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S&P upgrades OTP outlook to stable

Ratings

Standard & Poor’s has improved its assessment of Hungary’s OTP Bank and OTP Mortgage Bank, upgrading the banks’ credit rating to “stable” from “negative”. S&P announced Friday that both banks have a ”BB/B” rating.

S&P also said Friday that Hungary’s economy is stabilizing, and the agency has revised up its GDP growth expectations for 2014-2015 to about 2%.

In explaining its improved rating for Hungary’s largest commercial bank, S&P said that "OTP has significant buffers to absorb anticipated asset quality deterioration in some of its overseas operations and further one-time costs in Hungary without it affecting the current ratings".

Despite the improved rating, analysts believe that the upcoming currency mortgage regulations, now being discussed by Hungary’s governing party Fidesz, could undermine OTP’s profitability. Analysts also speculate that poor relations between Ukraine and Russia might further worsen OTP’s position.

Considering the outlook of the banking sector in Hungary as a whole, experts say that the stable rating of OTP Bank and OTP Mortgage Bank applies to the country as well for the upcoming 12 months.

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