Otp Bank Nyrt · BET:OTP
Otp Bank Nyrt — Otp Bank S/Adr R — FY2023 Earnings Presentation
33 slides from Otp Bank Nyrt's earnings presentation, Mar 8, 2024
Slide 1: OTP Group Full year 2023 results
OTP Group Full year 2023 results Conference call – 8 March 2024 László Bencsik, Chief Financial and Strategic Officer
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: 2023 consolidated profit after tax HUF 990 billion
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 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: Total assets exceeded EUR 100 billion; foreign profit contribution
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: OTP Core profit after tax and key indicators
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 highs
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 corporate and micro loans; subsidized lending schemes
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 income and NIM decomposition
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 D NII D NIM income (HUF bi
Slide 10: 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: Ipoteka Bank Uzbekistan 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: Ipoteka Bank Stage 3 ratio increase drivers
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 beh
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: Q-o-q performing loan volume changes
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: Y-o-y performing loan volume changes
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 up 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 21% y-o-y
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
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 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 up 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 billion) (HUF 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% 1.8% Stage
Slide 24: Decomposition of change in CET1 ratio
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 HUF 4
Slide 25: Group capital position stable and improved
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 26: MREL ratio and recent senior bond issuances
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 27: Robust liquidity position and redemption profile
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 28: ESG results, targets and ratings
The delivery of ESG obligations and goals set by the Bank’s ESG strategy are 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 29: 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 30: Group surpassed all management expectations for 2023
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 31: Management guidance for 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 32: 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", "expe
Slide 33: Questions and Answers session
Questions and Answers session 33