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OTP Bank stands by 2008 profit target based on Q2 results

Hungary’s OTP Bank deputy-CEO László Urbán said the bank's management considers the earlier targeted 10pc increase in 2008 after-tax profit realistic.

In spite of the global credit crisis, OTP Bank posted exceptionally strong profits in the first half of the year, Urbán said, speaking at a press conference following the publication of the bank's first-half report.

The strengthening of the forint contributed to OTP Bank's profit growth, but even excluding this factor, the bank's interest and non-interest revenue rose a marked 16.8% in H1, Urbán said. The interest margin widened in several countries where the bank is present and costs rose only moderately, he added.

OTP Bank had a good opportunity to capitalize on the volatile macroeconomic environment with options and through the skillful management of assets, Urbán said. The bank's excellent profits allowed it to raise risk reserves 63%, even though the quality of its lending portfolio deteriorated by a much smaller amount, he added.

OTP Bank's consolidated first-half after-tax profit rose 28.1% to Ft 129.6 billion from the same period a year earlier, the bank said in its IFRS report for the period.

OTP Bank is accumulating capital to finance further developments and to use for growth when the global credit crisis ends, Urbán said. The bank will sell its Slovakian and Serbian units, if it can get a good price, and it expects the sale of its insurance arm OTP Garancia to be completed in September. OTP Bank does not plan to spend income from any of the sales immediately. Rather, with the sales, management can concentrate on developments on markets with higher returns, such as Russia, he said.

Placing the income into reserves is also necessary as it has become more difficult to get the external financing necessary for developments because of the global credit crisis, Urbán said.

OTP Bank plans to drawn on €4 billion in external financing in the mid-term.

OTP Bank's strategy does not exclude taking advantage of a good investment opportunity in Russia or the region, Urbán said.

Urbán attributed OTP Bank's undervalued share price to “peer pressure among investment fund managers,” adding that the situation would most certainly change in the future as investors value the shares on an assessment of fundamentals. “I just don't know when,” he said. (MTI – Econews)