March 8, 2013 / 11:20 AM / 7 years ago

UPDATE 1-Hungarian bank OTP sees subdued loan growth in 2013

(Combines stories, adds comments from Dep CEO, analyst)

BUDAPEST, March 8 (Reuters) - Hungary’s OTP Bank expects its consolidated loan book to show subdued growth in 2013 and has “very serious” plans in Russia, its most important foreign market.

The bank, emerging Europe’s largest independent lender, said in a presentation on Friday that deposits should grow in sync with lending this year while its group level revenue margin could remain stable and portfolio deterioration could slow.

“We have very serious plans in Russia,” Deputy Chief Executive Laszlo Bencsik told a press conference. “We make serious investments and efforts to develop the bank further. It’s a dynamic market, where we cannot rest on our laurels.”

The bank posted a lower than expected Q4 2012 profit of 26.15 billion forints ($114.43 million) while its full-year bottom line grew 46 percent to 122.6 billion forints, mainly as its Russian and other foreign units returned a growing chunk of the bottom line.

OTP said it expected a stabilising environment in Bulgaria, its second most important foreign market, where the government’s collapse and the resulting political uncertainty have created turbulence.

In Ukraine, as well as Serbia, Romania and Slovakia, the bank will focus on expanding high margin consumer lending, while in its core Hungarian market it will zero in on small business loans especially in the agricultural sector, Bencsik said.

He said that risk provisioning already led to a coverage of bad loans of 80 percent, which was adequate and may not need to grow further, he said.

“If management sees a sustained moderation of risks it could reduce risk provisioning substantially, with coverage already at 80 percent,” the trading house Equilor said in a client note. “That could lead to an explosion in profits and dividends.”

Bencsik said the bank was doing what it could to cover risk and would not speculate about the risk environment going forward.

Despite an adverse operating environment in Hungary - where the economy shrank by 1.7 percent last year and the volatile forint currency leading to rising delinquency - the bank was more active than its market share would warrant, Bencsik said.

He said OTP stood ready to participate in any lending growth as its loan-to-deposit ratio fell to 95 percent in 2012.

“Obviously OTP needs no external financing, but this is not a natural state of affairs,” he said. “Banks should channel money from the financial markets into household and corporate loans. This should be started for credit demand to grow.”

He said government plans to consolidate foreign currency denominated household mortgages was a welcome development, adding that OTP has about 180 billion forints ($787.69 million) worth of problematic Swiss franc denominated loans.

$1 = 228.5152 Hungarian forints Reporting by Marton Dunai, editing by Paul Casciato

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