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OTP says central bank guidance could boost its refund costs
August 11, 2014 / 4:47 PM / in 3 years

OTP says central bank guidance could boost its refund costs

BUDAPEST, Aug 11 (Reuters) - Hungary’s OTP Bank issued a profit warning on Monday, saying that its legal obligations to pay refunds to borrowers would cause a deeper-than-expected cut in its pre-tax earnings if they were based on a new guidance from the central bank.

A law passed earlier this year requires banks to pay refunds to customers because they applied disadvantageous exchange rates to clients when they paid back foreign currency loans.

Based on the central bank’s July 29 guidance, OTP will have to refund 41 billion forints ($175.18 million) instead of 27 billion forints OTP projected earlier, it said in a statement.

Refunds due to unilateral loan contract changes by banks could amount to 177 billion forints if a planned new bill uses the central bank’s guidance, higher than the earlier expected 110-120 billion forints, it said.

The bank, which will report second-quarter earnings on Friday, said it would create risk provisions based on the central bank guidance. (1 US dollar = 234.0400 Hungarian forint) (Reporting by Marton Dunai, Sandor Peto, editing by David Evans)

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