Oma Säästöpankki reports €5.5 million profit drop amid misconduct revelations in Finland

Oma Säästöpankki’s streak of improving earnings came to an abrupt halt in the second quarter, with its comparable pre-tax profit plummeting to €5.5 million—an 86% decline compared to the same period last year. This significant downturn is attributed to the exposure of irregular lending practices within the bank, leading to €5.7 million in loan losses and a staggering €30 million in loan loss provisions for the quarter. This is in addition to nearly €20 million previously set aside for loan losses.

Prior to the latest financial report, which was released on Monday, the bank had enjoyed 16 consecutive quarters of profit improvements. However, the recent misconduct revelations have broken that positive trend. The bank announced new provisions last week following the completion of an external review of its loan portfolio.

In a notably unusual quarter, Oma Säästöpankki also logged almost €40 million in impairment losses on financial assets. Acting CEO Sarianna Liiri described the quarter as “exceptional,” noting that addressing the resulting issues has demanded significant resources. Significant efforts have been made during the second quarter to enhance risk management and independent operations, with a comprehensive examination of the loan portfolio being a key step implemented in July.

Despite the hefty loss provisions, Oma Säästöpankki managed to maintain a slim positive profit margin. The critical net interest income for the bank increased by 7%, totaling over €52 million. However, the bank did lower its full-year profit forecast, now expecting a comparable pre-tax profit of €80-100 million, down from the previous estimate of €120-140 million.

The misconduct involved violations of lending guidelines, reportedly linked to the actions of a former executive, which led to misleadingly low credit risk assessments for various real estate projects across Finland, particularly in the wake of rising interest rates. Moreover, several key executives, including the Deputy CEO and the Chairman, have recently departed from their positions amid investigations related to alleged securities market offenses by the Central Criminal Police.