Otp Bank Nyrt · BET:OTP
Otp Bank Nyrt — OTP Bank — Q2 2006 Earnings Presentation
41 slides from Otp Bank Nyrt's earnings presentation, Sep 12, 2006
Slide 1: OTP BANK – 2006 second quarter results
OTP BANK – 2006 second quarter results INVESTOR PRESENTATION Presented by: Dr. Zoltán Spéder, CFO September, 2006
Slide 2: Agenda
Macroeconomic environment and financial intermediary 3-7 Financial performance (consolidated, IFRS) 9-19 Market position in Hungary (HAR) 21-27 OTP Subsidiaries in the Region 29-30 Major developments affecting OTP Group’s medium term strategy 32-40
Slide 3: Main macroeconomic indicators in Hungary
07/09/2006 Main macroeconomic indicators in Hungary 2004 2005 2006 F 2007 F 2008 F 2009 F 2010 F Real GDP 5.2% 4.1% 4.1% 2.4% 3.7% 4.3% 5.4% Final household consumption 3.6% 1.4% 2.1% -3.0% 0.7% 3.8% 4.4% Public consumption 0.7% -0.9% 2.0% -3.0% 0.0% 1.0% 3.5% Investment 8.0% 6.6% 4.5% 3.8% 6.1% 7.6
Slide 4: Austerity package induced significant changes in the macroeconomic environment
07/09/2006 Austerity package induced significant changes in the macroeconomic environment which is indicated by the after package forecast Real GDP Final household consumption Budget deficit as a % of GDP 6% 5.4% 5% 4.4% 0% 3.9% 3.8% -1% 4.5% 4% 5% 4.3% -2% 4.1% 2.7% 3% 3.3% -3% -3.7% -3.7% 3.7% 3.7
Slide 5: Base rate increased by 125 bps to 7.25% YTD 2006
07/09/2006 Base rate increased by 125 bps to 7.25% YTD 2006 Interest rates Changes of base rate 10% 30-Jun-06, 8.13% 2003 + 400 bp 30-Jun-06, 7.94% 2004 - 300 bp 9% 30-Jun-06, 6.82% 2005 - 350 bp 30-Jun-06, 6.25% 2006 (June-August) + 125 bp 8% 2006 F + 150 bp 1-Jul-05, 7.00% 28-Feb-06, 6.80% 7% Base
Slide 6: Main macroeconomic indicators of countries of foreign subsidiaries
07/09/2006 Main macroeconomic indicators of countries of foreign subsidiaries Real GDP Budget deficit as a % of GDP 8% 3% 7% 1% 6% -1% -3% 5% -5% 4% -7% 3% -9% 2% -11% 2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010 Bulgaria Slovakia Croatia Romania Bulgaria Slovakia Croatia Romania Serb
Slide 7: Banking market has low penetration and promising growth potential in subsidiary countries
07/09/2006 The banking market has low penetration and promising growth potential in the countries of the subsidiaries Total assets to GDP Total deposits to GDP 140% 100% 120% 80% 100% 60% 80% 40% 60% 20% 40% 0% 2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010 Bulgaria Slovakia Croatia Rom
Slide 8: Agenda
Macroeconomic environment and financial intermediary 3-7 Financial performance (consolidated, IFRS) 9-19 Market position in Hungary (HAR) 21-27 OTP Subsidiaries in the Region 29-30 Major developments affecting OTP Group’s medium term strategy 32-40
Slide 9: OTP Bank realised HUF 46.7 billion consolidated profit after tax in 2Q 2006
07/09/2006 OTP Bank realised HUF 46.7 billion consolidated profit after tax in 2Q 2006 Financial highlights of OTP Group (consolidated, IFRS) 2005 2Q 2006 1Q 2006 2Q Q-o-Q Y-o-Y 2005 1H 2006 1H Y-o-Y Total assets (HUF bn) 4,693.0 5,444.8 5,735.3 5.3% 22.2% 4,693.0 5,735.3 22.2% Total loans and advan
Slide 10: Consolidated assets grew by 5.3% in 2Q 2006
07/09/2006 Consolidated assets grew by 5.3% in 2Q 2006 and by 22.2% on a yearly bases HUF bn Assets HUF bn Liabilities 6000 5,735.3 6000 5,735.3 5,444.8 Other assets 5,444.8 Equity 5,215.9 5,215.9 598.7 4,910.4 4,910.4 539.1 5000 4,693.0 5000 4,693.0 547.5 Investment 523.9 476.3 securities Other 400
Slide 11: Consolidated gross loans increased by 8.0% Q/Q and deposits by 5.6%
07/09/2006 Consolidated gross loans increased by 8.0% Q/Q and by 23.8% Y/Y, while deposits by 5.6% and 18.1% respectively Gross loans by business lines Gross loans by countries Change Q/Q: +8.0% Q/Q HUF bn Y/Y: +23.8% HUF bn 4000 3,690.6 Change 4000 3,690.6 3,417.7 Q/Q 3,417.7 +79.3% 3,297.2 3,297.2
Slide 12: NPL ratio stood at 4.2% on June 30, 2006
07/09/2006 NPL ratio stood at 4.2% on June 30, 2006 HUF bn Volume of qualified loans Qualified and NPL ratio 600 16% 505.6 13.5% 13.7% 500 12.4% 12.8% 12.5% 417.6 420.7 428.6 71 371.1 12% 3.8% 4.2% 400 60 64 87 49 3.3% 3.6% 3.9% 53 26 28 35 23 32 28 23 25 300 24 8% 200 350 301 302 294 9.1% 9.7% 9.1%
Slide 13: Capital adequacy ratio of OTP Bank stood at 10.74%
07/09/2006 Capital adequacy ratio of OTP Bank stood at 10,74% on June 30, 2006 Consolidated shareholder’s equity Non-consolidated shareholders’ equity HUF bn Q/Q: +11.1% HUF bn Q/Q: +6.3% 700 Y/Y: +25.7% 600 Y/Y: +12.5% 598.7 600 547.5 539.1 465.2 473.3 479.3 523.9 500 451.1 476.3 426.2 500 400 400
Slide 14: Net interest margin dropped by 12 bps compared to 1Q 2006
07/09/2006 Net interest margin dropped by 12 bps, without swaps grew by 30 bps compared to 1Q 2006 Net interest income Net interest margin Q/Q: +2.5% (w/o swap: +10.4%) HUF bn Y/Y: -4.9% (w/o swap: +11.9%) 100 7.0% 80.0 73.1 76.9 74.8 71.3 6.52% 80 6.32% 6.32% 3.7 6.5% 60 3.4 6.23% 6.03% 6.0% 6.23%
Slide 15: Cost income ratio increased by 230 bps to 55.9% in 2Q 2006
07/09/2006 Cost income ratio increased by 230 bps to 55.9% in 2Q 2006 Non interest income Cost/income ratio Q/Q: +230 bp HUF bn Q/Q: +10.9% 70% Y/Y: -90 bp 80 71.5 Y/Y: +46.4% 63.8 64.5 56.3 Other 60 18.5 60% 56.8% 56.2% 55.9% 48.8 56.7% 19.4 Insurance 53.5% 19.3 18.0 40 18.3 Dividend 50% 49.7% 51.8
Slide 16: Net fees and commissions increased by 1.8% Q/Q and 10.9% Y/Y
07/09/2006 Net fees and commissions increased by 1.8% Q/Q and by 10.9% Y/Y Fee and commission income Fee and commission expenses HUF bn HUF bn 40 Q/Q: +7.0% 10 Q/Q: +29.3% 35.8 Y/Y: +24.6% 34.2 33.5 Y/Y: +115.9% 5.4 8.1 29.9 28.8 7.6 5.4 8 30 5.2 6 6.2 6.3 3.2 10.6 6 5.2 9.5 20 9.5 2.3 2.4 8.5 8.8 3
Slide 17: Personnel expenses higher by 16.4%, other non-interest expenses up 21.7%
07/09/2006 Personnel expenses were higher by 16.4%, while other non-interest expenses grew by 21.7% q/q Personnel expenses Other non-interest expenses HUF bn Q/Q: +16.4% HUF bn Q/Q: +21.7% 40 Y/Y: +10.6% 40 Y/Y: +22.3% 27.9 29.7 30 26.1 26.4 30 27.2 27.3 23.9 24.4 22.7 24.3 24.4 20 20 25.5 24.9 24.5
Slide 18: Consolidated ROE stood at 32.9%, ROA at 3.34% in 2Q 2006
07/09/2006 Consolidated ROE stood at 32.9%, ROA at 3.34% in 2Q 2006 Profit after tax EPS, diluted HUF bn Q/Q: +1.2% HUF 50 Y/Y: +22.7% 46.2 46.7 200 179 180 41.0 40.9 38.1 155 155 40 145 150 30 100 20 50 10 0 0 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 Return on
Slide 19: Domestic subsidiaries' results
07/09/2006 Within domestic subsidiaries OTP Garancia Insurance reached HUF 2.6 bn; Merkantil Group HUF 2.0 bn; OTP Fund Management HUF 1.1 bn profit after tax OTP Bank (non-cons) OTP Mortgage Bank Merkantil Group OTP Garancia Insurance OTP Fund Management 2006 2Q Change 2006 2Q Change 2006 2Q Change
Slide 20: Agenda
Macroeconomic environment and financial intermediary 3-7 Financial performance (consolidated, IFRS) 9-19 Market position in Hungary (HAR) 21-27 OTP Subsidiaries in the Region 29-30 Major developments affecting OTP Group’s medium term strategy 32-40
Slide 21: OTP Group maintains its leading position on the Hungarian market
07/09/2006 Despite losing market share in some segments, OTP Group maintains its leading position on the Hungarian market Market share Change Market share Change (2006.06.30.) Q-Q (Y-Y) (2006.06.30.) Q-Q (Y-Y) Total assets 23.5% -0.2%p (-0.3%p) Total deposits 25.1% -0.2%p (-2.1%p) Total loans 20.7%
Slide 22: Market share in retail deposits declined to 33.3%
07/09/2006 OTP Group’s market share in retail deposits declined to 33.3% in Hungary Retail deposits of credit institutions Market share – OTP Group HUF bn 8000 35% 40% 27.6% 28.6% 25.1% 27.0% 23.3% 5,811 5,957 30% 5,667 38% 6000 5,268 5,268 36.4% 36.8% 665 748 25% 36.0% 36.0% 639 35.6% 585 619 36% 3
Slide 23: Market share in HUF and FX housing loans
07/09/2006 OTP Group lost market share in HUF housing loans, while share in FX housing loans increased to 24.0% Housing loans of credit institutions Market share – OTP Group HUF bn 2,526 2500 2,283 2,367 30% 60% 53.1% 52.9% 52.7% 52.4% 52.0% 2,175 736 2,055 29.1% 734 566 50% 2000 372 472 24% 272 48.
Slide 24: Market share in household consumer loans reached 24.9%
07/09/2006 OTP Group market share in household’s consumer loans reached 24.9% in the second quarter of 2006 Consumer loans of credit institutions Market share – OTP Group HUF bn 2000 1,858 60% 35% 29.7% 29.5% 28.7% 28.9% 1,618 28.1% 50% 30% 1600 1,503 1,380 52.1% 25% 1,233 46.7% 40% 24.0% 24.7% 24.4
Slide 25: OTP Group is amongst the top players in corporate banking
07/09/2006 OTP Group is amongst the top players also in the corporate banking sector Corporate loans Corporate deposits (volume of credit institutions and OTP Group) (volume of credit institutions and OTP Group) HUF bn HUF bn 9000 4500 7,998 3,846 3,910 8000 7,492 4000 7,180 3,444 6,735 3500 3,336 7
Slide 26: Net asset value of OTP Funds decreased by 1.9% in 2Q 2006
07/09/2006 Net asset value of OTP Funds decreased by 1.9% in 2Q 2006 but increased by 16.4 % on a yearly bases Market volume of mutual funds Net asset value of OTP Funds HUF bn HUF bn 2500 800 708 695 2,078 2,084 700 654 665 53 81 1,876 1,877 576 73 2000 600 86 402 425 46 47 1,553 268 500 56 362 49
Slide 27: OTP Garancia is the 2nd largest life insurance company in Hungary
07/09/2006 OTP Garancia is the 2th largest life insurance company in Hungary with 11.6% share of premium income Life and non-life premium income (market) Life and non-life premium income (OTP Garancia) HUF bn HUF bn 50 300 250 40 206.8 191.8 200 170.7 176.1 162.8 30 150 116.7 96.9 21.2 20.8 87.6 19.
Slide 28: Agenda
Macroeconomic environment and financial intermediary 3-7 Financial performance (consolidated, IFRS) 9-19 Market position in Hungary (HAR) 21-27 OTP Subsidiaries in the Region 29-30 Major developments affecting OTP Group’s medium term strategy 32-40
Slide 29: OTP Bank is represented in eight countries in the region
07/09/2006 OTP Bank is represented in eight countries in the region OTP Group OTP Banka Slovensko Raiffeisenbank Ukraine*** Investsberbank*** Branches* 1,012 Branches 82 Branches 55 Branches 78 Employees 18,905 Employees 788 Number of clients ~50 th Number of clients ~880 th Number of clients* ~9,0
Slide 30: Contribution of foreign subsidiaries to consolidated profit grew to 11.5%
07/09/2006 Contribution of foreign subsidiaries to the consolidated profit grew to 11.5% Share of foreign Niska subsidiaries DSK Group OTP Banka Slovensko OTP banka Hrvatska* OTP Bank Romania banka 2006 2Q Change 2006 2Q Change 2006 2Q Change 2006 2Q Change 2006 2Q 2006 1H Change Main balance sheet
Slide 31: Agenda
Macroeconomic environment and financial intermediary 3-7 Financial performance (consolidated, IFRS) 9-19 Market position in Hungary (HAR) 21-27 OTP Subsidiaries in the Region 29-30 Major developments affecting OTP Group’s medium term strategy 32-40
Slide 32: Austerity package focuses on the budget's revenue side
07/09/2006 The austerity package focuses almost solely on budget’s revenue side thus preserving the current unhealthy structure on the expenditure side Structure of the fiscal savings OTP’s comments on the economics of the austerity package expenditures 2007 19% The budget deficit will be reduced
Slide 33: Government stabilization approach sacrifices higher economic growth
07/09/2006 Governments’ approach to stabilize state budget sacrifices higher economic growth than expected earlier Assumptions in the Effects of the austerity package New forecasts original strategy HUF 550 bn unexpected increase in government 7.7 spending (ineffective spending freeze in 2005 hit
Slide 34: Expectations shifted to weaker HUF and higher interest rates
07/09/2006 Expectations on monetary conditions shifted to weaker HUF (HUF/EUR up by 15- 25 HUF) and 150-200 bps higher interest rates Comparing new estimate on NBH base rate to forecasts in the original strategy and current market forward swap yields 10% The chance for a sudden and sharp rate hike 9
Slide 35: Income shock split between consumption and net savings
07/09/2006 Income shock will be split between consumption and net savings, and slow down the credit driven financial deepening Estimated change in households’ net real The income shock will be split between income 2006-2010 consumption and net savings, and slow down the credit driven financial deepe
Slide 36: Austerity package to decrease OTP Group's net results by 5-10%
07/09/2006 Impacts of the austerity package will cause app. 5-10% decrease of OTP Group’s net results between 2006 and 2010 ESTIMATE Bottom line effect compared to strategic plan published in April 2006, HUF bn 2006 2007 2010 CAGR Original strategy’s profit target 185 208 317 15% (published on April
Slide 37: OTP has entered new markets with high growth opportunity
07/09/2006 OTP has entered new markets with high growth and excellent value creation opportunity Strong growth potential Low current Total loans as % of GDP, 2005 (bars) penetration, less and expected CAGR of loans in LCY uncertain expectations, 2005-2010, (in circles) lower interest rates, better
Slide 38: Main characteristics of OTP Bank's acquisitions
07/09/2006 Main characteristic of OTP Bank’s ytd acquisitions Date of trx Price P/BV Equity, m € Total assets, m € Profit bt, m € No of branches IRB (SK) 2002 € 17 m 0.5 +16% +22% +30 1260 -15 6 38 76 489 52 82 OTP Banka Slovensko +34% +36% 2918 +78% +62 356 DSK Bank (BG) 2003 € 311 m 2.2 355 79 294
Slide 39: Key descriptive data of enlarged OTP Group
07/09/2006 Entering Ukraine, Russia and Serbia is a significant step in OTP’s growth story Key descriptive data of enlarged OTP Group OTP Group Newly Enlarged OTP excluding new acquired Group total subsidiaries subsidiaries Number of 976 213 1,189 (+22%) branches (2005) Number of ~10 million ~1.1 mi
Slide 40: After new acquisitions, targeted profit growth increases to 17%
07/09/2006 After new acquisitions, OTP Group’s targeted profit growth increases to 17% between 2006 and 2010 ESTIMATE Bottom line effect compared to strategic plan published in April 2006, HUF bn 2006 2007 2010 CAGR Original strategy’s profit target 185 208 317 15% (published on April AGM) Austerity
Slide 41: OTP Bank Investor Relations
Further information OTP Bank Investor Relations Tel: + 36 1 473 5460 E-mail: investor.relations@otpbank.hu + 36 1 473 5457 Website: www.otpbank.hu Fax: + 36 1 473 5951 Forward looking statements This presentation contains certain forward-looking statements with respect to the financial condition, re