February 6, 2020 / 3:55 PM / 23 days ago

Acquisitive OTP Bank has big deal in the works, says CEO

BUDAPEST (Reuters) - Hungarian lender OTP Bank OTPB.BU has at least one big acquisition in the works and plans a fresh foray into new territory, its chief executive told Reuters.

FILE PHOTO: Sandor Csanyi, chief executive of Hungary's OTP Bank, gestures during a news conference in Budapest, July 24, 2013. REUTERS/Bernadett Szabo/File Photo

Central Europe’s largest independent lender has bought a string of Balkans banks and, though total assets of about 50 billion euros ($55 billion) remain modest, it is among Europe’s most profitable lenders with its growing bottom line of more than 1 billion euros.

“Our capability (to acquire) has widened,” Sandor Csanyi told Reuters. “The question is how we will make the most of that.

“It will slow in terms of the number of banks we buy, but the profit allows us to think bigger. Our scope includes banks we once had insufficient profit to think about.”

OTP has 6.6 billion euros in liquidity reserves, down from 7.8 billion at the end of 2018 and 8.3 billion in 2017, having wrapped up the purchase of the string of Balkans banks from Societe Generale (SOGN.PA).

Csanyi did not name the new country OTP had set its sights on, saying only that it was “on the eastern neighborhood” of central and eastern Europe, but not Turkey, where banks remain beyond OTP’s means.

However, Csanyi said that he sees growth potential in Ukraine, where OTP has good standing for sticking with the volatile market despite continuing conflict with Russia, another target market for OTP.

The bank’s management will soon discuss its proposed 2019 dividend, Csanyi said, adding that payments will depend on progress with the expansion plans as well as potential regulatory requirements.

The mandatory Supervisory Review and Evaluation Process (SREP) will determine the amount of capital OTP, as all banks, has to maintain for stable operations, Csanyi said.

OTP’s share price is about 6% off a record high of 15,800 forints set in December but up 30% year on year.

Csanyi said he would be “happy to bolster that with some increase in the dividend”.

OTP will not unwind risk provisions to bolster its bottom line, he said, cooling market expectations that the bank might lower the risk provisions it built after the financial crisis in 2008 sent defaults soaring.

Current provisions on past-due loans are at about 1.5 billion euros, coverage of about 66 percent of such debt, according to the bank’s third-quarter earnings report.

Csanyi said that the bank expects higher profits even without new acquisitions, citing integration of subsidiaries and recent back-office investments that have cut its cost-to-income ratio in some markets.

($1 = 0.9088 euros)

Reporting by Marton Dunai; Editing by David Goodman

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