Economy 23 February 2005, 8:56am

OTP does not fully follow central bank's 75 bps rate cut

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The direction of Hungarian monetary policy is determining for the country's largest commercial bank, OTP, but its profitability and competitiveness become object to a thorough analysis at every each central bank rate decision, OTP bank's Deputy CEO Zoltán Spéder said in a statement on Wednesday. OTP issued a statement after the National Bank of Hungary's Monetary Council cut its base rate by 75 basis points to 8.25% at its rate-setting meeting on Monday, effective Tuesday, and said that the bank would not fully follow the 75 basis point cut.

OTP decided to cut deposit rates by 50 basis points in the commercial banking division, but the overwhelming part of deposits and loans financed from own sources, are linked to money market interest rates and reference yields, thus they become re-priced automatically. Interest rate on savings products will be lowered by 25 or 50 basis points.

OTP will cut lending rates by close to 50 basis points on loans provided to construct or purchase new flats. These terms will be valid for new contracts to be signed after 1 March. This will imply that interest rates on housing loans provided for five years with fixed interest rate will be 4% with an unchanged 2% handling fee.

OTP will provide loans to buy used flat with an interest rate of 6.5% (fixed for five years) plus 2% handling feel.