,975 | 106,006 |
| Other liabilities | 5,573 | 700 | 6,273 |
| Deferred tax liabilities | 13,310 | -2,932 | 10,378 |
| Total liabilities | 112,914 | 9,743 | 122,657 |
| Net assets according to IFRS | 42,554 | ||
| Compensation for the merger | 40,800 | ||
| Activated acquisition costs | 1,630 | ||
| Acquisition price | 42,430 | ||
| - of which paid in cash | 1,630 | ||
| - of which 6,800,000 shares in Aktia plc at EUR 6 per share have been given as compensation for the merger. | 40,800 | ||
| Difference = negative goodwill | 124 |
As compensation for the merger, Aktia plc has issued 6,800,000 new shares in accordance with the approved merger plan. The evaluation of the issued shares was based on trading at the end of the year.
Customer related immaterial rights were examined when constructing the acquisition balance sheet. The client base of Veritas Non-Life Insurance. was 70,000 at the time of acquisition. Estimated value of each client was EUR 20 leading to value of EUR 1,400,000 of immaterial rights. This value will be depreciated duirng the next two years. Other immaterial asset has valued to zero in the acquisition balance.
Current values of technical provisions were adjusted based on assessments at fair value according to IFRS 4.32 and 4.31. After deductions for deferred tax, the equalisation provision included in technical provision was also entered as shareholders' equity according to IFRS rules.
Net assets in the preliminary acquisition balance were higher than the total acquisition price. That led to a preliminary negative goodwill of EUR 124,000 at the time of acquisition which will be recognised in the income statement for the first quarter of 2009.
| Interest income | 2008 | 2007 |
|---|---|---|
| Interest income from cash and balances with central banks | 9,320 | 8,065 |
| Interest income from financial assets held for trading | 497 | 306 |
| Interest income from financial assets that can be sold | 92,901 | 54,192 |
| Interest income from claims on credit institutes | 6,138 | 3,661 |
| Interest income from claims on public and public sector entities | 273,469 | 205,138 |
| Interest income från finance lease contracts | 516 | - |
| Interest income from loans and other receivables | 280,123 | 208,798 |
| Interest income from investments held until maturity | 2,467 | 2,290 |
| Interest income from hedging instruments | 691 | -1,526 |
| Other interest income | 130 | 279 |
| Total | 386,129 | 272,404 |
| Interest expenses | ||
| Interest expenses from deposits, credit institutes | -77,034 | -42,304 |
| Interest expenses from deposits, other public entities | -94,174 | -64,848 |
| Interest expenses from deposits | -171,208 | -107,152 |
| Interest expenses for debt securities issued to the public | -97,100 | -66,826 |
| Interest expenses for subordinated liabilities | -8,099 | -6,302 |
(EUR 1,000)
| Net interest income | 100,953 | 88,877 |
|---|---|---|
| Total | -285,176 | -183,526 |
| Other interest expenses | -68 | -340 |
| Interest costs for interest-rate derivatives in issued bonds | 109 | -295 |
| Interest expenses for hedging instruments | -8,811 | -2,612 |
| Interest expenses from securities issued and subordinated liabilities | -105,199 | -73,128 |
| 2008 | 2007 | |
|---|---|---|
| Dividend income from shares available for sale | 482 | 1,541 |
| Dividend income from shares held for trading | 913 | - |
| Total | 1,395 | 1,541 |
Life insurance business' dividends included in Net income from investments, see note 9.
| Commission income | 2008 | 2007 |
|---|---|---|
| Lending | 5,381 | 4,511 |
| Borrowing | 126 | 120 |
| Payment transactions | 11,047 | 10,638 |
| Asset management services | 23,970 | 31,076 |
| Brokerage of insurance | 1,734 | 1,857 |
| Guarantees and other off-balance sheet commitments | 633 | 598 |
| Real estate agency | 7,077 | 7,432 |
| Other commission income | 842 | 950 |
| Total | 50,809 | 57,182 |
| Net commission income | 41,034 | 47,346 |
|---|---|---|
| Total | -9,775 | -9,836 |
| Other commission expenses | -9,109 | -9,186 |
| Bank fees paid | -666 | -651 |
| Commission expenses |
Note 8. Premium income from the life insurance business
| Premium income from insurance agreements | 2008 | 2007 |
|---|---|---|
| Insurance agreements | 91,325 | 99,967 |
| Reinsurance agreements | 26 | 58 |
| Total gross income from premiums before the assuming company's share | 91,350 | 100,025 |
| Assuming company's share | -313 | -207 |
| Total income from premiums | 91,037 | 99,817 |
| Premium income from insurance agreements with a discretionary element | ||
| Saving plans | 8,783 | 12,465 |
| Individual pension insurance | 15,907 | 16,865 |
| Group pension insurance | 4,067 | 3,961 |
| Personal insurance | 18,686 | 18,582 |
| Group life insurance for employers | 777 | 783 |
| Other group life insurance | 51 | 104 |
| Risk insurance | 19,514 | 19,469 |
| Total | 48,271 | 52,761 |
| Premium income from unit-linked agreements | ||
| Saving plans | 32,524 | 38,364 |
| Individual pension insurance | 9,763 | 8,512 |
| Group pension insurance | 479 | 181 |
| Total | 42,766 | 47,057 |
| Total income from premiums | 91,037 | 99,817 |
| On-going and one-off premiums from direct insurance | ||
| On-going premiums | 60,435 | 60,851 |
| One-off premiums | 30,602 | 38,966 |
| Total income from premiums | 91,037 | 99,817 |
Insurance business' net income from investments
| Derivative contracts | 2008 | 2007 |
|---|---|---|
| Profit and losses | 2,387 | -364 |
| Total | 2,387 | -364 |
| Debt securities | ||
|---|---|---|
| Interest income | 837 | 0 |
| Profit and losses | -1,198 | 0 |
| Other income and expenses | - | 0 |
| Total | -361 | 0 |
| Net income from financial assets available for sale | ||
| Interest income | 20,273 | 16,843 |
| Capital gains and losses | -359 | -1,563 |
| Impairments | -4,871 | - |
| Other income and expenses | -212 | -431 |
| Debt securities | 14,831 | 14,849 |
| Dividends | 4,747 | 3,552 |
| Capital gains and losses | -39,936 | 12,485 |
| Impairments | -29,423 | - |
| Other income and expenses | -1,282 | -423 |
| Shares and participations | -65,894 | 15,614 |
| Total | -51,062 | 30,463 |
| Net income from investment properties | ||
| Rental income | 34 | 9,986 |
| Direct expenses from investment properties, which generated rental income during | ||
| the accounting period | -20 | -4,779 |
| Total | 14 | 5,206 |
| Expenses from financial liabilities | ||
| Subordinated liabilities | -109 | -186 |
| Total | -109 | -186 |
| Total for the Insurance business' net income from the investment business | -49,131 | 35,119 |
| Exchange rate differences included in net income from the investment business | -2,832 | -1,427 |
| Debt securities | 2008 | 2007 |
|---|---|---|
| Capital gains and losses | 90 | 83 |
| Total | 90 | 83 |
| Derivative contracts | ||
| Valuation gains and losses | -178 | - |
| Ineffective share of the cash flow hedging | 79 | -44 |
| Total | -100 | -44 |
| Other | ||
| Capital gains and losses | 3 | -5 |
| Total | 3 | -5 |
| Total | ||
|---|---|---|
| Capital gains and losses | 93 | 79 |
| Valuation gains and losses | -178 | - |
| Ineffective share of the cash flow hedging | 79 | -44 |
| Net income from financial assets and liabilities held for trading and | ||
| cash flow hedging, net | -7 | 35 |
| Net income from currency trading | 1,248 | 1,094 |
| Net income from securitites and currency trading | 1,241 | 1,129 |
| Net income from financial assets available for sale | ||
| Debt securities | ||
| Capital gains and losses | 365 | 132 |
| Transferred from the fund at fair value | -358 | -455 |
| Impairment losses | -1,786 | - |
| Total | -1,779 | -323 |
| Shares and participations | ||
| Capital gains and losses | 451 | 2,119 |
| Transferred from the fund at fair value | 398 | -434 |
| Impairment losses | -1,014 | - |
| Total | -165 | 1,685 |
| Other | ||
| Capital gains and losses | 1,038 | -112 |
| Impairment losses | -1,796 | - |
| Total | -758 | -112 |
| Total | ||
| Capital gains and losses | 1,854 | 2,139 |
| Transferred from the fund at fair value | 40 | -889 |
| Impairment losses | -4,596 | - |
| Net income from financial assets available for sale | -2,702 | 1,250 |
| Net result from hedge accounting | ||
| Fair value hedging | ||
| Financial derivatives hedging repayable on demand liabilities | 16,093 | -8,762 |
| Financial derivatives hedging issued bonds | 16,875 | -1,511 |
| Changes in the actual value of the hedge instrument, net | 32,968 | -10,273 |
| Repayable on demand liabilities | -16,993 | 8,616 |
| Bonds issued | -17,873 | 1,536 |
| Changes in the fair value of items that are hedged, net | -34,866 | 10,152 |
| Total | -1,898 | -121 |
Inefficiency is reported in the income statement under net result from hedge accounting'.
Net income from financial transactions -3,359 2,257
67
| 2008 | 2007 | |
|---|---|---|
| Rental income | 1,988 | 1,618 |
| Capital gains | 4,677 | 248 |
| Reversal if impairment losses | 751 | - |
| Other income from investment properties | 27 | 37 |
| Capital losses | -218 | -56 |
| Depreciation | -13 | -50 |
| Direct expenses from investment properties, which generated rental income during | ||
| the accounting period | -1,201 | -1,317 |
| Net income from investment properties | 6,010 | 480 |
| 2008 | 2007 | |
|---|---|---|
| Rental income | 22 | 17 |
| Profit from sale of tangible and intangible assets | 8,198 | 214 |
| Other income from the credit institute's own business | 4,713 | 1,861 |
| Other operating income | 2,025 | 974 |
| Total | 14,958 | 3,067 |
| Saving plans | 2008 | 2007 |
|---|---|---|
| Repayment of saving sums | -14,653 | -11,312 |
| Payments in the event of death | -3,180 | -2,237 |
| Repurchase | -11,705 | -5,028 |
| Total | -29,539 | -18,577 |
| Individual pension insurance | ||
| Pensions | -17,350 | -14,287 |
| Payments in the event of death | -765 | -114 |
| Repurchase | -442 | -410 |
| Total | -18,556 | -14,810 |
| Group pension insurance | ||
| Pensions | -2,468 | -1,988 |
| Repurchase | - | -40 |
| Other | -27 | -22 |
| Total | -2,495 | -2,050 |
| Risk insurance | ||
| Individual insurance | -12,675 | -11,981 |
| Group life insurance for employers | -568 | -555 |
| Other group life insurance | -47 | -33 |
| Total | -13,290 | -12,568 |
| Total claims paid from insurance agreements with discretionary element | -63,880 | -48,006 |
| Saving plans | |
|---|---|
| Repayment of saving sums -3,007 |
-1,890 |
| Payments in the event of death -4,964 |
-2,921 |
| Repurchase -14,565 |
-11,373 |
| Total -22,535 |
-16,184 |
| Individual pension insurance | |
| Pensions -132 |
-91 |
| Payments in the event of death -60 |
-127 |
| Repurchase -94 |
-71 |
| Total -286 |
-289 |
| Group pension insurance | |
| Pensions - |
- |
| Payments in the event of death - |
- |
| Repurchase - |
- |
| Total 0 |
0 |
| Total claims paid from unit-linked insurances -22,822 |
-16,473 |
| Total claims paid -86,702 |
-64,478 |
| 2008 | 2007 | |
|---|---|---|
| Changes in claims provisions, interest-linked | -5,648 | -11,622 |
| Changes in premium provisions, interest-linked | 32,372 | -8,537 |
| Change in provisions, interest-linked policies | 26,724 | -20,160 |
| 2008 | 2007 | |
|---|---|---|
| Changes in claims provisions, unit-linked | 275 | -576 |
| Changes in premium provisions, unit-linked | 50,669 | -33,062 |
| Changes in value of unit-linked investments, net | -66,629 | 4,419 |
| Change in provisions, unit-linked policies | -15,686 | -29,219 |
69
| 2008 | 2007 | |
|---|---|---|
| Other staff expenses | -4,833 | -4,299 |
| Office expenses | -3,675 | -3,102 |
| IT-expenses | -16,406 | -14,821 |
| Communication expenses | -3,893 | -3,396 |
| Representation and marketing expenses | -7,890 | -6,961 |
| Other administrative expenses | -1,722 | -2,922 |
| Total | -38,419 | -35,501 |
| Note 18. | Depreciations of intangible and tangible assets | ||
|---|---|---|---|
| 2008 | 2007 | ||
| Depreciation of tangible assets | -1,910 | -2,117 | |
| Depreciation of intangible assets | -3,772 | -3,004 | |
| Total | -5,682 | -5,121 |
| Note 19. | Other operating expenses |
|---|---|
| 2008 | 2007 | |
|---|---|---|
| Rental expenses | -5,447 | -3,560 |
| Expenses for commercial properties | -3,500 | -3,528 |
| Insurance- and security expenses | -1,610 | -2,027 |
| Monitoring, control and membership fees | -903 | -775 |
| Capital losses from commercial properties and other tangible assets | -199 | - |
| Other operating expenses | -4,527 | -2,573 |
| Total | -16,186 | -12,464 |
| Note 20. Impairment and reversal of impairment on intangible and tangible assets |
|||
|---|---|---|---|
| 2008 | 2007 | ||
| Impairment of tangible and intangible assets | -260 | - | |
| Impairment of shares in real estate corporations | - | - | |
| Total iImpairment losses | -260 | - | |
| Reversal of impairments on tangible and intangible assets for previous years | 112 | - | |
| Reversal of impairment on shares in real estate corporations | 890 | - | |
| Total reversal of imairment losses | 1,002 | - | |
| Total | 743 | - |
| Note 21. Taxes |
||
|---|---|---|
| 2008 | 2007 | |
| Income taxes on the ordinary business | -11,716 | -16,273 |
| Income taxes from previous financial years | -124 | 60 |
| Changes in deferred taxes | 11,028 | 2,763 |
| Total | -812 | -13,450 |
More information on deferred taxes is presented in note 32. The tax on the Group's profit before tax deviates from the theoretical value that should arise when using the tax rate for the parent company as follows:
| Profit before tax | 6,606 | 66,295 |
|---|---|---|
| Tax calculated on a 26% tax rate | 1,718 | 17,237 |
| Non-deductible expenses | 327 | 261 |
| Tax free income | -1,082 | -3,917 |
| Unused write-downs for tax purposes | -602 | -178 |
| Tax on the share of the profit from associated undertakings | -60 | -51 |
| Income taxes from previous financial years | 124 | -60 |
| Other | 388 | 158 |
| Income tax | 812 | 13,450 |
The only tax that is booked directly against the equity is attributable to the fund at fair value and is specified in note 47.
| Note 22. Earnings per share |
||
|---|---|---|
| 2008 | 2007 | |
| Profit for the financial year attributable to shareholders in Aktia plc | 5,170 | 51,951 |
| Average number of A shares | 40,116,985 | 39,762,048 |
| Average number of B shares | 20,050,850 | 20,050,850 |
| Average number of shares | 60,167,835 | 59,812,898 |
| Earning per share | 0.09 | 0.87 |
| Diluted earning per share | 0.09 | 0.87 |
| Note 23. | Cash and balances with central banks | |
|---|---|---|
| 2008 | 2007 | |
| Cash in hand | 9,970 | 10,866 |
| The Life Insurance business' cash and bank | 3,708 | 6,864 |
| Bank of Finland current account | 492,632 | 217,543 |
| Total | 506,311 | 235,273 |
| Note 24. Financial assets valuated through income statement |
||
|---|---|---|
| 2008 | 2007 | |
| Financial assets held for trading in banking business | 4,547 | - |
| Financial assets valued through income statement in life insurance business | 14,946 | - |
| Total | 19,492 | - |
| 2008 | 2007 | |
|---|---|---|
| Interest bearing securities, central and local goverment | 21,717 | 17,539 |
| Interest bearing securities, credit institutes | 2,305,738 | 1,681,763 |
| Interest bearing securities, other | 55,220 | 27,081 |
| Interest bearing securities, banking business | 2,382,675 | 1,726,383 |
| Interest bearing securities, central and local goverment | 211,650 | 62,897 |
| Interest bearing securities, credit institutes | 125,866 | 165,381 |
| Interest bearing securities, other | 88,281 | 117,574 |
| Interest bearing securities, life insurance business | 425,797 | 345,852 |
| Total interest-bearing securities | 2,808,472 | 2,072,235 |
|---|---|---|
| Publicly quoted shares and holdings | 18,530 | 51,186 |
| Shares and holdings that are not publicly quotes | 3,346 | 3,231 |
| Shares and holdings, banking business | 21,876 | 54,418 |
| Publicly quoted shares and holdings | 151,148 | 324,856 |
| Shares and holdings that are not publicly quotes | 55,832 | 27,210 |
| Shares and holdings, life insurance business | 206,980 | 352,066 |
| Total shares and holdings | 228,856 | 406,484 |
| Total financial assets available for sale | 3,037,328 | 2,478,719 |
Write-downs for financial assets available for sale stod at EUR 39.2 million as a result of significant or long-term negative value changes in shares and share funds and in interest-bearing securities where the issuer has noted an inability to pay. The limit for significant falls varies between 25% and 45%, depending on the volatility of the shares, while a long-term fall is noted if the share price remains continuously below the acquisition value for 18 months. As at 31 December 2008, write-downs were recorded against the value of investments in shares and participations above totalling EUR 30,4 million, of which EUR 29.4 million is attributable to the life insurance company's investments. The write-down amount in the life insurance company is significant, despite a conservative investment policy, portfolio diversification and active hedging. The share weighting was reduced significantly during the autumn, standing at approximately EUR 40 million at year-end.
Write-downs of interest-bearing securities totalled EUR 8.8 million, of which EUR 5.4 million is attributable to claims on, and agreements with, the bankrupt Lehman Brothers.
| Nedskrivningar av finansiella tillgångar | 2008 | |
|---|---|---|
| Interest-bearing securities | ||
| Banking business | 3,629 | |
| Life insurance business | 5,138 | |
| Shares and participations | ||
| Banking business | 1,014 | |
| Life insurance business | 29,423 | |
| Totalt | 39,203 |
Above mentioned write-downs reported in income statement are included in notes 9 and 10.
| 2008 | 2007 | |
|---|---|---|
| Repayable on demand claims on credit institutes | 6,040 | 5,493 |
| Other claims on credit institutes that are not repayable on demand | 94,500 | 177,772 |
| Lending to credit institutions | 100,540 | 183,265 |
| Transaction account credits, general and corporate | 91,147 | 63,773 |
| Credit bonds | 5,304,956 | 4,501,497 |
| Receivables from finance lease contracts | 13,288 | - |
| Loans | 5,409,391 | 4,565,269 |
| Write-downs for loans outstanding by group | -7,435 | -11,500 |
| Syndicated loans and sale and repurchase agreements, domestic/foreign | 23,523 | 19,787 |
| Bank guarantee claims | 175 | 190 |
| Lending to the public and public sector entities | 5,425,654 | 4,573,746 |
| Total | 5,526,194 | 4,757,011 |
The bank has in the category receivables from the public and public sector entities only receivables other than those repayable on demand.
| Total | 5,425,654 | 4,573,746 |
|---|---|---|
| Non-profit associations | 46,863 | 37,977 |
| Public associations | 11,724 | 10,026 |
| Housing associations | 220,171 | 185,221 |
| Companies | 803,793 | 557,959 |
| Households | 4,343,102 | 3,782,563 |
| and reversed write-downs for these |
| Write-downs at the beginning of the financial year | 26,644 | 26,862 |
|---|---|---|
| Write-downs at the end of the financial year | -5,230 | -779 |
| Individual write-downs of other commitments | -10 | - |
| Reversal of write-downs on credits outstanding by group for previous years | 4,065 | - |
| Reversal of write-downs on individual credits for the previous years | 391 | 536 |
| Reversal of write-downs on other individual commitments for the previous years | 1 | 3 |
| Reversal of impairment losses on credits | 75 | 21 |
| Total | -708 | -218 |
| Write-downs at the end of the financial year | 25,935 | 26,644 |
There are only write-downs on loans and other receivables.
Description of securities obtained and information on the fair values is commented on in note 2, risk management.
| Under 1 year | 2,323 | - |
|---|---|---|
| 1-5 years | 8,327 | - |
| Over 5 years | 6,654 | - |
| Gross investment | 17,304 | - |
| Unearned future finance income | -4,016 | - |
| Net investment in finance leases | 13,288 | - |
| Present value of future minimum lease payments receivables | ||
| Under 1 year | 1,565 | - |
| 1-5 years | 5,719 | - |
| Over 5 years | 6,005 | - |
| Total | 13,288 | - |
| Note 27. Financial assets held until maturity |
||
|---|---|---|
| 2008 | 2007 | |
| Interest bearing securities, states | - | - |
| Interest bearing securities, other public corporations | - | - |
| Interest bearing securities, other | 35,885 | 45,840 |
| Total | 35,885 | 45,840 |
| 74 | |
|---|---|
| 31 December 2008 | Immaterial rights |
Other long-term expenditures |
Total |
|---|---|---|---|
| Acquisition cost at 1 January | 11,128 | 9,154 | 20,283 |
| Increases | 4,702 | 2,378 | 7,080 |
| Decreases | -4,499 | -4,511 | -9,011 |
| Acquisition cost at 31 December | 11,330 | 7,021 | 18,352 |
| Accumulated depreciations and impairments at 1 January | -6,289 | -6,568 | -12,857 |
| Accumulated depreciation on decreases | 4,471 | 4,471 | 8,942 |
| Planned depreciation | -2,772 | -999 | -3,772 |
| Impairments | - | -260 | -260 |
| Accumulated depreciations and impairments at 31 December | -4,590 | -3,356 | -7,946 |
| Book value at 31 December | 6,741 | 3,665 | 10,406 |
| Other | |||
|---|---|---|---|
| 31 December 2007 | Immaterial rights |
long-term expenditures |
Total |
| Acquisition cost at 1 January | 4,797 | 7,782 | 12,579 |
| Acquisitions | 3,733 | - | 3,733 |
| Increases | 2,689 | 1,617 | 4,306 |
| Decreases | -90 | -245 | -336 |
| Acquisition cost at 31 December | 11,128 | 9,154 | 20,283 |
| Accumulated depreciations and impairments at 1 January | -4,387 | -5,504 | -9,891 |
| Accumulated depreciation on decreases | 34 | 4 | 38 |
| Planned depreciation | -1,936 | -870 | -2,806 |
| Impairments | - | -198 | -198 |
| Accumulated depreciations and impairments at 31 December | -6,289 | -6,568 | -12,857 |
| Book value at 31 December | 4,840 | 2,586 | 7,426 |
| Land and | Shares and participations in real estate |
|||
|---|---|---|---|---|
| 31 December 2008 | water areas | Buildings | corporations | Total |
| Acquisition cost at 1 January | 16,390 | 42,046 | 30,375 | 88,811 |
| Increases | 13 | - | 5,266 | 5,280 |
| Decreases | -16,278 | -42,296 | -27,579 | -86,153 |
| Acquisition cost at 31 December | 125 | -250 | 8,062 | 7,938 |
| Accumulated depreciations and impairments at 1 January | -32 | -4,465 | -5,151 | -9,648 |
| Accumulated depreciation on decreases | - | 4,747 | 267 | 5,014 |
| Planned depreciation | - | -13 | - | -13 |
| Reversal of impairments | 2 | 19 | 320 | 341 |
| Accumulated depreciations and impairments at 31 December | -30 | 287 | -4,564 | -4,307 |
| Book value at 31 December | 95 | 37 | 3,498 | 3,631 |
| Carrying amount at December, 31 | 95 | 37 | 3,995 | 4,128 |
| 31 December 2007 | Land and water areas |
Buildings | Shares and participations in real estate corporations |
Total |
|---|---|---|---|---|
| Acquisition cost at 1 January | 664 | 3,439 | 15,010 | 19,114 |
| Acquisitions | 28,717 | 69,914 | 20,380 | 119,011 |
| Increases | - | 139 | 3,486 | 3,626 |
| Decreases | -12,991 | -31,447 | -8,502 | -52,940 |
| Acquisition cost at 31 December | 16,390 | 42,046 | 30,375 | 88,811 |
| Accumulated depreciations and impairments at 1 January | -32 | -2,611 | -4,884 | -7,527 |
| Accumulated depreciation on decreases | - | 368 | - | 368 |
| Planned depreciation | - | -2,222 | -267 | -2,489 |
| Accumulated depreciations and impairments at 31 December | -32 | -4,465 | -5,151 | -9,648 |
| Book value at 31 December | 16,358 | 37,581 | 25,224 | 79,163 |
| Carrying amount at December, 31 | 16,479 | 38,064 | 27,315 | 81,858 |
| Land and | Shares and participations in real estate |
|||
|---|---|---|---|---|
| 31 December 2008 | water areas | Buildings | corporations | Total |
| Acquisition cost at 1 January | 458 | 3,620 | 28,680 | 32,758 |
| Increases | - | - | 9,427 | 9,427 |
| Decreases | -458 | -4,199 | -35,645 | -40,302 |
| Acquisition cost at 31 December | 0 | -579 | 2,463 | 1,883 |
| Accumulated depreciations and impairments at 1 January | -8 | -2,717 | -3,763 | -6,487 |
| Accumulated depreciation on decreases | - | 3,204 | - | 3,204 |
| Planned depreciation | - | -12 | - | -12 |
| Reversal of impairments | 8 | 104 | 1,300 | 1,412 |
| Accumulated depreciations and impairments at 31 December | 0 | 579 | -2,463 | -1,883 |
| Book value at 31 December | 0 | 0 | 0 | 0 |
| 31 December 2007 | Land and water areas |
Buildings | Shares and participations in real estate corporations |
Total |
|---|---|---|---|---|
| Acquisition cost at 1 January | 458 | 3,962 | 25,524 | 29,944 |
| Acquisitions | - | - | 3,221 | 3,221 |
| Increases | - | 3 | 3,421 | 3,424 |
| Decreases | - | -345 | -3,486 | -3,831 |
| Acquisition cost at 31 December | 458 | 3,620 | 28,680 | 32,758 |
| Accumulated depreciations and impairments at 1 January | -8 | -3,011 | -3,763 | -6,782 |
| Accumulated depreciation on decreases | - | 345 | - | 345 |
| Planned depreciation | - | -51 | - | -51 |
| Accumulated depreciations and impairments at 31 December | -8 | -2,717 | -3,763 | -6,487 |
| Book value at 31 December | 450 | 903 | 24,918 | 26,271 |
| 31 December 2008 | Machines and equipment |
Insurance business. machinery and equipment |
Other tangible assets |
Total tangible assets |
|---|---|---|---|---|
| Acquisition cost at 1 January | 27,797 | 389 | 15,650 | 165,405 |
| Increases | 1,682 | 542 | 113 | 17,044 |
| Decreases | -24,546 | -44 | -12,873 | -163,917 |
| Acquisition cost at 31 December | 4,933 | 887 | 2,890 | 18,532 |
| Accumulated depreciations and impairments at 1 January | -25,113 | -166 | -12,807 | -54,221 |
| Accumulated depreciation on decreases | 24,520 | 18 | 12,873 | 45,628 |
| Planned depreciation | -1,128 | -111 | -660 | -1,924 |
| Reversal of impairments | - | - | - | 1,753 |
| Accumulated depreciations and impairments at 31 December | -1,720 | -259 | -594 | -8,763 |
| Book value at 31 December | 3,213 | 628 | 2,296 | 9,769 |
| Machines and | Insurance business. machinery and |
Other tangible |
Total tangible |
|
|---|---|---|---|---|
| 31 December 2007 | equipment | equipment | assets | assets |
| Acquisition cost at 1 January | 26,862 | - | 14,907 | 90,827 |
| Acquisitions | - | 447 | 32 | 122,712 |
| Increases | 1,424 | 63 | 710 | 9,248 |
| Decreases | -489 | -122 | - | -57,382 |
| Acquisition cost at 31 December | 27,797 | 389 | 15,650 | 165,405 |
| Accumulated depreciations and impairments at 1 January | -24,561 | - | -11,980 | -50,850 |
| Accumulated depreciation on decreases | 477 | 45 | - | 1,235 |
| Planned depreciation | -1,029 | -211 | -827 | -4,606 |
| Accumulated depreciations and impairments at 31 December | -25,113 | -166 | -12,807 | -54,221 |
| Book value at 31 December | 2,685 | 223 | 2,843 | 111,184 |
| Note 30. Investments in associated companies |
||
|---|---|---|
| 2008 | 2007 | |
| Acquisition cost at 1 January | 3,764 | 2,097 |
| Share of profits at 1 January | -208 | 130 |
| Investments | 784 | 1,667 |
| Share of profit from associated companies | 230 | 5 |
| Dividends obtained during the financial year | -72 | -343 |
| Book value at 31 December | 4,497 | 3,556 |
| Associated companies at 31 December 2008 | Assets | Liabilities | Operating profit |
Profit for the reporting period |
|---|---|---|---|---|
| Oy Samlink Ab, Helsingfors | 16,957 | 9,048 | 1,889 | 1,205 |
| Unicus Ab, Helsingfors | 350 | 287 | -291 | -287 |
| ACH Finland Abp, Esbo | 2,836 | 44 | -281 | -209 |
| Other associated companies | 16,374 | 11,268 | -3 | -2 |
| Total | 36,517 | 20,647 | 1,314 | 707 |
| Associated companies at 31 December 2007 | Assets | Liabilities | Operating profit |
Profit for the reporting period |
|---|---|---|---|---|
| Oy Samlink Ab, Helsingfors | 17,500 | 10,900 | 700 | 400 |
| Unicus Ab, Helsingfors | 600 | 400 | -200 | -200 |
| Mannerheimvägen 14 Fast Ab, Helsingfors | 84,800 | 24,400 | 0 | 0 |
| Kiint. Oy Luna, Helsingfors | 5,109 | 2,091 | 468 | 0 |
| Other associated companies | 16,400 | 11,300 | 0 | 100 |
| Total | 124,409 | 49,091 | 968 | 300 |
| 2008 | 2007 | |
|---|---|---|
| Accrued income and advance payments, banking business | 66,974 | 43,989 |
| Accrued expenses and advance payments, life insurance business | 12,150 | 8,203 |
| Accrued income and advance payments | 79,124 | 52,191 |
| Cash items being collected | 161 | 159 |
| Other assets | 2,602 | 11,454 |
| Receivables from direct insurance business | 196 | 344 |
| Receivables from the reinsurance business | 65 | 199 |
| Other receivables | 4,164 | 1,080 |
| Other assets | 7,189 | 13,236 |
| Total | 86,312 | 65,427 |
| Deferred tax liabilities/receivables, net | 2008 | 2007 |
|---|---|---|
| Net deferred tax liabilties/receivables, net at 1 January | 40,055 | 22,347 |
| Acquisitions | - | 26,551 |
| Changes during the financial year booked via the income statement | -11,028 | -2,763 |
| Financial assets available for sale: | ||
| - Valuation of fair value direct to equity | -20,245 | -5,822 |
| - Transferred to the income statement | 8,922 | -231 |
| Cash flow hedging: | ||
| - Valuation of fair value direct to equity | 4,670 | -26 |
| Net deferred tax liabilties/receivables,net at 31 December | 22,373 | 40,055 |
| Deferred tax liabilities | ||
| Appropriations | 33,602 | 29,986 |
| Financial assets available for sale | 7 | 11,310 |
| Cash flow hedging | 3,785 | - |
| Group-specific write-downs | 572 | -2,990 |
| Properties acquired in the life insurance business | - | 4,645 |
| The life insurance business' reversed write-downs in IFRS | - | 1,384 |
| The life insurance business' equalisation liability | - | 1,552 |
| Other | 4 | 26 |
| Total | 37,970 | 45,911 |
| Total 15,597 |
5,857 |
|---|---|
| Other 493 |
294 |
| Negative years result 466 |
- |
| Group-specific write-downs 2,505 |
- |
| Cash flow hedging 0 |
366 |
| Financial assets available for sale 12,007 |
4,614 |
| Impairment of investment properties 126 |
583 |
| Appropriations | -3,900 | -3,386 |
|---|---|---|
| Impairment of investment properties | -457 | -2 |
| Impairment of financial assets | 7,913 | - |
| Realisation of financial assets | 7,393 | 5,981 |
| Cash flow hedging | 519 | 43 |
| Group-specific write-downs | -1,057 | - |
| Negative years result | 466 | - |
| The life insurance business' equalisation liability | -70 | -56 |
| Other | 220 | 183 |
| Total | 11,028 | 2,763 |
| Liabilities for assets classified as held for sale | 204 | - |
|---|---|---|
| Other liabilities | 10 | - |
| Liabilities to credit institutions | 194 | - |
| Assets classified as held for sale | 761 | - |
| Receivables and cash and bank balances | 48 | - |
| Other tangible assets | 35 | - |
| Buildings | 679 | - |
| 31 December 2008 | under 3 months | 3–12 months | 1–5 years |
|---|---|---|---|
| Cash and balances with central banks | 506,311 | - | - |
| Financial assets valued through income statement | 4,535 | 2,618 | 7,846 |
| Financial assets available for sale | 301,282 | 466,484 | 1,600,839 |
| Loans and other receivables | 449,895 | 347,029 | 1,341,342 |
| Financial assets held until maturity | - | 8,004 | 11,168 |
| Total | 1,262,022 | 824,134 | 2,961,195 |
| 31 December 2008 | 5–10 years | over 10 years | Total |
| Cash and balances with central banks | - | - | 506,311 |
| Financial assets valued through income statement | 4,494 | - | 19,492 |
| Financial assets available for sale | 358,965 | 309,758 | 3,037,328 |
| Loans and other receivables | 1,159,316 | 2,228,612 | 5,526,194 |
| Financial assets held until maturity | 16,712 | - | 35,885 |
| Total | 1,539,487 | 2,538,370 | 9,125,210 |
| 31 December 2007 | under 3 months | 3–12 months | 1–5 years |
|---|---|---|---|
| Cash and balances with central banks | 235,273 | - | - |
| Financial assets available for sale | 257,283 | 321,218 | 963,177 |
| Loans and other receivables | 363,806 | 353,284 | 1,152,332 |
| Financial assets held until maturity | - | 9,953 | 21,499 |
| Total | 621,090 | 684,455 | 2,137,009 |
| 31 December 2007 | 5–10 years | over 10 years | Total |
| Cash and balances with central banks | - | - | 235,273 |
| Financial assets available for sale | 475,283 | 461,757 | 2,478,719 |
| Loans and other receivables | 966,878 | 1,920,711 | 4,757,011 |
| Financial assets held until maturity | 14,388 | - | 45,840 |
| Total | 1,456,549 | 2,382,468 | 7,281,571 |
| 2008 | 2007 | |||
|---|---|---|---|---|
| Book value | Fair value | Book value | Fair value | |
| Cash and balances with central banks | 506,311 | 506,311 | 235,273 | 235,273 |
| Financial assets valued through income statement | 19,492 | 19,492 | - | - |
| Financial assets available for sale | 3,037,328 | 3,037,328 | 2,478,719 | 2,478,719 |
| Loans and other receivables | 5,526,194 | 5,557,376 | 4,757,011 | 4,747,269 |
| Financial assets held until maturity | 35,885 | 32,800 | 45,840 | 45,245 |
| Derivative instruments | 137,014 | 137,014 | 35,648 | 35,648 |
| Total | 9,262,224 | 9,290,322 | 7,552,492 | 7,542,155 |
In the table, the fair value and the book value, of the financial assets and liabilities, are presented by balance sheet item. Information is also provided for such financial assets and liabilities that are entered as fair values. The principles for calculating the fair value are described in the accounting principles.
The fair values on investment assets are determined by the market price quoted on the active market. If the quoted market prices are not available, the value is determined with the help of the discounted cash flow. The interest rate curve on the market gives the discount rate. Capital funds are valued at the acquisition value in the case where there is no objective evidence for writing down.
Fair values for financial derivatives are based on quoted market prices on the active market.
Fair values for loans and other equivalent financial instruments, which are not prioritesed on the active market, are determined according to the discounted cash flow based on market quotations. The credit risk is also considered in the discounting factor.
The value entered is used as the fair value for disposable receivables and liabilities as well as short-term receivables and liabilities (less than twelve months to the next rate adjustment).
The fair values are clean values without accrued interest.
| 2008 | 2007 | |
|---|---|---|
| Repayable on demand deposits | 1,122,584 | 139,382 |
| Other than repayable on demand from credit institutes | 794,358 | 789,231 |
| Liabilities to credit institutions | 1,916,941 | 928,614 |
| Repayable on demand deposits | 1,729,767 | 1,671,950 |
| Other than repayable on demand deposits | 1,368,569 | 1,129,428 |
| Liabilities to the public and public sector entities | 3,098,336 | 2,801,378 |
| Total | 5,015,277 | 3,729,991 |
| 2008 | 2007 | |||
|---|---|---|---|---|
| Book value | Nominal value | Book value | Nominal value | |
| Certificates of deposit | 262,239 | 264,960 | 380,583 | 386,600 |
| Bonds | 1,856,494 | 1,861,599 | 1,599,896 | 1,606,008 |
| Total | 2,118,733 | 2,126,559 | 1,980,478 | 1,992,608 |
| under 3 months | 3–12 months | 1–5 years | ||
| Certificates of deposit with fixed interest | 171,130 | 93,830 | - | |
| Aktia Mortgage Bank's EMTCN (Euro Medium Term Covered Note) program, fixed rate | - | 250,000 | 500,000 | |
| Aktia Mortgage Bank's EMTCN (Euro Medium Term Covered Note) program, variable rate |
- | - | 500,000 | |
| Total | 171,130 | 343,830 | 1,000,000 | |
| 5–10 years | over 10 years | Total | ||
| Certificates of deposit with fixed interest | - | - | 264,960 | |
| Aktia Mortgage Bank's EMTCN (Euro Medium Term Covered Note) program, fixed rate |
- | - | 750,000 | |
| Aktia Mortgage Bank's EMTCN (Euro Medium Term Covered Note) program, variable rate |
250,000 | - | 750,000 | |
| Total | 250,000 | 0 | 1,764,960 |
Other bonds are included in the same program as the subordinated liabilities, see note 38.
| Note 38. Subordinated liabilities |
||
|---|---|---|
| 2008 | 2007 | |
| Capital loans | 2,143 | 2,168 |
| Debenture loans | 199,708 | 188,469 |
| Loans without due date | 45,000 | - |
| Total | 246,851 | 190,637 |
| Nominal value | 246,783 | 191,118 |
| Amount included in upper Tier 2 capital | 45,000 | - |
| Amount included in lower Tier 2 capital | 163,029 | 165,197 |
The bank has a bonds program that is updated and approved by the Board yearly. Currently, the program's size is EUR 500 million. In this program, other bonds (included in note 37) and debenture loans are both issued. The debentures are issued on going at a fixed interest rate with 5 years maturity.
The insurance business in 2002 took an aggregated capital loan amounting to EUR 13,300,000. The capital loan has been reduced by EUR 9.1 million in 2005 and by EUR 2.1 million 2007. The remaining sum of the capital loan amounts to EUR 2.1 million at the end of 2008. The lender for the remaining sum is the Eschnerska Frilasarettet foundation. The company has given notice on the capital loan as of 30th September 2006. The term of notice is 5 years.
In 2008, the Group issued a perpetual loan (Upper Tier 2).
No individual debenture loan exceeds 10 % of all the subordinated liabilities.
| Note 39. Other liabilities to credit institutes |
||
|---|---|---|
| 2008 | 2007 | |
| Other liabilities to deposit banks | 88,615 | 54,000 |
| Other liabilities to credit institutions | 413,522 | 375,124 |
| Total | 502,138 | 429,124 |
Other liabilities to deposit banks include liabilities of EUR 25 million (35) to Swedish Export Credit with variable interest rate and EUR 25 million (19) to the European Investment Bank (EUR 19 million) with fixed interest rate.
Other liabilities to credit institutions are attributable to repurchase agreements and to three different long-term loans amounting to a total of EUR 60 million from the Nordic Investment Bank in 2008.
| 2008 | 2007 | |
|---|---|---|
| Other liabilities payable on demand | 245 | 249 |
| Liabilities other than those repayable on demand | 262,516 | 140,405 |
| Total | 262,761 | 140,653 |
| Provisions for interest-related insurances | 2008 | 2007 |
|---|---|---|
| Provision at 1 January | 654,316 | 634,156 |
| Income from premiums | 48,271 | 52,968 |
| Insurance claims paid | -63,880 | -48,041 |
| Transfer of savings from/to unit-linked insurance | 1,651 | -436 |
| Compensated interest for savings | 17,523 | 18,666 |
| Customer compensation for savings | 1,005 | 4,593 |
| Interest reductions and provision for customer compensation | 20,948 | 4,848 |
| Burdens | -9,795 | -9,787 |
| Other items | -551 | -2,652 |
| Provision at 31 December | 627,592 | 654,316 |
| Provisions for unit-linked insurances | ||
| Provision at 1 January | 200,527 | 166,889 |
| Income from premiums | 42,766 | 47,057 |
| Insurance claims paid | -22,822 | -16,473 |
| Transfer of savings from/to interest-linked insurances | -1,651 | 436 |
| Burdens | -2,627 | -2,696 |
| Value increases and other items | -66,609 | 5,315 |
| Provision at 31 December | 149,583 | 200,527 |
| 31 December 2008 | ||||
|---|---|---|---|---|
| Provisions for interest-related insurances | 1 January 2008 |
Premium income |
Claims | Total expense loading |
| Saving plans | 169,608 | 8,783 | -29,539 | -1,212 |
| Individual pension insurance | 386,396 | 15,907 | -18,556 | -1,751 |
| Group pension insurance | 50,455 | 4,067 | -2,495 | -345 |
| Risk insurance | 47,858 | 19,514 | -13,290 | -6,487 |
| Total | 654,316 | 48,271 | -63,880 | -9,795 |
| 31 December 2008 | Guaranteed calculation interest |
Customer compensation |
Other | 31 December 2008 |
|---|---|---|---|---|
| Saving plans | 4,500 | 65 | 1,307 | 153,512 |
| Individual pension insurance | -3,975 | - | 2,080 | 380,101 |
| Group pension insurance | -4,960 | - | 448 | 47,169 |
| Risk insurance | 1,771 | 180 | -2,735 | 46,810 |
| Total | -2,665 | 245 | 1,100 | 627,592 |
| Total | 3.2% |
|---|---|
| Risk insurance | 3.3% |
| Group pension insurance | 3.4% |
| Individual pension insurance | 3.2% |
| Saving plans | 3.1% |
| Provisions for unit-linked insurances | 1 January 2008 |
Premium income |
Claims |
|---|---|---|---|
| Saving plans | 144,922 | 32,524 | -22,535 |
| Individual pension insurance | 55,241 | 9,763 | -286 |
| Group pension insurance | 363 | 479 | - |
| Total | 200,527 | 42,766 | -22,822 |
| Total expense | 31 December | ||
|---|---|---|---|
| Provisions for unit-linked insurances | loading | Other | 2008 |
| Saving plans | -1,684 | -42,126 | 111,101 |
| Individual pension insurance | -917 | -25,748 | 38,052 |
| Group pension insurance | -28 | -384 | 430 |
| Total | -2,629 | -68,258 | 149,583 |
| 1 January 2008 |
Years change | 31 December 2008 |
|
|---|---|---|---|
| Provisions for interest-related insurances | 654,316 | -26,724 | 627,592 |
| Provisions for unit-linked insurances | 200,527 | -50,943 | 149,583 |
| Total | 854,843 | -77,667 | 777,176 |
| 31 December 2007 | ||||
|---|---|---|---|---|
| Provisions for interest-related insurances | 1 January 2008 |
Premium income |
Claims | Total expense loading |
| Saving plans | 171,195 | 12,454 | -18,255 | -1,429 |
| Individual pension insurance | 348,422 | 17,197 | -15,074 | -1,861 |
| Group pension insurance | 47,577 | 3,961 | -2,050 | -316 |
| Risk insurance | 47,063 | 19,148 | -12,700 | -6,180 |
| Total | 614,256 | 52,761 | -48,078 | -9,787 |
| Provisions for interest-related insurances | Guaranteed calculation interest |
Customer compensation |
Other | 31 December 2007 |
|---|---|---|---|---|
| Saving plans | 4,995 | 2,029 | -1,381 | 169,608 |
| Individual pension insurance | 31,220 | 5,384 | 1,107 | 386,396 |
| Group pension insurance | 881 | 1,572 | -1,170 | 50,455 |
| Risk insurance | 1,818 | 108 | -1,400 | 47,858 |
| Total | 38,914 | 9,093 | -2,844 | 654,316 |
| Average calculation interest | ||||
| Saving plans | 3.0 % | |||
| Individual pension insurance | 3.4 % | |||
| Group pension insurance | 2.8 % | |||
| Risk insurance | 2.6 % | |||
| Total | 2.9 % |
| Provisions for unit-linked insurances | 1 January 2008 |
Premium income |
Claims |
|---|---|---|---|
| Saving plans | 120,231 | 38,364 | -16,165 |
| Individual pension insurance | 46,526 | 8,512 | -308 |
| Group pension insurance | 132 | 181 | 0 |
| Total | 166,889 | 47,057 | -16,473 |
| Provisions for unit-linked insurances | Total expense loading |
Other | 31 December 2007 |
|---|---|---|---|
| Saving plans | -1,803 | 4,296 | 144,922 |
| Individual pension insurance | -880 | 1,390 | 55,241 |
| Group pension insurance | -14 | 65 | 363 |
| Total | -2,696 | 5,751 | 200,527 |
| 1 January 2008 |
Years change | 31 December 2008 |
|
| Provisions for interest-related insurances | 634,156 | 20,160 | 654,316 |
| Provisions for unit-linked insurances | 166,889 | 33,638 | 200,527 |
Total 801,045 53,798 854,843
| 2008 | 2007 | |
|---|---|---|
| Provisions at 1 January | 259 | 826 |
| Provisions entered through the income statement | 1,153 | - |
| Provisions used during the year | -475 | -567 |
| Provisions at 31 December | 936 | 259 |
The abovementioned provisions, personnel expenses, are attributable to agreements made 2008. The estimated costs run until June 2010, when they are finally eliminated.
| 2008 | 2007 | |
|---|---|---|
| Interest liabilities on deposits | 18,395 | 13,070 |
| Other accured interest expenses and interest income received in advance | 48,271 | 33,313 |
| Advance interest received | 30 | 1,125 |
| Accured interest expenses and interest income received in advance | 66,696 | 47,509 |
| Other accured expenses and income received in advance | 14,484 | 19,697 |
| Accrued expenses and income received in advance | 81,179 | 67,205 |
| Cash items in the process of collection | 79,855 | 85,350 |
| Other liabilities, banking business | 5,187 | 40,839 |
| Other liablilities, life insurance business | 2,755 | 4,731 |
| Other liabilities | 87,797 | 130,920 |
| 31 December 2008 | under 3 months | 3–12 months | 1–5 years |
|---|---|---|---|
| Deposits | 4,176,694 | 831,914 | 6,669 |
| Debt securities issued | 205,467 | 358,958 | 1,251,795 |
| Subordinated liabilities | 17,244 | 7,417 | 212,190 |
| Other liabilities to credit institutes | 362,138 | - | 94,500 |
| Other liabilities to the public and public sector entities | 206,945 | 49,540 | - |
| Total | 4,968,487 | 1,247,830 | 1,565,155 |
| 31 December 2008 | 5–10 years | over 10 years | Total |
| Deposits | - | - | 5,015,277 |
| Debt securities issued | 302,512 | - | 2,118,733 |
| Subordinated liabilities | 10,000 | - | 246,851 |
| Other liabilities to credit institutes | 45,500 | - | 502,138 |
| Other liabilities to the public and public sector entities | - | 6,276 | 262,761 |
| Total | 358,012 | 6,276 | 8,145,760 |
| 31 December 2007 | under 3 months | 3–12 months | 1–5 years |
| Deposits | 3,265,053 | 454,762 | 10,176 |
| Debt securities issued | 181,490 | 208,601 | 1,044,003 |
| Subordinated liabilities | 8,951 | 45,883 | 132,459 |
| Other liabilities to credit institutes | 345,124 | 15,000 | 69,000 |
| Other liabilities to the public and public sector entities | 107,884 | 25,400 | - |
| Total | 3,908,502 | 749,646 | 1,255,638 |
| 31 December 2007 | 5–10 years | over 10 years | Total |
| Deposits | - | - | 3,729,991 |
| Debt securities issued | 546,384 | - | 1,980,478 |
| Subordinated liabilities | 3,344 | - | 190,637 |
| Other liabilities to credit institutes | - | - | 429,124 |
| Other liabilities to the public and public sector entities | - | 7,370 | 140,653 |
| Total | 549,728 | 7,370 | 6,470,884 |
| 2008 | 2007 | |||||
|---|---|---|---|---|---|---|
| Book value | Fair value | Book value | Fair value | |||
| Deposits | 5,015,277 | 5,015,410 | 3,729,991 | 3,729,747 | ||
| Debt securities issued | 2,118,733 | 2,118,733 | 1,980,478 | 1,980,478 | ||
| Subordinated liabilities | 246,851 | 254,800 | 190,637 | 189,189 | ||
| Other liabilities to credit institutes | 502,138 | 504,603 | 429,124 | 429,218 | ||
| Other liabilities to the public and public sector entities | 262,761 | 262,761 | 140,653 | 140,653 | ||
| Derivative instruments | 84,725 | 84,725 | 35,181 | 35,181 | ||
| Total | 8,230,485 | 8,241,032 | 6,506,065 | 6,504,467 |
For definition of fair value, see note 35
| Number of shares |
Share capital | Unrestricted equity reserve |
Total | |
|---|---|---|---|---|
| 1 January 2007 | 55,348,900 | 70,596 | 0 | 70,596 |
| Directed issue to Veritas Pension Insurance Company 17 January 2007 |
3,000,000 | 6,000 | 33,000 | 39,000 |
| at EUR 13 per share | ||||
| Warrant issue 6 - 23 February 2007, subscription price EUR 9 per share |
1,764,865 | 3,530 | 12,354 | 15,884 |
| Other directed issues (29 March 207 and 24 May 2007) EUR 13 per share |
39,021 | 78 | 429 | 507 |
| Issue expenses | -530 | -530 | ||
| 31 December 2007 | 60,152,786 | 80,204 | 45,254 | 125,458 |
| Directed issue to the bank's highest operational management 30 April 2008 at EUR 8.67 per share |
22,482 | 45 | 150 | 195 |
| 31 December 2008 | 60,175,268 | 80,249 | 45,404 | 125,653 |
The legal reserve contains components transferred from the unrestricted equity in accordance with the company statutes or decisions of the Annual General Meeting. There have not been any changes in the legal reserve during the financial years 2007 and 2008.
At the end of the reporting period, the bank's paid-up share capital as entered in the Finnish Trade Register was EUR 80,248,836 divided into 40,124,418 A shares and 20,050,850 R shares. The number of shareholders at the end of the financial period was 659. The Annual General Meeting's decision on changes in Aktia Savings Bank plc's Articles of Association and the creation of a new share series, series R, were registered in the Trade Register on 7 April 2008. The issue of R shares was carried out as a payment-free issue aimed at the bank's shareholders at the time. The issue contained a maximum of 20,050,968 R shares so that one new R share was received for every two old shares (series A). Every R share entitles the holder to 20 votes. The issue was carried out without increasing the bank's share capital.
Aktia's Board of Directors decided on 30 April 2008, supported by the authorisation given by the AGM on 21 December 2006 regarding the establishment of share-based incentives for the Group's key personnel, on a directed share issue to named persons in the senior executive management. As a result of the issue, 22,482 new shares were issued at a subscription price of EUR 8.67 per share.
The number of shares at the end of the period was 60,175,268 (60,152,786 at 30 December 2007).
| 2008 | 2007 | |
|---|---|---|
| Fund at fair value at 1 January | -17,965 | -1,697 |
| Profit/loss on the evaluation of the fair value, shares and holdings | -49,896 | 5,788 |
| Profit/loss on the evaluation of the fair value, interest bearing securities | -27,431 | -27,146 |
| Deferred taxes on profit/loss on the evaluation of the fair value | 20,245 | 5,822 |
| Transferred to the income statement, shares and participations, included in: | ||
| Net income from financial assets available for sale | 33,160 | -434 |
| Deferred taxes | -8,622 | 113 |
| Transferred to the income statement, interest-bearing securities, included in: | ||
| Net income from financial assets available for sale | 1,154 | -455 |
| Deferred taxes | -300 | 118 |
| Profit/loss on the evaluation of the fair value for cash flow hedging derivative contracts | 18,339 | -265 |
| Deferred taxes on profit/loss on the evaluation of the fair value | -4,768 | 69 |
| Transferred to the income statement, cash flow hedging derivative contracts, included in: | ||
| Net income from securities and currency trading | -379 | 165 |
| Deferred taxes | 98 | -43 |
| Fund at fair value at 31 December | -36,365 | -17,965 |
The fund at fair value contains changes in fair value after tax on the financial assets available for sale and on financial derivatives that are held for cash flow hedging.
| Non-distributable assets in unrestricted equity | 2008 | 2007 |
|---|---|---|
| Share of the accumulated appropriations that have been included in the retained earnings at 1 January | 84,538 | 75,706 |
| Share of accumulated appropriations that have been included in the profit for the financial year | - | 8,832 |
| Total | 84,538 | 84,538 |
| Distributable assets in unrestricted equity | ||
| Retained earnings 1 January | 122,507 | 94,213 |
| Dividends to shareholders | -20,051 | -14,825 |
| Other changes in retained earnings | -26 | - |
| Profit for the reporting period attributable to shareholders in Aktia plc | 5,170 | 43,119 |
| Unrestricted equity reserve | 45,404 | 45,254 |
| Total | 153,004 | 167,761 |
| Total unrestricted equity | ||
| Retained earnings 1 January | 207,045 | 169,919 |
| Dividends to shareholders | -20,051 | -14,825 |
| Other changes in retained earnings | -26 | - |
| Profit for the reporting period attributable to shareholders in Aktia plc | 5,170 | 51,951 |
| Unrestricted equity reserve | 45,404 | 45,254 |
| Total | 237,541 | 252,298 |
The Board's proposal for the dividend for the year 2008, to the Annual General Meeting, on 30 March 2009, is EUR 0,15 per share or EUR 10,046,290.20. The dividend to shareholders is entered in 2009 against the equity, as a reduction in the retained earnings.
Derivative instruments, book value
| 2008 Assets |
2008 Liabilities |
2007 Assets |
2007 Liabilities |
||
|---|---|---|---|---|---|
| Interest rate derivatives | 38,135 | 11,762 | 6,484 | 6,195 | |
| Fair value hedging | 38,135 | 11,762 | 6,484 | 6,195 | |
| Interest rate derivatives | 25,406 | 1,186 | 777 | 2,061 | |
| Cash flow hedging | 25,406 | 1,186 | 777 | 2,061 | |
| Interest rate derivatives | 66,985 | 65,599 | 19,436 | 17,936 | |
| Currency derivatives | 4,072 | 4,607 | 217 | 255 | |
| Shares derivatives | 1,772 | 927 | 7,718 | 7,718 | |
| Other derivatives | 644 | 644 | 1,016 | 1,016 | |
| Other derivative instruments | 73,473 | 71,777 | 28,387 | 26,925 | |
| Total | 137,014 | 84,725 | 35,648 | 35,181 |
From cash flow hedging, a cash flow of approx. EUR 5-6 million is expected 2009, approx. EUR 6-7 million 2010 and the rest in the years years 2011-2014.
| Nominal values/term remaining | Fair value | |||||
|---|---|---|---|---|---|---|
| Under 1 | Over 5 | |||||
| year | 1–5 years | years | Total | Assets | Liabilities | |
| Fair value hedging | ||||||
| Interest rate swaps | 470,000 | 899,500 | 219,000 | 1,588,500 | 38,135 | -11,762 |
| Total | 470,000 | 899,500 | 219,000 | 1,588,500 | 38,135 | -11,762 |
| Cash flow hedging | ||||||
| Interest rate option agreements | - | 170,000 | 790,000 | 960,000 | 25,406 | -1,186 |
| Purchased | - | 170,000 | 550,000 | 720,000 | 25,406 | - |
| Written | - | - | 240,000 | 240,000 | - | -1,186 |
| Total | 0 | 170,000 | 790,000 | 960,000 | 25,406 | -1,186 |
| Total interest rate derivatives | 470,000 | 1,069,500 | 1,009,000 | 2,548,500 | 63,541 | -12,948 |
| Total hedging derivative instruments | 470,000 | 1,069,500 | 1,009,000 | 2,548,500 | 63,541 | -12,948 |
| 693,810 | 4,455,812 | 1,969,942 | 7,119,564 | 73,473 | -71,777 | |
|---|---|---|---|---|---|---|
| 0 | 8,608 | 0 | 8,608 | 644 | -644 | |
| Written | - | 4304 | - | 4,304 | - | -644 |
| Purchased | - | 4304 | - | 4,304 | 644 | - |
| - | 8,608 | - | 8,608 | 644 | -644 | |
| 92,678 | 52,804 | 47,300 | 192,782 | 1,772 | -927 | |
| Written | 17,589 | 26,402 | 23,650 | 67,641 | - | -927 |
| Purchased | 75,089 | 26,402 | 23,650 | 125,141 | 1,772 | - |
| 92,678 | 52,804 | 47,300 | 192,782 | 1,772 | -927 | |
| 255,932 | 0 | 0 | 255,932 | 4,072 | -4,607 | |
| 255,932 | - | - | 255,932 | 4,072 | -4,607 | |
| 345,200 | 4,394,400 | 1,922,642 | 6,662,242 | 66,985 | -65,599 | |
| Written | 4,600 | 1,357,500 | 713,671 | 2,075,771 | 4,273 | -24,467 |
| Purchased | 4,600 | 1,357,500 | 953,671 | 2,315,771 | 24,993 | -4,273 |
| 9,200 | 2,715,000 | 1,667,342 | 4,391,542 | 29,266 | -28,740 | |
| 336,000 | 1,679,400 | 255,300 | 2,270,700 | 37,719 | -36,859 | |
| Interest rate swaps Interest rate option agreements Total interest rate derivatives Forward rate agreements Total forward rate agreements Equity options Total equity options Options Other derivative instruments Total other derivative instruments |
| Nominal value/term remaining | Fair value | |||||
|---|---|---|---|---|---|---|
| Under 1 year |
1–5 years | Over 5 years |
Total | Assets | Liabilities | |
| Fair value hedging | ||||||
| Interest rate swaps | 50,000 | 1,307,000 | 79,000 | 1,436,000 | 6,484 | -6,195 |
| Total | 50,000 | 1,307,000 | 79,000 | 1,436,000 | 6,484 | -6,195 |
| Cash Flow hedging | ||||||
| Interest forward rate agreements | 400,000 | - | - | 400,000 | 379 | - |
| Interest rate option agreements | 1,000,000 | - | 480,000 | 1,480,000 | 398 | -2,061 |
| Purchased | 500,000 | - | 240,000 | 740,000 | 398 | - |
| Written | 500,000 | - | 240,000 | 740,000 | - | -2,061 |
| 1,400,000 | 0 | 480,000 | 1,880,000 | 777 | -2,061 | |
| Total interest rate derivatives | 1,450,000 | 1,307,000 | 559,000 | 3,316,000 | 7,261 | -8,256 |
| Total hedging derivative instruments | 1,450,000 | 1,307,000 | 559,000 | 3,316,000 | 7,261 | -8,256 |
| Total derivative instruments | 1,647,072 | 5,730,680 | 2,459,748 | 9,837,500 | 35,648 | -35,181 |
|---|---|---|---|---|---|---|
| Total other derivative instruments | 197,072 | 4,423,680 | 1,900,748 | 6,521,500 | 28,387 | -26,925 |
| Other derivative instruments | 0 | 8,608 | 0 | 8,608 | 1,016 | -1,016 |
| Written | - | 4304 | - | 4,304 | - | -1016 |
| Purchased | - | 4304 | - | 4,304 | 1016 | - |
| Options | - | 8,608 | - | 8,608 | 1,016 | -1,016 |
| Total equity options | 50,294 | 65,472 | 47,900 | 163,666 | 7,718 | -7,718 |
| Written | 25,147 | 32,736 | 23,950 | 81,833 | - | -7,718 |
| Purchased | 25,147 | 32,736 | 23,950 | 81,833 | 7,718 | - |
| Equity options | 50,294 | 65,472 | 47,900 | 163,666 | 7,718 | -7,718 |
| Total forward rate agreements | 136,778 | 0 | 0 | 136,778 | 217 | -255 |
| Forward rate agreements | 136,778 | - | - | 136,778 | 217 | -255 |
| Total interest rate derivatives | 10,000 | 4,349,600 | 1,852,848 | 6,212,448 | 19,436 | -17,936 |
| Written | - | 1,337,100 | 653,774 | 1,990,874 | - | -2,492 |
| Purchased | - | 1,337,100 | 893,774 | 2,230,874 | 3,054 | - |
| Interest rate option agreements | - | 2,674,200 | 1,547,548 | 4,221,748 | 3,054 | -2,492 |
| Interest rate swaps | - | 1,675,400 | 305,300 | 1,980,700 | 16,297 | -15,360 |
| Interest forward rate agreements | 10,000 | - | - | 10,000 | 85 | -84 |
| Collateral assets | |||
|---|---|---|---|
| For the bank 31 December 2008 | Type of security |
The nominal value of the liability |
The value of the security |
| Liabilities to credit institutions | Bonds | 1,058,409 | 1,056,254 |
| Collateral provided in connection with repurchasing agreements | Bonds | 362,138 | 362,138 |
| Collateral provided in connection with contracts of pledge | Cash and balances with central banks |
8,500 | 8,500 |
| Total | 1,429,047 | 1,426,892 | |
| For the bank 31 December 2007 | |||
| Liabilities to credit institutions | Bonds | 79,826 | 79,850 |
| Collateral provided in connection with repurchasing agree ments |
Bonds | 345,124 | 345,124 |
| Total | 424,950 | 424,973 |
As of 31 December 2008 - - -
As of 31 December 2007 - - -
The bank has not provided collateral for other parties.
Liabilities to credit instututes include collateral with the Bank of Finland and the European Investment Bank. For repurchase agreements, the standardised GMRA (Global Master Repurchase Agreement) conditions apply.
| For the bank 31 December 2008 | Type of | The nominal value | The value of |
|---|---|---|---|
| security | of the liability | the security | |
| Liabilities to credit institutions | Bonds | 93,250 | 93,250 |
| Note 52. Breakdown of off-balance sheet commitments |
||
|---|---|---|
| 2008 | 2007 | |
| Guarantees | 54,843 | 57,232 |
| Other commitments provided to a third party on behalf of a customer | 7,450 | 27,060 |
| Unused credit arrangements | 454,489 | 418,254 |
| Other irrevocable commitments | 12,050 | 127,064 |
| On behalf of a subsidiary | - | - |
| Total | 528,833 | 629,610 |
Off-balance sheet commitments, exclude rental commitments.
Credit equivalents for derivatives are not included in off-balance sheet commitments as of 31 December 2008 as their market value is entered in the balance.
| 31 December 2008 | under 3 months | 3–12 months | 1–5 years |
|---|---|---|---|
| Guarantees | 9,398 | 12,308 | 13,821 |
| Other commitments provided to a third party on behalf of a customer | 121 | 67 | 3,630 |
| Unused credit arrangements | 156,896 | 272,025 | 22,851 |
| Other irrevocable commitments | - | 10 | 583 |
| Total | 166,414 | 284,410 | 40,885 |
| 31 December 2008 | 5–10 years | over 10 years | Total |
| Guarantees | 17,184 | 2,133 | 54,843 |
| Other commitments provided to a third party on behalf of a customer | 3,632 | - | 7,450 |
| Unused credit arrangements | 2 | 2,716 | 454,489 |
| Other irrevocable commitments | 11,457 | - | 12,050 |
| Total | 32,275 | 4,849 | 528,833 |
| 31 December 2007 | under 3 months | 3–12 months | 1–5 years |
|---|---|---|---|
| Guarantees | 5,919 | 9,176 | 21,048 |
| Other commitments provided to a third party on behalf of a customer | 2,799 | 4,339 | 9,952 |
| Unused credit arrangements | 178,215 | 213,607 | 20,445 |
| Other irrevocable commitments | 4,004 | 5,982 | 52,820 |
| Total | 190,937 | 233,104 | 104,264 |
| 31 December 2007 | 5–10 years | over 10 years | Total |
| Guarantees | 19,482 | 1,606 | 57,232 |
| Other commitments provided to a third party on behalf of a customer | 9,211 | 759 | 27,060 |
| Unused credit arrangements | 2 | 5,985 | 418,254 |
| Other irrevocable commitments | 47,656 | 16,601 | 127,064 |
| Total | 76,352 | 24,952 | 629,610 |
| Note 53. Rent commitments |
||
|---|---|---|
| 2008 | 2007 | |
| Less than 1 year | 7,910 | 2,030 |
| 1–5 years | 27,511 | 4,901 |
| More than 5 years | 24,847 | 2,581 |
| Total | 60,268 | 9,513 |
Included in rental commitments are such fixed term hire agreements that cannot be broken without the landlord's consent or without paying a significant additional fee. Internal rental commitments are not considered. The rental agreements mainly concern business space (primarily bank offices) and the rent as a rule is linked to the cost of living index. In the main, these agreements are in effect until further notice.
| Note 54. Number of employees 31 december |
||
|---|---|---|
| 2008 | 2007 | |
| Full-time | 1,027 | 966 |
| Part-time | 99 | 90 |
| Temporary | 126 | 100 |
| Total | 1,252 | 1,156 |
| Number of employees converted to full-time equivalents | 1,052 | 983 |
| Full-time equivalent average number of employees | 1,009 | 940 |
Close relations include key persons in management positions and close family members and companies that are under the dominating influence of a key person in management position. The Group's key persons refer to Aktia plc's Board of Supervisors and Board of Directors and the Group's executive management, MDand deputy MD.
| Key Management personnel compensation | 2008 | 2007 |
|---|---|---|
| Short-term employee benefits 1) | 1,152 | 1,221 |
| - of which other long-term benefits 2) | 125 | 125 |
| - of which share-based payments 2) | 176 | 149 |
| Post-employment benefits 3) | 384 | - |
1) Includes salaries and merit pay including staff-related costs during the financial year.
2) Payments in accordance with the long-term incentive programme for executive management during the financial year. As an incentive, the Board of Directors has authorisation to issue a maximum of 938.498 shares. No option rights have been issued.
3) Includes contributions of basic insurance coverage (ArPL) and voluntary pension plans reported during the financial year.
| Salaries and fees as well as pension commitments arising or made 2008 |
2007 | |
|---|---|---|
| Members of the Board of Supervisors and their alternates | 189 | 195 |
| Board Members: | ||
| Kaj-Gustaf Bergh, Chairman of the Board | 40 | 36 |
| Dag Wallgren, Vice Chairman | 25 | 22 |
| Hans Frantz | 21 | 19 |
| Lars-Olof Hammarén | 21 | 19 |
| Lars-Erik Kvist | 21 | 19 |
| Kjell Sundström | 21 | - |
| Marina Vahtola | 21 | 18 |
| Nina Wilkman | 20 | 19 |
| Managing Director and Deputy Managing Director | ||
| Mikael Ingberg, Managing Director until 3.4.2008 | 124 | 391 |
| Jussi Laitinen, Managing Director from 4.4.2008 | 185 | - |
| Jarl Sved, Deputy Managing Director | 251 | 254 |
The notice of dismissal for the Managing Director is from the employer's side 18 months, and for the other members of the management group the notice of dismissal is from 12 to 18 months. Members of the management group can retire from and when they reach 60 years of age.
| 1.1.2008 | Increase / decrease |
31.12.2008 | |
|---|---|---|---|
| Credits and guarantees to close relations | 2,898 | 2,062 | 4,959 |
| Deposits from close relations | 5,755 | 1,201 | 6,956 |
| 1.1.2007 | Increase / decrease |
31.12.2007 | |
| Credits and guarantees to close relations | 2,060 | 837 | 2,898 |
| Deposits from close relations | 2,757 | 2,998 | 5,755 |
Lending to close relations is on the normal cus tomer conditions, with the normal evaluation of the debtor risk and with the same security requirement and with the same requirement on return as applies to the bank's customers in general.
At the end of 2008, the Group's key personnel held a total of 1,958,617 shares, if which 958,617 were series A shares and 978,122 series R shares in Aktia plc. This represents 4.9 % of the total number of shares and 4.9 % of votes.
| 2008 Percentage of all shares |
2008 Book value |
2007 Percentage of all shares |
2007 Book value |
|
|---|---|---|---|---|
| Financing | ||||
| Aktia Bank Plc, Helsinki | 100.0 | 207,558 | ||
| Aktia Real Estate Mortgage Bank Plc, Helsinki | 53.7 | 25,080 | 55.9 | 23,836 |
| Aktia Kort & Finans Ab, Helsingfors | 82.0 | 26 | 82.0 | 26 |
| Aktia Företagsfinans Ab, Helsingfors | 80.0 | 240 | 80.0 | 160 |
| Hsb-Finans Ab (dormant), Helsingfors | 100.0 | 589 | 100.0 | 589 |
| The investment funds | ||||
| Aktia Fund Management Ltd, Helsinki | 100.0 | 2,507 | 100.0 | 2,507 |
| Aktia Fund Management S A (dormant), Luxemburg | 100.0 | 111 | ||
| Securities companies | ||||
| Aktia Asset Management Ltd, Helsinki | 81.0 | 347 | 81.0 | 347 |
| Real estate agency operations | ||||
| Aktia Fastighetsförmedling Helsingfors-Esbo Ab, Helsingfors | 80.0 | 80 | 80.0 | 80 |
| Aktia Fastighetsförmedling ISKL Ab, Kyrkslätt | 90.0 | 72 | 90.0 | 72 |
| Aktia Fastighetsförmedling Jakobstad Ab, Jakobstad | 80.0 | 80 | 100.0 | 100 |
| Aktia Fastighetsförmedling Karlebynejden Ab, Karleby | 100.0 | 100 | 100.0 | 100 |
| Aktia Fastighetsförmedling Mellan-Nyland - Vanda Ab, Vanda | 100.0 | 80 | 100.0 | 80 |
| Aktia Fastighetsförmedling Pargas-Åboland Ab, Pargas (merged) | 88.6 | 62 | ||
| Aktia Fastighetsförmedling Raseborg Ab, Ekenäs | 100.0 | 73 | 100.0 | 73 |
| Aktia Fastighetsförmedling Sibbo Ab, Helsingfors | 60.0 | 71 | 60.0 | 61 |
| Aktia Fastighetsförmedling Tammerfors Ab, Tammerfors | 87.3 | 227 | 67.0 | 67 |
| Aktia Fastighetsförmedling Vasa Ab, Vasa | 80.0 | 517 | 60.0 | 313 |
| Aktia Fastighetsförmedling Uleåborg Ab, Uleåborg | 90.6 | 290 | 100.0 | 100 |
| Aktia Fastighetsförmedling Åbo Ab, Åbo | 90.0 | 119 | 90.0 | 119 |
| Aktia Fastighetsförmedling Östra Nyland Ab, Borgå | 80.0 | 80 | 80.0 | 80 |
| Magnus Nyman AFM Ab, Kimito | 51.0 | 155 | 51.0 | 125 |
| Insurance companies | ||||
| Life Insurance Company Veritas, Turku | 100.0 | 58,286 | 100.0 | 97,301 |
| Bostads Ab Esbo Sädesärla, Esbo | 100.0 | 1,072 | ||
| Bostads Ab Vanda Smyckeparken, Vanda | 100.0 | 3,190 | ||
| Bostads Ab Vanda Veketåksvägen 3, Vanda | 100.0 | 1,335 | ||
| Fast Ab Ridalsvägen 3, Vihtis | 100.0 | 3,495 | ||
| Kiint Oy Jauhokilo Ab, Esbo | 100.0 | 10,099 | ||
| Kiint Oy Tamteva, Tammerfors | 100.0 | 10,867 | ||
| Virastotalo Brahe, Brahestad | 100.0 | 8,001 | ||
| Others | ||||
| Robur Invest Ab (dormant), Helsinfors | 100.0 | 8 | 100.0 | 8 |
| Vasp-Invest Ab, Helsingfors | 100.0 | 325 | 75.0 | 101 |
| Other real estate companies | 254 | 5,925 | ||
| Total | 297,164 | 170,404 |
| 2008 Percentage |
2008 | 2007 Percentage |
2007 | |
|---|---|---|---|---|
| of all shares | Book value | of all shares | Book value | |
| Data processing | ||||
| Oy Samlink Ab, Helsingfors | 24.0 | 1,697 | 24.0 | 1,697 |
| Private equity company | ||||
| Unicus Ab, Helsingfors | 33.3 | 100 | 33.3 | 100 |
| Real estate investments | ||||
| Mannerheimvägen 14 Fast Ab, Helsingfors | 50.0 | 18,194 | ||
| Insurance companies | ||||
| Kiint Oy Luna, Helsingfors | 28.0 | 7,662 | ||
| Others | ||||
| ACH Finland Abp | 25.8 | 775 | ||
| Investmentbolaget Torggatan 14 Ab, Mariehamn | 33.3 | 376 | 33.3 | 376 |
| Järsö Invest Ab, Mariehamn | 33.3 | 376 | 33.3 | 376 |
| Mike Alpha Ab, Mariehamn | 33.3 | 1 | 33.3 | 1 |
| Mike Bravo Ab, Mariehamn | 33.3 | 1 | 33.3 | 1 |
| Mike Charlie Ab, Mariehamn | 33.3 | 1 | 33.3 | 1 |
| Mike Whiskey Ab, Mariehamn | 33.3 | 160 | 33.3 | 160 |
| November Sierra Ab, Mariehamn | 33.3 | 1 | 33.3 | 1 |
| Tenala Buccaneers Ab, Mariehamn | 33.3 | 376 | 33.3 | 376 |
| Tenala Invest Ab, Mariehamn | 33.3 | 376 | 33.3 | 376 |
| Total | 4,239 | 29,320 |
By means of its share transfer agreement, Aktia transferred its shareholding in relation to the real estate companies Mannerheimvägen 14, Silvertärnan and Mercator to Fastighetskapitalfonden Forum Fastighets Kb. The transfer was carried out on 1 October 2008. For Aktia, this means a capital gain amounting to more than EUR 6 million. Aktia disposed of its share in the fund in December.
| Increase / | |||
|---|---|---|---|
| Business transactions with shares in associated companies | 1.1.2008 | decrease | 31.12.2008 |
| Credits and guarantees | 65 | - | 65 |
| Deposits | 1,245 | 158 | 1,403 |
Aktia Bank plc offers private individuals and institutions discretionary asset management services. Customer funds are not intermediated to other customers. Aktia Asset Management Oy Ab offers institutions discretionary asset management services.
| Customer assets being managed | 2008 | 2007 |
|---|---|---|
| Funds in a customer funds account | - | - |
| Funds in discretionary asset management services | 2,592,473 | 3,113,555 |
| Funds within the framework of investment advising according to a separate agreement | 2,276,510 | 1,178,918 |
| Total funds in asset management services | 4,868,983 | 4,292,474 |
Veritas Mutual Non-Life Insurance Company has been merged with Aktia plc in accordance with the merger plan approved by both company's Annual General Meetings and registered in the Trade Register in 1 January 2009. At the same time, the name of the non-life insurance company was changed to Aktia Non-life Insurance Ab. In connection with this, 6,800,000 new A shares in Aktia plc were registered, and the company's share capital was thus increased by EUR 13,600,000. The total number of A shares in Aktia plc therefore rose to 46,924,418, increasing the company's total share capital to EUR 93,848,836.The final number of shares issued as compensation for the merger may be less as a result of uncertain shareholding in Veritas Mutual Non-Life Insurance Company.
In accordance with the merger plan, the new shares issued as compensation for the merger will be registered to the shareholders' book-entry accounts as soon as practically possible and probably during the first quarter of 2009.
Aktia Non-Life Insurance's Managing Director Anders Nordman was appointed as a member of Aktia plc's Executive Comittee on 1 January 2009 with responsibility for Aktia Bank's Corporate Banking and Aktia Non-Life Insurance. Aktia Non-Life Insurance Ab owned a total of 536,287 shares in Aktia at the time of the merger. Thus the Group has a 0.9 % ownership of own shares at present.
Aktia Bank plc intends to sell its entire shareholding in Aktia Life Insurance to the Group parent company Aktia plc during the first quarter of 2009.
The real estate agencies and insurance distribution have started cost-saving programs.
| (EUR 1,000) | Note | 2008 | 2007 |
|---|---|---|---|
| Interest income | 102 | 220,013 | 214,809 |
| Interest expenses | 102 | -154,928 | -136,830 |
| Net interest income | 65,085 | 77,980 | |
| Income from Tier 1 capital instruments | 103 | 2,550 | 3,846 |
| Commission income | 104 | 26,959 | 38,384 |
| Commission expenses | 104 | -2,474 | -3,908 |
| Net commission income | 24,485 | 34,476 | |
| Net income from securitites and currency trading | 105 | 904 | 1,146 |
| Net income from financial assets available for sale | 106 | -2,031 | 1,407 |
| Net income from investment properties | 107 | 2,484 | 79 |
| Other operating income | 108 | 6,699 | 3,012 |
| Staff costs | 109 | -35,387 | -41,266 |
| Other administrative expenses | 110 | -22,245 | -25,435 |
| Administrative expenses | -57,632 | -66,701 | |
| Depreciation and impairment of tangible and intangible assets | 111 | -2,431 | -2,597 |
| Other operating expenses | 112 | -9,838 | -10,709 |
| Write-downs of credits and other commitments | 113 | -165 | -218 |
| Operating profit | 30,113 | 41,721 | |
| Appropriations | - | -17,300 | |
| Taxes | -7,512 | -5,141 | |
| Profit for the reporting period | 22,600 | 19,280 |
| (EUR 1,000) | Note | 2008 | 2007 |
|---|---|---|---|
| Assets | |||
| Cash and balances with central banks | - | 228,317 | |
| Bonds that are eligible for refinancing with central banks | 116 | - | 1,621,886 |
| Claims on credit institutions | 117 | 16 | 313,255 |
| Receivables from the public and public sector entities | 118 | - | 2,960,204 |
| Other bonds | - | 72,812 | |
| Total bonds | - | 72,812 | |
| Shares and participations | 120 | 228,538 | 183,792 |
| Derivative contracts | 152 | - | 10,976 |
| Intangible assets | 121 | - | 3,994 |
| Investment properties and shares and participations | |||
| in investment properties | 122 | - | 11,410 |
| Other properties and shares and participations | |||
| in real estate corporations | 122 | - | 27,701 |
| Other tangible assets | 122 | 103 | 5,216 |
| Tangible assets | 103 | 44,327 | |
| Other assets | 123 | 1,024 | 11,200 |
| Accrued expenses and advance payments | 124 | 633 | 80,509 |
| Deferred tax receivables | 125 | 449 | 4,614 |
| Total assets | 230,762 | 5,535,887 | |
| Liabilities | |||
| Liabilities to credit institutions | 131 | 1,390 | 1,366,118 |
| Borrowing | - | 2,820,525 | |
| Other liabilities | - | 142,253 | |
| Liabilities to the public and public sector entities | 132 | 0 | 2,962,778 |
| Debt securities issued to the public | 133 | - | 520,964 |
| Derivatives and other liabilities held for trading | 152 | - | 7,424 |
| Other liabilities | 134 | 1,209 | 114,490 |
| Accured expenses and income received in advance | 135 | 2,163 | 58,354 |
| Subordinated liabilities | 136 | - | 180,221 |
| Deferred tax liabilities | 137 | - | - |
| Total liabilities | 4,762 | 5,210,350 | |
| Accumulated appropriations | - | 114,240 | |
| Equity | |||
| Share capital | 143 | 80,249 | 80,204 |
| Legal reserve | 8,067 | 8,067 | |
| Share premium account | 1,893 | 1,893 | |
| Other restricted equity | 103 | - | |
| Fund at fair value | 142 | -1,277 | -13,132 |
| Unrestricted equity reserve | 45,404 | 45,254 | |
| Retained earnings 1 January | 89,011 | 84,557 | |
| Dividends to shareholders | -20,051 | -14,825 | |
| Profit for the reporting period attributable to shareholders in Aktia plc | 22,600 | 19,280 | |
| Total equity | 142 | 226,000 | 211,297 |
| Total liabilities and equity | 230,762 | 5,535,887 | |
| (EUR 1,000) | Note 2008 |
2007 | |
|---|---|---|---|
| Off-balance-sheet commitments | 151 | ||
| Guarantees and pledges | - | 57,232 | |
| Other | - | 27,060 | |
| Commitments provided to a third party on behalf of the customer | - | 84,292 | |
| Securities repurchase commitments | - | ||
| Other | - | 674,622 | |
| Irrevocable commitments given in favour of a customer | - | 674,622 | |
| Total off-balance-sheet commitments | - | 758,914 |
| (EUR 1,000) | 2008 | 2007 |
|---|---|---|
| Cash flow from operating activities | ||
| Operating profit | 30,113 | 41,721 |
| Adjustment items not included in cash flow for the period: | ||
| Write-downs of credits and other commitments | 2,440 | 243 |
| Change in fair values | - | 2,172 |
| Depreciation and impairment of intangible and tangible assets | - | 2,645 |
| Other adjustments | 23,341 | -80 |
| Increase (-) or decrease (+) in receivables from operating activities | 5,061,490 | -1,057,948 |
| Bonds | 1,666,605 | -503,057 |
| Claims on credit institutions | 307,772 | -139,506 |
| Receicables from the public and public sector entities | 2,960,204 | -364,098 |
| Shares and participations | 33,034 | 1,193 |
| Other assets | 93,875 | -52,481 |
| Increase (+) or decrease (-) in liabilities from operating activities | -5,026,729 | 1,010,746 |
| Liabilities to credit institutions | -1,364,728 | 476,630 |
| Liabilities to the public and public sector entities | -2,962,778 | 279,846 |
| Debt securities issued to the public | -520,964 | 197,287 |
| Other liabilities | -178,259 | 56,982 |
| Paid income taxes | -2,962 | -17,197 |
| Total cash flow from operating activities | 87,693 | -17,699 |
| Cash flow from investing activities | ||
| Financial assets held until maturity, decrease | - | 2,003 |
| Investments in group companies and associated undertakings | - | -60,771 |
| Investment in tangible and intangible assets | -19,185 | -11,730 |
| Disposal of tangible and intangible assets | 70,554 | - |
| Total cash flow from investing activities | 51,369 | -70,498 |
| Cash flow from financing activities | ||
|---|---|---|
| Subordinated liabilities, increase | - | 5,276 |
| Increase in share capital | 45 | 3,608 |
| Paid dividends | -20,051 | -14,825 |
| Increase in unrestricted equity reserve | 150 | 12,254 |
| Total cash flow from financing activities | -19,856 | 6,313 |
| Change in cash and cash equivalents | 119,205 | -81,885 |
| Cash and cash equivalents at the beginning of the year | 233,800 | 315,684 |
| Cash and cash equivalents at the end of the year | 16 | 233,800 |
| Cash and cash equivalents transferred in connection with transfer of business operations | -352,989 | - |
| Cash and cash equivalents in the cash flow statement consist of the following items: | ||
| Cash in hand | - | 10,774 |
| Bank of Finland current account | - | 217,543 |
| Repayable on demand claims on credit institutes | 16 | 5,483 |
| Total | 16 | 233,800 |
Aktia plc's financial statement has been drawn up in compliance with the provisions of the Accounting Act and the Credit Institutions Act, the decisions of the Ministry of Finance on financial statements and consolidated financial statements for credit institutions and securities companies (150/2007) as well as the Annual Report Standard 3.1 issued by the Financial Supervisory Authority. Aktia plc's financial statement has been drawn up in compliance with Finnish Accounting Standards (FAS).
Assets and liabilities denominated in foreign currencies outside the Eurozone have been converted into euro using the European Central Bank's average rate of exchange on the day the accounts were closed. The exchange rate differences that have arisen on valuation have been reporten in the income statement as net income from currency trading.
Income and expenses are reproted in accordance with the approval basis of accounting.
Tangible and intangible assets are subject to linear and planned depreciation according to the financial lifetime of the assets. Land is not depreciated.
| Buildings | 40 years |
|---|---|
| Basic repairs to buildings which are | |
| not the bank's own property | 5–10 years |
| Other tangible assets | 3–5 years |
| IT licenses | 3–5 years |
Income or expenses arising from interest-rate swaps, forward rate agreements or interest-rate option agreements that were made in order to secure financial claims are entered under interest income. Income or expenses arising from interest-rate swaps, forward rate agreements or interest-rate option agreements that were made in order to secure financial liabilities are entered under interest income.
Value changes in the hedging derivative contracts have been dealt with in the income statement in the same way as value changes in balance sheet items that out to be protected.
Income, expenses and value changes arising from contracts included in the consignments stock and made for purposes other than service as security for a claim or liability are entered in the financial statement under net income from securities dealing.
Income and expense items arising from currencyrelated derivative contracts are entered in the income statement under net income from currency dealing, except for the difference between spot and forward rates which are entered under interest income or interest expenses.
Write-down of loans and other receivables are entered individually and in by group. A write-down is entered individually if there is objective evidence that the customer's ability to pay has been weakened after the claim was originally entered in the balance sheet. The objective evidence are significant financial difficulties on the part of the debtor, granting concessions for financial or legal reasons which the lender had not otherwise considered, or the bankruptcy or other financial restructuring of the debtor.
The value of the claim has been weakened if the estimated incoming cash flow from the claim – with regard to the fair value of the security – is less than the sum of the book value of the credit and the unpaid interest on the credit. The estimated incoming cash flow is discounted by the credit's original effective interest rate. If the credit has a variable rate of interest, the agreed rate of interest at the time of review is used as the discount rate. The write-down is entered as the difference between the lower current value of the recoverable cash flow and the book value of the credit.
A write-down by group is carried out where there is objective evidence for there being uncertainty in connection with repayment of the claims in the underlying credit portfolio. The analysis is based on a historic analysis of the probability of and loss in the event of bankruptcy in view of macroeconomic and microeconomic events and an experience-based assessment. The assessment of anticipated losses as a basis for deciding on write-down by group is carried out over a 12-month time horizon. Write-downs of customer receivables within the bank's corporate business are only carried out at individual level where there is a limited number of customers with specific operations.
Taxes in the income statement consist of direct taxes for the year and previous years and deferred taxes. The tax cost is reported in the income statement, except where this relates to items which are reported directly against shareholders' equity, where the tax effect is also reported as part of shareholders' equity. Income taxes are reported on the basis of estimated taxable income for the year. Deferred tax is recognised for differences between the book value of assets and liabilities, compared with their taxation value. A deferred tax asset is reported where it is likely that future taxable income will arise against which the temporary difference can be utilised.
Debt certificates (debt securities), claims on credit institutions, claims on the public and public sector entities, shares and participations are entered under financial assets. For these financial assets, Aktia applies the IFRS rules which entered into force on 1 January 2005 whereby financial assets are divided into four valuation categories.
Financial assets valued at fair value through the income statement include financial assets which are held for trading. This category includes certificates of claim and other publicly quoted Finnish and foreign securities that are actively traded in by the bank and that have been acquired for the short term with the intent to earn revenue. They have been entered at actual value with changes in value being currently enteted in the income statement.
Debt securities, shares and participations that have neither been held for active trading nor retained until maturity are classified as Financial assets available for sale. The unrealised value change is recognised in equity under Fund at fair value with deduction for deferred tax until sold or written down. When sold or written down, the accumulated unrealised profit or loss is transferred to the income statement and included under the item Net income from financial assets available for sale.
Debt certificates to be held until maturity are entered under Financial assets held until maturity. These securities are entered at accrued acquisition cost. If there is objective evidence to suggest that full repayment will not be received on such a security at the end of the accounting period, the difference compared with the acquisition price is entered as an expense. The difference between the acquisition price and the nominal value has been allocated as interest income or the loss thereof.
Claims on credit institutions and claims on the public and public sector entities are reported under this category. These receivables are entered at accrued acquisition value.
Other financial liabilities are included in the balance sheet at their acquisition value on entering into the agreement, and subsequently at their accrued acquisition value.
The Group's real estate property and shares and participations in real estate corporations have been divided up into commercial properties and investment properties according to how they are used. Commercial properties are properties used by the Group. Investment properties are properties which are held in order to generate rental income and to obtain an increase in the value of capital. If only part of the premises is used by the Group, the division has been made according to the square metres reserved for their respective purposes. Both commercial properties and investment properties have been included at their acquisition price. Buildings are depreciated linearly according to their financial lifetime over 40 years. Land is not depreciated.
Estimation of fair value for investment properties was carried out by external property valuators using the cash flow method or through an internal valuation based on the rental income that could be earned at market rates. If the probable assignment value of the property or shares ans participations is essentially or permanently lower than the acquisition price, a writedown is entered as expense in the income statement. If there is a likely objective indication that there will be a need for a write-down, the value of the asset is examined.
Other tangible and intangible assets are included in the balance sheet at their acquisition price less planned depreciation. Planned depreciation is based on the financial lifetime of the assets.
| (EUR 1,000) | ||
|---|---|---|
| Note 102. Interest income and expenses |
||
| Interest income | 2008 | 2007 |
| Claims on credit institutions | 22,397 | 20,902 |
| Receivables from the public and public sector entities | 129,880 | 140,181 |
| Bonds | 66,691 | 54,947 |
| Derivatives | 1,038 | -1,526 |
| Other interest income | 8 | 305 |
| Total | 220,013 | 214,809 |
| Interest costs | ||
| Liabilities to credit institutions | -56,223 | -42,911 |
| Other liabilities to the public and public sector entities | -69,720 | -64,930 |
| Debt securities issued to the public | -18,086 | -17,347 |
| Derivatives and liabilities held for trading | -5,735 | -4,368 |
| Subordinated liabilities | -5,111 | -5,994 |
| Other interest expenses | -53 | -1,280 |
| Total | -154,928 | -136,830 |
| Net interest income | 65,085 | 77,980 |
| 2008 | 2007 | |
|---|---|---|
| Income from companies within the same Group | 1,323 | 866 |
| Income from associated companies | 72 | 343 |
| Income from financial assets that can be sold | 242 | 1,382 |
| Income from shares and participations held for trading | 913 | 1,255 |
| Total | 2,550 | 3,846 |
| Commission income | 2008 | 2007 |
|---|---|---|
| Lending | 6,010 | 7,648 |
| Borrowing | 93 | 120 |
| Payment transactions | 6,723 | 8,717 |
| Asset management services | 8,729 | 15,535 |
| Brokerage of insurance | 2,666 | 3,552 |
| Guarantees and other off-balance sheet commitments | 510 | 598 |
| Other commission income | 2,229 | 2,216 |
| Total | 26,959 | 38,384 |
| Bank fees paid | -498 | -651 |
|---|---|---|
| Other commission expenses | -1,976 | -3,257 |
| Total | -2,474 | -3,908 |
| Net commission income | 24,485 | 34,476 |
| Debt securities | 2008 | 2007 |
|---|---|---|
| Capital gains and losses | 54 | 57 |
| Total | 54 | 57 |
| Other | ||
| Capital gains and losses | 0 | -5 |
| Total | 0 | -5 |
| Total | ||
| Capital gains and losses | 54 | 53 |
| Net income from securities | 54 | 53 |
| Net income from currency trading | 850 | 1,094 |
| Net income from securities and currency trading | 904 | 1,146 |
| Debt securities | 2008 | 2007 |
|---|---|---|
| Capital gains and losses | -1,883 | -319 |
| Total | -1,883 | -319 |
| Shares and participations | ||
| Capital gains and losses | 98 | 1,243 |
| Reversal of impairment losses | 19 | 595 |
| Total | 117 | 1,838 |
| Other | ||
| Capital gains and losses | 806 | -112 |
| Impairment losses | -1,795 | - |
| Net income from brokered derivative contracts | 725 | - |
| Total | -264 | -112 |
| Total | ||
| Capital gains and losses | -979 | 812 |
| Impairment losses | -1,795 | - |
| Reversal of impairment losses | 19 | 595 |
| Net income from brokered derivative contracts | 725 | - |
| Net income from financial assets available for sale | -2,031 | 1,407 |
| Note 107. Net income from investment properties |
||
|---|---|---|
| 2008 | 2007 | |
| Rental income | 1,254 | 1,017 |
| Sales gains | 1,942 | - |
| Sales losses | -32 | - |
| Depreciation | -10 | -48 |
| Other income from investment properties | 23 | 37 |
| Other expenses for investment properties | -694 | -927 |
| Total | 2,484 | 79 |
| Note 108. Other operating income |
||
|---|---|---|
| 2008 | 2007 | |
| Rental income from commercial properties | 242 | 47 |
| Capital gains from tangible and intangible assets | 3,682 | 214 |
| Other operating income | 2,776 | 2,752 |
| Total | 6,699 | 3,012 |
103
| 2008 | 2007 | |
|---|---|---|
| Salaries and fees | -28,240 | -32,343 |
| Transfer to the personnel fund | -614 | -2,152 |
| Pension costs | -4,862 | -4,751 |
| Other indirect employee costs | -1,671 | -2,020 |
| Indirect emplyee costs | -6,533 | -6,771 |
| Total | -35,387 | -41,266 |
| 2008 | 2007 | |
|---|---|---|
| Other staff expenses | -2,714 | -3,052 |
| Office expenses | -2,067 | -2,368 |
| IT-expenses | -11,321 | -12,938 |
| Communication expenses | -2,341 | -2,958 |
| Representation and marketing expenses | -3,790 | -3,977 |
| Other administrative expenses | -12 | -143 |
| Total | -22,245 | -25,435 |
| Total | -2,431 | -2,597 |
|---|---|---|
| Depreciation of intangible assets | -1,182 | -786 |
| Depreciation of tangible assets | -1,249 | -1,811 |
| 2008 | 2007 |
| Note 112. Other operating expenses |
||
|---|---|---|
| 2008 | 2007 | |
| Rental expenses | -3,273 | -3,015 |
| Expenses for commercial properties | -2,384 | -3,430 |
| Insurance- and hedging costs | -1,229 | -1,985 |
| Monitoring, control and membership fees | -422 | -472 |
| Capital losses from tangible and intangible assets | -164 | - |
| Other expenses | -2,366 | -1,807 |
| Total | -9,838 | -10,709 |
| Note 113. Write-downs of credits and other commitments |
||
|---|---|---|
| Receivables from the public and public sector entities | 2008 | 2007 |
| Individual write-downs | -504 | -779 |
| Reversals of and recoveries of write-downs | 338 | 557 |
| Total | -166 | -222 |
| Guarantees and other off-balance sheet items | ||
| Reversals of and recoveries of write-downs | 1 | 3 |
| Total | 1 | 3 |
| Total write-downs of credits and other commitments | -165 | -218 |
| Income by business area | 2008 | 2007 |
|---|---|---|
| Investments | 2,484 | 79 |
| Group administration | 465 | - |
| Banking | 99,702 | 125,775 |
| Total | 102,651 | 125,854 |
| Operating profit by business area | ||
| Investments | 2,484 | 79 |
| Group administration | -4,758 | - |
| Banking | 32,387 | 41,642 |
| Total | 30,113 | 41,721 |
| Personnel by business area | ||
| Group administration | 98 | - |
| Banking | - | 839 |
| Total | 98 | 839 |
The bank only carries out business operations in Finland
| (EUR 1,000) | |
|---|---|
| Note 116. Bonds that are eligible for refinancing with central banks |
|
| 2008 | 2007 |
| Government bonds - |
199 |
| Banks' certificates of deposit - |
255,606 |
| Other - |
1,366,082 |
| Total - |
1,621,886 |
| Note 117. Claims on credit institutions |
|
| Repayable on demand 2008 |
2007 |
| Finnish credit institutions 16 |
5,483 |
| Foreign credit institutions - |
- |
| Total 16 |
5,483 |
| Other than repayable on demand | |
| Finnish credit institutions - |
157,772 |
| Foreign credit institutions - |
150,000 |
| Total 0 |
307,772 |
| Total claims on credit institutions 16 |
313,255 |
105
| Note 118. Reveivables from the public and public sector entities |
||
|---|---|---|
| 2008 | 2007 | |
| A sector-by-sector analysis of receivables from the public and public sector entities | ||
| Households | - | 2,177,738 |
| Companies | - | 550,678 |
| Housing associations | - | 183,784 |
| Public associations | - | 10,026 |
| Non-profit associations | - | 37,977 |
| Total | - | 2,960,204 |
The bank has in the category receivables from the public and public sector entities only receivables other than repayable on demand.
| Write-downs during the financial year | ||
|---|---|---|
| Write-downs at the beginning of the financial year | 36,803 | 37,021 |
| Receivables from the public and public sector entities | ||
| Specific write-downs during the year | -504 | -779 |
| Specific write-downs that reversed during the year | 338 | 557 |
| Actual credit losses during the year, for which specific write-downs had been previously taken | ||
| Guarantees and other off-balance sheet items | ||
| Individual write-downs that were reversed during the year | 1 | 3 |
| Actual credit losses during the financial year, for which specific write-downs were made previously | ||
| Transferred to Aktia Bank plc | -36,638 | |
| Write-downs at the end of the financial year | 0 | 36,803 |
| 2008 | 2007 | |||
|---|---|---|---|---|
| Total 2008 | Of which, the bonds that are eligible for refinancing with central banks |
Total 2007 | Of which, the bonds that are eligible for refinancing with central banks |
|
| Bonds held for trading | ||||
| Publicly quoted | - | - | 1,310,119 | 1,305,102 |
| Other | - | - | 338,740 | 316,784 |
| Total | - | - | 1,648,859 | 1,621,886 |
| Bonds that can be sold | ||||
| Publicly quoted | - | - | - | - |
| Other | - | - | - | - |
| Total | - | - | - | - |
| Bonds retained until maturity | ||||
| Publicly quoted | - | - | 45,840 | - |
| Other | - | - | - | - |
| Total | - | - | 45,840 | - |
| Total bonds | - | - | 1,694,699 | 1,621,886 |
| Note 120. Shares and participations |
||
|---|---|---|
| 2008 | 2007 | |
| Shares and participations that can be sold | ||
| Publicly quoted | 15,605 | 47,838 |
| Other | 500 | 3,220 |
| Total | 16,105 | 51,057 |
| Total shares and participations | 16,105 | 51,057 |
| of which credit institutions | - | 25,707 |
| Shares and participations in associated companies | ||
| Credit institutions | - | - |
| Other companies | 1,667 | 3,764 |
| Total | 1,667 | 3,764 |
| Shares and participations in group companies | ||
| Credit institutions | - | 24,021 |
| Other companies | 210,766 | 104,950 |
| Total | 210,766 | 128,971 |
| Total shares and participations | 228,538 | 183,792 |
| The holdings in associated- and group companies have been valued at their acquisition cost |
| 31 December 2008 | Immaterial rights (IT expen ses) |
Other long-term expenditu res |
Total |
|---|---|---|---|
| Acquisition cost at January, 1 | 6,525 | 6,098 | 12,623 |
| Transferred assets | -2,870 | -2,786 | -5,655 |
| Investments | 1,510 | 1,373 | 2,884 |
| Decreases | -4,460 | -4,511 | -8,971 |
| Acquisition cost at December, 31 | 706 | 174 | 880 |
| Accumulated depreciations and impairments at January, 1 | -4,460 | -4,169 | -8,628 |
| Accumulated depreciation on decreases | 4,460 | 4,471 | 8,931 |
| Planned depreciation | -706 | -476 | -1,182 |
| Accumulated depreciations and impairments at December, 31 | -706 | -174 | -880 |
| Book value at December, 31 | 0 | 0 | 0 |
| 31 December 2007 | Immaterial rights (IT expen ses) |
Other long-term expenditu res |
Total |
|---|---|---|---|
| Acquisition cost at January, 1 | 4,601 | 4,952 | 9,553 |
| Investments | 1,924 | 1,387 | 3,311 |
| Decreases | - | -241 | -241 |
| Acquisition cost at December, 31 | 6,525 | 6,098 | 12,623 |
| Accumulated depreciations and impairments at January, 1 |
-4,251 | -3,592 | -7,843 |
| Planned depreciation | -208 | -577 | -786 |
| Accumulated depreciations and impairments at December, 31 | -4,460 | -4,169 | -8,628 |
| Book value at December, 31 | 2,065 | 1,929 | 3,994 |
| 31 December 2008 | Land and water areas |
Buildings | Shares and partici pations in real estate corpora tions |
Total |
|---|---|---|---|---|
| Acquisition cost at January, 1 | 506 | 3,005 | 14,255 | 17,766 |
| Transferred assets | -10 | -50 | -13,003 | -13,063 |
| Investments | - | - | 5,572 | 5,572 |
| Decreases | -495 | -2,945 | -2,715 | -6,156 |
| Acquisition cost at December, 31 | 0 | 10 | 4,110 | 4,119 |
| Accumulated depreciations and impairments at January, 1 | - | -2,246 | -4,110 | -6,355 |
| Accumulated depreciation on decreases | - | 2,246 | - | 2,246 |
| Planned depreciation | - | -10 | - | -10 |
| Accumulated depreciations and impairments at December, 31 | 0 | -10 | -4,110 | -4,119 |
| Book value at December, 31 | 0 | 0 | 0 | 0 |
Carrying amount at December, 31 0 0 0 0
| 31 December 2007 | Land and water areas |
Buildings | Shares and partici pations in real estate corpora tions |
Total |
|---|---|---|---|---|
| Acquisition cost at January, 1 | 506 | 3,003 | 10,772 | 14,281 |
| Investments | - | 1 | 3,486 | 3,488 |
| Decreases | - | - | -3 | -3 |
| Acquisition cost at December, 31 | 506 | 3,005 | 14,255 | 17,766 |
| Accumulated depreciations and impairments at January, 1 | - | -2,198 | -4,110 | -6,308 |
| Planned depreciation | - | -48 | - | -48 |
| Accumulated depreciations and impairments at December, 31 | - | -2,246 | -4,110 | -6,355 |
| Book value at December, 31 | 506 | 759 | 10,146 | 11,410 |
| Carrying amount at December, 31 | 707 | 943 | 11,101 | 12,751 |
| 31 December 2008 | Land and water areas |
Buildings | Shares and partici pations in real estate corpora tions |
Total |
|---|---|---|---|---|
| Acquisition cost at January, 1 | 458 | 3,620 | 28,695 | 32,773 |
| Transferred assets | -13 | -99 | -22,699 | -22,810 |
| Investments | - | - | 9,427 | 9,427 |
| Decreases | -445 | -3,508 | -12,961 | -16,914 |
| Acquisition cost at December, 31 | 0 | 13 | 2,463 | 2,476 |
| Accumulated depreciations and impairments at January, 1 | - | -2,610 | -2,463 | -5,073 |
| Accumulated depreciation on decreases | - | 2,610 | - | 2,610 |
| Planned depreciation | - | -13 | - | -13 |
| Accumulated depreciations and impairments at December, 31 | 0 | -13 | -2,463 | -2,476 |
| Book value at December, 31 | 0 | -0 | 0 | 0 |
| 31 December 2007 | Land and water areas |
Buildings | Shares and partici pations in real estate corpora tions |
Total |
|---|---|---|---|---|
| Acquisition cost at January, 1 | 458 | 3,616 | 25,539 | 29,614 |
| Investments | - | 3 | 3,421 | 3,424 |
| Decreases | - | - | -265 | -265 |
| Acquisition cost at December, 31 | 458 | 3,620 | 28,695 | 32,773 |
| Accumulated depreciations and impairments at January, 1 | - | -2,554 | -2,463 | -5,017 |
| Planned depreciation | - | -56 | - | -56 |
| Accumulated depreciations and impairments at December, 31 | - | -2,610 | -2,463 | -5,073 |
| Book value at December, 31 | 458 | 1,010 | 26,232 | 27,701 |
| Machines and |
Other tangible |
Total tangible |
|
|---|---|---|---|
| 31 December 2008 | inventory | assets | assets |
| Acquisition cost at January, 1 | 26,918 | 15,613 | 93,070 |
| Transferred assets | -2,755 | -2,424 | -41,053 |
| Investments | 1,193 | 109 | 16,302 |
| Decreases | -24,511 | -12,873 | -60,453 |
| Acquisition cost at December, 31 | 845 | 425 | 7,865 |
| Accumulated depreciations and impairments at January, 1 | -24,511 | -12,804 | -48,743 |
| Accumulated depreciation on decreases | 24,511 | 12,873 | 42,239 |
| Planned depreciation | -742 | -494 | -1,258 |
| Accumulated depreciations and impairments at December, 31 | -742 | -425 | -7,762 |
| Book value at December, 31 | 103 | 0 | 103 |
| Machines and |
Other tangible |
Total tangible |
|
|---|---|---|---|
| 31 December 2007 | inventory | assets | assets |
| Acquisition cost at January, 1 | 26,094 | 14,904 | 84,892 |
| Investments | 1,311 | 709 | 8,932 |
| Decreases | -487 | - | -755 |
| Acquisition cost at December, 31 | 26,918 | 15,613 | 93,070 |
| Accumulated depreciations and impairments at January, 1 | -24,062 | -11,980 | -47,367 |
| Accumulated depreciation on decreases | 483 | - | 483 |
| Planned depreciation | -932 | -824 | -1,859 |
| Accumulated depreciations and impairments at December, 31 | -24,511 | -12,804 | -48,743 |
| Book value at December, 31 | 2,407 | 2,809 | 44,327 |
| Note 123. Other assets |
||
|---|---|---|
| 2008 | 2007 | |
| Cash items being collected | - | 159 |
| Other assets | 1,024 | 11,042 |
| Total | 1,024 | 11,200 |
| Note 124. | Accrued expenses and advance payments | |
|---|---|---|
| 2008 | 2007 | |
| Interests | - | 72,015 |
| Other | 633 | 8,493 |
| Total | 633 | 80,509 |
| Note 125. Deferred tax receivables |
||
|---|---|---|
| 2008 | 2007 | |
| Deferred tax receivables at January, 1 | 4,614 | 0 |
| Financial assets available for sale: | ||
| - Fair value measurement | -4,165 | 4,496 |
| - Transfer to net profit | - | 118 |
| Deferred tax receivables at December, 31 | 449 | 4,614 |
Deferred tax receivables originates from valuation of financial assets to fair value.
| Note 126. Breakdown of maturity of assets by balance sheet item |
|
|---|---|
| -------------------------------------------------------------------- | -- |
| 31.12.2008 | Less than 3 months |
3–12 months |
1–5 years |
|---|---|---|---|
| Claims on credit institutions | 16 | - | - |
| Total | 16 | - | - |
| 31.12.2008 | 5–10 years | More than 10 years |
Total |
| Claims on credit institutions | - | - | 16 |
| Total | - | - | 16 |
| 31.12.2007 | Less than 3 months |
3–12 months |
1–5 years |
|---|---|---|---|
| Bonds that are eligible for refinancing with central banks | 145,969 | 284,109 | 806,779 |
| Claims on credit institutions | 173,255 | 140,000 | - |
| Receicables from the public and public sector entities | 201,811 | 250,192 | 862,789 |
| Bonds | 26,972 | 9,953 | 21,499 |
| Total | 548,007 | 684,254 | 1,691,067 |
| 31.12.2007 | 5–10 years | More than 10 years |
Total |
| Bonds that are eligible for refinancing with central banks | 385,029 | - | 1,621,886 |
| Claims on credit institutions | - | - | 313,255 |
| Receicables from the public and public sector entities | 605,214 | 1,040,199 | 2,960,204 |
| Bonds | 14,388 | - | 72,812 |
| Assets | Euros | currency | Total |
|---|---|---|---|
| Claims on credit institutions | 16 | - | 16 |
| Shares and participations | 228,538 | - | 228,538 |
| Other assets | 2,209 | - | 2,209 |
| Total | 230,762 | 0 | 230,762 |
| Foreign | |||
|---|---|---|---|
| Assets | Euros | currency | Total |
| Bonds | 1,694,699 | - | 1,694,699 |
| Claims on credit institutions | 296,568 | 16,687 | 313,255 |
| Receicables from the public and public sector entities | 2,961,796 | -1,592 | 2,960,204 |
| Shares and participations | 183,792 | - | 183,792 |
| Derivative contracts | 10,976 | - | 10,976 |
| Other assets | 383,198 | 738 | 383,937 |
| Total | 5,531,030 | 15,833 | 5,546,863 |
| 2008 | 2008 | 2007 | 2007 | |
|---|---|---|---|---|
| Book value | Fair value | Book value | Fair value | |
| Cash and balances with central banks | - | - | 228,317 | 228,317 |
| Bonds | - | - | 1,694,699 | 1,694,104 |
| Claims on credit institutions | 16 | 16 | 313,255 | 313,255 |
| Receicables from the public and public sector entities | - | - | 2,960,204 | 2,950,462 |
| Shares and participations | 16,105 | 16,105 | 51,057 | 51,057 |
| Shares and participations in associated companies | 1,667 | 1,667 | 3,764 | 3,764 |
| Shares and participations in group companies | 210,766 | 210,766 | 128,971 | 128,971 |
| Derivative contracts | - | - | 10,976 | 10,976 |
| Total | 228,553 | 228,553 | 5,391,243 | 5,380,906 |
111
In the table, the fair value and the book value, of the financial assets and liabilities, are presented by balance sheet item. Information is also provided for such financial assets and liabilities that are entered as fair values. The principles for calculating the fair value are described in the accounting principles.
The fair values on investment assets are determined by the market price quoted on the active market. If the quoted market prices are not available, the value is determined with the help of the discounted cash flow. The interest rate curve on the market gives the discount rate. Capital funds are valued at the acquisition value in the case where there is no objective evidence for writing down.
Fair values for loans and other equivalent financial instruments, which are not prioritesed on the active market, are determined according to the discounted cash flow based on market quotations. The credit risk is also considered in the discounting factor.
The value entered is used as the fair value for disposable receivables and liabilities as well as short-term receivables and liabilities (less than twelve months to the next rate adjustment).
The fair values are clean values, without accrued interest.
| Note 129. Total assets by business area |
||
|---|---|---|
| 2008 | 2007 | |
| Investments | - | 11,410 |
| Group administration | 230,762 | - |
| Banking | - | 5,524,477 |
| Total | 230,762 | 5,535,887 |
| Note 130. Breakdown of subordinated claims |
||
|---|---|---|
| 2008 | 2007 | |
| Shares and participations in group companies and associated companies | 342 | 2,920 |
| Total | 342 | 2,920 |
| Total | 1,390 | 1,366,118 |
|---|---|---|
| Other than repayable on demand from credit institutes | - | 1,221,742 |
| Repayable on demand deposits | 1,390 | 144,376 |
| 2008 | 2007 | |
| Note 131. Liabilities to credit institutions |
| 2008 | 2007 | |
|---|---|---|
| Repayable on demand | - | 1,691,097 |
| Other than repayable on demand | - | 1,129,428 |
| Borrowing | - | 2,820,525 |
| Repayable on demand | - | 249 |
| Other than repayable on demand | - | 142,005 |
| Other liabilities | - | 142,253 |
| Total | - | 2,962,778 |
| 2008 | ||||
|---|---|---|---|---|
| Book value | Nominal value |
Book value | Nominal value |
|
| Certificates of deposit | - | - | 390,879 | 397,150 |
| Bonds | - | - | 130,086 | 132,236 |
| Total | 0 | 0 | 520,964 | 529,386 |
| 2008 | 2007 | |
|---|---|---|
| Cash items in the process of collection | 243 | 85,231 |
| Provisions | 912 | 259 |
| Other | 55 | 29,000 |
| Total | 1,209 | 114,490 |
| Book value at the be ginning of the financial year |
Increase | Decrease | Reversed | Book value at the end of the financial year |
|
|---|---|---|---|---|---|
| Staff costs | 259 | 1,153 | -475 | -24 | 912 |
| Total | 259 | 1,153 | -475 | -24 | 912 |
| Note 135. Accrued expenses and income received in advance |
||
|---|---|---|
| 2008 | 2007 | |
| Interests | - | 46,882 |
| Other | 2,163 | 11,472 |
| Total | 2,163 | 58,354 |
| Note 136. Subordinated liabilities |
Amount of liability |
Nominal value |
Amount that is included in Tier 1 capital |
Perpetuals |
|---|---|---|---|---|
| No individual debenture loan exceeds 10 % of all the subordinated liabilities. Debenture loans 31.12.2008 |
- | - | - | - |
All of the disclosed liabilities are in euros. The liabilities entered are reckoned in the calculations for capital adequacy for the lower Tier 2 capital of credit institutions considering that this capital cannot exceed 50 % of Tier 1 equity. Loans targeted at companies belonging to the same Group or Group companies do not exist.
Debenture loans 31.12.2007 180,221 180,718 142,461 -
Terms and conditions of early redemption:
Aktia or its Group may not redeem debentures before the end of the loan period without permisission of the Finnish Financial Supervision. Creditors are not entitled to demand early repayment.
| Note 137. Deferred tax liabilities |
||
|---|---|---|
| 2008 | 2007 | |
| Deferred tax liabilities at January, 1 | 0 | -551 |
| Financial assets available for sale: | ||
| - Fair value measurement | - | 551 |
| Deferred tax liabilities at December, 31 | 0 | 0 |
| 31 December 2008 | Less than 3 months |
3–12 months |
1–5 years |
|---|---|---|---|
| Liabilities to credit institutions and central banks | 1,390 | - | - |
| Total | 1,390 | 0 | 0 |
| 31 December 2008 | 5–10 years | More than 10 years |
Total |
| Liabilities to credit institutions and central banks | - | - | 1,390 |
| Total | 0 | 0 | 1,390 |
| 31 December 2007 | Less than 3 months |
3–12 months |
1–5 years |
| Liabilities to credit institutions and central banks | 1,229,413 | 67,705 | 69,000 |
| Liabilities to the public and public sector entities | 2,517,375 | 427,857 | 10,176 |
| Debt securities issued to the public | 193,275 | 208,601 | 70,318 |
| Subordinated liabilities | 8,951 | 46,283 | 124,987 |
| Total | 3,949,015 | 750,446 | 274,481 |
| 31 December 2007 | 5–10 years | More than 10 years |
Total |
| Liabilities to credit institutions and central banks | - | - | 1,366,118 |
| Liabilities to the public and public sector entities | 7,370 | - | 2,962,778 |
| Debt securities issued to the public | 48,770 | - | 520,964 |
| Subordinated liabilities | - | - | 180,221 |
| Total | 56,140 | 0 | 5,030,082 |
| Foreign | |||
|---|---|---|---|
| Liabilities | Euros | currency | Total |
| Liabilities to credit institutions and central banks | 1,390 | - | 1,390 |
| Other liabilities | 3,372 | - | 3,372 |
| Total | 4,762 | - | 4,762 |
| Foreign | |||
|---|---|---|---|
| Liabilities | Euros | currency | Total |
| Liabilities to credit institutions and central banks | 1,365,236 | 882 | 1,366,118 |
| Liabilities to the public and public sector entities | 2,951,730 | 11,048 | 2,962,778 |
| Debt securities issued to the public | 520,964 | - | 520,964 |
| Subordinated liabilities | 180,221 | - | 180,221 |
| Other liabilities | 178,406 | 1,862 | 180,268 |
| Total | 5,196,558 | 13,792 | 5,210,350 |
| Note 140. Financial liabilities fair value |
||||
|---|---|---|---|---|
| 2008 | 2008 | 2007 | 2007 | |
| Book value | Fair value | Book value | Fair value | |
| Liabilities to credit institutions and central banks | 1,390 | 1,390 | 1,366,118 | 1,366,212 |
| Liabilities to the public and public sector entities | - | - | 2,962,778 | 2,962,534 |
| Debt securities issued to the public | - | - | 520,964 | 520,964 |
| Derivatives and other liabilities held for trading | - | - | 7,424 | 7,424 |
| Subordinated liabilities | - | - | 180,221 | 178,774 |
| Total | 1,390 | 1,390 | 5,037,506 | 5,035,908 |
For the definition of fair value, see note 128.
| Note 141. Total liabilities by business area |
||
|---|---|---|
| 2008 | 2007 | |
| Group administration | 4,762 | - |
| Banking | - | 5,210,350 |
| Total | 4,762 | 5,210,350 |
| At the beginning of the financial year |
Increase | Decrease | At the end of the financial year |
|
|---|---|---|---|---|
| Share capital | 80,204 | 45 | - | 80,249 |
| Legal reserve | 8,067 | - | - | 8,067 |
| Share premium account | 1,893 | - | - | 1,893 |
| Other restricted equity | - | 103 | - | 103 |
| Fund at fair value | -13,132 | 11,856 | - | -1,277 |
| Restricted equity | 77,032 | 12,004 | 0 | 89,036 |
| Unrestricted equity reserve | 45,254 | 150 | - | 45,404 |
| Retained earnings 1 January | 89,011 | 89,011 | ||
| Dividends to shareholders | 20,051 | -20,051 | ||
| Profit for the reporting period attributable to shareholders in Aktia plc | 22,600 | - | 22,600 | |
| Unrestricted equity | 134,265 | 22,750 | 20,051 | 136,964 |
| Total equity | 211,297 | 34,754 | 20,051 | 226,000 |
| 2008 | 2007 | |||
| Fund at fair value at January, 1 | -13,132 | -1,569 | ||
| Changes in fair value during the period | 16,021 | -15,170 | ||
| Deferred taxes on changes in fair value during the period | -4,165 | 4,063 | ||
| Moved to income statement during the period | - | -455 | ||
| Fund at fair value at December, 31 | -1,277 | -13,132 |
Only changes in the fair value of financial assets that can be sold are entered in the fund at fair value
| Distributable assets in unrestricted equity | 2008 | 2007 |
|---|---|---|
| Retained earnings 1 January | 89,011 | 84,557 |
| Dividends to shareholders | -20,051 | -14,825 |
| Profit for the reporting period attributable to shareholders in Aktia plc | 22,600 | 19,280 |
| Unrestricted equity reserve | 45,404 | 45,254 |
| Total | 136,964 | 134,265 |
There are no non-distributable assets in unrestricted equity.
At the end of the reporting period, the bank's paid-up share capital as entered in the Finnish Trade Register was EUR 80,248,836 divided into 40,124,418 A shares and 20,050,850 R shares. The number of shareholders at the end of the financial period was 659. The Annual General Meeting's decision on changes in Aktia Savings Bank plc's Articles of Association and the creation of a new share series, series R, were registered in the Trade Register on 7 April 2008. The issue of R shares was carried out as a payment-free issue aimed at the bank's shareholders at the time. The issue contained a maximum of 20,050,968 R shares so that one new R share was received for every two old shares (series A). Every R share entitles the holder to 20 votes. The issue was carried out without increasing the bank's share capital.
| 2008 | 2007 | |||||
|---|---|---|---|---|---|---|
| Shareholders | Number of shares |
Share of the shares. % |
Share of the votes. % |
Number of shares |
Share of shares and votes. % |
|
| The 15 largest shareholders: | ||||||
| Helsinki Savings Bank Foundation | 11,406,145 | 19.0 | 19.0 | 7,604,097 | 19.0 | |
| Livränteanstalten Hereditas | 6,231,318 | 10.4 | 10.4 | 4,154,212 | 10.4 | |
| Pension Insurance Company Veritas | 6,063,192 | 10.1 | 10.1 | 4,028,795 | 10.0 | |
| Savings Bank Foundation in Esbo-Grankulla | 3,519,877 | 5.8 | 5.9 | 2,346,585 | 5.9 | |
| Oy Hammarén & Co Ab | 2,835,000 | 4.7 | 4.7 | 1,890,000 | 4.7 | |
| Vantaa Savings Bank Foundation | 2,427,912 | 4.0 | 4.1 | 1,614,900 | 4.0 | |
| Svenska litteratursällskapet i Finland rf | 2,367,687 | 3.9 | 3.9 | 1,578,458 | 3.9 | |
| Porvoo Savings Bank Foundation | 1,954,575 | 3.2 | 3.2 | 1,303,050 | 3.2 | |
| Åbo Academy Foundation | 1,953,000 | 3.2 | 3.2 | 1,302,000 | 3.2 | |
| Aktia Foundation in Vasa | 1,515,787 | 2.5 | 2.7 | 1,014,525 | 2.5 | |
| Kirkkonummi Savings Bank Foundation | 1,314,793 | 2.2 | 2.2 | 876,529 | 2.2 | |
| Karjaa-Pohja Savings Bank Foundation | 1,181,025 | 2.0 | 2.0 | 787,350 | 2.0 | |
| Inkoo Savings Bank Foundation | 969,354 | 1.6 | 1.6 | 646,236 | 1.6 | |
| Föreningen Konstsamfundet rf | 952,882 | 1.6 | 1.6 | 635,255 | 1.6 | |
| Ab Kelonia Oy | 914,917 | 1.5 | 1.5 | 609,945 | 1.5 | |
| Shareholders by sector 2008 : | Number of | Number of | ||||
| owners | % | shares | % | |||
| Corporations | 35 | 5.3 | 11,109,695 | 18.5 | ||
| Financial institutes and insurance companies | 37 | 5.6 | 3,540,503 | 5.9 | ||
| Public sector entities | 2 | 0.3 | 6,138,192 | 10.2 | ||
| Non-profit institutions | 58 | 8.8 | 37,745,098 | 62.7 | ||
| Households | 525 | 79.5 | 1,041,780 | 1.7 | ||
| Foreign shareholders | 1 | 0.2 | 600,000 | 1.0 | ||
| Total | 658 | 100.0 | 0 | 100.0 | ||
| entered in nominee register | 1 | 8.268 |
| Breakdown of stock 2008: | Number of | Number of | ||
|---|---|---|---|---|
| Number of shares | owners | % | shares | % |
| 1-100 | 143 | 21.7 | 9,944 | 0.0 |
| 101-1 000 | 238 | 36.1 | 108,712 | 0.2 |
| 1 001 - 10 000 | 165 | 25.0 | 503,322 | 0.8 |
| 10 001 - 100 000 | 101 | 15.3 | 16,782,979 | 27.9 |
| 100 000 - | 12 | 1.8 | 42,770,311 | 71.1 |
| Totalt | 659 | 100.0 | 0 | 100.0 |
Aktia plc's Board of Directors has a valid authority to issue 938,498 A series shares. No rights of option have been issued.
| For the bank 31 December 2008 | Type of security | The liability's nominal value |
The value of the col lateral |
|---|---|---|---|
| Liabilities to credit institutions | Debt securities | 1,058,409 | 1,056,254 |
| Collateral provided in connection with repurchasing agreements | Debt securities | 362,138 | 362,138 |
| Securities given in connection with pledging agreements, CSA | Cash and balances with central banks | 8,500 | 8,500 |
| Totalt | 1,429,047 | 1,426,892 |
| For the bank 31 December 2007 | Type of security | The liability's nominal value |
The value of the col lateral |
|---|---|---|---|
| Liabilities to credit institutions | Debt securities | 79,826 | 79,850 |
| Collateral provided in connection with repurchasing agreements | Debt securities | 345,124 | 345,124 |
| Totalt | 424,950 | 424,973 |
| The | |||
|---|---|---|---|
| For the bank 31 December 2007 | Type of security | liability's nominal value |
The value of the col lateral |
| Securities given in connection with pledging agreements, CSA | Cash and balances with central banks | 93,250 | 93,250 |
The bank has not provided collateral for other parties.
The personnel's retirement plan is organised via the Pension insurance company Veritas and there are not any pension commitments that have a liability deficit.
| 2008 | 2007 | |
|---|---|---|
| Guarantees | - | 57,232 |
| Other commitments provided to a third party on behalf of a customer | - | 27,060 |
| Unused credit arrangements | - | 556,034 |
| On behalf of a subsidiary | - | 109,495 |
| Other irrevocable commitments | - | 118,588 |
| On behalf of a subsidiary | - | 20,883 |
| Total | - | 758,914 |
| Note 148. Rental commitments |
||
|---|---|---|
| 2008 | 2007 | |
| Less than 1 year | - | 1,851 |
| 1-5 years | - | 4,688 |
| More than 5 years | - | 2,581 |
| Total | 0 | 9,120 |
Included in rental commitments are such hire agreements that cannot be broken without the tenant's consent or without paying a significant additional fee. Internal rental commitments are not considered. The rental agreements mainly include business space and the rental level is as a rule linked to the cost of living index.
| Note 149. Number of employees 31 december |
||
|---|---|---|
| 2008 | 2007 | |
| Full-time | 90 | 700 |
| Part-time | 1 | 66 |
| Temporary | 7 | 73 |
| Total | 98 | 839 |
Aktia Bank plc offers private individuals and institutions discretionary asset management services. Customer funds are not intermediated to other customers.
| Customer assets being managed | 2008 | 2007 |
|---|---|---|
| Funds in a customer funds account | - | - |
| Funds in discretionary asset management services | - | 4,115 |
| Funds within the framework of investment advising according to a separate agreement | - | 567,601 |
| Total funds in asset management services | - | 571,716 |
| 2008 Assets |
2008 Liabilities |
2007 Assets |
2007 Liabilities |
|
|---|---|---|---|---|
| Interest rate derivatives | - | - | 3,416 | - |
| Other derivatives | - | - | 7,560 | 7,424 |
| Fair value hedging | 0 | 0 | 10,976 | 7,424 |
| Total | 0 | 0 | 10,976 | 7,424 |
| 31 December 2007 | Nominal value/term remaining | |||||
|---|---|---|---|---|---|---|
| Under 1 year |
1-5 years | More than 5 yrs |
Total | Assets | Liabilities | |
| Forward rate agreements | 400,000 | - | - | 400,000 | 379 | - |
| Interest rate swaps | 50,000 | 1,307,000 | 79,000 | 1,436,000 | 6,484 | -6,195 |
| Interest rate option agreements | 1,000,000 | - | 480,000 | 1,480,000 | 398 | -2,061 |
| Purchased | 500,000 | - | 240,000 | 740,000 | 398 | - |
| Written | 500,000 | - | 240,000 | 740,000 | - | -2,061 |
| Total interest rate derivatives | 1,450,000 | 1,307,000 | 559,000 | 3,316,000 | 7,261 | -8,256 |
| Total hedging derivative instruments | 1,450,000 | 1,307,000 | 559,000 | 3,316,000 | 7,261 | -8,256 |
| Forward rate agreements | 15,000 | - | - | 15,000 | 137 | -84 |
| Interest rate swaps | 23,000 | 2,880,000 | 851,800 | 3,754,800 | 23,918 | -16,134 |
| Interest rate option agreements | - | 2,790,361 | 1,547,548 | 4,337,909 | 3,054 | -3,254 |
| Purchased | - | 1,337,100 | 893,774 | 2,230,874 | 3,054 | - |
| Written | - | 1,453,261 | 653,774 | 2,107,035 | - | -3,254 |
| Total interest rate derivatives | 38,000 | 5,670,361 | 2,399,348 | 8,107,709 | 27,109 | -19,472 |
| Forward rate agreements | 136,778 | - | - | 136,778 | 217 | -255 |
| Total forward rate agreements | 136,778 | - | - | 136,778 | 217 | -255 |
| Equity options | 50,294 | 65,472 | 47,900 | 163,666 | 7,718 | -7,718 |
| Purchased | 25,147 | 32,736 | 23,950 | 81,833 | 7,718 | - |
| Written | 25,147 | 32,736 | 23,950 | 81,833 | - | -7,718 |
| Total equity options | 50,294 | 65,472 | 47,900 | 163,666 | 7,718 | -7,718 |
| Options | - | 8,608 | - | 8,608 | 1,016 | -1,016 |
| Purchased | - | 4,304 | - | 4,304 | 1,016 | - |
| Written | - | 4,304 | - | 4,304 | - | -1,016 |
| Other derivative instruments | - | 8,608 | - | 8,608 | 1,016 | -1,016 |
| Total other derivative instruments | 225,072 | 5,744,441 | 2,447,248 | 8,416,761 | 36,060 | -28,461 |
| 2008 Percentage |
2008 | 2007 Percentage |
2007 | |
|---|---|---|---|---|
| of all shares | Book value | of all shares | Book value | |
| Finansieringsverksamhet | ||||
| Aktia Bank Abp | 100.0 | 163,000 | - | - |
| Real estate agency operations | ||||
| Aktia Fastighetsförmedling Helsingfors-Esbo Ab, Helsingfors | 80.0 | 80 | 80.0 | 80 |
| Aktia Fastighetsförmedling ISKL Ab, Kyrkslätt | 90.0 | 72 | 90.0 | 72 |
| Aktia Fastighetsförmedling Jakobstad Ab, Jakobstad | 80.0 | 80 | 100.0 | 100 |
| Aktia Fastighetsförmedling Karlebynejden Ab, Karleby | 100.0 | 100 | 100.0 | 100 |
| Aktia Fastighetsförmedling Mellan-Nyland - Vanda Ab, Vanda | 100.0 | 80 | 100.0 | 80 |
| Aktia Fastighetsförmedling Pargas-Åboland Ab, Pargas (merged) | 88.6 | 62 | ||
| Aktia Fastighetsförmedling Raseborg Ab, Ekenäs | 100.0 | 73 | 100.0 | 73 |
| Aktia Fastighetsförmedling Sibbo Ab, Helsingfors | 60.0 | 71 | 60.0 | 61 |
| Aktia Fastighetsförmedling Tammerfors Ab, Tammerfors | 87.3 | 227 | 67.0 | 67 |
| Aktia Fastighetsförmedling Vasa Ab, Vasa | 80.0 | 517 | 60.0 | 313 |
| Aktia Fastighetsförmedling Uleåborg Ab, Uleåborg | 90.6 | 290 | 100.0 | 100 |
| Aktia Fastighetsförmedling Åbo Ab, Åbo | 90.0 | 119 | 90.0 | 119 |
| Aktia Fastighetsförmedling Östra Nyland Ab, Borgå | 80.0 | 80 | 80.0 | 80 |
| Magnus Nyman AFM Ab, Kimito | 51.0 | 155 | 51.0 | 125 |
| Robur Invest Oy (dormant), Helsingfors | 100.0 | 8 | 100.0 | 8 |
| Vasp Invest Ab, Helsingfors | 100.0 | 325 | 75.0 | 101 |
| Total | 165,277 | 1,542 |
| 2008 Percentage |
2008 | 2007 Percentage |
2007 | |
|---|---|---|---|---|
| of all shares | Book value | of all shares | Book value | |
| Others | ||||
| Investmentbolaget Torggatan 14 Oy, Mariehamn | 33,3 | 376 | 33,3 | 376 |
| Järsö Invest Ab, Mariehamn | 33,3 | 376 | 33,3 | 376 |
| Mike Alpha Ab, Mariehamn | 33,3 | 1 | 33,3 | 1 |
| Mike Bravo Ab, Mariehamn | 33,3 | 1 | 33,3 | 1 |
| Mike Charlie Ab, Mariehamn | 33,3 | 1 | 33,3 | 1 |
| Mike Whiskey Ab, Mariehamn | 33,3 | 160 | 33,3 | 160 |
| November Sierra Ab, Mariehamn | 33,3 | 1 | 33,3 | 1 |
| Tenala Buccaneers Ab, Mariehamn | 33,3 | 376 | 33,3 | 376 |
| Tenala Invest Ab, Mariehamn | 33,3 | 376 | 33,3 | 376 |
| Total | 1,667 | 1,667 |
| Financing income obtained from and financing expenses paid to other group companies |
2008 | 2007 |
|---|---|---|
| Interest income | - | 10,356 |
| Dividends | 196 | 1 209 |
| Interest expenses | - | -691 |
| Net finance items | 196 | 10,874 |
| Receivables from and liabilities to companies in the group | 2008 | 2007 |
|---|---|---|
| Loans to credit institutions | 16 | 130 000 |
| Loans to the public and public sector entities | 342 | 11 590 |
| Debt securities | - | 28 032 |
| Shares and participations in associated companies | - | 2 852 |
| Other assets | - | - |
| Accrued income and expenses paid in advance | 396 | 18 713 |
| Total receivables | 754 | 191 187 |
| Liabilities to credit institutions | 1 390 | 7 824 |
| Liabilities to the public and public sector entities | - | 12 749 |
| Bonds issued | - | 14 185 |
| Subordinated liabilities | - | 900 |
| Other liabilities | - | - |
| Accrued expenses and income recieved in advance | - | 7 655 |
| total liabilities | 1 390 | 43 314 |
The Group's key personal in management positions refers to Aktia plc's Board of Supervisors and Board of Directors and the Group's Management (MD and deputy MD). Close relations include key persons in management positions according to the above and close family members and companies that are under the dominating influence (over 20 % of teh shares) of a key person in a management position.
| Salaries and fees as well as pension commitments arising or made | 2008 | 2007 |
|---|---|---|
| Members of the Board of Supervisors and their alternates | 189 | 195 |
| Kaj-Gustaf Bergh, Chairman of the Board | 40 | 36 |
| Dag Wallgren, Vice Chairman | 25 | 22 |
| Board of Directors: | ||
| Hans Frantz | 21 | 19 |
| Lars-Olof Hammarén | 21 | 19 |
| Lars-Erik Kvist | 21 | 19 |
| Kjell Sundström | 21 | - |
| Marina Vahtola | 21 | 18 |
| Nina Wilkman | 20 | 19 |
| Mikael Ingberg, Managing Director until 3 April 2008 | 124 | 391 |
| Jussi Laitinen, Managing Director from 4 April 2008 | 185 | - |
| Jarl Sved, Deputy Managing Director | 251 | 254 |
| Total | 937 | 992 |
Members of the management group can retire from and when they reach 60 years of age.
| 2008 | 2007 | |
|---|---|---|
| Number of shares | 123 776 | 100 164 |
| Share of total shares | 0,31% | 0,17% |
To the Annual General Meeting of Aktia p.l.c.
We have audited the accounting records, the financial statements, the report of the Board of Direc-tors and the administration of Aktia p.l.c. (fomer Aktia Savings Bank p.l.c.) for the financial year 2008. The financial statements comprise the consolidated balance sheet, income statement, cash flow statement, statement of changes in equity and notes to the consolidated financial statements, as well as the parent company's balance sheet, income statement, cash flow statement and notes to the financial statements.
The Board of Directors and the Managing Director are responsible for the preparation of the finan-cial statements and the report of the Board of Directors and for the fair presentation of the consoli-dated financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, as well as for the fair presentation of the financial statements and the report of the Board of Directors in accordance with laws and regulations governing the preparation of the financial statements and the report of the Board of Directors in Finland. The Board of Directors is responsible for the appropriate arrangement of the control of the company's accounts and fi-nances, and the Managing Director shall see to it that the accounts of the company are in compli-ance with the law and that its financial affairs have been arranged in a reliable manner.
Our responsibility is to perform an audit in accordance with good auditing practice in Finland, and to express an opinion on the parent company's financial statements, on the consolidated financial statements and on the report of the Board of Directors based on our audit. Good auditing practice requires that we comply with ethical requirements and plan and perform the audit to obtain reason-able assurance whether the financial statements and the report of the Board of Directors are free from material misstatement and whether the members of the Board of Directors of the parent company and the Managing Director have complied with the Limited Liability Companies Act.
An audit involves performing procedures to obtain audit evidence about the amounts and disclo-sures in the financial statements and the report of the Board of Directors. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reason-ableness of accounting estimates made by management, as well as evaluating the overall presen-tation of the financial statements and the report of the Board of Directors.
The audit was performed in accordance with good auditing practice in Finland. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opin-ion.
In our opinion, the consolidated financial statements give a true and fair view of the financial posi-tion, financial performance, and cash flows of the group in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.
In our opinion, the financial statements and the report of the Board of Directors give a true and fair view of both the consolidated and the parent company's financial performance and financial posi-tion in accordance with the laws and regulations governing the preparation of the financial state-ments and the report of the Board of Directors in Finland. The information in the report of the Board of Directors is consistent with the information in the financial statements.
Helsinki, 5 March 2009 PricewaterhouseCoopers Oy Authorised Public Accountants
Jan Holmberg Authorised Public Accountant
Approved at the meeting of the Board of Supervisors on 10 March 2009.
The Board of Supervisors has examined the financial statement, the consolidated accounts, the report by the Board of Directors and the audit report for 2008 and recommends that the financial statement and the consolidated accounts be accepted.
Henry Wiklund Chairman (in office until 2009), M. Sc. (Econ), Chamber Counsellor
Johan Bardy Deputy Chairman (2011), Attorney-at-Law, LL.M.
Christina Gestrin Deputy Chairman (2011), Member of Parliament, M. Sc. (Agriculture and Forestry)
Henrik Sundbäck Deputy Chairman (2009), Consultant, M.Sc. (Agriculture and Forestry)
Lorenz Uthardt Deputy Chairman (2011), Agrologist, M.Sc. (Pol), Honorary Counsellor
Bo-Gustav Wilson Deputy Chairman (2010), Audit Manager, M.Sc. (Econ)
Harriet Ahlnäs (2009), Principal, M.Sc. (Eng)
Roger Broo (2009), Administrative Director, M.Sc. (Pol), Chamber Counsellor
Sten Eklundh (2010), M.Sc. (Econ)
Agneta Eriksson (2010), M.A.
Håkan Fagerström (2011), Managing Director, Forester
Christoffer Grönholm (2009), Chief Secretary, D.Sc. (Pol)
Peter Heinström (2010), Honorary Consul
Erik Karls (2010), Farmer Kari Kyttälä (2009), LL.M.
Patrik Lerche (2011), Managing Director, M.Sc. (Econ)
Per Lindgård (2009), Teacher
Kristina Lyytikäinen (2011), Private Entrepreneur, B.A. (Social Sciences)
Håkan Mattlin (2011), Director General, Lic.Sc. (Pol), Chamber Counsellor
Clas Nyberg (2010), M.Sc. (Eng)
Jorma J Pitkämäki (2011), Director of Development
Henrik Rehnberg (2009), Farmer, Engineer
Gunvor Sarelin-Sjöblom (2010), M.A.
Peter Simberg (2011), Agrologist
Carl Eric Stålberg (2010), Chairman of the Board of Directors of Swedbank AB (publ), M.Sc. (Econ)
Sture Söderholm (2009), Lic. Odont.
Maj-Britt Vääriskoski (2010), Financial Director
Lars Wallin (2010), Office Manager
Ann-Marie Åberg (2010), Physiotherapist
Marianne Österberg (2011), LL.M.
Kaj-Gustaf Bergh b. 1955 LL.M., M.SC. (Econ) Managing Director, Föreningen Konstsamfundet r.f. Member of the Board since 2003 (Chairman since 2005)
Shares in Aktia: 15,750 shares
Positions of trust:
b. 1961 M.Sc. (Econ) Managing Director, Swedish Literature Society in Finland Member of the Board since 2003 (Vice Chairman since 2006)
Shares in Aktia: 1,575 shares
Positions of trust:
Lars-Olof Hammarén
b. 1942 B. Sc. (Eng) Member of the Board since 2006
Positions of trust:
b. 1963 M.Sc. (Econ) Managing Director, Bauhaus Suomi Oy Member of the Board since 2007
• The Finnish Housing Fair Co-operation Organisation, member of the board
Borgström b. 1946 M.Sc. (Agr. & For.), Honorary Counsellor Member of the Board from 1 January 2009
Positions of trust:
Positions of trust:
b. 1945 M.Sc. (Econ) Member of the Board since 1998
Shares in Aktia: 3,150 shares
Positions of trust:
Nina Wilkman
b. 1958 LL.M. Attorney-at-Law, Attorneys at Law Borenius & Kemp pinen Ltd Member of the Board since 2006
Positions of trust:
b. 1948 Lic.Pol. Principal Lecturer, Health Care and Social Services, University of Applied Sciences in Vaasa Member of the Board since 2003
Shares in Aktia: 787 shares
The Board members' most important positions of trust are listed above. A complete list of communities and companies where the members of the Board exercise control or have authority is included in the bank's Insider Register.
For information on remuneration of members of the Board see www.aktia.com.
Jussi Laitinen b. 1956 Managing Director M.Sc. (Econ)
Positions of trust:
• Sigrid Jusélius Stiftelse, auxiliary in the Finance Committee
At Aktia from 4 April 2008
Jarl Sved b. 1954 Deputy Managing Director, Managing Director's alternate LL.M. At Aktia since 1980
Shares in Aktia: 61,343 shares
Positions of trust:
• Luottokunta, member of the Board
Robert Sergelius b. 1960
Deputy Managing Director M.Sc. (Eng) At Aktia since 2003
Shares in Aktia: 71,753 shares
Positions of trust:
• Unicus Ltd, member of the Board
Stefan Björkman b. 1963
Deputy Managing Director, CFO M.Sc. (Eng) At Aktia since 2006
Shares in Aktia: 17,367 shares
Positions of trust:
Olav Uppgård b. 1955
Director M.Sc. (Econ) At Aktia since 2003
Shares in Aktia: 28,442 shares
Merja Hellberg b. 1965 Director At Aktia since 1986
Shares in Aktia: 18,052 shares
Positions of trust:
Managing Director of Aktia Life Insurance M.Sc. (Econ) At Aktia since 2007
Shares in Aktia: 22,367 shares
Positions of trust:
Gösta Råholm b. 1955 Director
At Aktia since 1988
Shares in Aktia: 2,602 shares
Marit Leinonen b. 1958 Staff Representative At Aktia since 1994
Shares in Aktia:
A complete list of communities and companies where the members of the Executive Committee exercise control or have authority is included in the company's Insider Register.
For information regarding the Executive Committee's responsibilites, remuneration as well as the Managing Director's employment see www.aktia.com.
The members' areas of responsibility are presented as per 2 January 2009.
Anders Nordman 472 shares b. 1955
Managing Director of Aktia Non-Life Insurance M.Sc. (Econ) At Aktia since 2009
Positions of trust:
Henry Wiklund Chairman
Christina Gestrin Deputy Chairman
Lorenz Uthardt Deputy Chairman
Bo-Gustav Wilson Deputy Chairman
Henry Wiklund Chairman (in office until 2009), M. Sc. (Econ), Chamber Counsellor
Johan Bardy Deputy Chairman
Johan Bardy Deputy Chairman (2011), Attorney-at-Law, LL.M.
Christina Gestrin Deputy Chairman (2011), Member of Parliament, M. Sc. (Agriculture and Forestry)
Henrik Sundbäck Deputy Chairman (2009), Consultant, M.Sc. (Agriculture and Forestry)
Lorenz Uthardt Deputy Chairman (2011), Agrologist, M.Sc. (Pol), Honorary Counsellor
Bo-Gustav Wilson Deputy Chairman (2010), Audit Manager, M.Sc. (Econ)
Harriet Ahlnäs (2009), Principal, M.Sc. (Eng)
Roger Broo (2009), Administrative Director, M.Sc. (Pol), Chamber Counsellor
Sten Eklundh (2010), M.Sc. (Econ)
Agneta Eriksson (2010), M.A.
Håkan Fagerström (2011), Managing Director, Forester
Christoffer Grönholm (2009), Chief Secretary, D.Sc. (Pol)
Peter Heinström (2010), Honorary Consul
Erik Karls (2010), Farmer
Kari Kyttälä (2009), LL.M.
Henrik Sundbäck Deputy Chairman
Patrik Lerche (2011), Managing Director, M.Sc. (Econ)
Per Lindgård (2009), Teacher
Kristina Lyytikäinen (2011), Private Entrepreneur, B.A. (Social Sciences)
Håkan Mattlin (2011), Director General, Lic.Sc. (Pol), Chamber Counsellor
Clas Nyberg (2010), M.Sc. (Eng)
Jorma J Pitkämäki (2011), Director of Development
Henrik Rehnberg (2009), Farmer, Engineer
Gunvor Sarelin-Sjöblom (2010), M.A.
Peter Simberg (2011), Agrologist
Carl Eric Stålberg (2010), Chairman of the Board of Directors of Swedbank AB (publ), M.Sc. (Econ)
Sture Söderholm (2009), Lic. Odont.
Maj-Britt Vääriskoski (2010), Financial Director
Lars Wallin (2010), Office Manager
Ann-Marie Åberg (2010), Physiotherapist
Marianne Österberg (2011), LL.M.
P.O. Box 207 Mannerheimintie 14 00101 Helsinki Tel. 010 247 5000 Fax 010 247 6356 Managing Director Jussi Laitinen
Business ID 0108664-3 BIC/SWIFT: HELSFIHH
Internet: www.aktia.fi Group information: www.aktia.com Contact: [email protected] E-mail: [email protected]
P.O. Box 207 Mannerheimintie 14 A 00101 Helsinki Tel. 010 247 5000 Head of Communications Malin Pettersson
Production: Aktia communications Design and layout: ADD – Graphical Bureau Photo: Cata Portin Printing: Erweko
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