Wednesday 10/28/20
FINANCE

Finnish banks operating profit declined despite rising net income

Operating profit fell by 18.2% to 504 million euros in the second quarter of 2020.

Nordea bank office in Espoo. Photo: Foreigner.fi.
Nordea bank office in Espoo. Photo: Foreigner.fi.

The year of the coronavirus is far from ideal even for the banking business. Of course that does not mean that banks lose money like other industries, but their profit has been significantly reduced, as official data show.

In the second quarter of 2020, the net income from financial operations of credit institutions dedicated to banking in Finland rose to 1.2 billion euros. However, its operating profit fell by 18.2% to 504 million euros, according to figures from Statistics Finland's financial statements on credit institutions.

In the second quarter of 2020, Finnish banks accumulated 1,662 million euros in interest income. Their interest expenses, in turn, amounted to 490 million euros. The net income from financial operations calculated as the difference between these was 1,172 million euros, which was 102 million euros more than one year earlier. Net income went up by 25 million euros from the previous quarter.

In the second quarter, banks had 1,180 million euros in administrative expenses, which was 103 million euros less than in the same quarter of the year before. Relative to the quarter one year ago, administrative expenses decreased among bank groups especially for Finnish commercial banks. Wages and salaries made up 774 million euros or 65.6% of administrative expenses.

Operating profit down

Finnish banks operated in the second quarter of 2020 in a context marked by higher income and lower expenses. Even so, the operating profit, or profit from continuing operations before taxes, was 504 million euros, 112 million less (18.2% less) than in the second quarter of 2019, when the operating profit amounted 616 million euros.

The operating profit was weakened especially by reductions in value directed to profit and loss account items and credit loss reserves, Statistics Finland explains.

Balance sheet

The aggregate value of the balance sheets of banks was 751 billion euros. Of this, the share of equity was, on average, 5.9% or 44 billion euros. Cooperative banks belonging to OP Financial Group had the biggest share of equity in the balance sheet, around 11.4% and foreign banks the smallest, around 0.4%.

On average, the share of equity in the aggregate of the balance sheets for all banks operating in Finland fell by 0.10 percentage points from one year back.

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