Even without the addition of the financials of Alpha Bank Albania (which was legally merged on 1 December 2022 and only started to properly impact results from the beginning of this year), OTP Bank Albania’s results for 2022 make for encouraging reading.
Return on equity was 27.5% – up from 18.5% in 2021 – representing the highest return of any Albanian bank and the highest return of any OTP Group bank.
This performance has been achieved through a number of factors including cost efficiency, balance sheet optimisation, and the quality of the bank’s loan portfolio despite a challenging operational environment.
“Last winter there was a great deal of uncertainty around energy prices and the possibility of recession across central and eastern Europe,” explains OTP Bank Albania CEO, Bledar Shella. “OTP Group subsidiaries were advised in the second half of the year to be more selective in their lending, so our market share dropped slightly during that period. However, we had already gained market share in the first half of the year, which enabled us to retain our market share of 11.5%.”
The combined business now has a cost-to-income ratio of 43%. The interest rate environment has definitely helped, but our repricing of loans, the quality of our portfolio, and cost optimisation have also contributed to our strong performance this year
The process of integrating the two banks included a transparent selection or recruitment process, supported by KPMG, for managers to fill key positions in the merged bank.
It was also an opportunity to review branch locations. The 73 branches operated by OTP Bank Albania and Alpha Bank Albania prior to the merger were consolidated into 50 prime locations over a short time frame.
This attention to customer needs is reflected in the fact that OTP Bank Albania continues to record the highest customer satisfaction rating of any Albanian financial institution based on independent market assessment by Ipsos.
Shella says he is particularly proud that the bank has continued to focus on supporting customers. “We have the highest ratio of net loans to total assets in the domestic banking system at 58%, which is much higher than any other bank in Albania,” he says. “Further evidence of the quality of our loan portfolio can be found in our non-performing loan ratio, which fell further last year to just 4.5%.”
Seizing growth
OTP Albania is now the third largest bank in the country in terms of lending and only slightly behind the second-largest.
“We are second in terms of mortgage loans and small businesses loans, second for corporate loans, and third for retail loans,” adds Shella. “Our share of the deposit market has risen from 6% to 10%, bringing in a lot of liquidity which will enable us to grow further.”
In November 2022 the European Bank for Reconstruction and Development confirmed that it had extended a total of €8 million in loans to OTP Bank Albania as part of its SME Competitiveness Programme, which offers new financing opportunities for local businesses looking to boost productivity, cut operational costs, increase energy efficiency, and improve alignment with EU standards.
“This financial programme aims to increase the competitiveness of small and medium-sized Albanian enterprises by enabling the improvement and provision of European standards in the line of values that this giant market represents, specifically the improvement of environmental impacts, safety at work, the quality of the environment in enterprises, and the improvement of processes, as well as the quality and safety of products,” says Shella.
“The financial value of the programme may not be huge, but it is important in terms of showing businesses that we will deploy all available resources to help them grow and improve,” he adds.
As a modern bank, digitisation continues to be a key focus for OTP Bank Albania.
“We continue to invest in digital technology – last year we completed an online banking upgrade with a number of new features,” says Shella. “We also implemented an online loan origination tool, initially for mortgage loans and then for cash loans.”
In addition, the merger with Alpha Bank gave OTP Bank Albania access to point-of-sale services for the first time and boosted its position as the bank with the highest level of ATM coverage.
The positive impact of these developments translated into a 75% increase in net profit in the first half of this year and a 30% increase in interest margin. There has also been a massive improvement in the cost-to-income ratio of the merged business.
“When we bought Alpha Bank, our cost-to-income ratio was 44% and Alpha Bank was at 90%,” says Shella. “The combined business now has a cost-to-income ratio of 43%. The interest rate environment has definitely helped, but our repricing of loans, the quality of our portfolio, and cost optimisation have also contributed to our strong performance this year.”