Hungary’s OTP Bank cannot support the government’s bank rescue package in its current form as its conditions are not adequately tailored to the domestic banking system, OTP’s chief financial officer said. The bank lowers full-year net profit target. OTP shares rose on Friday at Budapest Stock Exchange more then 10%.
OTP has a large enough €1.5 billion ($1.9 billion) liquidity buffer to survive 2009 without having to raise cash, but its growth would be in the best interest of Hungary’s economy and the bank hoped the conditions of government assistance would be improved before a final vote in Parliament, László Urbán told a news conference on Friday.
The bank will prepare two business scenarios for 2009 and its base case will calculate on the basis of lending growing in line with the increase in deposits. A second scenario will calculate on the basis of credit markets resuming and allowing OTP to find reasonably priced financing to support its growth, he said.
OTP Bank’s Q3 consolidated after-tax profit jumped 205% to HUF 168.7 billion from the same period a year earlier as it booked a one-off gain from the sale of its insurance unit, the bank said in its unaudited consolidated IFRS report published on Friday. The bank lowered its full-year net profit outlook on the fallout from the global financial crisis and reported an 11% drop in Q3 net profit. OTP said it expects its full-year net profit at around HUF 220 billion ($1.04 billion), a 5% increase compared to the previous year but below an earlier projection for around 10% growth. “Considering the negative market developments in October -- especially the significant growth of funding and swap-related costs -- and also the potential increase of risk costs, the management forecasts the annual profit after tax to be around HUF 220 billion,” OTP said in a statement.
In the third quarter, the bank said its adjusted net profit totaled HUF 50.11 billion, down 11% from a year earlier and below analysts’ expectation for HUF 54.6 billion in a recent Reuters poll. Both the Q3 figure and the full-year projection exclude a HUF 121.4 billion one-off income from the sale of OTP’s insurance arm Garancia. Analysts earlier said that Q3 figures were of only moderate importance as they contained little if any impact of the global financial crisis and therefore had little relevance in the bank’s valuation.
Profits at the bank’s unit in Bulgaria, DSK, increased 8.2% to HUF 7.4 billion and total assets climbed 22.7 billion to HUF 1,088.2 billion. OTP Bank Russia’s after-tax profit rose 5.8% to HUF 1,745 billion and total assets increased 27.3% to HUF 477.7 billion. In Ukraine, profits were up 13.7% at HUF 4.2 billion and total assets rose 55.3% to HUF 836.3 billion. OTP Bank Romania booked Q3 profits of HUF 931 million, compared to losses of HUF 245m in the same period a year earlier.
The Romanian unit’s total assets rose 36.1% to HUF 358.7 billion. In Croatia, profits rose 14.1% to HUF 1.4 billion and total assets were up 13.2% at HUF 449.5 billion. Profits at the bank’s Slovakian unit increased 20.5% to HUF 609 million and total assets rose 15.4% to HUF 407.9 billion. OTP Bank Serbia made Q3 losses of HUF 191 million compared to a HUF 62 million profit in the same period a year earlier. The Serbian unit’s total assets rose 52.3% to HUF 150.9 billion. Profits at CKB, in Montenegro, climbed 48.9% to HUF 958 million and total assets increased 27.0% to HUF 297.4 billion.
The gross loan portfolio increased in the past twelve months the most remarkably at OTP banka Srbija (87.3%), CJSC, Ukraine (61.2%), OAO OTP Bank, Russia (55%) and OBR (51.9%), and by 40% at CKB, Montenegro and by 30% at DSK, while the quality of the lending portfolio remained practically stable, the report noted.
Deterioration could be registered with OTP Core (corporate portfolio), Ukraine, Slovakia and Bulgaria, but favorable developments could be observed in Russia, Serbia, Romania and Montenegro.
Share’s of OTP Bank at noon was up 8.22% at HUF 2,830 on an exchange-high turnover of HUF 5.09 billion after stating in its IFRS report on Friday morning that its Q3 after-tax profit had doubled. Trade in shares of OTP Bank was suspended for several minutes on Friday afternoon after its price rose more than 10%. OTP Bank shares traded at 2,877 when they were suspended at 13:25. The share price rose with those of other European banks. Stock exchange rules require shares that fluctuate more than 10% from their previous close to be suspended for up to ten minutes. (Reuters, MTI)