Higher revenue, lower risk and tax costs lift OTP Q1 profit 54%

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Photo by Jessica Fejos

OTP Bankʼs first-quarter consolidated after-tax profit rose 54% year-on-year to HUF 52.9 billion, lifted by higher revenue, lower risk costs and a cut in the corporate tax rate, an earnings report released early this morning shows, according to Hungarian news agency MTI.

After-tax profit was above the HUF 42.8 bln estimate by analysts polled by economic news portal Portfolio.hu. Earnings per share came to HUF 202.

In spite of the low interest rate environment, OTPʼs net interest income edged up 2% to HUF 132.2 bln. Net revenue from commissions and fees increased 15% to HUF 44.5 bln.

Risk costs dropped 40% to HUF 12.5 bln, and a reduction in the corporate tax rate from 19% to 9% from the start of the year cut OTPʼs corporate taxes by 42% to HUF 9.4 bln.

Operating costs were up 8% at HUF 100 bln. Return on equity rose 3.9 percentage points to 15%.

OTP noted that it booked the bank levy it must pay for the full year in the first quarter. Adjusted for this HUF 14.7 bln item as well as a few other minor items, after-tax profit would have reached HUF 66.8 bln.

Foreign units generate one-third of profit

OTPʼs foreign subsidiaries accounted for one-third of OTPʼs adjusted after-tax profit in Q1. All of the units were profitable expect for OTPʼs virtual bank in Russia, which racked up a HUF 2.3 bln loss, and its business in Croatia, which was HUF 1.8 bln in the red. OTP attributed the loss in Croatia to provisions made on a large corporate exposure.

The biggest earner was DSK Bank in Bulgaria, through profit there edged down 3% to HUF 13.4 bln. Next came OTP Bank Russia, where profits jumped 190% to HUF 7.6 bln.

Loan portfolio grows, quality improves

OTP had total assets of HUF 11.390 trillion at the end of March, up 6% from 12 months earlier. Net assets climbed 17% to HUF 1.4362 tln.

Gross client loans rose 4% to HUF 6.708 tln. Retail lending stock increased 3% to HUF 4.402 tln. Corporate loans were up 5% at HUF 2.0473 tln.

The ratio of non-performing loans in the portfolio fell 2.9 pp to 14.1%.

Client deposits rose 6% to HUF 8.441 tln. Retail deposits were up 9% at HUF 6.131 tln. Corporate deposits slipped 1% to HUF 2.298 tln.

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