1. THE MASTER'S RESEARCH PAPER : “BANK PROFITS MANAGEMENT” (BASED ON THE JOINT STOCK COMPANY “ОТP BANK”) Naumenko T. B-09 Scientific supervisor: S.A. Kuznetsova, Doctor of Economics, Full Professor, Head of the International Finance and Banking Department

2. С ONTENT : Chapter 1 Theoretical basis of yield management of the bank. 1.1. The essence of managing the Bank's profitability 1.2. Methodological evaluation instruments bank profitability: Ukrainian and international experience 1.3. Strategies for bank profitability 1.4. Evaluation of the profitability of banks of Ukraine Chapter 2 Analysis of yield management of JSC "OTP Bank" 2.1. Organizational and economic characteristics of JSC "OTP Bank" 2.2. Assessment of the profitability of JSC "OTP Bank" 2.3. Evaluation of the effectiveness of management profitability JSC "OTP Bank" Chapter 3 Ways to improve yield management of JSC "OTP Bank« 3.1. Organisational measures to improve the profitability of JSC "OTP Bank" 3.2. Directions improve profitability analysis of JSC "OTP Bank" 3.3. Model Application Dupont (Du Pont) in JSC "OTP Bank« Chapter 4 Health and safety in emergency situations JSC "OTP Bank" 4.1. Public works in JSC "OTP Bank" 4.2. Security in emergencies in JSC "OTP Bank 2

3. The purpose of the research is to develop measures to improve JSC "OTP Bank" profits management. Tasks: - to examine the nature of bank profits management; - to consider tools of bank profits management; - to conduct a critical review of bank profits management; - to analyze the performance of the bank during the period of 2009- 2013; - to develop ways of bank profits management improving. The Object of the investigation is the bank profits. The Subject of the investigation is the bank profits management. The Basis of investigation is JSC "OTP Bank" 3

4. The profitability of the bank The profitability of the bank is the relative value of enterprise management in terms of profit. 4

5. 1.Return on assets(ROA)2.Return on equity(ROE)3.Spread4.Interest margin (profit)5.Net interest margin6.Non-interest margin7.Net non-interest margin8.Net profit by 1 shares9.Net operating margin10.Profit before tax 5 The main profitability indicators

6. Return on equity after tax Return on equity before tax * tax rate Net margin / equity quota Risk Margin +Gross Profit Margin Margin Gross Income - Gross margin requirements Gross margin percent + commission margin + trading margin + ekstra margin Personnel costs margin + material costs margin Figure 1. European model of calculation and analysis of bank profits Return on assets Use of assets * Margin of profit Average Assets / Total Revenue Net income / total income Interest income on loans + Investments interest + payment services + other incomes Cash and necessary payments + investment (taxable and tax- free) + loans (commercial, consumer, farmer, mortgages and other loans) + other assets Total revenue - interest expense (deposits, non deposit) - Operating and other expenses (salary, relocation costs, provisions for losses on loans and other expenses) - income taxes Figure 2. American model of calculation and analysis of bank profits 6

7. maximization of service by stimulating the expansion of branch network in order to increase profit entity combination of aggressive and defensive strategy, so called "medium", which allows to correlate advantages and disadvantages of both options of bank profits management strategies Aggressive strategy Defensive strategy Diversification strategy cost control with the purpose of further increase of the bank's profit as the difference between the absolute value of revenues and expenses. This strategy is effective in the long term Bank profits management strategies Figure 3. Types of bank profits management strategies 7

8. №Indicator 01.01. 2008 01.01. 2009 01.01. 2010 01.01. 2011 01.01. 2012 01.01. 2013 1Return on assets1,501,03-4,38-1,45-0,760,21 2Return on Equity12,678,51-32,52-10,19-5,271,44 3Net interest margin5,035,306,215,795,324,08 4Net spread5,315,185,294,844,513,49 Table 1 Indicators of Ukrainian banks profits for the period of 2008-2013,%. 8

9. Figure 4. Results of JSC "OTP Bank" for 2011 Figure 5. Results of JSC "OTP Bank" for 2012 9

10. Table 2 Indicators of JSC "OTP Bank“ profits, % Indicator201020112012Changes (+;-) Return on Assets (ROA)0,250,150,890,64 Return on equity (ROE)12,5512,096,35-6,20 Interest margin (interest income) 200539018301741634257-371133 Non-interest margin (non- interest income) 255241313223449484194243 Net interest margin8,138,127,92-0,21 Net spread (spread profit) SPREAD 0,190,170,200,01 10

11. Figure 6 Return on assets of JSC "OTP Bank" Figure 7 Return on Equity of JSC "OTP Bank" 11

12. 1. Calculation of the actual values ​​ of the coefficients of return based on the balance sheet and other forms of annual and quarterly reports; 2. Comparative factors evaluation with their levels in the previous years and quarters; 3. Identifying the main trends in the dynamics of the coefficients (increase or decrease); 4. Identifying factors that have influenced the established tendencies in factors; 5. Evaluation of factors from the standpoint of balance sheet liquidity and banking risks; 6. Recommendations to improve the bank profits or ensure its stability in the new year. Figure 8. Stages analysis of JSC "OTP Bank" profits Profit management Income and expenses management Money back management Profitability management of individual units functioning Analysis of income Analysis of costs Turnover of resources Analysis of financial ratios Assets managem ent Development of business plans Pricing Policy Liabilities policy management Politics of effect (Marketing) Liability managem ent Figure 9. JSC "OTP Bank“ returns management process 12

13. Increased profitability of the bank Planning and estimating of income yield Improving of marketing policy Determination of the usage of all possible sources of funding Developing a plan of emergency funding Allocation of economic capital at risks Improving risk management Reducing costs, to create banking services Improvement of interest policy The increase in bank profits Ensuring the growth of non-interest income Figure 10. Scheme of common organizational measures to improve JSC "OTP Bank“ profits 13

14. Figure 11. Components of the DuPont model The DuPont Model Two-factor model Three-factor model ROE = Profit / (Capital Bank) = ROA * LR = profit / (assets) * (assets) / (Capital Bank) ROE = Profit / (Capital Bank) =PM*ROA*LR = profit / income * income / assets * (assets) / (Capital Bank) 14

15. FactorValue Two-factor model Net income assets2% Multiplier of capital98% Three-factor model Profit margin (total return)0% Return on (reversibility) assets11% Multiplier of capital89% Table 3 Factor ROE of JSC "OTP Bank" by the DuPont model 15

16. Thank you for your attention! 16