Interim Report for 1 January–30 September

OP Mortgage Bank
Interim Report
Stock Exchange Release 26 October 2022 at 10.00 EET

OP Mortgage Bank: Interim Report for 1 January–30 September 2022

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

Financial standing

The intermediary loans and loan portfolio of OP MB totalled EUR 18,545 million (18,275)* on 30 September 2022. Bonds issued by OP MB totalled EUR 16,915 million (16,415) at the end of September 2022.

In April, OP MB issued a green covered bond in the international capital market. The fixed-rate one-billion-euro covered bond had a maturity of five and a half year. The proceeds of the bonds were in full intermediated to 98 OP cooperative banks in the form of intermediary loans.

In June, OP MB issued a one-billion-euro retained covered bond with a maturity of one year and three months, which was implemented as OP Financial Group’s internal issue.

On 30 September 2022, 113 OP cooperative banks had a total of EUR 15,581 million (14,691) in intermediate loans from OP MB.

Earnings before tax totalled EUR 6.0 million (4.7). The company’s financial standing remained stable throughout the reporting period.

Impairment loss on receivables related to loans in OP MB’s balance sheet totalled EUR 0.4 million (–0.6). Loss allowance was EUR 2.6 million (3.1).

* The comparatives for 2021 are given in brackets. For income statement and other aggregated figures, January–September 2021 figures serve as comparatives. For balance-sheet and other cross-sectional figures, figures at the end of the previous financial year (31 December 2021) serve as comparatives.

Collateralisation of bonds issued to the public

On 30 September 2022, 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 16,325 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 3,492 million.

Capital adequacy

OP MB’s Common Equity Tier 1 (CET1) ratio stood at 31.3% (92.9) on 30 September 2022. The ratio was weakened by the adoption of the risk-weighted assets floor based on the Standardised Approach in OP Financial Group according to the decision made on 1 March 2022. The minimum CET1 capital requirement is 4.5% and the requirement for the capital conservation buffer is 2.5%. The minimum total capital requirement is 8% and 10.5% with increased capital conservation buffer. OP MB covers the capital requirements in their entirety with CET1 capital, so the CET1 capital requirement is 10.5%. Earnings for the reporting period 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. The capital adequacy requirement is increased by the RWA floor based on the Standardised Approach.

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.

Capital base and capital adequacy, TEUR 30 Sep 2022 31 Dec 2021
Shareholders’ equity 369,487 370,077
Common Equity Tier 1 (CET1) before deductions 369,487 370,077
Excess funding of pension liability -57 -57
Share of unaudited profits -4,773 -5,364
Impairment loss – shortfall of expected losses -1,895 -2,856
Common Equity Tier 1 (CET1) 362,762 361,800
Tier 1 capital (T1) 362,762 361,800
Total capital base 362,762 361,800
Total risk exposure amount    
Credit and counterparty risk 257,094 359,126
Operational risk 26,908 30,130
Other risks 873,464  
Total 1,157,465 389,256
Key ratios, %    
CET1 capital ratio 31.3 92.9
Tier 1 capital ratio 31.3 92.9
Capital adequacy ratio 31.3 92.9
Capital requirement    
Capital base 362,762 361,800
Capital requirement 121,541 40,872
Buffer for capital requirements 241,220 320,928

*Floor of risk-weighted assets based on the Standardised Approach.

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 2022, OP Cooperative’s member credit institutions comprised 115 cooperative banks as well as OP Corporate Bank plc, OP Mortgage Bank 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

Corporate responsibility is an integral part of OP Financial Group’s business and strategy and responsible business is one of OP Financial Group’s strategic priorities. OP Financial Group published its new sustainability programme in August 2022. The new sustainability programme and its policy priorities implement OP Financial Group’s strategy, guiding the sustainability actions taken by the business units and OP cooperative banks. OP Financial Group’s sustainability programme is built around three themes: Climate and the environment, People and communities and Corporate governance.

At OP Financial Group, sustainability and responsibility are guided by a number of principles and policies. In addition to com-plying with all applicable laws and regulations, we are committed to international initiatives and standards. 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 Financial Group is committed to complying with the UN Principles for Responsible Banking Investment and is a Founding Signatory of the Principles for Responsible Banking under the United Nations Environment Programme Finance Initiative (UNEP FI).

Green bonds issued by OP MB are part of the responsible offerings of OP Financial Group. In March 2022, OP MB published a Green Covered Bond Report on Finland’s first green covered bond issued in March 2021. According to OP MB’s Green Cov-ered Bond Framework, funds raised through the bond have been allocated to mortgages with energy-efficient residential buildings as collateral. In 2021, the environmental impacts allocated to the green covered bond include annual avoided ener-gy use of 26,000 MWh and annual avoided CO2-equivalent emissions of 4,100 tonnes.

In April 2022, OP MB issued a one-billion-euro green covered bond with a maturity of 5,5 years. According to OP MB’s Green Covered Bond Framework, funds raised through the bond have been allocated to mortgages recognised as energy efficient by OP Financial Group. The sector to be financed is energy-efficient residential buildings (green buildings).


On 30 September 2022, 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:

Chair Mikko Timonen Chief Financial Officer, OP Cooperative
Members Satu Nurmi Head of Retail Customer Financing and Housing-related Services,
OP Retail Customers plc
  Mari Heikkilä Head of Group Treasury and Asset and Liability Management, OP Corporate Bank plc

The Board was chaired by Vesa Aho until 28 February 2022 and Mikko Timonen has chaired the Board since 1 March 2022.

Lauri Iloniemi was a Board member until 8 May 2022 and Mari Heikkilä has been a Board member since 23 May 2022.

Kaisu Christie was a Board member until 23 May 2022 and Satu Nurmi has been a Board member since 23 May 2022.

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

A new Act on Mortgage Credit Banks and Covered Bonds (Laki kiinnitysluottopankeista ja katetuista joukkolainoista 151/2022) entered into force on 8 July 2022. The new law implemented a directive concerning covered bonds and it revoked the Act on Mortgage Credit Banks (Laki kiinnitysluottopankkitoiminnasta 688/2010). On 30 June 2022, the Finnish Financial Supervisory Authority granted OP MB a licence to engage in mortgage credit bank operations in accordance with section 8 of the Act on Mortgage Credit Banks and Covered Bonds (Laki kiinnitysluottopankeista ja katetuista joukkolainoista). OP MB has updated its prospectus concerning bonds to be in line with the new law. This mainly involved changes pertaining to legislative methods and in terminology, in addition to which the size of the programme was increased to EUR 25 billion. The name of the updated programme is “Euro Medium Term Covered Bond (Premium) Programme”. A new cover pool was established for issues to be made under the updated prospectus and the new law. The amended law has no effect on bonds issued before 8 July 2022, to which the former Act on Mortgage Credit Banks (Laki kiinnitysluottopankkitoiminnasta 688/2010) is applied, including the prospectuses and terms and conditions effective during the issue.

Risk exposure

When entering 2022, OP MB had a strong capital base, capital buffers and risk-bearing capacity.

The Covid-19 pandemic, Russia’s aggressive war in Ukraine and rise in raw material prices and consumer prices constitute a situation where their combined effects are very hard to predict. The risk factors may affect 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 continuous 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, geopolitical factors and fast technological progress.

For example, climate and environmental changes and other factors in the business environment are considered thoroughly so that their effects on the customers’ future success are understood. Through advice and business decisions, OP Financial Group encourages its customers in developing their sustainable and successful business in the future. At the same time, OP Financial Group ensures that its operations are profitable and in compliance with its core values in the long term.

Outlook towards the year end

The economic outlook dimmed during the third quarter. Nevertheless, the financial situation among households and companies still remained good.

Market interest rates have risen exceptionally fast in recent months, as central banks have raised their key interest rates. Central banks are expected to continue to tighten their monetary policy in the months to come. Uncertainty in the financial market has increased considerably, credit spreads have widened and stock prices fallen.

Exceptionally much uncertainly is still related to the economic outlook. Economic growth is anticipated to slow down, as demand in the home market and export demand go down.

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.

Schedule financial reports for 2022

Report by the Board of Directors and Financial Statements 2022 Week 10
Corporate Governance Statement 2022 Week 10

Schedule for Financial Statements Bulletin 2022 and Interim Reports in 2023

Financial Statements Bulletin 1 January‒31 December 2022 8 February 2023
Interim Report 1 January–31 March 2023 3 May 2023
Half-year Financial Report 1 January–30 June 2023 25 July 2023
Interim Report 1 January–30 September 2023 25 October 2023

Helsinki, 26 October 2022

OP Mortgage Bank
Board of Directors

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

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