Otp Bank Nyrt · BET:OTP
Otp Bank Nyrt — Debt Investor Presentation (June 2022)
43 slides from Otp Bank Nyrt's debt investor presentation, June 2022
Slide 1: OTP Group Sustainable Finance Framework introduction and Credit Update
OTP Group Sustainable Finance Framework introduction and Credit Update Investor Presentation June 2022
Slide 2: Important Information
Important Information • 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 are strictly confidential to the recipient, have been furnished to you solely for your information and may not
Slide 3: Important Information
Important Information • In member states of the EEA, this presentation is directed only at persons who are "qualified investors" within the meaning of Regulation (EU) 2017/1129 (the "EU Prospectus Regulation"). This presentation must not be acted on or relied on in any member state of the EEA by per
Slide 4: Content
Content 1. Overview of OTP Group 2. OTP Group’s sustainability approach 3. Sustainable Finance Framework and Second Party Opinion 4. 1Q 2022 Credit update 4
Slide 5: 1. Overview OTP Group
1. Overview OTP Group a — Pek
Slide 6: OTP Group offers universal banking services to around 16 million active customers in 11 countries
OTP Group offers universal banking services to around 16 million active customers in 11 countries with majority of its operations located in European Union countries that offer attractive growth opportunities versus EU average Major Group Members in Europe Total Assets1 Systemic position in Hungary…
Slide 7: Strong CEE franchise offsets temporary losses in Ukraine and Russia
Strong CEE franchise offsets temporary losses in Ukraine and Russia 2021 / 1Q 20221 PROFITABILITY SIZE & GROWTH CAPITAL STRENGTH ASSET QUALITY FUNDING & LIQUIDITY Profit after tax Total assets CET1 ratio Stage 3 ratio Net LTD €1.27bn/-€0.09bn €74.7bn/€77.9bn 17.5% / 16.2% 5.3% / 5.2% 75% / 74% ROE L
Slide 8: 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 recognised and transparent player with a well-diversified ownership structure Ownership structure of OTP Bank on 31 March 2022 Best Consumer Digital Bank in Hungary in 2019, 2020 and 2021 Best Bank in CEE
Slide 9: Almost 80% of the net loan book is invested in EU countries
Almost 80% of the total net loan book is invested in EU countries. Retail lending remains the leading product Breakdown of the consolidated net loan book Net loan book 1Q 2022 (in HUF billion) Hungary1 5,784 billion BulgariaLeasing 2,886 billion Leasing By country By product 7% Mortgage 8% Mortgage
Slide 10: Hungary represents half of the deposit book, Bulgaria is second largest
Hungary represents half of the deposit book, Bulgaria is the second largest deposit holder in the Group. Retail volumes account for 56% of the total deposit base Breakdown of the consolidated deposit base Deposit base 1Q 2022 (in HUF billion) Hungary1 10,846 billion Bulgaria 3,876 billion Vállalati
Slide 11: Acquisitions completed in the last few years materially 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 and Albanian acquisitions are expected to be completed in 2Q 2022, subject to regulatory approvals Target Net loan volumes Market share in total assets Book valu
Slide 12: Hungarian loan penetration levels are 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 13: 2. OTP Group's Sustainability Approach
2. OTP Group’s Sustainability Approach
Slide 14: OTP's way to a sustainable world: dedicated ESG organization, strategic focus
OTP’s way to a sustainable world: dedicated permanent ESG organization, strategic focus, and visible results ORGANISATION 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 15: Main pillars of OTP Group's ESG Strategy
We have defined the main pillars of OTP Group’ ESG Strategy OTP GROUP ESG STRATEGY OTP Group is aiming to be the regional leader in financing a fair and gradual transition to a low-carbon economy and building a sustainable future through our responsible solutions IMPLEMENTATION TIMELINE KPI’s TO MEA
Slide 16: Green Loan Framework based on EU and CB Taxonomy
With the help of Green Loan Framework based on EU and CB Taxonomy OTP Group established the new reference level for green loans and the basis for development of the corporate green lending in the whole Group The OTP’s Sustainability Strategy – adopted in 2021 – concentrates on the opportunities Sust
Slide 17: 3. Sustainable Finance Framework and Second Party Opinion
3. Sustainable Finance Framework and Second Party Opinion
Slide 18: OTP Group's Sustainable Finance Framework aligns corporate responsibility with funding needs
OTP Group’s Sustainable Finance Framework has been set up to align the broader OTP Group corporate responsibility strategy with its funding needs. By issuing Sustainable Finance Instruments, OTP Group shows its commitment to promoting sustainable business activities in the industry sectors and regio
Slide 19: Framework based on ICMA Green/Social Bond Principles: four key pillars
OTP Group’s Sustainable Finance Framework is based on the ICMA Green/Social Bond Principles and LMA Green/Social Loan Principles and as such is presented through the following four key pillars: 1) Use of Proceeds; 2) Process for Projects Evaluation & Selection; 3) Management of Proceeds; 4) Reportin
Slide 20: Net proceeds from Green Finance Instruments: eligible loans
An amount equal to the net proceeds from Green Finance Instruments issued by OTP Group will be used to finance and/or refinance a portfolio of eligible loans as defined by the Green Eligibility Criteria1 Green Buildings Renewable Energy Clean Transportation Eligibility criteria Eligibility criteria
Slide 21: Net proceeds from Social Finance Instruments: eligible loans
An amount equal to the net proceeds from Social Finance Instruments issued by OTP Group will be used to finance and/or refinance a portfolio of eligible loans as defined by the Social Eligibility Criteria1 SMEs Financing Eligibility criteria Financing and refinancing SMEs, meeting the following crit
Slide 22: Process for Project Evaluation and Selection
OTP Group has established a clear decision-making process to determine the eligibility of the nominated eligible loans, in accordance with the description of the eligibility criteria mentioned in the Use of Proceeds section of this Framework OTP Group’s Sustainable Finance Working Group ✓ Maintain a
Slide 23: Management of Proceeds: portfolio approach
The net proceeds from the Sustainable Finance Instruments will be managed by OTP Group in a portfolio approach Eligible Loan Portfolio Sustainable Finance Instruments (allocated in first year to existing credits) ✓ OTP Group intends to allocate these net proceeds to an Eligible Loan Portfolio, selec
Slide 24: Reporting on allocation of net proceeds and impact
OTP Group will make and keep readily available reporting on the allocation of net proceeds to Eligible Loans and, where feasible, reporting on the impact of the Eligible Green Loan Portfolio ✓ OTP Group will report to investors within one year from the date of a Sustainable Finance Instrument transa
Slide 25: Second party opinion from ISS ESG
OTP Group has obtained an independent second party opinion from ISS ESG to confirm the validity of the Sustainable Finance Instruments based on three key elements: 1) alignment with OTP Group’s sustainability strategy; 2) alignment with ICMA GBP/SBPs and GLP/SLPs; 3) alignment of the eligibility cri
Slide 26: Description eligible green loans: Eligibility criteria
Description eligible green loans: Eligibility criteria Screening criteria OTP Renewable Energy OTP Green Buildings OTP Clean Transportation • Solar power: Photovoltaics (PV), concentrated solar power (CSP) and • Buildings built before 31 December 2020 with EPC label ≥ “A” • Low-carbon vehicles and r
Slide 27: Description eligible social loans: Eligibility criteria
Description eligible social loans: Eligibility criteria Screening criteria Employment Generation, and Programmes designed to prevent and/or alleviate unemployment stemming from socioeconomic crises, including through the potential effect of SME financing and microfinance [1Q 2022] • SMEs as per EU C
Slide 28: 4. 1Q 2022 Credit update
4. 1Q 2022 Credit update a — Pek
Slide 29: 1Q 2022 adjusted ROE decreased to 12.1%
The 1Q 2022 adjusted ROE decreased to 12.1% shaped by surging risk costs in Russia and Ukraine 2003-2008 2009-2013 1Q 2022 average 2014 2015 2016 2017 2018 2019 2020 2021 average annualised 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% 29
Slide 30: Consolidated profit after tax turned negative in 1Q
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 31: Russia and Ukraine going concern approach and capital effect
Regarding Russia and Ukraine, a „going concern” approach is applied. Under an unexpected 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
Slide 32: Decline in adjusted profit after tax 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 upwardly biased by the fact that n
Slide 33: Results by country: Hungary, Bulgaria and Croatia stronger
In 1Q 2022, shaped by favourable risk cost developments, Hungary, Bulgaria and Croatia showed stronger q-o-q and y-o-y results. Ukraine, Russia, Romania and Montenegro brought negative returns 1Q 2021 4Q 2021 2021 1Q 2022 Q-o-Q Y-o-Y HUF billion Adjusted profit after tax 117.3 123.3 496.9 88.6 -28%
Slide 34: Profit excluding Russian and Ukrainian operations
OTP Group achieved a profit after tax of HUF 28 billion in 1Q 2022 excluding the Russian and Ukrainian operations, with the Russian subsidiary suffering a loss of HUF 27 billion and the Ukrainian HUF 35 billion, respectively in 1Q 2022 OTP Group without OTP Bank Russia OTP Bank Ukraine Russia and Uk
Slide 35: 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 36: Q-o-Q performing loan volume changes adjusted for FX
Consolidated performing loans grew by 3% Q-o-Q, which is the same as the growth rate without Russia and Ukraine. The Hungarian Personal Income Tax refund caused a decline in consumer credit, while mortgage demand (mainly green housing loans) jumped, where disbursements have not yet occurred Q-o-Q pe
Slide 37: Q-o-Q deposit volume changes adjusted for FX
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 38: Stage 3 rate continued to decline in first quarter
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 39: Strong capital position well above regulatory requirements
Strong capital position, all capital adequacy ratios are well above the regulatory requirements Decomposition of the change in CET1 ratio in 2021 Regulatory minima of capital adequacy ratios for OTP Group (changes in pps) in 4Q 2022 13.2% -0,6% 17.5% Combined 3.2% 10.7% +1.2 -0,3% -0.1 8.8% +0.4 Buf
Slide 40: Robust liquidity position and light maturity profile
Robust liquidity position with more than EUR 8 billion equivalent liquidity reserves; 74% net loan to deposit ratio; 224% LCR, 123% NSFR and light maturity profile with marginal refinancing needs Consolidated1 outstanding amount of wholesale debt (in EUR billion) Subordinated debt 25% Share of total
Slide 41: OTP Bank ratings closely correlate with the 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 / Scope Moody's Moody's S&P Scope A1 12 12 A+ Moody’s S&P A2 11 11 A Moody's Hungary rating Baa2 Scope Hungary rating
Slide 42: Footnotes and Glossary
Footnotes and Glossary Slide 6 Profit after tax and Total assets calculated with 358.52 / 364.27 (2021 / 1Q 2022) HUF/EUR average exchange rate and 369.00 / 369.62 (2021 / 1Q 2022) HUF/EUR closing exchange rate Loan growth: FX-adjusted performing (Stage 1 + Stage 2) loan growth year-on-year in 2021
Slide 43: Investor Relations & Debt Capital Markets
Investor Relations & Debt Capital Markets Tel: + 36 1 473 5460; + 36 1 473 5457 Fax: + 36 1 473 5951 E-mail: investor.relations@otpbank.hu www.otpbank.hu 43
OTP Bank Nyrt. — Debt Investor Presentation (June 2022) on 6ix