OTP Drops Most in Three Months on Central Bank: Budapest Mover

OTP Bank Nyrt., Hungary’s largest lender, slid the most in more than three months after the central bank urged the introduction of bankruptcy rules to protect household borrowers.

The shares fell 4.7 percent to 4,556 forint at the close in Budapest, the steepest drop since July 19. The stock’s 9.3 percent gain in the previous six trading sessions yesterday pushed the 14-day relative strength index to 73, above the 70 level which some analysts regard as overbought. The RSI slid to 55 today. The benchmark BUX stock index dropped 1.7 percent.

The government should introduce further measures to eliminate exchange-rate risk as foreign-currency loans pose a “particularly significant” threat to financial stability, the Magyar Nemzeti Bank said in a report today. Borrowers who can’t service their debt should be able to declare bankruptcy, the bank said.

“The central bank comments provided the peg for the turnaround in OTP shares,” Zsolt Balasy, a Budapest-based analyst at MKB Bank Zrt., a unit of Bayerische Landesbank, wrote in an e-mailed report. “It’s especially the potential introduction of private bankruptcy which may be scaring investors.”

The banking industry’s “severely low” profitability may prompt some “major foreign-owned banks” to exit the market, the central bank said in today’s report.

OTP rallied earlier this week as lawmakers approved measures to expand a program supporting foreign-currency mortgage holders, easing concern the Cabinet will immediately introduce further rescue steps whose cost would be borne by banks.

Any further help needs to safeguard financial stability and banking operations, Economy Minister Mihaly Varga said in an interview at his office in Budapest two days ago.

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