Otp Bank Nyrt · BET:OTP
Otp Bank Nyrt — Q2 2023 Earnings Presentation
46 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 2Q 2023 results
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 over the last 6 years, 11 acquisitions; >40% of net loans in Eurozone / ERM 2, ~80% within the EU Strong profitability: 35% ROE, 28% adjusted ROE (without one-offs) in 1H 2023 S
Slide 3: In 1H 2023 OTP Group posted HUF 577 billion profit after tax
In 1H 2023 OTP Group posted HUF 577 billion profit after tax, partially supported by the badwill of two acquisitions closed in the first half-year, as well as the improvement of adjusted profit Consolidated profit after tax Key performance indicators of OTP Group (HUF billion) (%) x13 Return on equi
Slide 4: Increase in semi-annual adjusted profit after tax driven by income growth
The increase in the Group’s semi-annual adjusted profit after tax was mainly shaped by dynamic income growth and close to zero total risk cost, partly offset by the operating cost pressure OTP Group (consolidated) P&L (in HUF billion) 1H 2022 1H 2023 1H Y-o-Y 1Q 2023 2Q 2023 2Q Q-o-Q FX-adj. w/o acq
Slide 5: OTP Core achieved HUF 57 billion profit in the first half
In the first half of the year, OTP Core achieved HUF 57 billion profit after tax excluding dividends from OTP CORE subsidiaries. The half-year adjusted result is 32% lower than last year OTP Core (milliárd profit after tax forintban) Highlighted key performance indicators of OTP Core (without divide
Slide 6: Foreign subsidiary banks in the CEE region substantially increased profit
In 1H 2023 foreign subsidiary banks in the CEE region substantially increased their profit after tax, their ROE indicators were typically between 15-25%. The Russian and Ukrainian subsidiaries continued their profitable operation in 2Q as well Profit after tax1 (HUF billion) ROE Cost / income ratio
Slide 7: Total assets approached EUR 100 billion; foreign profit contribution rising
Due to the acquisitions completed in recent years and the dynamic organic growth, consolidated total assets approached EUR 100 billion, while profit contribution of foreign operations gradually increased, hitting almost 70% in 1H 2023 Total assets development of OTP Group (in EUR billion) Flags repr
Slide 8: Uzbekistan's economy has significant growth potential
Uzbekistan's economy has significant growth potential. The population is young and rapidly growing, while UZBEKISTAN the educational indicators demonstrate a favourable position even in global comparison Population (million) Comparison of the median age (2020) GDP growth (y-o-y, %) GDP per capita (U
Slide 9: Ipoteka Bank is the fifth largest bank in Uzbekistan
In terms of total assets, Ipoteka Bank is the fifth largest bank in Uzbekistan with a market share of 7.7%, IPOTEKA BANK and it is also the largest player in the mortgage market with a market share of around 25% IFRS, HUF billion / % 2020 2021 2022 Share within OTP Group Profit after tax 12 25 44 To
Slide 10: OTP Russia and OTP Ukraine volumes and capital
Russian consumer loans expanded by 16% y-o-y, while corporate lending dropped by 64%. In Ukraine the provisioning level improved further. In both countries there is a substantial free capital above the regulatory minimum requirement OTP Russia OTP Ukraine Volume changes Gross intragroup financing Vo
Slide 11: 2Q 2023 FX-adjusted total income grew by 21%
Effect of In 2Q 2023 the Group’s FX-adjusted total income grew by 21% without the NKBM acquisition, driven primarily NKBM by Hungary acquisition TOTAL INCOME 1H 2023 2Q 2023 1H 2023 Y-o-Y 2Q 2023 Q-o-Q without one-off items (HUF billion) (HUF billion) (HUF billion) (HUF billion) OTP Group 1,005 547
Slide 12: Semi-annual FX-adjusted net interest income grew organically
Effect of Semi-annual FX-adjusted net interest income grew 20% organically, as stronger foreign contributions offset NKBM the weaker Hungarian performance. The q-o-q NII growth at OTP Core was driven by technical factors acquisition NET INTEREST 1H 2023 2Q 2023 1H 2023 Y-o-Y 2Q 2023 Q-o-Q 1 At OTP C
Slide 13: Consolidated net interest margin improved q-o-q
The consolidated net interest margin improved q-o-q, thanks to the continuation of positive trends at CEE Group members. As a result of technical and one-off items, the Hungarian margin grew by 10 bps q-o-q from close to its historic lows NET INTEREST 1 OTP Core's 2Q margin was 2Q 2022 1Q 2023 2Q 20
Slide 14: OTP Core net interest margin drop mainly due to reserve rules
At OTP Core the significant y-o-y drop of net interest margin was mainly due to the negative impact of the OTP CORE changes in the mandatory reserve rules, the NKBM acquisition and the shrinking deposit volumes OTP Core - net interest income Decomposition of y-o-y NII / NIM decline NII NIM (HUF
Slide 15: Structural changes on the Hungarian retail savings market
In the wake of high inflation and high retail government bond yields, significant structural changes occurred on the Hungarian retail savings market. The total retail savings grew 12% y-o-y, within that deposits suffered HUNGARY outflows, but retail government bonds and investment funds gained popul
Slide 16: OTP's deposit market share increased by 0.9 pp y-o-y
Despite declining retail deposit volumes, OTP’s deposit market share increased by 0.9 pp y-o-y OTP CORE Retail savings volumes at OTP Core (HUF billion) OTP’s market share in Hungary 18.765 Total Retail Savings 18.765 Total Retail Savings +3% -2.4%p 9,854 10,177 32.9% 30.4% 2Q 2022 2Q 2023 2Q 2022 2
Slide 17: Performing loans increased 2% q-o-q organically
Consolidated performing loans increased by 2% q-o-q organically, driven primarily by Bulgaria and Croatia, whereas Ukrainian and Moldovan volumes continued to shrink Q-o-Q performing (Stage 1+2) LOAN volume changes, adjusted for FX-effect Cons. Core2 DSK SKB+ OBH OBSrb OBA CKB OBRu OBU OBR OBM (Hung
Slide 18: Performing loans grew 18% in the first half
Consolidated performing loans grew by 18% in the first half of the year, within that the organic growth (excluding the Nova KBM and Ipoteka Bank acquisitions) reached 3% YTD performing (Stage 1+2) LOAN volume changes, adjusted for FX-effect Cons. Core2 DSK SKB+ OBH OBSrb OBA CKB OBRu OBU OBR OBM (Hu
Slide 19: Customer deposits decreased 1% q-o-q
Consolidated customer deposits decreased by 1% q-o-q without the Ipoteka Bank acquisition, mainly as a consequence of outflows affecting Hungarian retail and corporate segments Q-o-Q DEPOSIT volume changes, adjusted for FX-effect Cons. Core3 DSK SKB+ OBH OBSrb OBA CKB OBRu OBU OBR OBM (Hungary) (Bul
Slide 20: Customer deposits decreased 1% in the first six months
Consolidated customer deposits decreased by 1% in the first six month without the effect of acquisitions YTD DEPOSIT volume changes, adjusted for FX-effect Cons. Core3 DSK SKB+ OBH OBSrb OBA CKB OBRu OBU OBR OBM (Hungary) (Bulgaria) NKBM (Croatia) (Serbia) (Albania) (Monten.) (Russia) (Ukraine) (Rom
Slide 21: 14% q-o-q increase in net fees
Effect of In 2Q the 14% q-o-q increase in net fees was driven by OTP Core and Hungarian Fund Management, NKBM as well as seasonality acquisition NET FEE 1H 2023 2Q 2023 1H 2023 Y-o-Y 2Q 2023 Q-o-Q INCOME (HUF billion) (HUF billion) (HUF billion) (HUF billion) 1 At OTP Core net fees went up by 13% q-
Slide 22: Other net non-interest income more than doubled q-o-q
Effect of Other net non-interest income more than doubled q-o-q, driven mainly by the positive fair value adjustment NKBM of baby loans and subsidized CSOK housing loans at OTP Core acquisition OTHER 1H 2023 2Q 2023 1H 2023 Y-o-Y 2Q 2023 Q-o-Q 1 At OTP Core the HUF 36 billion INCOME (HUF billion) (H
Slide 23: Semi-annual operating costs grew by 20%
Amid high inflationary environment semi-annual FX-adjusted operating costs grew by 20% without the Effect of NKBM NKBM acquisition acquisition 1H 2023 Y-o-Y Y-o-Y, FX-adjusted OPERATING COSTS 1 (HUF 2023Q2 billion) CUM (HUF billion) (HUF billion) At OTP Core the followings were the drivers behind th
Slide 24: Mortgage applications dropped 66% y-o-y in Hungary
In Hungary applications for mortgage loans dropped 66% y-o-y in 1H, but OTP’s market share improved q-o-q. OTP CORE OTP’s market share in cash loan sales was above 41%, and its retail deposit market share further improved Y-o-y change of mortgage loan applications and disbursements Performing (Stage
Slide 25: Micro and small business loans continued to grow
Micro and small business loans continued to grow, while corporate loans decreased slightly during the first OTP CORE half of the year. The popularity of subsidized lending schemes remained intact Performing corporate loan volume changes OTP Group’s market share in loans to (DPD0-90 loan changes unti
Slide 26: Stage 3 ratio continued to decline; conservative provisioning
Stage 3 ratio continued to follow a declining trend. 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 at indicators the end of 2Q 2023 83.0% 83.4% 83.4% 84.9% 85.1%
Slide 27: 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 Ipoteka OBRu OBU OBR OBM Merk. NKBM2 (Uzbek.) (Moldova) (Hungary) (Bulgaria) (Croatia) (Serbia) (Albania) (Monten.) (Russia) (Ukraine) (Romania) (Hung. (Slovenia) leasing) 4Q 20 80.4% 77.9% 81.3% 82.9% 76.6%
Slide 28: 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 Ipoteka OBRu OBU OBR OBM Merk. NKBM1 (Uzbek.) (Moldova) (Hungary) (Bulgaria) (Croatia) (Serbia) (Albania) (Monten.) (Russia) (Ukraine) (Romania) (Hung. (Slovenia) leasing) 4Q 20 1.0%
Slide 29: Group capital position is stable
The Group’s capital position is stable. Capital adequacy ratios are well above the regulatory requirements and improved q-o-q despite the consolidation of Ipoteka Bank, thanks to the inclusion of eligible 2Q profit CAR and CET1 ratios (%)1 Regulatory minimum capital requirements for OTP Group in 4Q
Slide 30: Capital strength shown by EBA stress test
The capital strength and stability of OTP Bank has been demonstrated again by the outcome of the latest stress test conducted by the European Banking Authority in cooperation with the National Bank of Hungary OTP Bank achieved the 4th best result among the OTP Bank enjoyed high rankings even in peer
Slide 31: Robust liquidity position with 76% net loan to deposit ratio
Robust liquidity position with 76% net loan to deposit ratio, 204% LCR, 145% NSFR and moderate maturity profile with marginal refinancing needs OTP Bank outstanding FX wholesale debt OTP Bank FX wholesale debt maturity profile External (in EUR million) Maturity Actual Senior Preferred ISIN Instrumen
Slide 32: OTP Bank ratings correlate with 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 Macro Factors Macro Factors Weighted Macro Profile Moderate- Anchor bbb- Financial Profile Bank-Specific Factors Combi
Slide 33: 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. At the beginning of July OTP’s ESG risk rating by Sustainalytics improved further ESG RESULTS AND TARGETS ESG RATINGS 2Q 2023 Actual Long-term KPIs OTP Bank’s improving sustainability perform
Slide 34: Awards and recognition
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 35: Management upgraded guidance for 2023
In light of the stronger than expected 1H results, management upgraded its guidance for 2023 Updated Management Guidance for 2023 The organic performing loan volume growth may reach 5% y-o-y (FX-adjusted). Based on the 1H 2023 trends, management forecasts y-o-y lower credit risk cost rate and cost-t
Slide 36: Further details and financials
Further details and financials 36
Slide 37: OTP Group offers universal banking services to 17.3 million customers
OTP Group offers universal banking services to around 17.3 million active customers. OTP is present in 12 countries, in most of them with a dominant market position Major Group Members Total Assets1 Systemic position in Hungary Ukraine Romania 2Q 2023 market share (%) OTP Bank Russia Moldova Russia
Slide 38: OTP Bank offers unique access to 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 10.0 billion1 Total number of ordinary shares: 280,000,010, each having a Ownership structure of OTP Bank on
Slide 39: 79% of net loan book invested in EU countries
79% of the total net loan book is invested in EU countries, Hungary’s share within the Group is decreased to 33% Breakdown of the consolidated net loan book Net loan book, 2Q 23 Hungary1 HUF 6,776 bn Bulgaria HUF 3,595 bn Slovenia HUF 2,761 bn By country By product Leasing Leasing Leasing 6% Mortgag
Slide 40: 38% of deposit book held in Hungary
38% of the consolidated deposit book is held in Hungary, while Bulgaria and Slovenia together hold another third. Household volumes account for 57% of the total deposit base Breakdown of the consolidated deposit base Deposit base, 2Q 23 Hungary1 HUF 10,320 bn Bulgaria HUF 4,695 bn Slovenia HUF 4,393
Slide 41: Consolidated adjusted ROE exceeded 28% in 1H 2023
The consolidated adjusted ROE exceeded 28% in 1H 2023 2003-2008 2009-2013 average average 2014 2015 2016 2017 2018 2019 2020 2021 2022 1H 2023 ROE 29.4% 8.3% -7.4% 5.1% 15.4% 18.5% 18.7% 20.3% 10.9% 17.0% 11.0% 34.7% ROE (adjusted) 29.0% 11.6% 8.5% 9.6% 15.4% 18.7% 19.1% 20.6% 13.0% 18.5% 18.8% 28.4
Slide 42: Macro expectations tend to improve
Macro expectations tend to improve Hungary Bulgaria Slovenia Croatia 2022 2023F 2024F 2022 2023F 2024F 2022 2023F 2024F 2022 2023F 2024F GDP growth (annual, %) 4.6 -1.0 2.0 3.4 1.7 2.1 2.5 1.9 2.3 6.2 2.6 2.1 Unemployment (%) 3.6 4.1 4.0 4.2 4.2 4.1 4.0 3.5 3.2 7.0 6.5 6.5 Budget balance (% of GDP)
Slide 43: Loan penetration levels 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 ... 2Q 2023 data fo
Slide 44: Acquisitions drove 3.5-fold growth in consolidated loan book
Successful acquisitions played a great role in the almost 3.5-fold growth in consolidated loan book over the last 6.5 years. At the same time, the composition of the Group shifted towards Eurozone / ERM 2 countries Consolidated performing loan growth Share of Hungary in the Group's net loan portfoli
Slide 45: 11 acquisitions completed in the last 6.5 years
In the last 6.5 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 acq.1, %) (EUR million) Splitska banka, Croatia (
Slide 46: Important Information, disclaimers and contacts
Important Information, disclaimers and contacts Referring to both equity and fixed income investors: 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 is strictly confidential to the r