The corporate history of Russia-based OTP Bank dates back to March 1994 when savings bank Germes, part of the namesake concern at that time, was founded. The bank was later transformed into Joint Stock Commercial Bank of Investment and Savings (Investsberbank, in brief). The merger between Investsberbank and Moscow-based Russian General Bank (see Memory Book), which was spearheaded by the latters shareholders (Novorossiysky Sea Commercial Port co-owners Alexander Ponomarenko and Alexander Skorobogatko) was wrapped up in February 2005. Investsberbank was considered to hold a more «promoted» brand in the retail deposits market, and for this reason the banks merged on its basis, and Russian General Banks license was cancelled. At that time the transaction was valued at $800,000. In August 2006, the bank also took over Omsk-based Omskpromstroybank and Novorossiysk-headquartered Promfinservicebank (see Memory Book) that were transformed into Omsk and Novorossiysk branches, respectively. In October 2006 Hungarys OTP Bank* wrapped up the acquisition of a 96.4% stake in Investsberbank for as much as $477 mln. In 2008, Investsberbank ended up under the parent brand and was renamed OTP Bank.
As of November 10, 2016 Hungarian OTP Bank controlled 97.88% of the Russian lending institutions shares, and another 1.2% stake is in the hands of Hungarian closed joint stock company MFB Invest. The remaining shares (less than 1%) are distributed among other shareholders whose stakes do not exceed 1%.
The lending institution is headquartered in Moscow, and, as a whole, the financial institution operates in more than 3,700 localities of Russia. The banks sales network is comprised of six branches (Saint Petersburg, Omsk, Samara, Chelyabinsk, Gukovo (Rostov region) and Khabarovsk), 27,900 consumer lending offices, 81 additional and 95 credit & cash offices, and also 50 operating offices. The bank has six representative offices in Russia. The banks ATM network consists of around 490 machines. As of October 1, 2016 the banks headcount averaged 11,130 vs. 12,079 as of start 2016.
The financial institutions customers are offered a standard package of banking products and services, above all, retail deposits, cash and card loans, consumer loans at stores. The banks partners are such retail chains as digital supermarket DNS, Svyaznoy, Euroset, Media Markt, Tekhnosila, Mnogo Mebeli, Megafon, Expert, Beeline, Ulmart, Dyatkovo, jewelry chain 585, Adamas, Alef, fur coat producer Elena Furs. Retail products also include cards powered by international payment system MasterCard (credit, debit cards with cashback options), wire transfers (Western Union, and Golden Crown), safe deposit box lease, voluntary insurance programs, the maintenance of accounts, etc.
The banks corporate services and products include cash settlement services, placement of funds into deposit accounts and promissory notes, loans and guarantees, payroll projects, remote services, support of export and import operations, factoring, and trade finance. As part of Private Banking OTP Bank offers well-heeled clients special terms on deposit accounts, options to invest in mutual funds, a lineup of premium MasterCard cards, and lease of safe deposit boxes.
All in all, the bank serves over 3.9 mln clients (businesses and households). In the corporate segment the bank mainly lends borrowers engaged in retailing, real estate operations, financial and operating lease. The following companies were noticed among the banks clients: Otechestvennye lekarstva, Rusgrain holding, Element Leasing, MFO Peshekhod, Melnitsa, Impuls, Novaya perevozochnaya kompania, Soyuzshakhtoosushenie, etc.
Since the beginning of 2016 the lending institutions net assets have declined by Rub 16.4 bln to Rub 138.4 bln as of November 1, 2016. A contraction in liabilities was mainly recorded in drawn inter-bank loans (down Rub 5.9 bln), funds of businesses and institutions (minus Rub 5.7 bln), the portfolio of household funds (down Rub 2.7 bln), and a smaller drop was seen in the money held on loro accounts (down Rub 390.9 mln). At the same time, the bank bumped up capital by Rub 1.4 bln and expanded the portfolio of issued promissory notes (up Rub 20.3 mln). On the assets side, the credit portfolio shrank by Rub 15.7 bln and other assets declined by Rub 8.6 bln. Meanwhile, the bank placed more liquidity primarily at foreign banks (up Rub 7.3 bln).
Funds of households dominate in the banks liabilities (39.6%), although the metric has dropped 4.8% YTD to Rub 54.7 bln as of the balance sheet date. Most of retail funds (49.2%) were drawn for six to twelve months. An addition to the liabilities are own funds (19.8% of liabilities) and the money of corporate customers (16.1%). Corporate funds mainly consist of balances held on settlement accounts (53.3%), and also term deposits. Since the beginning of 2016 funds held by corporate customers have declined by 20.5% to Rub 22.2 bln as of November 1. Inter-bank loans that were raised from Russian and foreign counterparties (from the parent group) account for 1.8% of net liabilities. Meanwhile, the bank does not trade securities that are collateralized under repurchase transactions. Loro accounts and promissory notes issued by the bank account for less than 1% of liabilities.
The banks clientele is big, mainly comprising retailers, home builders, manufacturers, insurers, services providers, and also financial institutions and real estate companies. The banks client base is active, with monthly turnover ranging from Rub 123 bln to Rub 185 bln since start 2016. Most of turnover falls to active corporate customers, although a noticeable portion also falls to accounts held by households and individual entrepreneurs. As of December 31, 2015 the money held by the banks ten biggest customers accounted for 40.1% of total client funds. A quarter of the portfolio of term corporate deposits falls to non-resident businesses.
Own funds in the period under consideration increased by 5.6% to Rub 27.4 bln as of the balance sheet date. Also, two subordinated loans ($36 mln, falling due May 2, 2024, and Rub 3 bln, due on November 25, 2024) were added to capital. Since the beginning of 2016 the banks capital adequacy ratio, which is calculated in line with the CBR requirements, has improved a little cushion (№ 1.0 is equal to 15.3% vs. the 8% minimum).
A considerable portion in the banks net assets falls to the credit portfolio (over 60%). Funds floated in the inter-bank lending market (mainly with the parent bank) account for a considerable portion (13.3%), another 11% falls to other assets that mainly consist of the money invested in financial derivatives, 6.2% to high-liquidity assets, 3.5% to the securities portfolio (bonds), and 1.8% to fixed assets and intangibles.
Since the beginning of 2016 the credit portfolio has shrunk by 15% to Rub 88.9 bln as of November 1. The retail section of the portfolio declined the most (Rub 15.3 bln), while corporate loans were little changed. Despite a sharp decline since the beginning of the year retail loans still prevail in the total credit portfolio, accounting for 87.9% of all loans. NPLs are high, reflecting risks associated with the banks focus on retail lending. One cannot help but point to substantial growth of NPLs in 2016, with the metric leaping 60.8%, or Rub 6.7 bln, in January-October 2016. As a result, NPLs rose from 10.5% to 19.9%. Provisions grew at a slightly slower pace, although they are still much higher than NPLs, accounting for 30.5% of the portfolio as of November 1, 2016 (26% as of start 2016). The credit portfolio is fairly well diversified by duration, with loans extended for one to three years and overdraft loans prevailing. By virtue of specific features of retail business the banks portfolio collateralization rate is quite modest (11.2%). Based on IFRS data as of June 30, 2016 40.3% of the banks retail portfolio fell to overdraft payments under plastic cards, 36% to POS consumer loans, 17.2% to cash loans, and 6.1% to mortgage loans.
The bank both lends and borrows in the inter-bank lending market, although over the past few months the bank has been mainly a net creditor, depositing most funds via foreign counterparties. OTP Bank is also a market maker in the currency market, and is aggressive in stock markets.
The bank suffered a loss of Rub 6.5 bln under RAS in 2015 compared to Rub 1 bln in net profit in 2014. During the first ten months of 2016 the bank turned a profit of Rub 261.3 mln.
The Board of Directors: Zoltan Major (chairman), Ildiko Taksя, Zoltan Tamas Schenk, Janos Peter Bese, Ferenc Böle, Akos Monostori, Ilya Chizhevskiy, Robert Barlai, and Dr. Sandor Bela.
The Management Board: Ilya Chizhevskiy (president), Sergey Kapustin, Julia Oreshkina, and Alexander Vasiliev.
* OTP Bank was founded in 1949 and is now the biggest commercial bank in Hungary and a core of leading Hungarian financial group OTP Group. Apart from the bank, the group is comprised of subsidiaries operating in the following sectors: management of assets and pension accruals, auto leasing, tourism, rea estate rent, management and operations, factoring, and also the namesake mortgage bank.
In January-September 2016 total assets held by OTP Group amounted to $39.9 bln, $29.2 bln fell to client deposits, and net profit came to $641.2 mln. Hide