Capital Market Activity

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.

As a consequence of 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 15% in 3Q 2022 y-o-y, while deposit base increased by 17%.

Due to joint effect of these factors the net loanloan-to-deposit ratio of the Group changed to 75.5%, it is 0.1 pps FX-adjusted decrease on the yearly base. The capital position of the Group is stable with CET1 ratio standing at 16.4% at the end of 3Q 2022.

Funding Sources

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 and 2022, 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 Tier 2 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.

As part of its announced ESG strategy, on July 2022 and on September 2022 OTP Bank issued Green Senior Preferred Notes in the aggregate nominal amount of EUR 400 million and USD 60 million. The successful issuance of the 3-year and callable after two years EUR bonds and 4-year and callable after three years USD bonds, are a clear confirmation that the international market supports OTP Group's ESG efforts.

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