OP Corporate Bank plc
Half-year Financial Report 1 January–30 June 2022
Stock Exchange Release 27 July 2022 at 9.00 EEST
OP Corporate Bank plc’s Half-year Financial Report for 1 January–30 June 2022
- OP Corporate Bank plc’s earnings before tax were EUR 28 million (142). Earnings were reduced in particular by lower net investment income and higher impairment loss on receivables.
- Total income decreased by 22% to EUR 221 million (284). Net investment income fell by 86% to EUR 14 million (96). Net interest income increased by 20% to EUR 181 million (150). Net commissions and fees decreased by EUR 13 million to EUR 8 million (21).
- Total expenses of EUR 153 million were at the previous year’s level.
- Impairment loss recognised on receivables amounted to EUR 40 million. A year ago, impairment loss on receivables reversed came to EUR 12 million. A significant portion of the increase in impairment loss on receivables came from the indirect effects of the war in Ukraine in the first quarter.
- OP Corporate Bank has no significant direct exposures to Russia.
- The loan portfolio grew in the year to June by 10% to EUR 27.4 billion (24.9). The deposit portfolio decreased by 2% to EUR 14.3 billion (14.5).
- The Corporate Banking and Capital Markets segment’s earnings before tax were EUR –6 million (152). Total income decreased by 54% to EUR 94 million (206). Net interest income increased by 3% to EUR 109 million (106). Net investment income fell by EUR 88 million to EUR 7 million (95). Total expenses increased by 4% to EUR 71 million (68). Impairment loss on receivables increased to EUR 29 million. A year ago, impairment loss on receivables reversed came to EUR 15 million.
- The Asset and Sales Finance Services and Payment Transfers segment’s earnings before tax were EUR 55 million (52). Total income increased by 6% to EUR 119 million (111). Net interest income increased by 6% to EUR 81 million (76) and net commissions and fees by 9% to EUR 30 million (28). Total expenses increased by 4% to EUR 57 million (55). Impairment loss on receivables increased to EUR 6 million (4).
- Baltic earnings before tax amounted to EUR 9 million (7). Total income increased to EUR 30 million (17). Net interest income increased to EUR 25 million (14) and net commissions and fees to EUR 6 million (4). Total expenses increased to EUR 16 million (11).
- The Group Functions segment’s earnings before tax amounted to EUR –31 million (–69). Liquidity remained strong.
- OP Corporate Bank plc’s CET1 ratio was 12.4% (15.4), which exceeds the minimum regulatory requirement by 5.4 percentage points.
- OP Financial Group adopted an RWA floor, based on the Standardised Approach, in the calculation of its capital adequacy ratio. Application of the floor decreased OP Corporate Bank’s CET1 ratio by 2.4 percentage points in the second quarter.
- On 26 July 2022, OP Cooperative’s Board of Directors decided to file a pre-application with the European Central Bank (ECB) on the use of the Standardised Approach in capital adequacy calculation, instead of the internal models (IRBA) and the currently applied risk-weighted assets floor based on the Standardised Approach. A possible transfer to the Standardised Approach will not affect OP Corporate Bank’s capital adequacy or risk exposure.
| Earnings before tax, € million | H1/2022 | H1/2021 | Change, % | Q1–4/2021 |
| Corporate Banking and Capital Markets | -6 | 152 | -104.0 | 261 |
| Asset and Sales Finance Services and Payment Transfers | 55 | 52 | 6.5 | 90 |
| Baltics | 9 | 7 | 29.8 | 20 |
| Group Functions | -31 | -69 | - | -105 |
| Total | 28 | 142 | -80.6 | 267 |
| Return on equity (ROE), % | 1.1 | 5.3 | -4.2* | 5.2 |
| Return on assets (ROA), % | 0.05 | 0.27 | -0.22* | 0.25 |
| 30 Jun 2022 | 30 Jun 2021 | Change, % | 31 Dec 2021 | |
| CET1 ratio, % | 12.4 | 13.2 | -0.8* | 15.4 |
| Loan portfolio, € million | 27,434 | 24,858 | 10.4 | 26,236 |
| Guarantee portfolio, € million | 3,457 | 2,879 | 20.1 | 3,475 |
| Other exposures, € million | 5,921 | 5,670 | 4.4 | 5,731 |
| Deposits, € million | 14,298 | 14,549 | -1.7 | 16,089 |
| Ratio of non-performing exposures to exposures, % | 1.9 | 2.1 | -0.2 * | 1.8 |
| Ratio of impairment loss on receivables to loan and guarantee portfolio, % | 0.26 | -0.08 | 0.34* | 0.25 |
Comparatives for the income statement are based on the corresponding figures a year ago. Unless otherwise specified, figures from 31 December 2021 are used as comparatives for balance-sheet and other cross-sectional items.
*Change in ratio
Outlook towards the year end
The world and Finnish economy still developed favourably during the first half of the year in terms of many indicators. Companies showed good financial results and unemployment fell to the rate prevailing in boom conditions. However, Russia’s aggressive war in Ukraine, the Covid-19 pandemic, higher energy prices and inflation increased the level of uncertainty and undermined development.
Central banks began to tighten their monetary policy and market interest rates rose sharply in the spring. The financial market experienced greater uncertainty and stock prices fell markedly.
Several exceptional factors affect the economic outlook. The Covid-19 pandemic, the war in Ukraine, high inflation, increasing uncertainty in the financial market and the tightening monetary policy are undermining the economic outlook. However, there is a lot of pent-up demand following the pandemic, and the economic situation is still strong. In the near future, inflation is expected to remain high and economic growth to slow down, but the economic situation in Finland and the rest of the euro area should remain fairly good. As the year proceeds, monetary policy is anticipated to tighten and interest rates are expected to continue rising.
The most significant uncertainties affecting earnings performance due to the war in Ukraine, the Covid-19 pandemic and inflation relate to changes in the interest rate and investment environment and to the developments in impairment loss on receivables. In addition, future earnings performance will be affected by the market growth rate and the change in the competitive situation.
Full-year earnings estimates for 2022 will only be provided at the OP Financial Group level, in its financial statements bulletin and interim and half-year financial reports.
All forward-looking statements in this Half-year Financial Report expressing the management’s expectations, beliefs, estimates, forecasts, projections and assumptions are based on the current view of the future development in the business environment and the future financial performance of OP Corporate Bank plc’s and its various functions, and actual results may differ materially from those expressed in the forward-looking statements.
Schedule for Interim Reports in 2022:
| Interim Report Q1−3/2022 | 26 October 2022 |
Helsinki, 27 July 2022
OP Corporate Bank Plc
Board of Directors
For additional information, please contact:
Katja Keitaanniemi, Chief Executive Officer, tel. +358 (0)10 252 1387
Anni Hiekkanen, Chief Communications Officer, tel. +358 (0)10 252 1989
DISTRIBUTION
Nasdaq Helsinki Oy
Euronext Dublin (Irish Stock Exchange)
LSE London Stock Exchange
Major media
op.fi
OP Corporate Bank plc is part of OP Financial Group. OP Corporate Bank and OP Mortgage Bank are responsible for OP's funding in money and capital markets. As laid down in the applicable law, OP Corporate Bank, OP Mortgage Bank and their parent company OP Cooperative and other OP Financial Group member credit institutions are ultimately jointly and severally liable for each other's debts and commitments. OP Corporate Bank acts as OP Financial Group's central bank.
