OTP Q3 Earnings Climb 57%

With adjustments, after-tax profit climbed 48% year-on-year to HUF 188.4 bln

Net interest income increased 31% to HUF 290.9 bln and net revenue from commissions and fees climbed 23% to HUF 106.1 bln.

OTP booked HUF 53.3 bln on the "other net non-interest income" line, up 119%, boosted by proceeds from an asset sale by OTP's private equity business PortfoLion.

Return on equity rose 4.5 percentage points 22.8%. Return on assets increased 0.3 percentage point to 2.3%. OTP's total income margin widened by 0.29 percentage points to 5.46%.

Total risk costs increased 28% to HUF 32 bln.

Diluted earnings per share came to HUF 701 for the quarter.

Foreign Units' Profit Contribution Grows

The after-tax profit of OTP's Russian unit surged 467% to HUF 38.5 bln, boosted by a provisions release.

After-tax profit at OTP Bank Ukraine fell 25% to HUF 8.3 bln.

In the case of both businesses, OTP said its management applies a "going concern" approach. In Russia, however, the management is "still considering all strategic options".

Ukrainian and Russian assets accounted for 7.4% of OTP's consolidated assets at the end of Q3. Gross intragroup funding reached HUF 91 bn towards Ukraine and HUF 89 bln towards Russia.

The impact of deconsolidation and write-down of intragroup funding under an "unexpected and extremely negative scenario" would cut OTP's CET1 ratio by 3 bp in the case of Ukraine and by 137 bp in the case of Russia, the lender said.

The after-tax profit of DSK Group, OTP's Bulgarian business, climbed 12% to HUF 26.9 bln. Profit of OBH, in Croatia, rose 37% to HUF 14.9 bln, and profit of OTP Bank Serbia increased 80% to HUF 10.7 bln.

All of the foreign units were profitable, with the exception of OTP Bank Romania which booked a modest loss of HUF 58 mln.

The foreign businesses accounted for 62% of consolidated earnings, up from 54% in the base period.

Loan Book Growth Could Reach 15%

OTP had total assets of HUF 34.022 trillion at the end of September, up 30% from 12 months earlier. The gross stock of client loans rose 31% to HUF 20.635 tln and client deposits increased 31% to HUF 25.815 tln.

The ratio of NPLs over 90 days past due stood at 3.4%.

Excluding its businesses in Russia and Ukraine, OTP's management said organic performing loan volume growth might "reach 15%" for the full year, modifying earlier guidance for growth of "over 10%". Net interest margin "may stabilize" and the credit risk cost ratio may be "lower than the 2021 level", they added.

OTP said its Russian subsidiary is expected to deliver positive earnings for the rest of 2022, though the scale of that profit may be smaller than in Q3. The performance of the Ukrainian unit will be shaped mainly by the evolution of its risk profile, it added.

Q1-Q3 Earnings Fall

At a press conference after the earnings report was released, OTP deputy-CEO László Bencsik called the third quarter "an oasis" in the year, noting that OTP's Q1-Q3 after-tax profit fell 31% year-on-year to HUF 231.9 bln. He also pointed to the HUF 88 bln impact of the bank levy and windfall profit tax, which was raised to HUF 115.5 bln by the extension of the interest rate freeze, the repayment moratorium, and contributions to cover the depositors of failed Sberbank Magyarország.

He said extraordinary items would weigh on fourth-quarter earnings, too.
 

    Mr Bencsik said rate caps for retail and corporate lenders the government decided on in Q4 are expected to have a negative impact on earnings of around HUF 40bn.