OTP Bank's management continues to stand by its full-year profit target of HUF 150 billion, though it cannot exclude a slight deviation, deputy-CEO László Bencsik said, after the bank published its Q3 earnings.
Based on Q1-Q3 results and the bank's business activities, the full-year target appears achievable, but it is difficult to determine what the quality of the portfolio will be before the end of the year, Bencsik said. The management will not strive to maximize short-term profits at the end of the year, and it will set aside the maximum amount of risk reserves required by law, thus there could be a slight deviation from the full-year profit target, he added.
OTP Bank said early Friday that its third-quarter consolidated IFRS net profit plunged 73% to HUF 45.9 billion from the same period a year earlier as higher risk provisions offset rising operating profit, and because of a one-off gain from the sale of its insurance arm, OTP Garancia, in the base period. Excluding this gain, as well as the effect of open forex positions, dividends and net cash transfers, Q3 profits dropped by just 14%, the bank noted. Operating profit rose 30% to HUF 109.9 billion in Q3 from the same period a year earlier. At the same time, the bank set aside HUF 66.6 billion in risk provisions, up from HUF 55.5 billion in Q2 and just HUF 17.2 billion in Q3 2008.
In the current period, the bank's stability and secure operation are fundamental from the point of view of the management, and the size of risk reserves will be determined based on this, Bencsik said. The deterioration of the lending portfolio could halt next year, but a specific point in time cannot be said in advance, he added.
The quality of the lending portfolio deteriorated the fastest in Ukraine in Q3, Bencsik said. Corporate loans were affected the most in the current wave, he added.
After Ukraine's upcoming elections, the budget could be consolidated and the country's relationship with the International Monetary Fund could be repaired, Bencsik said. Ukraine's real economy is showing positive signs and the country could be helped by rising commodities prices, he added.
OTP Bank's Ukrainian unit could need a €30 million capital raise in the future, Bencsik said.
The proportion of loans past due 90 days or more dropped slightly to 13.8% in Q3 from 13.7% in Q2 in Russia. The proportion rose to 6.8% from 6.2% in Hungary. In Bulgaria, where OTP Bank has its biggest foreign unit, the proportion rose by 2.2 percentage points to 7.9%. Because the lev's rate is pegged, the effects of the crisis do not come in waves but are continuous, Bencsik explained.
OTP Bank has about €5.3 billion in liquidity, allowing it to meet all of its commitments until 2015, Bencsik said. The level of liquidity is about twice the normal level and hurts profits, he added. (MTI – Econews)