Hungary’s OTP Bank said its third-quarter net profit fell by 14% due to soaring lending loss provisions and worsening portfolio quality amid Central and East Europe's deep economic recession.
OTP, Central Europe's biggest independent bank, said its quarterly net profit fell to HUF 45.9 billion ($255.2 million) from an adjusted HUF 53.6 billion in the third quarter of 2008. The year-earlier figure is adjusted to exclude a HUF 121.4 billion one-off income from the sale of OTP's insurance arm as well as other minor one-off items.
OTP's quarterly net profit figure comes above analysts' average estimate for HUF 35.8 billion and beats even the most optimistic estimate in a recent Reuters poll.
The positive surprise is likely a result of an HUF 11.7 billion reduction in the company's tax burden relating to a 2008 goodwill writeoff, which was made possible by an accounting regulation change. A repurchase of Tier2 capital and better-than-expected cost control also helped the bank beat expectations.
But risk provisions, a figure closely watched by analysts, soared by 286% to HUF 66.6 billion and came well above expectations for HUF 58.4 billion. OTP's earnings have suffered and its provisions soared as all of the bank's key markets are struggling with deep recessions, surging unemployment and imploding demand for exports. (Reuters)