Sampo Pank                    NEWS RELEASE                      04/08/2004



AS SAMPO PANK-AUDITED ANNUAL REPORT 2003



Balance sheet

(in thousands of kroons, as at 31 December)



                           GROUP (EEK)       GROUP (EUR)

                               2003     2002    2003    2002

ASSETS

Cash                         55 659   49 091   3 557   3 137

Claims and loans          6 167 727 4 826 734 394 189 308 484

Claims and loans to

Central Bank                612 807  232 604  39 165  14 866

Claims and loans to

credit institutions         404 902  939 270  25 878  60 030

Claims and loans to 

clients                   3 950 372 2 895 484 252 474 185 055

Leasing receivables       1 307 424  860 807  83 559  55 015

Allowance for claims 

and loans                 - 107 778 -101 431 - 6 888 - 6 483

Securities                  699 866  667 989  44 729  42 692

Trading                     673 655  630 629  43 054  40 304

Available-for-sale           26 211   37 360   1 675   2 388

Derivatives                   2 621      120     168       8

Shares of subsidiary

undertakings                      0        0       0       0

Intangible assets             5 659    3 483     362     223

Tangible assets             141 657  136 331   9 054   8 713

Investment property          13 239   13 564     846     867

Other assets                 54 163   44 636   3 462   2 853

Prepayments and accrued

income                       57 981   45 347   3 706   2 898

TOTAL ASSETS              7 198 572 5 787 295 460 071 369 875



LIABILITIES

Amounts owed              5 157 689 4 129 399  329 636  263 916

Amounts owed to credit

institutions              1 110 250  559 746  70 958  35 774

Amounts owed to clients   4 031 512 3 547 842 257 660 226 748

Other amounts owed           15 927   21 811   1 018   1 394

Derivatives                  73 534   40 990   4 700   2 620

Issued debt securities      922 059  615 375  58 930  39 330

Other liabilities           169 277  249 735  10 819  15 961

Accruals and deferred

income                      141 296  118 999   9 030   7 605

Subordinated liabilities    213 849  198 528  13 667  12 688

TOTAL LIABILITIES         6 677 704 5 353 026 426 782 342 120

OWNERS' EQUITY

Share capital               323 111  323 111  20 651  20 651

Paid-in capital over par     17 081   17 081   1 092   1 092

Reserves                      4 695    2 048     300     131

Retained earnings           175 981   92 029  11 247   5 882

TOTAL OWNERS' EQUITY        520 868  434 269  33 289  27 755

TOTAL LIABILITIES AND

OWNERS' EQUITY            7 198 572 5 787 295 460 071 369 875

				

Income statement

(in thousands of kroons, year ended 31 December)



                              GROUP (EEK)     GROUP (EUR)

                                 2003    2002   2003   2002



Interest income               372 678 322 750 23 818 20 627

Interest income from banking

activities                    285 568 248 554 18 251 15 885

Interest income from leasing

activities                     87 110  74 196  5 567  4 742

Interest expense           -  144 419-156 569 -9 230 -10 007

Interest expense from banking

activities                 -  144 315-156 206 -9 223 - 9 983

Interest expense from leasing

activities                 -      104 -   363  -   7 -   23

Net interest income

(loss) (+/-)                  228 259 166 181 14 588  10 621

Income from securities          1 099       0     70      0

Income (loss) from associates    

(and subsidiaries in Bank)  (+/-)   0   1 724      0    110

Income from subsidiaries            0       0      0      0

Income from associates              0   1 724      0    110

Net fee and commission

income                         67 176  58 193  4 293  3 719

Fee and commission income      89 300  85 568  5 707  5 469

Fee and commission expense  -  22 124- 27 375- 1 414 -1 750

Net profit (loss) on financial

operations (+/-)               49 331  63 243  3 153  4 042

General administrative

expenses                    -  229 495-205 519-14 667-13 135

Salaries expense            -  98 065-  89 364- 6 267- 5 711

Social security tax expense  - 32 484-  30 040- 2 076- 1 920

Other administrative expenses- 98 946-  86 115- 6 324- 5 504

Depreciation and amortisation- 16 162-  15 373- 1 033-   983

Bad and doubtful debts

expense                      - 17 050-  20 822- 1 090- 1 331

Other operating income and

expense                         3 441   5 314    220    340

Other operating income          9 723   9 977    621    638

Other operating expenses     -  6 282-  4 663-   401-   298

PROFIT FOR THE FINANCIAL

YEAR                           86 599  52 941  5 535  3 384





BUSINESS RESULTS OF THE CONSOLIDATED GROUP OF AS SAMPO PANK



Balance Sheet 



At the end of 2003 the Consolidated Group of AS Sampo Pank 

(hereinafter the Group) had total assets of EEK 7.2 billion, a rise

of 24.4% or EEK 1.4 billion, generated mainly by the growth of the 

loan portfolio which was funded through an increase in customer 

deposits, new long-term loans obtained from other banks and the 

issuance of debt securities. 



In line with the Group’s long-term business goals and regarding the 

economic environment and the competitive situation changes took 

place both in the structure of the Group’s assets and liabilities 

in 2003. The share of loans in the assets increased by 8.4 

percentage points (to 71.6 %) over the year. At the same time the 

share of deposits in the liabilities decreased by 5.9 percentage 

points (to 60.4 %) largely due to the faster growth of debt 

securities and long-term bank loans.



Securities and Liquid Assets 



At the end of 2003, liquid assets comprised 24.3% of the Group’s 

total assets, compared to 32.0 % in the previous year. In 2003 

total liquid assets declined by EEK 104.6 million or 5.6%, 

amounting to EEK 1.7 billion at the end of the year. 



Of the Group’s liquid assets at year-end of 2003, the securities 

portfolio accounted for 38.6% (34.1% in 2002), time deposits with

other banks comprised 14.8% (38.1% in 2002) and cash and demand 

deposits with other banks (incl. the Central Bank) made up 46.6% 

(27.9% in 2002).



At year-end of 2003 the portfolio of liquid securities totalled 

EEK 673.7 million, a decrease of 6.8 % or EEK 43.0 million over 

the year. The portfolio comprised 36.5% of debt securities issued 

by the central governments of foreign countries, 38.4% of debt 

securities issued by various credit and financial institutions 

and 25.0 % of other debt securities (mainly international 

corporations’ debt securities with high investment grade).

 

Lending 



In 2003 the volume as well as the quality of the Group’s loan 

portfolio continued to increase. The gross loan portfolio 

increased by 40.0% or EEK 1.5 billion over the year. As a result 

of the Group’s active lending activity, the share of the loan 

portfolio in the Group’s assets increased from 63.2% at the end 

of 2002 to 71.6% at the end of 2003, amounting to EEK 5.3 billion.



As for the structure of borrowers, the previous year’s trends 

continued to prevail. Since the growth rate of loans to private 

persons exceeded that of loans to companies, the share of loans 

to private persons increased and the share of loans to companies 

decreased in the loan portfolio.     



Although the share of loans to companies has declined 

continuously over the recent years, loans granted to companies 

for the implementation of long-term investment projects as well 

as for the funding of working capital still make up the largest

part of the Group’s loan portfolio.  At the end of 2003 total 

outstanding loans to companies amounted to EEK 3.0 billion, an 

increase of 26.2% or EEK 631.2 million over the year. At the end

of 2003 loans to companies accounted for 57.7% of the loan 

portfolio, compared to 64.0% at the end of 2002.  



For several consecutive years loans to private persons have been 

the fastest growing part of the Group’s loan portfolio. Borrowing

has been favoured by the relatively small debt burden of private

persons, favourable loan conditions as well as the economic 

environment.   The average interest rate of housing loans granted

during the year declined by 1.7 percentage points due to the fall

of the 6 months Euribor and a decrease in loan margins. In 2003

the average maturity of housing loans extended by almost two 

years up to 17 years. 



Loans to private persons experienced an annual growth of 69.3% or 

EEK 841.3 million in 2003, largely due to the growth of the volume

of long-term housing loans. However, the growth rate of loans 

issued for short-term consumption purposes exceeded that of housing

loans. Loans to private persons totalled EEK 2.1 billion at the end

of 2003, of which the loans and leases granted for the acquisition

of homes accounted for 81.1% and the loans and leases issued for 

consumption purposes comprised 18.9%. Due to the rapid growth of 

loan volume the share of loans to private persons increased from 

32.3% at the end of 2002 to 39.1% by the end of 2003.  



Based on loans outstanding, the Group’s credit grants, categorized

by economic sectors, were the largest to the real estate sector 

(43.9% of total credits, whereas housing loans to private persons 

comprised 73.8% of total loans to the real estate sector), followed 

by industry (16.9%) and wholesale and retail trade (12.6%). 

Compared to the end of the prior year, the share of industry and 

that of trade decreased in the loan portfolio by 4.0 and 0.3 

percentage points, respectively, whereas the share of the real 

estate sector remained unchanged.  



At the end of 2003 allowances for loan impairment represented 2.0%

of the gross loan portfolio, compared to 2.7% in 2002. The 

decrease was related to the amendments made to the Group’s 

allowance principles which take into account the new Basel Capital

Accord recommendations as well as the positive developments that 

have prevailed in Estonia’s economy in the recent years. 



In 2003 allowances for impairment totalled EEK 18.4 million, 

compared to EEK 23.3 million in 2002. In the year under review 

EEK 1.3 million was recovered from the write-offs of previous 

years, compared to EEK 2.5 million in 2002. Net loan allowances 

(the difference of the allowances made and recovered loans) were

EEK 17.0 million in 2003, compared to EEK 20.8 million in 2002. 



The share of overdue loans in the gross loan portfolio accounted 

for 6.3% at the end of 2003, compared to 5.8% in December 2002.

Allowances for impairment comprised 31.8% of overdue loans at

year-end 2003, compared to 45.9% at the same time in 2002.    



Fixed and Other Assets   



Intangible and tangible assets comprised 2.0% of the Groups assets

at the end of 2003, compared to 2.4% at the end of 2002. Due to 

the purchase of new software licenses the Group’s intangible assets 

increased by EEK 2.2 million or 62.5% over the year, amounting to 

EEK 5.7 million at the end of 2003.The Group’s tangible assets 

increased by 3.9% (or EEK 5.3 million) over the year, totalling 

EEK 141.7 million at the end of 2003. The Group’s other assets 

increased by 21.3% or EEK 9.5 million over the year, mainly due to 

collateral assets for sale. 



Liabilities and Owners’ Equity



The Group’s liabilities amounted to EEK 6.7 billion at the end of

2003, an increase of EEK 1.3 billion or 24.7% over the year. The 

largest share of the Group’s liabilities includes client deposits

(60.4% in 2003 and 66.3% in 2002), loans from other banks (16.6% 

in 2003 and 10.5% in 2002) and issued debt securities (13.8% in 

2003 and 11.5% in 2002).



Client Deposits 



In 2003 the total volume of client deposits was EEK 4.0 billion, 

an increase of EEK 483.7 million or 13.6% over the year, chiefly 

due to the growth of client time deposits, which increased by 

EEK 376.9 million or 24.2%. At the same time client demand deposits 

increased by EEK 106.8 million or 5.4%. In 2003 demand deposits 

totalled EEK 2.1 billion (52.0% of total deposits) and time 

deposits amounted to EEK 1.9 billion (48.0% of total deposits).  



Like in the previous year private company deposits continued 

dominating in the structure of deposits in 2003, accounting for 

60.3% of total deposits (64,0% in 2002). Deposits of private 

persons formed the second largest part of total deposits, 

accounting for 26.0% in 2003 (23.8% in 2002). 



In 2003 deposits of private persons increased by 24.2% or 

EEK 204.8 million, totalling EEK 1.0 billion at the end of the 

year. This growth was primarily generated by an increase in time 

deposits which increased by 31.3% or EEK 151.5 million, amounting 

to EEK 635.1 million at year-end of 2003. As for the term of 

depositing, the priorities of clients remained almost unchanged - 

the duration of the majority of deposit agreements concluded with 

the Group did not exceed one year. In 2003 demand deposits of 

private persons increased by 14.7% or EEK 53.2 million, amounting

to EEK 414.6 million at the end of the year. 



Private company deposits increased by 7.0% or EEK 158.1 million,

totalling EEK 2.4 billion at the end of 2003. At the same time 

private company demand deposits increased by 2.4% or 

EEK 38.4 million, amounting to EEK 1.6 billion. The growth rate 

of private company time deposits exceeded that of demand deposits

considerably. Time deposits experienced an increase of 17.4% or 

EEK 119.7 million over the year, totalling EEK 808.0 million at 

the end of 2003.   



Issued Debt Securities and Loans from Banks



In the Group’s interest bearing liabilities the share of issued 

debt securities and loans from banks increased by 8.5 percentage 

points to 30.4% in 2003.  Loans from banks and issued debt 

securities gained by EEK 550.5 million or 98.3% and by EEK 306.7 

million or 49.8%, respectively. Issued debt securities totalled 

EEK 922.0 million and loans from banks amounted to EEK 1.1 billion 

at the end of 2003. 



Equity and Subordinated Liabilities 



The Group’s equity increased by 19.9% or EEK 86.6 million due to 

profit earned in 2003, amounting to EEK 520.9 million at the end 

of the year. Subordinated liabilities increased by EEK 15.3 

million or 7.7%, totalling EEK 213.8 million.  



The Group’s capital adequacy was 12.6% at the end of 2003, 

compared to 14.2% at the end of 2002. The Tier I Ratio was 8.9% 

at the end of 2003 (9.8% at the end of 2002). 



Income Statement Analysis



Net profit earned by the Group in 2003 amounted to EEK 86.6 

million. It was an increase of 63.6% or EEK 33.7 million, compared 

to the previous year. The Group’s return on equity was 17.7% in 

2003 (12.7% in 2002) and return on assets was 1.3% in 2003 

(1.0% in 2002). 



The Group’s total income which includes net interest income, net 

fee and commission income and other non-interest income increased

by 18.8% or EEK 56.3 million over the year, amounting to EEK 355.6

million at the end of 2003. Net interest income accounted for 69.4%

(65.8% in 2002), net fee and commission income   18.9% 

(19.4% in 2002), income from foreign exchange transactions 6.7% 

(9.0% in 2002), income from securities 2.3% (1.9% in 2002) and 

income from other sources 2.7% (3.9% in 2002) of 2003 total income. 

Net interest income increased by 25.3% or EEK 49.7 million, 

amounting to EEK 246.7 million. Net fee and commission income 

increased by 15.4% or EEK 9.0 million, totalling EEK 67.2 million. 

Other non-interest income declined by 5.5% or EEK 2.5 million to 

EEK 41.7 million.



Interest Income and Expense 



In 2003 the Group’s net interest income was influenced by several 

factors: the continued low level of interest rate environment, 

changes in the structure of interest earning assets and interest 

bearing liabilities and interest margins which had lowered due to 

an intense competition in the market.   



Although the Group’s average return on interest earning assets 

declined from 7.0% in 2002 to 6.3% in 2003 under these conditions, 

total interest income earned during the year gained by 10.6% or 

EEK 37.6 million, amounting to EEK 391.1 million at the end of the 

year. The rise principally resulted from the growth of the volume 

of interest earning assets and the increased share of the loan 

portfolio in the interest earning assets, thus contributing to 

higher return on interest earning assets. Along with the growth 

of the share of the loan portfolio in the interest earning assets 

the share of interest income earned from loans and leasing 

financing increased from 85.1% in 2002 to 92.1% in 2003.   



In 2003 the Group’s interest expense totalled EEK 144.4 million, a 

decrease of 7.8% or EEK 12.2 million over the year. The decrease was 

caused by the decline in the cost of interest bearing liabilities, 

the influence of which exceeded the impact of their volume growth. 

The average interest expense of interest bearing liabilities declined 

by 0.8 percentage points to 2.5%.



Despite great changes in the interest rates environment the Group’s

net interest income rose by 25.3% or EEK 49.7 million in 2003, 

totalling EEK 246.7 million. The rise in net interest income was 

favoured by the structure of cash flows generated by the Group’s 

interest bearing assets and liabilities, as a result of which the 

decrease in interest income due to the decline in market interest 

rates was smaller than the decrease in interest expense. In 2003 

the Group’s interest spread was 3.8% (3.7% in 2002).  Net interest 

margin after allowances accounted for 3.5% in 2003 (3.2% in 2002).  



Fee and Commission Income and Expense, Currency Exchange



In 2003 fee and commission income totalled EEK 89.3 million, an

increase of 4.4% or EEK 3.7 million over the year. Fees and 

commissions paid amounted to EEK 22.1 million, a decrease of 

19.2% or EEK 5.3 million over the year. Net fee and commission 

income totalled EEK 67.2 million, a gain of 15.4% or EEK 9.0 

million.



In 2003 of fee and commission income, fees and commissions earned 

from cash and bank operations accounted for 31.5% (32.1% in 2002),

arrangement fees from loan and guarantee agreements represented 

28.9% (39.4% in 2002), fees from card transactions comprised 19.6%

(16.1% in 2002), fees and commissions from investment services 

made up 11.8% (6.0% in 2002) and other fees and commissions formed 

8.2% (6.3% in 2002). 



Fees and commissions earned from bank operations increased by 4.4%

or EEK 1.1 million, amounting to EEK 25.3 million. Fees and 

commissions paid for bank operations increased by 8.4% or EEK 0.5 

million, totalling EEK 5.9 million. Net fee and commission income 

from bank operations increased by 3.2% or EEK 0.6 million, 

amounting to EEK 19.4 million. Fees and commissions earned from 

cash operations declined by 11.8% or EEK 0.4 million, totalling 

EEK 2.8 million.  



Arrangement fees from loan and guarantee agreements dropped by 23.4%

or EEK 7.9 million over the year, amounting to EEK 25.8 million at 

year-end 2003. The decrease was mainly caused by the adjustments 

made to arrangement fees from loan and guarantee agreements. As the 

influence of the adjustments on initial balances was insignificant 

in the overall context of the financial statements, the initial 

balances remained unchanged.



The Group’s fees from card transactions gained by 26.4% or 

EEK 3.6 million due to the increased number of bank cards as well 

as the growth of the volume of card payments in 2003, amounting to 

EEK 17.5 million at the end of the year. At the same time fee and 

commission expense related to card transactions increased by 37.2% 

or EEK 3.3 million. The Group’s net fee and commission income from 

card transactions increased by 7.5% or EEK 0.4 million. The volume 

of card payments increased by 59.4% and at the same time cash 

withdrawals from ATMs increased by 24.3%. The number of debit and 

credit cards issued by the Group increased by 3.6% and 56.4%, 

respectively. 



In 2003, fees and commissions from investment services experienced 

the highest growth rate. The volume of investment funds and private

portfolios managed by the Group almost doubled mainly owing to the 

increased number of clients who had joined Sampo’s Pillar II pension 

funds and the resulting growth of the volume of investments made in 

these funds and due to increased client investments in other 

investment products. Therefore, fees and commissions from investment 

services increased almost twofold or by EEK 5.4 million, totalling 

EEK 10.5 million.  



Income from foreign exchange transactions amounted to EEK 24.0 

million in 2003, a decrease of 10.7% or EEK 2.9 million.



Other Non-Interest Income 



Total other non-interest income earned by the Group in 2003 amounted 

to EEK 17.7 million, a gain of 2.4% or EEK 0.4 million.



Non-Interest Expense



The Group’s non-interest expense increased in line with the 

increasing business volumes. In 2003 non-interest expense 

increased by 11.7% or EEK 26.4 million, totalling EEK 252.0 

million. However, at the same time cost efficiency rose. The 

Group’s cost/income ratio declined from 75.4 in 2002 to 70.9% in 

2003 and the ratio of non-interest expense to average assets 

declined from 4.1% in 2002 to 3.8% in 2003.   



Personnel expenses represented the largest share of the Group’s

non-interest expense, accounting for 51.8% in 2003 

(52.9% in 2002). The Group’s personnel expenses totalled 

EEK 130.5 million, a gain of 9.3% or EEK 11.1 million. The 

growth was mainly caused by the increased number of employees 

as well as higher salaries. In 2003 the average number of 

employees increased by 7.2% (to 463 people in 2003).



In 2003 the largest expense items in other administrative expenses

were communication and data processing expenses (comprising 32.7% 

or EEK 32.3 million of other administrative expenses), an increase

of 29.0% or EEK 7.3 million over the year. The Group made 

significant investments in the development of network systems as 

well as electronic distribution channels which enable to improve 

the processes related to the services and products provided to 

clients and thus raise efficiency. 



Premises’ rent and maintenance expenses made up 18.1% or EEK 17.9

million of other administrative expenses, an increase of 5.0% or

EEK 0.9 million over the year. Advertising expenses amounted 

EEK 17.8 million in 2003, remaining at the previous year’s level.

Depreciation totalled EEK 16.2 million, a growth of 5.1% or 

EEK 0.8 million.





Anneli Rõuk

Kommunikatsioonijuht

6302103