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OP Mortgage Bank: Financial Statements Bulletin for 1 January‒31 December 2020

OP Mortgage Bank plc
·9-min read

OP Mortgage Bank plc
Financial Statements Bulletin
Stock Exchange Release 10 February 2021 at 10.00 am EET

OP Mortgage Bank: Financial Statements Bulletin for 1 January‒31 December 2020

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 15,326 million (14,335)* on 31 December 2020. OP MB issued a 1 billion-euro fixed-rate covered bond with a maturity of 8.25 years in international capital markets in January. Out of the proceeds of the bond, EUR 984 million were intermediated to 77 OP cooperative banks in the form of intermediary loans in April. In February, a new extension of an intermediary loan model was performed on a bond issued in February 2019 that will mature in 2029. As part of this extension, seven OP cooperative banks applied for an intermediary loan from OP MB at a total amount of EUR 185 million.

In April, OP MB issued a 500 million-euro retained covered bond with a maturity of two years. Out of the proceeds of the bond, EUR 100 million was intermediated to an OP cooperative bank in the form of an intermediary loan in June. In April, OP MB also issued a 300 million-euro retained covered bond with a maturity of eight years. The proceeds of the bond were intermediated in full to five OP cooperative banks in the form of intermediary loans. The bond issues in April were performed as internal issues within OP Financial Group.

OP MB issued a 1.25 billion-euro fixed-rate covered bond with a maturity of 10 years in international capital markets in November. Out of the proceeds of the bond, EUR 1.25 billion were intermediated to 61 OP cooperative banks in the form of intermediary loans in November.

On 31 December 2020, 122 OP cooperative banks had a total of EUR 10,790 million (8,706) in intermediary loans from OP MB.

Impairment loss on receivables increased to EUR 1.6 million (0.2). As a result of the Covid-19 crisis, customers have actively applied for repayment holidays on their loans. Combined with the changes in macroeconomic parameters applied in the calculation of expected credit losses, this increased the amount of expected credit losses. The new definition of default adopted in March also increased the amount of expected credit losses.

The company's financial standing remained stable throughout the reporting period. Earnings before tax totalled EUR 8.0 million (14.9).

*The comparatives for 2019 are given in brackets. For income statement and other aggregated figures, January–December 2019 figures serve as comparatives. For balance-sheet and other cross-sectional figures, figures at the end of the previous financial year (31 December 2019) serve as comparatives.

Collateralisation of bonds issued to the public

On 31 December 2020, 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 kiinnityspankkitoiminnasta 688/2010)) totalled EUR 15,722 million.

Capital adequacy and capital base

OP MB’s Common Equity Tier 1 (CET1) ratio stood at 61.8% (69.8) on 31 December 2020. The lower ratio was affected in particular by the rise in risk weights caused by the adoption of the new definition of default. 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 risk.

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

31 Dec. 2020

31 Dec. 2019

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)



Tier 2 Capital (T2)



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 31 December 2020, OP Cooperative's member credit institutions comprised 137 OP cooperative banks as well as OP Corporate Bank plc, OP MB and OP Card Company 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.


On 31 December 2020, 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

Director, 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. Until 30 June 2020, the deputy Managing Director was Pekka Moisio, Head of Funding and Liquidity Management. As of 1 July 2020, the deputy Managing Director is Tuomas Ruotsalainen, Senior Covered Bonds Manager at OP MB.

Risk exposure

When entering 2020, OP MB had a strong capital base, capital buffers and risk-bearing capacity. The coronavirus pandemic that spread widely in early 2020 had a global effect on societies, which has further affected economic development and operating conditions in the financial sector. This is the case in Finland too.

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

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 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. The interest rate risk of OP MB may be considered low and it has been within the set limit.

Outlook for 2021

The number of Covid-19 infections increased in most countries over the autumn. As a result of this, the economic recovery that started last summer faltered somewhat. Towards the end of the year, the effects of the pandemic on the economy began to ease off, mainly affecting the service sector. Economic recovery will continue as the pandemic will continue to subside. In financial markets, expectations are positive. Policy actions by central banks are expected to calm down markets and keep interest rates low. However, the Covid-19 pandemic will continue to cause uncertainty over the economic outlook.

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 2020 reports

Report by the Board of Directors and Financial Statements 2020

Week 10, 2021

Corporate Governance Statement 2020

Week 10, 2021

Schedule for Interim Reports in 2021

Interim Report 1 January–31 March 2021

28 April 2021

Half-year Financial Report 1 January–30 June 2021

28 July 2021

Interim Report 1 January–30 September 2021

27 October 2021

Helsinki, 10 February 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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