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By Marton Dunai
BUDAPEST, March 7 Hungary's OTP Bank
said its outlook for 2014 was promising, with an improved loan
portfolio, a growing loan book and reduced provisioning costs,
but flagged risks in both Ukraine and its home market.
OTP, central Europe's largest independent lender, also
reported a drop in 2013 net profit to 64 billion forints ($287.1
million), nearly halved from the year before and the bank's
lowest annual profit in a decade, mostly due to high risk
provisioning that nearly forced it into a fourth-quarter loss.
The bank said its operations outside Russia and Ukraine
would improve. It expects a healthier loan portfolio this year
and moderating risk costs.
"On the whole the countries where the group is present will
show economic growth, offer a better operating environment and
expanding market for banks," OTP said in a presentation prepared
for a press conference.
The bank however warned of risks in its home market, where a
potential government plan to help foreign currency loan holders
poses a risk to the bank's operations.
Detailing risks in Ukraine, where OTP has tied up 9 percent
of its loan book as of the end of last year, an "extreme
negative scenario" is plausible, the bank said.
That involves "prolonged political uncertainty, state debt
is not financed, economic output declines significantly and the
hryvnia (currency) is devalued significantly. In such a case the
Ukrainian operation will turn a loss (in 2014)."
But its "base case" scenario for Ukraine is more favourable,
with a strong government, a hryvnia that is no weaker than 10 to
the dollar and a stabilising economy, in which case the
Ukrainian bank could turn a profit, OTP said.
In Russia, the bank sees stabilising portfolio quality from
the second quarter, though consumer lending was set to drop by
about 20 or 30 percent from 2013.
The bank will continue to expand in Russia through the
launch of online banking, selling new products to existing
clients, strengthening the small business segment and boosting
($1 = 222.9408 Hungarian forints)
(Reporting by Marton Dunai)