Slide 1: OTP Group Full-year 2010 results
OTP Group Full-year 2010 results Conference call – 4 March 2011 László Bencsik Chief Financial and Strategic Officer
Slide 2: Content
Content Summary of 2010 Result 3-4 Macroeconomic Overview 6-12 2010 Financial Performance of OTP Group and 2011 Expectations 14-29 2
Slide 3: Adjusted after-tax profit increased by 7% y-o-y
The adjusted after-tax profit increased by 7% y-o-y; 4Q decrease is due to seasonally increasing operating costs, coverage-boosting higher risk costs and increasing corporate tax as a result of base effect Consolidated after-tax profit 4Q 09 3Q 10 4Q 10 2009 2010 (in HUF billion) 150 118 -22% ROE (a
Slide 4: Portfolio quality deterioration decelerated in 2H 2010
The portfolio quality deterioration gradually decelerated in 2H 2010, the consolidated coverage ratio (74.4%) improved further both in quarterly and yearly comparison Development of DPD90+ loan volume* Q-o-q change of DPD90+ ratio Y-o-y change of consolidated DPD90+ ratio DPD90+ ratio (%-point) 13.2
Slide 5: Content
Content Summary of 2010 Result 3-4 Macroeconomic Overview 6-12 2010 Financial Performance of OTP Group and 2011 Expectations 14-29 5
Slide 6: Hungary: high budget redistribution adverse effects on growth
Hungary: high budget redistribution had adverse effects on growth and Hungary Poland employment, through high debt ratios and tax burden Czech Republic Slovakia Budget expenditures (as % of GDP, 2009) Public debt (as % of GDP, 2000-2010) GDP growth (2002=100) 90 160 84 avg. +6.6pp 80 150 142 70 50.5
Slide 7: Key objectives of the government's structural reforms
The key objectives of the government’s structural reforms: reducing public debt, improving Hungary’s competitiveness and its growth potential Structural reforms – Major goals Individual actions’ effect on the balance (in HUF billion) 2012 2013 2014 TOTAL +550 +902 +902 Lowering state redistributio
Slide 8: Forecast: planned measures will secure market-based financing of the state
According to our forecast the planned measures will secure the market-based financing Government of the state through meeting the deficit and debt targets OTP Research Consolidated government deficit as % of GDP (ESA-95) Government debt as % of GDP (ESA-95) Forecast Forecast Consolidated government
Slide 9: Russia and Ukraine macro overview
Russia: strong growth continued in 4Q with inflation picking up; Ukraine: highest 2010 GDP growth in the region, IMF funding and Russian investment will further boost confidence Russia Real GDP growth (y-o-y, %) Manufacturing (2005=100, sa) Inflation rate (y-o-y, %) Growth Growth should should have
Slide 10: Romania, Bulgaria, Slovakia macro overview
Romania: fiscal consolidation resulted in GDP contraction; Bulgaria: on the path of recovery; Slovakia: strong growth but fiscal adjustment could have negative impact from 2011 Romania Real GDP growth (%, SA, annualized Industrial production and 90 DPD+ level (%) and monthly Preliminary Preliminary
Slide 11: Croatia, Serbia, Montenegro macro overview
Croatia: weak domestic demand, budget problems, but GDP-growth is forecasted to return this year; Serbia: strict fiscal policy, the Dinar’s depreciation stopped; Montenegro: positive developments in 2H 2010 Croatia Deficit of general government* Industrial production and retail Unemployment rate Cro
Slide 12: Forecasts for key macro indicators
Forecasts for key macro indicators: in most countries positive GDP growth is expected to return already in 2010 on the back of improving export performance REAL GDP GROWTH EXPORT UNEMPLOYMENT RATE 2009 2010F 2011F 2009 2010F 2011F 2009 2010F 2011F Hungary -6.7% 1.2% 2.8% Hungary -9.6% 14.2% 7.0% Hun
Slide 13: Content
Content Summary of 2010 Result 3-4 Macroeconomic Overview 6-12 2010 Financial Performance of OTP Group and 2011 Expectations 14-29 13
Slide 14: Adjusted operating profit dropped q-o-q on higher operating expenses
Adjusted for one-off items, the operating profit dropped by HUF 5 billion q-o-q due to higher operating expenses as a result of seasonally higher material costs; total income increased by HUF 3 billion q-o-q 23 Operating profit 150 9+8 2 115 105 110 107 109 101 107 102 20 5 3 109 (2009) (2010) 95 10
Slide 15: Total income grew q-o-q: net interest income and net fees
Adjusted for one-off items, total income grew by HUF 3 billion q-o-q: net interest income increased by HUF 1 billion, while net fees advanced by HUF 4 billion influenced by a technical factor; loan growth started in 3Q 2010 continued into 4Q as well Net interest margin (%) Net interest income (witho
Slide 16: Total income and net interest margin by subsidiary
Stable Hungarian total income; expanding total net interest margin in Bulgaria due to improving deposit margins; outstanding Russian income dynamics y-o-y, significantly improving net interest margin; increasing Ukrainian NII in UAH - but decreasing in HUF due to HUF appreciation, improving interest
Slide 17: Net loan to deposit ratios show Group-wide y-o-y improvement
Changes in net loan to deposit ratios (adjusted for technical effects*) show a Group-wide y-o-y improvement; the ratio increased q-o-q as a result of the drop of corporate deposits at OTP Core Loan to deposit ratio, % (31 December 2010) Change of net loan to At the end of 2010 the net loan/(deposit
Slide 18: Consolidated loan portfolio slightly increasing q-o-q
Slightly increasing consolidated loan portfolio q-o-q, still spectacular Russian consumer loan dynamics, gradually improving corporate lending in Ukraine, stabilizing Hungarian mortgage loan book Breakdown of consolidated loan book (in HUF billion) Q-o-q loan volume changes in 4Q 2010, adjusted for
Slide 19: Consolidated deposits decreased q-o-q
Consolidated deposits decreased q-o-q; significant increase of retail deposits in the main markets; the decline in Hungarian corporate deposits is the result of deposit withdrawals by OTP Fund Management and Hungarian municipalities Breakdown of consolidated customer deposits (in HUF billion) Q-o-q
Slide 20: OTP Bank Russia consumer loan growth accelerating
Due to strengthening demand for consumer loans as well as the improving sales performance, OTP Bank Russia posted significant further accelerating growth of POS-, credit card- and personal loans POS-loan disbursement (in RUB billion) Market share in new POS-loan disbursement (%) 1Q 4Q 2007 4Q 2008 4
Slide 21: OTP Core nearly doubled market share in new mortgage loans
In 2010 OTP Core (Hungary) almost doubled its market share in new mortgage loan disbursements and kept stable its share in retail savings Mortgage loan disbursements of OTP Bank and OTP Mortgage Liquid savings portfolio and market share of OTP Bank Bank* (in HUF billion) (in HUF billion) HUF Retail
Slide 22: Stringent cost control on Group-level
Stringent cost control on Group-level: in 2010 the Bank could successfully offset the negative effects stemming from inflation and FX changes that otherwise would automatically push up operating costs Consolidated operating expenses (HUF billion) Operating cost / Average Assets Other expenses 4.08%
Slide 23: Portfolio quality deterioration decelerated; risk cost rate increased
The pace of portfolio quality deterioration decelerated further q-o-q, however risk cost rate increased because the coverage of all of the subsidiaries except Montenegro improved (consolidated coverage: 74.4%, +1%-points q-o-q) Consolidated risk costs and its ratio to average gross loans Risk cost
Slide 24: FX-adjusted DPD90+ formation decelerated further q-o-q
FX-adjusted DPD90+ formation decelerated further q-o-q, the favourable tendency was visible in case of every subsidiary but Montenegro and Romania, while there was a significant write-off at OTP Bank Russia FX-adjusted quarterly change in DPD90+ loan volumes (in HUF billion) OTP Core OBRu OBU DSK OB
Slide 25: Stable coverage in Hungary, improving coverage in Russia, Bulgaria, Ukraine
Stable coverage in Hungary, q-o-q improving coverage ratios in Russia, Bulgaria and the Ukraine, at the Russian unit the DPD90+ ratio was positively influenced by the dynamic loan growth and write-offs of consumer loans OTP Core DSK Bank OTP Bank JSC OTP Bank Russia Hungary Bulgaria Ukraine Russia R
Slide 26: Mortgage book deteriorated in Hungary; improvement in Russia
In Hungary the mortgage book deteriorated further; q-o-q improvement in Russia due to steady volume growth and sales of DPD90+ portfolio; quality worsening in Bulgaria is driven by the retail; in Ukraine the DPD90+ growth slowed down and quality of the corporate book even improved q-o-q DPD90+ loan
Slide 27: Share of rescheduled retail loans followed downward trajectory
The share of rescheduled retail loans without re-defaults followed a downward trajectory in 2010, driven by decreasing Hungarian and Ukrainian restructured portfolios Share of rescheduled loans within the consolidated retail portfolio* OTP Core (Hungary) OTP Bank Ukraine (%, without SME exposures) 8
Slide 28: Capital adequacy ratios above regulatory minimum
Capital adequacy ratios of both OTP Bank (unconsolidated) and OTP Group (consolidated) are above regulatory minimum and remained outstandingly high in international comparison Capital Adequacy Ratio – OTP Bank unconsolidated (HAR) Capital Adequacy Ratio – OTP Group consolidated (IFRS) Tier2 Tier2 +0
Slide 29: OTP Group expectations for 2011
Moderate loan growth is expected with the exception of some segments (Russian, Ukrainian) in 2011, while risk costs remain difficult to predict OTP Group expectations Main tasks / Focus The growth of consolidated loan portfolio which Collection and work-out activity started in 3Q 2010 continues,
Slide 30: Forward looking statements
Forward looking statements This presentation contains certain forward-looking statements with respect to the financial condition, results of operations, and businesses of OTP Bank. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances