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

·11-min read

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



Common Equity Tier 1 (CET1) before deductions



Excess funding of pension liability



Share of unaudited profits



Shortfall of ECL minus expected losses



Common Equity Tier 1 (CET1)



Tier 1 capital (T1)



Total capital base



Total risk exposure amount

Credit and counterparty risk



Operational risk






Key ratios, %

CET1 capital ratio



Tier 1 capital ratio



Capital adequacy ratio



Capital requirement

Capital base



Capital requirement



Buffer for capital requirements



Joint and several liability of amalgamation

Under the Act on the Amalgamation of Deposit Banks, the amalgamation of 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 2021, OP Cooperative's member credit institutions comprised 125 OP cooperative banks as well as OP Corporate Bank plc, OP MB and OP Retail Customers plc.

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 Act on Mortgage Credit Banks, the holder of a covered bond has the right to receive payment, before other claims, for the entire term of the bond in accordance with the contract terms, from the assets entered as collateral, without this being prevented by OP MB's liquidation or bankruptcy.

Corporate responsibility

OP Financial Group’s core values and principles governing corporate responsibility also guide the operations of OP MB.

Corporate responsibility is an integral part of OP Financial Group’s business and strategy. The Group’s aim is to be a forerunner of corporate responsibility within its sector in Finland. OP Financial Group is committed to complying with the ten principles of the UN Global Compact initiative in the areas of human rights, labour rights, the environment and anti-corruption. OP has agreed to follow the UN Principles for Responsible Investment. OP Financial Group is a Founding Signatory of the Principles for Responsible Banking under the United Nations Environment Programme Finance Initiative (UNEP FI).

In March, OP Mortgage Bank issued the first green covered bond in Finland. The EUR 750 million bond has a maturity of 10 years. The bond is targeted at responsible international institutional investors, and proceeds raised with the bond will be allocated to OP Financial Group’s home loans recognised as green ones according to the Green Covered Bond Framework of OP Mortgage Bank. The sector to be financed is energy-efficient residential buildings (green buildings).


On 30 September 2021, OP MB had seven 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:


Vesa Aho

Chief Financial Officer, OP Cooperative


Kaisu Christie

Head of Retail Customer Financing and Housing related Services, OP Cooperative

Lauri Iloniemi

Head of Group Treasury and Asset and Liability Management, OP Corporate Bank plc

OP MB’s Managing Director is Sanna Eriksson. The deputy Managing Director is Tuomas Ruotsalainen, Senior Covered Bonds Manager at OP MB.

Risk exposure

When entering 2021, OP MB had a strong capital base, capital buffers and risk-bearing capacity.

The Covid-19 pandemic may continue to affect risks, especially those associated with lending, liquidity maintenance and business processes. OP MB’s capital base is sufficient to secure business continuity.

OP MB’s most significant risks are related to the quality of collateral and to the structural liquidity and interest rate risks on the balance sheet for which limits have been set in the Risk Policy of Banking. The key credit risk indicators in use show that OP MB's credit risk exposure is stable. The liquidity buffer for OP Financial Group, managed by OP Corporate Bank, 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 home loan interest, intermediary loan interest and interest on issued bonds into the same basis rate. OP MB has concluded all derivative contracts for hedging purposes, with OP Corporate Bank plc being their counterparty. OP MB’s interest risk exposure is under control, and it has been within the set limit.

OP Financial Group analyses the business environment as part of the ongoing strategy process. Megatrends and future visions behind the strategy reflect driving forces that affect the daily activities, conditions and future of OP Financial Group and its customers. Such factors shaping the business environment include sustainable development and responsibility (ESG), demographic change in the population and fast technological progress.

For example, climate and environmental changes are considered thoroughly so that their effects on the customer’s future success are understood. By means of advice and business decisions, OP Financial Group wants to support its customers in bolstering their sustainable and successful business. At the same time, OP Financial Group ensures that its operations are profitable and in compliance with its core values in the long term.

Events after the reporting period

In October, a new extension of an intermediary loan model was performed on a bond issued in January 2020 that will mature in 2028. As part of this extension, OP MB provided six OP cooperative banks with intermediary loans at a total amount of nearly EUR 16 million.

Outlook towards the year end

Economic recovery is expected to continue in the near term. Household and corporate finances in Finland are healthy and the mood on the housing market should remain favourable. The outlook for short-term market rates is stable. However, several factors are expected to increase uncertainty about the future. Restrictions due to the Covid-19 pandemic may still be resumed, slowing the recovery. Higher energy prices may weaken spending power, and production chain problems could lead to interruptions in manufacturing. Uncertainty may also be registered in the financial market.

It is expected that OP MB’s capital adequacy will remain extremely strong and the overall quality of the loan portfolio good. This will make it possible to issue new covered bonds in the future as well.

Time of publication of 2021 reports

Report by the Board of Directors and Financial Statements 2021

Week 10

Corporate Governance Statement 2021

Week 10

Schedule for Financial Statements Bulletin 2021 and Interim Reports in 2022

Financial Statements Bulletin 1 January‒31 December 2021

9 February 2022

Interim Report 1 January–31 March 2022

4 May 2022

Half-year Financial Report 1 January–30 June 2022

27 July 2022

Interim Report 1 January–30 September 2022

26 October 2022

Helsinki, 27 October 2021

OP Mortgage Bank
Board of Directors

For more information, please contact:
Sanna Eriksson, Managing Director, tel. +358 10 252 2517

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