OTP Group Investor presentation based on 1Q 2017 results. OTP Group has maintained strong profitability, capital adequacy and liquidity

Transcription

1 OTP Group Investor presentation based on Q 7 results OTP Group has maintained strong profitability, capital adequacy and liquidity

2 Content Investment Rationale -6 Q 7 Financial Performance of OTP Group 8-5 Macroeconomic overview 5-6

3 OTP Group is offering universal banking services to almost million customers in 9 countries across the CEE/CIS Region Major Group Members in Europe OTP banka Hrvatska OTP Banka Slovensko OTP Bank Romania OTP Bank DSK Bank Bulgaria Serbia CKB Montenegro Number of Branches OTP Bank Ukraine OTP Bank Russia Serbia Montenegro Slovakia 5 Croatia 6 Hungary 9 64 Romania Russia 4 Ukraine 84 7 Bulgaria Total number of branches:, Total Assets Montenegro Slovakia Serbia Romania % Croatia 5% 4% Ukraine % % 6% Russia Bulgaria 6% Headcount Total Assets: HUF,9 billion Romania Russia % Ukraine 9% 7% Bulgaria Croatia Slovakia Serbia 4% 4% Montenegro % Other % % 58% % 5% 8% Hungary Total headcount: 5,49 Hungary Systemic position in Hungary Total assets Retail loans Retail deposits Corporate loans Corporate deposits Asset management Q 7 market share (%) as well as in other CEE countries Bulgaria No. in Total assets No. in Retail deposits No. in Retail loans Russia No. in POS lending No. 8 in Credit card business No. 4 in Cash loan business Montenegro No. in Total assets 5 Source: OTP Bank Plc. Excluding selling agents employed at OTP Bank Russia and at OTP Bank Ukraine. 4

4 OTP offers a unique investment opportunity to access the CEE banking sector. The Bank is a well diversified, transparent player without strategic investors Ownership structure of OTP Bank on March 7 Treasury shares Employees & Senior Officers Domestic Individual Domestic Institutional MOL (Hungarian Oil and Gas Company) 9% 5% % 4% % Other* 9% 8% (Q-o-Q change) Rahimkulov Family Groupama Group (France) 5% 5% OPUS Securities S.A. Key features Total number of ordinary shares: 8,,, each having a nominal value of HUF and representing the same rights Diversified ownership structure without strategic investors No direct state involvement, the Golden Share was abolished in 7 The most important individual stakeholders: MOL, the Rahimkulov Family, MOL, OPUS Securities and Groupama Group, with each of them below % stake OTP Group s Capabilities OTP is one of the most liquid stocks in a peer group comparison in terms of average daily turnover** Avg. daily turnover to current market cap. bps. Average daily turnover in EUR million 7 OTP 7 PKO 5% Pekao Other Foreign Institutional 6 Erste 7 Komercni 9 Raiffeisen Best Private Bank in Hungary Best Private Bank in CEE (World Ranking: 77) Best local bank in Hungary The Best Private Banking Services in Hungary in 4 and 7 Best Bank in Bulgaria 4 Index Member of CEERIUS Best bank of the year in 6 Socially responsible Bank of the year in 6 The most likable Bank of the year in 6 Banker of the year in 6 DSK Bank - Best Bank in Bulgaria 5 Best FX providers in Hungary in 7 Best Bank in Hungary in 8, 9,,,, 4, 5, 6 and 7 * Foreign individuals and non-identified shareholders. ** According to the last 6M data (end date: 6 May 7) on the primary stock exchange. 4

5 The net loan book is dominated by Hungary and tilted to secured retail lending; 86% of the total book is invested in EU countries with stable earning generating capabilities Breakdown of the consolidated net loan book (in HUF billion) By countries 5,79 48% % Hungary By products 5,79 6% % Mortgage OTP Core (Hungary) Car-financing 6% Mortgage Corporate % 45% 6% % SME loans Consumer OTP Bank Romania DSK Bank (Bulgaria) Mortgage Corporate 9% 9% SME loans 6% 6% Consumer OTP Bank Croatia 7% Bulgaria % 8% Consumer SME Corporate 9% SME loans % % Consumer 48% Mortgage Corporate SME loans % % % Consumer Mortgage % 8% Romania OTP Bank Slovakia OTP Bank Russia Serbia, Montenegro, others 7% 6% 7% % % Q 7 Croatia Slovakia Russia Ukraine % % Q 7 Corporate Car-financing SME loans Corporate 7% 5% 6% 4% Consumer Mortgage Corporate 4% 8% Mortgage 88% Consumer Including car financing loan volumes of Merkantil Bank and Merkantil Car (Hungary). Excluding Touch Bank. 5

6 In the deposit book Hungary and the retail segment is dominant. In Hungary and Bulgaria OTP and DSK are the largest retail deposit holders Breakdown of the consolidated deposit base (in HUF billion) By countries 8,4 % By products 8,4 % OTP Core (Hungary) Corporate Retail sight 4% 9% DSK Bank (Bulgaria) Corporate Retail sight 4% 8% SME 8% 5% Retail sight SME % 5% Retail term 59% Retail term 58% Hungary 6% Retail term OTP Bank Croatia Corporate SME 4% % Retail sight % OTP Bank Slovakia Corporate Retail sight 7% 8% SME % Serbia, Montenegro, others 9% 6% 4% 4% 4% % % Q 7 Bulgaria Croatia Slovakia Romania Russia Ukraine % 7% Q 7 SME Corporate Retail term OTP Bank Romania Corporate SME 5% 5% 4% Retail sight 9% 4% Retail term OTP Bank Russia Corporate 6% SME % 44% Retail term Retail sight 9% 54% Retail term Excluding Touch Bank. 6

7 Key pillars of the OTP investment rationale. Return on Equity has returned to attractive levels (>5% on.5% CET ratio). A new era of structurally low risk environment has commenced. After years of deleveraging loan volumes show positive turnaround in Hungary 4. Strong capital and liquidity position coupled with robust internal capital generation 5. OTP is a frontrunner and has always been committed to innovation in digital banking 7

8 . Return on Equity has returned to attractive levels Consolidated ROE, accounting ROE based on.5% CET ratio Opportunity cost-adjusted consolidated accounting ROE over the average Y Hungarian government bond yields Price to Book ratio Max Min Bloomberg Q 7 The calculation methodology of certain indicators has been changed. ROEs are based on new methodology from 5. The indicated dividend and the CET capital surplus (calculated from the difference between the targeted.5% CET and the actual CET ratio including the interim result less dividend accrual) is deducted from the equity base. Accounting ROE less the annual average of the Hungarian Y government bond yields. 8

9 . The accounting ROE leaped since 6 on the back of moderating provision charges and eroding negative adjustment items; the total revenue margin has been relatively resilient amid lower interest rate environment Q 7 Accounting ROE.4% 9.4% 6.% 8.4% 4.% -7.4% 5.% 5.4% 5.% Accounting ROE on.5% CET ratio 5.4% 7.6% 8.% Adjusted ROE.5%.%.8%.% 9.6% 8.5% 9.6% 5.4% 8.8% Total Revenue Margin 7.9% 8.% 8.% 8.% 8.44% 7.74% 7.% 6.75% 6.8% Net Interest Margin Operating Costs / Average Assets 6.7% 6.6% 6.% 6.4% 6.7% 5.96% 5.6% 4.78% 4.76%.65%.6%.76%.89% 4.7%.85%.65%.67%.6% Risk Cost Rate.57%.69%.95%.%.5%.68%.7%.4%.65% Leverage (average equity / avg. assets).7%.8%.6% 4.4% 4.8%.%.5%.8%.8% General note: performance indicators according to the new calculation methodology from 5. The indicated/accrued dividend and the CET capital surplus (as calculated from the difference between the targeted.5% CET and the actual CET ratio including the interim result less dividend accrual) is deducted from the equity base. Calculated from the Group s adjusted after tax result. Excluding one-off revenue items. 9

10 . A new era of structurally low risk environment has commenced Existing DPD9+ loans are conservatively covered with provisions Q 7, consolidated DPD9+ ratio Provision coverage ratio 4.% 98.8% The DPD9+ formation has receded (in HUF billion, without loan sales and write-offs, FX-adjusted) Russia and Ukraine CEE countries Q 7 Vanishing toxic portfolios at OTP Group members 4 (HUF billion) Net Ukrainian USD mortgages Net CHF retail loans The Hungarian regulatory risk has moderated substantially Special burden on the Hungarian OTP Group members Q 7 (HUF billion, after tax) 87 Settlement & conv Early repayment Banking tax Hungary Romania Croatia E (incl. contribution tax) Positive measures supporting the banking system Funding for Growth Scheme Market-Based Lending Scheme Housing subsidy (CSOK) National Asset Mgmt. Company Performing.

11 . In Hungary the retail loan penetration ratios halved since and returned to levels seen before the lending boom Market penetration levels in Hungary in... housing loans (in % of GDP) Slovakia.9 Czech Republic.8 Poland 7.6 Romania consumer loans (incl. home equities) Poland 8.5 Slovakia 7.4 Czech Republic 7. Romania corporate loans Czech Republic.9 Slovakia 7.8 Poland.5 Romania Q 7 Net loan to deposit ratio in the Hungarian credit institution system 68% 9% Q 9 4Q 6 Latest available data. According to the supervisory balance sheet data provision.

12 . For most of the indicators affecting loan dynamics, Hungary is becoming again a frontrunner in the regional rally Real GDP growth (y-o-y) Real wage growth in the private sector (y-o-y) Hungary.%.% >4.% 4.% 5.4% 6.% Poland.9%.8%.% 4.% 4.4%.5% Czech Republic 4.6%.5%.6%.4%.7%.7% Slovakia.6%.%.%.%.8%.% Romania.8% 4.8% 4.%.4% 4.6%.% 5 6 7F 5 6 7F Household consumption growth (y-o-y) Housing price index (y-o-y) Hungary.% 4.9% 4.8% 4.%.4%.6% Poland.%.8%.6%.%.5%.9% Czech Republic.%.9%.9%.4% 4.% 7.% Slovakia.%.9%.%.4% 5.4% 6.7% Romania 6.% 8.% 6.% -.%.9% 6.% 5 6 7F Note: OTP Research Centre s 6 forecasts are displayed in case of real GDP, household consumption and real wage growth for Hungary, Slovakia and Romania. For Poland and the Czech Republic the Focus Economics and local central bank forecasts were used. Source of housing price indices: Eurostat.

13 . After years of loan volume contraction 6 ad Q 7 developments underpin a definite turnaround at OTP Core FX-adjusted Y-o-Y performing loan volume changes at OTP Core (%) avg.: -8.9% avg.: 4.5% Mortgage loan disbursement and market share at OTP Bank and OTP Mortgage Bank an OTP Building Society New disbursement, HUF billion Market share in contractual amount, % YTD. 6. Net loan to deposit + retail bonds ratio at OTP Core Q 7 AXA-effect Effect of local firms included in OTP Core in Q 7 5% n/a Q 7 4-8: gross loan volume changes; from 9: FX-adjusted performing (DPD-9) loan volume changes, estimate. Changes are based on OTP Bank, Mortgage Bank, Building Society and Factoring aggregated volumes until 5, and OTP Core volumes from 6. Calculated from raw, unadjusted data.

14 4. Strong capital and liquidity position coupled with robust internal capital generation Development of the fully loaded CET ratio of OTP Group +.8%p.% 5.8% 6.%.6% 6.6%.5% Net liquidity reserves (in EUR billion equivalent). 8. Net liquidity buffer / total assets (%).7%.4% 8 Q 7 8 Q 7 Reported Including profit less indicated dividend Reported 4Q 6 Q 7 Leverage ratio (average equity / average assets) Q 7 Q 7 Q 7 Q 7 Q 7 Q 7 Q 7 5.8% 7.6% 6.9% 6.% 7.7% Including profit less indicated dividend.8%.6% External debt (in EUR billion equivalent) % -5.5 Consolidated net loan to deposit + retail bond ratio 8 Group FX liquid assets (in EUR billion equivalent) 68% Q 7. 8 Q 7 8 Q 7 Senior bonds, mortgage bonds, bilateral loans. Negative amount implies FX liquidity placement. 4

15 5. OTP Bank is the market leader in all direct channels in Hungary ~9 thousand regular users monthly ~ thousand users monthly ~ thousand contacts monthly Monthly ATM cash withdrawals in the amount of HUF ~4 billion Based on 4Q 6 data. Based on 5 data. 5

16 5. The Digital Transformation Program serves as an umbrella focusing on digital customer experience and cost efficient and automatized processes Digital banking products and services aim at offering an outstanding customer experience Internal processes of the digital bank are set to simplify and digitise Aspirations Convenient, flexible and fast customer service Client-focused, simple and clear-cut processes through all sales and customer service channels Extensive services for favourable conditions Further expansion of digital channels in terms of sales and customer service Cost efficient, automatized and paperless processes Big Data based sale and business decision making Better transparency and compliance with regulations Quickly adaptive organization Facts More than 5 flagship projects (especially EE processes, integrated databases, new alternative risk modelling methods, new mobile solutions) and further 7 interdivisional developments More than 65K clients use the new OTP digital solutions (Loyalty program, Simple, SME onboarding, EBP, mpos) New agile project management methodology launched in top flagship projects Establishment of the digital program management office which coordinates, harmonizes and supports on-time delivery of several projects in the Digital Transformation Program All divisions and more than colleagues are involved in the Program Harmonizing group level synergies both at Hungarian group members and foreign subsidiaries 6

17 Content Investment Rationale -6 Q 7 Financial Performance of OTP Group 8-5 Macroeconomic overview 5-6 7

18 The Q accounting result grew by more than 5% y-o-y. The balance of adjustments was nearly the same as a year ago. CEE Group members contribution grew by %, while the Russian and Ukrainian contribution increased to.5-fold (in HUF billion) Accounting profit after tax Adjusted profit after tax Adjusted after tax results in the CEE countries % % +% Q 6 Q 7 Q 6 Q 7 Adjustments (after tax) Q 6 Q 6 Q 7 Q 7 Adjusted after tax results in Russia and Ukraine (including Touch Bank) Banking tax Other Total Q 6 +57% 8.6 Q 7 Total result of CEE operations does not include the result of Corporate Centre, foreign asset management companies, other Hungarian and foreign subsidiaries and eliminations. Their aggregated results amounted to HUF -. billion in Q 6 and HUF. billion in Q 7. 8

19 In Q 7 the aggregated after tax profit of CEE Group members grew by % y-o-y, led by OTP Core, Romania and Merkantil (Hungarian leasing). The Croatian result turned into red due to the sharp increase in risk costs Q 6 Q 6 Q 6 4Q 6 Q 7 Q-o-Q Y-o-Y in HUF billion Consolidated adjusted after tax profit % 4% CEE operation (adjusted) % % OTP Core (Hungary) % 4% DSK (Bulgaria) % -% OBR (Romania) % OBH (Croatia) OBS (Slovakia) % OBSrb (Serbia) % CKB (Montenegro) % Leasing (HUN, RO, BG, CR) % 6% OTP Fund Management (Hungary) % % Russian and Ukrainian operation (adjusted) % 57% OBRU (Russia) % 9% Touch Bank (Russia) OBU (Ukraine) % 87% Corporate Centre and others

20 In Q 7 only one major adjustment item emerged: the banking tax. The annual Hungarian banking tax was recognized in a lump-sum already in Q, while the Slovakian banking tax is booked quarterly Q 6 6 4Q 7 Q Q-o-Q Y-o-Y in HUF billion Consolidated after tax profit (accounting) % 54% Adjustments (total) Dividends and net cash transfers (after tax)... % Goodwill/investment impairment charges (after tax) % Special tax on financial institutions (after corporate income tax) % Impact of fines imposed by the Hungarian Competition Authority (after tax) % Consolidated adjusted after tax profit % 4% Impairment was booked in relation to the investments in OTP Life Annuity Ltd. and R.E. FOUR d.o.o. Novi Sad (Serbia), as a result, a positive tax shield of HUF.5 billion occurred. The special tax on financial institutions amounted to HUF 4.7 billion (after tax). The y-o-y increase is explained by the declining corporate tax shield due to the lowered statutory corporate tax rate in Hungary; the gross banking tax payable in Hungary declined by HUF. billion y-o-y. The banking tax incorporates the whole annual Hungarian banking levy recognized by the Hungarian group members in Q, as well as the prorated Slovakian banking tax. Based on the ruling of the Hungarian Supreme Court on 6 December 6 related to a fine imposed earlier by the Hungarian Competition Authority, a HUF.9 billion positive item emerged already in 4Q 6 (after tax). Related to this, an interest revenue of HUF 94 million (HUF 77 million after tax) occurred on this line in Q 7.

21 The spectacular q-o-q improvement in adjusted after tax profit was due to declining risk costs and moderating effective tax rate. The operating profit grew by 4% q-o-q despite total income for the quarter shrinking by % Q 6 4Q 6 Q 7 Q-o-Q Y-o-Y in HUF billion Consolidated adjusted after tax profit % 4% Corporate tax % -4% O/w tax shield of subsidiary investments Before tax profit % 9% Total one-off items... Gain on the repurchase of own capital instruments... Result of the Treasury share swap agreement... Before tax profit without one-off items % 9% Operating profit w/o one-off items % 5% Total income w/o one-off items % 6% Net interest income w/o one-off items % % Net fees and commissions % 5% Other net non interest income without one-offs % 5% Operating costs % 8% Total risk costs % -4%

22 Strong performance in 6 and Q 7 validates the management s mid-term ROE target of above 5% (based on.5% CET ratio) Management expectations for 7 The management s ROE target of >5% (based on.5% CET) remains valid for 7. Apart from the negative impact of the Hungarian and Slovakian banking tax (HUF 5.4 billion after tax) the management doesn t expect any other major adjustment item to occur in 7. Performing loan volume growth without the effect of acquisitions is expected to further accelerate, but its pace may remain single digit. The consolidated NIM erosion decelerates, but continues with around 5- bps y-o-y decline. Credit quality trends may remain favourable, total risk costs are expected to further decline. Operating expenses might increase by -4% y-o-y, fuelled by wage inflation and the additional costs of the on-going digital transformation. The solid capital position coupled with robust internal capital generation creates room for further acquisitions. In line with the practice of the previous two years, the nominal dividend amount to be paid from 7 earnings is expected to grow by 5% under the baseline scenario.

23 Miscellaneous. Acquisition of Splitska banka in Croatia On May 7, based on the acquisition agreement on purchasing % shareholding of Splitska banka d.d., member of Société Générale Group signed on December 6 between OTP banka Hrvatska, the Croatian subsidiary of OTP Bank and Société Générale Group, the financial closure of the transaction has been completed. The purchase price was EUR 45 million. The current interim management report does not incorporate the impact of the transaction, it will be reported in the Company s 7 second quarter earnings. Methodology changes on calculating financial indicators Starting from Q 7 the methodology of calculating performance indicators having average volumes in their denominators has been changed. Accordingly, while the numerator remained the same, the formula of how the averages are calculated in the denominator has changed. Against the old method when OTP Bank calculated the average as the arithmetic average of closing balance sheet items for the previous period and the current period, under the new method the calendar day-weighted averages of the average balance sheet items in periods (for example months in case of quarters) comprising the given period are used in the denominators. In the Q Stock Exchange Report all indicators were calculated and presented according to the new methodology. The summary of the change, as well as the time series of the affected indicators under the old and new methodology are shown within the Supplementary Data section in the Stock Exchange Report. Inclusion of other Hungarian companies in OTP Core There was a change in the number of companies comprising OTP Core (the Hungarian operation) therefore the following companies were included in OTP Core from Q 7: OTP Card Factory Ltd, OTP Real Estate Lease Ltd, OTP Facility Management Ltd. and MONICOMP Ltd. The cumulative gross loan portfolio of these companies represented HUF.7 billion at the end of Q 7, whereas their aggregated Q 7after tax profit reached HUF.5 billion. This change had no impact at all on the consolidated balance sheet and P&L. Earlier these entities results were presented within Other Hungarian Subsidiaries.

24 Miscellaneous. NBH s proposal on customerfriendly mortgages On 9 March 7 the National Bank of Hungary (NBH) published an announcement according to which NHB is going to introduce a customer-friendly housing loan certification and only those banks whose housing loan products meet certain conditions laid down by NBH can use the customer-friendly housing loan approval rating. Following intensive consultations with market participants, on 9 May 7 the NBH published the customer-friendly housing loan criteria for the newly issued housing loans (i.e. the below criteria apply only to new production of fixed-rate housing loans, e.g. home equity loans and variable rate loans are not part of the initiative). This scheme is a recommendation, and not a binding regulation. According to the conditions set by the Financial Stability Board of the NBH, the fair housing loan rating requires the fulfilment of following set of criteria (among others):. newly disbursed housing loans should be an annuity, i.e. with constant monthly instalments. interest rates should be fixed either with a repricing periods of, 5 or years, or for the whole tenor of the loan. the maximum tenor of the housing loan cannot exceed years 4. the credit decision should take place within 5 working days after obtaining the appraisal of the collateral 5. the deadline of disbursement is working days following the credit approval 6. the interest premium over the reference rate (more precisely, over the interest rate alteration indicator serving as a reference rate) cannot exceed 5 basis points. As for the reference rate, it will be the discretion of the lender to decide which reference rate should be applied out of the potential reference rates verified and published by the NBH. The list of potential interest rate alteration indicators for HUF loans include: o Hungarian government bond yields *.5 o Budapest Interest Rate Swap (BIRS) o Hungarian government bond yields 7. initial disbursement fees will be capped at.75% of the total loan amount, or HUF 5,. 8. early repayment fees cannot exceed.% of the prepaid amount Banks can apply for the customer-friendly housing loan approval rating at the NBH from June 7. Starting from autumn 7 the NBH will create a website where customers will be able to compare the pricing and other information of the various mortgages being provided under the scheme. 4

25 Consolidated total income increased by 6% y-o-y with slight decline at OTP Core, but decent growth in Russia supported by the FX translation effect, too. The q-o-q decline was mainly explained by base effect at OTP Asset Management TOTAL INCOME Q 7 without one-off items (HUF billion) Y-o-Y (HUF bn) Y-o-Y (%) Q-o-Q (HUF bn) Q-o-Q (%) OTP Group 89 6% -5 -% OTP CORE (Hungary) % - -% DSK (Bulgaria) 6 - -% - -9% OBRU (Russia) 4%/% %/% Touch Bank (Russia) n/a n/a OBU (Ukraine) %/-6% -%/% OBH (Croatia) 8 8% -% OBS (Slovakia) 4 % -% OBR (Romania) 7 % 8% CKB (Montenegro) -% -6% OBSrb (Serbia) % -5% Others % -4 -% Changes in local currency Other group members and eliminations. Of the HUF 4 billion y-o-y increase Corporate Centre represented HUF.4 billion, eliminations accounted for +. billion and other Hungarian subsidiaries -.6 billion. The q-o-q decline is explained by OTP Asset Management where success fees were booked in 4Q 6. 5

26 The net interest income marginally eroded q-o-q due to calendar effect and base effects; on the other hand, stronger RUB had a positive impact on the Russian NII contribution NET INTEREST INCOME Q 7 (HUF billion) OTP Group OTP CORE (Hungary) DSK (Bulgaria) OBRU (Russia) Touch Bank (Russia) OBU (Ukraine) OBH (Croatia) OBS (Slovakia) OBR (Romania) CKB (Montenegro) OBSrb (Serbia) Merkantil (Hungary) Corporate Centre Others and eliminations % 44% 4% % % 4% 5% % 4% % % % % % Q-o-Q (HUF billion) Q-o-Q (%) -% -5% -9% 6%/-% % -% % -% 4% -4% -% -45% 9% 4 At OTP Core the 5% q-o-q NII decline was partly reasoned by the calendar effect (-%-points or HUF -. billion q-o-q impact), and a HUF.9 billion NII-boosting one-off item booked in 4Q 6. Moreover, the NII was negatively influenced by the diminishing interbank interest rates (the average M BUBOR rate dropped by 9 bps q-o-q). On the other hand, it was positive for interest revenues that the liquidity reserves have been gradually shifting toward longer duration and higher yielding Hungarian government bonds. Furthermore, the positive impact of AXA already supported the full quarter (vs. only months in 4Q). In Bulgaria half of the q-o-q decline is explained by two recurring technical items. Firstly, methodology change: items related to the fair value adjustment of derivative instruments previously being accounted for on the other net non-interest income line have been reclassified to the NII line since the beginning of the year (this had a q-o-q negative NII impact of about HUF.95 billion, but was neutral to total income). Secondly, lower yields realized on liquid assets: DSK Bank holds securities issued by OTP Bank, which had a significant nominal one-off interest rate reduction in 4Q 6 (HUF -. billion effect q-o-q). Furthermore, the continuing repricing and refinancing of mortgage loans continued to be a drag on NII. At Merkantil a HUF.5 billion item supported the NII line in 4Q 6 due to a change in the accounting methodology. 4 The q-o-q increase was explained by base effect: the full-year amount of eliminations related to the intragroup FX swap deals concluded between OTP Bank (Hungary) and DSK Bank was booked in one sum in 4Q 6. This HUF.9 billion item emerged because in 4Q 6 certain components of the result on derivative instruments have been presented on a separate line in the accounting P&L structure: on the Gains and losses on derivative financial instruments line. In the previous accounting and adjusted P&L structure, items currently booked on this new line were accounted for on the NII, FX result and gains/losses on securities line. In 4Q 6 the full annual amounts have been moved in one sum to the new line. In the adjusted P&L structure this new line is part of the Other net non-interest income. 6

27 The consolidated net interest margin eroded by bps compared to the full-year 6 level. Without one-timers the margin of OTP Core would have declined by 7 bps q-o-q, while DSK would have experienced a 4 bps NIM attrition. Romania, Croatia and Ukraine, on the other hand, saw widening margins over the first quarter Net interest margin (%) OTP Group Q 6 - bps Q 6 Q Q Q 7 In 4Q the NII was distorted by:. eliminations (HUF -5 bn impact in 4Q) related to FX swaps between OTP and DSK (see point 4 on page 6);. a one-off item atotpcore(huf+.9bnin4q,thesameasonpage6inpointandthe. point on this page);. One-off interest revenues booked at Merkantil (HUF +.5 bn in 4Q). Adjusting for these items the 4Q NIM would have been 4.8%. A HUF.9 billion NII-boosting one-off item was booked in 4Q 6 at OTP Core (the same as explained on page 6 in point ). Adjusting for this item the 4Q 6 NIM would have been.4%. At DSK recurring technical items emerged (the same as on page 6 in point ): a methodology change reduced NII by HUF.95 billion, and the coupon step-down of securities issued by OTP Bank by HUF. billion. These two items explain bps out of the total 47 bps NIM decline, therefore the clean NIM contraction would have been 4 bps q-o-q ( clean Q NIM: 4.4%). OTP Core Hungary OTP Bank Croatia Q 6 Q 6 Q 6 4Q 6 Q Q 6 Q 6 Q 6 4Q 6 Q 7 DSK Bank Bulgaria OTP Bank Romania Q 6 Q 6 Q 6 4Q 6 Q Q 6 Q 6 Q 6 4Q 6 Q 7 OTP Bank Russia OTP Bank Ukraine Q 6 Q 6 Q 6 4Q 6 Q Q 6 Q 6 Q 6 4Q 6 Q 7 7

28 Consolidated performing loans increased by % q-o-q and 8% y-o-y (+4% y-o-y w/o AXA take-over and broadening of OTP Core definition), led by corporate loan expansion in Hungary and Bulgaria, and reviving consumer loan demand in Russia DPD-9 volumes Q-o-Q loan volume changes in Q 7, adjusted for FX-effect Total % % % % -% % -% % % -% % % Consumer % % % -% -% % % 5% % -% % % Mortgage % % -% % -% -5% % % % % % Corporate % 6% % % -% -% 5% -% % % Cons. Core (Hungary) DSK (Bulgaria) OBRu (Russia) Touch Bank (Russia) OBU (Ukraine) OBR (Romania) OBH (Croatia) OBS (Slovakia) OBSr (Serbia) CKB (Montenegro) Y-o-Y loan volume changes in Q 7, adjusted for FX-effect Total 8% 4% % 5% 4 4% 6% % % 7% -% 5% -% Consumer % % % 6% 8% 9% % % % % Mortgage 7% -% 5% -% 4 % -8% -% -6% 4% -% % 6% Corporate % % 4% 7% % % 7% % 7% -9% Loans to MSE and MLE clients and local governments Without the effect of entities consolidated into OTP Core from Q 7 Without the AXA-effect 4 Without the AXA-effect and entities consolidated into OTP Core from Q 7 8

29 In Q 7 new household loan disbursements improved significantly y-o-y at OTP Core and at almost all subsidiaries Y-o-Y change of new disbursements (in local currency) Q 7 Core (Hungary) DSK (Bulgaria) OBRu (Russia) OBU (Ukraine) OBR (Romania) OBH (Croatia) OBS (Slovakia) OBSr (Serbia) CKB (Montenegro) Mortgage loan 48% 9% 8% 5% % 68% 48% Cash loan* 7% 5% % 74% % 9% -% 8% 4% * Including POS loan disbursements in case of DSK (Bulgaria), OBRu (Russia) and OBU (Ukraine) 9

30 The consolidated deposit base showed a strong 6% growth y-o-y, but decreased by % q-o-q. The strength of the Hungarian and Bulgarian franchises is reflected in the steadily strong retail deposit inflows (+5% and +7%, respectively) Q-o-Q deposit volume changes in Q 7, adjusted for FX-effect Total -% -% % -8% -% % -% -% -% -6% -6% Retail % % % -5% -% -5% -% -% -% % -% Corporate -% -% % -% 9% -5% -% -% -% -4% Cons. Core (Hungary) DSK (Bulgaria) OBRu (Russia) Touch Bank (Russia) OBU (Ukraine) OBR (Romania) OBH (Croatia) OBS (Slovakia) OBSr (Serbia) CKB (Montenegro) Y-o-Y deposit volume changes in Q 7, adjusted for FX-effect Total 6% 8% 7% -4% 6% 9% -% % -6% -8% % Retail 8% 5% 7% -9% 6% -4% % -% -% 4% -% Corporate % % 7% 6% 4% -% % -% -9% 5% including SME, LME and municipality deposits

31 The net fee and commission income declined by 8% q-o-q mainly due to a seasonal setback at OTP Fund Management NET FEE AND COMMISSION INCOME Q 7 (HUF billion) OTP Group OTP CORE (Hungary) DSK (Bulgaria) OBRU (Russia) % 54% 4% % Q-o-Q (HUF billion) Q-o-Q (%) -8% -4% -% 45%/% At OTP Core the quarterly decline was explained by the fact that similar to previous years, the financial transaction tax on card transactions had to be paid in a lump-sum in the first quarter for the whole year, based on the annual volume of previous year s transactions. This item amounted to HUF.6 billion in Q 7. Touch Bank (Russia) OBU (Ukraine) OBH (Croatia) OBS (Slovakia) OBR (Romania) CKB (Montenegro) OBSrb (Serbia) Fund mgmt. (Hungary) % 5% % % % % % % n/a -% -6% -6% 6% -% -5% -7% Fee expenses dropped due to methodology change. From the beginning of 7 discounts paid to retail agents related to product sale and certain agent bonuses previously treated as fee expense are now capitalised and treatedaspartoftheamortised cost of the loans, thus these expenses will amortise through interest payment on loans during their lifetime. At OTP Fund Management the q-o-q drop is explained by success fees booked in 4Q 6. Change in local currency

32 The other net non-interest income remained relatively stable q-o-q OTHER NET NON-INTEREST INCOME Q 7 without one-off items (HUF billion) Q-o-Q (HUF billion) Q-o-Q (%) OTP Group OTP CORE (Hungary) DSK (Bulgaria) OBRU (Russia) % 5% % % % 6% -% -77% At OTP Core the q-o-q change was mainly induced by a base effect: in 4Q there was a HUF.9 billion decline in other revenues induced by a one-off item (the same as explained on page in point ), and a HUF.5 billion gain was realized on government securities in 4Q 6. Touch Bank (Russia) % n/a OBU (Ukraine) 5%.6. % OBH (Croatia) OBS (Slovakia) OBR (Romania) CKB (Montenegro) OBSrb (Serbia) Others 5% % 9% % % 5% % % % % -9% -6% The q-o-q change is explained by base effect: the lump-sum accounting of the full-year amount of eliminations (HUF 5 billion) related to the intragroup FX swap deals concluded between OTP Bank (Hungary) and DSK Bank in 4Q 6. As the other leg of this item, there was an elimination within NII with a similar magnitude, but with an opposite sign (see on page 6 in point 4). Other group members and eliminations

33 Consolidated operating costs grew by 8% y-o-y (+4% adjusted for FX rate changes), explained by higher costs at OTP Core, Touch Bank and OTP Bank Russia. Romania demonstrated efficient utilization of synergies from the Millennium deal OPERATING COSTS Q 7 (HUF billion) OTP Group OTP CORE (Hungary) DSK (Bulgaria) OBRU (Russia) Touch Bank (Russia) OBU (Ukraine) OBH (Croatia) OBS (Slovakia) OBR (Romania) CKB (Montenegro) % 5% % % % 4% 5% % 4% % Y-o-Y (HUF bn) Y-o-Y (%) 8% 4% % 8% % 6% % -5% -4% % Y-o-Y (FX-adj., HUF bn) - 4 Y-o-Y (FX-adj., %) 4% 4% % 6% 7% 9% % -4% -% % The consolidation of four Hungarian entities into OTP Core from Q 7 did not have a material impact on the dynamics of operating expenses due to eliminations. The y-o-y increase in operating expenses was fuelled by higher marketing costs and higher contributions paid to regulatory bodies. In Q 7 HUF.4 billion personal costs emerged due to the AXA take-over. Also, at OTP Bank there was an average base salary increase of 4% in April 6, however its effect for Q 7 operating costs was counterbalanced by the 5 pps cut in social and health care contributions from January 7. At OTP Bank Russia the opex growth was explained by higher business activity. The reclassification of deposit protection fund contributions from other income to opex line pushed up Q opex by HUF. billion. OBSrb (Serbia) Merkantil (Hungary) % % % % % % Increasing cost base at Touch Bank due to higher client acquisition costs and personnel expenses.

34 OTP Core The Q 7 performance of OTP Core was shaped by declining effective corporate tax rate, lower net interest income and risk cost releases OTP CORE (in HUF billion) Q 6 4Q 6 Q 7 Q-o-Q Y-o-Y Profit after tax % 4% Corporate tax % -5% Before tax profit % 6% Operating profit % -6% Total income % -% Net interest income % -% Net fees and commissions % 7% Other net non interest income without one-offs % -7% Operating costs % 4% Total risk costs Total one-off items... The effective corporate income tax rate for the first quarter was.%, marking a sharp drop both q-o-q and y-o-y (Q 6: 7.%, 4Q 6:.5%). The main reason behind was that effective from January 7 the Hungarian corporate tax rate was reduced to 9%. Also, the tax shield effect on the revaluation of subsidiary investments resulted in additional tax payment both in Q and 4Q 6 (Q: HUF.5 billion, 4Q: HUF.7 billion). Since the switch from Hungarian Accounting Standards into IFRS financials happened from January 7 in Hungary, from Q 7 the corporate tax line of OTP Core won t be distorted by this tax shield effect related to the HUF exchange rate movements. The y-o-y NII decline was driven by narrowing margins: declining interest rate environment that took its toll through lower deposit margins and lower gross interest income on customer loans. On the other hand, volume expansion could almost entirely offset the NIM pressure. Favourable risk cost developments can be attributed to the continuation of improving credit quality trends. 4

35 OTP Core Mortgage loan applications and disbursements accelerated further. OTP s market share remained strong in new loan disbursements, corporate loans and also in retail savings Change of mortgage loan applications and disbursement of OTP Bank (Q 7, y-o-y changes) New applications 5% OTP Group s market share in loans to Hungarian companies (%) % Disbursement 48% OTP s market share in mortgage loan contractual amounts 8.9% 5.6%.8% 9.% 6.9% 9.% 9.5% Q 7 OTP Bank s market share in household savings 9.8%.7%.6% 7.9% 8.7% 7.% 7.% Q 7 Activity of OTP Group in the Funding for Growth Scheme FGS I. FGS II. FGS+ FGS III. Changes of SME loan volumes (FX-adjusted y-o-y changes) 4.% Contracted volumes (in HUF billion) 6 5.% 9 7.% 7.%.7% 66 4.%.% Market share.% 9.% 7.% 4.9% 9.9% YTD 6.% Q Q 7 Including the performance of OTP Building Society. Raw, unadjusted data are used for the calculation of market shares. Aggregated market share of OTP Bank, OTP Mortgage Bank, OTP Building Society and Merkantil, based on central bank data (Supervisory Balance Sheet data provision until 6 and Monetary Statistics from Q 7). The source of the sector statistics is the central bank s publications on FGS. 4 The y-o-y increase in was influenced by reclassification, too. 5

36 DSK Bank Bulgaria Net earnings rebounded massively q-o-q and remained fairy stable y-o-y. NIM erosion (partially explained by technical and one-off items) continued, but coupled with parallel moderation in risk cost rate Income statement Net interest margin (in HUF billion) Q 6 4Q 6 Q 7 Q-o-Q Y-o-Y Profit after tax (adjusted) % -% Profit before tax % -% Operating profit % -6% Total income % -% Net interest income % -4% Net fees and commissions % % Other income % -997% Operating costs % % Total risk cost % -4% 6% 5% 4% % % % % 5.6% Q 5.67% Q 5.47% 4.6% 5.55% 5.9% Q 4Q 4.78% 4.69% 4.55% Q Q Q % 4Q.9% Q 7 Return on Equity Risk cost rate.6% 4.% 6.7%.% 9.8%.8%.5%.9%.%.6% Q Q 7 According to the old calculation methodology until 4 and the new calculation methodology from 5. 6

37 OTP Bank Russia The Russian subsidiary further improved its profit in Q 7 as a result of operating profit increasing. FX-adjusted performing POS and cash loan volumes grew y-o-y due to the favourable new disbursements Income statement (in HUF billion) Q 6 4Q 6 Q 7 Q-o-Q Y-o-Y Profit after tax (adjusted) % 9% Profit before tax % 9% Operating profit % 47% Total income % 4% Net interest income % % Net fees and commissions % 95% Other income % -5% Operating costs % 8% Total risk cost % -% DPD-9 loan volumes (FX-adjusted, in HUF billion) POS Cash loan 49 +9% % 9 Q 6 Q 7 Q 6 Q 7 Credit card Other loans 7 -% % 49 Q 6 Q 7 Q 6 Q 7 Return on Equity 8.%.% -.% 4-4.5% 5.%.4% 6 Q 7 OTP Bank Russia - risk cost rates in different segments POS % Credit card 5% Mikro- és kisvállalkozói hitelállomány y/y változása (árfolyamszűrt állományalakulás) % 5% % Cash loan.6% 9.7% 6.% 7 According to the old calculation methodology until 4 and the new calculation methodology from 5. 7

38 OTP Bank Russia In Q 7 POS and cash loan disbursements grew on a yearly basis, but performing credit card volumes declined further. Deposits decreased q-o-q in RUB terms. Average RUB term deposit rates kept shrinking POS loan disbursements (RUB billion) % Development of customer deposits (RUB billion) Q Q Q 4Q Q Q Q 4Q Q Q Q 4Q Q Q QQ4Q Q QQ4Q Q QQ4Q Q QQ4Q Q QQ4Q Q Q Q 4Q DPD-9 credit card loan volume q-o-q changes (RUB billion) 7 Cash loan disbursements (RUB billion, including quick cash loans) % Q QQ4Q Q QQ4Q Q QQ4Q Q QQ4Q Q QQ4Q Q Q Q 4Q Average interest rates for stock and new RUB deposits 6% 4% % % 9.% 8% 6% % Stock of term deposits New term deposit placements Q 4.8% 4.%.%.%.%.6% 4.%.%.5%.%.6%.% 9.4% 9.5%.% 9.5%.% 8.9%.% 9.9%.% 9.% 9.% 9.5% 7.7% 8.8% 7.% 7.9% 8.% 7.% 7.% 6.7% 6.7% 6.% Q Q 4Q Q Q Stock of total deposits Q 4Q Q 75% 76% 78% 77% 79% 78% 75% 7% 75% Share of term deposits (stock) Q Q 7% 7% 4Q 66% 8.% 8.% 5.8% Q % 8

39 Russia The recovery of domestic demand is sluggish, but retail lending has bottomed out by mid-6 Key economic indicators Retail loans 4. OTP Research Loan stock / GDP F 8F Loan flow / GDP Nominal GDP (RUB bn) 66,97 7,7 79, 8, 86,44 9,647 98, Real GDP change.5%.%.7% -.8% -.%.%.% Final consumption 6.%.6%.9% -8.% -.5%.%.% Household consumption 7.4% 4.4%.% -9.8% -4.5%.4% 4.%..4. Collective consumption.5%.4% -.% -.% -.5%.%.5%. Gross fixed capital formation 6.%.9% -.4% -9.9% -.8%.4%.% -. Exports.4% 4.6%.5%.7%.% 6.%.% Imports 9.7%.6% -7.6% -5.5% -5.% 8.5% 7.8% Mortgage loans Government balance* -.% -.5% -.4% -.4% -.5% -.8% -.8% Government debt* 9.7%.6%.4%.5%.4%.6%.4% Current account*.%.5%.8% 5.%.9%.4%.% Gross external debt* 8.9%.6% 4.6% 45.5% 6.%.7%.7% Gross nominal wages.%.5% 8.% 4.% 8.% 8.% 7.6% Unemployment rate (avg) 5.4% 5.5% 5.% 5.6% 5.5% 5.5% 5.% Inflation (annual average) 5.% 6.8% 7.8% 5.6% 7.% 4.% 4.% Consumer loans Brent (USD / barrel) Base rate (end of year) 8.5% 6.5% 8.%.%.% 8.% 6.5% RUB/USD FX rate (eop) Q 7 Source: Rosstat. Central Bank of Russia, BIS, OTP Bank. Penetration levels calculated from annual GDP figures. *as % of GDP 9

40 OTP Bank Ukraine In Ukraine profitability further improved in Q 7 due to moderating risk cost, stringent cost control, stable net interest margin and q-o-q slightly lower performing loan volumes Income statement (in HUF billion) Q 6 4Q 6 Q 7 Q-o-Q Y-o-Y Profit after tax.9.. 6% 87% Profit before tax % 7% Operating profit % -% Total income % -8% Net interest income % -7% Net fees and commissions..5. -% % Other income % % Operating costs % 6% Total risk cost % -69% Net interest margin 8.% 9.% %.56%.5% 9.7% % 8.8% 8.% 8% 7.49% 7.6% 7.74% 6.% 6% 4% % % Q Q Q 4Q Q Q Q 4Q 5 6 Q 7 Return on Equity.5% 6.% -7.4% Not available due to negative equity % Q 7 Composition of performing loan volumes (in HUF billion, FX-adj.) 9 % 8% 86 7% 8% 6% % 8% 5% 66% 7% UAH Mortgage loans FX Mortgage loans Consumer loans Car finance Corporate % 8% 6% 8% % 9% 9% 5% 6% 6% 9% % 7% 74% 74% Q 7 According to the old calculation methodology until 4 and the new calculation methodology from 5. 4

41 OTP Bank Ukraine OTP Bank Ukraine excelled in terms of nominal profit despite its low ranking by total assets. Intragroup funding remained stable q-o-q, but the net loan to deposit ratio sank further Ranking of Ukrainian banks by total assets Ranking of Ukrainian banks by after tax result PrivatBank Oschadbank Ukreximbank Raiffeisen Bank Aval Ukrgazbank Sberbank Ukrsibbank (BNP Paribas) First Ukr. Inter. Bank Ukrsotsbank (UniCredit) Alfa-Bank Prominvestbank Credit Agricole In UAH billion, as at //7 Source: National Bank of Ukraine Raiffeisen Bank Aval.8 Citibank.44 OTP Bank.96 Credit Agricole.8 ING Bank.79 Oshadbank.47 First Ukr. Inter. Bank.7 ProCredit Bank. Ukrgazbank.9 Kredobank.6 A-Bank. Deutsche Bank DBU. In UAH billion, based on FY6 profit Bank Vostok. Source: National Bank of Ukraine OTP Ukraine s share within consolidated loans and deposits Intragroup funding and net loan to deposit ratio Share of the Ukrainian bank s performing loans (DPD-9) within the Group Share of the Ukrainian bank s customer deposits within the Group.9%.7% Net loan to deposit ratio Subordinated debt (HUF bn equivalent) 8% 8% Intragroup funding (HUF bn equivalent) 4% % % 7% 8 85% 84% 9 7 8% Q 7 Out of the total outstanding intragroup funding exposure of HUF 44.6 billion equivalent toward the Ukrainian operation, HUF 9.5 billion (USD 7 million) was toward the leasing company and HUF 5. billion (USD 8 million) was toward the factoring company. 4

42 OTP Bank Romania OTP Bank Romania demonstrated strong profitability in Q 7, supported by favourable margins and the cost efficiency gains thanks to the exploitation of cost synergies after the Banca Millennium transaction Income statement (in HUF billion) Q 6 4Q 6 Q 7 Q-o-Q Y-o-Y Profit after tax (adjusted) % % Profit before tax % 6% Operating profit...9 4% 4% Total income % % Net interest income % % Net fees and commissions % 6% Other income..8. % % Operating costs % -4% Total risk cost % 8% Net interest margin.6%.4% 5% 4.8% 4%.56%.5%.7%.%.9%.4%.54%.67% % % % % Q Q Q 4Q Q Q Q 4Q Q Return on Equity Cost to income ratio.4%.%.8%.% 7.% 68.% 7.% 7.% 7.% 68.% 64.7% 68.6% 58.8% -8.% -.4% Q 7 Q Q Q 4Q Q Q Q 4Q Q According to the old calculation methodology until 4 and the new calculation methodology from 5. 4

43 The consolidated DPD9+ ratio declined further. The risk cost rate sank to multi-year lows Consolidated risk cost for possible loan losses and its ratio to average gross loans Risk cost for possible loan losses (in HUF bn).78%.8% Risk cost to average gross loans.66% (%).%.45%.4%.98%.7% %.%.87%.56%.65% Q Q Q 4Q Q Q Q 4Q Q Q Q 4Q Q Ratio of consolidated DPD9+ loans to total loans.%.6%.8% 9.% 9.% 8.4% 8.4% 6.4% 7.% 7.% 5.8% 4.7% 4.% 4 9 Change in DPD9+ loan volumes (consolidated, adjusted for FX and sales and write-offs, in HUF billion) Contribution of Russia and Ukraine Q DPD9+ coverage ratio 9.4% 9.5% 95.% 95.% 96.8% 98.8% 88.8% 89.6% 89.% 8.9% 84.% 84.8% 84.% 68 Consolidated provision coverage ratio Q 4Q Q Q Q 4Q Q Consolidated allowance for loan losses (FX-adjusted, in HUF billion),54,74,6,5,4,86,9,9,9, Q Q Q 4Q Q Q Q 4Q Q Q Q 4Q Q Q Q Q 4Q Q Q Q 4Q Q Q Q 4Q Q According to the old calculation methodology until 4Q 5 and the new calculation methodology from Q 6. 4

44 In Q 7 the FX-adjusted DPD9+ formation sank to HUF billion. The Russian inflow was below the quarterly average of the last couple of years FX-adjusted quarterly change in DPD9+ loan volumes (without the effect of sales / write-offs, in HUF billion) Consolidated OTP Core (Hungary) FX-adjusted sold or written-off loan volumes: Q Q Q 4Q Q Q Q 4Q Q OBRu (Russia) Q Q Q 4Q Q Q Q 4Q Q 7 8 OBU (Ukraine) Q Q Q 4Q Q Q Q 4Q Q DSK (Bulgaria) Q Q Q 4Q Q Q Q 4Q Q OBR (Romania) Q Q Q 4Q Q Q Q 4Q Q 6 7 FX-adjusted sold or written-off loan volumes: Q Q Q 4Q Q Q Q 4Q Q OBH (Croatia) OBS (Slovakia) OBSr (Serbia) CKB (Montenegro) Merkantil Bank+Car (Hungary) Technical effect of settlement: In Q 5 mortgages worth HUF 9 billion (FX-adjusted) slipped into the DPD9+ category again after the HUF 8 billion technical healing in Q. Out of the DPD9+ volume growth in 4Q 6, HUF 5 billion was attributable to the consolidation of AXA portfolio FX-adjusted sold or written-off loan volumes: 4 Q Q Q 4Q Q Q Q 4Q Q Q Q Q 4Q Q Q Q 4Q Q - Q Q Q 4Q Q Q Q 4Q Q Q Q Q 4Q Q Q Q 4Q Q Q Q Q 4Q Q Q Q 4Q Q 7 The netting out at Factoring induced by the conversion in Q 5 was equivalent of HUF 65 billion on an FX-adjusted basis. In Q 5 at Merkantil the settlement reduced the DPD9+ volumes by HUF 7 billion (FX-adjusted) and HUF billion re-defaulted in Q. In 4Q 5 at Merkantil the FX car financing loan conversion reduced the DPD9+ volumes by HUF bn. In Q 6 part of these volumes redefaulted. 44

45 The risk cost rate and the DPD9+ ratio declined q-o-q all across the board with the provision coverage ratios remaining conservative OTP Core Hungary DSK Bank Bulgaria OTP Bank Russia OTP Bank Ukraine Risk cost for possible loan losses / Average gross customer loans, %. -.6 (6) Q Q Q 4Q Q.5 Q.8.4 Q. (6) Q.8 4Q. Q.4 Q 7. Q 8. (6) 6.9 Q Q Q 4.5 Q. Q. (6). Q. 4Q -. Q DPD9+ loans / Gross customer loans, % Q Q Q 4Q Q Q Q Q 4Q Q Q Q Q 4Q Q Q Q Q 4Q Q Total provisions / DPD9+ loans, % Q Q Q 4Q Q Q Q Q 4Q Q Q Q Q 4Q Q Q Q Q 4Q Q

46 At OTP Core, DSK Bank and the Russian operation the DPD9+ ratio decreased q-o-q partly as a result of DPD9+ portfolio sales and write-offs DPD9+ ratio (%) DPD9+ ratio (%) OTP Core (Hungary) Q6 Q6 Q6 4Q6 Q7 Q-o-Q (%-point) Total.7%.%.4% 9.8% 9.%.7 Retail.6%.%.%.%.9%.4 Mortgage.4%.8%.%.4%.%. Consumer 8.% 7.% 6.% 5.% 4.%.9 MSE 7.4% 6.8% 6.4% 6.4% 6.5%. Corporate 9.4% 8.5% 8.% 7.9% 6.8%. Municipal.%.% 4.%.%.%. OTP Bank Russia Q6 Q6 Q6 4Q6 Q7 Q-o-Q (%-point) Total.5% 4.6%.4%.% 9.%. Mortgage 5.% 5.5% 7.% 6.9% 6.%.8 Consumer.8% 4.7%.% 9.8% 8.8%. Credit card 8.5%.4%.7%.6%.%.6 POS loan.% 5.9% 4.4%.%.7%.6 Personal loan 5.4% 6.9% 4.%.7% 8.7% 4. DPD9+ ratio (%) DPD9+ ratio (%) DSK Bank (Bulgaria) Q6 Q6 Q6 4Q6 Q7 Q-o-Q (%-point) OTP Bank Ukraine Q6 Q6 Q6 4Q6 Q7 Q-o-Q (%-point) Total 4.6% 4.%.5%.5%.%. Mortgage.5%.%.% 6.7% 6.5%. Consumer 7.9% 8.% 8.5% 7.7% 8.%.4 MSE 5.%.8%.6% 7.% 7.5%. Corporate.4%.%.4% 9.6% 8.7%.9 Total 47.5% 4.9% 44.9% 4.9% 4.%.7 Mortgage 76.6% 74.% 74.% 7.6% 7.%.6 Consumer 4.4% 4.6% 8.% 4.6%.8%.7 SME 88.% 86.% 87.8% 87.% 87.6%. Corporate 5.% 4.% 9.% 8.6% 7.6%. Car-financig 5.8% 47.9% 46.6% 4.6% 4.%.4 46

47 Restructured retail volumes slightly increased q-o-q on group level Definition of retail restructured loans: In comparison with the original terms and conditions, more favourable conditions are given to clients for a definite period of time or the maturity is prolonged. The exposure is not classified as restructured, if: the restructuring period with more favourable conditions is over and the client is servicing his loan according to the original terms for more than months, and/or the client is servicing his contract according to the prolonged conditions for more than months. Loans once restructured but currently with delinquency of more than 9 days are not included, either. Restructured retail loans with less than 9 days of delinquency Share out of retail + car-financing portfolio (without SME) OTP Flat Lease; included into OTP Core from Q 7. Q 6 Q 6 Q 6 4Q 6 Q 7 HUF mn % HUF mn % HUF mn % HUF mn % HUF mn % OTP Core (Hungary) 5,8.% 4,799.% 5,69.% 6,8.% 8,6.% OBRu (Russia),98.% 4,54.%,85.%,897.9% 5,94.% DSK (Bulgaria),68.9%,94.%,7.7%,55.7%,5.7% OBU (Ukraine) 6,958.% 8,8.7% 4,6 9.4% 4,8 9.7%,87 9.4% OBR (Romania) 7,467.%,56.%,78.9%,87.7%,9.6% OBH (Croatia),856.%,897.%,45.9% 4,67.4%,97.% OBS (Slovakia),85.5%,89.5% 78.4% 878.4% 648.% OBSr (Serbia),7.7% 74.8% 44.%.8% 6.6% CKB (Montenegro) 7.% 57.% 7.%.% 4.4% Merkantil (Hungary) 98.6%,58.7%,9.8%,566.9%,647.% Other leasing (Hungary) 6.4%.% 54.6%.% TOTAL 7,58.8% 7,8.8% 6,7.6% 64,85.6% 66,6.6% 47

48 In Q 7 the reported CET was 6.%, but the CET capital does not include the Q 7 profit less indicated dividend; including these items the CET would have been 6.6%, reflecting strong underlying capital generation OTP Group consolidated capital adequacy ratios (IFRS) Capital adequacy ratios (under local regulation) BASEL III Q 7 Capital adequacy ratio 9.7% 9.7% 6.9% 6.% 6.% 8.5% OTP Group (IFRS) Q 7 9.7% 9.7% 6.9%* 6.% 6.% 8.5% Hungary.4%.% 9.% 6.6% 7.7%.% Common Equity Tier ratio 5.% 6.%.5%.%.5%/ 5.8% 6.%/ 6.6% Russia 6.% 4.%.%.% 6.% 7.% Ukraine 9.6%.6%.4% 5.7%.4% 4.% Bulgaria 8.9% 6.4% 8.% 7.% 7.6% 7.5% The stand-alone capital adequacy ratio of OTP Bank is according to Hungarian Accounting Standards (HAS) until 6, and due to the switch from HAS to IFRS from 7 it is based on IFRS from Q 7. Romania 5.6%.7%.6% 4.% 6. % 6.% Serbia 6.5% 7.8%.8% 6.%.8%.% The acquisition of Splitska banka was completed on May 7. The Q 7 financials (including the capital adequacy ratio) reflect the impact of the transaction neither on standalone, nor on consolidated level. Croatia 6.% 6.7% 6.5% 5.5% 6.7% 6.5% Slovakia.8%.6%.7%.4%.9%.% Montenegro.4% 4.4% 5.8% 6.%.%.% Calculated with the deduction of the dividend amount accrued in 4. Including the unaudited full-year 6 net profit less indicated dividend. Including the unaudited Q 7 net profit less indicated dividend. 48

49 Continuously stable, outstanding capital position both on stand-alone and on consolidated level OTP Group consolidated CAR (according to Basel III, IFRS) in HUF million Q 6 4Q 6 Q 7 CAR 5.9% 6.% 8.5% Tier ratio.%.5% 6.% Common Equity Tier capital ratio.%.5% 6.% Own funds,64,8,79,64,49,5 Tier capital 88,89 9,8,8,678 Common Equity Tier capital 88,89 9,8,8,678 Paid in capital 8, 8, 8, Reserves and current year profit,8,697,7,88,99,69 Memorandum item: Dividend -, -5, -5, Accumulated other comprehensive income and other reserves -46,7-4,546-77,447 Treasury shares -58, -6, -6,57 Goodwill and other intangible assets -59,45-64,4-66,74 Minority interests Prudential filters -,85 -,94 -,68 Other transitional adjustments CET Deductions from investments Additional Tier capital Hybrid Tier Other AT corrections AT Deductions from investments Tier 8,994 67,76 66,47 Hybrid Tier 9,56 89,95 89,95 Lower Tier 4,79 Upper Tier 77,6 77,458 76,74 Instruments issued by subsidiaries that are given recognition in T Capital (8) 4 64 Transitional adjustments due to additional recognition in T Capital of instruments issued by subsidiaries Tier Deductions from investments Deductions n/a n/a n/a Investments n/a n/a n/a Consolidated risk weighted assets (RWA) (Credit&Market&Operational risk) 6,69,455 6,7,467 6,768, Consolidated risk weighted assets (RWA) (Credit risk) 5,5,5 5,44,66 5,55,7 Consolidated risk weighted assets (RWA) (Maket & Operational risk),457,94,85,8,5,665 TOTAL CAPITAL REQUIREMENT 55,476 58,47 54,44 Capital requirement for Credit risk 48,84 47,57 444,87 Capital requirement for Market risk 4,74 6,455,58 Capital requirement for Operational risk 74,56 74,4 74,95 OTP Bank unconsolidated CAR (according to Basel III, HAS until 4Q6, IFRS from Q7) in HUF million Q 6 4Q 6 Q 7 CAR 5.9% 7.7%.% Tier ratio.4% 4.8% 9.5% Common Equity Tier capital ratio.4% 4.8% 9.5% Own funds,9,985,4,46,87,88 Tier capital 884,56,,94,79, Common Equity Tier capital 884,56,,94,79, Paid in capital 8, 8, 8, Reserves and current year profit 856, ,95,4, Retained earnings 856, ,8,68,98 Eligible interim/year-end profit or loss 8,77 74,6 Memorandum item: Dividend -, -5, -5, Accumulated other comprehensive income and other reserves 6,7 4,847 76, Other reserves 6,7 4,847 -,976 Revaluation reserves n/a n/a Fair value adjustment of securities available-for-sale and of derivative financial instruments recognised directly through equity n/a n/a 58,97 Fair value of share based payments n/a n/a 9,8 Fair value adjustment of cash flow hedge transactions n/a n/a Fair value adjustment of strategic open FX position recognised directly through equity n/a n/a Treasury shares -,46 -,795 -,778 Direct shares -9, -8,87-8,844 Indirect shares -,96 -,95 -,94 Synthetic shares Actual or contingent obligations to purchase own CET instruments n/a n/a Goodwill and other intangible assets -4,87 -,954-5,648 Prudential filters n/a n/a -,54 Deferred tax assets n/a n/a -8,48 Other transitional adjusments CET Deductions due to investments Reserve for general banking risk Excess of non-financial investment limit (only Basel ) n/a n/a Excess of deduction from T items over T Capital n/a n/a Additional Tier capital Hybrid Tier Other AT corrections AT Deductions from investments Tier 5,45 9,69 8,75 Lower Tier 4,79 Upper Tier,686 9,69 8,75 Tier Deductions from investments Other transitional adjustment to Tier Capital Deductions (financial investments) - Basel n/a n/a Excess of non-financial investment limit (only Basel ) n/a n/a Consolidated risk weighted assets (RWA) (Credit&Market&Operational risk),944,667 4,6,4 4,,5 Consolidated risk weighted assets (RWA) (Credit risk),56,9,54,9,58,6 Consolidated risk weighted assets (RWA) (Maket & Operational risk) 787,75 87,4 46,5 TOTAL CAPITAL REQUIREMENT 5,57,8,7 Capital requirement for Credit risk 5,555 6,9 8,45 Capital requirement for Market risk 4,7 47,887 5,48 Capital requirement for Operational risk,846,84,49 49

50 While OTP Bank ratings closely correlate with the sovereign ceilings, subsidiaries ratings enjoy the positive impact of parental support (rating outlook) + positive - negative stable Hungarian sovereign, OTP Bank and OTP Mortgage Bank ratings BBB- Moody's Moody's Hungary rating Baa S&P Hungary rating BBB S&P Baa BBB+ Baa BBB Baa BBB Ba BB+ Ba BB Ba BB B B+ B B B B Caa CCC+ Caa CCC Caa CCC Ca CC C C/D OTP Mortgage Bank Covered Bond OTP Bank OTP Bank / OTP Mortgage Bank RATING HISTORY OTP Bank Slovakia, DSK Bank Bulgaria, OTP Bank Ukraine and OTP Bank Russia cancelled cooperation with Moody s in,, 5 and 6 respectively. Currently OTP Bank, OTP Mortgage Bank and OTP Bank Russia have solicited ratings from either Moody s, Standard & Poor s or Fitch. OTP GROUP RELATED RATING ACTIONS Moody's has withdrawn OTP Bank Russia's ratings for its own business reasons. ( May 6) Moody's affirmed the long-term ratings of OTP Bank and changed the outlook on its Baa long-term local currency deposit rating to positive from stable. Also, the rating agency withdrew the deposit ratings of OTP Mortgage Bank as it is not a deposit-taking entity and assigned a Ba local currency issuer rating to the mortgage bank with positive outlook. (9 June 6) S&P has upgraded OTP Bank s and OTP Mortgage Bank s foreign and local currency counterparty credit ratings to BB+ from BB with stable outlook. ( July 6) Moody s has upgraded OTP Bank s long-term foreign currency deposit rating to Baa with a stable outlook and OTP Mortgage Bank s covered bonds rating to Baa. (7 November 6) RECENT SOVEREIGN RATING DEVELOPMENTS Fitch changed the outlook on Croatia's sovereign rating to stable from negative, affirmed BB rating. (7 January 7) Moody s has changed the outlook on Russia s ratings to stable from negative. (7 February 7) Moody s has changed the outlook on Croatia s ratings to stable from negative. ( March 7) Moody s upgraded Serbia s ratings to Ba from B, with stable outlook. (7 March 7) S&P has changed the outlook on Russia s ratings to positive from stable. (7 March 7) Moody s has changed the outlook on Slovakia s ratings to positive from stable. (7 April 7) Moody s has changed the outlook on Romania s ratings to stable from positive. ( April 7) OTP Bank OTP Mortgage Bank OTP Bank Russia Baa BBB+ BBB+ Baa BG() BBB BBB Baa Moody's S&P Global Fitch RO() HU() Moody's S&P Fitch Baa () Baa HU() RO() BB+ () BB+ () Aaa AAA AAA Aa AA+ AA+ Aa AA AA Aa AA- AA- A A+ SK() A+ SK() A SK(+) A A A A- A- BBB- RU(+) Ba RU() BB+ BB+ BG() BB () HU() BG() RO() RU() Ba CR() BB CR() BB CR() Ba SRB() BB- SRB(+) BB- SRB() B MN(-) B+ MN(-) B+ B B B B B- UA () B- UA () Caa CCC+ CCC Caa CCC CCC Caa UA() CCC- CCC Last update: /4/7 Sovereign ratings: long term foreign currency government bond ratings, OTP Mortgage Bank Moody s rating: covered bond rating; Other bank ratings: long term foreign currency deposit ratings Abbreviations: BG - Bulgaria, CR - Croatia, HU - Hungary, MN - Montenegro, RO - Romania, RU - Russia, SRB - Serbia, SK - Slovakia, UA - Ukraine 5

51 Content Investment Rationale -6 Q 7 Financial Performance of OTP Group 8-5 Macroeconomic overview 5-6 5

52 Hungary After a temporary slowdown in 6 GDP growth is expected to accelerate to around 4% in 7. The dynamic growth of household consumption is going to be the main driver of the economy for a longer period of time Balance Growth Budget deficit Real GDP growth Investments to GDP 7.%.%.6%.7%.6%.% 4.%.%.%.9%.5%.8%.7% 7.8%.% F F F Current account balance Export growth Household consumption -7.8%.%.4% 4.9%.6% 6.4% 9.8% 7.7% 5.8% 4.5%.%.%.% 4.9% 4.8% F F F Gross external debt (in % of GDP) Housing construction permits Real wage growth 5.% 68.7%,6 7,56 9,6,55,559.%.8% 4.5% 6.% 5.9% Q F Source: CSO, NBH; forecasts: OTP Research Centre Without inter-company loans 5

53 Hungary Without jeopardizing fiscal balance the government intends to accelerate spending on investments. The current account surplus reached all-time high level in 6, and the external indebtedness fell further The budget position remains outstanding. Due to strong revenue dynamics and falling interest expenditures, the deficit would have dropped to zero in 6. However, the government decided to utilize this room: year-end spending on one-off items boosted the deficit to.7% of GDP. In a no-policy-change scenario the deficit would have remained below % of GDP in 7-8. The 8 draft budget aims to reach the.4% deficit target by increasing public investments and government purchases. Government debt decreased near 74% of GDP in 6 and expected to moderate further in coming years. After hitting an all-time high C/A surplus to GDP in 6, it started to moderate slowly due to stronger demand. The net financing capacity reached.5% of GDP in 6 as a whole as EU fund absorption fell back temporarily. External debt fell to 69% of GDP, almost in line with the regional average, from the peak of 5% in. Budget balance (as % of GDP) External balance (as % of GDP) Public debt (as % of GDP) External debt indicators (as % of GDP) Sources: HCSO, MNB, Ministry for National Economy, OTP Research The net financial capacity shows the amount of absorbed external funding / accumulated foreign assets in a period (equals to the sum of the current account balance + capital balance (EU funds) + Net errors and omissions) 5

54 Hungary Buffers represent adequate levels. The amount of fiscal reserves stood at elevated levels, the financing of the government debt is safe Reserves and adequacy rules (EUR billion) Liquid fiscal reserves* (EUR billion) Financial assets of the Central Government in Hungary (in HUF billion equivalent) HUF reserves Pension Reform and Debt Reduction Fund FX reserves, MOL shares 597, ,66 786,6,77, April 7 FX denominated funding transactions of the Central Government (in HUF billion equivalent) ,65,6,49,44,9 479,4,47,,99 FX Redemptions FX Issuances FX debt issuance: Issuance: floating rate FX debt is sold to domestic and foreign investors in small amounts and CNY billion international bond (dim sum bond) was issued for diversification reasons Redemption 6: HUF equivalent of 47 billion loan to EU in April, 46 billion domestic FX bond in May and October, international FX bond maturity in May and July; half of the total is already repaid Sources: MNB, Ministry for National Economy, GDMA, OTP Research. * The balance of the Treasury account and the liquid assets of the Pension Reform and Debt Reduction Fund 54

55 Hungary CPI is expected to hit the NBH s % target later this year, but only for a short period, hence the base rate is expected to remain on hold. The comfortable budgetary position may result in further selective VAT-cuts A slow growth in underlying inflation is masked by selective VAT cuts and very modest inflation of goods. Imported inflation is still subdued while food s inflation lags behind what OTP Bank assumed in its medium-term forecast. CPI is driven by the base effect of fuel prices: after peaking in February 7, CPI has been heading down as fuel prices started to rise a year ago, and from Q 7 onward CPI will pick up again as the rise in fuel prices stopped during the base period. From monetary policy perspective we forecast inflation to peak at % y-o-y in August, from where only very limited further acceleration may come (without government measures). However, we suppose that the government will have enough room for manoeuvre to take measures before the spring 8 parliamentary elections, which will drive CPI considerably lower. Taking into account that the MNB s March 7 update forecasts about % CPI for the entire forecast horizon under a nopolicy-change scenario (and its inflation target is %), we do not expect base rate hikes before 9, but the M BUBOR rate may slightly increase. Inflation (y-o-y, %) Base rate & M BUBOR (%) /Q /Q /Q /Q /Q /Q /Q /Q 4/Q 4/Q 5/Q 5/Q 6/Q 6/Q 7/Q 7/Q 8/Q 8/Q Wages in the private sector (y-o-y, %) Country risk indicators (%) Sources: HCSO, NBH, Reuters, OTP Research 55

56 Hungary Q 7 GDP growth exceeded market expectations by a wide margin. The economy is on track to achieve about 4% y-o-y GDP growth this year; we foresee election year (8) to bring further acceleration Q GDP growth jumped to 4.% from.6% a quarter earlier The start of 7 demonstrated encouraging signs of accelerating GDP growth: external demand has improved supporting the exportoriented industrial sector, while the 6 December government spending spree alongside robust private investment intention resulted in skyrocketing construction figures. Furthermore, administrative measures pushed up y-o-y wage dynamics toward %, supporting domestic demand. All these, coupled with the very modest performance during the base period, led to an eye-catching 4.% y-o-y growth rate. Growth is on track to be close to 4% in 7 In 7 consumption will remain strong, private construction is expected to revive, while EU fund absorption will accelerate. The stronger-than-expected Q start poses upside risk to our.9% GDP growth forecast. In addition there is further maneuvering room in the budget, so we expect 8 to bring further acceleration. y-o-y and annualized q-o-q GDP (%) Growth (y-o-y, %) and growth contribution of consumption (percentage points) Forecast Consensus on long-term growth (%) Real estate market indicators (nominal and real prices, 7=; transactions in thousand units, r.h.s.) l.h.s. l.h.s. Sources: CSO. NBH. Focus Economics. European Commission. OTP Research * w/o pension funds reserves. non-life insurance claims. other financial assets 56

57 Hungary Temporary slowdown in 6 coupled with reviving consumption and strong balance indicators. In 7 growth may accelerate to close to 4% and further in 8 Key economic indicators OTP Research Focus Economics* F 8F 7F 8F Nominal GDP (at current prices, HUF billion) Real GDP change.% 4.%.%.%.9% 4.%.5%.% Household final consumption.5%.%.% 4.% 4.9% 4.8% 4.8%.9% Household consumption expenditure.%.5%.4% 4.9% 4.8% 5.% Collective consumption 6.5% 9.%.6%.% 5.%.5% Gross fixed capital formation 9.8% 9.9%.9% -5.5% 9.% 5.%.% 5.% Exports 4.% 9.8% 7.7% 5.8% 4.5% 6.4% Imports 4.5%.9% 6.% 5.7% 5.4% 7.% General government balance (% of GDP) -.6% -.% -.6% -.7% -.6% -.% -.4% -.5% General government debt (% of GDP ESA ) 76.8% 76.% 75.% 74.% 7.% 67.6% 7.% 7.% Current account (% of GDP)**.8%.%.4% 4.9%.6%.5%.7%.% Gross external debt (% GDP)*** 86.8% 8.6% 74.8% 68.7% FX reserves (in EUR billion) Gross real wages.%.8% 4.4% 6.% 5.9% 4.8% Gross real disposable income.9% 4.% 4.% 4.8% 5.8% 4.6% Employment (annual change).7% 5.%.7%.4%.9%.5% Unemployment rate (annual average).% 7.7% 6.8% 5.%.8%.% 4.4% 4.% Inflation (annual average).7% -.% -.%.4%.5%.5%.6%.8% Base rate (end of year).%.%.5%.9%.9%.9%.9%.7% Y Treasury Bill (average) 4.%.8%.7%.77%.%.49% Real interest rate (average. ex post)****.%.5%.%.4% -.% -.% EUR/HUF exchange rate (end of year) Source: Central Statistical Office. National Bank of Hungary. OTP Bank. * May 7 consensus. **Official data of balance of payments (excluding net errors and omissions). *** w/o FDI related intercompany lending. last data. **** = (+ Yield of the Y Treasury Bill (average) ) / (+ annual average inflation) 57

58 Russia: private consumption may have turned the corner; inflation fell to CBR s target level prompting a rate-cutting cycle. Ukraine: GDP growth was.4% y-o-y in Q 7, inflation stabilized around % Russia Recession ended and GDP grew modestly in Q 7 as well. Retail sales may have finally turned the corner, helped by rising real income and returning consumer confidence. Disinflation continued on the back of a stabilizing currency and subdued demand; CPI fell near the 4% target of CBR and may even undershoot it in the short run. As for the monetary policy, the central bank started to cut rates, but high real rates will keep households saving rate high, as well. Fiscal consolidation weighs on medium-term growth expectations. However, a portion of oil revenues is used to replenish fiscal reserves, which lowers macroeconomic vulnerability. Real GDP growth (OTP estimation, %, annualized quarterly SA* and year/year) Retail sales and real wages (SA level, January 4=) Inflation (y-o-y %) and USD/RUB (r.a) Ukraine GDP increased by.4% y-o-y in Q 7, which is equivalent to a.% decrease q-o-q. The blockade of the rebel-held Eastern region could hurt GDP growth in Q and if sustained, it could pose a negative risk to our.7% GDP growth forecast for 7. Inflation slightly moderated from.4% in December to.% in April. The NBU cut the base rate to.%, as inflation expectations decreased. As inflation is expected to decrease to below % (around Q 7), the NBU may continue its ratecutting cycle. Real GDP growth (%, SA, annualized quarterly* and year/year) USD/UAH (r.a., %), base rate (r.a., %), and Inflation (%) Fiscal balance (l.a.) and government debt (r.a.) as % of GDP Source: CBR, Rosstat, Ukrstat, National Bank of Ukraine, Focus Economics *annualized q-o-q growth is OTP Research estimate 58

59 Romania: GDP grew by 4.8% last year, the largest y-o-y gain since 8; the budget deficit may exceed %. Bulgaria: solid growth, increasing retail trade, positive signs on the housing market. Slovakia:.% y-o-y growth in Q Romania GDP growth accelerated to.7% q-o-q and 5.7% y-o-y in Q 7, driven both by external and domestic demand. Consumption has been further fuelled by decreasing labour market uncertainties and the sizeable fiscal loosening through tax cuts and wage hikes. These measures have already pushed the budget deficit to % of GDP, while in 7 further widening is in the pipeline. Real GDP growth (%, SA annualized QoQ and NSA y-o-y) ESA- deficit (4Q avg., l.h.s.), debt (in % of GDP, r.h.s) Wage growth (y-o-y; %, r.h.s) & unemployment rate (%; l.h.s) Bulgaria GDP grew by.4% y-o-y and.8% q-o-qinq,maintainingthe%+dynamicsof recent years. The main driver was tourism, but industry and retail trade also support growth. Improving macroeconomic situation results in higher demand for loans and a sizeable improvement in debt repayment capacity, so the stock of performing loans is expected to grow by 5-7% year-on year. Real GDP growth (%, SA, annualized quarterly and year/year) Employment (SA; %, r.h.s) & unemployment rate (SA; %, l.h.s) Retail and non-financial corporate performing loans growth (%, YoY) Slovakia Economic growth in Slovakia in Q 7 reached. percent, as shown by a flash estimate of the Statistics Office of the Slovak Republic. The Slovak economy still maintains a solid growth of.8 percent in quarterly terms, just like in the last quarter of the previous year. The main driving forces might have been the consumption of households, but also foreign trade. Source: Eurostat, Bulgarian National Bank, Statistical Office of the Slovak Republic 59

60 Croatia: growth may remain around or even above.5% y-o-y in 7, imbalance indicators improve steadily. Serbia: GDP growth slowed to.% y-o-y in Q from.5% in 4Q; Montenegro: modest growth shadowed by imbalances Croatia GDP growth overshot expectations in 6. According to supranationals, Croatian and market expectations, growth may remain about % y-o-y over the coming years, fuelled by PITreduction, tightening labor market, accelerating EU-fund absorption and outstanding performance of tourism sector. However, due to labor shortage the latter may have limited room for further expansion. Imbalance indicators improved a lot and they are not crucial issues right now. Serbia GDP growth decelerated to.% y-o-y in Q from.5% y-o-y in 4Q 6, according to a flash estimate of the statistical office. The GDP growth can reach.% this year, up from.8% in 6, and will be driven by investments and net exports with an increasing contribution from household consumption. On the production side, the largest positive contribution to GDP growth should come from industry and services. Real GDP growth* (%, SA, annualized quarterly and year/year) Public debt (LHS) and budget balance (RHS) (as % of GDP) RSD/EUR, base rate (r.a., %), and Inflation (r.a., %) Montenegro Growth picked up in 4Q, but real GDP growth rate slowed to.5% in 6 after.% in 5. Households consumption is strengthening. GFCF showed a stunning % growth rate, as large-scale government projects intensified. However, investment growth was not enough to offset the deterioration of net export. The budget balance improved throughout 6, deficit shrank to.% of GDP. On the other hand, public debt increased to 64% by the end of last year and to 65% in Q 7. GDP and investments (r.h.s) real growth rate** (%) Public debt (r.h.s) and budget balance (% of GDP) C/A deficit (l.h.s), and gross external debt (r.h.s) (% of GDP) Sources: Eurostat, Croatian National Bank, National Bank of Serbia, Statistical Office of the Republic of Serbia, Central Bank of Montenegro, Monstat * Q annualized q-o-q growth rate was 9.%, Q data suggests.8% annualized q-o-q growth rate ** Monstat does not provide annualised q-o-q data on GDP 6