Lower interest income, higher risk costs weigh on OTP profit

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OTP Bank's fourth-quarter after-tax profit fell 13% to HUF 26.2 billion from the same period a year earlier as income from interest edged down and risk costs rose, the lender's consolidated IFRS report published Friday shows.
    Profit was under the HUF 30.0 billion estimate of analysts polled by Portfolio.hu. Basic earnings per share came to HUF 97. Net interest income slipped 2% to HUF 166.0 billion. But net fees and commissions rose 5% to HUF 40.6 billion.
    Operating costs were down 5% at HUF 105.2 billion, but risk costs climbed 4% to HUF 70.3 billion. Within these costs, provisions for loan losses rose at the same rate to HUF 64.3 billion. OTP booked HUF 44.0 billion on the "other expenses" line, where the bank levy is accounted, down 10%.
    Adjusted return on assets edged down 0.1 percentage point to 1.0%. Adjusted return on equity fell 1.5 percentage points to 7.0%. For the full year, after-tax profit was down 7% at HUF 149.9 billion as operating and risk costs rose.
    Net interest income rose 3% to HUF 650.3 billion and net fees and commissions were up 6% at HUF 151.6 billion. But operating costs climbed 5% to HUF 394.9 billion and risk costs increased 8% to HUF 253.7 billion. The bank attributed 2 percentage points of the increase in operating costs to the weaker forint. The "other expenses" line showed HUF 158.5 billion, up 1%. Basic earnings per share came to HUF 457 for 2012.
    OTP's foreign units accounted for 29% of after-tax profit in Q4 and for 41% of profit for the full year. The foreign units' after-tax profit for the year rose 19% to HUF 61.0 billion, while profit of the bank's core business in Hungary fell 17% to HUF 94.6 billion.
    The bank's Russian unit led the earners abroad, generating full-year after-tax profit of HUF 47.2 billion, up 15%. The Bulgarian business was runner-up, booking HUF 24.2 billion, up 90%. The units in Romania, Serbia, Slovakia and Montenegro were loss-making.
    The balance sheet shows the ratio of non-performing loans - those past 90 days due - in the lending portfolio rose to 19.1% at the end of 2012 from 16.6% a year earlier. The bank noted that the ratio's year-on-year increase accelerated from 0.8 percentage point in Q1 to 1.4 percentage points in Q2, but slowed to 0.2 percentage point in Q3 and 0.1 percentage point in Q4.
    OTP had total assets of HUF 10,113.5 billion on December 31, 2012, down 1% from twelve months earlier. Net assets rose 7% to HUF 1,514.6 billion.
    Stock of client loans fell 6% to HUF 7,618.4 billion. Retail loans inched up 1% to HUF 5,086.2 billion. Corporate loans fell 5% to HUF 2,168.1 billion.
    Client deposits rose 2% to HUF 6,550.7 billion. Retail deposits were up 3% at HUF 4,755.2 billion and corporate deposits jumped 15% to HUF 1,754.5 billion.
    OTP said gross liquidity reserves of the group reached the equivalent of almost €6 billion at the end of 2012. It added that all 2013 swap rollover needs had been renewed.

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