Mortgage Society of Finland (The)

The stable outlook indicates that Hypo's creditworthiness is expected to remain resilient over the next two years, supported by the bank's conservative underwriting standards, high and stable asset quality, and very strong capitalization. We do not anticipate significant changes in the bank's capital management over the next two years. We could lower the rating on Hypo in the next 12-24 months if it unexpectedly changes its current conservative lending policies or fails to maintain very strong capital. This could occur if it pursued more-ambitious business growth, without a corresponding improvement in earnings. We could raise the rating if the bank were to improve its funding profile so that it had a more-diversified funding mix and its funding metrics were in

...S&P Global Ratings expects The Mortgage Society of Finland (Hypo) to maintain its superior asset quality and exceptional loan-loss track record. Asset quality in Hypo's portfolio, which consists solely of residential real estate loans, remains robust. As of June 30, 2024, it had a nonperforming loan (NPL) ratio of 0.18% and limited credit losses. We attribute this to Hypo's conservative and selective underwriting standards and narrow focus on collateralized residential mortgage lending in Finland's expanding urban regions. In our view, the company is unlikely to compromise on its prudential approach or see a material increase in NPLs over the next two years. Despite Hypo's modest earnings capacity, it has a solid capital position. We anticipate that this would enable it to withstand potential shocks and project a RAC ratio of 18%-19% through 2026 (18.7% as of year-end 2023). The bank chose to focus its resources on overhauling its core banking IT system in 2022. Combined with weak demand...

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