OTP's Results Boosted by Foreign Banks

Foreign subsidiaries largely compensated for the losses caused to the group by the war and Hungarian government measures, with after-tax profit falling by only 24% to HUF 347 billion last year compared to a year earlier, Deputy CEO László Bencsik said at a press conference presenting OTP Group's last year's report on Friday.

He pointed out that the Hungarian unit's profit excluding dividends from subsidiaries amounted to HUF 27 billion last year, down 84% from a year earlier.

The negative impact of the Russian-Ukrainian war was HUF 94 billion, while items related to Hungarian government measures – special tax, extra profit tax, moratorium, interest rate freeze, Sberbank liquidation – amounted to HUF 138 billion, he explained.

He noted that the high interest rate environment in Hungary, contrary to popular perception, does not favor the bank: the net interest margin fell to a historic low of 2.11% in the fourth quarter.

In Hungary, loans grew by 15% despite the near disappearance of earnings; corporate loans jumped 33%, with "well-designed" government support programs playing a big role, he pointed out. The bank has signed contracts worth HUF 593 billion under the Széchenyi Card Program, giving it a market share of 32%, he added.

According to the deputy CEO, recession expectations will not come true either at the European level or in Hungary, but the growth environment will slow down. The bank expects the growth of the performing loan portfolio at the group level not to exceed 5% this year, and close to this level in the country.

It is realistic for the government and the central bank to expect inflation to fall below 10% in the second half of the year, according to László Bencsik, adding that they also hope that the interest rate environment will fall rapidly in parallel, which is currently "a problem for OTP's profitability and for the growth of the economy as a whole and of prosperity.".

They expect the bank's operating environment in neither Russia nor Ukraine to deteriorate further, and that it will be able to generate profits in both countries this year, he predicted.