OP Mortgage Bank
Interim Report 1 January–30 September 2024
Stock Exchange Release 31 October 2024 at 10.00 EET
OP Mortgage Bank: Interim Report 1 January–30 September 2024
OP Mortgage Bank (OP MB) is the covered bond issuing entity of OP Financial Group. Together with OP Corporate Bank plc, its role is to raise funding for OP Financial Group from money and capital markets.
Financial standing
The intermediary loans and loan portfolio of OP MB totalled EUR 16,628 million (16,988)* on 30 September 2024. Bonds issued by OP MB totalled EUR 14,915 million (14,915) at the end of September.
OP MB's covered bonds after 8 July 2022 are issued under the Euro Medium Term Covered Bond (Premium) programme (EMTCB), pursuant to the Finnish Act on Mortgage Credit Banks and Covered Bonds (151/2022). The collateral is added to the EMTCB cover pool from the member cooperative banks' balance sheets via the intermediary loan process on the issue date of a new covered bond.
In January, OP MB issued a covered bond in the international capital market. The fixed-rate covered bond worth EUR 1 billion has a maturity of seven years and six months. All proceeds of the bond were intermediated to 63 OP cooperative banks in the form of intermediary loans.
The terms of issue are available on the op.fi website, under Debt investors: www.op.fi/op-ryhma/velkasijoittajat/issuers/op-mortgage-bank/emtcb-debt-programme-documentation.
On 30 September 2024, 98 OP cooperative banks had a total of EUR 14,800 million (14,800) in intermediary loans from OP MB.
Impairment loss on receivables related to loans in OP MB’s balance sheet totalled EUR 0.1 million (-0.2). Loss allowance was EUR 2.4 million (2.6).
Operating profit was EUR 6.4 million (8.3). The company's financial standing remained stable throughout the reporting period.
* The comparatives for 2023 are given in brackets. For income statement and other aggregated figures, the January–September 2023 figures serve as comparatives. For balance-sheet and other cross-sectional figures, figures at the end of the previous financial year (31 December 2023) serve as comparatives.
Collateralisation of bonds issued to the public
The covered bonds issued under the EMTCB programme worth EUR 25 billion established on 11 October 2022, in accordance with the Act on Mortgage Credit Banks and Covered Bonds (151/2022), totalled EUR 5,250 million. The cover pool included a total of EUR 5,781 million in loans serving as collateral on 30 September 2024. Overcollateralisation exceeded the minimum requirement under the Act (151/2022).
The covered bonds issued under the Euro Medium Term Covered Note programme worth EUR 20 billion established on 12 November 2010, in accordance with the Act on Mortgage Credit Banks (Laki kiinnitysluottopankkitoiminnasta, 688/2010), totalled EUR 9,665 million. The cover pool included a total of EUR 11,900 million in loans serving as collateral on 30 September 2024. Overcollateralisation exceeded the minimum requirement under the Act (688/2010).
Capital adequacy
OP MB’s Common Equity Tier 1 (CET1) ratio stood at 49.3% (41.8) on 30 September 2024. The ratio was improved by the decrease in mortgages on OP MB's balance sheet and the resulting reduction in capital requirement for credit risk. 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% (or 10.5% with the increased capital conservation buffer). Because OP MB covers capital requirements in their entirety with CET1 capital, the CET1 capital requirement is 10.5%. Estimated profit distribution has been subtracted from earnings for the reporting period.
OP MB uses the Standardised Approach (SA) to measure its capital adequacy requirement for credit risk. The Standardised Approach is also used to measure the capital requirement for operational risks.
OP MB belongs to OP Financial Group. As part of the Group, OP MB is supervised by the European Central Bank. 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.
| Own funds and capital adequacy, TEUR | 30 Sep 2024 | 31 Dec 2023 |
| Equity capital | 369,686 | 372,160 |
| Excess funding of pension liability | -13 | -13 |
| Share of unaudited profits | -7,490 | |
| Proposed profit distribution | -5,016 | |
| Insufficient coverage for non-performing exposures | -4,632 | -2,856 |
| CET1 capital | 360,024 | 361,800 |
| Tier 1 capital (T1) | 360,024 | 361,800 |
| Total own funds | 360,024 | 361,800 |
| Total risk exposure amount | ||
| Credit and counterparty risk | 679,352 | 812,205 |
| Operational risk | 26,636 | 25,140 |
| Other risks* | 24,774 | 27,336 |
| Total | 730,762 | 864,682 |
| Ratios, % | ||
| CET1 ratio | 49.3 | 41.8 |
| Tier 1 capital ratio | 49.3 | 41.8 |
| Capital adequacy ratio | 49.3 | 41.8 |
| Capital requirement | ||
| Own funds | 360,024 | 361,800 |
| Capital requirement | 76,765 | 90,829 |
| Buffer for capital requirements | 283,259 | 270,971 |
* Risks not otherwise covered.
Liabilities under the Resolution Act
Under regulation applied to crisis resolution of credit institutions and investment firms, the resolution authority is authorised to intervene in the terms and conditions of investment products issued by a bank in a way that affects an investor's position. The EU's Single Resolution Board (SRB) based in Brussels is OP Financial Group's resolution authority. The SRB has confirmed a resolution strategy for OP Financial Group whereby the resolution measures would focus on the OP amalgamation and on the new OP Corporate Bank that would be formed in case of resolution. According to the resolution strategy, OP MB will continue its operations as the new OP Corporate Bank's subsidiary.
The SRB has set a Minimum Requirement for Own Funds and Eligible Liabilities (MREL) for OP MB. From May 2024, the MREL is 16% of the total risk exposure amount and 18.5% of the total risk exposure amount including a combined buffer requirement, and 6% of leverage ratio exposures. The requirement entered into force on 15 May 2024. The requirement includes a Combined Buffer Requirement (CBR) of 2.5%.
OP MB's buffer for the MREL requirement was EUR 215 million. The buffer consists of own funds only. OP MB clearly exceeds the MREL requirement. OP MB's MREL ratio was 46% of the total risk exposure amount.
Joint and several liability of amalgamation
Under the Act on the Amalgamation of Deposit Banks (599/2010), 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 2024, OP Cooperative’s member credit institutions comprised 99 OP cooperative banks, 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, and 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 the amount necessary to preventing 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 a support measure or to a creditor of such a member bank in payment of an overdue amount which the creditor has not received from the member bank. Furthermore, if the central cooperative defaults, 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 (688/2010), which was valid at that time, the creditors of covered bonds issued prior to 8 July 2022 have the right to receive payment, before other claims, for the entire term of the bond, in accordance with the terms and conditions of the bond, out of the funds entered as collateral for the bond, without this being prevented by OP MB’s liquidation or bankruptcy. A similar and equal priority also applies to derivative contracts entered in the register of bonds, and to marginal lending facilities referred to in section 26, subsection 4 of said Act. For mortgage-backed loans issued prior to 8 July 2022 and included in the total amount of collateral of covered bonds, the priority of the covered bond holders’ payment right is limited to the amount of loan that, with respect to home loans, corresponds to 70% of the value of shares or property serving as security for the loan and entered in the bond register at the time of the issuer’s liquidation or bankruptcy declaration.
Under section 20 of the Act on Mortgage Credit Banks and Covered Bonds (151/2022), which entered into force on 8 July 2022, the creditors of bonds issued after 8 July 2022, including the related management and clearing costs, have the right to receive payment from the collateral included in the cover pool, before other creditors of OP MB or the OP cooperative bank which is the debtor of an intermediary loan. A similar priority also applies to creditors of derivative contracts related to covered bonds, including the related management and clearing costs. Interest and yield accruing on the collateral, and any substitute assets, fall within the scope of said priority. Section 44, subsection 3 of the Act on Mortgage Credit Banks and Covered Bonds includes provisions on the creditor’s priority claim regarding cover pool liquidity support. According to said subsection, the creditor has the right to receive payment against the funds contained in the cover pool after claims based on the principal and interest of covered bonds secured by the cover assets included in the cover pool, obligations based on derivatives contracts associated with covered bonds, as well as administration and liquidation costs.
Sustainability and corporate responsibility
Responsible business is one of OP Financial Group's strategic priorities. OP Financial Group's sustainability programme guides the Group's actions and is built around three themes: Climate and the environment, People and communities, and Corporate governance. Read more about the sustainability programme at www.op.fi/en/op-financial-group/corporate-social-responsibility.
At OP Financial Group, sustainability and corporate responsibility are guided by a number of principles and policies. OP Financial Group is committed to complying not only with all applicable laws and regulations, but also with a number of international initiatives. The 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 a Founding Signatory of the Principles for Responsible Banking under the United Nations Environment Programme Finance Initiative (UNEP FI). Furthermore, OP Financial Group is committed to complying with the UN Principles for Responsible Investment and the UN Principles for Sustainable Insurance.
As of the reporting year 2024, OP Financial Group reports on its sustainability and corporate responsibility in accordance with the European Sustainability Reporting Standards (ESRS) under the EU's Corporate Sustainability Reporting Directive (CSRD).
OP Financial Group has drawn up a biodiversity road map that includes measures to promote biodiversity at OP Financial Group. The aim is to create a nature positive handprint by 2030. 'Nature positive' means that OP Financial Group's operations will have a net positive impact (NPI) on nature.
OP Financial Group has also drawn up a Human Rights Statement and Human Rights Policy. OP Financial Group respects all recognised human rights, and the Human Rights Statement includes the requirements and expectations that OP Financial Group has set for itself and actors in its value chains. OP Financial Group is committed to remediation actions if it causes adverse human rights impacts.
In March 2024, OP MB published a Green Covered Bond Report on the allocation and impacts of Finland’s first green covered bonds issued in March 2021 and April 2022. Under OP MB’s Green Covered Bond Framework, the proceeds from the bonds have been allocated to mortgages with energy-efficient residential buildings as collateral.
The environmental impacts allocated to the green covered bonds in 2023 were 59,000 MWh of energy use avoided per year and 8,800 tonnes of CO2-equivalent emissions avoided per year.
Personnel
On 30 September 2024, OP MB had six employees. OP MB has been digitising its operations and purchases all key support services from OP Cooperative and its Group members, reducing the need for its own personnel.
Management
The Board composition is as follows:
| Chair | Mikko Timonen | Chief Financial Officer, OP Cooperative |
| Members | Satu Nurmi | Head of Personal Finance and Real Estate Services, OP Retail Customers plc |
| Mari Heikkilä | Head of Group Treasury & ALM, 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 profile
OP MB has a strong capital base, capital buffers and risk-bearing capacity, and they are expected to remain strong throughout the rest of the year.
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 Banking Risk Policy. The key credit risk indicators in use show that OP MB’s credit risk exposure is stable. 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 onto the same basis rate. OP MB has concluded all derivative contracts for hedging purposes, applying fair value hedges which have OP Corporate Bank plc as their counterparty. OP MB’s interest risk exposure is under control and has been within the set limit.
The liquidity buffer for OP Financial Group is centrally managed by OP Corporate Bank and therefore exploitable by OP MB. At the end of the reporting period, OP Financial Group's Liquidity Coverage Ratio (LCR) was 214% and the Net Stable Funding Ratio (NSFR) was 130%. OP MB monitors its cash flows on a daily basis to secure funding liquidity and its structural funding risk on a regular basis as part of the company's internal capital adequacy assessment process (ICAAP).
An analysis of OP MB's risk exposure should always take account of OP Financial Group's risk exposure, which is based on the joint and several liability of all its member credit institutions. The member credit institutions are jointly liable for each other's debts. All member banks must participate in support measures, as referred to in the Act on the Amalgamation of Deposit Banks, to support each other's capital adequacy.
OP Financial Group analyses the business environment as part of the ongoing risk assessment activities and strategy process. Megatrends and worldviews behind OP Financial Group's strategy reflect driving forces that affect the daily activities, conditions and future of the Group and its customers. Factors currently shaping the business environment include climate, biodiversity loss, scientific and technological innovations, polarisation, demography and geopolitics. External business environment factors are considered thoroughly, so that their effects on customers’ future success are understood. OP Financial Group provides advice and makes business decisions that promote the sustainable financial success, security and wellbeing of its owner-customers and operating region while managing the Group's risk profile on a longer-term basis. Advice for customers, risk-based service sizing, contract lifecycle management, decision-making, management and reporting are based on correct and comprehensive information.
Events after the reporting period
In October, OP MB issued a covered bond in the international capital market. The fixed-rate covered bond worth EUR 1 billion has a maturity of five years. All proceeds of the bond were intermediated to 48 OP cooperative banks in the form of intermediary loans.
The terms of issue are available at the op.fi website, under Debt investors: www.op.fi/op-ryhma/velkasijoittajat/issuers/op-mortgage-bank/emtcb-debt-programme-documentation.
In October, OP MB's Board of Directors decided to sell OP MB's on-balance sheet loan portfolio of EUR 1,825 million to 85 OP cooperative banks later this year.
Outlook for 2024
The Finnish economy was sluggish in the first half. GDP contracted over the previous year and unemployment increased. Forecast data suggests that the Finnish economy began to grow in the third quarter of 2024. Falling inflation and interest rates provide a basis for the recovery to continue. Risks associated with the economic outlook are still higher than usual. The escalation of geopolitical crises may abruptly affect capital markets and the economic environment.
OP MB’s capital adequacy is expected to remain strong and risk exposure favourable. This will enable the issuance of new covered bonds also in the future.
Time of publication of 2024 reports
| Report by the Board of Directors and Financial Statements 2024 | Week 11, 2025 |
| Corporate Governance Statement 2024 | Week 11, 2025 |
Schedule for Financial Statements Bulletin 2024 and Interim Reports in 2025
| Financial Statements Bulletin 1 January‒31 December 2024 | 6 February 2025 |
| Interim Report 1 January–31 March 2025 | 7 May 2025 |
| Half-year Financial Report 1 January–30 June 2025 | 30 July 2025 |
| Interim Report 1 January–30 September 2025 | 28 October 2025 |
Helsinki, 31 October 2024
OP Mortgage Bank
Board of Directors
Additional information:
Managing Director Sanna Eriksson, phone +358 10 252 2517
DISTRIBUTION
LSE London Stock Exchange
Euronext Dublin (Irish Stock Exchange)
Officially Appointed Mechanism (OAM)
Major media
op.fi
