OTP Bank PLC (FRA:OTP) Q3 2025 Earnings Call Highlights: Strong Growth Amidst Challenges

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Revenue: HUF886 billion (EUR2.2 billion to EUR2.3 billion), up 5% year-on-year for the first nine months. Pretax Profit Growth: 8% increase, influenced by increased ecotaxes in Hungary. Operating Profit: 16% increase year-on-year for the first nine months. Return on Equity (ROE): 22.7%. Cost to Income Ratio: 39%, below 40%. Net Interest Margin (NIM): Increased from 2.84% to 3.09% year-on-year. Loan Growth: Year-to-date performing loan growth of 10%. Consumer Loans in Hungary: 39% higher contractual demand year-on-year. Market Share in Retail Deposits: 41.4% in Hungary. Corporate Loan Growth: Micro Small year-to-date growth rate of 12%, total corporate 5%. Deposit Growth: 9% year-to-date. Liquidity Coverage Ratio: 235%. Capital Adequacy Ratio: 18.4%.

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Release Date: November 07, 2025

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

Positive Points

OTP Bank PLC (FRA:OTP) reported a strong operating profit growth of 16% for the first nine months of 2025. The bank's return on equity was 22.7%, with a cost-to-income ratio below 40%, indicating efficient operations. Loan growth was robust, with a year-to-date performing loan growth of 10%, surpassing last year's 9%. The bank's market share in retail deposits increased, particularly in Hungary and Bulgaria, where it holds around 40%. OTP Bank PLC (FRA:OTP) received multiple credit rating upgrades, reflecting strong financial performance and stability.

Negative Points

The bank faced increased extra profit taxes in Hungary, impacting the profit after tax numbers. Risk costs were higher, primarily driven by volume effects in Russia, affecting overall profitability. Uzbekistan's nominal profit and return on equity declined due to limitations on consumer loan volume growth. The bank's capital adequacy ratio declined to 18.4% due to Basel IV impacts. There were challenges in Slovenia with competitive pricing strategies affecting loan book growth.

Q & A Highlights

Q: How do you view the loan growth outlook for 2026, and will NII growth be proportionate to loan growth? Also, can you comment on M&A interest in Kazakhstan? A: We are optimistic about loan growth, driven by strong trends in Hungarian mortgages and consumer loans. While we can't provide specific guidance, the current run rate is 12-13%, and factors influencing growth are positive. NII growth is supported by strong deposit growth in Hungary and Bulgaria, and Bulgaria's Eurozone entry will further boost it. Regarding M&A, we see Central Asia, including Kazakhstan, as a region with high growth potential, but we can't comment on specific deals.

Story Continues

Q: What is the outlook for regulatory environments in countries like Russia, Serbia, and Croatia, and how will it affect growth? Also, can you address the slower loan growth in Slovenia? A: We generally welcome macroprudential measures as they promote rational lending. In Serbia, forced lowering of consumer loan APRs is a concern as it distorts risk-based pricing. In Slovenia, competitive pricing strategies are challenging, but we have a new CEO with ambitious targets. Despite challenges, a 6% year-to-date growth is acceptable for a mature Eurozone market.

Q: Can you clarify the expected growth rate for subsidized mortgage lending in Hungary? A: The current run rate for mortgage growth in Hungary is annualized at 12%. With the home start program, we expect this rate to increase to high teens, possibly close to 20% by the end of the second quarter next year. This figure refers to total mortgage volume growth, not just subsidized mortgages.

Q: What is the outlook for risk costs, and are there any imminent risks? A: Risk costs have been elevated due to specific factors like consumer lending in Russia and Bulgaria, and corporate issues in Uzbekistan. However, we don't see any underlying portfolio quality issues or reasons for concern. The current risk cost levels are within expected ranges.

Q: Can you update us on the core banking system upgrade and its impact on costs? A: The core banking system upgrade is progressing well, with no expected cost increases. The extra expenditure is already included in our current cost structure. In the midterm, we anticipate a reduction in the total cost of operating this environment, but no immediate cost spikes are expected.

Q: What are your plans for capital return, specifically regarding the ongoing buyback program? A: We haven't decided on extending the buyback program, but given our strong capital generation and undervalued share price, we are supportive of continuing it. We have repurchased EUR88 billion so far, and there's still room to go.

Q: Can you discuss the nature of corporate lending growth and the mix effects on top and bottom lines? A: Corporate lending growth is primarily driven by working capital needs, not new investments. In the micro-small segment, there's more fundamental growth due to consumption-driven demand. We expect acceleration in Hungarian mortgages and consumer loans, with no major shifts in the mix unless the war in Ukraine ends, which could significantly boost growth there.

Q: Are you considering AT1 issuance given the current credit market conditions? A: We are not planning additional AT1 issuance unless a significant acquisition opportunity arises. Our current strategy is to reserve AT1 issuance for potential large acquisitions.

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

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