Otp Bank Nyrt · BET:OTP
Otp Bank Nyrt — OTP Bank — Q3 2020 Earnings Presentation
40 slides from Otp Bank Nyrt's earnings presentation, 2020
Slide 1: OTP Group Investor presentation based on 3Q 2020 results
OTP Group Investor presentation based on 3Q 2020 results Successful adaptation to the fast-changing operating environment: strong liquidity and capital position, ROE > 10%
Slide 2: Accumulated accounting profit fell 39% y-o-y, adjusted profit fell 26%
The cumulated accounting profit decreased by 39% y-o-y, while the adjusted profit dropped by 26%. In 3Q the adjusted profit improved by 43% q-o-q; the profit contribution of foreign subsidiaries remained stable at 50% After tax profit development q-o-q (in HUF billion) After tax profit development (
Slide 3: 3Q 2020 balance of adjustments was -HUF 4.1 billion
In 3Q 2020 the balance of adjustments was -HUF 4.1 billion, mostly related to integration expenditures (in HUF billion) 9M 19 9M 20 Y-o-Y 3Q 19 2Q 20 3Q 20 Q-o-Q Y-o-Y Consolidated after tax profit (accounting) 309.6 188.2 -39% 131.6 78.7 113.6 44% -14% Adjustments (total) -3.5 -43.5 21.2 -3.6 -4.1
Slide 4: 9M adjusted profit without acquisitions decreased by 34% y-o-y
The 9M adjusted profit without acquisitions decreased by 34% y-o-y (adjusted for FX-effect), mostly because of higher risk costs. In 3Q total risk costs declined q-o-q, and core banking revenues showed an improvement q-o-q Y-o-Y 9M 20 Y-o-Y Q-o-Q FX-adj. (in HUF billion) 9M 19 9M 20 Y-o-Y 2Q 20 3Q 2
Slide 5: Strong capital position, all ratios above regulatory requirements
Strong capital position, all capital ratios well above the regulatory requirements Decomposition of the change in CET1 ratio in 3Q 2020 The amount of eligible interim profit (HUF 82.5 billion) included into regulatory capital equals to the ytd profit (HUF 188.2 billion) reduced by +0.1pp the deducte
Slide 6: Management expectations for 2020, capital targets and dividend
The Management fine-tuned its expectations for 2020 based on 9M developments, reaffirmed the capital adequacy targets and remained committed to pay dividend after the 2020 financial year OTP Group: Management expectations for 2020 Currently there is a high degree of uncertainty around the duration o
Slide 7: Major Group members' profit declined due to elevated risk costs
All major Group members suffered a significant decline in the first nine month profit as a result of elevated risk costs Adjusted profit after tax (in HUF billion) 9M 2019 9M 2020 Y-o-Y OTP Group 313.1 231.7 -26% OTP Core (Hungary) 145.7 107.9 -26% DSK Group (Bulgaria) 53.8 34.3 -36% OBH (Croatia) 2
Slide 8: 9M total income grew 1% y-o-y without acquisitions
Effect of The 9M total income grew by 1% y-o-y without acquisitions. In 3Q total revenues went up by 4% q-o-q acquisitions TOTAL INCOME 9M 2020 3Q 2020 9M 2020 Y-o-Y 3Q 2020 Q-o-Q without one-off items (HUF billion) (HUF billion) (HUF billion, %) (HUF billion, %) OTP Group 862 294 10 81 90 12%/1%1 1
Slide 9: 9M net interest income increased by 4% without acquisitions
Effect of The 9M net interest income increased by 4% without acquisitions; on quarterly basis it expanded by 1% acquisitions NET INTEREST 9M 2020 3Q 2020 9M 2020 Y-o-Y 3Q 2020 Q-o-Q 1 3Q net interest income rose by 3%, INCOME (HUF billion) (HUF billion) (HUF billion, %) (HUF billion, %) partly becau
Slide 10: Consolidated 3Q net interest margin eroded by 7 bps q-o-q
The consolidated 3Q net interest margin eroded by 7 bps q-o-q mainly as a result the negative FX-effect: the weakening Rouble and Hryvnia reduced the share of higher-margin businesses. The Hungarian margin increased by 2 bps q-o-q Consolidated net interest margin development OTP CORE Composition 2Q
Slide 11: Performing loans increased by 3% q-o-q
Consolidated performing (Stage 1+2) loans increased by 3% q-o-q. Consumer loan growth in Hungary showed a remarkable increase (+10%) while the MSE portfolio surged by 25% and the housing loan portolio grew by 4% Q-o-Q performing (Stage 1 + 2) LOAN volume changes in 3Q 2020, adjusted for FX-effect Co
Slide 12: Performing loans grew by 6% in the first nine months
In the first nine month the consolidated performing (Stage 1+2) loans grew by 6%, driven mainly by double-digit growth in Hungary and Serbia. The Hungarian expansion was to a great extent due to the subsidized baby loans and MSE loans granted under the Funding for Growth Go! scheme (typically secure
Slide 13: Consolidated deposits increased by 4% q-o-q
Consolidated deposits increased by 4% q-o-q. The Hungarian deposits grew by 4%. The decline of the Russian deposit base was in line with the slight further contraction of the loan portfolio Q-o-Q DEPOSIT volume changes in 3Q 2020, adjusted for FX-effect Cons. Core DSK OBH OBSrb SKB OBR OBU OBRu CKB
Slide 14: Deposits increased 6% compared to end-2019
Consolidated deposits increased by 6% compared to end-2019, within that the Hungarian retail deposit base grew by 11% YTD DEPOSIT volume changes in 9M 2020, adjusted for FX-effect Cons. Core DSK OBH OBSrb SKB OBR OBU OBRu CKB OBA Mobias OBS (Hungary) (Bulgaria) (Croatia) (Serbia) (Slovenia) (Romania
Slide 15: Net fees shrank by 1% y-o-y without acquisitions
In the first nine months net fees shrank by 1% y-o-y without acquisitions. In 3Q a material q-o-q increase Effect of was observed at almost every subsidiary, supported by the pick-up in business activity from 2Q lows acquisitions 9M 2020 3Q 2020 9M 2020 Y-o-Y 3Q 2020 Q-o-Q 1 NET FEE INCOME 3Q net fe
Slide 16: Other net non-interest income dropped by 13% y-o-y
The cumulated other net non-interest income dropped by 13% y-o-y without acquisitions, despite the one- Effect of off gain on Visa C shares booked in 2Q 2020. Despite this base effect, 3Q other income could grow by 6% acquisitions OTHER INCOME 9M 2020 3Q 2020 9M 2020 Y-o-Y 3Q 2020 Q-o-Q 1 Other inco
Slide 17: Operating costs grew by 3.4% y-o-y adjusted for acquisitions and FX
Effect of Operating costs grew by 3.4% y-o-y in the first nine month, adjusted for acquisitions and FX-effect acquisitions 9M 2020 Y-o-Y Y-o-Y, FX-adjusted 1 OPERATING COSTS At OTP Core the 9M operating expenses (HUF 2020Q3 billion) CUM (HUF billion, %) (HUF billion, %) grew by 7%, driven by higher
Slide 18: OTP Core: mortgage and cash loan disbursements and market share
Hungarian mortgage loan disbursements have been rising steadily. Cash loan placements jumped from low basis q-o-q, so the performing portfolio increased by 6%. OTP Bank enjoys a market share over 30% in new OTP CORE mortgage and cash loan disbursements, as well as in retail savings Change of mortgag
Slide 19: OTP Core: demand for subsidized baby loans
OTP Bank continued to enjoy outstanding demand for the subsidized baby loans: at OTP Bank the contracted OTP CORE amount reached HUF 400 billion since the start of the program, implying a market share steadily above 40% Baby loans Contractual amounts OTP Bank's market share calculated (HUF billion)
Slide 20: OTP Core: micro and small company loans, Funding for Growth Go
In the micro and small companies segment OTP Core managed to demonstrate 40% ytd volume growth, due to the outstanding activity in Funding for Growth Go scheme – these loans granted under the FGS scheme are OTP CORE typically secured by guarantee institutions. OTP’s market share in corporate loans r
Slide 21: Loan repayment moratoria in the countries of OTP Group
Loan repayment moratoria in the countries of OTP Group: in Hungary the moratorium was extended by 6 months for certain retail client groups, and companies facing financial difficulties. In Serbia the second phase ended at the end of September; in Bulgaria the 6-months period has already elapsed for
Slide 22: Consolidated Stage 3 loan ratio declined in the third quarter
The consolidated ratio of Stage 3 loans declined in the third quarter, similarly to the DPD90+ ratio Ratio of Stage 3 loans1 (consolidated) Own coverage of Stage 3 loans1 (consolidated) 8.2% 7.7% 65.8% 65.9% 65.2% 65.3% 65.8% 6.9% 65.0% 64.7% 5.9% 5.7% 5.9% 5.6% 1Q 19 2Q 19 3Q 19 4Q 19 1Q 20 2Q 20 3
Slide 23: Stage 3 ratio improved q-o-q, Stage 2 ratio increased
In the third quarter the Stage 3 ratio improved q-o-q. The reason for the q-o-q increase of the Stage 2 ratio was the shifting of certain, mainly household exposures from S1 to S2 category Development of the Stage 1, Stage 2 and Stage 3 ratios (in % of total gross loans) Cons. Core DSK OBH OBSrb SKB
Slide 24: Reclassification of retail loans from S1 into S2 and coverage ratios
The reclassification of certain retail loans from S1 into S2 resulted in q-o-q declining S1 and S2 own coverage ratios, because the previously created extra provisions were also shifted. The coverage of S1 + S2 loans remained stable in total Development of the own provision coverage ratios in the th
Slide 25: Stage 2 ratios have risen at OTP and some competitors
The Stage 2 ratios have risen significantly at OTP and some of its competitors in the first nine months of 2020, but the Stage 3 ratios have typically not increased yet, partly due to the effect of moratoria Development of the Stage 1, Stage 2 and Stage 3 ratios (% of total gross loans) 4Q 19 88.8%
Slide 26: OTP Group's Stage 3 own coverage at higher end of peers
OTP Group’s Stage 3 own coverage is at the higher end of the range of the selected banks active in the CEE countries, whereas OTP’s Stage 1+2 own coverage significantly exceeds most of the presented banks’ similar ratios Development of the provision coverage ratios in IFRS 9 impairment categories 4Q
Slide 27: Corporate exposures classified by COVID-19 vulnerability
Based on macro scenarios and the potential COVID-19 impact on specific sectors, OTP Group classified the corporate exposures into four categories. 72% of the portfolio is in sectors with light / no impact expected Classification of the corporate1 exposures based on their anticipated vulnerability (3
Slide 28: Further details and financials
Further details and financials 28
Slide 29: OTP Group offers universal banking to 18.3 million customers in 12 countries
OTP Group offers universal banking services to 18.3 million customers in 12 countries across the CEE/CIS Region Major Group Members in Europe Total Assets Systemic position in Hungary… Albania Montenegro Moldova 3Q 2020 market share (%) Russia Slovakia Ukraine 3% 1% Total assets 26 Romania 3% 2% 5%
Slide 30: OTP Group's Capabilities
OTP 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 8.7 billion1 Total number of ordinary shares: 280,000,010, each having a nominal (Q-o-Q Ownership structure of OTP
Slide 31: Net loan book dominated by Hungary and tilted to retail lending
The net loan book is dominated by Hungary and tilted to retail lending; more than 80% of the total book is invested in EU countries with stable earning generation capabilities Breakdown of the consolidated net loan book OTP Core1 (Hungary) DSK Group (Bulgaria) (in HUF billion) Car-financing Car-fina
Slide 32: Deposit book dominated by Hungary and retail segment
In the deposit book Hungary and the retail segment is dominant. In Hungary and Bulgaria OTP and DSK are the largest retail deposit holders Breakdown of the consolidated deposit base OTP Core1 (Hungary) DSK Group (Bulgaria) (in HUF billion) Corporate Corporate Retail sight By countries By products 17
Slide 33: Performing loans grew 2.3-fold since 2016, organic and acquisitions
OTP Group’s performing loans grew to 2.3-fold since 2016, equally supported by strong organic growth and acquisitions OTP Group – performing (DPD0-90) loan growth1 FX-adjusted, in HUF billion 2016 6,060 Organic 633 +26% Acquisitions 958 Components of OTP Group’s performing loan growth 2017 7,651 bet
Slide 34: Acquisitions materially improved OTP's positions in many countries
Acquisitions completed in the last few years materially improved OTP’s positions in many countries Target Net loan volumes Market share in total assets Book value (seller, date of closing) (in HUF billion) (before/after acquisition2, %) (in EUR million) Splitska banka, Croatia (Nov 18) 631 4.8 11.2
Slide 35: Accounting ROE hit by temporary surge in risk costs
In the first nine months of 2020 the accounting ROE was hit mainly by the temporary surge in risk costs 2003-2008 2009-2013 9M 2020 2014 2015 2016 2017 2018 2019 average average Accounting ROE 29.4% 8.3% -7.4% 5.1% 15.4% 18.5% 18.7% 20.3% 10.7% Adjusted ROE1 29.0% 11.6% 8.5% 9.6% 15.4% 18.7% 19.1% 2
Slide 36: Hungarian loan penetration 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 Net loan to deposit ratio in the Market penetration levels in Hungary in ... 2Q 2020 data for other H
Slide 37: 3Q 2020 DPD90+ volumes increased by HUF 12 billion
In 3Q 2020 the DPD90+ volumes increased by HUF 12 billion (adjusted for FX effect and sales and write-offs) FX-adjusted quarterly change in DPD90+ loan volumes (without the effect of sales / write-offs, in HUF billion) Consolidated OTP Core DSK Group OBH OBSrb (Hungary) (Bulgaria) (Croatia) (Serbia)
Slide 38: OTP Bank ratings correlate with sovereign ceilings
+ positive While OTP Bank ratings closely correlate with the sovereign ceilings, subsidiaries’ ratings enjoy (rating outlook) - negative the positive impact of parental support 0 stable Hungarian sovereign, OTP Bank and OTP Mortgage Bank ratings Moody’s S&P Fitch Moody's S&P OTP Bank Baa1 (0) BBB (0
Slide 39: OTP Bank's ESG ratings have improved at Sustainalytics and MSCI
OTP Bank’s ESG ratings have improved recently at both Sustainalytics and MSCI Worst level Best level • Medium exposure and average score for the management of material ESG issues; • Ranked No. 45 out of 372 – 13rd percentile in the diversified 23.5 SEVERE HIGH MEDIUM LOW NEGLIGIBLE banks sub-group (
Slide 40: 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", "expec