OTP, With $1 Billion War Chest, Eyes East Europe Lenders

  • Hungarian lender about to close deal in Montenegro, CEO says
  • OTP is looking at banks from Romania to Russia to expand

Flush with cash, Hungary’s biggest bank is going on a buying spree in eastern Europe.

One of the region’s best-capitalized lenders, OTP Bank Nyrt has about $1 billion on hand for acquisitions and is prepared to take on debt for purchases if need be, Chairman and Chief Executive Officer Sandor Csanyi said in an interview Tuesday at his Budapest office. The Hungarian company is about to close a deal for a “locally important” bank in Montenegro and also is in talks to purchase a lender in Ukraine, he said, without elaborating.

Banks in eastern Europe are under pressure to consolidate as some struggle to comply with tougher post-crisis capital requirements while others adjust their business focus. That spells a long-awaited opportunity for OTP to make its move, Csanyi said, as the lender considers purchases in Belarus, Bulgaria, Romania, Russia, Serbia, Slovakia and Ukraine.

“We, like everyone else, have been waiting for about 10 years now for the market consolidation to start and it didn’t,” Csanyi said. “I feel that it’s now happening.”

OTP, with a presence in eight central and eastern European countries besides Hungary, remains committed to boosting its market share to more than 10 percent in nations where it has less than that, not including Russia, Csanyi said.

There are banks on sale in Romania and “we will examine each one,” he said. Serbia will also offer opportunities and Belarus is also of interest, he said. While Csanyi denied a report that OTP has made a bid for Prominvestbank in Ukraine, owned by Russia’s Vnesheconombank, he said he’s open to examining it “should it go on sale.” The Hungarian lender is in talks regarding the purchase of another bank in Ukraine, Csanyi said, without identifying it.

OTP in December bought Societe Generale SA’s Splitska Banka in Croatia, a move that will allow OTP to expand its reach inland from the Adriatic coastline, where it already had a strong presence, Csanyi said.

OTP was outbid by KBC Groep NV for United Bulgarian Bank, which National Bank of Greece sold off and is “late to the game” in Poland, where the value of banks has climbed beyond OTP’s reach, Csanyi said. In such markets, OTP may in the future attempt to “break in” via an interbank platform, rather than by purchasing a bank.

Should OTP fail to make an acquisition this year, its management would have to consider whether to buy back shares or boost dividend payments ahead of next year’s shareholder meeting because its Tier-1 ratio would have climbed to 18.5 percent by the end of 2017, Csanyi said. The goal is to keep the Tier-1 ratio at 12.5 percent in the long run, Csanyi said.

— With assistance by Edith Balazs

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