By Margit Feher
BUDAPEST--OTP Bank Nyrt. (OTP.BU), Hungary's largest bank both
by market share and total assets, expects the deterioration of its
loan portfolio, a key factor for its profitability, will slow in
the short term, the bank's chairman said Friday.
The slowdown will enable the bank to reduce its risk provisions,
Sandor Csanyi, OTP Chairman and Chief Executive, told shareholders
at their annual meeting.
Central and Eastern Europe, together with Russia and Ukraine,
where OTP is present, has been undervalued by investors despite the
region having a growth potential of 2.6% this year, significantly
higher than that of the European Union, Mr. Csanyi said.
He said OTP is seeking to expand both organically--through its
existing operations--and also by acquisitions, as its strong
capital position is making that possible.
"Naturally, we have to grow, first of all, organically but also
by acquisitions. We are looking for targets both in Hungary and
abroad, we don't see many but we do see expansion possibilities,"
Mr. Csanyi said. OTP is eying targets that would provide "serious
synergies," he added.
He said the company is not giving exact forecasts, just like its
peers, and warned shareholders that "amid the current economic
conditions in Europe and Hungary, decisions could be easily brought
about [by unidentified policy makers] which could undermine our
forecasts."
OTP projects that its loan-to-deposit ratio, one of the
indicators reflecting a bank's liquidity status, will remain 100
this year, Mr. Csanyi said.
OTP expects its loan stock, when adjusted for the different
currencies of the countries it operates in, will increase slightly
this year, including a double-digit rise forecast in its lending in
Russia, Ukraine, Slovenia, Slovakia, Romania and also in its
corporate loans in Hungary, the country of its bread-and-butter
operations.
OTP forecasts that the deposits it collects will increase in
line with the rise in loans, Mr. Csanyi said. Operating expenses
won't rise more than headline inflation, he added.
Mr. Csanyi also praised the Hungarian central bank's latest
plans to help boost Hungary's shrinking economy.
"After a long time, the central bank has started to care about
the real economy and not just about inflation and currency
stability, which are also important," Mr. Csanyi said.
OTP projects that Hungary's economy will expand about 1% this
year, a swing from a 1.7% contraction last year, due to a rise in
households' real income in the face of sharply slowing inflation,
he added.
The shareholders also approved Friday, as expected, the payment
of 120 forints ($0.52) a share on the company's 2012 net profits,
up from HUF102 a year earlier.
Mr. Csanyi said that share buybacks, which he prefers to
increasing dividend payments, would be a viable way to benefit
shareholders who want to hold OTP stock in the long term. OTP has
no share buyback plan in place at present, he added.
Write to Margit Feher at margit.feher@dowjones.com
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