OTP Q2 earnings better than expected



Second-quarter after-tax profit of OTP Bank, Hungaryʼs biggest commercial lender, rose 11% year-on-year to HUF 89.5 billion as business volume grew, an earnings report released early Friday shows, as reported by state news agency MTI.

Earnings outperformed the HUF 81.3 bln estimate of analysts polled earlier by business news site

Net interest income climbed 7% to HUF 145.9 bln, even as OTPʼs net interest margin narrowed by 0.41 of a percentage point to 4.25%. Net revenue from commissions and fees increased by 6% to HUF 56.7 bln. Earnings per share came to HUF 342 for the period.

Return on equity (ROE) stood at 21.9%, while return on assets (ROA), from adjusted net earnings, was 2.7%, both unchanged from the base period.

OTP had total assets of HUF 14.213 trillion at the end of June, up 17% from twelve months earlier. Net assets increased 14% to HUF 1.707 tln. The net stock of client loans rose 15% to HUF 7.738 tln. The ratio of non-performing loans in the portfolio fell 4.1 percentage points to 8.1%, the lowest level in nearly ten years.

OTPʼs retail lending stock was up 8% at HUF 5.215 tln, while the corporate loan portfolio swelled 18% to HUF 2.984 tln.

The stock of client deposits was up 14% at HUF 10.870 tln. OTPʼs net loan to deposit ratio edged up 1 percentage point to 71%.

After-tax profit of OTPʼs core business in Hungary increased 14% to HUF 56.3 bln.

The share of consolidated after-tax profit generated by OTPʼs foreign businesses was steady at one-third. Profit of the biggest unit, Bulgariaʼs DSK Bank, climbed 7% to HUF 12.9 bln. Profit of its unit in Ukraine more than doubled from HUF 2.5 bln to HUF 5.4 bln.

Acquisition targets still in sights

Speaking at a press conference after the report was published, Deputy CEO László Bencsik said OTPʼs acquisition strategy remains unchanged, as the lender remains intent on buying more banks in the region. He noted that OTP is in the process of acquiring the necessary permits for its recently announced deal to acquire the Bulgarian and Albanian units of Franceʼs Société Générale.

Bencsik acknowledged the impact of earlier acquisitions on OTPʼs strong first-half results, as well as the strong economic performance of all of the countries in which the bank does business. Profits would have risen even excluding the acquisitions, he added.

With the expansion of business activity, the lenderʼs headcount rose, while speeding up digital developments also added to costs, Bencsik said. Risk costs are very low at present because of the favorable state of the economy, he added, while conceding that this cannot go on forever.

Although Hungaryʼs strong economic performance can be maintained, this will require further measures to boost competitiveness, Bencsik observed, noting that this is a view shared by the Ministry of Finance and the National Bank of Hungary.

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