OTP Bank (OTP) Q2 2024 earnings summary

Executive summary

• HUF 508 billion profit after tax in H1 2024, down 12% year-on-year due to one-off gains in 2023; adjusted profit after tax rose 28% year-on-year, with foreign subsidiaries contributing nearly 70% of profit.

• Q2 2024 profit increased 12% quarter-on-quarter, supported by higher revenues and lower regulatory charges.

• Operating profit rose 27% year-on-year, driven by 35% net interest income growth and improved margins.

• Sale of Romanian business completed in July 2024; expected to add HUF 15bn after-tax profit in Q3 and improve CET1 and capital adequacy ratios.

• Maintained dominant CEE position, No.1 in net loans in 5 countries, with 42% of net loans in Eurozone/ERM2 and ~80% in EU.

Financial highlights

• Net interest income up 35% year-on-year in H1 2024; net fees and commissions up 18% year-on-year.

• Net interest margin stabilized at 4.29% in H1 2024, up 58 bps year-on-year.

• Cost/income ratio improved to 42.4% in H1 2024 from 44.4% in H1 2023.

• Risk cost was unusually high at HUF 46 billion in Q2, mainly due to increased provisions on Russian bonds and extension of rate caps in Hungary.

• Total assets reached HUF 42.5tn at end-Q2 2024, up 7% year-to-date and 15% year-on-year.

Outlook and guidance

• Management expects 2024 net interest margin above 2023 (3.93%), with guidance now closer to 4.3%.

• Organic performing loan growth (FX-adjusted) expected to exceed 6% in 2024, with 5% already achieved in H1.

• Cost/income ratio to remain around 45%; portfolio risk profile similar to 2023.

• ROE expected to be lower than 2023 due to declining leverage.

• External environment improved; optimistic outlook for H2 2024, though corporate loan demand remains muted.