OTP: We budgeted profit for 2011, this year will be loss-making

OTP Bank, the local subsidiary of Hungarian financial group OTP, with 1.4 billion euros in assets, will end the year with losses, after posting a four million-euro profit in 2009 because of significant loan-loss provision expenditures.

“In times like these, stability is our main priority. We cannot afford to play with numbers only to show profit. It would not be realistic. We are not seeing a profit in 2010, but we know we allocated the right provisions. We cleaned up our balance sheet and are preparing for 2011,” says Laszlo Diosi, CEO of OTP.
The bank posted 7.5 million-euro loss midway through last year, which Diosi then explained through the high provisions set up for financing granted to real estate developers. He says the same is true at present, with both the population and companies suffering amid the extended economic recession.
The group’s strategy is for provisions to cover 70% of the value of exposure, with the rest being recovered by selling the guarantees, if customers default on their payments.