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OTP Bank posts the strongest quarterly profit ever in Romania – RON 22.5 M

Hungary-based OTP Bank has registered an after-tax profit of RON 22.5 million (HUF 1.5 billion) in Romania in Q1, according to the report published in Budapest, which presents the consolidated result adjusted in accordance with the Group’s reporting standards.

This is the strongest quarterly profit ever, with an increase of 18 percent compared to 2017 results and a q-o-q advance of 60 percent, supported also by provisions releases.

Operating profit dropped by 34 percent y-o-y as a result of 5 percent lower total income and 15 percent higher operating expenses. On a quarterly base, operating expenses were moderated by 6 percent. Both personal expenses and amortization costs declined with 14 percent q-o-q.  Within administrative expenses, marketing costs and expert fees came down, too.

The net interest income eroded by 2 percent y-o-y. Higher interbank rates had negative impact on funding costs, however the bank managed to arrive at a net interest income with 41 percent higher than Q4 2017. The 4Q accounting correction also had a negative impact on the net interest margin, which dropped by 42 bps y-o-y.

On Q1 total risk costs line, there was a RON 1.5 million (HUF 0.1 billion) provision release (57 percent q-o-q), as a result of write backs on “Other risk costs” line. FX-adjusted DPD90+ volumes continued to decrease by RON 44.9 million (HUF 3 billion) in Q1 2018, induced by lower non-performing mortgage and corporate exposures. During Q1, RON 104.8 million (HUF 7 billion) problem loans were sold or written off. The DPD90+ ratio declined to 11.4 percent (-6.3 pps y-o-y, -2.1 pps q-o-q). The volume of Stage 3 loans under IFRS 9 amounted to RON 1,251 million (HUF 84 billion) at the end of Q1 (15.6 percent of total gross loans).

The FX-adjusted performing loan volumes increased by 12 percent y-o-y and by 2 percent q-o-q. Both the retail and corporate segment supported the expansion, with +9 percent and +22 percent y-o-y. Within retail, the consumer and the SME segments were the key drivers of growth, while mortgage volumes grew by 3 percent. As for new loan disbursements, in Q1 mortgages surged by 34 percent y-o-y, whereas the cash loan sales grew by 16 percent y-o-y.

FX-adjusted deposit volumes increased by 15 percent y-o-y and by 7 percent q-o-q. The growth was supported by retail and corporate inflows.

At the end of March 2018, according to local regulation, the Bank’s standalone total assets posted RON 9,440.24 million, a net profit after tax of RON 12.1 million, and the capital adequacy ratio stood at 17.64 percent, which means an improvement of 174bps compared to the previous quarter.

OTP Group has registered in the first quarter of 2018 an adjusted after-tax profit of RON 1,187.13 million (HUF 79.3 billion), with y-o-y growth of 19 percent, while the non-Hungarian profit contribution improved substantially, from 33 percent in Q1 2017, to 46 percent in Q1 2018.

About Anca Bernovici