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. FX-adjusted performing (Stage 1 + Stage 2) loan portfolio increased by 10% in 3Q 2021 y-o-y, while deposit base increased by 14%.

Due to joint effect of these factors the net loan/(deposit+retail bond) ratio of the Group changed to 75.6%, it is 2.8 pps FX-adjusted decrease on the yearly base. The capital position of the Group is stable with CET1 ratio standing at 15.4% at the end of 3Q 2021.

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 and updated in May 2021, 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.

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 billion

 3Q 20213Q 2020
Liabilities to credit institutions and governments1 667 1 114
Customer deposits19 66917 315
Issued securities498 444
Other liabilities1 374 1 089
Subordinated bonds and loans270 274
Total shareholders' equity2 701 2 473
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY26 181 22 709

Funding structure

Last update: 05/11/2021

 

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