The results of the operations of the OTP banka Group for the first six months of the year demonstrate that the main projects set out in our restructuring programme, which the European Commission consented to last December upon the recapitalisation of OTP banka, are gradually being implemented, in spite of the difficult and uncertain conditions in the financial markets and the Slovene economy in general. The common objective of these projects is to reshape the OTP banka Group into a more cost-efficient and profitable financial institution that builds its success on a slimmer organisational structure.
“We can see a clear improvement in the results of the OTP banka Group for the first six months of the year compared with those of last year´s June. The Bank is implementing the commitments set out in its restructuring programme and has, after three years, re-established itself as a profitable financial institution. We expect the Management Board to make every effort to continue improving the performance of both the Group and the Bank,” said Peter Kukovica, Chairman of the OTP banka Supervisory Board. The supervisors of OTP banka were informed of the Management Board´s report on the operations of the Bank and the Group in the first half of the year, and were presented the internal audit report for the same period. In addition, they were given a report on the restructuring of OTP banka, a report on cost-cutting measures taken by the Group, and a report on the recovery of bad loans. “OTP banka is a reliable and profitable financial institution with a strong liquidity position. We are happy to notice that an increasing number of individuals and companies place confidence in our performance, which is evidenced by the fact that the volume of certain transactions increased and that we managed to acquire quite a significant number of new customers in the first half of the year. We will devote all our energy to improving the performance of the OTP banka Group and to strengthening confidence of all stakeholders of the Bank and the Group,” stated Aleš Hauc, President of the OTP banka Management Board.
The ratio between debt and equity financing has seen an improvement in Slovenia. While the companies have started to reduce the level of their borrowing from banks, they are not willing to provide lending to either suppliers or buyers, due to strained liquidity conditions and the fear of insolvency. The demand of Slovene households for loans is weak too. Customer deposits placed with the OTP banka Group increased by 3.3% in the first six months of the year, reflecting an improvement in customer confidence. Despite a decline of 6.0% in net loans outstanding to customers, OTP banka managed to retain its market share of 7.8% in gross loans to the non-banking sector. As a result of these changes, the loan-to-deposit ratio (gross LTD ratio) improved in the first half of the year by 5.91 percentage points, to 85.73% as of 30 June 2014. OTP banka´s cost-efficiency improved as well. The OTP banka Group continues to make determined efforts to strengthen its relationships with customers, for example by closely monitoring their operations, while participating in the restructuring processes of companies. Moreover, by providing funding to businesses that have the ability to deliver profitable results, it plays an important role in generating fresh momentum for economic growth.
Following the cleaning up and restructuring of the OTP banka Group´s loan portfolio at the end of last year, a number of measures have been introduced to improve the management of credit risk, so it is expected the level of NPLs and provisioning charges incurred by the OTP banka Group in the future will stay relatively low. The proportion of net NPLs in the OTP banka Group´s total loan portfolio registered an increase of 9.9% in the first six months of the year, mainly owing to a worsening in the quality of several loans granted in the past. However, despite this deterioration, net provisioning charges set aside by the OTP banka Group were relatively low at €18,973,000, indicating a downturn in the number of new defaulting customers.
Operating costs (staff costs, general and administration costs) were 8.4% below those reported for the same period last year. As of 30 June 2014, the OTP banka Group had 1,829 employees, down 204 on the end of June 2013, reflecting its commitment to gradually reduce the number of staff. As a responsible employer, the OTP banka Group has so far implemented mostly so-called soft measures when making employees redundant. OTP banka Group´s cost-to-income ratio improved to 55.30%, while its total assets amounted to €4,545,553,000 at the end of June 2014, a decrease of 5.5% from the end of 2013.
The OTP banka Group is in the process of restructuring: more extensive consolidation activities, including the sale of leasing subsidiaries, the end of the liquidation proceedings against KBM Fineko, and a decision concerning the future of Adria Bank, are expected to be implemented in the second half of the year, with the outcome of these activities having an impact on the year-end results of the OTP banka Group. It is expected that the extraordinary costs incurred by the OTP banka Group will see an increase this year as a result of the asset quality review and stress tests that OTP banka was obliged to undergo because of its systemic importance in the Eurozone.
The process of selling OTP banka, the parent company of the OTP banka Group, entered the second stage in August. The Slovene Sovereign Holding, which runs the sale process on behalf of the Republic of Slovenia, expects to receive binding offers in October 2014. Irrespective of any change in the shareholding of OTP banka, and irrespective of when the sale takes place, the OTP banka Group remains committed to accomplishing the objectives set out in its restructuring programme and business strategy, namely to provide sound and reliable performance by devoting increased attention to its principal activities, and to strengthen customer confidence.
