OP Mortgage Bank’s Half-year Financial Report for 1 January–30 June 2021

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OP Mortgage Bank
Stock Exchange Release 28 July 2021 at 10.00am EEST
Half-year Financial Report

OP Mortgage Bank’s Half-year Financial Report for 1 January–30 June 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 18,344 million (15,326)* on 30 June 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 retained covered bonds in the amount of 1 billion euros each and with a maturity of two years. The proceeds of the bonds were intermediated in full to 113 OP cooperative banks. The bond issues in May were performed as internal issues within OP Financial Group.

On 30 June 2021, 125 OP cooperative banks had a total of EUR 14,310 million (10,790) in intermediary loans from OP MB.

Earnings before tax totalled EUR 2.6 million (4.0). The company's financial standing remained stable throughout the reporting period.

Impairment loss on receivables totalled EUR 0.7 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–June 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 June 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 15,814 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 3,575 million.

Capital adequacy

OP MB’s Common Equity Tier 1 (CET1) ratio stood at 76.2% (61.8) on 30 June 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% increased with 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 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 June 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 June 2021, OP Cooperative's member credit institutions comprised 132 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 June 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.

Outlook for 2021

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 interest rates are expected to remain 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.

Schedule for Interim Reports in 2021

Interim Report 1 January–30 September 2021 27 October 2021

Helsinki, 28 July 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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