Otp Bank Nyrt · BET:OTP
Otp Bank Nyrt — Otp Bank S/Adr R — Q2 2023 Earnings Presentation
32 slides from Otp Bank Nyrt's earnings presentation, Aug 10, 2023
Slide 1: OTP Group 2Q 2023 results
OTP Group 2Q 2023 results Conference call – 10 August 2023 László Bencsik Chief Financial and Strategic Officer
Slide 2: In 1H 2023 OTP Group posted HUF 577 billion profit after tax
In 1H 2023 OTP Group posted HUF 577 billion profit after tax, partially supported by the badwill of two acquisitions closed in the first half-year, as well as the improvement of adjusted profit Consolidated profit after tax Key performance indicators of OTP Group (HUF billion) (%) x13 Return on equi
Slide 3: Adjusted profit growth shaped by income growth and near-zero risk cost
The increase in the Group’s semi-annual 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) 1H 2022 1H 2023 1H Y-o-Y 1Q 2023 2Q 2023 2Q Q-o-Q FX-adj. w/o acq
Slide 4: OTP Core achieved HUF 57 billion profit in first half
In the first half of the year, OTP Core achieved HUF 57 billion profit after tax excluding dividends from OTP CORE subsidiaries. The half-year adjusted result is 32% lower than last year OTP Core (milliárd profit after tax forintban) Highlighted key performance indicators of OTP Core (without divide
Slide 5: Foreign subsidiary banks in CEE substantially increased profit
In 1H 2023 foreign subsidiary banks in the CEE region substantially increased their profit after tax, their ROE indicators were typically between 15-25%. The Russian and Ukrainian subsidiaries continued their profitable operation in 2Q as well Profit after tax1 (HUF billion) ROE Cost / income ratio
Slide 6: Total assets approached EUR 100 billion; foreign profit contribution rising
Due to the acquisitions completed in recent years and the dynamic organic growth, consolidated total assets approached EUR 100 billion, while profit contribution of foreign operations gradually increased, hitting almost 70% in 1H 2023 Total assets development of OTP Group (in EUR billion) Flags repr
Slide 7: Uzbekistan's economy has significant growth potential
Uzbekistan's economy has significant growth potential. The population is young and rapidly growing, while UZBEKISTAN the educational indicators demonstrate a favourable position even in global comparison Population (million) Comparison of the median age (2020) GDP growth (y-o-y, %) GDP per capita (U
Slide 8: Ipoteka Bank is the fifth largest bank in Uzbekistan
In terms of total assets, Ipoteka Bank is the fifth largest bank in Uzbekistan with a market share of 7.7%, IPOTEKA BANK and it is also the largest player in the mortgage market with a market share of around 25% IFRS, HUF billion / % 2020 2021 2022 Share within OTP Group Profit after tax 12 25 44 To
Slide 9: OTP Russia and OTP Ukraine volumes and capital
Russian consumer loans expanded by 16% y-o-y, while corporate lending dropped by 64%. In Ukraine the provisioning level improved further. In both countries there is a substantial free capital above the regulatory minimum requirement OTP Russia OTP Ukraine Volume changes Gross intragroup financing Vo
Slide 10: 2Q 2023 FX-adjusted total income grew by 21%
Effect of In 2Q 2023 the Group’s FX-adjusted total income grew by 21% without the NKBM acquisition, driven NKBM primarily by Hungary acquisition TOTAL INCOME 1H 2023 2Q 2023 1H 2023 Y-o-Y 2Q 2023 Q-o-Q without one-off items (HUF billion) (HUF billion) (HUF billion) (HUF billion) OTP Group 1,005 547
Slide 11: Semi-annual net interest income grew 20% organically
Effect of Semi-annual FX-adjusted net interest income grew 20% organically, as stronger foreign contributions offset NKBM the weaker Hungarian performance. The q-o-q NII growth at OTP Core was driven by technical factors acquisition NET INTEREST 1H 2023 2Q 2023 1H 2023 Y-o-Y 2Q 2023 Q-o-Q 1 At OTP C
Slide 12: Consolidated net interest margin improved q-o-q
The consolidated net interest margin improved q-o-q, thanks to the continuation of positive trends at CEE Group members. As a result of technical and one-off items, the Hungarian margin grew by 10 bps q-o-q from close to its historic lows NET INTEREST 1 OTP Core's 2Q margin was 2Q 2022 1Q 2023 2Q 20
Slide 13: OTP Core net interest margin decline drivers
At OTP Core the significant y-o-y drop of net interest margin was mainly due to the negative impact of the OTP CORE changes in the mandatory reserve rules, the NKBM acquisition and the shrinking deposit volumes OTP Core - net interest income Decomposition of y-o-y NII / NIM decline NII NIM (HUF
Slide 14: Structural changes in Hungarian retail savings market
In the wake of high inflation and high retail government bond yields, significant structural changes occurred on the Hungarian retail savings market. The total retail savings grew 12% y-o-y, within that deposits suffered HUNGARY outflows, but retail government bonds and investment funds gained popul
Slide 15: OTP's deposit market share increased by 0.9 pp y-o-y
Despite declining retail deposit volumes, OTP’s deposit market share increased by 0.9 pp y-o-y OTP CORE Retail savings volumes at OTP Core (HUF billion) OTP’s market share in Hungary 18.765 Total Retail Savings 18.765 Total Retail Savings +3% -2.4%p 9,854 10,177 32.9% 30.4% 2Q 2022 2Q 2023 2Q 2022 2
Slide 16: Performing loans increased 2% q-o-q organically
Consolidated performing loans increased by 2% q-o-q organically, driven primarily by Bulgaria and Croatia, whereas Ukrainian and Moldovan volumes continued to shrink Q-o-Q performing (Stage 1+2) LOAN volume changes, adjusted for FX-effect Cons. Core2 DSK SKB+ OBH OBSrb OBA CKB OBRu OBU OBR OBM (Hung
Slide 17: Performing loans grew 18% in first half
Consolidated performing loans grew by 18% in the first half of the year, within that the organic growth (excluding the Nova KBM and Ipoteka Bank acquisitions) reached 3% YTD performing (Stage 1+2) LOAN volume changes, adjusted for FX-effect Cons. Core2 DSK SKB+ OBH OBSrb OBA CKB OBRu OBU OBR OBM (Hu
Slide 18: Customer deposits decreased 1% q-o-q without Ipoteka
Consolidated customer deposits decreased by 1% q-o-q without the Ipoteka Bank acquisition, mainly as a consequence of outflows affecting Hungarian retail and corporate segments Q-o-Q DEPOSIT volume changes, adjusted for FX-effect Cons. Core3 DSK SKB+ OBH OBSrb OBA CKB OBRu OBU OBR OBM (Hungary) (Bul
Slide 19: Customer deposits decreased 1% in first six months
Consolidated customer deposits decreased by 1% in the first six month without the effect of acquisitions YTD DEPOSIT volume changes, adjusted for FX-effect Cons. Core3 DSK SKB+ OBH OBSrb OBA CKB OBRu OBU OBR OBM (Hungary) (Bulgaria) NKBM (Croatia) (Serbia) (Albania) (Monten.) (Russia) (Ukraine) (Rom
Slide 20: 14% q-o-q increase in net fees
Effect of In 2Q the 14% q-o-q increase in net fees was driven by OTP Core and Hungarian Fund Management, NKBM as well as seasonality acquisition NET FEE 1H 2023 2Q 2023 1H 2023 Y-o-Y 2Q 2023 Q-o-Q INCOME (HUF billion) (HUF billion) (HUF billion) (HUF billion) 1 At OTP Core net fees went up by 13% q-
Slide 21: Other net non-interest income more than doubled q-o-q
Effect of Other net non-interest income more than doubled q-o-q, driven mainly by the positive fair value adjustment NKBM of baby loans and subsidized CSOK housing loans at OTP Core acquisition OTHER 1H 2023 2Q 2023 1H 2023 Y-o-Y 2Q 2023 Q-o-Q 1 At OTP Core the HUF 36 billion INCOME (HUF billion) (H
Slide 22: Semi-annual operating costs grew by 20%
Amid high inflationary environment semi-annual FX-adjusted operating costs grew by 20% without the Effect of NKBM NKBM acquisition acquisition 1H 2023 Y-o-Y Y-o-Y, FX-adjusted OPERATING COSTS 1 (HUF 2023Q2 billion) CUM (HUF billion) (HUF billion) At OTP Core the followings were the drivers behind th
Slide 23: Capital and liquidity position is stable
The Group’s capital and liquidity position is stable. Capital adequacy ratios improved q-o-q despite the consolidation of Ipoteka, thanks to the inclusion of eligible 2Q profit. Two successful bond issues were executed in the second quarter CAR and CET1 ratio Regulatory Stable liquidity position 1Q
Slide 24: EBA stress test outcome demonstrates capital strength
The capital strength and stability of OTP Bank has been demonstrated again by the outcome of the latest stress test conducted by the European Banking Authority in cooperation with the National Bank of Hungary OTP Bank achieved the 4th best result among the OTP Bank enjoyed high rankings even in peer
Slide 25: Stage 3 ratio declining; conservative provisioning
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 quality Own coverage of Stage 1+2 loans compared to regional peers at indicators the end of 2Q 2023 83.0% 83.4% 83.4% 84.9% 85.1%
Slide 26: Hungary mortgage applications dropped 66% y-o-y
In Hungary applications for mortgage loans dropped 66% y-o-y in 1H, but OTP’s market share improved q-o-q. OTP CORE OTP’s market share in cash loan sales was above 41%, and its retail deposit market share further improved Y-o-y change of mortgage loan applications and disbursements Performing (Stage
Slide 27: Micro and small business loans continued to grow
Micro and small business loans continued to grow, while corporate loans decreased slightly during the first OTP CORE half of the year. The popularity of subsidized lending schemes remained intact Performing corporate loan volume changes OTP Group’s market share in loans to (DPD0-90 loan changes unti
Slide 28: ESG strategy delivery on track
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 2Q 2023 Actual Long-term KPIs OTP Bank’s improving sustainability perform
Slide 29: Macro expectations tend to improve
Macro expectations tend to improve Hungary Bulgaria Slovenia Croatia 2022 2023F 2024F 2022 2023F 2024F 2022 2023F 2024F 2022 2023F 2024F GDP growth (annual, %) 4.6 -0.6 2.0 3.4 1.5 2.4 5.4 1.0 2.4 6.2 2.7 3.0 Unemployment (%) 3.6 4.1 4.0 4.3 4.3 4.1 4.0 3.5 3.2 7.0 6.5 6.5 Budget balance (% of GDP)
Slide 30: Management upgraded its guidance for 2023
In light of the stronger than expected 1H results, management upgraded its guidance for 2023 Updated Management Guidance for 2023 The organic performing loan volume growth may reach 5% y-o-y (FX-adjusted). Based on the 1H 2023 trends, management forecasts y-o-y lower credit risk cost rate and cost-t
Slide 31: 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
Slide 32: Questions and Answers session
Questions and Answers session 32