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OP Mortgage Bank (70ZM)

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Wednesday 04 August, 2010

OP Mortgage Bank

Half Yearly Report

RNS Number : 4985Q
OP Mortgage Bank
04 August 2010
 

OP Mortgage Bank

H1 Report, January-June 2010

4 August 2010, 9.00 am Finnish time (GMT+3)

 

HALF YEARLY REPORT JANUARY-JUNE 2010

 

OP Mortgage Bank's (OPA) loan portfolio grew to EUR 4,398 million in the January-June period (EUR 4,360  million at the end of 2009). The bank increased its loan portfolio in May when it purchased housing loans from OP-Pohjola Group member cooperative banks. OPA launched a covered bond issue at a nominal valued of  EUR 1 billion in June.

 

Earnings Development

 

EUR thousand

Q1-Q2/2010

Q1-Q2/2009

Q2/2010

Q2/2009

2009







Income






Net interest income

8,043

5,901

3,952

2,803

14,030

Net commissions and fees

-4,340

-3,950

-2,163

-1,993

-7,970

Net income from trading

-1

0

0

0

0

Net income from investments

1

1

-

-

1

Other operating income

8

3

8

3

26

Total

3,711

1,954

1,797

813

6,086







Expenses






Personnel costs

161

129

79

62

297

Other administrative expenses

711

420

338

190

983

Other operating expenses

578

352

350

219

864

Total

1,450

901

767

472

2,145







Earnings before tax

2,261

1,054

1,030

341

3,941

 

 

The net interest income for January-June totalled EUR 8,043 thousand (5,901). Earnings before tax amounted to EUR 2,261 thousand (1,054). Increase in net interest income was due to the growth in the loan portfolio.

 

Net commissions and fees were negative with commission income increasing to EUR 1,357 thousand (841) and commission expenses to EUR 5,698 thousand (4,789).  Commission expenses mainly comprise commissions paid to OP-Pohjola Group member banks for servicing housing loans. The bank's expenses amounted to EUR 1,450 thousand (901). Growth in expenses derived largely from the ICT-services and the professional services purchased in connection with the new covered bond issue. OPA did not recognise any loan losses for the first six months.  

 

Net interest income for April-June grow to EUR 3,952 thousand (2,803) and earnings before taxes to EUR 1,030 thousand (341). The bank's expenses grow to EUR 767 thousand (472). 

  

Balance Sheet and Off-balance Sheet Commitments

 

OPA's balance sheet total amounted to EUR 4,624 million on 30 June (EUR 4,555 million) . 

 

Change in Major Asset and Liability Items

 

EUR Million

30 June 2010

31 March 2010

31 Dec 2009

30 June 2009

 

 

 

 

 

Balance Sheet

4,624

4,450

4,555

2,942

Receivables from customers

4,398

4,203

4,360

2,799

Receivables from financial institutions

89

56

55

34

Debt securities issued to the public

3,332

3,336

3,311

2,091

Liabilities to financial institutions

1,070

840

1,000

720

Shareholders' equity

142

141

140

88

Off-balance sheet commitments

10

12

15

16

 

The loan portfolio increased from EUR 4,360 million on 31 December 2009 to EUR  4,398 million on 30 June 2010. OPA increased its loan portfolio in the review period when it purchased housing loans from OP-Pohjola-Group member banks for EUR 398 million.

 

On 30 June, households accounted for 99 % (99) of the loan portfolio and housing corporations for 1 % (1). The bank's non-performing loans amounted to EUR 0,4 million (0,8). No impairment losses on loans were recognised.

 

The carrying amount of bonds issued to the public totalled EUR 3,332 million (2,091) on 30 June.

OPA issued its fourth covered bond at a nominal value of EUR 1 billion on international capital markets in June. Moody's Investor Services and Standard & Poor's Rating Services have given the bond their highest credit ratings of Aaa and AAA. The covered bond, issued in 2008 at a nominal value of EUR 1 billion, matured and were paid off in June. In addition to bonds, other funding was based on financing loans granted by Pohjola Bank plc (Pohjola). On 30 June, financing loans totalled EUR 1,070 million (1,000).

 

Shareholders' equity rose to EUR 141,9 million (140,2). Retained earnings amounted to EUR 11,9 million (10,2) at the end of the review period. 

 

OPA has hedged against the interest-rate risk associated with its housing loan portfolio through interest-rate swaps, i.e. base rate cash flows from housing loans to be hedged are swapped to short-term Euribor cash flows. OPA has also swapped the fixed interest rates of the bonds it has issued to short-term variable rates. OPA's interest-rate derivative portfolio totalled EUR 8,916 million (7,832). All derivative contracts have been concluded for hedging purposes. Pohjola is the counterparty to all derivative contracts.

 

Development of Capital Adequacy

 

OPA's capital adequacy ratio stood at 9,9 % on 30 June. Since the beginning of 2008, OPA has calculated its capital adequacy in compliance with Basel II.  Credit risk is calculated according to the standardised approach and the capital requirement for operational risk is calculated using the basic approach. 

 

 

OWN FUNDS, EUR thousand

30 June 2010

31 March

2010

31 Dec

2009

30 June 2009

Tier I

140,764

140,057

139,067

86,890

     of which capital loans





Tier II

20,000

20,000

20,000

20,000

Decreases





Total

160,764

160,057

159,067

106,890






Risk-weighted receivables, investments and off-balance sheet commitments

1,627,208

1,562,989

1,622,243

1,032,313






Capital adequacy ratio, %

9.9

10.2

9.8

10.4,






Tier I ratio to risk-weighted receivables, investments and off-balance sheet commitments

8.7

9.0

8.6

8.4

 

The increase in shareholders' equity arising from the measurement of pension liabilities and the assets covering them, under IFRS, is not considered own funds. Furthermore, intangible assets was also deducted from own funds.

 

Risk-weighted receivables, investments and off balance-sheet commitments,  EUR thousand

30 June 2010

31 March 2010

31 Dec

2009

              30 June 2009






 Receivables and investments

1,613,851

1,548,950

1,610,079

1,019,096

  Off-balance-sheet items

2,505

3,187

4,039

,5,092

 Market risk

-

-

-

-

 Operational risks

10,852

10,852

8,125

8,125

Risk-weighted receivables, investments and off balance-sheet commitments, total

 

 

1,627,208

 

 

1,562,989

 

 

1,622,243

 

 

1,032,313

 


The increase in the amount of risk-weighted receivables was due to an increased loan portfolio.

 

Joint Responsibility and Joint Security 

                            

Under the Act on Cooperative Banks and Other Cooperative Credit Institutions, the

amalgamation of the cooperative banks comprises the organisation's central institution

(OP-Pohjola Group Central Cooperative), the Central Cooperative's member credit

institutions and the companies belonging to their consolidation groups. This

amalgamation is monitored on a consolidated basis. The Central Cooperative and its

member banks are ultimately responsible for each other's liabilities and commitments.

 

The Central Cooperative's members at the end of the report period comprised OP-

Pohjola Group's 218 member banks as well as Pohjola Bank plc, Helsinki OP Bank Plc, OP Mortgage Bank and OP-Kotipankki Oyj. OP-Pohjola Group's insurance companies do not fall within the scope of joint responsibility.

 

Inspite of the joint responsibility and the joint security, pursuant to Section 17 of the Act on Mortgage Credit Banks, the holder of a bond with mortgage collateral shall, notwithstanding the liquidation or bankruptcy of a mortgage credit bank, have the right to receive payment, before other claims, for the entire loan period of the bond, in accordance with the contract terms, from the funds entered as collateral for the bond.

 

Personnel

On 30 June, OPA had five employees.  It purchases all key support services from Central Cooperative and its Group companies, which reduces the need for more staff.

 

Administration

 

The Annual General Meeting held in March confirmed the composition of the new Board of Directors. Mr. Mikko Rosenlund, Executive Vice President, Tampereen Seudun Osuuspankki was elected as a new member of the Board of Directors and Mr. Risto Korpela, Managing Director, Turun Seudun Osuuspankki was left out of the Board of Directors. The Board composition is as follows:

 

Chairman                      Harri Nummela                   Executive Vice President, OP-Pohjola                                                                                                                  Group Central Cooperative

Vice Chairman              Mikko Hyttinen                     Senior Vice President, OP-Pohjola Group                                                                                                            Central Cooperative

Members                       Sakari Haapakoski              Bank Manager, Oulun Osuuspankki

                                      Jari Himanen                      Senior Vice President, OP-Pohjola Group                                                                                                            Central Cooperative

Hanno Hirvinen                   Executive Vice President, Pohjola Bank plc

                                      Heikki Kananen                   Managing Director, Mäntsälän Osuuspankki

                                      Matti Nykänen                     Senior Vice President, OP-Pohjola Group                                                                                                             Central Cooperative

Mikko Rosenlund                Executive Vice President, Tampereen Seudun                                                              Osuuspankki

                                     

                                     

Managing Director         Lauri Iloniemi.

 

Prospects for the rest of the year

The overall quality of OPA's credit portfolio is expected to remain strong. The earnings before taxes for 2010 are forecasted to fall below the earnings of 2009 due to the more expensive funding costs. 

 

 

Income Statement

 

EUR thousand

Q1-Q2/2010

Q1-Q2/2009

Q2/2010

Q2/2009

2009







Interest income

28,171

43,592

14,177

17,730

68,928

Interest expenses

20,128

37,691

10,224

14,927

54,899

Net interest income

8,043

5,901

3,952

2,803

14,030

Net commissions and fees

-4,340

-3,950

-2,163

-1,993

-7,970

Net income from trading

-1

0

0

0

0

Net income from investments

1

1

0

0

1

Other operating income

8

3

8

3

26

Personnel costs

161

129

79

62

297

Other administrative expenses

711

420

338

190

983

Other operative expenses

578

352

350

219

864

Earnings before tax

2,261

1,054

1,030

341

3,941

Income taxes

589

274

269

87

1,017

Profit for the period

1,672

779

761

254

2,924

 

 

Key Ratios

 


Q1-Q2/2010

Q1-Q2/2009

Q2/2010

Q2/2009

2009

Return on equity (ROE), %

2.4

1.8

2.2

1.2

2.6

Cost/income ratio, %

39

46

43

58

35

 

 

Calculation of key ratios

 

Return on equity, % = Annualised profit for the period / Equity capital (average equity capital at the beginning and end of the period) × 100

 

Cost/income ratio, % = Personnel costs + Other administrative expenses + Other operating expenses / Net interest income + Net commission income + Net income from trading + Total net income from investments + Other operating income × 100

 

 

Balance Sheet

EUR thousand

30 June 2010

31 March 2010

31 Dec 2009

30 June 2009






Receivables from financial institutions

88,815

56,093

55,017

34,431

Derivative contracts

103,945

94,378

75,934

94,114

Receivables from customers

4,398,089

4,202,733

4,360,036

2,799,055

Investments assets

17

17

17

17

Intangible assets

942

886

942

923

Tangible assets

4

5

5

2

Other assets

32,441

95,524

63,177

13,517

Tax receivables




121

Total assets

4,624,252

4,449,634

4,555,128

2,942,179






Liabilities to financial institutions

1,070,000

840,000

1,000,000

720,000

Derivative contracts

12,012

5,756

11,971

8,538

Debt securities issued to the public

3,331,736

3,336,060

3,310,811

2,091,479

Reserves and other liabilities

48,390

106,233

71,727

13,894

Tax liabilities

219

450

395

171

Subordinated debt securities

20,000

20,000

20,000

20,000

Total liabilities

4,482,356

4,308,500

4,414,904

2,854,083

Shareholders' equity





  Share capital

60,000

60,000

60,000

60,000

  Reserve for invested unrestricted           . equity

70,000

70,000

70,000

20,000

  Retained earnings

11,896

11,135

10,224

8,096

Total equity

141,896

141,135

140,224

88,096

Total liabilities and shareholders' equity

4,624,252

4,449,634

4,555,128

2,942,179

 

Off-balance Sheet Commitments

EUR thousand

30 June 2010

31 March 2010

31 Dec 2009

30 June 2009

Binding credit commitments

9,939

12,245

15,108

16,346

 

Change Calculation on Shareholders' Equity

 

EUR thousand

Share capital

Other reserves

Retained earnings

Total equity

Shareholders' equity 1 Jan 2009

60,000

20,000

7,317

87,317

Reserve for invested unrestricted  equity

-

-

-

-

Profit for the period

-

-

779

779

Other changes

-

-

-

-

Shareholders' equity 30 June 2009

60,000

20,000

8,096

88,096






EUR thousand

Share capital

Other reserves

Retained earnings

Total equity

Shareholders' equity 1 Jan 2010

60,000

70,000

10,224

140,224

Reserve for invested unrestricted equity

-

-

-

-

Profit for the period

-

-

1,672

1,672

Other changes

-

-

-

-

Shareholders' equity 30 June 2010

60,000

70,000

11,896

141,896

 

 

Cash Flow Statement

 

EUR thousand

Q1-2/2010

Q1-2/2009




Liquid assets 1 January

41,129

18,380

Cash flow from operations

40,147

17,522

Cash flow from investments

-133

-341

Cash flow from financing

-6,226

-15,015

Liquid assets 30 June

74,918

20,546

 

The cash flow statement presents the cash flows for the period on the cash basis, divided into cash flows from operations, investments and financing. Cash flows from operations includes the cash flows generated from day-to-day operations. Cash flow from investments includes payments related to tangible and intangible assets, investments held to maturity and shares that are not considered as belonging to cash flow from operations. Cash flow from financing includes cash flows originating in the financing of operations either on equity or liability terms from money or capital market. Liquid assets include cash in hand and receivables from financial institutions payable on demand.  The statement has been prepared using the indirect method.

 

Fair values of financial assets and liabilities



EUR 1,000

Loans and  receivables

Recognised at fair value through profit or loss

Available for sale

Total





Financial assets




Receivables from financial institutions

88,815

-

-

88,815

Derivative contracts

-

103,945

-

103,945

Receivables from customers

4,398,089



4,398,089

Equities

-

-

17

17

Other receivables

32,441

-

-

32,441

Balance at 30 June 2010

4,519,345

103,945

17

4,623,306

Balance at 30 June 2009

2,848,048

94,114

17

2,942,179

Balance at 31 December 2009

4,478,235

75,934

17

4,554,186





EUR 1,000


Recognised at fair value through profit or loss

Other

liabilities

Total

Liabilities to financial institutions

-

-

1,070,000

1,070,000

Derivative contracts

-

12,012

-

12,012

Debt securities issued to the public

-

-

3,331,736

3,331,736

Subordinated liabilities

-

-

20,000

20,000

Other liabilities

-

-

48,609

48,609

Balance at 30 June 2010

-

12,012

4,470,345

4,482,356

Balance at 30 June 2009

-

8,538

2,845,545

2,854,083

Balance at 31 December 2009

-

11,971

4,402,933

4,414,904

 

Debt securities issued to the public are carried at amortised cost.  On 30 June 2010, the fair value of these debt instruments was approximately EUR 98,083 thousand higher than their carrying amount, based on information available in markets and employing commonly used valuation techniques. Subordinated liabilities are carried at amortised cost. Their  fair value are substantially lower than their carrying amount, but determining fair values realiably is difficult in the current market situation.

 

 

Derivative Contracts 30.6.2010

 

EUR thousand

Nominal values/the remaining maturity

Fair values

 

Credit counter-value


Less than 1 year

1-5 years

More than 5 years

Total

Assets

Liabilities

Interest rate derivatives








Hedging

272,456

8,643,932

-

8,916,388

103,945

12,012

171,492

Trading

-

-

-

-

-

-

-

Total

272,456

8,643,932

-

8,916,388

103,945

12,012

171,492

 

 

Derivative Contracts 30.6.2009

 

EUR thousand

Nominal values/the remaining maturity

Fair values

 

Credit counter-value


Less than 1 year

1-5 years

More than 5 years

Total

Assets

Liabilities

Interest rate derivatives








Hedging

2,003,284

2,790,607

-

4,793,891

94,114

8,538

112,675

Trading

-

-

-

-

-

-

-

Total

2,003,284

2,790,607

-

4,793,891

94,114

8,538

112,675

 

All derivative contracts have been entered into for hedging purposes, regardless of their classification in accounting.

 

The interim report is unaudited.

 

Helsinki, 4 August 2010

 

OP Mortgage Bank

Board of Directors

 

 

For further information, please contact Mr Lauri Iloniemi, Managing Director, tel. +358 10 252 3541


This information is provided by RNS
The company news service from the London Stock Exchange
 
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