Taxes on OTP to grow drastically in Hungary this year

The basic messages have not changed, but have been reinforced,

László Bencsik kicked off the press conference.

Outstanding profitability, stable asset quality, stable capital position, stable liquidity position.

In the first quarter, OTP booked several one-off charges for the full year, which also put pressure on the return on equity (ROE), which would have been 23.7% (officially 14.9%) if OTP had booked these items evenly. We have written about this in detail here.

Adjusted for the full-year items booked in the first quarter, profit would have been 4% higher than in Q1 last year.

Last year, the cost to the state was HUF 172 billion, while OTP expects it to reach HUF 263 billion this year.

If the government extends the interest-rate freeze again, the figure could be even higher,

said László Bencsik.

Premium Hungarian government securities have been very popular in retail savings in the recent period, but as interest rates have fallen, the retail savings market has also changed, with OTP's share of this market increasing.

Last year, the Group's total performing loan portfolio grew by 9%; in the first quarter of this year it grew by 3%, or 12% on an annualised basis, and according to László Bencsik, OTP is on track to achieve its target of higher growth this year than in 2024.

In Russia, our strategy has not changed, as it is virtually impossible to sell banks [there],

said László Bencsik.

The strategy is based on several pillars:

• the bank meets all regulatory requirements
• OTP has significantly reduced the scope of its activities and is not active in sensitive areas (e.g. corporate lending).
• OTP is seeking to reduce its exposure to Russia.

Consumption in Russia is very dynamic, which is why OTP's consumer lending is also growing dynamically. OTP collects deposits from foreign companies in Russia, these corporate deposits have a very high margin because OTP does not lend to companies, corporate deposits are deposited with the Central Bank of Russia where the base rate is 21%.

Without naming names, László Bencsik mentioned two banks present in Russia that increased their first-quarter profits under Russian accounting rules by 30% and 27%, respectively, meaning that their transaction activity in Russia has also increased significantly.

In response to the suggestion that peace in Ukraine could lead to a deterioration of OTP's performance in Russia (increased competition, outflow of deposits held at OTP by foreign companies, etc.), László Bencsik said

If this is the price of peace, we are happy to accept it.

OTP's management has not changed its earlier expectations for 2025.

Cover photo: Peter Zelei via Getty Images