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.