OTP Group announced the financial results for the first quarter of 2018, with a net profit of RON 22.5 million, the strongest quarterly profit ever, with an increase of 18 percent compared to 2017 results and a q/q advance of 60 percent.
Operating profit dropped by 34 percent y/y as a result of 5 percent lower total income and 15 percent higher operating expenses. On a quarterly base, operating expenses were moderated by 6 percent. Both personal expenses and amortization costs declined by 14 percent q/q. Within administrative expenses, marketing costs and expert fees also decreased.
The net interest income eroded by 2 percent y/y. Higher interbank rates had a negative impact on funding costs, however the bank managed to arrive at a net interest income 41 percent higher than in Q4 2017. The Q4 accounting correction also had a negative impact on the net interest margin, which dropped by 42 pp. y/y.
On Q1 total risks costs line, there was a RON 1.5 million provision release (57 percent q/q) as a result of writebacks on the “other risk costs” line. FX-adjusted DPD90+ volumes continued to decrease by RON 44.9 million in Q1, induced by lower non-performing mortgage and corporate exposures. During Q1, RON 104.8 million in problem loans were sold or written off. The DPD90+ ratio declined to 11.4 percent (-6.3 pp. y/y, -2.1 pp. q/q). The volume of Stage 3 loans under IFRS 9 amounted to Ron 1.25 million at the end of Q1 (15.6 of total gross loans).
The FX-adjusted performing loan volumes increased by 12 percent y/y and by 2 percent q/q. Both the retail and corporate segment supported the expansion, with +9 percent and +22 percent y/y. Within retail, the consumer and SME segments were the key drivers of growth, while mortgage volumes grew by 3 percent. As for new loan disbursements, in Q1 mortgages surged by 34 percent y/y, whereas cash loan sales grew by 16 percent.
FX-adjusted deposit volumes increased by 15 percent y/y and by 7 percent q/q. The growth was supported by retail and corporate inflows.
At the end of March 2018, according to local regulation, the bank’s standalone total assets posted RON 9.44 million, a net profit of RON 12.1 million, and the capital adequacy ratio stood at 17.64 percent, an improvement of 174 pp. compared to the previous quarter.