Otp Bank Nyrt · BET:OTP
Otp Bank Nyrt — Q1 2022 Earnings Presentation
39 slides from Otp Bank Nyrt's earnings presentation, 2022
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 1Q 2022 results
Slide 2: Consolidated profit after tax turned negative in 1Q due to adjustment items
The consolidated profit after tax turned into red in 1Q due to the deeply negative balance of adjustment items. The adjusted profit after tax for the first quarter reached HUF 88.6 billion, a decrease of 24% q-o-q and 28% y-o-y Profit development (milliárd forintban) (HUF billion) Profit after tax A
Slide 3: Capital adequacy ratios and liquidity reserves exceeded regulatory minimum requirements
Capital adequacy ratios and liquidity reserves significantly exceeded regulatory minimum requirements Regulatory minima1 CAR and CET1 ratio actual values2 The CET1 ratio decreased by 1.3 pps q-o-q: 19.1% • On one hand, CET1 capital decreased by HUF 115 billion: 18.3% 17.8% 16.8% 17.7% -HUF 33 billio
Slide 4: Total adjustment items were -HUF 122 billion in 1Q 2022
The total volume of adjustment items represented -HUF 122 billion in 1Q 2022, relating mainly to the Russian goodwill impairment charges and impairments on Russian bonds held by OTP Bank Hungary and DSK Bank Bulgaria (in HUF billion) 1Q 21 4Q 21 1Q 22 Q-o-Q Y-o-Y Consolidated after tax profit 93.3 1
Slide 5: Decline in adjusted profit after tax mainly due to surge in risk costs
The decline in adjusted profit after tax was mainly due to the surge in risk costs. The 1Q corporate tax burden was shaped by the write-off of Russian deferred tax assets in the amount of HUF 6.4 billion; in addition to this, the 1Q effective corporate tax rate was upward driven by the fact that no
Slide 6: OTP's performance recognized by professional organizations
OTP’s outstanding performance is traditionally recognized not only by capital markets, but professional organizations, too ’Best Bank in CEE 2022’ ‘Bank of the Year in 2021’ ’Best Bank in Hungary in 2022’ ‘Mobile Banking Solution of since 2012 in all consecutive the Year 2021’ years ‘UX Solution of
Slide 7: OTP's way to a sustainable world: dedicated ESG organization and strategy
OTP’s way to a sustainable world: dedicated permanent ESG organization, strategic focus, and visible results ORGANIZATION STRATEGY RATINGS The whole organization of the Bank and its OTP Bank has successfully started implementing its OTP Bank’s improving sustainability Subsidiaries are involved in th
Slide 8: Russian, Ukrainian, Romanian and Montenegrin operations suffered losses in 1Q 2022
In 1Q 2022 the Russian and Ukrainian as well as the Romanian and Montenegrin operations suffered losses. This was partly offset by stronger q-o-q results in Hungary, Bulgaria and Croatia, shaped by favourable risk cost developments 1Q 2021 4Q 2021 2021 1Q 2022 Q-o-Q Y-o-Y HUF billion Adjusted profit
Slide 9: Group profit excluding Russian and Ukrainian operations
OTP Group achieved a profit after tax of HUF 28 billion excluding the Russian and Ukrainian operations, while the Russian operation suffered a loss of HUF 27 billion and the Ukrainian one a loss of HUF 35 billion in 1Q 2022 OTP Group without OTP Bank Russia OTP Bank Ukraine Russia and Ukraine P&L (H
Slide 10: Total income flat q-o-q, up 20% y-o-y
Total income practically remained flat q-o-q, but increased by 20% y-o-y with Hungary being the primary growth driver 1Q 2022 Y-o-Y Q-o-Q TOTAL INCOME (HUF billion) (HUF billion, %) (HUF billion, %) OTP Group 361 60 20% -1 0% OTP CORE (Hungary) 166 41 33% 17 11% DSK Group (Bulgaria) 48 5 12% 1 2% OB
Slide 11: Net interest income grew 18% y-o-y
The 1Q 2022 net interest income grew by 18% y-o-y with bulk of the growth coming from Hungary and Ukraine. The q-o-q 3% decline was attributable to Hungary and Russia NET INTEREST 1Q 2021 4Q 2021 2021 1Q 2022 1Q 2022 Y-o-Y 1Q 2022 Q-o-Q 1 At OTP Core the interest income on INCOME (HUF billion) (HUF
Slide 12: Consolidated net interest margin shrank by 19 bps q-o-q
The consolidated net interest margin shrank by 19 bps q-o-q, mainly due to the narrowing Hungarian and Russian margins Drivers behind the q-o-q decline of the consolidated net interest margin 3.62% -13 bps -5 bps -4 bps 4 bps 3.43% 4Q 2021 OTP Core OTP Bank Others FX-effect 1Q 2022 (Hungary) Russia
Slide 13: Consolidated performing loans grew 3% q-o-q
Consolidated performing loans grew by 3% q-o-q, which is the same as the growth rate without Russia and Ukraine. The Hungarian PIT refund caused a decline in the consumer loan portfolio, while mortgage demand (mainly green housing loans) surged, but disbursements have not yet occurred Q-o-Q performi
Slide 14: Consolidated customer deposits increased 4% q-o-q
Consolidated customer deposits increased by 4% q-o-q, and by 7% in Hungary partly as a result of the PIT refund. Ukrainian and Russian deposits also increased Q-o-Q DEPOSIT volume changes adjusted for FX-effect – 1Q 2022 Cons. Core DSK OBH OBSrb SKB OBR OBU OBRu CKB OBA OBM (Hungary) (Bulgaria) (Cro
Slide 15: Net fees improved 19% y-o-y
In 1Q 2022 the 19% y-o-y improvement of net fees was driven by stronger business activity in Hungary and Bulgaria. The 2% q-o-q decline was largely due to the subdued lending activity in Russia and base effect at OTP Fund Management NET FEE 1Q 2021 4Q 2021 2021 1Q 2022 1Q 2022 Y-o-Y 1Q 2022 Q-o-Q 1
Slide 16: Other net non-interest income jumped 29% q-o-q
The other net non-interest income jumped by 29% q-o-q, thanks to the OTP Core division, largely explained by base effect as well as increased market volatility OTHER 1Q 2021 4Q 2021 2021 1Q 2022 1Q 2022 Y-o-Y 1Q 2022 Q-o-Q 1 At OTP Core the HUF 18 billion q-o-q INCOME (HUF billion) (HUF billion) (HU
Slide 17: Consolidated operating costs grew 10.3% y-o-y FX-adjusted
Consolidated operating costs grew by 10.3% y-o-y adjusted for FX effect 1Q 2022 Y-o-Y Y-o-Y, FX-adjusted 1 OPERATING COSTS At OTP Core the cost increase was 18% (HUF 2022Q1 billion) CUM (HUF billion, %) (HUF billion, %) y-o-y: personnel expenses rose on account of 4% higher average headcount and the
Slide 18: OTP Core: mortgage applications jumped 54% y-o-y; market share above 30%
In Hungary mortgage applications jumped by 54% y-o-y, mainly due to the newly launched subsidized green OTP CORE housing loans. OTP maintained its market share of above 30% both in new mortgage and cash loan flows Y-o-y change of mortgage loan applications and disbursements Performing (Stage 1+2) ca
Slide 19: OTP Core: baby loans and green housing loans
OTP Bank maintained its market share above 40% in baby loan flows. The subsidized green housing loans OTP CORE generated huge demand, thus the total available amount of HUF 300 billion has already been exhausted Baby loans Green Home Programme2 Contractual amount (HUF billion) Applications for green
Slide 20: OTP Core: micro and small enterprise loans grew 3% q-o-q
The micro and small enterprise loans grew by 3% q-o-q. The Széchenyi Card Go! scheme, introduced in last OTP CORE July, had a favourable effect on loan dynamics. OTP's corporate loan market share improved further in 1Q Performing corporate loan volume changes OTP Group’s market share in loans to (DP
Slide 21: OTP Core: volumes in the repayment moratorium
At OTP Core loans under the moratorium comprised HUF 227 billion, representing 4.1% of the total loan book. OTP CORE Eligible clients who apply for the moratorium by the end of July can remain in the scheme till the end of 2022 OTP Core – volumes participating in the repayment moratorium (in HUF bil
Slide 22: Digital channels kept gaining ground in Hungary
Digital channels kept on gaining ground in Hungary: the share of digitally active, especially mobile banking customers increased, similar to the number of digital transactions. Our market share in the card business remained stably high DIGITAL ACTIVITY The digital activity of OTP clients has increas
Slide 23: Digital developments: new Internet- and MobileBank, VideoBank
As a ground-breaking development, in 2021 both the Internet- and MobileBank was renewed, from March 2022 the new MobileBank became the primary mobile banking channel of OTP, resulting in a jump in digital customer service level DIGITAL DEVELOPMENTS There were no obstacles to digital developments tha
Slide 24: Stage 3 rate continued to decline; conservative provisioning
The Stage 3 rate continued to decline in the first quarter of 2022. The management's provisioning policy remained conservative compared to regional banking groups, especially regarding the coverage of performing loans Development of the Group's main credit quality Own coverage of Stage 1+2 loans com
Slide 25: Development of Stage 1, 2 and 3 ratios
Development of the Stage 1, Stage 2 and Stage 3 ratios Cons. Core DSK OBH OBSrb SKB2 OBR OBU OBRu CKB OBA OBM Merk.3 (Hungary) (Bulgaria) (Croatia) (Serbia) (Slovenia) (Romania) (Ukraine) (Russia) (Monten.) (Albania) (Moldova) (Hungary 4Q 19 88.8% 91.4% 88.6% 83.2% 96.0% 98.9% 83.9% 73.8% 75.0% 88.8
Slide 26: Development of own provision coverage ratios by Stage
Development of the own provision coverage ratios in different Stage categories Cons. Core DSK OBH OBSrb SKB1 OBR OBU OBRu CKB OBA OBM Merk.2 (Hungary) (Bulgaria) (Croatia) (Serbia) (Slovenia) (Romania) (Ukraine) (Russia) (Monten.) (Albania) (Moldova) (Hungary 4Q 19 1.1% 0.8% 1.1% 0.8% 0.4% 0.4% 1.3%
Slide 27: Ratings of OTP Bank and sovereigns
+ positive While OTP Bank ratings closely correlate with the sovereign ceilings, subsidiaries’ ratings - negative (rating outlook) 0 stable enjoy the positive impact of parental support +* on watch possible upgrade -* on watch possible downgrade Hungarian sovereign, OTP Bank and OTP Mortgage Bank ra
Slide 28: Russia and Ukraine: going concern approach and extreme scenario effects
Regarding both Russia and Ukraine, a „going concern” approach is applied. Under an extremely negative scenario of deconsolidating both entities and writing down the outstanding gross intragroup funding as well, the effect for the consolidated CET1 ratio would be 0 bp in the case of Ukraine and -60 b
Slide 29: Management guidance for 2022
Concerning the management expectations for 2022 there is a high degree of uncertainty, however excluding the Russian and Ukrainian operations the management expects financial indicators to be similar to 2021 Management guidance for 2022 The management’s expectations for the 2022 performance of the G
Slide 30: Further details and financials
Further details and financials 30
Slide 31: OTP offers universal banking services to around 16 million active customers in 11 countries
OTP offers universal banking services to around 16 million active customers in 11 countries across the CEE/CIS Region Major Group Members in Europe Total Assets Systemic position in Hungary… Montenegro Albania 1Q 2022 market share (%) OTP Bank Russia Russia Moldova Ukraine 3% 1% Total assets 28 Roma
Slide 32: 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 7.5 billion1 Total number of ordinary shares: 280,000,010, each having a Ownership structure of OTP Bank on 3
Slide 33: Almost 80% of net loan book invested in EU countries
Almost 80% of the total net loan book is invested in EU countries, with Hungary having the dominant share. Retail lending remains the leading product Breakdown of the consolidated net loan book Hungary1 5,784 billion Bulgaria 2,886 billion (in HUF billion) Leasing Leasing 7% Mortgage 8% Mortgage Cor
Slide 34: Hungary contributes half of the deposit book
Hungary contributes to half of the deposit book, Bulgaria is the second largest deposit holder in the Group. Retail placements account for 56% of the deposit base Breakdown of the consolidated deposit base Hungary1 10,846 billion Bulgaria 3,876 billion (in HUF billion) Corporate 13% Retail sight Ret
Slide 35: Adjusted ROE decreased to 12.1%
The adjusted ROE for the period decreased to 12.1% shaped by surging risk costs but improved cost efficiency 2003-2008 2009-2013 average 2014 2015 2016 2017 2018 2019 2020 2021 1Q 2022 average ROE -4.6% 29.4% 8.3% -7.4% 5.1% 15.4% 18.5% 18.7% 20.3% 10.9% 17.0% (from profit after tax) 4.4%5 ROE 12.1%
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 ... 1Q 2022 data for other H
Slide 37: Performing loans grew 2.7-fold between 2016 and 1Q 2022
OTP Group’s performing loans grew to 2.7-fold between 2016 and 1Q 2022, driven by both organic growth and acquisitions OTP Group – performing (DPD0-90) loan growth1 FX-adjusted, in HUF billion 2016 6,122 Organic 658 +26% Acquisitions 955 2017 7,735 Components of the Group’s Organic 1,136 performing
Slide 38: Acquisitions completed in recent years improved OTP's positions
Acquisitions completed in the last few years materially improved OTP’s positions in many countries. The financial closure of the Slovenian Nova KBM and Albanian acquisitions is waiting for regulatory approvals Target Net loan volumes Market share in total assets Book value (seller, date of closing)
Slide 39: 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