Otp Bank Nyrt · BET:OTP
Otp Bank Nyrt — Q4 2023 Earnings Presentation
45 slides from Otp Bank Nyrt's earnings presentation, 2024
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 4Q 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 and 11 acquisitions in 7 years. >40% of net loans in Eurozone + ERM2 countries, ~80% within the EU Outstanding profitability: 2023 ROE exceeded 27% Strong liquidity position: 72%
Slide 3: In 2023 OTP Group posted HUF 990 billion consolidated profit after tax
In 2023 OTP Group posted HUF 990 billion consolidated profit after tax. The strong y-o-y growth was due to higher net interest margin, lower risk costs and badwills Consolidated profit after tax Key performance indicators of OTP Group (HUF billion) (%) Return on equity NIM C/I Credit risk x2.9 cost
Slide 4: Operating profit grew by 37% y-o-y without acquisitions
In 2023 the operating profit grew by 37% y-o-y without acquisitions and by 50% y-o-y in 4Q. Full-year adjusted ROE was close to 28% OTP Group (consolidated) P&L (in HUF billion) 2022 2023 Y-o-Y 4Q 2022 4Q 2023 4Q Y-o-Y FX-adj. w/o acq. FX-adj. w/o acq. Net interest income 1,094 1,460 25% 296 425 36%
Slide 5: OTP Group's total assets exceeded EUR 100 billion
OTP Group's total assets exceeded EUR 100 billion driven by successful acquisitions and dynamic organic growth. Profit contribution of foreign subsidiaries showed a trend-like increase over the last several years and hit 64% in 2023 Total assets development of OTP Group (in EUR billion) Flags repres
Slide 6: Highlighted key performance indicators of OTP Core
In 2023 OTP Core achieved HUF 313 billion profit after tax without dividends from subsidiaries, and HUF 501 billion including dividends. The profit was boosted by the HUF 80 billion after tax effect of impairment reversal on OTP CORE subsidiary investments, and the HUF 79 billion after tax effect of
Slide 7: Hungary mortgage applications dropped; market shares at historic heights
In Hungary mortgage loans applications dropped by 33% y-o-y. OTP’s market share in mortgage and cash loan OTP CORE disbursements, plus in retail deposits is at historic heights Y-o-y change of mortgage loan applications and disbursements Performing (Stage 1+2) cash loan volume growth in 2023 (FX-adj
Slide 8: OTP Core micro, small business and corporate loans decreased slightly
At OTP Core, micro and small business loans as well as corporate loans decreased slightly during 2023. OTP CORE Subsidized lending schemes continued to generate significant new loan disbursements Performing corporate loan volume changes OTP Group’s market share in loans to Hungarian (DPD0-90 loan ch
Slide 9: OTP Core net interest margin decline drivers
At OTP Core the drop in annual net interest margin was driven by regulatory changes and technical factors, OTP CORE whereas rate changes and business-related factors altogether were supportive of NIM OTP Core – net interest Decomposition of y-o-y NII increase / NIM decline NII NIM income (HUF bi
Slide 10: All foreign subsidiaries profitable except Ipoteka Bank
In 2023 all foreign subsidiaries were profitable except Ipoteka Bank; ROEs improved y-o-y Profit after tax1 (HUF billion) ROE Cost / income ratio 2022 2023 2022 2023 2022 2023 DSK Group (Bulgaria) 120 202 17% 25% 38% 31% SKB + NKBM (Slovenia) 24 962 33 129 13% 23% 53% 37% OTP Bank Croatia 43 54 11%
Slide 11: Uzbekistan: Ipoteka Bank loans and deposits
As for Uzbekistan, in 2H 2023 household loans grew dynamically, but performing corporate + MSE loans eroded IPOTEKA BANK mainly due to migration into Stage 3. The share of digitally sold cash loans hit 77% in 4Q. Deposits kept growing Development of performing loans (FX-adj., HUF bn) Development of
Slide 12: Reasons behind Ipoteka Stage 3 ratio increase
Key reasons behind the increase in corporate + MSE Stage 3 ratio were extreme weather conditions and drop IPOTEKA BANK of cotton prices and energy supply shortages Total loan portfolio Stage 3 ratio development Industry split of corporate + MSE Stage 3 loans Others 17% 11.9% Agrosector 15% Reasons b
Slide 13: 4Q net interest income grew 11% q-o-q
4Q net interest income grew 11% q-o-q adjusted for FX rate changes, mainly on the back of Hungary Effect of benefitting from declining rates, and a technical item in Romania acquisitions NET INTEREST 2023 4Q 2023 2023 Y-o-Y 4Q 2023 Q-o-Q 1 OTP Core NII jumped by HUF 31 bn INCOME (HUF billion) (HUF b
Slide 14: Consolidated 4Q NIM improved by 31 bps q-o-q
Consolidated 4Q NIM improved by 31 bps q-o-q, driven by the continued improvement in Hungary, where NIM was shaped mainly by the positive NII sensitivity to declining rates. NIMs in EUR-linked countries remained broadly flat NET INTEREST 1 At OTP Core the q-o-q 57 bps NIM 4Q 2022 3Q 2023 4Q 2023 MAR
Slide 15: Consolidated performing loans increased by 1% q-o-q
Consolidated performing loans increased by 1% q-o-q, mainly due to the strong performance in Bulgaria and Russia, while performing loans decreased in Ukraine and Slovenia Q-o-Q performing (Stage 1+2) LOAN volume changes, adjusted for FX-effect Cons. Core2 DSK SKB+ OBH OBSrb OBA CKB Ipoteka OBRu OBU
Slide 16: Performing loans grew by 20% in 2023
Consolidated performing loans grew by 20% in 2023, within that organic growth (excluding acquisitions) reached 6%, driven to a great extent by Bulgaria, Croatia and Russia Y-o-Y performing (Stage 1+2) LOAN volume changes, adjusted for FX effect Cons. Core2 DSK SKB+ OBH OBSrb OBA CKB Ipoteka OBRu OBU
Slide 17: Customer deposits increased by 3% q-o-q
Consolidated customer deposits increased by 3% q-o-q, all countries boasted positive dynamics. The declining trend of Hungarian household deposits seemed to have broken with 2% quarterly expansion Q-o-Q DEPOSIT volume changes, adjusted for FX-effect Cons. Core2 DSK SKB+ OBH OBSrb OBA CKB Ipoteka OBR
Slide 18: Consolidated deposits increased by 21% in total
Consolidated deposits increased by 21% in total, and by 7% organically. With the exception of Hungary, deposit volumes increased in all countries. Hungarian household deposits eroded by 2% y-o-y Y-o-Y DEPOSIT volume changes, adjusted for EX-effect Cons. Core2 DSK SKB+ OBH OBSrb OBA CKB Ipoteka OBRu
Slide 19: Net fee income growth of 15% organic
The 15% y-o-y FX-adjusted organic growth in annual net fees was driven mainly by the Hungarian operation, Effect of OTP Core and Fund Management acquisitions 2023 4Q 2023 2023 Y-o-Y 4Q 2023 Q-o-Q 1 At OTP Core net fees grew by 11% NET FEE INCOME (HUF billion) (HUF billion) (HUF billion) (HUF billion
Slide 20: Other income grew by 77% y-o-y
Other income grew by 77% y-o-y on an FX-adjusted basis, driven mainly by the positive FVA of subsidized Effect of loans at OTP Core and stronger Russian contribution. The q-o-q drop was induced mainly by technical items acquisitions 2023 4Q 2023 2023 Y-o-Y 4Q 2023 Q-o-Q OTHER INCOME (HUF billion) (H
Slide 21: Operating costs increased by 17% y-o-y without acquisitions
Amid high inflationary environment, FX-adjusted operating costs increased by 17% y-o-y without acquisitions Effect of acquisitions 9M 2023 2023 Y-o-Y Y-o-Y, FX-adjusted OPERATING COSTS (HUF (HUF billion) billion) (HUF billion) (HUF billion) 1 At OTP Core the major drivers behind the 19% cost growth:
Slide 22: Total risk costs significantly decreased in 2023
Total risk costs significantly decreased in 2023, mainly due to decreasing risk cost in Russia and Ukraine and higher releases in Hungary. In Uzbekistan significant amount of risk costs was created with credit risk cost rate exceeding 10% 2022 2023 TOTAL RISK COST 2022 credit risk 2023 credit risk 3
Slide 23: Stage 3 ratio flat q-o-q; conservative provisioning
The Stage 3 ratio stayed flat q-o-q. 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 4Q 2023 83.4% 84.9% 85.1% 84.5% 82.7% 2.0% 1.6% Stage
Slide 24: 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 25: 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 26: CET1 ratio increased to 16.6% in 2023
The CET1 ratio increased to 16.6% in 2023, the strong capital generation capability offset all negative effects Decomposition of the change in CET1 ratio between 4Q 2022 – 4Q 2023 (based on the prudential scope of consolidation, changes in percentage points) Eligible profit was calculated with 4Q 20
Slide 27: Group capital position is stable and improved y-o-y
The Group’s capital position is stable and improved even further y-o-y, supported by the robust 2023 results CAR and CET1 ratios (%)1 Regulatory minimum capital requirements for OTP Group in 4Q 2023 (%) Capital adequacy ratio (CAR) CET1 ratio 14.0 Combined Buffer 11.5 4.0 19.4 Requirement 9.6 18.9 4
Slide 28: OTP Bank met the MREL requirement for 1Q 2024
At the end of 2023 OTP Bank met the MREL requirement for 1Q 2024, thanks to the series of successful MREL-eligible bond issuances in recent months 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/
Slide 29: Robust liquidity position with 72% net loan to deposit ratio
Robust liquidity position with 72% net loan to deposit ratio, 246% LCR, 153% NSFR and relatively benign redemption profile OTP Bank outstanding FX wholesale bonds1 OTP Bank FX MREL-eligible bond and loan maturity profile1 (in EUR million) Actual External obligation of Issue Date Instrument Call date
Slide 30: OTP Bank ratings closely correlate with 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 31: ESG strategy delivery on track; ESG ratings improved
The delivery of ESG obligations and goals set by the Bank’s ESG strategy is 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 4Q 2023 Actual
Slide 32: 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 Grand Prize’ ’Best Bank in Croatia in 2023’ ‘Bank of the Year Main Prize’ ’Best Bank in Mon
Slide 33: In 2023 the Group surpassed all management expectations
In 2023 the Group surpassed all management expectations Management guidance for 2023 was met Guidance 2023 Fact The consolidated organic performing loan volume growth may >5% +6% exceed 5% y-o-y (FX-adjusted). Compared to full-year 2022, for 2023 the management forecasted: • improving NIM, >3.51% 3.
Slide 34: Management expects the operating environment to improve in 2024
Management expects the operating environment to improve in 2024 Management guidance for 2024 – OTP Group We expect improving GDP growth rate, declining inflationary and rate environment, which may have positive impact on loan demand and portfolio quality. Therefore: FX-adjusted organic performing
Slide 35: Further details and financials
Further details and financials 35
Slide 36: OTP Group offers universal banking to over 17 million customers in 12 countries
OTP Group offers universal banking services to more than 17 million active customers in 12 countries; in many of them with dominant market position Major Group Members Total Assets1 Systemic position in Hungary Ukraine Romania 4Q 2023 market share (%) OTP Bank Russia Moldova Russia Uzbekistan 4% Tot
Slide 37: 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 12.3 billion1 Total number of ordinary shares: 280,000,010, each having a nominal value of HUF 100 and repres
Slide 38: Almost 80% of net loan book invested in EU countries
Almost 80% of the total net loan book is invested in EU countries, while Hungary’s share within the Group stood at 32% Breakdown of the consolidated net loan book Net loan book, 4Q 2023 By country By product Hungary1 HUF 6,906 bn Bulgaria HUF 3,941 bn Slovenia HUF 2,763 bn Leasing Leasing Leasing Co
Slide 39: 37% of deposit book 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, 4Q 2023 By country By product Hungary1 HUF 10,785 bn Bulgaria HUF 5,1
Slide 40: The consolidated ROE exceeded 27% in 2023
The consolidated ROE exceeded 27% in 2023 2003-2008 2009-2013 average average 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 ROE 29.4% 8.3% -7.4% 5.1% 15.4% 18.5% 18.7% 20.3% 10.9% 17.0% 11.0% 27.2% ROE (adjusted) 29.0% 11.6% 8.5% 9.6% 15.4% 18.7% 19.1% 20.6% 13.0% 18.5% 18.8% 27.7% Total Revenue
Slide 41: Economic growth expected to accelerate in 2024
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 1.8 2.1 2.5 1.6 2.4 6.3 2.8 3.2 Unemployment (%) 3.6 4.1 4.2 4.2 4.2 4.1 4.0 3.8
Slide 42: Hungarian loan penetration still low in regional comparison
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 for ot
Slide 43: Acquisitions drove ~3.5-fold growth in net loan book
Successful acquisitions played a great role in the ~3.5-fold growth in consolidated net loan book over the last 7 years. At the same time, the composition of the Group shifted towards Eurozone / ERM 2 countries Consolidated net loan growth Share of Hungary in the Group's net loan portfolio (FX-adjus
Slide 44: 11 acquisitions completed in the last 7 years
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