OTP Group results exceed expectations

In 1H 2015 OTP Group posted HUF 68.9 billion adjusted after tax profit. The 1H accounting after tax profit was HUF 40.1 billion versus HUF 147.3 billion loss in the corresponding period of last year. However, those periods are hard to be compared since adjustment items varied a lot.

As a result, in the Group’s accounting result the 1H adjustments represented HUF -28.8 billion in total against HUF -221.6 billion in the base period. In 1Q 2015 those items represented HUF -26.4 billion, whereas in 2Q their magnitude melted to HUF -2.4 billion.

The FX-adjusted consolidated loan portfolio contracted by 12% y-o-y and by 2% q-o-q. The erosion of the retail book was similar, whereas the large corporate portfolio decline was somewhat more moderate (-9% y-o-y, -1% q-o-q). Only the SME sector demonstrated growth: +2% y-o-y and +4% q-o-q mainly due to a good performance of OTP Core. Within the Group the most remarkable loan growth was achieved in Romania and Serbia (22% and 8% respectively), the former is mainly the reflection of the acquisition. The DPD90+ ratio stood at 18.4% and demonstrated a stable picture in 2Q (-3.3 ppts y-o-y).

The FX-adjusted deposit volumes declined by 1% q-o-q, but advanced dynamically on a yearly base (+9%). The volumes advanced by 7% y-o-y at OTP Core, by 15% y-o-y at DSK Bank and by 67% y-o-y in Romania (mainly explained by the acquisition). In Russia there was a moderate decrease (-1% y-o-y), in Ukraine deposits kept increasing (+2% y-o-y). The consolidated net loan to (deposit+retail bonds) ratio decreased further q-o-q to 73%.

Against a loss of HUF 2.8 billion in 1Q, the 2Q profit contribution of foreign subsidiaries to the consolidated adjusted profit improved a lot (HUF 8.7 billion), mainly as a result of lower losses in Russia, whereas the Ukrainian subsidiary posted a positive result and all other CEE subsidiaries achieved q-o-q better profit (but Slovakia). Those changes off-set the q-o-q lower, but still strong 2Q profit at DSK Bank.

As for the 6 months contribution to the consolidated adjusted Group earnings, foreign banks made HUF 6 billion (-16% y-o-y). Individual weights changed significantly y-o-y: the Bulgarian profit improved a lot, the Ukrainian loss (adjusted for the Crimean and East Ukrainian provisions) somewhat moderated, the Russian loss more than doubled (including Touch Bank, too), whereas profits from other CEE banks grew by 10% y-o-y.

The Group constantly enjoys strong liquidity position: by end of June the gross liquid reserves at OTP Core comprised EUR 7.1 billion equivalent. In 2Q there were neither new bond issuances, nor redemptions.

By the end of June 2015 the consolidated Common Equity Tier 1 ratio was 13.3%. OTP Bank’s standalone Common Equity Tier1 ratio stood at 24.3% at the end of June 2015, implying a q-o-q increase of 9 ppts.