OTP Bank Romania: bad loan weight, 6% in September

The tight competition for real estate financing, which has translated into a big appetite for housing project financing and a reduction in the advance payments customers are requested for such loans, makes banks vulnerable to possible problems on the real estate segment.
“As we are now seeing fluctuations on the Stock Exchange, we will witness similar moves on the real estate market. Overvalued homes will no longer be possible to sell and then people will take mortgages and let banks handle them,” warns Laszlo Diosi, OTP Bank general manager.
A similar situation was registered in Hungary, in the ’90s, and the Romanian market seems to be following the same scenario, OTP top man feels. He is also noticing a significant rise in the number of fraud attempts by individuals. However, OTP will sell “relaxed” loans starting December 3rd, according to its own regulations, which have been recently approved by the NBR.
“We will be aggressive, but we can also see some risks. We know zero-advance products are the most dangerous, both for customers and for the bank”. Thus, it is only customers with a solid credit history that will be able to access such loans, with costs to be set depending on each category of products.
Laszlo Diosi states he will continue to closely monitor the development of assumed risks, after the group in September reported a significant increase in the weight of bad loans amid the deteriorating quality of the corporate financing portfolio.
OTP head says the quality of the corporate financing portfolio will improve, while financing for small and real estate firms will continue to have a good quality. Instead, he expects the quality of the consumer loans portfolio to worsen.
“Provisions presented in the Group’s report are calculated in line with international financial reporting standards, significantly different from NBR rules on provisioning,” says Laszlo Diosi.
According to the report OTP Bank sent to the Budapest Stock Exchange, the weight of the domestic subsidiary’s bad loans had climbed to 6% in September, from 3% in June, mainly because of two exposures to corporate customers. Diosi chose not to specify the two firms’ field of operations as they “would be easy to identify”. “According to NBR rules, the weight of bad loans would come to 3.28% for OTP Bank Romania,” explains Diosi.

Laszlo Diosi, OTP Bank general manager