A Successful Quarter for OTP Bank

OTP Bank has further strengthened its market share and is the market leader in the region in terms of equity, and is ranked first in five countries in terms of net loans, OTP Bank Plc.'s Deputy CEO László Bencsik said at a press conference in Budapest on Friday, assessing the bank's first quarter results.

László Bencsik said that OTP's first-quarter performance was successful, with all indicators performing in line with expectations. Profitability is outstanding, with a first quarter return on equity (ROE) of 23%. The group's liquidity and capital position is stable and improving, with a net loan-to-deposit ratio of 73%, it said.

He said that management is not changing its expectations for 2024: the growth rate of organic loan growth at constant rates could exceed last year. Net interest margin should be around the 2023 level, while the cost-to-income ratio should be around 45%. The risk profile could be similar to 2023, while the expected reduction in leverage could result in an annual ROE lower than in 2023, he confirmed.

He stressed that Hungarian retail lending has grown rapidly, with new home loan contracts growing faster than consumer loans. Mortgage applications in Hungary nearly tripled in the first quarter, up 176%, with the amount of new contracts more than doubling compared to the same quarter last year and disbursements up 82%. There is a chance that the amount of new home loans in the Hungarian market as a whole will exceed HUF 1,000 billion this year, up from HUF 686 billion last year, he said.

Mortgage and personal loan disbursement and retail deposit market shares have reached multi-year highs, driven by a favourable interest rate environment and falling inflation, he said. The population's propensity to invest has increased and consumption is also on the rise.

Hungarian micro and small business loans have not yet started to grow, but have been stable in the first three months, a regional trend, according to László Bencsik. He said that state subsidized loan schemes continue to generate significant amounts of lending. They also expect corporate loan demand to start picking up over the rest of the year.

The performance of the foreign subsidiary banks was strong in the first quarter, with the Uzbek bank's profitability turning positive, a positive development reflecting the market potential there. The foreign profit contribution has been gradually increasing in recent years and is currently 74%, driven by the Hungarian tax burden, he said.

He said that the after-tax result was burdened by HUF 57 billion in lump-sum, full-year specific items, among which the Hungarian extra profit tax, the special tax on financial institutions and deposit insurance premiums in Bulgaria, Slovenia and Romania stand out. If they had been accounted for on a pro rata basis, the profit after tax would have been HUF 283 billion.

OTP Core achieved a profit of HUF 50 billion excluding dividends from subsidiaries, up 67% in the first quarter. According to the statement, HUF 251.5 billion of dividend income from subsidiaries was recorded at OTP Core, bringing OTP Core's after-tax profit to HUF 301.5 billion.

In response to a journalist's question on acquisitions, he said that 11 acquisitions had been made in seven years. According to a previous announcement, a takeover bid was made for an EU bank, but no further information on the transaction is available at the moment.