OTP Bank Romania starts foreclosing procedures against bad debtors

OTP will cut back on unsecured lending

“We have restructured around 2,000 loans. We have started the foreclosing procedures against borrowers who didn’t make their payments not even two months after being subject to restructuring procedures”, said Laszlo Diosi, CEO of OTP Bank Romania.

Borrowers are facing financial hardships and stopped making their monthly payments since the beginning of the year due to the steep devaluation of the local currency and pay cut. However, the banks were forced to set up huge loan loss provisions and sought to help their clients by offering the possibility of restructuring the loans.

Year, to-date, the local subsidiary of OTP group has tried to ease the debt burden of nearly 2,000 clients unable of making their payments, but was also forced to increase its loan loss provisions to 6.8 million euros.

OTP Bank Romania plans to thoroughly analyze the current credit and financial data of loan applicants to evaluate the lending risk, as well as to cut back on unsecured lending.

“We have no intention of relapsing to the early stages of the consumer lending industry or to grant unsecured loans. Nevertheless, we will continue selling credit cards and to cap the overdrafts, but only after an in-depth evaluation of the credit profile”, said the head of OTP Bank Romania.

�First Home� scheme has put mortgage lending on ice

“In the second quarter this year, I’ve noticed that the mortgage industry moved on ice due to First Home scheme. The program has clearly blocked the mortgage market”, says Laszlo Diosi.

“The mortgage market is hardly moving, and we barely grant a few loans, because people don’t come searching for financing, and we can’t start ‘head-hunting’”, said Laszlo Diosi.

“The market will most likely recover in September and we will probably grant more mortgage loans than we are now”, Diosi continued.

Consolidations in the banking system cannot be avoided

The local banking system will undergo major changes next year, according to OTP Bank’c CEO, but credit institutions in the local market will not be facing any problems as the regulations and supervisory operations carried by National Bank of Romania are reasonable.

“We will surely witness major consolidations in the banking system, many units will shut down, but banks in Romania won’t be facing the same problems as UK as they are under strict supervision”, Laszlo Diosi explained.

National Bank of Romania has imposed to banks a capital adequacy ratio of 10%, although the regulation provides a minimum level of only 8%.

“In other countries, for example, a card overdraft may be equal to 5 salaries, while in Romania it is accepted less than one salary, which is a difference”, Diosi stressed.

2.02 million euros profit in first half 2009

OTP Bank Romania said it swung back to profit in first half this year, reporting profit after tax of 586 million forints (2.02 million euros), compared to 1.2 million forints loss (4.7 million euros) a year earlier.

The 725 million forints (2.46 million euros) loss in the first quarter 2009 reported by the Romanian subsidiary of the Hungarian-based OTP was followed by a 1,311 million forints (4.59 million euros) profit in 2Q 2009.

The bank’s loan book reached 303.5 billion forints (1.11 bn euros), down 4.2% from a year earlier.

Non-performing loans, namely loans 90 days past due, accounted to 1.9% of the bank’s total lending in the six months through June, as compared to 0.6% in year-ago half.

After the significant deposit withdrawals in 4Q 2008, deposits grew by 22.1% in the first 6 months 2009 year-on-year, up to 88.18 billion forints (324 million euros).