Oma Säästöpankki

[Kasper_Mellas]

@JuhaR

I don’t see any competitive advantage for OmaSP. It’s not a competitive advantage to vacuum up customers that other banks don’t want.

Here are some more thoughts regarding the development of the loan portfolio.

First of all, pricing power is not the same as competitive advantage. Pricing power can be found in the banking sector in areas where other banks are not interested in operating. This can be due to excessively high collateral risks, as well as lower growth potential, the latter of which would be an acceptable reason for OmaSp to operate in these areas.

Turning the loan portfolio into profitable growth is not an easy trick for OmaSp. A riskier loan portfolio slowly melts away either through write-downs or repayments. This needs to be compensated somehow, otherwise the loan portfolio and revenues will continue to decline. However, the current market share is low, so I do not consider this impossible by any means. One can also think of it as needing to grow market share in good quality loans just to keep the business standing still. The old portfolio does not melt away instantly, of course, as corporate liabilities also have maturities of several years.

Reasonable business can be found in surrounding municipalities where there is little local competition and some customers are possibly willing to pay for the service. Currently, it is impossible to say what proportion of loans are of poor quality and what are not. For example, it is unlikely that there are significant risk concentrations in residential mortgages in Lieto. The loan risk can also be higher if a higher margin more than compensates for it. Of course, lending to targets whose collateral value approaches zero is not sensible banking. However, Finland still likely has areas where competition and bank presence are low and housing price development is reasonable. I cannot say this for sure, of course, and at the very least, the size of the potential market is limited. Something must be figured out, however, as competition in the Helsinki metropolitan area with a higher cost structure and lower margins is not an economically viable equation. All this inevitably leads to growth remaining moderate in the future and clearly lower than historical figures. At the same time, profitability will be clearly more modest than before.

The best scenario, of course, would be that the provisions made now are too cautious and the actual risk level of the portfolio turns out to be lower than feared. In this case, the bank could return to better profitability relatively quickly and continue lending almost as before (minus abuses and other excesses). The probability of this option has significantly decreased in my eyes recently.

In addition, successes in wealth management would help turn revenues back to growth.

In any case, assessing the development of OmaSp’s revenue streams is now very challenging. OmaSp thus lacks the key good characteristics of a bank stock: stability and predictability.

[Westend]

Deleway Projects from Seinäjoki, i.e., these Ostrobothnian connections. It owns Lappeenrannan Keskustalo Oy in the center of Lappeenranta, which is empty and awaiting demolition, and additionally Lappeenrannan Foorumi Oy, which is also a problem property.

[Westend]

Omasp’s growth and operations have been fundamentally skewed from the outset. Customers who couldn’t get credit elsewhere were taken on, leading to excessively high margins with excessively high risk. The focus has been on areas where real estate collateral values have eroded. Collateral was strongly overvalued, and realities were forgotten. Excessively high margins have been attributed to good service, which customers are willing to pay for. Has anyone believed that claim to be true? The real world works quite differently. The bank’s communication has also relentlessly promoted this. All of that can be done for a time, but now the moment of truth has arrived, and the bank is soft on the inside, and has been so in terms of both administration and management. Unraveling the tangle of problems will take many years, and apparently, almost the entire problem area has not yet come to light; instead, they are trying to resolve the mess by prolonging it and dealing with parts of it. Realism and integrity would now be required from the administration and management, if they possess it.
The administration is a product of its electors, and the evidence for this is truly dismal. Of course, well-meaning amateurs in foundations have not been able to delve into matters, meaning there has been no professional approach at all, as the traces show. The problem of money without proper oversight has starkly emerged, as it has before in savings banks. Now a professional approach would be needed from all parties. It is no longer possible to operate with the mentality and principles of village banks and hold a compensated position in administration.

[JuhaR]

@Kasper_Mellas

Sensible business can be found in surrounding municipalities, where there is little local competition and some customers are potentially willing to pay for the service.

Who in the age of taking out a home loan visits bank branches nowadays, and what kind of services are they willing to pay for? Local service is found in their pocket in the form of a mobile phone, and even large banks have a perfectly sufficient understanding of and trust in the surrounding municipalities of growth cities. And they also have better online banks and better digital services.

I do believe that when, for example, a couple goes to buy their first home, the local village bank has a certain competitive advantage, where the collected coins were taken in childhood or where they traveled with grandma to record pension income in a passbook. But at the same time, I also argue that nowadays, home loan offers are requested more diligently than ever, and at the very least, people google the “correct” margin online (let’s not go into the fact that the margin is always customer-specific, of course).

And at the risk of repetition: The better the customer (income/collateral), the more uncompetitive OmaSP is in its loan offers.

@Kasper_Mellas

Now it is impossible to say which part of the loans is of poor quality and which is not. For example, it is unlikely that there are significant risk concentrations in Lieto’s home loans.

That is, of course, true. Based on everything read on this forum, if I were an owner of OmaSP, I would be very concerned about how many more risks turning into losses will emerge. And at least so far, I haven’t had to critically examine my view, which I’ve been proclaiming for the past year, that this wasn’t over yet. Especially user @ValkoinenPeura’s messages should be read occasionally by anyone considering the bank as an investment, as a refresher, and compared to the information provided by the bank. At least so far, they have provided a better understanding of the bank’s true situation than the bank’s own investor communications.

I still believe that OmaSP gives investors too rosy a picture of its situation. Be that as it may, a drop in interest rates could indeed, at a critical moment, become a salvation for some house of cards to stay standing.

I also believe that the bank’s unhealthy ownership structure creates a permanent problem and investor risk. Or, more sharply put, it makes the bank an uninvestable listed company.

[ValkoinenPeura]

@Westend

Deleway Projects from Seinäjoki, so these Ostrobothnian connections. Owns Lappeenrannan Keskustalo Oy in the center of Lappeenranta, which is empty and awaiting demolition, and also Lappeenrannan Foorumi Oy, which is also a problem property.

Yes, I was aware of this, but what makes the arrangement strange is its implementation. Omasp has reportedly invested 2m€ in this contraption, with which they have acquired a 49% ownership stake in the company. This investment was recorded in the SVOP fund, which had already shrunk by 1/3 by the end of 2023 due to losses, even though the bank has maintained the contraption with additional investments in the company:

The bank is still apparently confident about the company’s future, as according to the latest interim report, it gave an additional 50t€ to the company, and the value of the ownership apparently remained unchanged:

:

51% of the company is owned by Deleway Oy, which has not invested a single euro in the company, as all financing has come from the bank:

The bank has also financed its business partner Deleway Oy with over ten million euros. During the 2023 financial year, new loans totaling almost 5m€ were drawn, which were used, among other things, to acquire care home properties that had reached the end of their useful life. The seller in these transactions was Fincap and its related parties:

Not even negative equity has slowed the bank down in financing this gold nugget, as the probable disposal price of the hotel, which has already been foreclosed once and is currently empty, exceeds its book value, on the basis of which the equity is positive:

These are relatively small amounts of money, but I find it quite difficult to trust the bank when these small things always surface when you poke around in the dung heap.

E: Let me add a link to the aforementioned hotel’s sales listing here:

Erillistalo, Inari, Ivalo, 2 980 000 €, 625 m²

[TZ1]

If a bank contracts, it usually means that new credit is not issued and old ones are paid off. This has two natural consequences:

• The percentage of problem loans increases (because by definition they are not paid off, unlike healthy loans) and
• Solvency improves (because equity remains unchanged but the loan portfolio decreases)

[Kivikko]

Oma Säästöpankki’s bad reputation has indeed been widely noticed, and competitors are taking advantage of it. This week, Aito Säästöpankki opened a branch in Turku. Aito Säästöpankki’s balance sheet was last 1.4 billion euros, with a profit of 17.3 million euros and a solvency ratio of 24.9%. The figures are so familiar and almost the same as those of Liedon Säästöpankki, which was sold to OmaSp. This is already the fourth savings bank in Turku. Immediately after the sale of Liedon Sp, branches of Someron Säästöpankki and Kalanti-Pyhäranta Säästöpankki were opened. Just before the sale of Liedon Sp, Lieto had bought Mietoisten Säästöpankki. Why didn’t Lieto continue along the same lines? OmaSp’s weaknesses are known now. Perhaps not at the time of the sale. In any case, the pressures in the Turku region are high, and these other savings banks will certainly target OmaSp’s customers.

[Westend]

Omasp’s operating model and risk-taking have long been known among industry players. So the problems did not come as a surprise to them. It cannot be that Liedon Sp’s management was unaware of them. Could it be that the lofty talk of growth and profitability, along with the stock exchange company status, misled Liedonsp’s administration? Especially, the bank’s board chairman, who is also the current Omasp’s board chairman, was likely in a key position. In many savings banks, the administration has been completely amateurish and thus susceptible to influence. Weak administration, combined with a fast-paced, risk- and growth-oriented management, led to the current situation at Omsp. It was very surprising at the time that Liedonsp joined, even though its operational management had skillfully and successfully managed the bank.

[Kivikko]

The arguments were tightening regulation and the high fees of the savings bank association. The bank could have continued just like Aito Säästöpankki. I don’t think they knew about OmaSp’s policy. Of course, the endowment of its own capital, which was initially 160 million euros, was tempting. If OmaSp’s problems had been known, the deal probably wouldn’t have happened. And Sydänlammi did make a good offer.

[Westend]

Based on discussions I had several years ago with management personnel from several competitor banks, I understood the logic behind Omasp’s growth and management’s operations. That is, the operating principles and what they generally lead to, based on empirical observations made over the years, have been quite generally known. I am surprised, therefore, that Liedonsp’s decision-makers would not have known Omasp’s policy. If they truly didn’t know, then they failed to do their homework when considering the merger and separation from the “evil” savings bank group. Could it be, however, that the 160 million euro offer made, as well as a seat on the board of a listed company, clouded their cool judgment? In addition, of course, Sydänlammi’s boastful speeches were an added factor. It seems to have happened like with a mouse, that it could not resist the temptation of a potential treat and ended up in a trap.
Omasp needed Liedonsp’s good results and low-risk, profitable balance sheet items to compensate for the bank’s already clear and identified problems, which Sydänlammi, of course, knew about, and therefore made an offer that Liedonsp’s management could not resist.
Lieto had no need, let alone urgency, to join Omasp.
Sometimes patience would also be a virtue. Even a good offer is not necessarily the best in time.

[jps]

@Westend

So, the operating principles and where they generally lead based on empirical observations made over the years have been quite generally known. I wonder why Liedonsp’s decision-makers wouldn’t have known Omasp’s policy.

A savings bank is an ownerless banking system; there is no owner’s personal property tied up in it. That’s why the decision-makers can be a bunch of amateurs who can be led by the nose.

[Westend]

Exactly. This has come up many times over the years in savings banks, and now foundations have proven their ability to manage the investments they’ve received. Omasp’s management has been out of control, or at least the results prove it. Amateur decision-makers in foundations have not been professional in choosing professional management for the bank, but rather familiar acquaintances, i.e., also amateurs and evidently lax individuals. The curse of ownerless money has emerged again.

[TZ1]

The Financial Supervisory Authority seems to have published an assessment. Quite grim reading, but probably nothing actually new.

Asiakirja paljastaa laajan ongelmavyyhdin Oma Säästöpankissa – Listalla...

[Lartsa]

Sarajärvi’s long interview in last week’s Urheilulehti. I get the paper version so I don’t have a link to share.
He blames Fiva and OmaSP for his problems and has moved to bigger banks.
The story was a bit strange for Urheilulehti, as it focused more on Sarajärvi’s businesses and OmaSP’s problems were also discussed a lot. Sports and SJK in a supporting role.

[Westend]

So, the bank has always been the cause of businessmen’s problems. Of course, in their great wisdom, these guys themselves haven’t made any mistakes. Especially not Ostrobothnian businessmen.

[karhumarkkina2]

What is essential here, in my opinion, is that the bank’s board of directors is now being put on the spot for its almost complete failure in performing its duties. In a limited company, and apparently even more so in a bank, the board is ultimately responsible for everything. Omasp’s board, on the other hand, seems to be trying to avoid responsibility by all means.

The strange general meeting episode concerning discharge from liability now looks much worse. A few foundations thus railroaded the discharge from liability for their buddies on the board, apparently knowing that a proper reprimand was coming from Fiva.

The worst situation is with Chairman Ossa due to his dual role. The Liedon Säästöpankkisäätiö (Lieto Savings Bank Foundation) led by him also led the group that pushed for the discharge from liability. People have been replaced for lesser matters; it remains to be seen what happens in this case.

It should also have an impact that the company’s value has halved during Ossa’s chairmanship. Let’s see if the foundations have the courage to take actions in the company’s best interest.

[JuhaR]

Article behind a paywall:

Pisteytimme pankit parhaasta heikoimpaan – Täältä löytyvät voittajat

Essential quote: “Mired in controversy, the Oma Säästöpankki Group has fallen to position 112, whereas in previous years it represented the very top of the major bank comparison.”

[Kunhalvallasaa]

It’s good to reward and encourage!!
(even if the results are what they are)

Oma Säästöpankki Oyj’s transfer of own shares for the payment of incentive scheme rewards

[Westend]

What is rewarded and what is encouraged? One can only wonder after everything that has happened.

[Junnu1]

Financial Supervisory Authority found serious deficiencies in Oma Säästöpankki | HS.fi Good publicity for the establishment.