It was hailed as one of the most progressive banks in Central Eastern Europe. The leading Hungarian bank during the communist period was starting to become the leading bank in the region too. The predecessor of OTP Bank, called the National Savings Bank, was established in 1949. It was listed on the Budapest Stock Exchange as OTP Bank in 1995.
Besides Hungary, OTP Group currently operates in 10 countries – Albania, Bulgaria, Croatia, Romania, Serbia, Ukraine, Montenegro, Moldova, Slovenia and Russia. OTP LAB is OTP Bank’s innovation hub, where companies like evrotrust and FintechBlocks are part of a startup program that is in progress. On paper, OTP Bank is doing everything that can be expected from a bank from the region.
Importantly, the Romanian unit of OTP Bank had $5 billion of total assets at the end of 2022 and a 2.9% market share in Romania at the end of 2021. However, whilst in most countries in the region OTP Bank has been growing market share or acquiring companies. In Romania this hasn’t been an easy task. Even with an ethnic Hungarian population of more than 6% who would seem to be ideal customers for the bank.
How has OTP Bank performed in Romania?
Earlier this year the National Bank of Romania (BNR) issued OTP Bank in Romania with a fine of 500,000 Lei or $112,500. The fine was issued due to AML processes that the BNR felt OTP Bank had not upheld when an offshore company from Belize emptied its bank account with the bank.
This happened at the same time as a small purge undertaken by the BNR where other banks were also fined. But OTP Bank’s fine was the highest and was for 11 different failures within the bank.
In late 2021 there had been plans in place to grow OTP Bank’s market share to 5% by 2024. The bank was posting profits. Growing its teams even through the pandemic.
By 2023 this growth spurt seems to have slowed. Like many other banks across the world, OTP Bank also saw its results decline. But in Romania the market has treated others better. Alpha Bank Romania showed a growth of 9.5% in customer deposits in the first quarter 2023. Banca Transilvania also posted that almost 50,000 new customers had joined the bank in 2023 so far. OTP lost customers during the same period.
What does OTP Bank leaving Romania mean for the group?
In 2020 OTP Bank left the Slovak market after 20 years. The Belgian banking leader KBC Group acquired 99.44% of the OTP Banka Slovensko business from OTP Bank. Strategically the deal made sense as KBC Group was also the shareholder behind Slovakian market leader CSOB Bank.
The situation in Romania is more dynamic. Interested parties could include Raiffeisen, Erste, or Unicredit. Whilst Romania’s most successful bank today, Banca Transilvania, will probably continue to grow organically.
The next question will be about OTP’s Russian business. But that, as they say, is a tale for another day.
Author: Andy Samu
