The Mortgage Society of Finland

The stable outlook reflects our view that Hypo's creditworthiness will remain resilient over the next two years, supported by the bank's conservative underwriting standards, high and stable 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 it fails to maintain its very strong capital, for example, via more ambitious business growth without corresponding earnings 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.

...We expect The Mortgage Society of Finland (Hypo) will continue to demonstrate superior asset quality and an exceptional loan-loss track record 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 32.0%, continues to translate into superior asset quality compared with domestic peers'. This is underpinned by a nonperforming loan (NPL) ratio of 0.1% as of Dec. 31, 2021. Despite the current uncertainty in the operating environment due to secondary effects of the Russia-Ukraine conflict, we do not expect any meaningful weakening of Hypo's asset quality and project marginal loan loss provisions through 2024. We continue to see Hypo's robust capitalization as a key rating strength. Hypo's very strong capitalization, with a RAC ratio of 17.9% as of year-end 2021, and its highly collateralized loan book, will in our view provide a robust buffer against unexpected...

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