OTP Rises to 1-Week High on Municipal Debt Plan: Budapest Mover

OTP Bank Nyrt. (OTP), Hungary’s largest lender, rose to the strongest in more than a week after Prime Minister Viktor Orban said the government will take over debt from local governments.

The shares climbed 3.2 percent to 4,180 forint by the close in Budapest, the highest since Oct. 17 and extending its gains this month to 7.3 percent. Traders bought and sold 2.2 million shares, more than 144 percent of the stock’s three-month daily average. The benchmark BUX stock index, in which OTP has a 29 percent weighting, added 1.2 percent.

Orban’s government, which has been working to cut the biggest sovereign debt burden in the east of the European Union, is extending its “war” on liabilities by taking over $2.8 billion in local council debt, Orban said on Oct. 27. The plan may boost OTP’s earnings by helping to cut provisions made for municipal bad debt, said Szabolcs Vaszko, a Budapest-based equities trader at Erste Group Bank AG.

“The plan may create a one-off improvement in OTP’s profits, which is probably behind the rally,” Vaszko said by phone.

Hungary’s currency depreciated 1.1 percent to per euro after the announcement of the municipal plan and on concern Hungary won’t obtain international aid.

“On a macroeconomic level, the municipal debt plan isn’t necessarily positive,” Vaszko said, citing the potential impact on the central government budget.

To contact the reporter on this story: Andras Gergely in Budapest at agergely@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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