The main elements of OTP Bank 2012 1H results: higher, than expected results, capital adequacy above required levels, strong liquidity position.
In 1H 2012 OTP Group posted HUF 53.9 billion accounting profit (1H 2011: HUF 74.5 billion) including the negative effects of the banking levy and the FX mortgage prepayment, as well as the positive impact of the tax shield on investment impairment charges. The adjusted 1H profit excluding the effect of the adjustments represented HUF 80.8 billion. The accounting profit of 2Q stood at HUF 41.1 billion, being significantly higher than in 1Q.
The adjusted quarterly net result was HUF 37.0 billion (-15% q-o-q). Operating profit without one-offs remained practically flat, but risk cost increased by HUF 5.4 billion, and the quarterly tax burden was higher, too.
Similar to the previous quarter, foreign subsidiaries’ profit contribution remained significant: it represented 42% both in 2Q and 1H 2012. In 1H 2012 in total HUF 34.0 billion of net earnings were made outside Hungary versus HUF 26.8 billion a year ago.
The operating profit without one-offs for 2Q practically equalled to 1Q earnings, while 1H profit improved by 4% y-o-y. During the previous few quarters the Group managed to post fairly balanced operating profit.
The banks of the group reached higher capital adequacy than the regulatory minimum in their country, which shows the stability of OTP Group. The consolidated capital adequacy ratio of OTP Group under IFRS increased to 17.9% in the second quarter (+0.8 ppt q-o-q). Within this, the Tier1 ratio reached 14.4%.
The stand-alone capital adequacy of OTP Bank stood at 18.6% by end-June (+0.6 ppt ytd).
On group level the liquidity position of OTP Bank has further developed: on one hand the consolidated loan/deposit ratio is 100%; and further the liquid reserves of the Group reached the amount of EUR 5 billion at the end of June 2012.
FX-adjusted loan volumes declined by 0.4% q-o-q and by 2% y-o-y. Deposit volumes remained flat. As a result, the “net loan-to-deposit+retail bonds” ratio (100%) improved by 1 ppt and 5 ppts q-o-q and y-o-y, respectively (adjusted for FX-effect).
The DPD90+ ratio grew to 18.8%, the provision coverage of the porfolio is 76.6%, which equalled 2011 year-end levels. The FX-adjusted DPD90+ volume formation accelerated a lot; its volume of HUF 80 billion in 2Q is the highest amount during the last eight quarters. The worsening portfolio quality partly reflects the delayed effect of HUF weakening in last fall 2011 and few one-off corporate items. At the same time both the Russian and Ukrainian new DPD90+ volumes expanded rapidly.
The adjusted after tax profit of OTP Core (basic activity in Hungary) in 2Q 2012 represented HUF 22.8 billion (-6% q-o-q), thus 1H results amounted to HUF 47.1 billion underpinning a 25% y-o-y decline. The lower profit was mainly the result of the negative effect of one-off items, but it was also caused by the 12% y-o-y decline in operating profit and the 9% increase in risk costs.