Strong funding base and liquidity
OmaSp has a strong refinancing base that has grown steadily with both the deposit portfolio and market-based debt financing. The bank's refinancing base consists mainly of deposits (1). The deposit portfolio is widely distributed among different customer groups and customers. Most of the deposits are held in customer current accounts. The diversification of the deposit portfolio reduces the risk of large simultaneous withdrawals, which could complicate the company's liquidity management.
OmaSp started issuing mortgage banking operations, ie covered bonds, in 2017 and for the first time trading on the Bank's bond began on the Helsinki Stock Exchange. OmaSp received its first permission from the Finnish Financial Supervisory Authority (FIN-FSA) on 14 September 2017 and a permission under the new law on 30 June 2022. The mortgage bank operates as part of OmaSp's banking business and diversifies the bank's funding. OmaSp's mortgage-backed loans act as collateral for the covered bonds. As part of the launch of mortgage banking, OmaSp applied for direct monetary policy and TARGET2. The bank's TARGET2 account with the Bank of Finland was opened in September 2017.
The loans will be issued under OmaSp's €3 billion bond program. Bonds play an important role in arranging the refinancing of OmaSp: their size has been consistently increased, with the aim of increasing the share of market-based debt financing in the bank's funding portfolio.
In addition, OmaSp uses certificates of deposit and debentures to diversify its financial position and increase refinancing opportunities. In addition to deposits and market-based debt financing, OmaSp has a TARGET2 account with the Bank of Finland, which enables the use of central bank financing for short-term and long-term liquidity management. The company has also obtained long-term financing from the European Investment Bank and the Nordic Investment Bank (NIB).
OmaSp has high liquidity, which is maintained by investing assets mainly in liquid funds and investments. OmaSp aims to minimize the cost of maintaining its liquidity portfolio by keeping its cash holdings with the Central Bank as low as possible in order to maximize the return on liquid assets. The Group’s Liquidity Coverage Ratio (LCR) maintained at a good level and was 166.4% at the end of 2022 when the minimum liquidity requirement level is 100%. Owing, among other things, to the expanded refinancing base and successful risk management, OmaSp has succeeded in lowering its financing costs. The decline in financing costs has also been influenced by lower interest rates on deposits, a relatively low interest rate on covered bonds, and support from the S&P BBB + credit rating.
1)The refinancing base includes liabilities to credit institutions, debts to the public and general government, debt securities issued to the public and subordinated debt.