Lower risk costs lift OTP Q4 profits

Net interest income fell 14% to HUF 133.3 bln and net fees and commissions edged down 2% to HUF 43.4 bln, but total risk costs dropped nearly one-third to HUF 52.7 bln. 

Adjustments lifted OTPʼs bottom line by HUF 10.1 bln. They included HUF 7.6 bln resulting from the “one-off impact of regulatory changes in relation to consumer contracts and the impact of the related methodological changes”, the lender said. The amount is related to the release of provisions and a change in methodology resulting from the settlement of compensation due under borrowers relief legislation and the conversion of FX retail loans into forints, OTP explained.

Without the adjustments, OTPʼs after-tax profit rose 62% to HUF 16.6 bln, just under the HUF 18.1 bln estimate made by analysts polled by portfolio.hu.

Diluted earnings per share came to HUF 103, up from HUF 41 in the base period.

Adjusted ROE was up 2.2 percentage points at 5.4% and ROA rose 0.2 of a percentage point to 0.6%.

OTP had total assets of HUF 10.719 trillion at the end of 2015, down 2% from twelve months earlier.

Gross stock of client loans fell 8% to HUF 6.427 tln. Retail loans were down 9% at HUF 4.259 tln and corporate loans dropped 4% to HUF 1.898 tln.

OTPʼs non-performing loan ratio dropped 2.3% percentage points to 17%.

Client deposits increased 4% to HUF 7.985 tln. Retail deposits rose 9% to HUF 5.664 tln but corporate deposits dropped 4% to HUF 2.301 tln.

OTP booked after-tax profit of HUF 23.7 bln at its businesses in Hungary in Q4, down 34% year-on-year. It had a HUF 7.1 bln loss at its foreign subsidiaries, albeit narrowing from a HUF 25.6 bln loss in the base period.

The biggest single loss was HUF 13.2 bln, at OTPʼs unit in Ukraine. OTP also booked a HUF 2.1 bln loss at Touch Bank in Russia and a HUF 1 bln loss at OBR in Romania.

OTP said in the report that its management expects no losses at its foreign units this year, with the exception of Touch Bank.

Additionally, the management does not expect any further negative adjustment items in 2016, except for “potentially some smaller scale additional provisions in Crimea and East Ukraine”, OTP added. 

OTP noted that the lawmakersʼ decision late last year to reduce the bank levy, “as a result of continuous conciliation between the government and the Hungarian Banking Association”, would cut its own payment to HUF 13.2 bln, after tax, down from HUF 28.6 bln in 2015.