Otp Bank Nyrt · BET:OTP
Otp Bank Nyrt — Q1 2023 Earnings Presentation
40 slides from Otp Bank Nyrt's earnings presentation, 2023
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 2023 results
Slide 2: Group profit after tax exceeded the previous quarter by 69%
The Group's profit after tax exceeded the previous quarter by 69%. The balance of adjustments was positive, as the NKBM acquisition and the recovery of additional payments on the Sberbank bankruptcy in Hungary offset the special bank taxes Consolidated profit after tax OTP Group’s Return on Equity i
Slide 3: 1Q adjusted profit boosted by 2 months of NKBM contribution
The 1Q adjusted profit was boosted by the 2 months contribution from NKBM (HUF 13 billion). Operating profit grew 5% q-o-q organically and FX-adjusted, whereas provision charges moderated significantly. 1Q adjusted ROE was 23% OTP Group (consolidated) Q-o-Q Y-o-Y Q-o-Q P&L (in HUF billion) 1Q 2022 4
Slide 4: OTP Core realized HUF 37 billion loss in 1Q 2023 excluding dividends
OTP Core realized HUF 37 billion loss in 1Q 2023 excluding dividends received from subsidiaries, primarily OTP CORE as a result of lump-sum accounting of special taxes in 1Q OTP Core (milliárd profit after tax forintban) OTP Core’s Return on Equity indicators (without dividends received from subsidi
Slide 5: Foreign subsidiaries increased profit after tax q-o-q
In 1Q 2023 the foreign subsidiaries typically increased their profit after tax q-o-q, with ROEs on average in the range of 15-25%, except for Romania. Operating cost efficiency improved across the board Profit after tax1 (HUF billion) Q-o-Q, ROE Cost / income ratio 4Q 2022 1Q 2023 FX-adjusted 1Q 202
Slide 6: Russian and Ukrainian loan volumes decreased y-o-y, deposits expanded
The Russian and Ukrainian loan volumes decreased y-o-y, while deposits expanded. In both countries there is a substantial free capital above the regulatory minimum requirement. In Ukraine, the provisioning level further improved OTP Russia OTP Ukraine Y-o-y change of volumes Gross intragroup financi
Slide 7: Total income increased by 3% q-o-q organically and FX-adjusted
Effect of Total income increased by 3% q-o-q organically and adjusted for the FX-effect, driven primarily by Hungary, NKBM Bulgaria, Slovenia and Albania acquisition 1Q 2023 Y-o-Y Q-o-Q TOTAL INCOME (HUF billion) (HUF billion, %) (HUF billion, %) OTP Group 457 73 23 96 27%/16%1 -17 23 6 1%/3%1 OTP C
Slide 8: Net interest income grew 18% y-o-y organically and FX-adjusted
Effect of Net interest income grew 18% y-o-y organically and FX-adjusted, as the weaker OTP Core performance was NKBM offset by stellar foreign performances acquisition NET INTEREST 1Q 2022 4Q 2022 1Q 2023 1Q 2023 Y-o-Y 1Q 2023 Q-o-Q 1 The 15% y-o-y drop in net interest INCOME (HUF billion) (HUF bil
Slide 9: Foreign operations drove net interest margin improvement q-o-q
Foreign operations in the CEE region played a major role in the net interest margin improvement q-o-q, as the rising but significantly lower interest rate environment than in Hungary has a favorable effect on margins 1 In the steeply increasing rate NET INTEREST MARGIN 1Q 2022 4Q 2022 1Q 2023 enviro
Slide 10: Consolidated performing loan growth was 11% q-o-q
Consolidated performing loan growth was 11% q-o-q, out of which 10%-point was explained by the NKBM acquisition. In Bulgaria and Montenegro lending remained strong, but other CEE countries slowed down. Russian corporate exposures kept melting down Q-o-Q performing (Stage 1 + 2) LOAN volume changes,
Slide 11: Performing loans expanded by 10% organically over twelve months
Consolidated performing loans expanded by 10% organically over the last twelve months. Strong growth in the CEE countries was partly offset by contraction in Russia, Ukraine and Moldova Y-o-Y performing (Stage 1 + 2) LOAN volume changes, adjusted for FX-effect Cons. Core2 DSK SKB+ OBH OBSrb OBA CKB
Slide 12: Consolidated deposits stable q-o-q without NKBM
Consolidated deposits remained stable q-o-q without the NKBM acquisition. In Hungary the slowly declining underlying trend continued in retail, but the 13th month pension paid in February gave a one-off boost; large corporate outflows were partly offset by a seasonal jump in municipal deposits. The
Slide 13: Consolidated deposits grew by 9% organically over 12 months
Consolidated deposits grew by 9% organically over the last 12 months Y-o-Y DEPOSIT volume changes, adjusted for FX-effect Cons. Core3 DSK SKB+ OBH OBSrb OBA CKB OBR OBRu OBU OBM (Hungary) (Bulgaria) NKBM (Croatia) (Serbia) (Albania) (Monten.) (Romania) (Russia) (Ukraine) (Moldova) (Slovenia) Y-o-Y n
Slide 14: Deposit franchise with strong market shares and insured retail deposits
OTP Group’s deposit collection franchise is featured by strong market shares and high share of insured retail deposits TOTAL customer deposits RETAIL deposits NON-RETAIL deposits 1Q 2023 Volume, Weight, Market Insured, Market Insured, Share of Market Insured, HUF billion % share, % % share, % % term
Slide 15: 6% decrease in net fees driven by base effect and one-offs
Effect of In 1Q the 6% decrease in net fees was driven primarily by base effect and negative one-offs in Hungary, NKBM as well as seasonality acquisition NET FEE 1Q 2022 4Q 2022 1Q 2023 1Q 2023 Y-o-Y 1Q 2023 Q-o-Q 1 At OTP Core net fees went up by 7% INCOME (HUF billion) (HUF billion) (HUF billion)
Slide 16: Other net non-interest income improved by 3% q-o-q
Effect of Other net non-interest income improved by 3% q-o-q on an FX-adjusted basis, driven mainly by OTP Core NKBM acquisition OTHER 1Q 2022 4Q 2022 1Q 2023 1Q 2023 Y-o-Y 1Q 2023 Q-o-Q 1 At OTP Core the q-o-q increase was INCOME (HUF billion) (HUF billion) (HUF billion) (HUF billion, %) (HUF billi
Slide 17: Operating costs grew by 22% y-o-y amid high inflation
Amid the high inflationary environment, operating costs grew by 22% y-o-y, adjusted for the FX-effect and Effect of NKBM the NKBM acquisition acquisition 1Q 2023 Y-o-Y Y-o-Y, FX-adjusted 1 OPERATING COSTS Drivers behind the 25% cost growth: (HUF 2023Q1 billion) CUM (HUF billion, %) (HUF billion, %)
Slide 18: Hungary mortgage applications dropped 79% y-o-y
In Hungary applications for mortgage loans dropped 79% y-o-y; OTP’s market share declined in 1Q 2023. OTP CORE OTP’s market share in cash loan sales was 41%, our market share in retail deposits further improved Y-o-y change of mortgage loan applications and disbursements Performing (Stage 1+2) cash
Slide 19: Baby loans declined q-o-q; green housing loans in demand
The baby loans contractual amounts declined q-o-q. The green housing loans generated huge demand last OTP CORE year, but actual disbursements come with a certain time delay Baby loans Green Home Programme2 Contractual amount (HUF billion) Applications for green housing loans (HUF billion) Market1 27
Slide 20: Hungarian corporate loan growth slowed, market share above 19%
In Hungary, the growth rate of corporate loans slowed down, OTP's market share remained above 19%. OTP CORE Amid the high interest rate environment, there is a strong demand for subsidized schemes in particular Performing corporate loan volume changes OTP Group’s market share in loans to (DPD0-90 lo
Slide 21: Stage 3 ratio decreased for four consecutive quarters
The Stage 3 ratio decreased in the past four consecutive quarters, despite the various headwinds. The management's provisioning policy remained conservative compared to regional banking groups Development of the Group's main credit quality Own coverage of Stage 1+2 loans compared to regional peers a
Slide 22: Development of Stage 1, 2 and 3 ratios
Development of the Stage 1, Stage 2 and Stage 3 ratios Cons. Core DSK SKB+ OBH OBSrb OBA CKB OBR OBRu OBU OBM Merk.3 NKBM2 (Hungary) (Bulgaria) (Croatia) (Serbia) (Albania) (Monten.) (Romania) (Russia) (Ukraine) (Moldova) (Hungarian (Slovenia) leasing) 4Q 20 80.4% 77.9% 81.3% 82.9% 76.6% 88.8% 79.5%
Slide 23: Development of own provision coverage ratios
Development of the own provision coverage ratios in different Stage categories Cons. Core DSK SKB+ OBH OBSrb OBA CKB OBR OBRu OBU OBM Merk.2 NKBM1 (Hungary) (Bulgaria) (Croatia) (Serbia) (Albania) (Monten.) (Romania) (Russia.) (Ukraine) (Moldova) (Hungarian (Slovenia) leasing) 4Q 20 1.0% 0.8% 1.0% 0
Slide 24: Capital and liquidity position is stable
The Group’s capital and liquidity position is stable, even though capital adequacy ratios declined q-o-q, partly driven by regulatory changes and the consolidation of NKBM. Series of successful bond issues were executed in recent months Regulatory minimum CAR and CET1 ratio Stable liquidity position
Slide 25: OTP Bank and subsidiaries credit ratings
+ 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 26: ESG obligations and goals on track
The delivery of ESG obligations and goals set by the Bank’s ESG strategy are on track according to schedule, with several new initiatives already in the field of green finance ESG RESULTS AND TARGETS ESG RATINGS 2022 Actual Long-term KPIs OTP Bank’s improving sustainability performance has been reco
Slide 27: OTP Group recognized by professional organizations
OTP Group’s outstanding performance has traditionally been recognized by professional organizations, too ’Best Bank in CEE 2023’ ’Best Bank in Hungary in 2023’ since 2012 in all consecutive years ‘Bank of the Year in 2022’ ’Best Bank in Croatia in 2023’ ’Best Bank in Montenegro in 2023’ ’Best Bank i
Slide 28: Updated management guidance for 2023
In 2023 the adjusted ROE may be close to the 2022 level due to new acquisitions, continued organic growth, stable risk profile and increasing cost pressure amid high inflation Updated management guidance for 2023 Compared to the management guidance published on 10 March 2023 the current one forecast
Slide 29: Further details and financials
Further details and financials 29
Slide 30: Universal banking services to almost 16 million active customers
OTP Group offers universal banking services to almost 16 million active customers. OTP is present in 11 countries, in most of them with a dominant market position Major Group Members in Europe Total Assets1 Systemic position in Hungary… Russia Ukraine 1Q 2023 market share (%) OTP Bank Russia Romania
Slide 31: 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 8.4 billion1 Total number of ordinary shares: 280,000,010, each having a Ownership structure of OTP Bank on 3
Slide 32: 82% of net loan book invested in EU countries
82% of the total net loan book is invested in EU countries, Hungary still represents the highest share within the Group Breakdown of the consolidated net loan book Net loan book, 1Q 2023 Hungary1 HUF 6,803 bn Bulgaria HUF 3,452 bn By country By product Leasing Leasing 6% Mortgage Mortgage 8% HUF 19,
Slide 33: 40% of deposit book held in Hungary
40% of the deposit book is held in Hungary, Bulgaria represents the second largest deposit book in the Group. Household volumes account for 57% of the total deposit base Breakdown of the consolidated deposit base Deposit base, 1Q 2023 Hungary1 HUF 10,888 bn Bulgaria HUF 4,794 bn By country By produc
Slide 34: Consolidated ROE reached 24% in 1Q 2023
The consolidated ROE reached 24% in 1Q 2023 2003-2008 2009-2013 average average 2014 2015 2016 2017 2018 2019 2020 2021 2022 1Q 2023 ROE (from profit 11.0% 29.4% 8.3% -7.4% 5.1% 15.4% 18.5% 18.7% 20.3% 10.9% 17.0% 24.0% after tax) 11.7%4 ROE (from adjusted 18.8% 29.0% 11.6% 8.5% 9.6% 15.4% 18.7% 19.
Slide 35: Economic growth expected to be moderate in 2023
Due to the effects of the war, high inflation and tight monetary conditions economic growth is expected to be moderate in 2023. In 2024 growth may pick up in the region Hungary Bulgaria Slovenia Croatia 2022 2023F 2024F 2022 2023F 2024F 2022 2023F 2024F 2022 2023F 2024F GDP growth (annual, %) 4.6 -0
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 customer loan to deposit ratio in the Market penetration levels in Hungary in ... 1Q 2023 data fo
Slide 37: Acquisitions drove almost 3.5-fold growth in loan book
Successful acquisitions played a great role in the almost 3.5-fold growth in consolidated loan book over the last six years on a pro-forma basis. At the same time, the composition of the Group shifted towards Eurozone / ERM 2 countries Consolidated performing loan growth Share of Hungary in the Grou
Slide 38: 11 acquisitions completed in the last 6 years
In the last 6 years 11 acquisitions were completed. As a result of the Ipoteka Bank acquisition in Uzbekistan, OTP Group entered the Central Asian region Target Net loans Market share Book value (seller, date of closing) (HUF billion) (before/after acquis.1, %) (EUR million) Splitska banka, Croatia
Slide 39: Acquisition of Ipoteka Bank completed in June 2023
The acquisition of Ipoteka Bank was completed in June 2023. Ipoteka is the 5th largest player in the Uzbek Uzbekistan banking sector, while it is the market leader in mortgage lending Main features of the transaction Financial highlights of Ipoteka Bank (IFRS, in HUF billion equivalent) • In June 20
Slide 40: 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