ANNUAL REPORT
2013
CEO’s review For the Savings Banks, their 191st year of operation was a year for active preparation and solid confidence in the future. The year will be marked in history as a turning point when 25 Savings Banks decided to combine forces for the benefit of even more efficient banking operations and customer work, while maintaining their local independence and power of decision. The reforming group will start as an amalgamation at the beginning of 2015, and the Savings Banks Association will become its central institution (see further information in Financial overview > Business Development). Savings Banks are facing these reforms from a strong financial position. Our business operations performed better than expected: in an extremely challenging operating environment, our operating profit amounted to EUR 73.5 million – almost a ten per cent increase on the previous year. With our business risks well under control, we are one of the most financially sound banking groups in Finland. Our customers can trust that the Savings Banks are a safe haven in a stormy economy.
Operating environment During 2013, the attention of Finnish economic debate turned to the impacts of the international financial crisis on Finland’s own difficulties: the structural problems and the sustainability gap of public finance. Economic growth did not materialise; instead of the expected boost, uncertainty still prevailed. Banking operations in our country are constantly facing new challenges. Finnish banks have had to adapt not only to the impacts of the international financial crisis and recession, but also to increasing regulation in the banking business. In the next few years, the sector will be shaken up mostly by the tightening regulation in the financial sector, changes in banking supervision, building of a banking union, and other official projects in the EU area. Regulation will result in more bureaucracy and costs. Finnish bank tax has already forced banks to seek cost savings. Fortunately, Finnish consumers are able to look beyond the difficulties. According to the Saving Barometer Survey of the Savings Banks, which was published in late 2013, it seems that Finnish people have decided to take control of their finances and start saving. At the same time, monthly savings have increased and people have become more interested in various saving and investment schemes. This change was evident because the results for the two previous years clearly showed that the gloomy news on the economy had crippled much of the willingness to save.
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The uncertainty of the situation is evident in the fact that the time span of Finnish people’s own financial planning has become shorter every year.
Finnish people need a bank that knows its customers An increasing number of bank customers would find it odd if their own bank were an international financial company with an objective of guaranteeing as big profits as possible to its owners. We at the Savings Banks act in a different way. Since we were founded, our main task has been to encourage our customers to save and to promote well-being in the communities where we operate. We believe in personal service, meeting the customer as a human being over the counter, online, on the mobile bank or telephone, or in any other customer service situation. We have our own operating model: we make progress on the basis of our own principles. It is important for us to offer Finnish consumers, entrepreneurs and businesses a different, customer-focused alternative. We promise outstanding customer service and a people-centred approach, which translate into a genuinely customer-driven business. The top rankings in numerous customer satisfaction surveys (see Customers) prove that we keep our promises. And we believe that Finnish people need us. The Savings Bank always helps.
Pasi Kämäri CEO The Savings Banks Association
Strategy Based on a close relationship with their customers, the fundamental task of the Savings Banks is to promote saving and financial well-being. Our values, basic service principles and customer relationships are rooted in this task. The Savings Banks focus on retail banking and in particular day-to-day banking, saving and investing, and lending services. Our product and service portfolio covers all key banking needs of private and corporate customers alike. These are complemented by the financial-sector services and products provided with our partners. We are a full-service retail bank. The aim of the Savings Banks is increasing customer share, good profitability, economic wellbeing of both the local community and customers, and a Savings Bank brand which attracts both customers and employees. Our growth shows both in current customers consolidating their banking with us and in the rising number of new customers. A genuinely customer-driven strategy is our strength (see the section on the Savings Banks experience). Satisfied customers will solidify our share of the customer market. Our strategy relies on the excellence of our employees. Customer care and financial management expertise constitute part of our core competences, as every customer satisfaction survey has consistently shown in recent years (see the sections on Customers and Employees). Our success is based on good profitability, cost-effectiveness, financial solidity, and risk management. Business development, risk-bearing capacity, dependable operations and security all rest on a foundation of a healthy capital adequacy buffer. Our risk-taking is conservatively dimensioned. The Savings Banks operate locally and responsibly, in a customeroriented manner and on a human scale.
Savings Banks values: Customer intimacy: We listen to our customers, and interact with them in a unique manner, based on their individual needs. Cooperation: Our cooperation with customers, personnel, other Savings Banks, and partners is open, sincere, and encourages growth. We adapt both ourselves and our operations. Reliability: Our management of the business is professional and trustworthy. We are here for our customers and the local community. Productivity: Our profit and growth ensure the development of our customer services and the vitality of our operating environment.
The Savings Banks experience The Savings Banks experience entails genuine customer intimacy, comprising unique customer encounters, the safeguarding of our customers’ economic well-being, wealth accumulation, and responsibility. Besides physical presence, customer intimacy also refers to a mental state of being on our customers’ side. The key characteristics of the Savings Banks customer encounter include excellent availability, ease, management of personal finances, and meeting our customers’ needs.
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Each and every customer experience is important to us and we strive to put ourselves in our customers’ shoes. We are present in the places where our customers want to meet us. Customer value arises from every encounter and builds into long-term customer relationships. We recognise our customers’ individual needs and create unique customer experiences, irrespective of time and place. With us, wealth accumulation is accomplished incrementally, in an orderly and reliable fashion. Saving is the key to wealth accumulation. Savings Banks are the personal financial trainers of their customers. Responsibility has been a mainstay of the Savings Banks since their establishment. We take an active role in our spheres of operation in order to promote the wealth accumulation and well-being our customers and local communities. We exist solely to serve our customers. The Savings Bank experience is based on our key values. Our promise, ‘The Savings Bank always helps’, describes our entire business premise in a nutshell.
Customers The Savings Banks’ business emphasis is on private customers, small and medium sized businesses (SMEs), and agricultural and forestry entrepreneurs. Private customers of working age, self-employed persons and small businesses make up our primary customer demographic. Through our working-age customers we also reach retired people, children, and young people. The role of SMEs and agricultural entrepreneurs depends on the geographical area served and particular knowhow of each specific bank. The focus of the Savings Banks on close customer relationships shows in our growing customer base and positive customer feedback. In 2013, the Savings Bank Group had as many as approximately 586,000 customers.
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Satisfied customers Customer satisfaction with the Savings Banks is among the best in the banking business. According to the international EPSI Rating, Savings Banks customers have been among the most satisfied banking customers since 2010 when the Savings Banks were included in the rating as their own group. In the 2013 analysis, the Savings Banks ranked fourth, with only a small difference to the other top-ranking banks. The Savings Banks were also rated high in the Asiakkuusindeksi 2013 survey run by the Finnish customer marketing association, Asiakkuusmarkkinointiliitto, and Avaus Consulting. The Savings Banks were included in the survey for the fourth year running. The Savings Banks ranked fifth in 2010, sixth in 2011, third in 2012, and seventh in 2013. In addition to the Asiakkuusindeksi survey, the customer experience (benefit, ease, pleasantness) of the companies included in the survey was also measured. In that survey, the Savings Banks ranked third, which was the best result in the banking business. A national customer feedback survey, Kansallinen Asiakaspalvelupalaute, implemented by Taloustutkimus on the customer service companies in 2013 ranked the Savings Banks on shared second place. According to a customer satisfaction survey carried out by the Savings Bank Group in spring 2013, as many as 83 per cent of our customers are prepared to recommend Savings Banks to their friends, and 86 per cent of those have already recommended it.
Employees The Savings Banks employees form the basis of our customer-driven strategy. Professional staff who act in a responsible manner are the key to successful customer encounters. For our customers, this translates into a unique Savings Bank experience. The Savings Bank experience means that we look after our customers at all stages of their life. We are their familiar and safe partner, who attends to their banking needs in a highly professional, but uncomplicated and easily understood fashion. Our way of working also manifests itself as a genuine interest in the people in our workplace communities. The seamless cooperation of our employees, and the way in which all of their competencies are mobilised, guarantee that our customers will benefit from the best solutions available. Each one of us is the best expert in their job, proactively bringing new ideas to the table for the development of our operations. The key to our work lies in professional and inspiring leadership. Competent line management is demonstrated by our day-today activities, results and employee spirit. We measure employee satisfaction in an annual survey. We support the professional and personal development of our employees throughout their careers. Our objective is to link learning and development to day-to-day work, as we believe this increases competence in the best possible way. Employee development is supported by training and coaching programmes, online training, and a number of other means. As an employer, the Savings Banks desire energetic and professional employees, who are interested in their own development and feel that their work is valuable and fosters development.
Local and responsible banking A local Savings Bank provides customers with many benefits: easy access to banking services, quick decision-making, and familiar customer service staff. Our local presence also shows in our contributions towards local well-being, such as the annual Thrift Week, cooperation with schools and educational institutions, support and sponsorship to local culture and education, and grants from the Savings Bank Foundations.
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Local operations are also a component of our responsible way of working. Responsibility was a central concept from the founding moment of the Savings Banks – they were established to promote thrift and encourage saving and personal wealth accumulation. Responsibility to the community is also an important part of the original Savings Bank mission.
Economic responsibility Economic responsibility comprises concerns such as good profitability, capital adequacy and liquidity, good governance and responsible leadership. We observe all sector-specific and professional codes of ethics. A feature particular to the Savings Banks is that we take responsibility for promoting saving and economic well-being in the local population. For example, we only provide our customers with loans and credit that they can service without overstraining their finances.
Social responsibility The Savings Banks actively promote well-being within their locales. We treat all of our customers equally, extend financing to local businesses, and introduce children to saving and wise spending habits already at an early age through activities such as cooperation with local schools, the Thrift Week, and the Savings Bank mascot Osmo. During the Thrift Week, the Savings Banks study the attitudes of Finns towards saving and the management of personal finances. In 2013, the Savings Banks carried out a Saving Barometer Survey for the fourth year running.
Fostering well-being in communities The Savings Banks sponsor universities, sports, culture, and research which promotes saving. In late 2013, 25 Savings Banks participated in a vote whereby our customers and all other Finns were given a chance, for the second time, to vote on how the Savings Banks allocate their support. The vote was held on Facebook and through text messaging. The sum allocated on the basis of the vote is approximately EUR 430,000. As many as 6,700 Finns gave their vote. The next vote will take place in late 2014. As usual, the Research Foundation of the Savings Banks awarded grants to university researchers and research undertakings. The awarded sum of EUR 73,500 included EUR 15,000 granted by the Foundation from the Kluuvi Fund. The Kluuvi Foundation will continue the work of the Kluuvi Fund, which was merged with the Research Foundation. The Savings Banks and their service companies are registered Finnish companies, which pay all their taxes in Finland. In many localities, the Savings Bank is among the largest taxpayers. In 2013, income tax paid by the Group totalled 13.4 million.
Environmental responsibility We also pay attention to the environmental impacts of banking. For example, we strive to replace business travel and face-to-face meetings with teleconferencing and videoconferencing. We also give thought to how we can develop environmentally friendly products and local well-being.
Finland’s oldest banking group Savings Banks constitute Finland’s oldest banking group. The first Savings Bank was established in Turku in 1822. Savings banks were founded to serve servants and other people of limited means. The banks also had a clear social agenda: their aim was to teach thrift to citizens. Promotion of thrift is still written into the Savings Bank Act, as the special purpose of the Savings Bank. The establishment of the first Savings Banks heralded the introduction of banking and savings activities accessible to all citizens. By the late 1800s, thanks to savings banks, rural areas had also largely made the transition to a money-based economy. The war ushered in an era of tight economic regulation, which continued until the mid-1980s. Due to the administrative role
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of the banks, cost-efficiency, preparedness for credit losses and risks, and the significance of capital adequacy faded into the background. In the 1980s, the Savings Banks began to implement a growth strategy, exploiting the opportunities provided by the newly deregulated financial markets. A significant role was played by the Savings Banks central institution Skopbank (Säästöpankkien Keskus-Osake-Pankki, SKOP), whose active investment policy was producing good results. However, Skopbank’s financial position could not withstand the simultaneous realisation of too many risks. Ultimately, the Bank of Finland took over the control of Skopbank in September 1991. Amid a recession and economic hardship, half of the Savings Banks merged to form Finland’s Savings Bank in 1992. With the Government Guarantee Fund forced to support the lossmaking bank, due to the terms of support the Government eventually owned Finland’s Savings Bank. In October 1993, the situation came to a head when the Government announced that it would sell Finland’s Savings Bank to its competitors. Some Savings Banks, however, were salvaged from the breakup. The 36 local Savings Banks, which had chosen not to join Finland’s Savings Bank, three regional Savings Banks, and Säästöpankki Aktia, formed by the merger of Helsingin Säästöpankki and seven other Savings Banks, continued to operate as independent Savings Banks. In 2003, Aktia broke away from the Savings Bank Group, ceasing to operate as a Savings Bank in 2008. Aktia is now a public limited company. After the hardships of the 1990s, the Savings Banks recreated their service network and began to grow once again. Their premise remains unchanged from that of the first Savings Banks in 1822: a customer-driven approach and the promotion of thrift. (Source: Aate ja Raha. Säästöpankit suomalaisessa yhteiskunnassa 1822–1994. Antti Kuusterä 1995.)
Savings Bank Museum The Savings Bank Museum housed at the Hämeenlinna Historical Museum provides the opportunity to learn more about the history of saving and savings banks. The exhibition, based on the collection compiled by the Research Foundation of Finnish Savings Banks, features items such as piggy banks, savings books and old currency. This specialised museum, which opened its doors in 1972, is the oldest national savings bank museum in the Nordic countries.
Market review Economic trends in 2013 2013 was fairly stable, and the global economy avoided new major crises. The growth in the US economy steadily picked up its pace throughout the year, which had a strong positive impact on global economic trends. In early 2013, tax increases and spending cuts held back economic growth and the development of inflation rates. Energy prices remained stable and the cost of food fell considerably during the year. The strong recovery measures by the US and Japanese central banks kept the interest rate levels low and contributed to the increasing confidence in continuing growth. In Europe, the year passed without any major crises, and progress was made in the implementation of the agreed crisis management measures. The euro area economy started to show signs of recovery in early summer, and the trend accelerated in the autumn. The drastic economic restructuring in Southern Europe started to bear fruit, and the competitiveness in the region showed signs of recovery. The global economic upturn eventually spread to Europe: the positive turn was in evidence at the end of the year. However, the European Central Bank allowed its balance sheet to shrink by 730 billion euro while other central banks took extensive recovery measures. Despite the cut in interest rates at the end of the year, monetary policy in the euro area was tough and the euro was strong in relation to the economic situation in the region. In Finland, there were futile hopes for an economic upturn. Finland lost a lot of its competitiveness and jobs in industry during the financial crisis, and the impacts of the expected export-driven recovery in the autumn remained very weak. Taxes were increased, the unemployment rate went up, and the need for public borrowing grew further. The moderate income settlement reduced corporate tax rates, and minor structural reforms were not enough to make an impact on the economy.
Economic outlook for 2014 The speed of the US economic recovery is accelerating, and that of the EU is at a turning point. Therefore, the preconditions for continuing growth in the global economy are good. The increase in demand in major economic areas also contributes to growth in the export-led countries in Asia. An ag-
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reement on the nuclear programme with Iran, together with growing shale oil production in the US, may bring more production into the oil market, which would keep oil prices at their current levels despite the economic growth. Any fall in energy prices would give a further boost to economic growth. In Europe, the early part of the year is looking moderately positive. We are confident that the unemployment rates in the euro area will start falling slightly and that economic growth will pick up speed once the pent-up consumer demand that has been building for years is unleashed. Due to the ageing population, tight taxation and high debt levels, we believe that the economic growth in the euro area will remain under two per cent. The threats include deflation, caused by a strong euro and the strict monetary policy, and political paralysis in decision-making after the European elections as a result of a potential success of EU-critical forces. A more rapid rise in US interest rates than expected may also result in pressure to increase interest rates in the euro area. This would slow down economic growth to a considerable extent. It would possibly also force some of the problem countries to utilise the support measures that are already available. Finland’s situation is challenging. We believe there will be a certain degree of recovery in exports as the global economy grows, but high taxation and the shrinking private sector will hardly bring any considerable relief to employment levels, at least during the early part of the year. Political decisions have an exceptionally great significance: Finland needs rapid structural reforms and a clear programme to repair its economic situation in order to restore confidence and maintain its credit ratings. It is possible that Finland will show a weaker development, too. If unemployment grows and no structural changes are implemented, any confidence may disappear quite quickly. This would have a negative impact on interest rate levels, corporate climate and employment.
Saving and investing
Central banks provide backup in investment in shares
According to Statistics Finland, the financial assets of Finnish households stood at EUR 238.4 billion at the end of September 2013, up EUR 13.2 billion on the previous year (EUR 225.2 billion).
Interest rates in the world’s major economic areas are at an exceptionally low level, and Western share prices are average. We believe that quantitative easing led by central banks will continue throughout the year. As a result, central banks will channel new money to the markets, short-term interest rates will remain low, and the preconditions for corporate funding will remain favourable due to exceptionally cheap money. For investors, this will bring safety and increase confidence in investing in shares.
In the third quarter of 2013, financial assets grew by EUR 2.4 billion on the previous quarter, mainly as a result of holding gains accrued from shares and fund units. As the low level of interest rates continued, households further reduced their term deposits. Households’ financial assets have grown more than their debts in the five previous quarters. At the end of September, the difference between households’ financial assets and debts, i.e. net financial assets, amounted to EUR 102.6 billion. As households’ loan stock and disposable income continued to grow at the same rate, households’ indebtedness ratio remained practically unchanged at 117.6 per cent. According to the Bank of Finland, the deposit stock increased in December by 5.5 per cent on the previous year, while the household deposit stock decreased by 0.7 per cent. At the end of 2013, the deposit stock stood at EUR 141.9 billion (EUR 135.1 billion year on year), of which households accounted for EUR 81.8 billion, equivalent to 58 per cent (61 per cent). In 2013, the Savings Banks held deposits totalling EUR 6.9 billion. Of this figure, private customers and corporate customers accounted for 77 per cent and 18 per cent respectively, with agricultural and forestry customers representing the remaining 5 per cent. A significant portion of these deposits, 67 per cent in all, were held in various kinds of savings and investment accounts. The deposits held by the Savings Banks increased by 3.7 per cent, breaking down into an increase of 4.4 per cent in day-to-day banking and 0 per cent in term deposits. The Savings Banks’ market share in deposits was 6.0 per cent (5.9 per cent year on year).
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However, Western shares do not carry particularly favourable prices. If the global economy continues to grow, there may be enough demand for shares from other countries, too.
Good development in fund capitals 2013 was a good year for Finnish investment funds. During the year, the fund capital grew by EUR 8.8 billion, equivalent to 13.3 per cent, of which net subscriptions amounted to EUR 4.7 billion. The positive market development, in turn, increased capital by EUR 4.1 billion. At the end of the year, the total capital of mutual funds registered in Finland was EUR 75.1 billion. Most capital was attracted by equity funds, EUR 2.8 billion in total. Sp-Fund Management Company performed very well. The funds administered by the company totalled EUR 934.1 million at year-end, up by 28.4 per cent on the year before. The number of fund unit holders was 103,757, an increase of 17.5 per cent. Net subscriptions in funds administered by the company were positive by EUR 109.8 million in 2013. On 29 August 2012, the Financial Supervisory Authority confirmed the Sp-Fund Management Company’s licence to provide personal asset management and investment advice. The operations started at the end of 2012 and were in full swing last year. At the end of 2013, the total capital of personal asset management amounted to EUR 180.4 million. The company had a 1.2 per cent share of the capital of mutual funds registered in Finland and 3.3 per cent of unit holders.
Life insurance sector had another good year In 2013, total premium incomes in the life insurance sector grew by 40.0 per cent to EUR 5.4 billion. The growth is again explained by the strong increase in premium incomes from personal endowment policies and from similar capital redemption policies. Premium incomes from pure risk policies continued to increase (growing by 2.6 per cent). Premium income from personal pension insurances fell by 8.5 per cent and that of group pension insurances by 10.9 per cent. Due to legislative changes, new sales of personal pension insurances for private individuals practically ended in the entire sector. Life Insurance Company Duo had another excellent year. Its premium income increased on the previous year by 22.6 per cent to EUR 82.7 million. Its claims and business expenses (incl. fees) remained well within budget. Duo’s insurance savings (total underwriting reserves) increased by 28.0 per cent to EUR 315 million. Its customer base fell somewhat due to the fact that the risk-based life insurance stock was transferred to the LocalTapiola Group in summer 2013. At the end of the year, the number of Duo customers stood at 48,000. Duo’s investments were also successful in 2013, resulting in a clear profit for 2013 and providing an excellent springboard for 2014.
Financing According to Bank of Finland statistics, the annual growth in the stock of household mortgages slowed down in 2013. The stock of mortgages extended by financial institutions to households was increased by 2.3 per cent, totalling EUR 88.3 billion at the end of the year. The number of new household mortgages is slightly smaller than in the previous year. The value of new mortgages raised by households in December 2013 was EUR 1.1 billion, down EUR 0.2 billion year on year. The average interest rate of new
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mortgages increased to 2.03 per cent (1.84 per cent in the previous year). At the end of the year, the average interest rate of the entire mortgage stock stood at 1.48 per cent, 1.63 per cent year on year. According to the Bank of Finland, the stock of euro-denominated loans extended by financial institutions to enterprises increased to EUR 66.7 billion (EUR 63.3 billion). The average interest on this stock was 1.97 per cent (1.95). The annual growth rate in the stock stood at 7.2 per cent, 5.2 per cent year on year.
Majority of Savings Banks loans extended to personal customers In 2013, the Savings Bank had a loan stock EUR 7.8 billion, including loans brokered for Aktia Real Estate Mortgage Bank (i.e. mortgage loans). Lending focused on low-risk personal loans, accounting for 73 per cent of the loan stock. Mortgages accounted for the majority of personal loans (61 per cent of the loan stock), while corporate loans accounted for 18 per cent and agricultural and forestry customers for 8 per cent. With an increase of 1.9 per cent in 2013, the growth in the Savings Banks household mortgages, including brokered loans, was just under the overall growth rate in the industry (2.3 per cent). New household mortgages fell by 20.7 per cent during the year, more than the trend in the industry (-15.8 per cent). The market share of household mortgages extended by the Savings Banks (including brokered loans) in 2013 was 5.7 per cent. The growth of corporate loans extended by the Savings Banks was slower than average in the industry. In 2013, loans to enterprises (including brokered loans) grew by 5.4 per cent (compared to industry growth of 7.2 per cent). The Savings Banks had a market share of 1.8 per cent (including brokered loans) of Finnish business funding. (General statistics on financial assets, deposits and loans: Statistics Finland and the Bank of Finland)
Financial overview The Savings Banks in 2013 The Savings Bank Group in 2013, year-on-year comparisons: • Operating profit MEUR 73.5; up by 9.5% • Capital adequacy 21.6% • Increase in deposits +3.7% • Increase in mortgages incl. brokered loans +2.7% • Increase in corporate loans incl. brokered loans +5.4% • Increase in insurance savings +28.0% • Increase in fund capital administered by Sp-Fund Management Company +28.3% • Increase in customer base +0.5% (trend without the figures for Saaristosäästöpankki) • The Savings Banks are forming an amalgamation, with a central institution.
Looking to a new accounting period with confidence after a strong year The Savings Bank Group performed better than expected, with the best results in six years. Operating profit rose by almost ten per cent to EUR 73.5 million (EUR 67.1 million). The Group is financially solid: net income from fees grew by over ten per cent, the fall in net interest was smaller than expected, costs were contained, and capital adequacy again was among the best in the banking business. The Savings Banks have adapted to the prevailing economic situation and managed to beat the challenges of low interest rates. We were able to stall the drop in net interest, and we are less dependent on net interest in the make-up of the financial result. Continuing growth of business operations is, naturally, most important. Financial performance was also boosted by the fact that one-off payments that were greater than normal in view of the fact that our business operations were made during the first quarter. At the end of the year, the Savings Banks strengthened their balance sheets and carried out asset reassessments and impairments which, in turn, reduced the profits to a certain extent. Uncertainty in the operating environment continued as expected. Finland is in desperate need of economic growth, but positive news is not forthcoming any time soon. Companies are announcing more and more co-determination negotiations, consumer caution is in evidence in the housing market, and credit risk is increasing.
The data is based on the combined figures of the profit and loss accounts and balance sheets of the Savings Banks. Vöyri Savings Bank, Oma Savings Bank, Kantasäästöpankki, South Karelia Savings Bank and Suodenniemi Savings Bank are included in all the Savings Banks total figures for 2013, when they were member banks of the Savings Banks Association. Saaristosäästöpankki is included in the figures from January to October when it was still a member bank of the Association. For 2014, the Savings Bank Group will publish its financial statements in accordance with the international accounting standard.
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In November 2013 and January 2014, twenty-five Savings Banks came to a decision to form an amalgamation of the Savings Banks and to turn the Savings Banks Association into a central institution for the amalgamation. The reforming group is applying for a licence for the central institution from the Financial Supervisory Authority, with the aim of launching the new organisation at the beginning of 2015.
Financial performance of the Savings Banks Basic business operations remain strong and costs are contained The Savings Bank Group posted an operating profit of EUR 73.5 million, up by 9.5 per cent on the comparison period. Business volumes continued to rise. The sale of mortgages and deposits, and especially that of fund units and life insurance policies, continued to grow, and the net income from fees grew by 10.1 per cent. Net interest income continued to weaken, yet not as sharply as before (-5.4% on the comparison period). Costs increased by 5.0 per cent. This is, above all, attributable to the bank tax and an increase in IT costs as a result of the strong investment in the development of customer services. The return to cost ratio was improved by 1.3 percentage points, standing at 66.9 per cent at year-end.
Excellent performance by fund management and life insurance companies Sp-Fund Management Company had an excellent year. The funds administered by the company totalled EUR 934.1 million at year-end, up by as much as 28.3 per cent on the year. The number of fund unit holders was 103,757 (88,324), showing an increase of 17.5 per cent. Net subscriptions in funds administered by the company during the year were positive by EUR 109.8 million. The company had a 1.2 per cent share of the capital of mutual funds registered in Finland and 3.3 per cent of unit holders. In August 2012, the Financial Supervisory Authority confirmed the Sp-Fund Management Company’s licence to provide personal asset management and investment advice. These operations were in full swing in 2013. At the end of 2013, the total capital of personal asset management amounted to EUR 180.4 million. Life Insurance Company Duo also had another excellent year. Its investments were highly successful, and its premium income increased by 22.6 per cent to EUR 82.7 million year on year. Duo’s insurance savings were increased by 28.0 per cent to EUR 315 million. Its customer base fell slightly due to the fact that the risk-based life insurance stock was transferred to the LocalTapiola Group in summer 2013. At the end of the year, the number of customers stood at 48,000.
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The 12-month growth rate in the housing loan portfolio, including brokered loans, was 2.7 per cent (9.1 in 2012). The slowing pace of growth was in line with the rest of the industry. The market share at year-end was 5.7 per cent (5.7%). Growth in corporate financing, including brokered loans, was 5.4 per cent (10.3 per cent during the comparison period) with moderate risk-taking. The growth was at the same level as in the industry on average. In corporate financing, Savings Banks focus primarily on small enterprises. The market share at year-end remained unchanged at 1.8 per cent. The 12-month growth in Savings Bank deposits was 3.7 per cent (6.1 per cent). The growth rate slowed down on the previous year, but still outperformed the average growth rate of banks. The market share of deposits at year-end was 6.0 per cent (5.9 per cent).
Sound capital adequacy The Savings Banks are among the most financially sound banks in Finland. Capital adequacy is built mainly on an organisation’s own funds, which is also the strongest element of financial solidity in view of future regulation. The Savings Bank Group’s Tier 1 ratio in 2013 was 17.6 per cent and capital adequacy was 21.6 per cent. Non-performing loans receivable by the Savings Banks was increased by 13.9 per cent. However, the level remained low at EUR 52.9 million, representing 0.6 per cent of all loans and commitments. The share of impairment losses was low.
Business development Establishing the Central Bank of Savings Banks In January 2013, Aktia Bank, a Savings Banks partner, announced the termination of the Savings Bank central credit institution facility at the beginning of 2015. In March, the Savings Banks and Itella signed a letter of intent on the share transaction, with which the Savings Banks acquired the entire share capital of Itella Bank. The acquisition was implemented in April. The official name of Itella Bank was registered in June as Säästöpankkien Keskuspankki Suomi Oy – Sparbankernas Centralbank Finland Ab – Central Bank of Savings Banks Finland Ltd.
Reform of the Savings Bank Group and applying for a licence for the amalgamation In August 2013, the Savings Bank Group announced that the Savings Banks will consider closing their ranks and making their own group status official. This is due to the fact that the reforming regulation of the financial sector does not recognise the networked business model of the group as an official group structure. After studying various alternatives, the Savings Banks came to the conclusion that legislation on the amalgamation of deposit banks offers a suitable model for reforming the group. At the end of September, the Board of Directors of the Savings Banks Association approved the rules and operating principles of the amalgamation.
In May, eleven employees were made redundant as a result of co-determination negotiations by the Central Bank of Savings Banks, launched in April. At the end of 2013, the bank had 15 employees.
In November, 25 Savings Banks came to a decision on joining the amalgamation, approving its operating principles and the rules of the central institution and making the changes to the bank’s rules or articles of association, required by the membership of the amalgamation.
Changes in the ownership and insurance portfolio of Life Insurance Company Duo
The Savings Banks Association will become the central institution of the group. The decisions on the central institution were taken in the extraordinary meeting of the Association in January 2014.
Life Insurance Company Duo, of which the Savings Banks previously owned an equal share with the Local Insurance Group, became fully owned by the Savings Banks in February 2013. At the end of January 2013, the Savings Bank Group and the LocalTapiola Group signed an agreement to end their partnership. At the turn of June–July, Duo assigned its entire riskbased life insurance portfolio to the LocalTapiola Group. The arrangement has no significant impact on Duo’s operations.
The preparation of the licence application for the central institution started at the end of the year after the decisions of the Savings Banks. The licence application will be submitted to the Financial Supervisory Authority during late spring 2014. The objective is to obtain the licence in autumn 2014 and to start operations as an amalgamation by the beginning of 2015 at the latest.
Sale of ACH Finland
Mergers and new names of Savings Banks
In June, Säästöpankkien Holding, owned by the Savings Banks, sold its shares in the payment transaction centre ACH Finland to the POP Bank Alliance. ACH Finland, or Bonum Bank as of December 2013, will continue its operations in payment transfer for the Savings Banks, POP Banks and Aktia Bank until the payment transactions of the Savings Banks and POP Banks transfer to their own central credit institutions and the central credit institution services offered by Aktia Bank end in 2015.
In April 2013, Eräjärvi Savings Bank and Längelmäki Savings Bank merged into Savings Bank Sinetti, and Oma Savings Bank and Parkano Savings Bank merged into Oma Savings Bank. In early July, Kortesjärvi Savings Bank changed its name to Avain Savings Bank. Saaristosäästöpankki and Aktia Bank reported on their planned merger in August and signed a merger agreement at the end of October. Saaristosäästöpankki has been part of Aktia Bank since November. In October, Vöyri Savings Bank reported on its intention to merge with Aktia Bank, and the merger will be carried out in 2014.
12
SAVINGS BANK GROUP – ANNUAL REPORT 2013
In August, Oma Savings Bank and Kantasäästöpankki reported on their merger. At the end of November, Oma Savings Bank and Kantasäästöpankki, as well as South Karelia Savings Bank and Suodenniemi Savings Bank, reported on their merger into a new Oma Savings Bank. At the same time, the banks made a decision that they will not join as members of the Savings Banks Association Co-operation and therefore will not be part of the amalgamation. At the end of 2013, the number of Savings Banks totalled 30, including Vöyri Savings Bank. Vöyri Savings Bank, Oma Savings Bank, Kantasäästöpankki, South Karelia Savings Bank and Suodenniemi Savings Banks are included in all financial and other business figures of the Group for 2013. Saaristosäästöpankki is included in the figures for January–October.
Other events The Annual Meeting of the Savings Banks Association on 14 March 2013 confirmed the number of members of the Association’s Board of Supervisors, the financial statements for 2012 and the budget for 2013. The Group’s Annual Report for 2012 was also published in March. In February and August, the Group published its market reviews, reporting on its near-future financial and market views. Sp-Koti’s housing market review was published for the first time in September. During Thrift Week at the end of October, the Group published its fourth Saving Barometer Survey of the Savings Bank, reviewing the trends of savings and investment in Finland. The Facebook vote on the allocation of support for the local communities of Savings Banks was also held during Thrift Week. The vote was organised for the second time. Based on the voting result of 2012, EUR 480,000 worth of support was distributed, and the amount of support for 2013 has been estimated at EUR 430,000.
New products and services At the beginning of 2013, the Savings Banks launched endowment policies with managed assets for private individuals. These are endowment policies provided by Life Insurance Company Duo where, instead of individually selected investment funds, the asset manager (SEB) oversees four fund management strategies, each carrying a different risk profile. Since March, Kotijousto has been available to Savings Banks customers. Kotijousto is a loan that is taken out in its entirety at once and is repaid in its entirety on the due date. The securities used in this product include residential properties or shares of stocks in a housing association owned by the customer.
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SAVINGS BANK GROUP – ANNUAL REPORT 2013
In March, Sp-Fund Management Company established a new Savings Bank High Yield specialised investment fund. It is a long-term bond fund that invests its assets in other investment funds with a lower credit rating which, in turn, invest in the high-yield corporate loan market. Sp-Fund Management Company is expanding its operations into individual asset management and investment advice. The licence extension was granted in autumn 2012. Asset management for the Savings Banks offers its services, above all, to the Savings Banks and their customers in co-operation with the banks. In May, the Savings Banks opened their online insurance store, www.saastopankinvakuutukset.fi, offering the most common personal insurance services, such as home, car, boat, travel and accident insurance policies. The insurer is Finnish P & C Insurance Ltd. In spring 2013, the project for designing the new online bank of the Savings Banks was launched. The objective is to introduce it in summer 2014. The website of the Savings Bank Group will also be revamped at the same time. In December, the Savings Banks raised the security level of the online banks by introducing additional payment authentication.
Outlook for 2014 The low level of market rates will continue to be challenging for our performance this year. However, the low interest rate level will not compromise our performance or capital adequacy to any significant extent. Banking is an activity that is sustained in the long term, and challenging years are part of its ebb and flow. This is just a phase, after all, and we will adjust to the circumstances. The Savings Banks are set to confront these challenges from a much better position than many other banks. With a view to implementing the regulatory changes, the Group has such capital adequacy as to avoid any immediate pressures on increasing own funds. Moreover, the state of our credit portfolio and our liquidity are at a good level, and our business volumes are on the rise. All things considered, the Group is performing well. Therefore, we are confidently looking forward to a new accounting period. Our main focus of attention in 2014 will be increasing business operations in line with the Savings Bank experience and building the foundations for a new Savings Bank Group.
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SAVINGS BANK GROUP – ANNUAL REPORT 2013
Key figures EUR million
2013
2012
CHANGE
CHANGE-%
Net interest income Other income
136.5 110.9
144.3 86.7
-7.8 +24.2
-5.4% +27.9%
Total income
247.4
231.0
+16.4
+7.1%
Staff costs Other operating costs Depreciation
68.1 92.0 5.4
68.9 82.8 5.6
-0.8 +9.2 -0.3
-1.2% +11.1% -4.7%
Total costs
165.4
157.5
+7.9
+5.0%
Impairment
8.5
6.4
+2.1
+33.1%
Operating profit
73.5
67.1
+6.4
+9.5%
Operating profit - % of average balance sheet total
0.8
0.8
+0.01
%pp
Cost/income (%)
66.9
68.2
-1.3
%pp
Non-performing assets and zero-interest claims (EUR million) - % of loans and commitments
52.2 0.6
46.5 0.6
+6.5 +0.1
+13.9% %pp
Impairment losses on loans and other receivables (%)
0.1
0.1
+0.0
%pp
Own funds (EUR million) Tier-1 own funds (EUR million) Capital adequacy (%) Tier-1 capital adequacy (%)
1 102 895 21.6 17.6
1 038 856 22.1 18.2
+63.7 +39.2 -0.4 -0.6
+6.1% +4.6% %pp %pp
Deposits Sp-funds fund capital Loans - incl. real estate mortgage loans Housing loans incl. mortgage loans
6 886 934.1 6 597 7 835 5 400
6 640 727.8 6 234 7 675 5 260
+246.0 +206.3 +363.1 +160.0 +140.5
+3.7% +28.3% +5.8% +2.1% +2.7%
Total assets
9 070
8 395
+675.4
+8.0%
Customers Customers (excluding Saaristosäästöpankki)
585 873
588 474
-2 601
-0.4%
585 873
583 013
+2 860
+0.5%
Vöyri Savings Bank, Oma Savings Bank, Kantasäästöpankki, South Karelia Savings Bank and Suodenniemi Savings Banks are included in all financial and other business figures of the Group for 2013. Saaristosäästöpankki is included in the figures for January–October.
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SAVINGS BANK GROUP – ANNUAL REPORT 2013
Five year review EUR million
2009
2010
2011
2012
2013
Net interest income
151.9
137.2
147.2
144.3
136.5
Other income
59.1
69.2
69.5
86.7
110.9
Total income
211.0
206.4
216.7
231.0
247.4
Staff costs
60.0
62.0
65.1
68.9
68.1
Other operating costs
71.4
77.5
77.7
82.8
92.0
Depreciation
6.2
5.9
5.6
5.6
5.4
Total costs
137.5
145.4
148.5
157.5
165.4
Impairment
7.0
6.7
2.9
6.4
8.5
Operating profit
66.5
54.3
65.4
67.1
73.5
- % of average balance sheet total
1.0
0.8
0.9
0.8
0.8
Cost/income (%)
65.2
70.5
68.5
68.2
66.9
Non-performing assets and zero-interest claims
29
32
35
46
53
- % of loans and commitments
0.5
0.5
0.6
0.7
0.8
0.4
0.5
0.6
0.6
- % of loans and commitments (inc. real estate mortgage loans) Impairment losses on loans and other receivables (%)
0.1
0.1
0.0
0.1
0.1
Own funds
835
892
940
1 038
1 102
Tier-1 own funds
713
752
807
856
895
Capital adequacy (%)
22.2
22.3
22.1
22.1
21.6
Tier-1 capital adequacy (%)
19.0
18.8
19.0
18.2
17.6
Deposits
5 714
5 950
6 260
6 640
6 886
Loans
5 309
5 470
5 651
6 234
6 597
- incl. real estate mortgage loans
6 304
6 706
7 111
7 675
7 835
Total assets
7 060
7 316
7 768
8 395
9070
Contingent liabilities
298
340
488
481
443
Employees
1 223
1 293
1 326
1 328
1 244
Branches
215
214
209
206
195
Customers
577 000
581 000
587 000
588 500
586 000
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SAVINGS BANK GROUP – ANNUAL REPORT 2013
Savings Banks in brief (12/2013) Managing Director
Balance sheet EUR million
Employees
Branches
Säästöpankki Optia
Mikko Paananen
1 188
161
17
Liedon Säästöpankki
Jussi Hakala
815
114
12
Oma Säästöpankki
Pasi Sydänlammi
745
82
17
Aito Säästöpankki
Pirkko Ahonen
636
77
13
Etelä-Karjalan Säästöpankki
Jarmo Partanen
615
82
12
Länsi-Uudenmaan Säästöpankki
Jukka Suominen
606
70
10
Nooa Säästöpankki
Tommi Rytkönen
600
70
8
Lammin Säästöpankki
Markku Moilanen
432
65
13
Someron Säästöpankki
Juhani Huupponen
401
46
5
Huittisten Säästöpankki
Toivo Alarautalahti
346
62
8
Närpes Sparbank
Hans Bondén
260
32
5
Avain Säästöpankki
Mikko Ruuska
247
38
9
Helmi Säästöpankki
Risto Seppälä
246
48
6
Kantasäästöpankki
Tarmo Laine
214
32
7
Eurajoen Säästöpankki
Matti Saustila
207
32
5
Säästöpankki Sinetti
Hannu Syvänen
202
35
6
Kvevlax Sparbank
Peter Finne
159
26
4
Kalannin Säästöpankki
Timo Reivonen
157
29
5
Ekenäs Sparbank
Berndt-Johan Lundström
146
15
3
Mietoisten Säästöpankki
Ari Jutila
137
17
2
Myrskylän Säästöpankki
Immo Laiho
133
20
4
Ylihärmän Säästöpankki
Erkki Järvi
130
21
5
Sysmän Säästöpankki
Matti Virtanen
84
14
3
Kristinestads Sparbank
Monika Mangs
79
14
3
Suomenniemen Säästöpankki
Jan Korhonen
74
13
3
Vörå Sparbank
Jan Björklund
71
9
2
Suodenniemen Säästöpankki
Kari Kaijo
46
5
2
Pyhärannan Säästöpankki
Juha Lahtela
39
5
3
Yttermark Sparbank
Niklas Näsman
34
5
1
Kiikoisten Säästöpankki
Sami Iltanen
23
5
2
9 070
1 244
195
17
SAVINGS BANK GROUP – ANNUAL REPORT 2013
Savings Banks on the map The map shows the domicile of each Savings Bank. Savings Banks are shown from biggest to smallest based on balance sheet total (12/2013).
26 17
22 3
11 29 24
15 10 28 18
27 30
4
16
23
14 20
2
6
25
13 8
9 19
18
1
12
21
7
SAVINGS BANK GROUP – ANNUAL REPORT 2013
5
1. Säästöpankki Optia 2. Liedon Säästöpankki 3. Oma Säästöpankki 4. Aito Säästöpankki 5. Etelä-Karjalan Säästöpankki 6. Länsi-Uudenmaan Säästöpankki 7. Nooa Säästöpankki 8. Lammin Säästöpankki 9. Someron Säästöpankki 10. Huittisten Säästöpankki 11. Närpes Sparbank 12. Avain Säästöpankki 13. Helmi Säästöpankki 14. Kantasäästöpankki 15. Eurajoen Säästöpankki 16. Säästöpankki Sinetti 17. Kvevlax Sparbank 18. Kalannin Säästöpankki 19. Ekenäs Sparbank 20. Mietoisten Säästöpankki 21. Myrskylän Säästöpankki 22. Ylihärmän Säästöpankki 23. Sysmän Säästöpankki 24. Kristinestads Sparbank 25. Suomenniemen Säästöpankki 26. Vörå Sparbank 27. Suodenniemen Säästöpankki 28. Pyhärannan Säästöpankkii 29. Yttermark Sparbank 30. Kiikoisten Säästöpankki
Savings Bank Group Savings banks are independent regional and local banks. Jointly the savings banks, the service companies owned by them, and the Savings Banks Association make up the Savings Bank Group. The Group banks are full-service retail banks. Through their service companies and a comprehensive network of partners, they can offer a full range of financial sector services to their private and corporate customers alike. the Savings Banks have decided to intensify their cooperation in accordance with the Act on the Amalgamation of Deposit Banks. A group of 25 savings banks are applying to the Financial Supervisory Authority for a licence to form a central institution. The licence will hopefully be granted by autumn 2014. The objective is to start operations in accordance with the new licence at the beginning of 2014 at the latest. (For further information, see Financial overview > Business development > Reform of the Savings Bank group and licence application.) The Annual Report for 2013 describes the situation and governance of the Savings Bank Group and the savings banks before establishing the amalgamation and the central institution.
Customers Savings Banks The Savings Banks Association Cooperation Lobbying Development • Customer relationships • Products and services • Know-how • Brand • Communications Savings Bank Inspectorate Savings Banks’ Guarantee Fund Research Foundation of Finnish Savings Banks European Savings Banks Group
19
Product and service companies • Central Bank of Savings Banks • Sp-Fund Management Company • Life Insurance Company Duo • Sp-Koti • Samlink
Key partners • Aktia Bank Plc • Finnish P&C Insurance • Nets (previously Luottokunta) • Automatia Pankkiautomaatit • Elo
SAVINGS BANK GROUP – ANNUAL REPORT 2013
During 2013, there were some changes in the structure of the Savings Bank Group, and at the end of the year there were thirty savings banks, six of which were in the form of a limited liability company. (For further information, see Financial overview > Business development > Reform of the Savings Bank group and licence application.)
Savings Banks Savings banks are deposit banks, regulated not only by the Credit Institutions Act but also by the Savings Bank Act, according to which the savings banks have the special objective of promoting saving. A minimum of ten corporations or foundations or a minimum of twenty natural persons are required to establish a savings bank. The restricted own capital of a savings bank consists of the basic capital and the reserve fund, as well as the possible revaluation fund and basic fund. Savings banks are independent regional and local banks. Together the savings banks make up the Savings Bank Group, combining local and national interests. At the end of 2013, the Group consisted of thirty savings banks. (For further information, see Financial overview > Business development > Reform of the Savings Banks and new names.) At the end of 2013, the savings banks maintained 195 offices under their own brand, with a total of 586,000 customers. Through additional co-operation agreements with the POP banks and Aktia Bank, savings bank customers could access almost 400 branch offices and some 200 automated service and payment points, as well as all ATMs in Finland. The savings banks’ chain of estate agents, Sp-Koti, maintained 53 service desks within branch offices.
Governance The highest decision-making body of each savings bank are the trustees, elected by the savings bank’s depositor customers and any holders of basic fund shares. The trustees elect the Board of Directors, which in turn appoints the Managing Director.
Savings banks in the form of a limited liability company are owned by savings bank foundations (with the exception of Nooa Savings Bank Ltd). Their highest decision-making body is the Council, which elects the Foundation’s Board of Directors. Savings banks foundations are actively involved in decision-making at the general meetings of shareholders of the savings bank in the form of a limited liability company. General meetings of shareholders elect the bank’s Board of Directors, which appoints the Managing Director. Nooa Savings Bank is owned by the other savings banks (96.3%) and Suomi Mutual Life Assurance Company. The purpose of savings bank foundations is to promote thrift and economic education in their respective regions. The foundations also have the purpose of supporting regional vitality and well-being, as well as the cultural and economic development of the region, in addition to fostering the savings bank heritage.
The Savings Banks Association The Savings Banks Association is the central organisation for the savings banks. Its key objective is to support and foster the competitiveness of the savings banks and the achievement of the Savings Bank Group’s objectives. The Association is tasked with promoting the development and co-operation of the savings banks and acting as their lobbyist. The Association seeks to influence banking prerequisites and banking legislation and, to this end, maintain contacts with the authorities and banking industry organisations. Joint savings bank policies, most importantly the strategy of the Savings Bank Group, are decided by the Savings Banks Association. The Association attends to the common business development, marketing, training provision and communications of the savings banks. The Savings Bank Inspectorate operates in connection with the Association. The highest decision-making body of the Savings Banks Association is the Annual Meeting of the Savings Banks Association, which is attended by all member banks of the Association. The Annual Meeting elects the Board of Supervisors of the Savings Banks Association. Members of the Board of Supervisors include the chairpersons of the Boards of Directors of all savings banks or the chairperson of the Board of Supervisors, if the bank has such a body. The Chairman of the Board of Directors of Nooa Savings Bank, who is the managing director of a savings bank that owns one Nooa Savings Bank and is therefore not a person elected to a position of trust, remains outside the Board of Supervisors. The Chairman of the Board of Supervisors of the Savings Banks Association is Jaakko Puomila who is Chairman of the Board of Directors of Länsi-Uudenmaan Säästöpankki.
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SAVINGS BANK GROUP – ANNUAL REPORT 2013
The Board of Supervisors elects the Board of Directors (6–9 members) of the Savings Banks Association. The Board of Directors of the Savings Banks Association comprises Mr Jussi Hakala (Chair), Managing Director of Lieto Savings Bank; Mr Matti Saustila (Deputy Chair), Managing Director of Eurajoki Savings Bank; Mr Hans Bondén, Managing Director of Närpiö Savings Bank; Mr Juhani Huupponen, Managing Director of Somero Savings Bank; Mr Immo Laiho, Managing Director of Myrskylä Savings Bank; and Mr Risto Sundqvist, Managing Director of Optia Savings Bank. The CEO of the Association is Mr Pasi Kämäri. Mr Harri Mattinen, Vice President of Development, serves as Deputy to the CEO. At the end of 2013, the Savings Bank Association and the Savings Bank Inspectorate employed a staff of 23.
Savings Banks’ Guarantee Fund The purpose of the Savings Banks’ Guarantee Fund is to safeguard the stable operations of its member banks. The Fund may grant its member banks financial assistance and loans, subscribe for shares or units of the member banks, subordinated loans issued by the member banks, and other commitments included in the bank’s own funds. In addition, the Fund may guarantee loans drawn by its member banks. The membership of the Guarantee Fund comprises all savings banks and savings banks limited liability companies. At the end of 2013, assistance from the Fund had not been extended to any of its savings bank members. The Board of Directors of the Fund is chaired by Mr Juhani Huupponen, Managing Director of Somero Savings Bank.
Research Foundation of Finnish Savings Banks The purpose of the Research Foundation of Finnish Savings Banks is to support research and publishing related to the financial markets, stock market, savings and housing in the fields of economics, social studies and law, and to safeguard the historical heritage of the savings banks. In 2013, the Kluuvi Foundation merged with the Research Foundation to form the Kluuvi Fund. In 2013, the Research Foundation of Finnish Savings Banks made grants of EUR 73,500 to university researchers and research undertakings. This sum included EUR 15,000 granted by the Foundation from the Kluuvi Fund. The costs of maintaining the Savings Bank Museum, operating as part of Hämeenlinna Historical Museum, are borne by the Foundation.
Savings Bank Service Companies Central Bank of Savings Banks Finland Ltd Purchased in April 2013 from Itella, the official name of Itella Bank was registered in June as Säästöpankkien Keskuspankki Suomi Oy – Sparbankernas Centralbank Finland AB – Central Bank of Savings Banks Finland Ltd. The main task of the Central Bank of Savings Banks will be to provide central credit institution facilities to the savings banks. Central bank operations will be transferred from Aktia Bank to the Central Bank of Savings Banks at the beginning of 2015 at the latest. At the end of 2013, the Central Bank had 15 employees, with Mr Hannu Lanteri acting as Managing Director.
Sp-Fund Management Company Ltd Sp-Fund Management Company, an investment fund company owned by the savings banks, provides the Savings Banks and their customers with services in fund and asset management. Established in 2003, it promotes long-term saving and serves as the investment markets expert unit for the savings banks. At the end of 2013, the company administered 17 mutual funds with total capital of EUR 934.1 million at the end of 2013. The number of fund unit holders is 103,757. At the end of the year, the funds administered on the basis of individual asset management agreements totalled EUR 180.3 million. At the end of 2013, Sp-Fund Management Company had a staff of 28, and its Managing Director is Mr Hannu Ruotsalainen.
Life Insurance Company Duo Life Insurance Company Duo adds to the core business and strategy of its owners by providing the life insurance services required by their customers. Established in 2007, Duo offers products and services in saving, investment and personal risk cover to private and corporate customers alike. The merger of Local Insurance Group and Tapiola Group changed Duo’s ownership structure. The company, of which the savings banks owned an equal share with Local Insurance Group, became fully owned by the Savings Banks in 2013. At the end of January 2013, the Savings Bank Group and LocalTapiola Group signed an agreement to end their partnership. At the end of the year, the company employed a staff of 30 and its Managing Director is Mr Timo Hiltunen. .
21
SAVINGS BANK GROUP – ANNUAL REPORT 2013
Sp-Koti Ltd At the end of 2010, the savings banks established a chain of estate agents, Sp-Koti. Sp-Koti is an estate agent franchising concept, which upholds the savings bank values. Sp-Koti Ltd offers a franchising opportunity to the local estate agents who will benefit from the use of the savings banks logo and the strong support provided by their local savings bank. During its first three years of operation, the chain has expanded strongly to cover the entire country. At the end of the year, Sp-Koti served customers in 53 locations. Sp-Koti’s objective is to continue its expansion and to become one of Finland’s four leading estate agent chains within the next few years. The chain employed 160 people and the central company had a staff of four at year-end. The Managing Director of Sp-Koti is Mr Antti Toivanen.
Samlink Group The IT and support systems company Samlink provides the Savings Bank Group with banking and information system services. The savings banks are a majority shareholder (57.4%) in the company. The other shareholders are Aktia Bank, POP Banks, Handelsbanken and Itella. Established in 1994, the Samlink Group is one of the first Finnish companies focusing on information technology service provision for the financial sector. Samlink Group’s subsidiary Paikallispankkien PP-Laskenta Ltd provides financial administration services to businesses operating in the financial sector. Samcom Oy is a subsidiary of the Samlink Group, offering online transaction services for the financial and energy sectors and for other industries. Partly owned by the Samlink Group, Project IT Ltd supplies project management and ITC consulting services in the financial and other sectors. At the end of 2013, the company had a staff of 500, and its Managing Director is Mr Heikki Sirve.
Bonum Bank Ltd ACH Finland Ltd (ACHF), or Bonum Bank Ltd as of December 2013, is a payment transaction centre serving the banks. It was established in May 2008. In June, Säästöpankkien Holding Oy owned by the savings banks sold its shares in the company to the POP Bank Alliance, which now owns the company in its entirety.
Aktia Real Estate Mortgage Bank Plc As a credit institution specialising in mortgages, the operations of Aktia Real Estate Mortgage Bank Plc are governed by the Act on Mortgage Banks and the Credit Institutions Act. Its shareholders are the savings banks (38.1%), Aktia Bank, and the POP Banks. Aktia Real Estate Mortgage Bank acts as a service company, and its financial services to shareholders are thus priced at cost. Since October 2012, Aktia Real Estate Mortgage Bank has focused on managing its existing loan stock and its refinancing. Re-mortgaging customers have been directed to the shareholding banks. The bank has funded its operations mainly with covered bonds issued to the international bond market. During 2013, the Real Estate Mortgage Bank sold the loans brokered by the banks back to the brokering banks in order to fund bonds that were becoming due for payment. At year-end 2013, the loan stock of EUR 2.9 billion held by the Real Estate Mortgage Bank was made up of more than 39,000 individual mortgages. Loans brokered by the savings banks accounted for 43% of total loan stock (EUR 1.2 billion). At the end of 2013, the company employed a staff of four, and its Managing Director is Mr Timo Ruotsalainen.
Savings Bank Partners Aktia Bank Plc Aktia Bank Plc acts as the central credit institution for the savings banks and also provides other services. Savings bank customers are served by Aktia branches and vice versa. At the end of January 2013, Aktia announced the termination of the savings banks’ central credit institution facility at the beginning of 2015 at the latest after the Central Bank of Savings Banks has taken over the central bank operations.
Finnish P&C Insurance Ltd Finnish P&C Insurance Ltd is the property and casualty insurance partner of the savings banks. The company provides the savings banks with tailored insurance services in line with the white-label concept, which means that the savings banks will sell the company’s insurances under their own brand.
Elo Mutual Pension Insurance Company Since 2007, the savings banks have engaged in co-operation with Pension Fennia in brokering statutory employees’ pension insurance and self-employed persons’ pension insurance.
22
SAVINGS BANK GROUP – ANNUAL REPORT 2013
The agreement-based co-operation also extends into the sector of corporate finance. Pension Fennia and LocalTapiola Pension merged on 1 January 2014. The name of the new company is Elo Mutual Pension Insurance Company.
Nets Ltd Nets Ltd (previously Luottokunta) is a long-term partner of the savings banks in the card payment business. The savings bank cards will be issued in partnership with Nets Ltd, which has been a member of the Nets Group since 31 October 2012. The Nets Group is a leading Nordic provider of payment solutions, information services, and digital safety solutions.
Automatia Pankkiautomaatit Ltd The savings banks have an active agreement with Automatia Pankkiautomaatit concerning the use of ATMs. The cooperation also extends to the Nouto. service, which provides corporate customers with daily deposits collection.
Other partners Genworth provides the cover for all Savings Bank Living Expenses Insurances and some of the loan protection insurances sold by the savings banks. Genworth is an insurance holding company headquartered in the United States. With respect to the deficiency guarantees used in connection with housing finance, the savings banks partner with the Garantia insurance company. Since 2007, the savings banks have engaged in agreementbased co-operation with FIM Bank Ltd in the sector of securities brokerage. The savings banks have an active co-operation agreement with Aktia Corporate Finance concerning finance company services. The co-operation was launched in 2008. SEB Wealth Management Finland Ltd has been partly responsible for the portfolio management for Sp-Fund Management Company.
23
SAVINGS BANK GROUP – ANNUAL REPORT 2013
Linnoitustie 9, P.O.Box 68 • FI-02601 Espoo Tel. +358 9 548 051 • Fax +358 20 602 9108 www.saastopankki.fi
