Otp Bank Nyrt · BET:OTP
Otp Bank Nyrt — OTP Group — Q4 2019 Earnings Presentation
41 slides from Otp Bank Nyrt's earnings presentation, March 2020
Slide 1: OTP Group Investor presentation based on 4Q 2019 results
OTP Group Investor presentation based on 4Q 2019 results OTP Group has maintained strong profitability, capital adequacy and liquidity
Slide 2: 2019 accounting profit up 30%, adjusted profit up 29%
In 2019 the accounting profit surged by 30% y-o-y, while the adjusted profit grew by 29%. The profit contribution of foreign subsidiaries improved to 46% After taxforintban) (milliárd profit development y-o-y (in HUF billion) After tax profit development (in HUF billion) Accounting profit after tax
Slide 3: Annual operating profit without acquisitions improved by 22%
The annual operating profit without acquisitions improved by 22% (+19% FX-adjusted), thanks to revenue dynamics outpacing operating cost growth Y-o-Y Q-o-Q 2019 Y-o-Y FX-adj. FX-adj. (in HUF billion) 2018 2019 Y-o-Y 3Q 19 4Q 19 Q-o-Q w/o without M&A1 M&A2 Consolidated adjusted after tax profit 325.3
Slide 4: Balance of adjustments in 2019 was -HUF 6.5 billion
In 2019 as a whole the balance of adjustments was -HUF 6.5 billion, of which -HUF 3 billion emerged in the last quarter (in HUF billion) 2018 2019 Y-o-Y 4Q 18 3Q 19 4Q 19 Q-o-Q Y-o-Y Consolidated after tax profit (accounting) 318.3 412.6 30% 77.8 131.6 103.0 -22% 32% Adjustments (total) -7.0 -6.5 -8
Slide 5: Adjusted profit driven by stronger foreign contribution
The improvement in adjusted profit was mainly driven by the stronger foreign contribution, especially from Effect of Bulgaria, Ukraine, Croatia, Russia and Serbia. The Hungarian operation posted a 6% profit growth acquisitions Adjusted profit after tax (in HUF billion) 2018 2019 Y-o-Y OTP Group 325.
Slide 6: Performing loan growth since 2016
OTP Group has more than doubled its performing loan volumes since 2016, as a result of strong organic growth and acquisitions completed during the last 3 years OTP Group – performing (DPD0-90) loan growth1 FX-adjusted, in HUF billion 2016 5,836 Organic 652 +26% Components of OTP Group’s expected per
Slide 7: Acquisitions in the last 3 years improved OTP's positions
Acquisitions in the last 3 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 (4Q 16) 496
Slide 8: SKB Banka acquisition completed, OTP 4th largest in Slovenia
The acquisition of SKB Banka was completed on 13 December, thus OTP became the 4th largest player in Slovenia Slovenia, with a market share of almost 9%. The P&L of the Slovenian bank will be recognized from 1Q 2020 Market share and equity of Slovenian banks Net loans Customer deposits (4Q 2018, in
Slide 9: Strong capital position and internal capital generation
Strong capital position coupled with sound internal capital generation Evolution of CET1 / CAR ratios Value generative acquisition and dividends offset by Tier 2 CET1 including profit less dividend organic capital generation 2018 2019 18.2% 18.3% 16.4% 17.3% CET1 ratio BoP 15.3% 16.5% 2.5% 1.8% 16.3
Slide 10: Robust liquidity and funding position
Robust liquidity and funding position: 79% net loan to deposit ratio; share of wholesale debt at 5% of consolidated total assets; 169% LCR, light maturity profile with marginal refinancing needs Consolidated1 outstanding amount of wholesale debt (in EUR billion) Tier 2 bond issuance Wholesale debt a
Slide 11: Sovereign and OTP 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 OTP Bank Baa3 (0) BBB (0) OTP Mortga
Slide 12: Net interest income growth despite eroding margin
Despite the y-o-y eroding net interest margin, the booming volumes helped net interest income growth. Effect of In 2019 the completed acquisitions added HUF 29 billion to the consolidated adjusted profit acquisitions Adjusted after-tax profit Effect of acquisitions: Net interest income (in HUF billi
Slide 13: Q-o-Q performing loan volume changes
Consolidated performing (Stage 1+2) loans expanded by 12% q-o-q, o/w organic growth was 4%. The 14% expansion in consumer loans at OTP Core was mainly due to the subsidized baby loans; housing loan growth speeded up to 5% q-o-q Q-o-Q performing (Stage 1 + 2) LOAN volume changes in 4Q 2019, adjusted
Slide 14: Y-o-Y performing loan volume changes
Consolidated performing (Stage 1 + 2) loans jumped to 1.5-fold y-o-y, of which organic growth represented 15%. The Hungarian growth was even faster (22%), supported by accelerating expansion in loans to households Y-o-Y performing (Stage 1 + 2) LOAN volume changes in 4Q 2019, adjusted for FX-effect
Slide 15: Q-o-Q deposit volume changes
Consolidated deposits increased by 10% q-o-q (+4% w/o acquisitions). Hungarian retail deposits increased by 4% Q-o-Q DEPOSIT volume changes in 4Q 2019, adjusted for FX-effect Cons. Core DSK OBH OBSrb OBR OBU OBRu CKB OBA Mobias OBS (Hungary) (Bulgaria) (Croatia) (Serbia) (Romania) (Ukraine) (Russia)
Slide 16: Y-o-Y deposit volume changes
Consolidated deposits went up by 34% y-o-y, even without acquisitions the growth was double digit (+11%). The strong Hungarian household deposit inflow continued, but Bulgaria, Ukraine and Romania also saw fast increase in deposits Y-o-Y DEPOSIT volume changes in 4Q 2019, adjusted for FX-effect Cons
Slide 17: Consolidated net interest margin improved by 7 bps
The consolidated 4Q net interest margin improved by 7 bps q-o-q, mainly due to the widening margin at OTP Core Consolidated net interest margin development 4Q 2019 3Q 2019 Group wo acquisitions 4.25% Expressbank (Bulgaria) -10 bps OTP Bank Albania 0 bps OTP banka Srbija (Serbia) -3 bps Podgoricka ba
Slide 18: OTP Core net interest margin widened by 8 bps
At OTP Core the net interest margin widened by 8 basis points q-o-q, shaped by five main factors OTP CORE OTP Core net interest margin development 3Q 2019 2.77% The swap result (partly related to intra-group swaps with DSK Bank) +6 bps improved by HUF 1.2 billion q-o-q. The accounting of certain hed
Slide 19: Net interest margin development at largest Group members
In Bulgaria and Russia the net interest margin improved in quarterly comparison, but declined in Ukraine and Romania Net interest Net interestmargin margindevelopment developmentat at thethe largest Group largest members Group (%) (%) members 11 11 Net interest income grew by 8%, or HUF 2.0 billion
Slide 20: Stage 3 ratio diminished further; provision coverage
The Stage 3 ratio diminished further, while the own provision coverage of Stage 3 loans stood at 65.2%. At the end of 2019 the ratio of adjusted total provisions to Stage 3 loans ratio reached 90.6%, and the coverage of DPD90+ loans by total provisions amounted to 128.3% At the end of 2019 the total
Slide 21: OTP Core market shares in mortgage, cash loans and savings
The upward trend of housing loan disbursements remained in place. OTP continued to enjoy a stable or OTP CORE improving market share in new mortgage and new cash loan disbursements, as well as in retail savings Change of housing loan disbursements of OTP Bank Performing (DPD0-90) cash loan volume gr
Slide 22: Subsidized baby loan key statistics
OTP Bank has experienced huge demand for the newly introduced subsidized baby loans: the contractual OTP CORE amount hit HUF 209 billion in the second half of the year, which is consistent with close to 45% market share Subsidized baby loan – key statistics for the second half of 2019 Contractual am
Slide 23: Corporate loan growth and market share
In the MSE segment OTP Core managed to demonstrate 14% y-o-y volume dynamics, whereas the medium OTP CORE and large corporate loans increased by 18% y-o-y. OTP’s market share in corporate loans got close to 16% Performing (DPD0-90) medium and large corporate loan OTP Group’s market share in loans to
Slide 24: Management expectations for 2020 – 1
Management expectations are fundamentally positive for 2020, credit demand might temporarily moderate in 2Q OTP Group: Management expectations for 2020, as of 6 March 2020 – 1. Management expectations for 2020 are overall positive and assume supporting operating environment. However, recent developm
Slide 25: Management expectations for 2020 – 2
The proposed dividend to be paid after the 2019 financial year is HUF 69.44 billion (+13% y-o-y) OTP Group: Management expectations for 2020, as of 6 March 2020 – 2. Concerning capital adequacy, there is no change in the targeted CET1 = Tier1 ratio range mid-point of 15%, which was set in November 2
Slide 26: Further details and financials
Further details and financials 26
Slide 27: Universal banking services to more than 19 million customers
OTP Group is offering universal banking services to more than 19 million customers in 12 countries across the CEE/CIS Region Major Group Members in Europe Total Assets Systemic position in Hungary… Albania Moldova 4Q 2019 market share (%) Montenegro Slovakia Russia 1% Total assets 29 Ukraine 5% 2% R
Slide 28: 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 10.8 billion1 Total number of ordinary shares: 280,000,010, each having a nominal (Q-o-Q Ownership structure of OT
Slide 29: Net loan book breakdown
The net loan book is dominated by Hungary and tilted to retail lending; more than 75% of the total book is invested in EU countries with stable earning generation capabilities Breakdown of the consolidated net loan book OTP Core1 (Hungary) DSK Group (Bulgaria) (in HUF billion) Car-financing Car-fina
Slide 30: 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 OTP Core (Hungary) DSK Group (Bulgaria) (in HUF billion) Corporate Corporate Retail sight By countries By products Ret
Slide 31: Return on Equity surpassed 20% in 2019
Return on Equity surpassed 20% in 2019 Consolidated ROE, accounting (%) 24.8 18.5 18.7 20.3 13.4 15.4 9.4 8.4 6.1 4.2 5.1 -7.4 Opportunity cost-adjusted1 consolidated accounting ROE over the average 10Y Hungarian government bond yields (%) 16.6 15.6 15.8 17.8 12.3 4.3 2.2 1.6 0.5 -1.5 -1.7 -12.2 Pri
Slide 32: Accounting ROE consistently above 15% since 2016
The accounting ROE has consistently been above 15% since 2016 on the back of moderate provision charges and vanishing negative adjustment items 2003-2008 2009-2013 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% Adjusted ROE1 29.0% 11.6% 8.5
Slide 33: Hungarian loan penetration levels still low
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 Market penetration levels in Hungary in ... Net loan to deposit ratio in the 4Q 2019 data for other H
Slide 34: Annual total income grew by 14% without acquisitions
The annual total income grew by 14% without acquisitions. The quarterly growth was driven by the excellent Effect of success fee revenues earned by OTP Fund Management (Hungary), and the newly acquired Serbian bank acquisitions TOTAL INCOME 2019 4Q 2019 2019 Y-o-Y 4Q 2019 Q-o-Q without one-off items
Slide 35: Net interest income increased by 9% without acquisitions
The annual net interest income increased by 9% without acquisitions, whereas in 4Q it grew by 5%; both Effect of changes were mainly driven by the strong loan growth acquisitions NET INTEREST 2019 4Q 2019 2019 Y-o-Y 4Q 2019 Q-o-Q 1 The full-year net interest income was % INCOME (HUF billion) (HUF bi
Slide 36: Net fee and commission income
The net fee and commission income in 4Q leaped by 14% q-o-q without the Serbian acquisition; apart from Effect of the strong business activity the key driver was the robust success fee earned by OTP Asset Mgmt (Hungary) acquisitions 2019 4Q 2019 2019 Y-o-Y 4Q 2019 Q-o-Q NET FEE INCOME % (HUF billion
Slide 37: Other income growth
Effect of The annual other income growth was boosted primarily by the better Hungarian results acquisitions OTHER INCOME 2019 4Q 2019 2019 Y-o-Y 4Q 2019 Q-o-Q 1 At OTP Core the HUF 18 billion without one-off items (HUF billion) (HUF billion) (HUF billion, %) (HUF billion, %) annual increase was driv
Slide 38: Operating costs – 2019
Operating costs grew by 6.0% y-o-y adjusted for acquisitions and FX-effect, fuelled by higher IT spending, Effect of wage inflation and intensifying business activity acquisitions OPERATING COSTS – 2019 Y-o-Y Y-o-Y Y-o-Y Y-o-Y 1 OTP Core: personnel expenses were shaped (HUF billion) 2019Q4 CUM (HUF
Slide 39: Credit quality indicators remained favourable
Credit quality indicators remained favourable. The DPD90+ ratio declined further, while the annual consolidated credit risk cost rate grew by 5 bps y-o-y Change in DPD90+ loan volumes (consolidated, without the Consolidated provision for impairment on loan and placement technical effect of new acqui
Slide 40: DPD90+ formation decreased slightly q-o-q
In 4Q 2019 the consolidated DPD90+ formation decreased slightly q-o-q, within that the Russian deterioration moderated further FX-adjusted quarterly change in DPD90+ loan volumes (without the effect of sales / write-offs, in HUF billion) Consolidated OTP Core OBRu1 OBU DSK Group OBR (Hungary) (Russi
Slide 41: 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