Equity 5 August 2025, 8:46am

Hungary's OTP Bank performs well in the second quarter

Portfolio

OTP's after-tax profit in the second quarter of 2025 was HUF 330 billion, which is 21% higher than a year earlier in organic and exchange rate-adjusted terms. The operating profit of Hungary's largest lender increased at a double-digit rate thanks to higher interest and fee income, while the quality of the loan portfolio remained stable. However, risk costs increased significantly, primarily due to additional impairment charges at the Russian, Serbian and Hungarian subsidiaries.

OTP Group further improved its operating performance in the second quarter. Consolidated after-tax profit for the quarter, including special items, amounted to HUF 330 billion — 21% higher than last year's figure on an organic and exchange rate-adjusted basis, i.e. filtering out the effect of the sale of Romania.

Operating profit increased by 13% q/q, primarily due to a 3% rise in net interest income, a 4-basis-point improvement in the net interest margin and an expansion in business volumes. Fee and commission income increased by 9%, partly due to the seasonal increase in activity at the start of the tourist season.

In Q2, total risk costs doubled q/q, as a consequence of the HUF 33 billion higher provision for impairment on loan losses. As for geographical segments, higher credit-related impairments were created in Russia (+HUF 14 billion q/q growth), Serbia (+7), and OTP Core Hungary (+10). Regarding OTP Core, the one-off effect of the further extended interest rate cap on certain mortgages amounted to HUF 4.4 billion, and the expected negative effect of higher tariff rates imposed by the United States induced an additional HUF 9 billion worth of provisioning on certain corporate exposures. At the Russian and Serbian subsidiaries, the higher impairments were partially related to the revision of macro parameters in the IFRS 9 impairment models entailing HUF 12 billion impairments in 2Q in these two countries; furthermore, in Russia the further growing and deteriorating portfolio necessitated additional impairments on possible loan losses, too.

Portfolio quality remained favourable. The ratio of Stage 3 loans under IFRS 9 declined by 0.1 pp q/q and 0.8 pp y/y to 3.4%. The own provision coverage of Stage 3 loans improved by 0.6 pp q/q to 61%. Consolidated performing (Stage 1+2) loans expanded by 4% q/q, bringing semi-annual growth rate to 7%, and yearly growth of 12%, on an FX-adjusted basis and excluding the effect of the Romanian deconsolidation.

At the Group level, performing consumer loans increased by 5% q/q and 24% y/y on an FX adjusted basis, excluding the effect of the sale of Romania. As for mortgage loans, the respective growth rates were 4% q/q and 14% y/y.

Regarding the corporate + MSE segment, meaningful acceleartion has not been observed so far: performing loan growth reached 2% q/q, while in the past 12 months the portfolio increased by 7% adjusted for the sale of Romania as well as the repayment of a big-ticket corporate loan held in the Hungarian, Bulgarian and Slovenian books, in the total amount of HUF 317 billion. It was favourable that Hungarian corporate + MSE loans advanced by 2% q/q; also, in Ukraine the growth rate of corporate loans reached 19% y/y.