Otp Bank Nyrt · BET:OTP
Otp Bank Nyrt — Q1 2020 Earnings Presentation
42 slides from Otp Bank Nyrt's earnings presentation, 2020
Slide 1: OTP Group Investor presentation based on 1Q 2020 results
OTP Group Investor presentation based on 1Q 2020 results Strong liquidity and capital position despite proactive provisioning, successful adaptation to the fast changing operating environment
Slide 2: Update on the recent operational environment amid COVID-19
Update on the recent operational environment amid COVID-19 Baseline macro scenarios were revised Broad range of measures introduced by monetary authorities, regulators and governments Rate changes, liquidity boosting steps, reduced/eliminated mandatory reserve requirements, lending facilities Divide
Slide 3: 1Q 2020 accounting profit turned negative on higher risk costs and adjustments
In 1Q 2020 the accounting profit turned into red as a result of higher risk costs and elevated quarterly adjustments. The profit contribution of foreign subsidiaries declined both y-o-y and q-o-q After taxforintban) (milliárd profit development q-o-q (in HUF billion) After tax profit development (in
Slide 4: 1Q 2020 adjustments shaped by banking tax and debt repayment moratorium
In 1Q 2020 the balance of adjustments was shaped mainly by the banking tax in Hungary and Slovakia and the negative impact of debt repayment moratorium in Hungary (in HUF billion) 1Q 19 4Q 19 1Q 20 Q-o-Q Y-o-Y Consolidated after tax profit (accounting) 72.6 103.0 -4.1 Adjustments (total) -17.8 -3.0
Slide 5: COVID-19 related loan repayment moratoria in the countries of OTP Group
COVID-19 related loan repayment moratoria in the countries of OTP Group: in 1Q the expected one-off negative effect of the Hungarian scheme was already booked Initiation Interest charged Participation of (state/regulator or on unpaid Scope of eligible clients Term of the moratorium clients voluntary
Slide 6: 1Q operating profit without acquisitions improved 3% y-o-y
The 1Q operating profit without acquisitions improved by 3% y-o-y; the quarterly setback was shaped by the decline in net fees and other income. The lower adjusted profit was driven by the sharply increasing risk costs Y-o-Y Q-o-Q 1Q 20 Y-o-Y FX-adj. FX-adj. (in HUF billion) 1Q 19 1Q 20 Y-o-Y 4Q 19
Slide 7: Profit by banking operation declined on elevated risk costs
All major banking operations suffered a decline in profit as a result of elevated risk costs in 1Q; in case of OTP Fund Management seasonality was the major driver (after HUF 14 billion earned as success fee in 4Q 2019) Adjusted profit after tax (in HUF billion) 4Q 2019 1Q 2020 Q-o-Q OTP Group 106.0
Slide 8: DPD90+ ratio declined but impairments grew; credit risk cost rate above 2.5%
Despite the DPD90+ ratio declined further in 1Q, impairments grew significantly as a response to COVID-19; the consolidated credit risk cost rate surged above 2.5% Change in DPD90+ loan volumes (consolidated, without the Consolidated provision for impairment on loan and placement technical effect of
Slide 9: Corporate exposures classified by expected COVID-19 impact
Based on macro scenarios and the potential COVID-19 impact on specific economic sectors OTP Group classified the corporate1 exposures into four categories. 70% of the portfolio is in sectors with light / no impact expected Cons. Core DSK OBH OBSrb SKB OBR OBU OBRu CKB OBA Mobias OBS Merk. (Hungary)
Slide 10: Stage 1, 2 and 3 ratios development
No material change in portfolio behavior in 1Q 2020; the Stage 2 ratio increased due to reclassification of certain COVID-19 impacted corporate + MSE segments to Stage 2 in line with EBA and ESMA guidelines Development of the Stage 1, Stage 2 and Stage 3 ratios (in % of total gross loans) Cons. Core
Slide 11: Own provision coverage ratio developments
The own coverage ratio developments were driven mainly by two factors: (1) Stage 1 coverage key changes due to macro updates in forward-looking calculations, and (2) increased amount of Stage 2 exposures Development of the own provision coverage ratios in the three Stage categories Cons. Core DSK OB
Slide 12: DPD90+ volumes increased by HUF 30 billion in 1Q 2020
In 1Q 2020 DPD90+ volumes increased by HUF 30 billion (adjusted for FX effect and sales and write-offs) FX-adjusted quarterly change in DPD90+ loan volumes (without the effect of sales / write-offs, in HUF billion) Consolidated OTP Core OBRu OBU DSK Group OBR (Hungary) (Russia) (Ukraine) (Bulgaria)
Slide 13: Strong capital position, ratios above regulatory requirements
Strong capital position, all capital ratios well above the regulatory requirements Evolution of CET1=Tier 1 and CAR ratios Decomposition of the change in CET1 ratio in 1Q 2020 Tier 2 CET1 including profit less dividend (if applicable) -0,2% -0.2pp +0.1pp 0,0% -0,1% 18.2% 18.3% -0.0pp -0.1pp 17.3% 16
Slide 14: Robust liquidity position: EUR 2.7 billion buffer over LCR requirement
Robust liquidity position: EUR 2.7 billion liquidity buffer over the LCR requirement; the current economic situation is rather liquidity generating than consuming Liquidity position is sound… Key liquidity ratios (in EUR billion) Regulatory approach Economic approach Required 4Q 1Q level 2019 2020 2
Slide 15: NBH interest rate hike positively impacts 2020 net interest income
NBH interest rate hike has a considerable positive impact on 2020 net interest income NBH improved the liquidity and the financial stability through several steps NBH measures Goal OTP Bank’s participation Potential impact on OTP Funding for Growth Scheme Go! Boosting loan volumes without reducing A
Slide 16: Net interest income kept increasing despite eroding net interest margin
Despite the eroding net interest margin the net interest income kept on increasing on the back of Effect of acquisitions, supported also by the performing loan volume growth acquisitions Adjusted after-tax profit Effect of acquisitions Net interest income (in HUF billion) closed in 2019 (in HUF bill
Slide 17: Total income grew 6% y-o-y without acquisitions
Total income grew by 6% y-o-y without acquisitions. The quarterly decrease was driven mainly by the base Effect of effect of the success fee income at OTP Fund Mgmt. booked in 4Q, and the q-o-q declining other income acquisitions TOTAL INCOME 1Q 2020 Y-o-Y Q-o-Q without one-off items (HUF billion) (
Slide 18: Annual net interest income increased 10% without acquisitions
The annual net interest income increased by 10% without acquisitions; on quarterly basis the growth was Effect of driven by the newly consolidated Slovenian SKB, filtering that out the NII declined by 1% acquisitions NET INTEREST 1Q 2020 Y-o-Y Q-o-Q % INCOME (HUF billion) (HUF billion, %) (HUF billi
Slide 19: Performing loans expanded 3% q-o-q
Consolidated performing (Stage 1+2) loans expanded by 3% q-o-q. The 11% expansion in consumer loans at OTP Core was mainly due to the subsidized baby loans Q-o-Q performing (Stage 1 + 2) LOAN volume changes in 1Q 2020, adjusted for FX-effect Cons. Core DSK OBH OBSrb SKB OBR OBU OBRu CKB OBA Mobias O
Slide 20: Consolidated deposits increased 1% q-o-q
Consolidated deposits increased by 1% q-o-q, Hungarian retail deposits increased by 3% Q-o-Q DEPOSIT volume changes in 1Q 2020, adjusted for FX-effect Cons. Core DSK OBH OBSrb SKB OBR OBU OBRu CKB OBA Mobias OBS (Hungary) (Bulgaria) (Croatia) (Serbia) (Slovenia) (Romania) (Ukraine) (Russia) (Monten.
Slide 21: Consolidated 1Q net interest margin eroded by 19 bps
The consolidated 1Q net interest margin eroded by 19 bps q-o-q as a result of the full consolidation of SBK, but also due to lower margins at OTP Core, OTP Bank Ukraine and DSK Group Consolidated net interest margin development Composition 4Q 2019 Effect of SKB OTP CORE OBU (Ukraine) DSK Group Other
Slide 22: Net fee and commission income grew 11% y-o-y without acquisitions
The net fee and commission income grew by 11% y-o-y without the effect of acquisitions. The q-o-q decline Effect of was mainly due to the normal seasonality and the base effect of the performance bonus at OTP Fund Mgmt. acquisitions 1Q 2020 Y-o-Y Q-o-Q NET FEE INCOME (HUF billion) (HUF billion, %) (
Slide 23: Other income declined by HUF 10 billion q-o-q
Effect of The other income declined by HUF 10 billion q-o-q, mostly due to OTP Core and Croatia acquisitions OTHER INCOME 1Q 2020 Y-o-Y Q-o-Q without one-off items (HUF billion) (HUF billion, %) (HUF billion, %) OTP Group 14 -5 -7 -28%/-37%1 -10 0 -41%/-42%1 OTP CORE (Hungary) 7 -1 -15% -7 50% DSK G
Slide 24: Operating costs grew 4.5% y-o-y adjusted for acquisitions and FX
Effect of Operating costs grew by 4.5% y-o-y, adjusted for acquisitions and FX-effect acquisitions 1Q 2020 Y-o-Y Y-o-Y, FX-adjusted OPERATING COSTS (HUFCUM 2020Q1 billion) (HUF billion, %) (HUF billion, %) OTP Group 157 13 26 20% / 8.6%1 8 21 15% / 4.5%1 OTP CORE 66 4 7% 4 7% (Hungary) DSK Group (Bu
Slide 25: OTP Core market share in mortgage, cash loans and savings
OTP continued to enjoy a stable or improving market share in new mortgage and new cash loan OTP CORE disbursements, as well as in retail savings. New household loan flows moderated from the middle of March Change of mortgage loan disbursements of OTP Bank Performing (DPD0-90) cash loan volume growth
Slide 26: OTP Core corporate and MSE loan volume and market share
In the MSE segment OTP Core managed to demonstrate 4% ytd volume dynamics, whereas the micro and OTP CORE small companies segment increased by 8% ytd. OTP’s market share in corporate loans remained above 15% Performing (DPD0-90) medium and large corporate loan OTP Group’s market share in loans to Hu
Slide 27: Further details and financials
Further details and financials 27
Slide 28: Universal banking services to more than 19 million customers in 12 countries
OTP Group offers 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 1Q 2020 market share (%) Montenegro Slovakia Russia Ukraine 4% 1% Total assets 28 Romania 3
Slide 29: Unique investment opportunity to access the CEE banking sector
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 7.4 billion1 Total number of ordinary shares: 280,000,010, each having a nominal Ownership structure of OTP Bank o
Slide 30: Net loan book dominated by Hungary and tilted to retail
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 1 Breakdown of the consolidated net loan book OTP Core (Hungary) DSK Group (Bulgaria) (in HUF billion) Car-financing Car-fin
Slide 31: Deposit book dominated by Hungary and retail segment
In the deposit book Hungary and the retail segment is dominant. In Hungary and Bulgaria OTP and DSK are the largest retail deposit holders 1 Breakdown of the consolidated deposit base OTP Core (Hungary) DSK Group (Bulgaria) (in HUF billion) Corporate Corporate Retail sight By countries By products 1
Slide 32: 1Q accounting ROE hit by surge in risk costs
The 1Q accounting ROE was hit by the temporary surge in risk costs and higher negative adjustment items 2003-2008 2009-2013 1Q 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% -0.7% Adjusted ROE1 29.0% 11.6% 8.5% 9.6% 15.4% 18.7% 19.1% 2
Slide 33: 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 34: 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 Market penetration levels in Hungary in ... Net loan to deposit ratio in the 1Q 2020 data for other H
Slide 35: OTP Bank's switch to 'pandemic mode' was quick and efficient
In OTP Bank the switch to ’pandemic mode’ was quick and efficient HQ Contact Center Branch In the branches, we place special Switching to home office during emphasis on the education of digital COVID-19 was smooth due to existing channels to clients. previous practices at OTP Bank. Due to the
Slide 36: Digital channels proved a source of resilience during COVID-19
Our digital channels have proven to be a source of resilience during the COVID-19 crisis RETAIL CLIENTS Record number of new registrations in … leading to increased log-ins … our mobile app … SmartBank mobile app weekly new registrations # of digital logons (period before the pandemic = 100) (01.01.
Slide 37: Digital activity on the rise for Simple users and corporate customers
The digital activity is on the rise both in the case of Simple users and corporate customers Simple mobile app users & SimplePay Corporate Customers Growth in Simple by OTP application and in SimplePay Growth in Internetbank & SmartBank mobile app active transactions by segments, March 2020 / Februa
Slide 38: Encouraging and supporting usage of digital channels during the pandemic
During the COVID-19 pandemic we encourage and support the usage of digital channels and are prepared to maintain this higher rate Campaigns and discounts Education and processes Launch of new digital channels Discount for money transfers: the In the branches we place emphasis We are going to l
Slide 39: GDP expected to contract by 1-5% at OTP Group members
GDP is expected to contract by 1-5% at OTP Group members as a baseline scenario; amid COVID-19 there may be a downside risk Macroeconomic outlook Both external and fiscal trajectories remained sustainable, and FX mismatches have decreased heavily, so the elbow room of economic policies remained size
Slide 40: GDP expected to contract by 1-5% at OTP Group members
GDP is expected to contract by 1-5% at OTP Group members as a baseline scenario; amid COVID-19 there may be a downside risk Macroeconomic outlook Romania had one of the highest growth rate in the CEE region prior to the crisis, mostly driven by loosening of fiscal policy. Despite the initial signifi
Slide 41: OTP Bank ratings correlate with sovereign ceilings
While OTP Bank ratings closely correlate with the sovereign ceilings, subsidiaries’ ratings enjoy (rating outlook) + positive - 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 42: 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