OTP-Q1 in red, guidance slightly better with high uncer-tainty

OTP’s net profit in the first quarter came to HUF -33.4 bln loss vs. our estimate of HUF 4.7 bln and consensus forecast of HUF 60.2 bln profit. The profit miss was almost entirely attributed to Russia apart from the “normally” expected one-offs i.e. bank tax, acquisitions. OTP had a goodwill impairment in Russia to the tune of HUF 56.3 bln and another negative HUF 34.5 bln was related to the Russian bond portfolio. Corporate tax rate was also higher in the quarter on deferred asset reduction in RU.

Key positives

• Apart from the higher corporate tax rate, adjusted net income was basically in line with market estimates and provision releases ex-Ukr,RU helped the quarter. This is also reflected in the movement between loan quality stages, apart from the concerned subsidiaries (Ukr, RU and Moldova), the rest of the Group saw a favourable development here. Net F&C stayed rather strong despite seasonality thanks to tax refunds in HU (-2% q-o-q, +19% y-o-y). It is hard to say the guidance became upbeat but at least no adverse changes so far and risk cost exp. was modified in a positive way.

Key negatives

• Most of the negatives were already anticipated related to the Ukr-RU segments (capital, write-downs, earnings, etc.). Apart from that net interest income despite the higher yield environment and loan book did not expand in HU, lending was also weaker at OTP Core (attributed to the early repayments from tax refunds).