OTP Q4 profit climbs 14% to HUF 77.8 bln

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Profit was over the HUF 66.3 bln estimate by analysts polled by Portfolio.hu. Net interest income rose 11% to HUF 156.4 bln, while net revenue from commissions and fees edged down 3% to HUF 56.6 bln. Earnings per share came to HUF 297 for the period.

Full-year profit more than EUR 1 bln

OTP booked full-year after-tax profit of HUF 318.3 bln, up 13%. Net interest income rose 10% to HUF 599.8 bln and net revenue from commissions and fees increased 5% to HUF 220.7 bln. Earnings per share stood at HUF 1,215. Return on equity inched up 0.2 percentage point to 18.7%. Return on assets, from adjusted net earnings, was flat at 2.3%.

OTP said earnings were helped by higher business volume, in turn supported by the favorable macroeconomic performance of the region. The bottom was also lifted by the incorporation for the full year of acquisitions in Croatia and Serbia, it added.

Foreign unit contribution up

After-tax profit of OTPʼs business in Hungary rose 8% to HUF 200.3 bln for the full year, while profit of its foreign businesses increased 26% to HUF 125 bln. The foreign units accounted for 38% of profits in 2018, up from 35% a year earlier.

The biggest earners were DSK Bank, in Bulgaria, with after-tax profit of HUF 47.3 bln; OBH, in Croatia, with profit of HUF 25 bln; OTP Bank Ukraine, with profit of HUF 24.4 bln; and OTP Bank Russia, with profit of HUF 16.4 bln.

Loan volume grows 15%

OTP had total assets of HUF 14,590.3 bln at the end of 2018, up 11% from a year earlier. Net client loans increased 15% to HUF 8,066.6 bln. Retail lending stock was up 8% at HUF 5,297.7 bln. Corporate lending stock rose 18% to HUF 3,110.7 bln. The non-performing loan ratio dropped 2.9 percentage points to 6.3%. Stock of client deposits increased 10% to HUF 11,285.1 bln.

Guidance puts lending growth around 10%

In guidance in the report, OTPʼs management put FX-adjusted growth of performing loans at "around 10%" in 2019, excluding the effect of further acquisitions. The management also augured an improvement in portfolio quality, with the NPL ratio set to fall further and the risk cost rate remaining around the level in 2018.

The risk cost rate - the provisions for impairment on loan and placement losses to average gross loans ratio - stood at 0.23% in 2018, down from 0.43% in 2017.

The management expects FX-adjusted operating costs, excluding the impact of acquisitions, to rise 4%, because of wage inflation, the ongoing digital transformation and strong organic growth.

The management noted that OTP recently closed the acquisition of Société Généraleʼs Bulgarian unit, and it has sealed deals to acquire the French lenderʼs subsidiaries in Serbia, Albania, Moldova and Montenegro. The shareholdersʼ equity of these entities is around the equivalent of EUR 1 bln, they said.

The management said they intend to allocate a "significant part" of excess capital for value-creating acquisitions.

The board will propose payment of a HUF 61.3 bln dividend on 2018 earnings, level with the dividend paid on 2017 earnings, according to MTI.