Hungary's OTP Bank Q1 net profit rises 9.5 pct

BUDAPEST, May 15 (Reuters) - Hungary's OTP Bank OTPB.BU said its first-quarter net profit rose by 9.5 percent as rapid profit growth at foreign subsidiaries more than offset difficulties on its home market.

OTP's net profit rose to 55.34 billion forints from 50.52 billion and came slightly ahead of expectations for 54.5 billion in a recent Reuters poll.

Net interest income rose by 12.6 percent to 112.50 billion and fell just short of analysts' forecasts for 115.4 billion.

Lending grew by 31 percent, mostly due to expansion abroad but portfolio quality did not decline and risk provisions grew at a third of the rate of lending increase.

But despite the rapid growth, margins fell and net interest margin dropped to 5.15 percent from 5.56 percent and came a touch below expectations.

OTP's core domestic banking unit increased its net profit by 6.1 percent, ahead of the company's full year guidance for flat annual profit growth, as household lending growth remained robust.

Lending at the bank's core unit was up by over 17 percent on a more than 18 percent rise in retail lending, mostly consumer and home equity loans.

Despite the rapid growth, net interest margin continued to shrink, which OTP attributed primarily to the rollover of its government subsidised mortgage portfolio.

In Russia, where OTP was expected to deliver a massive, possibly 50 percent profit growth, net profit was down 16 from a year earlier, which OTP said was the result of a one-off gain a year earlier and seasonal factors, which hurt this year's data.

But while profit fell, the Russian bank's margins widened, its cost to income ratio declined and net interest income more than doubled.

At Bulgaria's DSK, OTP's biggest subsidiary, net profit rose by 44 percent as lending grew and portfolio quality improved while in Ukraine, another major unit, net profit fell 1.8 percent as risk provisions increased. (eporting by Balazs Koranyi; editing by Carol Bishopric)