OTP Bank Nyrt., Hungary’s largest lender, slumped to a 15-month low as rising political tension in Crimea and a weaker hryvnia hampered the outlook for earnings at its Ukrainian unit.
The stock fell as much as 5.8 percent before closing 4.5 percent lower at 3,915 forint in Budapest, the lowest close since November 2012. The number of shares traded was more than two times the three-month average. Hungary’s 12-member BUX index slid 2.4 percent.
Ukraine, which accounted for 3.7 percent of OTP’s net income in the first nine months of 2013, pushed ahead to form a government to qualify for aid as tension rose in the Russian-speaking east and south of the country. The crisis will erode confidence in Ukraine’s banking industry and has resulted in deposit outflows over the past two weeks, Moody’s Investors Service said in a report today on Austrian lenders.
“The tension in Ukraine is weighing on OTP as there is still no solution to economic woes in the country,” Andras Somi, an analyst at KBC Groep NV’s Hungarian brokerage, said by phone today. The environment looks unfavorable for foreign-owned banks, he said.
The hryvnia tumbled 5.1 percent to 10.7 per dollar at 6:03 p.m. in Kiev, after Ukraine’s central bank abandoned its peg against the U.S. currency.
OTP is ready for hryvnia’s devaluation and its exchange-rate risk is “predictable and managed,” it said in an e-mail on Feb. 19. The lender closed branches for security reasons that day amid clashes between protesters and police in Kiev.
Ukraine accounted for 36 percent of OTP’s non-performing loans in the third quarter, according to the lender’s earnings report. That compares with a 21 percent rate at group-level.
Uncertainty about the economy means “increased risks of additional losses and additional capital needs,” Swen Metzler, an analyst at Moody’s, said today in the report.