OTP Bank: Considerable Profit in 2023

OTP Bank's consolidated adjusted profit after tax for the last quarter of last year was HUF 229.987 billion, exceeding the average expectations, closing the year at HUF 1,008.583 billion, according to a release published on the website of the Budapest Stock Exchange (BSE) on Friday morning.

Based on a summary of unaudited individual and consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS), the consolidated adjusted profit after tax for the last three months represents an increase of 50% compared to 2022, and 70% on an annual basis. Analysts had forecast a slightly lower average profit consensus of HUF 221.33 billion for the last three months of last year, according to OTP's summary of results.

Consolidated profit after tax for the last quarter of 2023 was 15% higher year-on-year at HUF 132.581 billion. On an annual basis, the result was HUF 990.459 billion, almost three times as much as in 2022. On a quarterly basis, however, both adjusted and unadjusted profit after tax fell, partly because of the negative impact on profit of almost HUF 60 billion related to the sale of the Romanian subsidiary. At the same time, risk costs fell by 78% year-on-year compared to 2022, and the items that still had a significant impact on profit before last year almost disappeared or were of a smaller magnitude, so the adjustment balance reduced profit by only HUF 18 billion in 2023, instead of HUF 245 billion minus before last year.

They also highlighted the 45% improvement in the operating result, which reached HUF 1,260 billion. The total revenue of more than HUF 2,224 billion represents a 34% year-on-year increase, with all revenue lines contributing to this. Operating expenditure increased by only 22%, exceeding HUF 963 billion by the end of the year. The balance sheet total increased from HUF 32,804 billion to HUF 39,609 billion in one year.

According to the information note, OTP's domestic operating environment last year was shaped by the combined effects of declining economic performance, high interest rates, government and central bank measures. However, the accelerating pace of inflation in the second half of the year and the overall reduction of special bank taxes in Hungary by almost a third are seen as positive factors. The interest rate freeze, which was also introduced in Serbia in the second half of the year, did not help OTP, but GDP growth was up across the board for foreign group members, and lower inflation and interest rates than in Hungary did not dampen lending activity as much, although the Hungarian loan portfolio also expanded by 3%. Organic growth in the consolidated performing loan portfolio reached 6% at constant exchange rates. It was added that portfolio quality and the group's key liquidity indicators remained stable, with deposit balances growing for the majority of group members and credit quality fundamentals remaining favorable in 2023. Last year, all group members except the newly acquired Uzbek Ipoteka Bank closed with a profit, and on an annual basis, the after-tax results of most subsidiaries improved by an order of magnitude. In total, the Group banks contributed more than HUF 946 billion to the consolidated adjusted profit after tax, of which the Hungarian share accounted for around HUF 303 billion.