OTP’s profitability will further be hurt in 2014. Bencsik said that while risk-management costs have dropped by nearly 45% year-on-year to HUF 40 billion ($179.4 million), taxation to the bank sector increased more than 100%. “No kind of portfolio improvement can counterbalance that,” Bencsik said.
“With the full transaction tax due all year next year and mandatory free cash withdrawals, that is a significant burden in terms of the group’s profit making ability.”
The press conference followed a release of figures from OTP, which showed the bank’s consolidated third-quarter after-tax profit falling 74% to HUF 10.9 billion year-on-year due to higher risk costs in addition to a write-off at its business in Ukraine.
Bencsik reported that OTP’s “risk coverage against its non-performing loans has reached a historic high and the stock of bad loans has begun to decline,” as quoted by Reuters.
The ratio of the bank’s non-performing loans, defined as those over 90 days in arrears, dropped to 20.8% at the end of the third quarter from 20.6% at the end of June.
Bencsik pointed out that “Risk coverage is at 80.6%, which is an all-time high. In the next quarters the need to form risk provisions will be lower… We have sold off non-performing loans at a profit relative to the risk provisions we had made on them. I trust we will do more such deals and prove that our provisioning had been sufficiently conservative.”
Finally, Bencsik noted that OTP Bank had lent HUF 91 billion to SMEs within the “Funding for Growth” scheme.
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