OTP BANK PLC.
SEPARATE FINANCIAL STATEMENTS
IN ACCORDANCE WITH
INTERNATIONAL FINANCIAL REPORTING STANDARDS
AS ADOPTED BY THE EUROPEAN UNION
FOR THE YEAR ENDED
31 DECEMBER 2022
[IMAGE]
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OTP BANK PLC.
CONTENTS
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4
5
OTP BANK PLC.
SEPARATE STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2022
(in HUF mn)
Note
2022
2021
Cash, amounts due from banks and balances with the National Bank of Hungary
5.
1,092,198
474,945
Placements with other banks
6.
2,899,829
2,567,212
Repo receivables
7.
246,529
33,638
Financial assets at fair value through profit or loss
8.
410,012
246,462
Financial assets at fair value through other comprehensive income
9.
797,175
641,939
Securities at amortised cost
10.
3,282,373
3,071,038
Loans at amortised cost
11.
4,825,040
4,032,465
Loans mandatorily measured at fair value through profit or loss
11.
793,242
662,012
Investments in subsidiaries
12.
1,596,717
1,573,008
Property and equipment
13.
94,564
81,817
Intangible assets
13.
69,480
62,161
Right of use assets
39,882
17,231
Investment properties
14.
4,207
4,328
Deferred tax assets
34.
35,742
-
Current tax assets
34.
1,569
-
Derivative financial assets designated as hedge accounting relationships
15.
47,220
17,727
Other assets
16.
329,752
224,488
TOTAL ASSETS
16,565,531
13,710,471
Amounts due to banks and deposits from the National Bank of Hungary and other banks
17.
1,736,128
1,051,203
Repo liabilities
18.
408,366
86,580
Deposits from customers
19.
11,119,158
9,948,532
Leasing liabilities
41,464
17,932
Liabilities from issued securities
20.
498,709
22,153
Financial liabilities designated at fair value through profit or loss
21.
16,576
20,133
Derivative financial liabilities designated as held for trading
22.
373,401
192,261
Derivative financial liabilities designated as hedge accounting relationships
23.
50,623
18,690
Deferred tax liabilities
34.
-
1,507
Current tax liabilities
34.
3,199
4,776
Provisions
24.
29,656
21,527
Other liabilities
24.
313,188
238,437
Subordinated bonds and loans
25.
294,186
271,776
TOTAL LIABILITIES
14,884,654
11,895,507
Share capital
26.
28,000
28,000
Retained earnings and reserves
27.
1,655,601
1,845,836
Treasury shares
28.
(2,724)
(58,872)
TOTAL SHAREHOLDERS' EQUITY
1,680,877
1,814,964
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
16,565,531
13,710,471
Budapest, 31 March 2023
Dr. Sándor Csányi László Wolf
Chairman and Chief Executive Officer Deputy Chief Executive Officer
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OTP BANK PLC.
SEPARATE STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 2022
(in HUF mn)
Note
Year ended 31 December 2022
Year ended 31 December 2021
Interest Income:
Interest income calculated using the effective interest method
29.
721,679
302,373
Income similar to interest income
29.
377,231
105,663
Interest income and similar to interest income total
1,098,910
408,036
Interest Expense:
Interest expenses total
29.
(802,020)
(155,491)
NET INTEREST INCOME
296,890
252,545
Loss allowance on loan, placement and repo receivables losses
6., 7., 11., 30.
(47,687)
(38,841)
Loss allowance on securities at fair value through other comprehensive income and on securities at amortised cost
9., 10., 30.
(53,238)
(1,484)
Provision for loan commitments and financial guarantees given
24., 30.
(5,541)
(130)
Change in the fair value attributable to changes in the credit risk of loans mandatorily measured at fair value through profit of loss
45.4.
11,872
(16,255)
Risk cost total
(94,594)
(56,710)
NET INTEREST INCOME AFTER RISK COST
202,296
195,835
LOSSES ARISING FROM DERECOGNITION OF FINANCIAL ASSETS MEASURED AT AMORTISED COST
(56,195)
(2,700)
MODIFICATION LOSS
4.
(14,856)
(7,017)
Income from fees and commissions
31.
362,444
300,803
Expenses from fees and commissions
31.
(66,087)
(52,276)
NET PROFIT FROM FEES AND COMMISSIONS
296,357
248,527
Foreign exchange gains and (losses)
32.
541
(5,638)
(Losses) and gains on securities, net
32.
(10,605)
2,104
Losses on financial instruments at fair value through profit or loss
32.
(18,790)
(6,494)
Net results on derivative instruments and hedge relationships
32.
9,917
3,436
Dividend income
32.
194,526
99,037
Other operating income
33.
13,775
11,265
Other operating expenses
33.
(131,942)
(41,636)
NET OPERATING INCOME
57,422
62,074
Personnel expenses
33.
(154,303)
(136,126)
Depreciation and amortization
33.
(46,738)
(40,692)
Other administrative expenses
33.
(290,989)
(178,611)
OTHER ADMINISTRATIVE EXPENSES
(492,030)
(355,429)
PROFIT BEFORE INCOME TAX
(7,006)
141,290
Income tax
34.
13,638
(15,951)
PROFIT AFTER INCOME TAX
6,632
125,339
Earnings per share (in HUF)
Basic
43.
24
455
Diluted
43.
24
455
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OTP BANK PLC.
SEPARATE STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2022 (in HUF mn)
Note
Year ended 31 December 2022
Year ended 31 December 2021
PROFIT AFTER INCOME TAX
6,632
125,339
Items that may be reclassified subsequently to profit or loss:
Fair value adjustment of debt instruments at fair value through other comprehensive income
(55,804)
(37,163)
Deferred tax (9%) related to fair value adjustment of debt instruments at fair value through other comprehensive income
34.
5,186
3,410
Gains / (Losses) on separated currency spread of financial instruments designated as hedging instrument
(4,887)
1,681
Deferred tax (9%) related to (losses) / gains on separated currency spread of financial instruments designated as hedging instrument
34.
440
(151)
(Losses) / Gains on derivative financial instruments designated as cash flow hedge
(5,641)
(6,307)
Items that will not be reclassified to profit or loss:
Gains on equity instruments at fair value through other comprehensive income
2,675
-
Fair value adjustment of equity instruments at fair value through other comprehensive income
61
1,407
Deferred tax (9%) related to equity instruments at fair value through other comprehensive income
34.
(41)
(281)
Total
(58,011)
(37,404)
TOTAL COMPREHENSIVE INCOME
(51,379)
87,935
8
OTP BANK PLC.
SEPARATE STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED 31 DECEMBER 2022 (in HUF mn)
Note
Share Capital
Capital reserve
Retained earnings and other reserves
Treasury Shares
Total
Balance as at 1 January 2021
28,000
52
1,697,081
(46,799)
1,678,334
Net profit for the period
-
-
125,339
-
125,339
Other comprehensive income
-
-
(37,404)
-
(37,404)
Total comprehensive income
-
-
87,935
-
87,935
Share-based payment
39.
-
-
3,589
-
3,589
Payments to ICES holders
-
-
(3,734)
-
(3,734)
Increase due to termination of ICES bonds
-
-
75,422
-
75,422
Sale of treasury shares
28.
-
-
-
264,360
264,360
Acquisition of treasury shares
28.
-
-
-
(276,433)
(276,433)
Loss on treasury shares
28.
-
-
(15,543)
-
(15,543)
Other transaction with owners
-
-
59,734
(12,073)
47,661
Balance as at 1 January 2022
28,000
52
1,845,784
(58,872)
1,814,964
Net profit for the period
-
-
6,632
-
6,632
Other movement
-
-
2
-
2
Other comprehensive income
-
-
(58,011)
-
(58,011)
Total comprehensive income
-
-
(51,377)
-
(51,377)
Share-based payment
39.
-
-
2,948
-
2,948
Sale of treasury shares
28.
-
-
-
72,416
72,416
Acquisition of treasury shares
28.
-
-
-
(16,268)
(16,268)
Loss on sale of treasury shares
-
-
(21,558)
-
(21,558)
Dividend for the year 2021
-
-
(120,248)
-
(120,248)
Other transaction with owners
-
-
(138,858)
56,148
(82,710)
Balance as at 31 December 2022
28,000
52
1,655,549
(2,724)
1,680,877
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OTP BANK PLC.
SEPARATE STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2022
(in HUF mn)
Note
2022
2021
OPERATING ACTIVITIES
Profit before income tax
(7,006)
141,290
Net accrued interest
(11,196)
(2,205)
Depreciation and amortization
13.
46,873
40,784
Loss allowance on loans and placements
30.
63,939
38,841
Loss allowance on securities at fair value through other comprehensive income
9.
25,615
(551)
Impairment loss / (Reversal of impairment loss) on investments in subsidiaries
12.
93,513
27,420
Loss allowance on securities at amortised cost
10.
27,623
2,035
Loss allowance / (Release of loss allowance) on other assets
16.
2,939
(961)
Provision on off-balance sheet commitments and contingent liabilities
24.
7,598
1,473
Share-based payment
39.
2,948
3,589
Unrealised losses on fair value adjustment of financial instruments at fair value through profit or loss
45.
11,870
23,051
Unrealised losses / (gains) on fair value adjustment of derivative financial instruments
45.
52,840
30,962
Gains on securities
32.
62,354
6,212
Interest expense from leasing liabilities
35.
(1,186)
(214)
Foreign exchange loss
32.
9,359
35,136
Proceeds from sale of tangible and intangible assets
33.
(267)
82
Net changing in assets and liabilities in operating activities
Net increase in placements with other banks and repo receivables before allowance for placement losses
6., 7.
(521,731)
(879,438)
Changes in held for trading securities
8.
(44,181)
(24,178)
Change in financial instruments mandatorily measured at fair value through profit or loss
8.
1,925
6,687
Changes in derivative financial instruments at fair value through profit or loss
8.
136
(1,303)
Net increase in loans
11.
(817,297)
(835,520)
Increase in other assets, excluding advances for investments and before provisions for losses
16.
(99,813)
(49,201)
Net increase in amounts due to banks and deposits from the National Bank of Hungary and other banks and repo liabilities
17., 18.
910,984
224,661
Financial liabilities designated as fair value through profit or loss
21.
(1,625)
(1,853)
Net increase in deposits from customers
19.
971,640
1,989,941
Increase in other liabilities
24.
77,424
114,259
Net increase in the compulsory reserve established by the National Bank of Hungary
5.
(641,125)
(23,270)
Dividend income
12.
(194,526)
(99,037)
Income tax paid
(19,953)
(15,259)
Net cash provided by operating activities
9,674
753,433
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OTP BANK PLC.
SEPARATE STATEMENT OF CASH FLOWS FOR THE YEAR ENDED
31 DECEMBER 2022
(in HUF mn) [continued]
Note
2022
2021
INVESTING ACTIVITIES
Purchase securities at fair value through other comprehensive income
9.
(1,322,153)
(850,030)
Proceeds from sale of securities at fair value through other comprehensive income
9.
1,074,212
1,081,372
Change in derivative financial instruments designated as hedge accounting
13,805
1,341
Increase in investments in subsidiaries
12.
(117,222)
(51,456)
Decrease in investments in subsidiaries
12.
-
-
Dividend income
194,449
98,091
Increase in securities at amortised cost
10.
(624,476)
(1,253,830)
Redemption of securities at amortised cost
10.
415,975
214,963
Additions to property, equipment and intangible assets
13.
(60,575)
(46,081)
Disposal of property, equipment and intangible assets
13.
648
529
Net (increase) / decrease in investment properties
14.
(14)
(2,484)
Net cash used in investing activities
(425,351)
(807,585)
FINANCING ACTIVITIES
Leasing payments
(6,189)
(5,136)
Cash received from issuance of securities
20.
575,994
5,897
Cash used for redemption of issued securities
20.
(91,635)
(9,051)
Cash received from issuance of subordinated bonds and loans
25.
6,781
1,874
Cash used for redemption of subordinated bonds and loans
25.
(7,523)
(35,518)
Payments to ICES holders
27.
-
(3,735)
Increase of Treasury shares
28.
(16,268)
(276,433)
Decrease of Treasury shares
28.
50,858
248,819
Dividends paid
27.
(120,213)
(10)
Net cash provided by financing activities
391,805
(73,293)
Net decrease in cash and cash equivalents
(23,872)
(127,445)
Cash and cash equivalents at the beginning of the year
375,642
503,087
Cash and cash equivalents at the end of the year
351,770
375,642
Interest received
941,406
345,504
Interest paid
511,635
98,395
OTP Bank Plc Separate Financial Statements 2022
11
NOTE 1: ORGANIZATION AND BASIS OF FINANCIAL STATEMENTS
1.1. General information
OTP Bank Plc. ("Bank" or "OTP Bank") was established on 31 December 1990, when the previously State-owned company was transformed into a limited liability company.
The Bank’s registered office address is 16, Nádor Street, Budapest 1051. Internet homepage:
http://www.otpbank.hu/
Signatory of the separate financial statements is the Chief Executive Officer, dr. Sándor Csányi and Deputy Chief Executive Officer, László Wolf.
The Bank’s owners have the power to amend the separate financial statements after issue if applicable.
These financial statements are authorised for issue on 31 March 2023 by the Board of Directors.
Responsible person for the control and management of accounting services: Zoltán Tuboly (Budapest), Managing Director of Accounting and Financial Directorate, Registration Number: 177289, IFRS qualified chartered accountant.
Due to Hungarian legislation audit services are statutory for OTP Bank. Disclosure information about the auditor: Ernst & Young Audit Ltd. (001165), 1132 Budapest Váci Street 20. Registered under 01-09-267553 by Budapest- Capital Regional Court, as registry court. Statutory registered auditor: Zsuzsanna Nagyváradiné Szépfalvi, registration number: 005313.
Audit service fee agreed by the Annual General Meeting of the Bank for the year ended 2022 is an amount of HUF 165 million + VAT.
All other fees charged by the Auditor for non-audit services during the financial year are disclosed in the consolidated financial statements of the Bank.
In 1995, the shares of the Bank were introduced on the Budapest and the Luxembourg Stock Exchanges and were also traded on the SEAQ board on the London Stock Exchange and PORTAL in the USA.
The structure of the Share capital by shareholders (%):
2022
2021
Domestic and foreign private and institutional investors
99%
98%
Employees
1%
1%
Treasury shares
-
1%
Total
100%
100%
The Bank’s Registered Capital consists of 280.000.010 pieces of ordinary shares with the nominal value of HUF 100 each, representing the same rights to the shareholders.
The Bank provides a full range of commercial banking services through a nationwide network of 352 branches in Hungary.
2022
2021
Number of employees
10,317
10,078
Average number of employees
10,516
9,934
1.2. Basis of accounting
These Separate Financial Statements were prepared based on the assumption of the Management that the Bank will remain in business for the foreseeable future. The Bank will not be forced to halt operations and liquidate its assets in the near term at what may be very low fire-sale prices.
The Bank maintains its accounting records and prepares their statutory accounts in accordance with the commercial, banking and fiscal regulations prevailing in Hungary.
The presentation and functional currency of the Bank is the Hungarian Forint ("HUF").
The separate financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”).
OTP Bank Plc Separate Financial Statements 2022
12
NOTE 1: ORGANIZATION AND BASIS OF FINANCIAL STATEMENTS [continued]
1.2.1. The effect of adopting new and revised IFRS standards effective from 1 January 2022
The following amendments to the existing standards and new interpretation issued by the International Accounting Standards Board (IASB) and adopted by the EU are effective for the current reporting period:
Amendments to IFRS 1 “First-time Adoption of International Financial Reporting Standards”, IFRS 9 “Financial Instruments”, IAS 41 “Agriculture” “Annual Improvements to IFRSs 2018-2020 Cycle” - adopted by EU on 28 June 2021 (effective for annual periods beginning on or after 1 January 2022),
o IFRS 1 First-time Adoption of International Financial Reporting Standards Subsidiary as a first- time adopter The amendment permits a subsidiary that elects to apply paragraph D16(a) of IFRS 1 to measure cumulative translation differences using the amounts reported in the parent’s consolidated financial statements, based on the parent’s date of transition to IFRS, if no adjustments were made for consolidation procedures and for the effects of the business combination in which the parent acquired the subsidiary. This amendment is also applied to an associate or joint venture that elects to apply paragraph D16(a) of IFRS 1. These amendments had no impact on the consolidated financial statements of the Group as it is not a first-time adopter.
o IFRS 9 Financial Instruments Fees in the ’10 per cent’ test for derecognition of financial liabilities The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. These fees include only those paid or received betwee n the borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf. There is no similar amendment proposed for IAS 39 Financial Instruments: Recognition and Measurement. In accordance with the transitional provisions, the Group applies the amendment to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first applies the amendment (the date of initial application). These amendments had no impact on the consolidated financial statements of the Group as there were no fees charged or incurred related to modifications during the period.
o IAS 41 Agriculture Taxation in fair value measurements The amendment removes the requirement in paragraph 22 of IAS 41 that entities exclude cash flows for taxation when measuring the fair value of assets within the scope of IAS 41. These amendments had limited impact on the consolidated financial statements of the Group as it have limited assets in scope of IAS 41 as at the reporti ng date.
Amendments to IFRS 3 “Business Combinations”; IAS 16 “Property, Plant and Equipment”; IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” adopted by the EU on 28 June 2021 Annual Improvements (effective for annual periods beginning on or after 1 January 2022).
o IFRS 3 Business Combinations (Amendments) update a reference in IFRS 3 to the previous version of the IASB’s Conceptual Framework for Financial Reporting to the current version issued in 2018 without significantly changing the accounting requirements for business combinations.
o IAS 16 Property, Plant and Equipment (Amendments) prohibit a company from deducting from the cost of property, plant and equipment any proceeds from the sale of items produced while bringing the asset to the location and condition necessary for it be capable of operating in the manner intended by management. Instead, a company recognizes such sales proceeds and related cost in profit or loss.
o IAS 37 Provisions, Contingent Liabilities and Contingent Assets (Amendments) specify which costs a company includes in determining the cost of fulfilling a contract for the purpose of assessing whether a contract is onerous. The amendments clarify, the costs that relate directly to a contract to provide goods or services include both incremental costs and an allocation of costs directly related to the contract activities.
The adoption of these amendments to the existing standards has not led to any material changes in these Separate Financial Statements.
OTP Bank Plc Separate Financial Statements 2022
13
NOTE 1: ORGANIZATION AND BASIS OF FINANCIAL STATEMENTS [continued]
1.2.2. New and revised Standards and Interpretations issued by IASB and adopted by the EU but not yet effective
Amendments to IAS 1 “Presentation of Financial Statements” and IFRS Practice Statement 2 - Disclosure of Accounting policies adopted by the EU on 2 March 2022 (effective for annual periods beginning on or after 1 January 2023 with earlier application permitted )
o The amendments provide guidance on the application of materiality judgements to accounting policy disclosures. In particular, the amendments to IAS 1 replace the requirement to disclose ‘significant’ accounting policies with a requirement to disclose ‘material’ accounting policies. Also, guidance and illustrative examples are added in the Practice Statement to assist in the application of the materiality concept when making judgements about accounting policy disclosures.
Amendments to IAS 8 “Accounting policies, Changes in Accounting Estimates and Errors” Definition of Accounting Estimates adopted in the EU on 2 March 2022 (effective for annual periods beginning on or after 1 January 2023 with earlier application permitted and apply to changes in accounting policies and changes in accounting estimates that occur on or after the start of that period )
o The amendments introduce a new definition of accounting estimates, defined as monetary amounts in financial statements that are subject to measurement uncertainty, if they do not result from a correction of prior period error. Also, the amendments clarify what changes in accounting estimates are and how these differ from changes in accounting policies and corrections of errors.
Amendments to IFRS 17 “Insurance Contracts” adopted by the EU on 19 November 2021 (effective for annual periods beginning on or after 1 January 2023) IFRS 17 is not relevant in case of these Separate Financial Statements
Amendments to IFRS 17 “Insurance Contracts” Initial application of IFRS 17 and IFRS 9 Comparative Information adopted by the EU on 8 September 2022 (effective date for annual periods beginning on or after 1 January 2023 with earlier application permitted, provided the entity also applies IFRS 9 Financial Instruments on or before the date it first applies IFRS 17 ) IFRS 17 is not relevant in case of these Separate Financial Statements.
Amendments to IAS 12 “Income Taxes” Deferred Tax r el ated to Asse t s and Liab ilitie s
arising f rom a Sing le
Transac t ion adopted by the EU on 11 August 2022 (effective for annual periods beginning on or after 1 January 2023; earlier applicaton permitted)
o The amendments narrow the scope of and provide further clarity on the initial recognition exception under IAS 12 and specify how companies should account for deferred tax related to assets and liabilities arising from a single transaction, such as leases and decommissioning obligations. The amendments clarify that where payments that settle a liability are deductible for tax purposes,