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OP Financial Group's Report by the Board of Directors

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OP Financial Group's Report by the Board of Directors OP Financial Group’s Report by the Board of Directors and Financial Statements 2019 OP OP Financial Group’s Report by the Board of Directors and Financial Statements 2019 Contents Report by the Board of Directors ...................................................................................................................................................5 Business environment ................................................................................................................................................................................................................8 Earnings analysis and balance sheet .......................................................................................................................................................................................9 2019 highlights ..........................................................................................................................................................................................................................12 OP Financial Group’s strategic targets and focus areas ....................................................................................................................................................12 Promotion of the success of owner-customers and operating region .........................................................................................................................13 Report on non-financial information .....................................................................................................................................................................................15 Capital adequacy and capital base .........................................................................................................................................................................................17 Risk exposure ..............................................................................................................................................................................................................................19 Retail Banking .............................................................................................................................................................................................................................23 Corporate Banking .....................................................................................................................................................................................................................26 Insurance ......................................................................................................................................................................................................................................27 Other Operations ........................................................................................................................................................................................................................30 Service development .................................................................................................................................................................................................................31 Personnel .....................................................................................................................................................................................................................................31 Executive Board members’ executive contracts .................................................................................................................................................................32 Changes in OP Financial Group’s structure ..........................................................................................................................................................................33 Governance of OP Cooperative ...............................................................................................................................................................................................34 Legal structure of OP Financial Group ..................................................................................................................................................................................35 Events after the balance sheet date ......................................................................................................................................................................................37 Outlook for 2020........................................................................................................................................................................................................................37 Key income statement and balance sheet items and financial indicators ....................................................................................................................38 Formulas for key figures and ratios .......................................................................................................................................................................................40 Main statements Income statement ......................................................................................................................................................................................................................43 Statement of comprehensive income ...................................................................................................................................................................................43 Balance sheet ..............................................................................................................................................................................................................................44 Statement of changes in equity ..............................................................................................................................................................................................45 Cash flow statement ..................................................................................................................................................................................................................46 Segment reporting ....................................................................................................................................................................................................................48 Notes Contents of the notes 51 1. OP Financial Group’s accounting policies under IFRS 54 2. OP Financial Group’s risk management principles 79 3. Changes in accounting policies and presentation 112 Notes to the income statement 4. Net interest income 115 5. Net insurance income 116 6. Net commissions and fees 116 7. Net investment income 118 8. Other operating income 120 9. Personnel costs 120 10. Depreciation/amortisation and impairment loss 120 11. Other operating expenses 121 12. Impairment losses on receivables 122 13. OP bonuses to owner-customers 122 14. Temporary exemption (overlay approach) 122 15. Income tax 123 2 OP OP Financial Group’s Report by the Board of Directors and Financial Statements 2019 Notes to assets 16. Cash and cash equivalents 124 17. Receivables from credit institutions 124 18. Derivative contracts 125 19. Receivables from customers 125 20. Investment assets 126 21. Assets covering unit-linked contracts 127 22. Investments accounted for using the equity method 127 23. Intangible assets 128 24. Property, plant and equipment 131 25. Leases 132 26. Other assets 134 27. Tax assets and liabilities 135 Notes to liabilities and equity capital 28. Liabilities to credit institutions 137 29. Derivative contracts 137 30. Liabilities to customers 138 31. Insurance liabilities 139 32. Liabilities from unit-linked insurance and investments contracts 144 33. Debt securities issued to the public 145 34. Provisions and other liabilities 146 35. Subordinated liabilities 152 36. Equity capital 154 Other notes to the balance sheet 37. Collateral given 157 38. Financial collateral held 157 39. Classification of financial assets and liabilities 157 40. Recurring fair value measurements by valuation technique 159 Notes to contingent liabilities and derivatives 41. Off-balance-sheet commitments 164 42. Contingent liabilities and assets 164 43. Derivative contracts 165 44. Financial assets and liabilities offset in the balance sheet or subject to enforceable master netting arrangements or similar agreements 171 Other notes 45. Ownership interests in subsidiaries, structured entities and joint operations 173 46. Information by country 181 47. Related-party transactions 181 48. Variable remuneration 183 49. Loss allowance regarding receivables and notes and bonds 187 50. Events after the balance sheet date 199 Notes to risk management OP Financial Group’s risk exposure 200 51. OP Financial Group’s risk tolerances 200 52. OP Financial Group’s exposure split by geographic region and exposure class 202 Risk exposure of Retail and Corporate Banking 53. Receivables from credit institutions and customers, and doubtful receivables 204 54. Loan losses and impairment losses 206 55. Structure of OP Financial Group funding 207 56. Maturity of financial assets and liabilities by residual maturity 207 57. Maturities of financial assets and liabilities by maturity or repricing 209
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