OTP Bank : Year ended Dec 31, 2023, IFRS, separate

OTP BANK PLC.

CONTENTS

sSEPARATE STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2023

5

SEPARATE STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 2023 (in

HUF mn)

6

SEPARATE STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED

31

DECEMBER 2023 (in HUF mn)

7

SEPARATE STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEAR ENDED

31 DECEMBER 2023 (in HUF mn)

8

SEPARATE STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2023

(in

HUF mn)

9

NOTE 1: ORGANIZATION AND BASIS OF FINANCIAL STATEMENTS

11

1.1.

General information

11

1.2.

Basis of accounting

11

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

15

2.1.

Basis of presentation

15

2.2.

Foreign currency translation

15

2.3.

Consolidated financial statements

15

2.4.

Investments in subsidiaries, associated companies and other investments

15

2.5.

Business model and SPPI test

16

2.6.

Securities at amortised cost

17

2.7.

Financial assets at fair value through profit or loss

17

2.8.

Hedge accounting

18

2.9.

Offsetting

19

2.10.

Embedded derivatives

19

2.11.

Securities at fair value through other comprehensive income ("FVOCI securities")

20

and repo receivables losses

20

2.13.

Loss allowance

23

(FVTPL option)

26

2.15.

Sale and repurchase agreements, security lending

26

2.16.

Property, equipment and intangible assets

27

2.17.

Inventories

27

2.18.

Investment properties

27

2.19.

Financial liabilities

27

2.20.

Leases

28

2.21.

Share capital

29

2.22.

Treasury shares

29

2.23.

Non-current assets held-for-sale and discontinued operations

29

2.24.

Interest income, income similar to interest income and interest expense

30

2.25.

Fees and Commissions

30

2.26.

Dividend income

32

2.27.

Income tax

32

2

2.28.

Banking tax

33

2.29.

Off-balance sheet commitments and contingent liabilities, provisions

34

2.30.

Share-based payment

34

2.31.

Employee benefits

34

2.32.

Separate statement of cash flows

35

2.33.

Segment reporting

35

2.34.

Comparative figures

35

NOTE 3:

SIGNIFICANT ACCOUNTING ESTIMATES AND DECISIONS IN THE APPLICATION

OF ACCOUNTING POLICIES

36

3.1.

Loss allowance on financial instruments

36

3.2.

Valuation of instruments without direct quotations

36

3.3.

Provisions

36

NOTE 4:

MACRO-ENVIRONMENT, IMPACT OF ECONOMIC SITUATION ON THE BANK

37

NOTE 5:

CASH, AMOUNTS DUE FROM BANKS AND BALANCES WITH THE NATIONAL

BANK OF HUNGARY (in HUF mn)

44

NOTE 6:

PLACEMENTS WITH OTHER BANKS (in HUF mn)

45

NOTE 7:

REPO RECEIVABLES (in HUF mn)

46

NOTE 8:

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (in HUF mn)

47

NOTE 9:

SECURITIES AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (in

HUF mn)

48

NOTE 10:

SECURITIES AT AMORTISED COST (in HUF mn)

50

NOTE 11:

LOANS (in HUF mn)

51

NOTE 12:

INVESTMENTS IN SUBSIDIARIES, ASSOCIATES, JOINT VENTURES AND OTHER

INVESTMENTS (in HUF mn)

53

NOTE 13:

PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS (in HUF mn)

58

NOTE 14:

INVESTMENT PROPERTIES (in HUF mn)

59

NOTE 15:

FAIR VALUE OF DERIVATIVE FINANCIAL ASSETS DESIGNATED AS HEDGE

ACCOUNTING (in HUF mn)

59

NOTE 16:

OTHER ASSETS (in HUF mn)

60

NOTE 17:

AMOUNTS DUE TO BANKS AND DEPOSITS FROM THE NATIONAL BANK OF

HUNGARY AND OTHER BANKS (in HUF mn)

61

NOTE 18:

REPO LIABILITIES (in HUF mn)

61

NOTE 19:

DEPOSITS FROM CUSTOMERS (in HUF mn)

62

NOTE 20:

LIABILITIES FROM ISSUED SECURITIES (in HUF mn)

63

NOTE 21:

FINANCIAL LIABILITIES DESIGNATED AS FAIR VALUE THROUGH PROFIT OR

LOSS (in HUF mn)

67

NOTE 22:

HELD FOR TRADING DERIVATIVE FINANCIAL LIABILITIES (in HUF mn)

67

NOTE 23:

FAIR VALUE OF DERIVATIVE FINANCIAL LIABLITIES DESIGNATED AS HEDGE

ACCOUNTING (in HUF mn)

67

NOTE 24:

OTHER LIABILITIES AND PROVISIONS (in HUF mn)

68

NOTE 25:

SUBORDINATED BONDS AND LOANS (in HUF mn)

69

NOTE 26:

SHARE CAPITAL (in HUF mn)

71

NOTE 27:

RETAINED EARNINGS AND RESERVES (in HUF mn)

72

NOTE 28:

TREASURY SHARES (in HUF mn)

76

NOTE 29:

INTEREST INCOME AND EXPENSES (in HUF mn)

77

NOTE 30:

RISK COST (in HUF mn)

78

NOTE 31:

NET PROFIT FROM FEES AND COMMISSIONS (in HUF mn)

79

3

NOTE 32: GAINS AND LOSSES BY TRANSACTIONS (in HUF mn)

80

NOTE 33:

OTHER OPERATING INCOME AND EXPENSES AND OTHER ADMINISTRATIVE

EXPENSES (in HUF mn)

82

NOTE 34: INCOME TAX (in HUF mn)

83

NOTE 35: LEASE (in HUF mn)

86

NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn)

87

36.1.

Credit risk

87

36.2.

Maturity analysis of assets and liabilities and liquidity risk

107

36.3.

Net foreign currency position and foreign currency risk

110

36.4.

Interest rate risk management

110

36.5.

Market risk

117

NOTE 37: TRANSFER OF FINANCIAL INSTRUMENTS (in HUF mn)

121

NOTE 38: OFF-BALANCE SHEET ITEMS (in HUF mn)

121

NOTE 39: SHARE-BASED PAYMENT AND EMPLOYEE BENEFIT (in HUF mn)

123

NOTE 40: RELATED PARTY TRANSACTIONS (in HUF mn)

128

NOTE 41: TRUST ACTIVITIES (in HUF mn)

130

NOTE 42: CONCENTRATION OF ASSETS AND LIABILITIES

130

NOTE 43: EARNINGS PER SHARE

131

NOTE 44: NET GAIN OR LOSS REALISED ON FINANCIAL INSTRUMENTS (in HUF mn)

132

NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn)

134

NOTE 46: ASSETS CLASSIFIED AS HELD-FOR-SALE (in HUF mn)

153

NOTE 47: SIGNIFICANT EVENTS DURING THE YEAR ENDED 31 DECEMBER 2023

153

NOTE 48: SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD

156

Note

31 December

31 December

2023

2022

Cash, amounts due from banks and balances with the National Bank of Hungary

5.

2,708,232

1,092,198

Placements with other banks

6.

2,702,433

2,899,829

Repo receivables

7.

201,658

246,529

Financial assets at fair value through profit or loss

8.

257,535

410,012

Financial assets at fair value through other comprehensive income

9.

559,527

797,175

Securities at amortised cost

10.

2,710,848

3,282,373

Loans at amortised cost

11.

4,681,359

4,825,040

Loans mandatorily measured at fair value through profit or loss

11.

934,848

793,242

Investments in subsidiaries

12.

2,001,952

1,596,717

Property and equipment

13.

107,306

94,564

Intangible assets

13.

98,115

69,480

Right of use assets

35.

66,222

39,882

Investment properties

14.

4,203

4,207

Deferred tax assets

34.

408

35,742

Current tax assets

34.

-

1,569

Derivative financial assets designated as hedge accounting relationships

15.

21,628

47,220

Non-current assets held for sale

46.

130,718

-

Other assets

16.

365,961

329,752

TOTAL ASSETS

17,552,953

16,565,531

Amounts due to banks and deposits from the National Bank of Hungary and

other banks

17.

1,761,579

1,736,128

Repo liabilities

18.

443,694

408,366

Deposits from customers

19.

10,734,325

11,119,158

Leasing liabilities

35.

68,282

41,464

Liabilities from issued securities

20.

1,163,109

498,709

Financial liabilities designated at fair value through profit or loss

21.

19,786

16,576

Derivative financial liabilities designated as held for trading

22.

183,565

373,401

Derivative financial liabilities designated as hedge accounting relationships

23.

27,423

50,623

Current tax liabilities

34.

14,393

3,199

Provisions

24.

22,497

29,656

Other liabilities

24.

295,399

313,188

Subordinated bonds and loans

25.

520,296

294,186

TOTAL LIABILITIES

15,254,348

14,884,654

Share capital

26.

28,000

28,000

Retained earnings and reserves

27.

2,276,759

1,655,601

Treasury shares

28.

(6,154)

(2,724)

TOTAL SHAREHOLDERS' EQUITY

2,298,605

1,680,877

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

17,552,953

16,565,531

Dr. Sándor Csányi

László Wolf

Chairman and Chief Executive Officer

Deputy Chief Executive Officer

Year ended 31

Year ended 31

December

December

Note

2023

2022

Interest Income:

Interest income calculated using the effective interest method

29.

1,227,173

721,679

Income similar to interest income

29.

795,906

377,231

Interest income and similar to interest income total

2,023,079

1,098,910

Interest Expense:

Interest expenses total

29.

(1,556,361)

(802,020)

NET INTEREST INCOME

466,718

296,890

(Release of loss allowance) / Loss allowance on loan, placement and

repo receivables losses

6., 7., 11., 30.

8,616

(47,687)

(Release of loss allowance) / Loss allowance on securities at fair value

through other comprehensive income and on securities at

amortised cost

9., 10., 30.

11,879

(53,238)

(Release of provision) / Provision for loan commitments and financial

guarantees given

24., 30.

7,172

(5,541)

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.

(980)

11,872

Risk cost total

26,687

(94,594)

NET INTEREST INCOME AFTER RISK COST

493,405

202,296

LOSSES ARISING FROM DERECOGNITION OF

FINANCIAL ASSETS MEASURED AT AMORTISED

COST

(19,707)

(56,195)

MODIFICATION LOSS

4.

(9,017)

(14,856)

Income from fees and commissions

31.

402,885

362,444

Expenses from fees and commissions

31.

(78,755)

(66,087)

NET PROFIT FROM FEES AND COMMISSIONS

324,130

296,357

Foreign exchange (losses) and gains

32.

(12,269)

541

Gains and (losses) on securities, net

32.

7,073

(10,605)

Gains / (losses) on financial instruments at fair value through profit or

loss

32.

91,268

(18,790)

Net results on derivative instruments and hedge relationships

32.

13,055

9,917

Dividend income

32.

275,705

194,526

Other operating income

33.

26,184

13,775

Other operating expenses

33.

63,590

(131,942)

NET OPERATING INCOME

464,606

57,422

Personnel expenses

33.

(195,404)

(154,303)

Depreciation and amortization

33.

(50,814)

(46,738)

Other administrative expenses

33.

(281,918)

(290,989)

OTHER ADMINISTRATIVE EXPENSES

(528,136)

(492,030)

PROFIT BEFORE INCOME TAX

725,281

(7,006)

Income tax

34.

(70,293)

13,638

PROFIT AFTER INCOME TAX

654,988

6,632

Earnings per share (in HUF)

Basic

43.

2,344

24

Diluted

43.

2,344

24

Note

Year ended 31

Year ended 31

December

December

2023

2022

PROFIT AFTER INCOME TAX

654,988

6,632

Items that may be reclassified subsequently to profit or loss:

Fair value adjustment of debt instruments at fair value through other

comprehensive income

37,917

(55,804)

Deferred tax related to fair value adjustment of debt instruments at fair value

through other comprehensive income

34.

(3,503)

5,186

Gains / (Losses) on separated currency spread of financial instruments

designated as hedging instrument

3,752

(4,887)

Deferred tax related to (losses) / gains on separated currency spread of financial

instruments designated as hedging instrument

34.

(338)

440

(Losses) / Gains on derivative financial instruments designated as cash flow

hedge

5,700

(5,641)

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

3,308

61

Deferred tax related to equity instruments at fair value through other

comprehensive income

34.

(374)

(41)

Total

46,462

(58,011)

TOTAL COMPREHENSIVE INCOME

701,450

(51,379)

Note

Share

Capital

Retained

Treasury

Total

Capital

reserve

earnings and

Shares

other reserves

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 treasury shares

28.

-

-

(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

Balance as at 1 January 2023

28,000

52

1,655,549

(2,724)

1,680,877

Net profit for the period

-

-

654,988

-

654,988

Other comprehensive income

-

-

46,462

-

46,462

Total comprehensive income

-

-

701,450

-

701,450

Share-based payment

39.

-

-

3,292

-

3,292

Sale of treasury shares

28.

-

-

-

36,388

36,388

Acquisition of treasury shares

28.

-

-

-

(39,818)

(39,818)

Loss on sale of treasury shares

28.

-

-

416

-

416

Dividend for the year 2022

-

-

(84,000)

-

(84,000)

Other transaction with owners

-

-

(80,292)

(3,430)

(83,722)

Balance as at 31 December 2023

28,000

52

2,276,707

(6,154)

2,298,605

Note

Year ended 31

Year ended 31

December

December

2023

2022

OPERATING ACTIVITIES

Profit before income tax

725,281

(7,006)

Net accrued interest

3,136

(11,196)

Depreciation and amortization

13.

50,834

46,873

Loss allowance on loans and placements

30.

357

63,939

(Release of loss allowance) / Loss allowance on securities at fair value through

other comprehensive income

9.

(3,303)

25,615

(Reversal of impairment loss) / Impairment loss on investments in subsidiaries

12.

(87,609)

93,513

(Release of loss allowance) / Loss allowance on securities at amortised cost

10.

(8,576)

27,623

Loss allowance on other assets

16.

3,575

2,939

(Release of provision) / Provision on off-balance sheet commitments and

contingent liabilities

24.

(6,663)

7,598

Share-based payment

39.

3,292

2,948

Unrealised gains on fair value adjustment of financial instruments at fair value

through profit or loss

45.

(95,953)

11,870

Unrealised (gains)/losses on fair value adjustment of derivative financial

instruments

45.

(76,357)

52,840

Gains on securities

32.

18,890

62,354

Interest expense from leasing liabilities

35.

(2,081)

(1,186)

Foreign exchange gain / (loss)

32.

(20,842)

9,359

Proceeds from sale of tangible and intangible assets

33.

(1,225)

(267)

Net changing in assets and liabilities in operating activities

Net decrease / (increase) in placements with other banks and repo receivables

before allowance for placement losses

6., 7.

291,024

(521,731)

Changes in held for trading securities

8.

52,640

(44,181)

Change in financial instruments mandatorily measured at fair value through

profit or loss

8.

(2,200)

1,925

Changes in derivative financial instruments at fair value through profit or loss

8.

(32,338)

136

Net increase in loans

11.

(35,369)

(817,297)

Increase in other assets, excluding advances for investments and before

provisions for losses

16.

(22,571)

(99,813)

Net increase in amounts due to banks and deposits from the National Bank of

17.,

Hungary and other banks and repo liabilities

18.

105,778

910,984

Financial liabilities designated as fair value through profit or loss

21.

(1,332)

(1,625)

Net (decrease) / increase in deposits from customers

19.

(237,889)

971,640

(Decrease) / Increase in other liabilities

24.

(73,221)

77,424

Net increase in the compulsory reserve established by the National Bank of

Hungary

5.

(402,879)

(641,125)

Dividend income

12.

(275,705)

(194,526)

Income tax paid

(19,213)

(19,953)

Net cash (used in) / provided by operating activities

(150,519)

9,674

Note

Year ended 31

Year ended 31

December

December

2023

2022

INVESTING ACTIVITIES

Purchase securities at fair value through other comprehensive income

9.

(342,984)

(1,322,153)

Proceeds from sale of securities at fair value through other

comprehensive income

9.

628,817

1,074,212

Change in derivative financial instruments designated as hedge

accounting

1,580

13,805

Increase in investments in subsidiaries

12.

(445,637)

(117,222)

Dividend income

254,694

194,449

Increase in securities at amortised cost

10.

(81,661)

(624,476)

Redemption of securities at amortised cost

10.

588,288

415,975

Additions to property, equipment and intangible assets

13.

(86,251)

(60,575)

Disposal of property, equipment and intangible assets

13.

1,903

648

Net increase in investment properties

14.

(134)

(14)

Net provided by / (used in) cash used in investing activities

518,615

(425,351)

FINANCING ACTIVITIES

Leasing payments

(5,341)

(6,189)

Cash received from issuance of securities

20.

829,166

575,994

Cash used for redemption of issued securities

20.

(140,736)

(91,635)

Cash received from issuance of subordinated bonds and loans

25.

293,590

6,781

Cash used for redemption of subordinated bonds and loans

25.

(44,611)

(7,523)

Increase of Treasury shares

28.

(39,818)

(16,268)

Decrease of Treasury shares

28.

36,804

50,858

Dividends paid

27.

(83,995)

(120,213)

Net cash provided by financing activities

845,059

391,805

Net increase in cash and cash equivalents

1,213,155

(23,872)

Cash and cash equivalents at the beginning of the year

351,770

375,642

Cash and cash equivalents at the end of the year

1,564,925

351,770

Interest received

1,848,542

941,406

Interest paid

1,320,920

511,635