I personally trusted Sydänlammi, and I feel truly terrible and betrayed right now. What makes this interesting is whether the bank, under the new management—which has already changed and will surely change even more—could make moves toward areas like wealth management and invoice financing, from which returns could be generated. The former management, after all, was only interested in basic banking operations.
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Now we are moving slightly in the right direction. All board members must also be replaced with professionals, and a brutally realistic review of the loan portfolio by an external party is needed. A small minus to the Inderes analysts for the materialization of this kind of risk. Stadigh once said that if you want to analyze a bank, you have to analyze the bank’s management.
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Who supervises the operational management if not the board? The board’s most important task is to dismiss/appoint the CEO. The second most important is to supervise the CEO they have appointed.
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Today, we have announced a change of CEO and held a related webcast, which is available as a recording here
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Exactly. Every company needs a professional board with its expertise. Professional management must not operate without professional sparring from the board. In a listed company, the board cannot just be a passive observer.
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Thank you @JuhaR for your feedback, it warms my heart greatly. I myself have been somewhat puzzled by the personal accusations I’ve received in this thread. My intention has only been to bring forward my own observations on matters, nothing more.
As JuhaR wrote, we haven’t seen nearly all the twists in this story yet. I have a pretty good idea of which party the €19.5m loss provision in the profit warning concerns regarding their lending. However, I think it is completely futile to imagine that the bank’s loose and uncontrolled lending would have been targeted only at this one customer entity. Handing out money has simply been OmaSp’s operating model for seeking growth.
Money has been handed out especially for real estate investments, most of which are in new housing companies. At worst, OmaSp has financed both the housing company and the investor who bought an apartment from the housing company for their down payment. I commented earlier in this thread that you can shovel quite a lot of crap into a bank’s balance sheet before it shows up as credit losses in the results. During the era of zero interest rates, many wannabe real estate millionaires with no equity entered the real estate investment market, and their holdings are still largely unrealized and credit losses unrecorded.
I have mixed feelings about the press conference. Ossa clearly admitted for the first time many mistakes made that the bank has previously denied. Liiri, on the other hand, was still hyping the growth story, even though that is exactly what lies behind the problems. How long will it take to teach the employees of that organization to conduct responsible banking when the “Pasis” spent years driving a very different corporate culture into the firm?
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On April 22nd, I posted this here:
“Both the current CEO and the former Deputy CEO are involved in the Fincap investment company, which has resulted in significant credit losses. It is just like the activities of Kaupthing Bank, where executives finance their own business with their bank. I could bet that Sydänlammi will no longer be in the bank’s management after the summer holidays.”
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I believe the incoming CEO will go through everything with a fine-tooth comb to record potential loan loss provisions left behind by the previous characters. And that is a good thing. Who would want the mistakes made by others to be attributed to them? This way, shareholders will also get a clear picture of the bank’s true situation.
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This is how the narrative changes as the investigation progresses. The lending has been quite brazen; shouldn’t loans to oneself be approved by the management team?
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Based on the scandals highlighted in the Talouselämä article and those previously mentioned here, I wouldn’t be surprised if the actual losses from the previous management’s escapades reached nine figures. This, of course, assumes that loans would soon have to be valued at their true fair value instead of “mark-to-fantasy” principles. Valuing at fair value, in turn, would likely require borrower bankruptcies; otherwise, these pools of losses can likely be hidden on the balance sheet for a very long time. Holding them for a long time does provide a buffer to withstand larger losses and write-downs, for which a smart board is likely already preparing.
OmaSP’s equity was 541 million at the end of last year, and the balance sheet total was 7.6 billion. The bank is unlikely to go under, but large losses effectively restrict lending and may force the sale of healthy assets to maintain capital adequacy. I wouldn’t rule out a share issue, either. The real estate market is already so frozen and balance sheet valuations so far above market prices that larger-than-usual write-downs and customer bankruptcies would likely be ahead even without the management’s additional scandals.
Like ValkoinenPeura, I also believe that we’ve only seen the prelude to OmaSP’s mess, and the real show is just beginning.
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Regarding Nordea’s lending practices for management, I know that from regional directors upwards, they had to take loans from completely different banks. If they wanted one from their own bank, it was only possible with a board decision, and even then, it was scrutinized closely. Few even tried. They did the exact same thing in other, smaller banks back in the day. CEOs would borrow money for themselves from neighboring banks. There’s a model for OmaSp, where apparently the boys agreed on things among themselves, or the board’s good ol’ boy network was at work. This last part is, of course, just an assumption.
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@ValkoinenPeura. Thanks also for the great comments in the thread! The Oma Säästöpankki thread is, in my opinion, a good example of how people on the Inderes Forum start writing too positively about a company in its dedicated thread. (Probably because they’ve bought a stake and are hoping for the best.) And questioning comments and the people making them are attacked without factual justification.
My own thoughts about four weeks ago after about 15 minutes of looking into the matter:
"I haven’t owned the shares and I’m not buying, at least not until there is more clarity regarding the current situation. The fact is that the performance so far has been exceptionally good. At the same time, it’s true that risk-taking has been rewarded due to market cycles.
If that were the only issue, I would have already become a shareholder after the share price drop. But that’s certainly not the case. There’s enough smoke based solely on the Kauppalehti article. If executives are getting fired in a bank this small, then almost certainly something is wrong. I mean in the operations and leadership, which is a much bigger issue than just one individual. Let those who dare buy the stock. Sincere congratulations if it all turns around for the better!"
It was, therefore, exceptionally clear that in a company this small, something is wrong with the entire management.
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@ValkoinenPeura is onto something that we see too little of on this forum. Thanks for that! We need to be able to ask even “stupid,” direct questions and look at things from a high level more often. Things are often exactly as they appear. At least until actions actually carry more weight than words. OmaSp is only just heading into deep waters. How can a challenger like this succeed in the market with a foundation like that? By taking risks. There is more of it in the structures and practices than, for example, in Nordea. Now they are paying the price for that. It is still unclear how much. Likely significantly more than has been disclosed so far.
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It took a long time to finally get rid of the CEO. The interim CEO appointed in his place is clearly a truly temporary one, and if the bank intends to restore market confidence, the new CEO must definitely come from the outside, without ties to the owners (various savings bank foundations own over 70% of the shares).
The new CEO will have a lot of cleaning up to do. Not just in terms of the figures, as in this rapidly grown bank, processes and systems have clearly not kept up with the growth.
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Yeah, both Pasis could have left at the same time; what an incredible two-month via dolorosa!
But there’s no cause for concern from the shareholders’ perspective. Sydänlammi cost €2.0M a year and Turtio €1.5M. With that kind of money, a capable leader can be found. A replacement for Turtio is probably not even needed.
So, if there’s a €3.5M annual salary on offer, there will be a queue at the door. Could OP’s Ritakallio be interested? Or even Varma’s Risto Murto—he only makes a million now, which I also consider unnecessarily high!
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I was also slammed in the thread when I spoke about the bank’s upcoming problems and potential accounting crimes being uncovered later.
My own view of the bank’s problems has only been reinforced. I sold my shares the very day the profit warning hit. I don’t regret it one bit.
With banks, it’s often the case that once these kinds of patterns emerge, the downward spiral is hard to stop. There are many examples of this from around the world. Perhaps this case isn’t directly comparable to Germany’s Wirecard, but Credit Suisse is a good example. Well, with the difference that Credit Suisse was profiled as a bank for the wealthy. OmaSp, on the other hand, generally operates with what is perhaps a below-average loan portfolio.
I might give some negative feedback to Inderes’ analysis at this point because their analyses on this have been, and in my opinion still are, quite naive.
Personally, I wouldn’t touch this stock with a ten-foot pole. And I don’t believe even a new CEO can fix the mistakes that have been made. I predict that the slide toward zero has now begun. Or, if this downward spiral can be stopped, at the very least, fantasies about the growth figures of past years can be forgotten. Could recapitalization through a share issue even be a possibility?
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Those who raised concerns have indeed been slammed for some reason and without justification. The expertise and judgment gained through experience of those presenting these issues have been questioned. There has always been someone dismissing facts that have held true in banking for decades.
Inderes has indeed been making quite positive comments. Could it be possible that the presenters’ own stock investments are also a factor? Hopefully not. It would be good if Inderes analysts disclosed whether they have holdings in the company in question when presenting their assessments. It would increase trust.
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Analyst comments regarding yesterday’s news. 
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Reports disclose if an Inderes analyst has significant holdings in a company they cover. Although it is not typically my custom to comment on my own investments in detail, I can state in this context that I do not own, nor have I owned during my coverage, a single share of Oma Säästöpankki. The recommendations that went wrong are explained purely by the fact that assessing the quality of the loan portfolio and the adequacy of risk management from outside the bank is very challenging. Of course, in hindsight, it is easy to state that a faster reaction when problems emerged would have been appropriate.
At the same time, however, I would remind you that the final verdict has not yet been seen. In this regard, we unfortunately have to wait a while longer to get a true picture of the quality of the bank’s loan portfolio. I still stand by the view that the stock indeed has significant potential, but assessing the risks is exceptionally challenging at the moment. Because of this, we are more cautious with our recommendation than before, even though the share price has fallen significantly.
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We have indeed seen quite a bit of the mindset that these problems are temporary, small-scale, and limited to a small circle. Perhaps the reason, besides wishful thinking, has been disbelief: “this simply can’t be happening” or “how could such a good bank have problems?”
I’ll give Kasperi a pass. In a situation like this, it must be incredibly difficult to provide analysis to paying customers under your own name and reputation when, in reality, no one has reliable information regarding the bank’s loan portfolio. Even we critics have only had red flags gathered from various bits of scattered information on the internet. As anonymous online commenters, we can form a strong opinion based on those, but an analyst must be able to prove their sources are reliable.
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