May 23 (SeeNews) - The Romanian unit of Hungarian banking group OTP targets 5% market share by assets in the medium term, and is considering the acquisition of local banks or loan portfolios in order to achieve this goal, the bank's CEO said.
Given the positive results of Millennium Bank takeover at the beginning of last year, OTP is constantly exploring new opportunities for expansion on the local market, Laszlo Diosi told SeeNews in a recent interview.
OTP Romania acquired Millennium Bank from Portugal's Banco Comercial Portugues (bcp) for 39 million euro ($43.7 million). Following the deal, it became the 11th biggest Romanian bank in terms of assets with a 2% market share. Its assets amounted to 9.33 billion lei ($2.3 billion/2.07 billion euro) at the end of December, up by 38% on the year.
The acquisition also helped OTP Bank Romania increase its client portfolio by 13% to 426,000.
OTP Romania posted a net consolidated profit of 8.8 million lei in the first quarter of 2016, 50% up from last year. It ended 2015 with a consolidated adjusted after-tax profit of 21.9 million lei, up from 11.1 million lei a year earlier.
The prospects for this year look good as household loans are certainly on an upward trend, as proven by recent figures published by the central bank, the official said.
Household lending in lei was up 34.3% on the year to 55.8 billion lei in March, according to latest data of the National Bank of Romania, BNR.
"Customers still prefer the national currency, as they are not willing to assume a currency risk, even though in the case of loan products with variable interest rate there is no exposure to the Romanian interbank offered rate (ROBOR) reference rate variation," Diosi said. BNR's latest data showed that lending to households in foreign currency dropped 14.3% on the year in March to 52.1 billion lei.
At its last meeting in May, BNR maintained its monetary policy rate at a record low 1.75%.
The boom in lending comes on the heels of rising revenues, tax cuts and growing consumption, which whets customers' appetite to contract new loans, Diosi commented.
OTP Romania plans to translate higher lending into 15% growth of customers on the corporate segment in 2016. "We want to increase our portfolio of corporate clients mainly in sectors such as agriculture, manufacturing, healthcare and IT and distribution of consumer goods."
However, the momentum in lending could be hampered by the entry into force of new legislation, such as the mortgage default law signed into law by president Klaus Iohannis at the end of April, under which banks can seize from mortgage defaulters only the property for which they were granted a loan up to 250,000 euro but cannot claim any further payment.
To help clients repay their home purchase loans after the massive appreciation of the Swiss currency, at the end of last year OTP launched a conversion offer for clients with loans in Swiss francs. Over 70% of OTP's customers accepted the conversion offer. OTP granted clients total discounts of more than 45 million Swiss francs ($45.4 million/ 40.4 million euro) within the conversion program, as of end-March.
Most people, however, are emotionally attached to their homes and do not want to lose them, which is why the cases where customers of the bank will give up their property are unlikely to be many, Diosi commented.
He also said that due to the bank's efforts to restructure its loan portfolio, its non performing loans dropped to 16.7% in 2015 from 17.8% in 2014 and risk cost was 50% lower on the year.
A FOCUS ON AGRICULTURE SMES, E-BANKING
Besides scanning the market for acquisitions, OTP Romania also intends to facilitate access to credits for small and medium-sized companies (SMEs), to increase its corporate portfolio and to further improve its internet banking services.
In April, the bank received a 25 million euro loan from the European Investment Bank (EIB) in support of SMEs and youth employment.
According to OTP's CEO, one of the main areas of interest for SME financing is agriculture. "Customers in this sector need financing for their working capital, loans for investment and for projects co-financed with EU funds or to pre-finance their subsidies," he said.
OTP Bank provides universal financial services in Hungary, Romania, Montenegro, Croatia, Bulgaria, Russia, Ukraine, Slovakia and Serbia for more than 13 million customers, through a regional network of over 1,500 outlets, the ATM network and electronic channels.
(1 euro = 4.5194 Romanian lei)
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