OTP Group last week has announced the financial results for the first three months of 2022. According to the report published in Budapest, which presents the consolidated results adjusted in accordance with the Group´s standards, OTP Bank Romania has registered a RON 24 million loss during the first quarter of 2022, predominantly shaped by risk costs.
Operating profit in Q1 2022 reached RON 35 million, several times higher than in the first quarter of 2021, but 4% lower than Q4 2021, due to an increase in operating expenses linked to the yearly payment of contributions to deposit insurance fund and resolution fund, booked in full in Q1 2022. On comparable terms (w/o the contributions), the operating profit in Q1 2022 grew by more than 70% compared to Q4 2021. Most of the cost increase stemmed from the Apollo growth strategy launched in 2019 and the developments and investments carried on during last year. This was also partly the result of the increase in personnel expenses following the 3% y-o-y growth in the average headcount and wage hikes. Within other expenses, the contribution to the resolution fund grew at the strongest rate, RON 7 million y-o-y (+HUF 0.5 billion y-o-y).
“We are now entering the fourth year of our local development strategy, and the quarterly results truly depict the journey we take through our investment plans and transformational programs. The operational change and growth, while we transitioned to the new working model, Agile, have brought us closer to our customers and contributed to the increase of interactions and operations. As it follows, in the first three months we have marked steady growth on our loans and deposits portfolios, as it was the case for the interest income. This could not have been achieved without considerable expenditure, which for the moment directly impacts quarterly profitability, and without increasing our teams and welcoming more and more local talents”, said Gyula Fatér, CEO OTP Bank Romania.
The net interest income increased by 31%, to a total of RON 147 million. The quarterly dynamics benefited from a vigorous growth in performing (Stage 1+2) loan volumes (+4% q-o-q), and the 19 bps q-o-q improvement in net interest margin. The three-month interbank lending rate, which is the benchmark for corporate loans, remained on an increasing trajectory, so the average interest on the corporate loan portfolio grew further in the first quarter.
In the first quarter, the total risk cost amounted to RON -58 million. The additional provisions for impairment of stage 2 and 3 loans generated a risk cost of RON 25 million. The provisions for other risks, amounting to RON 33 million in Q1 2022, were influenced by the establishment of an extraordinary provision for an operational risk event, amounting to RON 28 million.
The performing loan volumes increased by 22% y-o-y in the first quarter of 2022, being supported firstly by the corporate loans, while mortgages and cash loans have increased by + 6%, respectively +12%.
FX-adjusted deposit volumes increased by 8% compared to the first three months of last year, with a dynamic fuelled mainly by corporate placements (+90%), while the retail deposits have decreased by 21%. Despite the successful deposit-taking activity, the net loan-to-deposit ratio grew by 13 pps y-o-y, to 124% (+6 pps q-o-q).
According to local reporting standards, the bank´s assets reached the level of RON 18.5 billion, increasing by 18% compared to March 2021.
The bank’s capital adequacy ratio reached the level of 20.54% (-2.14 pp y-o-y) on the background of assets growth.
In the first three months of 2022, OTP Group has registered an adjusted after-tax profit of HUF 88.6 billion (RON 1.203 million) while the consolidated accounting loss was HUF -33.4 billion (RON -454 million).
Profit contribution of OTP Core – Hungary (HUF 94 billion / RON 1.277 million), DSK Bank in Bulgaria (HUF 21 billion / RON 286 million), the Croatian operation (HUF 11 billion, RON 150 million), , the Serbian (HUF 10.8 billion / RON 147million), the Ukrainian (HUF -34.4 billion / RON -467 million), the Russian (HUF -27.2 billion / RON -370 million), the Montenegro operation (HUF -1.2 billion / RON -17 million), the Moldavian subsidiary (HUF -0.5 billion / RON -7million) and Albanian subsidiary (HUF 2.2 billion / RON 31 million).
The full results of OTP Bank Romania are presented in the table below.
|Main components of P&L account
in RON mn
|1Q 2021||4Q 2021||2021||1Q 2022||Q-o-Q||Y-o-Y|
|Adjusted profit after tax||7||44||58||-24||-154%||-434%|
|Profit before income tax||12||51||78||-24||-147%||-298%|
|Net interest income||112||135||498||147||9%||31%|
|Net fees and commissions||13||16||57||16||-2%||17%|
|Other net non-interest income||22||17||86||28||68%||29%|
|Provision for impairment on loan losses||-19||-10||-94||-25||149%||30%|
|Main components of balance sheet
closing balances in RON mn
|1Q 2021||4Q 2021||2021||1Q 2022||Q-o-Q||Y-o-Y|
|Gross customer loans||11,894||13,887||13,887||14,390||4%||21%|
|Gross customer loans (FX-adjusted)||11,943||13,888||13,888||14,390||4%||20%|
|Stage 1+2 customer loans (FX-adjusted)||11,207||13,099||13,099||13,629||4%||22%|
|Allowances for possible loan losses||-642||-735||-735||-739||1%||15%|
|Allowances for possible loan losses (FX-adjusted)||-648||-735||-735||-739||0%||14%|
|Deposits from customers||10,111||11,142||11,142||10,972||-2%||9%|
|Deposits from customers (FX-adjusted)||10,137||11,145||11,145||10,972||-2%||8%|
|Liabilities to credit institutions||3,709||5,399||5,399||5,499||2%||48%|
|Total shareholders’ equity||1,959||2,216||2,216||2,190||-1%||12%|
|Loan Quality||1Q 2021||4Q 2021||2021||1Q 2022||Q-o-Q||Y-o-Y|
|Stage 1 loan volume under IFRS 9 (in RON million)||9,801||11,085||11,085||11,598||5%||18%|
|Stage 1 loans under IFRS 9/gross customer loans||82.4%||79.8%||79.8%||80.6%||0.8%p||-1.8%p|
|Own coverage of Stage 1 loans under IFRS 9||1.0%||1.0%||1.0%||1.0%||0.0%p||0.0%p|
|Stage 2 loan volume under IFRS 9 (in RON million)||1,365||2,012||2,012||2,031||1%||49%|
|Stage 2 loans under IFRS 9/gross customer loans||11.5%||14.5%||14.5%||14.1%||-0.4%p||2.6%p|
|Own coverage of Stage 2 loans under IFRS 9||9.9%||8.4%||8.4%||8.8%||0.4%p||-1.1%p|
|Stage 3 loan volume under IFRS 9 (in RON million)||728||789||789||762||-3%||5%|
|Stage 3 loans under IFRS 9/gross customer loans||6.1%||5.7%||5.7%||5.3%||-0.4%p||-0.8%p|
|Own coverage of Stage 3 loans under IFRS 9||56.0%||57.5%||57.5%||58.6%||1.1%p||2.6%p|
|Provision for impairment on loan losses/average gross loans||0.67%||0.29%||0.75%||0.72%||0.43%||0.05%|
|90+ days past due loan volume (in RON million)||477||482||482||478||-1%||0%|
|90+ days past due loans/gross customer loans||4.0%||3.5%||3.5%||3.3%||-0.2%p||-0.7%p|
|Performance Indicators||1Q 2021||4Q 2021||2021||1Q 2022||Q-o-Q||Y-o-Y|
|Total income margin||3.75%||3.62%||3.75%||4.02%||0.41%p||0.27%p|
|Net interest margin||2.86%||2.91%||2.92%||3.10%||0.19%p||0.25%p|
|Operating costs / Average assets||3.54%||2.84%||3.03%||3.30%||0.46%p||-0.24%p|
|Net loans to deposits (FX-adjusted)||111%||118%||118%||124%||6%p||13%p|
|FX rates (in HUF)||1Q 2021||4Q 2021||2021||1Q 2022||Q-o-Q||Y-o-Y|
The full report published by OTP Bank Plc. is available here.