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• Capital Adequacy Ratio: Above 19%.

• Leverage Ratio: Closer to 11%.

• Return on Equity (ROE): Close to 25%.

• Net Interest Margin: Stabilized close to 4.3%.

• Cost-to-Income Ratio: Approaching 40%.

• Third Quarter Profit: HUF319 billion.

• First 9 Months Profit: HUF826 billion.

• Year-on-Year Profit Growth: 19% after adjustments.

• Net Interest Income Growth: 25% year-on-year.

• Loan Growth: 7% year-to-date.

• Deposit Growth: 5% year-to-date.

• Operating Profit Improvement: 18% year-on-year.

• Adjusted Profit Growth: 14% year-on-year.

• Hungarian Mortgage Growth: 9% in 9 months.

• Stage 3 Ratio: Declined to 4% in the third quarter.

• Common Equity Tier 1 Ratio Increase: 2.9 percentage points in the first 9 months.

• Net Fee Income Growth: 14% year-on-year.

• Operating Costs Growth: 13% adjusted year-on-year.

• Warning! GuruFocus has detected 4 Warning Sign with STU:OTP.

Release Date: November 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• OTP Bank PLC (STU:OTP) reported a strong capital adequacy ratio above 19%, significantly higher than the European minimum requirement of 5%.

• The company achieved a 19% year-on-year growth after adjusting for last year's one-off items, showcasing robust financial performance.

• Net interest margin stabilized at approximately 4.3%, with significant improvements noted in Hungary.

• The cost-to-income ratio is approaching 40%, indicating improved operational efficiency.

• Foreign operations contributed 70% to earnings, highlighting successful international expansion and diversification.

Negative Points

• The third quarter earnings were slightly lower compared to the previous year due to the absence of one-off positive items from past acquisitions.

• The sale of the Romanian bank, despite efforts, indicates challenges in achieving organic growth in certain markets.

• Risk costs were higher this year, primarily due to extra provisions for Russian bonds.

• The Hungarian GDP growth was lower than expected, which could impact future corporate loan demand.

• Increased transaction taxes in Hungary negatively impacted fee growth in the third quarter.

Q & A Highlights

Q: Can you provide an update on your capital distribution plans, considering your comfortable capital levels and potential Basel IV impacts? A: We are in a comfortable equity position and are considering our options for capital distribution. Basel IV will have a one-off effect of 80-100 basis points on our common equity Tier 1. We plan to announce our capital distribution strategy, including potential dividends or share buybacks, when we present year-end numbers in early March.