Otp Bank Nyrt · BET:OTP
Otp Bank Nyrt — Q3 2023 Earnings Presentation
45 slides from Otp Bank Nyrt's earnings presentation, 2023
Slide 1: OTP Group – Strong results and capital provide resilience in turbulent times
OTP Group – Strong results and capital provide resilience in turbulent times Investor presentation Based on 3Q 2023 results
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: In the first nine months of 2023 OTP Group posted HUF 858 billion profit after tax
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: Increase in the Group's nine months adjusted profit after tax
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: In the first nine months of 2023 OTP Core achieved HUF 162 billion profit
In the first nine months of 2023 OTP Core achieved HUF 162 billion profit after tax excluding dividends from 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 Core (witho
Slide 6: OTP Group's total assets expanded almost 3-fold over the last 7 years
OTP Group's total assets expanded almost 3-fold over the last 7 years and exceeded EUR 100 billion, driven on one hand by the 11 acquisitions, but to a larger extent by organic growth Total assets development of OTP Group (in EUR billion) Flags represent countries in which acquisition were closed in
Slide 7: All foreign subsidiary banks were 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: Russian and Ukrainian operations: deconsolidation cost and asset quality
The potential capital cost of the Russian operation’s deconsolidation declined significantly. In 3Q the Ukrainian performing loans started to increase, supported by improving asset quality OTP Russia OTP Ukraine Volume changes Gross intragroup financing Volume changes Stage and coverage ratios (FX-a
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 NIM improved by 19 bps q-o-q
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 NIM decline decomposition
At OTP Core the significant drop of net interest margin since 2Q 2022 was driven by regulatory changes and OTP CORE technical factors. Rate changes and business-related factors altogether were supportive of NIM OTP Core – net interest Decomposition of NII / NIM decline (2Q 2022 vs. 3Q 2023) NII
Slide 12: Structural changes on the Hungarian retail savings market
Significant structural changes occurred on the Hungarian retail savings market: the decrease of retail deposits OTP CORE was accompanied by growing retail government bonds and investment funds Peak inflation, y-o-y Retail market volumes in Hungary (HUF billion) Total Retail Savings +16% +12.8%p 29,9
Slide 13: OTP's deposit market share increased by 1 pp y-o-y
Despite declining retail deposit volumes, OTP’s deposit market share increased by 1 pp y-o-y OTP CORE Retail savings volumes at OTP Core (HUF billion) OTP’s market share in Hungary Total Retail Savings Total Retail Savings +6% -2.8%p 9,854 10,473 32.9% 30.1% 2Q 2022 3Q 2023 2Q 2022 3Q 2023 Retail De
Slide 14: Consolidated performing loans increased by 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 15: Consolidated performing loans grew by 18% in 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 16: Consolidated customer deposits increased by 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 17: Customer deposits increased by 3% in the 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 18: Net fee income growth of 14% y-o-y
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 19: Other income grew by 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 OTHER INCOME 1 At OTP Core the 9M other
Slide 20: 9M FX-adjusted operating costs grew by 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 (HUF billion) billion) (HUF billion) (HUF billion) 1 At OTP Core the followings were the drivers behind the 20% cost gro
Slide 21: Total risk costs significantly decreased in the first nine months
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 22: Hungarian mortgage applications dropped 55% y-o-y
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 23: Micro and small business loans remained 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 24: The Stage 3 ratio continued to follow a declining trend
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 25: Development of the Stage 1, 2 and 3 ratios
Development of the Stage 1, Stage 2 and Stage 3 ratios Cons. Core DSK SKB+ OBH OBSrb OBA CKB Ipoteka OBRu OBU OBR OBM Merk. NKBM (Uzbek.) (Moldova) (Hungary) (Bulgaria) (Croatia) (Serbia) (Albania) (Monten.) (Russia) (Ukraine) (Romania) (Hung. (Slovenia) leasing) 4Q 20 80.4% 77.9% 81.3% 82.9% 76.6%
Slide 26: Development of own provision coverage ratios
Development of the own provision coverage ratios in different Stage categories Cons. Core DSK SKB+ OBH OBSrb OBA CKB Ipoteka OBRu OBU OBR OBM Merk. NKBM (Uzbek.) (Romania) (Moldova) (Hungary) (Bulgaria) (Croatia) (Serbia) (Albania) (Monten.) (Russia) (Ukraine) (Hung. (Slovenia) leasing) 4Q 20 1.0% 0
Slide 27: CET1 ratio remained stable compared to year-end 2022
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 28: The Group's capital position improved q-o-q
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 29: OTP Bank met the interim MREL target in 3Q 2023
OTP Bank pro-forma met the interim MREL target in 3Q 2023, and was on track to meet the binding requirement for 1Q 2024 OTP Bank’s consolidated MREL ratio and minimum MREL Recent Senior bond issuances by OTP Bank requirement (based on resolution group RWA) Pricing Date 15/12/23 23/01/24 MREL ratio,
Slide 30: Robust liquidity position with 74% net loan to deposit ratio
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 External (in EUR million) ISIN Instrument Issue date Call date Maturit
Slide 31: OTP Bank ratings closely correlate with the sovereign ceilings
OTP Bank ratings closely correlate with the sovereign ceilings Hungarian sovereign, OTP Bank and OTP Mortgage Bank ratings Composition of main ratings by Moody’s and S&P Moody’s S&P Macro Factors Macro Factors Weighted Macro Profile Moderate- Anchor bbb- Financial Profile Bank-Specific Factors Combi
Slide 32: Delivery of ESG obligations and goals on track
The delivery of ESG obligations and goals set by the Bank’s ESG strategy are on track according to schedule. The ESG rating by both Sustainalytics and Moody’s improved recently ESG RESULTS AND TARGETS ESG RATINGS OTP Bank’s improving sustainability performance has been recognized with 3Q 2023 Actual
Slide 33: OTP Group's performance recognized by professional organizations
OTP Group’s outstanding performance has traditionally been recognized by professional organizations ’Best Bank in CEE 2023’ ’Best Bank in Hungary in 2023’ since 2012 in all consecutive years ‘Bank of the Year in 2022’ ’Best Bank in Croatia in 2023’ ’Best Bank in Montenegro in 2023’ ’Best Bank in Rom
Slide 34: Management upgraded its 2023 Guidance for the 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 35: Further details and financials
Further details and financials 35
Slide 36: OTP Group offers universal banking services to more than 17 million customers
OTP Group offers universal banking services to more than 17 million active customers in 12 countries; in many of them with a dominant market position Major Group Members Total Assets1 Systemic position in Hungary Ukraine Romania OTP Bank Moldova 3Q 2023 market share (%) Russia Russia Uzbekistan 1% 3
Slide 37: OTP Bank offers a unique investment opportunity to access the CEE banking sector
OTP Bank offers a unique investment opportunity to access the CEE banking sector. The Bank is a well-diversified and transparent player without strategic investors Market capitalization: EUR 10.2 billion1 Total number of ordinary shares: 280,000,010, each having a nominal value of HUF 100 and repres
Slide 38: Almost 80% of the net loan book is invested in EU countries
Almost 80% of the total net loan book is invested in EU countries, Hungary’s share within the Group is decreased to 32% Breakdown of the consolidated net loan book Net loan book, 3Q 2023 By country By product Hungary1 HUF 6,845 bn Bulgaria HUF 3,886 bn Slovenia HUF 2,875 bn Leasing Leasing Leasing C
Slide 39: 37% of the consolidated deposit book is held in Hungary
37% of the consolidated deposit book is held in Hungary, while Bulgaria and Slovenia together hold another third. Household volumes account for 55% of the total deposit base Breakdown of the consolidated deposit base Deposit base, 3Q 2023 By country By product Hungary1 HUF 10,828 bn Bulgaria HUF 5,0
Slide 40: The consolidated ROE exceeded 32% in 9M 2023
The consolidated ROE exceeded 32% in 9M 2023 2003-2008 2009-2013 average average 2014 2015 2016 2017 2018 2019 2020 2021 2022 9M 2023 ROE 29.4% 8.3% -7.4% 5.1% 15.4% 18.5% 18.7% 20.3% 10.9% 17.0% 11.0% 32.8% ROE (adjusted) 29.0% 11.6% 8.5% 9.6% 15.4% 18.7% 19.1% 20.6% 13.0% 18.5% 18.8% 29.8% Total R
Slide 41: In 2024 economic growth is expected to accelerate in most operating countries
In 2024 economic growth is expected to accelerate in most operating countries Hungary Bulgaria Slovenia Croatia 2022 2023E 2024F 2022 2023E 2024F 2022 2023E 2024F 2022 2023E 2024F GDP growth (annual, %) 4.6 -0.9 2.5 3.9 1.7 2.1 2.5 1.4 2.3 6.3 2.6 2.8 Unemployment (%) 3.6 4.1 4.2 4.2 4.2 4.1 4.0 3.8
Slide 42: Hungarian loan penetration levels are still low in regional comparison
The Hungarian loan penetration levels are still low in regional comparison implying good volume growth potential. This is also the case for Romania, as well as for the Bulgarian housing loan segment Market penetration levels in Hungary in ... Net customer loan to deposit ratio in the 3Q 2023 data fo
Slide 43: Acquisitions drove almost 3.5-fold growth in consolidated loan book
Successful acquisitions played a great role in the almost 3.5-fold growth in consolidated loan book over the last 7 years. At the same time, the composition of the Group shifted towards Eurozone / ERM 2 countries Consolidated performing loan growth Share of Hungary in the Group's net loan portfolio
Slide 44: In the last 7 years 11 acquisitions were completed
In the last 7 years 11 acquisitions were completed. As a result of the Ipoteka Bank acquisition in Uzbekistan, OTP Group entered the Central Asian region Target Net loans Market share Book value (seller, date of closing) (HUF billion) (before/after acq.1, %) (EUR million) Splitska banka, Croatia (No
Slide 45: Important information, disclaimers and contacts
Important information, disclaimers and contacts Referring to both equity and fixed income investors: This presentation has been prepared by OTP Bank Nyrt. ("OTP Bank") and is the sole responsibility of OTP Bank. This presentation and the information contained herein is strictly confidential to the r