November 13, 2015 / 6:27 AM / 4 years ago

OTP Bank swings to Q3 loss on FX loan conversions

* Romania FX loan conversion causes unexpected loss

* Hungary, Croatia FX loan conversion also dent profit

* CEE outlook favourable, Russia, Ukraine more difficult

By Marton Dunai

BUDAPEST, Nov 12 (Reuters) - Hungary’s OTP Bank swung to a loss in the third quarter, missing analysts’ expectations of a small profit as a conversion of forex loans in several banks in its network eroded its underlying profit, the bank said on Friday.

OTP, one of Emerging Europe’s largest independent lenders, posted a net loss of 3.67 billion forints ($12.67 million) in the third quarter versus a profit of 34.1 billion forints a year earlier.

Analysts had expected a quarterly profit of 16.15 billion forints, according to a survey conducted by OTP before the results.

OTP booked big one-off losses related to conversion programmes on its loans denominated in foreign currency, mostly the Swiss franc, which has gained steeply in the past year and caused delinquency problems among borrowers around the region.

The bank decided in November to offer Romanian customers the option to convert their Swiss franc-denominated loans into leu or euros, along with a partial debt forgiveness to cut their payments to December 2014 levels, before the Swiss National Bank allowed the franc to strengthen against the euro.

OTP assumes all clients will take the conversion opportunity and all of the resulting after-tax loss of 25.5 billion forints will be booked in the third quarter.

In Hungary, it will convert FX-denominated consumer and vehicle loans into forints at a one-off after-tax cost of 6.5 billion forints, while FX loans conversions in Croatia dented the bottom line by another 6.3 billion forints.

Without one-offs, the bank would have posted a net profit of 34.6 billion forints, up 3 percent from the same period last year and down 15 percent from the previous quarter.

Market conditions are far better in the bank’s central European markets than Russia Ukraine, where OTP also has significant operations, it said. In Ukraine and Russia a slow stabilization is experienced following a dire 1H performance, the bank said.

Group-level risk costs were down 15 percent so far this year from 2014. Operating profit in the first nine months totalled 286.4 billion forints, down 12 percent year-on-year.

OTP’s net loan book shrank by an annual 9 percent while deposits grew by 5 percent, leading its loan-to-deposit ratio to sink to 84 percent from 98 percent a year earlier.

The bank’s solvency margin grew to 16.5 percent from 16.4 percent in the second quarter, compared with an 8 percent regulatory minimum.

Its non-performing loan rate was 19.2 percent after 18.4 percent at the end of June. ($1 = 289.6000 forints) (Reporting by Marton Dunai; Editing by Anand Basu)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below