April 24, 2014 / 1:56 PM / 4 years ago

Hungary's OTP says could withstand any Ukraine shock - Bloomberg

BUDAPEST, April 24 (Reuters) - Hungary’s OTP Bank, one of the main banking groups in central and eastern Europe, could withstand the worst case scenario of losing all of its investments in Ukraine and Russia, its chief executive Sandor Csanyi said.

“Should we lose all our investments in Russia and Ukraine, our core Tier 1 capital ratio would still remain above 12 percent,” Csanyi told Bloomberg in an interview recorded on Wednesday and published on Thursday.

“Even this unthinkable scenario would be unable to rattle our stability.”

OTP, whose 2013 results were hit by Ukrainian and Russian troubles, said in March an extreme negative scenario was only likely to involve prolonged political instability, economic contraction and a weakening Ukrainian hryvnia.

Csanyi told Bloomberg its Ukrainian bank would probably not make a profit this year unless the crisis was resolved positively, though its Russian unit should remain profitable.

In its home Hungarian market, where OTP Bank has faced some of Europe’s highest bank taxes and other punitive measures from the centre-right government of Prime Minister Viktor Orban, more measures were probably in the pipeline, he said.

“I would not be surprised if the government was considering further measures that unilaterally affect banks,” said Csanyi, who has a close relationship with Orban. “However, their scale will not be comparable to that of the early repayment (scheme).”

The early repayment scheme in 2011 allowed borrowers who had taken out foreign currency denominated loans to repay them at a preferential exchange rate to prevailing market rates, causing banks a loss of more than 1 billion euros ($1.4 billion).

Csanyi said consolidation among Hungary’s banks would probably take longer than previously thought but would likely result in 4-5 banks leaving the country in the medium term.

Central Bank Governor Gyorgy Matolcsy said last year he expected four banks to leave Hungary within 18 months. All major Hungarian banks have said they have no plans to leave the country except MKB, a unit that Germany’s BayernLB must sell by the end of next year because of legal constraints.

$1 = 0.7231 Euros Reporting by Marton Dunai; Editing by Mark Potter

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