The Mortgage Society of Finland

The outlook reflects our view that Hypo will remain resilient following the COVID-19 downturn, supported by the bank's conservative underwriting standards, stable high asset quality, and very strong capitalization. It also reflects our view that noteworthy changes to the bank's capital management are unlikely 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 if it fails to maintain its very strong capital, for example, via more ambitious business growth without corresponding earning improvements. We could raise the rating if the bank's funding profile improves, demonstrated by a more diversified funding mix and funding metrics in line with domestic peers. Furthermore, a reassessment

...We expect The Mortgage Society of Finland (Hypo) will continue to demonstrate superior asset quality and an exceptional loan-loss track record also following the COVID-19-induced downturn. The company's conservative underwriting and pure focus on residential mortgage lending in growth centers in Finland, with low loan-to-value ratios of 33.9%, continues to translate into superior asset quality compared with domestic peers. This is underpinned by a nonperforming loan (NPL) ratio of only 0.10% as of March 31, 2021. We do not expect the installment-free periods offered amid COVID-19 will lead to any meaningful weakening of asset quality and project marginal loan loss provisions through 2023. We continue to see Hypo's robust capitalization as a key rating strength. Hypo's very strong capitalization, with a RAC ratio of 18.3% as of year-end 2020, and its highly collateralized loan book, will in our view provide a robust buffer against unexpected asset quality risks stemming from the pandemic....

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