OTP Group reached an operating profit of RON 35 million in the first quarter of 2022
OTP Group announces the financial results for the first three months of 2022. According to the report published in Budapest, which presents the consolidated results adjusted in accordance with group standards, OTP Bank Romania recorded a loss of RON 24 million during the first quarter of 2022, mainly shaped by the costs of risk.
Operating profit in the first quarter of 2022 reached RON 35 million, several times higher than in the first quarter of 2021, but 4% lower than in the fourth quarter of 2021, due to an increase in operating expenses related to the annual payment of contributions to the deposit insurance fund and the resolution fund, recognized in full in Q1 2022. On a comparable basis (excluding contributions), operating income for Q1 2022 increased by more than 70% compared to in Q4 2021. Most of the cost increase stems from the Apollo growth strategy launched in 2019 and the developments and investments made over the past year. This is also partly explained by the increase in personnel costs following the 3% year-on-year growth in the average headcount and the increase in salaries. Within other expenses, the contribution to the resolution fund increased at the highest rate, RON 7 million year-on-year (+HUF 0.5 billion year-on-year).
“We are now entering the fourth year of our local development strategy, and the quarterly results truly illustrate how far we have come through our investment plans and transformation programs. Operational change and growth as we transition to the new working model, Agile, has brought us closer to our customers and contributed to increased interactions and operations. Thus, during the first three months, we recorded steady growth in our loan and deposit portfolios, as was the case for interest income. This could not have been achieved without considerable expenses, which for the moment directly impact quarterly profitability, and without strengthening our teams and welcoming more and more local talent,” said Gyula Fatér, CEO OTP Bank Romania.
Net interest income increased by 31% to a total of RON 147 million. The quarterly momentum benefited from vigorous growth in sound credit volumes (Stage 1+2) (+4% q/q), and the 19 bps q/q improvement in the net interest margin. The three-month interbank lending rate, which is the benchmark for corporate lending, remained on an increasing trajectory, so the average interest rate on the corporate loan book rose further in the first quarter.
In the first quarter, the total cost of risk was RON -58 million. Additional provisions for impairment of stage 2 and 3 loans generated a cost of risk of RON 25 million. Provisions for other risks, amounting to RON 33 million in the first quarter of 2022, were influenced by the establishment of an exceptional provision for an operational risk event, amounting to RON 28 million.
Sound lending volumes were up 22% year-on-year in Q1 2022, driven primarily by corporate lending, while mortgage lending and treasury lending grew +6%, respectively +12%.
Currency-adjusted deposit volumes increased by 8% compared to the first three months of last year, with momentum driven mainly by corporate placements (+90%), while retail deposits decreased by 21%. Despite the success of deposit-taking activity, the net loan-to-deposit ratio increased by 13 pps year-on-year to 124% (+6 pps year-on-year).
According to local reporting standards, the bank’s assets reached the level of RON 18.5 billion, up 18% from March 2021.
The bank’s capital adequacy ratio reached the level of 20.54% (-2.14pp y-o-y) on the back of asset growth.
In the first three months of 2022, OTP Group recorded an adjusted profit after tax of 88.6 billion HUF (1.203 million RON) while the consolidated accounting loss was -33.4 billion HUF (-454 million RON).
Contribution to the profits of OTP Core – Hungary (94 billion HUF / 1.277 million RON), DSK Bank in Bulgaria (21 billion HUF / 286 million RON), the Croatian operation (11 billion HUF, 150 million RON), the Serbian bank (10.8 million HUF billion / 147 million RON), the Ukrainian (-34.4 billion HUF / -467 million RON), the Russian (27.2 billion HUF / -370 million RON), the operation in Montenegro (1.2 billion HUF / -17 million RON), the Moldovan subsidiary (HUF -0.5 billion / RON -7 million) and Albanian subsidiary (HUF 2.2 billion / RON 31 million),