Shares of Hungarian OTP Bank climbed nearly 5-year high after the vault exceeded analysts’ expectations for profit in the fourth quarter of 2015. Legislative changes in Hungary and positive tax effects from Ukraine turned off support to financial results. The bank, which owns Bulgarian DSK Bank posted a net profit of 26.7 billion forints (94.3 million USD) in the period from October to December compared to a loss of 3.7 billion forints in the third quarter. Operating profit was down by 13% yoy to 362.6 billion forints. Legislative changes in the country in terms of consumer credit have added 7.6 billion forints to the positive financial result, while the tax effect of write-off assets in Ukraine amounted to 4 billion forints.
Analysts did not foresee these one-off effects expected quarterly profit to 17.23 billion forints. Without them, OTP Bank, which is one of the largest banks in emerging Europe would have reported a profit of 16.6 billion forints, which would be 62% more than the same period of 2014.
The results of the bank are subject to unprecedented effects of political uncertainty in Central Europe and the hostile environment of the markets into Russia and Ukraine. This year, however, this uncertainty will fade, indicated by the OTP. Market conditions continue to be much better in the Central European markets bank compared with Russia and Ukraine, which continue to undermine the results.
In Hungary, Bulgaria and the bank earned 176 billion forints in 2015, but lost 55 billion forints operations in Russia and Ukraine. Last year, the largest Hungarian bank suffered a contraction of profit margins and net interest margin. The loan portfolio shrank by 7% yoy, while deposits grew by 5%. The share of bad loans fell to 17% from 19.2%, as it was in late September.
In early February OTP announced that it acquired the operations of AXA Bank in Hungary, as the process is expected to be completed by the end of the year. As a result of the transaction OTP mortgage portfolio will rise by 25%.
Following disclosure of the financial results of OTP Bank shares rose 2.7% to 6.36 forints, closing at its highest level since April 2011. This has resulted in the rise in the leading Hungarian BUX stock index by 1.5% Friday to 6-year high, says Bloomberg. The index was second in growth in Central and Eastern Europe in 2015.