OTP announces first ever annual loss of HUF 102 billion in 2014

April 21, 2015

Csanyi

“We belong to the European Union, sometimes signs of this are visible, sometimes not.  There are rules governing competition.  The state cannot create a more favorite situation for certain banks.” – Sándor Csányi

21 months after OTP Bank chairman and CEO Sándor Csányi and nearly all of OTP’s board of directors liquidated most of their shares in Hungary’s largest bank, Csányi announced on Thursday that for the first time in the bank’s history it had closed a loss-making year.  Nevertheless, the bank plans to pay dividends in line with the previous year of HUF 146 (USD 0.52) per share by drawing on its profit reserves which, according to the CEO, OTP can do while still meeting Basil II bank capitalization requirements.

Last year OTP’s normal operating results before extraordinary expenses were HUF 118 billion (USD 421 million).  After writing off HUF 220 billion worth of extraordinary expenses the bank’s results plummeted deep into red territory to minus HUF 102 billion (-USD 364 million).  The difference is the result of the bank tax, the war in Ukraine and, most importantly, the FX loan act passed by parliament at the end of 2014, which are projected to cost the bank HUF 30 billion, HUF 38 billion and HUF 156 billion,  respectively.

In 2013 the bank’s adjusted results were HUF 64.2 billion (USD 223 million).

According to Csányi, had it not been for the bank tax and the effect of the FX loan law, results for last year would have been HUF 137 billion (USD 489 million).

The lending activity of the Hungarian bank sector last year decreased 3.5 percent.  However, it increased 4.2 percent in the case of OTP.  Within the framework of the National Bank of Hungary’s growth credit program, OTP has lent HUF 208 billion (USD 743 million) to companies to date.  Furthermore, household savings managed by the bank increased 11.3 percent last year.

OTP’s Russian subsidiary was also loss making for the first time in 2014, booking a loss of HUF 14.5 billion (USD 52 million).  However, even with this loss the Russian subsidiary’s profits to date exceed HUF 100 billion (USD 357 million).

The situation with OTP’s Ukrainian subsidiary is even worse, thanks in part to a 92 percent devaluation in the value of that embattled country’s currency, the hrivnya.

Csányi said the bank’s goals for this year are “stability, profitability and growth.”  He felt that if not this year then by 2017 the bank would achieve an 18.1 percent return on capital invested.

In response to whether he was concerned about “compeititon from a mammoth state-owned bank” referring to a recently recapitalized, state-owned Hungarian Trade Bank (MKB),  Csányi said “we belong to the European Union, sometimes signs of this are visible, sometimes not.  There are rules governing competition.  The state cannot create a more favorite situation for certain banks.”

Hungary’s richest man said he correspondences regularly with Minister in charge of the Prime Minister’s Office János Lázár and was monitoring the situation to ensure that EU funds are not used in a manner that would exclude competition on the part of a market actor.  He said that if they experienced this, they would attack the party doing so at the national and European competition authority.  “Nothing will go unanswered that tries to curtail OTP’s market share,” he emphasized.

Reference:

http://www.napi.hu/tozsdek-piacok/csanyi_tortenelmi_otp-kozgyulesrol_beszel.596548.html