Funding strategy

Background

Traditionally, within OTP Group’s funding sources the customer deposit base has a significant role, primarily due to the strong positions reached by the Group on the Hungarian and Bulgarian deposit markets.

Due to the global economic and financial crisis the importance of stable liquidity significantly increased, therefore OTP Group put much emphasis maintaining its strong customer deposit base. Due to the recent bank acquisitions and strong organic loan growth, FX-adjusted performing (Stage 1 + Stage 2) loan portfolio increased by 37% in 1Q 2020 y-o-y, while deposit base increased by 24%.

Due to joint effect of these factors the net loan/(deposit+retail bond) ratio of the Group changed to 80.0%, it is 6.8 pps FX-adjusted increase on the yearly base. On the domestic capital market the Bank continued the issuance of retail bonds. The capital position of the Group is stable with CET1 ratio standing at 13.9% at the end of 1Q 2020.


Funding Sources

The OTP Group applies wide range of money market and capital market sources to cover the funding need of its domestic and foreign customer loans. The Group is active primarily on the local capital markets through OTP Bank and OTP Mortgage Bank by issuing several instruments with varying maturity, denomination and structure. Through its EMTN Programme established in May 2020, OTP Bank has a flexible tool to access to the international eurobond markets.

In July 2019 OTP Bank successfully returned to the international debt capital markets with a EUR 500 million Tier2 issuance. This was the first subordinated Tier 2 issuance since 2006, with the aim of optimising the capital structure of the bank. The issued instrument is a CRR/CRD IV compliant Tier 2 and, as such, MREL eligible liability.

The Bank is present on the domestic bond market with a regular retail bond auction, thus providing the retail depositors a successful alternative investment form.

Beyond the capital market instruments from time to time OTP Bank uses syndicated and bilateral loans to diversify its funding structure.


Main components of balance sheet in HUF million

 1Q 20201Q 2019
Liabilities to credit institutions and governments1 366572
Customer deposits16 34212 390
Issued securities400382
Other liabilities1 163812
Subordinated bonds and loans27281
Total shareholders' equity2 3161 870
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY21 85816 108

Funding structure

Last update: 08/05/2020

 

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