Notes to OP Financial Group Financial Statements

NOTES TO LIABILITIES AND EQUITY CAPITAL

 

Note 42. Subordinated liabilities


EUR million Average
interest
rate %
31 Dec.
2014
Average
interest
rate %
31 Dec.
2013
Subordinated loans 2.31 204 2.68 192
Other        
  Perpetual loans - - - 0
  Debentures 5.23 816 5.38 668
Total subordinated liabilities   1,020 861
 
Principal terms and conditions of the hybrid bonds/subordinated loans are as follows:  

                               

Hybrid bonds included in Tier 1

1) Subordinated loan of 10 billion Japanese yen (equivalent of EUR 68.9 million)

This is a perpetual loan (a loan without a due date) carrying a fixed interest rate of 4.23% until 18 June 2034 and subsequently a variable 6-month Yen Libor + 1.58% (step up). Interest will be annually payable on 18 June and 18 December. If interest cannot be paid for a given interest period, the obligation to pay interest for the period in question will lapse. The loan can be called in at the earliest in 2014 and can be annually repaid after 2014 on the interest due date on 18 June or 18 December. The loan's entire principal must be repaid in one instalment.

 

2) Perpetual bond of EUR 50 million

This is a perpetual loan without interest-rate step-ups, but with an 8% interest rate cap. The loan was issued on 31 March 2005 and its interest rate for the first year was 6.5% and thereafter CMS 10 years + 0.1%.Interest payments are made annually on 11 April. If interest cannot be paid for a given interest period, the obligation to pay interest for the period in question will lapse. The loan can be called in on 11 April 2010 at the earliest, subject to authorisation by the Financial Supervisory Authority. The loan's entire principal must be repaid in one instalment.


3) Perpetual bond of EUR 60 million

This perpetual loan carries a variable interest rate based on 3-month Euribor + 0.65% payable quarterly on 28 February, 30 May, 30 August and 30 November. If interest cannot be paid for a given interest period, the obligation to pay interest for the period in question will lapse. It is possible to call in the loan at the earliest on 30 November 2015, subject to authorisation by the Financial Supervision Authority, and thereafter on the interest due dates. After 2015, the loan carries a variable interest rate based on 3-month Euribor +1.65% (step up). The entire loan principal must be repaid in one instalment.

 

4) Perpetual bond of EUR 40 million

This perpetual loan carries a variable interest rate based on 3-month Euribor + 1.25% payable quarterly on 28 February, 30 May, 30 August and 30 November. If interest cannot be paid for a given interest period, the obligation to pay interest for the period in question will lapse. Subject to authorisation by the Financial Supervisory Authority, the loan may be called in on the due dates of interest payment. The entire loan principal must be repaid in one instalment.

 

Loans 1 and 3 are included in hybrid instruments.

 

The difference between the nominal value and carrying amount is due to the fair value hedge related to interest rate risk measurement.

 

Debentures

1) A debenture loan of CHF 100 million (euro equivalent 83 million), which is a ten-year bullet loan, will mature on 14 July 2021. The loan carries a fixed interest rate of 3.375% p.a.
2) A debenture loan of EUR 100 million, which is a ten-year bullet loan, will mature on 14 September 2021. The loan carries a fixed interest rate of 5.25% p.a.
3) A debenture loan of EUR 500 million, which is a 10-year bullet loan, will mature on 22 August 2022. Under the terms and conditions of the loan, the issuer will have the opportunity for early redemption in case the principal cannot be counted as part of the bank’s Tier 2 capital. The loan carries a fixed interest rate of 5.75% p.a.
4) A debenture loan of EUR 11 million, which is a 10-year bullet loan, will mature on 14 May 2024. The loan carries a fixed interest rate of 3.25% p.a.
5) A debenture loan of EUR 11 million, which is a 10-year bullet loan, will mature on 18 June 2024. The loan carries a fixed interest rate of 3.25% p.a. until 18 June 2019 and thereafter a 6-month Euribor + 2.54% p.a.
6) A debenture loan of EUR 6 million, which is a 10-year bullet loan, will mature on 22 August 2024. The loan carries a fixed interest rate of 3.25% p.a. until 22 August 2019 and thereafter a 6-month Euribor + 2.67% p.a.
7) A debenture loan of EUR 11 million, which is a 10-year bullet loan, will mature on 10 October 2024. The loan carries a fixed interest rate of 3.25% p.a. until 10 October 2019 and thereafter a 6-month Euribor + 2.78% p.a.
8) A debenture loan of EUR 11 million, which is a 10-year bullet loan, will mature on 14 November 2024. The loan carries a fixed interest rate of 3.25% p.a. until 14 November 2019 and thereafter a 6-month Euribor + 2.81% p.a.
9) A debenture loan of EUR 8 million, which is a 10-year bullet loan, will mature on 29 December 2024. The loan carries a fixed interest rate of 3.25% p.a. until 29 December 2019 and thereafter a 6-month Euribor + 2.86% p.a.
                               
                               

Loans 1–3 were issued in international capital markets.

 

Pohjola Bank plc has no breaches of the terms and conditions of the loan contracts with respect to principal, interest and other conditions. The financial statements include EUR 0 million recognised for the price difference of the loans (2).

 

Other subordinated loans

 

On 27 October 1999, OP Life Assurance Company issued a subordinated loan worth EUR 25,830,000 with a fixed coupon rate of 7.0% for 70 years.

 

On 20 September 2001, OP Life Assurance Company issued a subordinated loan worth EUR 10,000,000 with a fixed coupon rate of 6.15% for 10 years.