OP Corporate Bank plc
Interim Report 1 January–31 March 2022
Stock Exchange Release 4 May 2022 at 9.00am EEST
OP Corporate Bank plc’s Interim Report 1 January–31 March 2022
- OP Corporate Bank plc’s earnings before tax were EUR –17 million (65). Earnings were reduced in particular by lower net investment income and higher impairment loss on receivables.
- Total income decreased by 22% to EUR 116 million (150). Net investment income fell by 85% to EUR 7 million (49). Net interest income increased by 23% to EUR 94 million (77). Net commissions and fees decreased by EUR 10 million to EUR 3 million (13).
- Total expenses increased by 5% to EUR 91 million (87).
- Impairment loss recognised on receivables amounted to EUR 42 million. A year ago, impairment loss on receivables reversed came to EUR 2 million. A significant portion of the increase in impairment loss on receivables came from the indirect effects of the war in Ukraine.
- OP Corporate Bank has no significant direct exposures to Russia. The impacts of the war in Ukraine on credit risk exposure mainly arise indirectly from certain sectors, especially as a result of a rise in energy and raw material prices.
- The loan portfolio grew in the year to March by 9% to EUR 26.6 billion (24.4). In the year to March, the deposit portfolio increased by 11% to EUR 14.8 billion (13.4).
- The Corporate Banking and Capital Markets segment’s earnings before tax were EUR –33 million (65). Total income decreased by 63% to EUR 40 million (107). Net interest income rose to EUR 53 million (52). Net investment income fell by EUR 50 million to EUR –2 million (49). Total expenses increased by 16% to EUR 44 million (38). Higher total expenses were explained by a higher stability contribution paid to the Single Resolution Fund financed by the euro-area banks. Impairment loss on receivables increased to EUR 29 million (5).
- The Asset and Sales Finance Services and Payment Transfers segment’s earnings before tax were EUR 17 million (30). Total income increased by 6% to EUR 60 million (57). Net interest income increased by 6% to EUR 40 million (37) and net commissions and fees by 9% to EUR 15 million (14). Total expenses decreased to EUR 32 million (33). Impairment loss on receivables increased to EUR 11 million (–5).
- Baltic earnings before tax amounted to EUR 2 million (3). Total income increased to EUR 14 million (9). Net interest income increased to EUR 12 million (7) and net commissions and fees to EUR 3 million (2). Total expenses increased to EUR 10 million (6).
- Group Functions segment’s earnings before tax amounted to EUR –3 million (–33). Liquidity remained strong.
- OP Corporate Bank plc’s CET ratio was 15.3% (15.4), which exceeds the minimum regulatory requirement by 8.3 percentage points.
- OP Financial Group has decided to apply an RWA floor, based on the standardised approach, in the calculation of its capital adequacy ratio. Application of the floor is expected to decrease OP Corporate Bank’s CET1 ratio by no more than 3 percentage points in the second quarter of 2022.
| Earnings before tax, € million | Q1/2022 | Q1/2021 | Change, % | Q1–4/2021 |
| Corporate Banking and Capital Markets | -33 | 65 | -151.2 | 261 |
| Asset and Sales Finance Services and Payment Transfers | 17 | 30 | -44.3 | 90 |
| Baltics | 2 | 3 | -35.5 | 20 |
| Group Functions | -3 | -33 | - | -105 |
| Total | -17 | 65 | -126.5 | 267 |
| Return on equity (ROE), % | -1.3 | 4.9 | -6.2* | 5.2 |
| Return on assets (ROA), % | -0.06 | 0.26 | -0.32* | 0.25 |
| 31 Mar 2022 | 31 Mar 2021 | Change, % | 31 Dec 2021 | |
| CET1 ratio, % | 15.3 | 13.6 | 1.7* | 15.4 |
| Loan portfolio, € million | 26,636 | 24,439 | 9.0 | 26,236 |
| Guarantee portfolio, € million | 3,546 | 2,799 | 26.7 | 3,475 |
| Other exposures, € million | 5,469 | 5,644 | -3.1 | 5,731 |
| Deposits, € million | 14,806 | 13,391 | 10.6 | 16,089 |
| Ratio of non-performing exposures to exposures, % | 2.0 | 2.1 | -0.1* | 1.8 |
| Ratio of impairment loss on receivables to loan and guarantee portfolio, % | 0.56 | -0.03 | 0.59* | 0.25 |
Comparatives deriving from the income statement are based on figures for the corresponding periods a year ago. Unless otherwise specified, balance-sheet and other cross-sectional figures on 31 December 2021 are used as comparatives.
*Change in ratio
Outlook towards the year end
The world economy grew at a brisk pace during early 2022. Fast economic recovery from the crisis caused by the Covid-19 pandemic increased raw material prices and sped up inflation, however. Covid-19 infections and the resulting restrictions continued to undermine economic development not only in service sectors but also in industrial sectors suffering from problems in production chains. After Russia’s attack on Ukraine, raw material prices rose more sharply and inflation accelerated further.
In the financial market, stock prices fell and market interest rates rose during the first quarter. The immediate increase in uncertainty caused by Russia’s war of aggression remained short-lived in the market.
Exceptional uncertainty casts a shadow over the economic outlook. The Covid-19 pandemic, the Russian invasion of Ukraine and a strong rise in raw material prices constitute a situation where their combined effects are very hard to predict.
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 losses. 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 Interim 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 and Half-year Financial Reports in 2022:
| Half-year Financial Report H1/2022 | 27 July 2022 |
| Interim Report Q1-3/2022 | 26 October 2022 |
Helsinki, 4 May 2022
OP Corporate Bank plc
Board of Directors
For additional information, please contact
Katja Keitaanniemi, President and CEO, 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. www.op.fi
