Hungary's OTP beats forecasts with stunning 2023 earnings

By bne IntelliNews March 8, 2024

Hungary’s leading lender beat even the most bullish forecasts in its Q4 earnings report, which showed consolidated after-tax profit rising 15% year-on-year to HUF133bn (€340mn) and full-year profit just a tad below the HUF1 trillion mark, up 185%.

In the earnings report published in the early hours of March 8 before the bell, the company said Q4 earnings were affected by HUF90bn in special items, including HUF59.5bn from the sale of its Romanian unit and HUF18bn in badwill related to its recently acquired Uzbek unit.

At the Uzbek unit, OTP said management expected normalising risk costs, an improved operating result and stable or increasing market share.

The bank’s total assets climbed 21% last year to HUF39.6 trillion, just passing the €100bn mark at current rates.

For the full-year, net interest income rose 33% to a record HUF1.5 trillion and net revenue from commissions and fees increased by 20% to HUF478bn.

Risk costs fell 78% to HUF38.5bn.

ROE improved by 16.2pp to 27.2%. Earnings per share came to HUF3,693.

At the end of 2023, the consolidated CET1 ratio was 16.6%, up 0.2pp on a quarterly and annual basis as well. Consolidated CAR increased to 18.9%

All units of OTP, except Ipoteka Bank, which OTP acquired in June, were profitable and foreign units accounted for two-thirds of earnings. The Uzbek bank raked up a HUF23bn loss in 2023.

Adjusted after-tax profit of OTP's business in Hungary increased 18% to HUF303bn and that of its Bulgarian unit DSK Group surged 68% to HUF202bn.

In Russia and Ukraine, OTP booked adjusted after-tax profits of HUF96bn and HUF45.2bn respectively.

OTP noted that the impact of a deconsolidation of the Russian business and write-down of intragroup exposure would cut its CET1 ratio by 11bp, while the negative effect of a deconsolidation in Ukraine would be 2bp.

In guidance for 2024, OTP's management said an expected improvement in GDP growth, disinflation and a declining interest rate environment could have a positive impact on credit demand and portfolio quality.

FX-adjusted organic performing loan volume growth may be higher than in 2023, the consolidated net interest margin may be similar to 2023, the consolidated cost-to-income ratio may be around 45% and the portfolio risk profile may be similar to 2023, the management said.

Leverage is expected to decline, thus ROE may be lower than in 2023, they added. The final decision on a dividend proposal will be made at a board meeting on March 20 and published on April 4, OTP said. Shareholders are expected to receive HUF150bn in dividends, or HUF535 per share.

Despite a 69% increase in the share price in the last months, OTP is trading at book value, which makes it undervalued compared to its European peers, financial website Portfolio adds.


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