Otp Bank Nyrt · BET:OTP
Otp Bank Nyrt — Q4 2022 Earnings Presentation
48 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 4Q 2022 results
Slide 2: 2022 profit after tax HUF 347.1 billion, 24% lower
In 2022 as a whole OTP Group posted HUF 347.1 billion profit after tax, 24% lower than a year before. Adjustments exceeded -HUF 245 billion (after tax), mainly relating to the war and the measures of the Hungarian government Cumulated profit development Y-o-Y (HUF billion) (milliárd forintban) Quart
Slide 3: OTP Group consolidated P&L and performance indicators
The increase in the Group’s annual adjusted profit after tax was mainly shaped by the dynamic growth in core banking revenues, partly offset by the operating cost pressure and more than doubling total risk cost OTP Group (consolidated) P&L (in HUF billion) 2021 2022 3Q 2022 4Q 2022 4Q Q-o-Q FY Y-o-Y
Slide 4: Group without Russia and Ukraine P&L
The Group’s 4Q adjusted profit without the Russian and Ukrainian operations contracted by 13% mainly due to lower other income and the seasonal spike in costs OTP Group without Russia and Ukraine P&L (in HUF billion) 2021 2022 3Q 2022 4Q 2022 4Q Q-o-Q Y-o-Y FX-adj. FX-adj. Net interest income 731 88
Slide 5: Adjusted profit development of Hungarian and foreign operations
During 2022 the adjusted profit contribution of both the Hungarian and foreign banks in the Central and Eastern European countries improved significantly, latter by 46%. Russia delivered somewhat higher profit, but Ukraine turned into negative Adjusted profit after tax development of Hungarian and f
Slide 6: OTP Russia results
The profit of the Russian bank fell by 57% in local currency terms. In line with the new strategy, the corporate OTP RUSSIA loan portfolio and intragroup funding has been consciously reduced Profit after tax Gross customer loans Corporate loans Deposits from customers (RUB billion) (RUB billion) (RU
Slide 7: OTP Ukraine results
The Ukrainian bank suffered a loss as a result of higher risk costs, but the coverage improved significantly. OTP UKRAINE The Ukrainian bank continues to provide services to its clients Profit after tax Gross customer loans Deposits from customers Total provisions to total (HUF billion) (HUF billion
Slide 8: CEE foreign subsidiary banks' profit after tax
In 2022, foreign subsidiary banks in the CEE region substantially increased their profit after tax, except for Romania. Loan volumes typically grew over 10%. Operating cost efficiency improved considerably in many countries Profit after tax 1 (HUF billion) ROE Loan growth2 Cost / income ratio 2021 2
Slide 9: Total income by subsidiary
In 2022 the Group’s total income grew by 26%, driven by Hungary, Bulgaria and Russia. In 4Q total income stagnated q-o-q, the declining Hungarian revenues were offset by the improving foreign contribution TOTAL INCOME 2022 4Q 2022 2022 Y-o-Y 4Q 2022 Q-o-Q without one-off items (HUF billion) (HUF bil
Slide 10: Net interest income by subsidiary
The annual net interest income grew 14% FX-adjusted, with bulk of the growth coming from Hungary, Bulgaria, Ukraine, Russia and Romania. The quarterly increase was driven by the foreign banks, while Hungary suffered a 20% contraction NET INTEREST 2022 4Q 2022 2022 Y-o-Y 4Q 2022 Q-o-Q 1 The annual NI
Slide 11: Consolidated net interest margin drivers
The consolidated net interest margin eroded by 3 bps q-o-q, bulk of the Hungarian margin compression was offset by the across-the-board improvement at the other CEE subsidiaries, most notably in Bulgaria, Serbia and Romania Drivers behind the q-o-q change of the consolidated net interest margin -3 b
Slide 12: Q-o-Q performing loan volume changes
The consolidated performing loan growth decelerated to 1% q-o-q. In Hungary and Bulgaria corporate lending remained strong. Russian consumer loans grew 5% in a seasonally strong quarter, but the corporate exposures kept melting down Q-o-Q performing (Stage 1 + 2) LOAN volume changes, adjusted for FX
Slide 13: Y-o-Y performing loan volume changes
The consolidated performing loans without Russia and Ukraine expanded by 15% over the last twelve months. Hungary posted another strong year with 15% expansion, driven by corporate. Volumes contracted in Russia, Ukraine and Moldova Y-o-Y performing (Stage 1 + 2) LOAN volume changes, adjusted for FX-
Slide 14: Q-o-Q deposit volume changes
Consolidated deposits grew by 2% q-o-q. Deposit inflows remained strong across the group except for Hungary, where household deposits continued their slowly declining trajectory Q-o-Q DEPOSIT volume changes, adjusted for FX-effect Cons. Core DSK OBH OBSrb SKB OBR OBU OBRu CKB OBA OBM (Hungary) (Bulg
Slide 15: Y-o-Y deposit volume changes
Consolidated deposits grew by 14% over the last 12 months. Within the 9% expansion in Hungary, corporate deposit growth was particularly strong. Both Russia and Ukraine enjoyed inflows Y-o-Y DEPOSIT volume changes, adjusted for FX-effect Cons. Core DSK OBH OBSrb SKB OBR OBU OBRu CKB OBA OBM (Hungary
Slide 16: Net fee income by subsidiary
In 2022 the 14% FX-adjusted net fee growth was driven by Hungary and Bulgaria. In 4Q fee income stagnated in most subsidiaries, the q-o-q growth was driven by the success fee income realized by OTP Fund Management in Hungary 2022 4Q 2022 2022 Y-o-Y 4Q 2022 Q-o-Q 1 At OTP Core the 17% annual growth N
Slide 17: Other net non-interest income
The annual other net non-interest income improved by 52% on an FX-adjusted basis. The q-o-q decline was mainly driven by base effect related to the other Hungarian subsidiaries segment OTHER 2022 4Q 2022 2022 Y-o-Y 4Q 2022 Q-o-Q 1 INCOME (HUF billion) (HUF billion) (HUF billion, %) (HUF billion, %)
Slide 18: Operating costs growth amid high inflation
Amid the high inflationary environment, the operating costs grew by 12.5% y-o-y, adjusted for the Effect of FX-effect and the Albanian acquisition acquisition 2022 Y-o-Y Y-o-Y, FX-adjusted 1 OPERATING COSTS Drivers behind the 19% cost growth: (HUF 2022Q4 billion) CUM (HUF billion, %) (HUF billion, %
Slide 19: OTP Core mortgage and cash loan market shares
In Hungary applications for mortgage loans dropped 19% y-o-y, with demand shifting towards subsidized OTP CORE products. OTP’s market share in cash loan sales exceeded 38% again in 4Q 2022 Y-o-y change of mortgage loan applications and disbursements Performing (Stage 1+2) cash loan volume growth in
Slide 20: Baby loans and Green Home Programme
The baby loans programme has been extended until the end of 2024. The green housing loans generated huge OTP CORE demand, actual disbursements come with a certain time delay Baby loans Green Home Programme2 Contractual amount (HUF billion) Applications for green housing loans (HUF billion) Market1 2
Slide 21: Corporate loan volumes and market share
Corporate loan volumes grew by 33% y-o-y, lifting OTP’s market share to 20%. Under the Széchenyi Card OTP CORE schemes the contracted amount reached HUF 593 billion overall, resulting in a market share of 32% Performing corporate loan volume changes OTP Group’s market share in loans to Hungarian (DP
Slide 22: Stage 3 ratio and coverage versus peers
The Stage 3 ratio decreased throughout 2022. Asset quality remained solid and even improved, despite the various headwinds. The management's provisioning policy remained conservative compared to regional banking groups Development of the Group's main credit quality Own coverage of Stage 1+2 loans co
Slide 23: Development of Stage 1, 2 and 3 ratios
Development of the Stage 1, Stage 2 and Stage 3 ratios Cons. Core DSK OBH OBSrb SKB2 OBR OBU OBRu CKB OBA OBM Merk.3 (Hungary) (Bulgaria) (Croatia) (Serbia) (Slovenia) (Romania) (Ukraine) (Russia) (Monten.) (Albania) (Moldova) (Hungarian leasing) 4Q 19 88.8% 91.4% 88.6% 83.2% 96.0% 98.9% 83.9% 73.8%
Slide 24: Own provision coverage ratios by Stage
Development of the own provision coverage ratios in different Stage categories Cons. Core DSK OBH OBSrb SKB1 OBR OBU OBRu CKB OBA OBM Merk.2 (Hungary) (Bulgaria) (Croatia) (Serbia) (Slovenia) (Romania) (Ukraine) (Russia) (Monten.) (Albania) (Moldova) (Hungarian leasing) 4Q 19 1.1% 0.8% 1.1% 0.8% 0.4
Slide 25: Capital and liquidity position, bond issues
The Group’s capital and liquidity position is stable: capital adequacy ratios and liquidity reserves significantly exceeded regulatory minimum requirements. Series of successful bond issues were executed in recent months Regulatory minimum CAR and CET1 ratio Stable liquidity position 2021 2022 Thres
Slide 26: Credit ratings of OTP Bank and sovereigns
+ positive While OTP Bank ratings closely correlate with the sovereign ceilings, subsidiaries’ ratings - negative (rating outlook) 0 stable enjoy the positive impact of parental support +* on watch possible upgrade -* on watch possible downgrade Hungarian sovereign, OTP Bank and OTP Mortgage Bank ra
Slide 27: ESG strategy delivery and risk management
The delivery of ESG obligations and goals set by the Bank’s ESG strategy are on track according to schedule, with several new initiatives already in the field of green finance KPI’s TO MEASURE STRATEGIC ESG GOALS ESG RISK MANAGEMENT 2022 Actual Credit risk The Group level ESG Credit Risk Management
Slide 28: ESG in subsidiaries and ratings
We build on the synergies of Group members capitalizing on their local knowledge and needs. OTP’s ESG ratings have improved and compare well to peers ESG IN OUR SUBSIDIARIES RATINGS The ESG program’s rollout to the foreign banks is progressing as planned OTP Bank’s improving sustainability performan
Slide 29: Awards and recognition
OTP’s outstanding performance is traditionally recognized not only by capital markets, but professional organizations, too ’Best Bank in CEE 2022’ ’Best Bank in Hungary in 2022’ since 2012 in all consecutive years ‘Bank of the Year in 2022’ ’Best Bank in Montenegro in 2022’ ’Best Bank in Slovenia in
Slide 30: Management guidance for 2023 – 1
In 2023 the adjusted ROE may be close to the 2022 level due to new acquisitions, continued organic growth, stabilizing net interest margin, stable risk profile and increasing cost pressure amid high inflation1 Management guidance for 2023 – 1. The direct and indirect impacts of the war between Russi
Slide 31: Management guidance for 2023 – 2
In 2023 the adjusted ROE may be close to the 2022 level due to new acquisitions, continued organic growth, stabilizing net interest margin, stable risk profile and increasing cost pressure amid high inflation1 Management guidance for 2023 – 2. At the same time, the Nova KBM acquisition completed in
Slide 32: Further details and financials
Further details and financials 32
Slide 33: OTP Group universal banking in 11 countries
OTP Group offers universal banking services to around 15.6 million active customers. It is present in 11 countries, in most of them with a dominant market position. Majority of the Group’s operations is in European Union member states Major Group Members in Europe Total Assets1 Systemic position in
Slide 34: OTP Bank investment opportunity and ownership structure
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 8.0 billion1 Total number of ordinary shares: 280,000,010, each having a Ownership structure of OTP Bank on 3
Slide 35: Net loan book breakdown
Almost 80% of the total net loan book is invested in EU countries, with Hungary still representing the highest share within the Group Breakdown of the consolidated net loan book Net loan book, 2022 Hungary1 HUF 6,798 bn Bulgaria HUF 3,430 bn By country By product Leasing Leasing 6% 8% Mortgage Mortg
Slide 36: Deposit base breakdown
Hungary represents almost half of the deposit book, Bulgaria is the second largest deposit holder in the Group. Household volumes account for 55% of the total deposit base Breakdown of the consolidated deposit base Deposit base, 2022 Hungary1 HUF 11,217 bn Bulgaria HUF 4,893 bn By country By product
Slide 37: Consolidated adjusted ROE and margins history
The consolidated adjusted ROE reached 18.8% in 2022, whereas this number was 20.7% without Russia and Ukraine 2003-2008 2009-2013 average 2014 2015 2016 2017 2018 2019 2020 2021 2022 average ROE 11.0% 29.4% 8.3% -7.4% 5.1% 15.4% 18.5% 18.7% 20.3% 10.9% 17.0% (from profit after tax) 11.7%4 ROE 18.8%
Slide 38: Macroeconomic outlook for regional countries
Due to the direct and secondary economic effects of the war, GDP growth significantly slowed down among the regional countries, but the recession in 2023 as a whole can probably be averted, except for Moldova Hungary Bulgaria Slovenia Croatia 2022 2023F 2024F 2022F 2023F 2024F 2022 2023F 2024F 2022
Slide 39: Loan penetration levels 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 loan to deposit ratio in the Market penetration levels in Hungary in ... 2022 data for other CEE/
Slide 40: Performing loan growth 2016–2022
OTP Group’s performing loans grew to 2.9-fold between 2016 and 2022, driven by both organic growth and acquisitions OTP Group – performing (DPD0-90) loan growth1 FX-adjusted, in HUF billion 2016 6,490 Organic 792 +27% Acquisitions 955 2017 8,236 Components of the Group’s Organic 1,216 performing loa
Slide 41: Acquisitions changed Group structure
Due to the acquisitions the Group structure changed profoundly. Eurozone and ERM 2 countries became dominant within the consolidated net loans (on a pro forma basis), while the weight of Hungary, Russia and Ukraine eroded significantly Target Net loans Market share Book value Share of Hungary in the
Slide 42: Acquisition of Nova KBM in Slovenia
On 6 February 2023, OTP Bank acquired 100% of the second largest Slovenian bank, Nova KBM, rendering Slovenia OTP the largest player in Slovenia on a pro forma basis in terms of outstanding loan volumes Market share of Slovenian banks Nova KBM SKB Banka (3Q 2022) Total Net Profit after tax1 Net loan
Slide 43: Key highlights of the Ipoteka Bank transaction in Uzbekistan
Key highlights of the Ipoteka Bank transaction in Uzbekistan Uzbekistan OTP is entering a promising, fast-growing market with a relatively low penetration of banking services • On 12 December 2022 OTP Bank signed a purchase and sale contract on the privatization of Ipoteka Bank in Uzbekistan • Accor
Slide 44: Uzbekistan GDP and export structure
Steadily growing GDP and export; the external trade is mainly commodity driven Uzbekistan GDP structure of Uzbekistan (2021) Export volume growth 19.7% 19.0% Industry 14.7% 14.8% 16.2% 26% Agriculture 10.6% 11.8% 25% Taxes 4.3% 5.3% 1.6% 2.1% Construction Trade Transportation -5.1% 7% -7.1% Info&Com
Slide 45: Uzbekistan population and education
Fast growing and young population, educational spending compares favourably to Emerging Markets Uzbekistan countries Steadily growing population Comparison of the median age (2020) 33.3 33.9 34.6 48 32.1 32.7 44 45 31.6 40 40 41 43 43 43 44 44 38 38 34 30 32 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Kazakhsta
Slide 46: Uzbek banking sector and market participants
The Uzbek banking sector is characterized by high level of state ownership (~80%) and dynamic credit growth Uzbekistan Major market participants and market shares Main trends in the Uzbek banking system Total Assets, 4Q 2022 Market Loan volumes, 4Q 2022 Total Assets (USD bn) Total Capital Ratio (%)
Slide 47: Financial highlights of Ipoteka Bank
Ipoteka Bank achieved around 20% ROE in 2021 and even exceeded that in the first half of 2022 Uzbekistan Financial highlights of Ipoteka Bank (IFRS, in HUF billion equivalent) Statement of recognized income 2018 2019 2020 2021 1H 2022 Naturals 2020 1H 2022 Operating profit 11 23 34 48 29 Total incom
Slide 48: 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