OTP Group: 2019 results
The full-year 2019 consolidated accounting after tax profit was HUF 412.6 billion, against HUF 318.3 billion reached in the base period, marking a 30% y-o-y increase. The accounting ROE was 0.3% (+1.6 pps y-o-y).
The total volume of adjustment items in 2019 represented -HUF 6.5 billion (after tax), i.e. less than in 2018. In 4Q the volume of adjustments amounted to -HUF 3 billion.
In 2019 OTP Group posted HUF 419 billion adjusted after-tax profit underpinning a 29% y-o-y increase. Without the contribution of the newly acquired Bulgarian, Albanian, Moldavian, Montenegrin and Serbian banks the annual profit would be HUF 389.7 billion (+20% y-o-y). The effective tax rate moderated by 0.2 pp y-o-y to 10.1%. The profit before tax increased by 28% y-o-y.
Out of the annual profit it was still OTP Core posting the highest individual net results (HUF 191 billion). Regarding the annual performances all subsidiaries managed to improve their earnings. Given its weight, the Bulgarian operation excelled itself with HUF 67.9 billion, followed by the Ukrainian (HUF 35.2 billion), Croatian (HUF 30.7 billion) and Russian profit contributions (HUF 28.1 billion). Besides, several other subsidiaries doubled or even tripled their annual profit. Of them the most outstanding improvement belonged to OTP Fund Management (Hungary): as a result of its all-time high success fee income the bottom-line profit jumped to 3.5-fold y-o-y (to HUF 15.1 billion).
In particular, the Bulgarian Expressbank contributed around HUF 18 billion through a 12-months period; the Albanian subsidiary brought in HUF 2.6 billion between April-December 2019 (9 months); both the Montenegrin and Moldavian subsidiaries contributed HUF 1.9 billion between August-December (5 months), whereas the newly acquired Serbian subsidiary boosted consolidated earnings by HUF 5 billion in 4Q (with its full quarterly earnings). As a result these five new entities brought in HUF 29.4 billion in total into the consolidated earnings in 2019.
Based on those figures the share of the non-Hungarian operations’ profit contribution within the Group’s total profit increased from 38% in 2018 to 46% in 2019 (4Q 2019: 42%).
2019 total income grew by 22% y-o-y (+14% without acquisitions). The annual operating income advanced by 33% (+21% w/o acquisitions), whereas total risk costs jumped by 80% y-o-y (+46% w/o acquisitions), within that credit costs grew by 53%.
The adjusted operating profit for 4Q reached HUF 106 billion (-4% q-o-q; without the acquisition of the Serbian subsidiary -9% q-o-q). Total income expanded by 12% q-o-q, within that net interest income increased by 11% q-o-q (+5% w/o the new Serbian acquisition) as a result of the continuing organic loan growth and the quarterly NIM (4.06%) improving by 8 bps q-o-q. The lower quarterly adjusted profit was shaped by higher operating expenses (+22%, w/o the newly purchased Serbian bank +17%) as a result of seasonality and one-off items but doubling risk costs – albeit from a low base – also took their tolls. Higher 4Q risk cost were mainly related to the Bulgarian, Croatian and Serbian operations. Regarding the individual performances, y-o-y the Hungarian (+21%, within that +81% for consumer credits), Ukrainian (+27%), Romanian (+23%) and Croatian (+15%) organic loan expansions were the most remarkable. In case of other operations yearly loan volume dynamics were distorted by acquisitions.
In 2019 the consolidated FX-adjusted performing (Stage 1+2) loan volumes surged by 48%, by around HUF 4,000 billion y-o-y, out of which the organic growth represented 15% (HUF 1,252 billion). In 4Q FX-adjusted performing volumes grew by 12%, w/o the Slovenian acquisition +4%, respectively. It was positive that volumes increased at all Group members and in each category.
As for the major credit categories in 2019 the Stage 1+2 micro and small enterprise book advanced the fastest y-o-y (+54%, and -3% w/o acquisitions), followed by the corporate portfolio (+52% and +17%) and the consumer exposure (+48% and +28%). The FX-adjusted mortgage loan portfolio advanced by 39% y-o-y (+9% w/o acquisitions).
In line with the improving macroeconomic environment and the steadily good recovery results of the work-out activity, risk indicators in total improved. At the end of 4Q 2019 the ratio of Stage 3 loans was 5.9% (-2.7 pps y-o-y, -0.9 pp q-o-q); the ratio of Stage 2 loans stood at 5.3% (-1.5 pps y-o-y and + 0.3 pp q-o-q).
In 2019 the DPD90+ volume growth (HUF 81 billion adjusted for FX and the effect of sales and write-offs, as well as for the one-off inclusion effect of newly acquired banks) was higher than in 2018 (HUF 24 billion). The consolidated DPD90+ ratio dropped significantly (-2.1 pps y-o-y) to 4.2%, lower than before the financial crisis. The decline was supported by sales and write-offs, too, in 2019 as a whole in the amount of HUF 133 billion (FX-adjusted), mainly at the Russian and Ukrainian subsidiaries. At OTP Core the DPD90+ ratio shrank to 3.2% (-1.3 pps y-o-y). The consolidated annual risk cost rate was 0.28% versus 0.23% in 2018.
The FX-adjusted deposit portfolio grew slower than loans, by 34% y-o-y (+11% adjusted for the acquisitions), in 4Q +7% q-o-q (+1% w/o acquisition). As a result, the consolidated net
loan-to-deposit ratio grew the fastest during the last couple of years and reached 79% (+7 pps y-o-y).
At the end of 4Q 2019 the gross operative liquidity reserves of the Group comprised EUR 7.4 billion equivalent.
At the end of December 2019 the consolidated Common Equity Tier1 ratio under IFRS – including the annual net result less the proposed dividend amount – was 13.9%.