OTP Q4 profit climbs 69% y.o.y.

Banking

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Consolidated after-tax profit of OTP Bank, Hungary's biggest commercial lender, rose 69% year-on-year to HUF 121.1 billion, lifted by an expanding balance sheet and a decline in risk costs, state news wire MTI writes, citing an earnings report published ahead of the opening bell on Friday.

Net interest income rose 25% to HUF 247.5 bln. Net revenue from commissions and fees increased 5% to HUF 87.3 bln.

OTP booked total risk costs of HUF 29.3 bln for the quarter, down from HUF 52.1 bln in the base period.

The bank had total assets of HUF 27.553 trillion at the end of December, up 18% from t12 months earlier. Gross stock of client loans climbed 14% to HUF 16.635 tln. Stock of client deposits increased 16% to HUF 21.069 tln.

Full-year profit reaches HUF 456 bln

OTP's full-year after-tax profit rose 76% to HUF 456.4 bln.

Net interest income increased 12% to HUF 884 bln. Net revenue from commissions and fees rose 11% to HUF 325.5 bln.

Risk costs fell to HUF 72.5 bln from HUF 188 bln in the base period.

Earnings per share came to HUF 1,739 for the year.

Foreign units generate half of profit

OTP's foreign subsidiaries accounted for 51% of the lender's consolidated after-tax profit.

DSK Group in Bulgaria was the biggest earner, generating an after-tax profit of HUF 76.8 bln, followed by OTP Bank Ukraine, with profit of HUF 39 bln, and OTP Bank Russia, with profit of HUF 37.6 bln. The after-tax profit of OBH in Croatia came to HUF 33.4 bln.

OTP noted that risk-weighted assets at the Ukrainian subsidiary stood at HUF 1,115 bln at the end of 2021, accounting for 6.7% of total consolidated RWA. Sub-consolidated RWA at the Russian business was HUF 822 bln at year-end, making up 4.9% of group RWA.

Dividend reserved for 2019, 2020 'reasonable'

In guidance for 2022, OTP's management said it is "difficult to quantify the ramifications" of the war in Ukraine on the lender's businesses in Russia and Ukraine.

"Potential scenarios vary over a wide spectrum," the management said.

Assuming the war doesn't have "a material negative effect" on the rest of the group, the management put organic loan volume growth around 10%, adjusted for exchange rates, in 2022. It added that the net interest margin "may stabilize" after steady erosion in the previous couple of years.

OTP's net interest margin narrowed to 3.51% in 2021 from 3.61% in the previous year.

The management said the bank's adjusted profitability indicators, its credit risk cost ratio, and its operating cost efficiency ratio "may be similar to 2021".

The management said it continues to consider a HUF 119 bln dividend set aside for payment on the 2019 and 2020 business years "as reasonable", but added that the board will decide on that dividend and the proposed dividend on 2021 earnings after its meeting in March "taking into account the development of the Russian-Ukrainian conflict".

The National Bank of Hungary (MNB) recently lifted a suspension on payment of dividends by lenders instituted in the spring of 2020 because of the coronavirus crisis.

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