Otp Bank Nyrt · BET:OTP
Otp Bank Nyrt — Otp Bank S/Adr R — Q3 2023 Earnings Presentation
31 slides from Otp Bank Nyrt's earnings presentation, Nov 10, 2023
Slide 1: OTP Group 3Q 2023 results
OTP Group 3Q 2023 results Conference call – 10 November 2023 László Bencsik, Chief Financial and Strategic Officer
Slide 2: OTP Group - Highlights
OTP Group - Highlights Dominant position in CEE countries: No. 1 in 5 countries based on net loans; 3.5-fold loan growth & 11 acquisitions in 7 years. >40% of net loans in Eurozone + ERM 2, ~80% within the EU Strong profitability: 33% ROE, 30% adjusted ROE (without one-offs) in January-September 202
Slide 3: First nine months 2023 profit after tax of HUF 858 billion
In the first nine months of 2023 OTP Group posted HUF 858 billion profit after tax. The strong y-o-y growth was supported by the badwill of the two acquisitions closed in the first half-year, as well as the improvement in adjusted profit Consolidated profit after tax Key performance indicators of OT
Slide 4: Nine months adjusted profit shaped by income growth and low risk cost
The increase in the Group’s nine months adjusted profit after tax was mainly shaped by dynamic income growth and close to zero total risk cost, partly offset by the operating cost pressure OTP Group (consolidated) P&L (in HUF billion) 9M 2022 9M 2023 9M Y-o-Y 2Q 2023 3Q 2023 3Q Q-o-Q FX-adj. w/o acq
Slide 5: OTP Core achieved HUF 162 billion profit in nine months
In the first nine months of 2023 OTP Core achieved HUF 162 billion profit after tax excluding dividends from OTP CORE subsidiaries. The first nine months adjusted result was 2% lower than last year despite improving 3Q profit OTP Core profit after tax Highlighted key performance indicators of OTP Co
Slide 6: Total assets exceeded EUR 100 billion; foreign profit contribution rising
Due to the acquisitions completed in recent years and the dynamic organic growth, consolidated total assets exceeded EUR 100 billion, while profit contribution of foreign operations gradually increased to 66% in January-September 2023 Total assets development of OTP Group (in EUR billion) Flags repr
Slide 7: All foreign subsidiary banks profitable in 9M 2023
In 9M 2023 all the foreign subsidiary banks were profitable, their ROE indicators were typically above 20%. The Russian and Ukrainian subsidiaries continued their profitable operation Profit after tax1 (HUF billion) ROE Cost / income ratio 9M 2022 9M 2023 9M 2022 9M 2023 9M 2022 9M 2023 DSK Group (B
Slide 8: OTP Russia and OTP Ukraine
The potential capital cost of the Russian operation’s deconsolidation declined q-o-q significantly. The Ukrainian performing loans started to increase q-o-q, supported by improving asset quality OTP Russia OTP Ukraine Volume changes Gross intragroup financing Volume changes Stage and coverage ratios
Slide 9: 3Q net interest income grew 4% q-o-q organically
3Q net interest income grew 4% q-o-q organically and adjusted for FX rate changes, on the back of Hungary Effect of benefitting from declining rates, as well as Eurozone and ERM 2 countries enjoying positive margin trends acquisitions NET INTEREST 9M 2023 3Q 2023 9M 2023 Y-o-Y 3Q 2023 Q-o-Q 1 At OTP
Slide 10: Consolidated 3Q net interest margin improved
Consolidated 3Q NIM improved by 19 bps q-o-q. The Hungarian margin was shaped by the positive NII sensitivity to declining rates, whereas ECB rate hikes continued to exert a positive effect on other large Group members’ margins NET INTEREST 3Q 2022 2Q 2023 3Q 2023 MARGIN 1 At OTP Core the q-o-q 19 b
Slide 11: OTP Core net interest income and margin
At OTP Core the significant drop of net interest margin since 2Q 2022 was mainly due to the changes to the OTP CORE mandatory reserve rules, new acquisitions and shrinking deposit volumes OTP Core – net interest income Decomposition of NII / NIM decline (2Q 2022 vs. 3Q 2023) D NII D NIM (HUF billion
Slide 12: Performing loans increased 1% q-o-q
Consolidated performing loans increased by 1% q-o-q, mainly due to strong performance in Bulgaria and Croatia, while performing loans decreased in Moldova, Uzbekistan and Albania Q-o-Q performing (Stage 1+2) LOAN volume changes, adjusted for FX-effect Cons. Core2 DSK SKB+ OBH OBSrb OBA CKB Ipoteka O
Slide 13: Performing loans grew 18% in first nine months
Consolidated performing loans grew by 18% in the first nine month of the year, within that the organic growth (excluding the Nova KBM and Ipoteka Bank acquisitions) reached 4%, driven to a great extent by Bulgaria and Croatia YTD performing (Stage 1+2) LOAN volume changes, adjusted for FX-effect Con
Slide 14: Customer deposits increased 4% q-o-q
Consolidated customer deposits increased by 4% q-o-q, driven by all countries except for Slovenia. Hungarian household deposits continued to erode, offset by corporate inflows Q-o-Q DEPOSIT volume changes, adjusted for FX-effect Cons. Core2 DSK SKB+ OBH OBSrb OBA CKB Ipoteka OBRu OBU OBR OBM (Hungar
Slide 15: Customer deposits increased 3% in first nine months
Consolidated customer deposits increased by 3% in the first nine month without the effect of acquisitions YTD DEPOSIT volume changes, adjusted for FX-effect Cons. Core3 DSK SKB+ OBH OBSrb OBA CKB Ipoteka OBRu OBU OBR OBM (Hungary) (Bulgaria) NKBM (Croatia) (Serbia) (Albania) (Monten.) (Uzbek.) (Russ
Slide 16: Net fee income growth of 14% organic
The 14% y-o-y FX-adjusted organic growth in net fees in the first nine months was driven mainly by the Effect of Hungarian operation: OTP Core and the Fund Management acquisitions 9M 2023 3Q 2023 9M 2023 Y-o-Y 3Q 2023 Q-o-Q 1 At OTP Core net fees rose by 10% NET FEE INCOME (HUF billion) (HUF billion
Slide 17: Other income grew 84% y-o-y
Other income grew by 84% y-o-y, driven mainly by the positive FVA of subsidized loans at OTP Core. Effect of In 3Q this FVA at OTP Core fell back q-o-q, but this was offset by a technical item in Romania acquisitions 9M 2023 3Q 2023 9M 2023 Y-o-Y 3Q 2023 Q-o-Q 1 At OTP Core the 9M other income OTHER
Slide 18: Operating costs grew 17% without acquisitions
Amid high inflationary environment the 9M FX-adjusted operating costs grew by 17% without acquisitions Effect of acquisitions 9M 2023 Y-o-Y Y-o-Y, FX-adjusted OPERATING COSTS (HUF billion) (HUF billion) (HUF billion) (HUF billion) 1 At OTP Core the followings were the drivers behind the 20% cost gro
Slide 19: Total risk costs significantly decreased
Total risk costs significantly decreased the first nine month of 2023, and those were Uzbekistan and Russia where significant amount of risk costs was created 9M 2022 9M 2023 TOTAL RISK COST 9M 2022 credit risk 9M 2023 credit risk 2Q 2023 3Q 2023 1 At OTP Core the positive risk costs (HUF billion) c
Slide 20: Stage 3 ratio continued to decline
The Stage 3 ratio continued to follow a declining trend. Provisioning policy remained conservative compared to regional banking groups Development of the Group's main credit Own coverage of Stage 1+2 loans compared to regional peers at quality indicators the end of 3Q 2023 83.4% 83.4% 84.9% 85.1% 84
Slide 21: Decomposition of the change in CET1 ratio
The CET1 ratio remained stable compared to year-end 2022, as the eligible profit offset the negative effect of the two completed acquisitions, organic growth and regulatory changes Decomposition of the change in CET1 ratio between 4Q 2022 – 3Q 2023 (based on the prudential scope of consolidation, ch
Slide 22: Group capital position stable and improved
The Group’s capital position is stable and improved even further q-o-q, supported by the robust 3Q results CAR and CET1 ratios (%)1 Regulatory minimum capital requirements for OTP Group in 4Q 2023 (%) 14.0 Capital adequacy ratio (CAR) CET1 ratio Combined Buffer 11.5 4.0 Requirement 9.6 19.4 4.0 2.5
Slide 23: MREL ratio and minimum requirement
OTP Bank met the interim MREL target in 3Q 2023, and is on track to meet the binding requirement for 1Q 2024 OTP Bank’s consolidated MREL ratio and minimum MREL Recent Senior Preferred bond issuances by OTP Bank requirement (based on resolution group RWA) Pricing Date 27/09/23 06/10/23 Settlement Da
Slide 24: Robust liquidity position and bond maturity profile
Robust liquidity position with 74% net loan to deposit ratio, 224% LCR, 149% NSFR and moderate maturity profile with marginal refinancing needs OTP Bank outstanding FX wholesale bonds1 OTP Bank FX wholesale bond maturity profile1 (in EUR million) External 1,120 Maturity Actual ISIN Instrument Issue
Slide 25: Hungarian mortgage applications dropped; market share improved
In Hungary applications for mortgage loans dropped by 55% y-o-y in the first nine months, but OTP’s market OTP CORE share improved q-o-q. OTP’s market share in cash loan flow is now approaching 45% Y-o-y change of mortgage loan applications and disbursements Performing (Stage 1+2) cash loan volume g
Slide 26: Micro and small business loans on growth track
Micro and small business loans remained on growth track, while corporate loans decreased during the first OTP CORE nine months of the year. Subsidized lending schemes continued to generate significant new loan placements Performing corporate loan volume changes OTP Group’s market share in loans to H
Slide 27: ESG results, targets and ratings
The delivery of ESG obligations and goals set by the Bank’s ESG strategy are on track according to schedule. At the beginning of July OTP’s ESG risk rating by Sustainalytics improved further ESG RESULTS AND TARGETS ESG RATINGS 3Q 2023 Actual Long-term KPIs OTP Bank’s improving sustainability perform
Slide 28: Economic growth expected to accelerate in 2024
In 2024 economic growth is expected to accelerate in most operating countries Hungary Bulgaria Slovenia Croatia 2022 2023F 2024F 2022 2023F 2024F 2022 2023F 2024F 2022 2023F 2024F GDP growth (annual, %) 4.6 -1.0 2.0 3.9 1.7 2.1 2.5 1.6 2.4 6.3 2.2 2.1 Unemployment (%) 3.6 4.1 4.2 4.2 4.2 4.1 4.0 3.6
Slide 29: Management guidance for 2023 – OTP Group
In light of the first nine months results management upgraded its 2023 Guidance for the Group Management guidance for 2023 – OTP Group The consolidated organic performing loan volume growth may exceed 5% y-o-y (FX-adjusted). Based on the first nine months trends, for 2023 the management forecasts im
Slide 30: Disclaimers and contacts
Disclaimers and contacts This presentation contains statements that are, or may be deemed to be, “forward-looking statements” which are prospective in nature. These forward- looking statements may be identified by the use of forward-looking terminology, or the negative thereof such as “plans", "expe
Slide 31: Questions and Answers session
Questions and Answers session 31