OP Mortgage Bank

OP Mortgage Bank: Interim Report for January-September 2018

OP Mortgage Bank: Interim Report for January-September 2018

OP Mortgage Bank
Stock exchange release 31 October 2018 at 10.00 am EET
Interim Report

OP Mortgage Bank: Interim Report for January-September 2018

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 the Group 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 were EUR 13,178 million (13,580)* in total during the reporting period. OP MB issued one fixed-rate covered bond with a maturity of 7.25 years in international capital markets in June. The proceeds of the bond were intermediated in their entirety to OP cooperative banks in the form of intermediary loans. On 30 September 2018, 116 OP cooperative banks had a total of EUR 5,776 million (4,776) in intermediary loans from OP MB.

The company's financial standing remained stable throughout the reporting period. Operating profit for January-September amounted to EUR 12,1 (13,2) million.

*The comparatives for 2017 are given in brackets. For income statement and other aggregated figures, January- Sptember 2017 figures serve as comparatives. For balance-sheet and other cross-sectional figures, figures at the end of the previous financial year (31 December 2017) serve as comparatives.  

Collateralisation of bonds issued to the public

On 30 September 2018, loans as collateral in security of the covered bonds issued under the Euro Medium Term Covered Note programme worth EUR 15 billion established on 12 November 2010 under the Covered Bond Act (Laki kiinnityspankkitoiminnasta (688/2010)) totalled EUR 12,976 million.

Capital adequacy

The Common Equity Tier 1 (CET1) ratio stood at 132,7 % (109.5) on 30 September 2018. The 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 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 risk.

The Financial Supervisory Authority has set a 15% minimum risk weight on housing loans from the beginning of 2018 for at least two years. According to the Authority, this floor is aimed at preparing for a systemic risk related to household indebtedness. The minimum risk weight floor does not apply to OP MB but applies only to OP Financial Group level.

Joint and several liability of amalgamation

Under the Act on the Amalgamation of Deposit Banks, the amalgamation of the cooperative banks comprises the organisation's central cooperative (OP Cooperative), the central cooperative's member credit institutions and the companies belonging to their consolidation groups, as well as credit and financial institutions and service companies in which the above together hold more than half of the total votes. This amalgamation is supervised on a consolidated basis. On 30 September 2018, OP Cooperative's members comprised 156 member cooperative banks as well as OP Corporate Bank plc, OP MB, OP Card Company Plc and OP Customer Services Ltd (formerly OP Process Services Ltd).

The central cooperative is responsible for issuing instructions to its member credit institutions concerning their internal control and risk management, their procedures for securing liquidity and capital adequacy as well as for compliance with harmonised accounting policies in the preparation of the amalgamation's consolidated financial statements.

As a support measure referred to in the Act on the Amalgamation of Deposit Banks, the central cooperative is liable to pay any of its member credit institutions an amount that is necessary to prevent the credit institution from being placed in liquidation. The central cooperative is also liable for the debts of a member credit institution which cannot be paid using the member credit institution's assets.

Each member bank is liable to pay a proportion of the amount which the central cooperative has paid to either another member bank as part of support action or to a creditor of such member bank in payment of an amount overdue which the creditor has not received from the member bank. Furthermore, in the case of the central cooperative's default, a member bank has unlimited refinancing liability for the central cooperative's debts as referred to in the Co-operatives Act.

Each member bank's liability for the amount the central cooperative has paid to the creditor on behalf of a member bank is divided between the member banks in proportion to their last adopted balance sheets. OP Financial Group's insurance companies do not fall within the scope of joint and several liability.

According to Section 25 of the Covered Bond Act, the holder of a covered bond has the right to receive a payment for the entire term of the bond from the assets entered as collateral before other receivables without this being prevented by OP MB's liquidation or bankruptcy.


On 30 September 2018, OP MB had five employees. OP MB has been digitising its operations and purchases all the most important support services from OP Cooperative and its Group members, reducing the need for its own personnel.


The Board composition is as follows:

ChairHarri LuhtalaChief Financial Officer, OP
MembersElina Ronkanen-MinogueHead of Asset and Liability Management and Group Treasury, OP Cooperative
 Hanno HirvinenHead of Group Treasury, OP Corporate Bank plc

OP MB's Managing Director is Lauri Iloniemi, and his deputy was Hanno Hirvinen until 2 July 2018 and is Sanna Eriksson as of 3 July 2018.

On 31 October 2018, Harri Luhtala, Chair of the Board of Directors, resigned from membership of the Executive Board of OP Financial Group's central cooperative and, consequently, from membership of the Board of Directors of OP Mortgage Bank.

Vesa Aho was appointed to member of the Board of Directors to replace Harri Luhtala as of 1 November 2018. He was also appointed the Board's Chair.

Risk exposure

The most typical types of risks related to OP MB are credit risk, structural funding risk, liquidity risk and interest rate risk. The key credit risk indicators in use show that OP MB's credit risk exposure is stable, and the limit for liquidity risk set by the Board of Directors has not been exceeded. The liquidity buffer for OP Financial Group, managed by OP Corporate Bank plc, is exploitable by OP MB. OP MB has used interest rate swaps to hedge against its interest rate risk. Interest rate swaps have been used to swap housing loan interest, intermediary loan interest and interest on issued bonds into the same basis rate. OP MB has entered into all derivative contracts for hedging purposes, with OP Corporate Bank plc being their counterparty. The interest rate risk of OP MB may be considered low and it has been within the set limit.


It is expected that the OP MB's capital adequacy will remain strong, risk exposure favourable and the overall quality of the loan portfolio good. This will make it possible to issue new covered bonds in the future.

Schedule for Financial Statements Bulletin for 2018 and Interim Reports in 2019

Financial Statements Bulletin 2018             5 February 2019
Interim Raport Q1/2019                               7 May 2019
Interim Report H1/2019                               30 July 2019
Interim Report Q1-3/2019                           29 October 2019

Helsinki, 31 October 2018

OP Mortgage Bank
Board of Directors

For more information, please contact:
Lauri Iloniemi, Managing Director, tel. +358 (0)10 252 3541

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OP Mortgage Bank plc Interim Report Q3 2018

This announcement is distributed by West Corporation on behalf of West Corporation clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: OP Mortgage Bank plc via Globenewswire