Real estate problems push OTP into the red

OTP Bank, the domestic subsidiary of Hungary’s biggest financial group, posted net losses of almost 7.5m euros in the second quarter, after it had to set up provisions topping 16m euros, mainly as several large real estate clients entered insolvency.
The bank had ended the first quarter with zero profit, after having made 4m-euro income last year.
“We’ve been coping with clients’ problems for months, but what caused current losses was the insolvency of several major real estate clients, no more than six,” Laszlo Diosi, general manager of OTP Bank, commented for ZF.
He says the real estate market is still frozen, nobody is making any investments, and companies are losing their breath.
“Except real estate clients, the others are doing well, revenues are good and the quality of new loans is very good. We have no trouble with loans granted this year,” Diosi also says.
Diosi says now that he expects the bank to end 2010 with a net loss because of high provision expenses, after having derived profit in the past two years. The bank had originally budgeted profit for this year.
“We will not end this year in the black. It will be clearly a negative figure, but I do not know how big it will be. Everything depends on provisions, because operating income is very good,” says Diosi.