AUM up but cost ratio deteriorates in OP Pohjola’s latest quarter

OP Pohjola, one of Finland’s biggest financial groups, has reported its asset management business continued to strip out costs and increase its AUM in the first quarter of 2013, but that its operating cost/income ratio still deteriorated.

Asset management business generally in Finland is being helped by continued record low interest rates, which is helping mutual fund assets grow faster than other areas of banking, OP Pohjola said. Stock prices rose 6% in Finland during the first quarter.

OP Pohjola’s own asset management business reported earnings before tax of €5m, as AUM increased 4% to €34.2bn, up from €32.7bn at the end of 2012. The group said 64% of its asset management portfolio outperformed their relevant benchmarks over the period.

A breakdown of assets shows that institutional clients accounted for €19.8bn of assets, OP Mutual Funds accounted for €10.3bn, and private investors accounted for €4.1bn.

By asset class, money marke investments stood for 17% of the overall AUM, notes and bonds 38%, equities 28% and ‘other’ 17%.

However, despite the increase in AUM, the asset management business remains far off its 45% target operating cost/income ratio. For the quarter it deteriorated to 58%. Asset management staff numbers have been significantly decreased already, from 155 at the end of 2012, to some 88 in the latest quarter. This cut personnel costs by some -6%, the results show.

However, in its results statement the group said: “The greatest uncertainties related to asset management’s financial performance in 2013 are associated with the actual performance-based fees tied to the success of investments and the amount of assets under management.”

Net commission and fees from asset management and legal services amounted to €14m over the quarter, relatively unchanged from €13m in the same period last year.

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