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OTP books HUF 3.7 bln Q3 loss on FX loan conversions

Telco

LaMography/Moni Lazar

OTP Bank booked a consolidated loss of HUF 3.7 bln in the third quarter as the impact of FX loan conversions in Hungary, Romania and Croatia weighed, according to an earnings report published early today.

OTP in Croatia is known as OTP Banka. (Photo: LaMography/Moni Lazar)
Analysts polled by Portfolio.hu estimated that OTP Bankʼs Q3 earnings would reach HUF 15.8 bln.

Earnings per share were a negative HUF 14.

In the base period, the bankʼs after-tax profit came to HUF 34.1 bln.

OTP Bank noted negative impacts resulting from FX loan conversions of HUF 6.5 bln for its business in Hungary, HUF 6.3 bln for the Croatian business and HUF 25.5 bln in Romania during the period. The bank added that the one-off negative impact of the conversion in Romania, including a discount for borrowers as well as the positive effect of the release of unamortized commissions, would come to about HUF 30 bln, before tax.

Excluding the impact of the conversions and a number of smaller one-off factors, OTP estimated its profit for the period would have reached HUF 34.6 bln.

Net interest income fell 14% to HUF 137.7 bln as the National Bank of Hungaryʼs policy rate reached a record low. Net revenue from commissions and fees edged up 2% to HUF 42.6 bln.

Adjusted for the impact of one-off factors, return on equity rose 0.9 percentage points to 11.1%. Adjusted return on assets was flat at 1.3%.

Provisions for loan losses fell 12% to HUF 56.9 bln.

Excluding the one-off factors, OTP said its Hungarian businesses generated after-tax profit of HUF 37 bln, while its foreign subsidiaries racked up losses of HUF 2.4 bln. DSK Bank, OTPʼs unit in Bulgaria, had profit of HUF 14.1 bln, but its unit in Ukraine had a loss of HUF 17.5 bln and OTP Bank Russia was HUF 2.2 bln in the red. Nearly all of OTPʼs other foreign units were profitable, after adjustments, during the period.

OTP had total assets of HUF 10.691 trillion on September 30, down 3% from twelve months earlier. Net assets fell 7% to HUF 1.226 trillion.

Client loans were down 11% at HUF 6.601 trillion. Retail lending stock dropped 11% to HUF 4.444 trillion and corporate loan stock slipped 9% to HUF 1.869 trillion.

OTPʼs non-performing loan ratio declined by 2.6 percentage points to 19.2% during the period.

Client deposits rose 3% to HUF 7.809 trillion. Retail deposits increased 8% to HUF 5.396 trillion but corporate deposits fell 2% to HUF 2.384 trillion.

In comments on the domestic market in the report, OTP said property lending could be an "engine of growth" for its loan portfolio in the future, noting a rapid increase in property market transaction volume in the past twelve months and a more than 10% increase in property prices.

"Currently lukewarm lending activity could be improved substantially if the burden on banks would decline materially in line with the intentions of the government," it added.

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