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OP Mortgage Bank (76YF)

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Thursday 04 February, 2016

OP Mortgage Bank

OP Mortgage Bank: Financial Statements Bulletin for 1 January-31 December 2015

OP Mortgage Bank: Financial Statements Bulletin for 1 January-31 December 2015

OP MORTGAGE BANK
Stock exchange release, 4 February 2016 at 10.00 EET
Financial Statements Bulletin

OP Mortgage Bank: Financial Statements Bulletin for 1 January-31 December 2015

OP Mortgage Bank (OP MB) is part of OP Financial Group and its role is to raise, together with Pohjola 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 loan portfolio of OP MB increased to EUR 9,610 million (9,329)* during January-December. The company increased its loan portfolio by buying mortgage-backed loans from OP Financial Group's member banks worth a total of EUR 1,992 million. During the financial year, OP MB issued two fixed-rate covered bonds in international capital markets that got the highest credit ratings from credit rating agencies. The bond with a nominal value of EUR 1,000 million issued in September has a maturity of seven years. Out of the bond with a nominal value of EUR 1,250 million and a maturity of five years issued in November, the company intermediated EUR 713 million in intermediate loans to OP Financial Group member cooperative banks.

The company's financial standing remained stable throughout the financial year. Operating profit came to EUR 25.3 (18.3) million.

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 and interest on issued bonds into the same basis rate. OP MB has entered into all derivative contracts for hedging purposes, with Pohjola Bank plc being their counterparty.

*The comparatives for 2014 are given in brackets. For income statement and other aggregated figures, January-December 2014 figures serve as comparatives. For balance-sheet and other cross-sectional figures, figures at the end of the previous financial year (31 December 2014) serve as comparatives.  

Collateralisation of bonds issued to the public

The programme amount of the Euro Medium Term Covered Note programme established on 12 November 2010 under the Laki kiinnityspankkitoiminnasta (688/2010) (Covered Bond Act) was increased from EUR 10,000 million to EUR 15,000 million in November and collateral in security of the covered bonds issued under the programme totalled EUR 10 million on 31 December.

Capital adequacy

OP MB has presented its capital base and capital adequacy in accordance with the EU capital requirement regulation and directive (EU 575/2013). 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 Common Equity Tier 1 (CET1) ratio stood at 140.2% (133.0) on 31 December. The CET1 capital requirement is 4.5% and the requirement for the capital conservation buffer is 2.5%, or a total of 7%.

OP MB's highest minimum capital requirement is determined by the Basel I floor. OP MB's capital base exceeded the Basel I floor by EUR 22.5 million in December. Information on the Basel I floor and capital surplus can be found in note "Capital base and capital adequacy".

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 31 December 2015, OP Cooperative's members comprised 178 member cooperative banks as well as Pohjola Bank plc, Helsinki OP Bank Ltd, OP Mortgage Bank, OP Card Company Plc and 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. Companies belonging to the amalgamation are legally liable for each other's debts. OP Financial Group's insurance companies do not fall within the scope of joint and several liability. The amalgamation's central cooperative, OP Cooperative, is obliged, if necessary, to assist member banks as a support action with a sum that prevents them from going into liquidation. The central cooperative is liable for the debts of a member bank which cannot be paid using the member bank's capital.

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.

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.

Personnel

On 31 December, OP MB had five employees. The Bank purchases all the most important support services from OP Cooperative and its Group members, reducing the its need for its own personnel.

Administration

The Board composition is as follows:

Chairman    Harri Luhtala Chief Financial Officer, OP Cooperative, Financial Group
Members    Elina Ronkanen-Minogue  Head of Asset and Liability Management and Group Treasury, OP Cooperative
  Hanno Hirvinen Group Treasurer, Pohjola Bank plc 

            

OP MB's Managing Director is Lauri Iloniemi and Hanno Hirvinen is his deputy.  


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 Pohjola 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 and interest on issued bonds into the same basis rate. The interest rate risk may be considered to be low.

Outlook

The existing issuance programme makes it possible to issue new covered bonds in 2016. It is expected that the Bank's capital adequacy will remain strong, risk exposure favourable and the overall quality of the loan portfolio good.

Accounting policies

The Financial Statements Bulletin for 2015 has been prepared in accordance with IAS 34 (Interim Financial Reporting).

This Financial Statements Bulletin is based on unaudited figures. Given that all figures have been rounded off, the sum total of individual figures may deviate from the presented sums.

OP MB's related parties include the parent company OP Cooperative and its subsidiaries, the OP Financial Group pension insurance companies OP Bank Group Pension Fund and OP Bank Group Pension Foundation, and the company's administrative personnel. Standard loan terms and conditions are applied to loans granted to the related parties. Loans are tied to generally used reference interest rates. The financial year saw no major changes in related-party transactions.

Formulas for key ratios

Return on equity (ROE), % = 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 commissions and fees + Net trading income + Total net investment income + Other operating income) × 100  

Income statement, TEURQ4/2015Q4/201420152014
         
Interest income 26,317 28,086 106,362 117,550
Interest expenses 6,444 13,161 33,007 62,539
Net interest income19,87314,92573,35555,011
Impairment loss on receivables -35 -2 210 -150
Net commissons and fees -11,329 -9,989 -43,361 -32,394
Net trading income 0 0 0 -1
Net investment income 0 0 22 1
Other operating income 0 0 1 1
Personnel costs 94 103 382 385
Other administrative expenses 812 564 2,612 2,300
Other operating expenses 865 406 1,924 1,506
Earnings before tax6,7373,86125,30818,277
Income tax expense 1,311 775 5,020 3,657
Profit for the period5,4263,08620,28814,619

Statement of comprehensive
income, TEUR
Q4/2015Q4/201420152014
    
Profit for the period 5,426 3,086 20,288 14,619
         
Items that will not be reclassified to profit
or loss
       
Gains/(losses) arising from remeasurement of defined benefit plans 231 -17 231 -17
Income tax on gains/(losses) on arising from remeasurement of defined benefit plans -46 3 -46 3
Total comprehensive income5,6113,07320,47314,606

Key ratiosQ4/2015Q4/201420152014
Return on equity (ROE), % 5.9 3.5 5.6 4.2
Cost/income ratio, % 21 22 16 19

Cash flow
from operating activities, TEUR
20152014
Profit for the financial year 20,288 14,615
Adjustments to profit for the financial year 9,372 -59,526
Increase (-) or decrease (+)
in operating assets
-1,005,090-1,419,284
Receivables from credit institutions -733,369 -10,000
Receivables from the public and public-sector entities -282,945 -1,395,644
Shares and participations   -23
Other assets 11,224 -13,616
Increase (+) or decrease (-)
in operating liabilities
-143,399-357,524
Liabilities to credit institutions and
central banks
-130,000 -380,000
Other liabilities -13,399 22,476
     
Income tax paid -3,362 -3,403
Dividends received 22 1
A. Net cash from operating activities-1,118,830-1,821,718
Cash flow from investing activities    
Purchase of PPE and intangible assets -681 -1,064
B. Net cash used in investing activities-681-1,064
Cash flow from financing activities  
Increases in debt securities issued
to the public
1,260,582 1,811,278
Dividends paid and interest on cooperative capital -4,996  
Other monetary increases in equity items   10,000
C. Net cash used in financing activities1,255,5861,821,278
D. Effect of foreign exchange rate changes on cash and cash equivalents0  
Net change in cash and cash equivalents (A+B+C+D)136,074-1,504
Cash and cash equivalents at year-start109,046110,550
Cash and cash equivalents at year-end245,120109,046
Change in cash and cash equivalents136,074-1,504
   
Interest received 117,954 103,959
Interest paid 46,724 110,157
Adjustments to profit for the financial year    
Non-cash items   
Unrealised net gains on foreign exchange operations 0  
Impairment losses on receivables -207 168
Other 8,863 -59,747
Total adjustments8,656-59,578
Cash and cash equivalents  
Receivables from credit institutions payable on demand 245,120 109,046
Total cash and cash equivalents245,120109,046

Balance sheet, TEUR31 Dec 201530 Sep 201530 Jun 201531 March 201531 Dec 2014
           
Receivables from credit institutions 988,490 200,823 156,412 101,181 119,046
Derivative contracts 192,206 200,981 191,919 285,540 261,346
Receivables from customers 9,610,252 9,194,581 9,600,216 9,635,434 9,329,077
Investments assets 40 40 40 40 40
Intangible assets 2,575 2,784 2,835 2,630 2,610
Other assets 78,823 58,208 62,080 111,691 90,047
Tax assets   3 2 392 380
Total assets10,872,3869,657,42010,013,50510,136,9089,802,546
Liabilities to credit institutions 1,375,000 1,425,000 2,790,000 1,795,000 1,505,000
Derivative contracts 12,971 5,639 22,769 7,156 8,298
Debt securities issued to the public 9,002,669 7,770,710 6,748,760 7,836,945 7,810,673
Provisions and other liabilities 108,485 87,863 88,896 141,278 122,116
Tax liabilities 1,325 1,883 1,333 551 0
Total liabilities10,500,4509,291,0959,651,7589,780,9299,446,086
Shareholders' equity          
  Share capital 60,000 60,000 60,000 60,000 60,000
  Reserve for invested unrestricted equity 245,000 245,000 245,000 245,000 245,000
  Retained earnings 66,937 61,325 56,747 50,979 51,459
Total equity 371,937 366,325 361,747 355,979 356,459
Total liabilities and shareholders' equity10,872,3869,657,42010,013,50510,136,9089,802,546

Off-balance-sheet commitments, TEUR31 Dec 201530 Sep 201530 June 201531 March 201531 Dec 2014
Irrevocable commitments given on behalf of customers 858 1,583 1,822 3,305 3,252

Statement of changes in equity, TEURShare capitalOther reservesRetained earningsTotal equity
         
Shareholders' equity 1 Jan 201460,000235,00036,853331,853
Reserve for invested unrestricted  equity   10,000   10,000
Profit for the period     14,619 14,619
Total comprehensive income     -13 -13
Other changes        
Shareholders' equity 31 Dec 201460,000245,00051,459356,459
         
Shareholders' equity 1 Jan 201560,000245,00051,459356,459
Reserve for invested unrestricted equity        
Profit for the period     20,288 20,288
Total comprehensive income     185 185
Other changes     -4,996 -4,996
Shareholders' equity 31 Dec 201560,000245,00066,937371,937
      
OP MB has presented its capital base and capital adequacy in accordance with the EU capital requirement regulation and directive
(EU 575/2013).
  

Capital base and capital adequacy, TEUR31 Dec 201531 Dec 2014
     
Shareholders' equity 371,937 356,459
Common Equity Tier 1 (CET1) before deductions371,937356,459
Intangible assets -2,575 -2,610
Excess funding of pension liability, indirect holdings and deferred tax assets for losses -74 -55
Planned profit distribution / profit distribution as proposed by the Board   -5,000
Share of unaudited profits -20,288  
Impairment loss - shortfall of expected losses -2,046 -1,898
Common Equity Tier 1 (CET1)346,954346,897
Tier 1 capital (T1)346,954346,897
Total capital base 346,954346,897
   
Risk-weighted assets  
Credit and counterparty risk 219,560 237,258
Market risk    
Operational risk 27,846 23,527
Total247,407260,785
   
Key ratios, %  
CET1 capital ratio 140.2 133.0
Tier 1 capital ratio 140.2 133.0
Capital adequacy ratio 140.2 133.0
     
Basel I floor  
Capital base 346,954 346,897
Basel I capital requirements floor 324,461 304,995
Capital buffer for Basel I floor 22,493 41,901

Classification of financial assets  liabilities 31 Dec 2015, TEUR      
Financial assetsLoans and  other receivablesRecognised at fair value through profit or loss Available
for sale
Total
Receivables from credit institutions 988,490     988,490
Derivative contracts   192,206   192,206
Receivables from customers 9,610,252     9,610,252
Shares and participations     40 40
Other receivables 78,823     78,823
Other assets 2,575     2,575
Total10,680,140192,2064010,872,386
        
Financial liabilities Recognised at fair value through profit or loss Other liabilitiesTotal
Liabilities to credit institutions     1,375,000 1,375,000
Derivative contracts   12,971   12,971
Debt securities issued to the public     9,002,669 9,002,669
Other liabilities     109,810 109,810
Total 12,97110,487,47910,500,450
Valuation difference of debt securities issued to the public (difference between fair value and carrying amount) 31 Dec 2015     219,641 219,641

Classification of financial assets  liabilities 31 Dec 2014, TEUR      
Financial assetsLoans and  other receivablesRecognised at fair value through profit or loss Available
for sale
Total
Receivables from credit institutions 119,046     119,046
Derivative contracts   261,346   261,346
Receivables from customers 9,329,077     9,329,077
Shares and participations     40 40
Other receivables 90,047     90,047
Other assets 2,990     2,990
Total9,541,160261,346409,802,546
        
Financial liabilities Recognised at fair value through profit or loss Other liabilitiesTotal
Liabilities to credit institutions     1,505,000 1,505,000
Derivative contracts   8,298   8,298
Debt securities issued to the public     7,810,673 7,810,673
Other liabilities     122,116 122,116
Total 8,2989,437,7899,446,087
Valuation difference of debt securities issued to the public (difference between fair value and carrying amount) 31 Dec 2014     327,389 327,389

Debt securities issued to the public are carried at amortised cost. The fair value of these debt instruments has been measured using information available in markets and employing commonly used valuation techniques. The difference between the fair value and carrying amount is presented as valuation difference in the Classification of financial assets and liabilities table.

Derivative contracts 31 Dec 2015, TEUR Nominal values/residual term to maturity
  Less than
1 year
1-5
years
More than
5 years
Total
Interest rate derivatives        
Hedging 2,387,456 8,816,977 7,118,958 18,323,391
Total2,387,4568,816,9777,118,95818,323,391

    Fair values Credit
  Assets Liabilities equivalent
Interest rate derivatives      
Hedging 192,206 12,971 411,985
Total192,20612,971411,985

Derivative contracts 31 Dec 2014, TEUR Nominal values/residual term to maturity
  Less than
1 year
1-5
years
More than
5 years
Total
Interest rate derivatives        
Hedging 4,496,752 9,141,000 4,396,000 18,033,752
Total4,496,7529,141,0004,396,00018,033,752

    Fair values Credit
  Assets Liabilities equivalent
Interest rate derivatives      
Hedging 261,346 8,298 449,799
Total261,3468,298449,799

Financial instruments classification, grouped by valuation technique, TEURFair value measurement at year end 
 
31 Dec 2015  
 Balance sheet valueLevel 1Level 2 
Recurring fair value measurements of assets    
Derivate contracts 192,206   192,206  
Total192,206 192,206 
Recurring fair value measurements of liabilities        
Derivate contracts 12,971   12,971  
Total12,971 12,971 
Financial liabilities not measured at fair value        
Debt securities issued to the public 9,002,669 8,872,880 349,430  
Total9,002,6698,872,880349,430 

31 Dec 2014 Fair value measurement at year end
 Balance sheet valueLevel 1Level 2
Recurring fair value measurements of assets      
Derivate contracts 261,346   261,346
Total261,346 261,346
Recurring fair value measurements of liabilities      
Derivate contracts 8,298   8,298
Total8,298 8,298
Financial liabilities not measured at fair value      
Debt securities issued to the public 7,810,673 7,995,455 142,607
Total7,810,6737,995,455142,607
    
OP MB does not hold any transfers between the levels of fair value valuation.

Helsinki, 4 February 2016  
  
OP Mortgage Bank 
Board of Directors 
  
For more information, please contact: Lauri Iloniemi, Managing Director,
tel. +358 (0)10 252 3541
  
DISTRIBUTION 
LSE London Stock Exchange  
OAM (Officially Appointed Mechanism)
Major media  
op.fi

 

 

 
 



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Source: OP Mortgage Bank plc via Globenewswire

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