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OTP Q3 profit triples on base effect of Ukraine write-off

Telco

Third-quarter after-tax profit of OTP Bank, Hungary’s biggest commercial lender, more than tripled to HUF 34.1 bln from the same period a year earlier, an earnings report published Friday reveals. Earnings rose on the base effect of a HUF 30.8 bln goodwill write-off at the bank’s business in Ukraine in Q3 2013.

In Q3 2014, the biggest adjustments on the profit and loss statement were a HUF 6.8 bln risk cost related to exposure in Donetsk and Luhansk, counterbalanced by a HUF 7.7 bln reduction in the amount OTP expects borrowers’ relief legislation to impact its bottom line.

Profit was over the HUF 30.0 bln estimate by analysts polled by Portfolio.hu.

Earnings per share came to HUF 128.

Net interest income fell 3% to HUF 159.7 bln. Net revenue from commissions and fees declined 4pc to HUF 41.6 bln.

Provisions on loan losses were up 2% at HUF 64.7 bln.

Excluding one-off items, OTP Bank's Hungarian businesses generated HUF 35.8 bln of profit in the quarter, while its foreign units racked up a combined loss of HUF 2.3 bln. The unit in Bulgaria, DSK Bank, had after-tax profit of HUF 11.9 bln, but the Ukrainian unit had a loss of HUF 10.9 bln and OTP Bank Russia's loss reached HUF 5.7 bln.

Total assets stood at HUF 10,978.4 bln at the end of September, up 9% from twelve months earlier. Net assets fell 14pc to HUF 1,315.0 bln.

Stock of client loans edged down 2% to HUF 7,441.2 bln. Retail loans slipped 1p% to HUF 5,110.4 bln. Corporate loans dropped 8% to HUF 2,029.7 bln.

Allowances for loan losses increased 8% to HUF 1,359.4 bln.

OTP’s non-performing loan ratio rose to 21.8% from 20.6%.

Stock of client deposits rose 13% to HUF 7,555.2 bln. Retail deposits were up 7% at HUF 5,057.4 bln and corporate deposits jumped 25pc to HUF 2,458.7 bln.

For Q1-Q3, OTP booked a HUF 113.2 bln loss, mainly because the HUF 168.4 bln impact of the borrowers’ relief legislation which requires lenders to compensate retail clients for using exchange rate margins when calculating repayments on foreign currency-denominated loans and for making unilateral changes to FX and forint loans contracts. The Hungarian businesses' profits, excluding one-off items, came to HUF 102.9 bln, while the foreign units' profit reached HUF 4.9 bln.

Speaking at a press conference after the report was published, deputy-CEO Laszlo Bencsik said OTP could decide only when earnings data for the full year is available whether losses will affect dividend policy. Dividend has not yet been discussed, he added.

OTP's stock of FX home loans came to HUF 480 bln at the end of September, he said, responding to a query. The bank has purchased euros from the National Bank of Hungary, in two steps, to pay compensation for retail clients under the borrowers' relief legislation and, just days earlier, to cover FX required for the remaining stock.

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