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OTP Q1 Profit Reaches HUF 240 bln

Banking

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Consolidated adjusted first-quarter after-tax profit of OTP Bank, Hungary's biggest commercial lender, rose 126pc year-on-year to HUF 240 billion, an earnings report released ahead of the opening bell on Friday shows.

OTP noted that starting in Q1 2024, only the effect of goodwill impairments and acquisitions would be taken out from the P+L hierarchy and shown at consolidated level as adjustment items, while all other previous adjustment items would be booked at the particular geographies or business segments where they arose.

Net interest income jumped 40% to HUF 435.3 bln. Net revenue from commissions and fees increased 17% to HUF 121.2 bln.

OTP released HUF 6.9 bln of risk provisions, after booking HUF 8.8 bln of risk costs in the base period.

OTP noted that it had booked the full-year amounts for the bank levy and the windfall profit tax -- HUF 29 bln and HUF 10 bln, respectively -- in Q1. 

Diluted earnings per share from adjusted after-tax profit came to HUF 898.

All group members were profitable in Q1 and foreign units contributed 74% to consolidated after-tax profit.

In a disclaimer regarding war-related risks, OTP said the precise consequences of the war in Ukraine and international sanctions were difficult to estimate at present, adding that it "continues to monitor the situation closely".

OTP noted that the impact of a deconsolidation of its Russian business and write-down of intragroup exposure would cut its CET1 ratio by 5 bp, while the negative effect of a deconsolidation in Ukraine would be 11 bp.

OTP had total assets of HUF 41.482 tln at the end of March, up 15% from 12 months earlier. Gross client loans increased 9% to HUF 23.348 tln. The stock of client deposits climbed 8% to HUF 30.433 tln.

Stage 3 credit-impaired loans under IFRS 9 comprised 4.3% of the gross loan portfolio at the end of the period. The Stage 3 ratio was highest in Ukraine (21.2%), Russia (12.1%), and Uzbekistan (13.3%).

Q1 Indicators "In Line With Expectations"

At a press conference after the report was published, deputy CEO László Bencsik said all first-quarter indicators had been "in line with expectations". Profitability was "outstanding", with ROE of 23%, and group liquidity and capital position was stable and even showed improvement, with the net loan-to-deposit ratio reaching 73%, he added.

Management left earlier guidance for organic growth in the lending portfolio, cleared of exchange rate effects, unchanged, he said. Net interest margin could be level with that in 2023, while the lender's cost-to-revenue ratio could be around 45%, he added.

He said ROE could be lower than in 2023.

Bencsik said OTP was now the market leader, in terms of net lending stock, in five countries.

Commenting on lending in Hungary, Bencsik said applications for mortgage loans had climbed 176% in Q1, while new contract volume more than doubled. Mortgage outlays for the whole market could exceed HUF 1 trillion this year, up from HUF 686 bln in 2023, he added.

SME lending still hasn't picked up but was stable during the quarter, in line with the trend for the region, he said. Outlays of state-subsidized credit constructions remain significant, he added and augured a pickup in corporate lending during the rest of the year.

Fielding questions on an offer OTP earlier said it made for a bank in the European Union, Bencsik said there was no further information regarding the transaction at present.

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