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OP Mortgage Bank (70ZM)

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Thursday 07 August, 2008

OP Mortgage Bank

Interim Results

RNS Number : 8289A
OP Mortgage Bank
07 August 2008
 

OP Mortgage Bank    COMPANY RELEASE

                                   Message category: Interim Report

                                   7 August 20088.30 am Finnish time (GMT+3)




OP Mortgage Bank's (OPA) loan portfolio grew to EUR 2,703 million in the January-June period (EUR 1,531 million at the end of 2007). The bank increased its loan portfolio significantly in April when it purchased housing loans from OP-Pohjola Group member cooperative banks. OPA launched a covered bond issue at a nominal valued of EUR 1 billion in June. 


Earnings Development

 

EUR thousand

Q2/2008

Q2/2007

Q12/2008

Q1-2/2007

2007







Income






Net interest income

3,888

2,136

6,421

3,689

8,274

Net commissions and fees

- 1,692 

-1,204

- 2,912

-1,684

-3,950

Net income from trading

0

41

7

60

87

Net income from investments

-

-

1

1

1

Other operating income

-

4

-

4

4

Total

2,196

977

3,518

2,070

4,416







Expenses






Personnel costs

70

79

137

140

257

Other administrative expenses

191

81

343

146

337

Other operating expenses

513

282

609

305

781

Total

774

443

1,089

591

1,375







Earnings before tax

1,422

534

2,428

1,479

3,039



Earnings before tax for April-June increased to EUR 1 422 thousand (534). Improvements in net interest income and earnings were due to the growth in the loan portfolio. The income for the April-June period increased more than two-fold (year-on-year). The net interest income amounted to EUR 3,888 thousand (2,136). Net commissions and fees were negative, as in the previous year, with commission income increasing to EUR180 thousand (103) and commission expenses to EUR 1,873 thousand (1,307). Commission expenses stem mainly from commissions paid to OP-Pohjola Group member banks for servicing housing loans. The bank's expenses increased to EUR 774 thousand (443). Growth in other operating expenses derives largely from purchased professional services and ICT services.  


Earnings before tax for January-June amounted to EUR 2,428 thousand (1,479). Net interest income rose to EUR 6,421 thousand (3,689) due to the growth of the loan portfolio. The bank's expenses increased due to the aforementioned professional services. OPA did not recognise any loan losses for the first six months.  




Balance Sheet and Off-balance Sheet Commitments


OPA's balance sheet total amounted to EUR 2,769 million on 30 June (EUR 1,704 million).  


Change in Major Asset and Liability Items

 

EUR Million 

30 June 2008

31 March 2008

31 Dec. 2007

30 June 2007






Balance Sheet

2,769

1,545

1,704

1,487

Receivables from customers

2,703

1,481

1,531

1,459

Receivables from financial institutions

47

8

138

16

Debt securities issued to the public

1,998

1,054

1,060

1,100

Liabilities to financial institutions

605

346

516

276

Shareholders' equity

86

64

64

63

Off-balance sheet commitments

19

20

17

25


The bank's loan portfolio grew to EUR 2,703 million in January-June (1,531). OPA increased its loan portfolio during the review period when it purchased housing loans from OP-Pohjola Group member banks for EUR 1,350 million. 


On June 2008, households accounted for 97 per cent (95) of the loan portfolio and housing corporations for 3 per cent (5). The bank has one non-performing loan. No impairment losses on loans were recognised, 


The carrying amount of the bonds issued to the public totalled EUR 1,998 million (1,060) on 30 June. OPA issued its second covered bond at a nominal value of EUR 1 billion on international capital markets in June. Moody's Investor Services and Standard & Poor's Rating Services have given the bond their highest credit ratings of Aaa and AAA. In addition to bonds, OPA funded its operations through financing loans taken out with Pohjola Bank plc. On 30 June, financing loans totalled EUR 605 million (516).  


Shareholders' equity increased to EUR 86 million (64). Shareholders' equity increased by EUR 20 million after OP-Pohjola Group Central Cooperative made an additional investment in the company in April. Retained earnings amounted to EUR 5,5 million (3,7) on 30 June. 


OPA has hedged against the interest-rate risk associated with its housing loan portfolio through interest-rate swaps, i.e. base rate cash flows from housing loans to be hedged are swapped to short-term Euribor cash flows. OPA has also swapped the fixed interest rates of the bonds it has issued to short-term variable rates. OPA's interest-rate derivative portfolio totalled EUR 4,781 million (2,619). All derivative contracts have been concluded for hedging purposes. Pohjola Bank plc is the counterparty to all derivative contracts.



Development of Capital Adequacy OPA's capital adequacy ratio stood at 10,2 % on 30 June. Since the beginning of 2008, OPA has calculated its capital adequacy in compliance with Basel II. In 2008 credit risk is calculated according to the standardised approach and the capital requirement for operational risk is calculated using the basic approach. Shareholder's equity increased by EUR 20 million in April when OP-Pohjola Group Central Cooperative made an additional investment in OPA. 

  



OWN FUNDS, EUR thousand 

Basel II

Basel II

Basel I


30 June 2008

31 March 2008

31 Dec 2007

Tier I

84,758

64,211

62,932

  of which capital loans

-

-

-

Tier II

20,000

20,000

20,000

Decreases


-

-

Total

104,758

84,211

82,932





Risk-weighted receivables, investments and off-balance sheet commitments


1,027,388

659,926

789,555  





Capital adequacy ratio, %

10,2

12,8

10,5 





Tier I ratio to risk-weighted receivables, investments and off-balance sheet commitments 

8,2

9,7

8,0


The increase in shareholders' equity arising from the measurement of pension liabilities and the assets covering them, under IFRS, is not considered own funds. Furthermore, intangible assets was also deducted from own funds. 




Basel II

Basel II

Basel I

Risk-weighted receivables, investments and off balance-sheet commitments

30 June 2008

31 March 2008

31 Dec 2007





 Receivables and investments

1,016,463

648,522

777,312

  Off-balance-sheet items

6,364

6,843

12,243

 Market risk

-

-

-

 Operational risks

4,561

4,561

-

Risk-weighted receivables, investments and off balance-sheet commitments, total

1,027,388

659,926

789,555



Joint Responsibility and Joint Security 

    

OPA is a member of OP-Pohjola Group Central Cooperative, which is the central institution of the amalgamation of OP-Pohjola Group. Within the amalgamation, the resources of OP-Pohjola Group secure the operations of all member banks since, according to Chapter 2, Section 3 of the Act on Cooperative Banks and Other Cooperative Credit Institutions, the Central Cooperative and its member credit institutions are jointly and severally responsible for each other's liabilities and commitments that cannot be paid from the funds of the Central Cooperative or the member credit institution in question. In addition to OPA, Central Cooperative members at the end of March 2008 included 229 cooperative banks, Pohjola Bank plc, Helsinki OP Bank plc, and OP-Kotipankki Oyj.


Central Cooperative provides its member banks with instructions governing operations to secure liquidity, capital adequacy and risk management, as well as shared accounting policies.


Inspite of the joint responsibility and the joint security, pursuant to Section 17 of the Act on Mortgage Credit Banks, the holder of a bond with mortgage collateral shall, notwithstanding the liquidation or bankruptcy of a mortgage credit bank, have the right to receive payment, before other claims, for the entire loan period of the bond, in accordance with the contract terms, from the funds entered as collateral for the bond.



Personnel

On 30 June, OPA had three permanent employees on an employment contract basis. It purchases all key support services from Central Cooperative and its Group companies, which reduces the need for more staff.


Administration 

The Annual General Meeting held in March confirmed the composition of the new Board of Directors. Mr. Matti Nykänen, was elected as a new member of the Board of Directors, after which the composition of the Board of Directors is as follows:

 

Chairman                      Harri Nummela                   Executive Vice President, OP-Pohjola
                                                                                  Group Central Cooperative
Vice Chairman              Mikko Hyttinen                     Senior Vice President, OP-Pohjola Group                                                                                                                  Central Cooperative
Members                       Sakari Haapakoski              Bank Manager, Oulun Osuuspankki
                                      Hanno Hirvinen                    Executive Vice President, Pohjola Bank plc
                                      Heikki Kananen                   Managing Director, Mäntsälän Osuuspankki
                                      Risto Korpela                      Managing Director, Turun Seudun Osuuspankki
                                      Matti Nykänen                      Senior Vice President, OP-Pohjola Group
                                                                                  Central Cooperative
                                      Jarmo Viitanen                    Managing Director, Länsi-Uudenmaan
                                                                                  Osuuspankki
 
Managing Director         Lauri Iloniemi.


Prospects for the rest of the year

Earnings before tax in 2008 are expected to equal or exceed the 2007 figure. The estimate is based on the assumption that the demand for housing loans will remain good and that there will be no further disturbances on the capital markets.


For further information, please contact Mr Lauri Iloniemi, Managing Director, tel. +358 10 252 3541


 



Income Statement


EUR thousand

Q2/2008

Q2/2007

Q1-2/2008

Q1-2/2007

2007







Interest income

31,805

16,611

51,760

26,242

62,594

Interest expenses

27,917

14,475 

45,339

22,553

54,320

Net interest income

3,888

2,136

6,421

3,689

8,274

Net commissions and fees

- 1,692

-1,204

- 2,912

-1,684

-3,950

Net income from trading

0

41

7

60 

87

Net income from investments

0

0

1

1

1

Other operating income

0

4

0

4

4

Personnel costs

70

79

137

140 

257

Other administrative expenses

191

81

343

146

337

Other operative expenses

514

282

609

305

781

Earnings before tax

1,422

534

2,428

1,479

3,039

Income taxes

329

147

585

381

798

Profit for the period

1,093

388

1,843

1,087

2,241



Key Ratios



Q2/2008

Q2/2007

Q1-2/2008

Q1-2/2007

2007

Return on equity (ROE), %

5,8

2,5

4,9

5,2

5,3

Cost/income ratio, %

35

45

31

29

31



Calculation of key ratios


Return on equity, % = Annualised profit for the period / Equity capital (average equity capital at the beginning and end of the period) × 100


Cost/income ratio, % = Personnel costs + Other administrative expenses + Other operating expenses / Net interest income + Net commission income + Net income from trading + Total net income from investments + Other operating income × 100



 



Balance Sheet


EUR thousand

30 June 2008

31 March 2008

31 Dec 2007

30 June 2007






Receivables from financial institutions

46,829

7,664

138,266

16,470

Derivative contracts

3,019

13,494

883

1,359

Receivables from customers

2,702,650

1,481,030

1,531,475

1,458,609

Investments assets

17

17

17

17

Intangible assets

482

512

542

38

Tangible assets

1

0

0

0

Other assets

15,732

42,628

32,956

10,680

Tax receivables

-3

-

-

-3

Total assets

2,768,728

1,545,345

1,704,140

1,487,170






Liabilities to financial institutions

605,000

346,200

516,200

276,200

Derivative contracts

34,911

1,118

3,165

12,212 

Debt securities issued to the public

1,998,403

1,053,873

1,059,989

1,099,995

Reserves and other liabilities

24,312

59,566

40,493

16,077

Tax liabilities

578

157

611

159

Subordinated debt securities

20,000

  20,000

20,000

20,000

Total liabilities

2,683,204

1,480,914

1,640,459

1,424,643

Shareholders' equity





  Share capital

60,000

60,000

60,000

60,000

  Reserve for invested unrestricted . equity

20,000

-

-

-

  Retained earnings

5,524

4,431

3,681

2,527

Total equity

85,524

64,431

63,681

62,527

Total liabilities and shareholders' equity

2,768,728

1,545,345

1,704,140

1,487,170


Off-balance Sheet Commitments

EUR thousand

30 June 2008

31 March 2008

31 Dec 2007

30 June 2007

Binding credit commitments

19,452

20,104

17,272

25,146


Change Calculation on Shareholders' Equity


EUR thousand

Share capital

Retained earnings

Total equity

Shareholders' equity 1 January 2007

19,148

1,440

20,588

Distribution of profit

-

-

Profit for the period

-

1,087

1,087

Other

40,852

-

40,852

Shareholders' equity 30 June 2007

60,000

2,527

62,527





EUR thousand

Share capital

Retained earnings

Total equity

Shareholders' equity 1 January 2008

60,000

3,681

63,681

Distribution of profit

-

-

-

Profit for the period

-

1,843

1,843

Other

20,000

-

20,000

Shareholders' equity 30 June 2008

80,000

5,524

85,524


Cash Flow Statement


EUR thousand

Q1-2/2008

Q1-2/2007




Liquid assets 1 January

15,266

11,196

Cash flow from operations

-958,598

- 1,020,443

Cash flow from investments

0

-6

Cash flow from financing

970,161

1,025,723

Liquid assets 30 June

26,829

16,470



The cash flow statement presents the cash flows for the period on the cash basis, divided into cash flows from operations, investments and financing. Cash flows from operations includes the cash flows generated from day-to-day operations. Cash flow from investments includes payments related to tangible and intangible assets, investments held to maturity and shares that are not considered as belonging to cash flow from operations. Cash flow from financing includes cash flows originating in the financing of operations either on equity or liability terms from money or capital market. Liquid assets include cash in hand and receivables from financial institutions payable on demand. The statement has been prepared using the indirect method.



Derivative Contracts 30.6.2008


EUR thousand

Nominal values/the remaining maturity

Fair values


Credit counter-value


Less than 1 year

1-5 years

More than 5 years

Total

Assets 

Liabilities

Interest rate derivatives








Hedging

75,000

4,705,669

-

4,780,669

3,019

34,594

23,780

Trading

-

-

-

-

-

-

-

Total

75,000

4,705,669

-

4,780,669

3,019

34,594

23,780



Derivative Contracts 30.6.2007


EUR thousand

Nominal values/the remaining maturity

Fair values


Credit counter-value


Less than 1 year

1-5 years

More than 5 years

Total

Assets 

Liabilities

Interest rate derivatives








Hedging

121,600

1,037,500

1,459,968

2,619,068

1,359

12,212

28,601

Trading

-

-

-

-

-

-

-

Total

121,600

1,037,500

1,459,968

2,619,068

1,359

12,212

28,601


All derivative contracts have been entered into for hedging purposes, regardless of their classification in accounting.


The interim report is unaudited.


Helsinki, 7 August 2008


OP Mortgage Bank

Board of Directors



This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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