OTP Bank reported minimal profit in Q4 2014

Noam Stiekema

The Hungarian OTP Bank reported minimal profit in Q4 2014, exceeding expectations of analysts who had forecast a loss. This occurs against the backdrop of the unfavorable conditions in the Eastern markets where it operates. The bank, which has significant exposure to Ukraine and Russia, won 10.9 billion HUF (39.35 million USD) during the period […]

OTP Bank

OTP BankThe Hungarian OTP Bank reported minimal profit in Q4 2014, exceeding expectations of analysts who had forecast a loss. This occurs against the backdrop of the unfavorable conditions in the Eastern markets where it operates. The bank, which has significant exposure to Ukraine and Russia, won 10.9 billion HUF (39.35 million USD) during the period from October to December 2014. The analysts forecast were for lose of 3.5 billion HUF in the quarter.

After a record loss of 153 billion HUF recorded in the second quarter due to provisions, the bank returned to profit in the third quarter. Then OTP won 34.1 billion HUF. However, much of this profit was deleted in the final three months of 2014, due to increased costs and a decline in operating profit. Furthermore, the bank doubled its loss in Ukraine on the third quarter.

The ongoing year conflict between Ukraine and Russia already given its negative impact, as they were profitable markets for OTP. The Hungarian bank warned that it expects losses in 2014 in Ukraine to 30 billion HUF, but later increased the number to 50 billion HUF and eventually lost 77 billion HUF, mainly due to writedowns in the shaken from unrest areas.

Russia brought OTP Bank loss of 14.5 billion HUF, but markets in Central and Eastern Europe, where it operates bank marked economic upturn. Moreover, the Hungarian government agreed to abolish punitive measures for banks concerning exchange of the foreign currency. The foreign operations, which formed quite a large part of the profit of the bank for years, brought losses not only in the fourth quarter, but for the entire year.

For the period from October to December operating profit of OTP was down by 17% yoy. The net interest income was 2% lower than an year earlier to 155.8 billion HUF. Income from fees also decreased – by 1% an year to 44.5 billion HUF. The loan portfolio of OTP Bank decreased by 6% yoy, while deposits grew by 11%. Moreover, the share of bad loans shrank sharply to 19.3% from 21.8%. The decrease is due to write off bad assets.

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