Otp Bank Nyrt · BET:OTP
Otp Bank Nyrt — Q4 2020 Earnings Presentation
45 slides from Otp Bank Nyrt's earnings presentation, 2021
Slide 1: OTP Group - Ideally positioned for post-COVID rebound
OTP Group - Ideally positioned for post-COVID rebound Investor presentation Based on 4Q 2020 results
Slide 2: Key achievements in 2020
Key achievements in 2020 13% ROE, improving operating income Stable operation amid challenges Accelerating digitalization +9% organic performing loan growth Stable loan quality and capital position Note: the organic loan growth refers to the FX-adjusted y-o-y growth in Stage 1 + 2 loan volumes, filt
Slide 3: 2020 adjusted profit declined 26% on higher risk costs
In 2020 the adjusted profit of OTP Group declined by 26% as a result of higher risk costs related mainly to the pandemic situation, meanwhile the Return on Equity remained outstanding compared with other banks active in the CEE region After tax profit (in HUF billion) Operating profit (in HUF billio
Slide 4: 4Q 2020 balance of adjustments
In 4Q 2020 the balance of adjustments was -HUF 7.1 billion, mostly related to the extended moratorium in Hungary, partly offset by the release of provisions set aside for the sale of the Slovakian bank presented on the effect of acquisitions line (in HUF billion) 2019 2020 Y-o-Y 4Q 19 3Q 20 4Q 20 Q-
Slide 5: Full-year adjusted profit without acquisitions decreased by 31%
The full-year adjusted profit without acquisitions decreased by 31% y-o-y (adjusted for FX-effect and the sale of OBS), mostly due to higher risk costs. In 4Q risk costs and operating costs surged q-o-q, but banking revenues improved, too Y-o-Y Q-o-Q 2020 Y-o-Y FX-adj. (in HUF billion) 2019 2020 Y-o
Slide 6: Stable operations during pandemic and integration milestones
Despite the pandemic OTP Bank kept its operations stable. On top of this, the agile transformation of the organization continued, and the Bulgarian and Montenegrin integration processes, as well as the sale of Slovakia were completed MILESTONES OF THE REGIONAL OPERATION DURING THE PANDEMIC EXPANSION
Slide 7: Digitalization accelerated in 2020
Digitalization accelerated in 2020: the number of digitally active clients increased, and digital developments continued smoothly even during the pandemic DIGITAL ACTIVITY DIGITAL DEVELOPMENTS During the pandemic the digital activity of OTP customers Due to the agile operation, there were no obstacl
Slide 8: Group members' annual profit declined on elevated risk costs
All major Group members suffered a significant decline in their annual profit as a result of elevated risk costs Adjusted profit after tax (in HUF billion) 2019 2020 Y-o-Y OTP Group 419.1 310.3 -26% / -31%2 OTP Core (Hungary) 191.0 159.3 -17% DSK Group (Bulgaria) 67.9 41.0 -40% / -44%3 OBH (Croatia)
Slide 9: Total income by group member
Effect of In 2020 the total income remained flat y-o-y without the effect of acquisitions and the sale of Slovakia. acquisitions In 4Q the total revenues went up by 5% q-o-q without the effect of the Slovakian disposal & OBS sale TOTAL INCOME 2020 4Q 2020 2020 Y-o-Y 4Q 2020 Q-o-Q without one-off ite
Slide 10: Net interest income by group member
Effect of The 2020 full-year net interest income remained stable without the effect of acquisitions and the sale of acquisitions Slovakia, also adjusted for FX rate changes; on a quarterly basis it expanded by 2% organically & OBS sale NET INTEREST 2020 4Q 2020 2020 Y-o-Y 4Q 2020 Q-o-Q 1 2020 FY net
Slide 11: Group net interest margin eroded by 13 bps q-o-q
The Group net interest margin eroded by 13 bps q-o-q as a result of diminishing margins in Hungary and Croatia, as well as the adverse weight changes within the Group (higher share of lower-margin businesses, lower share of Russia) Consolidated net interest margin development OTP CORE Composition 3Q
Slide 12: Q-o-Q performing loan volume changes
The consolidated performing loans increased by 3% q-o-q w/o the effect of the sale of Slovakia (FX-adjusted). The strong growth continued in Hungary, mostly induced by subsidized loans. Also, the Russian and Ukrainian volumes picked up Q-o-Q performing (Stage 1 + 2) LOAN volume changes in 4Q 2020, a
Slide 13: Y-o-Y performing loan volume changes in 2020
In 2020 the consolidated performing (Stage 1+2) loans grew by 9% organically, driven by double-digit growth rates in Hungary and Serbia, partly explained by the moratorium. The Hungarian expansion was mainly due to the subsidized baby loans and MSE loans granted under the Funding for Growth Go! sche
Slide 14: Q-o-Q deposit volume changes
Consolidated deposits increased by 6% q-o-q organically. The Hungarian and Romanian deposit growth rates excelled Q-o-Q DEPOSIT volume changes in 4Q 2020, adjusted for FX-effect Cons. Core DSK OBH OBSrb SKB OBR OBU OBRu CKB OBA Mobias (Hungary) (Bulgaria) (Croatia) (Serbia) (Slovenia) (Romania) (Ukr
Slide 15: Y-o-Y deposit volume changes
The consolidated deposits grew by 13% y-o-y organically. The steady inflow continued in Hungary, Bulgaria, Serbia, Romania and Ukraine. The Russian outflow was consistent with the loan volume developments, leaving little change in the deposit-net loan gap Y-o-Y DEPOSIT volume changes in 2020, adjust
Slide 16: Net fee income by group member
Effect of In 2020 net fees shrank by 2% y-o-y (w/o acquisitions and OBS sale) due to economic recession and lower acquisitions tourism-related revenues. The 4Q figure was boosted by the success fees at OTP Fund Mgmt (Hungary) & OBS sale 2020 4Q 2020 2020 Y-o-Y 4Q 2020 Q-o-Q 1 At OTP Core the one-off
Slide 17: Other net non-interest income
Effect of The annual other net non-interest income dropped by 7% (without the effect of acquisitions and the sale acquisitions of Slovakia). The 11% q-o-q increase in 4Q was mainly due to the higher Hungarian contribution & OBS sale OTHER INCOME 2020 4Q 2020 2020 Y-o-Y 4Q 2020 Q-o-Q 1 Full-year othe
Slide 18: Operating costs grew 2.4% organically
Effect of Operating costs grew by 2.4% y-o-y organically, adjusted for FX-effect acquisitions & OBS sale 2020 Y-o-Y Y-o-Y, FX-adjusted OPERATING COSTS 1 (HUF 2020Q4 billion) CUM (HUF billion, %) (HUF billion, %) The annual cost growth was chiefly because of higher depreciation, and to a lesser exten
Slide 19: Hungarian government and central bank measures
In Hungary the Government and Central Bank measures were the engine of economic growth Hungary Major economy protection and lending activity boosting measures with direct impact on banking operations Government measures Central Bank measures Introduction of the payment moratorium (blanket solution
Slide 20: OTP Core mortgage and cash loan market share
Hungarian mortgage loan disbursements have been rising steadily. Cash loan placements declined q-o-q in 4Q, thus the outstanding volumes slightly contracted. OTP Bank enjoys a market share over 30% in new OTP CORE mortgage and cash loan disbursements, as well as in retail savings Change of mortgage
Slide 21: Subsidized baby loans demand
OTP Bank continued to enjoy outstanding demand for the subsidized baby loans: at OTP Bank the contracted OTP CORE amount reached HUF 470 billion since the start of the program, implying a market share steadily above 40% Baby loans Contractual amounts OTP Bank's market share calculated (HUF billion)
Slide 22: Corporate and MSE loan growth, Funding for Growth Go!
In the MSE segment OTP Core achieved more than 50% volume growth in 2020, due to the outstanding OTP CORE activity in the Funding for Growth Go! scheme. OTP’s market share in corporate loans grew further Performing medium and large corporate loan volume changes OTP Group’s market share in loans to H
Slide 23: Portfolio quality and provisioning policy
Portfolio quality remained basically stable, partly due to the economy protection measures, in particular the payment moratoria; the annual consolidated risk costs increased substantially Changes in different Stage categories OTP Group’s conservative provisioning policy is demonstrated through a pee
Slide 24: Loan repayment moratoria in OTP Group countries
Loan repayment moratoria in the countries of OTP Group: in Hungary the moratorium was extended by 6 months in unchanged form. Also in Bulgaria, Croatia, Serbia and Slovenia the moratorium was extended further Details of the currently running payment holiday schemes in Currently Interest charged on A
Slide 25: Corporate exposure classified by COVID-19 vulnerability
Based on macro scenarios and the potential COVID-19 impact on specific sectors, OTP Group classified the corporate exposures into four categories. 72% of the portfolio is in sectors with light / no impact expected Classification of the corporate1 exposures based on their anticipated vulnerability (4
Slide 26: 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 Mobias 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% 8
Slide 27: 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 Mobias 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
Slide 28: Development of Stage 2 and Stage 3 ratios, peers
Development of the Stage 2 and Stage 3 ratios 4Q 19 5.3% 8.4% 11.1% 9.8% 6.9% 10.7% 6.5% 7.5% 14.5% 12.8% 14.1% 11.7% 1Q 20 8.6% 10.7% 21.4% 9.2% 9.5% 11.0% 7.0% 8.7% n/a 13.6% 13.9% 13.0% Stage 2 2Q 20 8.6% 16.2% 23.6% 9.7% 12.5% 15.6% 8.0% 9.6% 17.5% 13.4% 15.0% 13.9% ratio1 3Q 20 11.0% 16.8% 21.9
Slide 29: Provision coverage ratios in IFRS 9 categories
Development of the provision coverage ratios in IFRS 9 impairment categories Group Group w/o Russia 4Q 19 1.6% 1.2% 0.5% 0.5% 0.2% 0.4% 0.5% 0.8% 0.6% 2.7% 1.8% 1.7% 1.4% 1Q 20 2.1% 1.7% 0.6% 0.6% 0.2% 0.7% 0.6% 0.9% 0.6% n/a 2.1% 1.8% 1.7% Stage 1+2 own 2Q 20 2.2% 1.8% 0.8% 0.6% 0.6% 0.8% 0.6% 0.9%
Slide 30: Strong capital position, CET1 ratio
Strong capital position, all capital ratios are well above the regulatory requirements Decomposition of the change in CET1 ratio in 2020 and in 4Q 2020 (changes in pps) Effects impacting the CET1 ratio in 2020 -0,1% • The eligible interim profit (HUF 140.2 billion) 0,4% -0,6% +0.1 included into regu
Slide 31: Management expectations for 2020 met; outlook for 2021
The management expectations for the 2020 financial year, as updated after the release of the 3Q 2020 report, were met. For 2021 the management expects improving profitability and cost efficiency, and continued strong loan growth Management expectations for the 2020 financial year were met Expectatio
Slide 32: Dividend
The management remains committed to pay dividend, within the framework set by the National Bank of Hungary Dividend In its circular of 8 January 2021 the National Bank of Hungary instructed the Hungarian credit institutions to refrain from paying dividends or making irrevocable commitments to pay di
Slide 33: Further details and financials
Further details and financials 33
Slide 34: OTP Group offers universal banking services in 11 countries
OTP Group offers universal banking services to 18 million customers in 11 countries across the CEE/CIS Region Major Group Members in Europe Total Assets Systemic position in Hungary… Montenegro Albania 4Q 2020 market share (%) OTP Bank Russia Russia Moldova Ukraine 1% 26 3% Total assets Romania 5% 3
Slide 35: OTP Group's Capabilities
OTP 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 10.5 billion1 Total number of ordinary shares: 280,000,010, each having a nominal (Q-o-Q Ownership structure of OT
Slide 36: Net loan book breakdown
The net loan book is dominated by Hungary and tilted to retail lending; almost 80% of the total book is invested in EU countries with stable earning generation capabilities Breakdown of the consolidated net loan book Hungary1 4,820 billion Bulgaria 2,449 billion Car-financing Car-financing (in HUF b
Slide 37: Deposit base breakdown
In the deposit book Hungary and the retail segment is dominant. In Hungary and Bulgaria OTP and DSK are the largest retail deposit holders Breakdown of the consolidated deposit base Hungary1 8,092 billion Bulgaria 3,587 billion (in HUF billion) Corporate Corporate Retail sight Retail sight 16% By co
Slide 38: Accounting ROE hit by surge in risk costs
In 2020 the accounting ROE was hit mainly by the temporary surge in risk costs 2003-2008 2009-2013 2020 2014 2015 2016 2017 2018 2019 average average Accounting ROE 29.4% 8.3% -7.4% 5.1% 15.4% 18.5% 18.7% 20.3% 10.9% Adjusted ROE1 29.0% 11.6% 8.5% 9.6% 15.4% 18.7% 19.1% 20.6% 13.0% Total Revenue 8.6
Slide 39: Hungarian loan penetration levels still low regionally
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 ... 3Q 2020 data for other H
Slide 40: Performing loans grew 2.2-fold between 2016 and 2019
OTP Group’s performing loans grew to 2.2-fold between 2016 and 2019, almost equally driven by organic growth and acquisitions OTP Group – performing (DPD0-90) loan growth1 FX-adjusted, in HUF billion 2016 6,050 Organic 631 +26% Acquisitions 960 Components of OTP Group’s performing loan growth 2017 7
Slide 41: Acquisitions improved OTP's positions in many countries
Acquisitions completed in the last few years materially improved OTP’s positions in many countries Target Net loan volumes Market share in total assets Book value (seller, date of closing) (in HUF billion) (before/after acquisition2, %) (in EUR million) Splitska banka, Croatia (Nov 18) 631 4.8 11.2
Slide 42: Change in DPD90+ loan volumes
In 4Q 2020 the DPD90+ volumes decreased by HUF 3 billion (adjusted for FX effect and sales and write-offs as well as for the revaluation of Factoring claims in Hungary) FX-adjusted quarterly change in DPD90+ loan volumes (without the effect of sales / write-offs, in HUF billion) Consolidated OTP Cor
Slide 43: OTP Bank and subsidiaries' credit ratings
+ positive While OTP Bank ratings closely correlate with the sovereign ceilings, subsidiaries’ ratings enjoy (rating outlook) - negative the positive impact of parental support 0 stable Hungarian sovereign, OTP Bank and OTP Mortgage Bank ratings Moody’s S&P Fitch Moody's S&P OTP Bank Baa1 (0) BBB (0
Slide 44: OTP Bank's ESG ratings improved
OTP Bank’s ESG ratings have improved recently at Sustainalytics and the CDP score was upgraded as well Worst level Best level • Medium exposure and average score for the management of material ESG issues; • Ranked No. 45 out of 372 – 13rd percentile in the 23.5 SEVERE HIGH MEDIUM LOW NEGLIGIBLE dive
Slide 45: 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