Otp Bank Nyrt · BET:OTP
Otp Bank Nyrt — Q2 2020 Earnings Presentation
40 slides from Otp Bank Nyrt's earnings presentation, 2020
Slide 1: OTP Group Investor presentation based on 2Q 2020 results
OTP Group Investor presentation based on 2Q 2020 results Successful adaptation to the fast-changing operating environment: strong liquidity and capital position, ROE > 10%
Slide 2: Semi-annual accounting profit decreased by 58% y-o-y, adjusted profit by 44%
The semi-annual accounting profit decreased by 58% y-o-y, while the adjusted profit declined by 44%. In the second quarter the profit contribution of foreign subsidiaries increased significantly and reached 50% After tax profit development q-o-q (in HUF billion) After tax profit development (in HUF
Slide 3: In 2Q 2020 the balance of adjustments was -HUF 3.6 billion
In 2Q 2020 the balance of adjustments was -HUF 3.6 billion, mostly related to integration expenditures (in HUF billion) 1H 19 1H 20 Y-o-Y 2Q 19 1Q 20 2Q 20 Q-o-Q Y-o-Y Consolidated after tax profit (accounting) 178.0 74.6 -58% 105.4 -4.1 78.7 -25% Adjustments (total) -24.7 -39.5 60% -6.9 -35.9 -3.6
Slide 4: Semi-annual adjusted profit without acquisitions halved
The semi-annual adjusted profit without acquisitions halved (adjusted for FX-effect), mostly because of higher risk costs due to the forward-looking provisioning. In 2Q total risk costs declined q-o-q, but core banking revenues also moderated Y-o-Y 1H 20 Y-o-Y Q-o-Q FX-adj. (in HUF billion) 1H 19 1H
Slide 5: Strong capital position with all capital ratios well above requirements
Strong capital position with all capital ratios well above the regulatory requirements Decomposition of the change in CET1 ratio in 2Q 2020 Regulatory and other effects influencing the CET1 ratio -0,1% Regulatory changes already implemented in 2Q: 0,4% -0,6% +0.3pp • provisions for the expected cred
Slide 6: Management expectations for 2020, capital adequacy targets and dividend update
The Management disclosed its expectations for 2020, reaffirmed the capital adequacy targets and provided an update on dividend OTP Group: Management expectations for 2020 Currently there is a high degree of uncertainties around the duration of the pandemic, as well as the pace of the recovery of the
Slide 7: All major Group members, but Serbia, suffered a decline in 1H profit
All major Group members, but Serbia suffered a decline in 1H profit as a result of elevated risk costs Adjusted profit after tax (in HUF billion) 1H 2019 1H 2020 Y-o-Y OTP Group 202.6 114.1 -44% OTP Core (Hungary) 97.4 54.7 -44% DSK Group (Bulgaria) 34.2 21.5 -37% OBH (Croatia) 17.4 9.9 -43% OBSrb (
Slide 8: DPD90+ ratio increased in first half of 2020; credit risk cost surged
Regarding asset quality trends, the DPD90+ ratio increased in the first half of 2020; impairments grew significantly as a response to COVID-19 pandemic; the consolidated credit risk cost rate surged, as well Change in DPD90+ loan volumes (consolidated, without the Consolidated provision for impairme
Slide 9: In 2Q 2020 DPD90+ volumes increased by HUF 53 billion
In 2Q 2020 DPD90+ volumes increased by HUF 53 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 DSK Group OBH OBSrb (Hungary) (Bulgaria) (Croatia) (Serbia) 10
Slide 10: Corporate exposure reclassified by expected COVID-19 sector impact
Based on macro outlook and the potential COVID-19 pandemic impact on specific economic sectors OTP Group re-assessed the corporate1 exposure classifications. 70% of the portfolio is in sectors with light / no impact expected, slight change q-o-q Cons. Core DSK OBH OBSrb SKB OBR OBU OBRu CKB OBA Mobi
Slide 11: Stage 1, Stage 2 and Stage 3 ratios development
No material change in portfolio behaviour in 2Q 2020; the Stage 2 ratio remained stable q-o-q on consolidated level, while the Stage 3 ratio slightly increased due to consumer unsecured portfolio deterioration in selective countries Development of the Stage 1, Stage 2 and Stage 3 ratios (in % of tot
Slide 12: Increasing coverage ratios on Stage 2 and Stage 3 exposures
The increasing coverage ratios on Stage 2 and Stage 3 exposures were driven by updated macro forecasts, portfolio migration and moratorium participation impact Development of the own provision coverage ratios in the three Stage categories Cons. Core DSK OBH OBSrb SKB1 OBR OBU OBRu CKB OBA Mobias OBS
Slide 13: Semi-annual total income grew by 3% y-o-y without acquisitions
The semi-annual total income grew by 3% y-o-y without acquisitions, and remained stable in the second Effect of quarter acquisitions TOTAL INCOME 1H 2020 2Q 2020 1H 2020 Y-o-Y 2Q 2020 Q-o-Q without one-off items (HUF billion) (HUF billion) (HUF billion, %) (HUF billion, %) OTP Group 568 284 13 56 69
Slide 14: 1H net interest income increased by 6% without acquisitions
The 1H net interest income increased by 6% without acquisitions; on quarterly basis it decreased by 3% Effect of mainly due to the weaker Russian and Ukrainian contribution acquisitions NET INTEREST 1H 2020 2Q 2020 1H 2020 Y-o-Y 2Q 2020 Q-o-Q 1 2Q net interest income rose by 1%, INCOME (HUF billion)
Slide 15: Consolidated 2Q net interest margin eroded by 25 bps q-o-q
The consolidated 2Q net interest margin eroded by 25 bps q-o-q mainly as a result of lower margins in Bulgaria, Hungary, Ukraine and Serbia, as well as the adverse weight changes within the Group (declining share of high margin businesses) Consolidated net interest margin development DSK + Compositi
Slide 16: Consolidated performing loans stable q-o-q; consumer loans expanded
Consolidated performing (Stage 1+2) loans were stable q-o-q. Consumer loans excelled with a remarkable 8% expansion at OTP Core, while housing loans grew at an accelerating rate q-o-q (+4% in 2Q) Q-o-Q performing (Stage 1 + 2) LOAN volume changes in 1Q 2020, adjusted for FX-effect Cons. Core DSK OBH
Slide 17: In 1H consolidated performing loans grew by 2%
In 1H the consolidated performing (Stage 1+2) loans grew by 2%. The Hungarian expansion was significant with 8% growth, driven by consumer loans, especially by 'baby loans’; mortgage and corporate loan growth reached 5% YTD performing (Stage 1 + 2) LOAN volume changes in 1H 2020, adjusted for FX-eff
Slide 18: Loan repayment moratoria in the countries of OTP Group
Loan repayment moratoria in the countries of OTP Group: the Hungarian participation rate showed a declining trend; the application deadlines were extended in Bulgaria and Romania, whereas in Serbia the second phase started in August Interest charged Participation of Scope of eligible Participation o
Slide 19: Consolidated deposits increased by 2% q-o-q
Consolidated deposits increased by 2% q-o-q. The Hungarian retail deposits increased by 6%, partly driven by the debt repayment moratorium. The contraction of the Russian deposit base was in line with the shrinkage of the loan portfolio Q-o-Q DEPOSIT volume changes in 2Q 2020, adjusted for FX-effect
Slide 20: Consolidated deposits increased by 3% compared to end-2019
Consolidated deposits increased by 3% compared to end-2019, within that the Hungarian retail deposit base grew by 9% YTD DEPOSIT volume changes in 1H 2020, adjusted for FX-effect Cons. Core DSK OBH OBSrb SKB OBR OBU OBRu CKB OBA Mobias OBS (Hungary) (Bulgaria) (Croatia) (Serbia) (Slovenia) (Romania)
Slide 21: Net fees grew by 1% y-o-y without acquisitions
In the first six month net fees grew by 1% y-o-y without acquisitions. The q-o-q decline in the second Effect of quarter was mostly related to Russia; the Hungarian q-o-q development was supported by one-off items acquisitions 1H 2020 2Q 2020 1H 2020 Y-o-Y 2Q 2020 Q-o-Q NET FEE INCOME 1 One-off item
Slide 22: Other net non-interest income dropped by 18% in 1H
In 1H the other net non-interest income dropped by 18% without acquisitions, despite the one-off gain on Effect of Visa shares booked in 2Q. The other income in 2Q recovered from 1Q lows even without the Visa gain acquisitions OTHER INCOME 1H 2020 2Q 2020 1H 2020 Y-o-Y 2Q 2020 Q-o-Q 1 In 2Q the othe
Slide 23: Operating costs grew by 2.6% y-o-y adjusted for acquisitions and FX
Effect of Operating costs grew by 2.6% y-o-y in the first half of the year, adjusted for acquisitions and FX-effect acquisitions 1H 2020 Y-o-Y Y-o-Y, FX-adjusted 1 OPERATING COSTS At OTP Core the semi-annual operating (HUF 2020Q2 billion) CUM (HUF billion, %) (HUF billion, %) expenses grew by 6%, as
Slide 24: New housing loan flows kept expanding; improving OTP Core market share
New housing loan flows kept on expanding in the second quarter. OTP continued to enjoy an improving OTP Core market share in new mortgage loan disbursements, as well as in retail savings Change of mortgage loan disbursements of OTP Bank Performing (DPD0-90) cash loan volume growth (FX-adjusted) 2Q 2
Slide 25: Outstanding demand for subsidized baby loans
OTP Bank continued to enjoy outstanding demand for the subsidized baby loans: at OTP Bank the contracted OTP Core amount reached HUF 341 billion since the start of the program, implying a market share steadily above 40% Baby loans Contractual amounts OTP Bank's market share calculated (HUF billion)
Slide 26: OTP Core micro, small and corporate loan dynamics and market share
In the micro and small companies segment OTP Core managed to demonstrate 12% ytd volume dynamics, OTP Core whereas MLE volumes increased by 2% 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 Hunga
Slide 27: Further details and financials
Further details and financials 27
Slide 28: OTP Group offers universal banking services to almost 18.5 million customers
OTP Group offers universal banking services to almost 18.5 million customers in 12 countries across the CEE/CIS Region Major Group Members in Europe Total Assets Systemic position in Hungary… Albania Montenegro Moldova 2Q 2020 market share (%) Russia Slovakia Ukraine 4% 1% Total assets 27 Romania 3%
Slide 29: OTP Group's Capabilities: ownership structure and market capitalization
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 8.6 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 lending
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 31: Deposit book: Hungary and retail segment dominant
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 Core1 (Hungary) DSK Group (Bulgaria) (in HUF billion) Corporate Corporate Retail sight By countries By products 17
Slide 32: 1H accounting ROE hit by temporary surge in risk costs
The 1H accounting ROE was hit mainly by the temporary surge in risk costs 2003-2008 2009-2013 1H 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% 6.4% Adjusted ROE1 29.0% 11.6% 8.5% 9.6% 15.4% 18.7% 19.1% 20.6% 9.8% Total Revenue 8.60% 8
Slide 33: 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 2Q 2020 data for other H
Slide 34: Macroeconomic highlights
Macroeconomic environment: our expected baseline trajectory shifted downwards, now we expect a recession of 2-8% with an average of 5.8% for 2020, which could be followed by a 4-6% growth in 2021, with an average of 5% Macroeconomic highlights All countries where OTP operates face recession in 2020.
Slide 35: In Hungary we expect above 6% recession this year
In Hungary we expect above 6% recession this year, with modest rise in unemployment and moderating real wage growth GDP growth (y-o-y %) Household consumption (y-o-y %) 5.1% 5.8% 4.9% 4.4% 4.9% 5.0% 5.4% 4.9% 4.3% 2.2% -1.6% Investment (% of GDP) 25.2% 28.6% 27.3% 26.8% 19.7% 22.2% -6.3% 2016 2017 2
Slide 36: Main macroeconomic indicators in the CEE region's countries
We expect a sizable GDP growth in 2021 in the CEE countries Main macroeconomic indicators in the CEE region’s countries Hungary Bulgaria Croatia Serbia 2019A 2020F 2021F 2019A 2020F 2021F 2019A 2020F 2021F 2019A 2020F 2021F GDP growth (y-o-y %) 4.9 -6.3 5.8 3.2 -4.7 4.3 2.9 -8.4 5.4 4.2 -1.9 5.3 Une
Slide 37: High-frequency indicators support the regional recovery story
High-frequency indicators and anecdotal evidence support the regional recovery story Country highlights • Employment has been on the rise since June. Unemployment rate in July was 1.1%-points higher than in the same period of last year. Hungary • The number of real estate transactions in July reache
Slide 38: Country highlights: Russia, Ukraine and others
High-frequency indicators and anecdotal evidence support the regional recovery story Country highlights • After a relatively benign 2Q GDP (-8% y-o-y, above our expectations), the recovery seems to have halted in 3Q (July GDP Russia -4.6%, August -4.3%) based on monthly GDP data. The phasing out of
Slide 39: OTP Bank ratings correlate with sovereign ceilings
+ 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 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