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2021-10-27

OP Mortgage Bank’s Interim Report for 1 January–30 September 2021

OP Mortgage Bank
Stock Exchange Release 27 October 2021 at 10.00am EEST
Interim Report

OP Mortgage Bank’s Interim Report for 1 January–30 September 2021

OP Mortgage Bank (OP MB) is part of OP Financial Group and its role is to raise, together with OP Corporate Bank plc, funding for OP from money and capital markets. OP MB is responsible for the Group's funding for the part of covered bond issuance.

Financial standing

The intermediary loans and loan portfolio of OP MB totalled EUR 18,342 million (15,326)* on 30 September 2021.

In March, OP MB issued Finland’s first green covered bond in the international capital market. The fixed-rate EUR 750-million covered bond had a maturity of 10 years. Out of the proceeds of the bond, EUR 520 million was intermediated to 42 OP cooperative banks in the form of intermediary loans.

In May, OP MB issued three floating-rate covered bonds in the amount of one billion euros each and with a maturity of two years. The proceeds of the bond were intermediated in their entirety to 113 OP cooperative banks in the form of intermediary loans. The bond issues in May were performed as internal issues within OP Financial Group.

In September, a new extension of an intermediary loan model was performed on a bond issued in March 2021 that will mature in 2031. As part of this extension, OP MB provided 15 OP cooperative banks with intermediary loans at a total amount of EUR 230 million.

On 30 September 2021, 121 OP cooperative banks had a total of EUR 14,540 million (10,790) in intermediate loans from OP MB.

Earnings before tax totalled EUR 4.7 million (6.3). The company's financial standing remained stable throughout the reporting period.

Impairment loss on receivables totalled EUR 0.6 million (1.3). A year ago, customers actively applied for repayment holidays on their loans as a result of the Covid-19 crisis. Combined with the changes in macroeconomic parameters applied in the calculation of expected credit losses, this increased the amount of expected credit losses. A year ago, the adoption of the new definition of default also increased the amount of expected credit losses.

*The comparatives for 2020 are given in brackets. For income statement and other aggregated figures, January–September 2020 figures serve as comparatives. For balance-sheet and other cross-sectional figures, figures at the end of the previous financial year (31 December 2020) serve as comparatives.

Collateralisation of bonds issued to the public

On 30 September 2021, loans as collateral in security of the covered bonds issued under the Euro Medium Term Covered Note programme worth EUR 20 billion established on 12 November 2010 under the Act on Mortgage Credit Banks (Laki kiinnitysluottopankkitoiminnasta 688/2010) totalled EUR 15,840 million. On the same date, loans as collateral in security of the covered bonds issued under the Euro Medium Term Retained Covered Note programme worth EUR 10 billion established on 15 June 2020 totalled EUR 3,550 million.

Capital adequacy

OP MB’s Common Equity Tier 1 (CET1) ratio stood at 86.2% (61.8) on 30 September 2021. The decrease in exposures improved the CET1 ratio. The minimum CET1 capital requirement is 4.5% and the requirement for the capital conservation buffer is 2.5%, i.e. the total CET1 capital requirement is 7%. The minimum total capital requirement is 8% and 10.5% with increased capital conservation buffer. Earnings for the financial year were not included in CET1 capital.

OP MB uses the Internal Ratings Based Approach (IRBA) to measure its capital adequacy requirement for credit risk. OP MB uses the Standardised Approach to measure its capital adequacy for operational risks.

OP MB belongs to OP Financial Group. As part of the Group, OP MB is supervised by the ECB. OP Financial Group presents capital adequacy information in its financial statements bulletins and interim and half-year financial reports in accordance with the Act on the Amalgamation of Deposit Banks. OP Financial Group also publishes Pillar III disclosures.

OP MB has presented its capital base and capital adequacy in accordance with the EU Capital Requirements Regulation (EU 575/2013).

Capital base and capital adequacy, TEUR 30 Sep 2021 31 Dec 2020
     
Shareholders' equity 368,461 371,093
Common Equity Tier 1 (CET1) before deductions 368,461 371,093
Excess funding of pension liability -56 -56
Share of unaudited profits -3,749 -6,381
Shortfall of ECL minus expected losses -3,082 -3,448
Common Equity Tier 1 (CET1) 361,574 361,208
Tier 1 capital (T1) 361,574 361,208
Total capital base 361,574 361,208
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