OTP
BANK PLC
A
NNUAL REPORT 2021
(AS DEFINED IN ACT CXX OF 2001 ON THE CAPITAL MARKET)
BUDAPEST, 13 APRIL 2022
Dear Shareholders!
OTP Bank Plc. hereby provides you with the Annual Report of OTP Bank Plc. for the year 2021,
which is based on the audited financial statements approved by the Annual General Meeting of the
Company on 13 April 2022.
On behalf of OTP Bank Plc. we declare that, to the best of our knowledge, the separate and
consolidated financial statements which have been prepared in accordance with the applicable
accounting standards, present a true and fair view of the assets, liabilities, financial position and
profit and loss of OTP Bank Plc. and its consolidated subsidiaries and associates, and give a fair
view of the position, development and performance of OTP Bank Plc. and its consolidated
subsidiaries and associates, describing the principal risks and uncertainties, and do not conceal facts
or information which are relevant to the evaluation of the Issuer’s position.
13 April 2022, Budapest
dr. Sándor Csányi László Bencsik
Chairman & CEO Deputy CEO
ANNUAL REPORT 2021
CONTENTS
BUSINESS REPORT 2021 (SEPARATE)
BUSINESS REPORT 2021 (CONSOLIDATED)
INDEPENDENT AUDITORS’ REPORT (SEPARATE AND CONSOLIDATED, IN ACCORDANCE
WITH
IFRS)
SEPARATE FINANCIAL STATEMENTS IN ACCORDANCE WITH IFRS (2021)
CONSOLIDATED FINANCIAL STATEMENTS IN ACCORDANCE WITH IFRS (2021)
OTHER INFORMATIONS
ANNUAL REPORT 2021
BUSINESS REPORT 2021 (SEPARATE)
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
2021 2020
Cash, amounts due from banks and balances with the National Bank of Hungary 474,945 579,120
Placements with other banks, net of allowance for placement losses 2,567,212 1,535,884
Repo receivables 33,638 183,364
Financial assets at fair value through profit or loss 246,462 160,483
Financial assets at fair value through other comprehensive income 641,939 911,950
Securities at amortised cost 3,071,038 2,007,692
Loans at amortised cost 4,032,465 3,417,760
Loans mandatorily measured at fair value through profit or loss 662,012 480,937
Investments in subsidiaries 1,573,008 1,548,972
Property and equipment 81,817 77,974
Intangible assets 62,161 57,639
Right of use assets 17,231 13,479
Investment properties 4,328 1,936
Current tax assets - 593
Derivative financial assets designated as hedge accounting relationships 17,727 6,817
Other assets 224,488 169,794
TOTAL ASSETS 13,710,471 11,154,394
Amounts due to banks and deposits from the National Bank of Hungary and other
banks 1,051,203 766,977
Repo liabilities 86,580 109,612
Deposits from customers 9,948,532 7,895,735
Leasing liabilities 17,932 14,106
Liabilities from issued securities 22,153 28,435
Financial liabilities at fair value through profit or loss 20,133 25,902
Derivative financial liabilities designated as held for trading 192,261 99,987
Derivative financial liabilities designated as hedge accounting relationships 18,690 3,104
Deferred tax liabilities 1,507 3,062
Current tax liabilities 4,776 1,464
Other liabilities 259,964 223,433
Subordinated bonds and loans 271,776 304,243
TOTAL LIABILITIES 11,895,507 9,476,060
Share capital 28,000 28,000
Retained earnings and reserves 1,845,836 1,697,133
Treasury shares (58,872) (46,799)
TOTAL SHAREHOLDERS' EQUITY 1,814,964 1,678,334
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 13,710,471 11,154,394
SEPARATE STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2021
(IN HUF MILLION)
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
2021 2020
Interest Income:
Interest income calculated using the effective interest method 302,373 239,633
Income similar to interest income 105,663 81,663
Interest income and similar to interest income total 408,036 321,296
Interest Expense:
Interest expenses total (155,491) (99,630)
NET INTEREST INCOME 252,545 221,666
Loss allowance on loan, placement and repo receivables losses (38,841) (57,671)
Loss allowance on securities at fair value through other comprehensive income and on
securities at amortised cost (1,484) (1,848)
Provision for loan commitments and financial guarantees given (130) (3,202)
Change in the fair value attributable to changes in the credit risk of loans mandatorily
measured at fair value through profit of loss (16,255) (405)
Risk cost total (56,710) (63,126)
NET INTEREST INCOME AFTER RISK COST 195,835 158,540
LOSSES ARISING FROM DERECOGNITION OF FINANCIAL ASSETS
MEASURED AT AMORTISED COST (2,700) (3,279)
MODIFICATION LOSS (7,017) (17,358)
Income from fees and commissions 300,803 259,781
Expenses from fees and commissions (52,276) (40,750)
NET PROFIT FROM FEES AND COMMISSIONS 248,527 219,031
Foreign exchange losses (5,638) (4,518)
Gains on securities, net 2,104 17,595
Losses on financial instruments at fair value through profit or loss (6,494) (671)
Gains on derivative instruments, net 3,436 7,057
Dividend income 99,037 60,973
Other operating income 11,265 7,900
Other operating expenses (41,636) (28,064)
NET OPERATING INCOME 62,074 60,272
Personnel expenses (136,126) (118,498)
Depreciation and amortization (40,692) (38,948)
Other administrative expenses (178,611) (154,165)
OTHER ADMINISTRATIVE EXPENSES (355,429) (311,611)
PROFIT BEFORE INCOME TAX 141,290 105,595
Income tax (15,951) (13,121)
NET PROFIT FOR THE YEAR 125,339 92,474
Earnings per share (in HUF)
Basic 455 333
Diluted 455 333
SEPARATE STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED
31 DECEMBER 2021
(IN HUF MILLION)
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
2021 2020
NET PROFIT FOR THE YEAR 125,339 92,474
Items that may be reclassified subsequently to profit or loss:
Fair value adjustment of debt instruments at fair value through other comprehensive
income
(37,163) (14,459)
Deferred tax (9%) related to fair value adjustment of debt instruments at fair value
through other comprehensive income
3,410 1,262
Gains / (Losses) on separated currency spread of financial instruments designated as
hedging instrument
1,681 (1,526)
Deferred tax (9%) related to (losses) / gains on separated currency spread of
financial instruments designated as hedging instrument
(151) 137
(Losses) / Gains on derivative financial instruments designated as cash flow hedge
(6,307) (296)
Deferred tax (9%) related to gains on derivative financial instruments designated as
cash flow hedge
- 27
Items that will not be reclassified to profit or loss:
Fair value adjustment of equity instruments at fair value through other
comprehensive income
1,407 (3,275)
Deferred tax (9%) related to equity instruments at fair value through other
comprehensive income
(281) 310
Total (37,404) (17,820)
NET COMPREHENSIVE INCOME 87,935 74,654
SEPARATE STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED
31 DECEMBER 2021
(IN HUF MILLION)
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
POST-BALANCE SHEET EVENTS
Post-balance sheet events cover the period until 17 February 2022.
Hungary
Against the initially planned 2 pps social security contribution cut effective from July 2022, the government
reduced employers’ taxes by 4 pps already from 1 January 2022 (the 1.5% vocational training contribution
was abolished and the social contribution taxes were cut by 2.5 pps).
On 25 January 2022 the NBH hiked the base rate by 50 bps to 2.
9%.
On 27 January 2022 the NBH hiked the rate of the 1-week central bank deposit by 30 bps to 4
.3%.
On 15 February 2022 the CSO revealed the final GDP growth figures: accordingly, in 4Q 2021 the quarterly
expansion of 2.1% was stronger than expected, lifting the annual growth rate to 7.1% in 2021 as a whole
(seasonally and working day adjusted). Mr. Mihály Varga (Minister of Finance) announced that the
government expects 5.9% growth for 20
22.
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
MACROECONOMIC OVERVIEW
The Hungarian economy grew by 7.2% in 2021, stronger than had been expected. The rapid expansion
was supported by both an intensive vaccination campaign and strong fiscal and monetary support measures.
Rapid growth could continue in 2022, and it can draw near 6%, thanks to the government's economic support
measures and, hopefully, the recovery of tourism after the pandemic.
As a result of the rapid growth of demand, coupled with the rise of the global inflation, Hungary's central
bank started a monetary tightening cycle in June 2021, to prevent the increasing inflation risks. As part of
this, the Monetary Council raised the central bank base rate to 0.9% on 22 June from 0.6%, and also raised
the one-week deposit rate to 0.9%. By the end of 2021, the base rate had risen to 2.4% and the one-week
deposit rate to 4%. As inflation rose steadily and reached 7.9% in January 2022, interest rate hikes continued
in January and February 2022, with 50-basis-points increases each time.
According to the MNB's data, both retail and non-financial corporate loan portfolios expanded dynamically,
at double-digit rates in 2021. The former grew by 15% and the latter by almost 11%. Within retail loans, one
of the main drivers was the subsidized baby loan, which amounted to HUF 1,569 billion at the end of 2021.
Housing loans increased by 15% in 2021, and the value of new contracts also hit record in 2021,
approaching HUF 1,300 billion, supported by the increase in home renovation loans. The stock of cash loans
increased by 16.6% in 2021, while the stock of home equity loans shrank by about 4.0%, following the trend
of the previous years.
In connection with the favourable developments observed in the domestic banking sector and the improved
assessment of the Hungarian macroeconomic situation, on 13 July 2021 Moody’s improved the Hungarian
“macro profile” effective for banks operating in Hungary, which resulted in rating upgrades for several
domestic banks (Budapest Bank, MKB Bank, Raiffeisen Bank) and also contributed to the placement on
review for upgrade of OTP Bank’s baseline credit assessment (BCA). In September 2021 Moody’s upgraded
the Hungarian sovereign rating to ‘Baa2’ underpinned by the strong growth rebound throughout the first half
of 2021 and the projected strong growth outlook over the coming years, which will support fiscal
consolidation and reduction in the government's debt burden.
DIGITAL AND IT INNOVATIONS
We announced the SmartBank mobile application’s phase-out for retail customers, which will be replaced
with Digital Contract’s new channels, OTP internet- & mobile banking applications. By the end of 2021, more
than 600,000 OTP customers registered for the new Digital Contract. During the pandemic digital activity of
OTP clients has increased significantly, which was supported by online campaigns, customer education in
branches and continuous development of our digital services.
In 2021 new end-to-end processes were launched in new internet- & mobile banking applications such as
online personal loan request, installment payment for credit card, purchase of government securities,
prepaid mobile phone top-up, QR payment of postal cheques (including not completely filled cheques).
Several innovative features serve customer needs such as open banking function to view foreign bank
account balances, donation opportunity for money transfers, Apple Pay card digitization, branch
appointment feature, profile picture setting and maintenance of notification settings.
We pay special attention for improvements of Personal Finance Manager to support financial awareness,
and for launch of other innovative features (such as payment and other beyond banking services).
As an important milestone of banking chat platform extension we launched chat opportunity in new
internetbank in 2021, so we can serve several client needs also in identified chats. We automated the most
often topics: 15 new automated chatbot processes went live in 2021, with which our customers can get help
without human intervention in 7x24 hours.
As the end of a multi-annual process we renewed our branch and Contact Center front-end system.
Remote Expert from Home service launched in December 2021 which ensures to clients the consultation
video call not only in branches but also from home at a pre-arranged time.
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
BRANCH NETWORK OF OTP BANK
The Bank provides a full range of commercial banking services through a nationwide network and its
branches are available to customers in Hungary.
1013 Budapest, Alagút utca 3.
1011 Budapest, Iskola utca 38-42.
1015 Budapest, Széna tér 7.
1012 Budapest, Vérmező út 4.
1024 Budapest, Fény utca 11-13.
1025 Budapest, Törökvész út 1/a
1026 Budapest, Szilágyi Erzsébet
fasor 121.
1021 Budapest, Hüvösvölgyi út 138.
1033 Budapest, Flórián tér 15.
1025 Budapest, Szépvölgyi út 4/b.
1039 Budapest, Heltai Jenő tér 2.
1032 Budapest, Bécsi út 154.
1033 Budapest, Szentendrei utca
115.
1041 Budapest, Erzsébet utca 50.
1048 Budapest, Kordován tér 4.
1042 Budapest, Árpád út 63-65.
1052 Budapest, Deák Ferenc utca 7-
9.
1055 Budapest, Szent István krt. 1.
1051 Budapest, Nádor utca 16.
1054 Budapest, Széchenyi rkp. 19.
1066 Budapest, Oktogon tér 3.
1077 Budapest, Király utca 49.
1073 Budapest, Erzsébet krt. 41.
1075 Budapest, Károly krt. 1.
1076 Budapest, Thököly út 4
1075 Budapest, Károly krt. 25.
1085 Budapest, József krt. 33.
1085 Budapest, József krt. 53.
1087 Budapest, Könyves Kálmán krt.
76-1. sz.
1081 Budapest, Népszínház utca 3-5.
1083 Budapest, Futó utca 35-45
1191 Budapest, Üllői út 201.
1094 Budapest, Ferenc krt. 13.
1085 Budapest, Kálvin tér 12-13.
1097 Budapest, Könyves Kálmán krt.
12-14.
1095 Budapest, Soroksári út 32-34.
1102 Budapest, Kőrösi Csoma sétány
6.
1103 Budapest, Sibrik Miklós utca 30.
1106 Budapest, Örs vezér tere 25
1106 Budapest, Örs Vezér tere 25/A
1.em
1115 Budapest, Bartók Béla út 92-94.
1117 Budapest, Móricz Zsigmond
körtér 18.
1118 Budapest, Rétköz utca 5.
1117 Budapest, Hunyadi János út 19.
1117 Budapest, Október
huszonharmadika utca 8-10.
1126 Budapest, Böszörményi út 9-11.
1123 Budapest, Alkotás utca 53
1124 Budapest, Apor Vilmos tér 11.
1055 Budapest, Nyugati tér 9.
1137 Budapest, Pozsonyi út 38.
1062 Budapest, Váci út 1-3.
1138 Budapest, Váci út 135-139
1133 Budapest, Váci út 80.
1134 Budapest, Váci út 17.
1135 Budapest, Lehel út 70-76.
1148 Budapest, Nagy Lajos király útja
19-21.
1149 Budapest, Fogarasi út 15/b.
1149 Budapest, Bosnyák tér 17.
1146 Budapest, Thököly út 102/b.
1152 Budapest, Szentmihályi út 131.
1151 Budapest, Fő utca 64.
1157 Budapest, Zsókavár utca 28.
1163 Budapest, Jókai Mór utca 3/b.
1161 Budapest, Rákosi út 118.
1173 Budapest, Ferihegyi út 93.
1173 Budapest, Pesti út 5-7.
1181 Budapest, Üllői út 377.
1188 Budapest, Vasút utca 48.
1183 Budapest, Üllői út 440.
1195 Budapest, Üllői út 285.
1195 Budapest, Vak Bottyán út 75 a-
c
1204 Budapest, Kossuth Lajos utca
44-46.
1238 Budapest, Grassalkovich út
160.
1203 Budapest, Bíró Mihály utca 7.
1239 Budapest, Bevásárló utca 2.
1211 Budapest, Kossuth Lajos utca
86.
1211 Budapest, Kossuth Lajos utca
99.
1221 Budapest, Kossuth Lajos utca
31.
1222 Budapest, Nagytétényi út 37-45.
7621 Pécs, Rákóczi út 44.
7621 Pécs, Rákóczi út 1.
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
7632 Pécs, Pécs-Kertváros,Diana tér
14.
7633 Pécs, Pécs-Újmecsekalja,Ybl
Miklós utca 7/3.
7300 Komló, Kossuth Lajos utca 95/1.
7700 Mohács, Jókai utca 1.
7800 Siklós, Felszabadulás utca 60-
62.
7900 Szigetvár, Vár utca 4.
7720 Pécsvárad, Bem utca 2/b
7370 Sásd, Dózsa György utca 2.
7960 Sellye, Köztársaság tér 4.
7940 Szentlőrinc, Munkácsy utca
16/A
7773 Villány, Baross Gábor utca 36.
7754 Bóly, Hősök tere 8/b.
6000 Kecskemét, Korona utca 2.
6000 Kecskemét, Szabadság tér 5.
6500 Baja, Deák Ferenc utca 1.
6300 Kalocsa, Szent István király út
43-45.
6200 Kiskőrös, Petőfi tér 13.
6400 Kiskunhalas, Sétáló utca 7
6100 Kiskunfélegyháza, Petőfi tér 1
6430 Bácsalmás, Szt János utca 32.
6087 Dunavecse, Fő út 40.
6070 Izsák, Szabadság tér 1.
6440 Jánoshalma, Rákóczi utca 10.
6237 Kecel, Császártöltési utca 1.
6120 Kiskunmajsa, Csendes köz 1.
6090 Kunszentmiklós, Kálvin tér 11.
6050 Lajosmizse, Dózsa György utca
102/a.
6449 Mélykút, Petőfi tér 18.
6230 Soltvadkert, Szentháromság
utca 2.
6060 Tiszakécske, Béke tér 6.
6000 Kecskemét, Dunaföldvári út 2.
6320 Solt, Kossuth Lajos utca 48-50.
6080 Szabadszállás, Dózsa György
út 1.
5600 Békéscsaba, Szt István tér 3.
5700 Gyula, Bodoky utca 9.
5800 Mezőkovácsháza, Árpád utca
177.
5900 Orosháza, Kossuth Lajos utca
20.
5540 Szarvas, Kossuth Lajos tér 1.
5520 Szeghalom, Tildy Zoltán utca 4-
8.
5630 Békés, Széchenyi tér 2.
5830 Battonya, Fő utca 86.
5510 Dévaványa, Árpád utca 32.
5742 Elek, Gyulai út 5.
5500 Gyomaendrőd, Szabadság tér 7
5650 Mezőberény, Kossuth Lajos tér
12.
5820 Mezőhegyes, Zala Gy ltp. 7.
5720 Sarkad, Árpád fejedelem tér 5.
5940 Tótkomlós, Széchenyi utca 4-6.
5661 Újkígyós, Kossuth Lajos utca
38.
5530 Vésztő, Kossuth Lajos utca 72.
5525 Füzesgyarmat, Szabadság tér
1.
5600 Békéscsaba, Andrássy út 37-
43.
3530 Miskolc, Uitz B. utca 6.
3530 Miskolc, Rákóczi út 1.
3531 Miskolc, Győri kapu 51.
3535 Miskolc, Árpád út 2.
3780 Edelény, Tóth Árpád út 1.
3860 Encs, Bem József utca 1.
3400 Mezőkövesd, Mátyás király utca
149.
3580 Tiszaújváros, Szent István út
30.
3600 Ózd, Városház tér 1/a.
3980 Sátoraljaújhely, Széchenyi tér
13.
3900 Szerencs, Kossuth tér 3/a.
3700 Kazincbarcika, Egressy Béni út
50.
3950 Sárospatak, Eötvös József utca
2.
3630 Putnok, Kossuth Lajos út 45.
3800 Szikszó, Kassai utca 16.
3770 Sajószentpéter, Bethlen Gábor
utca 1/a.
3450 Mezőcsát, Hősök tere 23.
3910 Tokaj, Rákóczi utca 37.
3527 Miskolc, József Attila utca 87.
6720 Szeged, Takaréktár utca 7.
6720 Szeged, Aradi vértanúk tere 3.
6791 Szeged, Negyvennyolcas utca
3.
6600 Szentes, Kossuth Lajos utca 26.
6640 Csongrád, Szentháromság tér
2-6.
6800 Hódmezővásárhely, Andrássy
út 1.
6900 Makó, Széchenyi tér 14-16.
6760 Kistelek, Kossuth Lajos utca 6-8
6782 Mórahalom, Szegedi út 3.
6724 Szeged, Rókusi krt. 42-64.
6724 Szeged, Londoni krt. 3.
8000 Székesfehérvár, Ősz utca 13.
2060 Bicske, Bocskai köz 1.
2400 Dunaújváros, Dózsa György út
4/e.
8060 Mór, Deák Ferenc utca 2.
7000 Sárbogárd, Ady Endre út 172.
2457 Adony, Petőfi Sándor utca 2.
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
8130 Enying, Kossuth Lajos utca 43.
2483 Gárdony, Szabadság út 18.
8154 Polgárdi, Deák Ferenc utca 16.
8000 Székesfehérvár, Fő utca 7.
8000 Székesfehérvár, Holland fasor
2.
9022 Győr, Teleki László utca 51.
9011 Győr, Győr-Szentiván, Déryné
út 77.
9400 Sopron, Teleki Pál út 22./A
9300 Csorna, Soproni út 58.
9200 Mosonmagyaróvár, Fő utca 24
9400 Sopron, Várkerület 96. fszt. 1.
9330 Kapuvár, Szt István király utca
4-6.
9431 Fertőd, Fő utca 7.
9317 Szany, Ady Endre utca 2.
9024 Győr, Bartók Béla út 53/b.
9024 Győr, Kormos István utca 6.
9026 Győr, Egyetem tér 1.
9027 Győr, Budai út 1.
4025 Debrecen, Pásti utca 1-3.
4025 Debrecen, Piac utca 45-47.
4032 Debrecen, Füredi út 43.
4100 Berettyóújfalu, Oláh Zsigmond
utca 1.
4150 Püspökladány, Kossuth utca 2.
4220 Hajdúböszörmény, Kossuth
Lajos utca 3.
4080 Hajdúnánás, Köztársaság tér
17-18/a.
4200 Hajdúszoboszló, Szilfákalja utca
6-8.
4060 Balmazújváros, Veres Péter
utca 3.
4110 Biharkeresztes, Kossuth utca 4.
4130 Derecske, Köztársaság utca
111.
4087 Hajdúdorog, Petőfi tér 9-11.
4138 Komádi, Fő utca 1-3.
4181 Nádudvar, Fő utca 119.
4090 Polgár, Barankovics tér 15.
4242 Hajdúhadház, Kossuth utca 2.
4032 Debrecen, Egyetem tér 1.
4254 Nyíradony, Árpád tér 6.
4025 Debrecen, Hatvan utca 2-4.
3300 Eger, Törvényház utca 4.
3390 Füzesabony, Rákóczi utca 77.
3200 Gyöngyös, Fő tér 1.
3360 Heves, Hősök tere 4.
3000 Hatvan, Kossuth tér 8. fszt. 1.
3021 Lőrinci, Szabadság tér 25/A
3250 Pétervására, Szt Márton utca 9.
3245 Recsk, Kossuth Lajos út 93.
3300 Eger, Széchenyi utca 2.
2800 Tatabánya, Fő tér 32.
2510 Dorog, Bécsi út 33.
2900 Komárom, Mártirok útja 23.
2890 Tata, Ady Endre utca 1-3.
2500 Esztergom, Rákóczi tér 2-4.
2840 Oroszlány, Rákóczi utca 84.
2941 Ács, Gyár utca 14.
2870 Kisbér, Batthyány tér 5.
2536 Nyergesújfalu, Kossuth Lajos
utca 126.
2800 Tatabánya, Bárdos László utca
2.
3100 Salgótarján, Rákóczi út 22.
2660 Balassagyarmat, Rákóczi
fejedelem utca 44.
3060 Pásztó, Fő utca 73/a.
2651 Rétság, Rákóczi Ferenc utca
28-30.
3070 Bátonyterenye, Bányász utca
1/a.
3170 Szécsény, Feszty Árpád utca 1.
2700 Cegléd, Szabadság tér 6.
2370 Dabas, Bartók Béla út 46.
2100 Gödöllő, Szabadság tér 12-13.
2200 Monor, Kossuth Lajos utca 88/b.
2760 Nagykáta, Bajcsy-Zsilinszky
utca 1.
2300 Ráckeve, Szt István tér 3.
2000 Szentendre, Pannónia út 1-3.
2600 Vác, Széchenyi utca 3-7.
2120 Dunakeszi, Barátság utca 29.
2030 Érd, Budai út 24.
2750 Nagykőrös, Szabadság tér 2.
2440 Százhalombatta, Szent István
tér 8.
2740 Abony, Kossuth Lajos tér 3.
2730 Albertirsa, Vasút utca 4/a.
2170 Aszód, Kossuth Lajos utca 42-
46.
2040 Budaörs, Szabadság utca
131/a.
2330 Dunaharaszti, Dózsa György
utca 25.
2230 Gyömrő, Szt István utca 17.
2340 Kiskunlacháza, Dózsa György
utca 219.
2364 Ócsa, Szabadság tér 1.
2721 Pilis, Rákóczi utca 9.
2085 Pilisvörösvár, Fő utca 60
2310 Szigetszentmiklós, Ifjúság útja
17.
2220 Vecsés, Fő utca 170.
2360 Gyál, Kőrösi út 160.
2143 Kistarcsa, Hunyadi utca 7.
2119 Pécel, Kossuth tér 4.
2092 Budakeszi, Fő utca 174.
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
2040 Budaörs, Sport út 2-4.
2120 Dunakeszi, Nádas utca 6.
2310 Szigetszentmiklós, Háros utca
120.
2141 Csömör, Határ út 6.
2013 Pomáz, József Attila utca 17.
2083 Solymár, Szent Flórián utca 2.
2220 Vecsés, Fő utca 246-248
2112 Veresegyház, Fő út 52
2234 Maglód, Esterházy utca 1.
2030 Érd, Iparos út 5.
2225 Üllő, Pesti út 92/b.
7400 Kaposvár, Széchenyi tér 2.
7400 Kaposvár, Honvéd utca 55.
8700 Marcali, Rákóczi utca 6-10.
7500 Nagyatád, Korányi Sándor utca
6.
8600 Siófok, Fő tér 10/a
7570 Barcs, Séta tér 5.
8630 Balatonboglár, Dózsa György
utca 1.
8840 Csurgó, Petőfi tér 20.
8640 Fonyód, Ady Endre utca 25.
8693 Lengyeltóti, Csalogány utca 2.
8660 Tab, Kossuth Lajos utca 96.
7561 Nagybajom, Fő út 107
8638 Balatonlelle, Rákóczi út 202-204
4400 Nyíregyháza, Rákóczi utca 1.
4900 Fehérgyarmat, Móricz
Zsigmond utca 4.
4600 Kisvárda, Szt László utca 30.
4700 Mátészalka, Szalkay László
utca 34.
4300 Nyírbátor, Zrínyi utca 1.
4800 Vásárosnamény, Szabadság tér
33.
4561 Baktalórántháza, Köztársaság
tér 4.
4233 Balkány, Szakolyi utca 5.
4765 Csenger, Ady Endre utca 1.
4492 Dombrád, Szabadság tér 7.
4501 Kemecse, Móricz Zsigmond
utca 18.
4320 Nagykálló, Árpád utca 10.
4450 Tiszalök, Kossuth Lajos utca
52/a.
4440 Tiszavasvári, Kossuth Lajos
utca 6.
4244 Újfehértó, Fő tér 15.
4625 Záhony, Ady Endre út 27-29.
5000 Szolnok, Szapáry utca 31.
5000 Szolnok, Nagy Imre krt. 2/a.
5100 Jászberény, Lehel vezér tér 28.
5440 Kunszentmárton, Kossuth Lajos
utca 2.
5350 Tiszafüred, Piac tér 3.
5200 Törökszentmiklós, Kossuth
Lajos út 141.
5300 Karcag, Kossuth Lajos tér 15.
5310 Kisújszállás, Szabadság tér 6.
5400 Mezőtúr, Szabadság tér 29.
5420 Túrkeve, Széchenyi utca 32-34.
5130 Jászapáti, Kossuth Lajos út 2-8.
5123 Jászárokszállás, Rákóczi
Ferenc utca 4-6.
5055 Jászladány, Kossuth Lajos utca
77.
5340 Kunhegyes, Szabadság tér 4.
5321 Kunmadaras, Karcagi út 2-4.
5435 Martfű, Szolnoki út 142
5430 Tiszaföldvár, Kossuth Lajos út
191.
5000 Szolnok, Széchenyi krt. 135.
7100 Szekszárd, Szent István tér 5-7.
7030 Paks, Dózsa György utca 33.
7090 Tamási, Szabadság utca 33
7150 Bonyhád, Szabadság tér 10.
7200 Dombóvár, Dombó Pál utca 3.
7020 Dunaföldvár, Béke tér 11.
7081 Simontornya, Petőfi utca 68.
7130 Tolna, Kossuth Lajos utca 31.
7030 Paks, Kishegyi út 44/a
7140 Bátaszék, Budai út 13.
9700 Szombathely, Fő tér 3-5.
9700 Szombathely, Rohonci út 52.
9900 Körmend, Vida József utca 12.
9600 Sárvár, Batthyány utca 2.
9500 Celldömölk, Kossuth Lajos utca
18.
9730 Kőszeg, Kossuth Lajos utca 8.
9970 Szentgotthárd, Mártírok út 2.
9800 Vasvár, Alkotmány utca 2.
9737 Bük, Kossuth Lajos utca 1-3.
9700 Szombathely, Király utca 10.
9970 Szentgotthárd, Füzesi út 15.
8200 Veszprém, Brusznyai Árpád
utca 1.
8400 Ajka, Szabadság tér 18.
8500 Pápa, Fő tér 22.
8300 Tapolca, Fő tér 2.
8230 Balatonfüred, Petőfi Sándor
utca 8.
8100 Várpalota, Újlaky út 2.
8220 Balatonalmádi, Baross Gábor
utca 5/a.
8460 Devecser, Kossuth Lajos utca
13.
8330 Sümeg, Kisfaludy Sándor tér 1.
8420 Zirc, Rákóczi tér 15.
8900 Zalaegerszeg, Kisfaludy utca
15-17.
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
8800 Nagykanizsa, Deák tér 15.
8960 Lenti, Dózsa György utca 1.
8360 Keszthely, Kossuth Lajos utca
38.
8868 Letenye, Szabadság tér 8.
8790 Zalaszentgrót, Batthyány utca
11.
8380 Hévíz, Erzsébet királyné utca
11.
1054 Budapest, Szabadság tér 7-8.
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
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STATEMENT ON CORPORATE GOVERNANCE PRACTICE
Corporate governance practice
OTP Bank Plc., being registered in Hungary, has a corporate governance policy that complies with the
provisions on companies of the act applicable (Civil Code). As the company conducts banking operations, it
also adheres to the statutory regulations pertaining to credit institutions.
Beyond fulfilling the statutory requirements, as a listed company on the Budapest Stock Exchange (BSE), the
company also makes an annual declaration on its compliance with the BSE’s Corporate Governance
Recommendations. After being approved by the General Meeting, this declaration is published on the websites
of both the Stock Exchange (www.bet.hu) and the Bank (www.otpbank.hu).
System of internal controls
OTP Bank Plc., as a provider of financial and investment services, operates a closely regulated and state-
supervised system of internal controls.
OTP Bank Plc. has detailed risk management regulations applicable to all types of risks (credit, country,
counterparty, market, liquidity, operational, compliance), which are in compliance with the regulations on
prudent banking operations. Its risk management system extends to cover the identification of risks, the
assessment and analysis of their impact, elaboration of the required action plans and the monitoring of their
effectiveness and results. The business continuity framework is intended to provide for the continuity of
services. Developed on the basis of international methodologies, the lifecycle model includes process
evaluation, action plan development for critical processes, the regular review and testing of these, as well as
related DRP activities.
OTP Bank Plc.'s internal audit system is realised on several levels of control built on each other. The system
of internal checks and balances includes process-integrated control, management control, independent
internal audit organisation and executive information system. The independent internal audit organisation as
an element of internal lines of defence promotes the statutory and efficient management of assets and
liabilities, the defence of property, the safe course of business, the efficient operation of internal control
systems, the minimisation of risks, moreover it reveals and reports deviations from statutory regulations and
internal rules, makes proposal to abolish deficiencies and follows up the execution of actions. The independent
internal audit organisation annually and quarterly prepares group-level reports on control actions for the
executive boards. Once a year, the internal audit organisation with the prior opinion of the Audit Committee
draws up, for the Supervisory Board and the Board of Directors, objective and independent reports in respect
of the operation of risk management, internal control mechanisms and corporate governance functions.
Furthermore, in line with the provisions of the Credit Institutions Act, reports, once a year, to the Supervisory
Board and the Board of Directors on the regularity of internal audit tasks, professional requirements and the
conduct of audits, and on the review of compliance with IT and other technical conditions needed for the audits.
In line with the regulations of the European Union, the applicable Hungarian laws and supervisory
recommendations, OTP Bank Plc. operates an independent organisational unit with the task of identifying and
managing compliance risks.
IT Controls
Applications are developed by both in-house group resources and by third parties. OTP Bank applies
administrative, logical and physical control measures commensurate with the risk to protect the IT systems
storing and processing data, as follows:
• access to data/systems is only possible on the basis of a predefined authorisation management process
that applies the principle of least privilege, ensures segregation of responsibilities, that has regular access
right reviews and ensures that dismissed employees’ access is revoked;
• user authentication, authorisation and password management processes are controlled by policies and
audited;
• the systems have well-separated test and development environments, which ensures that program
developments or modifications are only deployed to the operatio
nal environment after proper, controlled
testing and approval;
• systems are protected by appropriate network perimeter protection, various security devices and network
segmentation, furthermore all network communications are protected;
• the IT systems that store and process data are regularly backed up and stored in controlled premises with
adequate protection for long-term retention, and the organisation carries out regular back-up tests;
• adequate redundancy is applied for IT systems that store and process data to ensure business continuity
and disaster resiliency;
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• has developed a BCP for critical systems and processes, which is regularly tested and reviewed;
• the Bank collects and retains the complete log of all data processing activities and the confidentiality,
availability, integrity and non-repudiation of these audit logs are ensured;
• there is a continuous, up-to-date protection against malicious codes;
• it ensures the regular implementation of vendor patches and updates for the environments used;
• it uses a data leakage protection solution to reduce the risk of data loss;
• it ensures the continuous monitoring of the operation of the physical and virtual environment system
elements, and the detection and management of events, where possible automatically;
• the above measures are documented at an appropriate level, which ensures the traceability of the
implementation of data security requirements in a transparent manner;
• it ensures the irretrievable deletion of the data stored on the media, the destruction of the media and the
documentation of the destruction of the media during secure operational media disposal processes;
• it enforces data protection requirements already at the design stage of the implementation of the
IT systems storing and processing personal data and of the systems operational processes related to
them;
• it ensures that its employees have adequate knowledge of data protection requirements and provides
regular data protection and information security training for them.
General meeting
The General Meeting is the supreme governing body of OTP Bank Plc. The regulations pertaining to its
operation are set forth in the Company’s Articles of Association, and comply fully with both general and special
statutory requirements. Information on the General Meeting is available in the Corporate Governance Report.
In view of the situation caused by the epidemic, on 22 February 2021 the Parliament voted Act I of 2021 on
the prevention of the coronavirus pandemic, which extended the scope of the Government Decree 502/2020
(XI.16.) (Government Decree) until 22 May 2021. Pursuant to such, in line with Section 9 of the Government
Decree, the resolutions on the published agenda items were passed by OTP Bank Plc’s Board of Directors
acting in the competence of the General Meeting on 16 April 2021.
The Extraordinary General Meeting was held on 15 October 2021 in accordance with the general rules,
traditionally, with the personal participation of the shareholders, subject to Section 3 (1) of the Government
Decree, also in line with the Act I of 2021 on the prevention of the coronavirus pandemic.
Regulations and information to be presented in the Business Report concerning securities conferring
voting rights issued by the Company and senior officials, according to the effective Articles of
Association, and ownership structure
The Company’s registered capital is HUF 28,000,001,000, that is twenty-eight thousand million one
thousand Hungarian forint, divided into 280,000,010 that is Two hundred and eighty million and ten
dematerialised ordinary shares with a nominal value of HUF 100 each, and a total nominal value of
HUF 28,000,001,000, that is twenty eight billion one thousand Hungarian forint.
The ordinary shares of the Company specified all have the same nominal value and bestow the same rights
in respect of the Company.
There are no restrictions in place concerning the transfer of issued securities constituting the registered
capital of the Company.
No securities with special control rights have been issued by the Company.
Special Employee Partial Ownership Plan Organization No. I. of OTP Employees and Special Employee
Partial Ownership Plan Organization No. II. of OTP Employees (hereinafter referred to as: OTP SEPOPs)
were established based on the decision of the Company’s certain employees and executives considered as
employees pursuant to the Act XLIV of 1992 on Employee Partial Ownership Plan. Management rights of
OTP SEPOPs are exercised by a trust named Alapítvány az OTP Munkavállalók Különleges Résztulajdonosi
Programjáért, founded by the same employees setting up OTP SEPOPs. The Company did not participate
either in foundation or in management of OTP SEPOPs.
The Company in line with the ESOP Act initiated an employee share ownership plan having a remuneration
purpose and founded OTP Bank ESOP Organization for its execution (hereinafter referred to as ESOP
Organization). Pursuant to the laws, the management rights over the ESOP Organization are exercised by
a law firm, the so called trustee. In the case of the ESOP Organization Szűcs Law Firm is entitled to exercise
the authorities of the trustee. The Company participated in the foundation of the ESOP Organization,
however, after its foundation it cannot participate in its management, and according to the laws, it is not
entitled to either give orders or to recall the trustee.
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Rules on the restrictions of the voting rights:
The Company’s ordinary shares confer one vote per share.
An individual shareholder or group of shareholders may not exercise voting rights in respect of in an extent
exceeding 25%, or – if the voting rights of another shareholder or group of shareholders exceed 10% –
exceeding 33% of the total voting rights represented by the shares conferring voting rights at the Company’s
General Meeting.
The shareholder is obliged to notify the Company’s Board of Directors without delay if the shareholder
directly or indirectly, or together with other shareholders in the same group of shareholders, holds more than
2% of the voting rights represented by the shares conferring voting rights at the Company’s General Meeting.
Concurrently with this, the shareholder is obliged to designate the shareholders through which the indirect
voting right exists, or the members of the group of shareholders. In the event of a failure to provide such
notification, or if there are substantive grounds for assuming that the shareholder has made a misleading
declaration regarding the composition of the shareholder group, then the shareholder’s voting right shall be
suspended and may not be exercised until the shareholder has met the above obligations. The notification
obligation stipulated in this paragraph and the related legal consequences are also incumbent upon
individuals who are classified or may be classified as the Company’s shareholders under Article 61 of the
Capital Markets Act. The Company must also be provided with proof of the conditions for exemption from
the notification obligation in accordance with Section 61 (7)-(8) and Section 61 (10)-(11)-(12), of the Capital
Markets Act.
Shareholder group: the shareholder and another shareholder, in which the former has either a direct or
indirect shareholding or has an influence without a shareholding (collectively: a direct and/or indirect
influence); furthermore: the shareholder and another shareholder who is exercising or is willing to exercise
its voting rights together with the former shareholder, regardless of what type of agreement between the
participants underlies such concerted exercising of rights.
For determining the existence and extent of the indirect holding, the rules of the Credit Institutions Act
relating to the calculation of indirect ownership shall be applied.
If the voting rights that may be exercised by a shareholder group exceed the threshold stipulated in the first
paragraph of this section, the voting rights shall be reduced in such a way that the voting rights relating to
the shares most recently acquired by the group of shareholders shall not be exercisable.
If there are substantive grounds to presume that the exercising of voting rights by any shareholder or
shareholders might result in a breach of the rules of the Capital Markets Act relating to the acquisition of a
controlling interest, the Board of Directors’ authorised representative responsible for the registration of
shareholders at the venue of the General Meeting, or the Chairman of the General Meeting, may exclude
the affected shareholders from attending the General Meeting or exercising voting rights.
The General Meeting has exclusive authority with respect to the decision regarding the delisting of the
shares (qualified majority). When making the decisions, shares embodying multiple voting rights shall
represent one share.
The Company is not aware of any kind of agreements among the owners that could give rise to the restriction
of the transfer of issued securities and/or the voting rights.
Rules on the appointment and removal of executive officers, and rules on amendment of the Articles of
Association:
The Board of Directors has at least 5, and up to 11 members.
When making the decisions, shares embodying multiple voting rights shall represent one share. The
members of the Board of Directors are elected by the General Meeting based on its decision uniformly either
for an indefinite period or for five years; in the latter case the mandate ends with the General Meeting
concluding the fifth financial year following the election. The mandate of a member elected during this period
expires together with the mandate of the Board of Directors.
The Board of Directors elects a Chairman and, may elect one or more Deputy Chairmen, from among its
own members, whose period of office shall be equal to the mandate of the Board of Directors. The Chairman
of the Board of Directors is also the Chief Executive Officer (Chairman & CEO) of the Company, unless the
Board of Directors decides within its competence that the position of Chairman of the Board of Directors and
the Chief Executive Officer of the Company are held by separate persons.
The membership of the Board of Directors ceases to exist by
a. expiry of the mandate,
b. resignation,
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
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c. recall,
d. death,
e. the occurrence of grounds for disqualification as regulated by law.
f. termination of the employment of internal (executive) Board members.
The General Meeting has exclusive authority with respect to the following matters:
the recall of members of the Board of Directors, the Supervisory Board and Audit Committee, and of the
auditor; (qualified majority)
More than one third of the members of the Board of Directors and the non-executive members of the
Supervisory Board may be recalled within a 12-month period only if any shareholder holds more than
33% of the shares issued by the Company, which have been obtained by the shareholder by way of
a public purchase offer.
except in the cases referred by these Articles of Association to the authority of the Board of Directors,
the establishment and amendment of the Articles of Association; (qualified majority); the General
Meeting decides on proposals concerning the amendment of the Articles of Association – based on a
resolution passed by shareholders with a simple majority – either individually or en masse.
The Board of Directors is obliged to
prepare the Company’s financial statements in accordance with the Accounting Act, and make a
proposal for the use of the profit after taxation;
prepare a report once a year for the General Meeting, and once every three months for the Supervisory
Board, concerning management, the status of the Company’s assets and business policy;
provide for the proper keeping of the Company's business books;
perform the tasks referred to its authority under the Credit Institutions Act, in particular:
- ensuring the integrity of the accounting and financial reporting system;
- elaborating the appropriate strategy and determining risk tolerance levels for each business unit
concerned;
- setting risk assumption limits;
- providing the necessary resources for the management or risk, the valuation of assets, the use of
external credit ratings and the application of internal models.
The following, in particular, come under the exclusive authority of the Board of Directors:
election of the Chairman & Chief Executive Officer of the Company, and exercising employer’s right in
respect thereof;
election of one or more Deputy Chairmen of the Board of Directors;
determination of the annual plan;
the analysis and assessment of the implementation of business-policy guidelines, on the basis of the
Company’s quarterly balance sheet;
decisions on transactions referred to the authority of the Board of Directors by the Company's
organisational and operational regulations;
decision on launching, suspending, or terminating the performance of certain banking activities within
the scope of the licensed activities of the Company;
designation of the employees entitled to sign on behalf of the Company;
decision on the increasing of registered capital at the terms set out in the relevant resolution of the
General Meeting;
decision to acquire treasury shares at the terms set out in the relevant resolution of the General Meeting;
decision on approving internal loans in accordance with the Credit Institutions Act;
decision on the approval of regulations that fundamentally determine banking operations, or are referred
to its authority by the Credit Institutions Act. The following shall qualify as such regulations:
- the collateral evaluation regulations,
- the risk-assumption regulations,
- the customer rating regulations,
- the counterparty rating regulations,
- the investment regulations,
- the regulations on asset classification, impairment and provisioning,
- the organisational and operational regulations, which contain the regulations on the procedure for
assessing requests related to large loans,
- the regulations on the transfer of signatory rights;
the decision on approving the Rules of Procedure of the Board of Directors;
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decision on steps to hinder a public takeover procedure;
decision on the acceptance of a public purchase offer received in respect of treasury shares;
decision on the commencement of trading in the shares in a regulated market (flotation);
decision on the cessation of trading in the shares in a given regulated market, provided that the shares
are traded in another regulated market (hereinafter: transfer).
The Board of Directors is exclusively authorised to:
decide, in the cases specified in the Civil Code, on acceptance of the Company’s interim balance sheet,
subject to the prior approval of the Supervisory Board;
decide, instead of the General Meeting, to pay an advance on dividends, subject to the preliminary
approval of the Supervisory Board;
make decisions regarding any change in the Company’s name, registered office, permanent
establishments and branches, and in the Company’s activities – with the exception of its core activity –
and, in relation to this, to modify the Articles of Association should it become necessary to do so on the
basis of the Civil Code or the Articles of Association;
make decision on mergers (if, according to the provisions of the law on the transformation, merger and
demerger of legal entities, the approval of the General Meeting is not required in order for the merger to
take place).
The Board of Directors directly exercises employer's rights in respect of the Chairman & CEO. The person
affected by a decision may not participate in the decision making. Employer rights in respect of the executive
directors of the Company are exercised by the Board of Directors through the Chairman & CEO, with the
proviso that the Board of Directors must be notified in advance of the appointment and dismissal of the
Deputy CEOs. With regard to issues related to the exercising of employer's rights in respect of employees,
the Company is represented by the Chief Executive Officer and by the senior company employees defined
in the Organisational and Operational Regulations of the Company, in accordance with the delegation of
authority approved by the Board of Directors. If the Chairman of the Board of Directors and the CEO are
different persons, the employer rights in respect of the other executive directors of the Company (CEO,
deputy CEOs) are exercised by the Board of Directors through the Chairman of Board of Directors, with the
proviso that the Board of Directors shall be notified in advance of the appointment and dismissal of the CEO
and Deputy CEOs. With regard to issues related to the exercising of employer's rights in respect of
employees, the Company is represented by the persons defined in the Organisational and Operational
Regulations of the Company, in accordance with the delegation of authority approved by the Board of
Directors.
The Board of Directors may delegate, to individual members of the Board of Directors, to executive directors
employed by the Company, and to the heads of the individual service departments, any task that does not
come under the exclusive authority of the Board of Directors in accordance with these Articles of Association
or a General Meeting resolution.
The Company may acquire treasury shares in accordance with the rules of the Civil Code. The prior
authorisation of the General Meeting is not required for the acquisition of treasury shares if the acquisition
of the shares is necessary in order to prevent a direct threat of severe damage to the Company (this
provision is not applicable in the event of a public purchase offer aimed at buying up the Company’s shares),
as well as if the Company acquires the treasury shares in the context of a judicial procedure aimed at the
settlement of a claim to which the Company is entitled, or in the course of a transformation.
The Company has not made agreements in the meaning of points (j) and (k) in paragraph 95/A of
Act No. C of 2000 on Accounting.
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ANNUAL REPORT 2021
Ownership structure of OTP Bank Plc.
Description of owner
Total equity
1 January 2021 31 December 2021
Ownership
share
Voting
rights
1
Quantity
Ownership
share
Voting
rights
1
Quantity
Domestic institution/company 20.93% 21.26% 58,605,628 26.66% 26.97% 74,637,180
Foreign institution/company 71.60% 72.73% 200,480,153 66.69% 67.47% 186,733,858
Domestic individual 4.79% 4.87% 13,424,090 4.57% 4.63% 12,805,389
Foreign individual 0.11% 0.12% 319,346 0.11% 0.12% 319,712
Employees, senior officers 0.85% 0.87% 2,393,390 0.69% 0.70% 1,941,018
Treasury shares
2
1.55% 0.00% 4,334,140 1.16% 0.00% 3,251,484
Government held owner 0.08% 0.08% 219,800 0.07% 0.07% 188,326
International Development Institutions 0.04% 0.04% 108,981 0.04% 0.04% 120,871
Other
3
0.04% 0.04% 114,482 0.00% 0.00% 2,172
TOTAL 100.00% 100.00% 280,000,010 100.00% 100.00% 280,000,010
1
Voting rights in the General Meeting of the Issuer for participation in decision-making.
2
Treasury shares do not include the OTP shares held by ESOP (OTP Bank Employee Stock Ownership Plan Organization). Pursuant to Act V of 2013 on
the Civil Code, OTP shares held by the ESOP are not classified as treasury shares, but the ESOP must be consolidated in accordance with IFRS 10
Consolidated Financial Statements standard. On 31 December 2021 ESOP owned 7.656.897 OTP shares.
3
Non-identified shareholders according to the shareholders’ registry.
Number of treasury shares held in the year under review (2021)
1 January 31 March 30 June 30 September 31 December
OTP Bank 4,334,140 4,330,609 1,120,786 1,077,322 3,251,484
Subsidiaries 0 0 0 0 0
TOTAL 4,334,140 4,330,609 1,120,786 1,077,322 3,251,484
SHAREHOLDERS WITH OVER/AROUND 5% STAKE AS AT 31 DECEMBER 2021
Name Nationality
1
Activity
2
Number of
shares
Ownership
3
Voting
rights
3,4
Notes
5
MOL (Hungarian Oil and Gas Company Plc.) D C 24,000,000 8.57% 8.67% -
KAFIJAT Group D C 19,661,409 7.02% 7.10% -
KAFIJAT Ltd. D C 9,839,918 3.51% 3.56% -
MGTR Alliance Ltd. D C 9,836,491 3.51% 3.55% -
Groupama Group F/D C 14,311,769 5.11% 5.17% -
Groupama Gan Vie SA F C 14,140,000 5.05% 5.11% -
Groupama Biztosító Ltd. D C 171,769 0.06% 0.06% -
1
Domestic (D), Foreign (F).
2
Custodian (CU), Public Institution (PU), International Development Institutions (ID), Institutional (I), Company (C), Private (PR),
Employee or senior officer (E).
3
Rounded to two decimals.
4
Voting rights in the General Meeting of the Issuer for participation in decision-making.
5
Eg: professional investor, financial investor, etc.
Senior officers, strategic employees and their shareholding of OTP shares as at 31 December 2021
Type
1
Name Position
Commencement
date of the term
Expiration/termination
of the term
Number of
shares
IT dr. Sándor Csányi
2
Chairman and CEO 15/05/1992 2026 293,907
IT Tamás Erdei Deputy Chairman 27/04/2012 2026 32,285
IT Gabriella Balogh member 16/04/2021 2026 1,393
IT Mihály Baumstark member 29/04/1999 2026 44,000
IT Péter Csányi member, Deputy CEO 16/04/2021 2026 1
IT dr. István Gresa member 27/04/2012 2026 173,258
IT Antal Kovács member, Deputy CEO 15/04/2016 2026 79,244
IT György Nagy
3
member 16/04/2021 2026 0
IT dr. Márton Gellért Vági member 16/04/2021 2026 0
IT dr. József Vörös member 15/05/1992 2026 171,114
IT László Wolf member, Deputy CEO 15/04/2016 2026 532,143
FB Tibor Tolnay Chairman 15/05/1992 2023 54
FB dr. Gábor Horváth Deputy Chairman 19/05/1995 2023 0
FB Klára Bella member 12/04/2019 2023 344
FB dr. Tamás Gudra member 16/04/2021 2023 0
FB András Michnai member 25/04/2008 2023 100
FB Olivier Péqueux member 13/04/2018 2023 0
SP László Bencsik Deputy CEO 10,038
SP György Kiss-Haypál Deputy CEO 3,137
TOTAL No. of shares held by management: 1,341,018
1
Employee in strategic position (SP), Board Member (IT), Supervisory Board Member (FB)
2
Number of OTP shares owned by Dr. Sándor Csányi directly or indirectly: 4,080,034
3
Number of OTP shares owned by György Nagy directly or indirectly: 600,000
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
Committees
1
Members of the Board of Directors
Dr. Sándor Csányi – Chairman
Mr. Tamás Erdei – Deputy Chairman
Ms. Gabriella Balogh
2
Mr. Mihály Baumstark
Dr. Tibor Bíró
3
Mr. Péter Csányi
2
Dr. István Gresa
Mr. Antal Kovács
Mr. György Nagy
2
Dr. Antal Pongrácz
3
Dr. László Utassy
3
Dr. Márton Gellért Vági
2
Dr. József Vörös
Mr. László Wolf
Members of the Supervisory Board
Mr. Tibor Tolnay – Chairman
Dr. József Gábor Horváth – Deputy Chairman
Ms. Klára Bella
Dr. Tamás Gudra
4
Mr. András Michnai
Mr. Olivier Péqueux
Dr. Márton Gellért Vági
5
Members of the Audit Committee
Dr. József Gábor Horváth – Chairman
Mr. Tibor Tolnay – Deputy Chairman
Dr. Tamás Gudra
6
Mr. Olivier Péqueux
Dr. Márton Gellért Vági
7
The résumés of the committee and board members are available in the Corporate Governance Report/Annual
Report.
Personal and organizational changes
On 12 March 2021, the labour contract of Mr. Tibor Johancsik, Deputy CEO in charge of IT had been terminated
by mutual agreement. The new head of the Digital Division (IT Division until 1 May 2021) is Mr. Péter Csányi,
who had been in charge of digital developments and sales as managing director until his appointment. Key task
of the area in transition is going to be the efficient support of the Bank’s digital transformation through further
improving customer experience. The new strategy of the division is aimed at creating such an IT that has
business competence, but also serving as a platform for other business areas while setting the pace of
digitalization in accordance with the National Bank of Hungary’s digital recommendations.
On 16 April 2016 the Board of Directors acting in the competency of the Annual General Meeting elected Ernst
& Young Ltd. as the Bank’s auditor concerning the audit of OTP Bank Plc.’s separate and consolidated annual
financial statements in accordance with International Financial Reporting Standards for the year 2021, from
1 May 2021 until 30 April 2022.
On 16 April the Board of Directors acting in the competency of the Annual General Meeting, elects Dr. Tamás
Gudra as member of the Supervisory Board (SB) and of Audit Committee (AC) of the Company until the Annual
General Meeting of the Company closing the 2022 business year, but not later than 30 April 2023.
1
Personal changes can be found in the „Personal and organizational changes” chapter.
2
From 16 April 2021, she/he is a member of the Board of Directors of OTP Bank Plc.
3
His term of office expired on 16 April 2021.
4
From 16 April 2021, he is a member of the Supervisory Board of OTP Bank Plc.
5
His position on the Supervisory Board was terminated on 16 April 2021.
6
From 16 April 2021, he is a member of the Audit Committe of OTP Bank Plc.
7
His position on the Audit Committee was terminated on 16 April 2021.
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
On 16 April 2021 the Board of Directors acting in the competency of the Annual General Meeting, elects
Dr. Sándor Csányi
Mr. Antal György Kovács
Mr. László Wolf
Mr. Tamás György Erdei
Mr. Mihály Baumstark
Dr. István Gresa
Dr. József Zoltán Vörös
Mr. Péter Csányi
Mrs. Gabriella Balogh
Mr. György Nagy
Dr. Gellért Márton Vági
as members of the Board of Directors (BoD) of the Company until the Annual General Meeting of the Company
closing the 2025 business year, but not later than 30 April 2026.
On 16 April 2021, Dr. Sándor Csányi was elected as Chairman of the Bank’s Board of Directors and in
accordance with subsection 4 of section 9 of the Articles of Association of the Company as Chief Executive
Officer (Chairman & CEO).
Dr. Sándor Csányi performs his duties until the closing AGM of the fiscal year 2025 but latest until 30 April 2026.
On 16 April 2021 Mr. Tamás György Erdei, the member of the Board of Directors, was elected a Deputy
Chairman of the Board of Directors.
Mr. Tamás György Erdei performs his duties until the closing AGM of the fiscal year 2025 but latest until
30 April 2026
Operation of the executive boards
OTP Bank Plc. has a dual governance structure, in which the Board of Directors is the Company’s executive
management body in its managerial function, while the Supervisory Board is the management body in its
supervisory function of the Company. It controls the supervision of the lawfulness of the Company’s operation,
its business practices and management, performs oversight tasks and accepts the provisions of the Bank
Group's Remuneration Policy. The effective operation of Supervisory Board is supported by the Audit
Committee, as a committee, which also monitors the internal audit, the risk management, the reporting systems
and the activities of the auditor.
In order to assist the performance of the governance functions the Board of Directors founded and operates,
as permanent or other committees, such as the Management Committee, the Remuneration Committee, the
Nomination Committee and the Risk Assumption and Risk Management Committee. To ensure effective
operation OTP Bank Plc. also has a number of further permanent committees.
OTP Bank Plc. gives an account of the activities of the executive boards and the committees every year in its
Corporate Governance Report.
The Board of Directors held 9, the Supervisory Board held 6 meetings, while the Audit Committee held
2 meetings in 2021. In addition, resolutions were passed by the Board of Directors on 180, by the Supervisory
Board on 90 and by the Audit Committee on 28 occasions by written vote.
Policy of diversity
OTP Bank Plc. determines and regulates the criteria for the selection of senior executives in line with European
Union as well as domestic legal requirements and directives fundamentally determining the operation of credit
institutions.
When designating members of the management bodies (Board of Directors, Supervisory Board) as well as
appointing members of the Board of Directors and administrative members (Management), OTP Bank Plc.
considers the existence of professional preparation, the high-level human and leadership competence, the
versatile educational background, the widespread business experience and business reputation of the utmost
importance, at the same time, it is also highly committed to taking efficient measures in order to ensure diversity
with regard to corporate operation, including the gradual improvement in women’s participation rate.
OTP Bank Plc.’s Nomination Committee continuously keeps tracking the European Union and domestic
legislation relating to women’s quota on its agenda, in that when unambiguously worded expectations are
announced, it promptly takes the necessary measures. In accordance with OTP Bank Plc.’s currently approved
strategy, the goal is to have at least one female member in both the Bord of Directors and the Supervisory
Board.
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
It is important to note, however, that, as a public limited company, the selection of the members of the
management bodies falls within the exclusive competence of the General Meeting upon which – beyond its
capacity to designate enforcing the above aspects to maximum effect – OTP Bank Plc. has no substantive
influence.
According to OTP Bank Plc.’s Articles of Association, a Board of Directors comprising 5-11 members and a
Supervisory Board comprising 5-9 members are set up at OTP Bank Plc. Currently the Board of Directors
operates with 11 members and has one female member, the Supervisory Board comprises 6 members and
has one female member. The management of OTP Bank Plc. currently comprises 6 members and has no
female member.
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
ENVIRONMENTAL POLICY, ENVIRONMENTAL PROJECTS
Environmental protection principles
OTP Group is committed to the protection of the environment, the combating of climate change and its impacts,
and the preservation and low-impact use of natural resources. OTP Bank’s environmental activities are
regulated in its Environmental Regulation, which is revised annually. The Regulation ensures legal compliance
and the consideration and integration of environmental criteria into the Bank’s business operations in order to
minimise the environmental impacts of operating and maintaining the Bank’s organisation. It also sets out the
rules on implementing the principles of sustainable procurement. OTP Group members operate in full
compliance with environmental legislation and received no fines in 2020.
In CDP’s Climate Change Questionnaire, OTP Group was rated at B- in 2021, thus retaining its previous rating.
The environmental impacts of the OTP Group are related to the provision of financial services and directly from
its operations. In connection with the provision of financial services, the management of environmental risks
and the exploitation of environmental opportunities take place within the framework of the Environmental,
Social and Governance (ESG) strategy; therefore, these activities are presented in the chapter Non-financial
Report.
Our efforts to reduce the direct environmental impact of OTP Group’s operations are centred around improving
energy efficiency and reducing paper usage. The environmental risks associated with our operations are
analysed and managed within our operational risk management process. Potential risks are identified during
the annual process-based self-assessment, and the assessment of climate change risks is also included in
the scenario analysis of risks with low probability but high impact.
Energy consumption and business travel
OTP Group uses state-of-the-art technology in new construction and renovation projects; we are also
continually expanding our use of LED lighting technology. We are constantly seeking opportunities to increase
energy efficiency, by analysing the energy efficiency and consumption characteristics of our buildings. As part
of our renovation process, we are replacing air conditioning units, always ensuring that the new units use
environmentally-friendly coolants. Thanks to its energy efficiency investments in 2021, OTP Bank consumed
1,400 GJ less energy.
Whenever a branch of the parent bank is renovated, we always examine the possibility of installing solar panels
and heat pumps. In 2021, we installed solar panels at two branches and a holiday resort. Our systems
generated a total of 842 GJ energy from solar power. Moreover, our central archives facility has been using
geothermal energy for several years, amounting to 3,499 GJ in 2021. The solar panels of our subsidiaries
generated a total of 893 GJ of solar power. We are committed to using green electricity. One of DSK Bank's
data centres in Sofia procures electricity from 100% renewable sources, and from 2022, we will cover 100%
of the electricity demand of the parent bank and our Serbian and Croatian subsidiaries in the same way.
Energy use across the Banking Group has been greatly impacted by the pandemic. Regarding ventilation and
fresh air in our buildings, air recirculation was suspended and ventilation was intensified instead, which
increased our energy usage; however, the high percentage of staff working from home reduced our electricity
consumption.
The number of business trips and the size of the vehicle fleet are determined by the needs of the business.
Our Group’s vehicle policy sets carbon limits; moreover, the choice of cars includes environmentally-friendly
vehicles in all vehicle categories. In 2021, our Romanian subsidiary purchased two electric cars, our Bulgarian
bank seven and our Croatian bank three hybrid cars. The number of kilometres travelled also decreased at
group level and for OTP Bank, partly due to the measures related to the pandemic and partly due to business
reasons. The amount of business travel has been reduced significantly by the use of online meetings, which
has become common practice due to hybrid work.
Our existing bicycle storage facilities continued to be available to both customers and employees in 2021.
OTP Bank provided new storage facilities at three branches and the new Record Office, our Bulgarian and
Ukrainian subsidiaries have each created new bicycle storage sp
aces at two locations, while the Albanian
bank provided bicycle storage at five locations at the capital's branches.
Energy consumption figures are presented for OTP Bank. The bank’s overall energy consumption decreased
by 5% compared to the previous year. Energy consumption per capita is unchanged.
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
Volume of energy consumption, OTP Bank 2020 2021
Total energy consumption (GJ) 251,730
1
263,228
Per capita energy consumption (GJ) 26.75 26.75
Energy consumption data are derived from readings; the measured consumption volumes are converted to energy using local average
calorific values
The projection of the per capita value is the average number of full-time employees (TMD).
1
Data adjusted for the consumption of Monicomp merged into OTP Bank, which was not available at the time of the previous year's
statement.
Efforts to reduce paper use
OTP Group has been consistently endeavouring to reduce paper use and printing. OTP Bank reduced its office
paper usage by 17% over 2020, with the pandemic and increased rates of working from home playing a
significant role in this development. Thanks to a change in printing technology, paper consumption decreased
by 6.5%; however, at the group level, there was no further decrease compared to the drop in 2020. At our
Romanian, Ukrainian and Russian subsidiaries, the use of paper has decreased with the expansion of digital
processes.
OTP Bank and its Romanian subsidiary increased its share of recycled paper in paper use. OTP Bank uses
FSC-certified paper for its invoices and marketing flyers, as well as recycled paper for DM letters. Our Serbian
subsidiary also uses FSC-certified paper and our Slovenian subsidiary PEFC-certified paper.
Paper usage quantities, OTP Bank 2020 2021
Total amount of paper used (t) (office, packaging, indirect) 1,137 978
Per capita paper use (kg)
1
121 99
1
The projection is based on the average number of full-time employees (TMD).
Sustainable use and waste management
We follow the principle of using all our equipment, devices and machines for the longest time reasonably
possible. We explicitly aim to use furniture until the end of its lifecycle, reusing it multiple times and ensuring
the compatibility of replacements. OTP Bank, DSK Bank, OTP Bank Romania and OTP Banka Srbija all follow
the practice of making charitable donations of any furniture no longer used but in good condition, as well as
functioning IT equipment (mostly computers and laptops), to institutions and organisations in need.
OTP Bank was the first bank in Hungary to issue a bank card made largely (85%) of recycled plastic. The card
was available to junior customers, and we issued 50,000 recycled cards to our customers over the year.
In 2021, our Serbian subsidiary reduced its purchases of plastic packaging products and began using paper
cups for water dispensers. Our Romanian, Croatian, Serbian, Montenegrin and Moldovan subsidiaries also
use refilled toners to reduce waste from the use of toners and ink cartridges.
All members of OTP Group collect and manage hazardous waste and paper containing business secrets
selectively, in compliance with the relevant laws and regulations. The selective collection of non-confidential
paper waste, PET bottles and glass is available in the head office buildings of OTP Bank, while the collection
of packaging metal has also been available since 2021. During the year, we also set up selective waste
collection in ten bank branches. Our Ukrainian subsidiary operates selective paper collection at its head office
building. Our Serbian subsidiary collects paper waste selectively in its branches and head office buildings. Our
Albanian subsidiary collects paper waste selectively. Our Romanian subsidiary collects all paper, metal, glass
and plastic selectively. Our Slovenian subsidiary also collects communal waste selectively (including
biodegradable food waste). Our Croatian subsidiary has collected paper and plastic waste selectively for years,
and from 2021, metal and glass waste will also be collected separately. DSK Bank operates selective waste
collection at its sites in Sofia and Varna and has expanded the selective collection of paper waste during the
year. Our Montenegrin subsidiary has introduced selective paper waste collection at its head office and its
archives facility.
Most members of our Banking Group have a tradition of raising awareness and taking joint action to protect
environmental and natural resources. In 2021, we supported several environmental initiatives and encouraged
the environmentally conscious behaviour of our employees.
OTP Bank and OTP Bank Serbia have joined the Mastercard Priceless Planet Coalition, launched in 2020,
and are participating in a campaign that encourages consumers to protect the environment and actively
contribute to this goal themselves. The Priceless Planet Coalition aims to preserve the environment through
the restoration of 100 million trees over five years and to help mitigate the adverse effects of climate change.
By 2022, three afforestation sites have been selected in Kenya, Brazil and Australia, but more will be added
later. OTP Bank has supported the Priceless Planet Coalition with a donation of 100,000 euros, while our
Serbian subsidiary has committed to planting a tree for each bank account opened.
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
DSK Bank was the first bank in Bulgaria to join the Mastercard Wildlife Impact Card programme. The bank and
Mastercard support the issuance of all Mastercard Wildlife Impact cards with one dollar spent on protecting
and restoring natural habitats. The credit card is made of environmentally friendly material.
DSK Bank also supported the One Tree Initiative, which aims to create an interactive map of Sofia’s tree stock.
The tree survey was conducted by volunteers, registering a total of more than 12,000 trees. The bank also
supported the initiative of the Hungarian Cultural Institute, within the framework of which bicycle storage
spaces will be installed in front of cultural institutions. The aim of the project was to ensure the environmentally
friendly accessibility of cultural institutions.
Our Croatian subsidiary also supported the “Drop into the Sea” ecological action of the Telašćica Nature
Reserve, which drew attention to the threat to marine ecosystems and fish stocks due to increasing amounts
of waste. The bank also supported Ekotlon, the biggest plogging competition. In addition to collecting litter, the
event also supported a kindergarten with eco-equipment purchased from its registration fees.
Generator (Gamechanger), our Serbian subsidiary’s local start-up programme, launched the Generator Zero
competition in 2021, specifically seeking and rewarding innovative solutions to reduce its carbon footprint.
Organisations had until the end of the year to apply for the competition, and the winner will receive mentoring
for further development and promotion in addition to the cash prize. Ten finalists were selected from the
72 projects nominated.
We are also extending the scope of our employee involvement programmes:
To promote environmental awareness, we wrote about the reduction in paper use and disposable plastics
in the OTP Bank’s online magazine.
Our Croatian subsidiary has reduced its use of plastics and implemented even more responsible waste
management in three cities under the “Green Way to Green” programme.
Our Serbian bank has launched an awareness-raising initiative among employees to increase
environmentally and business-friendly behaviour and reduce CO
2
emissions. The bank also supported the
Green Serbia 2021 campaign, which planted trees in ten cities.
In order to make employees more sensitive to the environment, our Slovenian subsidiary bank organised
a workshop and presentation for managers and e-learning for employees. In 2021, the Bank joined the
Slovenian Green Network, which brings together more than 400 companies, educational institutions,
institutes and other organisations with a variety of projects for sustainable development and social
responsibility.
Our Ukrainian subsidiary has joined the “Batteries, inward” campaign, in which used batteries are collected
and delivered to a recycling plant in Romania. The bank sent more than 200 kg of batteries to be recycled.
Following its energy renovations, our Montenegrin subsidiary will also train its employees in the energy-
conscious use of the systems.
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
NON-FINANCIAL STATEMENT – OTP BANK PLC. (SEPARATE)
The social, environmental and wider economic performance and impacts of OTP Group are also reported in
its dedicated Sustainability Report. The Sustainability Report for 2021 is a group-level report that meets the
GRI (Global Reporting Initiative) Standard and is certified by an independent third party. It is available as a
digital version on OTP Bank’s website. The information in this chapter is provided in order to comply with the
Accounting Act, while also aiming to keep the duplication of information to a minimum. Information concerning
environmental protection and climate change is provided mainly in the chapter on environmental Policy and
Environmental Protection Measures.
OTP Bank is committed to ethical business conduct in all respects; our principles are set out in our Code of
Ethics, which is binding for all our employees and agents. Our financial services and operations have significant
social and environmental impacts; thus, our objective is to manage risks responsibly while taking advantage
of opportunities and delivering positive outcomes.
In 2021, OTP Bank signed the UN Environment Programme Finance Initiative (UNEP FI), a framework for the
sustainable banking sector. The Principles are the leading framework for ensuring that banks’ strategy and
practice align with the vision society has set out for its future in the UN Sustainable Development Goals and
the Paris Climate Agreement. Banks who have signed the Principles commit to be ambitious in their
sustainability strategies, working to mainstream and embed sustainability into the heart of their business.
The integration of sustainability is supported by a strong organisational background, which was completed in
2021. The ESG transformation covers both OTP Bank and its subsidiaries and is managed by an ESG
Committee established by the Board of Directors. The Committee is the decision-making body responsible for
ESG strategy, plans and policies and for supporting the Bank's governing bodies in the performance of ESG
tasks. The Chairman of the Committee is appointed by the Board of Directors. The ESG Committee has
established an ESG Operational Subcommittee, which provides operational support to the ESG Committee
and help in the preparation of decisions. The head of the Subcommittee - also the head of ESG Business
Transformation - is the Director of the Green Programme Directorate. The three key areas of ESG integration
are ESG business transformation, ESG risk management and ESG control function.
The ESG Strategy of the OTP Group was approved by the Management Committee in 2021. The OTP Group
wishes to play a leading role regionally in financing a fair and gradual transition to a low-carbon economy as
well as building a sustainable future by offering balanced financing opportunities. OTP Group approaches ESG
from three main perspectives: as a responsible service provider, as a responsible employer and as a
responsible social player. In addition to business opportunities, the strategy includes the management of
relevant risks as well as social and corporate governance objectives. The strategy covers the period up to
2024, and our goal is to achieve full ESG integration at group level.
Green Finance
We have taken significant steps towards exploiting the potential of green finance. Green mortgage loans
(distributed by OTP Bank, and held in the balance sheet of OTP Mortgage Bank) and green covered bonds
(issued by OTP Mortgage Bank) help achieve real estate goals for sustainability. OTP Mortgage Bank has set
the strategic goal of increasing the proportion of green loans within new loan disbursements and has also
created a framework for green mortgage bonds. The bank was the first in the domestic market to issue a green
mortgage bond, building on the Hungarian National Bank's (MNB) green mortgage purchase programme. The
company issued securities with a total nominal value of HUF 95 billion in 2021, so in addition to the previously
disbursed green loans, the company also provided funds to finance the green loans to be disbursed after the
issue.
The Mortgage Bank publishes the most important financial and environmental impact data relating to mortgage
bonds annually. The first report presenting information for the year 2021 will be published at the same time as
the company’s annual report.
The MNB Green Home Programme was launched in the second half of 2021 as part of the Growth Loan
Programme. These loans with a maximum interest rate of 2.5% help customers buy and build energy-efficient
new homes. Under the programme, the Hungarian National Bank provides refinancing sources to credit
institutions at 0% interest rates, provided that the energy requirements for the financed property are met. The
central bank provides a total of HUF 200 billion in funds for the programme. We experienced interest in this
loan structure that exceeded expectations, and by the end of 2021, our bank group had concluded contracts
in the amount of HUF 20.1 billion and disbursed loans in the amount of HUF 4.9 billion.
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
Loan products of the Hungarian Development Bank (MFB) financed by both EU and from MFB’s own sources
were still available at OTP Bank in 2021. The population had access to preferential loans through these
structures in order to implement energy improvements. During the year, we entered into loan agreements
amounting to HUF 5 billion, accounting for 7% of all loans contracted through MFB Points.
We have developed four new products for corporate lending to help meet renewable energy production,
electro-mobility, green agricultural goals and high-energy office investments. The total amount of loans cleared
under the green housing, corporate and municipal capital relief programme provided by the MNB in OTP Bank
is approximately HUF 74.5 billion.
A significant proportion of green loans comprise projects for the utilisation of renewable energy sources within
the framework of project financing. Renewable energy projects represent a considerable share of green
lending in our project financing. In 2021, we signed contracts for eight new projects at OTP Group level in the
amount of HUF 81.5 billion, a significant increase compared to previous years.
The projects are located in Hungary, Bulgaria, Romania and Croatia, and the financing was partly implemented
with the involvement of the subsidiaries. The projects generated 1,175 MW of renewable capacity, but funding
is not always provided by OTP Group alone. At group level, the project financing portfolio related to renewable
energy projects had reached HUF 84.2 billion by the end of the year, of which OTP Bank's share was
HUF 57.8 billion.
In 2021, loans promoting energy efficiency, the use of renewable energy and e-mobility were available from
our subsidiaries in Croatia, Romania, Montenegro, Albania and Moldova.
Our goal for 2025 is to have green products available in all segments for OTP Core, while the development of
green financing plans at subsidiaries will take place in 2022. OTP Bank plans to issue green bonds in 2022 to
finance group-level projects.
The purpose of the OTP Fund Management OTP Climate Change 130/30 Fund is to provide investment
opportunities in the shares of developed and emerging market companies that may be the winners of
directives, legal regulations and economic policy changes aimed at mitigating the effects of climate change.
The net asset value of the Fund at the end of 2021 was HUF 36.3 billion. In 2021, together with the
OTP Omega Fund, we started to amend the management regulations of the OTP Climate Change 130/30
Fund in order to meet the criteria of a fund promoting environmental or social characteristics or a combination
thereof, i.e. Sustainable Finance Disclosure Regulation (SFDR) Article 8.
The table below shows the disclosures of the OTP Group and banks operating in EU member states in
accordance with Regulation (EU) 2020/852 (Taxonomy Regulation).
Disclosure under Article 8 Delegated art 10
OTP Group consolidated
Art 10 (3) a, Eligible proportion * 0.15%
Art 10 (2) a, Non-eligible proportion* 67.29%
Art 10 (2) b, Proportion of derivatives * 0.93%
Art 10 (2) b, Proportion to central gov., central bank,
supranational issuer*
27.14%
Art 10 (2) c, Proportion of non-NFRD undertakings* 8.48%
Art 10 (2) Proportion of trading portfolio* 1.17%
Art 10 (2) Proportion of on-demand inter-bank
loans*
4.77
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
Disclosure under Article 8 Delegated art 10
DSK Bank
0.41%
OTP Bank
Croatia
0.21%
SKB Bank
0%
OTP Bank
Romania
0.11%
Art 10 (3) d, XI. Annex disclosures
Contextual information towards
quantitative indivators incl. scope of
assets and activities covered, data
sources and limitation.
Exposures to taxonomy-eligible activities
were examined among non-financial
corporations. Companies covered by the
NFRD were defined as listed companies with
more than 500 employees based on Nace
code
*Excluding exposures to be excluded from
the denominator of KPIs by the Regulation.
Starting from second year of
implementationonly: Explanations of the
nature and objectives of Taxonomy-
aligned economic activities and the
evouolution of Taxonomy-aligned
economic activities over time,
distingiushing between business related
and methodological and data-related
elements.
Taxonomy elgible activities were examined.
Our goals for green funding and the activities
we have implemented can be found in the
text pf NFRD.
Description of the compliance with
Regulation (EU) 2020/852 in the
financial undertaking’s business
startegy, product design process and
engagement with clients and
counterparties.
Our goals for green funding and the activities
we have implemented can be found in the
text pf NFRD.
for credit institutions that are not required
to dsiclose quantitative information fo
trading exposures: Quakitative
information ont he alignment of trading
portfolios with Regulation (EU)
2020/852, includong overall
composition, trendsm objectives and
policy;
Taxonomy eligible activities were examined.
the weight of other or additional
information in support of the financial
undertaking’s strategy and the financing
of taxonomic activities in relation to their
total activity.
Taxonomy eligible activities were examined.
Our goals for green funding and the activities
we have implemented can be found in the
text pf NFRD.
Green asset ratio in corporate lending:
In relation to the mitigation and adaptation objectives of the taxonomy regulation, we have examined the
corporate portfolio based on the NACE codes that can be attributed to activities in the delegated act.
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
OTP Bank Group's corporate lending activities are linked to environmentally sustainable economic activities in
the EU Member States
8
in the followings scope:
Share of the taxonomy-adjusted corporate portfolio of EU core and subsidiary banks in total non-segmented
exposures at group level: 8.3%
Share of the taxonomy-adjusted corporate portfolio of EU core and subsidiary banks in the total EU core and
subsidiary corporate portfolio: 42.3%.
ESG risk management
In order to integrate ESG aspects, comply with legal obligations and the Hungarian National Bank's Green
Programme, we continued to develop our ESG lending policy in 2021. At group level, we have introduced a
lending and monitoring ESG risk management framework for non-retail and non-motorised leasing assets. The
framework also includes the ESG Exclusion List, which comprises activities excluded from financing by
OTP Group, as well as the industry ESG risk heat map. In 2021, ESG credit risk exposure became part of
internal reporting. In accordance with the Hungarian National Bank’s Green Programme, we will continue to
include ESG factors in the rest of the portfolio and in respect of collateral.
The purpose of ESG risk management in lending is to identify ESG risks and reduce transaction risks arising
from the environmental and social risk factors associated with financing. By integrating these issues into our
lending process, we are also emphasising the importance of our clients adopting excellent environmental and
social practices.
We invest and lend the money deposited with us in a way ensuring that it will not serve illegal purposes, or
those contrary to the values of society.
OTP Bank will not finance:
customers whose financing is forbidden in international agreements, EU acts or national laws;
those whose activity is likely to violate public morals or social value systems, or is connected to crime;
those who are connected, directly or indirectly, to criminal activities or to the deliberate violation or evasion
of legal;
regulations;
transactions classified as prohibited business sectors (e.g. the illegal arms trade, prohibited gambling,
drug trade, or any other illegal activity); and
transactions that fail to meet environmental standards.
The OTP Bank Group does not finance transactions that violate the laws of the country concerned or
international law.
In accordance with our regulations, our banking group always expects and examines compliance with
environmental regulations during lending. Violation of commitments and expectations is sanctioned in the
framework credit agreements.
In accordance with the SFDR's expectations, we have developed an investment risk management policy for
all relevant group members, so that investment risk management has been integrated into decision-making
processes during investment advisory and portfolio management activities, and information on this has been
provided to clients. Our statements on the integration of sustainability risks and the adverse effects of
investment decisions on sustainability factors (PAIs) are available on our websites. In addition to the legal
requirements, the prospectuses containing the product characteristics of the investment funds also include the
ESG score calculated by the bank, helping customers make decisions and orient themselves.
We have strengthened the assessment of ESG risks in our operational risk management scenario analyses
by analysing a separate scenario related to climate change, and we have also indicated the risks affected by
ESG in both the risk self-assessment and the loss database.
Responsible customer service
In carrying out our financial intermediary duties we ensure that the savings of our customers remain safe at all
times. Our rules guarantee that the standards of responsible lending are observed regarding the avoidance of
over-indebtedness, fair, understandable, complete and attentive information provision and adequate product
offers.
8
EU core and subsidiary banks means: OTP Nyrt, DSK Banka EAD, OTP Bank Romania S.A., OTP banka Hrvatska d.d., SKB banka d.d.
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
Our principles and guidelines on the fair treatment of customers and the compliance of consumer protection
are set out in our Compliance Policy. In designing our products, we follow the principles of ethical product
development. Our New Product Policy prescribes the assessment of potential risks to consumers.
We offer personalised administrative options to our customers with the highest level of service quality and
continuous innovations. The coronavirus pandemic increased the use of online channels, and our Banking
Group also encouraged this trend.
We use TRI*M methodology to measure the satisfaction of our retail customers. OTP Bank’s client retention
power increased by three points to 69 points in 2021, while the average satisfaction score among
competitors also increased slightly. The average TRI*M of banks in Central Europe was 77 points.
OTP Bank’s stated objective is to serve its customers without fault. In order to improve customer satisfaction,
we are also continuously improving our complaint management practices. Our Complaint Management
Policy, Complaint Management Regulation and a Glossary are available to view in our branches as well as
on our website.
In 2021, the most typical complaints at OTP Bank were related to the payment moratorium and unapproved
payment transactions.
The number of both complaints and legitimate complaints decreased significantly in 2021 compared to the
outstanding values of 2020, which could be attributed to the significant changes made during the year. The
declining trend also prevailed at group level. In 2021, we continued to improve our complaint management
practices, including expanding our complaint analysis process and the range of complaints that can be
resolved immediately.
Customer complaint data, OTP Bank
1
2020 2021
Number of warranted complaints 202,040 155,298
Ratio of warranted complaints 67% 62%
Compensation paid (HUF million) 84
2
36
1
Includes data from OTP Housing Savings and OTP Mortgage Bank.
2
Corrected data.
Our objective is to provide equal access for persons living with disability, through services adapted to their
special needs, in line with the Accessibility Strategy of OTP Bank. Accessibility is integrated into our website,
which supports one-handed use and provides accessibility options including text-to-speech software and video
content transcripts. Physical accessibility was also provided in every branch but one in 2021. Tactile guide
strips are available in 38% of our branches. Our customers can request special-needs services at the queue
management machine, with physical push buttons and tactile strips also assisting them in using the device.
Interpreter Services are available at 167 branches; this is a service allowing a sign language interpreter to
assist with administration tasks through a live video chat. Induction loop amplifier systems are also available
in 38% of branches. Moreover, we have made text-to-speech software available on 910 of our ATMs.
Security and data protection
Security is a top concern for us. The principles and main guidelines concerning security at the bank are set
forth in the Security Policy, which is approved by the Board of Directors. The policy covers all aspects of
security, including IT and cyber security, which have become increasingly important. OTP Bank's Group-level
Information Security Policy and Cyber Security Strategy of OTP Bank were completed in 2021, and the
development of a Group-level cyber security strategy was launched. The processing and protection of personal
data is covered by the Compliance Policy, which is also approved by the Board of Directors. Both policies
prescribe the regular evaluation of risks and the need to maintain and enhance awareness.
The handling and protection of personal data is covered by the Compliance Policy also approved by the Board
of Directors. We also developed security processes and applied solutions in 2021, with our innovations
focusing on the cyber security centre, the central log analysis system, authorisation management and virus
protection. In addition we made customer communication more effective in detecting suspicious transactions.
The number of distributed denial-of-service (DDoS) and phishing attacks increased significantly at group level
compared to previous years. We published several awareness campaigns for our customers, providing
information on our intranet and through security awareness training, which was also focused on phishing.
Besides protecting against phishing activities, the European Cyber Security Month programmes focused on
presenting the security challenges of modern application development and operations.
White-collar crime, which causes significant losses to customers and the banking group, decreased at most
subsidiaries due to our continuous development, more efficient employee action and stricter controls. We have
reviewed our anti-money laundering training material to ensure our employees gain greater knowledge of this
and have started to develop harmonised training at group level. The number of suspected money laundering
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
reports by bank employees increased by eight percent. During the year, OTP Bank reported 68 cases of
suspected money laundering.
Our Banking Group has experienced numerous card-related attacks; in these cases the sharing of important
information was extremely helpful in the prevention of fraudulent transactions. The number of successful card
fraud cases has been kept low continuously, which demonstrates that our systems operate effectively.
The ratio of bank card fraud to turnover is significantly lower than the European average published by
MasterCard (for OTP Bank it is 0.0071% and the consolidated ratio of subsidiaries is 0.00986%, while the
European average stands at 0.0414%). In the case of OTP Bank we were able to prevent bank card fraud of
HUF 5.5 billion.
Losses expected from the detected criminal activities amounted to HUF 447 million in the case of OTP Bank
and HUF 2.2 billion at Group level. The amount of loss prevented was HUF 457 million at OTP Bank and
HUF 2.0 billion at OTP Group.
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
Fight against corruption and against the practice of bribery
The Code of Ethics and the Anti-Corruption Policy of OTP Bank contains provisions on the fight against
corruption and against the practice of bribery, also on the acceptance of individual differences and the denial
of discrimination (https://www.otpbank.hu/portal/en/EthicalDeclaration
https://www.otpbank.hu/static/portal/sw/file/OTP_EtikaiKodex_EN.pdf,
https://www.otpbank.hu/static/portal/sw/file/OTP_Anti_Corruption_Policy_202102.pdf). As it can be read in
the foreword of the Code and the Anti-Corruption Policy as well, the Bank and its management have adopted
the principle of zero tolerance towards corruption and bribery, taking a definite stance against all forms of
corruption and giving full support to the fight against corruption. In addition, the Code states that "As an ethical
and compliant institution, the Bank and its management are fully committed to ensuring observance of all
relevant legislation, including anti-corruption statutes."
The Bank has set up an ethics reporting system (whistleblowing), which is for the reporting and the handling
of the reports on suspected or actual violation of the values set forth in the Code of Ethics, where anonymous
reporting of ethics issues is also possible. The Bank conducts inquiries for the purpose of detecting, preventing
anomalies in connection with reports made or anomalies it became aware of otherwise.
Through the Bank's ethics reporting system a total of 26 reports were received in 2021, 8 of them was
reclassified as complaints and 2 case’s investigation resulted in declaring ethics offense – though not due to
corruption, bribery or discrimination.
The Bank has created and maintains its Code of Ethics to keep reputational risk and financial losses, which
may incur in relation to corruption, bribery and discrimination, on a minimum level. Both employees and
newcomers receive education on the Code of Ethics, and in addition, the acceptance to be bound by it is a
prerequisite for their employment.
Any requests from third parties affecting human rights are treated by the Bank as a priority.
We manage the risks regarding the fight against corruption and bribery within the framework of our operational
risk management process. Our quarterly compliance reports cover the changes in risks as well as the steps
necessary steps to manage them. The reports are presented to the Management Committee and the Board of
Directors; the annual report is also submitted to the Supervisory Board.
Citizenship
OTP is one of the most generous charitable donors in Hungary, giving a total of HUF 2.3 billion in charitable
donations, almost half of which was for educational purposes, primarily the development of financial culture.
We aim to provide genuine and effective help by supporting programmes and causes that serve the interests
of society. We cooperate with a number of local non-governmental organisations, concentrating our donated
funds and monitoring their usage and the results achieved.
Our efforts were focused on the following areas:
developing financial literacy: attitude shaping;
sponsoring culture and the arts: creating and preserving values;
equal opportunities: helping the disadvantaged and those in need; and
sport.
We consider donation habits a part of financial literacy; therefore, in 2021 we took a significant step forward in
encouraging our customers to support the social initiatives that they consider important financially. Under the
digital donation programme we enabled them to make donations simply and easily while taking care of their
day-to-day finances. Donation has become possible on our digital platforms, including our website, the
internetbank, the mobile application, the Simple application, as well as through 750 ATMs and the digital points
of 80 branches. Our Bank assumes all extra costs of the donation, including both the transaction tax of
customers and the costs of NGOs. Our Bank also cooperates with the supported organisations and we
supplement the donations of our customers. In addition, in our experience, our customers view the Bank’s
participation as a guarantee that their donations will truly go to the right beneficiary. In 2021 we supported the
initiatives of 6 foundations through customer donations in the amount of HUF 250 million.
The Humanitas Social Foundation supports vulnerable communities and individuals with a focus on healthcare
and education; donation recipients are selected through an application process. Its most important activity in
2020 involved priority support to hospitals. We supported 30 hospitals, 18 educational institutions and one
foundation through the Foundation in 2021. In order to provide more effective assistance, we provided
targeted, tailored asset support to institutions.
The OTP Fáy András Foundation provides financial and economic education services, a key element of which
is operating the OK Educational and Innovation Centre. The Foundation provides youth, adult and vocational
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
training. The activities of the Foundation in 2021 were determined mostly by the coronavirus pandemic and
several planned activities could not be organised as a result. However, the Foundation developed 30 curricula
in 2021.
Digital education continued to be the focus of the year, with more than 17,000 students attending online and
nearly 2,500 classroom training. Roma youth also participated in financial and economic training through the
Roma Education Fund. Significant progress has been made in the development and testing of the Financial
Basic Education Programme in adult education. During the training, in which participation is free of charge and
without prior knowledge, users acquire essential personal money management and general economic
knowledge and improve their financial literacy. The Foundation also continued its previous programmes, so
the teacher training programme of Eötvös Loránd University (ELTE), the regular Teachers' Club and the
summer camps took place. The Foundation's national awareness-raising programme also continued, with
screenings of short films on national commercial television channels around 400 times, covering topics such
as housing renovation, business start-ups and data security.
Responsible employment
Our goal is to create value for our employees by focusing on them in a constantly changing environment. The
central objective of our human resource strategy is to intensify employee experience and commitment.
In 2021 we conducted an employee satisfaction survey at Group level with a high response ratio of 92%. Based
on the results, the rate of employee satisfaction was 70%, slightly lower than the average of the international
financial sector. The action plans prepared in response to the feedback for all areas that needed improvement
were approved by the Management Committee.
We developed our activities during the year along the lines of the six priorities stated in our strategy, also
relying on the results of the employee satisfaction survey. We launched numerous projects that will result in
significant changes; for example, we developed the framework of Group-level dialogue, and placed
management development on new foundations. Although the pandemic slightly delayed the implementation of
the international talent programme, we created a uniform talent framework at Group level and operated local
talent programmes. All of our employees participate in trainings; in addition to network and head office
management development, we rejuvenated the frameworks of our employees’ skills development.
Due to the pandemic situation, hybrid work performance became typical in 2021. We maintained access to the
tools promoting our employees’ emotional, mental and physical health and their ability to stand firm under
harsh circumstances, and once again in 2021, numerous employees took recourse to them.
OTP Bank’s employees (31 December) 2020 2021
Total Men Women Total Men Women
Employees, total (individuals) 9,826 3,402 6,424 10,078 3,547 6,531
Distribution by gender 100% 34.6% 65.4% 100% 35.2% 64,8%
Turnover rate
1
10.5% 9.3% 11.2% 14.3% 14.5% 14.1%
1
Compared to the end-of-year headcount; includes termination of employment both by employee and by employer, as well as
retirement.
Ethical conduct and legal compliance also remain core principles in our human resource management.
OTP Bank analyses and manages the risks relating to employment within its operational risk management
process. Our employees’ interests are represented by their trade union, with a Collective Agreement setting
out the rights and obligations of every employee.
The Bank’s Code of Ethics declares its commitment to providing a safe and healthy working environment and
states its expectation of mutual respect between executive officers and employees, including the prohibition of
discrimination and harassment. We consistently apply the principle of “equal pay for equal work”, including
providing equal pay to men and women for the same position and performance. Within the objective limitations
of specific job descriptions, we allow for flexible working hours and part-time employment options. We
encourage healthy lifestyle choices, offering a complex health insurance package, and subsidising recreation
and sporting activities.
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
Short description of the business model of the company
OTP Bank is the market-leading credit institution in Hungary. As for its business model, the Bank offers high-
quality financial services to retail, private banking, micro and small business, medium and large corporate, as
well as municipality clients through both its branch network and its steadily developing digital channels. The
Bank provides comprehensive retail and corporate banking services: its activities include deposit collection
from customers and raising money from the money and capital markets. On the asset side, OTP Bank offers
mortgage loans, consumer credits, working capital and investment loans to companies, as well as loans to
municipalities, whereas its liquidity reserves are invested in money and capital market instruments. Moreover,
the Bank provides a wide range of state-of-the-art services, including the areas of wealth management,
investment services, payment services, treasury and other services.
In addition, OTP Bank's Hungarian subsidiaries deliver a wide range of further financial services. The Bank
owns foreign subsidiaries in many countries of Central and Eastern Europe through capital investments.
Non-financial performance indicators
Internal audit: 203 closed audits, 1,478 recommendations, 1,478 accepted recommendations
Compliance with Budapest Stock Exchange (BSE) Recommendations (yes/no ratio): 72 yes, 0 no;
Compliance: 18 closed consumer protection related investigations
Bank security: the expected value of damages resulting from detected criminal offenses is
HUF 447,124,093, HUF 460,655,117. In 2021, we filed an official complaint in 620 cases on suspicion of
money laundering. There is a slight decrease in 2021, when this number changed from 4438 in the
previous year to 4,432, a decrease of 8.4%. In the case of OTP, the ratio of bank card misuse to turnover
is still lower than the European average published by MasterCard (last year's figures: OTP Bank 0.0071%,
European average 0.0414%).
Ethics issues: 26 ethics reports, establishing ethics offense in 2 cases.
OTP BANK BUSINESS REPORT 2021 (SEPARATE)
ANNUAL REPORT 2021
LIST OF NON-AUDIT SERVICES BY SERVICE CATEGORIES USED BY THE BANK
The statutory audit of OTP Bank is carried out by Ernst and Young Ltd., in addition to which the following
services were contracted:
Issue of Comfort letters
Engagements to review historical financial statements and interim financial statements (ISRE 2400,
2410)
Consultation relating to interpretation and implementation of accounting standards and relating to
accounting of potential future transaction
Pre- or post-transaction due diligence services relating to acquisition of assets or entites or sales
transactions or other transactions: financial, accounting, taxation, legal and IT specific services -
except for buy-side lead advisory, transactional and negotiation support
ANNUAL REPORT 2021
BUSINESS REPORT 2021 (CONSOLIDATED)
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
CONSOLIDATED FINANCIAL HIGHLIGHTS
9
AND SHARE DATA
Main components of the adjusted Statement of recognised income
2020
HUF million
2021
HUF million
Change
%
Consolidated after tax profit 259,636 456,428 76
Adjustments (total) (50,631) (40,474) (20)
Consolidated adjusted after tax profit
without the effect of adjustments
310,268 496,902 60
Pre-tax profit 351,802 587,853 67
Operating profit 537,437 660,391 23
Total income 1,169,920 1,313,124 12
Net interest income 788,079 884,012 12
Net fees and commissions 293,112 325,548 11
Other net non-interest income 88,729 103,563 17
Operating expenses (632,483) (652,733) 3
Total risk costs (187,995) (72,538) (61)
One off items 2,360 -
Corporate taxes (41,534) (90,951) 119
Main components of the adjusted balance sheet
closing balances
2020 2021 %
Total assets 23,335,841 27,553,384 18
Total customer loans (net, FX adjusted) 13,715,487 15,743,922 15
Total customer loans (gross, FX
adjusted)
14,575,916 16,634,454 14
Performing (Stage 1+2) customer loans
(gross, FX-adjusted)
13,736,409 15,756,503 15
Allowances for possible loan losses (FX
adjusted)
(860,429) (890,532) 3
Total customer deposits (FX adjusted) 18,152,563 21,068,644 16
Issued securities 464,214 436,325 (6)
Subordinated loans 274,704 278,334 1
Total shareholders' equity 2,537,112 3,036,766 20
Indicators based on adjusted earnings 2020 2021 pps
ROE (from accounting net earnings) 10.9% 17.0% 6.1
ROE (from adjusted net earnings) 13.0% 18.5% 5.5
ROA (from adjusted net earnings) 1.4% 2.0% 0.5
Operating profit margin 2.47% 2.62% 0.16
Total income margin 5.37% 5.21% (0.15)
Net interest margin 3.61% 3.51% (0.11)
Cost-to-asset ratio 2.90% 2.59% (0.31)
Cost/income ratio 54.1% 49.7% (4.4)
Provision for impairment on loan and
placement losses-to-average gross loans
ratio
1.15% 0.30% (0.84)
Total risk cost-to-asset ratio 0.86% 0.29% (0.57)
Effective tax rate 11.8% 15.5% 3.7
Net loan/(deposit+retail bond) ratio (FX adjusted) 76% 75% (1)
Capital adequacy ratio (consolidated,
IFRS) - Basel3
17.7% 19.1% 1.4
Tier1 ratio - Basel3 15.4% 17.5% 2.1
Common Equity Tier 1 ('CET1') ratio - Basel3 15.4% 17.5% 2.1
Share Data 2020 2021 %
EPS base (HUF) (from unadjusted net earnings) 1,004 1,739 73
EPS diluted (HUF) (from unadjusted net earnings) 1,003 1,738 73
EPS diluted (HUF) (from adjusted net earnings) 1,200 1,896 58
Closing price (HUF) 13,360 16,600 24
Highest closing price (HUF) 15,630 19,400 24
Lowest closing price (HUF) 8,010 12,920 61
Market Capitalization (EUR billion) 10.2 12.6 23
Book Value Per Share (HUF) 9,061 10,846 20
Tangible Book Value Per Share (HUF) 8,436 10,190 21
Price/Book Value 1.5 1.5 4
Price/Tangible Book Value 1.6 1.6 3
P/E (trailing, from accounting net earnings) 14.4 10.2 (29)
P/E (trailing, from adjusted net earnings) 12.1 9.4 (22)
Average daily turnover (EUR million) 22 19 (12)
Average daily turnover (million share) 0.7 0.4 (38)
9
Structural adjustments made on consolidated IFRS profit and loss statement as well as balance sheet, together with the calculation
methodology of adjusted indicators are detailed in the Supplementary data section of this Report.
OTP
B
ANK
B
USINESS
R
EPORT
2021
(C
ONSOLIDATED
)
A
NNUAL
R
EPORT
2021
ACTUAL CREDIT RATINGS
S&P GLOBAL
OTP Bank and OTP Mortgage Bank – FX long-term issuer credit rating BBB
MOODY'S
OTP Bank – FX long term deposits
Baa1
OTP Bank – Dated subordinated FX debt
Ba1
OTP Mortgage Bank – Covered bonds
A1
SCOPE
OTP Bank – Issuer rating BBB+
OTP Bank – Covered bonds BB+
FITCH
OTP Bank Russia – Long term credit rating
B
ACTUAL ESG RATINGS
AWARDS
In the Euromoney Awards for Excellence 2021 OTP Bank received the “Best Bank in Central and Eastern
Europe” award. In addition, the Bank won the title of “Best Bank in Hungary” and its subsidiaries also proved to
be the best in Bulgaria, Montenegro and Albania. Global Finance named again in 2021 OTP Bank the safest
bank in Hungary, thus it joined the group the World’s Safest Banks, furthermore OTP Bank received the “Best
Bank Award” again in Hungary in 2021. In the annual ranking of The Banker magazine, member of Financial
Times Group, the OTP Group has become the “Best Bank in Central and Eastern Europe”. In addition, the
Hungarian, Montenegrin, Croatian and Slovenian subsidiaries of the OTP Group received the “Bank of the
Year” award.
SHARE PRICE PERFORMANCE
7,000
9,000
11,000
13,000
15,000
17,000
19,000
21,000
31/12/2019 30/06/2020 31/12/2020 30/06/2021 31/12/2021
OTP
Bloomberg EMEA Banks Index (relative to OTP)
CECE Banking Sector Index (relative to OTP)
HUF
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
MANAGEMENT’S ANALYSIS OF THE FULL-YEAR 2021 RESULTS OF OTP GROUP
According to the preliminary Hungarian GDP data published on 15 February 2022, the annual growth rate
was 7.1% y-o-y.
The faster than originally expected GDP-growth was mainly due to the targeted and successful measures
initiated by the Government and the Hungarian Central Bank aimed at safeguarding the economy. These
steps to a large extent helped the economy to reach its pre-Covid performance by 3Q 2021 with the
employment level reaching new heights. Acknowledging the results in restoring the economy, in January
2022 Fitch affirmed the sovereign rating (‘BBB’) and its stable outlook.
As for 2022, the Government expects 5.9% annual GDP growth, 4.9% budget deficit with the public debt to
GDP ratio declining further; the average inflation may be 4.8%. The recent inflation figures, however
manifest upward risk.
During the course of the year there have been significant changes in the monetary policy: as a respond to
elevating inflation NBH started a tightening trend and the base rate was increased from 0.6% to 2.4%,
whereas the 1-week deposit rate reached 4% by the end of 2021. Following a 50 bps rate hike on
22 February, the base rate stood at 3.4%, whereas on 24 February the 1-week deposit rate was hiked to
4.6%. The 3M Bubor, i.e. the reference rate for floating rate loans started 2021 at 0.75% and closed at
4.21% (+346 bps y-o-y) and by mid-February stood at 4.58%.
The 10-year Government bond yielded 4.51% at the end of 2021, since then it increased further. The local
currency was volatile during 2021 and finally closed at 369.0 against the EUR. As a meaningful change, two
essential tools playing important role during the last couple of years in boosting economic performance
through supporting the local corporate sector, namely the Funding for Growth Go! Scheme and the Bond
Funding for Growth Scheme, have been gradually phased out in the second half of 2021. At the same time
NBH launched its FGS Green Home programme focused on sustainable household funding.
According to the report published by the NBH on 2 February 2022, in 2021 both the household loan volumes
and corporate exposures expanded steadily: the former grew by 11% y-o-y, and the corporate portfolio by
15%, respectively, supported also by the payment moratorium putting on hold principal amortization. Within
the retail segment the main engine was the subsidized baby loans; total sector level volumes reached
HUF 1,569 billion by the end of December underpinning an almost 50% y-o-y growth. Cash loan volumes
leaped by 17.0% y-o-y, whereas housing loan volumes grew by 15% y-o-y; home equity exposures kept
eroding by 4% y-o-y following the trend of recent years.
On a Group level all economies enjoyed favourable trends in 2021 coupled with numerous rating upgrades
or improving outlooks. Alongside the improving GDP and employment statistics, in a few countries local
central banks had to react to surging inflation with definite monetary tightening: the Ukrainian and Russian
base rate was increased by 300 bps and 425 bps y-o-y, and in Romania by 50 bps, respectively.
With regard to the recent pandemic developments, despite the significant differences in vaccination levels
across the Group, the general trend is rather the gradual easing/relaxing of restriction measures.
Consolidated earnings: HUF 497 billion adjusted profit after tax, stabilizing NIM, stable credit quality,
improving efficiency, with performing loan volumes organically increasing by 15% y-o-y
(FX-adjusted)
The annual performance was clean of new acquisitions, however the y-o-y dynamics were affected by the
sale of the Slovakian subsidiary at the end of 2020. The integration process of the second Serbian
acquisition was completed in 2Q 2021, the anticipated cost synergies have been utilized.
In 2021 the total amount of adjustments comprised -HUF 40.5 billion within the accounting earnings of
HUF 456.4 billion (after tax), by HUF 10 billion less than in 2020. The major items were as follows:
-HUF 18.9 billion special banking tax on financial institutions (after tax) paid by the Hungarian operation;
-HUF 15.5 billion effect of acquisitions (after tax) related mainly to the Bulgarian, Serbian and Slovenian
integration expenses;
-HUF 15 billion related to the expected negative one-off effect of the debt repayment moratorium in
Hungary and Serbia (after tax);
+HUF 6 billion related to the treasury share swap agreement between MOL and OTP, reflecting the
share price changes and the updated model calculation for dividend pay-outs.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
+HUF 1.9 billion tax shield related to the recognition or reversal of impairment charges booked in
relation to the revaluation of investments in certain subsidiaries (after tax);
In 2021 OTP Group posted HUF 588 billion the pre-tax profit (+67% y-o-y). The corporate tax burden was
more than twice as big as in the base period mainly due to the higher pre-tax earnings. Besides, starting
from 2021, in the adjusted P&L structure the Hungarian local business tax and innovation contribution (IPA)
payable by Hungarian Group members was presented on the corporate taxes line against the previous
practice of showing it as part of operational expenses
10
. That particular amount in 2020 comprised HUF16.5
billion (in the stock exchange report it was presented amongst operational expenses), while in 2021 it was
HUF 19.2 billion (shown on the corporate tax line).
The Group posted HUF 496.9 billion consolidated adjusted profit in 2021 (+60% y-o-y), the adjusted ROE
for the period reached 18.5% (+5.5 pps y-o-y).
The size of the bottom-line profit to a large extent was shaped by total risk costs, their volume of
HUF 72.5 billion was around a third of that in the base period. The operating profit showed a decent picture:
in 2021 the Group posted HUF 660.4 billion, 23% more than in 2020. Adjusted for FX, the sale of OBS and
IPA reclassification the increase would be 19.5% y-o-y.
Total income advanced dynamically, by 13% y-o-y (without the effect of the sale of the Slovakian unit,
FX-adjusted) with net interest income growing by the same magnitude, whereas the net fee & commission
income grew somewhat slower (+12% y-o-y). Other net non-interest income surged by 17% y-o-y.
Despite the annual net interest margin eroded further (2021: 3.51%, y-o-y -11 bps). The declining interest
rate environment prevailing for years turned around in several markets, and in 2021 first the Ukrainian and
Russian central banks, later the Hungarian, and most recently the Romanian hiked rates. However, the
favourable impact of the higher interest rates for the interest income will be gradual and stretched out for
several quarters given the time lag in repricing of variable rate assets. At the same time, there were several
developments affecting the net interest margin negatively. On one hand FX changes had negative impact
on annual NIM: during 2021 the HUF was 2.7% stronger y-o-y against the Ukrainian hryvna and by 3.8%
against RUB, respectively. Also, NIM was negatively affected by the steady increase of deposit volumes
through the dilution impact of higher total assets and the higher weight of low margin liquid assets. As for
the whole Group, the annual NIM improved y-o-y at OTP Core, Ukraine and Russia, whereas other Group
members suffered margin erosion at different scale.
In 2021 operating expenses nominally grew by 3% y-o-y. However, adjusted for IPA and the sale of the
Slovakian subsidiary the FX-adjusted y-o-y increase would be 7.7%. The annual cost-to-income ratio was
49.7% (-4.4 pps), whereas the cost to total assets ratio stood at 2.59% (-31 bps y-o-y).
As for the overall performance of the Group, all operations but the Hungarian Fund Management and CKB
(Montenegro) posted y-o-y improving adjusted profit after-tax. The profit contribution of non-Hungarian
Group members leaped from 41% to 51% y-o-y.
2021 performing loan volumes grew 15% y-o-y (FX-adjusted). The Hungarian payment moratorium had a
1 pp positive impact on the consolidated portfolio growth (the principal is not amortizing, and the accrued
interest adds to the outstanding principal). As a result, in 2021 the performing loan portfolio expansion
exceeded HUF 2,000 billion. Last year all Group members posted y-o-y volume increase. Out of the major
Group members the fastest loan growth was posted at the Ukrainian (+41%), Hungarian (+19%), the
Russian (+18%) and Bulgarian (+11%) operations, but the Romanian, Serbian, Croatian and Slovenian
dynamics were also outstanding. It was positive that strong volumes were coupled with improving market
shares in several countries and segments.
As for the major loan segments, during the last twelve months the consolidated FX-adjusted performing
corporate exposures increased the fastest (+19%), followed by the expansion of the mortgage portfolio
(+15%) and the consumer book (+14%) and leasing exposures (+11%). The MSE portfolio, however, shrank
by 6% partly as a result of the phase-out of the Hungarian subsidized structures and also the reclassification
between MLE and MSE segments during the course of the year.
One of the side-effects of pandemic is the more cautious attitude in household spending and corporate
investment activity, as a result the volume of overall savings increased. The FX-adjusted consolidated
deposits grew by 16% y-o-y or HUF 2,916 billion, i.e. increased faster than loan volumes. The Hungarian,
Ukrainian, Romanian and Croatian operations demonstrated double-digit deposit expansion. The
consolidated net loan-to-deposit ratio decreased to 75% (-1 pp y-o-y).
10
The Hungarian local tax and innovation contribution was uniformly booked within the
Corporate tax line
in the accounting income
statement and the consolidated IFRS report for 2020 and 2021, as well.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
At the end of December 2021, the gross operative liquidity reserves of the Group comprised EUR 9.1 billion
equivalent (+EUR 0.2 billion y-o-y).
The quality of the consolidated loan book remained stable in 2021, the major trends shaping the risk profile
were overall favourable.
By the end of 2021 the Stage 3 ratio under IFRS 9 was 5.3% underpinning a 0.4 pp y-o-y improvement. The
own coverage of Stage 1, 2 and 3 exposures were 1.0%, 10.1% and 60.5%, respectively.
In Hungary the payment moratorium was extended again until 30 June 2022, true, the scope of available
clients was narrowed and clients had to opt-in until 31 October 2021. By the end of 2021 the total household
and corporate exposure remaining under the moratorium comprised HUF 245 billion at OTP Core and
Merkantil Group, which was 4.1% of total gross loan portfolio of those two entities. As a result of the
moratorium extension retail and corporate exposures were shifted into Stage 3, elevating the Stage 3 ratio
at OTP Core.
The volume of credit risk costs for the whole year comprised -HUF 46 billion versus -HUF 158.4 billion in
the base period. The annual credit cost ratio was 0.30%.
Russian-Ukrainian situation
In the second half of February 2022 the military conflict between Russia and Ukraine escalated.
It is difficult to quantify the effect of the Ukrainian-Russian conflict regarding the Ukrainian and the Russian
operations, the possible scenarios are covering a wide range of spectrum. According to the worst possible
scenario, the Bank may lose its control over its investments, which under extreme conditions could result in
the full write-off of the invested amount.
The Consolidated Financial Statements do not contain any write-offs as possible consequences of the
Ukrainian-Russian conflict, the Group recognizes it as not adjusting, post balance sheet event.
OTP Group’s Ukrainian operation incorporates the Ukrainian bank, as well as the leasing and factoring
companies. The country-consolidated Ukrainian total assets represented HUF 984 billion at the end of 2021
(3.6% of total consolidated assets), while net loans comprised HUF 614 billion (3.9% of consolidated net
loans) and shareholders’ equity HUF 160 billion (5.3% of the consolidated total equity). At the end of 2021
the book value of the capital investment in the Ukrainian subsidiaries comprised HUF 105 billion; there was
no goodwill at all, it was already written down entirely in 2014.
The gross intragroup funding towards the Ukrainian operation represented HUF 72 billion, and taking into
account the Ukrainian deposits placed with the HQ, i.e. the net group funding represented HUF 29 billion
equivalent. According to the 28 February 2022 figures, the gross funding amounted to HUF 75 billion
equivalent and the net intragroup funding stood at HUF 9 billion equivalent.
The Ukrainian sub-consolidated RWA (“risk-weighted asset”) was HUF 1,115 billion by the end of 2021
(6.7% of the total consolidated RWA).
The consolidated maximum capital effect on the potential write-off of the Ukrainian operation, taking into
account the equity, the intragroup funding and the Ukrainian risk weighted assets, is estimated at 27 bps on
the consolidated CET1 ratio, according to year-end figures.
The Ukrainian operation posted HUF 39.0 billion adjusted profit in 2021 which represented 7.9% of
OTP Group’s adjusted annual profit.
The total assets of the Group’s Russian operation represented HUF 800 billion at the end of 2021 (2.9% of
consolidated total assets), while net loans comprised HUF 621 billion (3.9% of consolidated net loans) and
shareholders’ equity HUF 241 billion (7.9% of consolidated total equity). At the end of 2021 the book value
of the capital investment in the Russian subsidiaries comprised directly HUF 74 billion and indirectly
HUF 50 billion.
The gross intragroup funding towards the Russian operation represented HUF 73 billion, and taking into
account the Russian deposits placed with the Headquarter, i.e. the net group funding represented
HUF 14 billion equivalent. On 28 February 2022 the gross intragroup funding reached HUF 52 billion
equivalent, which equalled the net figure because there was no deposit placement by the Russian operation
at other Group members.
The Russian sub-consolidated RWA was HUF 822 billion by the end of 2021 (4.9% of the total consolidated
RWA).
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
The consolidated maximum capital effect on the potential write-off of the Russian operation, taking into
account the equity, the intragroup funding and the Russian risk weighted assets, is estimated at 116 bps on
the consolidated CET1 ratio, according to year-end figures.
The Russian operation posted HUF 37.6 billion adjusted profit in 2021 which represented 7.9% of OTP
Group’s adjusted annual profit.
According to the estimation of the Bank’s Management the Ukrainian-Russian conflict does not have
considerably negative impact on the business activity, financial position, efficiency, liquidity and capital
position of OTP Bank. Even after the recognition of the potential losses and write-offs outlined above, the
Group's capital adequacy remains above the expected regulatory level. There is no sign of significant
uncertainties having been arisen regarding carrying out its business as a going concern.
The Bank’s Management is monitoring the situation of the Ukrainian-Russian conflict continuously and will
take the necessary steps in order to moderate the business risk.
Consolidated capital adequacy ratio (in accordance with BASEL III)
At the end of 2021, the consolidated CET1 under the accounting scope of consolidation according to IFRS
was 17.5% (+2.1 pps y-o-y). This ratio equals to the Tier1 ratio and includes the eligible annual profit.
Effective from 1 July 2020 the original level of O-SII capital buffer (2%) was modified to 0% by the NBH until
31 December 2021. Afterwards, this buffer shall be rebuilt gradually, between 1 January 2022 and
31 December 2023. At the end of 2021 the countercyclical capital buffer requirement was 0% in Hungary,
and the central bank stated that it does not plan to raise it in the short term. However, in Bulgaria the local
central bank prescribed a 0.5% buffer for the local subsidiary, thus, the institution-specific countercyclical
buffer requirement for OTP Group was 0.1%. As a result, the effective regulatory minimum requirement for
the Tier 1 capital adequacy ratio for OTP Group was 9.6% for end-2021 (which also incorporated the
effective SREP rate of 117.25%), whereas the minimum CET1 requirement was 7.9%. According to the
decision of NBH, effective from March 2022 the SREP rate increased to 125%.
Credit rating, shareholder structure
In 2021 there was no change in S&P Global Ratings, accordingly, OTP Bank Plc.’s long-term issuer rating
is ꞌBBBꞌ with stable outlook.
On 13 July the ꞌBa1ꞌ dated subordinated debt rating of OTP Bank was placed on review for downgrade by
Moody’s, while its ꞌBa3(hyb)ꞌ junior subordinated debt rating, the BCA (baseline credit assessment) and the
adjusted BCA were placed on review for upgrade. The outlook on OTP Bank’s long-term deposit ratings was
changed to positive from stable. At the same time, Moody’s placed on review for downgrade the ꞌBaa2ꞌ long-
term issuer rating of OTP Mortgage Bank Ltd., while all other ratings and assessments of OTP Mortgage
Bank were affirmed. On 28 September OTP Bank’s Counterparty Risk Assessment (CRA) was upgraded
from ꞌBaa2ꞌ to ꞌBaa1ꞌ, at the same time the long-term deposit rating of ꞌBaa1ꞌ and the long-term Counterparty
Risk Ratings (CRR) were put on credit watch with potential upgrade. Furthermore, Moody’s upgraded OTP
Mortgage Bank’s CRA rating from ꞌBaa2ꞌ to ꞌBaa1ꞌ and put on credit watch with potential upgrade its long-
term CRR rating. Finally, OTP MB’s mortgage bond rating was also upgraded from ꞌA2ꞌ to ꞌA1ꞌ.
On 15 November Scope Ratings assigned an issuer rating of ꞌBBB+ꞌ, preferred senior unsecured debt rating
of ꞌBBB+ꞌ, non-preferred senior unsecured debt rating of ꞌBBBꞌ and Tier 2 debt rating of ꞌBB+ꞌ to OTP Bank.
The outlook for all ratings is stable.
On 4 March 2022 Fitch downgraded OTP Bank Russia’s rating to ꞌBꞌ and put the ratings on Rating Watch
Negative.
Regarding the ownership structure of the Bank, on 31 December 2021 the following investors had more than
5% influence (voting rights) in the Company: MOL (the Hungarian Oil and Gas Company, 8.67%), the Kafijat
Group (7.10%) and Groupama Group (5.17%). On 29 October 2021 OPUS Securities S.A.’s previous holding
and influence (voting rights) in the Company dropped to nil.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
SUMMARY OF ECONOMIC POLICY MEASURES MADE IN THE LAST PERIOD AND OTHER
IMPORTANT DEVELOPMENTS, AS WELL AS POST-BALANCE SHEET EVENTS
Post-balance sheet events cover the period until 17 February 2022.
Hungary
Against the initially planned 2 pps social security contribution cut effective from July 2022, the government
reduced employers’ taxes by 4 pps already from 1 January 2022 (the 1.5% vocational training contribution
was abolished and the social contribution taxes were cut by 2.5 pps).
On 25 January 2022 the NBH hiked the base rate by 50 bps to 2.9%.
On 27 January 2022 the NBH hiked the rate of the 1-week central bank deposit by 30 bps to 4.3%.
On 15 February 2022 the CSO revealed the final GDP growth figures: accordingly, in 4Q 2021 the quarterly
expansion of 2.1% was stronger than expected, lifting the annual growth rate to 7.1% in 2021 as a whole
(seasonally and working day adjusted). Mr. Mihály Varga (Minister of Finance) announced that the
government expects 5.9% growth for 2022.
Slovenia
On 2 February 2022, the Slovenian Parliament passed a law requiring banks to compensate customers
for losses arising from FX rate depreciation of more than 10% in the case of CHF mortgages disbursed
between 2004 and 2010. The law came into force 15 days after its Parliamentary approval, and under the
law banks have 60 days to notify their customers about the reimbursement and the recalculated new
instalments. SKB Banka intends to file a constitutional objection against the law, and plans to submit the
appeal to the local Constitutional Court after the law’s entry into force. A provision is expected to be made
in March 2022 for the potential negative impact.
Russia
On 11 February 2022 CBR hiked the base rate by 100 bps to 9.5%.
In the second half of February 2022 an armed conflict erupted between Russia and Ukraine.
Ukraine
On 20 January 2022 the National Bank of Ukraine raised its key interest rate by 1 pp to 10%.
In the second half of February 2022 an armed conflict erupted between Russia and Ukraine.
Romania
The National Bank of Romania raised the key interest rate by 25 bps on 10 January 2022, and by further
50 bps on 10 February 2022 to 2.5%.
Moldova
On 13 January 2022, the National Bank of Moldova raised the key interest rate by 2 pps to 8.5%.
On 15 February 2022, the National Bank of Moldova raised the key interest rate by 2 pps to 10.5%.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
CONSOLIDATED AFTER TAX PROFIT BREAKDOWN BY SUBSIDIARIES (IFRS)
11
2020
HUF million
2021
HUF million
Change
%
Consolidated after tax profit 259,636 456,428 76
Adjustments (total) (50,631) (40,474) (20)
Consolidated adjusted after tax profit
without the effect of adjustments
310,268 496,901 60
Banks total
1
285,103 468,962 64
OTP Core (Hungary)
2
159,303 213,377 34
DSK Group (Bulgaria)
3
40,957 76,790 87
OBH (Croatia)
4
14,830 33,448 126
OTP Bank Serbia
5
7,298 32,104 340
SKB Banka (Slovenia) 9,665 16,822 74
OTP Bank Romania
6
1,558 4,253 173
OTP Bank Ukraine
7
26,104 39,024 49
OTP Bank Russia
8
16,317 37,624 131
CKB Group (Montenegro)
9
4,307 4,140 (4)
OTP Bank Albania 1,959 5,522 182
OTP Bank Moldova 3,973 5,858 47
OBS (Slovakia)
10
(1,169) -
Leasing 7,661 7,998 4
Merkantil Group (Hungary)
11
7,661 7,998 4
Asset Management 9,824 6,321 (36)
OTP Asset Management (Hungary) 9,747 6,116 (37)
Foreign Asset Management
Companies (Ukraine, Romania,
Bulgaria)
12
77 205 166
Other Hungarian Subsidiaries 8,241 10,205 24
Other Foreign Subsidiaries
13
108 50 (54)
Corporate Centre
14
(569) 2,887 (608)
Eliminations (101) 479 (574)
Total adjusted after tax profit of HUNGARIAN subsidiaries
15
184,282 241,062 31
Total adjusted after tax profit of FOREIGN subsidiaries
16
125,986 255,839 103
Share of foreign profit contribution 41% 51% 11
11
Belonging footnotes are in the Supplementary data section of the Report.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
Main components of the adjusted Statement of recognized income 2020 2021
Change
%
Consolidated after tax profit 259,636 456,428 76
Adjustments (total) (50,631) (40,474) (20)
Dividends and net cash transfers (after tax) 213 729 243
Goodwill/investment impairment charges (after tax) 886 1,909 116
Special tax on financial institutions (after corporate income tax) (17,365) (18,893) 9
Expected one-off negative effect of the debt repayment moratorium in
Hungary and Serbia (after corporate income tax)
(28,262) (15,040) (47)
Effect of acquisitions (after tax) (6,852) (15,506) 126
Result of the treasury share swap agreement (after tax) 6,326
Consolidated adjusted after tax profit
without the effect of adjustments
310,268 496,902 60
Before tax profit 351,802 587,853 67
Operating profit 537,437 660,391 23
Total income 1,169,920 1,313,124 12
Net interest income 788,079 884,012 12
Net fees and commissions 293,112 325,548 11
Other net non-interest income 88,729 103,563 17
Foreign exchange result, net 44,927 44,251 (2)
Gain/loss on securities, net 14,193 9,726 (31)
Net other non-interest result 29,610 49,586 67
Operating expenses (632,483) (652,733) 3
Personnel expenses (312,495) (340,201) 9
Depreciation (70,286) (72,816) 4
Other expenses (249,702) (239,716) (4)
Total risk costs (187,995) (72,538) (61)
Provision for impairment on loan and placement losses (158,421) (46,006) (71)
Other provision (29,574) (26,532) (10)
Total one-off items 2,360 -
Result of the treasury share swap agreement at OTP Core 2,360 -
Corporate taxes (41,534) (90,951) 119
Indicators 2020 2021 %/pps
ROE (from accounting net earnings) 10.9% 17.0% 6.1
ROE (from adjusted net earnings) 13.0% 18.5% 5.5
ROA (from adjusted net earnings) 1.4% 2.0% 0.5
Operating profit margin 2.47% 2.62% 0.16
Total income margin 5.37% 5.21% (0.15)
Net interest margin 3.61% 3.51% (0.11)
Net fee and commission margin 1.34% 1.29% (0.05)
Net other non-interest income margin 0.41% 0.41% 0.00
Cost-to-asset ratio 2.90% 2.59% (0.31)
Cost/income ratio 54.1% 49.7% (4.4)
Provision for impairment on loan and placement losses-to-average gross loans 1.15% 0.30% (0.84)
Total risk cost-to-asset ratio 0.86% 0.29% (0.57)
Effective tax rate 11.8% 15.5% 3.7
Non-interest income/total income 33% 33% 0
EPS base (HUF) (from unadjusted net earnings) 1,004 1,739 73
EPS diluted (HUF) (from unadjusted net earnings) 1,003 1,738 73
EPS base (HUF) (from adjusted net earnings) 1,200 1,896 58
EPS diluted (HUF) (from adjusted net earnings) 1,200 1,896 58
Comprehensive Income Statement 2020 2021 %
Consolidated after tax profit 259,636 456,428 76
Fair value changes of financial instruments measured at fair value
through other comprehensive income
(4,764) (44,877) 842
Fair value adjustment of derivative financial instruments designated as
cash-flow hedge
(2) 0 (100)
Net investment hedge in foreign operations (8,591) 0 (100)
Foreign currency translation difference 68,593 61,729 (10)
Change of actuarial costs (IAS 19) 144 42 (71)
Net comprehensive income 315,016 473,322 50
o/w Net comprehensive income attributable to equity holders 315,239 472,281 50
Net comprehensive income attributable to non-controlling interest (223) 1,041 (567)
Average exchange rate
1
of the HUF
2020
HUF
2021
HUF
Change
%
HUF/EUR 351 359 2
HUF/CHF 328 332 1
HUF/USD 308 303 (2)
1
Exchange rates presented in the tables of this report should be interpreted as follows: the value of a unit of the other currency expressed in Hungarian forint
terms, i.e. HUF/EUR represents the HUF equivalent of one EUR.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
ASSET-LIABILITY MANAGEMENT
Similar to previous periods OTP Group maintained a strong and safe liquidity position…
The primary objective of OTP Bank in terms of asset-liability management has not changed, that is to ensure
that the Group’s liquidity is maintained at a safe level.
Refinancing sources of the European Central Bank are available for OTP (ECB repo eligible security portfolio
on Group level exceeded EUR 2 billion).
Total liquidity reserves of OTP Bank remained steadily and substantially above the safety level. As of 31
December 2021 the gross liquidity buffer was around EUR 9.1 billion equivalent. The level of these buffers
is significantly higher than the maturing debt within one year and the reserves required to manage possible
liquidity shocks.
As of 30 December 2021 OTP Group consolidated liquidity coverage (LCR) ratio was 180% (4Q 2020: 214%,
2Q 2021: 212%) while NSFR compliance has remained comfortable (2Q 2021: 135%, 4Q 2021: 137%).
The volume of issued securities decreased on a consolidated basis by HUF 28 billion y-o-y, mainly because
of the change of net volume of mortgage bonds issued by OTP Mortgage Bank and the redemption of corporate
and retail bonds issued by OTP Bank in the total amount of approximately HUF 9 billion. The redemption of
ICES bonds issued by OPUS Securities S.A. was accounted for in the equity. The temporary negative effect
of ICES redemption on the Group’s liquidity position was counterbalanced as OTP Bank treasury shares were
transferred from OPUS Securities, the issuer of ICES, to OTP Bank, which thus have become saleable and
majority of those were sold to the Special Employee Partial Ownership Plan Organizations in December 2021.
…and kept its interest-rate risk exposures low
Interest-rate risk exposure of OTP Group is determined primarily by the positions of OTP Bank Plc. and OTP
Mortgage Bank Ltd. Due to the forint liabilities on OTP Bank’s balance sheet, which respond to yield changes
only to a moderate extent, the Bank has an interest-rate risk exposure resulting from its business operations.
The Bank considers the reduction and closing of this exposure as a strategic matter. Consequently, it has been
reducing its interest-rate risk exposure through the purchase of fixed-rate government securities in order to
offset the negative impact of declining yields on net interest income.
The increase of BUBOR is almost completely reflected in the interest rate of the variable rate forint assets of
the Bank within 6 months: the loans get repriced typically in 3 months, the interest rate swaps (IRS) in 6
months, and other liquid assets within 1-3 months. On the deposit side the repricing is not automatic, its extent
and speed depends on the level of interest rates and the liquidity postition of the Bank.
The already manifested rate and yield increases in 2021 in Hungary exert a positive effect on the net interest
income.
Market Risk Exposure of OTP Group
The consolidated capital requirement of the trading book positions, the counterparty risk and the FX risk
exposure represented HUF 31.3 billion in total.
OTP Group is an active participant of the international FX and derivative market. Open FX positions of group
members are restricted to individual and global net open position limits (overnight and intraday), and to
stop-loss limits. The open positions of the group members outside Hungary except for the Bulgarian DSK Bank
– the EUR/BGN exposure of DSK under the current exchange rate regime does not represent real risk – were
negligible measured against either the balance sheet total or the regulatory capital. Therefore, the group level
FX exposure was concentrated at OTP Bank.
In the last couple of years the main part of the FX exposure at OTP Bank was the strategic open FX position
(EUR 310 million), kept in order to hedge the currency risk of the expected FX-denominated net earnings of
the main foreign subsidiaries. In the course of 2021 the strategic open FX position was fully closed in
accounting meaning.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF OTP GROUP
Main components of the adjusted balance sheet
2020
HUF million
2021
HUF million
Change
%
TOTAL ASSETS 23,335,841 27,553,384 18
Cash, amounts due from Banks and balances with the National Banks 2,432,314 2,556,035 5
Placements with other banks, net of allowance for placement losses 1,148,987 1,584,860 38
Financial assets at fair value through profit or loss 235,194 341,397 45
Securities at fair value through other comprehensive income 2,140,118 2,224,510 4
Net customer loans 13,528,586 15,743,922 16
Net customer loans (FX adjusted
1
) 13,730,752 15,743,922 15
Gross customer loans 14,363,281 16,634,454 16
Gross customer loans (FX adjusted
1
) 14,575,916 16,634,454 14
Gross performing (Stage 1+2) customer loans (FX-adjusted
1
) 13,736,409 15,756,503 15
o/w Retail loans 7,619,159 8,560,531 12
Retail mortgage loans (incl. home equity) 3,585,272 4,123,484 15
Retail consumer loans 3,290,818 3,739,128 14
SME loans 743,068 697,919 (6)
Corporate loans 5,065,053 6,025,106 19
Leasing 1,052,197 1,170,866 11
Allowances for loan losses (834,695) (890,532) 7
Allowances for loan losses (FX adjusted
1
) (845,164) (890,532) 5
Associates and other investments 52,444 67,223 28
Securities at amortized costs 2,625,952 3,891,335 48
Tangible and intangible assets, net 589,878 689,290 17
o/w Goodwill, net 101,393 105,640 4
Tangible and other intangible assets, net 488,485 583,650 19
Other assets 582,368 454,811 (22)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 23,335,841 27,553,384 18
Amounts due to banks, the National Governments, deposits from the National Banks and
other banks, and Financial liabilities designated at fair value through profit or loss
1,219,446 1,608,533 32
Deposits from customers 17,890,863 21,068,644 18
Deposits from customers (FX adjusted
1
) 18,152,563 21,068,644 16
o/w Retail deposits 12,992,703 14,297,453 10
Household deposits 10,774,361 11,897,580 10
SME deposits 2,218,342 2,399,873 8
Corporate deposits 5,151,386 6,762,795 31
Accrued interest payable related to customer deposits 8,474 8,396 (1)
Liabilities from issued securities 464,214 436,325 (6)
o/w Retail bonds 1,326 0 (100)
Liabilities from issued securities without retail bonds 462,888 436,325 (6)
Other liabilities 949,502 1,124,782 18
Subordinated bonds and loans
2
274,704 278,334 1
Total shareholders' equity 2,537,112 3,036,766 20
Indicators 2020 2021 pps
Loan/deposit ratio (FX adjusted
1
) 80% 79% (1)
Net loan/(deposit + retail bond) ratio (FX adjusted
1
) 76% 75% (1)
Stage 1 loan volume under IFRS 9 11,544,791 13,561,883 17
Stage 1 loans under IFRS9/gross customer loans 80.4% 81.5% 1.2
Own coverage of Stage 1 loans under IFRS 9 1.0% 1.0% 0.0
Stage 2 loan volume under IFRS 9 1,998,867 2,194,620 10
Stage 2 loans under IFRS9/gross customer loans 13.9% 13.2% (0.7)
Own coverage of Stage 2 loans under IFRS 9 10.4% 10.0% (0.4)
Stage 3 loan volume under IFRS 9 819,622 877,951 7
Stage 3 loans under IFRS9/gross customer loans 5.7% 5.3% (0.4)
Own coverage of Stage 3 loans under IFRS 9 62.3% 60.5% (1.8)
90+ days past due loan volume 543,733 535,445 (2)
90+ days past due loans/gross customer loans 3.8% 3.2% (0.6)
Consolidated capital adequacy - Basel3 2020 2021 %/pps
Capital adequacy ratio (consolidated, IFRS) 17.7% 19.1% 1.4
Tier1 ratio 15.4% 17.5% 2.1
Common Equity Tier 1 ('CET1') capital ratio 15.4% 17.5% 2.1
Regulatory capital (consolidated) 2,669,806 3,191,765 20
o/w Tier1 Capital 2,316,118 2,926,882 26
o/w Common Equity Tier 1 capital 2,316,118 2,926,882 26
Tier2 Capital 353,688 264,883 (25)
o/w Hybrid Tier2 89,935 0 (100)
Consolidated risk weighted assets (RWA) (Credit&Market&Operational risk) 15,046,888 16,691,315 11
o/w RWA (Credit risk) 13,389,536 14,992,797 12
RWA (Market & Operational risk) 1,657,352 1,698,518 2
Closing exchange rate of the HUF 2020 2021
Change
%
HUF/EUR 365 369 1
HUF/CHF 337 357 6
HUF/USD 297 326 10
1
Exchange rates presented in the tables of this report should be interpreted as follows: the value of a unit of the other currency expressed in Hungarian forint
terms, i.e. HUF/EUR represents the HUF equivalent of one EUR.
2
The ICES bonds were considered as Tier2 debt, but accounting-wise they were treated as part of the shareholders’ equity until 2Q 2021, but in 3Q 2021
the ICES bonds are no longer part of the shareholders’ equity. In the wake of the redemption of the ICES bonds announced on 14 September 2021, at the
end of 3Q the HUF equivalent of ICES bonds (using the FX rate of 14 September) was recognized within the Other liabilities (HUF 179.8 billion) both on OTP
Bank standalone and consolidated level, and within the consolidated shareholders’ equity the other reserves declined by HUF 89.9 billion and the retained
earnings by HUF 89.9 billion. The ICES bonds were redeemed on 29 October 2021.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
OTP BANK’S HUNGARIAN CORE BUSINESS
OTP Core Statement of recognized income:
Main components of the Statement of recognised income
2020
HUF million
2021
HUF million
Change
%
After tax profit without the effect of adjustments 159,303 213,377 34
Corporate income tax (16,558) (40,594) 145
Pre-tax profit 175,860 253,972 44
Operating profit 181,178 257,182 42
Total income 453,634 546,215 20
Net interest income 286,448 369,309 29
Net fees and commissions 130,470 150,578 15
Other net non-interest income 36,717 26,328 (28)
Operating expenses (272,457) (289,034) 6
Total risk costs (7,677) (3,210) (58)
Provision for impairment on loan and placement losses 2,374 (1,116) (147)
Other provisions (10,052) (2,094) (79)
Total one-off items 2,360 -
Revaluation result of the treasury share swap agreement 2,360 -
Indicators 2020 2021 pps
ROE 9.3% 11.6% 2.3
ROA 1.5% 1.6% 0.1
Operating profit margin 1.7% 2.0% 0.3
Total income margin 4.34% 4.22% (0.12)
Net interest margin 2.74% 2.85% 0.11
Net fee and commission margin 1.25% 1.16% (0.08)
Net other non-interest income margin 0.35% 0.20% (0.15)
Operating costs to total assets ratio 2.6% 2.2% (0.4)
Cost/income ratio 60.1% 52.9% (7.1)
Provision for impairment on loan and placement losses/average gross loans
1
(0.06%) 0.02% 0.08
Effective tax rate 9.4% 16.0% 6.6
1
Negative Provision for impairment on loan and placement losses/average gross loans ratio implies positive amount on the Provision for impairment on loan
and placement losses line.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
Main components of OTP Core’s Statement of financial position:
Main components of balance sheet
closing balances
2020
HUF million
2021
HUF million
Change
%
Total Assets 11,492,949 14,207,399 24
Net customer loans 4,415,778 5,310,327 20
Net customer loans (FX adjusted) 4,425,421 5,310,327 20
Gross customer loans 4,631,974 5,549,248 20
Gross customer loans (FX adjusted) 4,642,248 5,549,248 20
Stage 1+2 customer loans (FX-adjusted) 4,449,398 5,293,960 19
Retail loans 2,797,121 3,320,579 19
Retail mortgage loans (incl. home equity) 1,437,243 1,613,416 12
Retail consumer loans 995,361 1,246,723 25
SME loans 364,517 460,440 26
Corporate loans 1,652,277 1,973,381 19
Provisions (216,196) (238,921) 11
Provisions (FX adjusted) (216,828) (238,921) 10
Deposits from customers + retail bonds 8,083,488 10,124,795 25
Deposits from customers + retail bonds (FX adjusted) 8,122,814 10,124,795 25
Retail deposits + retail bonds 5,394,876 6,261,808 16
Household deposits + retail bonds 4,254,102 4,870,560 14
o/w: Retail bonds
1,326 0 (100)
SME deposits 1,140,774 1,391,247 22
Corporate deposits 2,727,938 3,862,988 42
Liabilities to credit institutions 858,230 1,117,086 30
Issued securities without retail bonds 513,860 531,471 3
Total shareholders' equity 1,766,639 2,011,932 14
Loan Quality 2020 2021 %/pps
Stage 1 loan volume under IFRS 9 (in HUF million) 3,606,490 4,327,232 20
Stage 1 loans under IFRS 9/gross customer loans 77.9% 78.0% 0.1
Own coverage of Stage 1 loans under IFRS 9 (%) 0.8% 1.0% 0.3
Stage 2 loan volume under IFRS 9 (in HUF million) 833,163 966,727 16
Stage 2 loans under IFRS 9/gross customer loans 18.0% 17.4% (0.6)
Own coverage of Stage 2 loans under IFRS 9 (%) 10.1% 8.9% (1.2)
Stage 3 loan volume under IFRS 9 (in HUF million) 192,321 255,288 33
Stage 3 loans under IFRS 9/gross customer loans 4.2% 4.6% 0.4
Own coverage of Stage 3 loans under IFRS 9 (%) 54.5% 42.7% (11.8)
90+ days past due loan volume (in HUF million) 144,816 136,003 (6)
90+ days past due loans/gross customer loans 3.1% 2.5% (0.7)
Market Share 2020 2021 pps
Loans 22.9% 24.4% 1.5
Deposits 25.3% 28.2% 2.9
Total Assets 25.8% 26.9% 1.1
Performance Indicators 2020 2021 pps
Net loans to (deposits + retail bonds) (FX adjusted) 54% 52% (2)
Leverage (closing Shareholder's Equity/Total Assets) 15.4% 14.1% (1.2)
Leverage (closing Total Assets/Shareholder's Equity) 6.5x 7.1x 0.6x
Capital adequacy ratio (OTP Bank, non-consolidated, Basel3, IFRS) 26.7% 25.1% (1.6)
Common Equity Tier1 ratio (OTP Bank, non-consolidated, Basel3, IFRS) 22.5% 21.8% (0.7)
In June 2021, OTP Home Solutions was added to the range of companies that make up OTP Core; its
balance sheet total was HUF 1.6 billion at the end of 2021.
P&L developments
In 2021 OTP Core's adjusted after-tax profit amounted to HUF 213.4 billion, 34% more than a year earlier.
Starting from 2021, the local business tax and the innovation contribution paid by Hungarian Group members
are presented on the corporate income tax line, rather than under operating expenses, in the adjusted P&L
structure. At OTP Core, the local business tax and the innovation contribution amounted to HUF 15.2 billion
in 2020 (presented under operating expenses), and to HUF 17.4 billion in 2021 (shown on the corporate
income tax line). This item caused much of the increase in the annual effective corporate income tax rate.
The above item explained 3.2 pps from the 7.1 pps improvement in the annual cost/income ratio, which
would have decreased nearly 4 pps even without this technical effect, as income growth outpaced that of
operating expenses.
The full-year operating profit jumped by 42%. Even without the above reclassification affecting operating
expenses, operating profit would have improved by 34%.
Net interest income grew at an accelerating pace, by 29% y-o-y in 2021. This could be largely ascribed to
the continued dynamic growth in business volumes, as well as to last year’s reversal of net interest margin’s
erosion: it has risen by 11 bps y-o-y in full year 2021.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
The main reason for the favourable turn in the net interest margin development was that rising reference
rates’ benign effect on interest revenues was more and more visible in the second half of the year. Overall,
the effect of rising reference rates is reflected in the asset-side interest rates with a certain delay; what is
more, the time lag in the repricing of variable-rate assets (mortgage and corporate loans with variable rates,
central bank deposits, and government securities swapped to variable-rate) is also different. Of the short-
term interbank interest rates, which are typically the reference rates for variable rate loans, the 3M BUBOR
increased to 77 bps by end-March, to 105 bps by end-June, to 176 bps by end-September, and to 421 bps
by end-December (from 75 bps at the end of 2020), while its quarterly average was 76 bps in 1Q, 87 bps in
2Q, 139 bps in 3Q, and 277 bps in 4Q 2021. The 3M BUBOR hit 459 bps on 17 February 2022. Likewise,
the 6M BUBOR printed a similar pattern, hitting 479 bps on 17 February. Most of the deposits kept with the
central bank was held in its one-week instrument; it amounted to HUF 750 billion at the end of 2021.
Also, two one-off effects emerging in 1Q 2021 (a technical effect relating to the accounting of the loan
repayment moratorium, and the repricing of cash loans for regulatory reasons) exerted a positive impact on
the margin development, as they elevated the margin level in the first quarter, but have not helped the
margin dynamics since then.
On the other hand, partly as a result of the strong competition, the erosion of product-level spreads typically
continued in the case of newly disbursed loans, adversely affecting the margin development.
In 2021 as a whole, the changes in the balance sheet structure had an overall neutral effect on the y-o-y
margin dynamics: although due to the sustained dynamic growth in deposits the weight of financial assets
carrying lower margins than loans increased in the balance sheet (partly at the expense of loans), but the
share of non-interest-bearing assets was in downtrend in recent quarters, and the weight of consumer loans
within total loans grew, too.
As a negative development, for the period between 1 January – 30 June 2022 the government introduced
an interest rate cap for variable-rate retail mortgage loans, and with its decision announced on 18 February,
for housing purposes financial leasing contracts, too. Accordingly, the affected exposures’ reference rate
cannot be higher than the relevant reference rate as at 27 October 2021. Furthermore, according to
Government Decree 537/2021. (IX. 15.) published on 15 September, credit institutions shall re-calculate the
interest deferred during the period spent in the moratorium in the case of overdraft loans and credit card
exposures. The base for the re-calculation shall be the NBH’s statistical data for the average annualized
cash loan interest rate published for February 2020. The difference between the deferred interest booked
according to the original contract and the re-calculated amount shall be refunded to the borrowers by way
of crediting the borrowers’ account with the due amount. In the adjusted P&L structure, the negative effect
of this regulatory change wa presented amongst the adjustment items, on the Expected one-off negative
effect of the debt repayment moratorium in Hungary and Serbia line.
Net fees and commissions rose by 15% y-o-y in 2021. The improvement can be attributed to the double-
digit growth rate of commissions on deposits, transactions, cards, lending, as well as securities sales, fuelled
by the strengthening economic activity compared to the base period. One-off items reduced the y-o-y growth
of net fees and commissions by a total of HUF 3 billion.
The annual other net non-interest income dropped by 28%, or nearly HUF 10 billion. This can be explained
mainly by two items: the weaker foreign exchange result in 2Q 2021, and the weaker securities result in 4Q
2021, latter owing to the sale of government securities. The development of other income was also
influenced by the fact that, starting from 2021, the recoveries from claims written off at OTP Factoring for
legal reasons (e.g. irretraceable borrower, time-barred debt) are presented amongst other income, rather
than under risk costs.
Operating expenses grew by 6% y-o-y in 2021. In the reporting period, there were three major one-off or
technical items that affected costs: first, starting from 2021, the local business tax and the innovation
contribution (HUF 17.4 billion in 2021) are presented as part of corporate income tax, rather than under
operating expenses. Second, in the second quarter, the provisions for untaken holidays on a pro rata
temporis basis were moved to personnel expenses from the other risk costs line, and simultaneously, the
HUF 3.1 billion amount for all such untaken holidays was recorded in 2Q. Third, in 4Q 2021, in the case of
certain expected future bonus payments, the expected amount on
a longer time horizon and according to
model calculations was booked in a lump sum, against the previous practice of recognising the expected
payments over the next12 months. This item explained HUF 5.4 billion increase in personnel expenses in
2021 y-o-y. Without the effect of these three items, expenses would have grown by 9%
y-o-y, partly owing to higher personnel expenses (due to a 2% increase in annual average headcount and
the implemented wage hikes), the steady rise in depreciation on the back of IT and digital development, as
well as higher other expenses (due to stronger business activity, higher cost of hardware, office equipment,
and other services, and supervisory fees increased by HUF 3.8 billion y-o-y).
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
On the whole, underlying credit quality trends were favourable in 2021. In 2021 total risk costs amounted to
-HUF 3.2 billion (down from -HUF 7.7 billion in 2020), including -HUF 2.1 billion other risk costs partly relating
to provisions for securities, while credit risk costs amounted to -HUF 1.1 billion. The main reason for the
positive amount of total risk costs in the first two quarters was the continued recoveries on retail claims
managed by OTP Faktoring, but these recoveries followed a declining path during the year. In the third
quarter, nearly HUF 3 billion additional credit risk cost emerged as a result of the reclassification of certain
corporate loans participating in the moratorium into the riskier Stage 2 bucket, in accordance with the more
conservative approach applied by the Bank. In the fourth quarter, HUF 7.8 billion credit risk cost (the highest
since 1Q 2020) weighed on profit. In the last quarter, credit risk costs were adversely affected by the
additional provisions allocated to exposures participating in the extended moratorium: borrowers who
applied for the extended loan repayment moratorium starting from November were reclassified into riskier
categories (Stage 2 or Stage 3), based on the Bank’s assessment; moreover, the impairment parameters
were also revised.
In 2021, the loan repayment moratorium was first extended by three months (until the end of September
2021), then by one more month (until end-October), with unchanged terms and conditions. Between
November 2021 and June 2022, only eligible borrowers who had applied for it at their bank in October 2021
are entitled to participate in the moratorium. At OTP Core, the volume of loans subject to the debt repayment
moratorium was in downtrend in 2021: At the end of 2020 HUF 1,760 billion, at the end of 3Q 2021
HUF 1,286 billion, and at the end of 2021 HUF 237 billion worth of loans participated in the loan repayment
moratorium; the latter makde up 4.3% of OTP Core’s total gross loan portfolio.
Partly as a result of the above mentioned one-timer effects, at the end of 2021 the ratio of Stage 3 loans
stood at 4.6%, while the Stage 2 ratioat 17.4%. At the end of the year the aggregated own provision coverage
of the Stage 1+2 portfolio stood at 2.5%, while the own provision coverage of Stage 3 loans at 42.7%.
The volume of more than 90 days past due (DPD90+) loans declined by HUF 5 billion both in full year 2020
and by HUF 1 billion in 2021 as a whole (FX-adjusted, without sales/write-offs and the revaluation of
Faktoring’s claims). In 2021, HUF 10 billion non-performing loans were sold/written off (FX-adjusted).
Balance sheet trends
OTP Core’s balance sheet total grew by 24% y-o-y or more than HUF 2,700 billion in 2021. Most of this
year-over-year increase stemmed from the inflow of deposits (+25%, or +HUF 2,040 billion), and a smaller
part came from interbank liabilities’ increase (+30% y-o-y, +HUF 260 billion); the latter was partly explained
by the expansion of loan volumes under the Funding for Growth scheme refinanced by the central bank.
In full year 2021, the nominal growth in customer deposits significantly exceeded the increase in loans,
which crystallized in the further rise in the volume of financial and other liquid assets. In 2021, the share of
financial assets on OTP Core’s assets side rose by 4.3 pps y-o-y on average, while that of non-interest-
bearing assets dropped by 2.6 pps, and the weight of net loans shrank by 1.7 pps.
Performing (Stage 1+2) loans increased dynamically, this brought the full-year growth to 19% (FX-adjusted),
of which 3 pps increase could be ascribed to the volume-boosting effect of the moratorium. Much of the
yearly growth came from the government's and the national bank’s subsidized loan programmes (baby loan,
CSOK subsidized housing loan, green mortgage loan, home renovation loan, Funding for Growth Go!,
Széchenyi Card Go!).
Regarding individual product categories, performing consumer loans jumped by 25% y-o-y.
Within consumer loans, baby loans remained highly popular: in whole year 2021, the newly contracted
amount at OTP Bank hit HUF 232 billion; this was consistent with a market share of 42.1% in 2021.
In the case of cash loans, market pricing has been in effect since the beginning of 2021, as the regulatory
interest rate cap expired. New cash loan placements grew by 50% last year. OTP Bank's market share in
cash loan disbursements reached 38.4% in 2021, against 34.8% in full year 2020. All in all, performing cash
loan volumes expanded by 17% y-o-y.
To help borrowers take advantage of the government's home renovation subsidy, OTP made available both
the mortgage-backed subsidized home renovation loan (from the beginning of February 2021) and the
Bank's own unsecured home renovation cash loan product (from March 2021). By the end of December,
loan applications for the unsecured product amounted to HUF 16 billion, and those for the secured product
was close to HUF 37 billion. Because of its collateralized nature, the subsidized home renovation loan is
presented among mortgage loans in the product structure, whereas the unsecured home renovation loan is
shown under consumer loans.
As for mortgage loans, the strong demand persisted: applications grew by 55% in full year 2021 HUF 43
billion of the applications () were for green housing loans with subsidized interest rates, under the central
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
bank’s FGS Green Home programme launched in October 2021. OTP Bank's market share in new mortgage
loan contractual amounts was 31.5% in 2021 (against 32% in 2020).
The Bank's corporate lending activity remained strong, largely because of the Funding for Growth Go!
scheme launched by the Magyar Nemzeti Bank in April 2020. By the end of September 2021, the FGS Go!
contracted amount reached the HUF 3,000 billion available amount at sector level, thus the programme was
phased out by the central bank. Since the launch of this scheme, OTP Bank’s contracted amounts exceeded
HUF 752 billion, which resulted in a market share of 26%.
Because of the phasing out of the FGS Go! programme, in July 2021 the government introduced subsidized
lending programmes for micro and small enterprises through the KAVOSZ Széchenyi Card scheme. Under
the programme, by the end of December OTP Bank signed loan agreements worth more than
HUF 130 billion.
Overall, in 2021 at OTP core the outstanding expansion of loans to micro and small enterprises continued:
their performing volumes surged 26% y-o-y (FX-adjusted), partly bolstered by the FGS Go! programme,
which has already been ended.
Performing corporate loans grew by 19% y-o-y (FX-adjusted).
OTP Core’s 12-month customer deposit growth rate was 25% (FX-adjusted). Within this, the 42% jump in
corporate deposits was outstanding, but retail deposits also increased by 14%.
The net loan/deposit ratio stood at 52% at the end of 2021, marking a 2 pps y-o-y contraction.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
OTP FUND MANAGEMENT (HUNGARY)
Changes in assets under management and financial performance of OTP Fund Management:
Main components of P&L account
2020
HUF million
2021
HUF million
Change
%
After tax profit w/o dividends and net cash transfer 9,747 6,116 (37)
Income tax (915 (788) (14)
Profit before income tax 10,662 6,904 (35)
Operating profit 10,662 6,918 (35)
Total income 14,453 10,044 (31)
Net fees and commissions 14,154 9,799 (31)
Other net non-interest income 299 245 (18)
Operating expenses (3,791) (3,125) (18)
Other provisions (1) (14)
Main components of balance sheet
closing balances
2020 2021 %
Total assets 33,210 24,988 (25)
Total shareholders' equity 16,425 12,792 (22)
Asset under management
2020
HUF billion
2021
HUF billion
%
Assets under management, total (w/o duplicates)
1
1,201 1,331 11
Volume of investment funds (closing, w/o duplicates) 828 942 14
Volume of managed assets (closing) 373 389 4
Volume of investment funds (closing, with duplicates)
2
1,183 1,479 25
bond 376 444 18
absolute return fund 374 300 (20)
equity 248 342 38
mixed 133 345 160
commodity market 28 37 33
guaranteed 20 5 (73)
money market 5 4 (21)
1
The cumulative net asset value of investment funds and managed assets of OTP Fund Management, eliminating the volume of own investment funds
(duplications) being managed in other investment funds and managed assets of OTP Fund Management.
2
The cumulative net asset value of investment funds with duplications managed by OTP Fund Management.
In 2021, OTP Fund Management generated more than HUF 6 billion profit, 37% less than in 2020.
The annual profit was shaped by the 31% y-o-y drop in fees and commissions, as the success fee revenues
from funds with above-benchmark performance fell short of the 4Q 2020 level: while HUF 7.3 billion success
fee was recorded in the 2020 base period, less than a third of that, HUF 1.9 billion was realized on the fund
management activity in 2021.
Last year the other income dropped by 18% y-o-y owing to two factors: the revaluation result of the
investment units in the Company’s own books improved, which was offset by the decline in foreign exchange
result.
Last year 18% cost saving was achieved within that personnel expenses came down 21% y-o-y, in sync
with the decline in bonus payments for funds’ performance.
In 2021, the market of Hungarian investment funds was rather hectic: the accelerating inflation and interest
rate hikes by the central banks transformed the structure of investment funds. Equity funds were the most
successful ones last year: two of Hungary’s top three equity funds by assets under management, OTP
Quality Fund and OTP Climate Change Fund, are both managed by the Company. Although bond funds’
performance was adversely affected by the rising yield environment, the capital influx helped their volumes
further expand y-o-y. Overall, regarding the whole portfolio, the total wealth managed by OTP Fund
Management expanded further, by 25% y-o-y.
The Company's markets share rose by 1.3 pps y-o-y, to 26.0% by end-December 2021, thus preserving its
leadership in the securities funds market.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
MERKANTIL GROUP (HUNGARY)
Performance of Merkantil Group:
Main components of P&L account
2020
HUF million
2021
HUF million
Change
%
After tax profit without the effect of adjustments 7,661 7,998 4
Income tax (956) (918) (4)
Profit before income tax 8,617 8,916 3
Operating profit 10,280 11,961 16
Total income 21,283 23,291 9
Net interest income 17,688 20,680 17
Net fees and commissions 40 116 187
Other net non-interest income 3,555 2,495 (30)
Operating expenses (11,004) (11,330) 3
Total provisions (1,663) (3,045) 83
Provision for impairment on loan and placement losses (1,491) (3,093) 107
Other provision (171) 48 (128)
Main components of balance sheet
closing balances
2020 2021 %
Total assets 667,120 782,222 17
Gross customer loans 416,987 444,549 7
Gross customer loans (FX-adjusted) 417,282 444,549 7
Stage 1+2 customer loans (FX-adjusted) 402,526 431,714 7
Retail loans 6,993 4,866 (30)
Corporate loans 51,520 46,870 (9)
Leasing 344,013 379,977 10
Allowances for possible loan losses (12,874) (14,230) 11
Allowances for possible loan losses (FX-adjusted) (12,888) (14,230) 10
Deposits from customers 9,344 8,198 (12)
Deposits from customer (FX-adjusted) 9,344 8,198 (12)
Retail deposits 6,071 5,166 (15)
Corporate deposits 3,273 3,032 (7)
Liabilities to credit institutions 584,944 688,675 18
Total shareholders' equity 52,553 59,246 13
Loan Quality 2020 2021 %/pps
Stage 1 loan volume under IFRS 9 (in HUF million) 343,668 334,732 (3)
Stage 1 loans under IFRS 9/gross customer loans 82.4% 75.3% (7.1)
Own coverage of Stage 1 loans under IFRS 9 0.2% 0.4% 0.2
Stage 2 loan volume under IFRS 9 (in HUF million) 58,592 96,982 66
Stage 2 loans under IFRS 9/gross customer loans 14.1% 21.8% 7.8
Own coverage of Stage 2 loans under IFRS 9 3.8% 5.3% 1.5
Stage 3 loan volume under IFRS 9 (in HUF million) 14,727 12,836 (13)
Stage 3 loans under IFRS 9/gross customer loans 3.5% 2.9% (0.6)
Own coverage of Stage 3 loans under IFRS 9 66.5% 60.0% (6.5)
Provision for impairment on loan and placement losses/average gross loans 0.38% 0.71% 0.33
90+ days past due loan volume (in HUF million) 8,971 5,852 (35)
90+ days past due loans/gross customer loans 2.2% 1.3% (0.8)
Performance Indicators 2020 2021 pps
ROA 1.3% 1.0% (0.2)
ROE 15.7% 14.3% (1.4)
Total income margin 3.58% 3.05% (0.52)
Net interest margin 2.97% 2.71% (0.26)
Operating costs / Average assets 1.8% 1.5% (0.4)
Cost/income ratio 51.7% 48.6% (3.1)
The table presents the sub-consolidated performance of Merkantil Group, whose members are: Merkantil
Bank Ltd., Merkantil Bérlet Ltd., NIMO 2002 Ltd., SPLC-P Ingatlanfejlesztő, Ingatlanhasznosító Ltd., SPLC
Vagyonkezelő Ltd., and OTP Ingatlanlízing Ltd.
In 2021, Merkantil Group posted HUF 8 billion adjusted after-tax profit, which brought its ROE to 14.3%.
The 4% y-o-y profit growth stemmed from the 16% y-o-y improvement in operating profit, which was offset
by the jump in risk costs.
In 2021, net interest income grew by 17% y-o-y driven by the 7% y-o-y increase in performing loans and a
32% surge in financial assets, while annual net interest margin declined by 26 bps y-o-y.
Annual operating expenses rose by 3% y-o-y. Without the effect of the local business tax and innovation
contribution being presented on the corporate income tax line instead of costs starting from 2021, this rate
would be 8%. Most of the underlying cost growth could be attributed to personnel and vehicle-related
expenses, as well as higher supervisory fees.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
In 2021 total risk costs amounted to -HUF 3 billion. This was predominantly the result of the revision of the
IFRS 9 model parameters, and of the additional loan loss provisions for the loans that remained in the
extended moratorium from November 2021. Customers who had indicated their decision to remain in the
moratorium were reclassified to riskier categories (Stage 2 or Stage 3), which resulted in additional loan loss
provisions. At the end of the year, Merkantil Group’s loan volumes that participated in the moratorium
amounted to HUF 8.3 billion, which represented 2% of total gross loans.
As a result, the ratio of Stage 3 loans was 2.9% as at the end of 2021, yet it fell by 0.6 pp y-o-y. The own
provision coverage of Stage 3 loans dropped to 60.6%. The own provision coverage of Stage 2 loans stood
at 5.4% (+1.6 pps y-o-y).
The volume of 90 days past due loans fell by HUF 0.7 billion (FX-adjusted, without sales/write-offs) in 2021.
FX-adjusted performing (Stage 1+2) loans increased by 7% y-o-y Its dynamics benefited from the central
bank’s Funding for Growth Scheme Go! programme launched in April 2020, under which Merkantil Bank’s
contracted amount hit HUF 74 billion. Due to the termination of FGS Go!, since the beginning of July 2021
the government has been providing preferential, interest-subsidized funds to micro- and small enterprises
through the KAVOSZ Széchenyi Card scheme. Under the programme, Merkantil Bank contracted more than
HUF 32 billion in loans by the end of December.
Merkantil Bank remained the market leader in both new loan placements and volumes.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
IFRS REPORTS OF THE MAIN FOREIGN SUBSIDIARIES OF OTP BANK
DSK GROUP (BULGARIA)
Performance of DSK Group:
Main components of P&L account
2020
HUF million
2021
HUF million
Change
%
After tax profit without the effect of adjustments 40,957 76,790 87
Income tax (3,707) (8,454) 128
Profit before income tax 44,665 85,244 91
Operating profit 89,775 106,241 18
Total income 166,668 178,470 7
Net interest income 111,239 112,869 1
Net fees and commissions 45,453 54,508 20
Other net non-interest income 9,975 11,093 11
Operating expenses (76,893) (72,230) (6)
Total provisions (45,110) (20,997) (53)
Provision for impairment on loan and placement losses (44,875) (18,938) (58)
Other provision (235) (2,059) 777
Main components of balance sheet
closing balances
2020 2021 %
Total assets 4,283,625 4,627,132 8
Gross customer loans 2,634,870 2,922,886 11
Gross customer loans (FX-adjusted) 2,663,462 2,922,886 10
Stage 1 + 2 customer loans (FX-adjusted) 2,466,457 2,741,964 11
Retail loans 1,375,184 1,609,216 17
Corporate loans 913,099 927,478 2
Car financing loans 178,174 205,270 15
Allowances for possible loan losses (185,829) (193,180) 4
Allowances for possible loan losses (FX-adjusted) (187,812) (193,180) 3
Deposits from customers 3,587,364 3,785,300 6
Deposits from customers (FX-adjusted) 3,642,801 3,785,300 4
Retail deposits 3,056,883 3,342,569 9
Corporate deposits 585,918 442,730 (24)
Liabilities to credit institutions 17,010 86,606 409
Total shareholders' equity 620,379 699,375 13
Loan Quality 2020 2021 %/pps
Stage 1 loan volume under IFRS 9 (in HUF million) 2,142,644 2,454,806 15
Stage 1 loans under IFRS 9/gross customer loans 81.3% 84.0% 2.7
Own coverage of Stage 1 loans under IFRS 9 1.0% 1.0% 0.1
Stage 2 loan volume under IFRS 9 (in HUF million) 297,292 287,157 (3)
Stage 2 loans under IFRS 9/gross customer loans 11.3% 9.8% (1.5)
Own coverage of Stage 2 loans under IFRS 9 12.6% 15.5% 2.9
Stage 3 loan volume under IFRS 9 (in HUF million) 194,934 180,922 (7)
Stage 3 loans under IFRS 9/gross customer loans 7.4% 6.2% (1.2)
Own coverage of Stage 3 loans under IFRS 9 65.6% 68.2% 2.5
Provision for impairment on loan and placement losses/average gross loans 1.79% 0.70% (1.09)
90+ days past due loan volume (in HUF million) 126,242 114,362 (9)
90+ days past due loans/gross customer loans 4.8% 3.9% (0.9)
Performance Indicators 2020 2021 pps
ROA 1.0% 1.8% 0.7
ROE 7.0% 11.8% 4.8
Total income margin 4.13% 4.07% (0.05)
Net interest margin 2.75% 2.58% (0.18)
Operating costs / Average assets 1.9% 1.6% (0.3)
Cost/income ratio 46.1% 40.5% (5.7)
Net loans to deposits (FX-adjusted) 68% 72% 4
FX rates
2020
HUF
2021
HUF
Change
%
HUF/BGN (closing) 186.7 188.7 1
HUF/BGN (average) 177.9 182.3 2
In 2021, DSK Group reached HUF 76.8 billion cumulated after-tax profit, 87% more than in 2020, due to
improving operating results and lower risk costs.
Annual operating profit grew by 18% y-o-y, mainly driven by a 20% surge in net fees and commissions. The
improvement partly stemmed from a 6% y-o-y decline in operating expenses (in local currency terms): the
cost synergies resulting from the integration of Expressbank were observable also in 2021, and the continuing
decrease in average headcount brought down personnel costs. In 2021 the bank launched a comprehensive
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
project in order to transform its business and operational model, and develop its digital capabilities, which
also supported the operational efficiency.
With regard to the annual income, cumulated net interest income stagnated in BGN terms, as a joint result of
the 18 bps erosion in net interest margin and increasing volumes. Net fee income grew by 18% in local
currency last year, mainly as a result of stronger business activity and the introduction of new fees on
deposits. Furthermore, fees related to loans and investment services also increased.
The annual cost efficiency indicators showed an improving trend, with the cost-to-income ratio declining by
5.7 pps to 40.5% and operating expenses/average assets ratio declining by 0.3 pp to 1.6%.
Performing (Stage 1+2) loan volumes grew by 11% y-o-y (FX-adjusted). The retail loan book expanded by
17% last year, supported by 29% y-o-y growth in new cash loan disbursement, as well as a 47% jump in
mortgage loan disbursements. Performing corporate loan volumes rose by 2% last year.
At the end of 2021, the bank’s market share by total asset value was 18.03%, which ranked it second on the
market.
In 2021, HUF 21 billion total risk cost weighed on profit, 53% less than in 2020. The 12-month credit risk cost
ratio stood at 0.70% (-1.09 pps y-o-y).
The ratio of Stage 2 loans declined by 1.5 pps (to 9.8%) from the previous year; the large corporate and the
mortgage loan portfolios improved.
Deposit volumes expanded by a total of 4% over the past 12 months. The FX-adjusted net loan/deposit ratio
stood at 72% at the end of December.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
OTP BANK CROATIA
Performance of OTP Bank Croatia:
Main components of P&L account
2020
HUF million
2021
HUF million
Change
%
After tax profit without the effect of adjustments 14,830 33,448 126
Income tax (2,771) (7,618) 175
Profit before income tax 17,600 41,065 133
Operating profit 40,329 43,422 8
Total income 84,907 88,736 5
Net interest income 58,199 60,933 5
Net fees and commissions 16,093 18,183 13
Other net non-interest income 10,615 9,619 (9)
Operating expenses (44,578) (45,313) 2
Total provisions (22,728) (2,357) (90)
Provision for impairment on loan and placement losses (19,491) 1,767 (109)
Other provision (3,238) (4,124) 27
Main components of balance sheet
closing balances
2020 2021 %
Total assets 2,325,669 2,576,445 11
Gross customer loans 1,642,170 1,811,376 10
Gross customer loans (FX-adjusted) 1,664,491 1,811,376 9
Stage 1+2 customer loans (FX-adjusted) 1,519,909 1,667,213 10
Retail loans 770,976 875,737 14
Corporate loans 640,362 676,124 6
Leasing 108,572 115,351 6
Allowances for possible loan losses (100,920) (109,575) 9
Allowances for possible loan losses (FX-adjusted) (102,293) (109,575) 7
Deposits from customers 1,634,652 1,899,671 16
Deposits from customers (FX-adjusted) 1,664,844 1,899,671 14
Retail deposits 1,255,438 1,416,254 13
Corporate deposits 409,406 483,417 18
Liabilities to credit institutions 287,647 228,733 (20)
Total shareholders' equity 328,165 351,023 7
Loan Quality 2020 2021 %/pps
Stage 1 loan volume under IFRS 9 (in HUF million) 1,257,492 1,448,458 15
Stage 1 loans under IFRS 9/gross customer loans 76.6% 80.0% 3.4
Own coverage of Stage 1 loans under IFRS 9 0.8% 0.6% (0.2)
Stage 2 loan volume under IFRS 9 (in HUF million) 241,962 218,754 (10)
Stage 2 loans under IFRS 9/gross customer loans 14.7% 12.1% (2.7)
Own coverage of Stage 2 loans under IFRS 9 5.7% 5.9% 0.1
Stage 3 loan volume under IFRS 9 (in HUF million) 142,716 144,163 1
Stage 3 loans under IFRS 9/gross customer loans 8.7% 8.0% (0.7)
Own coverage of Stage 3 loans under IFRS 9 53.9% 61.4% 7.5
Provision for impairment on loan and placement losses/average gross loans 1.27% (0.11%) (1.38)
90+ days past due loan volume (in HUF million) 68,712 73,826 7
90+ days past due loans/gross customer loans 4.2% 4.1% (0.1)
Performance Indicators 2020 2021 pps
ROA 0.7% 1.4% 0.7
ROE 4.7% 10.0% 5.3
Total income margin 3.93% 3.73% (0.20)
Net interest margin 2.69% 2.56% (0.13)
Operating costs / Average assets 2.06% 1.90% (0.16)
Cost/income ratio 52.5% 51.1% (1.4)
Net loans to deposits (FX-adjusted) 94% 90% (4)
FX rates
2020
HUF
2021
HUF
Change
%
HUF/HRK (closing) 48.4 49.1 2
HUF/HRK (average) 46.6 47.6 2
The Croatian bank realized HUF 33.5 billion after-tax profit in 2021, more than doubling its profit y-o-y., This
was primarily caused by a favourable development in credit risk costs, but operating profit also improved
(+8% y-o-y).
Within annual income, net interest income expanded by 5%. The dynamic organic growth of loans was partly
offset by a further erosion in net interest margin (-13 bps y-o-y).
Net fees and commissions surged 13% y-o-y in 2021, mainly as a result of stronger economic activity and
tourism, starting from the second quarter.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
Other income contracted by 9% y-o-y last year, largely because of the 31% q-o-q decline in the fourth quarter.
The latter stemmed from the seasonally lower income from foreign currency exchange, as well as from the
negative revaluation result owing to an IT-system-related write-off and unfavourable exchange rate
fluctuations.
Operating expenses rose by 2% (but dropped by 1% in local currency) in 2021, thus cost efficiency indicators
improved.
In 2021, HUF 2.4 billion total risk cost weighed on profit, which was a tenth of what was recorded in the base
year.
In the past quarter, the share of Stage 3 loans in the portfolio sank to 8.0%, while their own provision coverage
grew to 61.4% (+7.5 pps y-o-y).
The volume of 90 days past due loans grew by HUF 8.7 billion (FX-adjusted, without sales/write-offs) in 2021.
It was in 4Q when considerable non-performing loans were sold/written off last year (nearly HUF 4 billion,
FX-adjusted).
As to lending activity, performing (Stage 1+2) loans surged 10% y-o-y (FX-adjusted).
In the retail segment, mortgage (+67% y-o-y) and cash (+40%) loan disbursement volumes grew dynamically.
Despite the strong fourth quarter, the volume of corporate loan disbursement contracted by 6% from the
previous year.
The FX-adjusted deposit volumes increased by 14% compared to end-2020, largely driven by the corporate
segment, but the growth in the on-demand retail deposits also continued.
The Croatian bank's liquidity position remained stable; the net loan/deposit ratio stood at 90% at the end of
December (-4 pps y-o-y).
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
OTP BANK SERBIA
Performance of OTP Bank Serbia:
Main components of P&L account
2020
HUF million
2021
HUF million
Change
%
After tax profit without the effect of adjustments 7,298 32,104 340
Income tax (1,157) (3,610) 212
Profit before income tax 8,455 35,714 322
Operating profit 35,898 40,754 14
Total income 79,001 83,494 6
Net interest income 59,514 62,497 5
Net fees and commissions 14,766 14,410 (2)
Other net non-interest income 4,721 6,586 40
Operating expenses (43,102) (42,740) (1)
Total provisions (27,443) (5,040) (82)
Provision for impairment on loan and placement losses (22,170) (387) (98)
Other provision (5,273) (4,653) (12)
Main components of balance sheet
closing balances
2020 2021 %
Total assets 2,052,332 2,224,715 8
Gross customer loans 1,539,738 1,715,347 11
Gross customer loans (FX-adjusted) 1,555,706 1,715,347 10
Stage 1+2 customer loans (FX-adjusted) 1,515,269 1,665,924 10
Retail loans 716,486 786,945 10
Corporate loans 711,244 794,091 12
Leasing 87,538 84,889 (3)
Allowances for possible loan losses (43,597) (44,587) 2
Allowances for possible loan losses (FX-adjusted) (44,054) (44,587) 1
Deposits from customers 1,147,712 1,238,864 8
Deposits from customers (FX-adjusted) 1,162,891 1,238,864 7
Retail deposits 686,059 750,275 9
Corporate deposits 476,832 488,589 2
Liabilities to credit institutions 548,354 584,453 7
Total shareholders' equity 273,046 306,630 12
Loan Quality 2020 2021 %/pps
Stage 1 loan volume under IFRS 9 (in HUF million) 1,367,313 1,542,170 13
Stage 1 loans under IFRS 9/gross customer loans 88.8% 89.9% 1.1
Own coverage of Stage 1 loans under IFRS 9 0.8% 0.7% (0.1)
Stage 2 loan volume under IFRS 9 (in HUF million) 132,427 123,754 (7)
Stage 2 loans under IFRS 9/gross customer loans 8.6% 7.2% (1.4)
Own coverage of Stage 2 loans under IFRS 9 8.5% 6.1% (2.4)
Stage 3 loan volume under IFRS 9 (in HUF million) 39,998 49,423 24
Stage 3 loans under IFRS 9/gross customer loans 2.6% 2.9% 0.3
Own coverage of Stage 3 loans under IFRS 9 53.6% 53.6% 0.0
Provision for impairment on loan and placement losses/average gross loans 1.62% 0.02% (1.59)
90+ days past due loan volume (in HUF million) 22,697 33,405 47
90+ days past due loans/gross customer loans 1.5% 1.9% 0.5
Performance Indicators 2020 2021 pps
ROA 0.4% 1.6% 1.2
ROE 2.7% 11.4% 8.6
Total income margin 4.25% 4.07% (0.17)
Net interest margin 3.20% 3.05% (0.15)
Operating costs / Average assets 2.32% 2.09% (0.23)
Cost/income ratio 54.6% 51.2% (3.4)
Net loans to deposits (FX-adjusted) 130% 135% 5
FX rates
2020
HUF
2021
HUF
Change
%
HUF/RSD (closing) 3.1 3.1 1
HUF/RSD (average) 3.0 3.0 2
The Serbian banking group’s adjusted after-tax profit exceeded HUF 32 billion in 2021, almost 4.5 times more
than in the previous year. This dynamic profit growth was largely the result of a sharp fall in risk costs, and
14% improvement in operating profit.
Following the financial closure of the second Serbian acquisition at the end of September 2019, the integration
continued as planned, and was successfully accomplished on 30 April 2021. The Serbian operation's total
market share by balance sheet total jumped to 13.0% on pro forma basis (ranking No. 2), and it remained
market leader in net loans (with 16.6% market share), according to the most recent data of end-September
2021.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
The total network in Serbia consists of 187 branches. Since the end of September 2019, it has contracted by
a total of 53 units. At the end of 2021 the network had 2,707 employees, 16% (525 workers) less than at the
end of September 2019.
Operating expenses in 2021 stagnated y-o-y in HUF but dropped by 3% in local currency. The Bank’s annual
cost/income ratio improved by 3.4 pps y-o-y, to 51.2%.
Both the full-year and the fourth-quarter changes in after-tax profit were largely shaped by the size of risk costs.
In 2021, total risk cost volume fell by 82% y-o-y, from more than HUF 27 billion in the previous year. The 2021
amount on the other risk cost line were mostly induced by legal disputes.
In full year 2021, the income side grew by 6% y-o-y, supported by a 5% increase in net interest income, and a
40% jump in other income. Annual net fees and commissions contracted by 2% from the previous year’s level.
As regards loan quality, the share of Stage 3 loans in the whole portfolio was at 2.9% at the end of December
(+0.3 pp y-o-y). The DPD90+ volume (FX-adjusted, without sales/write-offs) grew by a total of HUF 13 billion
in 2021. This brought the DPD90+ ratio 0.5 pp higher, to 1.9% y-o-y by the end of December.
Performing (Stage 1+2) loan volumes increased by 10% y-o-y (FX-adjusted), while the deposit base
increased by 7%. The bank’s net loan/deposit ratio rose in y-o-y terms, hitting 135%.
In Serbia, borrowers could apply for the third phase of the loan moratorium until the end of April 2021; the
moratorium (maximum six months from the date of entrance) ended at the end of October.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
SKB BANKA (SLOVENIA)
Performance of SKB Banka (Slovenia):
Main components of P&L account
2020
HUF million
2021
HUF million
Change
%
After tax profit without the effect of adjustments 9,665 16,822 74
Income tax (2,439) (3,838) 57
Profit before income tax 12,104 20,660 71
Operating profit 19,787 19,595 (1)
Total income 40,388 42,354 5
Net interest income 28,103 27,673 (2)
Net fees and commissions 11,127 13,258 19
Other net non-interest income 1,158 1,423 23
Operating expenses (20,601) (22,759) 10
Total provisions (7,683) 1,065
Provision for impairment on loan and placement losses (6,244) 1,819
Other provision (1,440) (754) (48)
Main components of balance sheet
closing balances
2020 2021 %
Total assets 1,353,772 1,433,206 6
Gross customer loans 909,439 984,605 8
Gross customer loans (FX-adjusted) 919,331 984,605 7
Stage 1+2 customer loans (FX-adjusted) 905,333 971,578 7
Retail loans 507,762 475,971 (6)
Corporate loans 230,038 328,691 43
Leasing 167,533 166,915 0
Allowances for possible loan losses (14,876) (16,271) 9
Allowances for possible loan losses (FX-adjusted) (15,040) (16,271) 8
Deposits from customers 1,136,666 1,213,698 7
Deposits from customers (FX-adjusted) 1,150,365 1,213,698 6
Retail deposits 985,148 895,652 (9)
Corporate deposits 165,217 318,046 93
Liabilities to credit institutions 29,524 15,565 (47)
Total shareholders' equity 166,124 179,515 8
Loan Quality 2020 2021 %/pps
Stage 1 loan volume under IFRS 9 (in HUF million) 753,584 846,646 12
Stage 1 loans under IFRS 9/gross customer loans 82.9% 86.0% 3.1
Own coverage of Stage 1 loans under IFRS 9 0.5% 0.3% (0.2)
Stage 2 loan volume under IFRS 9 (in HUF million) 142,015 124,932 (12)
Stage 2 loans under IFRS 9/gross customer loans 15.6% 12.7% (2.9)
Own coverage of Stage 2 loans under IFRS 9 4.3% 5.0% 0.7
Stage 3 loan volume under IFRS 9 (in HUF million) 13,840 13,027 (6)
Stage 3 loans under IFRS 9/gross customer loans 1.5% 1.3% (0.2)
Own coverage of Stage 3 loans under IFRS 9 36.3% 56.1% 19.8
Provision for impairment on loan and placement losses/average gross loans 0.70% (0.20%) (0.90)
90+ days past due loan volume (in HUF million) 3,620 4,353 20
90+ days past due loans/gross customer loans 0.4% 0.4% 0.0
Performance Indicators 2020 2021 pps
ROA 0.8% 1.2% 0.5
ROE 6.3% 10.0% 3.7
Total income margin 3.18% 3.13% (0.05)
Net interest margin 2.21% 2.04% (0.17)
Operating costs / Average assets 1.62% 1.68% 0.06
Cost/income ratio 51.0% 53.7% 2.7
Net loans to deposits (FX-adjusted) 79% 80% 1
FX rates
2020
HUF
2021
HUF
Change
%
HUF/EUR (closing) 365.1 369.0 1
HUF/EUR (average) 351.2 358.5 2
In 2021, OTP’s Slovenian subsidiary generated HUF 16.8 billion adjusted profit, 74% more than in the base
period. This substantial improvement was driven by the decline in risk costs.
Operating profit was marginally smaller in 2021 than in the base period. The 5% growth in income largely
stemmed from strong fees and commissions, mostly because of higher fee income from payment services
and from deposits: the Bank introduced commissions for corporate and retail deposits above a certain
amount. Full-year net interest income dropped by 4% in local currency as the growth in business volumes
was offset by the 17 bps y-o-y erosion of net interest margin, to 2.04%, owing to the strong competition and
the low interest rate environment.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
Operating expenses increased by 10% last year, mostly because of higher personnel expenses and
administrative costs: annual supervisory costs rose, as did IT spending; amortization stagnated.
The favourable development of the quality of the loan portfolio throughout the year enabled the release of
provisions for loan losses and resulted in moderate risk cost.
At the end of 2021, the ratio of Stage 3 loans (1.3%) improved by 0.2 pp y-o-y. The own provision coverage
of Stage 3 loans grew by almost 20 pps y-o-y, to 56.1%, thus it is already nearing the Group average.
The performing loan volumes grew by 7% y-o-y. One reason for the y-o-y increase in corporate deposits
and loans was the change in the definition of the MSE and corporate segments in 3Q 2021 (just like in 1Q),
thus part of the MSE loan stock (customers above a certain annual income) was reclassified into the
corporate segment.
Mortgage loan volumes grew by 8% y-o-y, disbursements jumped by more than 70%. Corporate loans and
credit card loan volumes surged by double-digit rates y-o-y.
The bank’s market share in cash loans improved y-o-y, but it slightly declined in mortgage and corporate
loans, owing to the strong price competition.
The FX-adjusted deposit book expanded by 6% y-o-y. The net-loan-to-deposit ratio stood at 80% at the end
of the quarter (+1 pp y-o-y).
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
OTP BANK ROMANIA
Performance of OTP Bank Romania:
Main components of P&L account
2020
HUF million
2021
HUF million
Change
%
After tax profit without the effect of adjustments 1,558 4,253 173
Income tax 91 (1,444)
Profit before income tax 1,467 5,697 288
Operating profit 11,811 8,937 (24)
Total income 43,748 46,699 7
Net interest income 32,739 36,270 11
Net fees and commissions 3,813 4,143 9
Other net non-interest income 7,195 6,285 (13)
Operating expenses (31,937) (37,762) 18
Total provisions (10,344) (3,240) (69)
Provision for impairment on loan and placement losses (7,840) (6,821) (13)
Other provision (2,504) 3,581 (243)
Main components of balance sheet
closing balances
2020 2021 %
Total assets 1,162,183 1,438,484 24
Gross customer loans 861,393 1,035,400 20
Gross customer loans (FX-adjusted) 863,037 1,035,400 20
Stage 1+2 customer loans (FX-adjusted) 806,492 976,556 21
Retail loans 552,550 500,791 (9)
Corporate loans 216,060 429,245 99
Leasing 37,881 46,520 23
Allowances for possible loan losses (48,174) (54,780) 14
Allowances for possible loan losses (FX-adjusted) (48,519) (54,780) 13
Deposits from customers 710,047 830,717 17
Deposits from customers (FX-adjusted) 712,274 830,717 17
Retail deposits 508,556 436,727 (14)
Corporate deposits 203,718 393,990 93
Liabilities to credit institutions 284,173 402,553 42
Total shareholders' equity 127,238 164,914 30
Loan Quality 2020 2021 %/pps
Stage 1 loan volume under IFRS 9 (in HUF million) 690,664 826,518 20
Stage 1 loans under IFRS 9/gross customer loans 80.2% 79.8% (0.4)
Own coverage of Stage 1 loans under IFRS 9 1.0% 1.0% 0.0
Stage 2 loan volume under IFRS 9 (in HUF million) 114,615 150,038 31
Stage 2 loans under IFRS 9/gross customer loans 13.3% 14.5% 1.2
Own coverage of Stage 2 loans under IFRS 9 9.0% 8.4% (0.6)
Stage 3 loan volume under IFRS 9 (in HUF million) 56,113 58,844 5
Stage 3 loans under IFRS 9/gross customer loans 6.5% 5.7% (0.8)
Own coverage of Stage 3 loans under IFRS 9 54.6% 57.5% 2.9
Provision for impairment on loan and placement losses/average gross loans 0.99% 0.74% (0.25)
90+ days past due loan volume (in HUF million) 38,713 35,921 (7)
90+ days past due loans/gross customer loans 4.5% 3.5% (1.0)
Performance Indicators 2020 2021 pps
ROA 0.1% 0.3% 0.2
ROE 1.3% 3.0% 1.8
Total income margin 4.18% 3.75% (0.43)
Net interest margin 3.13% 2.92% (0.21)
Operating costs / Average assets 3.05% 3.04% (0.02)
Cost/income ratio 73.0% 80.9% 7.9
Net loans to deposits (FX-adjusted) 114% 118% 4
FX rates
2020
HUF
2021
HUF
Change
%
HUF/RON (closing) 75.0 74.6 (1)
HUF/RON (average) 72.6 72.8 0
In 2021 OTP Bank Romania generated HUF 4.3 billion after-tax profit, which is consistent with 3% ROE.
The tripling annual profit benefited from the 69% fall in risk costs.
The annual operating profit dropped by 24%, as a result of y-o-y 7% higher total income, and 18% growth
in operating expenses.
The twelve-month net interest income surged 10% y-o-y in local currency. The annual dynamics was
supported by the vigorous, 21% growth in performing (Stage 1+2) loan volumes, while net interest margin
shrank by 21 bps y-o-y.
Operating expenses surged by 18% y-o-y. Most of the higher costs stemmed from the growth strategy
launched in 2019. The increase in personnel expenses was partly the result of the 8% y-o-y growth in the
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
average number of employees and wage hikes. The higher depreciation was due to the CAPEX requirement
of developments, in line with the growth strategy. Within other expenses, supervisory fees grew at the
strongest rate (+HUF 0.7 billion y-o-y).
In 2021, total risk cost amounted to -HUF 3.2 billion. The 69% y-o-y decline stemmed from the lower credit
risk cost than in the base period, and from the release of other provisions.
As to loan quality, the volume of 90 days past due loans fell by HUF 1 billion (FX-adjusted, without
sales/write-offs) last year. The ratio of Stage 3 loans declined by 1.4 pps y-o-y, to 5.7%, their own provision
coverage stood at 57.5% at the end of 2021 (+2.9 pps y-o-y). The ratio of Stage 2 loans fell by 1.2 pps y-o-
y, to 14.5%. The growth was driven by the revision of IFRS model parameters, during which a substantial
retail volume was reclassified as Stage 2. The own provision coverage of Stage 2 loans edged higher (+0.6
pp y-o-y), and stood at 8.4% at the end of 2021.
As to business activity, both new placements and volumes grew dynamically, in accordance with the Bank’s
strategy. In 2021, mortgage loan placements increased by 25% y-o-y. Performing (Stage 1+2) loan volumes
rose by 21% y-o-y (FX-adjusted). In the third quarter of 2021, group-level definitions were adopted for MSE
and large corporate loans. As a result, certain exposures were reclassified between the two categories.
Despite the successful deposit-taking (+17% y-o-y; FX-adjusted), the net loan/deposit ratio grew by 4 pps
y-o-y, to 118%.
The 30% y-o-y increase in total shareholders’ equity was largely the result of the capital increases by the
parent bank (RON 250 million in March and RON 200 million in December).
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
OTP BANK UKRAINE
Performance of OTP Bank Ukraine:
Main components of P&L account
2020
HUF million
2021
HUF million
Change
%
After tax profit without the effect of adjustments 26,104 39,024 49
Income tax (5,485) (8,242) 50
Profit before income tax 31,589 47,266 50
Operating profit 42,030 54,760 30
Total income 67,385 83,567 24
Net interest income 48,581 62,051 28
Net fees and commissions 13,540 14,494 7
Other net non-interest income 5,264 7,022 33
Operating expenses (25,355) (28,806) 14
Total provisions (10,441) (7,494) (28)
Provision for impairment on loan and placement losses (6,286) (5,827) (7)
Other provision (4,155) (1,667) (60)
Main components of balance sheet
closing balances
2020 2021 %
Total assets 729,012 983,557 35
Gross customer loans 443,031 662,173 49
Gross customer loans (FX-adjusted) 491,631 662,173 35
Stage 1 + 2 customer loans (FX-adjusted) 440,021 620,582 41
Retail loans 90,510 115,140 27
Corporate loans 227,872 341,118 50
Car financing loans 121,640 164,324 35
Allowances for possible loan losses (46,200) (47,830) 4
Allowances for possible loan losses (FX-adjusted) (51,699) (47,830) (7)
Deposits from customers 493,884 671,002 36
Deposits from customers (FX-adjusted) 546,495 671,002 23
Retail deposits 244,679 275,196 12
Corporate deposits 301,815 395,805 31
Liabilities to credit institutions 91,059 115,714 27
Total shareholders' equity 117,071 159,756 36
Loan Quality 2020 2021 %/pps
Stage 1 loan volume under IFRS 9 (in HUF million) 365,266 576,876 58
Stage 1 loans under IFRS 9/gross customer loans 82.4% 87.1% 4,7
Own coverage of Stage 1 loans under IFRS 9 1.9% 1.9% 0,0
Stage 2 loan volume under IFRS 9 (in HUF million) 31,726 43,707 38
Stage 2 loans under IFRS 9/gross customer loans 7.2% 6.6% (0,6)
Own coverage of Stage 2 loans under IFRS 9 15.9% 18.5% 2,6
Stage 3 loan volume under IFRS 9 (in HUF million) 46,039 41,590 (10)
Stage 3 loans under IFRS 9/gross customer loans 10.4% 6.3% (4,1)
Own coverage of Stage 3 loans under IFRS 9 74.3% 69.6% (4,8)
Provision for impairment on loan and placement losses/average gross loans 1.39% 1.09% (0,30)
90+ days past due loan volume (in HUF million) 28,401 21,914 (23)
90+ days past due loans/gross customer loans 6.4% 3.3% (3,1)
Performance Indicators 2020 2021 pps
ROA 3.8% 4.7% 0.9
ROE 23.0% 28.8% 5.8
Total income margin 9.78% 10.06% 0.28
Net interest margin 7.05% 7.47% 0.42
Operating costs / Average assets 3.68% 3.47% (0.21)
Cost/income ratio 37.6% 34.5% (3.2)
Net loans to deposits (FX-adjusted) 81% 92% 11
FX rates
2020
HUF
2021
HUF
Change
%
HUF/UAH (closing) 10.5 11.9 14
HUF/UAH (average) 11.4 11.1 (3)
OTP Bank Ukraine's financial figures in HUF terms were affected by the UAH/HUF exchange rate moves: by
the end of 4Q 2021, the hryvnia appreciated by 14% y-o-y and by 2% q-o-q against the HUF. The UAH’s
annual average exchange rate weakened 3%. Therefore, the balance sheet and P&L dynamics in HUF terms
differ from the ones expressed in local currency.
OTP Bank Ukraine generated HUF 39 billion after-tax profit in 2021. Most of the 49% y-o-y growth stemmed
from a 30% y-o-y improvement in operating profit. This was a result of a dynamic growth in income (+24%
y-o-y in HUF terms), including the outstanding 28% growth of net interest income. All this offset the 14%
increase in operating expenses, which was fuelled by a hike in personnel expenses.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
The Ukrainian base rate grew by a total of 300 bps, to 9% in 2021. The rising interest rate environment
supported the steady improvement of net interest margin, which grew by 42 bps y-o-y, to 7.47%.
The Ukrainian operation could further improve its cost efficiency: the cost/income ratio sank by 3.2 pps y-o-y,
to 34.5%, as did the ratio of operating expenses to average balance sheet total, compared to the previous year
(to 3.4%). Based on average shareholders’ equity and twelve-month profit in 2021, ROE was 28.8%, the
highest ratio in the Group again.
Total risk costs fell 28% y-o-y, to -HUF 7.5 billion in full year 2021. The annual risk cost rate stood at 1.09%.
Owing to the improved loan quality, the volume of 90 days past due loans fell by HUF 6.5 billion (FX-adjusted,
without sales/write-offs).
Loan sales grew robustly in 2021. The FX-adjusted volume of performing (Stage 1+2) loans expanded by 41%
last year, owing to a 50% jump in corporate loans, and a 27% surge in retail loans. Leasing activity was likewise
strong in 2021, growing by 35% y-o-y. Thanks to the steady improvement in consumer loan sales, the Ukrainian
bank could increase its market share in this segment, as well as in the performing corporate loan market.
While loan volumes increased, the Ukrainian operation's liquidity position remained stable; the net loan/deposit
ratio remained stable at 92%.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
OTP BANK RUSSIA
Performance of OTP Bank Russia
Main components of P&L account
2020
HUF million
2021
HUF million
Change
%
After tax profit without the effect of adjustments 16.317 37.624 131
Income tax (5.092) (9.690) 90
Profit before income tax 21.409 47.313 121
Operating profit 65.068 62.368 (4)
Total income 123.198 118.158 (4)
Net interest income 99.872 91.364 (9)
Net fees and commissions 22.503 25.728 14
Other net non-interest income 823 1.066 30
Operating expenses (58.130) (55.790) (4)
Total provisions (43.659) (15.055) (66)
Provision for impairment on loan and placement losses (41.160) (13.075) (68)
Other provision (2.499) (1.979) (21)
Main components of balance sheet
closing balances
2020 2021 %
Total assets 688,980 799,965 16
Gross customer loans 597,849 753,373 26
Gross customer loans (FX-adjusted) 656,236 753,373 15
Stage 1 + 2 customer loans (FX-adjusted) 564,686 667,347 18
Retail loans 486,612 542,886 12
Corporate loans 78,074 124,461 59
Allowances for possible loan losses (127,598) (131,878) 3
Allowances for possible loan losses (FX-adjusted) (140,026) (131,878) (6)
Deposits from customers 350,608 411,633 17
Deposits from customers (FX-adjusted) 383,877 411,633 7
Retail deposits 315,780 307,663 (3)
Corporate deposits 68,097 103,970 53
Liabilities to credit institutions 90,852 85,485 (6)
Subordinated debt 22,580 8,842 (61)
Total shareholders' equity 183,402 240,724 31
Loan Quality 2020 2021 %/pps
Stage 1 loan volume under IFRS 9 (in HUF million) 447,094 576,404 29
Stage 1 loans under IFRS 9/gross customer loans 74.8% 76.5% 1.7
Own coverage of Stage 1 loans under IFRS 9 4.6% 3.8% (0.9)
Stage 2 loan volume under IFRS 9 (in HUF million) 67,394 90,944 35
Stage 2 loans under IFRS 9/gross customer loans 11.3% 12.1% 0.8
Own coverage of Stage 2 loans under IFRS 9 43.1% 31.1% (12.0)
Stage 3 loan volume under IFRS 9 (in HUF million) 83,361 86,025 3
Stage 3 loans under IFRS 9/gross customer loans 13.9% 11.4% (2.5)
Own coverage of Stage 3 loans under IFRS 9 93.4% 95.1% 1.7
Provision for impairment on loan and placement losses/average gross loans 6.36% 2.05% (4.31)
90+ days past due loan volume (in HUF million) 77,929 87,550 12
90+ days past due loans/gross customer loans 13.0% 11.6% (1.4)
Performance Indicators 2020 2021 pps
ROA 2.1% 5.4% 3.3
ROE 8.9% 18.2% 9.3
Total income margin 16.03% 17.02% 0.99
Net interest margin 13.00% 13.16% 0.16
Operating costs / Average assets 7.56% 8.04% 0.47
Cost/income ratio 47.2% 47.2% 0.0
Net loans to deposits (FX-adjusted) 134% 151% 17
FX rates
2020
HUF
2021
HUF
Change
%
HUF/RUB (closing) 4.0 4.4 10
HUF/RUB (average) 4.3 4.1 (4)
OTP Bank Russia's financial figures in HUF terms were affected by the HUF/RUB exchange rate's moves:
in 4Q 2021, the rouble's closing exchange rate against the forint appreciated by 2% q-o-q, and 10% y-o-y.
The annual average exchange rate weakened 4% y-o-y. Therefore, the balance sheet and the P&L dynamics
in HUF terms differ from the ones expressed in local currency.
OTP Bank Russia posted HUF 37.6 billion profit in 2021, 131% more than in the base period.
The bank’s operating profit in local currency stagnated from the previous year, just like operating expenses.
In RUB terms, 2021 total income did not change from 2020, because the 19% y-o-y growth in net fees and
commissions offset the 5% contraction in net interest income. Net interest income was adversely affected
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
by the lower average interest rate on loans (in part because of the strong competition, partly because of
regulatory reasons, partly because of composition effect), and this led to lower interest income on loans,
despite growing volumes. Net interest margin crawled up y-o-y last year, partially supported by the overall
decline in deposit interest expenses. The yield environment grew over the past year: the base rate increased
by a total of 425 bps, to 8.5%.
Operating expenses stagnated y-o-y in RUB. The annual cost/income ratio was 47.2%, similar to the
previous year.
Risk costs fell by 66% y-o-y 2021, owing to the pandemic-induced loan loss provisions set aside in the base
period, the favourable portfolio quality trend in 2021, and the release of provisions owing to the revision of
the IFRS 9 depreciation model parameters in 4Q 2021.
The ratio of Stage 3 loans declined by 2.5 pps, to 11.4%, while that of Stage 1 loans upped by 1.7 pps, to
76.5%. The credit risk cost ratio dropped by 4.31 pps, to 2.05% y-o-y.
The performing (Stage 1+2) loan volume expanded by 18% y-o-y (FX-adjusted), bolstered by the 12% retail
and 59% corporate volume growth rates. During 2021, the composition of the portfolio shifted towards lower-
margin corporate loans and car financing, while the ratio of retail consumer loans with higher risk profile
dropped. New retail loan disbursements in 2021 were 28% higher y-o-y than in the previous year,
while
interest rates headed down.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
CKB GROUP (MONTENEGRO)
Performance of CKB Group:
Main components of P&L account
2020
HUF million
2021
HUF million
Change
%
After tax profit without the effect of adjustments 4,307 4,140 (4)
Income tax (302) (817) 170
Profit before income tax 4,609 4,957 8
Operating profit 8,353 10,240 23
Total income 22,095 22,046 0
Net interest income 17,188 16,553 (4)
Net fees and commissions 4,446 4,880 10
Other net non-interest income 461 613 33
Operating expenses (13,743) (11,805) (14)
Total provisions (3,743) (5,283) 41
Provision for impairment on loan and placement losses (3,434) 647 (119)
Other provision (309) (5,930)
Main components of balance sheet
closing balances
2020 2021 %
Total assets 477,676 513,522 8
Gross customer loans 362,067 366,369 1
Gross customer loans (FX-adjusted) 365,907 366,369 0
Stage 1+2 customer loans (FX-adjusted) 339,502 340,776 0
Retail loans 164,896 162,018 (2)
Corporate loans 174,606 178,758 2
Allowances for possible loan losses (24,510) (23,504) (4)
Allowances for possible loan losses (FX-adjusted) (24,772) (23,504) (5)
Deposits from customers 324,671 386,572 19
Deposits from customers (FX-adjusted) 329,051 386,572 17
Retail deposits 216,100 235,340 9
Corporate deposits 112,951 151,232 34
Liabilities to credit institutions 58,967 19,698 (67)
Total shareholders' equity 76,556 82,029 7
Loan Quality 2020 2021 %/pps
Stage 1 loan volume under IFRS 9 (in HUF million) 294,548 280,910 (5)
Stage 1 loans under IFRS 9/gross customer loans 81.4% 76.7% (4.7)
Own coverage of Stage 1 loans under IFRS 9 1.3% 1.0% (0.4)
Stage 2 loan volume under IFRS 9 (in HUF million) 41,390 59,866 45
Stage 2 loans under IFRS 9/gross customer loans 11.4% 16.3% 4.9
Own coverage of Stage 2 loans under IFRS 9 9.3% 6.5% (2.8)
Stage 3 loan volume under IFRS 9 (in HUF million) 26,129 25,593 (2)
Stage 3 loans under IFRS 9/gross customer loans 7.2% 7.0% (0.2)
Own coverage of Stage 3 loans under IFRS 9 63.9% 66.0% 2.1
Provision for impairment on loan and placement losses/average gross loans 0.99% (0.18%) (1.17)
90+ days past due loan volume (in HUF million) 17,538 16,472 (6)
90+ days past due loans/gross customer loans 4.8% 4.5% (0.3)
Performance Indicators 2020 2021 pps
ROA 0.9% 0.9% 0.0
ROE 6.0% 5.2% (0.7)
Total income margin 4.70% 4.62% (0.08)
Net interest margin 3.65% 3.47% (0.18)
Operating costs / Average assets 2.92% 2.48% (0.45)
Cost/income ratio 62.2% 53.5% (8.6)
Net loans to deposits (FX-adjusted) 104% 89% (15)
FX rates
2020
HUF
2021
HUF
Change
%
HUF/EUR (closing) 365.1 369.0 1
HUF/EUR (average) 351.2 358.5 2
In full year 2021, the Montenegrin CKB Group generated HUF 4.1 billion adjusted profit, which marked a
4% y-o-y decrease compared to the base period.
The twelve-month operating profit grew by 23% y-o-y as operating expenses fell by 14%, while income was
stable. One reason for the lower operating expenses was the synergies from the merger of the acquired
Podgoricka banka: average headcount fell by 155 y-o-y, and the number of branches dropped to 34, from
48 at the end of 3Q 2020. Marketing, real estate-related, and hardware costs also subsided. Thus, the
twelve-month cost/income ratio (53.5%) improved by 8.6 pps y-o-y.
Full-year total income declined by 1% in local currency: owing to the narrowing margins the net interest
income fell 5%, while net fees and commissions grew by 8% as tourism re-started and business activity
intensified.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
Total risk cost in 2021 increased 41% y-o-y, primarily due to other risk costs generated in relation to an
operational risk event.
Performing (Stage 1+2) loans stayed flat y-o-y (FX-adjusted). In y-o-y comparison: cash loan disbursement
grew by 11%, while mortgage loans increased by 27%.
In full year 2021, the volume of DPD90+ loans dropped by HUF 0.3 billion (FX-adjusted, without sales and
write-offs). The DPD90+ ratio (4.5%) declined 0.3 pp y-o-y, simultaneously with the sale/write-off of the HUF
1 billion ) worth of non-performing loans in 2021. At the end of 2021, the ratio of Stage 3 loans was 7.0% (-
0.2 pp y-o-y); their own coverage stood at 66%.
The FX-adjusted deposit book expanded by 17% y-o-y. The net loan/deposit ratio stood at 89% at the end
of the year (-15 pps y-o-y).
At the end of December 2021, the total market share of OTP Group's Montenegrin operation by balance
sheet total was 26.8%. The Bank retained its market leading position in Montenegro.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
OTP BANK ALBANIA
Performance of OTP Bank Albania:
Main components of P&L account
2020
HUF million
2021
HUF million
Change
%
After tax profit without the effect of adjustments 1,959 5,522 182
Income tax (489) (986) 102
Profit before income tax 2,448 6,508 166
Operating profit 5,904 7,213 22
Total income 11,597 13,398 16
Net interest income 9,824 10,619 8
Net fees and commissions 1,278 1,843 44
Other net non-interest income 495 936 89
Operating expenses (5,693) (6,186) 9
Total provisions (3,455) (705) (80)
Provision for impairment on loan and placement losses (2,515) (880) (65)
Other provision (940) 175 (119)
Main components of balance sheet
closing balances
2020 2021 %
Total assets 286,606 350,848 22
Gross customer loans 180,815 219,890 22
Gross customer loans (FX-adjusted) 185,390 219,890 19
Stage 1+2 customer loans (FX-adjusted) 179,767 212,699 18
Retail loans 83,135 84,207 1
Corporate loans 93,097 124,691 34
Leasing 3,536 3,801 7
Allowances for possible loan losses (8,089) (10,096) 25
Allowances for possible loan losses (FX-adjusted) (8,285) (10,096) 22
Deposits from customers 214,808 251,270 17
Deposits from customers (FX-adjusted) 220,322 251,270 14
Retail deposits 184,605 210,200 14
Corporate deposits 35,717 41,070 15
Liabilities to credit institutions 37,151 53,257 43
Total shareholders' equity 28,781 35,134 22
Loan Quality 2020 2021 %/pps
Stage 1 loan volume under IFRS 9 (in HUF million) 143,701 191,308 33
Stage 1 loans under IFRS 9/gross customer loans 79.5% 87.0% 7.5
Own coverage of Stage 1 loans under IFRS 9 1.3% 1.2% 0.0
Stage 2 loan volume under IFRS 9 (in HUF million) 31,620 21,391 (32)
Stage 2 loans under IFRS 9/gross customer loans 17.5% 9.7% (7.8)
Own coverage of Stage 2 loans under IFRS 9 10.4% 11.4% 1.0
Stage 3 loan volume under IFRS 9 (in HUF million) 5,494 7,190 31
Stage 3 loans under IFRS 9/gross customer loans 3.0% 3.3% 0.2
Own coverage of Stage 3 loans under IFRS 9 54.2% 73.3% 19.1
Provision for impairment on loan and placement losses/average gross loans 1.55% 0.46% (1.08)
90+ days past due loan volume (in HUF million) 3,984 3,624 (9)
90+ days past due loans/gross customer loans 2.2% 1.6% (0.6)
Performance Indicators 2020 2021 pps
ROA 0.7% 1.8% 1.1
ROE 7.3% 17.6% 10.3
Total income margin 4.32% 4.43% 0.11
Net interest margin 3.66% 3.51% (0.15)
Operating costs / Average assets 2.12% 2.05% (0.08)
Cost/income ratio 49.1% 46.2% (2.9)
Net loans to deposits (FX-adjusted) 80% 83% 3
FX rates
2020
HUF
2021
HUF
Change
%
HUF/ALL (closing) 3.0 3.1 4
HUF/ALL (average) 2.8 2.9 3
On 6 December 2021, OTP Bank announced to purchase a 100% stake in Alpha Bank Albania, for
EUR 55 million, which corresponds to a price / end of 2020 book value of 0.7. The closure of the transaction
is expected in 2Q 2022, depending on regulatory approvals, therefore Alpha Bank Albania’s figures were
not consolidated until the end of 2021.
OTP Bank Albania generated HUF 5.5 billion after-tax profit in full year 2021; it has nearly tripled y-o-y.
In 2021, operating profit grew by 22% y-o-y, supported by 16% expansion in total income, while operating
expenses increased by 9%.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
The 8% expansion in annual net interest income was driven by volume growth, while interest margin
narrowed. The 44% y-o-y jump in annual net fees and commissions can be put down to higher fee income
from bank card transactions and from loan-related fees. The reason for the y-o-y jump in other net non-
interest income was a technical one: the full-year revaluation gain on foreign currency-denominated
provisions due to exchange rate fluctuations was reclassified from risk costs to other income in 3Q. This
move is neutral to the net result, and the presentation of this item is thus in line with the practice of the
Group’s other subsidiaries.
The 9% y-o-y jump in annual operating expenses was influenced by higher personnel cost and depreciation,
as well as rising supervisory fees among other expenses.
Annual total credit risk cost amounted to -HUF 0.7 billion, in 80% y-o-y slump.
In full year 2021, the volume of DPD90+ loans (FX-adjusted, without sales and write-offs) dropped by
HUF 0.4 billion.
The ratio of Stage 3 loans upped by 0.2 pp y-o-y to 3.3% by the end of 2021. The own provision coverage
of Stage 3 loans increased by 19.1 pps y-o-y to 73.3%. The ratio of Stage 2 loans dropped by 7.8 pps
y-o-y; their own provision coverage was 11.4% at the end of 2021.
The FX-adjusted performing (Stage 1+2) loan volume expanded by 18% y-o-. In the third quarter of 2021,
group-level definitions were introduced for MSE and large corporate loans. As a result, some volumes were
reclassified between the two categories in the third quarter.
The net loan/deposit ratio stood at 83% at the end of December 2021.
Based on its balance sheet total, the market share of OTP’s Albanian operation was 6.4% at the end of
December 2021; this ranks it the fifth biggest bank in the country
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
OTB BANK MOLDOVA
Performance of OTB Bank Moldova:
Main components of P&L account
2020
HUF million
2021
HUF million
Change
%
After tax profit without the effect of adjustments 3,973 5,858 47
Income tax (540) (802) 48
Profit before income tax 4,513 6,660 48
Operating profit 7,707 7,835 2
Total income 14,596 15,271 5
Net interest income 8,889 9,698 9
Net fees and commissions 2,137 2,344 10
Other net non-interest income 3,570 3,230 (10)
Operating expenses (6,889) (7,437) 8
Total provisions (3,193) (1,175) (63)
Provision for impairment on loan and placement losses (2,695) (663) (75)
Other provision (499) (512) 3
Main components of balance sheet
closing balances
2020 2021 %
Total assets 249,921 310,511 24
Gross customer loans 132,081 166,573 26
Gross customer loans (FX-adjusted) 138,650 166,573 20
Stage 1+2 customer loans (FX-adjusted) 134,504 163,525 22
Retail loans 72,740 90,473 24
Corporate loans 58,146 69,231 19
Leasing 3,618 3,820 6
Allowances for possible loan losses (4,578) (5,020) 10
Allowances for possible loan losses (FX-adjusted) (4,804) (5,020) 5
Deposits from customers 203,176 247,610 22
Deposits from customers (FX-adjusted) 213,302 247,610 16
Retail deposits 139,838 160,603 15
Corporate deposits 73,465 87,008 18
Liabilities to credit institutions 5,906 15,886 169
Total shareholders' equity 37,287 42,701 15
Loan Quality 2020 2021 %/pps
Stage 1 loan volume under IFRS 9 (in HUF million) 121,459 153,157 26
Stage 1 loans under IFRS 9/gross customer loans 92.0% 91.9% 0.0
Own coverage of Stage 1 loans under IFRS 9 1.1% 1.3% 0.1
Stage 2 loan volume under IFRS 9 (in HUF million) 6,670 10,368 55
Stage 2 loans under IFRS 9/gross customer loans 5.1% 6.2% 1.2
Own coverage of Stage 2 loans under IFRS 9 19.5% 13.6% (5.9)
Stage 3 loan volume under IFRS 9 (in HUF million) 3,952 3,048 (23)
Stage 3 loans under IFRS 9/gross customer loans 3.0% 1.8% (1.2)
Own coverage of Stage 3 loans under IFRS 9 48.0% 54.3% 6.3
Provision for impairment on loan and placement losses/average gross loans 2.23% 0.46% (1.76)
90+ days past due loan volume (in HUF million) 2,109 2,164 3
90+ days past due loans/gross customer loans 1.6% 1.3% (0.3)
Performance Indicators 2020 2021 pps
ROA 1.7% 2.2% 0.5
ROE 10.7% 15.2% 4.5
Total income margin 6.24% 5.86% (0.39)
Net interest margin 3.80% 3.72% (0.08)
Operating costs / Average assets 2.95% 2.85% (0.09)
Cost/income ratio 47.2% 48.7% 1.5
Net loans to deposits (FX-adjusted) 63% 65% 2
FX rates
2020
HUF
2021
HUF
Change
%
HUF/MDL (closing) 17.3 18.4 6
HUF/MDL (average) 17.8 17.2 (4)
In full year 2021, OTP Bank Moldova contributed to OTP Group's performance by HUF 5.9 billion profit.
This is consistent with 47% y-o-y improvement, mostly caused by lower risk costs. ROE rose by 4.5 pps, to
15.2% in 2021.
In 2021 operating profit rose by 2% y-o-y, driven by a 5% increase in total income; operating expenses
surged 8%. Of core banking incomes, net interest income grew by 9% and net fees jumped by 10% y-o-y,
which was related to revenues from cash and card transactions.
Other net non-interest income dropped by 6% y-o-y in local currency, owing to lower gains on foreign
currency exchange in 2021.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
The 8% y-o-y rise in twelve-month operating expenses was caused by fees paid to supervisory authorities
12
,
as well as by the 8% increase in average headcount, and the resulting higher personnel expenses.
In 2021, total risk cost fell by 63% y-o-y, as a result of the base effect of the loan loss provisions necessitated
by the pandemic in 2020.
In full-year 2021, the DPD90+ loan portfolio stagnated (FX-adjusted, without the impact of sales and write-
offs). The ratio of Stage 3 loans was 1.8% (-1.2 pps y-o-y) at the end of 2021. The own provision coverage
of Stage 3 loans was 54.3%.
In 2021 the FX-adjusted stock of performing (Stage 1+2) loans expanded by 22% y-o-y. Within that, retail
loans jumped by 24%, and corporate loans surged by 19%. In the third quarter of 2021, group-level
definitions were introduced for MSE and large corporate loans. As a result, some volumes were reclassified
between the two categories.
The FX-adjusted deposit volume grew by 16% y-o-y. The net loan/deposit stood at 65% at the end of
December, which is consistent 2 pps y-o-y growth.
Based on total assets, the market share of OTP’s Moldavian operation was 14.2% at the end of December
2021; this ranks it the third biggest bank in Moldova.
12
In 2021, payments were made not only the Deposit Protection Fund, but also to the Resolution Fund established in 2020, which had stipulated lower
contribution in the base period.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
STAFF LEVEL AND OTHER INFORMATION
31/12/2020 31/12/2021
Branches ATM POS
Headcount
(closing)
Branches ATM POS
Headcount
(closing)
OTP Core 362 1,920 125,800 10,189 356 1,906 135,901 10,506
DSK Group (Bulgaria) 334 1,094 14,329 5,619 311 1,046 15,580 5,539
OBH (Croatia) 124 488 11,037 2,228 114 467 11,384 2,279
OTP Bank Serbia 217 323 16,657 3,022 187 298 15,038 2,707
SKB Banka (Slovenia) 51 83 4,167 889 49 82 4,940 864
OTP Bank Romania 95 149 6,256 1,693 95 148 7,843 1,740
OTP Bank Ukraine
(w/o employed agents)
86 161 402 2,313 85 176 293 2,341
OTP Bank Russia
(w/o employed agents)
135 224 704 5,127 134 220 607 4,992
CKB Group (Montenegro) 34 115 6,421 514 34 117 7,251 517
OTP Bank Albania 38 80 0 447 39 86 0 454
OTP Bank Moldova 54 148 0 830 51 151 0 899
Foreign subsidiaries, total 1,168 2,865 59,973 22,681 1,099 2,791 62,936 22,332
Other Hungarian and foreign
subsidiaries
557 568
OTP Group (w/o employed agents) 33,427 33,406
OTP Bank Russia -
employed agents
4,402 3,783
OTP Bank Ukraine -
employed agents
618 657
OTP Group (aggregated) 1,530 4,785 185,773 38,447 1,455 4,697 198,837 37,846
Definition of headcount number: closing, active FTE (full-time employee). The employee is considered as full-time employee in case his/her employment
conditions regarding working hours are in line with a full-time employment defined in the Labour Code in the reporting entity's country. Part-time employees
are taken into account proportional to the full-time working hours being effective in the reporting entity’s country.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
STATEMENT ON CORPORATE GOVERNANCE PRACTICE
Corporate governance practice
OTP Bank Plc., being registered in Hungary, has a corporate governance policy that complies with the
provisions on companies of the act applicable (Civil Code). As the company conducts banking operations, it
also adheres to the statutory regulations pertaining to credit institutions.
Beyond fulfilling the statutory requirements, as a listed company on the Budapest Stock Exchange (BSE), the
company also makes an annual declaration on its compliance with the BSE’s Corporate Governance
Recommendations. After being approved by the General Meeting, this declaration is published on the websites
of both the Stock Exchange (www.bet.hu) and the Bank (www.otpbank.hu).
System of internal controls
OTP Bank Plc., as a provider of financial and investment services, operates a closely regulated and state-
supervised system of internal controls.
OTP Bank Plc. has detailed risk management regulations applicable to all types of risks (credit, country,
counterparty, market, liquidity, operational, compliance), which are in compliance with the regulations on
prudent banking operations. Its risk management system extends to cover the identification of risks, the
assessment and analysis of their impact, elaboration of the required action plans and the monitoring of their
effectiveness and results. The business continuity framework is intended to provide for the continuity of
services. Developed on the basis of international methodologies, the lifecycle model includes process
evaluation, action plan development for critical processes, the regular review and testing of these, as well as
related DRP activities.
OTP Bank Plc.'s internal audit system is realised on several levels of control built on each other. The system
of internal checks and balances includes process-integrated control, management control, independent
internal audit organisation and executive information system. The independent internal audit organisation as
an element of internal lines of defence promotes the statutory and efficient management of assets and
liabilities, the defence of property, the safe course of business, the efficient operation of internal control
systems, the minimisation of risks, moreover it reveals and reports deviations from statutory regulations and
internal rules, makes proposal to abolish deficiencies and follows up the execution of actions. The independent
internal audit organisation annually and quarterly prepares group-level reports on control actions for the
executive boards. Once a year, the internal audit organisation with the prior opinion of the Audit Committee
draws up, for the Supervisory Board and the Board of Directors, objective and independent reports in respect
of the operation of risk management, internal control mechanisms and corporate governance functions.
Furthermore, in line with the provisions of the Credit Institutions Act, reports, once a year, to the Supervisory
Board and the Board of Directors on the regularity of internal audit tasks, professional requirements and the
conduct of audits, and on the review of compliance with IT and other technical conditions needed for the audits.
In line with the regulations of the European Union, the applicable Hungarian laws and supervisory
recommendations, OTP Bank Plc. operates an independent organisational unit with the task of identifying and
managing compliance risks.
IT Controls
Applications are developed by both in-house group resources and by third parties. OTP Bank applies
administrative, logical and physical control measures commensurate with the risk to protect the IT systems
storing and processing data, as follows:
• access to data/systems is only possible on the basis of a predefined authorisation management process
that applies the principle of least privilege, ensures segregation of responsibilities, that has regular access
right reviews and ensures that dismissed employees’ access is revoked;
• user authentication, authorisation and password management processes are controlled by policies and
audited;
• the systems have well-separated test and development environments, which ensures that program
developments or modifications are only deployed to the operational environment after proper, controlled
testing and approval;
• systems are protected by appropriate network perimeter protection, various security devices and network
segmentation, furthermore all network communications are protected;
• the IT systems that store and process data are regularly backed up and stored in controlled premises with
adequate protection for long-term retention, and the organisation carries out regular back-up tests
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• adequate redundancy is applied for IT systems that store and process data to ensure business continuity
and disaster resiliency;
• has developed a BCP for critical systems and processes, which is regularly tested and reviewed;
• the Bank collects and retains the complete log of all data processing activities and the confidentiality,
availability, integrity and non-repudiation of these audit logs are ensured;
• there is a continuous, up-to-date protection against malicious codes;
• it ensures the regular implementation of vendor patches and updates for the environments used;
• it uses a data leakage protection solution to reduce the risk of data loss;
• it ensures the continuous monitoring of the operation of the physical and virtual environment system
elements, and the detection and management of events, where possible automatically;
• the above measures are documented at an appropriate level, which ensures the traceability of the
implementation of data security requirements in a transparent manner;
• it ensures the irretrievable deletion of the data stored on the media, the destruction of the media and the
documentation of the destruction of the media during secure operational media disposal processes;
• it enforces data protection requirements already at the design stage of the implementation of the IT
systems storing and processing personal data and of the systems operational processes related to them;
• it ensures that its employees have adequate knowledge of data protection requirements and provides
regular data protection and information security training for them.
General meeting
The General Meeting is the supreme governing body of OTP Bank Plc. The regulations pertaining to its
operation are set forth in the Company’s Articles of Association, and comply fully with both general and special
statutory requirements. Information on the General Meeting is available in the Corporate Governance Report.
In view of the situation caused by the epidemic, on 22 February 2021 the Parliament voted Act I of 2021 on
the prevention of the coronavirus pandemic, which extended the scope of the Government Decree 502/2020
(XI.16.) (Government Decree) until 22 May 2021. Pursuant to such, in line with Section 9 of the Government
Decree, the resolutions on the published agenda items were passed by OTP Bank Plc’s Board of Directors
acting in the competence of the General Meeting on 16 April 2021.
The Extraordinary General Meeting was held on 15 October 2021 in accordance with the general rules,
traditionally, with the personal participation of the shareholders, subject to Section 3 (1) of the Government
Decree, also in line with the Act I of 2021 on the prevention of the coronavirus pandemic.
Regulations and information to be presented in the Business Report concerning securities
conferring voting rights issued by the Company and senior officials, according to the effective
Articles of Association, and ownership structure
The Company’s registered capital is HUF 28,000,001,000, that is twenty-eight thousand million one
thousand Hungarian forint, divided into 280,000,010 that is Two hundred and eighty million and ten
dematerialised ordinary shares with a nominal value of HUF 100 each, and a total nominal value of
HUF 28,000,001,000, that is twenty eight billion one thousand Hungarian forint.
The ordinary shares of the Company specified all have the same nominal value and bestow the same rights
in respect of the Company.
There are no restrictions in place concerning the transfer of issued securities constituting the registered
capital of the Company.
No securities with special control rights have been issued by the Company.
Special Employee Partial Ownership Plan Organization No. I. of OTP Employees and Special Employee
Partial Ownership Plan Organization No. II. of OTP Employees (h
ereinafter referred to as: OTP SEPOPs)
were established based on the decision of the Company’s certain employees and executives considered as
employees pursuant to the Act XLIV of 1992 on Employee Partial Ownership Plan. Management rights of
OTP SEPOPs are exercised by a trust named Alapítvány az OTP Munkavállalók Különleges Résztulajdonosi
Programjáért, founded by the same employees setting up OTP SEPOPs. The Company did not participate
either in foundation or in management of OTP SEPOPs.
The Company in line with the ESOP Act initiated an employee share ownership plan having a remuneration
purpose and founded OTP Bank ESOP Organization for its execution (hereinafter referred to as ESOP
Organization). Pursuant to the laws, the management rights over the ESOP Organization are exercised by
a law firm, the so called trustee. In the case of the ESOP Organization Szűcs Law Firm is entitled to exercise
the authorities of the trustee. The Company participated in the foundation of the ESOP Organization,
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however, after its foundation it cannot participate in its management, and according to the laws, it is not
entitled to either give orders or to recall the trusteeRules on the restrictions of the voting rights:
The Company’s ordinary shares confer one vote per share.
An individual shareholder or group of shareholders may not exercise voting rights in respect of in an extent
exceeding 25%, or – if the voting rights of another shareholder or group of shareholders exceed 10% –
exceeding 33% of the total voting rights represented by the shares conferring voting rights at the Company’s
General Meeting.
The shareholder is obliged to notify the Company’s Board of Directors without delay if the shareholder
directly or indirectly, or together with other shareholders in the same group of shareholders, holds more than
2% of the voting rights represented by the shares conferring voting rights at the Company’s General Meeting.
Concurrently with this, the shareholder is obliged to designate the shareholders through which the indirect
voting right exists, or the members of the group of shareholders. In the event of a failure to provide such
notification, or if there are substantive grounds for assuming that the shareholder has made a misleading
declaration regarding the composition of the shareholder group, then the shareholder’s voting right shall be
suspended and may not be exercised until the shareholder has met the above obligations. The notification
obligation stipulated in this paragraph and the related legal consequences are also incumbent upon
individuals who are classified or may be classified as the Company’s shareholders under Article 61 of the
Capital Markets Act. The Company must also be provided with proof of the conditions for exemption from
the notification obligation in accordance with Section 61 (7)-(8) and Section 61 (10)-(11)-(12), of the Capital
Markets Act.
Shareholder group: the shareholder and another shareholder, in which the former has either a direct or
indirect shareholding or has an influence without a shareholding (collectively: a direct and/or indirect
influence); furthermore: the shareholder and another shareholder who is exercising or is willing to exercise
its voting rights together with the former shareholder, regardless of what type of agreement between the
participants underlies such concerted exercising of rights.
For determining the existence and extent of the indirect holding, the rules of the Credit Institutions Act
relating to the calculation of indirect ownership shall be applied.
If the voting rights that may be exercised by a shareholder group exceed the threshold stipulated in the first
paragraph of this section, the voting rights shall be reduced in such a way that the voting rights relating to
the shares most recently acquired by the group of shareholders shall not be exercisable.
If there are substantive grounds to presume that the exercising of voting rights by any shareholder or
shareholders might result in a breach of the rules of the Capital Markets Act relating to the acquisition of a
controlling interest, the Board of Directors’ authorised representative responsible for the registration of
shareholders at the venue of the General Meeting, or the Chairman of the General Meeting, may exclude
the affected shareholders from attending the General Meeting or exercising voting rights.
The General Meeting has exclusive authority with respect to the decision regarding the delisting of the
shares (qualified majority). When making the decisions, shares embodying multiple voting rights shall
represent one share.
The Company is not aware of any kind of agreements among the owners that could give rise to the restriction
of the transfer of issued securities and/or the voting rights.
Rules on the appointment and removal of executive officers, and rules on amendment of the Articles of
Association:
The Board of Directors has at least 5, and up to 11 members.
When making the decisions, shares embodying multiple voting rights shall represent one share. The
members of the Board of Directors are elected by the General Meeting based on its decision uniformly either
for an indefinite period or for five years; in the latter case the mandate ends with the General Meeting
concluding the fifth financial year following the election. The mandate of a member elected during this period
expires together with the mandate of the Board of Directors.
The Board of Directors elects a Chairman and, may elect one or more Deputy Chairmen, from among its
own members, whose period of office shall be equal to the mandate of the Board of Directors. The Chairman
of the Board of Directors is also the Chief Executive Officer (Chairman & CEO) of the Company, unless the
Board of Directors decides within its competence that the position of Chairman of the Board of Directors and
the Chief Executive Officer of the Company are held by separate persons.
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The membership of the Board of Directors ceases to exist by
g. expiry of the mandate,
h. resignation,
i. recall,
j. death,
k. the occurrence of grounds for disqualification as regulated by law.
l. termination of the employment of internal (executive) Board members.
The General Meeting has exclusive authority with respect to the following matters:
the recall of members of the Board of Directors, the Supervisory Board and Audit Committee, and of the
auditor; (qualified majority)
More than one third of the members of the Board of Directors and the non-executive members of the
Supervisory Board may be recalled within a 12-month period only if any shareholder holds more than
33% of the shares issued by the Company, which have been obtained by the shareholder by way of
a public purchase offer.
except in the cases referred by these Articles of Association to the authority of the Board of Directors,
the establishment and amendment of the Articles of Association; (qualified majority); the General
Meeting decides on proposals concerning the amendment of the Articles of Association – based on a
resolution passed by shareholders with a simple majority – either individually or en masse.
The Board of Directors is obliged to
prepare the Company’s financial statements in accordance with the Accounting Act, and make a
proposal for the use of the profit after taxation;
prepare a report once a year for the General Meeting, and once every three months for the Supervisory
Board, concerning management, the status of the Company’s assets and business policy;
provide for the proper keeping of the Company's business books;
perform the tasks referred to its authority under the Credit Institutions Act, in particular:
- ensuring the integrity of the accounting and financial reporting system;
- elaborating the appropriate strategy and determining risk tolerance levels for each business unit
concerned;
- setting risk assumption limits;
- providing the necessary resources for the management or risk, the valuation of assets, the use of
external credit ratings and the application of internal models.
The following, in particular, come under the exclusive authority of the Board of Directors:
election of the Chairman & Chief Executive Officer of the Company, and exercising employer’s right in
respect thereof;
election of one or more Deputy Chairmen of the Board of Directors;
determination of the annual plan;
the analysis and assessment of the implementation of business-policy guidelines, on the basis of the
Company’s quarterly balance sheet;
decisions on transactions referred to the authority of the Board of Directors by the Company's
organisational and operational regulations;
decision on launching, suspending, or terminating the performance of certain banking activities within
the scope of the licensed activities of the Company;
designation of the employees entitled to sign on behalf of the
Company;
decision on the increasing of registered capital at the terms set out in the relevant resolution of the
General Meeting;
decision to acquire treasury shares at the terms set out in the relevant resolution of the General Meeting;
decision on approving internal loans in accordance with the Credit Institutions Act;
decision on the approval of regulations that fundamentally determine banking operations, or are referred
to its authority by the Credit Institutions Act. The following shall qualify as such regulations:
- the collateral evaluation regulations,
- the risk-assumption regulations,
- the customer rating regulations,
- the counterparty rating regulations,
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- the investment regulations,
- the regulations on asset classification, impairment and provisioning,
- the organisational and operational regulations, which contain the regulations on the procedure for
assessing requests related to large loans,
- the regulations on the transfer of signatory rights;
the decision on approving the Rules of Procedure of the Board of Directors;
decision on steps to hinder a public takeover procedure;
decision on the acceptance of a public purchase offer received in respect of treasury shares;
decision on the commencement of trading in the shares in a regulated market (flotation);
decision on the cessation of trading in the shares in a given regulated market, provided that the shares
are traded in another regulated market (hereinafter: transfer).
The Board of Directors is exclusively authorised to:
decide, in the cases specified in the Civil Code, on acceptance of the Company’s interim balance sheet,
subject to the prior approval of the Supervisory Board;
decide, instead of the General Meeting, to pay an advance on dividends, subject to the preliminary
approval of the Supervisory Board;
make decisions regarding any change in the Company’s name, registered office, permanent
establishments and branches, and in the Company’s activities – with the exception of its core activity –
and, in relation to this, to modify the Articles of Association should it become necessary to do so on the
basis of the Civil Code or the Articles of Association;
make decision on mergers (if, according to the provisions of the law on the transformation, merger and
demerger of legal entities, the approval of the General Meeting is not required in order for the merger to
take place).
The Board of Directors directly exercises employer's rights in respect of the Chairman & CEO. The person
affected by a decision may not participate in the decision making. Employer rights in respect of the executive
directors of the Company are exercised by the Board of Directors through the Chairman & CEO, with the
proviso that the Board of Directors must be notified in advance of the appointment and dismissal of the
Deputy CEOs. With regard to issues related to the exercising of employer's rights in respect of employees,
the Company is represented by the Chief Executive Officer and by the senior company employees defined
in the Organisational and Operational Regulations of the Company, in accordance with the delegation of
authority approved by the Board of Directors. If the Chairman of the Board of Directors and the CEO are
different persons, the employer rights in respect of the other executive directors of the Company (CEO,
deputy CEOs) are exercised by the Board of Directors through the Chairman of Board of Directors, with the
proviso that the Board of Directors shall be notified in advance of the appointment and dismissal of the CEO
and Deputy CEOs. With regard to issues related to the exercising of employer's rights in respect of
employees, the Company is represented by the persons defined in the Organisational and Operational
Regulations of the Company, in accordance with the delegation of authority approved by the Board of
Directors.
The Board of Directors may delegate, to individual members of the Board of Directors, to executive directors
employed by the Company, and to the heads of the individual service departments, any task that does not
come under the exclusive authority of the Board of Directors in accordance with these Articles of Association
or a General Meeting resolution.
The Company may acquire treasury shares in accordance with the rules of the Civil Code. The prior
authorisation of the General Meeting is not required for the acquisition of treasury shares if the acquisition
of the shares is necessary in order to prevent a direct threat
of severe damage to the Company (this
provision is not applicable in the event of a public purchase offer aimed at buying up the Company’s shares),
as well as if the Company acquires the treasury shares in the context of a judicial procedure aimed at the
settlement of a claim to which the Company is entitled, or in the course of a transformation.
The Company has not made agreements in the meaning of points (j) and (k) in paragraph 95/A of
Act No. C of 2000 on Accounting.
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OWNERSHIP STRUCTURE OF OTP BANK PLC.
Description of owner
Total equity
1 January 2021 31 December 2021
Ownership
share
Voting
rights
1
Quantity
Ownership
share
Voting
rights
1
Quantity
Domestic institution/company 20.93% 21.26% 58,605,628 26.66% 26.97% 74,637,180
Foreign institution/company 71.60% 72.73% 200,480,153 66.69% 67.47% 186,733,858
Domestic individual 4.79% 4.87% 13,424,090 4.57% 4.63% 12,805,389
Foreign individual 0.11% 0.12% 319,346 0.11% 0.12% 319,712
Employees, senior officers 0.85% 0.87% 2,393,390 0.69% 0.70% 1,941,018
Treasury shares
2
1.55% 0.00% 4,334,140 1.16% 0.00% 3,251,484
Government held owner 0.08% 0.08% 219,800 0.07% 0.07% 188,326
International Development Institutions 0.04% 0.04% 108,981 0.04% 0.04% 120,871
Other
3
0.04% 0.04% 114,482 0.00% 0.00% 2,172
TOTAL 100.00% 100.00% 280,000,010 100.00% 100.00% 280,000,010
1
Voting rights in the General Meeting of the Issuer for participation in decision-making.
2
Treasury shares do not include the OTP shares held by ESOP (OTP Bank Employee Stock Ownership Plan Organization). Pursuant to Act V of 2013 on
the Civil Code, OTP shares held by the ESOP are not classified as treasury shares, but the ESOP must be consolidated in accordance with IFRS 10
Consolidated Financial Statements standard. On 31 December 2021 ESOP owned 7,656,897 OTP shares.
3
Non-identified shareholders according to the shareholders’ registry.
NUMBER OF TREASURY SHARES HELD IN THE YEAR UNDER REVIEW (2021)
1 January 31 March 30 June 30 September 31 December
OTP Bank 4,334,140 4,330,609 1,120,786 1,077,322 3,251,484
Subsidiaries 0 0 0 0 0
TOTAL 4,334,140 4,330,609 1,120,786 1,077,322 3,251,484
SHAREHOLDERS WITH OVER/AROUND 5% STAKE AS AT 31 DECEMBER 2021
Name Nationality
1
Activity
2
Number of
shares
Ownership
3
Voting
rights
3,4
Notes
5
MOL (Hungarian Oil and Gas Company Plc.) D C 24,000,000 8.57% 8.67% -
KAFIJAT Group D C 19,661,409 7.02% 7.10% -
KAFIJAT Ltd. D C 9,839,918 3.51% 3.56% -
MGTR Alliance Ltd. D C 9,836,491 3.51% 3.55% -
Groupama Group F/D C 14,311,769 5.11% 5.17% -
Groupama Gan Vie SA F C 14,140,000 5.05% 5.11% -
Groupama Biztosító Ltd. D C 171,769 0.06% 0.06% -
1
Domestic (D), Foreign (F).
2
Custodian (CU), Public Institution (PU), International Development Institutions (ID), Institutional (I), Company (C), Private (PR),
Employee or senior officer (E).
3
Rounded to two decimals.
4
Voting rights in the General Meeting of the Issuer for participation in decision-making.
5
Eg: professional investor, financial investor, etc.
Senior officers, strategic employees and their shareholding of OTP shares as at 31 December 2021
Type
1
Name Position
Commencement
date of the term
Expiration/termination
of the term
Number of
shares
IT dr. Sándor Csányi
2
Chairman and CEO 15/05/1992 2026 293,907
IT Tamás Erdei Deputy Chairman 27/04/2012 2026 32,285
IT Gabriella Balogh member 16/04/2021 2026 1,393
IT Mihály Baumstark member 29/04/1999 2026 44,000
IT Péter Csányi member, Deputy CEO 16/04/2021 2026 1
IT dr. István Gresa member 27/04/2012 2026 173,258
IT Antal Kovács member, Deputy CEO 15/04/2016 2026 79,244
IT György Nagy
3
member 16/04/2021 2026 0
IT dr. Márton Gellért Vági member 16/04/2021 2026 0
IT dr. József Vörös member 15/05/1992 2026 171,114
IT László Wolf member, Deputy CEO 15/04/2016 2026 532,143
FB Tibor Tolnay Chairman 15/05/1992 2023 54
FB dr. Gábor Horváth Deputy Chairman 19/05/1995 2023 0
FB Klára Bella member 12/04/2019 2023 344
FB dr. Tamás Gudra member 16/04/2021 2023 0
FB András Michnai member 25/04/2008 2023 100
FB Olivier Péqueux member 13/04/2018 2023 0
SP László Bencsik Deputy CEO 10,038
SP György Kiss-Haypál Deputy CEO 3,137
TOTAL No. of shares held by management: 1,341,018
1
Employee in strategic position (SP), Board Member (IT), Supervisory Board Member (FB)
2
Number of OTP shares owned by Dr. Sándor Csányi directly or indirectly: 4,080,034
3
Number of OTP shares owned by György Nagy directly or indirectly: 600,000
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Committees
13
Members of the Board of Directors
Dr. Sándor Csányi – Chairman
Mr. Tamás Erdei – Deputy Chairman
Mrs. Gabriella Balogh
14
Mr. Mihály Baumstark
Dr. Tibor Bíró
15
Mr. Péter Csányi
6
Dr. István Gresa
Mr. Antal Kovács
Mr. György Nagy
6
Dr. Antal Pongrácz
7
15
Dr. László Utassy
7
Dr. Márton Gellért Vági
6
Dr. József Vörös
Mr. László Wolf
Members of the Supervisory Board
Mr. Tibor Tolnay – Chairman
Dr. József Gábor Horváth – Deputy Chairman
Ms. Klára Bella
Dr. Tamás Gudra
16
Mr. András Michnai
Mr. Olivier Péqueux
Dr. Márton Gellért Vági
17
Members of the Audit Committee
Dr. József Gábor Horváth – Chairman
Mr. Tibor Tolnay – Deputy Chairman
Dr. Tamás Gudra
18
Mr. Olivier Péqueux
Dr. Márton Gellért Vági
19
The résumés of the committee and board members are available in the Corporate Governance Report/Annual
Report.
Personal and organizational changes
On 12 March 2021, the labour contract of Mr. Tibor Johancsik, Deputy CEO in charge of IT had been terminated
by mutual agreement. The new head of the Digital Division (IT Division until 1 May 2021) is Mr. Péter Csányi,
who had been in charge of digital developments and sales as managing director until his appointment. Key task
of the area in transition is going to be the efficient support of the Bank’s digital transformation through further
improving customer experience. The new strategy of the division is aimed at creating such an IT that has
business competence, but also serving as a platform for other business areas while setting the pace of
digitalization in accordance with the National Bank of Hungary’s digital recommendations.
On 16 April 2016 the Board of Directors acting in the competency of the Annual General Meeting elected Ernst
& Young Ltd. as the Bank’s auditor concerning the audit of OTP Bank Plc.’s separate and consolidated annual
financial statements in accordance with International Financial Reporting Standards for the year 2021, from
1 May 2021 until 30 April 2022.
On 16 April the Board of Directors acting in the competency of the Annual General Meeting, elects Dr. Tamás
Gudra as member of the Supervisory Board (SB) and of Audit Committee (AC) of the Company until the Annual
General Meeting of the Company closing the 2022 business year, but not later than 30 April 2023.
13
Personal changes can be found in the „Personal and organizational changes” chapter.
14
From 16 April 2021, she is a member of the Board of Directors of OTP Bank Plc.
15
His term of office expired on 16 April 2021.
16
From 16 April 2021, he is a member of the Supervisory Board of OTP Bank Plc.
17
His position on the Supervisory Board was terminated on 16 April 2021.
18
From 16 April 2021, he is a member of the Audit Committe of OTP Bank Plc.
19
His position on the Audit Committee was terminated on 16 April 2021.
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On 16 April 2021 the Board of Directors acting in the competency of the Annual General Meeting, elects
Dr. Sándor Csányi
Mr. Antal György Kovács
Mr. László Wolf
Mr. Tamás György Erdei
Mr. Mihály Baumstark
Dr. István Gresa
Dr. József Zoltán Vörös
Mr. Péter Csányi
Mrs. Gabriella Balogh
Mr. György Nagy
Dr. Gellért Márton Vági
as members of the Board of Directors (BoD) of the Company until the Annual General Meeting of the Company
closing the 2025 business year, but not later than 30 April 2026.
On 16 April 2021, Dr. Sándor Csányi was elected as Chairman of the Bank’s Board of Directors and in
accordance with subsection 4 of section 9 of the Articles of Association of the Company as Chief Executive
Officer (Chairman & CEO).
Dr. Sándor Csányi performs his duties until the closing AGM of the fiscal year 2025 but latest until 30 April 2026.
On 16 April 2021 Mr. Tamás György Erdei, the member of the Board of Directors, was elected a Deputy
Chairman of the Board of Directors.
Mr. Tamás György Erdei performs his duties until the closing AGM of the fiscal year 2025 but latest until
30 April 2026
Operation of the executive boards
OTP Bank Plc. has a dual governance structure, in which the Board of Directors is the Company’s executive
management body in its managerial function, while the Supervisory Board is the management body in its
supervisory function of the Company. It controls the supervision of the lawfulness of the Company’s operation,
its business practices and management, performs oversight tasks and accepts the provisions of the Bank
Group's Remuneration Policy. The effective operation of Supervisory Board is supported by the Audit
Committee, as a committee, which also monitors the internal audit, the risk management, the reporting systems
and the activities of the auditor.
In order to assist the performance of the governance functions the Board of Directors founded and operates,
as permanent or other committees, such as the Management Committee, the Remuneration Committee, the
Nomination Committee and the Risk Assumption and Risk Management Committee.
To ensure effective operation OTP Bank Plc. also has a number of further permanent committees.
OTP Bank Plc. gives an account of the activities of the executive boards and the committees every year in its
Corporate Governance Report.
The Board of Directors held 9, the Supervisory Board held 6 meetings, while the Audit Committee held
2 meetings in 2021. In addition, resolutions were passed by the Board of Directors on 180, by the Supervisory
Board on 90 and by the Audit Committee on 28 occasions by written vote.
Policy of diversity
OTP Bank Plc. determines and regulates the criteria for the selection of senior executives in line with European
Union as well as domestic legal requirements and directives fundamentally determining the operation of credit
institutions.
When designating members of the management bodies (Board of Directors, Supervisory Board) as well as
appointing members of the Board of Directors and administrative members (Management), OTP Bank Plc.
considers the existence of professional preparation, the high-level human and leadership competence, the
versatile educational background, the widespread business experience and business reputation of the utmost
importance, at the same time, it is also highly committed to taking efficient measures in order to ensure diversity
with regard to corporate operation, including the gradual improvement in women’s participation rate.
OTP Bank Plc.’s Nomination Committee continuously keeps tracking the European Union and domestic
legislation relating to women’s quota on its agenda, in that when unambiguously worded expectations are
announced, it promptly takes the necessary measures. In accordance with OTP Bank Plc.’s currently approved
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strategy, the goal is to have at least one female member in both the Bord of Directors and the Supervisory
Board.
It is important to note, however, that, as a public limited company, the selection of the members of the
management bodies falls within the exclusive competence of the General Meeting upon which – beyond its
capacity to designate enforcing the above aspects to maximum effect – OTP Bank Plc. has no substantive
influence.
According to OTP Bank Plc.’s Articles of Association, a Board of Directors comprising 5-11 members and a
Supervisory Board comprising 5-9 members are set up at OTP Bank Plc. Currently the Board of Directors
operates with 11 members and has one female member, the Supervisory Board comprises 6 members and
has one female member. The management of OTP Bank Plc. currently comprises 6 members and has no
female member.
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ENVIRONMENTAL POLICY, ENVIRONMENTAL PROJECTS
OTP Group is committed to the protection of the environment, the combating of climate change and its impacts,
and the preservation and low-impact use of natural resources. OTP Bank’s environmental activities are
regulated in its Environmental Regulation, which is revised annually. The Regulation ensures legal compliance
and the consideration and integration of environmental criteria into the Bank’s business operations in order to
minimise the environmental impacts of operating and maintaining the Bank’s organisation. It also sets out the
rules on implementing the principles of sustainable procurement. OTP Group members operate in full
compliance with environmental legislation and received no fines in 2020.
In CDP’s Climate Change Questionnaire, OTP Group was rated at B- in 2021, thus retaining its previous rating.
The environmental impacts of the OTP Group are related to the provision of financial services and directly from
its operations. In connection with the provision of financial services, the management of environmental risks
and the exploitation of environmental opportunities take place within the framework of the Environmental,
Social and Governance (ESG) strategy; therefore, these activities are presented in the chapter Non-financial
Report.
Our efforts to reduce the direct environmental impact of OTP Group’s operations are centred around improving
energy efficiency and reducing paper usage. The environmental risks associated with our operations are
analysed and managed within our operational risk management process. Potential risks are identified during
the annual process-based self-assessment, and the assessment of climate change risks is also included in
the scenario analysis of risks with low probability but high impact.
Energy consumption and business travel
OTP Group uses state-of-the-art technology in new construction and renovation projects; we are also
continually expanding our use of LED lighting technology. We are constantly seeking opportunities to increase
energy efficiency, by analysing the energy efficiency and consumption characteristics of our buildings. As part
of our renovation process, we are replacing air conditioning units, always ensuring that the new units use
environmentally-friendly coolants. Thanks to its energy efficiency investments in 2021, OTP Bank consumed
1,400 GJ less energy.
Whenever a branch of the parent bank is renovated, we always examine the possibility of installing solar panels
and heat pumps. In 2021, we installed solar panels at two branches and a holiday resort. Our systems
generated a total of 842 GJ energy from solar power. Moreover, our central archives facility has been using
geothermal energy for several years, amounting to 3,499 GJ in 2021. The solar panels of our subsidiaries
generated a total of 893 GJ of solar power. We are committed to using green electricity. One of DSK Bank's
data centres in Sofia procures electricity from 100% renewable sources, and from 2022, we will cover 100%
of the electricity demand of the parent bank and our Serbian and Croatian subsidiaries in the same way.
Energy use across the Banking Group has been greatly impacted by the pandemic. Regarding ventilation and
fresh air in our buildings, air recirculation was suspended and ventilation was intensified instead, which
increased our energy usage; however, the high percentage of staff working from home reduced our electricity
consumption.
The number of business trips and the size of the vehicle fleet are determined by the needs of the business.
Our Group’s vehicle policy sets carbon limits; moreover, the choice of cars includes environmentally-friendly
vehicles in all vehicle categories. In 2021, our Romanian subsidiary purchased two electric cars, our Bulgarian
bank seven and our Croatian bank three hybrid cars. The number of kilometres travelled also decreased at
group level and for OTP Bank, partly due to the measures related to the pandemic and partly due to business
reasons. The amount of business travel has been reduced significantly by the use of online meetings, which
has become common practice due to hybrid work.
Our existing bicycle storage facilities continued to be available to both customers and employees in 2021.
OTP Bank provided new storage facilities at three branches and the new Record Office, our Bulgarian and
Ukrainian subsidiaries have each created new bicycle storage spaces at two locations, while the Albanian
bank provided bicycle storage at five locations at the capital's branches.
Energy consumption figures are presented for OTP Bank. The bank’s overall energy consumption decreased
by 5% compared to the previous year. Energy consumption per capita is unchanged.
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Volume of energy consumption, OTP Bank 2020 2021
Total energy consumption (GJ) 251,730
1
263,228
Per capita energy consumption (GJ) 26.75 26.75
Energy consumption data are derived from readings; the measured consumption volumes are converted to energy using local average
calorific values
The projection of the per capita value is the average number of full-time employees (TMD).
1
Data adjusted for the consumption of Monicomp merged into OTP Bank, which was not available at the time of the previous year's
statement.
Efforts to reduce paper use
OTP Group has been consistently endeavouring to reduce paper use and printing. OTP Bank reduced its office
paper usage by 17% over 2020, with the pandemic and increased rates of working from home playing a
significant role in this development. Thanks to a change in printing technology, paper consumption decreased
by 6.5%; however, at the group level, there was no further decrease compared to the drop in 2020. At our
Romanian, Ukrainian and Russian subsidiaries, the use of paper has decreased with the expansion of digital
processes.
OTP Bank and its Romanian subsidiary increased its share of recycled paper in paper use. OTP Bank uses
FSC-certified paper for its invoices and marketing flyers, as well as recycled paper for DM letters. Our Serbian
subsidiary also uses FSC-certified paper and our Slovenian subsidiary PEFC-certified paper.
Paper usage quantities, OTP Bank 2020 2021
Total amount of paper used (t) (office, packaging, indirect) 1.137 978
Per capita paper use (kg)
1
121 99
1
The projection is based on the average number of full-time employees (TMD).
Sustainable use and waste management
We follow the principle of using all our equipment, devices and machines for the longest time reasonably
possible. We explicitly aim to use furniture until the end of its lifecycle, reusing it multiple times and ensuring
the compatibility of replacements. OTP Bank, DSK Bank, OTP Bank Romania and OTP Banka Srbija all follow
the practice of making charitable donations of any furniture no longer used but in good condition, as well as
functioning IT equipment (mostly computers and laptops), to institutions and organisations in need.
OTP Bank was the first bank in Hungary to issue a bank card made largely (85%) of recycled plastic. The card
was available to junior customers, and we issued 50,000 recycled cards to our customers over the year.
In 2021, our Serbian subsidiary reduced its purchases of plastic packaging products and began using paper
cups for water dispensers. Our Romanian, Croatian, Serbian, Montenegrin and Moldovan subsidiaries also
use refilled toners to reduce waste from the use of toners and ink cartridges.
All members of OTP Group collect and manage hazardous waste and paper containing business secrets
selectively, in compliance with the relevant laws and regulations. The selective collection of non-confidential
paper waste, PET bottles and glass is available in the head office buildings of OTP Bank, while the collection
of packaging metal has also been available since 2021. During the year, we also set up selective waste
collection in ten bank branches. Our Ukrainian subsidiary operates selective paper collection at its head office
building. Our Serbian subsidiary collects paper waste selectively in its branches and head office buildings. Our
Albanian subsidiary collects paper waste selectively. Our Romanian subsidiary collects all paper, metal, glass
and plastic selectively. Our Slovenian subsidiary also collects communal waste selectively (including
biodegradable food waste). Our Croatian subsidiary has collected paper and plastic waste selectively for years,
and from 2021, metal and glass waste will also be collected separately. DSK Bank operates selective waste
collection at its sites in Sofia and Varna and has expanded the selective collection of paper waste during the
year. Our Montenegrin subsidiary has introduced selective paper waste collection at its head office and its
archives facility.
Awareness-raising
Most members of our Banking Group have a tradition of raising awareness and taking joint action to protect
environmental and natural resources. In 2021, we supported several environmental initiatives and encouraged
the environmentally conscious behaviour of our employees.
OTP Bank and OTP Bank Serbia have joined the Mastercard Priceless Planet Coalition, launched in 2020,
and are participating in a campaign that encourages consumers to protect the environment and actively
contribute to this goal themselves. The Priceless Planet Coalition aims to preserve the environment through
the restoration of 100 million trees over five years and to help mitigate the adverse effects of climate change.
By 2022, three afforestation sites have been selected in Kenya, Brazil and Australia, but more will be added
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later. OTP Bank has supported the Priceless Planet Coalition with a donation of 100,000 euros, while our
Serbian subsidiary has committed to planting a tree for each bank account opened.
DSK Bank was the first bank in Bulgaria to join the Mastercard Wildlife Impact Card programme. The bank and
Mastercard support the issuance of all Mastercard Wildlife Impact cards with one dollar spent on protecting
and restoring natural habitats. The credit card is made of environmentally friendly material.
DSK Bank also supported the One Tree Initiative, which aims to create an interactive map of Sofia’s tree stock.
The tree survey was conducted by volunteers, registering a total of more than 12,000 trees. The bank also
supported the initiative of the Hungarian Cultural Institute, within the framework of which bicycle storage
spaces will be installed in front of cultural institutions. The aim of the project was to ensure the environmentally
friendly accessibility of cultural institutions.
Our Croatian subsidiary also supported the “Drop into the Sea” ecological action of the Telašćica Nature
Reserve, which drew attention to the threat to marine ecosystems and fish stocks due to increasing amounts
of waste. The bank also supported Ekotlon, the biggest plogging competition. In addition to collecting litter, the
event also supported a kindergarten with eco-equipment purchased from its registration fees.
Generator (Gamechanger), our Serbian subsidiary’s local start-up programme, launched the Generator Zero
competition in 2021, specifically seeking and rewarding innovative solutions to reduce its carbon footprint.
Organisations had until the end of the year to apply for the competition, and the winner will receive mentoring
for further development and promotion in addition to the cash prize. Ten finalists were selected from the
72 projects nominated.
We are also extending the scope of our employee involvement programmes:
To promote environmental awareness, we wrote about the reduction in paper use and disposable plastics
in the OTP Bank’s online magazine.
Our Croatian subsidiary has reduced its use of plastics and implemented even more responsible waste
management in three cities under the “Green Way to Green” programme.
Our Serbian bank has launched an awareness-raising initiative among employees to increase
environmentally and business-friendly behaviour and reduce CO
2
emissions. The bank also supported the
Green Serbia 2021 campaign, which planted trees in ten cities.
In order to make employees more sensitive to the environment, our Slovenian subsidiary bank organised
a workshop and presentation for managers and e-learning for employees. In 2021, the Bank joined the
Slovenian Green Network, which brings together more than 400 companies, educational institutions,
institutes and other organisations with a variety of projects for sustainable development and social
responsibility.
Our Ukrainian subsidiary has joined the “Batteries, inward” campaign, in which used batteries are collected
and delivered to a recycling plant in Romania. The bank sent more than 200 kg of batteries to be recycled.
Following its energy renovations, our Montenegrin subsidiary will also train its employees in the energy-
conscious use of the systems.
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NON-FINANCIAL STATEMENT – OTP BANK PLC.
The social, environmental and wider economic performance and impacts of OTP Group are also reported in
its dedicated Sustainability Report. The Sustainability Report for 2021 is a group-level report that meets the
GRI (Global Reporting Initiative) Standard and is certified by an independent third party. It is available as a
digital version on OTP Bank’s website. The information in this chapter is provided in order to comply with the
Accounting Act, while also aiming to keep the duplication of information to a minimum. Information concerning
environmental protection and climate change is provided mainly in the chapter on environmental Policy and
Environmental Protection Measures.
OTP Bank is committed to ethical business conduct in all respects; our principles are set out in our Code of
Ethics, which is binding for all our employees and agents. Our financial services and operations have significant
social and environmental impacts; thus, our objective is to manage risks responsibly while taking advantage
of opportunities and delivering positive outcomes.
In 2021, OTP Bank signed the UN Environment Programme Finance Initiative (UNEP FI), a framework for the
sustainable banking sector. The Principles are the leading framework for ensuring that banks’ strategy and
practice align with the vision society has set out for its future in the UN Sustainable Development Goals and
the Paris Climate Agreement. Banks who have signed the Principles commit to be ambitious in their
sustainability strategies, working to mainstream and embed sustainability into the heart of their business.
The integration of sustainability is supported by a strong organisational background, which was completed in
2021. The ESG transformation covers both OTP Bank and its subsidiaries and is managed by an ESG
Committee established by the Board of Directors. The Committee is the decision-making body responsible for
ESG strategy, plans and policies and for supporting the Bank's governing bodies in the performance of ESG
tasks. The Chairman of the Committee is appointed by the Board of Directors. The ESG Committee has
established an ESG Operational Subcommittee, which provides operational support to the ESG Committee
and help in the preparation of decisions. The head of the Subcommittee - also the head of ESG Business
Transformation - is the Director of the Green Programme Directorate. The three key areas of ESG integration
are ESG business transformation, ESG risk management and ESG control function.
The ESG Strategy of the OTP Group was approved by the Management Committee in 2021. The OTP Group
wishes to play a leading role regionally in financing a fair and gradual transition to a low-carbon economy as
well as building a sustainable future by offering balanced financing opportunities. OTP Group approaches ESG
from three main perspectives: as a responsible service provider, as a responsible employer and as a
responsible social player. In addition to business opportunities, the strategy includes the management of
relevant risks as well as social and corporate governance objectives. The strategy covers the period up to
2024, and our goal is to achieve full ESG integration at group level.
Green Finance
We have taken significant steps towards exploiting the potential of green finance. Green mortgage loans
(distributed by OTP Bank, and held in the balance sheet of OTP Mortgage Bank) and green covered bonds
(issued by OTP Mortgage Bank) help achieve real estate goals for sustainability. OTP Mortgage Bank has set
the strategic goal of increasing the proportion of green loans within new loan disbursements and has also
created a framework for green mortgage bonds. The bank was the first in the domestic market to issue a green
mortgage bond, building on the Hungarian National Bank's (NBH) green mortgage purchase programme. The
company issued securities with a total nominal value of HUF 95 billion in 2021, so in addition to the previously
disbursed green loans, the company also provided funds to finance the green loans to be disbursed after the
issue.
The Mortgage Bank publishes the most important financial and environmental impact data relating to mortgage
bonds annually. The first report presenting information for the year 2021 will be published at the same time as
the company’s annual report.
The NBH Green Home Programme was launched in the second half of 2021 as part of the Growth Loan
Programme. These loans with a maximum interest rate of 2.5% help customers buy and build energy-efficient
new homes. Under the programme, the Hungarian National Bank provides refinancing sources to credit
institutions at 0% interest rates, provided that the energy requirements for the financed property are met. The
central bank provides a total of HUF 200 billion in funds for the programme. We experienced interest in this
loan structure that exceeded expectations, and by the end of 2021, our bank group had concluded contracts
in the amount of HUF 20.1 billion and disbursed loans in the amount of HUF 4.9 billion.
Loan products of the Hungarian Development Bank (MFB) financed by both EU and from MFB’s own sources
were still available at OTP Bank in 2021. The population had access to preferential loans through these
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structures in order to implement energy improvements. During the year, we entered into loan agreements
amounting to HUF 5 billion, accounting for 7% of all loans contracted through MFB Points.
We have developed four new products for corporate lending to help meet renewable energy production,
electro-mobility, green agricultural goals and high-energy office investments. The total amount of loans cleared
under the green housing, corporate and municipal capital relief programme provided by the NBH in OTP Bank
is approximately HUF 74.5 billion.
A significant proportion of green loans comprise projects for the utilisation of renewable energy sources within
the framework of project financing. Renewable energy projects represent a considerable share of green
lending in our project financing. In 2021, we signed contracts for eight new projects at OTP Group level in the
amount of HUF 81.5 billion, a significant increase compared to previous years. The projects are located in
Hungary, Bulgaria, Romania and Croatia, and the financing was partly implemented with the involvement of
the subsidiaries. The projects generated 1,175 MW of renewable capacity, but funding is not always provided
by OTP Group alone. At group level, the project financing portfolio related to renewable energy projects had
reached HUF 84.2 billion by the end of the year, of which OTP Bank's share was HUF 57.8 billion.
In 2021, loans promoting energy efficiency, the use of renewable energy and e-mobility were available from
our subsidiaries in Croatia, Romania, Montenegro, Albania and Moldova.
Our goal for 2025 is to have green products available in all segments for OTP Core, while the development of
green financing plans at subsidiaries will take place in 2022. OTP Bank plans to issue green bonds in 2022 to
finance group-level projects.
The purpose of the OTP Fund Management OTP Climate Change 130/30 Fund is to provide investment
opportunities in the shares of developed and emerging market companies that may be the winners of
directives, legal regulations and economic policy changes aimed at mitigating the effects of climate change.
The net asset value of the Fund at the end of 2021 was HUF 36.3 billion. In 2021, together with the
OTP Omega Fund, we started to amend the management regulations of the OTP Climate Change 130/30
Fund in order to meet the criteria of a fund promoting environmental or social characteristics or a combination
thereof, i.e. Sustainable Finance Disclosure Regulation (SFDR) Article 8.
The table below shows the disclosures of the OTP Group and banks operating in EU member states in
accordance with Regulation (EU) 2020/852 (Taxonomy Regulation).
Disclosure under Article 8 Delegated art 10
OTP Group consolidated
Art 10 (3) a, Eligible proportion * 0.15%
Art 10 (2) a, Non-eligible proportion* 67.29%
Art 10 (2) b, Proportion of derivatives * 0.93%
Art 10 (2) b, Proportion to central gov., central bank,
supranational issuer*
27.14%
Art 10 (2) c, Proportion of non-NFRD undertakings* 8.48%
Art 10 (2) Proportion of trading portfolio* 1.17%
Art 10 (2) Proportion of on-demand inter-bank loans* 4.77
DSK Bank
0.41%
OTP Bank
Croatia
0.21%
SKB Bank
0%
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Disclosure under Article 8 Delegated art 10
OTP Bank
Romania
0.11%
Art 10 (3) d, XI. Annex disclosures
Contextual information towards
quantitative indivators incl. scope of assets
and activities covered, data sources and
limitation.
Exposures to taxonomy-eligible activities
were examined among non-financial
corporations. Companies covered by the
NFRD were defined as listed companies with
more than 500 employees based on Nace
code
*Excluding exposures to be excluded from
the denominator of KPIs by the Regulation.
Starting from second year of
implementationonly: Explanations of the
nature and objectives of Taxonomy-
aligned economic activities and the
evouolution of Taxonomy-aligned
economic activities over time,
distingiushing between business related
and methodological and data-related
elements.
Taxonomy elgible activities were examined.
Our goals for green funding and the activities
we have implemented can be found in the
text pf NFRD.
Description of the compliance with
Regulation (EU) 2020/852 in the financial
undertaking’s business startegy, product
design process and engagement with
clients and counterparties.
Our goals for green funding and the activities
we have implemented can be found in the
text pf NFRD.
for credit institutions that are not required
to dsiclose quantitative information fo
trading exposures: Quakitative information
ont he alignment of trading portfolios with
Regulation (EU) 2020/852, includong
overall composition, trendsm objectives
and policy;
Taxonomy eligible activities were examined.
the weight of other or additional
information in support of the financial
undertaking’s strategy and the financing of
taxonomic activities in relation to their total
activity.
Taxonomy eligible activities were examined.
Our goals for green funding and the activities
we have implemented can be found in the
text pf NFRD.
Green asset ratio in corporate lending:
In relation to the mitigation and adaptation objectives of the taxonomy regulation, we have examined the
corporate portfolio based on the NACE codes that can be attributed to activities in the delegated act.
OTP Bank Group's corporate lending activities are linked to environmentally sustainable economic activities in
the EU Member States
20
in the followings scope:
Share of the taxonomy-adjusted corporate portfolio of EU core and subsidiary banks in total non-segmented
exposures at group level: 8.3%
Share of the taxonomy-adjusted corporate portfolio of EU core and subsidiary banks in the total EU core and
subsidiary corporate portfolio: 42.3%.
20
EU core and subsidiary banks means: OTP Nyrt, DSK Banka EAD, OTP Bank Romania S.A., OTP banka Hrvatska d.d., SKB banka d.d.
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ESG risk management
In order to integrate ESG aspects, comply with legal obligations and the Hungarian National Bank's Green
Programme, we continued to develop our ESG lending policy in 2021. At group level, we have introduced a
lending and monitoring ESG risk management framework for non-retail and non-motorised leasing assets. The
framework also includes the ESG Exclusion List, which comprises activities excluded from financing by OTP
Group, as well as the industry ESG risk heat map. In 2021, ESG credit risk exposure became part of internal
reporting. In accordance with the Hungarian National Bank’s Green Programme, we will continue to include
ESG factors in the rest of the portfolio and in respect of collateral.
The purpose of ESG risk management in lending is to identify ESG risks and reduce transaction risks arising
from the environmental and social risk factors associated with financing. By integrating these issues into our
lending process, we are also emphasising the importance of our clients adopting excellent environmental and
social practices.
We invest and lend the money deposited with us in a way ensuring that it will not serve illegal purposes, or
those contrary to the values of society.
OTP Bank will not finance:
customers whose financing is forbidden in international agreements, EU acts or national laws;
those whose activity is likely to violate public morals or social value systems, or is connected to crime;
those who are connected, directly or indirectly, to criminal activities or to the deliberate violation or evasion
of legal;
regulations;
transactions classified as prohibited business sectors (e.g. the illegal arms trade, prohibited gambling,
drug trade, or any other illegal activity); and
transactions that fail to meet environmental standards.
The OTP Bank Group does not finance transactions that violate the laws of the country concerned or
international law.
In accordance with our regulations, our banking group always expects and examines compliance with
environmental regulations during lending. Violation of commitments and expectations is sanctioned in the
framework credit agreements.
In accordance with the SFDR's expectations, we have developed an investment risk management policy for
all relevant group members, so that investment risk management has been integrated into decision-making
processes during investment advisory and portfolio management activities, and information on this has been
provided to clients. Our statements on the integration of sustainability risks and the adverse effects of
investment decisions on sustainability factors (PAIs) are available on our websites. In addition to the legal
requirements, the prospectuses containing the product characteristics of the investment funds also include the
ESG score calculated by the bank, helping customers make decisions and orient themselves.
We have strengthened the assessment of ESG risks in our operational risk management scenario analyses
by analysing a separate scenario related to climate change, and we have also indicated the risks affected by
ESG in both the risk self-assessment and the loss database.
Responsible customer service
In carrying out our financial intermediary duties we ensure that the savings of our customers remain safe at all
times. Our rules guarantee that the standards of responsible lending are observed regarding the avoidance of
over-indebtedness, fair, understandable, complete and attentive information provision and adequate product
offers.
Our principles and guidelines on the fair treatment of customers and the compliance of consumer protection
are set out in our Compliance Policy. In designing our products, we follow the principles of ethical product
development. Our New Product Policy prescribes the assessment of potential risks to consumers.
We offer personalised administrative options to our customers with the highest level of service quality and
continuous innovations. The coronavirus pandemic increased the use of online channels, and our Banking
Group also encouraged this trend.
We use TRI*M methodology to measure the satisfaction of our retail customers. OTP Bank’s client retention
power increased by three points to 69 points in 2021, while the average satisfaction score among
competitors also increased slightly. The average TRI*M of banks in Central Europe was 77 points.
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OTP Bank’s stated objective is to serve its customers without fault. In order to improve customer satisfaction,
we are also continuously improving our complaint management practices. Our Complaint Management
Policy, Complaint Management Regulation and a Glossary are available to view in our branches as well as
on our website.
In 2021, the most typical complaints at OTP Bank were related to the payment moratorium and unapproved
payment transactions. The number of both complaints and legitimate complaints decreased significantly in
2021 compared to the outstanding values of 2020, which could be attributed to the significant changes made
during the year. The declining trend also prevailed at group level. In 2021, we continued to improve our
complaint management practices, including expanding our complaint analysis process and the range of
complaints that can be resolved immediately.
Customer complaint data, OTP Bank
1
2020 2021
Number of warranted complaints 202,040 155,298
Ratio of warranted complaints 67% 62%
Compensation paid (HUF million) 84
2
36
1
Includes data from OTP Housing Savings and OTP Mortgage Bank.
2
Corrected data.
Our objective is to provide equal access for persons living with disability, through services adapted to their
special needs, in line with the Accessibility Strategy of OTP Bank. Accessibility is integrated into our website,
which supports one-handed use and provides accessibility options including text-to-speech software and video
content transcripts. Physical accessibility was also provided in every branch but one in 2021. Our customers
can request special-needs services at the queue management machine, with physical push buttons and tactile
strips also assisting them in using the device. Tactile guide strips are available in 38% of our branches.
Interpreter Services are available at 167 branches (47%); this is a service allowing a sign language interpreter
to assist with administration tasks through a live video chat. Moreover, we have made text-to-speech software
available on 910 of our ATMs (48%).
Security and data protection
Security is a top concern for us. The principles and main guidelines concerning security at the bank are set
forth in the Security Policy, which is approved by the Board of Directors. The policy covers all aspects of
security, including IT and cyber security, which have become increasingly important. OTP Bank's Group-level
Information Security Policy and Cyber Security Strategy of OTP Bank were completed in 2021, and the
development of a Group-level cyber security strategy was launched. The processing and protection of personal
data is covered by the Compliance Policy, which is also approved by the Board of Directors. Both policies
prescribe the regular evaluation of risks and the need to maintain and enhance awareness.
The handling and protection of personal data is covered by the Compliance Policy also approved by the Board
of Directors. We also developed security processes and applied solutions in 2021, with our innovations
focusing on the cyber security centre, the central log analysis system, authorisation management and virus
protection. In addition we made customer communication more effective in detecting suspicious transactions.
The number of distributed denial-of-service (DDoS) and phishing attacks increased significantly at group level
compared to previous years. We published several awareness campaigns for our customers, providing
information on our intranet and through security awareness training, which was also focused on phishing.
Besides protecting against phishing activities, the European Cyber Security Month programmes focused on
presenting the security challenges of modern application development and operations.
White-collar crime, which causes significant losses to customers and the banking group, decreased at most
subsidiaries due to our continuous development, more efficient employee action and stricter controls. We have
reviewed our anti-money laundering training material to ensure our employees gain greater knowledge of this
and have started to develop harmonised training at group level. The number of suspected money laundering
reports by bank employees increased by eight percent. During the year, OTP Bank reported 68 cases of
suspected money laundering.
Our Banking Group has experienced numerous card-related attacks; in these cases the sharing of important
information was extremely helpful in the prevention of fraudulent transactions. The number of successful card
fraud cases has been kept low continuously, which demonstrates that our systems operate effectively. The
ratio of bank card fraud to turnover is significantly lower than the European average published by MasterCard
(for OTP Bank it is 0.0071% and the consolidated ratio of subsidiaries is 0.00986%, while the European
average stands at 0.0414%). In the case of OTP Bank we were able to prevent bank card fraud of
HUF 5.5 billion.
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Losses expected from the detected criminal activities amounted to HUF 447 million in the case of OTP Bank
and HUF 2.2 billion at Group level. The amount of loss prevented was HUF 457 million at OTP Bank and
HUF 2.0 billion at OTP Group.
Fight against corruption and against the practice of bribery
The Code of Ethics and the Anti-Corruption Policy of OTP Bank contains provisions on the fight against
corruption and against the practice of bribery, also on the acceptance of individual differences and the denial
of discrimination (https://www.otpbank.hu/portal/en/EthicalDeclaration
https://www.otpbank.hu/static/portal/sw/file/OTP_EtikaiKodex_EN.pdf,
https://www.otpbank.hu/static/portal/sw/file/OTP_Anti_Corruption_Policy_202102.pdf). As it can be read in
the foreword of the Code and the Anti-Corruption Policy as well, the Bank and its management have adopted
the principle of zero tolerance towards corruption and bribery, taking a definite stance against all forms of
corruption and giving full support to the fight against corruption. In addition, the Code states that "As an ethical
and compliant institution, the Bank and its management are fully committed to ensuring observance of all
relevant legislation, including anti-corruption statutes."
The Bank has set up an ethics reporting system (whistleblowing), which is for the reporting and the handling
of the reports on suspected or actual violation of the values set forth in the Code of Ethics, where anonymous
reporting of ethics issues is also possible. The Bank conducts inquiries for the purpose of detecting, preventing
anomalies in connection with reports made or anomalies it became aware of otherwise.
Through the Bank's ethics reporting system a total of 26 reports were received in 2021, 8 of them was
reclassified as complaints and 2 case’s investigation resulted in declaring ethics offense – though not due to
corruption, bribery or discrimination.
The Bank has created and maintains its Code of Ethics to keep reputational risk and financial losses, which
may incur in relation to corruption, bribery and discrimination, on a minimum level. Both employees and
newcomers receive education on the Code of Ethics, and in addition, the acceptance to be bound by it is a
prerequisite for their employment.
Any requests from third parties affecting human rights are treated by the Bank as a priority.
We manage the risks regarding the fight against corruption and bribery within the framework of our operational
risk management process. Our quarterly compliance reports cover the changes in risks as well as the steps
necessary steps to manage them. The reports are presented to the Management Committee and the Board of
Directors; the annual report is also submitted to the Supervisory Board.
Citizenship
OTP is one of the most generous charitable donors in Hungary, giving a total of HUF 2.3 billion in charitable
donations, almost half of which was for educational purposes, primarily the development of financial culture.
We aim to provide genuine and effective help by supporting programmes and causes that serve the interests
of society. We cooperate with a number of local non-governmental organisations, concentrating our donated
funds and monitoring their usage and the results achieved.
Our efforts were focused on the following areas:
developing financial literacy: attitude shaping;
sponsoring culture and the arts: creating and preserving values;
equal opportunities: helping the disadvantaged and those in need; and
sport.
We consider donation habits a part of financial literacy; therefore, in 2021 we took a significant step forward in
encouraging our customers to support the social initiatives that they consider important financially. Under the
digital donation programme we enabled them to make donations simply and easily while taking care of their
day-to-day finances. Donation has become possible on our digital platforms, including our website, the
internetbank, the mobile application, the Simple application, as well as through 750 ATMs and the digital points
of 80 branches. Our Bank assumes all extra costs of the donation, including both the transaction tax of
customers and the costs of NGOs. Our Bank also cooperates with the supported organisations and we
supplement the donations of our customers. In addition, in our experience, our customers view the Bank’s
participation as a guarantee that their donations will truly go to the right beneficiary. In 2021 we supported the
initiatives of 6 foundations through customer donations in the amount of HUF 250 million.
The Humanitas Social Foundation supports vulnerable communities and individuals with a focus on healthcare
and education; donation recipients are selected through an application process. Its most important activity in
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
2020 involved priority support to hospitals. We supported 30 hospitals, 18 educational institutions and one
foundation through the Foundation in 2021. In order to provide more effective assistance, we provided
targeted, tailored asset support to institutions.
The OTP Fáy András Foundation provides financial and economic education services, a key element of which
is operating the OK Educational and Innovation Centre. The Foundation provides youth, adult and vocational
training. The activities of the Foundation in 2021 were determined mostly by the coronavirus pandemic and
several planned activities could not be organised as a result. However, the Foundation developed 30 curricula
in 2021.
Digital education continued to be the focus of the year, with more than 17,000 students attending online and
nearly 2,500 classroom training. Roma youth also participated in financial and economic training through the
Roma Education Fund. Significant progress has been made in the development and testing of the Financial
Basic Education Programme in adult education. During the training, in which participation is free of charge and
without prior knowledge, users acquire essential personal money management and general economic
knowledge and improve their financial literacy. The Foundation also continued its previous programmes, so
the teacher training programme of Eötvös Loránd University (ELTE), the regular Teachers' Club and the
summer camps took place. The Foundation's national awareness-raising programme also continued, with
screenings of short films on national commercial television channels around 400 times, covering topics such
as housing renovation, business start-ups and data security.
Responsible employment
Our goal is to create value for our employees by focusing on them in a constantly changing environment. The
central objective of our human resource strategy is to intensify employee experience and commitment.
In 2021 we conducted an employee satisfaction survey at Group level with a high response ratio of 92%. Based
on the results, the rate of employee satisfaction was 70%, slightly lower than the average of the international
financial sector. The action plans prepared in response to the feedback for all areas that needed improvement
were approved by the Management Committee.
We developed our activities during the year along the lines of the six priorities stated in our strategy, also
relying on the results of the employee satisfaction survey. We launched numerous projects that will result in
significant changes; for example, we developed the framework of Group-level dialogue, and placed
management development on new foundations. Although the pandemic slightly delayed the implementation of
the international talent programme, we created a uniform talent framework at Group level and operated local
talent programmes. All of our employees participate in trainings; in addition to network and head office
management development, we rejuvenated the frameworks of our employees’ skills development.
Due to the pandemic situation, hybrid work performance became typical in 2021. We maintained access to the
tools promoting our employees’ emotional, mental and physical health and their ability to stand firm under
harsh circumstances, and once again in 2021, numerous employees took recourse to them.
OTP Bank’s employees (31 December) 2020 2021
Total Men Women Total Men Women
Employees, total (individuals) 9,826 3,402 6,424 10,078 3,547 6,531
Distribution by gender 100% 34.6% 65.4% 100% 35.2% 64,8%
Turnover rate
1
10.5% 9.3% 11.2% 14.3% 14.5% 14.1%
1
Compared to the end-of-year headcount; includes termination of employment both by employee and by employer, as well as
retirement.
Ethical conduct and legal compliance also remain core principles in our human resource management. OTP
Bank analyses and manages the risks relating to employment within its operational risk management process.
Our employees’ interests are represented by their trade union, with a Collective Agreement setting out the
rights and obligations of every employee.
The Bank’s Code of Ethics declares its commitment to providing a safe and healthy working environment and
states its expectation of mutual respect between executive officers and employees, including the prohibition of
discrimination and harassment. We consistently apply the principle of “equal pay for equal work”, including
providing equal pay to men and women for the same position and performance. Within the objective limitations
of specific job descriptions, we allow for flexible working hours and part-time employment options. We
encourage healthy lifestyle choices, offering a complex health insurance package, and subsidising recreation
and sporting activities.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
Short description of the business model of the company
OTP Bank is the market-leading credit institution in Hungary. As for its business model, the Bank offers high-
quality financial services to retail, private banking, micro and small business, medium and large corporate, as
well as municipality clients through both its branch network and its steadily developing digital channels. The
Bank provides comprehensive retail and corporate banking services: its activities include deposit collection
from customers and raising money from the money and capital markets. On the asset side, OTP Bank offers
mortgage loans, consumer credits, working capital and investment loans to companies, as well as loans to
municipalities, whereas its liquidity reserves are invested in money and capital market instruments. Moreover,
the Bank provides a wide range of state-of-the-art services, including the areas of wealth management,
investment services, payment services, treasury and other services.
In addition, OTP Bank's Hungarian subsidiaries deliver a wide range of further financial services. The Bank
owns foreign subsidiaries in many countries of Central and Eastern Europe through capital investments.
Non-financial performance indicators – OTP Bank Plc. (standalone)
Internal audit: 203 closed audits, 1,478 recommendations, 1,478 accepted recommendations
Compliance with Budapest Stock Exchange (BSE) Recommendations (yes/no ratio): 72 yes, 0 no;
Compliance: 18 closed consumer protection related investigations
Bank security: the expected value of damages resulting from detected criminal offenses is HUF
447,124,093, HUF 460,655,117. In 2021, we filed an official complaint in 620 cases on suspicion of money
laundering. There is a slight decrease in 2021, when this number changed from 4438 in the previous year
to 4432, a decrease of 8.4%. In the case of OTP, the ratio of bank card misuse to turnover is still lower
than the European average published by MasterCard (last year's figures: OTP Bank 0.0071%, European
average 0.0414%).
Ethics issues: 26 ethics reports, establishing ethics offense in 2 cases.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
LIST OF NON-AUDIT SERVICES BY SERVICE CATEGORIES USED BY THE BANK
The statutory audit of OTP Bank is carried out by Ernst and Young Ltd., in addition to which the following
services were contracted:
Issue of Comfort letters
Engagements to review historical financial statements and interim financial statements (ISRE 2400,
2410)
Consultation relating to interpretation and implementation of accounting standards and relating to
accounting of potential future transaction
Pre- or post-transaction due diligence services relating to acquisition of assets or entites or sales
transactions or other transactions: financial, accounting, taxation, legal and IT specific services -
except for buy-side lead advisory, transactional and negotiation support
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
SUPPLEMENTARY DATA
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
FOOTNOTES OF THE TABLE ‘CONSOLIDATED AFTER TAX PROFIT BREAKDOWN BY SUBSIDIARIES
(IFRS)’
General note: regarding OTP Core and other subsidiaries, profit after tax is calculated without received dividends and net
cash transfers (and other adjustment items). Dividends and net cash transfers received from non-group member
companies are shown on a separate line in one sum in the table, regardless to the particular receiver or payer group
member company.
(1) Aggregated adjusted after tax profit of OTP Core and foreign banks.
(2) OTP Core is an economic unit for measuring the result of core business activity of OTP Group in Hungary. Financials
of OTP Core are calculated from the partially consolidated IFRS financial statements of certain companies engaged in
OTP Group’s operation in Hungary. These companies include OTP Bank Hungary Plc., OTP Mortgage Bank Ltd, OTP
Building Society Ltd, OTP Factoring Ltd, OTP Financial Point Ltd., and companies providing intragroup financing; OTP
Bank Employee Stock Ownership Plan Organization was included from 4Q 2016; OTP Card Factory Ltd., OTP Facility
Management Llc., MONICOMP Ltd. and OTP Real Estate Leasing Ltd. were included from 1Q 2017 (from 1Q 2019 OTP
Real Estate Lease Ltd. was eliminated from OTP Core); OTP Mobile Service Llc. and OTP Ingatlanpont Llc. were included
from 1Q 2019; OTP eBIZ Ltd. was included from 1Q 2020; OTP OTP Home Solutions was included from 2Q 2021. The
consolidated accounting results of these companies are segmented into OTP Core and Corporate Centre. Latter is a virtual
entity.
(3) The result and balance sheet of OTP Factoring Bulgaria EAD and DSK Leasing AD is included. From 1Q 2019
Expressbank AD and its subsidiarieswere included into the Bulgarian operation.
(4) The statement of recognised income and balance sheet of OTP Leasing d.d. and SB Leasing d.o.o. was included. In
February 2020 the company name of OTP banka Hrvatska dioničko društvo was changed to OTP banka dioničko društvo.
(5) The financial performance of OTP Factoring Serbia d.o.o, OTP Lizing d.o.o, OTP Services d.o.o. and the newly acquired
OTP banka Srbija is included.
(6) The statement of recognised income and balance sheet of OTP Faktoring SRL and OTP Leasing Romania IFN S.A.was
included.
(7) Figures are based on the aggregated financial statements of OTP Bank JSC, LLC OTP Leasing, and OTP Factoring
Ukraine LLC.
(8) The statement of recognised income and balance sheet of LLC MFO “OTP Finance” is included in the Russian
performance.
(9) The statement of recognised income and balance sheet of the acquired Podgoricka banka was included, which merged
into the Montenegrin bank in 4Q 2020.
(10) P&L data are adjusted for the special banking tax and the Slovakian Deposit Protection Fund contributions being
introduced again in 2014, as well as the contribution into the Resolution Fund. Including the financial performance of OTP
Faktoring Slovensko s.r.o. The sale of the Slovakian subsidiary was concluded at the end of November 2020.
(11) The subconsolidated adjusted after tax profit of Merkantil Group (Merkantil Bank Ltd., Merkantil Bérlet Ltd., OTP Real
Estate Leasing Ltd., NIMO 2002 Ltd., SPLC-P Ltd., SPLC Ltd.) was presented (w/o dividends, net cash transfers and other
adjustment items).
(12) LLC AMC OTP Capital, OTP Asset Management SAI S.A. (Romania), DSK Asset Management EAD (Bulgaria).
(13) OTP Buildings s.r.o. (Slovakia), Velvin Ventures Ltd. (Belize), R.E. Four d.o.o., Novi Sad (Serbia), SC Aloha Buzz
SRL, SC Favo Consultanta SRL, SC Tezaur Cont SRL (Romania), Cresco d.o.o. (Croatia), OTP Osiguranje d.d. (Croatia),
OTP Solution Fund (Ukraine).
(14) Within OTP Group, the Corporate Centre acts as a virtual entity established by the equity investment of OTP Core for
managing the wholesale financing activity for all the subsidiaries within OTP Group but outside OTP Core. Therefore the
balance sheet of the Corporate Centre is funded by the equity and intragroup lending received from OTP Core, the
intragroup lending received from other subsidiaries, and the subordinated debt and senior notes issued by OTP Bank.
From this funding pool, the Corporate Centre is to provide intr
agroup lending to, and hold equity stakes in OTP subsidiaries
outside OTP Core. Main subsidiaries financed by Corporate Centre are as follows: Hungarians: Merkantil Bank Ltd,
Merkantil Leasing Ltd, OTP Fund Management Ltd, OTP Real Estate Fund Management Ltd, OTP Life Annuity Ltd;
foreigners: banks, leasing companies, factoring companies.
(15) Total Hungarian subsidiaries: sum of the adjusted after tax results of Hungarian group members, Corporate Centre
and related eliminations.
(16) Total Foreign subsidiaries: sum of the adjusted after tax profits of foreign subsidiaries.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
CALCULATION OF THE ADJUSTED LINES OF IFRS PROFIT AND LOSS STATEMENTS, AS WELL AS
THE ADJUSTED BALANCE SHEET LINES PRESENTED IN THE REPORT, AND THE METHODOLOGY
FOR CALCULATING THE FX-ADJUSTED VOLUME CHANGES
In order to present Group level trends in a comprehensive way in the Report, the presented consolidated and separate
profit and loss statements of this report were adjusted in the following way, and the adjusted P&Ls are shown and analysed
in the report. Consolidated accounting figures together with Separate accounting figures of OTP Bank are still disclosed in
the Supplementary Data section.
Adjustments affecting the income statement:
The after tax effect of adjustment items (certain, typically non-recurring items from banking operations’ point of view) are
shown separately in the Statement of Recognised Income. The following adjustment items emerged in the period under
review and the previous year: received dividends, received and paid cash transfers, the effect of goodwill/investment
impairment charges, special tax on financial institutions, the expected one-off negative effect of the debt repayment
moratorium in Hungary and Serbia, the impact of fines imposed by the Hungarian Competition Authority, the effect of
acquisitions, and from 2021 the result of the treasury share swap agreement (earlier the latter was presented amongst
the one-off revenue items in the adjusted income statement structure).
Beside the Slovakian banking levy payable until 2Q 2020, the total amount of the special banking tax includes and the
Slovakian Deposit Protection Fund contributions being introduced again in 2014, and the contribution into the Resolution
Fund in Slovakia, too.
In 4Q 2019 the following items have been moved from the Other operating expenses line among the Net interest income
after loss allowance, impairment and provisions line: Release of loss allowance on securities at fair value through other
comprehensive income and on securities at amortized cost, Provision for commitments and guarantees given, Release
of impairment of assets subject to operating lease and of investment properties. In the adjusted P&L structure these
items are presented amongst the Other provisions (adj.) line (through the Structural correction between Provision for
loan losses and Other provisions adjustment line). From 1Q 2021 the Provision for commitments and guarantees given
line contains lending activity-related amounts, therefore this line is no longer shifted from 1Q 2021. In 3Q 2021
(retrospectively from 3Q 2020) the components of the new Gain from derecognition of financial assets at amortized cost
line in the accounting P&L were shifted back in the adjusted P&L structure to the lines on which they were presented
previously.
Other non-interest income is shown together with Gains and losses on real estate transactions, Net insurance result
(appearing in the accounting P&L structure from 3Q 2017), Gains and losses on derivative instruments, and Gains and
losses on non-trading securities mandatorily at fair value through profit or loss lines between 1Q 2019 – 4Q 2019, but
without the above mentioned income from the release of pre-acquisition provisions and without received cash transfers.
However other non-interest expenses stemming from non-financial activities are added to the adjusted net other non-
interest income line, therefore the latter incorporates the net amount of other non-interest income from non-financial
activities.
OTP Bank’s share in the change in the shareholders’ equity of companies consolidated with equity method is reclassified
from the After tax dividends and net cash transfers line to the Net other non-interest result (adj.) without one-offs line. In
the addition to this, OTP Bank has changed the way how private equity funds managed by PortfoLion are recorded. As
a result of this, as opposed to the previous method of recording the funds at book value (initial book value less
impairments), the funds are now evaluated based on their net asset value. The change in the carrying value was
reclassified to the Net other non-interest result (adj.) without one-offs line in the adjusted P&L structure. Furthermore,
received cash transfers within the framework of the subsidy programme targeting the expansion of POS network in
Hungary were reclassified from the After tax dividends and net cash transfers line to the Net other non-interest result
(adj.) without one-offs line.
Other provisions are separated from other expenses and shown on a separate line in the adjusted profit or loss statement.
Other administrative expenses have been adjusted in the following way in order to create a category comprising
administrative cost items exclusively. Other costs and expenses and other non-interest expenses were included into the
adjusted Other non-interest expenses. At the same time, the following cost items were excluded from adjusted other non-
interest expenses: paid cash transfers (except for movie subsidies and cash transfers to public benefit organisations,
whereas from 2019 certain part of cash transfers to public benefit organizations was presented amongst net fees and
commissions), Other other non-interest expenses stemming from non-financial activities, and special tax on financial
institutions.
Tax deductible transfers (offset against corporate taxes) paid by Hungarian group members were reclassified from Other
non-interest expenses to Corporate income tax. As a result, the net P&L effect of these transfers (i.e. the paid transfer
less the related corporate tax allowances) is recognised in the corporate income tax line of the adjusted P&L. The amount
of tax deductible transfers offset against the special tax on financial institutions is shown on a net base on the special tax
on financial institutions line.
The financial transaction tax paid in Hungary is reclassified from other (administrative) expenses to net fee and
commission income, both on consolidated and OTP Core level.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
OTP Group is hedging the revaluation result of the FX provisions on its FX loans and interest claims by keeping hedging
open FX positions. In the accounting statement of recognized income, the revaluation of FX provisions is part of the risk
costs (within line “Provision for loan losses”), other provisions and net interest income lines, whereas the revaluation
result of the hedging open FX positions is made through other non-interest income (within line “Foreign exchange result,
net”). The two items have the same absolute amount but an opposite sign. As an adjustment to the accounting statement
of income, these items are eliminated from the adjusted P&L. By modifying only the structure of the income statement,
this correction does not have any impact on the bottom line net profits.
The Compensation Fund contributions are recognized on the Other administrative expenses line of the accounting
income statement, and are presented on the financial transaction tax and/or Special tax on financial institutions line the
in the adjusted P&L structure (due to the tax deductibility).
In case of OTP Banka Slovensko and OTP Bank Romania the total revaluation result of intra-group swap deals – earlier
booked partly within the net interest income, but also on the Foreign exchange gains and Net other non-interest result
lines within total Other non-interest income – is presented on a net base on the net interest income line.
Due to the introduction of IFRS16, certain items previously presented on the Other non-interest expenses line (rental
fees) were moved to the interest expenses and depreciation lines in the accounting income statement. These items were
shifted back to the Other non-interest expenses line in the adjusted P&L structure.
Staring from 2020 the currency exchange result was shifted in the accounting P&L structure from the FX result to the net
fees and commissions line, retroactively for the 2019 base period as well. In the adjusted P&L structure this item is moved
to the FX result line.
In 4Q 2021 the Modification gains or losses line (one of the components of the Provision for impairment on loan and
placement losses) was presented on a separate line in the accounting P&L structure, retroactively from 1Q 2020. In the
adjusted P&L this line was shifted back to the Provision for impairment on loan and placement losses line. Secondly, in
4Q 2021 the Gains and losses on non-trading securities mandatorily at fair value through profit or loss line was moved
from the Gains / losses on securities to the Fair value adjustment on financial instruments measured at fair value through
profit or loss line in the accounting P&L structure, retroactively from 1Q 2020. In the adjusted P&L this item remained
part of the Gains / losses on securities. Thirdly, from 1Q 2021 the local business taxes and the innovation contribution
payable by Hungarian Group members were booked on the Income tax expenses line, whereas these items were
recognised amongst the Other general expenses. In 4Q 2021 this change was retrospectively reflected in the full-year
2020 accounting P&L, too, but in the adjusted P&L structure for the 2020 base period we continue to present these items
amongst the Other non-interest expenses.
Performance indicators (such as cost/income ratio, net interest margin, risk cost to average gross loans as well as ROA
and ROE ratios, etc.) presented in this report are calculated o
n the basis of the adjusted profit and loss statement
excluding adjustment items (unless otherwise indicated).
Within the report, FX-adjusted statistics for business volume developments and their product breakdown, as well as the
FX-adjusted stock of allowances for loan losses are disclosed, too. For FX adjustment, the closing cross currency rates
for the current period were used to calculate the HUF equivalent of loan and deposit volumes in the base periods. Thus
the FX-adjusted volumes will be different from those published earlier. Regarding the
FX-adjusted volume change of DPD90+ loans (adjusted for sales and write-offs), instead of the previously applied 3Q
2009 FX rates, from 4Q 2020 onwards the actual end of period FX rates are used for calculating the FX-adjusted figures.
Adjustments affecting the balance sheet:
On 17 February 2020 OTP Bank announced the signing of the sale agreement of its Slovakian subsidiary. According to
IFRS 5 the Slovakian bank was presented as a discontinued operation in the consolidated income statement and balance
sheet until it was sold. With regards to the consolidated accounting balance sheet, all assets and liabilities of the
Slovakian bank were shown on one line until 9M 2020 in the balance sheet (by the end of 4Q 2020 the Slovakian entity
was deconsolidated). As for the consolidated accounting income statement, the Slovakian contribution for 2020 (in 2020
the January-October contribution was consolidated) was shown separately from the result of continued operation, on the
Loss from discontinued operation line, i.e. the particular P&L lines in the ‘continuing operations’ section of the accounting
P&L don’t incorporate the contribution from the Slovakian subsidiary. As opposed to this, the adjusted financial
statements presented in the Stock Exchange Report incorporated the Slovakian banks’ balance sheet and P&L
contribution in the relevant respective lines, in line with the structure of the financial statements monitored by the
management.
From the end of 2020, OTP Osiguranje d.d. was presented as asset classified as held for sale in the accounting financial
statements. Accordingly, from end-2020 until its deconsolidation, i.e. until 2Q 2021 its assets and liabilities were shown
on a separate line in the consolidated balance sheet. Regarding the 2020 and 2021 accounting statement of recognized
income, the entity’s result was presented on the Gains from held for trading operations line, therefore the particular P&L
lines in the ‘continuing operations’ section of the accounting P&L don’t incorporate the contribution from this entity. As
opposed to this, the adjusted financial statements presented in the Stock Exchange Report incorporated the company’s
balance sheet and P&L contribution in the relevant respective lines, in line with the structure of the financial statements
monitored by the management.
Finance lease receivables – earlier presented within customer loans – are shown on a separate line in the accounting
balance sheet from the end of 2019. As for the adjusted balance sheet, net customer loans continue to include the stock
of finance lease receivables.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
In the adjusted balance sheets presented in the analytical section of the report, the Stage 3 loans under IFRS 9 were
netted with the provisions created in relation to the total exposure toward those particular clients, in case of the affected
Group members. Therefore, this adjustment made on the accounting balance sheet has an impact on the consolidated
gross customer loans and allowances for loan losses.
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
ADJUSTMENTS ON THE CONSOLIDATED STATEMENT OF PROFIT OR LOSS (IFRS)
2021
HUF million
2020
HUF million
Net interest income 874,310 782,673
(-) Revaluation result of FX provisions 0 (57)
(+) Presentation of the revaluation result of intra-group swaps on the net interest income line realized at the Romanian
and Slovakian operations
625 337
(-) Netting of interest revenues on DPD90+ loans with the related provision (booked on the Provision for loan losses
line) at OTP Core and CKB
1,131 5,951
(-) Effect of acquisitions (2,680) (600)
(-) Initial NPV gain on the monetary policy interest rate swap (MIRS) deals 0 0
(-) Reclassification due to the introduction of IFRS16 (1,556) (1,623)
(+) Presentation of the contribution from discontinued operation on the adjusted P&L lines 46 8,755
(-) Expected one-off negative effect of the debt repayment moratorium in Hungary and Serbia (5,925) 15
Net interest income (adj.) 884,012 788,079
Net fees and commissions 442,177 397,635
(+) Financial Transaction Tax (68,818) (61,588)
(-) Effect of acquisitions (33) (145)
(+) Presentation of the contribution from discontinued operation on the adjusted P&L lines 0 3,210
(-) Structural shift of income from currency exchange from net fees to the FX result 47,843 46,290
Net fees and commissions (adj.) 325,548 293,112
Foreign exchange result (4,075) 7,864
(-) Revaluation result of FX positions hedging the revaluation of FX provisions 0 11,195
(-) Presentation of the revaluation result of intra-group swaps on the net interest income line realized at the Romanian
and Slovakian operations
(492) (1,964)
(-) Effect of acquisitions 0 0
(+) Presentation of the contribution from discontinued operation on the adjusted P&L lines (10) 3
(+) Structural shift of income from currency exchange from net fees to the FX result 47,843 46,290
Foreign exchange result (adj.) 44,251 44,927
Gain/loss on securities, net 5,559 7,464
(-) Effect of acquisitions (1,077) (98)
(+) Presentation of the contribution from discontinued operation on the adjusted P&L lines 14 349
(-) Revaluation result of the treasury share swap agreement 2,766
(+) Structural adjustment due to the Gain from derecognition of financial assets at amortized cost line (against Gain/loss
on securities, net)
1,031 1,402
(+) Shifting of the Gains and losses on non-trading securities mandatorily at fair value through profit or loss line from the
Net other non-interest income to the Gains or losses from securities line
4,812 7,239
Gain/loss on securities, net (adj.) with one-offs 9,726 16,553
(-) Revaluation result of the treasury share swap agreement (booked as Gain on securities, net (adj) at OTP Core) - 2,360
Gain/loss on securities, net (adj.) without one-offs 9,726 14,193
Result of discontinued operation and gains from disposal of subsidiaries classified as held for sale 116 5,590
(-) Effect of acquisitions (165) 7,496
Result of discontinued operation and gains from disposal of subsidiaries classified as held for sale (adj.) 282 (1,907)
Gains and losses on real estate transactions 6,424 3,631
Result of discontinued operation and gains from disposal of subsidiaries classified as held for sale (adj.) 282 (1,907)
(+) Other non-interest income 74,246 29,109
(+) Gains and losses on derivative instruments 6,797 11,339
(+) Net insurance result 657 721
(+) Losses on loans measured mandatorily at fair value through other comprehensive income and on securities
at amortized cost
(532) 4,843
(-) Shifting of the Gains and losses on non-trading securities mandatorily at fair value through profit or loss line from the
Net other non-interest income to the Gains or losses from securities line
4,812 7,239
(-) Received cash transfers 165 65
(+) Other other non-interest expenses (44,882) (5,800)
(+) Change in shareholders' equity of companies consolidated with equity method, and the change in the net asset
value of the private equity funds managed by PortfoLion
11,155 128
(-) Effect of acquisitions (4) 7,264
(-) Presentation of the revaluation result of intra-group swaps on the net interest income line realized at the Romanian
and Slovakian operations
1,117 2,301
(-) One-off impact of the CHF mortgage loan conversion programme and regulatory changes related to mortgage loans
in Romania
(948) (226)
(-) Impact of fines imposed by the Hungarian Competition Authority 0 823
(-) Netting of refunds related to legal cases (accounted for on the Net other non-interest result line) with the release of
provisions created earlier for these cases (accounted for on the Other provisions line) from 1Q 2017 at OTP Bank
Romania
(194) (216)
(+) Presentation of the contribution from discontinued operation on the adjusted P&L lines 387 3,149
(-) Expected one-off negative effect of the debt repayment moratorium in Hungary and Serbia 0 (1,646)
Net other non-interest result (adj.) without one-offs 49,586 29,610
Gain from derecognition of financial assets at amortized cost 1,884 3,380
(-) Structural adjustment due to the Gain from derecognition of financial assets at amortized cost line (against Gain/loss
on securities, net)
1,031 1,402
(-) Structural adjustment due to the Gain from derecognition of financial assets at amortized cost line (against Provision
for impairment on loan and placement losses)
854 1,978
Gain from derecognition of financial assets at amortized cost (adj.) 0 0
Provision for impairment on loan and placement losses (27,723) (172,520)
(+) Modification gains or losses (13,672) (29,773)
(+) Change in the fair value attributable to changes in the credit risk of loans mandatorily measured at fair
value through profit of loss
(16,289) (3,262)
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
2021
HUF million
2020
HUF million
(+) Loss allowance on securities at fair value through other comprehensive income and on securities at
amortized cost
(3,974) (7,309)
(+) Provision for commitments and guarantees given (99) (8,662)
(+) Impairment of assets subject to operating lease and of investment properties 438 877
(-) Revaluation result of FX provisions 0 (10,997)
(-) One-off impact of the CHF mortgage loan conversion programme and regulatory changes related to mortgage loans
in Romania
339 459
(+) Netting of interest revenues on DPD90+ loans with the related provision (booked on the Provision for loan losses
line) at OTP Core and CKB
1,131 5,951
(-) Effect of acquisitions 0 (2,149)
(-) Structural correction between Provision for loan losses and Other provisions (3,536) (15,094)
(+) Presentation of the contribution from discontinued operation on the adjusted P&L lines 0 (3,024)
(-) Expected one-off negative effect of the debt repayment moratorium in Hungary and Serbia (10,131) (29,543)
(+) Structural adjustment due to the Gain from derecognition of financial assets at amortized cost line (against Provision
for impairment on loan and placement losses)
854 1,978
Provision for impairment on loan and placement losses (adj.) (46,006) (158,421)
Dividend income 15,648 527
(+) Received cash transfers 165 65
(+) Paid cash transfers (11,992) (12,768)
(-) Sponsorships, subsidies and cash transfers to public benefit organisations (11,873) (12,508)
(-) Dividend income of swap counterparty shares kept under the treasury share swap agreement 3,809 0
(-) Change in shareholders' equity of companies consolidated with equity method, and the change in the net asset
value of the private equity funds managed by PortfoLion
11,155 128
(+) Presentation of the contribution from discontinued operation on the adjusted P&L lines 0 8
After tax dividends and net cash transfers 729 213
Depreciation (94,995) (92,762)
(-) Effect of acquisitions (6,134) (7,415)
(-) Reclassification due to the introduction of IFRS16 (16,064) (16,447)
(+) Presentation of the contribution from discontinued operation on the adjusted P&L lines (20) (1,385)
Depreciation (adj.) (72,816) (70,286)
Personnel expenses (340,684) (308,643)
(-) Effect of acquisitions (781) (2,785)
(+) Presentation of the contribution from discontinued operation on the adjusted P&L lines (298) (6,638)
Personnel expenses (adj.) (340,201) (312,495)
Income taxes (72,123) (43,918)
(-) Corporate tax impact of goodwill/investment impairment charges 1,909 886
(-) Corporate tax impact of the special tax on financial institutions 1,787 1,773
(+) Tax deductible transfers (offset against corporate taxes) (8,137) (8,083)
(-) Corporate tax impact of the effect of fines imposed by the Hungarian Competition Authority 0 (74)
(-) Corporate tax impact of the effect of acquisitions 5,738 497
(+) Presentation of the contribution from discontinued operation on the adjusted P&L lines (18) (80)
(-) Corporate tax impact of the expected one-off negative effect of the debt repayment moratorium in Hungary and
Serbia
1,487 2,913
(-) Corporate tax impact of the result of the treasury share swap agreement (249)
(-) Shifting of the Hungarian local business tax and innovation contribution for 2020 between corporate income tax and
other non-interest expenses
(16,542)
Corporate income tax (adj.) (90,951) (41,534)
Other operating expense (85,733) (39,447)
(-) Other costs and expenses (6,508) (7,506)
(-) Other non-interest expenses (56,874) (18,568)
(-) Effect of acquisitions 0 1,022
(-) Revaluation result of FX provisions 0 (141)
(-) One-off impact of the CHF mortgage loan conversion programme and regulatory changes related to mortgage loans
in Romania
609 (233)
(-) Netting of refunds related to legal cases (accounted for on the Net other non-interest result line) with the release of
provisions created earlier for these cases (accounted for on the Other provisions line) from 1Q 2017 at OTP Bank
Romania
194 216
(+) Structural correction between Provision for loan losses and Other provisions (3,536) (15,094)
(+) Presentation of the contribution from discontinued operation on the adjusted P&L lines 4 (243)
(-) Expected one-off negative effect of the debt repayment moratorium in Hungary and Serbia (153) 0
Other provisions (adj.) (26,532) (29,574)
Other administrative expenses (311,931) (289,721)
(+) Other costs and expenses (6,508) (7,506)
(+) Other non-interest expenses (56,874) (18,568)
(-) Paid cash transfers (11,992) (12,768)
(+) Film subsidies and cash transfers to public benefit organisations (11,873) (12,508)
(-) Other other non-interest expenses (44,882) (5,800)
(-) Special tax on financial institutions (recognised as other administrative expenses) (20,680) (19,138)
(-) Tax deductible transfers (offset against corporate taxes) (8,137) (8,083)
(-) Financial Transaction Tax (68,818) (61,588)
(-) Effect of acquisitions (10,370) (9,940)
(+) Reclassification due to the introduction of IFRS16 (17,620) (18,069)
(+) Presentation of the contribution from discontinued operation on the adjusted P&L lines (106) (4,105)
(+) Shifting of the Hungarian local business tax and innovation contribution for 2020 between corporate income tax and
other non-interest expenses
(16,542)
(-) Expected one-off negative effect of the debt repayment moratorium in Hungary and Serbia (318)
Other non-interest expenses (adj.) (239,716) (249,702)
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
ADJUSTMENTS OF CONSOLIDATED IFRS BALANCE SHEET LINES
2021
HUF million
2020
HUF million
Cash, amounts due from Banks and balances with the National Banks 2,556,035 2,432,312
(+) Allocation of Assets classified as held for sale among balance sheet lines 0 3
Cash, amounts due from Banks and balances with the National Banks (adjusted) 2,556,035 2,432,314
Placements with other banks, net of allowance for placement losses 1,584,860 1,148,744
(+) Allocation of Assets classified as held for sale among balance sheet lines 0 244
Placements with other banks, net of allowance for placement losses (adjusted) 1,584,860 1,148,987
Financial assets at fair value through profit or loss 341,397 234,006
(+) Allocation of Assets classified as held for sale among balance sheet lines 0 1,188
Financial assets at fair value through profit or loss (adjusted) 341,397 235,194
Securities at fair value through other comprehensive income 2,224,510 2,136,709
(+) Allocation of Assets classified as held for sale among balance sheet lines 0 3,410
Securities at fair value through other comprehensive income (adjusted) 2,224,510 2,140,118
Gross customer loans (incl. finance lease receivables and accrued interest receivables related to
loans)
16,670,469 14,401,930
(-) Accrued interest receivables related to DPD90+ / Stage 3 loans 36,015 38,650
(+) Allocation of Assets classified as held for sale among balance sheet lines 0 0
Gross customer loans (adjusted) 16,634,454 14,363,281
Allowances for loan losses (incl. impairment of finance lease receivables) (926,547) (873,344)
(-) Allocated provision on accrued interest receivables related to DPD90+ / Stage 3 loans (36,015) (38,650)
(+) Allocation of Assets classified as held for sale among balance sheet lines 0 0
Allowances for loan losses (adjusted) (890,532) (834,695)
Securities at amortized costs 3,891,335 2,624,921
(+) Allocation of Assets classified as held for sale among balance sheet lines 0 1,031
Securities at amortized costs (adjusted) 3,891,335 2,625,952
Tangible and intangible assets, net 689,290 589,743
(+) Allocation of Assets classified as held for sale among balance sheet lines 0 135
Tangible and intangible assets, net (adjusted) 689,290 589,878
Other assets 454,811 588,378
(+) Allocation of Assets classified as held for sale among balance sheet lines 0 (6,010)
Other assets (adjusted) 454,811 582,368
Amounts due to banks, the National Governments, deposits from the National Banks and other
banks, and Financial liabilities designated at fair value through profit or loss
1,608,533 1,219,446
(+) Allocation of Liabilities directly associated with assets classified as held-for-sale among balance sheet
lines
0 0
Amounts due to banks, the National Governments, deposits from the National Banks and other
banks, and Financial liabilities designated at fair value through profit or loss (adjusted)
1,608,533 1,219,446
Deposits from customers 21,068,644 17,890,863
(+) Allocation of Liabilities directly associated with assets classified as held-for-sale among balance sheet
lines
0 0
Deposits from customers (adjusted) 21,068,644 17,890,863
Other liabilities 1,124,782 949,502
(+) Allocation of Liabilities directly associated with assets classified as held-for-sale among balance sheet
lines
0 0
Other liabilities (adjusted) 1,124,782 949,502
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
STATEMENT OF PROFIT OR LOSS OF OTP BANK PLC., ACCORDING TO IFRS STANDARDS AS
ADOPTED BY THE EUROPEAN UNION (CONSOLIDATED)
1
2021
HUF million
2020
HUF million
Change
%
CONTINUING OPERATIONS
Interest income calculated using the effective interest method 922,539 841,901 10
Income similar to interest income 194,920 135,986 43
Interest incomes 1,117,459 977,887 14
Interest expenses (243,149) (195,216) 25
NET INTEREST INCOME 874,310 782,671 12
Risk cost total (47,645) (190,875) (75)
Loss allowance / Release of loss allowance on loans, placements and repo
receivables (27,721) (172,520) (84)
Change in the fair value attributable to changes in the credit risk of loans
mandatorily measured at fair value through profit of loss (16,289) (3,262) 399
Loss allowance / Release of loss allowance on securities at fair value through
other comprehensive income and on securities at amortized cost (3,974) (7,309) (46)
Provision for commitments and guarantees given (99) (8,662) (99)
Impairment / (Release of impairment) of assets subject to operating lease and of
investment properties 438 878 (50)
NET INTEREST INCOME AFTER LOSS ALLOWANCE, IMPAIRMENT AND
PROVISIONS 826,665 591,796 40
Income from fees and commissions 554,113 486,529 14
Expense from fees and commissions (111,939) (88,896) 26
Net profit from fees and commissions 442,174 397,633 11
Modification gain or loss (13,672) (29,773) (54)
Foreign exchange gains / losses, net 2,723 19,204 (86)
Foreign exchange result (4,075) 7,864 (152)
Gains and losses on derivative instruments 6,798 11,340 (40)
Gains / Losses on securities, net 5,560 7,465 (26)
Gain from derecognition of financial assets at amortized cost 1,885 3,380 (44)
Gains / Losses on financial assets /liabilities measured at fair value through profit
or loss (532) 4,843 (111)
Dividend income and gain / loss from associated companies 15,648 527
Other operating income 81,328 33,461 143
Gains and losses on real estate transactions 6,424 3,631 77
Other non-interest income 74,246 29,109 155
Net insurance result 657 721 (9)
Other operating expense (85,732) (39,447) 117
Net operating income 20,880 29,433 (29)
Personnel expenses (340,684) (308,642) 10
Depreciation and amortization (94,996) (92,761) 2
Other administrative expenses (311,932) (289,722) 8
Other administrative expenses (747,612) (691,125) 8
PROFIT BEFORE INCOME TAX 528,435 297,964 77
Income tax expense (72,123) (43,918) 64
NET PROFIT FOR THE PERIOD FROM CONTINUING OPERATIONS 456,312 254,046 80
From this, attributable to:
Non-controlling interest 836 220 280
Owners of the company 455,476 253,826 79
DISCONTINUED OPERATIONS
Gains from disposal of subsidiaries classified as held for sale 0 199
Loss from discontinued operation 116 5,391 (98)
PROFIT FROM CONTINUING AND DISCOUNTINUED OPERATION 456,428 259,636 76
1
The rows of the table are based on audited numbers, but the structure of the table can differ from the IFRS financial statements presented in the Annual
Report (certain rows might be merged or represent different level of aggregation).
OTP BANK BUSINESS REPORT 2021 (CONSOLIDATED)
ANNUAL REPORT 2021
STATEMENT OF FINANCIAL POSITION OF OTP BANK PLC., ACCORDING TO IFRS STANDARDS AS
ADOPTED BY THE EUROPEAN UNION (CONSOLIDATED)
1
2021
HUF million
2020
HUF million
Change
%
Cash, amounts due from banks and balances with the National Banks 2,556,035 2,432,312 5
Placements with other banks, net of loss allowance for placements 1,584,861 1,148,743 38
Repo receivables 61,052 190,849 (68)
Financial assets at fair value through profit or loss 341,397 234,007 46
Securities at fair value through other comprehensive income 2,224,510 2,136,709 4
Loans at amortized cost 13,493,183 11,674,842 16
Loans mandatorily at fair value through profit or loss 1,068,111 802,605 33
Finance lease receivables 1,182,628 1,051,140 13
Associates and other investments 67,222 52,443 28
Securities at amortized cost 3,891,335 2,624,920 48
Property and equipment 411,136 322,766 27
Intangible assets and goodwill 248,631 239,004 4
Right-of-use assets 50,726 46,283 10
Investment properties 29,882 38,601 (23)
Derivative financial assets designated as hedge accounting 18,757 6,820 175
Deferred tax assets 15,109 22,317 (32)
Current income tax receivable 29,978 38,936 (23)
Other assets 276,785 266,474 4
Assets classified as held for sale / discontinued operations 2,046 6,070 (66)
TOTAL ASSETS 27,553,384 23,335,841 18
Amounts due to banks, the National Governments, deposits from the National Banks
and other banks
1,567,348 1,185,315 32
Repo liabilities 79,047 117,991 (33)
Financial liabilities at fair value through profit or loss 41,184 34,131 21
Deposits from customers 21,068,644 17,890,863 18
Liabilities from issued securities 436,325 464,213 (6)
Derivative financial liabilities held for trading 202,716 104,823 93
Derivative financial liabilities designated as hedge accounting 11,228 11,341 (1)
Leasing liabilities 53,286 48,451 10
Deferred tax liabilities 24,045 25,990 (7)
Current income tax payable 36,581 27,684 32
Other liabilities 717,880 607,737 18
Subordinated bonds and loans 278,334 274,704 1
Liabilities directly associated with assets classified as held-for-sale / discontinued
operation
0 5,486 (100)
TOTAL LIABILITIES 24,516,618 20,798,729 18
Share capital 28,000 28,000 0
Retained earnings and reserves 3,109,509 2,629,076 18
Treasury shares (106,941) (124,080) (14)
Non-controlling interest 6,198 4,116 51
TOTAL SHARHOLDERS' EQUITY 3,036,766 2,537,112 20
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 27,553,384 23,335,841 18
1
The rows of the table are based on audited numbers, but the structure of the table can differ from the IFRS financial statements presented in the Annual
Report (certain rows might be merged or represent different level of aggregation).
ANNUAL REPORT 2021
INDEPENDENT AUDITORS’ REPORT
(CONSOLIDATED AND SEPARATE, IN ACCORDANCE WITH IFRS)
A member firm of Ernst & Young Global Limited
Page 1 / 9
Ernst & Young Kft.
Ernst & Young Ltd.
H-1132 Budapest Váci út 20.
1399 Budapest 62. Pf.632, Hungary
Tel: +36 1 451 8100
Fax: +36 1 451 8199
www.ey.com/hu
Cg. 01-09-267553
This is a translation of the Hungarian Report
Independent Auditors' Report
To the Shareholders of OTP Bank Nyrt.
Report on the audit of the separate financial statements
Opinion
We have audited the accompanying 2021 separate financial statements of OTP Bank
Nyrt. (“the Company”) included in the accompanying
Nem_konsz_IFRS_beszamolo_20211231_hun03.11.xhtml
1
digital file, which
comprise the separate statement of financial position as at 31 December 2021 -
showing a balance sheet total of HUF 13,710,471 million and a total comprehensive
income for the year of HUF 87,935 million -, the related separate profit or loss,
separate statement of comprehensive income, separate statement of changes in
equity, separate statement of cash flows for the year then ended and notes to the
separate financial statements, including a summary of significant accounting
policies.
In our opinion the separate financial statements give a true and fair view of the
financial position of the Company as at 31 December 2021 and of its financial
performance and its cash flows for the financial year then ended in accordance with
International Financial Reporting Standards as adopted by the EU (“EU IFRSs”) and
have been prepared, in all materials respects, in accordance with the supplementary
requirements of Act C of 2000 on Accounting (“Hungarian Accounting Law”)
relevant for separate financial statements prepared in accordance with EU IFRSs.
Basis for opinion
We conducted our audit in accordance with Hungarian National Auditing Standards
and with applicable laws and regulations in Hungary, including also Regulation (EU)
No. 537/2014 of the European Parliament and of the Council of 16 April 2014 on
specific requirements regarding statutory audit of public-interest entities
(“Regulation (EU) No. 537/2014“). Our responsibilities under those standards are
further described in the “Auditor’s responsibilities for the audit of the separate
financial statements” section of our report.
1
Digital identification of the above referred
Nem_konsz_IFRS_beszamolo_20211231_hun03.11.xhtml separate financial statements,
using SHA 256 HASH algorithm is
7B70D0042C4F288106C404CF838A2307C84AF2D88D6DE5A53C3599286E52C4ED
A member firm of Ernst & Young Global Limited
Page 2 / 9
We are independent of the Company in accordance with the applicable ethical
requirements according to relevant laws in effect in Hungary and the policy of the
Chamber of Hungarian Auditors on the ethical rules and disciplinary proceedings
and, concerning matters not regulated by any of these, with the International Ethics
Standards Board of Accountants’ (IESBA) International Code of Ethics for
Professional Accountants (including International Independence Standards) (IESBA
Code), and we have fulfilled our other ethical responsibilities in accordance with
these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Emphasis of matter
We draw attention to Note 47 of notes to the separate financial statements, which
describes the risk and potential impact of the Ukrainian-Russian conflicts on the
Company and the entire OTP Group’s operation in Ukraine and Russia. Our opinion
is not modified in respect of this matter.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most
significance in our audit of the separate financial statements of the current period.
These matters were addressed in the context of our audit of the separate financial
statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters. For each matter below, our description of how
our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the “Auditor’s responsibilities for
the audit of the separate financial statements section” of our report, including in
relation to these matters. Accordingly, our audit included the performance of
procedures designed to respond to our assessment of the risks of material
misstatement of the separate financial statements. The results of our audit
procedures, including the procedures performed to address the matters below,
provide the basis for our audit opinion on the accompanying separate financial
statements.
Determination of expected credit losses relating to loans at amortised cost
Material misstatements due to
fraudulent financial reporting often
result from understatement of expected
credit losses.
Credit impairment is a highly subjective
area due to the level of judgement
We involved valuation specialists to
assist us in performing our audit
procedures on ECL and related credit
impairments. Our audit procedures
included among others the following
procedures.
A member firm of Ernst & Young Global Limited
Page 3 / 9
applied by management in determining
expected credit losses (“ECL”). The
identification of impairment and the
determination of the recoverable
amount are an inherently uncertain
process involving various assumptions
and factors, including the financial
condition of the counterparty, expected
future cash flows, and expected net
selling prices of collaterals. The
portfolios which give rise to the greatest
uncertainty are typically those where
impairments are derived from estimates
of future cash flows and realizable value
of collateral, calculated using collective
impairment models, are unsecured or
are subject to potential collateral
shortfalls. These models require the
significant periodic judgment of
management regarding correct
segmentation, the identification of
significant changes in credit risk, the
inclusion of forward-looking elements as
well as the application of management
overlay to reflect on circumstances
beyond the modelling capabilities.
Due to the significance of loans at
amortised cost (representing 29% of
Total Assets as of 31 December 2021)
and the related estimation uncertainty,
this is considered a key audit matter.
We assessed the design and tested the
operating effectiveness of internal
controls over the approval, recording
and monitoring of loans at amortized
cost and controls over ECL calculations
including the quality of underlying data
and applications. We assessed the
controls over the general IT
environment of the applications
relevant from audit perspective
related to the determination of ECL.
For ECL calculated on an individual
basis, we tested the assumptions used
by the management underlying the
impairment identification and
quantification focusing on loan cases
with the most significant potential
impact on the separate financial
statements. We also assessed the
management’s assumptions on the
expected future cash flows, including
the value of realisable collateral and
estimates of recovery on default based
on our own understanding and
available market information.
For ECL calculated on collective basis
we evaluated the model governance,
methodologies, inputs and
management assumptions used
(probability of default, loss given
default, significant changes in credit
risk and forward-looking elements).
We considered the regulatory
measures on the assumptions applied
by the Company for ECL estimation
purposes.
We also assessed whether the
disclosures in the separate financial
statements appropriately reflect the
Company’s exposure to credit risk and
are compliant with the EU IFRSs.
The Company’s disclosures about its
risk management policies are included
in Note 2.12 and 36.1 Credit risk which
A member firm of Ernst & Young Global Limited
Page 4 / 9
specifically explains the key
assumptions used when determining
credit risk and their evaluation are
detailed in Note 11 Loans and Note 30
Risk cost.
General Information Technology controls
over the financial reporting process
A significant part of the Company's
financial reporting process, including
revenue recognition is significantly
reliant on IT systems with embedded
automated processes and controls over
the capture, storage and extraction of
information. A fundamental component
of these processes and controls is
ensuring appropriate user access and
change management protocols exist and
are being adhered to.
These protocols are important because
they ensure that access and changes to
IT systems and related data are made
and authorized in an appropriate
manner.
As our audit of the financial statements
sought to place a high level of reliance
on IT systems and application controls
related to financial reporting, a high
proportion of the overall audit effort has
been carried out regarding to
understand and test IT infrastructure
and applications including relevant
application controls. Furthermore, the
complexity of IT systems and nature of
application controls requires special
technology expertise and specialized
skills to be involved in the audit we
therefore consider this as a key audit
matter.
We focused our audit on those IT
systems and controls that are
significant for the Company’s financial
reporting. As audit procedures over
the IT systems and application controls
require specific expertise, we involved
IT audit specialists to assist us in
performing our audit procedures. Our
audit procedures included among
others the following procedures.
We understood and assessed the
overall IT control environment and the
controls in place which included
controls over access to systems and
data, as well as system changes. We
adjusted our audit approach based on
the financial significance of the system
and whether there were automated
procedures supported by that system.
As part of our audit procedures we
tested the operating effectiveness of
controls over appropriate access rights
to assess whether only appropriate
users had the ability to create, modify
or delete user accounts for the
relevant in-scope applications. We also
tested the operating effectiveness of
controls around system development
and program changes to establish that
changes to the system were
appropriately authorized, developed
and implemented. Additionally, we
assessed and tested the design and
operating effectiveness of the
application controls embedded in the
processes relevant to our audit.
A member firm of Ernst & Young Global Limited
Page 5 / 9
The Company’s disclosures about its IT
systems and related IT general and
application controls are included in
section System of internal controls and
IT Controls of the Business report.
Other matters
The separate financial statements as at 31 December 2020 were audited by another
auditor who expressed an unmodified opinion on those financial statements on
17 March 2021.
Management is responsible for the presentation of the separate financial statements
in the format that complies with the Article 3 of Commission (EU) Regulation
2019/815 of 17 December 2018 (“ESEF Regulation”). The scope of our audit was
the human-readable content of the electronically identified digital file, which
contains the separate financial statements. The scope of our audit did not include to
review and consequently we do not report on, whether the digitalized information
complies in all material respect with the requirements of ESEF Regulation.
Other information
Other information consists of the 2021 business report of the Company and the
“Management’s Analysis” section of the annual report which have been made
available to us before the date of our independent auditor’s report and of the
“Message to the Shareholders”, “Corporate Governance” and “Macroeconomic and
financial environment in 2021” sections of the annual report which are expected to
be made available after the date of our independent auditor’s report but do not
include the separate financial statements and our independent auditor’s report.
Management is responsible for the other information, including preparation of the
business report in accordance with the Hungarian Accounting Law and other
relevant legal requirements, if any. Our opinion on the separate financial statements
does not cover the other information.
In connection with our audit of the separate financial statements, our responsibility
is to read the business report and, in doing so, consider whether 1) the other
information is materially inconsistent with the separate financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated and
2) the business report has been prepared in accordance with the Hungarian
Accounting Law and other relevant legal requirements, if any.
Our opinion on the business report should include the information required according
to Subsection (2) e) and f) of Section 95/B of the Hungarian Accounting Law and we
are required to confirm also whether the information prescribed in Subsection (2) a)-
d) and g)-h) of Section 95/B of the Hungarian Accounting Law have been made
available and whether the business report includes the non-financial statement as
required by Section 95/C of the Hungarian Accounting Law.
A member firm of Ernst & Young Global Limited
Page 6 / 9
In our opinion, the business report of the Company, including the information
required according to Subsection (2) e) and f) of Section 95/B of the Hungarian
Accounting Law for 2021 is consistent, in all material respects, with the 2021
separate financial statements of the Company and the relevant requirements of the
Hungarian Accounting Law.
Since no other legal regulations prescribe for the Company further requirements
with regard to its business report, we do not express opinion in this regard.
We also confirm that the Company have made available the information required
according to Subsection (2) a)-d) and g)-h) of Section 95/B of the Hungarian
Accounting Law and that the business report includes the non-financial statement as
required by Section 95/C of the Hungarian Accounting Law.
Further to the above, based on the knowledge we have obtained about the Company
and its environment in the course of the audit we are required to report whether we
have identified any material misstatement in the business report, and if so, the
nature of the misstatement in question. We have nothing to report in this regard.
When we read the sections of the annual report, which had not yet been made
available to us at the date of this report, if we conclude that there is a material
misstatement therein, we are required to communicate the matter to those charged
with governance.
Responsibilities of management and those charged with governance for the
separate financial statements
Management is responsible for the preparation and fair presentation of the separate
financial statements in accordance with EU IFRSs and for the preparation in
accordance with the supplementary requirements of the Hungarian Accounting Law
relevant for separate financial statements prepared in accordance with EU IFRSs,
and for such internal control as management determines is necessary to enable the
preparation of separate financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the separate financial statements, management is responsible for
assessing the Company’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of
accounting unless management either intends to liquidate the Company or to cease
operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s
financial reporting process.
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Auditor’s responsibilities for the audit of the separate financial statements
Our objectives are to obtain reasonable assurance about whether the separate
financial statements as a whole are free from material misstatement, whether due
to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with Hungarian National Auditing Standards and with
applicable laws and regulations in Hungary, including also Regulation (EU) No.
537/2014 will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of these separate financial statements.
As part of an audit in accordance with Hungarian National Auditing Standards and
with applicable laws and regulations in Hungary, including also Regulation (EU) No.
537/2014, we exercise professional judgment and maintain professional scepticism
throughout the audit. We also:
► Identify and assess the risks of material misstatement of the separate
financial statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
► Obtain an understanding of internal control relevant to the audit in order to
design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control.
► Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by
management.
► Conclude on the appropriateness of management’s use of the going concern
basis of accounting and, based on the audit evidence obtained, whether a
material uncertainty exists related to events or conditions that may cast
significant doubt on the Company’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the separate
financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the
date of our auditor’s report. However, future events or conditions may cause
the Company to cease to continue as a going concern.
► Evaluate the overall presentation, structure and content of the separate
financial statements, including the disclosures, and whether the separate
financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
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We communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit and significant audit findings,
including any significant deficiencies in internal control that we identify during our
audit.
We also provide those charged with governance with a statement that we have
complied with relevant ethical requirements regarding independence, and to
communicate with them all relationships and other matters that may reasonably be
thought to bear on our independence, and where applicable, actions taken to
eliminate threats or safeguards applied.
From the matters communicated with those charged with governance we determine
those matters that were of most significance in the audit of the separate financial
statements of the current period and are therefore the key audit matters.
Report on other legal and regulatory requirements
Reporting requirements on content of auditor’s report in compliance with Regulation
(EU) No. 537/2014:
Appointment and Approval of Auditor
We were appointed as the statutory auditor of the Company by the General Assembly
of Shareholders of the Company on 16 April 2021. Total uninterrupted engagement
period, including previous renewals (extension of the period for which we were
originally appointed) and reappointments for the statutory auditor, has lasted for
one year.
Consistency with Additional Report to Audit Committee
Our audit opinion on the separate financial statements expressed herein is consistent
with the additional report to the audit committee of the Company, which we issued
in accordance with Article 11 of the Regulation (EU) No. 537/2014 on the same date
as the date of this report.
Non-audit Services
We declare that no prohibited non-audit services referred to in Article 5(1) of
Regulation (EU) No. 537/2014 were provided by us to the Company and its
controlled undertakings and we remained independent from the Company in
conducting the audit.
In addition to statutory audit services and services disclosed in the business report
and in the separate financial statements, no other services were provided by us to
the Company and its controlled undertakings.
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The engagement partner on the audit resulting in this independent auditor’s report
is Kónya Zsolt.
Budapest, 17 March 2022
The original Hungarian version has been signed.
Kónya Zsolt Nagyváradiné Szépfalvi Zsuzsanna
Engagement partner Registered auditor
Ernst & Young Kft. Chamber membership No.: 005313
1132 Budapest, Váci út 20.
Registration No. 001165
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Ernst & Young Kft.
Ernst & Young Ltd.
H-1132 Budapest Váci út 20.
1399 Budapest 62. Pf.632, Hungary
Tel: +36 1 451 8100
Fax: +36 1 451 8199
www.ey.com/hu
Cg. 01-09-267553
This is a translation of the Hungarian Report
Independent Auditors' Report
To the Shareholders of OTP Bank Nyrt.
Report on the audit of the consolidated financial statements
Opinion
We have audited the accompanying 2021 consolidated financial statements of OTP Bank
Nyrt. (“the Company”) and its subsidiaries (altogether “the Group”) included in the
accompanying CON 2021-12-31_HU_final_v5_119_1_preview.xhtml
1
digital file, which
comprise the consolidated statement of financial position as at 31 December 2021 -
showing a balance sheet total of HUF 27,553,384 million and a total
comprehensive income for the year of HUF 473,322 million -, the related consolidated
statement of profit or loss, the consolidated statement of comprehensive income,
consolidated statement of changes in equity, consolidated statement of cash flows for the
year then ended and notes to the consolidated financial statements, including a summary
of significant accounting policies.
In our opinion the consolidated financial statements give a true and fair view of the
consolidated financial position of the Group as at 31 December 2021 and of its
consolidated financial performance and its consolidated cash flows for the financial year
then ended in accordance with International Financial Reporting Standards as adopted by
the EU (“EU IFRSs”) and have been prepared, in all material respects, in accordance with
the supplementary requirements of Act C of 2000 on Accounting (“Hungarian Accounting
Law”) relevant for consolidated financial statements prepared in accordance with EU
IFRSs.
Basis for opinion
We conducted our audit in accordance with Hungarian National Auditing Standards and
with applicable laws and regulations in Hungary, including also Regulation (EU) No.
537/2014 of the European Parliament and of the Council of 16 April 2014 on specific
requirements regarding statutory audit of public-interest entities (“Regulation (EU) No.
537/2014“). Our responsibilities under those standards are further described in the
“Auditor’s responsibilities for the audit of the consolidated financial statements” section of
our report.
1
Digital identification of the above referred CON 2021-12-31_HU_final_v5_119_1_preview.xhtml
consolidated financial statements, using SHA 256 HASH algorithm is
072C2A820D46B8755FFE07F5A12CBC2A0899FFDA58EF9B5C9B355C22A95903DB
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We are independent of the Group in accordance with the applicable ethical requirements
according to relevant laws in effect in Hungary and the policy of the Chamber of Hungarian
Auditors on the ethical rules and disciplinary proceedings and, concerning matters not
regulated by any of these, with the International Ethics Standards Board of Accountants’
(IESBA) International Code of Ethics for Professional Accountants (including International
Independence Standards) (IESBA Code), and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Emphasis of matter
We draw attention to Note 51 of notes to the consolidated financial statements, which
describes the risk and potential impact of the Ukrainian-Russian conflicts on the Group’s
operation in Ukraine and Russia. Our opinion is not modified in respect of this matter.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most
significance in our audit of the consolidated financial statements of the current period.
These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the “Auditor’s responsibilities for the
audit of the consolidated financial statements section” of our report, including in relation
to these matters. Accordingly, our audit included the performance of procedures designed
to respond to our assessment of the risks of material misstatement of the consolidated
financial statements. The results of our audit procedures, including the procedures
performed to address the matters below, provide the basis for our audit opinion on the
accompanying consolidated financial statements.
Determination of expected credit losses relating to loans at amortised cost
Material misstatements due to fraudulent
financial reporting often result from
understatement of expected credit losses.
Credit impairment is a highly subjective
area due to the level of judgement applied
by management in determining expected
credit losses (“ECL”). The identification of
impairment and the determination of the
recoverable amount are an inherently
uncertain process involving various
assumptions and factors, including the
We involved valuation specialists to assist
us in performing our audit procedures on
ECL and related credit impairments. Our
audit procedures included among others
the following procedures.
We assessed the design and tested the
operating effectiveness of internal
controls over the approval, recording and
monitoring of loans at amortized cost and
controls over ECL calculations including
the quality of underlying data and
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financial condition of the counterparty,
expected future cash flows, and expected
net selling prices of collaterals. The
portfolios which give rise to the greatest
uncertainty are typically those where
impairments are derived from estimates of
future cash flows and realizable value of
collateral, calculated using collective
impairment models, are unsecured or are
subject to potential collateral shortfalls.
These models require the significant
periodic judgment of management
regarding correct segmentation, the
identification of significant changes in
credit risk, the inclusion of forward-looking
elements as well as the application of
management overlay to reflect on
circumstances beyond the modelling
capabilities.
Due to the significance of loans at
amortised cost (representing 49% of Total
Assets as of 31 December 2021) and the
related estimation uncertainty, this is
considered a key audit matter.
applications.
We assessed the controls over the general
IT environment of the applications
relevant from audit perspective related to
the determination of ECL.
For ECL calculated on an individual basis,
we tested the assumptions used by the
management underlying the impairment
identification and quantification focusing
on loan cases with the most significant
potential impact on the consolidated
financial statements. We also assessed
the management’s assumptions on the
expected future cash flows, including the
value of realisable collateral and
estimates of recovery on default based on
our own understanding and available
market information.
For ECL calculated on collective basis we
evaluated the model governance,
methodologies, inputs and management
assumptions used (probability of default,
loss given default, significant changes in
credit risk and forward-looking elements).
We considered the regulatory measures
on the assumptions applied by the
Company for ECL estimation purposes.
We also assessed whether the disclosures
in the consolidated financial statements
appropriately reflect the Group’s
exposure to credit risk and are compliant
with the EU IFRSs.
The Group’s disclosures about its risk
management policies are included in Note
2.14 Loss allowance and Note 37.1 Credit
risk which specifically explains the key
assumptions used when determining
credit risk and their evaluation are
detailed in Note 11 Loans at amortised
cost and at fair value and Note 31 Loss
allowance / Impairment / Provisions.
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General Information Technology controls
over the financial reporting process
A significant part of the Group's financial
reporting process, including revenue
recognition is significantly reliant on IT
systems with embedded automated
processes and controls over the capture,
storage and extraction of information. A
fundamental component of these processes
and controls is ensuring appropriate user
access and change management protocols
exist and are being adhered to.
These protocols are important because they
ensure that access and changes to IT systems
and related data are made and authorized in
an appropriate manner.
As our audit of the financial statements
sought to place a high level of reliance on IT
systems and application controls related to
financial reporting, a high proportion of the
overall audit effort has been carried out
regarding to understand and test IT
infrastructure and applications including
relevant application controls. Furthermore,
the complexity of IT systems and nature of
application controls requires special
technology expertise and specialized skills
to be involved in the audit we therefore
consider this as a key audit matter.
We focused our audit on those IT systems
and controls that are significant for the
Group’s financial reporting. As audit
procedures over the IT systems and
application controls require specific
expertise, we involved IT audit specialists
to assist us in performing our audit
procedures. Our audit procedures
included among others the following
procedures.
We understood and assessed the overall
IT control environment and the controls in
place which included controls over access
to systems and data, as well as system
changes. We adjusted our audit approach
based on the financial significance of the
system and whether there were
automated procedures supported by that
system.
As part of our audit procedures, we tested
the operating effectiveness of controls
over appropriate access rights to assess
whether only appropriate users had the
ability to create, modify or delete user
accounts for the relevant in-scope
applications. We also tested the operating
effectiveness of controls around system
development and program changes to
establish that changes to the system were
appropriately authorized, developed and
implemented. Additionally, we assessed
and tested the design and operating
effectiveness of the application controls
embedded in the processes relevant to
our audit.
The Group’s disclosures about its IT
systems and related IT general and
application controls are included in
section System of internal controls and IT
Controls in the consolidated business
report.
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Other matters
The consolidated financial statements as at 31 December 2020 were audited by another
auditor who expressed an unmodified opinion on those financial statements on 17 March
2021.
Management is responsible for the presentation of the consolidated financial statements
in the format that complies with the Articles 3 and 4 of Commission (EU) Regulation
2019/815 of 17 December 2018 (“ESEF Regulation”). The scope of our audit was the
human-readable content of the electronically identified digital file, which contains the
consolidated financial statements. The scope of our audit did not include to review and
consequently we do not report on, whether the digitalized information complies in all
material respect with the requirements of ESEF Regulation.
Other information
Other information consists of the 2021 consolidated business report of the Group and the
“Management’s Analysis” section of the annual report which have been made available to
us before the date of our independent auditor’s report and of the “Message to the
Shareholders”, “Corporate Governance” and “Macroeconomic and financial environment
in 2021” sections of the annual report which are expected to be made available after the
date of our independent auditor’s report but do not include the consolidated financial
statements and our independent auditor’s report. Management is responsible for the other
information, including preparation of the consolidated business report in accordance with
the Hungarian Accounting Law and other relevant legal requirements, if any. Our opinion
on the consolidated financial statements does not cover the other information.
In connection with our audit of the consolidated financial statements, our responsibility is
to read the other information and, in doing so, consider whether 1) the other information
is materially inconsistent with the consolidated financial statements or our knowledge
obtained in the audit or otherwise appears to be materially misstated and 2) the
consolidated business report has been prepared in accordance with the Hungarian
Accounting Law and other relevant legal requirements, if any.
Our opinion on the consolidated business report should include the information required
according to Subsection (2) e) and f) of Section 95/B of the Hungarian Accounting Law and
we are required to confirm also whether the information prescribed in Subsection (2) a)-d)
and g)-h) of Section 95/B of the Hungarian Accounting Law have been made available and
whether the consolidated business report includes the non-financial statement as required
by Subsection (5) of Section 134 of the Hungarian Accounting Law.
In our opinion, the consolidated business report of the Group, including the information
required according to Subsection (2) e) and f) of Section 95/B of the Hungarian Accounting
Law for 2021 is consistent, in all material respects, with the 2021 consolidated financial
statements of the Group and the relevant requirements of the Hungarian Accounting Law.
Since no other legal regulations prescribe for the Group further requirements with regard
to its consolidated business report, we do not express opinion in this regard.
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We also confirm that the Group have made available the information required according to
Subsection (2) a)-d) and g)-h) of Section 95/B of the Hungarian Accounting Law and that
the consolidated business report includes the non-financial statement as required by
Subsection (5) of Section 134 of the Hungarian Accounting Law.
Further to the above, based on the knowledge we have obtained about the Group and its
environment in the course of the audit we are required to report whether we have identified
any material misstatement in the other information, and if so, the nature of the
misstatement in question. We have nothing to report in this regard.
When we read the sections of the annual report, which had not yet been made available to
us at the date of this report, if we conclude that there is a material misstatement therein,
we are required to communicate the matter to those charged with governance.
Responsibilities of management and those charged with governance for the consolidated
financial statements
Management is responsible for the preparation and fair presentation of the consolidated
financial statements in accordance with the EU IFRSs and for the preparation in accordance
with the supplementary requirements of the Hungarian Accounting Law relevant for
consolidated financial statements prepared in accordance with EU IFRSs, and for such
internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due
to fraud or error.
In preparing the consolidated financial statements, management is responsible for
assessing the Group’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial
reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated
financial statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with Hungarian National Auditing Standards and with applicable laws and regulations in
Hungary, including also Regulation (EU) No. 537/2014 will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these consolidated
financial statements.
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As part of an audit in accordance with Hungarian National Auditing Standards and with
applicable laws and regulations in Hungary, including also Regulation (EU) No. 537/2014,
we exercise professional judgment and maintain professional scepticism throughout the
audit. We also:
► Identify and assess the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or
the override of internal control.
► Obtain an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Group’s internal control.
► Evaluate the appropriateness of accounting policies used and the reasonableness
of accounting estimates and related disclosures made by management.
► Conclude on the appropriateness of management’s use of the going concern basis
of accounting and, based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast significant doubt on
the Group’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the
related disclosures in the consolidated financial statements or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or
conditions may cause the Group to cease to continue as a going concern.
► Evaluate the overall presentation, structure and content of the consolidated
financial statements, including the disclosures, and whether the consolidated
financial statements represent the underlying transactions and events in a manner
that achieves fair presentation.
► Obtain sufficient appropriate audit evidence regarding the financial information of
the entities or business activities within the Group to express an opinion on the
consolidated financial statements. We are responsible for the direction, supervision
and performance of the group audit. We remain solely responsible for our audit
opinion.
We communicate with those charged with governance regarding, among other matters,
the planned scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied
with relevant ethical requirements regarding independence, and to communicate with
them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, actions taken to eliminate threats or safeguards
applied.
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From the matters communicated with those charged with governance we determine those
matters that were of most significance in the audit of the consolidated financial statements
of the current period and are therefore the key audit matters.
Report on other legal and regulatory requirements
Reporting requirements on content of auditor’s report in compliance with Regulation (EU)
No. 537/2014:
Appointment and Approval of Auditor
We were appointed as the statutory auditor of OTP Bank Nyrt. by the General Assembly of
Shareholders of the Company on 16 April 2021. Total uninterrupted engagement period,
including previous renewals (extension of the period for which we were originally
appointed) and reappointments for the statutory auditor, has lasted for one year.
Consistency with Additional Report to Audit Committee
Our audit opinion on the consolidated financial statements expressed herein is consistent
with the additional report to the audit committee of the Company, which we issued in
accordance with Article 11 of the Regulation (EU) No. 537/2014 on the same date as the
date of this report.
Non-audit Services
We declare that no prohibited non-audit services referred to in Article 5(1) of Regulation
(EU) No. 537/2014 were provided by us to the Company and its controlled undertakings
and we remained independent from the Group in conducting the audit.
In addition to statutory audit services and services disclosed in the consolidated business
report and in the consolidated financial statements, no other services were provided by us
to the Company and its controlled undertakings.
The engagement partner on the audit resulting in this independent auditor’s report is
Kónya Zsolt.
Budapest, 17 March 2022
The original Hungarian version has been signed.
Kónya Zsolt Nagyváradiné Szépfalvi Zsuzsanna
Engagement partner Registered auditor
Ernst & Young Kft. Chamber membership No.: 005313
1132 Budapest, Váci út 20.
Registration No. 001165
ANNUAL REPORT 2021
SEPARATE FINANCIAL STATEMENTS IN ACCORDANCE WITH IFRS (2021)
OTP BANK PLC.
SEPARATE FINANCIAL STATEMENTS
IN ACCORDANCE WITH
INTERNATIONAL FINANCIAL REPORTING STANDARDS
AS ADOPTED BY THE EUROPEAN UNION
FOR THE YEAR ENDED
31 DECEMBER 2021
2
OTP BANK PLC.
CONTENTS
SEPARATE STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2021 .................................... 5
SEPARATE STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 2021 ............. 6
SEPARATE STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER
2021 (in HUF mn) ............................................................................................................................. 7
SEPARATE STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED 31
DECEMBER 2021 (in HUF mn) ...................................................................................................... 8
SEPARATE STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2021 .................... 9
NOTE 1: ORGANIZATION AND BASIS OF FINANCIAL STATEMENTS ................................................ 11
1.1. General information ........................................................................................................................... 11
1.2. Basis of accounting ............................................................................................................................ 11
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ......................................................... 13
2.1. Basis of presentation .......................................................................................................................... 13
2.2. Foreign currency translation .............................................................................................................. 13
2.3. Consolidated financial statements ..................................................................................................... 13
2.4. Investments in subsidiaries, associated companies and other investments ........................................ 13
2.5. Securities at amortised cost................................................................................................................ 14
2.6. Financial assets at fair value through profit or loss ........................................................................... 14
2.7. Derivative financial instruments designated as a fair value or cash flow hedge ................................ 16
2.8. Offsetting ........................................................................................................................................... 16
2.9. Embedded derivatives ........................................................................................................................ 16
2.10. Securities at fair value through other comprehensive income (“FVOCI securities”) ........................ 17
2.11. Loans, placements with other banks, repo receivables and loss allowance for loan, placements and
repo receivables losses ....................................................................................................................... 17
2.12. Loss allowance .................................................................................................................................. 20
2.13. Option to designate a financial asset/liability measured at fair value through profit or loss (FVTPL
option) ................................................................................................................................................ 22
2.14. Sale and repurchase agreements, security lending ............................................................................. 22
2.15. Property, equipment and intangible assets ......................................................................................... 22
2.16. Inventories ......................................................................................................................................... 22
2.17. Investment properties ......................................................................................................................... 23
2.18. Financial liabilities............................................................................................................................. 23
2.19. Leases ................................................................................................................................................ 23
2.20. Share capital ...................................................................................................................................... 24
2.21. Treasury shares .................................................................................................................................. 24
2.22. Interest income, income similar to interest income and interest expense .......................................... 24
2.23. Fees and Commissions ...................................................................................................................... 24
2.24. Dividend income ................................................................................................................................ 25
2.25. Income tax ......................................................................................................................................... 25
2.26. Banking tax ........................................................................................................................................ 25
3
2.27. Off-balance sheet commitments and contingent liabilities, provisions .............................................. 26
2.28. Share-based payment and employee benefits .................................................................................... 26
2.29. Separate statement of cash flows ....................................................................................................... 27
2.30. Segment reporting .............................................................................................................................. 27
2.31. Comparative figures........................................................................................................................... 28
NOTE 3: SIGNIFICANT ACCOUNTING ESTIMATES AND DECISIONS IN THE APPLICATION OF
ACCOUNTING POLICIES .............................................................................................................. 29
3.1. Loss allowance on financial instruments ........................................................................................... 29
3.2. Valuation of instruments without direct quotations ........................................................................... 29
3.3. Provisions .......................................................................................................................................... 29
3.4. Business models ................................................................................................................................ 30
3.4. Contractual cash-flow characteristics of financial assets ................................................................... 30
NOTE 4: COVID-19 (in HUF mn) ................................................................................................................... 31
NOTE 5: CASH, AMOUNTS DUE FROM BANKS AND BALANCES WITH THE NATIONAL BANK OF
HUNGARY (in HUF mn) ................................................................................................................. 37
NOTE 6: PLACEMENTS WITH OTHER BANKS, NET OF ALLOWANCE FOR PLACEMENT LOSSES
(in HUF mn) ...................................................................................................................................... 38
NOTE 7: REPO RECEIVABLES (in HUF mn) ............................................................................................... 39
NOTE 8: FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (in HUF mn) .............. 40
NOTE 9: SECURITIES AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (in HUF
mn) ..................................................................................................................................................... 41
NOTE 10: SECURITIES AT AMORTISED COST (in HUF mn) ..................................................................... 43
NOTE 11: LOANS (in HUF mn) ........................................................................................................................ 44
NOTE 12: INVESTMENTS IN SUBSIDIARIES, ASSOCIATES, JOINT VENTURES AND OTHER
INVESTMENTS (in HUF mn) .......................................................................................................... 46
NOTE 13: PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS (in HUF mn) ...................................... 51
NOTE 14: INVESTMENT PROPERTIES (in HUF mn) .................................................................................... 53
NOTE 15: FAIR VALUE OF DERIVATIVE FINANCIAL ASSETS DESIGNATED AS HEDGE
ACCOUNTING (in HUF mn) ........................................................................................................... 53
NOTE 16: OTHER ASSETS (in HUF mn) ......................................................................................................... 54
NOTE 17: AMOUNTS DUE TO BANKS AND DEPOSITS FROM THE NATIONAL BANK OF HUNGARY
AND OTHER BANKS (in HUF mn) ................................................................................................ 55
NOTE 18: REPO LIABILITIES (in HUF mn) ................................................................................................... 55
NOTE 19: DEPOSITS FROM CUSTOMERS (in HUF mn) .............................................................................. 56
NOTE 20: LIABILITIES FROM ISSUED SECURITIES (in HUF mn) ............................................................ 56
NOTE 21: FINANCIAL LIABILITIES DESIGNATED AS FAIR VALUE THROUGH PROFIT OR LOSS (in
HUF mn) ............................................................................................................................................ 60
NOTE 22: HELD FOR TRADING DERIVATIVE FINANCIAL LIABILITIES (in HUF mn) ........................ 60
NOTE 23: FAIR VALUE OF DERIVATIVE FINANCIAL LIABLITIES DESIGNATED AS HEDGE
ACCOUNTING (in HUF mn) ........................................................................................................... 60
NOTE 24: OTHER LIABILITIES AND PROVISIONS (in HUF mn) .............................................................. 61
NOTE 25: SUBORDINATED BONDS AND LOANS (in HUF mn) ................................................................ 62
NOTE 26: SHARE CAPITAL (in HUF mn) ....................................................................................................... 62
NOTE 27: RETAINED EARNINGS AND RESERVES (in HUF mn) .............................................................. 63
NOTE 28: TREASURY SHARES (in HUF mn) ................................................................................................ 68
NOTE 29: INTEREST INCOME AND EXPENSES (in HUF mn) .................................................................... 69
NOTE 30: RISK COST (in HUF mn) ................................................................................................................. 70
4
NOTE 31: NET PROFIT FROM FEES AND COMMISSIONS (in HUF mn) .................................................. 70
NOTE 32: GAINS AND LOSSES (in HUF mn) ................................................................................................ 73
NOTE 33: OTHER OPERATING INCOME AND EXPENSES AND OTHER ADMINISTRATIVE
EXPENSES (in HUF mn) .................................................................................................................. 74
NOTE 34: INCOME TAX (in HUF mn)............................................................................................................. 75
NOTE 35: LEASE (in HUF mn) ......................................................................................................................... 77
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) ........................................................................ 78
36.1. Credit risk .......................................................................................................................................... 78
36.2. Maturity analysis of assets and liabilities and liquidity risk .............................................................. 92
36.3. Net foreign currency position and foreign currency risk ................................................................... 95
36.4. Interest rate risk management ........................................................................................................... 95
36.5. Market risk ....................................................................................................................................... 102
36.5.1. Market risk sensitivity analysis ........................................................................................................ 102
36.5.2. Foreign currency sensitivity analysis ............................................................................................... 103
36.5.3. Interest rate sensitivity analysis ....................................................................................................... 104
36.5.4. Equity price sensitivity analysis ...................................................................................................... 105
36.6. Capital management ........................................................................................................................ 105
NOTE 37: TRANSFER AND RECLASSIFICATION OF FINANCIAL INSTRUMENTS (in HUF mn) ...... 107
NOTE 38: OFF-BALANCE SHEET ITEMS (in HUF mn) .............................................................................. 108
NOTE 39: SHARE-BASED PAYMENT AND EMPLOYEE BENEFIT (in HUF mn) ................................... 109
NOTE 40: RELATED PARTY TRANSACTIONS (in HUF mn) .................................................................... 114
NOTE 41: TRUST ACTIVITIES (in HUF mn) ................................................................................................ 115
NOTE 42: CONCENTRATION OF ASSETS AND LIABILITIES ................................................................. 116
NOTE 43: EARNINGS PER SHARE ............................................................................................................... 117
NOTE 44: NET GAIN OR LOSS REALISED ON FINANCIAL INSTRUMENTS (in HUF mn) ................. 118
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) ................................................... 120
NOTE 46: SIGNIFICANT EVENTS DURING THE YEAR ENDED 31 DECEMBER 2021 ........................ 134
NOTE 47: SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD ................................................... 136
5
OTP BANK PLC.
SEPARATE STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2021
(in HUF mn)
Note
2021
2020
Reclassified
Cash, amounts due from banks and balances with the National Bank of
Hungary
5.
474,945
579,120
Placements with other banks, net of allowance for placement losses
6.
2,567,212
1,535,884
Repo receivables
7.
33,638
183,364
Financial assets at fair value through profit or loss
8.
246,462
160,483
Financial assets at fair value through other comprehensive income
9.
641,939
911,950
Securities at amortised cost
10.
3,071,038
2,007,692
Loans at amortised cost
11.
4,032,465
3,417,760
Loans mandatorily measured at fair value through profit or loss
11.
662,012
480,937
Investments in subsidiaries
12.
1,573,008
1,548,972
Property and equipment
13.
81,817
77,974
Intangible assets
13.
62,161
57,639
Right of use assets
35.
17,231
13,479
Investment properties
14.
4,328
1,936
Current tax assets
34.
-
593
Derivative financial assets designated as hedge accounting relationships
15.
17,727
6,817
Other assets
16.
224,488
169,794
TOTAL ASSETS
13,710,471
11,154,394
Amounts due to banks and deposits from the National Bank of Hungary and
other banks
17.
1,051,203
766,977
Repo liabilities
18.
86,580
109,612
Deposits from customers
19.
9,948,532
7,895,735
Leasing liabilities
35.
17,932
14,106
Liabilities from issued securities
20.
22,153
28,435
Financial liabilities at fair value through profit or loss
21.
20,133
25,902
Derivative financial liabilities designated as held for trading
22.
192,261
99,987
Derivative financial liabilities designated as hedge accounting relationships
23.
18,690
3,104
Deferred tax liabilities
34.
1,507
3,062
Current tax liabilities
34.
4,776
1,464
Provisions
24.
21,527
19,906
Other liabilities
24.
238,437
203,527
Subordinated bonds and loans
25.
271,776
304,243
TOTAL LIABILITIES
11,895,507
9,476,060
Share capital
26.
28,000
28,000
Retained earnings and reserves
27.
1,845,836
1,697,133
Treasury shares
28.
(58,872)
(46,799)
TOTAL SHAREHOLDERS' EQUITY
1,814,964
1,678,334
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
13,710,471
11,154,394
Budapest, 17 March 2022
Dr. Sándor Csányi
Chairman and Chief Executive Officer
6
OTP BANK PLC.
SEPARATE STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED
31 DECEMBER 2021
(in HUF mn)
Note
Year ended
31 December
2021
Year ended 31
December
2020
Reclassified
Interest Income:
Interest income calculated using the effective interest method
29.
302,373
239,633
Income similar to interest income
29.
105,663
81,663
Interest income and similar to interest income total
408,036
321,296
Interest Expense:
Interest expenses total
29.
(155,491)
(99,630)
NET INTEREST INCOME
252,545
221,666
Loss allowance on loan, placements and repo receivables losses
6., 7., 11.,
30.
(38,841)
(57,671)
Loss allowance on securities at fair value through other comprehensive income
and on securities at amortised cost
9., 10., 30.
(1,484)
(1,848)
Provision for loan commitments and financial guarantees given
24., 30.
(130)
(3,202)
Change in the fair value attributable to changes in the credit risk of loans
mandatorily measured at fair value through profit of loss
45.4.
(16,255)
(405)
Risk cost total
(56,710)
(63,126)
NET INTEREST INCOME AFTER RISK COST
195,835
158,540
LOSSES ARISING FROM DERECOGNITION OF FINANCIAL
ASSETS MEASURED AT AMORTISED COST
32.
(2,700)
(3,279)
MODIFICATION LOSS
4.
(7,017)
(17,358)
Income from fees and commissions
31.
300,803
259,781
Expenses from fees and commissions
31.
(52,276)
(40,750)
NET PROFIT FROM FEES AND COMMISSIONS
248,527
219,031
Foreign exchange losses
32.
(5,638)
(4,518)
Gains on securities, net
32.
2,104
17,595
Losses on financial instruments at fair value through profit or loss
32.
(6,494)
(671)
Gains on derivative instruments, net
32.
3,436
7,057
Dividend income
32.
99,037
60,973
Other operating income
33.
11,265
7,900
Other operating expenses
33.
(41,636)
(28,064)
NET OPERATING INCOME
62,074
60,272
Personnel expenses
33.
(136,126)
(118,498)
Depreciation and amortization
33.
(40,692)
(38,948)
Other administrative expenses
33.
(178,611)
(154,165)
OTHER ADMINISTRATIVE EXPENSES
(355,429)
(311,611)
PROFIT BEFORE INCOME TAX
141,290
105,595
Income tax
34.
(15,951)
(13,121)
NET PROFIT FOR THE YEAR
125,339
92,474
Earnings per share (in HUF)
Basic
43.
455
333
Diluted
43.
455
333
7
OTP BANK PLC.
SEPARATE STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED
31 DECEMBER 2021
(in HUF mn)
Note
Year ended 31
December
2021
Year ended 31
December
2020
NET PROFIT FOR THE YEAR
125,339
92,474
Items that may be reclassified subsequently to profit or loss:
Fair value adjustment of debt instruments at fair value through other
comprehensive income
(37,163)
(14,459)
Deferred tax related to fair value adjustment of debt instruments at fair
value through other comprehensive income
34.
3,410
1,262
Gains / (Losses) on separated currency spread of financial instruments
designated as hedging instrument
1,681
(1,526)
Deferred tax related to (losses) / gains on separated currency spread of
financial instruments designated as hedging instrument
34.
(151)
137
(Losses) / Gains on derivative financial instruments designated as cash flow
hedge
(6,307)
(296)
Deferred tax related to gains on derivative financial instruments designated
as cash flow hedge
34.
-
27
Items that will not be reclassified to profit or loss:
Fair value adjustment of equity instruments at fair value through other
comprehensive income
1,407
(3,275)
Deferred tax related to equity instruments at fair value through other
comprehensive income
34.
(281)
310
Total
(37,404)
(17,820)
TOTAL COMPREHENSIVE INCOME
87,935
74,654
8
OTP BANK PLC.
SEPARATE STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED
31 DECEMBER 2021
(in HUF mn)
Note
Share Capital
Capital
reserve
Retained
earnings and
other reserves
Treasury
Shares
Total
Balance as at 1 January 2020
28,000
52
1,628,302
(2,636)
1,653,718
Net profit for the period
-
-
92,474
-
92,474
Other comprehensive income
-
-
(17,820)
-
(17,820)
Total comprehensive income
-
-
74,654
-
74,654
Share-based payment
39.
-
-
3,394
-
3,394
Payments to ICES holders
-
-
(4,853)
-
(4,853)
Sale of treasury shares
28.
-
-
-
41,759
41,759
Acquisition of treasury shares
28.
-
-
-
(85,922)
(85,922)
Loss on treasury shares
28.
-
-
(4,416)
-
(4,416)
Other transaction with owners
-
-
(5,875)
(44,163)
(50,038)
Balance as at 31 December 2020
28,000
52
1,697,081
(46,799)
1,678,334
Balance as at 1 January 2021
28,000
52
1,697,081
(46,799)
1,678,334
Other modification
-
-
1,034
-
1,034
Balance as at 1 January 2021
28,000
52
1,698,115
(46,799)
1,679,368
Net profit for the period
-
-
125,339
-
125,339
Other comprehensive income
-
-
(37,404)
-
(37,404)
Total comprehensive income
-
-
87,935
-
87,935
Share-based payment
39.
-
-
3,589
-
3,589
Payments to ICES holders
-
-
(3,734)
-
(3,734)
Increase due to termination of ICES bonds
-
-
75,422
-
75,422
Sale of treasury shares
28.
-
-
-
264,360
264,360
Acquisition of treasury shares
28.
-
-
-
(276,433)
(276,433)
Loss on sale of treasury shares
28.
-
-
(15,543)
-
(15,543)
Other transaction with owners
-
-
59,734
(12,073)
47,661
Balance as at 31 December 2021
28,000
52
1,845,784
(58,872)
1,814,964
9
OTP BANK PLC.
SEPARATE STATEMENT OF CASH FLOWS FOR THE YEAR ENDED
31 DECEMBER 2021
(in HUF mn)
Note
Year ended 31
December
2021
Year ended 31
December
2020
OPERATING ACTIVITIES
Profit before income tax
141,290
93,246
Net accrued interest
(2,205)
(34,365)
Depreciation and amortization
13.
40,784
38,997
Loss allowance on loans and placements
30.
38,841
61,310
(Release of loss allowance) / Loss allowance on securities at fair value
through other comprehensive income
9.
(551)
3
Impairment loss on investments in subsidiaries
12.
27,420
10,042
Loss allowance on securities at amortised cost
10.
2,035
1,845
(Release of loss allowance) / Loss allowance on other assets
16.
(961)
3,521
Provision on off-balance sheet commitments and contingent liabilities
24.
1,473
3,110
Share-based payment
39.
3,589
3,394
Unrealised losses / (gains) on fair value adjustment of financial instruments
at fair value through profit or loss
23,051
3,549
Unrealised losses on fair value adjustment of derivative financial
instruments
30,962
4,011
Gains on securities
6,212
(6,433)
Interest expense from leasing liabilities
(214)
(257)
Foreign exchange loss
35,136
(4,476)
Gains on sale of tangible and intangible assets
82
72
Net changing in assets and liabilities in operating activities
Net (increase) / decrease in placements with other banks and repo
receivables before allowance for placement losses
6.
(879,438)
(78,996)
Changes in held for trading securities
8.
(24,178)
34,976
Change in securities mandatorily measured at fair value through profit or
loss
8.
6,687
(7,278)
Changes in derivative financial instruments at fair value through profit or
loss
8.
(1,303)
2,895
Net increase in loans
11.
(835,520)
(499,065)
Increase in other assets, excluding advances for investments and before
provisions for losses
16.
(49,201)
(43,471)
Net increase / (decrease) in amounts due to banks and deposits from the
National Bank of Hungary and other banks and repo liabilities
17.
224,661
(363,140)
Net decrease of financial liabilities designated as fair value through profit
or loss
21.
(1,853)
(4,219)
Net increase in deposits from customers
19.
1,989,941
1,218,775
Increase/(decrease) in other liabilities
24.
114,259
(17,368)
Net increase in the compulsory reserve established by the National Bank of
Hungary
5.
(23,270)
(10,978)
Dividend income
12.
(99,037)
(60,913)
Income tax paid
(15,259)
(12,950)
Net cash provided by operating activities
753,433
335,837
10
OTP BANK PLC.
SEPARATE STATEMENT OF CASH FLOWS FOR THE YEAR ENDED
31 DECEMBER 2021
(in HUF mn) [continued]
Note
Year ended 31
December
2021
Year ended 31
December
2020
INVESTING ACTIVITIES
Purchase securities at fair value through other comprehensive income
9.
(850,030)
(1,079,151)
Proceeds from sale of securities at fair value through other comprehensive
income
9.
1,081,372
1,652,131
Change in derivative financial instruments designated as hedge accounting
1,341
(190)
Increase in investments in subsidiaries
12.
(51,456)
(32,961)
Decrease in investments in subsidiaries
12.
-
16,485
Dividend income
98,091
60,913
Increase in securities at amortised cost
10.
(1,253,830)
(680,089)
Redemption of securities at amortised cost
10.
214,963
122,146
Additions to property, equipment and intangible assets
13.
(46,081)
(68,885)
Disposal of property, equipment and intangible assets
13.
529
29,433
Net (increase) / decrease in investment properties
14.
(2,484)
396
Net (used in) / provided by cash investing activities
(807,585)
20,228
FINANCING ACTIVITIES
Leasing payments
(5,136)
(4,590)
Cash received from issuance of securities
20.
5,897
7,119
Cash used for redemption of issued securities
20.
(9,051)
(22,096)
Increase in subordinated bonds and loans
25.
1,874
773
Decrease in subordinated bonds and loans
25.
(35,518)
(5,373)
Payments to ICES holders
27.
(3,735)
(4,853)
Increase of Treasury shares
28.
(276,433)
(85,923)
Decrease of Treasury shares
28.
248,819
37,344
Dividends paid
27.
(10)
(10)
Net cash used in financing activities
(73,293)
(77,609)
Net (decrease) / increase in cash and cash equivalents
(127,445)
278,456
Cash and cash equivalents at the beginning of the year
503,087
224,631
Cash and cash equivalents at the end of the year
375,642
503,087
Interest received
345,504
306,646
Interest paid
98,395
88,237
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
11
NOTE 1: ORGANIZATION AND BASIS OF FINANCIAL STATEMENTS
1.1. General information
OTP Bank Plc. ("Bank" or "OTP Bank") was established on 31 December 1990, when the previously State-
owned company was transformed into a limited liability company.
The Bank’s registered office address is 16, Nádor Street, Budapest 1051. Internet homepage:
http://www.otpbank.hu/
Signatory of the separate financial statements is the Chief Executive Officer, dr. Sándor Csányi (Budapest).
The Bank’s owners have the power to amend the separate financial statements after issue if applicable.
These financial statements are authorised for issue on 17 March 2022 by the Board of Directors.
Responsible person for the control and management of accounting services: Zoltán Tuboly (Budapest),
Managing Director of Accounting and Financial Directorate, Registration Number: 177289, IFRS qualified
chartered accountant.
Due to Hungarian legislation audit services are statutory for OTP Bank. Disclosure information about the
auditor: Ernst & Young Audit Ltd. (001165), 1132 Budapest Váci Street 20. Registered under 01-09-267553 by
Budapest-Capital Regional Court, as registry court. Statutory registered auditor: Zsuzsanna Nagyváradiné
Szépfalvi, registration number: 005313.
Audit service fee agreed by the Annual General Meeting of the Bank for the year ended 2021 is an amount of
HUF 162 million + VAT.
All other fees charged by the Auditor for non-audit services during the financial year are disclosed in the
consolidated financial statements of the Bank.
In 1995, the shares of the Bank were introduced on the Budapest and the Luxembourg Stock Exchanges and
were also traded on the SEAQ board on the London Stock Exchange and PORTAL in the USA.
The structure of the Share capital by shareholders (%):
2021
2020
Domestic and foreign private and institutional investors
98%
97%
Employees
1%
1%
Treasury shares
1%
2%
Total
100%
100%
The Bank’s Registered Capital consists of 280.000.010 pieces of ordinary shares with the nominal value of HUF
100 each, representing the same rights to the shareholders.
The Bank provides a full range of commercial banking services through a nationwide network of 356 branches in
Hungary.
2021
2020
Number of employees
10,078
9,829
Average number of employees
9,934
9,654
1.2. Basis of accounting
These Separate Financial Statements were prepared based on the assumption of the Management that the Bank
will remain in business for the foreseeable future. The Bank will not be forced to halt operations and liquidate its
assets in the near term at what may be very low fire-sale prices.
The Bank maintains its accounting records and prepares their statutory accounts in accordance with the
commercial, banking and fiscal regulations prevailing in Hungary.
The presentation and functional currency of the Bank is the Hungarian Forint ("HUF").
The separate financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as adopted by the European Union (“EU”).
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
12
NOTE 1: ORGANIZATION AND BASIS OF FINANCIAL STATEMENTS [continued]
1.2.1. The effect of adopting new and revised IFRS standards effective from 1 January 2021
The following amendments to the existing standards and new interpretation issued by the International
Accounting Standards Board (IASB) and adopted by the EU are effective for the current reporting period:
• Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 “Interest Rate Benchmark Reform –
Phase 2 adopted by EU on 13 January 2021 (effective for annual periods beginning on or after 1 January
2021)
• Amendments to IFRS 4 “Insurance Contracts” – “Deferral of IFRS 9” - adopted by EU on 15
December 2020 (effective for annual periods beginning on or after 1 January 2021)
• IFRS 17 “Insurance Contracts” (effective for annual periods beginning on or after 1 January 2021),
• Amendments to IFRS 16 “Leases” – “Covid 19-Related Rent Concessions beyond 30 June 2021”
(effective for annual periods beginning on or after 1 April 2021),
The adoption of these amendments to the existing standards has not led to any material changes in these Separate
Financial Statements.
1.2.2. New and revised Standards and Interpretations issued by IASB and adopted by the EU but not
yet effective
• Amendments to IFRS 1 “First-time Adoption of International Financial Reporting Standards”, IFRS
9 “Financial Instruments”, IAS 41 “Agriculture”– “Annual Improvements to IFRSs 2018-2020 Cycle” -
adopted by EU on 28 June 2021 (effective for annual periods beginning on or after 1 January 2022),
• Amendments to IFRS 3 “Business Combinations”; IAS 16 “Property, Plant and Equipment”; IAS 37
“Provisions, Contingent Liabilities and Contingent Assets” – adopted by the EU on 28 June 2021
Annual Improvements (effective fog annual periods beginning on or after 1 January 2022)
• Amendments to IFRS 17 “Insurance Contracts” (effective for annual periods beginning on or after 1
January 2023),
1.2.3. Standards and Interpretations issued by IASB but not yet adopted by the EU
At present, IFRS as adopted by the EU do not significantly differ from regulations adopted by the IASB except
for the following new standards, amendments to the existing standards and new interpretation, which were not
endorsed for use in EU as at date of publication of these financial statements:
• Amendments to IAS 1 “Presentation of Financial Statements” - Classification of Liabilities as Current
or Non-Current (effective for annual periods beginning on or after 1 January 2023),
• Amendments to IAS 1 “Presentation of Financial Statements” and IFRS Practice Statement 2-
Disclosure of Accounting policies (effective for annual periods beginning on or after 1 January 2023),
• Amendments to IAS 8 “Accounting policies, Changes in Accounting Estimates and Errors” –
Definition of Accounting Estimates (effective for annual periods beginning on or after 1 January 2023),
• Amendments to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in
Associates and Joint Ventures” - Sale or Contribution of Assets between an Investor and its Associate or
Joint Venture and further amendments (effective date deferred indefinitely until the research project on the
equity method has been concluded).
• Amendments to IAS 12 “Income Taxes” – Deferred Tax related to Assets and Liabilities
arising from a
Single
Transaction (effective for annual periods beginning on or after 1 January 2023),
• Amendments to IFRS 17 “Insurance Contracts” – Initial application of IFRS 17 and IFRS 9 –
Comparative Information (effective date for annual periods beginning on or after 1 January 2023)
The Bank anticipates that the adoption of these new standards, amendments to the existing standards and new
interpretations will have no material impact on the financial statements of the Bank in the period of initial
application.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
13
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies applied in the preparation of the accompanying separate financial statements are
summarized below:
2.1. Basis of presentation
These separate financial statements have been prepared under the historical cost convention with the exception
of certain financial instruments, which are recorded at fair value. Revenues and expenses are recorded in the
period in which they are earned or incurred. The Bank does not offset assets and liabilities or income and
expenses unless it is required or permitted by an IFRS standard.
During the preparation of separate financial statements assets and liabilities, income and expenses are presented
separately, except in certain cases, when one of the IFRS standards prescribes net presenting related to certain
items. (See below 2.8.)
The presentation of separate financial statements in conformity with IFRS requires the Management of the Bank
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as at the date of the financial statements and their reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates.
Future changes in economic conditions, business strategies, regulatory requirements, accounting rules and other
factors could result in a change in estimates that could have a material impact on future separate financial
statements.
2.2. Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are translated into HUF that is the presentation
currency, at exchange rates quoted by the National Bank of Hungary ("NBH") as at the date of the separate
financial statements. Income and expenses arising in foreign currencies are converted at the rate of exchange on
the transaction date. Resulting foreign exchange gains or losses are recorded to the separate statement of profit or
loss.
2.3. Consolidated financial statements
These financial statements present the separate financial position and results of operations of the Bank.
Consolidated financial statements are prepared by the Bank and consolidated net profit for the year and
shareholders’ equity differs significantly from that presented in these separate financial statements. See Note 2.4
for the description of the method of accounting for investments in subsidiaries and associated companies in these
separate financial statements. The consolidated financial statements and the separate financial statements will be
published on the same date.
2.4. Investments in subsidiaries, associated companies and other investments
Investments in subsidiaries comprise those investments where OTP Bank, through direct and indirect ownership
interest, controls the investee. Control is achieved when the Bank has power over the investee, is exposed or has
rights, to variable returns from its involvement with the investee and has the ability to use its power to affect its
returns.
Investments in subsidiaries are recorded at the cost of acquisition, less impairment for permanent diminution in
value, when appropriate. After initial measurement investments in subsidiaries are measured at cost, in the case
of foreign currency denominated investments for the measurement the Bank uses the exchange rate at the date of
transaction.
Impairment is determined based on the future economic benefits of the subsidiary and macroeconomic factors.
OTP Bank calculates the fair value based on discounted cash flow model. The 3 year period explicit cash flow
model serves as a basis for the impairment test by which the Bank defines the impairment need on investment in
subsidiaries based on the strategic factors and financial data of its cash-generating units.
OTP Bank in its strategic plan has taken into consideration the cautious recovery of global economic situation
and outlook, the associated risks and their possible effect on the financial sector as well as the current and
expected availability of wholesale funding.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
14
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.5. Securities at amortised cost
The Bank measures at amortized cost those securities which are held for contractual cash collecting purposes,
and contractual terms of these securities give rise to cash flows that are solely payment of principal and interest
on the principal amount outstanding. The Bank initially recognises these securities at fair value. Securities at
amortised cost are subsequently measured using the effective interest (EIR) method and are subject to
impairment. The amortisation of any discount or premium on the acquisition of a security at amortized cost is
part of the amortized cost and is recognised as interest income so that the revenue recognized in each period
represents a constant yield on the investment. Securities at amortized cost are accounted for on a trade date basis.
Such securities comprise mainly securities issued by the Hungarian Government bonds and corporate bonds.
2.6. Financial assets at fair value through profit or loss
2.6.1. Securities held for trading
Investments in securities are accounted for on a trade date basis and are initially measured at fair value.
Securities held for trading are measured at subsequent reporting dates at fair value. Unrealised gains and losses
on held for trading securities are recognized in profit or loss and are included in the separate statement of profit
or loss for the period. The Bank holds held for trading securities within the business model to obtain short-term
gains, consequently realised and unrealised gains and losses are recognized in the net operating income, while
interest income is recognised in income similar to interest income. The Bank applies FIFO
1
inventory valuation
method for securities held for trading. Such securities consist of discounted and interest bearing Treasury bills,
Hungarian Government bonds, mortgage bonds, shares in non-financial commercial companies, shares in
investment funds, shares in venture capital funds and shares in financial institutions.
2.6.2. Derivative financial instruments
In the normal course of business, the Bank is a party to contracts for derivative financial instruments, which
represent a low initial investment compared to the notional value of the contract and their value depends on
value of underlying asset and are settled in the future. The derivative financial instruments used include interest
rate forward or swap agreements and currency forward or swap agreements and options. These financial
instruments are used by the Bank both for trading purposes and to hedge interest rate risk and currency
exposures associated with its transactions in the financial markets.
Derivative financial instruments are accounted for on a trade date basis and are initially measured at fair value
and at subsequent reporting dates also at fair value. Fair values are obtained from quoted market prices,
discounted cash flow models and option pricing models as appropriate. OTP Bank adopts multi curve valuation
approach for calculating the net present value of future cash flows – based on different curves used for
determining forward rates and used for discounting purposes. It shows the best estimation of such derivative
deals that are collateralised as OTP Bank has almost its entire open derivative transactions collateralised.
Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are
recognized in profit or loss and are included in the separate statement of profit or loss for the period. Each
derivative deal is determined as asset when fair value is positive and as liability when fair value is negative.
Certain derivative transactions, while providing effective economic hedges under risk management positions of
the Bank, do not qualify for hedge accounting under the specific rules of IFRS 9 and are therefore treated as
derivatives held for trading with fair value gains and losses charged directly to the separate statement of profit or
loss.
Foreign currency contracts
Foreign currency contracts are agreements to exchange specific amounts of currencies at a specified rate of
exchange, at a spot date (settlement occurs two days after the trade date) or at a forward date (settlement occurs
more than two days after the trade date). The notional amount of forward contracts does not represent the actual
market or credit risk associated with these contracts.
Foreign currency contracts are used by the Bank for risk management and trading purposes. The Bank’s risk
management foreign currency contracts were used to hedge the exchange rate fluctuations of loans and deposits
denominated in foreign currency.
1
First In First Out
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
15
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.6.2 Derivative financial instruments [continued]
Foreign exchange swaps and interest rate swaps
The Bank enters into foreign-exchange swap and interest rate swap (“IRS”) transactions. The swap transaction is
a complex agreement concerning the swap of certain financial instruments, which usually consists of a spot and
one or more forward contracts.
Interest rate swaps obligate two parties to exchange one or more payments calculated with reference to fixed or
periodically reset rates of interest applied to a specific notional principal amount (the base of the interest
calculation). Notional principal is the amount upon which interest rates are applied to determine the payment
streams under interest rate swaps.
Such notional principal amounts are often used to express the volume of these transactions but are not actually
exchanged between the counterparties. The Bank’s interest rate swap contracts can be hedging or held for
trading contracts.
Cross-currency interest rate swaps
The Bank enters into cross-currency interest rate swap (“CCIRS”) transactions which have special attributes, i.e.
the parties exchange the notional amount at the beginning and also at the maturity of the transaction. A special
type of these deals is the mark-to-market CCIRS agreements. At this kind of deals the parties – in accordance
with the foreign exchange prices – revalue the notional amount during lifetime of the transaction.
Equity and commodity swaps
Equity swaps obligate two parties to exchange more payments calculated with reference periodically reset rates
of interest and performance of indices. A specific notional principal amount is the base of the interest
calculation. The payment of index return is calculated on the basis of current market price compared to the
previous market price. In case of commodity swaps payments are calculated on the basis of the strike price of a
predefined commodity compared to its average market price in a period.
Forward rate agreements (“FRA”)
A forward rate agreement is an agreement to settle amounts at a specified future date based on the difference
between an interest rate index and an agreed upon fixed rate. Market risk arises from changes in the market value
of contractual positions caused by movements in interest rates.
The Bank limits its exposure to market risk by entering into generally matching or offsetting positions and by
establishing and monitoring limits on unmatched positions. Credit risk is managed through approval procedures
that establish specific limits for individual counter-parties. The Bank’s forward rate agreements were transacted
for management of interest rate exposures.
Foreign exchange options
A foreign exchange option is a derivative financial instrument that gives the owner the right to exchange money
denominated in one currency into another currency at a pre-agreed exchange rate at a specified future date. The
transaction, for a fee, guarantees a worst-case exchange rate for the futures purchase of one currency for another.
These options protect against unfavourable currency movements while preserving the ability to participate in
favourable movements.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
16
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.7. Derivative financial instruments designated as a fair value or cash flow hedge
Changes in the fair value of derivatives that are designated and qualify as hedging instruments fair value hedges
and that prove to be highly effective in relation to the hedged risk, are recorded in the separate statement of profit
or loss along with the corresponding change in fair value of the hedged asset or liability that is attributable to the
specific hedged risk. Changes in the fair value of the hedging instrument in fair value hedges are charged directly
to the separate statement of profit or loss. The conditions of hedge accounting applied by the Bank are the
following: formally designated as hedging relationship, proper hedge documentation is prepared, effectiveness
test is performed and based on it the hedge is qualified as effective.
Changes in fair value of derivatives that are designated and qualify as hedging instrument in cash flow hedges
and that prove to be highly effective in relation to hedged risk are recognized as reserve in other comprehensive
income. Amounts deferred in other comprehensive income are transferred to the separate statement of profit or
loss and classified as revenue or expense in the periods during which the hedged assets and liabilities effect the
separate statement of recognized and comprehensive income for the period. The ineffective element of the hedge
is charged directly to the separate statement of profit or loss. The Bank terminates the hedge accounting if the
hedging instrument expires or is sold, terminated, or exercised, or the hedge no longer meets the criteria for
hedge accounting. In case of cash flow hedges - in line with the standard – hedge accounting is still applied as
long as the underlying asset is derecognised.
2.8. Offsetting
Financial assets and liabilities may be offset and the net amount is reported in the statement of financial position
when the Bank has a legally enforceable right to set off the recognised amounts and the transactions are intended
to be reported in the statement of financial position on a net basis. In the case of the derivative financial
instruments the Bank applies offsetting and net presentation in the Statement of Financial Position when the
Bank has the right and the ability to settle the assets and liabilities on a net basis.
2.9. Embedded derivatives
Sometimes, a derivative may be a component of a combined or hybrid contract that includes a host contract and
a derivative (the embedded derivative) affecting cash flows or otherwise modifying the characteristics of the host
instrument. An embedded derivative must be separated from the host instrument and accounted for as a separate
derivative if, and only if:
- The economic characteristics and risks of the embedded derivative are not closely related to the
economic characteristics and risks of the host contract;
- A separate financial instrument with the same terms as the embedded derivative would meet the
definition of a derivative as a stand-alone instrument; and
- The host instrument is not measured at fair or is measured at fair value but changes in fair value are
recognised in other comprehensive income.
As long as a hybrid contract contains a host that is a financial asset the general accounting rules for
classification, recognition and measurement of financial assets are applicable for the whole contract and no
embedded derivative is separated.
Derivatives that are required to be separated are measured at fair value at initial recognition and subsequently. If
the Bank is unable to measure the embedded derivative separately either at acquisition or at the end of a
subsequent financial reporting period, the Group shall designate the entire hybrid contract as at fair value
through profit or loss. The Bank shall assess whether an embedded derivative is required to be separated from
the host contract and accounted for as a derivative when the Bank first becomes a party to the contract.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
17
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.10. Securities at fair value through other comprehensive income (“FVOCI securities”)
FVOCI securities are held within a business model whose objective is achieved by both collecting of contractual
cash flows and selling securities. Furthermore contractual terms of FVOCI securities give rise on specified dates
to cash flows that are solely payment of principal and interest on the principal amount outstanding.
Debt instruments
Investments in debt securities are accounted for on a trade date basis and are initially measured at fair value.
Securities at fair value through other comprehensive income are measured at subsequent reporting dates at fair
value. Unrealised gains and losses on FVOCI financial instruments are recognized in other comprehensive
income, except for interest and foreign exchange gains/losses on monetary items, unless such FVOCI security is
part of an effective hedge. Such gains and losses will be reported when realised in profit or loss for the
applicable period. The Bank applies FIFO
1
inventory valuation method for FVOCI securities.
For debt securities at fair value through other comprehensive income the loss allowance is calculated based on
expected credit loss model. The expected credit loss is accounted for against Other Comprehensive Income.
FVOCI securities are remeasured at fair value based on quoted prices or values derived from cash flow models.
In circumstances where the quoted market prices are not readily available, the fair value of debt securities is
estimated using the present value of the future cash flows and the fair value of any unquoted equity instruments
are calculated using the EPS ratio.
Fair value through other comprehensive income option for equity instruments
In some cases the Bank made an irrevocable election at initial recognition for certain non-trading investments in
an equity instrument to present subsequent changes in fair value of these securities in other comprehensive
income instead of in profit or loss.
The use of the fair value option is based only on direct decision of management of the Bank.
2.11. Loans, placements with other banks, repo receivables and loss allowance for loan, placements and
repo receivables losses
The Bank measures Loans, placements with other banks and repo receivables at amortised cost, which are held
to collect contractual cash flows, and contractual terms of these assets give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount outstanding. The Bank recognises
loans, which are not held for trading and do not give rise contractual cash flows that are solely payments of
principal and interest on the principal amount outstanding as loans measured at fair value through profit or loss
(“FVTPL loans”).
Loans, placements with other banks and repo receivables are accounted at amortised cost, stated at the principal
amounts outstanding including accrued interest, net of allowance for loan or placement losses, respectively.
In case of the above mentioned financial assets measured at amortised cost transaction fees and charges adjust
the carrying amount at initial recognition and are included in effective interest calculation. In case of FVTPL
loans fees and charges are recognised when incurred in the separate statement of profit or loss.
Loans, placements with other banks and repo receivables loans are derecognised when the contractual rights to
the cash flows expire or they are transferred. When a financial asset is derecognised the difference of the
carrying amount and the consideration received is recognised in the profit or loss. In case of the above mentioned
financial assets at amortised cost gains or losses from derecognition are presented in “Gains/losses arising from
derecognition of financial assets at amortised cost” line. In case of FVTPL loans gains or losses from
derecognition are presented in “Net operating income”.
Change in the fair value of FVTPL loans is broken down into two components and presented in the separate
statement of profit or loss as follows:
• Portion of the change in fair value arising from changes in credit risk are presented within “Risk cost”
as “Change in the fair value attributable to changes in the credit risk of loans mandatorily measured at
fair value through profit of loss”.
• The remaining component of the change is presented in fair value within “Net operating income” as
“Gains/(Losses) on financial instruments at fair value through profit or loss”.
1
First In First Out
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
18
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.11. Loans, placements with other banks, repo receivables and loss allowance for loan, placements and
repo receivables losses [continued]
Initially, financial assets shall be recognised at fair value which is usually equal to the transaction value in case
of loans and placements. However, when the amounts are not equal, the initial fair value difference should be
recognized.
If the fair value of financial assets is based on a valuation technique using only inputs observable in market
transactions, the Bank recognises the initial fair value difference in the Separate Statement of Profit or Loss.
When the fair value of financial assets is based on models for which inputs are not observable, the difference
between the transaction price and the fair value is deferred and only recognised in profit or loss when the
instrument is derecognised or the inputs became observable.
Initial fair value of loans lent at interest below market conditions is lower than their transaction price.
Allowance for losses on loans, placements with other banks and repo receivables represent management
assessment for potential losses in relation to these activities.
The Bank recognises a loss allowance for expected credit losses on a financial asset at each reporting date. The
loss allowance for a financial asset equals to 12-month expected credit loss or equals to the lifetime expected
credit losses. The maximum period over which expected credit losses shall be measured is the maximum
contractual period over which the Bank is exposed to credit risk.
If the credit risk on a financial asset has not increased significantly since initial recognition then 12-month
expected credit losses, otherwise (in case of significant credit risk increase) lifetime expected credit losses
should be calculated. The expected credit loss is the present value of the difference between the contractual cash
flows that are due to the Bank under the contract and the cash flows that the Bank expects to receive.
When the contractual cash flows of a financial asset are modified and the modification does not result in the
derecognition of the financial asset the Bank recalculate the gross carrying amount of the financial asset by
discounting the expected future cash flows with the original effective interest rate of the asset. The difference
between the carrying amount and the present value of the expected cash flows is recognised as a “Modification
gain or loss” in the statement of profit or loss. Interest income and amortised cost are accounted for using the
effective interest rate method.
Write-offs are generally recorded after all reasonable restructuring or collection activities have taken place and
the possibility of further recovery is considered to be remote. The loan is written off against the related account
“Loss allowance on loan, placement and repo receivables losses” in the Statement of Profit or loss.
OTP Bank applies partial or full write-off for loans based on the definitions and prescriptions of financial
instruments in accordance with IFRS 9. If OTP Bank has no reasonable expectations regarding a financial asset
(loan) to be recovered, it will be written off partially or fully at the time of emergence.
The gross amount and loss allowance of the loans shall be written off in the same amount to the estimated
maximum recovery amount while the net carrying value remains unchanged.
If there are reasonable expectations of recovery for a financial asset that is written-off fully or partially, OTP
Bank shall re-estimate cash flows of a financial asset and write-off reversal is applied in the financial statements.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
19
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.11. Loans, placements with other banks, repo receivables and loss allowance for loan, placements and
repo receivables losses [continued]
Modification of contractual cash flows
If the net present value of the contracted cash flows changes due to the modification of the contractual terms and
it is not qualified as derecognition, modification gain or loss should be calculated and accounted for in the
separate statement of profit or loss. Modification gain or loss is accounted in cases like restructuring – as defined
in internal policies of the Bank – prolongation, renewal with unchanged terms, renewal with shorter terms and
prescribing capital repayment rate, if it doesn’t exist or has not been earlier.
The changes of net present value should be calculated on portfolio level in case of retail exposures. Each retail
contract is restructured based on restructuring frameworks. The Bank has to evaluate these frameworks (and not
individual contracts). The changes of net present value should be calculated individually on contract level in case
of corporate portfolio.
Among the possible contract amendments, the Bank considers as a derecognition and a new recognition when
the discounted present value – discounted at the original effective interest rate – of the cash flows under the new
terms is at least 10 per cent different from the discounted present value of the remaining cash flows. In case of
derecognition and new recognition the unamortised fees of the derecognised asset should be presented as Income
similar to interest income. The newly recognised financial asset is initially measured at fair value and is placed in
stage 1 if the derecognised financial asset was in stage 1 or stage 2 portfolio. The newly recognised financial
asset will be purchased or originated credit impaired financial asset (“POCI”) if the derecognised financial asset
was in stage 3 portfolio or it was POCI.
The modification gain or loss shall be calculated at each contract amendments unless they are handled as a
derecognition and new recognition. In case of modification the Bank recalculates the gross carrying amount of
the financial asset. To do this, the new contractual cash flows should be discounted using the financial asset’s
original effective interest rate (or credit-adjusted effective interest rate for POCI financial asset). Any costs or
fees incurred adjust the carrying amount of the modified financial asset are amortized over the remaining term of
the modified financial asset.
Purchased or originated credit impaired financial assets
Purchased or originated financial assets are credit-impaired on initial recognition. A financial asset is credit-
impaired when one or more events that have a detrimental impact on the estimated future cash flows of that
financial asset have occurred.
A purchased credit-impaired asset is likely to be acquired at a deep discount. In unusual circumstances, it may be
possible that an entity originates a credit-impaired asset, for example, following a substantial modification of a
distressed financial asset that resulted in the derecognition of the original financial asset.
In the case of POCI financial assets, interest income is always recognized by applying the credit-adjusted
effective interest rate.
For POCI financial assets, in subsequent reporting periods an entity is required to recognize:
- the cumulative changes in lifetime expected credit losses since initial recognition as a loss allowance,
- the impairment gain or loss which is the amount of any change in lifetime expected credit losses.
An impairment gain is recognized (with the parallel increase of the net amortized cost of receivable) if due
to the favourable changes after initial recognition the lifetime expected credit loss estimation is becoming
lower than the original estimated credit losses at initial recognition.
The POCI qualification remains from initial recognition to derecognition in the Bank’s books.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
20
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.12. Loss allowance
Loss Allowance for loans and placements with other banks and repo receivables are recognised by the Bank
based on the expected credit loss model in accordance with IFRS 9. Based on the three stage model loss
allowance is recognised in amount of 12 month expected credit loss from the initial recognition. Financial assets
with significantly increased credit risk or credit impaired financial assets (based on objective evidences) loss
allowance is recognised in amount of lifetime expected credit loss.
In case of purchased or originated credit impaired financial assets loss allowance is recognised in amount of
lifetime expected credit loss since initial recognition. Impairment gain is recognised if lifetime expected credit
loss for purchased or originated credit impaired financial assets at measurement date are less than the estimated
credit loss at initial recognition.
Loss allowance for loan and placements are determined at a level that provides coverage for individually
identified credit losses. Collective impairment loss is recognised for loans with similar credit risk characteristics
when it is not possible to determine the amount of the individually identified credit loss in the absence of
objective evidence. The expected cash flows for loan portfolios are estimated based on historical loss experience.
At subsequent measurement the Bank recognises through “Loss allowance on loan, placement and repo
receivables losses” in the Statement of Profit or Loss impairment gain or loss as an amount of expected credit
losses or reversal that is required to adjust the loss allowance at the reporting date to the amount that is required
to be recognised in accordance with IFRS 9.
If a financial asset, which previously classified in the first stage, classified subsequently in the second or third
stage than loss allowance is adjusted to lifetime expected credit loss. If a financial asset, which previously
classified in the second or third stages, classified subsequently in the first stage than loss allowance is adjusted to
level of 12 month expected credit loss.
Classification into risk classes
According to the requirements of the IFRS9 standard, the Bank classifies financial assets measured at amortised
cost and fair value through other comprehensive income, and loan commitments and financial guarantees into
the following categories in accordance with IFRS9:
Stage 1
Performing
Stage 2
Performing, but compared to the initial recognition it shows significant increase in credit risk
Stage 3
Non-performing
POCI
Purchased or originated credit impaired
In the case of trade receivables, contract assets and lease receivables the Group applies the simplified approach
and calculates only lifetime expected credit loss. Simplified approach is the following:
• for the past 3 years the average annual balance of receivables under simplified approach is
calculated,
• the written-off receivables under simplified approach are determined in the past 3 years,
• the loss allowance ratio will be the sum of the written-off amounts divided by the sum of the
average balances,
• historical losses are adjusted to reflect information about current conditions and reasonable
forecasts of future economic conditions,
• the loss allowance is multiplied by the end-of-year balance and it will be the actual loss allowance
on these receivables,
• loss allowance should be recalculated annually.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
21
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.12. Loss allowance [continued]
Classification into risk classes [continued]
The Bank assumes that the credit risk on a financial instrument has not increased significantly since initial
recognition if the financial asset is determined to have low credit risk at the reporting date. This might occur if
the financial asset has a low risk of default, the borrower has a strong capacity to meet its contractual cash flow
obligations in the near term and adverse changes in economic and business conditions in the longer term may,
but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations. The
Bank considers souvereign exposures having low credit risk.
Credit risk of financial assets increases significantly at the following conditions:
• the payment delay exceeds 30 days,
• it is classified as performing forborne,
• based on individual decision, its currency suffered a significant "shock" since the disbursement of the
loan,
• the transaction/client rating exceeds a predefined value or falls into a determined range, or compared to
the historic value it deteriorates to a predefined degree,
• in the case household mortgage loans, the loan-to-value ratio (“LTV”) exceeds a predefined rate,
• default on another loan of the retail client, if no cross-default exists,
• in case of corporate and municipal clients:
o financial difficulty (capital requirements, liquidity, impairment of asset quality),
o significant decrease of activity and liquidity in the market of the asset,
o client’s rating reflects higher risk, but better than default,
o collateral value drops significantly, from which the client pays the loan,
o more than 50% decrease in owner’s equity due to net losses,
o client under dissolution,
o negative information from Central Credit Information System: the payment delay exceeds 30
days
Financial assets classifies as non-performing, if the following conditions are met:
• default,
• non-performing forborne exposures,
• in case of corporate and municipal clients:
o breach of contract terms and conditions
o critical financial difficulty of the client (capital requirements, liquidity, impairment of asset
quality),
o liquidation, dissolution or debt clearing procedures against client,
o forced deregistration procedures from company registry,
o terminated loans by the Bank,
o in case of fraud,
o negative information from Central Credit Information System: the payment delay exceeds 90
days,
o cessation of active markets of the financial asset,
o default of ISDA based contracts.
For lifetime expected credit losses, the Bank shall estimate the risk of a default occurring on the financial
instrument during its expected life. 12-month expected credit losses are a portion of the lifetime expected credit
losses and represent cash flow shortfalls that will result if a default occurs in the 12 months after the reporting
date (or a shorter period fi the expected life of the financial instrument is less than 12 months), weighted by the
probability of that default occurring.
Expected credit losses are measured in a way that reflects:
• an unbiased and probability-weighted amount that is determined by evaluating a range of possible
outcomes,
• the time value of money, and
reasonable and supportable information that is available without undue cost of effort at the reporting date about
past events, current conditions and forecasts of future economic conditions.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
22
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.13. Option to designate a financial asset/liability measured at fair value through profit or loss (FVTPL
option)
The Bank may, at initial recognition, irrevocably designate a financial asset or liability as measured at fair value
through profit or loss. The Bank may use FVTPL option in the following cases:
- if doing so eliminates or significantly reduces a measurement or recognition inconsistency (accounting
mismatch) that would otherwise arise from measuring assets or liabilities or recognising the gains and
losses on them on different bases
- if the group of financial liabilities or assets is managed and its performance is evaluated on a fair value
basis, in accordance with a documented risk management or investment strategy, and information about
the group is provided internally on that basis to the Bank’s key management personnel.
The use of the fair value option is limited only to special situations, and it can be based only on direct decision of
management of the Bank.
2.14. Sale and repurchase agreements, security lending
Where debt or equity securities are sold under a commitment to repurchase them at a pre-determined price, they
remain on the statement of financial position and the consideration received is recorded in Other liabilities or
Amounts due to banks and deposits from the National Bank of Hungary and other banks, or Deposits from
customers. Conversely, debt or equity securities purchased under a commitment to resell are not recognized in
the statement of financial position and the consideration paid is recorded either in Placements with other banks
or Deposits from customers. Interest is accrued evenly over the life of the repurchase agreement. In the case of
security lending transactions the Bank does not recognize or derecognize the securities because it is believed that
the transferor retains substantially all the risks and rewards of the ownership of the securities. Only a financial
liability or financial receivable is recognized for the consideration amount.
2.15. Property, equipment and intangible assets
Property, equipment and intangible assets are stated at cost, less accumulated depreciation and amortization and
impairment, if any. The depreciable amount (book value less residual value) of the non-current assets must be
allocated over their useful lives. Depreciation and amortization are calculated using the straight-line method over
the estimated useful lives of the assets based on the following annual percentages:
Intangible assets
Software
20-33.3%
Property rights
16.7-33.3%
Property
1-2%
Office equipment and vehicles
9-33.3%
Depreciation and amortization on properties, equipment and intangible assets starts on the day when such assets
are placed into service. At each balance sheet date, the Bank reviews the carrying value of its tangible and
intangible assets to determine if there is any indication that those assets have suffered an impairment loss.
If such indication exists, the recoverable amount of the asset is estimated to determine the extent (if any) of the
impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Bank
estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Where the carrying value of property, equipment, other tangible fixed assets and intangible assets is greater than
the estimated recoverable amount, it is impaired immediately to the estimated recoverable amount.
2.16. Inventories
The inventories shall be measured at the lower of cost and net realisable value. The cost of inventories shall
comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their
present location and condition. The Bank uses generally FIFO formulas to the measurement of inventories.
Inventories shall be removed from books when they are sold, unusable or destroyed. When inventories are sold,
the carrying amount of those inventories shall be recognized as an expense in the period in which the related
revenue is recognized. Repossessed assets are classified as inventories.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
23
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.17. Investment properties
Investment properties of the Bank are land, buildings, part of buildings which are held (as the owner or as the
lessee under a finance lease) to earn rentals or for capital appreciation or both, rather than for use in the
production or supply of services or for administrative purposes or sale in the ordinary course of business. The
Bank measures the investment properties at cost less accumulated depreciation and impairment, if any. The
depreciable amount (book value less residual value) of the investment properties must be allocated over their
useful lives. Depreciation and amortization are calculated using the straight-line method over the estimated
useful lives of the assets based on the 1-2% annual percentages.
The fair value of the investment properties is established mainly by external experts. According to the opinion of
the Management there is no significant difference between the fair value and the carrying value of these
properties.
2.18. Financial liabilities
The financial liabilities are presented within financial liabilities at fair value through profit or loss or financial
liabilities measured at amortised cost. In connection to the financial liabilities at fair value through profit or loss,
the Bank presents the amount of change in their fair value originated from the changes of market conditions and
business environment. Financial liabilities at fair value through profit or loss are either financial liabilities held
for trading or they are designated upon initial recognition as at fair value through profit or loss. In the case of
financial liabilities measured at amortised cost, fees and commissions related to the origination of the financial
liability are recognised through profit or loss during the maturity of the instrument. In certain cases the Bank
repurchases a part of financial liabilities (mainly issued securities or subordinated bonds) and the difference
between the carrying amount of the financial liability and the amount paid for it is recognised in the statement of
profit or loss and included in other operating income.
2.19. Leases
An agreement is a lease or contains a lease if it transfers the rights to control the use of an identified asset for a
given period in exchange for compensation.
Expenses related to the use of lease assets, the majority of which were previously recognised in external services
costs, will be currently classified as depreciation/amortisation and interest costs. Usufruct rights are depreciated
using a straight line method, while lease liabilities are settled using an effective discount rate.
Recognition of lease liabilities
The Bank will recognise lease liabilities related to leases which were previously classified as "operating leases"
in accordance with IAS 17 Leases. These liabilities will be measured at the present value of lease payments
receivable as at the date of commencement of the application of IFRS 16. Lease payments shall be discounted
using the interest rate implicit in the lease or, if that rate cannot be readily determined, the incremental
borrowing rate. Interest rate applied by the Bank: weighted average lessee’s incremental borrowing rate: ~1,62%
At their date of initial recognition, lease payments contained in the measurement of lease liabilities comprise the
following types of payments for the right to use the underlying asset for the life of the lease:
- fixed lease payments less any lease incentives,
- variable lease payments which are dependent on market indices,
- amounts expected to be payable by the lessee under residual value guarantees,
- the strike price of a purchase option, if it is reasonably certain that the option will be exercised, and
- payment of contractual penalties for terminating the lease, if the lease period reflects that the lessee
used the option of terminating the lease.
The Bank makes use of expedients with respect to short-term leases (less than 12 months) as well as in the case
of leases in respect of which the underlying asset has a low value (less than HUF 1.4 million) and for which
agreements it will not recognise financial liabilities nor any respective right-of-use assets. These types of lease
payments will be recognised as costs using the straight-line method during the life of the lease.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
24
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.20. Leases [continued]
Recognition of right-of-use assets
Right-of-use assets are initially measured at cost.
The cost of a right-of-use asset comprises:
- the amount of the initial measurement of lease liabilities,
- any lease payments made at or before the commencement date, less any lease incentives received,
- any initial direct costs incurred by the lessee,
- estimates of costs to be incurred by the lessee as a result of an obligation to disassemble and remove an
underlying asset or to carry out renovation/restoration.
Right-of-use assets are presented separately in the financial statements.
2.20. Share capital
Share capital is the capital determined in the Articles of Association and registered by the Budapest-Capital
Regional Court. Share capital is the capital the Bank raised by issuing common stocks at the date the shares were
issued. The amount of share capital has not changed over the current period.
2.21. Treasury shares
Treasury shares are shares which are purchased on the stock exchange and the over-the-counter market by the
Bank and are presented in the separate statement of financial position at acquisition cost as a deduction from
shareholders’ equity. Gains and losses on the sale of treasury shares are recognised directly to shareholder’s
equity. Derecognition of treasury shares is based on the FIFO method.
2.22. Interest income, income similar to interest income and interest expense
Interest income and expenses are recognised in profit or loss in the period to which they relate, using the
effective interest rate method.
For exposures categorized into stage 1 and stage 2 the interest income is recognized on a gross basis. For
exposures categorized into stage 3 (using effective interest rate) and for POCI (using credit-adjusted effective
interest rate) the interest income is recognized on a net basis.
The time-proportional income similar to interest income of derivative financial instruments calculated without
using the effective interest method and the positive fair value adjustment of interest rate swaps are also included
in income similar to interest income. Interest income of FVTPL loans is calculated based on interest fixed in the
contract and presented in “Income similar to interest income” line.
Interest from loans and deposits are accrued on a daily basis. Interest income and expense include certain
transaction cost and the amortisation of any discount and premium between the initial carrying amount of an
interest-bearing instrument and its amount at maturity calculated on an effective interest rate basis.
All interest income and expense recognised are arising from loans, placements with other banks, repo
receivables, securities at fair value through other comprehensive income, securities at amortised cost, and
amounts due to banks, repo liabilities, deposits from customers, liabilities from issued securities, subordinated
bonds and loans are presented under these lines of financial statements
2.23. Fees and Commissions
Fees and commissions that are not involved in the amortised cost model are recognised in the Separate Statement
of Profit or Loss on an accrual basis according to IFRS 15. These fees are related to deposits, cash withdrawal,
security trading, bank card, etc.
The Bank recognise income if performance obligations related to the certain goods or service are satisfied,
performed, and control over the asset is transferred to the customer, and it is probable that consideration payable
will probably flow to the entity. In case of those service, where the Bank transfer control over the asset
continuously, income is recognised on accrual basis. (For more details see note 31)
The Bank provides foreign exchange trading services to its customers, the profit margin achieved on these
transactions is presented as Net profit from fees and commissions in the Separate Statement of Profit or Loss.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
25
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.24. Dividend income
Dividend income refers to any distribution of entity’s earnings to shareholders from stocks or mutual funds that
is owned by the Bank. The Bank recognizes dividend income in the separate financial statements when its right
to receive the payment is established.
2.25. Income tax
The Bank considers corporate income tax and local business tax and the innovation contribution as income tax in
Hungary. The annual taxation charge is based on the tax payable under Hungarian fiscal law, adjusted for
deferred taxation. Deferred taxation is accounted for using the balance sheet liability method in respect of
temporary differences between the tax bases of assets and liabilities and their carrying value for financial
reporting purposes, measured at the tax rates that are expected to apply when the asset is realised or the liability
is settled.
Deferred tax assets and liabilities are presented in a net way in the statement of financial position. Current tax
asset or current tax liability is presented related to income tax and innovation contribution separately in the
statement of financial position.
Deferred tax assets are recognized by the Bank for the amounts of income tax that are recoverable in future
periods in respect of deductible temporary differences as well as the carry forward of unused tax losses and the
carryforward of unused tax credits.
The Bank recognizes a deferred tax asset for all deductible temporary differences arising from investments in
subsidiaries, branches and associates, and interests in joint arrangements, to the extent that, and only to the extent
that, it is probable that:
- the temporary difference will reverse in the foreseeable future; and
- taxable profit will be available against which the temporary difference can be utilised.
The Bank considers the availability of qualifying taxable temporary differences and the probability of other
future taxable profits to determine whether future taxable profits will be available.
The Bank recognizes a deferred tax liability for all taxable temporary differences associated with investments in
subsidiaries, branches and associates, and interests in joint arrangements, except to the extent that both of the
following conditions are satisfied:
- the Bank is able to control the timing of the reversal of the temporary difference, and
- it is probable that the temporary difference will not reverse in the foreseeable future.
The Bank only offsets its deferred tax liabilities against deferred tax assets when:
- there is a legally enforceable right to set-off current tax liabilities against current tax assets, and
- the taxes are levied by the same taxation authorities on either
• the same taxable entity or
• different taxable entities which intend to settle current tax liabilities and assets on a net basis.
2.26. Banking tax
The Bank is obliged to pay banking tax based on Act LIX of 2006. As the calculation is not based on the taxable
profit (but the adjusted Assets total calculated based on the Separate Financial Statements for the second period
preceding the current tax year), banking tax is not considered as income tax. Therefore, the banking tax is
considered as an other administrative expense, not as income tax.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
26
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.27. Off-balance sheet commitments and contingent liabilities, provisions
In the ordinary course of its business, the Bank has entered into off-balance sheet commitments such as
guarantees, commitments to extend credit, letters of credit and transactions with financial instruments. The
provision on off-balance sheet commitments and contingent liabilities is maintained at a level adequate to absorb
probable future losses which are probable and relate to present obligations.
Those commitments and contingent liabilities Management determines the adequacy of the provision based upon
reviews of individual items, recent loss experience, current economic conditions, the risk characteristics of the
various categories of transactions and other pertinent factors.
The Bank recognizes a provision for off-balance sheet commitment and contingent liabilities in accordance with
IAS 37 when it has a present obligation as a result of a past event; it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation; and a reliable estimate can be made of the
obligation.
Expected credit loss model is applied for given financial guarantees and loan commitments which are under
IFRS 9 the, when the provision is calculated (see more details in Note 2.12.). After initial recognition the Group
subsequently measures those contracts at a higher of the amount of the loss allowance or of the amount initially
recognised less the cumulative amount of income recognized in accordance with IFRS 15.
2.28. Share-based payment and employee benefits
The Bank has applied the requirements of IFRS 2 Share-based Payment.
The Bank issues equity-settled share-based payments to certain employees. Equity-settled share-based payments
are measured at fair value at the grant date. The fair value determined at the grant date of the equity-settled
share-based payments is expensed on a straight-line basis over the year, based on the Bank’s estimate of shares
that will eventually vest.
Fair value is measured by use of a binomial model. The expected life used in the model has been adjusted, based
on Management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural
considerations.
The Bank has applied the requirement of IAS 19 Employee Benefits. The Bank’s short-term employee benefits
are wages, salaries and bonuses, premium, paid annual leave and paid sick leave and other free services (health
care, reward holiday). Short-term employee benefits are expected to pay by the Bank within 12 month. These
benefits are recognised as an expense and liability undiscounted in the separate financial statements.
Long-term employee benefits are mostly the jubilee reward. Long-term employee benefits are recognised as an
expense and liability in the separate financial statements. Liabilities are regularly remeasured. Gains or losses
due to the remeasurement are recognised in the separate statement of profit or loss.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
27
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.29. Separate statement of cash flows
Cash flows arising from the operating, investing or financing activities are reported in the Statement of Cash-
Flows of the Bank primarily on a gross basis. Net basis reporting are applied by the Bank in the following cases:
▪ when the cash flows reflect the activities of the customer rather than those of the Bank, and
▪ for items in which the turnover is quick, the amounts are large, and the maturities are short.
For the purposes of reporting cash flows “Cash, due from banks and balances with the NBH” line item excluding
compulsory reserve are considered as cash and cash equivalents by the Bank. This line item shows balances of
HUF and foreign currency cash amounts, and sight depos from NBH and from other banks, furthermore balances
of current accounts.
Cash flows from hedging activities are classified in the same category as the item being hedged. The unrealised
gains and losses from the translation of monetary items to the closing foreign exchange rates and the unrealised
gains and losses from derivative financial instruments are presented separately net in the statement of cash flows
for the monetary items which have been revaluated.
2.30. Segment reporting
IFRS 8 Operating Segments requires operating segments to be identified on the basis of internal reports about
components of the Bank that are regularly reviewed by the chief operating decision maker in order to allocate
resources to the segments and to assess their performance.
At separate level, the Management does not separate and makes decisions based on different segments; the
segments are identified by the Bank only at consolidated level in line with IFRS 8 paragraph 4. At Group level
the segments identified by the Bank are the business and geographical segments.
The Group’s operating segments under IFRS 8 are therefore as follows: OTP Core Hungary, Russia, Ukraine,
Bulgaria, Romania, Serbia, Croatia, Montenegro, Albania, Moldova, Slovenia, Merkantil Group, Asset
Management subsidiaries, other subsidiaries, Corporate Centre.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
28
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.31. Comparative figures
Reclassification of certain local taxes
The Bank has reviewed prescriptions related to local taxes, the determination of their tax base and their effects
on payment obligation. As a result of the review the local business tax and innovation contribution have been
reclassified to income tax in line with banking industry practice. In the financial statements prepared for the year
ended 31 December 2021 the Bank presents these taxes as income tax and reclassified the financial information
for comparative periods.
Derecognition of financial assets at amortized cost is presented separately in the separate statement of profit or
loss. Those items are to be separated from those results which previously contained them. In the separate
financial position there is provision for conditional liability to be separated from other liabilities which
previously contained them. All these reclassifications were necessary to improve presentation.
The impact of the reclassification of comparative information is summarized in the following tables:
Statement of Financial Position
Line item
31 December
2021
31 December
2020 after
reclassification
Reclassification of
amounts related to
local taxes
31 December 2020
Previously
presented
Current tax liabilities
4,776
1,464
1,464
-
Other liabilities
238,437
223,433
(1,464)
224,897
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
13,710,471
11,154,394
-
11,154,394
Statement of Profit or Loss
Line item
Year ended 31
December
2021
Year ended 31
December 2020
After
reclassification
Reclassification of
amounts related to
local taxes
Year ended 31
December 2020
Previously
presented
Taxes, other than income tax
(81,171)
(73,384)
(12,349)
(85,733)
Other administrative expenses
(178,611)
(154,165)
(12,349)
(166,514)
OTHER ADMINISTRATIVE
EXPENSES
(355,429)
(311,611)
(12,349)
(323,960)
PROFIT BEFORE INCOME
TAX
141,290
105,595
(12,349)
93,246
Income tax
(15,951)
(13,121)
12,349
(772)
NET PROFIT FOR THE YEAR
125,339
92,474
-
92,474
Amendments to the information published in the supplementary annexes concerned the following
supplementary notes
Note
Name of the Note
24
Other liabilities and provisions
33
Other operating income and expenses and other administrative expenses
34
Income tax
The Bank has reclassified the presentation of the detailed notes to the amended statement of financial position
and statement of profit or loss line items for comparative information in accordance with the new values. These
amendments have been marked “Reclassified” by the Bank.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
29
NOTE 3: SIGNIFICANT ACCOUNTING ESTIMATES AND DECISIONS IN THE
APPLICATION OF ACCOUNTING POLICIES
The presentation of separate financial statements in conformity with IFRS requires the Management of the Bank
to make judgements about estimates and assumptions that affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities as at the date of the financial statements and their reported
amounts of revenues and expenses during the reporting period. The estimates and associated assumptions are
based on expected loss and other factors that are considered to be relevant. The estimates and underlying
assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognized in the period.
Actual results could differ from those estimates. Significant areas of subjective judgements include:
3.1. Loss allowance on financial instruments
The Bank regularly assesses its financial instruments for impairment. Management determines the adequacy of
the allowances based upon reviews of individual loans and placements, recent loss experience, current economic
conditions, the risk characteristics of the various categories of loans and other pertinent factors. The use of a
new, three stage model was implemented for IFRS 9 purposes. The new impairment methodology is used to
classify financial instruments in order to determine whether credit risk has significantly increased since initial
recognition and able to identify credit-impaired assets. For instruments with credit-impairment or significant
increase of credit risk lifetime expected losses will be recognized. (For details see note 36.1.1.)
3.2. Valuation of instruments without direct quotations
Financial instruments without direct quotations in an active market are valued using the valuation model
technique. The models are regularly reviewed and each model is calibrated for the most recent available market
data. While the models are built only on available data, their use is subject to certain assumptions and estimates
(e.g. for correlations, volatilities, etc). Changes in the model assumptions may affect the reported fair value of
the relevant financial instruments.
IFRS 13 Fair Value Measurement seeks to increase consistency and comparability in fair value measurements
and related disclosures through a 'fair value hierarchy'. The hierarchy categorises the inputs used in valuation
techniques into three levels. The hierarchy gives the highest priority to (unadjusted) quoted prices in active
markets for identical assets or liabilities and the lowest priority to unobservable inputs. The Bank evaluates the
levelling at each reporting period on an instrument-by-instrument basis and reclassifies instruments when
necessary, based on the facts at the beginning of the reporting period. The objective of a fair value measurement
is to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place
between market participants at the measurement date under current market conditions.
3.3. Provisions
Provision is recognised and measured for commitments to extend credit and for warranties arising from banking
activities based on IFRS 9 Financial Instruments. Provision for these instruments is recognised based on the
credit conversion factor, which shows the proportion of the undrawn credit line that will be probably drawn.
Other provision is recognised and measured based on IAS 37 Provisions, Contingent Liabilities and Contingent
Assets. The Bank is involved in a number of ongoing legal disputes. Based upon historical experience and expert
reports, the Bank assesses the developments in these cases, and the likelihood and the amount of potential
financial losses which are appropriately provided for. (See Note 24.)
Other provision for off-balance sheet items includes provision for litigation, provision for retirement and
expected liabilities and provision for Confirmed letter of credit.
A provision is recognised by the Bank when it has a present obligation as a result of a past event, it is probable
that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable
estimate can be made of the amount of the obligation.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
30
NOTE 3: SIGNIFICANT ACCOUNTING ESTIMATES AND DECISIONS IN THE
APPLICATION OF ACCOUNTING POLICIES [continued]
3.4. Business models
A business model refers how the Bank manages its financial instruments in order to generate cash flows. It is
determined at a level that reflects how groups of financial instruments are managed rather than at an instrument
level.
The financial assets held by the Bank are classified into three categories depending on the business model within
the financial assets are managed.
• Business model whose objective is to hold financial assets in order to collect contractual cash flows.
Some sales can be consistent with hold to collect business model and the Bank assesses the nature,
frequency and significance of any sales occurring. The Bank does not consider the sale frequent when at
least six months have elapsed between sales. The significant sales are those when the sales exceed 2%
of the total hold to collect portfolio. Within this business model the Bank manages mainly loans and
advances and long term securities and other financial assets.
• Business model whose objective is achieved by both collecting contractual cash flows and selling
financial assets. Within this business model the Bank only manages securities.
• Business model whose objective is to achieve gains in a short term period. Within this business model
the Bank manages securities and derivative financial instrument.
If cash flows are realised in a way that is different from the expectations at the date that the Bank assessed the
business model, that does not give rise to a prior error in the Bank’s financial statements nor does it change the
classification of the remaining financial assets held in that business model.
When, and only when the Bank changes its business model for managing financial assets it reclassifies all
affected assets. Such changes are determined by the Bank’s senior management as a result of external or internal
changes and must be significant to the Bank’s operations and demonstrable to external parties. The Bank shall
not reclassify any financial liability.
3.4. Contractual cash-flow characteristics of financial assets
Classification of a financial asset is based on the characteristics of its contractual cash flows if the financial asset
is held within a business model whose objective is to hold assets to collect contractual cash flows or within a
business model whose objective is achieved by both collecting contractual cash flows and selling financial
assets.
The Bank should determine whether the asset’s contractual cash flows are solely payments of principal and
interest on the principal amount outstanding (SPPI test). Contractual cash flows that are solely payments of
principal and interest on the principal amount outstanding are consistent with a basic lending arrangement.
Contractual terms that introduce exposure to risks or volatility in the contractual cash flows that is unrelated to a
basic lending arrangement, such as exposure to changes in equity prices or commodity prices, do not give rise to
contractual cash flows that are solely payments of principal and interest on the principal amount outstanding.
The Bank assesses whether contractual cash flows are solely payments of principal and interest on the principal
amount outstanding for the currency in which the financial asset is denominated.
Time value of money is the element of interest that provides consideration for only the passage of time.
However, in some cases, the time value of money element may be modified. In such cases, the Bank assesses the
modification to determine whether the contractual cash flows represent solely payments of principal and interest
on the principal amount outstanding.
When assessing a modified time value of money element, the objective is to determine how different the
undiscounted contractual cash flows could be from undiscounted cash flows that would arise if the time value of
money element was not modified (the benchmark cash flows). The benchmark instrument can be an actual or a
hypothetical financial asset. If the undiscounted contractual cash flows significantly – above 2% – differ from
the undiscounted benchmark cash flows, the financial asset should be subsequently measured at fair value
through profit or loss.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
31
NOTE 4: COVID-19 (in HUF mn)
Covid-19 has had substantial implications for the operations of the Bank during 2021. Below are some of the
more important Covid-19 related events that occurred in Hungary:
• Effective from 13 January 2021 the National Bank of Hungary extended the available amount for the Bond
Funding for Growth scheme by HUF 750 billion to HUF 1,150 billion. At the same time it decided to
increase the maximum maturity of corporate bonds that can be purchased by the central bank from 20 to 30
years. Also, the central bank’s exposure limit to a company group was revised from HUF 50 billion to HUF
70 billion.
• On 4 February 2021 the Prime Minister announced an interest-free loan programme for companies in trouble
in the wake of the pandemic. According to Government Resolution 1038/2021. (II. 5.) the programme will be
administered by the Hungarian Development Bank, and the available amount under the programme will be
HUF 100 billion. Companies can take out maximum HUF 10 million each for the purpose of covering wages
and social contributions, overhead costs, general operating expenses and inventory financing. Client interest
rate is 0%, the loan tenor can be up to 10 years, and the servicing of the loan will start after a 3 year grace
period. The scope of eligible entities was determined in agreement with the Hungarian Chamber of
Commerce and Industry.
• On 1 April 2021 Moody’s rating agency upgraded the outlook on the Hungarian banking sector from
negative to stable
• On 6 April 2021 the NBH raised the available amount for the Funding for Growth Go! Scheme by HUF 500
billion to HUF 3,000 billion.
• On 18 May 2021 the Hungarian Development Bank revealed that the interest-free, maximum HUF 10 million
loan for micro- and small enterprises (the so-called interest-free restart quick loan) can be applied for by
companies whose revenues in 2020 plummeted by more than 30%, irrespective of the scope of activities
(certain other criteria must be met).
• On 25 May 2021 the National Bank of Hungary did not touch the benchmark interest rates, but stressed that
the central bank is ready to tighten monetary conditions in a proactive manner to the extent necessary in order
to ensure price stability and to mitigate inflation risks.
• On 9 June 2021 Viktor Orbán Prime Minister announced that their actual personal income tax payments (up
to the tax burden of the average wage) will be refunded to families raising kids in early-2022 provided that
the 2021 GDP growth surpasses 5.5%.
• According to Government Decree No. 317/2021. (VI. 9.) released on 9 June 2021 the payment moratorium
was extended with unchanged conditions until 30 September 2021.
• On 9 June 2021 Viktor Orbán Prime Minister announced that once the central bank phases out its Funding
for Growth scheme, the government will have to shoulder the financial burden of providing cheap (not higher
than 0.5% interest rate) subsidized loans to domestic micro and small enterprises, through the Széchenyi
Card programme by KAVOSZ. On 9 June László Krisán, CEO of KAVOSZ revealed the details of the
Széchenyi Card GO! programme launched on 1 July 2021.
• On its 22 June 2021 meeting the Monetary Council embarked on a rate hike cycle: the base rate was
increased by 30 bps to 0.9%. Also, effective from 24 June 2021 the National Bank of Hungary raised the one-
week deposit rate to the level of the base rate.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
32
NOTE 4: COVID-19 (in HUF mn) [continued]
• The Monetary Council has started to transform the use of instruments having an effect at longer maturities.
Accordingly, with the exhaustion of the HUF 3,000 billion available amount, the Funding for Growth Go!
programme will be phased out. However, the central bank continues to consider the government securities
purchase programme to be crucial in its set of monetary policy instruments. The central bank will continue to
use the programme by maintaining a lasting presence in the market, taking a flexible approach to changing
the quantity and structure of weekly securities purchases, to the extent and for the time necessary.
• On 2 July 2021 the National Bank of Hungary recommended in its circular that financial institutions should
abstain from charging prepayment fees in the case of full or partial prepayment of deferred interest and fee
accumulated during the term of the moratorium. The central bank also recommended free of charge loan
contract modification if borrowers voluntarily undertake higher monthy instalments in order to shorten the
remaining maturity.
• On 6 July 2021 the National Bank of Hungary announced that with the aim of boosting green mortgage
lending, it decided to launch the Green Mortgage Bond Purchase Programme and the FGS Green Home
Programme as the first steps of the implementation of the new Green Monetary Policy Toolkit Strategy:
The strategic goal of the Green Mortgage Bond Purchase Programme is to contribute to the development of
the domestic green mortgage bond market through targeted purchases and, through this, encourage green
mortgage loan activities. The central bank will review the programme when the HUF 200 billion purchase
volume has been reached. Additionally, the central bank also decided to re-launch the Mortgage Bond
Rollover Facility for mortgage bonds without green rating.
The central bank will launch the Green Home Programme in October 2021 with a total limit of HUF 200
billion as part of the Funding for Growth Scheme (FGS). As in the previous phases of the FGS, the MNB
will provide refinancing operation to credit institutions at 0% interest, which will be lent to residential
customers at a maximum of 2.5%, fixed interest rate until the end of the maturity period. Under the scheme,
loans of up to HUF 70 million and a maximum term of 25 years can be granted for constructions or purchases
of new, highly energy-efficient residential real estates.
• On 23 July 2021 the European Central Bank announced that restrictions concerning dividend payments won’t
be prolonged beyond the previously effective deadline of 30 September 2021.
• A Government Decree was published on 23 July 2021 facilitating the VAT refund in the case of newly built
houses in brownfield sites.
• On 27 July 2021 the National Bank of Hungary raised the base rate by 30 bps to 1.2%, then on 29 July the
one-week deposit rate was hiked to the same level, by the same magnitude.
• On 30 July 2021 the results of the 2021 EU-wide stress test conducted by the European Banking Authority
were revealed. The fully loaded consolidated Common Equity Tier 1 (CET1) ratio of OTP Bank Plc. would
change to 16.3% under the baseline scenario and to 11.2% under the adverse scenario in 2023, compared to
14.2% as at the end of 2020.
• On 12 August 2021 the National Bank of Hungary announced that its management circular has been
reviewed. According to one of the amendments, the central bank extended the deadline concerning
restrictions on dividend payment and treasury share purchases until the end of 2021. Credit instititions might
be exempted from the dividend payment ban only if they meet certain strict conditions.
• On 24 August 2021 the National Bank of Hungary raised the base rate by 30 bps to 1.5%. Additionally, the
central bank decided to begin gradually withdrawing the government securities purchase programme while
considering aspects of maintaining market stability. Also, the central bank increased the available amount
under the Bond Funding for Growth scheme by HUF 400 billion to HUF 1,550 billion.
• Pursuant to Government Decree 536/2021. (IX. 15.) published on 15 September, the Government decided to
extend the debt repayment moratorium with the following conditions:
• The blanket moratorium was extended by an additional month, until the end of October, in an unchanged
form.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
33
NOTE 4: COVID-19 (in HUF mn) [continued]
• From the beginning of November 2021 until 30 June 2022 only the eligible borrowers can participate in the
moratorium provided that they submitted a request to their banks about their intention to stay. So, the
extension beyond October is not automatic: borrowers had to submit a notification to their bank (opt-in).
Eligible retail borrowers include private individuals whose income fell compared to the previous period,
unemployed people, fostered workers, families raising children below the age of 25 or expecting a baby, and
pensioners (for details see the relevant decree). Eligible companies shall fulfil the following criteria: more
than 25% decline in revenues in the 18 months period preceding the submission of the request to participate,
and if the company has not concluded a new subsidized loan contract since 18 March 2020.
• During the term of the one-month extension until the end of October, eligible clients could submit the
necessary documents to their banks in order to stay in the scheme until June 2022, so this one-month
lengthening could be regarded as technical.
• According to Government Decree 537/2021. (IX. 15.) published on 15 September, credit institutions shall re-
calculate the interest deferred during the period spent in the moratorium in the case of overdraft loans and
credit card exposures. The base for the re-calculation shall be the NBH’s statistical data for the average
annualized cash loan interest rate published for February 2020. The difference between the deferred interest
booked according to the original contract and the re-calculated amount shall be refunded to the borrowers by
way of crediting the borrowers’ account with the due amount.
• On 21 September 2021 the National Bank of Hungary hiked the base rate by 15 bps to 1.65%. Furthermore,
the NBH continued to gradually withdraw the government securities purchase programme.
• On 4 October 2021 the National Bank of Hungary launched the FGS Green Home Programme as part of its
green monetary policy toolkit strategy.
• On 19 October 2021 the National Bank of Hungary increased the base rate by 15 bps to 1.8%.
• On 16 November 2021 the Monetary Council of the NBH hiked the base rate by 30 bps to 2.1%. The Deputy
Governor of NBH stressed after the Monetary Council meeting that the NBH is ready to set the rate of the 1-
week central bank deposit above the level of the base rate already from 18 November. Accordingly, on 18
November the NBH raised the rate of the 1-week deposit facility to 2.5%, and the central bank accepted all
offers at the tender. Consequently, the 1-week deposit has become the effective rate for the banking sector
determining the marginal asset yields.
• On its weekly one-week deposit tender on 25 November 2021 the NBH offered an interest rate of 2.9%.
• On 30 November 2021 the NBH’s Monetary Council widened the interest rate corridor and also decided to
make it asymmetric. Accordingly, the lower bound of the corridor was raised by 45 bps and the upper one by
105 bps.
• On 2 December 2021 the NBH hiked the rate of the 1-week central bank deposit by 20 bps to 3.1%.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
34
NOTE 4: COVID-19 (in HUF mn) [continued]
• On 9 December 2021 the NBH hiked the rate of the 1-week central bank deposit by 20 bps to 3.3%.
• On 14 December 2021 the NBH’s Monetary Council raised the base rate by 30 bps to 2.4% and made a
decision to phase out both the Bond Funding for Growth programme and the government bond purchase
programme.
• On 16 December 2021 the NBH hiked the rate of the 1-week central bank deposit by 30 bps to 3.6%.
• Mr. Viktor Orbán Prime Minister announced on 22 December 2021 that the government will introduce an
interest rate cap for certain retail mortgage loans (for example whose pricing is linked to a reference rate, but
the legislation does not apply to those with longer fixation periods) for the period between 1 January and 30
June 2022. Accordingly, the affected mortgages’ reference rate cannot be higher than the relevant reference
rate as at 27 October 2021. Furthermore, banks had to inform their borrowers about the interest rate risk and
offer amendments to the contract until 31 January 2022. Details were laid down by Government Decree
782/2021 (XII. 24.) and Decree 1/2022 (I. 3.) by the Prime Minister’s Office.
• On 23 December 2021 the NBH hiked the rate of the 1-week central bank deposit by 20 bps to 3.8%.
• In its release published on 27 December 2021 the NBH said that from 1 January 2022 Hungarian credit
institutions can pay dividends and buy back shares with shareholder remuneration purposes again. Thus, the
NBH did not extend these restrictions in line with the similar step taken by the ECB at the end of September.
• On 30 December 2021 the NBH hiked the rate of the 1-week central bank deposit by 20 bps to 4.0%.
• Against the initially planned 2 pps social security contribution cut effective from July 2022, the government
reduced employers’ taxes by 4 pps already from 1 January 2022 (the 1.5% vocational training contribution
was abolished and the social contribution taxes were cut by 2.5 pps).
• On 25 January 2022 the NBH hiked the base rate by 50 bps to 2.9%.
• On 27 January 2022 the NBH hiked the rate of the 1-week central bank deposit by 30 bps to 4.3%.
• On 15 February 2022 the CSO revealed the final GDP growth figures: accordingly, in 4Q 2021 the quarterly
expansion of 2.1% was stronger than expected, lifting the annual growth rate to 7.1% in 2021 as a whole
(seasonally and working day adjusted). Mr. Mihály Varga (Minister of Finance) announced that the
government expects 5.9% growth for 2022.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
35
NOTE 4: COVID-19 (in HUF mn) [continued]
Interest rate cap
For the period between 1 January and 30 June 2022 the government introduced an interest rate cap for variable-
rate retail mortgage loans, and with its decision announced on 18 February, for housing purposes financial
leasing contracts, too. Accordingly, the affected exposures’ reference rate cannot be higher than the relevant
reference rate as at 27 October 2021.
The modification loss related to the interest rate cap for variable rate mortgage loans announced on 22 December
2021 was recognized in the Bank’s 2021 financial accounts. The extension of the interest rate cap to housing
purposes financial leasing contracts does not have a significant negative effect.
Moratorium one-off effect
In Hungary the first phase of the moratorium on loan payments was effective from 19 March 2020 to 31
December 2020. At the end of 2020 the moratorium was extended in unchanged form for the period between 1
January 2021 and 30 June 2021. Furthermore, according to Government Decree No. 317/2021. (VI. 9.) released
on 9 June 2021 the payment moratorium was extended with unchanged conditions until 30 September 2021.
Pursuant to Government Decree 536/2021. (IX. 15.) published on 15 September, the Government decided to
extend the debt repayment moratorium: the blanket moratorium was extended by an additional month, until the
end of October, in an unchanged form. Furthermore, from the beginning of November 2021 until 30 June 2022
only the eligible borrowers can participate in the moratorium provided that they submitted a request to their
banks about their intention to stay.
During the term of the moratorium OTP Bank accrues the unpaid interest in its statement of recognized income,
amongst the revenues. At the same time, due to the fact that interest cannot be charged on the unpaid interest,
and the unpaid interest will be repaid later, in the course of 2020 and 2021 altogether HUF 43.3 billion after tax
loss emerged in Hungary and Serbia altogether. Within that amount there was a -HUF 1.7 billion (after tax)
negative impact booked in December 2020 in relation to the Serbian deferral scheme, as the original interest
calculation method was changed by the local regulator (originally the compound interest method was allowed by
the law in Serbia, but charging interest on deferred interest was later retroactively disallowed by the regulator).
Loan volumes under the Hungarian payment holiday followed a declining trend till the end of October 2021,
then from November the participation dropped materially due to the changes to the structure. At the end of 2021
the total household and corporate exposures remaining under the moratorium comprised HUF 245 billion at OTP
Core and Merkantil Group, which made up 4.1% of the total gross loan portfolio of those two entities.
Participation in COVID moratorium as at 31 December 2021
Current volume in moratorium
Current participation ratio
OTP Bank
113,639
2.3%
Participation in COVID moratorium as at 31 December 2021
Current volume in moratorium
Current participation ratio
OTP Bank
1,059,428
26.2%
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
36
NOTE 4: COVID-19 (in HUF mn) [continued]
Financial assets modified during the year ended 31 December 2021 related to covid moratorium
Modification due to prolongation of deadline of covid moratoria till 30 September
Gross carrying amount before modification
668,312
Modification loss due to covid moratoria
(5,284)
Gross carrying amount after modification
663,028
Loss allowance before modification
(55,180)
Net amortised cost after modification
607,848
Modification due to prolongation of deadline of covid moratoria till 31 October
Gross carrying amount before modification
665,620
Modification loss due to covid moratoria
(1,292)
Gross carrying amount after modification
664,328
Loss allowance before modification
(58,412)
Net amortised cost after modification
605,916
In case of credit card and overdraft loans interest charged during the moratoria period should be refunded to
the debtors in amount determined as a difference between the charged interest and a premoratoria personal loan
interest at 11,99%. The Bank has managed this government measure as loan agreement modification in the
financial statements.
Gross carrying amount before modification
57,892
Modification loss due to covid moratoria
(1,983)
Gross carrying amount after modification
55,909
Loss allowance before modification
(9,234)
Net amortised cost after modification
46,675
Modification due to prolongation of deadline of covid moratoria till 30 June 2022
Gross carrying amount before modification
82,438
Modification loss due to covid moratoria
(1,614)
Gross carrying amount after modification
80,824
Loss allowance before modification
(23,516)
Net amortised cost after modification
57,308
On 24 December 2021 new regulation was issued on fixing of retail loan product’s interest, under that interest
rates of mortgage loans with variable interest shall be fixed at reference rates of 27 October 2021, predictably
till 30 June 2022.
Gross carrying amount before modification
67,108
Modification loss due to covid moratoria
(703)
Gross carrying amount after modification
66,405
Loss allowance before modification
(1,625)
Net amortised cost after modification
64,780
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
37
NOTE 5: CASH, AMOUNTS DUE FROM BANKS AND BALANCES WITH THE NATIONAL
BANK OF HUNGARY (in HUF mn)
2021
2020
Cash on hand:
In HUF
82,839
107,523
In foreign currency
21,182
18,899
104,021
126,422
Amounts due from banks and balances with National Bank of Hungary:
Within one year:
In HUF
81,512
204,942
In foreign currency
289,596
247,756
371,108
452,698
Loss allowance
(185)
-
Subtotal
474,944
579,120
Average amount of compulsory reserve
99,303
76,033
Total
375,641
503,087
Rate of the compulsory reserve
1%
1%
The Bank shall deposit compulsory reserve in a determined percent of its liabilities at NBH. Liabilities
considered in compulsory reserve calculation are as follows:
a) deposits and loans,
b) debt instruments,
c) repo transactions.
The amount of the compulsory reserve is the multiplication of the daily average of the liabilities considered in
the compulsory reserve calculation and compulsory reserve rate, which are determined by the NBH in a specific
decree. The Bank is required to complete compulsory reserve requirements in average in the second month after
the reserve calculation period, requirements shall be completed once a month on the last calendar day. The Bank
complies with the compulsory reserve requirements by the deposit of the adequate amount of cash as the
calculated compulsory reserve on the bank account at NBH in monthly average.
An analysis of the change in the loss allowance on placement losses is as follows:
2021
2020
Balance as at 1 January
-
-
Loss allowance
185
-
Closing balance
185
-
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
38
NOTE 6: PLACEMENTS WITH OTHER BANKS, NET OF ALLOWANCE FOR PLACEMENT
LOSSES (in HUF mn)
2021
2020
Within one year:
In HUF
1,388,709
905,241
In foreign currency
372,361
329,633
1,761,070
1,234,874
Over one year
In HUF
747,871
267,291
In foreign currency
65,761
39,538
813,632
306,829
Total placements
2,574,702
1,541,703
Loss allowance on placement losses
(7,490)
(5,819)
Total
2,567,212
1,535,884
An analysis of the change in the loss allowance on placement losses is as follows:
2021
2020
Balance as at 1 January
5,819
3,592
Loss allowance
20,524
12,548
Release of loss allowance
(18,911)
(10,497)
Use of loss allowance
(2)
-
FX movement
60
176
Closing balance
7,490
5,819
Interest conditions of placements with other banks (%):
2021
2020
Placements with other banks in HUF
0% - 5.9%
0% - 3.84%
Placements with other banks in foreign currency
(0.59%) - 29%
(0.76%) - 29%
Average interest of placements with other banks
1.63%
0.78%
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
39
NOTE 7: REPO RECEIVABLES (in HUF mn)
2021
2020
Within one year:
In HUF
33,710
183,656
33,710
183,656
Total gross amount
33,710
183,656
Loss allowance on repo receivables
(72)
(292)
Total repo receivables
33,638
183,364
An analysis of the change in the loss allowance on repo receivables is as follows:
2021
2020
Balance as at 1 January
292
6
Loss allowance
449
362
Release of loss allowance
(669)
(76)
Closing balance
72
292
Interest conditions of repo receivables (%):
2021
2020
Repo receivables in HUF
2%-3.2%
(0.1%) - 0.9%
Average interest of repo receivables
0.29%
0.09%
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
40
NOTE 8: FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (in HUF mn)
2021
2020
Held for trading securities:
Government bonds
30,827
6,031
Other non-interest bearing securities
1,134
1,964
Hungarian government discounted Treasury Bills
869
1,233
Corporate shares and investments
599
426
Mortgage bonds
116
-
Other securities
2,088
2,075
Subtotal
35,633
11,729
Securities mandatorily measured at fair value through profit or loss
Shares in investment funds
25,126
23,818
Bonds
-
5,342
Shares
2,935
2,776
Subtotal
28,061
31,936
Held for trading derivative financial instruments:
Foreign currency swaps
38,811
41,852
Interest rate swaps
59,097
34,256
CCIRS and mark-to-market CCIRS swaps
11,649
7,359
Other derivative transactions
73,211
33,351
Subtotal
182,768
116,818
Total
246,462
160,483
Interest conditions and the remaining maturities of securities held for trading are as follows:
2021
2020
Within one year:
variable interest
111
78
fixed interest
4,163
2,319
4,274
2,397
Over one year:
variable interest
1,544
1,355
fixed interest
28,083
5,587
29,627
6,942
Non-interest bearing securities
1,732
2,390
Total
35,633
11,729
Securities held for trading denominated in HUF
81%
71%
Securities held for trading denominated in foreign currency
19%
29%
Securities held for trading total
100%
100%
Government bonds denominated in HUF
83%
68%
Government bonds denominated in foreign currency
17%
32%
Government securities total
100%
100%
Interest rates on securities held for trading in HUF
0%-6.75%
0.5%-6.75%
Interest rates on securities held for trading in foreign currency
0%-5.75%
0.5%-6.375%
Average interest on securities held for trading
1.17%
0.63%
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
41
NOTE 8: FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (in HUF mn)
[continued]
Interest conditions and the remaining maturities of securities mandatorily measured at fair value through profit or
loss are as follows:
2021
2020
Within one year:
variable interest
-
28
Over one year:
variable interest
-
5,314
Non-interest bearing securities
28,061
26,594
Total
28,061
31,936
Securities mandatorily measured at fair value through profit or loss
denominated in HUF
67%
58%
Securities mandatorily measured at fair value through profit or loss
denominated in foreign currency
33%
42%
Securities mandatorily measured at fair value through profit or loss
total
100%
100%
Interest rates on securities mandatorily measured at fair value through profit
or loss
-
2.49%
Average interest on securities mandatorily measured at fair value through
profit or loss
-
2.49%
NOTE 9: SECURITIES AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
(in HUF mn)
2021
2020
Securities at fair value through other comprehensive income
Government bonds
278,876
488,459
Mortgage bonds
217,941
332,667
Interest bearing treasury bills
63,115
9,957
Other securities
64,870
65,136
listed securities
43,759
42,776
in HUF
2,896
2,968
in foreign currency
40,863
39,808
-non-listed securities
21,111
22,360
in HUF
15,487
16,782
in foreign currency
5,624
5,578
Subtotal
624,802
896,219
Non-trading equity instruments
-non-listed securities
17,137
15,731
in HUF
528
528
in foreign currency
16,609
15,203
17,137
15,731
Securities at fair value through other comprehensive income total
641,939
911,950
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
42
NOTE 9: SECURITIES AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
(in HUF mn) [continued]
Detailed information of the non-trading equity instruments to be measured at fair value through other
comprehensive income:
Name
Currency
2021
2020
Garantiqa
HUF
392
392
Hage / Közvil / Pénzügykut
HUF
136
136
OBS
EUR
13,221
12,081
VISA A Preferred
USD
3,388
3,122
Interest conditions and the remaining maturities of FVOCI securities can be analysed as follows:
2021
2020
Within one year:
variable interest
1,089
3,779
fixed interest
66,970
123,481
68,059
127,260
Over one year:
variable interest
71,344
101,555
fixed interest
485,398
667,404
556,742
768,959
Non-interest bearing securities
17,138
15,731
Total
641,939
911,950
FVOCI securities denominated in HUF
73%
83%
FVOCI securities denominated in foreign currency
27%
17%
FVOCI securities total
100%
100%
Interest rates on FVOCI securities denominated in HUF
1.25%-11%
0.5%-11%
Interest rates on FVOCI securities denominated in foreign currency
0%-16%
0.625%-7.25%
Average interest on FVOCI securities
2.85%
2.17%
Certain fixed-rate mortgage bonds and other securities are hedged against interest rate risk. (See Note 45.4.)
2021
2020
Net gain / (loss) reclassified from other comprehensive income to statement
of profit or loss
(26,440)
(2,008)
Fair value of the hedged securities:
Government bonds
201,530
399,441
201,530
399,441
During the year ended 31 December 2021 and 2020 the Bank didn’t sell any of equity instruments designated to
measure at fair value through other comprehensive income.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
43
NOTE 10: SECURITIES AT AMORTISED COST (in HUF mn)
2021
2020
Government bonds
2,863,259
1,947,821
Other bonds
190,155
63,159
Mortgage bonds
24,309
-
Subtotal
3,077,723
2,010,980
Loss allowance
(6,685)
(3,288)
Total
3,071,038
2,007,692
Interest conditions and the remaining maturities of securities at amortised cost can be analysed as follows:
2021
2020
Within one year:
variable interest
8,101
-
fixed interest
305,694
57,746
313,795
57,746
Over one year:
variable interest
5,122
-
fixed interest
2,758,806
1,953,234
2,763,928
1,953,234
Total
3,077,723
2,010,980
The distribution of the securities at amortised cost by currency (%):
2021
2020
Securities at amortised cost denominated in HUF
83%
99%
Securities at amortised cost denominated in foreign currency
17%
1%
Securities at amortised cost total
100%
100%
Interest rates on securities at amortised cost
0.1%-12.75%
0.5%-7%
Average interest on securities at amortised cost denominated in HUF
2.84%
2.42%
An analysis of change in the loss allowance on securities at amortised cost:
2021
2020
Balance as at 1 January
3,288
1,443
Reclassification
1,281
-
Balance as at 1 January
4,569
1,443
Loss allowance
4,404
4,820
Release of loss allowance
(2,370)
(2,977)
FX movement
82
2
Closing balance
6,685
3,288
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
44
NOTE 11: LOANS (in HUF mn)
Loans measured at fair value through profit or loss
2021
2020
Within one year
32,091
25,732
Over one year
629,921
455,205
Loans measured at fair value through profit or loss total
662,012
480,937
Loans measured at fair value through profit or loss are mandatorily measured at fair value through profit or loss.
Loans measured at amortised cost, net of allowance for loan losses
2021
2020
Within one year
2,125,908
1,793,352
Over one year
2,062,114
1,748,078
Loans at amortised cost gross total
4,188,022
3,541,430
Loss allowance on loan losses
(155,557)
(123,670)
Loans at amortised cost total
4,032,465
3,417,760
An analysis of the loan portfolio by currency (%):
2021
2020
In HUF
62%
61%
In foreign currency
38%
39%
Total
100%
100%
Interest rates of the loan portfolio mandatorily measured at fair value through profit or loss are as follows (%):
2021
2020
Loans denominated in HUF
1.5% - 9.85%
1.5% - 9.85%
Average interest on loans denominated in HUF
4.56%
4.20%
Interest rates of the loan portfolio measured at amortised cost are as follows (%):
2021
2020
Loans denominated in HUF
0%-37.5%
0%-37.5%
Loans denominated in foreign currency
(0.59%)-13%
(0.50%)-13%
Average interest on loans denominated in HUF
6.64%
6.41%
Average interest on loans denominated in foreign currency
1.48%
2.24%
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
45
NOTE 11: LOANS (in HUF mn) [continued]
For an analysis of the loan portfolio by type please see Note 36.1.
An analysis of the change in the loss allowance on loans at amortised cost is as follows:
2021
2020
Balance as at 1 January
123,670
72,066
Reclassification
(1,281)
-
Balance as at 1 January
122,389
72,066
Loss allowance
221,084
213,618
Release of loss allowance
(180,291)
(156,383)
Use of loss allowance
(6,951)
(6,228)
Partial write-off
(1,733)
(2,797)
FX movement
1,059
3,394
Closing balance
155,557
123,670
The Bank sells non-performing loans without recourse at estimated fair value to a wholly owned subsidiary, OTP
Factoring Ltd.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
46
NOTE 12: INVESTMENTS IN SUBSIDIARIES, ASSOCIATES, JOINT VENTURES AND
OTHER INVESTMENTS (in HUF mn)
2021
2020
Investments in subsidiaries:
Controlling interest
2,006,178
1,965,197
Other
16,086
8,938
Subtotal
2,022,264
1,974,135
Impairment loss
(449,256)
(425,163)
Total
1,573,008
1,548,972
Other investments contain certain securities accounted at cost. These instruments do not have a quoted market
price in an active market and whose fair value cannot be reliably measured.
Significant subsidiaries
Investments in companies in which the Bank has a controlling interest (direct) are detailed below. All companies
are incorporated in Hungary unless indicated otherwise:
2021
2020
% Held
(direct/indirect)
Gross book
value
% Held
(direct/indirect)
Gross book
value
OTP Bank JSC (Ukraine)
100%
311,390
100%
311,390
DSK Bank EAD (Bulgaria)
100%
280,692
100%
280,692
OTP banka Srbija akcionarsko drustvo Novi
Sad (Serbia)
100%
262,759
100%
131,164
OTP banka Hrvatska d.d. (Croatia)
100%
205,349
100%
205,349
OTP Bank Romania S.A. (Romania)
100%
167,764
100%
133,987
OTP Mortgage Bank Ltd.
100%
154,294
100%
154,294
SKB Banka d.d. Ljubljana (Slovenia)
100.00%
107,689
100%
107,689
JSC "OTP Bank" (Russia)
98%
74,337
98%
74,335
Crnogorska komercijalna banka a.d.
(Montenegro)
100%
72,784
100%
72,784
LLC Alliance Reserve (Russia)
100%
50,074
100%
50,074
Air-Invest Llc.
100%
39,248
100%
36,748
OTP Holding Malta Ltd.
100%
32,359
100%
32,359
Balansz Private Open-end Investment Fund
100%
29,150
100%
29,150
Bank Center No. 1. Ltd.
100%
26,063
100%
26,063
OTP Factoring Ltd.
100%
25,411
100%
25,411
OTP banka Srbija a.d. (Serbia)
-
-
100%
127,140
Other
166,815
166,568
Total
2,006,178
1,965,197
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
47
NOTE 12: INVESTMENTS IN SUBSIDIARIES, ASSOCIATES, JOINT VENTURES AND
OTHER INVESTMENTS (in HUF mn) [continued]
An analysis of the change in the impairment loss is as follows:
2021
2020
Balance as at 1 January
425,163
427,770
Impairment loss for the period
59,132
10,052
Reversal of impairment loss
(31,712)
(10)
Use of impairment loss
(3,327)
(12,649)
Closing balance
449,256
425,163
The Bank decided that the recoverable amount is determined based on fair value less cost of disposal. The Bank
prepared impairment tests of the subsidiaries based on two different net present value calculation methods that
show the same result; however they represent different economical logics. On one hand is the discount cash flow
method (“DCF”) that calculates the value of the subsidiaries by discounting their expected cash flow; on the
other hand the economic value added (“EVA”) method estimates the value of the subsidiaries from the initial
invested capital and the present value of the economic profit that the companies are expected to generate in the
future. Applying the EVA method was more practically than DCF method because it gives a more realistic
picture about how the explicit period and the residual value can contribute to the value of the company.
The Bank, in its strategic plan, has taken into consideration the effects of the present global economic situation,
the cautious recovery of economic situation and outlook, the associated risks and their possible effect on the
financial sector as well as the current and expected availability of wholesale funding.
An analysis of the impairment loss by significant subsidiaries is as follows:
2021
2020
OTP Bank JSC (Ukraine)
207,397
207,397
OTP Bank Romania S.A. (Romania)
77,962
38,416
OTP Mortgage Bank Ltd.
65,096
65,096
OTP banka Srbija a.d. (Serbia)
43,477
53,383
OTP Life Annuity Ltd.
10,969
10,969
Air-Invest Ltd.
10,491
10,491
Monicomp Ltd.
8,632
-
Crnogorska komercijalna banka a.d. (Montenegro)
6,697
23,324
Balansz Private Open-end Investment Fund
5,566
-
OTP Real Estate Ltd.
5,557
5,557
R.E. Four d.o.o. (Serbia)
3,763
3,763
OTP Buildings s.r.o (Romania)
-
3,327
Total
445,607
421,723
Dividend income from significant subsidiaries and shares held-for-trading and shares measured at fair
value through other comprehensive income is as follows:
2021
2020
OTP Factoring Ltd.
44,000
45,463
OTP Bank JSC (Ukraine)
12,853
-
OTP banka dioničko društvo (Croatia)
12,244
-
Inga Kettő Llc.
11,000
-
OTP Holding Malta Ltd.
5,531
4,823
OTP Real Estate Investment Fund Management Ltd.
3,500
4,000
Monicomp Ltd.
1,173
3,800
Other
4,741
2,827
Subtotal
95,042
60,913
Dividend from shares held-for-trading
3,844
8
Dividend from shares fair value through other comprehensive income
151
52
Total
99,037
60,973
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
48
NOTE 12: INVESTMENTS IN SUBSIDIARIES, ASSOCIATES, JOINT VENTURES AND
OTHER INVESTMENTS (in HUF mn) [continued]
Significant associates and joint ventures
The main figures of the Bank’s indirectly owned associates and joint ventures at cost
1
:
As at 31 December 2021
List of associated entities
Carrying
amount
Ownership
of OTP
Bank
Profit after
tax
Country /
Headquarter
Activity
OTP Kockázati Fund I.
526
44.12%
(52)
Hungary /Budapest
Trusts, funds and similar financial entities
OTP-DayOne Magvető Fund
288
22.00%
13
Hungary /Budapest
Trusts, funds and similar financial entities
D-ÉG Thermoset Ltd. 'u.l.'
-
46.99%
-
Hungary / Dunaújváros
Wholesale of hardware, plumbing and heating equipment and supplies
Company for Cash Services AD
392
25.00%
(183)
Bulgaria / Sofia
Other financial service activities, exc. insurance and pension funding
Edrone spółka z ograniczoną
odpowiedzialnością
779
17.34%
(293)
Poland / Krakow
Computer programming activities
Graboplast Closed Co. Plc.
700
7.00%
n.a.
Hungary / Győr
Manufacture of builders’ ware of plastic
NovaKid Inc.
2,006
4.17%
(4,621)
USA / San Francisco
Online kids English learning platform operator
Banzai Cloud Closed Co. Plc.
374
17.42%
n.a.
Hungary /Budapest
Computer programming activities
ClodeCool Ltd.
1,770
20.15%
1
Hungary /Budapest
Other education n.e.c.
Pepita.hu Closed Co. Plc.
516
34.00%
(132)
Hungary / Szeghalom
Retail sale via mail order houses or via Internet
Seon Holdings Ltd.
4,756
23.86%
(4)
UK / London
Computer programming activities
Starschema Ltd.
3,944
36.19%
n.a.
Hungary /Budapest
Computer consultancy activities
VCC Live Group Closed Co. Plc.
1,672
49.56%
(203)
Hungary /Budapest
Computer programming activities
Virtual Solutaion Ltd.
-
8.33%
n.a.
Hungary /Budapest
Computer programming activities
Yieldigo s.r.o.
76
1.97%
(168)
Czech Republic/Prague
Computer programming activities
Szallas.hu Closed Co. Plc.
2
8,809
51.19%
1,278
Hungary / Miskolc
Web portals
Cursor Insight LTD
146
6.75%
(247)
UK / London
Computer programming activities
Fabetker Ltd.
1
20.48%
132
Hungary / Nádudvar
Manufacture of concrete products for construction purposes
OneSoil Ag.
318
3.72%
(1,058)
Switzerland / Zurich
Computer programming activities
Packhelp Spółka Akcyjna
2,160
1.00%
(3,038)
Poland / Warsaw
Manufacture of corrugated paper and paperboard
and of containers of paper and paperboard
PHOENIX PLAY Invest closed Co. Plc.
3,081
21.69%
(1)
Hungary /Budapest
Activities of holding companies
ALGORITHMIQ Invest Closed Co. Plc.
8,996
21.69%
792
Hungary /Budapest
Activities of holding companies
NGY Propertiers Investment SRL
12,331
14.54%
(22,567)
Romania / Bucharest
Renting and operating of own or leased real estate
1
Based on unaudited financial statements.
2
The Group does not control the entity even though it holds more than half of the voting rights.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
49
NOTE 12: INVESTMENTS IN SUBSIDIARIES, ASSOCIATES, JOINT VENTURES AND
OTHER INVESTMENTS (in HUF mn) [continued]
Significant associates and joint ventures [continued]
As at 31 December 2020
List of associated entities
Carrying
amount
Ownership
of OTP
Bank
Profit after
tax
Country / Headquarter
Activity
OTP Kockázati Fund I.
531
44.12%
(2)
Hungary /Budapest
Trusts, funds and similar financial entities
OTP-DayOne Magvető Fund
674
22.00%
(37)
Hungary /Budapest
Trusts, funds and similar financial entities
D-ÉG Thermoset Ltd. 'u.l.'
-
46.99%
-
Hungary / Dunaújváros
Wholesale of hardware, plumbing and heating equipment and supplies
Company for Cash Services AD
392
25.00%
(254)
Bulgaria / Sofia
Other financial service activities,
except insurance and pension funding n.e.c.
Edrone spółka z ograniczoną
odpowiedzialnością
497
17.34%
(79)
Poland / Krakow
Computer programming activities
Graboplasr Closed Co. Plc.
711
7.00%
(1,349)
Hungary / Győr
Manufacture of builders’ ware of plastic
NovaKid Inc.
497
4.17%
(398)
USA / San Francisco
Online kids English learning platform operator
Banzai Cloud Closed Co. Plc.
1,008
17.42%
13,430
Hungary /Budapest
Computer programming activities
ClodeCool Ltd.
1,797
20.15%
132
Hungary /Budapest
Other education n.e.c.
Pepita.hu Closed Co. Plc.
575
34.00%
3
Hungary / Szeghalom
Retail sale via mail order houses or via Internet
Seon Holdings Ltd.
378
23.86%
37
UK / London
Computer programming activities
Starschema Ltd.
1,310
36.19%
454
Hungary /Budapest
Computer consultancy activities
Tresorit S.A.
1,501
7.77%
232
Luxembourg/Luxembourg
Activities of holding companies
VCC Live Group Closed Co. Plc.
1,599
49.56%
(58)
Hungary /Budapest
Computer programming activities
Virtual Solutaion Ltd.
72
8.33%
(86)
Hungary /Budapest
Computer programming activities
Yieldigo s.r.o.
79
1.97%
103
Czech Republic / Prague
Computer programming activities
Szallas.hu Closed Co. Plc.
1
7,456
51.19%
595
Hungary / Miskolc
Web portals
1
The Group does not control the entity even though it holds more than half of the voting rights.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
50
NOTE 12: INVESTMENTS IN SUBSIDIARIES, ASSOCIATES, JOINT VENTURES AND
OTHER INVESTMENTS (in HUF mn) [continued]
Significant event related to investments
The Romanian Court of Registration registered a capital increase at OTP Bank Romania SA, the Romanian
subsidiary of OTP Bank. Accordingly, the registered capital of the Romanian subsidiary of OTP Bank was
increased to RON 2,079,253,200 from RON 1,829,253,120.
TP Bank signed a share sale and purchase agreement on purchasing 100% shareholding of Nova KBM d.d. and
its subsidiaries, which are 80% owned by funds managed by affiliates of Apollo Global Management, Inc. and
20% by EBRD. With a market share of 20.5% by total assets as of December 2020, Nova KBM d.d. is the 2nd
largest bank in the Slovenian banking market and as a universal bank it has been active in the retail and
corporate segments as well.
Serbian Court of Registration registered a capital increase at OTP banka Srbija a.d. Novi Sad, the Serbian
subsidiary of OTP Bank. Accordingly, the registered capital of the Serbian subsidiary of OTP Bank was
increased to RSD 56,830,752,260 from RSD 55,330,780,140.
OTP Bank signed a non-binding Memorandum of Agreement regarding the potential acquisition of the majority
stake of Ipoteka Bank and its subsidiaries with the Ministry of Finance of the Republic of Uzbekistan. Ipoteka
Bank is the fifth largest bank in Uzbekistan, with a market share of 8.5% based on total assets at the end of July
2021, with more than 1.2 million retail customers and a large corporate clientele.
OTP Bank signed an acquisition agreement with Alpha International Holdings Single Member S.A. on
purchasing 100% shareholding of Alpha Bank SH.A., the Albanian subsidiary of the Greek Alpha Bank S.A.
The purchase price has been agreed at Euro 55 million.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
51
NOTE 13: PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS (in HUF mn)
For the year ended 31 December 2021
Intangible assets
Property
Office equipment
and vehicles
Vehicles
Construction in
progress
Right of use
assets
Total
Cost
Balance as at 1 January
164,875
72,277
93,878
160
9,421
22,443
363,054
Additions
52,130
4,074
13,434
87
20,394
8,675
98,794
Disposals
(28,152)
(1,845)
(3,843)
(48)
(20,390)
-
(54,278)
Balance as at 31 December
188,853
74,506
103,469
199
9,425
31,118
407,570
Depreciation and Amortization
Balance as at 1 January
107,236
25,789
71,899
74
-
8,964
213,962
Charge for the year
23,032
3,284
9,190
25
-
5,161
40,692
Disposals
(3,576)
(757)
(3,685)
(37)
-
(238)
(8,293)
Balance as at 31 December
126,692
28,316
77,404
62
-
13,887
246,361
Net book value
Balance as at 1 January
57,639
46,488
21,979
86
9,421
13,479
149,092
Balance as at 31 December
62,161
46,190
26,065
137
9,425
17,231
161,209
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
52
NOTE 13: PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS (in HUF mn) [continued]
For the year ended 31 December 2020
Intangible assets
Property
Office equipment
and vehicles
Vehicles
Construction in
progress
Right of use
assets
Total
Cost
Balance as at 1 January
139,026
69,380
87,235
126
10,523
17,827
324,117
Additions
54,651
3,858
10,766
35
13,556
4,764
87,630
Disposals
(28,802)
(961)
(4,123)
(1)
(14,658)
(148)
(48,693)
Balance as at 31 December
164,875
72,277
93,878
160
9,421
22,443
363,054
Depreciation and Amortization
Balance as at 1 January
85,744
22,948
66,506
56
-
4,220
179,474
Charge for the year
21,492
3,192
9,495
19
-
4,750
38,948
Disposals
-
(351)
(4,102)
(1)
-
(6)
(4,460)
Balance as at 31 December
107,236
25,789
71,899
74
-
8,964
213,962
Net book value
Balance as at 1 January
53,282
46,432
20,729
70
10,523
13,607
144,643
Balance as at 31 December
57,639
46,488
21,979
86
9,421
13,479
149,092
The Bank has no intangible assets with indefinite useful life.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
53
NOTE 14: INVESTMENT PROPERTIES (in HUF mn)
For the year ended 31 December 2021 and 2020, respectively
2021
2020
Cost
Balance as at 1 January
2,577
3,061
Additions result from subsequent expenditure
2,640
38
Disposals
(204)
(522)
Balance as at 31 December
5,013
2,577
Depreciation and Amortization
Balance as at 1 January
641
680
Charge for the period
92
51
Disposals
(48)
(90)
Balance as at 31 December
685
641
Net book value
Balance as at 1 January
1,936
2,381
Balance as at 31 December
4,328
1,936
According to the opinion of the Management there is no significant difference between the fair value and the
carrying value of these properties.
Income and Expenses
2021
2020
Rental income
6
6
Depreciation
92
49
NOTE 15: FAIR VALUE OF DERIVATIVE FINANCIAL ASSETS DESIGNATED AS HEDGE
ACCOUNTING (in HUF mn)
Positive fair value of derivative financial assets designated as hedge accounting:
2021
2020
Interest rate swaps designated as fair value hedge
13,276
637
CCIRS designated as fair value hedge
5,471
6,180
Interest rate swaps designated as cash flow hedge
(1,020)
-
Total
17,727
6,817
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
54
NOTE 16: OTHER ASSETS
1
(in HUF mn)
2021
2020
Other financial assets
Receivables from OTP Employee Stock Ownership Program (OTP ESOP)
84,304
53,338
Prepayments and accrued income
16,391
14,721
Receivables from investment services
16,074
9,472
Stock exchange deposit
11,643
9,667
Trade receivables
10,519
9,731
Receivables from card operations
10,423
8,453
Accrued day one gain of loans provided at below-market interest
-
14,465
Receivables from suppliers
5,812
5,885
Other
3,729
9,375
158,895
135,107
Loss allowance
(5,148)
(7,928)
Other financial assets total
153,747
127,179
Other non-financial assets
Prepayments and accrued income
44,411
17,732
Receivable related to Hungarian Government subsidies
14,281
10,622
Other
12,563
14,743
71,255
43,097
Provision for impairment on other assets
(514)
(482)
Other non-financial assets total
70,741
42,615
Total
224,488
169,794
An analysis of the movement in the loss allowance on other financial assets is as follows:
2021
2020
Balance as at 1 January
7,928
5,646
Charge for the period
3,888
6,663
Release of loss allowance
(5,972)
(3,971)
Use of loss allowance
(707)
(537)
FX movement
11
127
Balance as at 31 December
5,148
7,928
An analysis of the movement in the loss allowance on other non-financial assets is as follows:
2021
2020
Balance as at 1 January
482
464
Charge for the period
86
81
Release of provision
(74)
(67)
FX movement
20
4
Balance as at 31 December
514
482
1
Other assets are expected to be recovered or settled no more than twelve months after the reporting period.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
55
NOTE 17: AMOUNTS DUE TO BANKS AND DEPOSITS FROM THE NATIONAL BANK OF
HUNGARY AND OTHER BANKS (in HUF mn)
2021
2020
Within one year:
In HUF
354,647
172,799
In foreign currency
81,550
41,643
436,197
214,442
Over one year:
In HUF
588,161
457,882
In foreign currency
26,845
94,653
615,006
552,535
Subtotal
1,051,203
766,977
Total
1,051,203
766,977
Interest rates on amounts due to banks and deposits from the NBH and other banks are as follows (%):
2021
2020
Within one year:
In HUF
(2.4%) - 4.5%
0%-20%
In foreign currency
(2.4%) - 8.5%
(0.56%)-0.26%
Over one year:
In HUF
(2.4%) - 1.3%
(2.4%)-1.43%
In foreign currency
(2.4%) - 1.5%
2.4%)-4.84%
Average interest on amounts due to banks in HUF
1.26%
0.72%
Average interest on amounts due to banks in foreign currency
1.14%
1.42%
NOTE 18: REPO LIABILITIES (in HUF mn)
2021
2020
Within one year:
In HUF
49,726
-
49,726
-
Over one year:
In HUF
-
73
In foreign currency
36,854
109,539
36,854
109,612
Subtotal
86,580
109,612
Total
86,580
109,612
Interest rates on repo liabilities are as follows (%):
2021
2020
Within one year:
In HUF
1.5% - 2.8%
-
Over one year:
In foreign currency
(0.35%)
0.63%-3.85%
Average interest on repo liabilities in HUF
11.67%
1.21%
Average interest on repo liabilities in foreign currency
0.67%
1.05%
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
56
NOTE 19: DEPOSITS FROM CUSTOMERS (in HUF mn)
2021
2020
Within one year:
In HUF
7,823,118
6,412,897
In foreign currency
2,079,643
1,438,255
9,902,761
7,851,152
Over one year:
In HUF
45,771
44,583
45,771
44,583
Subtotal
9,948,532
7,895,735
Interest rates on deposits from customers are as follows (%):
2021
2020
Within one year in HUF
(2.48%)-7.96%
(4.58%)-7.96%
Over one year in HUF
0.01%-2.4%
0.01%-0.4%
In foreign currency
(0.6%)-17.2%
(0.58%)-15.5%
Average interest on deposits from customers in HUF
0.16%
(0.07%)
Average interest on deposits from customers in foreign currency
0.01%
(0.04%)
An analysis of deposits from customers by type, not including accrued interest, is as follows:
2021
2020
Retail deposits
4,475,933
45%
3,840,950
49%
Household deposits
4,475,933
45%
3,840,950
49%
Corporate deposits
5,472,599
55%
4,054,785
51%
Deposits to medium and large corporates
4,639,198
47%
3,301,434
42%
Municipality deposits
833,401
8%
753,351
10%
Total
9,948,532
100%
7,895,735
100%
NOTE 20: LIABILITIES FROM ISSUED SECURITIES (in HUF mn)
2021
2020
Within one year:
In HUF
12,048
11,115
In foreign currency
-
1,356
12,048
12,471
Over one year:
In HUF
10,105
15,964
10,105
15,964
Total
22,153
28,435
Interest rates on liabilities from issued securities are as follows (%):
2021
2020
Issued securities denominated in HUF
0%-1.7%
0%-1.7%
Issued securities denominated in foreign currency
-
0.01%-1.11%
Average interest on issued securities denominated in HUF
4.9%
1.03%
Average interest on issued securities denominated in foreign currency
-
1.12%
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
57
NOTE 20: LIABILITIES FROM ISSUED SECURITIES (in HUF mn) [continued]
Term Note Program in the value of HUF 200 billion for the year of 2021/2022
On 28 May 2021 the Bank initiated term note program in the value of HUF 200 billion with the intention of
issuing registered dematerialized bonds in public. The NBH approved on 8 July 2021 the prospectus of Term
Note Program. The prospectus is valid for 12 months following the disclosure.
The Issuer can initiate to introduce the bonds issued under the program to the Hungarian and to other stock
exchanges without any obligations.
Term Note Program in the value of HUF 200 billion for the year of 2020/2021
On 21 April 2020 the Bank initiated term note program in the value of HUF 200 billion with the intention of
issuing registered dematerialized bonds in public. The NBH approved on 9 July 2020 the prospectus of Term
Note Program and the disclosure as at 10 July 2020. The prospectus is valid for 12 months following the
disclosure.
The Issuer can initiate to introduce the bonds issued under the program to the Hungarian and to other stock
exchanges without any obligations.
Hedge accounting
Certain issued structured securities are hedged by the Bank with interest rate swaps (“IRS”) which exchange the
fixed and floating interest rate with the interest rate of the securities between the parties at a notional amount that
equals the nominal amount of the hedged securities. These are considered as fair value hedge relationships as
they cover the interest rate risk arising from the coupons of the hedged securities. OTP Bank does not intend to
be exposed to the risk embedded in the structured bonds, consequently as part of interest rate swap transaction
the structured interest payments are swapped to floating interest rate. This hedging relationship meets all of the
following hedge effectiveness requirements:
• there is an economic relationship between the hedged item and the hedging instrument
• the effect of credit risk does not dominate the value changes that result from that economic relationship
• the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged
item that the Bank actually hedges and the quantity of the hedging instrument that the Bank actually
uses to hedge that quantity of hedged item
The cash-flows of the fixed rate securities issued by the Bank are exposed to the changes in the HUF/EUR
foreign exchange rate and the volatility of the quoted interest rates of EUR and HUF. The interest rate risk and
foreign exchange risk related to these securities are hedged with EUR and HUF IRS transactions, where the
fixed interests were swapped to payments linked to 3 month HUF BUBOR and EURIBOR, resulting in a
decrease in the interest rate and foreign exchange exposure of issued securities.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
58
NOTE 20: LIABILITIES FROM ISSUED SECURITIES (in HUF mn) [continued]
Issued securities denominated in HUF as at 31 December 2021
Name
Date of
issuance
Maturity
Nominal value
in HUF million
Amortised cost in HUF
million
Interest
conditions
Hedged
1
OTP_DK_22/II
29/05/2020
31/05/2022
3,173
3,164
discount
2
OTPRF2022A
22/03/2012
23/03/2022
2,321
2,513
indexed
1.70
hedged
3
OTP_DK_25/3
31/05/2021
31/05/2025
1,216
1,138
discount
4
OTPRF2022B
22/03/2012
23/03/2022
934
1,011
indexed
1.70
hedged
5
OTP_DK_22/I
15/12/2018
31/05/2022
993
985
discount
6
OTP_DK_23/II
29/05/2020
31/05/2023
997
981
discount
7
OTPRF2023A
22/03/2013
24/03/2023
899
977
indexed
1.70
hedged
8
OTPRF2022E
29/10/2012
31/10/2022
862
933
indexed
1.70
hedged
9
OTP_DK_24/3
31/05/2021
31/05/2024
883
848
discount
10
OTPRF2022F
28/12/2012
28/12/2022
708
773
indexed
1.70
hedged
11
OTP_DK_27/II
31/05/2021
31/05/2027
795
703
discount
12
OTP_DK_23/I
15/12/2018
31/05/2023
717
694
discount
13
OTP_DK_26/II
31/05/2021
31/05/2026
707
644
discount
14
OTP_DK_24/II
29/05/2020
31/05/2024
592
573
discount
15
OTP_DK_28/I
31/05/2021
31/05/2028
669
572
discount
16
OTP_DK_25/II
29/05/2020
31/05/2025
592
564
discount
17
OTPX2022B
18/07/2012
18/07/2022
164
549
indexed
1.70
hedged
18
OTP_DK_24/I
30/05/2019
31/05/2024
426
400
discount
19
OTP_DK_26/I
29/05/2020
31/05/2026
392
366
discount
20
OTPX2023A
22/03/2013
24/03/2023
312
366
indexed
1.70
hedged
21
OTPX2024B
10/10/2014
16/10/2024
295
336
indexed
0.70
hedged
22
OTP_DK_29/I
31/05/2021
31/05/2029
403
332
discount
23
OTPRF2022D
28/06/2012
28/06/2022
286
324
indexed
1.70
hedged
24
OTPX2022C
29/10/2012
28/10/2022
177
317
indexed
1.70
hedged
25
OTPX2022D
28/12/2012
27/12/2022
238
290
indexed
1.70
hedged
26
OTPX2024A
18/06/2014
21/06/2024
241
277
indexed
1.30
hedged
27
OTPX2024C
15/12/2014
20/12/2024
242
275
indexed
0.60
hedged
28
OTPX2023B
28/06/2013
26/06/2023
198
272
indexed
0.60
hedged
29
OTPRF2022C
28/06/2012
28/06/2022
209
266
indexed
1.70
hedged
30
OTPX2022A
22/03/2012
23/03/2022
175
236
indexed
-
hedged
31
OTP_DK_25/I
30/05/2019
31/05/2025
104
94
discount
32
OTP_DK_27/I
29/05/2020
31/05/2027
95
87
discount
33
OTP_DK_30/I
31/05/2021
31/05/2030
104
82
discount
Other
211
211
indexed
Subtotal issued securities in HUF
21,330
22,153
Total
21,330
22,153
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
59
NOTE 20: LIABILITIES FROM ISSUED SECURITIES (in HUF mn) [continued]
Issued securities denominated in foreign currency as at 31 December 2020
Name
Date of
issuance
Maturity
Currency
Nominal
value in FX
million
Nominal
value in
HUF
million
Amortised
cost in FX
million
Amortised
cost in HUF
million
Interest
conditions
(in % actual)
hedged
1
OTP_VK1_21/1
20/02/2020
20/02/2021
USD
1.39
414
1.39
414
variable
0.01
2
OTP_VK1_21/2
02/04/2020
02/04/2021
USD
1.24
370
1.24
370
variable
0.01
3
OTP_VK1_21/3
14/05/2020
14/05/2021
USD
1.18
351
1.18
351
variable
0.01
4
OTP_VK1_21/4
18/06/2020
18/06/2021
USD
0.74
221
0.74
221
variable
0.01
Subtotal issued securities in foreign currency
4.55
1,356
4.55
1,356
Issued securities denominated in HUF as at 31 December 2020
Name
Date of
issuance
Maturity
Nominal value
in HUF million
Amortised cost in HUF
million
Interest
conditions
Hedged
1
OTP_DK_21/I
15/12/2018
31/05/2021
3,520
3,501
discount
2
OTP_DK_22/II
29/05/2020
31/05/2022
3,175
3,133
discount
3
OTPRF2021B
20/10/2011
25/10/2021
2,894
2,954
indexed
-
hedged
4
OTPRF2021A
05/07/2011
13/07/2021
2,607
2,807
indexed
-
hedged
5
OTPRF2022A
22/03/2012
23/03/2022
2,065
1,920
indexed
1.70
hedged
6
OTP_DK_23/II
29/05/2020
31/05/2023
997
970
discount
7
OTP_DK_22/I
15/12/2018
31/05/2022
993
965
discount
8
OTPRF2022B
22/03/2012
23/03/2022
831
772
indexed
1.70
hedged
9
OTPRF2023A
22/03/2013
24/03/2023
787
740
indexed
1.70
hedged
10
OTPRF2022E
29/10/2012
31/10/2022
761
715
indexed
1.70
hedged
11
OTP_DK_23/I
15/12/2018
31/05/2023
717
679
discount
12
OTPRF2022F
28/12/2012
28/12/2022
623
592
indexed
1.70
hedged
13
OTP_DK_24/II
29/05/2020
31/05/2024
592
566
discount
14
OTP_DK_25/II
29/05/2020
31/05/2025
592
555
discount
15
OTPRF2021C
21/12/2011
30/12/2021
527
544
indexed
-
hedged
16
OTPX2022B
18/07/2012
18/07/2022
172
440
indexed
1.70
hedged
17
OTP_DK_24/I
30/05/2019
31/05/2024
426
390
discount
18
OTPRF2021D
21/12/2011
30/12/2021
372
381
indexed
-
hedged
19
OTPX2021B
17/06/2011
21/06/2021
245
370
indexed
-
hedged
20
OTP_DK_26/I
29/05/2020
31/05/2026
392
361
discount
21
OTPX2023A
22/03/2013
24/03/2023
324
327
indexed
1.70
hedged
22
OTPX2021D
21/12/2011
27/12/2021
259
325
indexed
-
hedged
23
OTPX2022D
28/12/2012
27/12/2022
248
299
indexed
1.70
hedged
24
OTPX2024B
10/10/2014
16/10/2024
295
284
indexed
0.70
hedged
25
OTPRF2022D
28/06/2012
28/06/2022
260
251
indexed
1.70
hedged
26
OTPX2021A
01/04/2011
01/04/2021
183
246
indexed
-
hedged
27
OTPX2024A
18/06/2014
21/06/2024
241
237
indexed
1.30
hedged
28
OTPX2022C
29/10/2012
28/10/2022
201
233
indexed
1.70
hedged
29
OTPX2024C
15/12/2014
20/12/2024
242
232
indexed
0.60
hedged
30
OTPX2023B
28/06/2013
26/06/2023
198
225
indexed
0.60
hedged
31
OTPX2022A
22/03/2012
23/03/2022
201
214
indexed
-
hedged
32
OTPRF2022C
28/06/2012
28/06/2022
190
196
indexed
1.70
hedged
33
OTPX2021C
19/09/2011
24/09/2021
231
192
indexed
-
hedged
34
OTP_DK_25/I
30/05/2019
31/05/2025
104
91
discount
35
OTP_DK_27/I
29/05/2020
31/05/2027
95
85
discount
36
OTPRF2021E
21/12/2011
30/12/2021
76
74
indexed
-
hedged
37
Other
213
213
Subtotal issued securities in HUF
26,849
27,079
Total
28,205
28,435
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
60
NOTE 21: FINANCIAL LIABILITIES DESIGNATED AS FAIR VALUE THROUGH PROFIT OR
LOSS (in HUF mn)
2021
2020
Within one year:
In HUF
1,784
2,010
1,784
2,010
Over one year:
In HUF
18,349
23,892
18,349
23,892
Total
20,133
25,902
Contractual amount outstanding
21,479
23,332
Interest rates on financial liabilities designated as fair value through profit or loss are as follows (%):
2021
2020
Within one year:
In HUF
0.46%-2.46%
0.51% - 2.5%
Over one year:
In HUF
0.01%-2.9%
0% - 2.5%
Average interest on amounts due to banks in HUF
2.15%
2.46%
Certain MFB refinanced loan receivables are categorised as fair value through profit or loss based on SPPI test.
Related refinancing loans at the liability side are categorised as fair value through profit or loss based on fair
value option due to accounting mismatch as provided by the IFRS 9 standard.
NOTE 22: HELD FOR TRADING DERIVATIVE FINANCIAL LIABILITIES (in HUF mn)
Negative fair value of held for trading derivative financial liabilities by deal types:
2021
2020
Interest rate swaps
78,066
28,812
Foreign currency swaps
45,884
34,327
CCIRS and mark-to-market CCIRS
7,786
7,285
Other derivative contracts
60,525
29,563
Total
192,261
99,987
NOTE 23: FAIR VALUE OF DERIVATIVE FINANCIAL LIABLITIES DESIGNATED AS
HEDGE ACCOUNTING (in HUF mn)
Fair value of derivative financial liabilities designated as hedge accounting is detailed as follows:
2021
2020
IRS designated as fair value hedge
5,747
5,266
CCIRS designated as fair value hedge
5,325
5,865
IRS designated as cash flow hedge
7,618
(8,027)
Total
18,690
3,104
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
61
NOTE 24: OTHER LIABILITIES
1
AND PROVISIONS (in HUF mn)
2021
2020
Reclassified
Other financial liabilities
Liabilities from investment services
87,582
62,490
Accrued expenses
27,546
15,473
Accounts payable
18,754
24,121
Liabilities due to short positions
16,904
9,131
Liabilities from customer's credit card payments
14,574
11,195
Accrued day one gain of loan liabilities at below-market interest
-
14,391
Other
11,383
13,249
Other financial liabilities total
176,743
150,050
Other non-financial liabilities
Technical accounts
41,186
37,304
Current income tax payable
10,080
8,216
Social contribution
4,516
3,746
Accrued expenses
3,062
2,902
Other
2,850
1,309
Other non-financial liabilities total
61,694
53,477
Other liabilities total
238,437
203,527
The provision on other liabilities, off-balance sheet commitments and contingent liabilities are detailed as
follows:
2021
2020
Provision for losses on other off-balance sheet commitments and contingent
liabilities
17,768
17,490
Provisions in accordance with IFRS 9
17,768
17,490
Provision for litigation
259
199
Provision for retirement pension and severance pay
975
1,300
Provision on other long-term employee benefits
-
723
Provision on other liabilities
2,525
194
Provisions in accordance with IAS 37
3,759
2,416
Total
21,527
19,906
Movements in the provision for losses on commitments and contingent liabilities in accordance with IFRS 9 can
be summarized as follows:
2021
2020
Opening balance
17,490
14,288
Provision for the period
47,626
56,863
Release of provision for the period
(47,496)
(54,044)
FX revaluation
148
383
Closing balance
17,768
17,490
Movements in the provision for losses on commitments and contingent liabilities in accordance with IAS 37 can
be summarized as follows:
2021
2020
Opening balance
2,416
2,508
Provision for the period
14,286
20,970
Release of provision
(11,608)
(21,062)
Use of provision
(1,335)
-
Closing balance
3,759
2,416
1
Other liabilities are expected to be recovered or settled no more than twelve months after the reporting period.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
62
NOTE 25: SUBORDINATED BONDS AND LOANS (in HUF mn)
2021
2020
Within one year
In foreign currency
2,841
2,972
Over one year:
In foreign currency
268,935
301,271
Total
271,776
304,243
Interest rates on subordinated bonds and loans are as follows (%):
2021
2020
Subordinated bonds and loans denominated in foreign currency
2.5%-2.9%
2.5%-2.9%
Average interest on subordinated bonds and loans denominated in foreign currency
2.74%
2.85%
Subordinated loans and bonds are detailed as follows as at 31 December 2021:
Type
Nominal
value
Date of
issuance
Date of
maturity
Issue price
Interest conditions
Current
interest rate
Subordinated
bond
EUR 231
million
7 November
2006
Perpetual
99.375%
Three-month EURIBOR +
3%, variable (payable
quarterly)
2.428%
Subordinated
bond
EUR 500
million
15 July
2019
15 July
2029
99.738%
Fixed 2.875% annual in the
first 5 years and callable
after 5 years, variable after
year 5 (payable annually)
calculated as a sum of the
initial margin (320 basis
point) and the 5 year mid-
swap rate prevailing at the
and of the 5 year.
2.875%
NOTE 26: SHARE CAPITAL (in HUF mn)
2021
2020
Authorized, issued and fully paid:
Ordinary shares
28,000
28,000
The nominal value of the shares is HUF 100 per shares. All of the shares are ordinary shares representing the
same rights to the shareholders. Furthermore there are no restrictions on the distribution of dividends and the
repayment of capital.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
63
NOTE 27: RETAINED EARNINGS AND RESERVES (in HUF mn)
Based on the instructions of Act C of 2000 on accounting (“Act on Accounting”) financial statements of the
Bank are prepared in accordance with IFRS as issued by the IASB as adopted by the EU.
In 2021, the Bank did not pay dividend based on the earlier NBH warnings issued due to covid moratoria. In
2022 dividend of HUF 119 billion from the profit of the years 2019 and 2020 and HUF 1 billion from the profit
of the year 2021 (totally HUF 120 billion) are expected to be proposed by the Management, which means HUF
425,89 (for the year 2019 and 2020) and HUF 3,57 (for the year 2021) dividend per share payable to
shareholders. In the opinion of the Management dividend is still considered to be payable, which will be decided
on the Bank’s Board meeting in March taken in consideration the Russian-Ukrainian conflict.
Based on paragraph 114/B of Act on Accounting Equity Correlation Table is prepared and disclosed as a part of
the explanatory notes for the reporting date by the Bank.
On 19 October 2006 the Bank sold 14.5 million Treasury shares owned by OTP Group through an issue of
Income Certificates Exchangeable for Shares ("ICES"). Within the transaction 10 million shares owned by OTP
Bank and 4.5 million OTP shares owned by OTP Fund Management Ltd. were sold during the underwriting
period of ICES on the weighted average market price (HUF 7,080) of the Budapest Stock Exchange. The shares
have been purchased by Opus Securities S.A. ("OPUS"), which issued an exchangeable bond with a total face
value of EUR 514,274,000 backed by those shares. The exchangeable bonds have been sold at a 32% premium
over the selling price of the shares. The EUR denominated exchangeable bonds were perpetual and the investors
could exercise the conversion right between year 6 and 10. The bonds carry a fixed coupon of 3.95% during the
first 10 years thereafter the Issuer had the right to redeem the bonds at face value. Following the year 10, the
bonds carry a coupon of 3 month EURIBOR +3%. OTP Bank had discretional right to cancel the payments. The
interest payable was non-cumulative.
Due to the conditions described above, ICES was accounted as an equity instrument and therefore any payment
was accounted as equity distribution paid to ICES holders.
On 14 September 2021 the Bank claimed to terminate the subordinated swap agreement related to ICES
transaction as at 29 October 2021, and to exercise its option for repurchasing approximately 14.5 million OTP
ordinary shares held by Opus at market price based on the agreement. On the same day the Bank recognised
liability due to Opus as a reduction of EUR 514 million in the shareholder’s equity.
Treasury shares were repurchased on 29 October 2021 on a price HUF 18.118 and on the same day the swap
transaction was financially settled. As a result of the closure of the subordinated swap agreement the Bank’s
shareholder’s equity increased by HUF 75.422 million as follows:
in HUF mn
Recognition of liability against shareholder’s equity
179,767
equity decrease
Payment of price for treasury shares by Opus
262,648
equity increase
Tax effect accounted in retained earnings
7,459
equity decrease
Approximately 12 million treasury shares were sold to OTP SECOP I. (‘OTP Special Employee Stock
Ownership Program’) and OTP SECOP II.
Equity correlation table shall contain the opening and closing balances of the shareholder’s equity in accordance
with IFRS, furthermore deducted from this the opening and closing balances of the specified equity elements.
Equity correlation table shall contain also untied retained earnings available for the payment of dividends,
covering retained earnings from the last financial year for which accounts have been adopted comprising net
profit for the period of that financial year minus cumulative unrealized gains claimed in connection with any
increase in the fair value of investment properties, as provided in IAS 40 - Investment Property, reduced by the
cumulative income tax accounted for under IAS 12 - Income Taxes.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
64
NOTE 27: RETAINED EARNINGS AND RESERVES (in HUF mn) [continued]
Share capital
Share capital is the portion of the Bank’s equity that has been obtained by the issue of shares in the corporation
to a shareholder, usually for cash.
Share-based payment reserve
Share-based payment reserve represents the increase in the equity due to the goods or services were received by
the Bank in an equity-settled share-based payment transaction, valued at the fair value of the goods or services
received.
Retained earnings
Profit of previous years generated by the Bank that are not distributed to shareholders as dividends.
Put option reserve
OTP Bank Plc. and MOL Plc. entered into a share swap agreement in 16 April 2009, whereby OTP has changed
24,000,000 OTP ordinary shares for 5,010,501 „A series” MOL shares. The final maturity of the share swap
agreement is 11 July 2022, until which any party can initiate cash or physical settlement of the transaction.
Put option reserve represents the written put option over OTP ordinary shares were accounted as a deduction
from equity at the date of OTP-MOL share swap transaction.
Other comprehensive income
Other comprehensive income comprises items of income and expense (including reclassification adjustments)
that are not recognised in profit or loss as required or permitted by other IFRSs.
General reserve
The Bank shall place ten per cent of the after-tax profit of the year into general reserve prescribed by the Act
CCXXXVII of 2013 on Credit Institutions and Financial Enterprises. The Bank is allowed to use general
reserves only to cover operating losses arising from their activities.
Tied-up reserve
The tied-up reserve shall consist of sums tied up from the capital reserve and from the retained earnings.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
65
NOTE 27: RETAINED EARNINGS AND RESERVES (in HUF mn) [continued]
The equity correlation table of the Bank based on paragraph 114/B of Act on Accounting as at 31 December 2021:
31 December 2021
Closing balance
Share
Capital
Capital
reserve
Share-based
payment
reserve
Retained
earnings and
reserves
Option
reserve
Treasury
Shares
Revaluation
reserve
Tied-up
reserve
Net profit
for the year
Total
Components of Shareholder’s
equity in accordance with
IFRS
28,000
52
46,162
1,855,090
(55,468)
(58,872)
-
-
-
1,814,964
Unused portion of reserve for
developments
-
-
-
(497)
-
-
-
497
-
-
Other comprehensive income
-
-
-
(5,078)
-
-
5,078
-
-
-
Option reserve
-
(55,468)
-
-
55,468
-
-
-
-
-
Treasury shares
-
(58,872)
-
-
-
58,872
-
-
-
-
Share based payments
-
46,162
(46,162)
-
-
-
-
-
-
-
Net profit for the year
-
-
-
(125,339)
-
-
-
-
125,339
-
General reserve
-
-
-
(117,905)
-
-
-
117,905
-
-
Components of Shareholder’s
equity in accordance with
paragraph 114/B of Act on
Accounting
28,000
(68,126)
-
1,606,271
-
-
5,078
118,402
125,339
1,814,964
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
66
NOTE 27: RETAINED EARNINGS AND RESERVES (in HUF mn) [continued]
The equity correlation table of the Bank based on paragraph 114/B of Act on Accounting as at 1 January 2021:
1 January 2021
Opening balance
Share
Capital
Capital
reserve
Share-based
payment
reserve
Retained
earnings and
reserves
Option
reserve
Treasury
Shares
Revaluation
reserve
Tied-up
reserve
Net profit for
the year
Total
Components of Shareholder’s
equity in accordance with IFRS
28,000
52
42,573
1,709,976
(55,468)
(46,799)
-
-
-
1,678,334
Unused portion of reserve for
developments
-
-
-
(998)
-
-
-
998
-
-
Other comprehensive income
-
-
-
(44,356)
-
-
44,356
-
-
-
Portion of supplementary payment
recognised as an asset
-
-
-
-
-
-
-
-
-
-
Option reserve
-
(55,468)
-
-
55,468
-
-
-
-
-
Treasury shares
-
(46,799)
-
-
-
46,799
-
-
-
-
Share based payments
-
42,573
(42,573)
-
-
-
-
-
-
-
Net profit for the year
-
-
-
(92,474)
-
-
-
-
92,474
-
General reserve
-
-
-
(105,371)
-
-
-
105,371
-
-
Components of Shareholder’s
equity in accordance with
paragraph 114/B of Act on
Accounting
28,000
(59,642)
-
1,466,777
-
-
44,356
106,369
92,474
1,678,334
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
67
NOTE 27: RETAINED EARNINGS AND RESERVES (in HUF mn) [continued]
Calculated untied retained earnings in accordance with paragraph 114/B of Act on Accounting
2021
2020
Retained earnings
1,606,271
1,466,777
Net profit for the year
125,339
92,474
Untied retained earnings
1,731,610
1,559,251
Items of retained earnings and other reserves
2021
2020
Retained earnings
1,606,770
1,465,037
Capital reserve
52
52
Option reserve
(55,468)
(55,468)
Other reserves
117,903
105,370
Fair value reserve of financial instruments measured at fair value through
other comprehensive income
8,646
44,356
Share-based payment reserve
46,162
42,573
Fair value reserve of derivative financial instruments designated as cash-flow
hedge
(3,568)
2,739
Net profit for the period
125,339
92,474
Retained earnings and other reserves
1,845,836
1,697,133
Fair value adjustment of securities at fair value through other comprehensive income
2021
2020
Balance as at 1 January
36,441
51,011
Change of fair value adjustment
(34,484)
(22,069)
Deferred tax related to change of fair value adjustment
2,801
1,973
Other transfer to retained earnings
(5,070)
-
Deferred tax related to other transfer to retained earnings
457
-
Transfer to p/l due to derecognition
-
6,073
Deferred tax related to accumulated transfer to p/l
-
(547)
Closing balance
145
36,441
Expected credit loss on securities at fair value through other comprehensive income
2021
2020
Balance as at 1 January
1,714
1,702
Increase of loss allowance
1,103
795
Release of loss allowance
(1,654)
(783)
FX movement
11
-
Closing balance
1,174
1,714
Fair value changes of equity instruments as at fair value through other comprehensive income
2021
2020
Balance as at 1 January
6,201
10,262
Change of fair value correction
1,407
(3,276)
Deferred tax related to change of fair value correction
(281)
310
Transfer to retained earnings
-
(1,095)
Closing balance
7,327
6,201
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
68
NOTE 28: TREASURY SHARES (in HUF mn)
2021
2020
Nominal value (ordinary shares)
325
433
Carrying value at acquisition cost
58,872
46,799
The changes in the carrying value of treasury shares are due to repurchase and sale transactions on market
authorised by the General Assembly.
Change in number of shares:
2021
2020
Number of shares as at 1 January
4,331,169
320,165
Additions
16,251,451
8,296,388
Disposals
(17,332,636)
(4,285,384)
Number of shares at the end of the period
3,249,984
4,331,169
Change in carrying value:
2021
2020
Balance as at 1 January
46,799
2,636
Additions
276,433
85,922
Disposals
(264,360)
(41,759)
Closing Balance
58,872
46,799
2021
2020
Face value of treasury shares held by OTP Group members
766
1,959
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
69
NOTE 29: INTEREST INCOME AND EXPENSES (in HUF mn)
2021
2020
Interest income accounted for using the effective interest rate method from /
on
Loans at amortised cost
168,388
143,652
FVOCI securities
21,456
29,095
Securities at amortised cost
61,085
48,654
Placements with other banks
33,544
12,248
Financial liabilities
3,337
1,544
Amounts due from banks and balances with National Bank of Hungary
14,245
4,391
Repo receivables
318
49
Subtotal
302,373
239,633
Income similar to interest income
Loans mandatorily measured at fair value through profit or loss
26,045
15,094
Swap and forward deals related to Placements with other banks
68,975
56,341
Swap and forward deals related to Loans at amortised cost
11,487
14,011
Swap and forward deals related to FVOCI securities
(850)
(3,789)
Other
6
6
Subtotal
105,663
81,663
Interest income total
408,036
321,296
Interest expense due to / from / on
Amounts due to banks and deposits from the National Bank of Hungary and
other banks
107,928
67,747
Deposits from customers
33,403
19,598
Leasing liabilities
214
257
Liabilities from issued securities
377
414
Subordinated bonds and loans
7,890
8,327
Other
92
49
Financial assets
2,193
1,622
Repo liabilities
3,394
1,616
Subtotal
155,491
99,630
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
70
NOTE 30: RISK COST (in HUF mn)
2021
2020
Loss allowance of loans at amortised cost
Loss allowance
218,534
211,543
Release of loss allowance
(181,270)
(156,385)
37,264
55,158
Loss allowance of sight deposits and placements with other banks
Loss allowance
20,709
12,724
Release of loss allowance
(18,912)
(10,497)
1,797
2,227
Loss allowance of placements with other banks
Loss allowance
449
362
Release of loss allowance
(669)
(76)
(220)
286
Loss allowance of FVOCI securities
Loss allowance
1,103
2,119
Release of loss allowance
(1,654)
(2,116)
(551)
3
Loss allowance of securities at amortised cost
Loss allowance
4,404
4,822
Release of loss allowance
(2,369)
(2,977)
2,035
1,845
Provision on loan commitments and financial guarantees
Provision for the period
47,626
57,246
Release of provision
(47,496)
(54,044)
130
3,202
Change in the fair value attributable to changes in the credit risk of loans
mandatorily measured at fair value through profit of loss
16,255
405
Risk cost total
56,710
63,126
NOTE 31: NET PROFIT FROM FEES AND COMMISSIONS (in HUF mn)
Income from fees and commissions:
2021
2020
Fees and commissions related to lending
12,164
11,141
Deposit and account maintenance fees and commissions
123,800
106,341
Fees and commission related to the issued bank cards
89,243
77,115
Fees and commissions related to security trading
28,227
25,414
Fx margin
16,155
6,159
Fees and commissions paid by OTP Mortgage Bank Ltd.
11,187
8,725
Net insurance fee income
8,481
7,155
Other
11,546
17,731
Fees and commissions from contracts with customers
288,639
248,640
Total Income from fees and commissions:
300,803
259,781
Contract balances
2021
2020
Receivables, which are included in ‘other assets’
16,391
7,625
Loss allowance
196
(103)
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
71
NOTE 31: NET PROFIT FROM FEES AND COMMISSIONS (in HUF mn) [continued]
Performance obligations and revenue recognition policies:
Fee type
Nature and timing of satisfaction of performance
obligations, and the significant payment terms
Revenue recognition
under IFRS 15
Deposit and
account
maintenance fees
and commissions
The Bank provides a number of account management
services for both retail and corporate customers in which they
charge a fee. Fees related to these services can be typically
account transaction fees (money transfer fees, direct debit
fees, money standing order fees, etc.), internet banking fees
(e.g. OTP Direct fee), account control fees (e.g. sms fee), or
other fees for occasional services (account statement fees,
other administration fees, etc.).
Fees for ongoing account
management services are
charged on a monthly
basis during the period
when they are provided.
Transaction-based fees are
charged when the
transaction takes places or
charged monthly at the
end of the month.
Fees for ongoing account management services are charged
to the customer’s account on a monthly basis. The fees are
commonly fix amounts that can be vary per account package
and customer category.
In the case of the transaction based fees where the services
include money transfer the fee is charged when the
transaction takes place. The rate of the fee is typically
determined in a certain % of the transaction amount. In case
of other transaction-based fees (e.g. SMS fee), the fee is
settled monthly.
In case of occasional services the Bank basically charges the
fees when the services are used by the customer. The fees can
be fixed fees or they can be set in %.
The rates are reviewed by the Bank regularly.
Fees and
commission
related to the
issued bank cards
The Bank provides a variety of bank cards to its customers,
for which different fees are charged. The fees are basically
charged in connection with the issuance of cards and the
related card transactions.
Fees for ongoing services
are charged on a monthly
basis during the period
when they are provided.
Transaction-based fees are
charged when the
transaction takes places or
charged monthly at the
end of the month.
The annual fees of the cards are charged in advance in a fixed
amount. The amount of the annual card fee depends on the
type of card.
In case of transaction-based fees (e.g. cash
withdrawal/payment fee, merchant fee, interchange fee, etc.),
the settlement of the fees will take place immediately after
the transaction or on a monthly basis. The fee is typically
determined in % of the transaction with a fixed minimum
amount.
For all other cases where the Bank provides a continuous
service to the customers (e.g. card closing fee), the fees are
charged monthly. The fee is calculated in a fix amount.
The rates are reviewed by the Bank regularly.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
72
NOTE 31: NET PROFIT FROM FEES AND COMMISSIONS (in HUF mn) [continued]
Performance obligations and revenue recognition policies: [continued]
Fee type
Nature and timing of satisfaction of performance
obligations, and the significant payment terms
Revenue recognition
under IFRS 15
Fees and
commissions
related to security
account
management
services
The Bank provides its clients with security account
management services. Fees will be charged for account
management and transactions on accounts.
Fees for ongoing services
are charged quarterly or
annually during the period
when they are provided.
The fees are accrued
monthly.
Transaction-based fees are
charged when the
transaction takes places.
Account management fees are typically charged quarterly or
annually. The amount is determined in%, based on the stocks
of securities managed by the clients on the account in a given
period.
Fees for transactions on the securities account are charged
immediately after the transaction. They are determined in%,
based on the transaction amount.
Fees for complex services provided to clients (e.g. portfolio
management or custody) are typically charged monthly or
annually. The fees are fixed monthly amounts and in some
cases a bonus fee are charged.
Fees and
commissions paid
by OTP Mortgage
Bank Ltd.
The Bank provides a number of services to its subsidiaries, in
connection with fees are charged. These fees typically include
services related to various warranties and guarantees, credit
account management, agency activities, and marketing
activities.
Fees for ongoing services
are charged on a monthly
basis during the period
when they are provided.
Transaction-based fees are
charged when the
transaction takes places.
The credit account management fee granted to OTP Mortgage
Bank is settled on a monthly basis. It has a fixed part that is
based on the number of the managed credit accounts, and a
variable one determined by the profit split method.
The fees for the guarantee services provided by the Bank are
charged monthly. The fee is determined by% and based on
the stock being guaranteed.
Fees for agent services are charged monthly. The rate is %,
based on the products sold during the period.
Net insurance fee
income
Due to the fact that the Bank does not provide insurance
services to its clients, only acts as an agent, the fee income
charged to the customers and fees payable to the insurance
company are presented net in the fee income.
Fees for ongoing services
are charged on a monthly
basis during the period
when they are provided.
In addition, agency fee charged for the sale of insurance
contracts is also recorded in this line. The fee is charged on a
monthly basis and determined in %.
Other
Fees that are not significant in the Banks total income are
included in Other fees category. Such fees are safe lease,
special procedure fee, account rent fee, adlak service fee, fee
of a copy of document, etc.
Fees for ongoing services
are charged on a monthly
basis during the period
when they are provided.
Fees for ad hoc services
are charged when the
transaction takes places.
Other fees may include charges for continuous services or for
ad hoc administration services. Continuous fees are charged
monthly (e.g., safe lease fees) at the beginning of the period,
typically at a fixed rate. Fees for ad hoc services are charged
immediately after the service obligation had been met,
typically also in a fixed amount.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
73
NOTE 31: NET PROFIT FROM FEES AND COMMISSIONS (in HUF mn) [continued]
2021
2020
Other fees and commissions related to issued bank cards
39,835
31,701
Insurance fees
771
758
Fees and commissions related to lending
5,011
3,432
Fees and commissions related to security trading
618
1,584
Fees and commissions relating to deposits
2,610
1,355
Trust activities related to securities
1,652
566
Postal fees
224
202
Money market transaction fees and commissions
265
91
Other
1,290
1,061
Total
52,276
40,750
248,527
219,031
NOTE 32: GAINS AND LOSSES (in HUF mn)
2021
2020
Losses arising from derecognition of financial assets measured at amortised
cost
Gain from loans
93
894
Loss from loans
(818)
(4,533)
Gain from securities
968
360
Loss from securities
(2,520)
-
Other
(423)
-
Losses arising from derecognition of financial assets measured at amortised
cost
(2,700)
(3,279)
Additional information to Gains or losses from operating income:
2021
2020
Foreign exchange losses
Loss from foreign exchange
(5,875)
(5,302)
Margin gains
3,597
2,592
Margin losses
(3,360)
(1,808)
Total
(5,638)
(4,518)
2021
2020
Gains on derivative instruments, net
Gains on FX spot, swap and option deals
41,224
53,171
Losses from FX spot, swap and option deals
(34,716)
(46,329)
Fees received related to option deals
2,203
17,983
Fees paid related to option deals
(2,830)
(17,912)
Gains on commodity deals
91,487
22,122
Losses from commodity deals
(91,474)
(22,123)
Gains on futures transactions
580
1,555
Losses from futures transactions
(208)
(1,410)
Losses from credit valuation adjustment related to FX spot, swap and option deals
held for trading
(2,643)
-
Losses from credit valuation adjustment related to commodity deals held for
trading
(187)
-
Total
3,436
7,057
2021
2020
Losses on financial instruments at fair value through profit or loss
Gains on securities mandatorily measured at fair value through profit or loss
2,285
2,725
Gains on loans mandatorily measured at fair value through profit or loss
12,069
2,328
Losses on loans mandatorily measured at fair value through profit or loss
(24,760)
(4,453)
Gains on financial liabilities designated at fair value through profit or loss
4,353
2,443
Losses on financial liabilities designated at fair value through profit or loss
(438)
(3,713)
Total
(6,491)
(670)
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
74
NOTE 32: GAINS AND LOSSES (in HUF mn) [continued]
Additional information to Gains or losses from operating income: [continued]
2021
2020
Gains on securities, net
Interest income from held for trading securities
277
368
Gains on held for trading securities
8,018
5,948
Losses on held for trading securities
(3,646)
(3,697)
Gains on FVOCI securities
2,138
6,639
Losses on FVOCI securities
(6,797)
(566)
Gains on derecognition of investments in subsidiaries
1,311
23,028
Losses on derecognition of investments in subsidiaries
(1,963)
(16,485)
Gains/losses from other securities
2,766
2,360
Total
2,104
17,595
2021
2020
Dividend income
Distribution from investments in subsidiaries
95,042
60,913
Distribution from held for trading securities
3,844
8
Distribution from FVOCI equity instruments
151
52
Total
99,037
60,973
Total gains and losses from operating income (without other operating
income)
92,445
80,436
NOTE 33: OTHER OPERATING INCOME AND EXPENSES AND OTHER ADMINISTRATIVE
EXPENSES (in HUF mn)
Other operating income:
2021
2020
Intermediary and other services
2,272
2,677
Derecognition of financial liabilities at amortised cost
2,290
710
Non-repayable assets received
1,174
26
Income from lease of tangible assets
1,009
749
Gains on derecognition of deposits
281
710
Gains on discount from advertising agency fees
182
171
Income from written off receivables
281
206
Gains on sale of receivables
-
377
Gains on transactions related to property activities
239
266
Gains on IT services provided to subsidiaries
940
-
Other operating income from OTP Employee Stock Ownership Program
(OTP ESOP)
2,234
236
Gains on sale of tangible assets
(81)
150
Other
444
1,772
Total
11,265
7,900
Net other operating expenses:
2021
2020
Release of loss allowance on other assets
961
(3,521)
Non-repayable assets contributed
(862)
(4,055)
Release of provision for off-balance sheet commitments and contingent
liabilities
(1,343)
92
Financial support for sport association and organization of public utility
(10,960)
(7,999)
Losses on other assets
-
(697)
Loss allowance on investments in subsidiaries
(27,420)
(10,042)
Other
(2,012)
(1,842)
Total other operating expenses
(41,636)
(28,064)
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
75
NOTE 33: OTHER OPERATING INCOME AND EXPENSES AND OTHER ADMINISTRATIVE
EXPENSES (in HUF mn) [continued]
Other administrative expenses:
2021
2020
Reclassified
Personnel expenses:
Wages
105,176
89,705
Taxes related to personnel expenses
16,709
16,308
Other personnel expenses
14,241
12,485
Subtotal
136,126
118,498
Depreciation and amortization
40,692
38,948
Other administrative expenses:
Taxes, other than income tax
1
81,171
73,384
Services
57,290
41,590
Fees payable to authorities and other fees
17,362
13,769
Administration expenses, including rental fees
7,439
15,517
Professional fees
6,714
2,500
Advertising
8,635
7,405
Subtotal
178,611
154,165
Total
355,429
311,611
NOTE 34: INCOME TAX (in HUF mn)
The Bank is presently liable for income tax at a rate of 9% of taxable income, local taxes at a rate of 2.3% of
taxable revenue.
A breakdown of the income tax expense is:
2021
2020
Reclassified
Current tax expense
14,528
14,198
Deferred tax expense/(benefit)
1,423
(1,077)
Total
15,951
13,121
A reconciliation of the deferred tax liability is as follows:
2021
2020
Balance as at 1 January
(3,062)
(5,875)
Deferred tax (expense)/ benefit
(1,423)
1,077
Tax effect of fair value adjustment of FVOCI securities and ICES recognised
in comprehensive income
2,978
1,736
Closing balance
(1,507)
(3,062)
1
Special tax of financial institutions was paid by OTP Bank in the amount of HUF 13.1 and 11.6 billion for the for the year ended 31
December 2021 and 2020, recognized as an expense thus decreased the corporate tax base. For the year ended 31 December 2021 financial
transaction duty was paid by the Bank in the amount of HUF 68 billion.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
76
NOTE 34: INCOME TAX (in HUF mn) [continued]
A breakdown of the deferred tax liability is as follows:
2021
2020
Unused tax allowance
-
1,321
Provision for untaken leave
282
-
Provision for termination benefits and jubilee
644
-
Amounts unenforceable by tax law
-
247
Deferred tax asset
926
1,568
Fair value adjustment of held for trading and securities at fair value through
other comprehensive income
(1,312)
(4,199)
Difference in depreciation and amortization
(1,076)
(329)
Provision for developments
(45)
-
Amounts unenforceable by tax law
-
(102)
Deferred tax liabilities
(2,433)
(4,630)
Net deferred tax assets/(liabilities)
(1,507)
(3,062)
A reconciliation of the income tax (income) / expense is as follows:
2021
2020
Profit before income tax
141,290
93,246
Income tax at statutory tax rate (9%)
12,717
8,392
A reconciliation of effective tax rate as follows:
Share-based payment
323
305
Deferred use of tax allowance
90
-
Dividend income
(8,787)
(5,488)
Use of tax
(3,461)
(2,023)
Amounts unenforceable by tax law
(847)
(38)
Change due to accounting policy (Visa)
-
69
Use of tax losses
-
(167)
Deferred tax asset due to unused tax allowance
-
(1,039)
Other
1,618
761
Income tax
1,653
772
Effective tax rate
1.2%
0.8%
2021
2020
(as presented in the separate statement of financial position)
Current tax assets
-
593
Current tax liabilities
4,776
1,464
Net tax liabilities
(4,776)
(871)
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
77
NOTE 35: LEASE (in HUF mn)
The Bank as a lessee:
Amounts recognised in profit and loss
2021
2020
Interest expense on lease liabilities
214
257
Expense relating to short-term leases
2,143
2,128
Expense relating to variable lease payments not included in the measurement
of lease liabilities
1,271
1,084
Leasing liabilities by maturities:
2021
2020
Within one year
4,868
4,423
Over one year
13,064
9,683
Total
17,932
14,106
An analysis of movement in the carrying amount of right-of-use assets by category is as follows:
Gross carrying amount
Right-of-use of
real estate
Right-of-use of
machinery and
equipment
Total
Balance as at 1 January 2020
17,790
37
17,827
Additions due to new contracts
3,707
-
3,707
Derecognition due to matured contracts
(18)
-
(18)
Change due to revaluation and modification
927
-
927
Balance as at 31 December 2020
22,406
37
22,443
Additions due to new contracts
5,788
-
5,788
Derecognition due to matured contracts
(263)
-
(263)
Change due to revaluation and modification
3,150
-
3,150
Balance as at 31 December 2021
31,081
37
31,118
Depreciation
Balance as at 1 January
4,214
4,220
Depreciation charge
4,744
6
4,750
Derecognition due to matured contracts
(6)
-
(6)
Balance as at 31 December 2021
8,952
12
8,964
Depreciation charge
5,155
6
5,161
Derecognition due to matured contracts
(238)
-
(238)
Balance as at 31 December 2021
13,869
18
13,887
Net carrying amount
Balance as at 31 December 2020
13,454
25
13,479
Balance as at 31 December 2021
17,212
19
17,231
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
78
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn)
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or
equity instrument of another entity.
Financial instruments may result in certain risks to the Bank. The most significant risks the Bank faces include:
36.1. Credit risk
The Bank takes on exposure to credit risk which is the risk that a counter-party will be unable to pay amounts in
full when due. The Bank structures the levels of credit risk it undertakes by placing limits on the amount of risk
accepted in relation to one borrower, or banks of borrowers, and to geographical areas and loan types. Such risks
are monitored on a periodical basis and subject to an annual or more frequent review. The exposure to any
borrower including banks and brokers is further restricted by sublimit covering on- and off-balance sheet
exposures and daily delivery risk limits in relation to trading items such as forward foreign exchange contracts.
Actual exposures against limits are monitored daily.
Exposure to credit risk is managed through regular analysis of the ability of borrowers and potential borrowers to
meet interest and capital repayment obligations and by changing these lending limits when appropriate. Exposure
to credit risk is partly managed obtaining collateral, corporate and personal guarantees.
36.1.1. Financial instruments by stages
Defining the expected credit loss on individual and collective basis
On individual basis:
Individually assessed are the non-retail or micro- and small enterprise exposure of significant amount on a stand-
alone basis:
• exposure in stage 3,
• exposure in workout management
• purchased or originated credit-impaired instruments which are in accordance with the conditions
mentioned above
The calculation of impairment must be prepared and approved by the risk management functional areas. The
calculation, all relevant factors (amortised cost, original and current EIR, contracted and expected cash flows
(from business and/or collateral) for the individual periods of the entire lifecycle, other essential information
enforced during the valuation) and the criteria thereof (including the factors underlying the classification as stage
3) must be documented individually.
The expected credit loss of the exposure equals the difference of the receivable's AC (gross book value) on the
valuation date and the present value of the receivable's expected cash flows discounted to the valuation date by
the exposure's original effective interest rate (EIR) (calculated at the initial recognition, or in the case of variable
rate, recalculated due to the last interest rate change). The estimation of the expected future cash flows should be
forward looking, it must also contain the effects of the possible change of macroeconomic outlook.
At least two scenarios must be used for the estimation of the expected cash flow. At least one scenarios should
anticipate that realised cash flows will be significantly different from the contractual cash flows. Probability
weights must be allocated to the individual scenarios. The estimation must reflect the probability of the
occurrence and non-occurrence of the credit loss, even if the most probable result is the non-occurrence of the
loss.
On collective basis:
The following exposures are subject to collective assessment:
• retail exposure irrespective of the amount,
• micro and small enterprise exposures irrespective of the amount,
• all other exposure which are insignificant on a stand-alone basis and not part of the workout
management,
• exposure which are not in stage 3, significant on a stand-alone basis,
• purchased or originated credit-impaired instruments which are in accordance with the conditions
mentioned above.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
79
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
36.1.1. Financial instruments by stages [continued]
In the collective impairment methodology credit risk and the change of credit risk can be correctly captured by
understanding the risk characteristics of the portfolio. In order to achieve this the main risk drivers shall be
identified and used to form homogeneous segments having similar risk characteristics. The segmentation is
expected to stay stable from month to month however a regular (at least yearly) revision of the segmentation
process should be set up to capture the change of risk characteristics. The segmentation must be performed
separately for each parameter, since in each case different factors may have relevance.
The Bank's Headquarters Group Reserve Committee stipulates the guidelines related to the collective
impairment methodology at group level. In addition, it has right of agreement in respect of the risk parameters
(PD -probability of default, LGD - loss given default, EAD – exposure at default) and segmentation criteria
proposed by the group members.
The review of the parameters must be performed at least annually and the results should be approved by the
Group Reserve Committee. Local Risk Managements is responsible for parameter estimations and updates,
macroeconomic scenarios are calculated by OTP Bank Headquarters for each subsidiary and each parameter.
Based on the consensus proposal of Local Risk Management and OTP Bank Headquarters, the Group Reserve
Committee decides on the modification of parameters (all parameters for impairment calculation).
The impairment parameters should be backtested at least annually.
The expected loss calculation should be forward looking, including forecasts of future economic conditions. This
may be achieved by applying 3-5 different macroeconomic scenarios, which may be integrated in the PD, LGD
and EAD parameters.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
80
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
36.1.1. Financial instruments by stages [continued]
Gross carrying amount and accumulated loss allowance of financial assets at amortized cost and fair value through other comprehensive income by IFRS 9 stages as at 31 December 2021:
Carrying
amount/
Exposure
Gross carrying amount / Notional amount
Loss allowance
Write-off
Stage 1
Stage 2
Stage 3
Purchased or
originated credit
impaired
Total
Stage 1
Stage 2
Stage 3
Purchased or
originated credit
impaired
Total
Cash, amounts due from banks and balances
with the National Bank of Hungary
474,945
475,130
-
-
-
475,130
185
-
-
-
185
-
Placements with other banks, net of allowance
for placement losses
2,567,212
2,573,226
-
1,476
-
2,574,702
6,014
-
1,476
-
7,490
-
Repo receivables
33,638
33,710
-
-
-
33,710
72
-
-
-
72
-
Retail consumer loans
598,699
488,639
139,193
33,687
3
661,522
11,168
27,597
24,056
2
62,823
-
Mortgage loans
81,471
33,254
39,220
8,377
2,724
83,575
25
309
1,503
267
2,104
-
Municipal loans
71,328
70,311
1,346
-
-
71,657
223
106
-
-
329
-
Corporate loans
3,280,967
2,909,439
384,223
66,915
10,691
3,371,268
17,945
39,260
31,528
1,568
90,301
21,838
Loans at amortised cost
4,032,465
3,501,643
563,982
108,979
13,418
4,188,022
29,361
67,272
57,087
1,837
155,557
21,838
FVOCI securities
641,939
641,939
-
-
-
641,939
1,174
-
-
-
1,174
-
Securities at amortised cost
3,071,038
3,064,500
13,223
-
-
3,077,723
5,882
803
-
-
6,685
-
Other financial assets
153,748
119,174
38,964
735
23
158,896
1,696
2,840
598
14
5,148
-
Total as at 31 December 2021
10,974,985
10,409,322
616,169
111,190
13,441
11,150,122
44,384
70,915
59,161
1,851
176,311
21,838
Loan commitments
1,665,288
1,615,196
56,838
4,996
-
1,677,030
5,620
3,968
2,154
-
11,742
-
Financial guarantees
1,500,977
1,491,470
14,883
244
-
1,506,597
4,820
749
51
-
5,620
-
Factoring loan commitments
423,267
412,692
5,847
5,133
-
423,672
228
32
145
-
405
-
Bill of credit
30,380
30,381
-
-
-
30,381
1
-
-
-
1
-
Loan commitments and financial guarantees
total
3,619,912
3,549,739
77,568
10,373
-
3,637,680
10,669
4,749
2,350
-
17,768
-
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
81
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
36.1.1. Financial instruments by stages [continued]
Gross carrying amount and accumulated loss allowance of financial assets at amortized cost and fair value through other comprehensive income by IFRS 9 stages as at 31 December 2020:
Assets measured at amortised cost and
FVOCI as at 31 December 2020
Carrying
amount/
Exposure
Gross carrying amount / Notional amount
Loss allowance
Write-off
Stage 1
Stage 2
Stage 3
Purchased or
originated credit
impaired
Total
Stage 1
Stage 2
Stage 3
Purchased or
originated credit
impaired
Total
Cash, amounts due from banks and balances
with the National Bank of Hungary
579,120
579,120
-
-
-
579,120
-
-
-
-
-
-
Placements with other banks, net of allowance
for placement losses
1,535,884
1,540,240
2
1,461
-
1,541,703
4,356
2
1,461
-
5,819
-
Repo receivables
183,364
183,656
-
-
-
183,656
292
-
-
-
292
-
Retail consumer loans
531,115
456,034
98,027
10,632
5
564,698
5,945
20,866
6,770
2
33,583
-
Mortgage loans
95,762
29,857
58,609
6,602
2,909
97,977
20
688
1,313
194
2,215
-
Municipal loans
86,061
72,406
15,564
43
-
88,013
227
1,709
16
-
1,952
-
Corporate loans
2,704,822
2,361,979
380,458
37,177
11,128
2,790,742
16,314
43,034
25,127
1,445
85,920
25,720
Loans at amortised cost
3,417,760
2,920,276
552,658
54,454
14,042
3,541,430
22,506
66,297
33,226
1,641
123,670
25,720
FVOCI securities
911,950
911,950
-
-
-
911,950
1,714
-
-
-
1,714
-
Securities at amortised cost
2,007,692
2,010,980
-
-
-
2,010,980
3,288
-
-
-
3,288
-
Other financial assets
127,179
93,491
40,452
1,133
31
135,107
2,407
4,504
996
21
7,928
-
Total as at 31 December 2020
8,762,949
8,239,713
593,112
57,048
14,073
8,903,946
34,563
70,803
35,683
1,662
142,711
25,720
Loan commitments
1,429,732
1,369,379
69,998
1,683
-
1,441,060
5,442
5,047
839
-
11,328
-
Financial guarantees
1,412,663
1,409,766
8,609
161
-
1,418,536
5,087
738
48
-
5,873
-
Factoring loan commitments
304,993
299,908
3,551
1,810
-
305,269
175
35
66
-
276
-
Bill of credit
5,026
5,039
-
-
-
5,039
13
-
-
-
13
-
Loan commitments and financial guarantees
total
3,152,414
3,084,092
82,158
3,654
-
3,169,904
10,717
5,820
953
-
17,490
-
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
82
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
36.1.1. Financial instruments by stages [continued]
Changes in the Loss allowance of financial assets at amortised cost and fair value through other
comprehensive income by IFRS 9 stages
Loans at amortised cost
Stage 1
Stage 2
Stage 3
POCI
Total
Loss allowance as at 1 January 2020
26,777
18,678
25,841
770
72,066
Transfer to Stage 1
633
(612)
(21)
-
-
Transfer to Stage 2
(4,374)
5,682
(1,308)
-
-
Transfer to Stage 3
(188)
(1,683)
1,871
-
-
Net remeasurement of loss allowance
(2,736)
40,164
9,196
839
47,463
New financial assets originated or purchased
11,393
7,498
2,918
45
21,854
Financial assets derecognised (other than write-offs)
(8,975)
(3,354)
(3,717)
(11)
(16,057)
Unwind of discount
-
-
1,613
217
1,830
Write-offs
(24)
(76)
(3,167)
(219)
(3,486)
Loss allowance as at 31 December 2020
22,506
66,297
33,226
1,641
123,670
Modification
-
(1,281)
-
-
(1,281)
Loss allowance as at 31 December 2020
22,506
65,016
33,226
1,641
122,389
Transfer to Stage 1
12,289
(11,919)
(370)
-
-
Transfer to Stage 2
(1,867)
3,241
(1,374)
-
-
Transfer to Stage 3
(369)
(5,636)
6,005
-
-
Net remeasurement of loss allowance
(10,705)
18,125
20,779
221
28,420
New financial assets originated or purchased
15,197
6,326
4,292
1
25,816
Financial assets derecognised (other than write-offs)
(7,638)
(7,540)
(5,323)
(16)
(20,517)
Unwind of discount
-
-
947
9
956
Write-offs
(52)
(341)
(1,095)
(19)
(1,507)
Loss allowance as at 31 December 2021
29,361
67,272
57,087
1,837
155,557
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
83
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
36.1.1. Financial instruments by stages [continued]
Changes in the Loss allowance of financial assets at amortised cost and fair value through other
comprehensive income by IFRS 9 stages [continued]
Loan commitments and financial guarantees
Stage 1
Stage 2
Stage 3
Total
Provision as at 1 January 2020
11,564
1,077
1,647
14,288
Transfer to Stage 1
142
(125)
(17)
-
Transfer to Stage 2
(501)
522
(21)
-
Transfer to Stage 3
(9)
(28)
37
-
Net remeasurement of loss allowance
(939)
3,651
(642)
2,070
New financial assets originated or purchased
2,843
796
67
3,706
Decrease
(2,383)
(73)
(118)
(2,574)
Provision as at 31 December 2020
10,717
5,820
953
17,490
Transfer to Stage 1
2,910
(2,840)
(70)
-
Transfer to Stage 2
(200)
322
(122)
-
Transfer to Stage 3
(21)
(109)
130
-
Net remeasurement of loss allowance
(4,628)
1,371
1,500
(1,757)
New financial assets originated or purchased
3,215
904
98
4,217
Decrease
(1,324)
(719)
(139)
(2,182)
Loss allowance as at 31 December 2021
10,669
4,749
2,350
17,768
Placements with other banks, net of allowance for placement losses
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January 2020
3,590
2
-
3,592
Net remeasurement of loss allowance
515
-
-
515
New financial assets originated or purchased
2,321
-
1,461
3,782
Financial assets derecognised (other than write-offs)
(2,070)
-
-
(2,070)
Loss allowance as at 31 December 2020
4,356
2
1,461
5,819
Net remeasurement of loss allowance
(303)
-
15
(288)
New financial assets originated or purchased
4,566
-
-
4,566
Financial assets derecognised (other than write-offs)
(2,605)
(2)
-
(2,607)
Loss allowance as at 31 December 2021
6,014
-
1,476
7,490
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
84
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
36.1.1. Financial instruments by stages [continued]
Changes in the Loss allowance of financial assets at amortised cost and fair value through other
comprehensive income by IFRS 9 stages [continued]
Repo Receivables
Stage 1
Total
Loss allowance as at 1 January 2020
6
6
New financial assets originated or purchased
362
362
Financial assets derecognised (other than write-offs)
(76)
(76)
Loss allowance as at 31 December 2020
292
292
New financial assets originated or purchased
449
449
Financial assets derecognised (other than write-offs)
(669)
(669)
Loss allowance as at 31 December 2021
72
72
Securities at amortised cost
Stage 1
Stage 2
Total
Loss allowance as at 1 January 2020
1,443
-
1,443
Net remeasurement of loss allowance
1,334
-
1,334
New financial assets originated or purchased
595
-
595
Financial assets derecognised (other than write-offs)
(84)
-
(84)
Loss allowance as at 31 December 2020
3,288
-
3,288
Modification
-
1,281
1,281
Loss allowance as at 31 December 2020
3,288
1,281
4,569
Net remeasurement of loss allowance
898
(478)
420
New financial assets originated or purchased
1,761
-
1,761
Financial assets derecognised (other than write-offs)
(65)
-
(65)
Loss allowance as at 31 December 2021
5,882
803
6,685
FVOCI Securities
Stage 1
Total
Loss allowance as at 1 January 2020
1,702
1,702
Net remeasurement of loss allowance
286
286
New financial assets originated or purchased
509
509
Financial assets derecognised (other than write-offs)
(783)
(783)
Loss allowance as at 31 December 2020
1,714
1,714
Net remeasurement of loss allowance
(483)
(483)
New financial assets originated or purchased
348
348
Financial assets derecognised (other than write-offs)
(405)
(405)
Loss allowance as at 31 December 2021
1,174
1,174
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
85
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
36.1.1. Financial instruments by stages [continued]
Loan portfolio by internal ratings
Gross carrying amount
Internal rating grade
Stage1
Stage2
Stage3
POCI
Total
High grade (1-4)
1,930,488
215,519
-
224
2,146,231
Medium grade (5-7)
1,459,861
238,767
-
10,522
1,709,150
Low grade (8-9)
111,294
109,696
-
253
221,243
Non performing
-
-
108,979
2,419
111,398
Total
3,501,643
563,982
108,979
13,418
4,188,022
Accumulated loss allowance
Internal rating grade
Stage1
Stage2
Stage3
POCI
Total
High grade (1-4)
11,870
21,906
-
4
33,780
Medium grade (5-7)
15,929
24,853
-
1,234
42,016
Low grade (8-9)
1,562
20,513
-
12
22,087
Non performing
-
-
57,087
587
57,674
Total
29,361
67,272
57,087
1,837
155,557
Loan portfolio by countries
An analysis of carrying amount of the non-qualified and qualified gross loan portfolio by country is as follows:
31 December 2021
31 December 2020
Country
Gross loan and
placements with
other banks
portfolio
Loss allowance
Gross loan and
placements with
other banks
portfolio
Loss allowance
Hungary
5,039,601
(130,588)
3,797,729
(99,295)
Malta
792,943
(2,556)
759,425
(3,985)
Serbia
148,599
(2,048)
-
-
Romania
113,517
(3,695)
40,143
(4,220)
France
112,810
(321)
38,876
(8)
Bulgaria
105,899
(11,786)
102,067
(9,158)
Russia
85,420
(961)
124
(5)
Slovakia
76,373
(263)
73,808
(207)
Other
321,272
(10,901)
454,617
(12,903)
Loans, placements with other
banks and repo receivables
at amortised cost total
6,796,434
(163,119)
5,266,789
(129,781)
Hungary
662,008
-
480,933
-
Other
4
-
4
-
Loans at fair value total
662,012
-
480,937
-
Loans, placements with other
banks and repo receivables
total
7,458,446
(163,119)
5,747,726
(129,781)
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
86
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
Loan portfolio classification by economic activities
Loans at amortised cost by economic activities
31 December 2021
31 December 2020
Gross
amount
Loss
allowance
Gross
amount
Loss
allowance
Retail
708,355
63,843
647,323
34,289
Agriculture, forestry and fishing
177,202
4,976
152,152
2,074
Manufacturing, mining and quarrying
320,990
7,249
241,763
6,765
and other industry
172,441
4,919
136,353
3,626
Construction
657,273
18,490
506,561
16,813
Wholesale and retail trade, transportation and
23,072
1,136
19,846
681
storage accommodation and food service activities
211,292
9,444
147,849
11,338
Information and communication
305,100
13,143
291,475
13,595
Financial and insurance activities
136,876
3,109
105,159
1,979
Real estate activities
72,027
472
70,640
672
Professional, scientific, technical, administration
1,403,394
28,776
1,222,309
31,838
Total
4,188,022
155,557
3,541,430
123,670
36.1.2. Collaterals
The collateral value held by the Bank by collateral types is as follows (total collateral value). The collaterals
cover loans as well as off-balance sheet exposures.
Types of collateral
2021
2020
Mortgages
1,602,913
1,450,951
Guarantees and warranties
1,554,921
1,074,420
Deposit
229,041
191,268
from this: Cash
80,598
62,469
Securities
148,443
128,799
Other
387
563
Total
3,387,262
2,717,202
The collateral value held by the Bank by collateral types is as follows (to the extent of the exposures). The
collaterals cover loans as well as off-balance sheet exposures.
Types of collateral
2021
2020
Mortgage
753,222
687,688
Guarantees and warranties
1,196,385
836,874
Deposit
106,620
94,397
from this: Cash
12,756
8,204
Securities
93,864
86,193
Other
305
423
Total
2,056,532
1,619,382
The coverage level of loan portfolio to the extent of the exposures increased from 31.86% to 30.41% as at 2021,
while the coverage to the total collateral value decreased from 53.46% to 50.09%.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
87
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
The collateral value (total collateral value) held by the Bank related to impaired loan portfolio (Stage 3 and
POCI loans) is as follows:
For the year ended 31
December 2021
Gross carrying
amount
Loss allowance
Carrying amount
Collateral value
Retail consumer loans
33,690
(24,058)
9,632
387
Mortgage loans
11,101
(1,770)
9,331
39,263
Corporate loans
77,606
(33,096)
44,510
56,960
Total
122,397
(58,924)
63,473
96,610
For the year ended 31
December 2020
Gross carrying
amount
Loss allowance
Carrying amount
Collateral value
Retail consumer loans
10,637
(6,772)
3,865
128
Mortgage loans
9,511
(1,507)
8,004
32,302
Municipal loans
43
(16)
27
104
Corporate loans
48,305
(26,572)
21,733
46,210
Total
68,496
(34,867)
33,629
78,744
36.1.3. Restructured loans
31 December 2021
31 December 2020
Gross portfolio
Loss allowance
Gross portfolio
Loss allowance
Consumer loans
118,094
(21,816)
5,399
(2,575)
Mortgage loans
36,413
(266)
2,156
(68)
Corporate loans
193,571
(25,865)
27,963
(8,283)
SME loans
33,388
(4,487)
6,295
(1,278)
Municipal loans
-
-
41
(16)
Total
381,466
(52,434)
41,854
(12,220)
Restructured portfolio definition
The forborne definition used by the Group is based on EU regulation 2015/227. Restructuring (forbearance) is a
modification of the contract – initiated by either the client or the bank – that provides a concession or allowance
towards the client in respect to the client’s current or future financial difficulties. The table of restructured loans
contains exposures classified as performing forborne. An exposure is considered performing forborne if the
conditions of the non-performing status are not met at the time of the restructuring, or the exposure fulfilled the
requirements of the minimum one year cure period as non-performing forborne.
The significant increase of the performing forborne loan volume is due to the forborne classification rules set by
the MNB executive circulars of 21 January 2021 and 25 November 2021 for loans participating in phase 2 and
phase 3 of the moratoria. The loan volume classified as performing forborne exclusively due to moratoria
participation is HUF 290 billion. For the affected portfolios the earliest possible exit from the forborne status is 6
months after the exit from moratorium for retail and 2 years after the exit from moratorium for corporate
exposures.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
88
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
Financial instruments by rating categories
1
Held-for-trading securities as at 31 December 2021
A1
A2
A3
B1
Aa3
Ba2
Baa1
Baa2
Baa3
N/A
Total
Government bonds
-
16
-
-
-
3,634
-
26,024
1,153
-
30,827
Other bonds
-
-
485
-
-
-
-
1,348
97
158
2,088
Other non-interest bearing securities
-
-
-
-
-
-
-
-
-
1,134
1,134
Hungarian government discounted Treasury Bills
-
-
-
-
-
-
-
869
-
-
869
Shares
49
59
35
6
19
2
12
24
83
310
599
Mortgage bonds
-
-
-
-
-
-
-
16
-
100
116
Total
49
75
520
6
19
3,636
12
28,281
1,333
1,702
35,633
Held-for-trading securities 31 December 2020
A2
A3
B1
Ba2
Ba3
Baa1
Baa2
Baa3
N/A
Total
Other non-interest bearing securities
-
-
-
-
-
-
-
-
1,964
1,964
Government bonds
-
-
-
-
465
-
-
5,566
-
6,031
Mortgage bonds
-
-
-
-
-
-
-
-
-
-
Hungarian government discounted
Treasury Bills
-
-
-
-
-
-
-
1,233
-
1,233
Hungarian government interest bearing
Treasury Bills
-
-
-
-
-
-
-
-
-
-
Shares
36
33
5
7
-
45
7
36
257
426
Other bonds
-
495
-
-
-
-
-
998
582
2,075
Total
36
528
5
7
465
45
7
7,833
2,803
11,729
Securities mandatorily measured at fair value through profit or loss as at 31 December 2021
N/A
Total
Government bonds
25,126
25,126
Mortgage bonds
2,935
2,935
Total
28,061
28,061
1
Moody’s ratings
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
89
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
Financial instruments by rating categories
1
Securities mandatorily measured at fair value through profit or loss as at 31 December 2020
N/A
Total
Government bonds
23,818
23,818
Mortgage bonds
5,342
5,342
Shares
2,776
2,776
Total
31,936
31,936
FVOCI securities as at 31 December 2021
A1
A2
A3
Ba1
Ba2
Baa1
Baa2
Baa3
N/A
Total
Government bonds
740
2,471
-
15,209
6,784
5,032
182,439
66,201
-
278,876
Mortgage bonds
47,568
-
-
-
-
-
156,027
-
14,346
217,941
Other bonds
-
-
2,896
4,001
-
-
1,622
37,606
18,745
64,870
Hungarian Treasury Bills
-
-
-
-
-
-
63,115
-
-
63,115
Non-treading equity instruments
-
-
-
-
-
-
-
-
17,137
17,137
Total
48,308
2,471
2,896
19,210
6,784
5,032
403,203
103,807
50,228
641,939
FVOCI securities as at 31 December 2020
A2
A3
Ba1
Ba3
Baa2
Baa3
N/A
Total
Mortgage bonds
63,577
-
-
-
250,673
-
18,417
332,667
Government bonds
226
7,391
4,624
15,055
-
461,163
-
488,459
Hungarian interest bearing Treasury Bills
-
-
-
-
-
9,957
-
9,957
Shares
-
-
-
-
-
-
15,731
15,731
Other bonds
-
4,815
3,958
-
1,620
37,961
16,782
65,136
Total
63,803
12,206
8,582
15,055
252,293
509,081
50,930
911,950
1
Moody’s ratings
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
90
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
Financial instruments by rating categories
1
Securities at amortised cost as at 31 December 2021
A1
A2
Aaa
Ba1
Ba2
Baa1
Baa2
Baa3
N/A
Total
Government bonds
9,002
-
185,261
18,871
12,663
25,986
2,550,824
55,256
-
2,857,863
Corporate bonds
-
8,210
-
-
-
7,343
3,682
14,780
154,886
188,901
Mortgage bonds
12,992
-
-
-
-
-
-
-
11,282
24,274
Total
21,994
8,210
185,261
18,871
12,663
33,329
-
70,036
166,168
3,071,038
Securities at amortised cost as at 31 December 2020
Ba2
Baa3
N/A
Total
Government bonds
2,816
1,941,855
-
1,944,671
Mortgage bonds
-
14,579
48,442
63,021
Total
2,816
1,956,434
48,442
2,007,692
1
Moody’s ratings
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
91
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
An analysis of securities (held for trading, mandatorily FVTPL, FVOCI and amortised cost) in a country
breakdown is as follows:
Country
2021
2020
Gross carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
Hungary
2,709,786
(5,823)
1,986,362
(3,194)
United States of America
194,518
(149)
1,069
(4)
Portugal
36,268
(177)
-
-
Spain
33,659
(178)
-
-
Russia
32,901
(46)
2,757
(3)
Romania
22,527
(126)
-
-
Croatia
18,917
(46)
-
-
Luxembourg
-
-
20,792
(87)
Other
29,147
(140)
-
-
Securities at amortised cost total
3,077,723
(6,685)
2,010,980
(3,288)
Hungary
517,462
-
761,472
-
Russia
65,275
-
29,697
-
Croatia
15,209
-
-
-
Serbia
6,784
-
-
-
Spain
5,032
-
-
-
Luxembourg
-
-
85,006
-
Other
15,040
-
20,044
-
FVOCI securities total
624,802
-
896,219
-
Austria
13,223
-
3,122
-
United States of America
3,388
-
12,079
-
Other
526
-
530
-
Non-trading equity instruments designated to
measure at fair value through other
comprehensive income
17,137
-
15,731
-
Hungary
29,814
-
8,613
-
Serbia
3,634
-
465
-
Russia
1,278
-
808
-
Germany
420
-
410
-
Luxembourg
-
-
771
-
Other
487
-
662
-
Held for trading securities total
35,633
-
11,729
-
Hungary
18,807
-
18,470
-
Luxembourg
5,542
-
10,428
-
United States of America
2,935
-
2,776
-
Portugal
777
-
262
-
Securities mandatorily measured at fair value
through profit or loss
28,061
-
31,936
-
Securities total
3,783,356
(6,685)
2,966,595
(3,288)
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
92
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.2. Maturity analysis of assets and liabilities and liquidity risk
Liquidity risk is a measure of the extent to which the Bank may be required to raise funds to meet its
commitments associated with financial instruments. The Bank maintains its liquidity profiles in accordance with
regulations laid down by the NBH.
The essential aspect of the liquidity risk management strategy is to identify all relevant systemic and
idiosyncratic sources of liquidity risk and to measure the probability and severity of such events. During liquidity
risk management the Bank considers the effect of liquidity risk events caused by reasons arising in the bank
business line (deposit withdrawal), the national economy (exchange rate shock, yield curve shock) and the global
financial system (capital market shock).
In line with the Bank’s risk management policy liquidity risks are measured and managed on multiply hierarchy
levels and applying integrated unified VaR based methodology. The basic requirement is that the Bank must
keep high quality liquidity reserves by means it can fulfil all liabilities when they fall due without material
additional costs.
The liquidity reserves can be divided into two parts. There are separate decentralized liquid asset portfolios at
subsidiary level and a centralized flexible liquidity pool at Group level. The reserves at subsidiary levels are held
to cover the relevant shocks of the subsidiaries which may arise in local currencies (deposit withdrawal, local
capital market shock, unexpected business expansion), while the centralized liquidity pool is held to cover the
OTP Bank’s separate shocks (deposit-, yield curve- and exchange rate shocks) and all group member’s potential
shocks that may arise in foreign currencies (deposit withdrawal, capital market shock).
The recalculation of shocks is made at least quarterly while the recalibration of shock measurement models and
review of the risk management methodology is an annual process. The monitoring of liquidity reserves for both
centralized and decentralized liquid asset portfolio has been built into the daily reporting process.
Due to the balance sheet adjustment process (deleveraging) experienced in the last few years, the liquidity
reserves of the Bank increased significantly while the liquidity risk exposure has decreased considerably.
Currently the (over)coverage of risk liquidity risk exposure by high quality liquid assets is at all-time record
highs. There were no material changes in the liquidity risk management process for the year ended 31 December
2021.
The following tables provide an analysis of assets and liabilities about the non-discounted cash flow into relevant
maturity groupings based on the remaining period from the balance sheet date to the contractual maturity date. It
is presented under the most prudent consideration of maturity dates where options or repayment schedules allow
for early repayment possibilities.
The contractual amounts disclosed in the maturity analyses are the contractual undiscounted cash flows like
gross finance lease obligations (before deducting finance charges); prices specified in forward agreements to
purchase financial assets for cash; net amounts for pay-floating/receive-fixed interest rate swaps for which net
cash flows are exchanged; contractual amounts to be exchanged in a derivative financial instrument for which
gross cash flows are exchanged; gross loan commitments.
Such undiscounted cash flows differ from the amount included in the statement of financial position because the
amount in that statement is based on discounted cash flows. When the amount payable is not fixed, the amount
disclosed is determined by reference to the conditions existing at the end of the reporting period. For example,
when the amount payable varies with changes in an index, the amount disclosed may be based on the level of the
index at the end of the period.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
93
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.2. Maturity analysis of assets and liabilities and liquidity risk [continued]
As at 31 December 2021
Within 3
months
Within one
year and
over 3
months
Within 5
years and
over one
year
Over 5
years
Without
maturity
Total
Cash, amounts due from banks and balances with
the National Bank of Hungary
475,130
-
-
-
-
475,130
Placements with other banks, net of allowance for
placement losses
1,176,184
585,499
609,182
204,493
-
2,575,358
Repo receivables
33,710
-
-
-
-
33,710
Financial assets at fair value through profit or loss
908
3,709
19,804
10,259
29,794
64,474
Securities at fair value through other
comprehensive income
16,329
58,446
358,805
199,854
17,138
650,572
Loans at amortised cost
1,327,629
873,169
1,377,885
726,016
-
4,304,699
Loans mandatorily measured at fair value through
profit or loss
16,516
15,575
121,104
553,569
-
706,764
Securities at amortised cost
28,514
308,921
1,792,058
938,902
-
3,068,395
Investments in subsidiaries, associates and other
investments
-
-
-
-
1,573,008
1,573,008
Other financial assets
157,669
1,227
-
-
-
158,896
TOTAL ASSETS
3,232,589
1,846,546
4,278,838
2,633,093
1,619,940
13,611,006
Amounts due to banks and deposits from the
National Bank of Hungary and other banks
297,779
138,418
506,233
108,773
-
1,051,203
Deposits from customers
9,844,911
57,851
33,112
12,658
-
9,948,532
Repo liabilities
49,726
-
36,854
-
-
86,580
Liabilities from issued securities
5,258
6,812
8,812
2,065
-
22,947
Subordinated bonds and loans
2,841
-
-
269,698
-
272,539
Financial liabilities at fair value through profit or
loss
531
1,253
4,422
13,927
-
20,133
Leasing liabilities
1,078
3,791
9,356
3,707
-
17,932
Other financial liabilities
193,315
5,337
876
-
-
199,528
TOTAL LIABILITIES
10,395,439
213,462
599,665
410,828
-
11,619,394
NET POSITION
1
-7,162,850
1,633,084
3,679,173
2,222,265
1,619,940
1,991,612
Receivables from derivative financial instruments
classified as held for trading
4,573,312
1,957,498
339,869
135,728
-
7,006,407
Liabilities from derivative financial instruments
classified as held for trading
(4,581,312)
(1,951,622)
(328,607)
(132,345)
-
(6,993,886)
Net position of derivative financial instruments
classified as held for trading
(8,000)
5,876
11,262
3,383
-
12,521
Receivables from derivative financial instruments
designated as hedge accounting
5,693
37,436
580,280
16,195
-
639,604
Liabilities from derivative financial instruments
designated as hedge accounting
(7,658)
(46,925)
(595,692)
(16,417)
-
(666,692)
Net position of derivative financial instruments
designated as hedging accounting
(1,965)
(9,489)
(15,412)
(222)
-
(27,088)
Net position of derivative financial instruments
total
(9,965)
(3,613)
(4,150)
3,161
-
(14,567)
Commitments to extend credit
1,677,030
-
-
-
-
1,677,030
Confirmed letters of credit
30,381
-
-
-
-
30,381
Factoring loan commitment
423,673
-
-
-
-
423,673
Bank guarantees
133,460
189,747
247,886
936,824
-
1,507,917
Off-balance sheet commitments
2,264,544
189,747
247,886
936,824
-
3,639,001
1
Analysis for net position of assets and liabilities are calculated in accordance with IFRS 7, therefore certain financial instruments are
presented in the earliest period in which the Bank could be required to pay. On-demand deposits are presented in the earliest (within 3
month) period category, however based on Management’s discretion the Bank has appropriate liquidity reserves as maintenance and
management of liquidity risk.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
94
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.2. Maturity analysis of assets and liabilities and liquidity risk [continued]
As at 31 December 2020
Within 3
months
Within one
year and over
3 months
Within 5 years
and over one
year
Over 5
years
Without
maturity
Total
Cash, amounts due from banks and balances with
the National Bank of Hungary
579,120
-
-
-
-
579,120
Placements with other banks, net of allowance for
placement losses
578,907
656,143
273,834
33,027
-
1,541,911
Repo receivables
183,656
-
-
-
-
183,656
Financial assets at fair value through profit or loss
1,401
1,151
3,576
9,042
22,121
37,291
Securities at fair value through other
comprehensive income
14,453
111,117
402,797
305,507
15,731
849,605
Loans at amortised cost
1,134,542
728,410
1,132,083
645,980
-
3,641,015
Loans mandatorily measured at fair value through
profit or loss
14,850
11,674
85,000
383,775
-
495,299
Securities at amortised cost
19,735
37,950
1,354,479
559,171
-
1,971,335
Investment properties
-
-
-
-
1,936
1,936
Investments in subsidiaries, associates and other
investments
-
-
-
-
1,548,972
1,548,972
Other financial assets
133,832
1,277
-
-
-
135,109
TOTAL ASSETS
2,660,496
1,547,722
3,251,769
1,936,502
1,588,760
10,985,249
Amounts due to banks and deposits from the
National Bank of Hungary and other banks
152,633
62,871
492,291
73,574
-
781,369
Deposits from customers
7,716,000
131,890
30,628
14,115
-
7,892,633
Repo liabilities
-
-
109,612
-
-
109,612
Liabilities from issued securities
636
11,835
15,256
487
-
28,214
Subordinated bonds and loans
2,972
-
-
302,182
-
305,154
Financial liabilities at fair value through profit or
loss
3,159
1,421
6,115
15,207
-
25,902
Leasing liabilities
1,073
3,350
7,213
2,470
-
14,106
Other financial liabilities
161,652
4,877
1,417
-
-
167,946
TOTAL LIABILITIES
8,038,125
216,244
662,532
408,035
-
9,324,936
NET POSITION
1
(5,377,629)
1,331,478
2,589,237
1,528,467
1,588,760
1,660,313
Receivables from derivative financial instruments
classified as held for trading
160,910
3,156,604
552,687
270,557
-
4,140,758
Liabilities from derivative financial instruments
classified as held for trading
(88,685)
(3,774,109)
(490,468)
(226,529)
-
(4,579,791)
Net position of derivative financial instruments
classified as held for trading
72,225
(617,505)
62,219
44,028
-
(439,033)
Receivables from derivative financial instruments
designated as hedge accounting
183
7,286
168,912
173,109
-
349,490
Liabilities from derivative financial instruments
designated as hedge accounting
(40,485)
(114,512)
(472,245)
(88,720)
-
(715,962)
Net position of derivative financial instruments
designated as hedging accounting
(40,302)
(107,226)
(303,333)
84,389
-
(366,472)
Net position of derivative financial instruments
total
31,923
(724,731)
(241,114)
128,417
-
(805,505)
Commitments to extend credit
1,441,060
-
-
-
-
1,441,060
Confirmed letters of credit
5,039
-
-
-
-
5,039
Factoring loan commitment
305,269
-
-
-
-
305,269
Bank guarantees
115,485
136,569
305,714
861,775
-
1,419,543
Off-balance sheet commitments
1,866,853
136,569
305,714
861,775
-
3,170,911
1
Analysis for net position of assets and liabilities are calculated in accordance with IFRS 7, therefore certain financial instruments are
presented in the earliest period in which the Bank could be required to pay. On-demand deposits are presented in the earliest (within 3
month) period category, however based on Management’s discretion the Bank has appropriate liquidity reserves as maintenance and
management of liquidity risk.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
95
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.3. Net foreign currency position and foreign currency risk
As at 31 December 2021
USD
EUR
CHF
Others
Total
Assets
486,225
2,448,729
14,989
290,504
3,240,447
Liabilities
(296,903)
(2,121,543)
(42,590)
(59,350)
(2,520,386)
Derivative financial instruments
(197,080)
(321,377)
27,953
(229,089)
(719,593)
Net position
(7,758)
5,809
352
2,065
468
As at 31 December 2020
USD
EUR
CHF
Others
Total
Assets
174,993
1,929,758
17,509
251,877
2,374,137
Liabilities
(291,985)
(1,623,605)
(35,701)
(105,346)
(2,056,637)
Derivative financial instruments
116,987
(350,237)
18,614
(146,208)
(360,844)
Net position
(5)
(44,084)
422
323
(43,344)
The table above provides an analysis of the Bank’s main foreign currency exposures. The remaining foreign
currencies are shown within ‘Others’. The Bank monitors its foreign exchange position for compliance with the
regulatory requirements of the NBH and its own limit system established in respect of limits on open positions.
The measurement of the Bank’s open its currency position involves monitoring the VaR limit on the foreign
exchange exposure of the Bank.
In the table Derivative financial instruments are stated at fair value.
36.4. Interest rate risk management
Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest
rates. The length of time for which the rate of interest is fixed on a financial instrument, therefore, indicates to
what extent it is exposed to interest rate risk.
The majority of the Bank's interest bearing assets and liabilities are structured to match either short-term assets
and short-term liabilities, or long-term assets and liabilities with repricing opportunities within one year, or long-
term assets and corresponding liabilities where repricing is performed simultaneously.
In addition, the significant spread existing between the different types of interest bearing assets and liabilities
enables the Bank to benefit from a high level of flexibility in adjusting for its interest rate matching and interest
rate risk exposure.
The following table presents the interest repricing dates of the Bank. Variable yield assets and liabilities have
been reported in accordance with their next repricing date. Fixed income assets and liabilities have been reported
in accordance with their maturity.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
96
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.4. Interest rate risk management [continued]
As at 31 December 2021
within 1 month
within 3 months over 1
month
within 1 year over 3
months
within 2 years over 1
year
over 2 years
Non-interest -bearing
Total
Total
ASSETS
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
Cash, amounts due from
banks and balances
with the National Bank
of Hungary
31,228
289,008
-
-
-
-
-
-
-
-
133,053
21,655
164,281
310,663
474,944
fixed interest
31,228
289,008
-
-
-
-
-
-
-
-
-
-
31,228
289,008
320,236
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
133,053
21,655
133,053
21,655
154,708
Placements with other
banks
1,353,059
127,852
148,091
165,940
31,821
79,243
76,105
29,677
499,636
27,178
24,416
4,194
2,133,128
434,084
2,567,212
fixed interest
774,315
34,420
449
156,755
2,446
79,243
76,105
29,677
499,636
27,178
-
-
1,352,951
327,273
1,680,224
variable interest
578,744
93,432
147,642
9,185
29,375
-
-
-
-
-
-
-
755,761
102,617
858,378
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
24,416
4,194
24,416
4,194
28,610
Repo receivables
33,638
-
-
-
-
-
-
-
-
-
-
-
33,638
-
33,638
fixed interest
33,638
-
-
-
-
-
-
-
-
-
-
-
33,638
-
33,638
Securities held for
trading
1,237
-
664
-
2,481
1,242
360
3,508
22,931
1,478
1,200
532
28,873
6,760
35,633
fixed interest
32
-
487
-
2,208
1,242
360
3,508
22,931
1,478
-
-
26,018
6,228
32,246
variable interest
1,205
-
177
-
273
-
-
-
-
-
-
-
1,655
-
1,655
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
1,200
532
1,200
532
1,732
Securities mandatorily
measured at fair value
through profit or loss
-
-
-
-
-
-
-
-
-
-
18,807
9,254
18,807
9,254
28,061
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
18,807
9,254
18,807
9,254
28,061
Securities at fair value
through other
comprehensive income
50,774
-
22,420
-
65,666
432
40,185
39,228
289,634
116,463
528
16,609
469,207
172,732
641,939
fixed interest
2,437
-
6,897
-
57,092
432
40,185
39,228
289,634
116,463
-
-
396,245
156,123
552,368
variable interest
48,337
-
15,523
-
8,574
-
-
-
-
-
-
-
72,434
-
72,434
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
528
16,609
528
16,609
17,137
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
97
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.4. Interest rate risk management [continued]
As at 31 December 2021
within 1 month
within 3 months over 1
month
within 1 year over 3
months
within 2 years over 1
year
over 2 years
Non-interest -bearing
Total
Total
ASSETS [continued]
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
Loans measured at
amortised cost
639,477
339,611
424,299
1,161,425
53,018
126,963
185,264
10,912
829,049
89,993
121,277
51,177
2,252,384
1,780,081
4,032,465
fixed interest
295
286
894
9,746
13,723
57,602
183,818
10,912
819,629
89,993
-
-
1,018,359
168,539
1,186,898
variable interest
639,182
339,325
423,405
1,151,679
39,295
69,361
1,446
-
9,420
-
-
-
1,112,748
1,560,365
2,673,113
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
121,277
51,177
121,277
51,177
172,454
Loans mandatorily
measured at fair value
through profit or loss
19,371
-
136
-
829
-
755
-
640,921
-
-
-
662,012
-
662,012
variable interest
19,371
-
136
-
829
-
755
-
640,921
-
-
-
662,012
-
662,012
Securities at amortised
cost
-
7,609
-
4,811
304,051
1,069
215,615
343
2,044,502
493,038
-
-
2,564,168
506,870
3,071,038
fixed interest
-
-
-
-
304,051
1,069
215,615
343
2,044,502
493,038
-
-
2,564,168
494,450
3,058,618
variable interest
-
7,609
-
4,811
-
-
-
-
-
-
-
-
-
12,420
12,420
Other financial assets
-
-
-
-
-
-
-
-
-
-
133,896
19,852
133,896
19,852
153,748
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
133,896
19,852
133,896
19,852
153,748
Derivative financial
instruments
1,507,306
1,256,601
395,623
936,093
675,976
863,692
10,760
57,437
183,617
54,913
181,095
675,035
2,954,377
3,843,771
6,798,148
fixed interest
1,400,852
1,133,429
188,144
551,308
570,718
861,983
10,760
57,378
183,617
54,913
-
-
2,354,091
2,659,011
5,013,102
variable interest
106,454
123,172
207,479
384,785
105,258
1,709
-
59
-
-
-
-
419,191
509,725
928,916
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
181,095
675,035
181,095
675,035
856,130
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
98
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.4. Interest rate risk management [continued]
As at 31 December 2021
within 1 month
within 3 months over 1
month
within 1 year over 3
months
within 2 years over 1
year
over 2 years
Non-interest -bearing
Total
Total
LIABILITIES
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
Amounts due to banks
and deposits with the
National Bank of
Hungary and other
banks
151,809
95,432
12,344
10,405
52,872
577
224,479
1,140
471,620
-
29,684
841
942,808
108,395
1,051,203
fixed interest
106,028
22,624
12,344
10,405
52,872
577
224,479
1,140
471,620
-
-
-
867,343
34,746
902,089
variable interest
45,781
72,808
-
-
-
-
-
-
-
-
-
-
45,781
72,808
118,589
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
29,684
841
29,684
841
30,525
Financial liabilities
designated to measure
at fair value through
profit or loss
20,133
-
-
-
-
-
-
-
-
-
-
-
20,133
-
20,133
variable interest
20,133
-
-
-
-
-
-
-
-
-
-
-
20,133
-
20,133
Repo liabilities
49,726
36,854
-
-
-
-
-
-
-
-
-
-
49,726
36,854
86,580
fixed interest
49,726
36,854
-
-
-
-
-
-
-
-
-
-
49,726
36,854
86,580
Deposits from customers
7,628,098
2,039,650
197,780
18,468
30,063
11,066
-
-
-
-
12,948
10,459
7,868,889
2,079,643
9,948,532
fixed interest
496,069
131,836
197,780
18,468
30,063
11,066
-
-
-
-
-
-
723,912
161,370
885,282
variable interest
7,132,029
1,907,814
-
-
-
-
-
-
-
-
-
-
7,132,029
1,907,814
9,039,843
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
12,948
10,459
12,948
10,459
23,407
Liabilities from issued
securities
865
-
8,514
-
4,696
-
1,676
-
6,402
-
-
-
22,153
-
22,153
fixed interest
212
-
-
-
4,147
-
1,676
-
6,402
-
-
-
12,437
-
12,437
variable interest
653
-
8,514
-
549
-
-
-
-
-
-
-
9,716
-
9,716
Subordinated bonds and
loans
-
-
-
85,551
-
186,225
-
-
-
-
-
-
-
271,776
271,776
variable interest
-
-
-
85,551
-
186,225
-
-
-
-
-
-
-
271,776
271,776
Leasing liabilities
192
380
236
522
1,004
2,535
1,362
1,321
4,838
5,542
-
-
7,632
10,300
17,932
fixed interest
108
25
72
34
538
123
717
144
2,118
485
-
-
3,553
811
4,364
variable interest
84
355
164
488
466
2,412
645
1,177
2,720
5,057
-
-
4,079
9,489
13,568
Other financial liabilities
-
-
-
-
-
-
-
-
-
-
156,012
38,499
156,012
38,499
194,511
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
156,012
38,499
156,012
38,499
194,511
Derivative financial
instruments
840,797
2,004,808
220,053
1,083,211
709,776
870,457
12,937
54,862
96,350
73,700
411,167
430,486
2,291,080
4,517,524
6,808,604
fixed interest
728,548
1,814,645
151,791
579,843
525,835
868,689
12,360
54,789
96,350
73,700
-
-
1,514,884
3,391,666
4,906,550
variable interest
112,249
190,163
68,262
503,368
183,941
1,768
577
73
-
-
-
-
365,029
695,372
1,060,401
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
411,167
430,486
411,167
430,486
841,653
NET POSITION
(5,055,530)
(2,156,443)
552,306
1,070,112
335,431
1,781
288,590
83,782
3,931,080
703,821
4,461
318,023
56,338
21,076
77,414
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
99
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.4. Interest rate risk management [continued]
As at 31 December 2020
within 1 month
within 3 months over 1
month
within 1 year over 3
months
within 2 years over 1
year
over 2 years
Non-interest -bearing
Total
Total
ASSETS
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
Cash, amounts due from banks
and balances with the
National Bank of Hungary
144,030
239,960
-
-
-
-
-
-
-
-
168,435
26,695
312,465
266,655
579,120
fixed interest
144,030
239,960
-
-
-
-
-
-
-
-
-
-
144,030
239,960
383,990
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
168,435
26,695
168,435
26,695
195,130
Placements with other banks
783,024
80,732
177,155
189,231
43,239
64,447
23,378
3,629
122,035
27,080
19,194
2,740
1,168,025
367,859
1,535,884
fixed interest
220,175
17,719
15,106
179,174
13,934
64,447
23,378
3,629
122,035
27,080
-
-
394,628
292,049
686,677
variable interest
562,849
63,013
162,049
10,057
29,305
-
-
-
-
-
-
-
754,203
73,070
827,273
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
19,194
2,740
19,194
2,740
21,934
Repo receivables
183,364
-
-
-
-
-
-
-
-
-
-
-
183,364
-
183,364
fixed interest
183,364
-
-
-
-
-
-
-
-
-
-
-
183,364
-
183,364
Securities held for trading
1,260
526
287
567
608
465
1,250
298
2,983
1,095
1,926
464
8,314
3,415
11,729
fixed interest
354
-
287
567
608
465
1,250
298
2,983
1,095
-
-
5,482
2,425
7,907
variable interest
906
526
-
-
-
-
-
-
-
-
-
-
906
526
1,432
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
1,926
464
1,926
464
2,390
Securities mandatorily measured
at fair value through profit or
loss
-
5,342
-
-
-
-
-
-
-
-
18,470
8,124
18,470
13,466
31,936
variable interest
-
5,342
-
-
-
-
-
-
-
-
-
-
-
5,342
5,342
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
18,470
8,124
18,470
8,124
26,594
Securities at fair value through
other comprehensive income
79,240
5,717
16,218
-
111,153
10,223
3,533
19,578
551,328
99,229
528
15,203
762,000
149,950
911,950
fixed interest
600
5,717
673
-
100,003
10,223
3,533
19,578
551,328
99,229
-
-
656,137
134,747
790,884
variable interest
78,640
-
15,545
-
11,150
-
-
-
-
-
-
-
105,335
-
105,335
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
528
15,203
528
15,203
15,731
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
100
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.4. Interest rate risk management [continued]
As at 31 December 2020
within 1 month
within 3 months over 1
month
within 1 year over 3
months
within 2 years over 1
year
over 2 years
Non-interest -
bearing
Total
Total
ASSETS [continued]
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
Loans measured at amortised cost
555,311
252,682
391,295
1,112,003
54,263
66,998
45,539
15,984
709,929
56,172
125,861
31,723
1,882,198
1,535,562
3,417,760
fixed interest
2,769
8,967
1,285
74,088
11,731
8,970
33,604
15,984
700,585
56,172
-
-
749,974
164,181
914,155
variable interest
552,542
243,715
390,010
1,037,915
42,532
58,028
11,935
-
9,344
-
-
-
1,006,363
1,339,658
2,346,021
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
125,861
31,723
125,861
31,723
157,584
Loans mandatorily measured at
fair value through profit or loss
24,870
-
59
-
334
-
368
-
455,306
-
-
-
480,937
-
480,937
variable interest
24,870
-
59
-
334
-
368
-
455,306
-
-
-
480,937
-
480,937
Securities at amortised cost
-
-
-
1,065
38,112
-
393,442
1,092
1,551,614
22,367
-
-
1,983,168
24,524
2,007,692
fixed interest
-
-
-
1,065
38,112
-
393,442
1,092
1,551,614
22,367
-
-
1,983,168
24,524
2,007,692
Other financial assets
-
-
-
-
-
-
-
-
-
-
112,055
15,124
112,055
15,124
127,179
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
112,055
15,124
112,055
15,124
127,179
Derivative financial instruments
936,413
706,442
880,140
378,405
557,115
419,548
26,738
7,333
39,765
101,640
733,551
248,095
3,173,724
1,861,463
5,035,187
fixed interest
920,404
567,652
658,754
183,228
559,258
387,941
26,799
7,333
40,012
101,640
-
-
2,205,227
1,247,793
3,453,020
variable interest
16,010
138,790
221,387
195,178
(2,143)
31,607
(61)
-
(247)
-
-
-
234,945
365,575
600,520
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
733,551
248,095
733,551
248,095
981,646
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
101
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.4. Interest rate risk management [continued]
As at 31 December 2020
within 1 month
within 3 months over 1
month
within 1 year over 3
months
within 2 years over 1
year
over 2 years
Non-interest -bearing
Total
Total
LIABILITIES
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
Amounts due to banks and
deposits with the National Bank
of Hungary and other banks
106,883
86,885
12,008
40,429
3,363
7,491
39,270
-
467,479
-
1,678
1,491
630,681
136,296
766,977
fixed interest
36,937
15,136
12,008
8,569
3,363
1,490
39,270
-
467,479
-
-
-
559,057
25,195
584,252
variable interest
69,946
71,749
-
31,860
-
6,001
-
-
-
-
-
-
69,946
109,610
179,556
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
1,678
1,491
1,678
1,491
3,169
Financial liabilities designated to
measure at fair value through
profit or loss
25,902
-
-
-
-
-
-
-
-
-
-
-
25,902
-
25,902
fixed interest
79
-
-
-
-
-
-
-
-
-
-
-
79
-
79
variable interest
25,823
-
-
-
-
-
-
-
-
-
-
-
25,823
-
25,823
Repo liabilities
-
-
-
-
-
109,612
-
-
-
-
-
-
-
109,612
109,612
variable interest
-
-
-
-
-
109,612
-
-
-
-
-
-
-
109,612
109,612
Deposits from customers
6,211,090
1,404,362
133,886
15,540
101,496
13,367
227
-
-
-
10,782
4,985
6,457,481
1,438,254
7,895,735
fixed interest
325,464
116,385
133,886
15,540
101,496
13,367
227
-
-
-
-
-
561,073
145,292
706,365
variable interest
5,885,626
1,287,977
-
-
-
-
-
-
-
-
-
-
5,885,626
1,287,977
7,173,603
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
10,782
4,985
10,782
4,985
15,767
Liabilities from issued securities
3,090
221
11,691
414
4,502
721
4,098
-
3,698
-
-
-
27,079
1,356
28,435
fixed interest
213
-
-
-
3,500
-
4,098
-
3,698
-
-
-
11,509
-
11,509
variable interest
2,877
221
11,691
414
1,002
721
-
-
-
-
-
-
15,570
1,356
16,926
Subordinated bonds and loans
-
-
-
120,153
-
184,090
-
-
-
-
-
-
-
304,243
304,243
variable interest
-
-
-
120,153
-
184,090
-
-
-
-
-
-
-
304,243
304,243
Leasing liabilities
149
187
260
477
1,267
2,082
1,333
1,233
5,747
1,371
-
-
8,756
5,350
14,106
fixed interest
103
11
69
40
528
170
707
65
2,796
37
-
-
4,203
323
4,526
variable interest
46
176
191
437
739
1,912
626
1,168
2,951
1,334
-
-
4,553
5,027
9,580
Other financial liabilities
-
-
-
-
-
-
-
-
-
-
138,508
29,032
138,508
29,032
167,540
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
138,508
29,032
138,508
29,032
167,540
Derivative financial instruments
1,264,723
383,260
1,035,481
206,796
479,506
492,403
9,453
24,907
49,757
89,983
724,945
253,430
3,563,865
1,450,778
5,014,643
fixed interest
1,111,371
376,748
648,762
188,722
481,293
469,699
9,514
24,907
50,004
89,802
-
-
2,300,945
1,149,878
3,450,822
variable interest
153,351
6,512
386,719
18,074
(1,787)
22,704
(61)
-
(247)
181
-
-
537,975
47,471
585,446
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
724,945
253,430
724,945
253,430
978,374
NET POSITION
(4,904,324)
(583,514)
271,828
1,297,462
214,690
(248,085)
439,867
21,774
2,906,279
216,230
304,108
59,231
(767,552)
763,097
(4,455)
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
102
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.5. Market risk
The Bank takes on exposure to market risks. Market risks arise from open positions in interest rate, currency and
equity products, all of which are exposed to general and specific market movements. The Bank applies a Value-
at-Risk ("VaR") methodology to estimate the market risk of positions held and the maximum losses expected,
based upon a number of assumptions for various changes in market conditions. The Management Board sets
limits on the value of risk that may be accepted, which is monitored on a daily basis. (Analysis of liquidity risk,
foreign currency risk and interest rate risk is detailed in Notes 36.2, 36.3 and 36.4 respectively.)
36.5.1. Market risk sensitivity analysis
The VaR risk measure estimates the potential loss in pre-tax profit over a given holding period for a specified
confidence level. The VaR methodology is a statistically defined, probability-based approach that takes into
account market volatilities as well as risk diversification by recognizing offsetting positions and correlations
between products and markets. Risks can be measured consistently across all markets and products, and risk
measures can be aggregated to arrive at a single risk number. The one-day 99% VaR number used by the Group
reflects the 99% probability that the daily loss will not exceed the reported VaR.
VaR methodologies are employed to calculate daily risk numbers include the historical and variance-covariance
approach. The diversification effect has not been validated among the various market risk types when capital
calculation happens.
The VaR of the trading portfolio can be summarized as follows (in HUF mn):
Historical VaR (99%, one-day) by risk type
Average
2021
2020
Foreign exchange
1,560
1,507
Interest rate
135
77
Equity instruments
20
141
Diversification
-
-
Total VaR exposure
1,715
1,725
While VaR captures the OTP’s daily exposure to currency and interest rate risk, sensitivity analysis evaluates the
impact of a reasonably possible change in interest or foreign currency rates over a year. The longer time frame of
sensitivity analysis complements VaR and helps the OTP to assess its market risk exposures. Details of
sensitivity analysis for foreign currency risk are set out in Note 36.5.2., for interest rate risk in Note 36.5.3., and
for equity price sensitivity analysis in Note 36.5.4.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
103
NOTE 35: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.5. Market risk [continued]
36.5.2. Foreign currency sensitivity analysis
The Bank changed its methodology of foreign currency sensitivity analysis and has been using a
historical VaR calculation since 31 March 2021. The former Monte Carlo simulation represented the
Group’s sensitivity to the rise and fall in the HUF exchange rate against EUR, over a 3 months period.
The sensitivity analysis included only outstanding foreign currency denominated monetary items as
strategic open positions related to foreign activities. In line with the Management's intention, the former
EUR -310 million strategic open position was fully closed as of 31 March 2021.
Since the closing of the strategic open position, the Group has been using a historical VaR calculation
with 1 day holding period. The analysis includes the same net open foreign exchange position as used
under the internal capital adequacy assessment process (ICAAP). The VaR methodology is a statistically
defined, probability-based approach that takes into account market volatilities as well as risk
diversification by recognizing offsetting positions and correlations between products and markets.
Additionally, the Bank determines the foreign currency risk of assets evaluated through the Other
Comprehensive Income (OCI), which includes securities valuated on FVOCI and the foreign currency
translation reserves.
The following table shows the result of the foreign currency sensitivity analysis. Numbers below indicate
the expected daily profit or loss of the portfolio beside the given confidence level.
Probability
Effects to the P&L in 3 months period
2021
2020
In HUF billion
In HUF billion
1%
(178)
(274)
5%
(119)
(151)
25%
(39)
(44)
50%
2
4
25%
49
57
5%
126
157
1%
187
197
Notes:
(1) Historical VaR simulation is based on the empirical distribution of the historical exchange rate
movements between 31 December 2020 and 31 December 2021.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
104
NOTE 35: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.5. Market risk [continued]
36.5.3. Interest rate sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives
and non-derivative instruments at the balance sheet date. The analysis is prepared assuming the amount of assets
and liabilities outstanding at the balance sheet date was outstanding for the whole year. The analysis was
prepared by assuming only adverse interest rate changes. The main assumptions were as follows:
● Floating rate assets and liabilities were repriced to the modelled benchmark yields at the repricing
dates assuming the unchanged margin compared to the last repricing.
● Fixed rate assets and liabilities were repriced at the contractual maturity date.
● As for liabilities with discretionary repricing feature by the Bank were assumed to be repriced with
two-weeks delay, assuming no change in the margin compared to the last repricing date.
● Deposits with an interest rate lower than 0.3% even at high market rates were assumed to be
unchanged for the whole period.
The sensitivity of interest income to changes in BUBOR was analysed by assuming two interest rate path
scenarios:
(1) HUF base rate and BUBOR increases gradually by 100 bps over the next year (probable scenario)
(2) HUF base rate and BUBOR decreases gradually by 50 bps over the next year (alternative scenario)
The net interest income in a one year period after 1 January 2022 would be increased by HUF 1,238 million
(probable scenario) and decreased by HUF 919 million (alternative scenario) as a result of these simulation. The
same simulation indicated HUF 1,476 million (probable scenario) and HUF 6,420 million (alternative scenario)
decrease in the Net interest income in a one year period after 1 January 2021. This effect is counterbalanced by
capital gains HUF -619 million (or probable scenario), HUF 322 million (for alternative scenario) as at 31
December 2021 and (HUF 584 million for probable scenario, HUF 2,329 million for alternative scenario as at 31
December 2020) on the government bond portfolio held for hedging (economic).
Furthermore, the effects of an instant 10bps parallel shift of the HUF, EUR and USD yield-curves on net interest
income over a one-year period and on the market value of the hedge government bond portfolio booked against
capital was analysed. The results can be summarized as follows (in HUF million):
Description
2021
2020
Effects to the net
interest income
(one-year period)
Effects to the net
interest income (one-
year period)
Effects to the net
interest income
(one-year period)
Effects to the net
interest income
(one-year period)
HUF (0.1%) parallel shift
(25)
64
(1,991)
389
HUF 0.1% parallel shift
(40)
(64)
1,715
389
EUR (0.1%) parallel shift
(483)
-
(676)
-
USD (0.1%) parallel shift
(23)
-
(165)
-
Total
(546)
(64)
(2,832)
389
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
105
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.5. Market risk [continued]
36.5.4. Equity price sensitivity analysis
The following table shows the effect of the equity price sensitivity. The Bank uses VaR calculation with 1 day
holding period and a 99% confidence level. The VaR methodology is a statistically defined, probability-based
approach that takes into account market volatilities as well as risk diversification by recognizing offsetting
positions and correlations between products and markets. The daily loss will not exceed the reported VaR
number with 99% of probability.
The stress test assumes the largest price movement of the last year and calculates with it as the adverse direction.
These scenarios show the loss of the portfolio when all prices change with the maximum amount of the last year.
Description
2021
2020
VaR (99%, one day, million HUF)
12
141
Stress test (million HUF)
(21)
(233)
36.6. Capital management
Capital management
The primary objective of the capital management of the Bank is to ensure the prudent operation, the entire
compliance with the prescriptions of the regulator for a persistent business operation and maximising the
shareholder value, accompanied by an optimal financing structure.
The capital management of the Bank includes the management and evaluation of the shareholders` equity
available for hedging risks, other types of funds to be recorded in the equity and all material risks to be covered
by the capital.
The basis of the capital management of the Bank in the short run is the continuous monitoring of its capital
position, in the long run the strategic and the business planning, which includes the monitoring and forecast of
the capital position of the Bank.
The Bank maintains the capital adequacy required by the regulatory bodies and the planned risk taking mainly by
means of ensuring and developing its profitability. In case the planned risk level of the Bank exceeded its Core
and Supplementary capital, the Bank ensures the prudent operation by occasional measures. A further tool in the
capital management of the Bank is the dividend policy, and the transactions performed with the treasury shares.
Capital adequacy
The Capital Requirements Directive package (CRDIV/CRR) transposes the global standards on banking
regulation (commonly known as the Basel III agreement) into the EU legal framework. The rules are applied
from 1 January 2014. They set stronger prudential requirements for institutions, requiring them to keep sufficient
capital reserves and liquidity. This framework makes institutions in the EU more solid and strengthens their
capacity to adequately manage the risks linked to their activities, and absorb any losses they may incur in doing
business.
The Bank has entirely complied with the regulatory capital requirements in 2021 as well as in 2020.
The Bank’s capital adequacy calculation is in line with IFRS and based on Basel III as at 31 December 2021 and
2020. The Bank uses the standard method for determining the regulatory capital requirements of the credit risk
and market risk while in case of the operational risk the Advanced Measurement Approach (AMA).
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
106
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.6. Capital management [continued]
Capital adequacy [continued]
1
The calculation of the Capital Adequacy ratio as at 31 December 2021 and 2020 is as follows:
2021
2020
Basel III
Basel III
Core capital (Tier 1)
1,747,480
1,598,295
Primary core capital (CET1)
1,747,480
1,598,295
Supplementary capital (Tier 2)
264,396
295,795
Regulatory capital
2,011,876
1,894,090
Credit risk capital requirement
603,253
526,283
Market risk capital requirement
7,519
11,550
Operational risk capital requirement
31,629
27,597
Total eligible regulatory capital
642,401
565,430
Surplus capital
1,369,475
1,328,660
CET 1 ratio
21.76%
22.61%
Capital adequacy ratio
25.05%
26.80%
Basel III:
Common equity Tier 1 capital (CET1):
Issued capital, Capital reserve, useable part of Tied-up reserve, General reserve, Profit reserve, Profit for the
year, Treasury shares, Intangible assets, deductions due to investments, adjustments due to temporary disposals
Tier 2 capital:
Subsidiary loan capital, Subordinated loan capital, deductions due to repurchased loan capital and Subordinated
loan capital issued by the OTP Bank, adjustments due to temporary disposals.
1
The dividend amount planned to pay out after the profit of financial year 2019, 2020 and 2021 is also deducted from CET 1 capital.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
107
NOTE 37: TRANSFER AND RECLASSIFICATION OF FINANCIAL INSTRUMENTS (in HUF
mn)
Reclassification from securities held-for-trading to securities measured at fair value through other
comprehensive income
As at 31 December 2021
Date of
reclassification
Reason
Type of
securities
Nominal value
at
reclassification
Fair value at the
date of
reclassification
EIR at the date
of
reclassification
Interest
income
1 September
2018
Change in
business
model
retail
hungarian
government
bonds
1,069
1,087
2%-3%
38
During the year 2018, securities issued by the Hungarian Government with the nominal value of HUF 66.506
million were transferred from the trading portfolio to the securities measured at fair value through other
comprehensive income, of which HUF 1,087 million remaining amount was presented as at 31 December 2021.
The Bank has previously held retail government bonds in the portfolio measured at fair value through other
comprehensive income. During 2018 the Bank changed the business model of the retail government bonds to
manage all on the basis of a single business model aimed at collecting the future contractual cash flows and/or
selling them.
In 2018, the terms and conditions of sale of retail government bonds and the pricing environment have changed
significantly, as a result of which the Bank is no longer able to maintain its sole trading intent with these
securities that the Bank applied earlier. Furthermore there is an option-agreement between the Bank and the
Government Debt Management Agency (“GDMA”) that GDMA will buy back this portfolio therefore it has
been reclassified.
Financial assets transferred but not derecognised
2021
2020
Transferred
assets
Associated
liabilities
Transferred
assets
Associated
liabilities
Carrying amount
Financial assets at amortised cost
Debt securities
88,181
86,580
125,244
109,612
Total:
88,181
86,580
125,244
109,612
Total:
88,181
86,580
125,244
109,612
As at 31 December 2021 and 2020, the Bank had obligation from repurchase agreements about HUF 87 billion
and HUF 110 billion respectively. Securities sold temporarily under repurchase agreements will continue to be
recognized in the Statement of Financial Position of the Bank in the appropriate securities category. The related
liability is measured at amortized cost in the Statement of Financial Position as ’Amounts due to banks and
deposits from the National Bank of Hungary and other banks’. Under these repurchase agreements only
Hungarian and foreign government bonds were transferred.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
108
NOTE 38: OFF-BALANCE SHEET ITEMS (in HUF mn)
In the normal course of business, the Bank becomes a party to various financial transactions that are not reflected
on the statement of financial position and are referred to as off-balance sheet financial instruments. The
following represents notional amounts of these off-balance sheet financial instruments, unless stated otherwise.
Contingent liabilities and commitments
2021
2020
Loan commitments
1,677,030
1,441,060
Guarantees arising from banking activities
1,507,917
1,419,543
from this: Payment undertaking liabilities (related to issue of mortgage
bonds) of OTP Mortgage Bank
746,476
683,736
Factoring loan commitments
423,673
305,269
Confirmed letters of credit
30,381
5,039
Contingent liabilities and commitments total in accordance with IFRS 9
3,639,001
3,170,911
Legal disputes (disputed value)
3,204
4,720
Contingent liabilities related to payments from shares in venture capital fund
47,550
32,712
Other
408
602
Contingent liabilities and commitments total in accordance with IAS 37
51,162
38,034
Total
3,690,163
3,208,945
Legal disputes
At the balance sheet date the Bank was involved in various claims and legal proceedings of a nature considered
normal to its business. The level of these claims and legal proceedings corresponds to the level of claims and
legal proceedings in previous years.
The Bank believes that the various asserted claims and litigations in which it is involved will not materially
affect its financial position, future operating results or cash flows, although no assurance can be given with
respect to the ultimate outcome of any such claim or litigation.
Provision due to legal disputes was HUF 259 million and HUF 199 million as at 2021 and 2020, respectively.
(See Note 24.)
Commitments to extend credit, guarantees and letter of credit
The primary purpose of these instruments is to ensure that funds are available to a customer as required.
Guarantees and standby letters of credit, which represent irrevocable assurances that the Bank will make
payments in the event that a customer cannot meet its obligations to third parties, carry the same credit risk as
loans.
Documentary and commercial letters of credit, which are written undertakings by the Bank on behalf of a
customer authorising a third party to draw drafts on the Bank up to a stipulated amount under specific terms and
conditions, are collateralised by the underlying shipments of goods to which they relate and therefore carry less
risk than a direct borrowing.
Commitments to extend credit represent unused portions of authorisations to extend credit in the form of loans,
guarantees or letters of credit. With respect to credit risk on commitments to extend credit, the Bank is
potentially exposed to loss in an amount equal to the total unused commitments. However, the likely amount of
loss is less than the total unused commitments since most commitments to extend credit are contingent upon
customers maintaining specific credit standards.
Guarantees, irrevocable letters of credit and undrawn loan commitments are subject to similar credit risk
monitoring and credit policies as utilised in the extension of loans. The Management of the Bank believes the
market risk associated with guarantees, irrevocable letters of credit and undrawn loan commitments are minimal.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
109
NOTE 38: OFF-BALANCE SHEET ITEMS (in HUF mn) [continued]
Guarantees, payment undertakings arising from banking activities
Payment undertaking is a promise by the Bank to assume responsibility for the debt obligation of a borrower if
that borrower defaults until a determined amount and until a determined date, in case of fulfilling conditions,
without checking the underlying transactions. The guarantee’s liability is joint and primary with the principal, in
case of payment undertaking, while the Bank assumes the obligation derived from guarantee independently by
the conditions established by the Bank. A guarantee is most typically required when the ability of the primary
obligor or principal to perform its obligations under a contract is in question, or when there is some public or
private interest which requires protection from the consequences of the principal's default or delinquency. A
contract of guarantee is subject to the statute of frauds (or its equivalent local laws) and is only enforceable if
recorded in writing and signed by the surety and the principal.
If the surety is required to pay or perform due to the principal's failure to do so, the law will usually give the
surety a right of subrogation, allowing the surety to use the surety's contractual rights to recover the cost of
making payment or performing on the principal's behalf, even in the absence of an express agreement to that
effect between the surety and the principal.
Contingent liabilities related to OTP Mortgage Bank Ltd.
Under a syndication agreement with its wholly owned subsidiary, OTP Mortgage Bank Ltd., the Bank had
guaranteed, in return for an annual fee, to purchase all mortgage loans held by OTP Mortgage Bank Ltd. that
become non-performing. The repurchase guarantee contract of non-performing loans between OTP Mortgage
Bank Ltd. and OTP Bank Plc. was modified in 2010. According to the arrangement the repurchase guarantee
was cancelled and OTP Bank Plc. gives bail to the loans originated or purchased by the Bank.
NOTE 39: SHARE-BASED PAYMENT AND EMPLOYEE BENEFIT (in HUF mn)
Previously approved option program required a modification thanks to the introduction of the Bank Group Policy
on Payments accepted in resolution of Annual General Meeting regarding to the amendment of CRD III.
Directives and Act on Credit Institutions and Financial Enterprises.
Key management personnel affected by the Bank Group Policy receive compensation based on performance
assessment generally in the form of cash bonus and equity shares in a ratio of 50-50%. Assignment is based on
OTP shares, furthermore performance based payments are deferred in accordance with the rules of Credit
Institutions Act.
OTP Bank ensures the share-based payment part for the management personnel of OTP Group members.
During implementation of the Remuneration Policy of the Group it became apparent that in case of certain
foreign subsidiaries it is not possible to ensure the originally determined share-based payment because of legal
reasons – incompatible with relevant EU-directives –, therefore a decision was made to cancel the share-based
payment in affected countries, and virtual share based payment – cash payment fixed to share price - was made
from 2017. In case of foreign subsidiaries virtual share based payment was made uniformly from 2021 (in case
of payments related to 2021).
The quantity of usable shares for individuals calculated for settlement of share-based payment shall be
determined as the ratio of the amount of share-based payment and share price determined by Supervisory Board.
The value of the share-based payment at the performance assessment is determined within 10 days by
Supervisory Board based on the average of the three previous trade day’s middle rate of OTP Bank’s equity
shares fixed on the Budapest Stock Exchange.
At the same time the conditions of discounted share-based payment are determined, and share-based payment
shall contain maximum HUF 6,000 discount at the assessment date, and earnings for the shares at the payment
date is maximum HUF 12,000.
Employee benefits are all forms of consideration given by an entity in exchange for service rendered by
employees or for the termination of employment. IAS 19 Employee Benefits shall be applied in accounting for
all employee benefits, except those to which IFRS 2 Share-based Payment applies.
Short-term employee benefits are employee benefits (other than termination benefits) that are expected to be
settled wholly before twelve months after the end of the annual reporting period in which the employees render
the related service. Post-employment benefits are employee benefits (other than termination and short-term
employee benefits) that are payable after the completion of employment. Post-employment benefit plans are
formal or informal arrangements under which an entity provides post-employment benefits for one or more
employees. Post-employment benefit plans are classified as either defined contribution plans or defined benefit
plans, depending on the economic substance of the plan as derived from its principal terms and conditions.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
110
NOTE 39: SHARE-BASED PAYMENT AND EMPLOYEE BENEFIT (in HUF mn) [continued]
Termination benefits are employee benefits provided in exchange for the termination of an employee’s
employment as a result of either: an entity’s decision to terminate an employee’s employment before the normal
retirement date or an employee’s decision to accept an offer of benefits in exchange for the termination of
employment. Other long-term employee benefits are all employee benefits other than short-term employee
benefits, postemployment benefits and termination benefits.
The parameters for the share-based payment relating to ongoing years 2016-2020 by Supervisory Board for
periods of each year as follows:
Year
Share purchasing at a
discounted price
Price of
remuneration
exchanged to
share
Share purchasing at a
discounted price
Price of
remuneration
exchanged to
share
Share purchasing at a
discounted price
Price of
remuneration
exchanged to
share
Exercise
price
Maximum
earnings per
share
Exercise
price
Maximum
earnings per
share
Exercise
price
Maximum
earnings per
share
HUF per share
for the year 2016
for the year 2017
for the year 2018
2017
7,200
2,500
9,200
-
-
-
-
-
-
2018
7,200
3,000
9,200
8,064
3,000
10,064
-
-
-
2019
7,200
3,500
9,200
8,064
3,500
10,064
10,413
4,000
12,413
2020
7,200
4,000
9,200
8,064
4,000
10,064
10,413
4,000
12,413
2021
-
-
-
8,064
4,000
10,064
10,413
4,000
12,413
2022
-
-
-
8,064
4,000
10,064
10,913
4,000
12,413
2023
-
-
-
-
-
-
10,913
4,000
12,413
2024
-
-
-
-
-
-
10,913
4,000
12,413
2025
-
-
-
-
-
-
10,913
4,000
12,413
Year
Share purchasing at a discounted price
Price of remuneration
exchanged to share
Share purchasing at a discounted price
Price of remuneration
exchanged to share
Exercise price
Maximum earnings
per share
Exercise price
Maximum earnings
per share
HUF per share
for the year 2019
for the year 2020
2020
9,553
4,000
11,553
-
-
-
2021
9,553
4,000
11,553
12,644
9,000
16,644
2022
9,553
4,000
11,553
12,644
8,000
16,644
2023
9,553
4,000
11,553
13,644
8,000
16,644
2024
9,553
4,000
11,553
13,644
8,000
16,644
2025
9,553
4,000
11,553
13,644
8,000
16,644
2026
9,553
4,000
11,553
13,644
8,000
16,644
2027
-
-
-
13,644
8,000
16,644
Relevant factors considered during measurement of fair value related to share-based payment as follows:
Year
Reference
price
Assumed
volatility
Risk-free interest rate (HUF)
1Y
2Y
3Y
4Y
5Y
6Y
7Y
2017
9,200
21.3%
0.1%
0.5%
0.7%
1.0%
1.3%
1.3%
1.3%
2018
10,064
26.0%
0.2%
0.6%
1.0%
1.3%
1.6%
1.9%
2.1%
2019
12,413
19.2%
0.2%
0.7%
0.9%
1.1%
1.3%
1.4%
1.6%
2020
11,553
33.6%
0.6%
0.4%
0.5%
0.6%
0.8%
0.9%
1.0%
2021
16,644
28.6%
1.0%
1.6%
1.8%
1.9%
2.0%
2.1%
2.1%
Év
Expected dividends (HUF/Share)
Pricing
model
1Y
2Y
3Y
4Y
5Y
6Y
7Y
2017
219
219
252
290
334
384
442
Binomial
2018
219
219
219
219
219
219
219
Binomial
2019
252
290
333
383
440
507
583
Binomial
2020
219
252
290
333
383
440
507
Binomial
2021
371
321
357
393
432
475
523
Binomial
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
111
NOTE 39: SHARE-BASED PAYMENT AND EMPLOYEE BENEFIT (in HUF mn) [continued]
Based on parameters accepted by Supervisory Board, relating to the year 2016 effective pieces are follows As at 31
December 2021:
Approved
pieces of shares
Exercised until
31 December
2021
Weighted
average share
price at the
date of exercise
(in HUF)
Expired
pieces
Exercisable at 31
December 2021
Share-purchasing period started in 2017
147,984
147,984
9,544
-
-
Remuneration exchanged to share
provided in 2017
4,288
4,288
9,194
-
-
Share-purchasing period started in 2018
321,528
321,528
10,387
-
-
Remuneration exchanged to share
provided in 2018
8,241
8,241
10,098
-
-
Share-purchasing period started in 2019
161,446
161,446
12,415
-
-
Remuneration exchanged to share
provided in 2019
4,033
4,033
11,813
-
-
Share-purchasing period starting in 2020
166,231
166,231
13,629
-
-
Remuneration exchanged to share
applying in 2020
4,303
4,303
11,897
-
-
Based on parameters accepted by Supervisory Board, relating to the year 2017 effective pieces are follows As at 31
December 2021:
Approved
pieces of shares
Exercised until
31 December
2021
Weighted
average share
price at the
date of exercise
(in HUF)
Expired
pieces
Exercisable at 31
December 2021
Share-purchasing period started in 2018
108,243
108,243
11,005
-
-
Remuneration exchanged to share
provided in 2018
11,926
11,926
10,098
-
-
Share-purchasing period started in 2019
212,282
212,282
12,096
-
-
Remuneration exchanged to share
provided in 2019
26,538
26,538
11,813
-
-
Share-purchasing period starting in 2020
101,571
101,565
12,084
6
-
Remuneration exchanged to share
applying in 2020
11,584
11,584
11,897
-
-
Share-purchasing period starting in 2021
109,460
106,719
16,441
-
2,741
Remuneration exchanged to share
applying in 2021
11,531
11,531
16,477
-
-
Share-purchasing period starting in 2022
-
-
-
-
42,820
Remuneration exchanged to share
applying in 2022
-
-
-
-
3,003
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
112
NOTE 39: SHARE-BASED PAYMENT AND EMPLOYEE BENEFIT (in HUF mn) [continued]
Based on parameters accepted by Supervisory Board, relating to the year 2018 effective pieces are follows As at 31
December 2021:
Approved
pieces of shares
Exercised until
31 December
2021
Weighted
average share
price at the
date of exercise
(in HUF)
Expired
pieces
Exercisable at 31
December 2021
Share-purchasing period started in 2019
82,854
82,854
13,843
-
-
Remuneration exchanged to share
provided in 2019
17,017
17,017
11,829
-
-
Share-purchasing period starting in 2020
150,230
150,230
14,294
-
-
Remuneration exchanged to share
applying in 2020
33,024
33,024
11,897
-
-
Share-purchasing period starting in 2021
73,799
73,799
16,314
-
-
Remuneration exchanged to share
applying in 2021
14,618
14,618
16,468
-
-
Share-purchasing period starting in 2022
-
-
-
-
99,341
Remuneration exchanged to share
applying in 2022
-
-
-
-
17,042
Share-purchasing period starting in 2023
-
-
-
-
45,155
Remuneration exchanged to share
applying in 2023
-
-
-
-
4,114
Remuneration exchanged to share
applying in 2024
-
-
-
-
864
Remuneration exchanged to share
applying in 2025
-
-
-
-
432
Based on parameters accepted by Supervisory Board, relating to the year 2019 effective pieces are follows As at 31
December 2021:
Approved
pieces of shares
Exercised until
31 December
2021
Weighted
average share
price at the
date of exercise
(in HUF)
Expired
pieces
Exercisable at 31
December 2021
Share-purchasing period started in 2020
91,403
91,403
12,218
-
-
Remuneration exchanged to share
provided in 2020
22,806
22,806
11,897
-
-
Share-purchasing period starting in 2021
201,273
192,577
16,523
-
8,696
Remuneration exchanged to share
applying in 2021
30,834
30,834
17,618
-
-
Share-purchasing period starting in 2022
-
-
-
-
109,567
Remuneration exchanged to share
applying in 2022
-
-
-
-
15,554
Share-purchasing period starting in 2023
-
-
-
-
125,771
Remuneration exchanged to share
applying in 2023
-
-
-
-
18,025
Share-purchasing period starting in 2024
-
-
-
-
44,421
Remuneration exchanged to share
applying in 2024
-
-
-
-
6,279
Remuneration exchanged to share
applying in 2025
-
-
-
-
1,000
Remuneration exchanged to share
applying in 2026
-
-
-
-
500
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
113
NOTE 39: SHARE-BASED PAYMENT AND EMPLOYEE BENEFIT (in HUF mn) [continued]
Based on parameters accepted by Supervisory Board, relating to the year 2020 effective pieces are follows As at 31
December 2021:
Approved
pieces of shares
Exercised until
31 December
2021
Weighted
average share
price at the
date of exercise
(in HUF)
Expired
pieces
Exercisable at 31
December 2021
Share-purchasing period started in 2021
41,098
8,184
18,471
-
32,914
Remuneration exchanged to share
provided in 2021
17,881
17,881
17,498
-
-
Share-purchasing period starting in 2022
-
-
-
-
82,826
Remuneration exchanged to share
applying in 2022
-
-
-
-
19,390
Share-purchasing period starting in 2023
-
-
-
-
47,826
Remuneration exchanged to share
applying in 2023
-
-
-
-
9,292
Share-purchasing period starting in 2024
-
-
-
-
51,002
Remuneration exchanged to share
applying in 2024
-
-
-
-
9,518
Share-purchasing period starting in 2025
-
-
-
-
13,080
Remuneration exchanged to share
applying in 2025
-
-
-
-
3,443
Remuneration exchanged to share
applying in 2026
-
-
-
-
680
Remuneration exchanged to share
applying in 2027
-
-
-
-
680
Effective pieces relating to the periods starting in 2022-2027 settled during valuation of performance of year
2017-2020, can be modified based on risk assessment and personal changes.
In connection with the share-based compensation for Board of Directors and connecting compensation, shares
given as a part of payments detailed above and for the year 2021 based on performance assessment accounted as
equity-settled share based transactions HUF 3,589 million was recognized as expense for the year ended 31
December 2021.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
114
NOTE 40: RELATED PARTY TRANSACTIONS (in HUF mn)
Outstanding balances and transactions with related parties are summarized below in aggregate:
Statement of financial position
2021
2020
Associated
companies
and other
companies
Other
related
parties
Associated
companies
and other
companies
Other
related
parties
Cash, amounts due from banks and balances with the National
Bank of Hungary
1,675
-
7,301
-
Placements with other banks, net of allowance for placement
losses
1,557,437
-
1,177,504
-
Held for trading securities
16
-
526
-
Securities mandatorily measured at fair value through profit or
loss
-
-
5,342
-
Held for trading derivative financial instruments:
19,397
-
21,587
-
Financial assets at fair value through other comprehensive
income
156,162
-
250,673
-
Securities at amortised cost
-
596
-
590
Loans at amortised cost
960,288
105,503
834,555
92,889
Loans mandatorily measured at fair value through profit or loss
-
9
-
10
Right of use assets
5,713
-
6,567
-
Derivative financial assets designated as hedge accounting
relationships
(9)
-
-
-
Other assets
101,569
5
67,077
557
Total Assets
2,802,248
106,113
2,371,132
94,046
Amounts due to banks and deposits from the National Bank of
Hungary and other banks
(115,042)
-
(151,254)
-
Repo liabilities
(36,854)
-
-
-
Deposits from customers
(263,139)
(27,174)
(249,410)
(4,027)
Leasing liabilities
(5,926)
-
(6,736)
-
Liabilities from issued securities
(12,232)
-
(11,299)
-
Derivative financial liabilities designated as held for trading
(5,344)
-
(9,957)
-
Derivative financial liabilities designated as hedge accounting
relationships
(61)
-
-
-
Other liabilities
(4,599)
(551)
(7,014)
(400)
Total Liabilities
(443,197)
(27,725)
(435,670)
(4,427)
Off balance sheet items
Guarantees
(921,818)
-
(870,892)
-
Loan commitments
(85,810)
(44,812)
(96,032)
(37,051)
Factoring loan commitments
(1,475)
-
(37)
-
Total
(1,009,103)
(44,812)
(966,961)
(37,051)
Statement of Profit or Loss
2021
2020
Interest Income
42,706
39,193
Interest Expense
(11,449)
(11,186)
Risk cost
904
(1,925)
(Losses)/Gains arising from derecognition of financial assets
measured at amortised cost
(2,198)
914
Income from fees and commissions
33,128
28,951
Expenses from fees and commissions
(2,859)
(1,971)
Other administrative expenses
(7,570)
(8,465)
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
115
NOTE 40: RELATED PARTY TRANSACTIONS (in HUF mn) [continued]
Related party transactions with key management
The compensation of key management, such as the members of the Board of Directors, the members of the
Supervisory Board and the employees involved in the decision-making process in accordance with the
compensation categories defined in IAS 24 Related Party Disclosures, is summarised below:
2021
2020
Short-term employee benefits
2,957
2,923
Share-based payment
2,740
2,619
Long-term employee benefits (on the basis of IAS 19)
246
278
Total
5,943
5,820
2021
2021
Loans provided to companies owned by the Management (in the
normal course of business)
105,503
92,889
Commitments to extend credit and bank guarantees
44,812
37,051
An analysis of payment to Executives related to their activity in Board of Directors and Supervisory
Board is as follows (in HUF mn):
2021
2020
Members of Board of Directors
1,489
969
Members of Supervisory Board
173
57
Total
1,662
1,026
In the normal course of business, OTP Bank enters into other transactions with its subsidiaries, the amounts and
volumes of which are not significant to these financial statements taken as a whole.
NOTE 41: TRUST ACTIVITIES (in HUF mn)
The Bank acts as a trustee for certain loans granted by companies or employers to their employees, mainly for
housing purposes. The ultimate risk for these loans rests with the party advancing the funds. As these loans and
related funds are not considered to be assets or liabilities of the Bank, they have been excluded from the
accompanying separate statement of financial position.
2021
2020
Loans managed by the Bank as a trustee
27,532
28,055
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
116
NOTE 42: CONCENTRATION OF ASSETS AND LIABILITIES
2021
2020
In the percentage of the total assets
Receivables from, or securities issued by the Hungarian Government or the
NBH
22.79%
22.69%
Securities issued by the OTP Mortgage Bank Ltd.
1.77%
2.24%
Loans at amortised cost
6.51%
6.48%
There were no other significant concentrations of the assets or liabilities of the Bank as at 31 December 2021 or
31 December 2020.
OTP Bank continuously provides the Authority with reports on the extent of dependency on large depositors as
well as the exposure of the largest 50 depositors towards OTP Bank. Further to this obligatory reporting to the
Authority. OTP Bank pays particular attention on the exposure of its largest partners and cares for maintaining a
closer relationship with these partners in order to secure the stability of the level of deposits.
The organisational unit of OTP Bank in charge of partner-risk management analyses the largest partners on a
constant basis and sets limits on OTP Bank’s and the Group’s exposure separately partner-by-partner. If
necessary, it modifies partner-limits in due course thereby reducing the room for manoeuvring of the Treasury
and other business areas.
The Bank’s internal regulation (Limit-management regulation) controls risk management which related to
exposures of clients. Bank makes a difference between clients or clients who are economically connected with
each other, partners, partners operating in the same geographical region or in the same economic sector,
exposures from customers. Limit-management regulation includes a specific range provisions system used by
Bank to control risk exposures. This regulation has to be used by the Bank for its business (lending) risk-taking
activity in both the retail and corporate sector.
To specify credit risk limits, the Bank strives their clients get an acceptable margin of risk based on their
financial situation. In the Bank limit system a lower level decision-making delegation has to be provided.
If an OTP group member takes risk against a client or group of clients (either inside the local economy or
outside), the client will be qualified as a group level risk and these limits will be specified at group level.
The validity period of this policy is 12 months. The limit shall be reviewed prior to the expiry date but at least
once a year based on the relevant information required to limit calculations.
The maximum credit exposure to any client or counterparty among Loans at amortised cost was HUF 893 billion
and HUF 722 billion as at 31 December 2021 and 31 December 2020 respectively, before taking into account
collateral or other credit enhancements.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
117
NOTE 43: EARNINGS PER SHARE
Earnings per share attributable to the Bank’s ordinary shares are determined by dividing Net profit for the year
attributable to ordinary shareholders, after the deduction of declared preference dividends, by the weighted
average number of ordinary shares outstanding during the year. Dilutive potential ordinary shares are deemed to
have been converted into ordinary shares.
2021
2020
Net profit for the year attributable to ordinary shareholders (in HUF mn)
125,339
92,474
Weighted average number of ordinary shares outstanding during the year for
calculating basic EPS (number of share)
275,523,535
277,301,936
Basic Earnings per share (in HUF)
455
333
Separate net profit for the year attributable to ordinary shareholders (in HUF
mn)
125,339
92,474
Modified weighted average number of ordinary shares outstanding during the
year for calculating diluted EPS (number of share)
275,538,262
277,310,069
Diluted Earnings per share (in HUF)
455
333
2021
2020
Weighted average number of ordinary shares
280,000,010
280,000,010
Average number of Treasury shares
(4,476,475)
(2,698,074)
Weighted average number of ordinary shares outstanding during the
year for calculating basic EPS
275,523,535
277,301,936
Dilutive effect of options issued in accordance with the Remuneration Policy
/ Management Option Program and convertible into ordinary shares
1
14,727
8,133
The modified weighted average number of ordinary shares outstanding
during the year for calculating diluted EPS
275,538,262
277,310,069
The ICES bonds could potentially dilute basic EPS in the future, but were not included in the calculation of
diluted EPS because they are antidilutive for the period presented.
1
In 2021 and 2020 dilutive effect is in connection with the Remuneration Policy.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
118
NOTE 44: NET GAIN OR LOSS REALISED ON FINANCIAL INSTRUMENTS (in HUF mn)
Year ended 31 December 2021
Net interest
income and
expense
Net non-
interest gain
and loss
Loss
allowance
Other
comprehensive
income
Financial assets measured at amortised cost
Cash, amounts due from banks and balances with the
National Bank of Hungary
14,124
-
-
-
Placements with other banks, net of allowance for
placement losses
31,981
-
1,797
-
Repo receivables
315
-
(220)
-
Loans at amortised cost
167,882
13,591
37,264
-
Securities at amortised cost
61,085
(1,552)
2,035
-
Financial assets measured at amortised cost total
275,387
12,039
40,876
-
Financial assets measured at fair value
Securities held for trading
277
6,657
-
-
Securities at fair value through other comprehensive
income
21,456
(4,659)
1
(551)
(35,756)
Loans mandatorily measured at fair value through
profit or loss
26,045
(8,671)
16,255
-
Financial assets measured at fair value total
47,778
(6,673)
15,704
(35,756)
Financial liabilities measured at amortised cost
Amounts due to banks and deposits from the National
Bank of Hungary and other banks
(11,177)
-
-
-
Repo liabilities
(2,860)
-
-
-
Deposits from customers
(10,162)
170,598
-
-
Leasing liabilities
(214)
-
-
-
Liabilities from issued securities
(1,166)
-
-
-
Subordinated bonds and loans
(7,890)
-
-
-
Financial liabilities measured at amortised cost
total
(33,469)
170,598
-
-
Financial liabilities designated to measure at fair
value through profit or loss
(493)
3,916
-
-
Derivative financial instruments
2
(36,295)
3,436
-
-
Total
252,908
183,316
56,580
(35,756)
1
For the year ended 31 December 2021 HUF (4,659) million net non-interest gain on securities at fair value through other comprehensive
income was transferred from other comprehensive income to profit or loss.
2
Gains/losses from derivative financial instruments recognised in net interest income as Income similar to interest income.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
119
NOTE 44: NET GAIN OR LOSS REALISED ON FINANCIAL INSTRUMENTS
(in HUF mn) [continued]
Year ended 31 December 2020
Net interest
income and
expense
Net non-
interest gain
and loss
Loss
allowance
Other
comprehensive
income
Financial assets measured at amortised cost
Cash, amounts due from banks and balances with the
National Bank of Hungary
4,369
-
-
-
Placements with other banks, net of allowance for
placement losses
10,650
-
2,227
-
Repo receivables
49
-
286
-
Loans at amortised cost
143,650
23,298
55,444
-
Securities at amortised cost
48,654
360
1,845
-
Financial assets measured at amortised cost total
207,372
23,658
59,802
-
Financial assets measured at fair value
Securities held for trading
368
2,251
-
-
Securities at fair value through other comprehensive
income
29,095
6,073
1
3
(17,734)
Loans mandatorily measured at fair value through
profit or loss
15,094
2,125
-
-
Financial assets measured at fair value total
44,557
10,449
3
(17,734)
Financial liabilities measured at amortised cost
Amounts due to banks and deposits from the National
Bank of Hungary and other banks
(9,862)
-
-
-
Repo liabilities
(1,476)
-
-
-
Deposits from customers
(3,985)
216,512
-
-
Leasing liabilities
(244)
-
-
-
Liabilities from issued securities
(598)
-
-
-
Subordinated bonds and loans
(8,327)
-
-
-
Financial liabilities measured at amortised cost
total
(24,492)
216,512
-
-
Financial liabilities designated to measure at fair
value through profit or loss
(307)
1,270
-
-
Derivative financial instruments
2
(5,053)
5,818
-
-
Total
222,077
257,707
59,805
(17,734)
1
For the year ended 31 December 2020 HUF 6,073 million net non-interest gain on securities at fair value through other comprehensive
income was transferred from other comprehensive income to profit or loss.
2
Gains/losses from derivative financial instruments recognised in net interest income as Income similar to interest income.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
120
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn)
In determining the fair value of a financial asset or liability the Bank in the case of instruments that are quoted on
an active market uses the market price. In most cases market price is not publicly available so the Bank has to
make assumptions or use valuation techniques to determine the fair value of a financial instrument. See Note 45.
d) for more information about fair value classes applied for financial assets and liabilities measured at fair value
in these financial statements.
To provide a reliable estimate of the fair value of those financial instrument that are originally measured at
amortised cost, the Bank used the discounted cash flow analysis (loans, placements with other banks, amounts
due to banks, deposits from customers). The fair value of issued securities and subordinated bonds is based on
quoted prices (e,g, Reuters), Cash and amounts due from banks and balances with the National Bank of Hungary
represent amounts available immediately thus the fair value equals to the cost.
The assumptions used when calculating the fair value of financial assets and liabilities when using valuation
technique are the following:
• the discount rates are the risk free rates related to the denomination currency adjusted by the appropriate
risk premium as of the end of the reporting period,
• the contractual cash flows are considered for the performing loans and for the non-performing loans, the
amortised cost less impairment is considered as fair value,
• the future cash flows for floating interest rate instruments are estimated from the yield curves as of the
end of the reporting period,
• the fair value of the deposit which can be due in demand cannot be lower than the amount payable on
demand.
For classes of assets and liabilities not measured at fair value in the statement of financial position, the income
approach was used to convert future cash flows to a single current amount. Fair value of current assets is equal to
carrying amount, fair value of liabilities from issued securities and other bond-type classes of assets and
liabilities not measured at fair value measured based on Reuters market rates and, fair value of other classes not
measured at fair value of the statement of financial position are measured using the discounted cash flow
method. Fair value of loans, net of allowance for loan losses measured using discount rate adjustment technique,
the discount rate is derived from observed rates of return for comparable assets or liabilities that are traded in the
market.
Fair value measurements – in relation to instruments measured not at fair value – are categorized in level 3 of the
fair value hierarchy.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
121
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
a) Fair value of financial assets and liabilities
31 December 2021
31 December 2020
Carrying
amount
Fair value
Carrying amount
Fair value
Cash, amounts due from banks and balances with the
National Bank of Hungary
474,945
474,945
579,120
579,120
Placements with other banks, net of allowance for
placement losses
2,567,212
2,548,809
1,535,884
1,550,747
Repo receivables
33,638
33,707
183,364
183,664
Financial assets at fair value through profit or loss
246,462
246,462
160,483
160,483
Held for trading securities
35,633
35,633
11,729
11,729
Derivative financial instruments classified as held for
trading
182,768
182,768
116,818
116,818
Securities mandatorily measured at fair value through
profit or loss
28,061
28,061
31,936
31,936
Securities at fair value through other comprehensive
income
641,939
641,939
911,950
911,950
Securities at amortised cost
3,071,038
2,877,380
2,007,692
2,085,881
Loans at amortised cost
4,032,465
3,576,519
3,417,760
3,178,368
Loans mandatorily measured at fair value through profit
or loss
662,012
662,012
480,937
480,937
Derivative financial assets designated as hedge
accounting relationships
17,727
17,727
6,817
6,817
Other financial assets
153,747
153,747
127,179
127,179
FINANCIAL ASSETS TOTAL
11,901,185
11,233,248
9,411,186
9,265,147
Amounts due to banks, deposits from the National Bank
of Hungary and other banks
1,051,203
958,463
766,977
754,573
Repo liabilities
86,580
86,543
109,612
111,548
Deposits from customers
9,948,532
9,946,444
7,895,735
7,895,211
Leasing liabilities
17,932
17,928
14,106
14,105
Liabilities from issued securities
22,153
21,006
28,435
31,588
Financial liabilities at fair value through profit or loss
20,133
20,133
25,902
25,902
Derivative financial liabilities designated as held for
trading
192,261
192,261
99,987
99,987
Derivative financial liabilities designated as hedge
accounting relationships
18,690
18,690
3,104
3,104
Subordinated bonds and loans
271,776
278,151
304,243
295,218
Other financial liabilities
194,511
194,511
167,540
167,540
FINANCIAL LIABILITIES TOTAL
11,823,771
11,734,130
9,415,641
9,398,776
b) Derivative financial instruments
OTP Bank regularly enters into hedging transactions in order to decrease its financial risks. However some
economically hedging transaction do not meet the criteria to account for hedge accounting, therefore these
transactions were accounted as derivatives held for trading. Net investment hedge in foreign operations is not
applicable in separate financial statements.
The assessment of the hedge effectiveness (both for fair value hedges and cash flow hedges) to determine the
economic relationship between the hedged item and the hedging instrument is accomplished with prospective
scenario analysis via different rate shift scenarios of the relevant risk factor(s) of the hedged risk component(s).
The fair value change of the hedged item and the hedging instrument is compared in the different scenarios.
Economic relationship is justified if the change of the fair value of the hedged item and the hedging instrument
are in the opposite direction and the absolute changes are similar amounts. The hedge ratio is determined as the
ratio of the notional of the hedged item and the notional of the hedging instrument. The sources of hedge
ineffectiveness are the not hedged risk components (e,g, change of cross currency basis spreads in case of
interest rate risk hedges), slight differences in maturity dates and interest payment dates in case of fair value
hedges, and differences between the carrying amount of the hedged item and the carrying amount of the hedging
instrument in case of FX hedges (e,g, caused by interest rate risk components in the fair value of the hedging
instrument).
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
122
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
b) Derivative financial instruments [continued]
Fair value of derivative financial instruments
1
The Bank has the following held for trading derivatives and derivatives designated as hedge accounting:
31 December 2021
31 December 2020
Before netting
Netting
After netting
Before netting
Netting
After netting
Assets
Liabilities
Assets
Liabilities
Assets
Liabilities
Assets
Liabilities
Held for trading derivative financial instruments
Interest rate derivatives
Interest rate swaps
54,251
(53,720)
40,783
13,468
(12,937)
30,216
(28,474)
8,984
21,232
(19,490)
Cross currency interest rate swaps
7,207
(7,618)
-
7,207
(7,618)
7,315
(7,285)
-
7,315
(7,285)
OTC options
479
(479)
-
479
(479)
356
(356)
-
356
(356)
Total interest rate derivatives (OTC derivatives)
61,937
(61,817)
40,783
21,154
(21,034)
37,887
(36,115)
8,984
28,903
(27,131)
From this: Interest rate derivatives cleared by NBH
1,276
-
-
1,276
-
5
(72)
-
5
(72)
Foreign exchange derivatives
Foreign exchange swaps
36,896
(40,639)
-
36,896
(40,639)
39,644
(30,374)
-
39,644
(30,374)
Foreign exchange forward
8,854
(6,819)
-
8,854
(6,819)
6,990
(9,869)
-
6,990
(9,869)
OTC options
804
(180)
-
804
(180)
3,909
(3,836)
-
3,909
(3,836)
Foreign exchange spot conversion
175
(246)
-
175
(246)
619
(704)
-
619
(704)
Total foreign exchange derivatives (OTC derivatives)
46,729
(47,884)
-
46,729
(47,884)
51,162
(44,783)
-
51,162
(44,783)
From this: Foreign exchange derivatives cleared by NBH
3,447
(1,480)
-
3,447
(1,480)
5,211
(1,852)
-
5,211
(1,852)
1
Certain derivative financial assets and liabilities are offset and the net amount is presented in accordance with IAS 32 in the Statement of Financial Position. The Bank has the ability and the intention to settle those instruments
on a net basis, which are settled through the same clearing house.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
123
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
b) Derivative financial instruments [continued]
1
Fair value of derivative financial instruments [continued]
31 December 2021
31 December 2020
Before netting
Netting
After netting
Before netting
Netting
After netting
Assets
Liabilities
Assets
Liabilities
Assets
Liabilities
Assets
Liabilities
Equity stock and index derivatives
Commodity Swaps
52,197
(52,166)
-
52,197
(52,166)
13,999
(12,901)
-
13,999
(12,901)
Equity swaps
10,538
(357)
-
10,538
(357)
7,071
(560)
-
7,071
(560)
OTC derivatives
62,735
(52,523)
-
62,735
(52,523)
21,070
(13,461)
-
21,070
(13,461)
Exchange traded futures and options
164
(278)
-
164
(278)
379
(1,262)
-
379
(1,262)
Total equity stock and index derivatives
62,899
(52,801)
-
62,899
(52,801)
21,449
(14,723)
-
21,449
(14,723)
Derivatives held for risk management not designated in
hedges
Interest rate swaps
51,311
(70,811)
5,682
45,629
(65,129)
25,760
(22,058)
12,736
13,024
(9,322)
Foreign exchange swaps
1,915
(5,245)
-
1,915
(5,245)
2,208
(3,953)
-
2,208
(3,953)
Forward
-
-
-
-
-
28
(75)
-
28
(75)
Cross currency interest rate swaps
4,442
(168)
-
4,442
(168)
44
-
-
44
-
Total derivatives held for risk management not designated in
hedges
57,668
(76,224)
5,682
51,986
(70,542)
28,040
(26,086)
12,736
15,304
(13,350)
From this: Total derivatives cleared by NBH held for risk
management
35,226
(497)
-
35,226
(497)
759
(6,269)
-
759
(6,269)
Total Held for trading derivative financial instruments
229,233
(238,726)
46,465
182,768
(192,261)
138,538
(121,707)
21,720
116,818
(99,987)
Derivative financial instruments designated as hedge
accounting relationships
Derivatives designated in cash flow hedges
Interest rate swaps
-
(8,638)
1,020
(1,020)
(7,618)
8,027
-
8,027
-
8,027
Total derivatives designated in cash flow hedges
-
(8,638)
1,020
(1,020)
(7,618)
8,027
-
8,027
-
8,027
Derivatives designated in fair value hedges
Interest rate swaps
25,407
(17,878)
12,131
13,276
(5,747)
2,432
(7,061)
1,795
637
(5,266)
Cross currency interest rate swaps
5,471
(5,325)
-
5,471
(5,325)
6,180
(5,865)
-
6,180
(5,865)
Total derivatives designated in fair value hedges
30,878
(23,203)
12,131
18,747
(11,072)
8,612
(12,926)
1,795
6,817
(11,131)
From this: Total derivatives cleared by NBH held for hedging
-
(2,249)
-
-
(2,249)
-
(1,691)
-
-
(1,691)
Total derivatives held for risk management (OTC derivatives)
30,878
(31,841)
13,151
17,727
(18,690)
16,639
(12,926)
9,822
6,817
(3,104)
1
Certain derivative financial assets and liabilities are offset and the net amount is presented in accordance with IAS 32 in the Statement of Financial Position. The Bank has the ability and the intention to settle those instruments
on a net basis, which are settled through the same clearing house.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
124
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
c) Hedge accounting
Interest rate risk management is centralized at OTP Group. Interest rate risk exposures in major currencies are managed at
HQ on consolidated level. Although risk exposures in local currencies are managed at subsidiary level, the respective
decisions are subject to HQ approval. Interest rate risk is measured by simulating NII and EVE under different stress and
plan scenarios, the established risk limits are described in „OTP Bank’s Group-Level Regulations on the Management of
Liquidity Risk and Interest Rate Risk of Banking Book”. The interest rate risk management activity aims to stabilize NII
within the approved risk limits.
The risk management objective of these hedge relationships is to mitigate the risk of clean fair value (i.e. excluding accrued
interest) change of MIRS loans due to the change of interest rate reference indexes (BUBOR, EURIBOR, LIBOR, etc.) of
the respective currency.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
125
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
c) Hedge accounting [continued]
Amount, timing and uncertainty of future cash flows - hedging instruments as at 31 December 2021 (amounts in million currency)
31 December 2021
Type of hedge
Type of risk
Type of instrument
Within one
month
Within three
months and over
one month
Within one year
and over three
months
Within five years
and over one year
More than five
years
Total
Fair Value Hedge
Interest rate risk
Interest rate swap
HUF
Notional
-
2,000
900
(52,474)
42,950
(6,624)
Average Interest Rate (%)
-
1.09%
0.49%
1.65%
1.31%
EUR
Notional
-
-
1
111
50
162
Average Interest Rate (%)
-
-
0.23%
0.24%
0.05%
USD
Notional
-
-
-
119
47
166
Average Interest Rate (%)
-
-
-
2.54%
4.18%
JPY
Notional
-
-
-
4,500
-
4,500
Average Interest Rate (%)
-
-
-
0.22%
-
Fair Value Hedge
FX & IR risk
Cross currency interest rate swap
EUR/HUF
Notional
-
1
2
12
12
27
Average Interest Rate (%)
-
(1.68%)
(1.67%)
(1.69%)
(1.82%)
Average FX Rate
-
310.29
310.26
310.01
307.81
Fair Value Hedge
FX risk
Cross currency interest rate swap
EUR/HUF
Notional
-
-6
35
572
-
601
Average FX Rate
-
354.22
356.94
355.93
-
RON/HUF
Notional
-
-
200
2,225
-
2,425
Average FX Rate
-
-
66.21
73.08
-
RUB/HUF
Notional
-
-
-
11,200
-
11,200
Average FX Rate
-
-
-
4.15
-
JPY/HUF
Notional
-
-
-
4,500
-
4,500
Average FX Rate
-
-
-
2.79
-
USD/HUF
Notional
-
-
(3)
306
-
303
Average FX Rate
-
-
323.77
323.77
-
Fair Value Hedge
Other
Interest rate swap
HUF
Notional
-
3,345
1,823
3,093
-
8,261
Cash flow Hedge
Interest rate risk
Interest rate swap
HUF
Notional
-
-
-
7,819
28,027
35,846
Average FX Rate
-
-
-
1.80
2.46
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
126
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
c) Hedge accounting [continued]
Amount, timing and uncertainty of future cash flows - hedging instruments as at 31 December 2020 (amounts in million currency)
31 December 2020
Type of hedge
Type of risk
Type of instrument
Within one
month
Within three
months and over
one month
Within one year
and over three
months
Within five
years and over
one year
More than
five years
Total
Fair Value Hedge
Interest rate risk
Interest rate swap
HUF
Notional
-
-
60,000
(89,622)
173,810
144,188
Average Interest Rate (%)
-
-
1.31%
1.06%
1.35%
EUR
Notional
15
-
5
102
10
132
Average Interest Rate (%)
(0.11%)
-
0.09%
0.24%
0.22%
USD
Notional
-
-
21
171
29
221
Average Interest Rate (%)
-
-
2.00%
2.38%
2.35%
RUB
Notional
-
-
-
2,100
-
2,100
Average Interest Rate (%)
-
-
-
7.38%
-
Fair Value Hedge
FX & IR risk
Cross currency interest rate swap
EUR/HUF
Notional
-
-
2
12
14
28
Average Interest Rate (%)
-
-
(1.60%)
(1.63%)
(1.67%)
Average FX Rate
-
-
310.82
310.14
308.15
Fair Value Hedge
FX risk
Cross currency interest rate swap
EUR/HUF
Notional
1
92
123
613
-
829
Average FX Rate
360.19
354.92
360.47
356.03
-
RON/HUF
Notional
-
-
-
1,550
-
1,550
Average FX Rate
-
-
-
72.60
-
RUB/HUF
Notional
-
-
-
4,100
-
4,100
Average FX Rate
-
-
-
4.46
-
Fair Value Hedge
Other
Interest rate swap
HUF
Notional
-
(183)
6,940
8,342
-
15,099
Cash flow Hedge
Interest rate risk
Interest rate swap
HUF
Notional
-
-
-
12,194
28,027
40,221
Average FX Rate
-
-
-
1.77
2.46
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2021
127
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
c) Hedge accounting [continued]
Derivative financial instruments designated as hedge accounting as follows:
Type of instrument
Type of risk
Nominal amount of
the hedging
instrument
Carrying amount of the hedging instrument for the year
ended 31 December 2021
Line item in the statement of financial
position where the hedging instrument is
located
Changes in fair value used for
calculating hedge ineffectiveness for
the year ended 31 December 2021
Before netting
Netting
After netting
Assets
Liabilities
Assets
Liabilities
Fair value hedge
Interest rate swap
Interest rate risk
409,595
23,976
(17,878)
12,131
11,845
(5,747)
Derivative assets (liabilities) held for risk
management
6,494
Cross-currency swap
FX & IR risk
8,175
-
(2,249)
-
-
(2,249)
Derivative assets (liabilities) held for risk
management
4
Cross-currency swap
FX risk
566,936
5,471
(3,076)
-
5,471
(3,076)
Derivative assets (liabilities) held for risk
management
(1,687)
Interest rate swap
Other
8,261
1,431
-
-
1,431
-
Derivative assets (liabilities) held for risk
management
3
Cash flow hedge
Interest rate swap
Interest rate risk
35,846
-
(8,638)
1,020
(1,020)
(7,618)
Derivative assets (liabilities) held for risk
management
(101)
31 December 2021
Type of risk
Carrying amount of the hedged
item
Accumulated amount of fair value hedge
adjustments on the hedged item included
in the carrying amount of the hedged
item
Line item in the statement of financial position in
which the hedged item is included
Assets
Liabilities
Assets
Liabilities
Fair value hedges
- Loans
Interest rate risk
57,176
-
637
-
Loans
- Loans
Interest rate risk
-
142,649
-
(16,858)
Amounts due to banks and deposits from the National
Bank of Hungary and other banks
- Government bonds
Interest rate risk
13,921
-
1,230
-
Securities at amortised cost
- Government bonds
Interest rate risk
152,830
-
22,457
-
Securities at fair value through other comprehensive
income
- Government bonds
Interest rate risk
-
-
-
-
Financial assets at fair value through profit or loss
- Other securities
Interest rate risk
42,008
-
318
-
Securities at fair value through other comprehensive
income
- Loans
FX & IR risk
10,595
-
611
-
Loans
- Loans
FX risk
458,312
-
-
-
Loans
- Government bonds
FX risk
12,811
-
-
-
Securities at amortised cost
- Government bonds
FX risk
98,668
-
-
-
Securities at fair value through other comprehensive
income
- Other securities
Other risk
-
8,261
-
(161)
Liabilities from issued securities
Fair value hedges total
846,321
150,910
25,253
(17,019)
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2021
128
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
c) Hedge accounting [continued]
Derivative financial instruments designated as hedge accounting as follows:
For the year ended 31 December 2021 OCI related to cash flow hedges as follows:
Type of risk
Carrying amount of the
hedged item
Cash flow hedge reserve
Year ended 2021
Line item in the statement of
financial position in which
the hedged item is included
Assets
Liabilities
Interest rate
risk
35,965
-
3,568
Loans at amortised cost
For the year ended 31 December 2020 OCI related to cash flow hedges as follows:
Type of risk
Carrying amount of the
hedged item
Cash flow hedge reserve
Year ended 2021
Line item in the statement of
financial position in which
the hedged item is included
Assets
Liabilities
Interest rate
risk
40,221
-
(2,739)
Loans at amortised cost
For the year ended 31 December 2021 change in basis swap spread recognised in OCI related to fair value hedges as follows:
Type of risk
Carrying amount of the
hedged item
Items recognised in other
comprehensive income
Year ended 2021
Change in the items
recognized in other
comprehensive income Year
ended 2021
Line item in the statement
of financial position in
which the hedged item is
included
Assets
Liabilities
FX risk
458,312
-
(1,032)
(1,681)
Loans at amortised cost
FX risk
12,811
-
64
-
FVOCI securities
471,123
-
(968)
(1,681)
For the year ended 31 December 2020 change in basis swap spread recognised in OCI related to fair value hedges as follows:
Type of risk
Carrying amount of the
hedged item
Items recognised in other
comprehensive income
Year ended 2021
Change in the items
recognized in other
comprehensive income Year
ended 2021
Line item in the statement
of financial position in
which the hedged item is
included
Assets
Liabilities
FX risk
303,572
-
713
-
Loans at amortised cost
303,572
-
713
-
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2021
129
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
c) Hedge accounting [continued]
Derivative financial instruments designated as hedge accounting as follows:
Type of instrument
Type of risk
Nominal amount of
the hedging
instrument
Carrying amount of the hedging instrument for the year
ended 31 December 2020
Line item in the statement of financial
position where the hedging instrument is
located
Changes in fair value used for
calculating hedge ineffectiveness for
the year ended 31 December 2020
Before netting
Netting
After netting
Assets
Liabilities
Assets
Liabilities
Fair value hedge
Interest rate swap
Interest rate risk
468,574
1,900
(7,062)
1,795
105
(5,267)
Derivative assets (liabilities) held for risk
management
(370)
Cross-currency swap
FX & IR risk
8,874
-
(1,408)
-
-
(1,408)
Derivative assets (liabilities) held for risk
management
(36)
Cross-currency swap
FX risk
438,401
6,182
(4,456)
-
6,182
(4,456)
Derivative assets (liabilities) held for risk
management
(809)
Interest rate swap
Other
16,224
530
-
-
530
-
Derivative assets (liabilities) held for risk
management
2
Cash flow hedge
-
Interest rate swap
Interest rate risk
40,221
8,027
-
8,027
-
8,027
Derivative assets (liabilities) held for risk
management
(85)
31 December 2020
Type of risk
Carrying amount of the
hedged item
Accumulated amount of fair value
hedge adjustments on the hedged
item included in the carrying
amount of the hedged item
Line item in the statement of financial position in which
the hedged item is included
Assets
Liabilities
Assets
Liabilities
Fair value hedges
- Loans
Interest rate risk
35,256
-
1,679
-
Loans
- Loans
Interest rate risk
-
100,299
-
(235)
Loans
- Government bonds
Interest rate risk
8,678
-
(106)
-
Securities at amortised cost
- Government bonds
Interest rate risk
269,838
-
2,518
-
Securities at fair value through other comprehensive income
- Other securities
Interest rate risk
47,560
-
781
-
Securities at fair value through other comprehensive income
- Loans
FX & IR risk
10,378
-
284
-
Loans
- Loans
FX risk
303,572
-
-
-
Loans
- Other securities
Other risk
-
15,032
-
(528)
Liabilities from issued securities
Fair value hedges total
675,282
115,331
5,156
(763)
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2021
130
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
c) Hedge accounting [continued]
31 December 2021
Type of
instrument
Type of risk
Change in the value
of the hedging
instrument
recognised in cash
flow hedge reserve
Hedge ineffectiveness
recognised in profit or
loss
Line item in profit or loss that
includes hedge ineffectiveness
Interest rate
swap
Interest rate
risk
6,307
(101)
Interest Income from Placements
with other banks, net of
allowance for placement losses
For the year ended 31 December 2021 an amount HUF 171 million reclassified from cash flow hedge reserve to
profit or loss due to termination of hedging relationship.
31 December 2020
Type of
instrument
Type of risk
Change in the value
of the hedging
instrument
recognised in cash
flow hedge reserve
Hedge ineffectiveness
recognised in profit or
loss
Line item in profit or loss that
includes hedge ineffectiveness
Interest rate
swap
Interest rate
risk
296
(85)
Interest Income from Placements
with other banks, net of
allowance for placement losses
d) Fair value classes
Methods and significant assumptions used to determine fair value of the different classes of financial
instruments:
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
- Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or
liability either directly or indirectly, Fair value measurements – in relation with instruments
measured not at fair value – are categorized in level 2;
- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable
inputs).
The following table shows an analysis of financial instruments recorded at fair value by level of the fair value
hierarchy:
31 December 2021
Total
Level 1
Level 2
Level 3
Loans at fair value through other comprehensive income
662,012
-
-
662,012
Financial assets at fair value through profit or loss
246,462
37,537
189,501
19,424
from this: securities held for trading
35,633
18,566
17,067
-
from this: positive FVA of derivative financial instruments
designated as held for trading
182,768
164
172,434
10,170
from this: securities mandatorily measured at fair value
through profit or loss
28,061
18,807
-
9,254
Securities at fair value through other comprehensive income
641,939
315,147
326,792
-
Positive fair value of derivative financial instruments
designated as hedge accounting
17,727
-
17,727
-
Financial assets measured at fair value total
1,568,140
352,684
534,020
681,436
Financial liabilities at fair value through profit or loss
20,133
-
-
20,133
Negative fair value of derivative financial instruments
classified as held for trading
192,261
278
191,983
-
Short position
16,904
16,904
-
-
Negative fair value of derivative financial instruments
designated as hedge accounting
18,690
-
18,690
-
Financial liabilities measured at fair value total
247,988
17,182
210,673
20,133
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2021
131
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
d) Fair value classes [continued]
As at 31 December 2020
Total
Level 1
Level 2
Level 3
Loans at fair value through other comprehensive income
480,937
-
-
480,937
Financial assets at fair value through profit or loss
160,483
34,643
111,130
14,710
from this: securities held for trading
11,729
10,453
1,276
-
from this: positive FVA of derivative financial instruments
designated as held for trading
116,818
378
109,854
6,586
from this: securities mandatorily measured at fair value
through profit or loss
31,936
23,812
-
8,124
Securities at fair value through other comprehensive income
911,950
426,566
485,384
-
Positive fair value of derivative financial instruments
designated as hedge accounting
6,817
-
6,817
-
Financial assets measured at fair value total
1,560,187
461,209
603,331
495,647
Financial liabilities at fair value through profit or loss
25,902
-
-
25,902
Negative fair value of derivative financial instruments
classified as held for trading
99,987
1,263
98,724
-
Short position
9,131
9,131
-
-
Negative fair value of derivative financial instruments
designated as hedge accounting
3,104
-
3,104
-
Financial liabilities measured at fair value total
138,124
10,394
101,828
25,902
Valuation techniques and sensitivity analysis on Level 3 instruments
Sensitivity analysis is performed on products with significant unobservable inputs (Level 3) to generate a range
of reasonably possible alternative valuations. The sensitivity methodologies applied take account of the nature of
the valuation techniques used, as well as the availability and reliability of observable proxy and historical date
and the impact of using alternative models.
The calculation is based on range or spread data of reliable reference source or a scenario based on relevant
market analysis alongside the impact of using alternative models. Sensitivities are calculated without reflecting
the impact of any diversification in the portfolio.
Unobservable inputs used in measuring fair value
Type of financial
instrument
Valuation technique
Significant
unobservable input
Range of estimates for
unobservable input
VISA C shares
Market approach
combined with expert
judgement
Discount applied due to
illiquidity and
litigation
+/-12%
MFB refinancing loans
Discounted cash flow
model
Probability of default
+/- 20%
Subsidised personal loans
Discounted cash flow
model
Probability of default
+/- 20%
Subsidised personal loans
Discounted cash flow
model
Operational costs
+/- 20%
Subsidised personal loans
Discounted cash flow
model
Demography
Change in the cash
flow estimation +/- 5%
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2021
132
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
d) Fair value classes [continued]
The effect of unobservable inputs on fair value measurement
Although the Bank believes that its estimates of fair value are appropriate, the use of different methodologies or
assumptions could lead to different measurements of fair value. For fair value measurements in Level 3 changing
the assumptions used to reasonably possible alternative assumptions would have the following effects.
31 December 2021
Unobservable
inputs
Fair values
Effect on profit and loss
Favourable
Unfavourable
Favourable
Unfavourable
VISA C shares
Illiquidity
3,339
2,529
405
(405)
MFB refinancing loans
Probability of
default
19,218
18,972
123
(123)
Subsidised personal loans
Probability of
default
639,006
631,855
3,590
(3,561)
Subsidised personal loans
Operational costs
647,291
623,933
11,875
(11,483)
Subsidised personal loans
Demography
635,484
635,387
68
(29)
31 December 2020
Unobservable
inputs
Fair values
Effect on profit and loss
Favourable
Unfavourable
Favourable
Unfavourable
VISA C shares
Illiquidity
3,150
2,402
374
(374)
MFB refinancing loans
Probability of
default
24,876
24,690
93
(93)
Subsidised personal loans
Probability of
default
452,781
447,647
2,579
(2,555)
Subsidised personal loans
Operational costs
464,974
436,194
14,772
(14,008)
Subsidised personal loans
Demography
451,419
448,987
1,217
(1,215)
The favourable and unfavourable effects of using reasonably possible alternative assumptions for the valuation
of Visa C shares have been calculated by modifying the discount rate used for the valuation by +/-12% as being
the best estimates of the management as at 31 December 2021 and 2020 respectively.
In the case of MFB refinancing loans and subsidised personal loans the Bank calculated the favourable and
unfavourable effects of using reasonably possible alternative assumptions by modifying the rates of probability
of default by +/- 20% as one of the most significant unobservable input.
In case of subsidised personal loans operational cost and factors related to demography are considered as
unobservable inputs to the applied fair value calculation model in addition to credit risk.
The Bank calculated the favourable and unfavourable effects of using reasonably possible alternative
assumptions by modifying the rates of operational costs by +/- 20% as one of the most significant unobservable
input.
In case of subsidised personal loans cash flow estimation are based on assumption related to the future number
of childbirths performed by the debtors. According to the current assumptions 15% of the debtors will not fulfill
the conditions of the subsidy determined by the government after 5 years (“breach of conditions”), thereby
debtors will be obliged to pay back advanced interest subsidy given in advance. Furthermore, in this case
subsidised loans are converted to loans provided based on market conditions. Loans are prepaid by the
government as part of the subsidy after the second and the third childbirth following the signatory of the loan
contract. The Bank calculated the favourable and unfavourable effects of using reasonably possible alternative
assumptions by modifying the demographical assumption of breach of conditions by +/- 5% as one of the most
significant unobservable input in the cash flow estimation.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2021
133
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
d) Fair value classes [continued]
The effect of unobservable inputs on fair value measurement [continued]
Reconciliation of the opening and closing balances of Level 3 instruments for the year ended 31 December 2021
Opening
balance
Issuance/
Disbursement
Change in
FVA due to
credit risk
Change in FVA
due to market
factors
Settlement
Closing
balance
Loans mandatorily
measured at fair
value through profit
or loss
480,937
227,324
(16,255)
(12,692)
(17,302)
662,012
Securities mandatorily
measured at fair
value through profit
or loss
8,124
390
-
740
-
9,254
Derivative financial
instruments
designated as held
for trading
6,586
-
-
3,584
-
10,170
Financial liabilities at
fair value through
profit or loss
(25,902)
-
-
(3,916)
9,685
(20,133)
Total
469,745
227,714
(16,255)
(12,284)
(7,617)
661,303
Reconciliation of the opening and closing balances of Level 3 instruments for the year ended 31 December 2020
Opening
balance
Issuance/
Disbursement
Change in
FVA due to
credit risk
Change in
FVA due
to market
factors
Reclassification
Settlement
Closing
balance
Loans mandatorily
measured at fair
value through
profit or loss
238,538
257,055
(405)
(2,125)
-
(12,126)
480,937
Securities
mandatorily
measured at fair
value through
profit or loss
4,644
1,204
-
23
5,188
(2,935)
8,124
Securities at fair
value through
other
comprehensive
income
4,735
-
-
453
(5,188)
-
-
Derivative financial
instruments
designated as held
for trading
4,227
-
-
2,359
-
-
6,586
Financial liabilities at
fair value through
profit or loss
(28,861)
-
-
1,270
-
1,689
(25,902)
Total
223,283
258,259
(405)
1,980
-
(13,372)
469,745
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2021
134
NOTE 46: SIGNIFICANT EVENTS DURING THE YEAR ENDED 31 DECEMBER 2021
1) Capital increase in OTP Bank Romania
2) Acquisition at Slovenia
3) Capital increase in OTP Bank Srbija
4) Potential acquisition of Uzbek Ipoteka Bank
5) Acquisition of Alpha Banka
See details about the event above in Note 11.
6) Discontinuance of international arbitration proceedings
On 30th June 2021 OTP Bank Plc. has jointly with the Republic of Croatia requested the discontinuance of the
international arbitration proceedings - registered on 16th October 2020 relating to mandatory exchange of FX
loans and FX based consumer loans - from the Centre for Settlement of Investment Disputes (ICSID), due to the
fact that the parties have resolved their disputes by way of mutual consent. The ICSID Secretary has on 30th
June 2021 acknowledged receipt of the joint claim of the contending parties relating the discontinuance of the
proceedings. According to the request of the parties, ICSID shall also formerly confirmed the termination of the
litigation during 2021.
7) Termination of ICES bond
See details about the event above in Note 27.
8) Resolutions made at OTP Bank’s Extraordinary General Meeting
The Extraordinary General Meeting hold on 15 October, 2021 resolved that, the Bank shall sell its treasury
shares on the stock exchange to those two Special Employee Stock Ownership Program organizations being
established by the Bank employees (“OTP SECOP I.” and “OTP SECOP II.”).
The Extraordinary General Meeting decided that if additional SECOP organisations will be initiated, those will
be given one-off support on a yearly basis, under defined conditions, defined extent and in specified manner.
9) Interest benchmark reform
OTP Bank was actively involved in industry efforts supporting transition to IBOR alternatives. The bank has
taken extensive steps to prepare for the discontinuation of IBORs and worked closely with clients to ensure
awareness and support transition activities. As the transition is complex, time-consuming process and relevant
for the whole Group, the management of Bank has evaluated the impacts of the interest rate benchmarks reform,
preparing itself for the transition through a dedicated internal group-wide project. As LIBOR’s five currencies
(USD, GBP, EUR, JPY and CHF) and EONIA will be replaced by Risk Free Rates – which are different in
nature compared to IBOR rates – OTP Group has implemented the relevant rates into the IT systems, and
reached out the clients. The Bank’s priority was to ensure that the Bank can continue to offer clients the products
and services they need, while also supporting them in the transition to the new alternative Risk Free Rates.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2021
135
NOTE 46: SIGNIFICANT EVENTS DURING THE YEAR ENDED 31 DECEMBER 2021
[continued]
9) Interest benchmark reform
During the IBOR reform the Bank identified several risks at the beginning of 2021, which the project had to
manage and monitor closely. These risks include but are not limited to the following:
▪ The abolution of LIBOR affected several transactions that may require automated IT solutions,
▪ The new reference rates are different in nature from LIBOR that cause difficulties to settle the value
differences with the customers,
▪ It was necessary to implement new processes not to develop LIBOR based products, and to develop a
strategy for removing or modifying the affected products handled by the Bank,
▪ After termination of LIBOR, the Bank has to act under the "Fallback clauses", the clauses that regulate the
replacement of the reference interest rates in the contract and the use of an alternative interest as a
reference. The content of these clauses needs to be clearly defined and checked from a business point of
view, ie which reference interest rate will be applied instead of LIBOR for the given contract and whether it
is commercially appropriate. In defining the fallback clauses, efforts had to be made to provide a viable
alternative to the termination of LIBOR that would not result in a business loss for the Bank.
▪ Legal risks related to the termination of LIBOR. Such risks can arise when Fallback clauses are not
included in the contracts, or the law governing the contract doesn’t contain a statutory reference rate. In
these cases the contracts can be cancelled due to impossibility or the termination by either party.
▪ Missing of contractual interest rates can result in settlement disputes, compensation cases or litigation.
▪ Business risks of the termination of LIBOR. The most significant of these are
o the law governing the contract can set the applicable interest rate that can be result in a business loss
for the Bank,
o business loss due to negative customer experience,
o operational risk, when several unique contracts must be handled in a short time
Terminating interest rates ()
Alternative Reference Rates
LIBOR USD* (1 week and 2 months settings), FedFund Rate
SOFR
LIBOR GBP
SONIA
LIBOR JPY
TONA
LIBOR EUR
EURIBOR
LIBOR CHF**
SARON
EONIA
€STR
* The following USD LIBOR settings will be terminated after June 30, 2023: overnight and 1, 3, 6 and 12
Months. The affected USD LIBOR contracts will be handled on an ongoing basis until the remaining USD
LIBOR settings’ cessation date.
**In the case of CHF LIBOR, OTP Bank acts in accordance with the implementing regulation of the European
Commission (https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=PI_COM:C(2021)7488&from=EN).
Amounts effected by IBOR reform as at 31 December 2021
Reference rate
Type of the contract
Nominal value of the
contract
Pieces of contracts
USD LIBOR
Loan
49.116
12
USD LIBOR
Deposit
3.579
7
USD LIBOR
Derivatives
802.854
190
Other LIBOR
Loan
1.166
42
Other LIBOR
Deposit
25.864
98
Other LIBOR
Derivatives
25.464
4
Other LIBOR
Bonds (assets)
13.162
3
Total
921.205
356
The above LIBOR-based amounts outstanding as at 31 December 2021 will be managed at the first interest
period in 2022 therefore they do not cause a risk to the Bank or to the customers.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2021
136
NOTE 47: SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD
In the second half of February 2022 the military conflict between Russia and Ukraine escalated.
It is difficult to quantify the effect of the Ukrainian-Russian conflict regarding the Ukrainian and the Russian
operations, the possible scenarios are covering a wide range of spectrum. According to the worst possible
scenario, the Bank may lose its control over its investments, which under extreme conditions could result in the
full write-off of the invested amount. These Consolidated Financial Statements do not contain any write-offs as
possible consequences of the Ukrainian-Russian conflict, the Group recognizes it as not adjusting, post balance
sheet event.
Ukraine
OTP Group’s Ukrainian operation incorporates the Ukrainian bank, as well as the leasing and factoring
companies. The country-consolidated Ukrainian total assets represented HUF 984 billion at the end of 2021
(3.6% of total consolidated assets), while net loans comprised HUF 614 billion (3.9% of consolidated net loans)
and shareholders’ equity HUF 160 billion (5.3% of the consolidated total equity). At the end of 2021 the book
value of the capital investment in the Ukrainian subsidiaries comprised HUF 105 billion; there was no goodwill
at all, it was already written down entirely in 2014.
The gross intragroup funding towards the Ukrainian operation represented HUF 72 billion, and taking into
account the Ukrainian deposits placed with the HQ, i.e. the net group funding represented HUF 29 billion
equivalent. According to the 28 February 2022 figures, the gross funding amounted to HUF 75 billion equivalent
and the net intragroup funding stood at HUF 9 billion equivalent.
The Ukrainian RWA (“risk-weighted asset”) was HUF 230 billion by the end of 2021 (2.9% of the total RWA).
The maximum capital effect on the potential write-off of the Ukrainian operation, taking into account the equity,
the intragroup funding and the Ukrainian risk weighted assets, is estimated at 148 bps on the CET1 ratio,
according to year-end figures.
Russia
The total assets of the Group’s Russian operation represented HUF 800 billion at the end of 2021 (2.9% of
consolidated total assets), while net loans comprised HUF 621 billion (3.9% of consolidated net loans) and
shareholders’ equity HUF 241 billion (7.9% of consolidated total equity). At the end of 2021 the book value of
the capital investment in the Russian subsidiaries comprised directly HUF 74 billion and indirectly HUF 50
billion.
The gross intragroup funding towards the Russian operation represented HUF 73 billion, and taking into account
the Russian deposits placed with the Headquarter, i.e. the net group funding represented HUF 14 billion
equivalent. On 28 February 2022 the gross intragroup funding reached HUF 52 billion equivalent, which
equalled the net figure because there was no deposit placement by the Russian operation at other Group
members.
The Russian RWA was HUF 276.6 billion by the end of 2021 (3.4% of the total RWA).
The capital maximum effect on the potential write-off of the Russian operation, taking into account the equity,
the intragroup funding and the Russian risk weighted assets, is estimated at 173 bps on the CET1 ratio, according
to year-end figures.
Although the impact of the Russian-Ukrainian conflict on the Group’s Russian and Ukrainian operations is
currently difficult to quantify, and as such uncertain, based on the current estimation of the Bank’s Management
the Ukrainian-Russian conflict does not have considerably negative impact on the business activity, financial
position, efficiency, liquidity and capital position of OTP Bank. Even after the recognition of the potential losses
and write-offs outlined above, the Group's capital adequacy remains above the expected regulatory level. There
is no sign of significant uncertainties having been arisen regarding carrying out its business as a going concern.
The Bank’s Management is monitoring the situation of the Ukrainian-Russian conflict continuously and will take
the necessary steps in order to moderate the business risk.
ANNUAL REPORT 2021
CONSOLIDATED FINANCIAL STATEMENTS IN ACCORDANCE WITH IFRS (2021)
OTP BANK PLC
CONSOLIDATED FINANCIAL STATEMENTS
IN ACCORDANCE WITH
INTERNATIONAL FINANCIAL REPORTING
STANDARDS AS ADOPTED BY THE EUROPEAN UNION AND
INDEPENDENT AUDITORS’ REPORT
FOR THE YEAR ENDED
31 DECEMBER 2021
Table of Contents
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31
DECEMBER 2021 ............................................................................................................................................. 4
CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR
ENDED 31 DECEMBER 2021 .......................................................................................................................... 5
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR
THE YEAR ENDED 31 DECEMBER 2021 ..................................................................................................... 6
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE
YEAR ENDED 31 DECEMBER 2021 .............................................................................................................. 7
CONSOLIDATED STATEMENT OF CASH-FLOWS FOR THE YEAR
ENDED 31 DECEMBER 2021 .......................................................................................................................... 8
NOTE 1: ORGANIZATION AND BASIS OF CONSOLIDATED FINANCIAL STATEMENTS ................ 10
1.1. General information 10
1.2. Basis of Accounting 10
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ......................................................... 12
2.1. Basis of Presentation 12
2.2. Foreign currency translation 13
2.3. Principles of consolidation 14
2.4. Accounting for acquisitions 14
2.5. Securities at amortized cost 15
2.6. Financial assets at fair value through profit or loss 15
2.7. Hedge accounting 17
2.8. Offsetting 17
2.9. Embedded derivatives 18
2.10. Securities at fair value through other comprehensive income 18
2.11. Loans, placements with other banks, repo receivables and loss allowance for loan and placements and
repo receivable losses 19
2.12. Modified assets 20
2.13. Purchased or originated credit impaired financial assets 21
2.14. Loss allowance 21
2.15. Sale and repurchase agreements, security lending 24
2.16. Associates and other investments 24
2.17. Property and equipment, Intangible assets 24
2.18. Inventories 25
2.19. Government grants and government assistance 25
2.20. Financial liabilities 25
2.21. Leases 26
2.22. Investment properties 27
2.23. Share capital 28
2.24. Treasury shares 28
2.25. Non-current assets held-for-sale and discontinued operations 28
2.26. Interest income and income similar to interest income and interest expense 28
2.27. Fees and Commissions 29
2.28. Profit from associates 29
2.29. Income tax 29
2.30. Banking tax 30
2.31. Off-balance sheet commitments and contingent liabilities 30
2.32. Share-based payment 30
2.33. Employee benefits 31
2.34. Biological assets and agricultural produce 31
2.35. Consolidated Statement of Cash-flows 31
2.36. Segment reporting 32
2.37. Comparative balances 32
NOTE 3: SIGNIFICANT ACCOUNTING ESTIMATES AND DECISIONS IN THE APPLICATION
OF ACCOUNTING POLICIES ......................................................................................................... 34
3.1. Loss allowances on financial instruments exposed to credit risk 34
3.2. Valuation of instruments without direct quotations 34
3.3. Provisions 34
3.4. Impairment on goodwill 35
3.5. Business model 35
3.6. Contractual cash-flow characteristics of financial assets 35
NOTE 4: IMPACT OF CORONA VIRUS ( COVID-19) ................................................................................ 36
NOTE 5: CASH, AMOUNTS DUE FROM BANKS AND BALANCES WITH THE NATIONAL
BANKS (in HUF mn) ........................................................................................................................ 44
NOTE 6: PLACEMENTS WITH OTHER BANKS, NET OF LOSS ALLOWANCE FOR
PLACEMENTS (in HUF mn) ............................................................................................................ 44
NOTE 7: REPO RECEIVABLES (in HUF mn) ................................................................................................ 45
NOTE 8: FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (in HUF mn) ............. 46
NOTE 9: SECURITIES AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (in
HUF mn) ............................................................................................................................................ 49
NOTE 10: SECURITIES AT AMORTIZED COST (in HUF mn) ..................................................................... 51
NOTE 11: LOANS AT AMORTIZED COST AND AT FAIR VALUE (in HUF mn) ...................................... 53
NOTE 12: A SSOCIATES AND OTHER INVESTMENTS (in HUF mn) ........................................................ 55
NOTE 13: PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS (in HUF mn) ....................................... 56
NOTE 14: INVESTMENT PROPERTIES (in HUF mn) .................................................................................... 63
NOTE 15: DERIVATIVE FINANCIAL ASSETS DESIGNATED AS HEDGE ACCOUNTING (in HUF
mn) ..................................................................................................................................................... 64
NOTE 16: OTHER ASSETS (in HUF mn) ......................................................................................................... 64
NOTE 17: AMOUNTS DUE TO BANKS, THE NATIONAL GOVERNMENTS, DEPOSITS FROM
THE NATIONAL BANKS AND OTHER BANKS (in HUF mn) .................................................... 66
NOTE 18: REPO LIABILITIES (in HUF mn) .................................................................................................... 66
NOTE 19: FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR
LOSS (in HUF mn) ............................................................................................................................ 67
NOTE 20: DEPOSITS FROM CUSTOMERS (in HUF mn) .............................................................................. 68
NOTE 21: LIABILITIES FROM ISSUED SECURITIES (in HUF mn) ............................................................ 69
NOTE 22: DERIVATIVE FINANCIAL LIABILITIES HELD FOR TRADING (in HUF mn) ......................... 73
NOTE 23: DERIVATIVE FINANCIAL LIABILITIES DESIGNATED AS HEDGE ACCOUNTING (in
HUF mn) ............................................................................................................................................ 73
NOTE 24: PROVISIONS AND OTHER LIABILITIES (in HUF mn) ............................................................... 74
NOTE 25: SUBORDINATED BONDS AND LOANS (in HUF mn) ................................................................. 76
NOTE 26: SHARE CAPITAL (in HUF mn) ....................................................................................................... 77
NOTE 27: RETAINED EARNINGS AND RESERVES (in HUF mn) .............................................................. 77
NOTE 28: TREASURY SHARES (in HUF mn) ................................................................................................. 81
NOTE 29: NON-CONTROLLING INTEREST (in HUF mn) ........................................................................... 81
NOTE 30: INTEREST INCOME, INCOME SIMILAR TO INTEREST INCOME AND EXPENSE (in
HUF mn) ............................................................................................................................................ 82
NOTE 31: LOSS ALLOWANCES / IMPAIRMENT / PROVISIONS (in HUF mn) ......................................... 83
NOTE 32: NET PROFIT FROM FEES AND COMMISSIONS (in HUF mn) ................................................... 84
NOTE 33: GAIN AND LOSSES BY TRANSACTIONS (in HUF mn) ............................................................. 86
NOTE 34: OTHER OPERATING INCOME AND EXPENSES AND OTHER ADMINISTRATIVE
EXPENSES (in HUF mn) .................................................................................................................. 87
NOTE 35: INCOME TAXES (in HUF mn) ........................................................................................................ 89
NOTE 36: LEASES (in HUF mn) ...................................................................................................................... 92
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) ........................................................................ 95
37.1. Credit risk 95
37.2. Maturity analysis of assets, liabilities and liquidity risk 112
37.3. Net foreign currency position and foreign currency risk 117
37.4. Interest rate risk management 117
37.5. Market risk 126
37.6. Capital management 129
NOTE 38: RECLASSIFICATION AND TRANSFER OF FINANCIAL INSTRUMENTS (in HUF mn) ...... 131
NOTE 39: OFF-BALANCE SHEET ITEMS AND DERIVATIVE FINANCIAL INSTRUMENTS (in
HUF mn) .......................................................................................................................................... 132
NOTE 40: SHARE-BASED PAYMENTS AND EMPLOYEE BENEFITS (in HUF mn) ............................... 133
NOTE 41: RELATED PARTY TRANSACTIONS (in HUF mn) .................................................................... 139
NOTE 42: SIGNIFICANT SUBSIDIARIES AND ASSOCIATES (in HUF mn) ............................................ 141
NOTE 43: TRUST ACTIVITIES (in HUF mn) ................................................................................................ 144
NOTE 44: CONCENTRATION OF ASSETS AND LIABILITIES ................................................................. 144
NOTE 45: EARNINGS PER SHARE (in HUF mn) ......................................................................................... 145
NOTE 46: NET GAIN OR LOSS REALIZED ON FINANCIAL INSTRUMENTS (in HUF mn) .................. 146
NOTE 47: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) ................................................... 148
NOTE 48: SEGMENT REPORTING BY BUSINESS AND GEOGRAPHICAL SEGMENTS (in HUF
mn) ................................................................................................................................................... 168
NOTE 49: DISCONTINUED OPERATIONS (in HUF mn)............................................................................. 174
NOTE 50: SIGNIFICANT EVENTS DURING THE YEAR ENDED 31 DECEMBER 2021 ........................ 175
NOTE 51: POST BALANCE SHEET EVENTS .............................................................................................. 178
The accompanying Notes to Consolidated Financial Statements on pages 10 to 179 form an integral part of these Consolidated
Financial Statements prepared in accordance with International Financial Reporting Standards as adopted by EU.
4
OTP BANK PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2021
(in HUF mn)
Note
2021
2020
Reclassified
Cash, amounts due from banks and balances with the National Banks
5.
2,556,035
2,432,312
Placements with other banks, net of loss allowance for placements
6.
1,584,861
1,148,743
Repo receivables
7.
61,052
190,849
Financial assets at fair value through profit or loss
8.
341,397
234,007
Securities at fair value through other comprehensive income
9.
2,224,510
2,136,709
Securities at amortized cost
10.
3,891,335
2,624,920
Loans at amortized cost
11.
13,493,183
11,674,842
Loans mandatorily at fair value through profit or loss
11.
1,068,111
802,605
Finance lease receivables
35.
1,182,628
1,051,140
Associates and other investments
12.
67,222
52,443
Property and equipment
13.
411,136
322,766
Intangible assets and goodwill
13.
248,631
239,004
Right-of-use assets
35.
50,726
46,283
Investment properties
14.
29,882
38,601
Derivative financial assets designated as hedge accounting
15.
18,757
6,820
Deferred tax assets
35.
15,109
22,317
Current income tax receivables
35.
29,978
39,171
Other assets
16.
276,785
266,239
Assets classified as held for sale / discontinued operations
49.
2,046
6,070
TOTAL ASSETS
27,553,384
23,335,841
Amounts due to banks, the National Governments,
deposits from the National Banks and other banks
17.
1,567,348
1,185,315
Repo liabilities
18.
79,047
117,991
Financial liabilities designated at fair value through profit or loss
19.
41,184
34,131
Deposits from customers
20.
21,068,644
17,890,863
Liabilities from issued securities
21.
436,325
464,213
Derivative financial liabilities held for trading
22.
202,716
104,823
Derivative financial liabilities designated as hedge accounting
23.
11,228
11,341
Leasing liabilities
36.
53,286
48,451
Deferred tax liabilities
35.
24,045
25,990
Current income tax payable
35.
36,581
29,528
Provisions
24.
119,799
116,467
Other liabilities
24.
598,081
489,426
Subordinated bonds and loans
25.
278,334
274,704
Liabilities directly associated with assets classified as held for sale /
discontinued operations
49.
-
5,486
TOTAL LIABILITIES
24,516,618
20,798,729
Share capital
26.
28,000
28,000
Retained earnings and reserves
27.
3,109,509
2,629,076
Treasury shares
28.
(106,941)
(124,080)
Total equity attributable to the parent
3,030,568
2,532,996
Total equity attributable to non-controlling interest
29.
6,198
4,116
TOTAL SHAREHOLDERS' EQUITY
3,036,766
2,537,112
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
27,553,384
23,335,841
Budapest, 17 March, 2022
Dr. Sándor Csányi
Chairman and Chief Executive Officer
The accompanying Notes to Consolidated Financial Statements on pages 10 to 179 form an integral part of these Consolidated
Financial Statements prepared in accordance with International Financial Reporting Standards as adopted by EU.
5
OTP BANK PLC
CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR
ENDED 31 DECEMBER 2021
(in HUF mn)
Note
2021
2020
Reclassified
CONTINUING OPERATIONS
Interest income calculated using the effective interest method
30.
922,539
841,901
Income similar to interest income
30.
194,920
135,986
Interest income and income similar to interest income
1,117,459
977,887
Interest expense
(243,149)
(195,216)
NET INTEREST INCOME
874,310
782,671
Loss allowance on loans, placements and on repo receivables
31.
(27,721)
(172,520)
Change in the fair value attributable to changes in the credit risk of
loans mandatorily measured at fair value through profit of loss
31.
(16,289)
(3,262)
Loss allowance on securities
at fair value through other comprehensive income and
on securities at amortized cost
31.
(3,974)
(7,309)
Provision for commitments and guarantees given
31.
(99)
(8,662)
Release of impairment of assets subject to
operating lease and of investment properties
31.
438
878
Risk cost total
(47,645)
(190,875)
NET INTEREST INCOME AFTER RISK COST
826,665
591,796
Gain from derecognition of financial assets
at amortized cost
33.
1,885
3,380
Modification loss
4.
(13,672)
(29,773)
Income from fees and commissions
32.
554,113
486,529
Expense from fees and commissions
32.
(111,939)
(88,896)
Net profit from fees and commissions
442,174
397,633
Foreign exchange result, net
33.
(4,075)
7,864
Gains on securities, net
33.
5,560
7,465
Fair value adjustment on financial instruments
measured at fair value through profit or loss
33.
(532)
4,843
Gain on derivative instruments, net
33.
6,798
11,340
Profit from associates
8., 9.
15,648
527
Other operating income
34.
81,328
33,461
Other operating expenses
34.
(85,732)
(39,447)
Net operating income
18,995
26,053
Personnel expenses
34.
(340,684)
(308,642)
Depreciation and amortization
13.
(94,996)
(92,761)
Goodwill impairment
13.
-
-
Other general expenses
34.
(311,932)
(289,722)
Other administrative expenses
(747,612)
(691,125)
PROFIT BEFORE INCOME TAX
528,435
297,964
Income tax expense
35.
(72,123)
(43,918)
NET PROFIT FOR THE YEAR
FROM CONTINUING OPERATIONS
456,312
254,046
From this, attributable to:
Non-controlling interest
29.
836
220
Owners of the company
455,476
253,826
DISCONTINUED OPERATIONS
Gain from disposal of subsidiary classified as held for sale
49.
-
199
Gain from discontinued operations
49.
116
5,391
PROFIT FROM CONTINUING AND
DISCOUNTINUED OPERATION
456,428
259,636
Earnings per share (in HUF)
From continuing operations
Basic
45.
1,738
982
Diluted
45.
1,738
982
From continuing and discontinued operations
Basic
45.
1,738
1,004
Diluted
45.
1,738
1,003
The accompanying Notes to Consolidated Financial Statements on pages 10 to 179 form an integral part of these Consolidated
Financial Statements prepared in accordance with International Financial Reporting Standards as adopted by EU.
6
OTP BANK PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR
ENDED 31 DECEMBER 2021
(in HUF mn)
Note
2021
2020
NET PROFIT FOR THE YEAR
456,428
259,636
Items that may be reclassified
subsequently to profit or loss:
Fair value adjustment of securities at fair value
through other comprehensive income
27.
(50,789)
(3,175)
Deferred tax related to fair value adjustment of securities
at fair value through other comprehensive income
27.
3,526
918
Derivative financial instruments designated as cash flow hedge
27.
-
(2)
Net investment hedge in foreign operations
27.
-
(9,440)
Deferred tax related to net investment hedge
in foreign operations
27.
-
849
Foreign currency translation difference
27.
61,729
68,593
Items that will not be reclassified
subsequently to profit or loss:
Fair value changes of equity instruments at fair value
through other comprehensive income
27.
2,747
(2,890)
Deferred tax related to equity instruments at
fair value through other comprehensive income
27.
(361)
383
Change of actuarial loss related to
employee benefits
27.
53
143
Deferred tax related to change of actuarial loss related to
employee benefits
27.
(11)
1
Subtotal
16,894
55,380
TOTAL COMPREHENSIVE INCOME
473,322
315,016
From this, attributable to:
Non-controlling interest
1,041
(223)
Owners of the company
472,281
315,239
The accompanying Notes to Consolidated Financial Statements on pages 10 to 179 form an integral part of these Consolidated Financial Statements prepared in accordance with International Financial Reporting
Standards as adopted by EU.
7
OTP BANK PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2021
(in HUF mn)
Note
Share
capital
Capital
reserve
Retained earnings
and other reserves
1
Treasury
shares
Total
attributable to
shareholders
Non-controlling
interest
Total
Balance as at 1 January 2020
28,000
52
2,319,211
(60,931)
2,286,332
4,956
2,291,288
Net profit for the period
-
-
259,416
-
259,416
220
259,636
Other Comprehensive Income
-
-
55,823
-
55,823
(443)
55,380
Total comprehensive income
-
-
315,239
-
315,239
(223)
315,016
Purchasing of non-controlling interest
-
-
-
(382)
(382)
Decrease due to discontinued operation
49.
-
-
-
-
-
(235)
(235)
Share-based payment
40.
-
-
3,394
-
3,394
-
3,394
Sale of Treasury shares
28.
-
-
-
22,773
22,773
-
22,773
Treasury shares - loss on sale
28.
-
-
(3,967)
-
(3,967)
-
(3,967)
Treasury shares - acquisition
28.
-
-
-
(85,922)
(85,922)
-
(85,922)
Payments to ICES holders
27.
-
-
(4,853)
-
(4,853)
-
(4,853)
Balance as at 31 December 2020
28,000
52
2,629,024
(124,080)
2,532,996
4,116
2,537,112
Balance as at 1 January 2021
28,000
52
2,629,024
(124,080)
2,532,996
4,116
2,537,112
Net profit for the period
-
-
455,592
-
455,592
836
456,428
Other Comprehensive Income
-
-
16,689
-
16,689
205
16,894
Total comprehensive income
-
-
472,281
-
472,281
1,041
473,322
Increase due to business combination
-
-
-
-
-
1,041
1,041
Share-based payment
40.
-
-
3,589
-
3,589
-
3,589
Adjustment of previous years' reserves
-
-
1,034
-
1,034
-
1,034
Sale of Treasury shares
28.
-
-
-
293,572
293,572
-
293,572
Treasury shares - loss on sale
28.
-
-
(27,800)
-
(27,800)
-
(27,800)
Treasury shares - acquisition
28.
-
-
-
(276,433)
(276,433)
-
(276,433)
Payments to ICES holders
27.
-
-
(3,734)
-
(3,734)
-
(3,734)
Increase due to termination of ICES
27.
-
-
35,063
-
35,063
-
35,063
Balance as at 31 December 2021
28,000
52
3,109,457
(106,941)
3,030,568
6,198
3,036,766
1
See details in Note 27, where the Retained earnings and other reserves category contains the capital reserve, share-based payment reserve and option reserve.
The accompanying Notes to Consolidated Financial Statements on pages 10 to 179 form an integral part of these Consolidated
Financial Statements prepared in accordance with International Financial Reporting Standards as adopted by EU.
8
OTP BANK PLC
CONSOLIDATED STATEMENT OF CASH-FLOWS FOR THE YEAR
ENDED 31 DECEMBER 2021
(in HUF mn)
OPERATING ACTIVITIES
Note
2021
2020
Net profit for the period
(attributable to the owners of the company)
455,592
259,416
Net accrued interest
14,854
(9,040)
Dividend income
27.
(15,648)
(527)
Depreciation and amortization
13.
100,321
98,385
Loss allowance on securities
9.,10.
3,974
7,309
Loss allowance on loans and placements,
amounts due from banks and on repo receivables
5., 6., 7., 11.
27,721
251,440
Loss allowance / (Release of loss allowance)on investments
12.
6,640
(381)
Release of loss allowance on investment properties
14.
(243)
(741)
Impairment on tangible and intangible assets
13.
2,772
51
Loss allowance on other assets
16.
1,986
7,416
Provision on off-balance sheet
commitments and contingent liabilities
24.
10,856
14,792
Share-based payment
40.
3,589
3,394
Unrealized losses on fair value change of financial
instrumentum at fair value through profit or loss
33.
11,404
762
Non-realized foreign exchange loss / (gain)
33.
22,258
(6,820)
Loss / (Gain) from sale of tangible and intangible assets
13.
129
(637)
Unrealized losses / (gains) on fair value change of
derivative financial instruments
33.
18,982
(25,068)
Gain on discontinued operations
49.
(116)
(5,391)
Net changes in assets and liabilities in operating activities
Net (increase) / decrease in securities
at fair value through profit or loss
8.
(126,364)
23,928
Net (increase) / decrease in compulsory reserves
at the National Banks
5.
(96,936)
17,839
Increase in placement with other banks,
before loss allowance for placements
6.
(307,731)
(903,119)
Net increase in loans at amortized cost before loss allowance
for loans and in loans at fair value
11.
(2,206,183)
(1,473,258)
Net increase in other assets
before loss allowance
16.
(17,930)
(86,868)
Net increase in amounts due to banks,
the National Governments, deposits from the National Banks
and other banks and repo liabilities
17., 18.
299,138
470,671
Net increase in financial liabilities designated
at fair value through profit or loss
19.
1,315
4,647
Net increase in deposits from customers
20.
3,125,494
2,306,621
Cash payments for the interest portion of the lease liability
36.
(935)
(1,592)
Net increase in other liabilities
24.
186,319
61,684
Income tax paid
35.
(47,876)
(37,729)
Net Cash Provided by Operating Activities
1,473,382
977,184
The accompanying Notes to Consolidated Financial Statements on pages 10 to 179 form an integral part of these Consolidated
Financial Statements prepared in accordance with International Financial Reporting Standards as adopted by EU.
9
OTP BANK PLC
CONSOLIDATED STATEMENT OF CASH-FLOWS FOR THE YEAR
ENDED 31 DECEMBER 2021
(in HUF mn)
[continued]
Note
2021
2020
INVESTING ACTIVITIES
Purchase of securities at fair value
through other comprehensive income
9.
(2,342,772)
(1,864,934)
Proceeds from sale of securities at fair value
through other comprehensive income
9.
2,217,702
2,162,682
Purchase of investments
12.
(32,626)
(33,494)
Proceeds from sale of investments
12.
11,207
2,382
Dividends received
27.
15,648
399
Purchase of securities at amortized cost
10.
(6,249,137)
(6,655,496)
Redemption of securities at amortized cost
10.
4,997,215
6,022,703
Purchase of property, equipment and intangible assets
13.
(300,715)
(136,130)
Proceeds from disposals of property,
equipment and intangible assets
13.
119,661
68,625
Purchase of investment properties
14.
(134)
(574)
Proceeds from sale of investment properties
14.
7,983
10,416
Net change in cash and cash equivalents
from discontinued operation
49.
116
5,544
Net cash paid for acquisition
-
-
Net Cash Used in Investing Activities
(1,555,852)
(417,877)
FINANCING ACTIVITIES
Cash received from issuance of securities
21.
76,728
149,105
Cash used for redemption of issued securities
21.
(106,350)
(78,597)
Cash payments for the principal portion of the lease liability
36.
(14,149)
(16,856)
Cash received from issuance of subordinated bonds and loans
25.
2,676
773
Cash used for redemption of subordinated bonds and loans
25.
-
(2,600)
Payments to ICES holders
27.
71,688
(4,853)
Sale of Treasury shares
28.
293,572
18,806
Purchase of Treasury shares
28.
(276,433)
(85,922)
Dividends paid
27.
(10)
(10)
Net Cash Provided by / (Used in) Financing Activities
47,722
(20,154)
TOTAL NET CASH (USED IN) / PROVIDED BY
(34,748)
539,153
Cash and cash equivalents
5.
at the beginning of the period
1,674,777
1,049,737
Foreign currency translation
61,533
69,036
Net change in cash and cash equivalent
(34,748)
539,153
Adjustment due to discontinued operation
2
16,851
Cash and cash equivalents
at the end of the period
5.
1,701,564
1,674,777
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
10
NOTE 1: ORGANIZATION AND BASIS OF CONSOLIDATED FINANCIAL STATEMENTS
1.1. General information
OTP Bank Plc. (the “Bank” or “OTP Bank”) was established on 31 December 1990, when the previously State-
owned company was transformed into a public liability company. The Bank’s registered office address is 16,
Nador Street, Budapest 1051.
Due to Hungarian legislation audit services are a statutory requirement for OTP Bank. Disclosure information
about the auditor: Ernst & Young Audit Ltd. (001165), 1132 Budapest Váci Street 20. Registered under 01-09-
267553 by Budapest-Capital Regional Court, as registry court. Statutory registered auditor: Zsuzsanna
Nagyváradiné Szépfalvi, registration number: 005313.
These Consolidated Financial Statements were approved by the Board of Directors and authorised for issue on
17 March 2022. The Bank’s owners have the power to amend the Consolidated Financial Statements after issue
if applicable.
In 1995, the shares of the Bank were introduced on the Budapest and the Luxembourg Stock Exchanges and
were also traded on the SEAQ board on the London Stock Exchange and on PORTAL in the USA.
The structure of the Share capital by shareholders (%):
2021
2020
Domestic and foreign private and
institutional investors
97%
97%
Employees
1%
1%
Treasury shares
2%
2%
Total
100%
100%
The Bank’s Registered Capital consists of 280.000.010 pieces of ordinary shares with the nominal value of HUF
100 each, representing the same rights to the shareholders.
The Bank and its subsidiaries (“Entities of the Group“, together the “Group” or “OTP Group”) provide a full
range of commercial banking services through a wide network of 1,455 branches in the following countries
Hungary, Bulgaria, Serbia, Croatia, Russia, Romania, Ukraine, Albania, Montenegro, Moldova and Slovenia, as
well as provides other services in the Netherlands, Cyprus and Malta.
The number of the active employees without long-term breaks, and with part-time employees taken into account
proportionately, and the average number of active employees on monthly basis at the Group:
2021
2020
The number of employees at the Group
37,866
38,626
The average number of employees at the Group
37,890
39,943
1.2. Basis of Accounting
These Consolidated Financial Statements were prepared based on the assumptions of the Management that the
Bank will remain in business for the foreseeable future and that the Bank will not be forced to halt operations
and liquidate its assets in the near term at what may be very low fire-sale prices.
The Entities of the Group maintain their accounting records and prepare their statutory accounts in accordance
with the commercial, banking and fiscal regulations prevailing in Hungary and in case of foreign subsidiaries in
accordance with the commercial, banking and fiscal regulations of the country in which they are domiciled.
The Bank’s functional currency is the Hungarian Forint (“HUF”). It is also presentation currency for the Group.
The financial statements of the subsidiaries used during the preparation of Consolidated Financial Statements of
the Group have the same reporting period – starting from 1 January ending as at 31 December – like the
reporting period of the Group.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
11
NOTE 1: ORGANIZATION AND BASIS OF CONSOLIDATED FINANCIAL STATEMENTS
[continued]
1.2. Basis of Accounting [continued]
Due to the fact that the Bank is listed on international and national stock exchanges, the Bank is obliged to
present its financial statements in accordance with International Financial Reporting Standards (“IFRS”) as
adopted by the European Union (the “EU”).
Certain adjustments have been made to the Entities’ statutory accounts in order to present the Consolidated
Financial Statements of the Group in accordance with all standards and interpretations approved by the
International Accounting Standards Board (“IASB”).
These Consolidated Financial Statements have been prepared in accordance with IFRS as adopted by the EU.
1.2.1. The effect of adopting new and revised International Financial Reporting Standards effective from
1 January 2021
The following amendments to the existing standards and new interpretation issued by the International
Accounting Standards Board (IASB) and adopted by the EU are effective for the current reporting period:
- Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 “Interest Rate Benchmark Reform –
Phase 2 adopted by EU on 13 January 2021 (effective for annual periods beginning on or after 1 January
2021),
- Amendments to IFRS 4 “Insurance Contracts” – “Deferral of IFRS 9” adopted by EU on 15 December
2020 (effective for annual periods beginning on or after 1 January 2021),
- IFRS 17 “Insurance Contracts” (effective for annual periods beginning on or after 1 January 2021),
- Amendments to IFRS 16 “Leases” – “Covid 19-Related Rent Concessions beyond 30 June 2021”
(effective for annual periods beginning on or after 1 April 2021).
The adoption of these amendments to the existing standards has not led to any material changes in the Group’s
Consolidated Financial Statements.
1.2.2. New and revised Standards and Interpretations issued by IASB and adopted by the EU but not yet
effective
At the date of authorization of these financial statements there are new standards, amendments to the existing
standards nor interpretations which are issued by IASB and adopted by the EU which are not yet effective:
- Amendments to IFRS 1 “First-time Adoption of International Financial Reporting Standards”,
IFRS 9 “Financial Instruments”, IAS 41 “Agriculture”– “Annual Improvements to IFRSs 2018-2020
Cycle” - adopted by EU on 28 June 2021 (effective for annual periods beginning on or after 1 January
2022),
- Amendments to IFRS 3 “Business Combinations”; IAS 16 “Property, Plant and Equipment”; IAS
37 “Provisions, Contingent Liabilities and Contingent Assets” - adopted by the EU on 28 June 2021
Annual Improvements (effective for annual periods beginning on or after 1 January 2022),
- Amendments to IFRS 17 “Insurance Contracts” (effective for annual periods beginning on or after 1
January 2023).
The Group does not adopt these new standards and amendments to existing standards before their effective date.
The Group anticipates that the adoption of these new standards, amendments to the existing standards and new
interpretations will have no material impact on the Consolidated Financial Statements of the Group in the period
of initial application.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
12
NOTE 1: ORGANIZATION AND BASIS OF CONSOLIDATED FINANCIAL STATEMENTS
[continued]
1.2. Basis of Accounting [continued]
1.2.3. Standards and Interpretations issued by IASB, but not yet adopted by the EU
At present, IFRS as adopted by the EU do not significantly differ from regulations adopted by the International
Accounting Standards Board (IASB) except for the following new standards, amendments to the existing
standards and new interpretation, which were not endorsed for use in EU as at the publication of these
Consolidated Financial Statements:
- Amendments to IAS 1 “Presentation of Financial Statements” - Classification of Liabilities as Current
or Non-Current (effective for annual periods beginning on or after 1 January 2023),
- Amendments to IAS 1 “Presentation of Financial Statements” and IFRS Practice Statement 2 –
Disclosure of Accounting policies (effective for annual periods beginning on or after 1 January 2023),
- Amendments to IAS 8 “Accounting policies, Changes in Accounting Estimates and Errors” –
Definition of Accounting Estimates (effective for annual periods beginning on or after 1 January 2023),
- Amendments to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in
Associates and Joint Ventures” – Sale or Contribution of Assets between an Investor and its Associate
or Joint Venture and further amendments (effective date deferred indefinitely until the research project on
the equity method has been concluded),
- Amendments to IAS 12 “Income Taxes” – Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (effective for annual periods beginning on or after 1 January 2023),
- Amendments to IFRS 17 “Insurance Contracts” – Initial application of IFRS 17 and IFRS 9 –
Comparative Information (effective date for annual periods beginning on or after 1 January 2023).
The Group anticipates that the adoption of these new standards, amendments to the existing Standards and new
interpretations will have no significant impact on the Consolidated Financial Statements of the Group in the
period of initial application.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies applied in the preparation of the accompanying Consolidated Financial
Statements are summarized below:
2.1. Basis of Presentation
These Consolidated Financial Statements have been prepared under the historical cost convention with the
exception of certain financial instruments, which are recorded at fair value. Revenues and expenses are recorded
in the period in which they are earned or incurred. The Group does not offset assets and liabilities or income and
expenses unless it is required or permitted by an IFRS standard.
During the preparation of Consolidated Financial Statements assets and liabilities, income and expenses are
presented separately, except in certain cases, when one of the IFRS standards prescribes net presenting related to
certain items (see note 2.8. below).
The presentation of Consolidated Financial Statements in conformity with IFRS as adopted by the EU requires
the Management of the Group to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and their
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
Future changes in economic conditions, business strategies, regulatory requirements, accounting rules and other
factors could result in a change in estimates that could have a material impact on future financial statements.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
13
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.2. Foreign currency translation
In preparing the financial statements of each individual group entity, transactions in currencies other than the
entity's functional currencies are translated into functional currencies at the rates of exchange prevailing at the
dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies
are retranslated at the exchange rates quoted by the National Bank of Hungary (“NBH”), or if there is no official
rate, at exchange rates quoted by OTP Bank as at the date of the Consolidated Financial Statements.
Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates
prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognized in profit or loss in the period in which they arise except
for:
- exchange differences on foreign currency borrowings relating to assets under construction for future
productive use, which are included in the cost of those assets when they are regarded as an adjustment to
interest costs on those foreign currency borrowings;
- exchange differences on transactions entered into in order to hedge certain foreign currency risks (see note
2.7. below for hedging accounting policies); and
- exchange differences on monetary items receivable from or payable to a foreign operation for which
settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign
operation), which are recognized initially in Other Comprehensive Income and reclassified from equity to
profit or loss on repayment of the monetary items.
For the purposes of presenting Consolidated Financial Statements, the assets and liabilities of the Group's foreign
operations are translated into HUF using exchange rates prevailing at the end of each reporting period. Income
and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate
significantly during that period, in which case the exchange rates at the dates of the transactions are used.
Exchange differences arising, if any, are recognized in Other Comprehensive Income and accumulated in equity
(attributed to non-controlling interests as appropriate).
On the disposal of a foreign operation (i.e. a disposal of the Group's entire interest in a foreign operation, or a
disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of
joint control over a jointly controlled entity that includes a foreign operation, or a disposal involving loss of
significant influence over an associate that includes a foreign operation), all of the exchange differences
accumulated in equity in respect of that operation attributable to the owners of the Group are reclassified to
profit or loss.
In addition, in relation to a partial disposal of a subsidiary that does not result in the Group losing control over
the subsidiary, the proportionate share of accumulated exchange differences are re-attributed to non-controlling
interests and are not recognized in profit or loss.
Goodwill and fair value adjustments on identifiable assets and liabilities acquired arising on the acquisition of a
foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of
exchange prevailing at the end of each reporting period. Exchange differences arising are recognized in Other
Comprehensive Income and accumulated in equity.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
14
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.3. Principles of consolidation
As the ultimate parent, OTP Bank is preparing Consolidated Financial Statements of the Group.
These Consolidated Financial Statements combine the assets, liabilities, equity, income, expenses and cash flows
of the Bank and of those subsidiaries of the Bank in which the Bank exercises control.
All intra-group transactions are consolidated fully on a line-by-line basis while under equity method other
consolidation rules are applied. Determination of the entities which are involved into the consolidation
procedures based on the determination of the Group’s Control over another entity. Control exists when the Bank
has power over the investee, is able to use this power and is exposed or has right to variable returns.
Consolidation of a subsidiary should begin from the date when the Group obtains control and cease when the
Group loses control. Therefore, income and expenses of a subsidiary should be included in the Consolidated
Financial Statements from the date the Group gains control of the subsidiary until the date when the Group
ceases to have control of the subsidiary.
The list of the major fully consolidated subsidiaries, the percentage of issued capital owned by the Bank and the
description of their activities is provided in Note 42.
2.4. Accounting for acquisitions
Business combinations are accounted for using the acquisition method. Any goodwill arising on acquisition is
recognized in the Consolidated Statement of Financial Position and accounted for as indicated below.
The acquisition date is the date on which the acquirer effectively obtains control over the acquiree. Before this
date, it should be presented as Advance for investments within Other assets.
Goodwill, which represents the residual cost of the acquisition after obtaining the control over the acquiree in the
fair value of the identifiable assets acquired and liabilities assumed is held as an intangible asset and recorded at
cost less any accumulated impairment losses in the Consolidated Financial Statements. The Group tests goodwill
for impairment by comparing its recoverable amount with its carrying amount, and recognising any excess of the
carrying amount over the recoverable amount an impairment loss. The recoverable amount of goodwill is the
higher of its fair value less costs of disposal and its value in use.
If the Group loses control of a subsidiary, derecognizes the assets (including any goodwill) and liabilities of the
subsidiary at their carrying amounts at the date when control is lost and recognizes any difference as a gain or
loss on the sale attributable to the parent in the Consolidated Statement of Profit or Loss on Net income from
discontinued operations.
Goodwill acquired in a business combination is tested for impairment annually or more frequently if events or
changes in circumstances indicate. The goodwill is allocated to the cash-generating units that are expected to
benefit from the synergies of the combinations.
The Group calculates the fair value of identified assets and liabilities assumed on discounted cash-flow model.
The 3 year period explicit cash-flow model serves as a basis for the impairment test by which the Group defines
the impairment need on goodwill based on the strategic factors and financial data of its cash-generating units.
The Group, in its strategic plan, has taken into consideration the effects of the present global economic situation,
the present economic growth and outlook, the associated risks and their possible effect on the financial sector as
well as the current and expected availability of wholesale funding.
Negative goodwill (gain from bargain purchase), when the interest of the acquirer in the net fair value of the
acquired identifiable net assets exceeds the cost of the business combination, is recognized immediately in the
Consolidated Statement of Profit or Loss as “Other income”.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
15
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.5. Securities at amortized cost
The Group measures at amortized cost those securities which are held for contractual cash collecting purposes,
and contractual terms of these securities give rise to cash flows that are solely payment of principal and interest
on the principal amount outstanding. The Group initially recognizes these securities at fair value. Securities at
amortized cost are subsequently measured using the effective interest (“EIR”) method and are subject to
impairment. The amortisation of any discount or premium on the acquisition of a security at amortized cost is
part of the amortized cost and is recognized as interest income so that the revenue recognized in each period
represents a constant yield on the investment. Securities at amortized cost are accounted for on a trade date basis.
The Group applies the FIFO
1
inventory valuation method for securities at amortized cost.
Such securities comprise mainly securities issued by the Hungarian and foreign Governments, corporate bonds,
mortgage bonds and discounted treasury bills.
2.6. Financial assets at fair value through profit or loss
2.6.1. Securities held for trading
Investments in securities are accounted for on a trade date basis and are initially measured at fair value.
Securities held for trading are measured at subsequent reporting dates at fair value, so unrealized gains and
losses on held for trading securities are recognized in profit or loss and included in the Consolidated Statement
of Profit or Loss for the period. The Group holds held for trading securities within the business model to obtain
short-term gains, consequently realized and unrealized gains and losses are recognized in the net operating
income, while interest income is recognized in income similar to interest income. The Group applies the FIFO
inventory valuation method for securities held for trading.
Such securities consist of equity instruments, shares in investment funds, Hungarian and foreign government
bonds, corporate bonds, discounted treasury bills, mortgage bonds and other securities.
2.6.2. Financial assets designated as fair value through profit or loss
The Group may - at initial recognition - irrevocable designate a financial asset as measured at fair value through
profit or loss that would otherwise be measured at fair value through other comprehensive income or at
amortized cost.
The Group may use fair value designation only in the following cases:
- if the classification eliminates or significantly reduces a measurement or recognition inconsistency that
would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on
different bases (‘accounting mismatch’)
The use of the fair value designation is based only on direct decision of management of the Group.
2.6.3. Derivative financial instruments
In the normal course of business, the Group is a party to contracts for derivative financial instruments, which
represent a low initial investment compared to the notional value of the contract and their value depends on
value of underlying asset and are settled in the future. The derivative financial instruments used include interest
rate forward or swap agreements and currency forward or swap agreements and options. These financial
instruments are used by the Group both for trading purposes and to hedge interest rate risk and currency
exposures associated with its transactions in the financial markets.
Derivative financial instruments are accounted for on a trade date basis and are initially measured at fair value
and at subsequent reporting dates also at fair value. Fair values are obtained from quoted market prices,
discounted cash-flow models and option pricing models as appropriate. The Group adopts a multi curve
valuation approach for calculating the net present value of future cash-flows – based on different curves used for
determining forward rates and used for discounting purposes. It shows the best estimation of such derivative
deals that are collateralised as the Group has almost all of its open derivative transactions collateralised.
Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are
recognized in profit or loss and are included in the Consolidated Statement of Profit or Loss for the period. Each
derivative deal is determined as asset when fair value is positive and as liability when fair value is negative.
1
First In First Out
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
16
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.6. Financial assets at fair value through profit or loss [continued]
2.6.3. Derivative financial instruments [continued]
Certain derivative transactions, while providing effective economic hedges under the risk management policy of
the Group, do not qualify for hedge accounting under the specific rules of IFRS 9 and are therefore treated as
derivatives held for trading with fair value gains and losses charged directly to the Consolidated Statement of
Profit or Loss.
Foreign currency contracts
Foreign currency contracts are agreements to exchange specific amounts of currencies at a specified rate of
exchange, at a spot date (settlement occurs two days after the trade date) or at a forward date (settlement occurs
more than two days after the trade date). The notional amount of these forward contracts does not represent the
actual market or credit risk associated with these contracts.
Foreign currency contracts are used by the Group for risk management and trading purposes. The risk
management foreign currency contracts of the Group were used to hedge the exchange rate fluctuations of loans
and deposits to credit institutions denominated in foreign currency.
Foreign exchange swaps and interest rate swaps
The Group enters into foreign exchange swap and interest rate swap (“IRS”) transactions. The swap transaction
is an agreement concerning the swap of certain financial instruments, which usually consists of spot and one or
more forward contracts.
IRS transactions oblige two parties to exchange one or more payments calculated with reference to fixed or
periodically reset rates of interest applied to a specific notional principal amount (the base of the interest
calculation). Notional principal is the amount upon which interest rates are applied to determine the payment
streams under IRS transactions. Such notional principal amounts often are used to express the volume of these
transactions but are not actually exchanged between the counterparties.
IRS transactions are used by the Group for risk management and trading purposes.
Cross-currency interest rate swaps
The Group enters into cross-currency interest rate swap (CCIRS) transactions which have special attributes, i.e.
the parties exchange the notional amount at the beginning and also at the maturity of the transaction. A special
type of these deals is the mark-to-market CCIRS agreements. For these kind of transactions the parties – in
accordance with the foreign exchange prices – revalue the notional amount during lifetime of the transaction.
Equity and commodity swaps
Equity swaps obligate two parties to exchange more payments calculated with reference to periodically reset
rates of interest and performance of indices. A specific notional principal amount is the base of the interest
calculation. The payment of index return is calculated on the basis of current market price compared to the
previous market price. In case of commodity swaps payments are calculated on the basis of the strike price of a
predefined commodity compared to its average market price in a period.
Forward rate agreements (FRA)
A forward rate agreement is an agreement to settle amounts at a specified future date based on the difference
between an interest rate index and an agreed upon fixed rate. Market risk arises from changes in the market value
of contractual positions caused by movements in interest rates.
The Group limits its exposure to market risk by entering into generally matching or offsetting positions and by
establishing and monitoring limits on unmatched positions. Credit risk is managed through approval procedures
that establish specific limits for individual counterparties. The Group’s forward rate agreements were transacted
for management of interest rate exposures and have been accounted for at mark-to-market fair value.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
17
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.6. Financial assets at fair value through profit or loss [continued]
2.6.3 Derivative financial instruments [continued]
Foreign exchange options
A foreign exchange option is a derivative financial instrument that gives the owner the right to exchange money
denominated in one currency into another currency at a pre-agreed exchange rate at a specified future date. The
transaction, for a fee, guarantees a worst-case exchange rate for the futures purchase of one currency for another.
These options protect against unfavourable currency movements while preserving the ability to participate in
favourable movements.
2.7. Hedge accounting
Derivative financial instruments designated as a fair-value hedge
Changes in the fair value of derivatives that are designated and qualify as hedging instruments in fair value
hedges and that prove to be highly effective in relation to the hedged risk, are recorded in the Consolidated
Statement of Profit or Loss along with the corresponding change in fair value of the hedged asset or liability that
is attributable to the specific hedged risk. Changes in the fair value of hedging instrument in fair value hedges is
charged directly to the Consolidated Statement of Profit or Loss.
The conditions of hedge accounting applied by the Bank are the following: formally designated as hedge
relationship, proper hedge documentation is prepared, effectiveness test is performed and based on it the hedge is
qualified as effective.
The Group implemented hedge accounting rules prescribed by IFRS 9 in 2018.
Derivative financial instruments designated as cash flow hedge
Changes in the fair value of derivatives that are designated and qualify as hedging instrument in cash-flow
hedges and that prove to be highly effective in relation to the hedged risk are recognized in their effective portion
as reserve in Other Comprehensive Income. The ineffective element of the changes in fair value of hedging
instrument is charged directly to the Consolidated Statement of Profit or Loss.
The Group terminates the hedge relationship if the hedging instrument expires or is sold, terminated or
exercised, or the hedge no longer meets the criteria for hedge accounting. In the case of cash-flow hedges – in
line with the standard -hedge accounting is still applied by the Group as long as the underlying asset is
derecognized.
Net investment hedge in foreign operations
Hedges of a net investment in a foreign operation, including a hedge of a monetary item that is accounted for as
part of the net investment, shall be accounted for similarly to cash flow hedges.
On the disposal of a foreign operation, the cumulative value of any gains and losses recognized in Other
Comprehensive Income is transferred to the Consolidated Statement of Profit or Loss.
2.8. Offsetting
Financial assets and liabilities are offset and the net amount is reported in the Consolidated Statement of
Financial Position when the Group has a legally enforceable right to set off the recognized amounts and the
transactions are intended to be reported in the Consolidated Statement of Financial Position on a net basis. In
case of the derivative financial instruments the Group applies offsetting and net presentation in the Consolidated
Statement of Financial Position when the Group has the right and the ability to settle these assets and liabilities
on a net basis.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
18
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.9. Embedded derivatives
Sometimes, a derivative may be a component of a combined or hybrid contracts that includes a host contract and
a derivative (the embedded derivative) affecting cash-flows or otherwise modifying the characteristics of the
host instrument. An embedded derivative must be separated from the host instrument and accounted for as a
separate derivative if, and only if:
The economic characteristics and risks of the embedded derivative are not closely related to the economic
characteristics and risks of the host contract;
A separate financial instrument with the same terms as the embedded derivative would meet the definition
of a derivative as a stand-alone instrument; and
The host instrument is not measured at fair value or is measured at fair value but changes in fair value are
recognized in Other Comprehensive Income.
As long as a hybrid contract contains a host that is a financial asset the general accounting rules for
classification, recognition and measurement of financial assets are applicable for the whole contract and no
embedded derivative is separated.
Derivatives that are required to be separated are measured at fair value at initial recognition and subsequently.If
the Group is unable to measure the embedded derivative separately either at acquisition or at the end of a
subsequent financial reporting period, the Group shall designate the entire hybrid contract as at fair value
through profit or loss. The Group shall assess whether an embedded derivative is required to be separated from
the host contract and accounted for as a derivative when the Bank first becomes a party to the contract.
2.10. Securities at fair value through other comprehensive income
Securities at fair value through other comprehensive income are held within a business model whose objective is
achieved by both collecting of contractual cash flows and selling securities. Furthermore, the contractual terms
of these securities give rise on specified dates to cash flows that are solely payment of principal and interest on
the principal amount outstanding.
Debt instruments
Investments in debt securities are accounted for on a trade date basis and are initially measured at fair value.
Securities at fair value through other comprehensive income are measured at subsequent reporting dates at fair
value. Unrealized gains and losses on securities at fair value through other comprehensive income are recognized
directly in Other Comprehensive Income, except for interest and foreign exchange gains/losses on monetary
items, unless such financial asset at fair value through other comprehensive income is part of an effective hedge.
Such gains and losses are reported when realized in Consolidated Statement of Profit or Loss for the applicable
period. The Group applies the FIFO
1
inventory valuation method for securities at fair value through other
comprehensive income.
For debt securities at fair value through other comprehensive income the loss allowance is calculated based on
expected credit loss model. The expected credit loss is accounted for against Other Comprehensive Income.
Securities at fair value through other comprehensive income are remeasured at fair value based on quoted prices
or amounts derived from cash-flow models. In circumstances where the quoted market prices are not readily
available, the fair value of debt securities is estimated using the present value of future cash-flows and the fair
value of any unquoted equity instruments are calculated using the EPS ratio.
Such securities consist of Hungarian and foreign government bonds, corporate bonds, mortgage bonds,
discounted and interest bearing Treasury bills, securities issued by the NBH and other securities.
1
First In First Out
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
19
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.10. Securities at fair value through other comprehensive income [continued]
Fair value through other comprehensive income option for equity instruments
The Group has elected to present in the Statement of Other Comprehensive Income changes of fair value of
those equity instruments which are neither held for trading nor recognized under IFRS 3.
In some cases, the Group made an irrevocable election at initial recognition for certain equity instruments to
present subsequent changes in fair value of these securities in the consolidated other comprehensive income
instead of in profit or loss.
The use of the fair value option is based only on direct decision of management of the Group.
2.11. Loans, placements with other banks, repo receivables and loss allowance for loan and placements
and repo receivable losses
The Group measures at amortized cost those Loans and placements with other banks and repo receivables, which
are held to collect contractual cash flows, and contractual terms of these assets give rise on specified dates to
cash flows that are solely payments of principal and interest on the principal amount outstanding. These loans
are recognized as Loans at amortized cost in the Consolidated Statement of Financial Position. The Group
recognizes those financial assets which are not held for trading and do not give rise to contractual cash flows that
are solely payments of principal and interest on the principal amount outstanding as loans measured at fair value
through profit or loss. These loans are recognized as Loans mandatorily at fair value through profit or loss in the
Consolidated Statement of Financial Position.
Those Loans and placements with other banks and repo receivables that are accounted at amortized cost, stated
at the principal amounts outstanding (including accrued interest), net of allowance for loan or placement losses,
respectively.
In case of the above mentioned financial assets measured at amortised cost transaction fees and charges adjust
the carrying amount at initial recognition and are included in effective interest calculation. In case of loans at fair
value through profit or loss fees and charges are recognised when incurred in the Consolidated Statement of
Profit or Loss.
Loans and placements with other banks and repo receivables are derecognized when the contractual rights to the
cash-flows expire or they are transferred. When a financial asset is derecognized the difference of the carrying
amount and the consideration received is recognized in the profit or loss in case of financial assets at amortised
cost the gains or losses from derecognition are presented in “Gains/losses from derecognition of financial assets
at amortised cost” line while in case of loans at fair value through profit or loss the gains or losses from
derecognition are presented in “Net operating income”.
Change in the fair value of loans at fair value through profit or loss is broken down into two components and
presented in the Consolidated Statement of Profit or Loss as follows:
• Portion of the change in fair value arising from changes in credit risk are presented within “Risk cost” as
“Change in the fair value attributable to changes in the credit risk of loans mandatorily measured at fair
value through profit of loss”.
• The remaining component of the change is presented in fair value within “Net operating income” as “Fair
value adjustment on financial instruments measured at fair value through profit or loss”.
Initially financial assets shall be recognized at fair value which is usually equal to transaction value in case of
loans and placements. However, when the amounts are not equal, the initial fair value difference should be
recognized.
If the fair value of financial assets is based on a valuation technique using only inputs observable in market
transactions, the Group recognizes the initial fair value difference in the Consolidated Statement of Profit or
Loss.
When the fair value of financial assets is based on models for which inputs are not observable, the difference
between the transaction price and the fair value is deferred and only recognized in profit or loss when the
instrument is derecognized or the inputs became observable.
Initial fair value of loans lent at interest below market conditions is lower than their transaction price.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
20
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.11. Loans, placements with other banks, repo receivables and loss allowance for loan and placements
and repo receivable losses [continued]
The Group recognizes a loss allowance for expected credit losses on a financial asset at each reporting date. The
loss allowance for a financial asset equals to 12-month expected credit loss or equals to the lifetime expected
credit losses. The maximum period over which expected credit losses shall be measured is the maximum
contractual period over which the Group is exposed to credit risk.
If the credit risk on a financial asset has not increased significantly since initial recognition then 12-month
expected credit losses, otherwise (in case of significant credit risk increase) lifetime expected credit losses
should be calculated. The expected credit loss is the present value of the difference between the contractual cash
flows that are due to the Group under the contract and the cash flows that the Group expects to receive.
When the contractual cash flows of a financial asset are modified and the modification does not result in the
derecognition of the financial asset the Group recalculates the gross carrying amount of the financial asset by
discounting the expected future cash flows with the original effective interest rate of the asset. The difference
between the carrying amount and the present value of the expected cash flows is recognized as a modification
gain or loss in the profit or loss. Interest and amortized cost are accounted using effective interest rate method.
Write-offs are generally recorded after all reasonable restructuring or collection activities have taken place and
the possibility of further recovery is considered to be remote. The loan is written off against the related account
“Gain / (Loss) from derecognition of financial assets at amortized cost” in the Consolidated Statement of Profit
or Loss.
The Group applies partial or full write-off for loans based on the definitions and prescriptions of financial
instruments in accordance with IFRS 9. If the Group has no reasonable expectations regarding a financial asset
(loan) to be recovered, it will be written off partially or fully at the time of emergence.
The gross amount and loss allowance of the loans shall be written off in the same amount to the estimated
maximum recovery amount while the net carrying value remains unchanged. In those cases when on the
previously partially or fully written-off loans or placements, which perhaps were derecognized from the books
no having been reasonable expectations but later recoveries could be determined then reversal of written-off will
be booked in the Consolidated Statement of Profit or Loss on “Income from recoveries of written-off, but legally
existing loan” line in Risk cost.
2.12. Modified assets
If the net present value of the contracted cash flows changes due to the modification of the contractual terms and
it is not qualified as derecognition, modification gain or loss should be calculated and accounted for in the
Consolidated Statement of Profit or Loss. Modification gain or loss is accounted in cases like restructuring – as
defined in guidelines of the Group – prolongation, renewal with unchanged terms, renewal with shorter terms
and prescribing capital repayment rate, if it doesn’t exist or has not been earlier.
The changes of net present value should be calculated on portfolio level in case of retail exposures. Each retail
contract is restructured based on restructuring frameworks. The Group has to evaluate these frameworks (and not
individual contracts). The changes of net present value should be calculated individually on contract level in case
of corporate portfolio.
Among the possible contract amendments, the Group considers as a derecognition and a new recognition when
the discounted present value – discounted at the original effective interest rate – of the cash flows under the new
terms is at least 10 per cent different from the discounted present value of the remaining cash flows. In case of
derecognition and new recognition the unamortized fees of the derecognized asset should be presented as Income
similar to interest income. The newly recognized financial asset is initially measured at fair value and is placed
in stage 1 if the derecognized financial asset was in stage 1 or stage 2 portfolio. The newly recognized financial
asset will be purchased or originated credit impaired financial asset (“POCI”) if the derecognized financial asset
was in stage 3 portfolio or it was POCI.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
21
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.12. Modified assets [continued]
The modification gain or loss shall be calculated at each contract amendments unless they are handled as a
derecognition and new recognition. In case of modification the Group recalculates the gross carrying amount of
the financial asset. To do this, the new contractual cash flows should be discounted using the financial asset’s
original effective interest rate (or credit-adjusted effective interest rate for POCI financial asset). Any costs or
fees incurred adjust the carrying amount of the modified financial asset are amortized over the remaining term of
the modified financial asset.
2.13. Purchased or originated credit impaired financial assets
Purchased or originated financial assets are credit-impaired on initial recognition. A financial asset is credit-
impaired when one or more events that have a detrimental impact on the estimated future cash flows of that
financial asset have occurred.
A purchased credit-impaired asset is likely to be acquired at a deep discount. In unusual circumstances, it may be
possible that an entity originates a credit-impaired asset, for example, following a substantial modification of a
distressed financial asset that resulted in the derecogniton of the original financial asset.
In the case of POCI financial assets, interest income is always recognized by applying the credit-adjusted
effective interest rate.
For POCI financial assets, in subsequent reporting periods an entity is required to recognize:
- the cumulative changes in lifetime expected credit losses since initial recognition as a loss allowance,
- the impairment gain or loss which is the amount of any change in lifetime expected credit losses.
An impairment gain is recognized (with the parallel increase of the net amortized cost of receivable) if due
to the favourable changes after initial recognition the lifetime expected credit loss estimation is becoming
lower than the original estimated credit losses at initial recognition.
The POCI qualification remains from initial recognition to derecognition in the Group’s books.
2.14. Loss allowance
A loss allowance for loans and placements with other banks and repo receivables is recognized by the Group
based on the expected credit loss model in accordance with IFRS 9. Based on the three stage model the
recognized loss allowance equals to 12-month expected credit loss from the initial recognition. On financial
assets with significantly increased credit risk or credit impaired financial assets (based on objective evidences)
the recognized loss allowance is the lifetime expected credit loss.
In the case of purchased or originated credit impaired financial assets, a loss allowance is recognized in the
amount of the lifetime expected credit loss since initial recognition. The impairment gain in the Consolidated
Statement of Profit or Loss is recognized if lifetime expected credit loss for purchased or originated credit
impaired financial assets at measurement date are less than the estimated credit loss at initial recognition.
A loss allowance for loans and placements with other banks and repo receivables represents Management’s
assessment for potential losses in relation to these activities.
Loss allowance for loan and placements are determined at a level that provides coverage for individually
identified credit losses. For loans for which it is not possible to determine the amount of the individually
identified credit loss in the absence of objective evidence, a collective impairment loss is recognized. With this,
the Group reduces the carrying amount of financial asset portfolios with similar credit risk characteristics to the
amount expected to be recovered based on historical loss experience.
At subsequent measurement the Group recognizes an impairment gain or loss through “Impairment gain on
POCI loans” in the Consolidated Statement of Profit or Loss as part of “Risk cost” line as an amount of expected
credit losses or reversal which is required to adjust the loss allowance at the reporting date to the amount that is
required to be recognized in accordance with IFRS 9.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
22
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.14. Loss allowance [continued]
If a financial asset, for which previously there were no indicators of significant increase in credit risk (i.e.
classified in Stage 1) is subsequently classified in Stage 2 or Stage 3 then loss allowance is adjusted to lifetime
expected credit loss. If a financial asset, which was previously classified in Stage 2 or Stage 3 is subsequently
classified in Stage 1 then the loss allowance is adjusted to the level of 12 month expected credit loss.
Classification into risk classes
According to the requirements of the IFRS9 the Group classifies the financial assets measured at amortized cost,
at fair value through other comprehensive income and loan commitments and financial guarantees into the
following stages:
- Stage 1 – performing financial instruments without significant increase in credit risk since initial
recognition
- Stage 2 – performing financial instruments with significant increase in credit risk since initial recognition
but not credit-impaired
- Stage 3 – non-performing, credit-impaired financial instruments
- POCI – purchased or originated credit impaired
In the case of trade receivables and contract assets the Group applies the simplified approach and calculates only
lifetime expected credit loss. The simplified approach is the following:
- for the past 3 years the average annual balance of receivables under simplified approach is calculated,
- the written-off receivables under simplified approach are determined in the past 3 years,
- historical losses are adjusted to reflect information about current conditions and reasonable forecasts of
future economic conditions,
- the loss allowance ratio is the sum of the written-off amounts divided by the sum of the average balances,
- the loss allowance is multiplied by the end-of-year balance and it is the actual loss allowance on these
receivables,
- loss allowance should be recalculated annually.
The Group assumes that the credit risk on a financial instrument has not increased significantly since initial
recognition if the financial asset is determined to have low credit risk at the reporting date. This might occur if
the financial asset has a low risk of default, the borrower has a strong capacity to meet its contractual cash flow
obligations in the near term and adverse changes in economic and business conditions in the longer term may,
but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations. The
Group considers souvereign exposures as having low credit risk.
Stage 1: financial instruments for which the events and conditions specified in respect of Stage 2 and Stage 3 do
not exist on the reporting date.
A client or loan must be qualified as default if one or both the following two conditions occur:
The client delays more than 90 days. This is considered a hard trigger.
There is reasonable probability that the client will not pay all of its obligation. This condition is examined
on the basis of probability criteria of default.
The subject of default qualification is that exposure (on-balance and off-balance) which originates credit risk (so
originated from loan commitments, risk-taking contracts).
A financial instruments shows significant increase in credit risk, and is allocated to Stage 2, if in respect of
which any of the following triggers exist on the reporting date, without fulfilling any of the conditions for the
allocation to the non-performing stage (stage 3):
the payment delay exceeds 30 days,
it is classified as performing forborne,
based on individual decision, its currency suffered a significant "shock" since the disbursement of the
loan,
the transaction/client rating exceeds a predefined value or falls into a determined range, or compared to
the historic value it deteriorates to a predefined degree,
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
23
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.14. Loss allowance [continued]
Classification into risk classes [continued]
in the case retail mortgage loans, the loan-to-value ratio exceeds a predefined rate,
default on another loan of the retail client, if no cross-default exists,
monitoring classification of corporate and municipal clients above different thresholds defined on group
- financial difficulties at the debtor (capital adequacy, liquidity, deterioration of the instrument
quality),
- significant decrease of the liquidity or the activity on the active market of the financial instrument
can be observed,
- the rating of the client reflects high risk but it is better than the default one,
- significantly decrease in the value of the recovery from which the debtor would disburse the loan,
- clients under liquidation.
A financial instrument is non-performing and it is allocated to Stage 3 when any of the following events or
conditions exists on the reporting date:
default (based on the group level default definition),
classified as non-performing forborne (based on the group level forborne definition),
the monitoring classification of corporate and municipal clients above different thresholds defined on
group level (including but not limited to):
- breaching of contracts,
- significant financial difficulties of the debtor (like capital adequacy, liquidity, deterioration of the
instrument quality),
- bankruptcy, liquidation, debt settlement processes against debtor,
- forced strike-off started against debtor,
- termination of loan contract by the bank,
- occurrence of fraud event,
- termination of the active market of the financial instrument.
-
If the exposure is no longer considered as credit impaired, the Group allocates this exposure to Stage 2.
When loss allowance is calculated at exposures categorized into stages the following process is needed by
stages:
Stage 1 (performing): loss allowance at an amount equal to 12-month expected credit loss should be
recognized,
Stage 2 (significant increase in credit risk): loss allowance at an amount equal to lifetime expected
credit loss should be recognized,
Stage 3 (non-performing): loss allowance at an amount equal to lifetime expected credit loss should be
recognized.
For lifetime expected credit losses, an entity shall estimate the risk of a default occurring on the financial
instrument during its expected life. 12-month expected credit losses are a portion of the lifetime expected credit
losses and represent the lifetime cash shortfalls that will result if a default occurs in the 12 months after the
reporting date (or a shorter period if the expected life of a financial instrument is less than 12 months), weighted
by the probability of that default occurring.
An entity shall measure expected credit losses of a financial instrument in a way that reflects:
- an unbiased and probability-weighted amount that is determined by evaluating a range of possible
outcomes
- the time value of money and
- reasonable and supportable information that is available without undue cost or effort at the reporting
date about past events, current conditions and forecasts of future economic conditions.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
24
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.15. Sale and repurchase agreements, security lending
Where debt or equity securities are sold under a commitment to repurchase them at a pre-determined price, they
remain on the Consolidated Statement of Financial Position and the consideration received is recorded in Other
liabilities or Amounts due to banks, the National Governments, deposits from the National Banks and other
banks. Conversely, debt or equity securities purchased under a commitment to resell are not recognized in the
Consolidated Statement of Financial Position and the consideration paid is recorded either in Placements with
other banks or Deposits from customers. Interest is accrued based on the effective interest method evenly over
the life of the repurchase agreement.
In the case of security lending transactions the Group does not recognize or derecognize the securities because
believes that the transferor retains substantially all the risks and rewards of the ownership of the securities. Only
a financial liability or financial receivable is recognized for the consideration amount.
2.16. Associates and other investments
Companies where the Bank has the ability to exercise significant influence are accounted for using the equity
method. Subsidiaries and associated companies that were not accounted for using the equity method and other
investments where the Bank does not hold a significant interest are recorded according to IFRS 9. When an
investment in an associate is held indirectly through an entity that is a venture capital fund, the Group elects to
measure these investments in the associate at fair value through profit or loss in accordance with IFRS 9.
Under the equity method, the investment is initially recognized at cost, and the carrying amount is adjusted
subsequently for:
- the Group’s share of the post-acquisition profits or losses of the investee, which are recognized in the
Group’s Consolidated Statement of Profit or Loss; and
- the distributions received from the investee, which reduce the carrying amount of the investment.
The Group’s share of the profits or losses of the investee, or other changes in the investee’s equity, is determined
on the basis of its proportionate ownership interest. The Group recognizes its share of the investee’s income and
losses based on the percentage of the equity interest owned by the Group.
Gains and losses on the sale of investments are determined on the basis of the specific identification of the cost
of each investment.
2.17. Property and equipment, Intangible assets
Property and equipment and Intangible assets are measured at cost, less accumulated depreciation and
amortization and impairment, if any.
Internally generated intangibles, excluding capitalized development costs, are not capitalized – the related
expenditures are accounted as cost in the period in which they are incurred. Development costs are capitalized
only when the technical and commercial feasibility of the asset has been clearly demonstrated, the Group has the
intent and ability to complete the intangible asset and either use it or sell it and be able to demonstrate how the
asset will generate future economic benefits. Amortization of these type of assets begins when development is
complete and the asset is available for use. During the period of development, the asset is tested for impairment
annually.
The Group lists mainly self-developed softwares among internally generated intangible assets.
The depreciable amount (book value less residual value) of the non-current assets must be allocated over the
useful lives.
Depreciation and amortization are computed usually by using the straight-line method over the estimated useful
lives of the assets based on the following annual percentages:
Annual
percentages
Useful life
period (years)
Intangible assets
Software
6.3% - 50.0%
2 – 15
Property right
16.7% - 33.3%
3 – 6
Property
1.0% - 50.0%
2 – 100
Machinery and office equipment
3.3% - 63.0%
1.5 – 30
Vehicle
3.0% - 33.3%
3 – 33
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
25
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.17. Property and equipment, Intangible assets [continued]
Depreciation and amortization on Property and equipment and Intangible assets commence on the day such
assets are ready to use.
At each balance sheet date, the Group reviews the carrying value of its Property and equipment and Intangible
assets to determine if there is any indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated to determine the extent (if any) of the
impairment loss.
Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs.
Where the carrying value of Property and equipment and Intangible assets is greater than the estimated
recoverable amount, it is impaired immediately to the estimated recoverable amount.
The Group may conclude contracts for purchasing property, equipment and intangible assets, where the purchase
price is settled in foreign currency. By entering into such agreements, firm commitment in foreign currency due
on a specified future date arises at the Group.
Reducing the foreign currency risk caused by firm commitment, forward foreign currency contracts may be
concluded to ensure the amount payable in foreign currency on a specified future date on one hand and to
eliminate the foreign currency risk arising until settlement date of the contract on the other hand.
In the case of an effective hedge the realized profit or loss of the hedging instrument is stated as the part of the
cost of the hedged asset as it has arisen until recognizing the asset.
2.18. Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories comprise all costs
of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and
condition.
The Group uses generally FIFO formulas to the measurement of inventories.
Inventories are removed from books when they are sold, unusable or destroyed. When inventories are sold, the
carrying amount of those inventories are recognized as an expense in the period in which the related revenue is
recognized.
Repossessed assets are classified as inventories. The Group's policy is to sell repossessed assets and not to use
them for its internal operations.
2.19. Government grants and government assistance
The Group recognise government grants only when there is a reasonable assurance that the grant will be
received, and all attached conditions will be complied with.
The Group presents grants relating to assets as deferred income in the Consolidated Statement of Financial
Position, which is recognized in profit or loss on a systematic basis over the useful life of the asset.
Grants related to an expense item are recorded as an other operating income in those periods when the related
costs were recognized.
2.20. Financial liabilities
The financial liabilities are presented within these lines in the Consolidated Financial Statements:
- Amount due to banks, the National Governments, deposits from the National Banks and other banks
- Repo liabilities
- Financial liabilities designated at fair value through profit or loss
- Deposits from customers
- Liabilities from issued securities
- Derivative financial liabilities held for trading
- Derivative financial liabilities designated as hedge accounting
- Other financial liabilities
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
26
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.20. Financial liabilities [continued]
At initial recognition, the Group measures financial liabilities at fair value plus or minus – in the case of a
financial liability not at fair value through profit or loss – transaction costs that are directly attributable to the
acquisition or issue of the financial liability.
Usually, the initial fair value of financial liabilities equals to transaction value. However, when the amounts are
not equal, the initial fair value difference should be recognized.
If the fair value of financial liabilities is based on a valuation technique using only inputs observable in market
transactions, the Group recognizes the initial fair value difference in the Consolidated Statement of Profit or
Loss.
When the fair value of financial liabilities is based on models for which inputs are not observable, the difference
between the transaction price and the fair value is deferred and only recognized in profit or loss when the
instrument is derecognized or the inputs became observable.
Financial liabilities at fair value through profit or loss are either financial liabilities held for trading or they are
designated upon initial recognition as at fair value through profit or loss.
In connection to the derivative financial liabilities measured at fair value through profit or loss, the Group
presents the amount of change in their fair value originated from the changes of market conditions and business
environment.
The Group designated some financial liabilities upon initial recognition to measure at fair value through profit or
loss. This classification eliminates or significantly reduces a measurement or recognition inconsistency that
would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on
different bases (“accounting mismatch”). The changes in fair value of these liabilities are recognized in profit or
loss, except the fair value changes attributable to credit risk which are recognized among other comprehensive
income.
In the case of financial liabilities measured at amortized cost fees and commissions related to the origination of
the financial liability are recognized through profit or loss during the maturity of the instrument using effective
interest method. In certain cases the Group repurchases a part of financial liabilities (mainly issued securities or
subordinated bonds) and the difference between the carrying amount of the financial liability and the amount
paid for it is recognized in the net profit or loss for the period and included in other operating income.
2.21. Leases
The Group as a lessor
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are classified as operating leases. Lease classification is
made at the inception date and is reassessed only if there is a lease modification.
Finance leases
At the commencement date, a lessor derecognizes the assets held under a finance lease in the Consolidated
Statement of Financial Position and present them as a receivable at an amount equal to the net investment in the
lease. The lessor shall use the interest rate implicit in the lease to measure the net investment in the lease. Direct
costs such as commissions are included in the initial measurement of the finance lease receivables.
The Group as a lessor recognizes finance income over the lease term, based on a pattern reflecting a constant
periodic rate of return on the Group’s net investment in the lease. The Group applies the lease payments relating
to the period against the gross investment in the lease to reduce both the principal and the unearned finance
income.
The Group applies the derecognition and impairment requirements in IFRS 9 to the net investment in the lease.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
27
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.21. Leases [continued]
Operating leases
The Group as a lessor recognizes lease payments from operating leases as income on either a straight-line basis
or another systematic basis. Costs, including depreciation, incurred in earning the lease income are recognized
as an expense.
Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the underlying
asset and recognized as an expense over the lease term on the same basis as the lease income.
The depreciation policy for depreciable underlying assets subject to operating leases is consistent with the
Group’s normal depreciation policy for similar assets. The Group accounts for a modification to an operating
lease as a new lease from the effective date of the modification, considering any prepaid or accrued lease
payments relating to the original lease as part of the lease payments for the new lease.
The Group as a lessee
The Group recognizes a right-of-use asset and a lease liability at the commencement of the lease term except for
short-term leases and leases, where the underlying asset is of low value (less than USD 5,000). For these leases,
the Group recognizes the lease payments as an expense on either a straight-line basis over the lease term or
another systematic basis if that basis is more representative of the pattern of the lessee’s benefit.
Deferred tax implication if the Group is lessee: At the inception of the lease, there is no net lease asset or
liability, no tax base and, therefore, no temporary difference. Subsequently, as depreciation on the right-of-use
asset initially exceeds the rate at which the debt reduces, a net liability arises resulting in a deductible temporary
difference on which a deferred tax asset should be recognized if recoverable. Assuming that the lease liability is
not repaid in advance, the total discounted cash outflows should equal the total rental payments deductible for
income tax purposes.
Right-of-use asset
The right-of-use assets are presented separately in the Consolidated Statement of Financial Position and initially
measured at cost, subsequently the Group applies the cost model and these assets are depreciated on a straight
line basis from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the
end of the lease term. If the lease transfers ownership of the underlying asset to the Group by the end of the lease
term or if the cost of the right-of-use asset reflects that the Group will exercise a purchase option, the right-of-
use asset are depreciated from the commencement date to the end of the useful life of the underlying asset.
Lease liability
At the commencement date, the lease liability is measured at the present value of the lease payments that are not
paid at that date discounted by using the rate implicit in the lease, or if this cannot be determined, by using the
incremental borrowing rate of the Group.Variable lease payments that do not depend on an index or a rate but
e.g. on revenues or usage are recognized as an expense. The Group always separates the non-lease components
of the lease contracts and accounts them as an expense. Lease payments must be included in the measurement of
the lease liability without value added taxes. Non-deductible VAT is recognized as other expense.
The lease liability is remeasured in the event of a reassessment of the lease liability or lease modification
2.22. Investment properties
Investment properties of the Group are land, buildings, part of buildings which held (as the owner or as the
lessee under a finance lease) to earn rentals or for capital appreciation or both, rather than for use in the
production or supply of services or for administrative purposes or sale in the ordinary course of business. The
Group measures the investment properties at cost less accumulated depreciation and impairment, if any.
The depreciable amount (book value less residual value) of the investment properties must be allocated over
their useful lives. The depreciation and amortization are computed using the straight-line method over the
estimated useful lives of the assets.
The Group discloses the fair value of the investment properties in Note 14 established mainly by external
experts.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
28
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.23. Share capital
Share capital is the capital determined in the Articles of Association and registered by the Budapest-Capital
Regional Court. Share capital is the capital the Bank raised by issuing common stocks at the date the shares were
issued. The amount of share capital has not changed over the current period.
2.24. Treasury shares
Treasury shares are shares which are purchased on the stock exchange and the over-the-counter market by the
Bank and its subsidiaries and are presented in the Consolidated Statement of Financial Position at cost as a
deduction from Consolidated Shareholders’ Equity.
Gains and losses on the sale of treasury shares are credited or charged directly to shareholder’s equity.
Derecognition of treasury shares is based on the FIFO method.
2.25. Non-current assets held-for-sale and discontinued operations
The Group classifies a non-current asset (or disposal group) as held for sale if its carrying amount will be
recovered principally through a sale transaction rather than through continuing use. The Group does not account
for a non-current asset that has been temporarily taken out of use as if it had been abandoned.
The Group measures a non-current asset (or disposal group) classified as held for sale at the lower of its carrying
amount and fair value less costs to sell. When the sale is expected to occur beyond one year, the Group measures
the costs to sell at their present value. Any increase in the present value of the costs to sell that arises from the
passage of time shall be presented in profit or loss. Immediately before the initial classification of the asset (or
disposal group) as held for sale, the carrying amounts of the asset (or all the assets and liabilities in the group)
are measured in accordance with applicable IFRS.
The Group does not depreciate (or amortize) a non-current asset while it is classified as held for sale or while it
is part of a disposal group classified as held for sale. Interest and other expenses attributable to the liabilities of a
disposal group classified as held for sale shall continue to be recognized.
If the Group has classified an asset (or disposal group) as held for sale, but the criteria for that are no longer met,
the Group ceases to classify the asset (or disposal group) as held for sale. The Group measures a non-current
asset that ceases to be classified as held for sale (or ceases to be included in a disposal group classified as held
for sale) at the lower of:
- its carrying amount before the asset (or disposal group) was classified as held for sale, adjusted for any
depreciation, amortisation or revaluations that would have been recognized had the asset (or disposal group)
not been classified as held for sale, and
- its recoverable amount at the date of the subsequent decision not to sell.
The Group presents a non-current asset classified as held for sale and the assets of a disposal group classified as
held for sale separately from other assets in the Consolidated Statement of Financial Position. The liabilities of a
disposal group classified as held for sale is presented separately from other liabilities in the Consolidated
Statement of Financial Position. Those assets and liabilities shall not be offset and presented as a single amount.
The major classes of assets and liabilities classified as held for sale are separately disclosed in the Notes.
The Group presents separately any cumulative income or expense recognized in other comprehensive income
relating to a non-current asset (or disposal group) classified as held for sale. Results from discontinued
operations are reported separately in the Consolidated Statement of Profit or Loss as result from discontinued
operations.
2.26. Interest income and income similar to interest income and interest expense
Interest income and expense are recognized in profit or loss in the period to which they relate, using the effective
interest rate method.
For exposures categorized into Stage 1 and Stage 2 the interest income is recognized on a gross basis. For
exposures categorized into Stage 3 (using effective interest rate) and for POCI (using credit-adjusted effective
interest rate) the interest income is recognized on a net basis.
The time-proportional income similar to interest income of derivative financial instruments is calculated without
using the effective interest method and the positive fair value adjustment of interest rate swaps are included in
income similar to interest income.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
29
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.26. Interest income and income similar to interest income and interest expense [continued]
Interest income of loans at fair value through profit or loss is calculated based on interest fixed in the contract
and presented in “Income similar to interest income” line.
Interest from loans and deposits are accrued on a daily basis. Interest income and expense include certain
transaction costs and the amortisation of any discount or premium between the initial carrying amount of an
interest-bearing instrument and its amount at maturity calculated on an effective interest rate basis.
All interest income and expense recognized are arising from loans, placements with other banks, repo
receivables, securities at fair value through other comprehensive income, securities at amortized cost and
amounts due to banks, repo liabilities, deposits from customers, liabilities from issued securities, subordinated
bonds and loans are presented under these lines of Consolidated Financial Statements.
2.27. Fees and Commissions
Fees and commissions that are not involved in the amortized cost model are recognized in the Consolidated
Statement of Profit or Loss on an accrual basis according to IFRS 15 Revenue from contracts with customers
(see more details in Note 32). These fees are related to deposits, cash withdrawals, security trading, bank card
etc.
The Group recognizes income if performance obligations related to the certain goods or services are satisfied,
performed, and control over the asset is transferred to the customer, and it is probable that consideration payable
will probably flow to the entity. In case of those services, where the Group transfers control over the asset
continuously, income is recognised on accrual basis.
The Group provides foreign exchange trading services to its customers, the profit margin achieved on these
transactions is presented as Net profit from fees and commissions in the Consolidated Statement of Profit or
Loss.
2.28. Profit from associates
Profit from associates refers to any distribution of an entity earnings to shareholders from stocks or mutual funds
that is owned by the Group. The Group recognizes profit from associates in the Consolidated Financial
Statements when its right to receive payment is established.
2.29. Income tax
The Group considers corporate income tax as current tax according to IAS 12. The Group also considers local
business tax and the innovation contribution as income tax in Hungary.
The annual taxation charge is based on the tax payable under fiscal regulations prevailing in the country where
the company is incorporated, adjusted for deferred taxation. Deferred taxation is accounted for using the balance
sheet liability method in respect of temporary differences between the tax bases of assets and liabilities and their
carrying value for financial reporting purposes, measured at the tax rates that apply to the future period when the
asset is expected to be realized or the liability is settled.
Current tax asset or current tax liability is presented related to income tax and innovation contribution separately
in the Consolidated Statement of Financial Position.
Deferred tax assets are recognized by the Group for the amounts of income taxes that are recoverable in future
periods in respect of deductible temporary differences as well as the carryforward of unused tax losses and the
carryforward of unused tax credits.
The Group recognizes a deferred tax asset for all deductible temporary differences arising from investments in
subsidiaries, branches and associates, and interests in joint arrangements, to the extent that, and only to the extent
that, it is probable that:
- the temporary difference will reverse in the foreseeable future; and
- taxable profit will be available against which the temporary difference can be utilised.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
30
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.29. Income tax [continued]
The Group considers the availability of qualifying taxable temporary differences and the probability of other
future taxable profits to determine whether future taxable profits will be available according to IAS 12.
The Group recognizes a deferred tax liability for all taxable temporary differences associated with investments in
subsidiaries, branches and associates, and interests in joint arrangements, except to the extent that both of the
following conditions are satisfied:
- the Bank is able to control the timing of the reversal of the temporary difference, and
- it is probable that the temporary difference will not reverse in the foreseeable future.
The Group only offsets its deferred tax liabilities against deferred tax assets when:
- there is a legally enforceable right to set-off current tax liabilities against current tax assets, and
- the taxes are levied by the same taxation authorities on either
the same taxable entity or
different taxable entities which intend to settle current tax liabilities and assets on a net basis.
2.30. Banking tax
The Bank and some of its subsidiaries are obliged to pay banking tax based on Act LIX of 2006. As the
calculation is not based on the taxable profit but on the adjusted total assets as reported in the Separate Financial
Statements of the Bank and its entities for the second period preceding the current tax year, therefore, the
banking tax is considered as an other administrative expense, not as income tax.
2.31. Off-balance sheet commitments and contingent liabilities
In the ordinary course of its business, the Group enters into off-balance sheet commitments such as guarantees,
letters of credit, commitments to extend credit and transactions with financial instruments. The provision for off-
balance sheet commitments and contingent liabilities is maintained at a level adequate to absorb future cash
outflows which are probable and relate to present obligations.
In the case of commitments and contingent liabilities, the Management determines the adequacy of the loss
allowance based upon reviews of individual items, recent loss experience, current economic conditions, the risk
characteristics of the various categories of transactions and other pertinent factors. The Group recognizes
provision for off-balance sheet commitment and contingent liabilities in accordance with IAS 37 when it has a
present obligation as a result of a past event; it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation; and a reliable estimate can be made of the obligation. For
financial guarantees and loan commitments given which are under IFRS 9 the expected credit loss model is
applied when the provision is calculated (see more details in Note 2.14.). After initial recognition the Group
subsequently measures those contracts at a higher of the amount of the loss allowance or of the amount initially
recognised less the cumulative amount of income recognized in accordance with IFRS 15.
2.32. Share-based payment
The Group has applied the requirements of IFRS 2 Share-based Payment.
The Group issues equity-settled share-based payment to certain employees. Equity-settled share-based payment
is measured at fair value at the grant date. The fair value determined at the grant date of the equity-settled share-
based payment is expensed on a straight-line basis over the year, based on the Group’s estimate of shares that
will eventually vest. Share-based payment is recorded in Consolidated Statement of Profit or Loss as Personnel
expenses.
Fair value is measured by use of a binomial model. The expected life used in the model has been adjusted, based
on Management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural
considerations.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
31
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.33. Employee benefits
The Group has applied the requirement of IAS 19 Employee Benefits. These benefits are recognised as an
expense and liability undiscounted in the Consolidated Financial Statements. Liabilities are regularly
remeasured. Gains or losses due to the remeasurement are recognised in the Consolidated Statement of Profit or
Loss.
Short-term employee benefits are employee benefits (other than termination benefits) that are expected to be
settled wholly before twelve months after the end of the annual reporting period in which the employees render
the related service. These can be wages, salaries and bonuses, premium, paid annual leave and paid sick leave
and other free services (health care, reward holiday). Long-term employee benefits are mostly the jubilee reward.
Post-employment benefits are employee benefits (other than termination and short-term employee benefits) that
are payable after the completion of employment. Post-employment benefit plans are formal or informal
arrangements under which an entity provides post-employment benefits for one or more employees. Post-
employment benefit plans are classified as either defined contribution plans or defined benefit plans, depending
on the economic substance of the plan as derived from its principal terms and conditions.
Defined benefit plan is post‑employment benefit plans other than defined contribution plan. The Group's net
obligation is calculated by estimating the amount of employee's future benefit based on their servicies for the
current and prior periods. The future value of benefit is being discounted to present value.
Termination benefits are employee benefits provided in exchange for the termination of an employee’s
employment as a result of either: an entity’s decision to terminate an employee’s employment before the normal
retirement date or an employee’s decision to accept an offer of benefits in exchange for the termination of
employment. Other long-term employee benefits are all employee benefits other than short-term employee
benefits, postemployment benefits and termination benefits.
2.34. Biological assets and agricultural produce
The Group recognises a biological asset or agricultural produce according to IAS 41 only when it controls the
asset as a result of past events, it is probable that future economic benefits will flow and the fair value or the cost
can be measured reliably.
Biological assets are measured on initial recognition and at subsequent periods at fair value less estimated costs
to sell, unless fair value cannot be reliably measured.
Agricultural produce is measured at fair value less estimated costs to sell at the point of harvest.
The gain on initial recognition of biological assets at fair value less costs to sell, and changes in fair value less
costs to sell of biological assets during a period are included in profit or loss for the period in which it arises as
other operating income.
2.35. Consolidated Statement of Cash-flows
Cash flows arising from the operating, investing or financing activities are reported in the Statement of Cash-
Flows of the Group primarily on a gross basis. Net basis reporting are applied by the Group in the following
cases:
- when the cash flows reflect the activities of the customer rather than those of the Group, and
- for items in which the turnover is quick, the amounts are large, and the maturities are short.
For the purposes of reporting Consolidated Statement of Cash-flows, cash and cash equivalents include cash, due
from banks and balances with the National Banks, excluding the compulsory reserve established by the National
Banks. This line item shows balances of HUF and foreign currency cash amounts, and sight deposit from NBH
and from other banks, furthermore balances of current accounts.
Consolidated cash-flows from hedging activities are classified in the same category as the item being hedged.
The unrealized gains and losses from the translation of monetary items to the closing foreign exchange rates and
unrealized gains and losses from derivative financial instruments are presented net as operating activity
separately in the Consolidated Statement of Cash-flows for the monetary items which have been revaluated.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
32
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.36. Segment reporting
IFRS 8 Operating Segments requires operating segments to be identified on the basis of internal reports about
components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate
resources to the segments and to assess their performance.
Based on the above, the segments identified by the Group are the business and geographical segments.
The Group’s operating segments under IFRS 8 are therefore as follows: OTP Core Hungary, Russia, Ukraine,
Bulgaria, Romania, Serbia, Croatia, Montenegro, Albania, Moldova, Slovenia, Merkantil Group, Asset
Management subsidiaries, Other subsidiaries, Corporate Center.
2.37. Comparative balances
Reclassification of certain business tax, innovation contribution and other lines in the Consolidated
Statement of Profit or Loss
The Goup has reviewed prescriptions related to business tax and innovation contribution, the determination of
their tax base and their effects on payment obligation. As a result of the review the local business tax and
innovation contribution have been reclassified to income tax in line with banking industry practice. In these
Consolidated Financial Statements prepared for the year ended 31 December 2021 the Group presents these
taxes as income tax and reclassified the financial information for comparative periods.
There are other lines in the Consolidated Statement of Profit or Loss which are presented on separate lines like:
derecognition of financial assets at amortized cost, modification loss and net result on derivative instruments, in
the Consolidated Statement of Financial Position there is provision for conditional liability to be separated from
those items, results which previously contained them. While gains on securities mandatorily at fair value through
profi or loss was presented previously among Gains on securities now it is presented among Fair value
adjustment on financial instruments at fair value through profit or loss. All these reclassifications were necessary
to improve presentation.
The Group has reclassified the presentation of the detailed notes to the amended Consolidated Statement of
Financial Position and Consolidated Statement of Profit or Loss line items for comparative information in
accordance with the new values. These amendments have been marked “Reclassified” by the Group.
Amendments to the information published in the supplementary annexes concerned the following supplementary
notes:
- Note 16 Other assets
- Note 24 Other liabilities
- Note 31 Loss allowances / impairment / provisions
- Note 33 Gains and losses by transactions
- Note 35 Income tax
Except as described above these Consolidated Financial Statements are prepared in accordance with the same
accounting policies in all respects as the Consolidated Financial Statements prepared in accordance with IFRS as
adopted by the European Union for the year ended 31 December 2020.
Line item
2021
2020
Revised
presentation
Reclassification
of business tax
and innovation
contribution
Reclassification
of provisions
2020 As
previously
presented
Current income tax receivables
29,978
39,171
235
-
38,936
Other assets
276,785
266,239
(235)
-
266,474
Further assets items
27,246,621
23,030,431
-
-
23,030,431
TOTAL ASSETS
27,553,384
23,335,841
-
-
23,335,841
Current income tax payable
36,581
29,528
1,844
-
27,684
Provisions
119,799
116,467
-
116,467
-
Other liabilities
598,081
489,426
(1,844)
(116,467)
607,737
Further liability items
23,762,157
20,163,308
-
-
20,163,308
TOTAL LIABILITIES
24,516,618
20,798,729
-
-
20,798,729
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
33
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.37. Comparative balances [continued]
Line item
2021
2020 Revised
presentation
Reclassification of
business tax and
innovation
contribution
Reclassification of
amounts related to
derivative
instruments
Reclassification of
gains on securities
mandatorily at fair
value through profi
or loss
Reclassification of
amounts related to
modification losses
Reclassification of
amounts related to
derecognition of
financial assets at
amortized cost
2020 As
previously
presented
Interest income calculated using
the effective interest method
922,539
841,901
-
-
-
-
-
841,901
Income similar to interest income
194,920
135,986
-
-
-
-
-
135,986
Interest income and income
similar to interest income
1,117,459
977,887
-
-
-
-
-
977,887
Interest expense
(243,149)
(195,216)
-
-
-
-
-
(195,216)
Loss allowance on loans, placements
and on repo receivables
(27,721)
(172,520)
-
-
-
29,773
(1,978)
(200,315)
Change in the fair value attributable to changes
in the credit risk of loans mandatorily
measured at fair value through profit of loss
(16,289)
(3,262)
-
-
-
-
-
(3,262)
Further risk cost items
(3,635)
(15,093)
-
-
-
-
-
(15,093)
Risk cost total
(47,645)
(190,875)
-
-
-
29,773
(1,978)
(218,670)
NET INTEREST INCOME
AFTER RISK COST
826,665
591,796
-
-
-
29,773
(1,978)
564,001
Gain from derecognition of financial assets
at amortized cost
1,885
3,380
-
-
-
-
3,380
-
Modification loss
(13,672)
(29,773)
-
-
-
(29,773)
-
-
Net profit from fees and commissions
442,174
397,633
-
-
-
-
-
397,633
Foreign exchange gains, net
(4,075)
7,864
-
(11,340)
-
-
-
19,204
Gains on securities, net
5,560
7,465
-
-
(7,239)
-
(1,402)
16,106
Fair value adjustment on financial instruments
at fair value through profit or loss
(532)
4,843
-
-
7,239
-
-
(2,396)
Gain on derivative instruments, net
6,798
11,340
-
11,340
-
-
-
Further non-operating items
11,244
(5,459)
-
-
-
-
-
(5,459)
Net operating income
18,995
26,053
-
-
-
-
(1,402)
27,455
Other general expenses
(340,684)
(308,642)
-
-
-
-
-
(308,642)
Further administrative expenses
(406,928)
(382,483)
16,542
-
-
-
-
(399,025)
Other administrative expenses
(747,612)
(691,125)
16,542
-
-
-
-
(707,667)
Profit before income tax
528,435
297,964
16,542
-
-
-
-
281,422
Income tax expense
(72,123)
(43,918)
(16,542)
-
-
-
-
(27,376)
Net profit for the year
456,312
254,046
-
-
-
-
-
254,046
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
34
NOTE 3: SIGNIFICANT ACCOUNTING ESTIMATES AND DECISIONS IN THE
APPLICATION OF ACCOUNTING POLICIES
The presentation of financial statements in conformity with IFRS as adopted by EU requires the Management of
the Group to make judgement about estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities as at the date of the financial statements and their
reported amounts of revenues and expenses during the reporting period. The estimates and associated
assumptions are based on the expected loss and other factors that are considered to be relevant. The estimates
and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized
in the period. Actual results could differ from those estimates. Significant areas of subjective judgement include:
3.1. Loss allowances on financial instruments exposed to credit risk
The Group regularly assesses its financial instruments portfolio for loss allowance. Management determines the
adequacy of the loss allowances based upon reviews of individual loans and placements, recent loss experience,
current economic conditions, the risk characteristics of the various categories of loans and other pertinent factors.
The use of the three stage model was implemented for IFRS 9 purposes. The impairment methodology is used
to classify financial instruments in order to determine whether credit risk has significantly increased since
initial recognition and to identify the credit-impaired assets. For instruments with credit-impairment or
significant increase of credit risk lifetime expected losses are recognized (see more details in Note 37.1.)
3.2. Valuation of instruments without direct quotations
Financial instruments without direct quotations in an active market are valued using the valuation model
technique. The models are regularly reviewed and each model is calibrated for the most recent available market
data. While the models are built only on available data, their use is subject to certain assumptions and estimates
(e.g. correlations, volatilities, etc.). Changes in the model assumptions may affect the reported fair value of the
relevant financial instruments.
IFRS 13 Fair Value Measurement seeks to increase the consistency and comparability in fair value
measurements and related disclosures through a 'fair value hierarchy'. The hierarchy categorises the inputs used
in valuation techniques into three levels. The hierarchy gives the highest priority to (unadjusted) quoted prices in
active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The Group
evaluates the levelling at each reporting period on an instrument-by-instrument basis and reclassifies instruments
when necessary, based on the facts at the beginning of the reporting period. The objective of a fair value
measurement is to estimate the price at which an orderly transaction to sell the asset or to transfer the liability
would take place between market participants at the measurement date under current market conditions.
3.3. Provisions
Provision is recognized and measured for commitments to extend credit and for warranties arising from banking
activities based on IFRS 9 Financial Instruments. Provision for these instruments is recognized based on the
credit conversion factor, which shows the proportion of the undrawn credit line that will probably be drawn.
Other provisions are recognized and measured based on IAS 37 Provisions, Contingent Liabilities and
Contingent Assets. The Group is involved in a number of ongoing legal disputes. Based upon historical
experience and expert reports, the Group assesses the developments in these cases, and the likelihood and the
amount of potential financial losses which are appropriately provided for. (See Note 24.)
Other provision includes provision for litigation, provision for retirement and expected liabilities and provision
for confirmed letter of credit.
A provision is recognized by the Group when it has a present obligation as a result of a past event, it is probable
that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable
estimate can be made of the amount of the obligation.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
35
NOTE 3: SIGNIFICANT ACCOUNTING ESTIMATES AND DECISIONS IN THE
APPLICATION OF ACCOUNTING POLICIES [continued]
3.4. Impairment on goodwill
Goodwill acquired in a business combination is tested for impairment annually or more frequently when there is
an indication that the unit might be impaired, in accordance with IAS 36 “Impairment of assets”.
The Group calculates the fair value based on discounted cash-flow model. The 3 year period explicit cash-flow
model serves as a basis for the impairment test by which the Group defines the impairment need on goodwill
based on the strategic factors and financial data of its cash-generating units. In the calculation of the goodwill
impairment, also the expectations about possible variations in the amount or timing of those future cash-flows,
the time value of money, represented by the current market risk-free rate of interest and other factors are
reflected.
3.5. Business model
A business model refers to how the Group manages its financial instruments in order to generate cash flows. It is
determined at a level that reflects how groups of financial instruments are managed rather than at an instrument
level.
The financial assets held by the Group are classified into three categories depending on the business model
within the financial assets are managed.
Business model whose objective is to hold financial assets in order to collect contractual cash flows.
Some sales can be consistent with hold to collect business model and the Group assesses the nature,
frequency and significance of any sales occurring. The Group does not consider the sale frequent when
at least six months have elapsed between sales. The significant sales are those when the sales exceed
2% of the total hold to collect portfolio. Within this business model the Group manages mainly loans
and advances and long term securities and other financial assets.
Business model whose objective is achieved by both collecting contractual cash flows and selling
financial assets. Within this business model the Group only manages securities.
Business model whose objective is to achieve gains in a short term period. Within this business model
the Group manages securities and derivative financial instrument.
If cash flows are realised in a way that is different from the expectations at the date that the Bank/Group assessed
the business model, that does not give rise to a prior error in the Group’s financial statements nor does it change
the classification of the remaining financial assets held in that business model.
When, and only when the Group changes its business model for managing financial assets it reclassifies all
affected assets. Such changes are determined by the Group’s senior management as a result of external or
internal changes and must be significant to the Group’s operations and demonstrable to external parties. The
Group shall not reclassify any financial liability.
3.6. Contractual cash-flow characteristics of financial assets
Classification of a financial asset is based on the characteristics of its contractual cash flows if the financial asset
is held within a business model whose objective is to hold assets to collect contractual cash flows or within a
business model whose objective is achieved by both collecting contractual cash flows and selling financial
assets.
The Group should determine whether the asset’s contractual cash flows are solely payments of principal and
interest on the principal amount outstanding (SPPI test). Contractual cash flows that are solely payments of
principal and interest on the principal amount outstanding are consistent with a basic lending arrangement.
Contractual terms that introduce exposure to risks or volatility in the contractual cash flows that is unrelated to a
basic lending arrangement, such as exposure to changes in equity prices or commodity prices, do not give rise to
contractual cash flows that are solely payments of principal and interest on the principal amount outstanding.
The Group assesses whether contractual cash flows are solely payments of principal and interest on the principal
amount outstanding for the currency in which the financial asset is denominated.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
36
NOTE 3: SIGNIFICANT ACCOUNTING ESTIMATES AND DECISIONS IN THE
APPLICATION OF ACCOUNTING POLICIES [continued]
3.6. Contractual cash-flow characteristics of financial assets [continued]
The time value of money is the element of interest that provides consideration for only the passage of time.
However, in some cases, the time value of money element may be modified. In such cases, the Group assesses
the modification to determine whether the contractual cash flows represent solely payments of principal and
interest on the principal amount outstanding.
When assessing a modified time value of money element, the objective is to determine how different the
undiscounted contractual cash flows could be from undiscounted cash flows that would arise if the time value of
money element was not modified (the benchmark cash flows). The benchmark instrument can be an actual or a
hypothetical financial asset. If the undiscounted contractual cash flows significantly – above 2% – differ from
the undiscounted benchmark cash flows, the financial asset should be subsequently measured at fair value
through profit or loss.
NOTE 4: IMPACT OF CORONA VIRUS (COVID-19)
Risks relating to the impact of COVID-19 pandemic
The COVID-19 pandemic has had, and continues to have, a material impact on businesses around the world and
the economic environment. There are a number of factors associated with the COVID-19 pandemic and its
impact on global economies that could have a material adverse effect on (among other things) the profitability,
capital and liquidity of financial institutions such as the OTP Group.
The COVID-19 pandemic has caused disruption to the OTP Group’s customers, suppliers and staff. A number of
jurisdictions in which the OTP Group operates have implemented severe restrictions on the movement of their
respective populations, with a resultant significant impact on economic activity in those jurisdictions. These
restrictions are being determined by the governments of individual jurisdictions and impacts (including the
timing of implementation and any subsequent lifting of restrictions) may vary from jurisdiction to jurisdiction. It
remains unclear how this will evolve through 2020 and the OTP Group continues to monitor the situation
closely. However, the OTP Group's ability to conduct business may be adversely affected by disruptions to its
infrastructure, business processes and technology services, resulting from the unavailability of staff due to illness
or the failure of third parties to supply services. This may cause significant customer detriment, costs to
reimburse losses incurred by the OTP Group’s customers, and reputational damage.
Furthermore, the OTP Group relies on models to support a broad range of business and risk management
activities, including informing business decisions and strategies, measuring and limiting risk, valuing exposures,
conducting stress testing and assessing capital adequacy. Models are, by their nature, imperfect and incomplete
representations of reality because they rely on assumptions and inputs, and as such assumptions may later
potentially prove to be incorrect, this can affect the accuracy of their outputs. This may be exacerbated when
dealing with unprecedented scenarios, such as the COVID-19 pandemic, due to the lack of reliable historical
reference points and data.
Any and all such events mentioned above could have a material adverse effect on the OTP Group’s business,
financial condition, results of operations, prospects, liquidity, capital position and credit ratings, as well as on the
OTP Group’s customers, employees and suppliers.
Summary of economic policy measures made in response to the pandemic and other important
developments, as well as post-balance sheet events
In the section below, the measures and developments which have been made since the beginning of 2021, and –
in OTP Bank’s view – are relevant and have materially influenced / can materially influence the operation of the
Group members.
OTP Bank excludes any liability for the completeness and accuracy of the measures presented herein.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
37
NOTE 4: IMPACT OF CORONA VIRUS (COVID-19) [continued]
Summary of economic policy measures made in response to the pandemic and other important
developments, as well as post-balance sheet events [continued]
Hungary
Effective from 13 January 2021 the National Bank of Hungary („NBH”) extended the available amount for
the Bond Funding for Growth scheme by HUF 750 billion to HUF 1,150 billion. At the same time it decided
to increase the maximum maturity of corporate bonds that can be purchased by the central bank from 20 to
30 years. Also, the NBH’s exposure limit to a specific group was revised from HUF 50 billion to HUF 70
billion.
On 4 February 2021, the Prime Minister announced an interest-free loan programme for companies in trouble
in the wake of the pandemic. According to Government Resolution 1038/2021. (II. 5.) the programme will be
administered by the Hungarian Development Bank, and the available amount under the programme will be
HUF 100 billion. Companies can take out maximum HUF 10 million each for the purpose of covering wages
and social contributions, overhead costs, general operating expenses and inventory financing. The client
interest rate is 0%, the loan tenor can be up to 10 years, and the servicing of the loan will start after a 3 year
grace period. The scope of eligible entities was determined in agreement with the Hungarian Chamber of
Commerce and Industry.
On 1 April 2021, Moody’s rating agency upgraded the outlook on the Hungarian banking sector from
negative to stable.
On 6 April 2021, the NBH raised the available amount for the Funding for Growth Go! Scheme by HUF 500
billion to HUF 3,000 billion.
On 18 May 2021, the Hungarian Development Bank revealed that the interest-free, maximum HUF 10
million loan for micro- and small enterprises (the so-called interest-free restart quick loan) can be applied for
by companies whose revenues in 2020 plummeted by more than 30%, irrespective of the scope of activities
(certain other criteria must be met).
On 25 May 2021, the National Bank of Hungary did not touch the benchmark interest rates, but stressed that
the central bank is ready to tighten monetary conditions in a proactive manner to the extent necessary in order
to ensure price stability and to mitigate inflation risks.
On 9 June 2021, Viktor Orbán Prime Minister announced that their actual personal income tax payments (up
to the tax burden of the average wage) will be refunded to families raising kids in early-2022 provided that
the 2021 GDP growth surpasses 5.5%.
According to Government Decree No. 317/2021. (VI. 9.) released on 9 June 2021 the payment moratorium
was extended with unchanged conditions until 30 September 2021.
On 9 June 2021, Viktor Orbán Prime Minister announced that once the central bank phases out its Funding
for Growth scheme, the government will have to shoulder the financial burden of providing cheap (not higher
than 0.5% interest rate) subsidized loans to domestic micro and small enterprises, through the Széchenyi
Card programme by KAVOSZ. On 9 June László Krisán, CEO of KAVOSZ revealed the details of the
Széchenyi Card GO! programme launched on 1 July 2021.
On its 22 June 2021 meeting the Monetary Council embarked on a rate hike cycle: the base rate was
increased by 30 bps to 0.9%. Also, effective from 24 June 2021 the National Bank of Hungary raised the one-
week deposit rate to the level of the base rate.
The Monetary Council has started to transform the use of instruments having an effect at longer maturities.
Accordingly, with the exhaustion of the HUF 3,000 billion available amount, the Funding for Growth Go!
programme will be phased out. However, the central bank continues to consider the government securities
purchase programme to be crucial in its set of monetary policy instruments. The central bank will continue to
use the programme by maintaining a lasting presence in the market, taking a flexible approach to changing
the quantity and structure of weekly securities purchases, to the extent and for the time necessary.
On 2 July 2021, the National Bank of Hungary recommended in its circular that financial institutions should
abstain from charging prepayment fees in the case of full or partial prepayment of deferred interest and fee
accumulated during the term of the moratorium. The central bank also recommended free of charge loan
contract modification if borrowers voluntarily undertake higher monthly instalments in order to shorten the
remaining maturity.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
38
NOTE 4: IMPACT OF CORONA VIRUS (COVID-19) [continued]
Summary of economic policy measures made in response to the pandemic and other important
developments, as well as post-balance sheet events [continued]
Hungary [continued]
On 6 July 2021, the National Bank of Hungary announced that with the aim of boosting green mortgage
lending, it decided to launch the Green Mortgage Bond Purchase Programme and the FGS Green Home
Programme as the first steps of the implementation of the new Green Monetary Policy Toolkit Strategy:
o The strategic goal of the Green Mortgage Bond Purchase Programme is to contribute to the
development of the domestic green mortgage bond market through targeted purchases and, through
this, encourage green mortgage loan activities. The central bank will review the programme when the
HUF 200 billion purchase volume has been reached. Additionally, the central bank also decided to re-
launch the Mortgage Bond Rollover Facility for mortgage bonds without green rating.
o The National Bank of Hungary will launch the Green Home Programme in October 2021 with a total
limit of HUF 200 billion as part of the Funding for Growth Scheme (FGS). As in the previous phases
of the FGS, the NBH will provide refinancing operation to credit institutions at 0% interest, which
will be lent to residential customers at a maximum of 2.5%, fixed interest rate until the end of the
maturity period. Under the scheme, loans of up to HUF 70 million and a maximum term of 25 years
can be granted for constructions or purchases of new, highly energy-efficient residential real estates.
On 23 July 2021, the European Central Bank announced that restrictions concerning dividend payments
won’t be prolonged beyond the previously effective deadline of 30 September 2021.
A Government Decree was published on 23 July 2021 facilitating the VAT refund in the case of newly built
houses in brownfield sites.
On 27 July 2021, the National Bank of Hungary raised the base rate by 30 bps to 1.2%, then on 29 July the
one-week deposit rate was hiked to the same level, by the same magnitude.
On 30 July 2021, the results of the 2021 EU-wide stress test conducted by the European Banking Authority
were revealed. The fully loaded consolidated Common Equity Tier 1 („CET1”) ratio of OTP Bank Plc. would
change to 16.3% under the baseline scenario and to 11.2% under the adverse scenario in 2023, compared to
14.2% (fully loaded „CET1”) as at the end of 2020.
On 12 August 2021, the National Bank of Hungary announced that its management circular has been
reviewed. According to one of the amendments, the central bank extended the deadline concerning
restrictions on dividend payment and treasury share purchases until the end of 2021. Credit institutions might
be exempted from the dividend payment ban only if they meet certain strict conditions.
On 24 August 2021, the National Bank of Hungary raised the base rate by 30 bps to 1.5%. Additionally, the
central bank decided to begin gradually withdrawing the government securities purchase programme while
considering aspects of maintaining market stability. Also, the central bank increased the available amount
under the Bond Funding for Growth scheme by HUF 400 billion to HUF 1,550 billion.
Pursuant to Government Decree 536/2021. (IX. 15.) published on 15 September, the Government decided to
extend the debt repayment moratorium with the following conditions:
o The blanket moratorium was extended by an additional month, until the end of October, in an
unchanged form.
o From the beginning of November 2021 until 30 June 2022 only the eligible borrowers can participate
in the moratorium provided that they submitted a request to their banks about their intention to stay.
So, the extension beyond October is not automatic: borrowers had to submit a notification to their
bank (opt-in). Eligible retail borrowers include private individuals whose income fell compared to the
previous period, unemployed people, fostered workers, families raising children below the age of 25
or expecting a baby, and pensioners (for details see the relevant decree). Eligible companies shall
fulfil the following criteria: more than 25% decline in revenues in the 18 months period preceding the
submission of the request to participate, and if the company has not concluded a new subsidized loan
contract since 18 March 2020. During the term of the one-month extension until the end of October,
eligible clients could submit the necessary documents to their banks in order to stay in the scheme
until June 2022, so this one-month lengthening could be regarded as technical.
According to Government Decree 537/2021. (IX. 15.) published on 15 September, credit institutions shall re-
calculate the interest deferred during the period spent in the moratorium in the case of overdraft loans and
credit card exposures. The base for the re-calculation shall be the NBH’s statistical data for the average
annualized cash loan interest rate published for February 2020. The difference between the deferred interest
booked according to the original contract and the re-calculated amount shall be refunded to the borrowers by
way of crediting the borrowers’ account with the due amount.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
39
NOTE 4: IMPACT OF CORONA VIRUS (COVID-19) [continued]
Summary of economic policy measures made in response to the pandemic and other important
developments, as well as post-balance sheet events [continued]
Hungary [continued]
On 21 September 2021, the National Bank of Hungary hiked the base rate by 15 bps to 1.65%. Furthermore,
the NBH continued to gradually withdraw the government securities purchase programme.
On 4 October 2021, the National Bank of Hungary launched the FGS Green Home Programme as part of its
green monetary policy toolkit strategy.
On 5 October 2021, OTP Mortgage Bank issued green covered bonds in the amount of HUF 90 billion.
On 19 October 2021, the National Bank of Hungary increased the base rate by 15 bps to 1.8%.
On 16 November 2021, the Monetary Council of the NBH hiked the base rate by 30 bps to 2.1%. The Deputy
Governor of NBH stressed after the Monetary Council meeting that the NBH is ready to set the rate of the 1-
week central bank deposit above the level of the base rate already from 18 November. Accordingly, on 18
November the NBH raised the rate of the 1-week deposit facility to 2.5%, and the central bank accepted all
offers at the tender. Consequently, the 1-week deposit has become the effective rate for the banking sector
determining the marginal asset yields.
On its weekly one-week deposit tender on 25 November 2021 the NBH offered an interest rate of 2.9%.
On 30 November 2021, the NBH’s Monetary Council widened the interest rate corridor and also decided to
make it asymmetric. Accordingly, the lower bound of the corridor was raised by 45 bps and the upper one by
105 bps.
On 2 December 2021, the NBH hiked the rate of the 1-week central bank deposit by 20 bps to 3.1%.
On 9 December 2021, the NBH hiked the rate of the 1-week central bank deposit by 20 bps to 3.3%.
On 14 December 2021, the NBH’s Monetary Council raised the base rate by 30 bps to 2.4% and made a
decision to phase out both the Bond Funding for Growth programme and the government bond purchase
programme.
On 16 December 2021, the NBH hiked the rate of the 1-week central bank deposit by 30 bps to 3.6%.
Mr. Viktor Orbán Prime Minister announced on 22 December 2021 that the government will introduce an
interest rate cap for certain retail mortgage loans (for example whose pricing is linked to a reference rate, but
the legislation does not apply to those with longer fixation periods) for the period between 1 January and 30
June 2022. Accordingly, the affected mortgages’ reference rate cannot be higher than the relevant reference
rate as at 27 October 2021. Furthermore, banks had to inform their borrowers about the interest rate risk and
offer amendments to the contract until 31 January 2022. Details were laid down by Government Decree
782/2021 (XII. 24.) and Decree 1/2022 (I. 3.) by the Prime Minister’s Office.
On 23 December 2021, the NBH hiked the rate of the 1-week central bank deposit by 20 bps to 3.8%.
In its release published on 27 December 2021 the NBH said that from 1 January 2022 Hungarian credit
institutions can pay dividends and buy back shares with shareholder remuneration purposes again. Thus, the
NBH did not extend these restrictions in line with the similar step taken by the ECB at the end of September.
On 30 December 2021, the NBH hiked the rate of the 1-week central bank deposit by 20 bps to 4.0%.
Against the initially planned 2 pps social security contribution cut effective from July 2022, the government
reduced employers’ taxes by 4 pps already from 1 January 2022 (the 1.5% vocational training contribution
was abolished and the social contribution taxes were cut by 2.5 pps).
On 25 January 2022, the NBH hiked the base rate by 50 bps to 2.9%.
On 27 January 2022, the NBH hiked the rate of the 1-week central bank deposit by 30 bps to 4.3%.
On 15 February 2022, the CSO revealed the final GDP growth figures: accordingly, in 4Q 2021 the quarterly
expansion of 2.1% was stronger than expected, lifting the annual growth rate to 7.1% in 2021 as a whole
(seasonally and working day adjusted). Mr. Mihály Varga (Minister of Finance) announced that the
government expects 5.9% growth for 2022.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
40
NOTE 4: IMPACT OF CORONA VIRUS (COVID-19) [continued]
Summary of economic policy measures made in response to the pandemic and other important
developments, as well as post-balance sheet events [continued]
Bulgaria
On 19 February 2021, Fitch rating agency affirmed the credit rating of Bulgaria at ‘BBB’, while changing the
outlook from stable to positive.
The parliamentary elections held on 4 April 2021 were won by the GERB party led by Mr. Boyko Borisov,
the previous prime minister.
Serbia
On 12 March 2021, the credit rating of Serbia was upgraded by Moody’s from ’Ba3’ to ’Ba2’. The outlook is
stable.
At the end of April 2021 the integration process of the two Serbian banks was successfully completed, thus
the merger process came to an end from all legal, operational and organizational point of view.
Slovenia
On 2 February 2022, the Slovenian Parliament passed a law requiring banks to compensate customers for
losses arising from FX rate depreciation of more than 10% in the case of CHF mortgages disbursed between
2004 and 2010. The law came into force 15 days after its Parliamentary approval, and under the law banks
have 60 days to notify their customers about the reimbursement and the recalculated new instalments. SKB
Banka intends to file a constitutional objection against the law, and plans to submit the appeal to the local
Constitutional Court after the law’s entry into force. A provision is expected to be made in March 2022 for
the potential negative impact.
Romania
On 15 January 2021, the National Bank of Romania decided to reduce the key interest rate by 25 bps to
1.25%.
On 16 April 2021, Standard & Poor’s changed outlook on the country’s „BBB-" credit rating from negative
to stable.
On 5 October 2021, the central bank increased the reference rate by 25 bps to 1.5%.
The National Bank of Romania raised the key interest rate by 25 bps on 10 January 2022, and by further 50
bps on 10 February 2022 to 2.5%.
Ukraine
• On 4 March 2021, the Ukrainian central bank increased the base rate by 50 bps to 6.5%.
• On 15 April 2021, the Ukrainian central bank increased the base by 100 bps to 7.5%.
• On 23 July 2021 the National Bank of Ukraine increased the base rate by 50 bps to 8%.
• On 6 August 2021, Fitch Ratings changed outlook on the country’s „B" credit rating from stable to positive.
• On 9 September 2021, the National Bank of Ukraine raised the base rate by 50 bps to 8.5%.
• On 20 January 2022, the National Bank of Ukraine raised its key interest rate by 1 pp to 10%.
Russia
• On 20 January 2021, the Central Bank of Russia published its 2021-2022 road map for regulating consumer
lending, as a result loosening measures taken in 2020 to facilitate lending will be reversed through higher risk
weights being introduced.
• On 19 March 2021, the Russian central bank hiked the base rate from 4.25% to 4.5%.
• On 23 April 2021, the Russian central bank hiked the base rate from 4.5% to 5%.
• On 23 July 2021, the Central Bank of Russia hiked the base rate by 100 bps, to 6.5%.
• On 30 July 2021, the Central Bank of Russia announced that the risk weight of local currency denominated
unsecured consumer loans granted after 1 October will be increased.
• On 10 September 2021, the Russian national bank hiked the base rate by 25 bps to 6.75%.
• On 22 October 2021, the Russian central bank raised the base rate by 75 bps to 7.5%.
• On 11 February 2022, CBR hiked the base rate by 100 bps to 9.5%.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
41
NOTE 4: IMPACT OF CORONA VIRUS (COVID-19) [continued]
Interest rate cap
For the period between 1 January and 30 June 2022 the government introduced an interest rate cap for variable-
rate retail mortgage loans, and with its decision announced on 18 February, for housing purposes financial
leasing contracts, too. Accordingly, the affected exposures’ reference rate cannot be higher than the relevant
reference rate as at 27 October 2021.
The modification loss related to the interest rate cap for variable rate mortgage loans announced on 22 December
2021 was recognized in the Bank’s 2021 financial accounts. The extension of the interest rate cap to housing
purposes financial leasing contracts does not have a significant negative effect.
Moratorium, one-off effect
In Hungary the first phase of the moratorium on loan payments was effective from 19 March 2020 to 31
December 2020. At the end of 2020 the moratorium was extended in unchanged form for the period between 1
January 2021 and 30 June 2021. Furthermore, according to Government Decree No. 317/2021. (VI. 9.) released
on 9 June 2021 the payment moratorium was extended with unchanged conditions until 30 September 2021.
Pursuant to Government Decree 536/2021. (IX. 15.) published on 15 September, the Government decided to
extend the debt repayment moratorium: the blanket moratorium was extended by an additional month, until the
end of October, in an unchanged form. Furthermore, from the beginning of November 2021 until 30 June 2022
only the eligible borrowers can participate in the moratorium provided that they submitted a request to their
banks about their intention to stay.
During the term of the moratorium OTP Bank accrues the unpaid interest in its statement of recognized income,
amongst the revenues. At the same time, due to the fact that interest cannot be charged on the unpaid interest,
and the unpaid interest will be repaid later, in the course of 2020 and 2021 altogether HUF 43.3 billion after tax
loss emerged in Hungary and Serbia altogether. Within that amount there was a -HUF 1.7 billion (after tax)
negative impact booked in December 2020 in relation to the Serbian deferral scheme, as the original interest
calculation method was changed by the local regulator (originally the compound interest method was allowed by
the law in Serbia, but charging interest on deferred interest was later retroactively disallowed by the regulator).
Loan volumes under the Hungarian payment holiday followed a declining trend till the end of October 2021,
then from November the participation dropped materially due to the changes to the structure. At the end of 2021
the total household and corporate exposures remaining under the moratorium comprised HUF 245 billion at OTP
Core and Merkantil Group, which made up 4.1% of the total gross loan portfolio of those two entities.
The following table below shows the volume of loans in moratorium as at 31 December 2021 in OTP Group and
the ratio of these loans of the portfolio by countries:
Current volume in
moratorium
(million LCY)
Current volume
in moratorium
(million HUF)
Gross loans
(million HUF)
Current
participation
ratio
OTP Core
237,027
237,027
5,549,019
4.27%
Merkantil Group
8,281
8,281
440,621
1.88%
OTP banka Srbija Group
(Serbia)
276
868
1,715,347
0.05%
DSK Group (Bulgaria)
2
342
2,922,886
0.01%
SKB Banka d.d. Ljubljana
(Slovenia)
0.02
7
984,605
0.001%
OTP banka d.d. (Croatia)
55
2,722
1,811,376
0.15%
Crnogorska komercijalna
banka Group
(Montenegro)
0.08
28
366,369
0.01%
JSC “OTP Bank” (Russia)
269
1,170
753,373
0.16%
Total
250,445
14,543,596
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
42
NOTE 4: IMPACT OF CORONA VIRUS (COVID-19) [continued]
The following table below shows the volume of loans in moratorium as at 31 December 2020 in OTP Group and
the ratio of these loans of the portfolio by countries:
Current volume in
moratorium
(million LCY)
Current volume
in moratorium
(million HUF)
Gross loans
(million HUF)
Current
participation
ratio
OTP Core
1,760,231
1,760,231
4,631,974
38.00%
OTP banka d.d. (Croatia)
3,372
163,052
1,642,170
9.93%
Merkantil Group
120,379
120,379
416,987
28.87%
SKB Banka d.d. Ljubljana
(Slovenia)
150
54,835
909,439
6.03%
OTP Bank Romania S.A.
(Romania)
545
40,853
861,393
4.74%
DSK Group (Bulgaria)
60
11,190
2,634,870
0.42%
Crnogorska komercijalna
banka Group
(Montenegro)
13
4,589
362,067
1.27%
JSC “OTP Bank” (Russia)
734
2,907
597,849
0.49%
Total
2,158,036
12,056,749
Financial assets modified during the period related to moratorium in the Group for the year ended 31
December 2021 (in HUF mn)
Modification due to prolongation of deadline of covid moratoria until 30 September:
Group
Gross carrying amount before modification
1,175,230
Loss allowance before modification
(66,066)
Net amortised cost before modification
1,109,164
Modification loss due to covid moratoria
(6,620)
Net amortised cost after modification
1,102,544
Modification due to prolongation of deadline of covid moratoria until 31 October:
Group
Gross carrying amount before modification
1,166,115
Loss allowance before modification
(69,415)
Net amortised cost before modification
1,096,700
Modification loss due to covid moratoria
(2,104)
Net amortised cost after modification
1,094,596
In the case of credit card and overdraft loans interest charged during the moratoria period should be refunded to
the debtors in amount determined as a difference between the charged interest and a premoratoria personal loan
interest at 11,99%. The Bank has managed this government measure as loan agreement modification in the
financial statements.
Gross carrying amount before modification
57,892
Loss allowance before modification
(9,234)
Net amortised cost before modification
48,658
Modification loss due to covid moratoria
(1,983)
Net amortised cost after modification
46,675
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
43
NOTE 4: IMPACT OF CORONA VIRUS (COVID-19) [continued]
Financial assets modified during the period related to moratorium in the Group for the year ended 31
December 2021 (in HUF mn) [continued]
Modification due to prolongation of deadline of covid moratoria until 30 June 2022:
Group
Gross carrying amount before modification
113,728
Loss allowance before modification
(25,428)
Net amortised cost before modification
88,300
Modification loss due to covid moratoria
(2,838)
Net amortised cost after modification
85,462
Modification due to temporarily fixing of loan with variable interest rate:
On 24 December 2021 new regulation was issued on fixing of retail loan product’s interest, under that interest
rates of mortgage loans with variable interest shall be fixed at reference rates of 27 October 2021, predictably till
30 June 2022.
Group
Gross carrying amount before modification
321,323
Loss allowance before modification
(9,317)
Net amortised cost before modification
312,006
Modification loss due to covid moratoria
(3,397)
Net amortised cost after modification
308,609
Financial assets modified during the period related to moratorium in the Group for the year ended 31
December 2020 (in HUF mn):
Hungary
Serbia
Gross carrying amount before modification
1,119,943
53,080
Loss allowance before modification
(61,445)
(9,881)
Net amortized cost before modification
1,058,498
43,199
Modification loss due to covid moratorium
(26,774)
(239)
Net amortized cost after modification
1,031,724
42,960
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
44
NOTE 5: CASH, AMOUNTS DUE FROM BANKS AND BALANCES WITH THE NATIONAL
BANKS (in HUF mn)
2021
2020
Cash on hand
In HUF
87,489
113,492
In foreign currency
409,045
372,972
496,534
486,464
Amounts due from banks and balances with the National Banks
2021
2020
Within one year
In HUF
83,540
208,074
In foreign currency
1,977,069
1,675,628
2,060,609
1,883,702
Over one year
In HUF
-
-
In foreign currency
-
62,146
-
62,146
Impairment on amounts due from bank and
balances with the National Banks
(1,108)
-
Total
2,556,035
2,432,312
Compulsory reserve set by
the National Banks
1
(854,474)
(757,535)
Cash and cash equivalents
1,701,561
1,674,777
NOTE 6: PLACEMENTS WITH OTHER BANKS, NET OF LOSS ALLOWANCE FOR
PLACEMENTS (in HUF mn)
2021
2020
Within one year
In HUF
851,053
251,206
In foreign currency
523,205
729,249
1,374,258
980,455
Over one year
In HUF
162,774
136,418
In foreign currency
50,823
33,359
213,597
169,777
Loss allowance on placements
(2,994)
(1,489)
Total
1,584,861
1,148,743
1
Foreign subsidiary banks within the Group have to comply with country specific regulation of local National Banks. Each country within
the Group has its own regulation for compulsory reserve calculation and maintenance. Based on that banks are obliged to place compulsory
reserve at their National Bank in a specified percentage of their liabilities considered in compulsory reserve calculation.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
45
NOTE 6: PLACEMENTS WITH OTHER BANKS, NET OF LOSS ALLOWANCE FOR
PLACEMENTS (in HUF mn) [continued]
An analysis of the change in the loss allowance on placements with other banks is as follows:
2021
2020
Balance as at 1 January
1,489
478
Loss allowance for the period
25,133
16,476
Release of loss allowance for the period
(23,613)
(15,629)
Use of loss allowance for the period
(112)
-
Foreign currency translation difference
97
164
Closing balance
2,994
1,489
Interest conditions of placements with other banks:
2021
2020
Interest rates on placements with other banks
denominated in HUF
(1.50)% - 5.90%
0.00% - 3.84%
Interest rates on placements with other banks
denominated in foreign currency
(5.00)% - 29.00%
(17.33)% - 5.50%
2021
2020
Average interest rates on placements
with other banks (%)
1.52%
0.93%
NOTE 7: REPO RECEIVABLES (in HUF mn)
2021
2020
Within one year
In HUF
33,710
183,656
In foreign currency
27,632
7,485
61,342
191,141
Loss allowance on repo receivables
(290)
(292)
Total
61,052
190,849
An analysis of the change in the loss allowance on repo receivables is as follows:
2021
2020
Balance as at 1 January
292
62
Loss allowance for the period
1,112
362
Release of loss allowance for the period
(1,124)
(125)
Foreign currency translation difference
10
(7)
Closing balance
290
292
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
46
NOTE 7: REPO RECEIVABLES (in HUF mn) [continued]
Interest conditions of repo receivables (%):
2021
2020
Interest rates on repo receivables denominated
in HUF
3.04% - 3.20 %
(0.10)% - 0.90%
Interest rates on repo receivables denominated
in foreign currency
(0.58)% - 9.62%
(0.55)% - 4.15%
NOTE 8: FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (in HUF mn)
2021
2020
Securities held for trading
Government bonds
97,531
38,036
Equity instruments and fund units
1,173
3,740
Corporate bonds
740
-
Discounted Treasury bills
923
12,721
Mortgage bonds
101
-
Other interest bearing securities
1,347
2,075
Other non-interest bearing securities
1,695
-
103,510
56,572
Non-trading securities mandatorily at
fair value through profit or loss
Equity instruments, shares and open-ended fund units
44,894
46,063
Bonds
8,509
11,514
53,403
57,577
Debt securities designated at
fair value through profit or loss
-
2,235
Total
156,913
116,384
Positive fair value of derivative financial assets held for trading
2021
2020
Foreign exchange swaps held for trading
38,728
42,646
Interest rate swaps held for trading
59,504
36,922
Commodity swaps
51,523
9,695
CCIRS and mark-to-market CCIRS
held -for trading
1
11,758
7,359
Foreign exchange forward contracts held for trading
10,790
8,730
Held-for-trading option contracts
1,285
4,268
Held-for-trading forward security agreement
-
22
Other derivative transactions held for trading
2
10,896
7,981
Total
184,484
117,623
Total
341,397
234,007
1
CCIRS: Cross Currency Interest Rate Swaps (See Note 2.6.3.)
2
Other category includes: equity swaps, option and index futures.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
47
NOTE 8: FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (in HUF mn)
[continued]
An analysis of securities held for trading portfolio by currency (%):
2021
2020
Denominated in HUF
30.46%
19.75%
Denominated in foreign currency
69.54%
80.25%
Total
100.0%
100.0%
An analysis of government bond portfolio by currency (%):
2021
2020
Denominated in HUF
28.31%
16.92%
Denominated in foreign currency
71.69%
83.08%
Total
100.00%
100.00%
Interest conditions of held for trading securities (%):
2021
2020
Interest rates on securities held for trading
denominated in HUF
0.00% - 6.75%
0.50% - 7.00%
Interest rates on securities held for trading
denominated in foreign currency
0.00% - 9.57%
0.38% - 6.38%
Interest conditions and the remaining maturities of securities held for trading can be analysed as follows:
2021
2020
Within one year
With variable interest
111
78
With fixed interest
44,011
17,147
44,122
17,225
Over one year
With variable interest
1,544
1,370
With fixed interest
54,976
34,237
56,520
35,607
Non-interest bearing securities
2,868
3,740
Total
103,510
56,572
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
48
NOTE 8: FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (in HUF mn)
[continued]
Interest conditions and the remaining maturities of non-trading securities mandatorily measured at fair value
through profit or loss are as follows:
2021
2020
Over one year
With variable interest
-
-
With fixed interest
-
5,492
-
5,492
Non-interest bearing securities
53,403
52,085
Total
53,403
57,577
2021
2020
Profit from associates from shares measured
at fair value through profit or loss
3,893
75
An analysis of non-trading securities mandatorily measured at fair value through profit or loss portfolio by
currency (%):
2021
2020
Denominated in HUF
57.11%
57.10%
Denominated in foreign currency
42.89%
42.90%
Total
100.00%
100.0%
2021
2020
Interest rates on non-trading securities mandatorily
measured at fair value through profit or loss
0.00% - 0.00%
0.00% - 2.50%
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
49
NOTE 9: SECURITIES AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (in
HUF mn)
2021
2020
Securities at fair value through other
comprehensive income
Government bonds
1,765,172
1,855,134
Corporate bonds
88,519
81,620
Listed securities:
In HUF
2,896
2,968
In foreign currency
51,882
52,633
54,778
55,601
Non-listed securities:
In HUF
15,487
16,782
In foreign currency
18,254
9,237
33,741
26,019
Mortgage bonds
63,072
88,272
Discounted Treasury bills
96,625
76,358
Interest bearing treasury bills
63,115
-
Securities issued by the National Bank of Hungary
109,774
-
Other securities
3,257
-
Total
2,189,534
2,101,384
2021
2020
Non-trading equity instruments to be measured
at fair value through other comprehensive income
Listed securities:
In HUF
-
-
In foreign currency
8,416
4,931
8,416
4,931
Non-listed securities:
In HUF
403
539
In foreign currency
26,157
29,855
26,560
30,394
34,976
35,325
Total
2,224,510
2,136,709
An analysis of securities at fair value through other comprehensive income by currency (%):
2021
2020
Denominated in HUF
32.74%
36.62%
Denominated in foreign currency
67.26%
63.38%
Total
100.00%
100.0%
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
50
NOTE 9: SECURITIES AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
(in HUF mn) [continued]
Detailed information of the non-trading equity instruments to be measured at fair value through other
comprehensive income:
2021
2020
Strategic investments closely related to banking actitvity
Fair value
29,320
27,502
Dividend income from instruments held
at the reporting date
438
180
Other strategic investments
Fair value
5,656
7,823
Dividend income from instruments held
at the reporting date
29
43
Total
Total fair values
34,976
35,325
Dividend income from instruments held
at the reporting date
467
223
During the year ended 31 December 2021 the Group sold HUF 65 million equity instruments designated to
measure at fair value through other comprehensive income while during the year ended 31 December 2020 there
wasn’t any sale transaction.
An analysis of government bonds by currency (%):
2021
2020
Denominated in HUF
24.29%
35.83%
Denominated in foreign currency
75.71%
64.17%
Total
100.00%
100.0%
Interest conditions of the security portfolio at fair value through other comprehensive income are as follows (%):
2021
2020
Interest rates on securities at fair value through
other comprehensive income denominated in HUF
1.25% - 7.00%
0.50% - 7.50%
Interest rates on securities at fair value through
other comprehensive income denominated
in foreign currency
0.00% - 17.25%
0.00% - 18.00%
2021
2020
Average interest rates securities at fair value through
other comprehensive income denominated in HUF (%)
2.00%
1.63%
Average interest rates on securities at fair value
through other comprehensive income denominated
in foreign currency (%)
2.51%
2.31%
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
51
NOTE 9: SECURITIES AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
(in HUF mn) [continued]
Interest conditions and the remaining maturities of securities at fair value through other comprehensive income
can be analysed as follows:
2021
2020
Within one year
With variable interest
1,091
4,780
With fixed interest
522,939
346,928
524,030
351,708
Over one year
With variable interest
51,211
62,068
With fixed interest
1,614,293
1,687,608
1,665,504
1,749,676
Non-interest bearing securities
34,976
35,325
Total
2,224,510
2,136,709
Certain securities are hedged against interest rate risk. See Note 37.4.
NOTE 10: SECURITIES AT AMORTIZED COST (in HUF mn)
2021
2020
Government bonds
3,651,508
2,545,476
Corporate bonds
172,526
74,632
Discounted Treasury bills
15,705
10,469
Mortgage bonds
24,356
-
Other securities
36,353
-
3,900,448
2,630,577
Loss allowance on securities at amortized cost
(9,113)
(5,657)
Total
3,891,335
2,624,920
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
52
NOTE 10: SECURITIES AT AMORTIZED COST (in HUF mn) [continued]
Interest conditions and the remaining maturities of securities at amortized cost can be analysed as follows:
2021
2020
Within one year
With variable interest
8,101
-
With fixed interest
480,296
156,532
488,397
156,532
Over one year
With variable interest
5,122
-
With fixed interest
3,406,929
2,474,045
3,412,051
2,474,045
Total
3,900,448
2,630,577
An analysis of securities at amortized cost by currency (%):
2021
2020
Denominated in HUF
75.42%
86.86%
Denominated in foreign currency
24.58%
13.14%
Total
100.00%
100.00%
Interest conditions of securities at amortized cost (%):
2021
2020
Interest rates of securities at amortized cost
with variable interest
1.20% - 2.08%
-
Interest rates of securities at amortized cost
with fixed interest
0.00% - 9.00%
0.50% - 7.00%
2021
2020
Average interest rates on securities
at amortized cost (%)
2.46%
3.07%
An analysis of the change in the loss allowance on securities at amortized cost is as follows:
2021
2020
Balance as at 1 January
5,657
2,739
Opening change due to modification
1,281
-
Balance as at 1 January after modification
6,938
2,739
Loss allowance for the period
6,634
6,863
Release of loss allowance
(3,621)
(4,061)
Use of loss allowance
(992)
12
Foreign currency translation difference
154
104
Closing balance
9,113
5,657
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
53
NOTE 11: LOANS AT AMORTIZED COST AND AT FAIR VALUE (in HUF mn)
Loans at amortized cost
2021
2020
Within one year
In HUF
1,243,635
1,154,223
In foreign currency
2,901,682
2,445,006
4,145,317
3,599,229
Over one year
In HUF
2,359,485
2,002,814
In foreign currency
7,840,375
6,902,342
10,199,860
8,905,156
14,345,177
12,504,385
Loss allowance on loans
(851,994)
(829,543)
Total
13,493,183
11,674,842
An analysis of the gross loan portfolio at amortized cost by currency (%):
2021
2020
In HUF
25.12%
25.25%
In foreign currency
74.88%
74.75%
Total
100.00%
100.0%
Interest rates of the loan portfolio at amortized cost are as follows:
2021
2020
Within one year
In HUF
0.00% - 52.00%
1
0.00% - 47.70%
1
In foreign currency
(0.59)% - 90.00%
2
(0.50)% - 90.00%
2
Over one year
In HUF
0.00% - 38.70%
1
0.00% - 37.45%
1
In foreign currency
(0.59)% - 90.00%
2
(0.50)% - 60.00%
2
2021
2020
Average interest rates on loans at amortized cost
denominated in HUF (%)
6.49%
6.00%
Average interest rates on loans at amortized cost
denominated in foreign currency (%)
4.85%
5.53%
The amount of those loans which were written-off in the current year but they are still subject to enforcement
activity to be collected is still going on were HUF 104,940 million and HUF 94,197 million as at 31 December
2021 and 2020 respectively.
1
The highest interest rate relates to HUF loans within one year is overdraft loan, over one year is car loan.
2
The highest interest rate relates to loans in foreign currency regarding POS services in Russia.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
54
NOTE 11: LOANS AT AMORTIZED COST AND AT FAIR VALUE (in HUF mn) [continued]
An analysis of the change in the loss allowance on loans is as follows:
2021
2020
Balance as at 1 January
829,543
684,319
Opening change due to modification
(1,281)
-
Balance as at 1 January after modification
828,262
684,319
Loss allowance for the period
546,284
650,165
Release of loss allowance
(464,888)
(382,800)
Loss allowance in the current period
81,396
267,365
from this: effect of change in parameters
used for loss allowance calculation
(60,531)
126,002
Use of loss allowance
(66,784)
(100,711)
Partial write-off
1
(17,936)
(12,503)
Unwinding
345
Foreign currency translation difference
26,711
(8,927)
Closing balance
851,994
829,543
Movement in loss allowance on loans and placements is summarized as below:
2021
2020
Loss allowance on placements and
gains from write-off and sale of placements
1,664
851
Loss allowance on loans and gains from write-off
and sale of loans
34,776
162,733
Total
2
36,440
163,584
Loans mandatorily at fair value through profit or loss
2021
2020
Within one year
In HUF
61,537
48,770
In foreign currency
-
-
61,537
48,770
Over one year
In HUF
1,006,293
750,211
In foreign currency
281
3,624
1,006,574
753,835
Total
1,068,111
802,605
1
See details in Note 2.11.
2
See details in Note 31.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
55
NOTE 11: LOANS AT AMORTIZED COST AND AT FAIR VALUE (in HUF mn) [continued]
An analysis of the loan portfolio mandatorily at fair value through profit or loss by currency (%):
2021
2020
In HUF
99.17%
99.55%
In foreign currency
0.83%
0.45%
Total
100.00%
100.00%
Interest rates of the loan portfolio mandatorily at fair value through profit or loss are as follows (%):
2021
2020
Interest rates on loans denominated
in HUF
1.21% - 10.83%
0.77% - 12.83%
Interest rates on loans denominated
in foreign currency
4.00% - 4.00%
2.50% - 7.89%
2021
2020
Average interest rates on loan portfolio at fair value through
profit or loss denominated in HUF (%)
4.17%
1.32%
Average interest rates on loan portfolio at fair value through
profit or loss denominated in foreign currency (%)
1.82%
0.00%
NOTE 12: ASSOCIATES AND OTHER INVESTMENTS (in HUF mn)
2021
2020
Investments
Investments in associates (non-listed)
42,409
14,149
Other investments (non-listed)
37,327
44,158
79,736
58,307
Impairment on investments
(12,514)
(5,864)
Total
67,222
52,443
An analysis of the change in the impairment on investments is as follows:
2021
2020
Balance as at 1 January
5,864
8,816
Impairment for the period
7,266
43
Release of impairment for the period
(626)
(424)
Modification due to merge
28
-
Reclassification to securities at fair value
through other comprehensive income
-
(2,654)
Foreign currency translation difference
(18)
83
Closing balance
12,514
5,864
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
56
NOTE 13: PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS (in HUF mn)
For the year ended 31 December 2021
Cost
Intangible
assets
Goodwill
Property
Machinery
and office
equipment
Vehicle
Construction
in progress
Tangible
assets subject
to operating
lease
Total
Balance as at 1 January
364,495
101,393
285,506
212,105
23,893
23,403
28,926
1,039,721
Additions
90,887
-
28,684
37,266
19,135
111,316
13,427
300,715
Foreign currency
translation differences
4,656
4,247
3,609
3,237
163
136
422
16,470
Disposals
(52,035)
(12,877)
(8,877)
(1,939)
(67,198)
(11,942)
(154,868)
Closing balance
408,003
105,640
304,922
243,731
41,252
67,657
30,833
1,202,038
Depreciation and amortization
Intangible
assets
Property
Machinery
and office
equipment
Vehicle
Tangible assets
subject to
operating lease
Total
Balance as at 1 January
224,180
77,753
155,292
6,241
10,279
473,745
Charge for the period
44,973
9,219
22,753
1,986
4,212
83,143
Foreign currency
translation differences
3,263
1,266
2,394
102
262
7,287
Disposals
(10,109)
(4,531)
(7,301)
(1,141)
(5,260)
(28,342)
Closing balance
262,307
83,707
173,138
7,188
9,493
535,833
Impairment
Intangible
assets
Property
Machinery
and office
equipment
Tangible assets
subject to
operating lease
Total
Balance as at 1 January
2,704
1,122
42
338
4,206
Impairment for the period
2,967
-
9
2,976
Release of impairment for the period
(204)
(204)
Foreign currency
translation differences
5
55
6
(1)
65
Use of impairment
(4)
(591)
(5)
(5)
(605)
Closing balance
2,705
3,553
43
137
6,438
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
57
NOTE 13: PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS (in HUF mn) [continued]
For the year ended 31 December 2021 [continued]
Intangible
assets
Goodwill
Property
Machinery
and office
equipment
Vehicle
Construction
in progress
Tangible
assets subject
to operating
lease
Total
Carrying value
Balance as at 1 January
137,611
101,393
206,631
56,771
17,652
23,403
18,309
561,770
Closing balance
142,991
105,640
217,662
70,550
34,064
67,657
21,203
659,767
Fair values
-
-
247,754
70,258
34,063
-
21,339
373,414
Carrying amount of the temporarily idle properties was HUF 3,057 million and HUF 4,211 million as at 31 December 2021 and 2020 respectively.
There were no restrictions on title and properties, plants or equipment pledged as security for liabilities as at 31 December 2021 and 2020.
As at 31 December 2021 and 2020 the amount of contractual commitments for the acquisition of tangible and intangible assets was HUF 1,595 million and HUF 200 million,
respectively.
Impairment for the propertied in the currenct period was needed as a result of the valuation performed by using the comparative value method (market analogy method) with
direct comparison to the market price of other similar properties. Actual market transactions were used based on the 6-month period prior to the valuation date where the
market price of the analogous property is adjusted by an expert coefficient for market adaptation (“ECMA”). Usually this range is from -25% to +25%, and reflects the
availability of sufficient market information for similar items but at these properties ECMA exceeded this range where the circumstances were exceptional although by
decision of the appraiser it was used only for unique properties with characteristics similar to the appraised ones, for which no sufficient market analogues are available. The
price was adjusted by coefficients reflecting the area, location, size and structure of the property, as well as a weighing factor reflecting the weight of the selected market
analogies in the determined fair value.
An analysis of the intangible assets for the year ended 31 December 2021 is as follows:
Intangible assets
Self-
developed
Purchased
Total
Gross values
12,700
395,303
408,003
Accumulated amortization
(5,017)
(257,290)
(262,307)
Impairment
-
(2,705)
(2,705)
Carrying value
7,683
135,308
142,991
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
58
NOTE 13: PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS (in HUF mn) [continued]
For the year ended 31 December 2021 [continued]
Carrying value of the investment and goodwill allocated to the appropriate cash generating units
Subsidiaries
Carrying amounts
of the subsidiary in
HUF million
Goodwill
values in
HUF million
Goodwill values in
million functional
currency
Type of
functional
currency
Consolidated
ownership
interest
With ownership
adjusted company
value in
HUF million
Applied long
term grow rate
Applied long
term discount
rate
DSK Bank EAD
(Bulgaria)
280,692
43,138
28,541
HUF
99.91%
832,445
3.00%
7.90%
77
BGN
OTP banka d.d.
(Croatia)
205,349
21,421
58
EUR
100.00%
361,995
2.69%
8.83%
JSC “OTP Bank”
(Russia)
124,411
40,866
9,395
RUB
97.92%
187,552
1.89%
15.44%
POK-DSK Rodina a.d.
(Bulgaria)
1,680
11
11
HUF
99.85%
15,299
3.00%
7.90%
George Consult
(Croatia)
225
204
4
HRK
76.00%
171
2.69%
8.83%
612,357
105,640
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
59
NOTE 13: PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS (in HUF mn) [continued]
For the year ended 31 December 2021 [continued]
The Bank decided that the recoverable amount of goodwill is determined based on fair value less cost of
disposal. In the fair value hierarchy goodwill is categorized into level 3. When the Bank prepares goodwill
impairment tests of the subsidiaries, the two methods which are used based on discounted cash-flow calculation
that shows the same result; however they represent different economical logics.
Based on the internal regulation of the Bank as at 31 December 2021 impairment test was prepared where a
three-year cash-flow model was applied with an explicit period between 2022-2024. The basis for the estimation
was the financial preliminary estimations for December 2021, and based on the prepared medium-term (2022-
2024) forecasts. When the Bank prepared the calculations for the period 2022-2024, it considered the actual
worldwide economic situations, the expected economic growth for the following years, their possible effects on
the financial sector, the plans for growing which result from these, and the expected changes of the mentioned
factors.
Present value calculation with the FCF method
The Bank calculated the expected cash-flow for the given period based on the expected after tax profit of the
companies. The calculation is highly sensitive to the level of discount rate and growth rate used. As discount
factor the Bank uses a zero coupon yield curve derived by the Headquarter Asse-Liability Management
department. This zero coupon curve is estimated for each related countries, based on the countries’ issued bonds
and segmented by the issuances’ currencies.
The Bank calculated risk premiums on the basis of information from the country risk premiums that are
published by Aswath Damodaran – New York STERN University, according to the Bank’s assumption the risk
free interest rate includes the country-dependent risks in an implicit way.
When the subsidiary owns subordinated debt, the discount rate is calculated as a weighted average of the
expected return on equity presented previously and the subordinated debt’s interest rate. At the end of the
calculation, the value of subordinated debt is being subtracted from the valuations’ result.
The growth rate in the explicit period is the growth rate of the profit after tax adjusted by the interest rate of the
cash and subordinated loans. The supposed growth rates for the periods of residual values reflect the long-term
economic expectations in case of every country.
The values of the subsidiaries in the FCF method were then calculated as the sum of the discounted cash-flows
of the explicit period, the present value of the terminal values and the initial free capital assuming an effective
capital structure.
Summary of the impairment test for the year ended 31 December 2021
Based on the valuations of the subsidiaries as at 31 December 2021 no goodwill impairment was needed to be
recorded by the Group.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
60
NOTE 13: PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS (in HUF mn) [continued]
For the year ended 31 December 2020
Cost
Intangible
assets
Goodwill
Property
Machinery
and office
equipment
Vehicle
Construction
in progress
Tangible
assets subject
to operating
lease
Total
Balance as at 1 January
320,749
111,687
279,538
192,369
23,079
22,717
31,799
981,938
Additions
92,313
1,413
7,342
27,533
2,208
36,835
6,586
174,230
Foreign currency
translation differences
7,769
(5,319)
12,987
4,094
215
538
2,602
22,886
Disposals
(56,183)
(6,388)
(14,361)
(11,737)
(1,609)
(36,687)
(12,061)
(139,026)
Reclassified as held-for-sale
(153)
-
-
(154)
-
-
-
(307)
Closing balance
364,495
101,393
285,506
212,105
23,893
23,403
28,926
1,039,721
Depreciation and amortization
Intangible
assets
Property
Machinery
and office
equipment
Vehicle
Tangible assets
subject to
operating lease
Total
Balance as at 1 January
183,026
71,085
139,813
5,508
10,889
410,321
Charge for the period
44,115
8,981
22,195
1,570
5,064
81,925
Foreign currency
translation differences
3,875
2,540
2,681
150
1,113
10,359
Disposals
(6,733)
(4,853)
(9,302)
(987)
(6,787)
(28,662)
Reclassified as held-for-sale
(103)
-
(95)
-
-
(198)
Closing balance
224,180
77,753
155,292
6,241
10,279
473,745
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
61
NOTE 13: PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS (in HUF mn) [continued]
For the year ended 31 December 2020 [continued]
Impairment
Intangible
assets
Goodwill
Property
Machinery
and office
equipment
Tangible
assets subject
to operating
lease
Total
Balance as at 1 January
803
6,388
-
1,337
440
8,968
Impairment for the period
2,328
-
1,601
-
-
3,929
Release of impairment for the period
-
-
-
-
(137)
(137)
Foreign currency
translation differences
85
-
129
5
35
254
Use of impairment
(512)
(6,388)
(608)
(1,300)
-
(8,808)
Closing balance
2,704
-
1,122
42
338
4,206
Intangible
assets
Goodwill
Property
Machinery
and office
equipment
Vehicle
Construction
in progress
Tangible
assets subject
to operating
lease
Total
Carrying value
Balance as at 1 January
136,920
105,299
208,453
51,219
17,571
22,717
20,470
562,649
Closing balance
137,611
101,393
206,631
56,771
17,652
23,403
18,309
561,770
Fair values
-
-
217,161
57,614
16,962
-
18,309
310,046
An analysis of the intangible assets for the year ended 31 December 2020 is as follows:
Intangible assets
Self-
developed
Purchased
Total
Gross values
8,117
356,378
364,495
Accumulated amortization
(3,675)
(220,505)
(224,180)
Impairment
-
(2,704)
(2,704)
Carrying value
4,442
133,169
137,611
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
62
NOTE 13: PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS (in HUF mn) [continued]
For the year ended 31 December 2020 [continued]
Carrying value of the investment and goodwill allocated to the appropriate cash generating units
Subsidiaries
Carrying amounts
of the subsidiary in
HUF million
Goodwill
values in
HUF million
Goodwill values in
million functional
currency
Type of
functional
currency
Consolidated
ownership
interest
With ownership
adjusted company
value in
HUF million
Applied long
term grow rate
Applied long
term discount
rate
DSK Bank EAD
(Bulgaria)
280,692
42,984
28,541
HUF
99.91%
717,318
3.00%
8.13%
77
BGN
OTP banka d.d.
(Croatia)
205,349
21,196
58
EUR
100.00%
336,403
2.69%
9.37%
JSC “OTP Bank”
(Russia)
124,410
37,202
9,395
RUB
97.91%
173,315
1.89%
13.26%
POK-DSK Rodina a.d.
(Bulgaria)
943
11
11
HUF
99.75%
941
3.00%
8.13%
611,394
101,393
Summary of the impairment test for the year ended 31 December 2020
Based on the valuations of the subsidiaries as at 31 December 2020 no goodwill impairment was needed to be recorded by the Group.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
63
NOTE 14: INVESTMENT PROPERTIES (in HUF mn)
An analysis of the change in gross values of investment properties is as follows:
Gross values
2021
2020
Balance as at 1 January
54,154
53,906
Increase due to transfer from inventories
or owner-occupied properties
3,425
6,896
Increase from purchase
134
574
Increase due to transfer from held-for-sale properties
-
86
Transfer to held-for-sale properties
(66)
(118)
Transfer to inventories or owner-occupied properties
(2,858)
(936)
Disposal due to sale
(14,993)
(8,725)
Foreign currency translation difference
445
2,471
Closing balance
40,241
54,154
The applied depreciation and amortization rates were as follows:
2021
2020
Depreciation and amortization rates
1.00% - 20.00%
1.00% - 20.00%
An analysis of the movement in the depreciation and amortization on investment properties is as follows:
Depreciation and amortization
2021
2020
Balance as at 1 January
11,383
8,352
Additions due to transfer from inventories
or owner-occupied properties
1,296
1,657
Charge for the period
1,113
908
Transfer to inventories or owner-occupied properties
(236)
(10)
Disposal due to sale
(4,577)
(322)
Foreign currency translation difference
132
798
Closing balance
9,111
11,383
An analysis of the movement in the impairment on investment properties is as follows:
Impairment
2021
2020
Balance as at 1 January
4,170
3,994
Impairment for the period
54
178
Release of impairment for the period
(297)
(919)
Use of impairment
(2,726)
-
Additions due to transfer from inventories
or owner-occupied properties
-
587
Foreign currency translation difference
47
330
Closing balance
1,248
4,170
Carrying values
2021
2020
Balance as at 1 January
38,601
41,560
Closing balance
29,882
38,601
Fair values
34,257
37,842
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
64
NOTE 14: INVESTMENT PROPERTIES (in HUF mn) [continued]
The Group chose the cost model for measuring investment properties but estimates and reviews the fair value of
the investment properties by external experts, these investment properties would have been presented on level 3
in the fair value hierarchy if the Group didn’t apply cost method for these recognition.
Income and expenses
2021
2020
Rental income
2,621
2,520
Direct operating expenses of investment properties
– income generating
318
455
Direct operating expenses of investment properties
– non income generating
14
8
NOTE 15: DERIVATIVE FINANCIAL ASSETS DESIGNATED AS HEDGE ACCOUNTING (in
HUF mn)
Positive fair value of derivative financial assets designated as fair value hedge
2021
2020
CCIRS and mark-to-market CCIRS designated
as fair value hedge
5,471
6,179
Interest rate swaps designated as fair value hedge
13,286
641
Total
18,757
6,820
NOTE 16: OTHER ASSETS
1
(in HUF mn)
2021
2020
Reclassified
Other financial assets
Receivables from card operations
27,820
24,816
Prepayments and accrued income on other financial assets
27,778
23,521
Trade receivables
24,951
17,039
Receivables from investment services
15,077
10,716
Other advances
21,043
26,806
Stock exchange deals
12,255
10,632
Giro clearing accounts
2,635
2,441
Receivables due from pension funds and investment funds
3,250
8,323
Receivables from leasing activities
363
431
Advances for securities and investments
525
774
Accrued day one gain of loans
provided at below-market interest
-
14,465
Other financial assets
17,019
19,057
Loss allowance on other financial assets
(16,800)
(18,459)
Total
135,916
140,562
1
Other assets are expected to be recovered or settled no more than twelve months after the reporting period.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
65
NOTE 16: OTHER ASSETS
1
(in HUF mn) [continued]
Other non-financial assets
2021
2020
Reclassified
Prepayments and accrued income on other non-financial assets
46,418
19,307
Receivables, subsidies from the State, Government
15,800
11,767
Settlement and suspense accounts
14,974
16,355
Biological assets and agricultural produce
5,193
-
Other non-financial assets
15,495
11,513
Impairment on other non-financial assets
(4,413)
(4,699)
Total
93,467
54,243
Other assets (under IAS 2)
2021
2020
Reclassified
Inventories
43,843
66,748
Repossessed real estate
6,354
9,706
Repossessed other non-financial assets
1,069
2,034
Write-down of the assets measured under IAS 2
(3,864)
(7,054)
Total
47,402
71,434
Total other assets
276,785
266,239
An analysis of the movement in the loss allowance on other financial assets is as follows:
2021
2020
Balance as at 1 January
18,459
14,617
Loss allowance for the period
8,569
10,057
Release of allowance for the period
(6,903)
(4,755)
Use of loss allowance
(3,767)
(1,607)
Foreign currency translation difference
442
147
Closing balance
16,800
18,459
An analysis of the movement in the impairment on other non-financial assets is as follows:
2021
2020
Reclassified
Balance as at 1 January
4,699
11,871
Transfer due to separation of assets under IAS 2
-
(7,419)
Impairment for the period
949
1,358
Release of impairment for the period
(653)
(522)
Use of impairment
(751)
(516)
Foreign currency translation difference
169
(73)
Closing balance
4,413
4,699
1
Other assets are expected to be recovered or settled no more than twelve months after the reporting period.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
66
NOTE 17: AMOUNTS DUE TO BANKS, THE NATIONAL GOVERNMENTS, DEPOSITS FROM
THE NATIONAL BANKS AND OTHER BANKS (in HUF mn)
2021
2020
Within one year
In HUF
277,397
132,182
In foreign currency
225,398
117,672
502,795
249,854
Over one year
In HUF
900,948
741,772
In foreign currency
163,605
193,689
1,064,553
935,461
Total
1,567,348
1,185,315
Interest rates on amounts due to banks, the National Governments, deposits from the National Banks and other
banks are as follows:
2021
2020
Within one year
In HUF
(2.04)% - 4.66%
0.00% - 20.00%
In foreign currency
(2.40)% - 17.60%
1
(0.56)% - 5.00%
Over one year
In HUF
(2.40)% - 4.66%
(2.40)% - 2.73%
In foreign currency
(2.40)% - 12.00%
2
(2,40)% - 17.60%
2
2021
2020
Average interest rates on amounts due to banks,
the National Governments, deposits from the
National Banks and other banks denominated in HUF
1.20%
1.00%
Average interest rates on amounts due to banks,
the National Governments, deposits from the
National Banks and other banks denominated in
in foreign currency
1.49%
2.11%
NOTE 18: REPO LIABILITIES (in HUF mn)
2021
2020
Within one year
In HUF
49,726
-
In foreign currency
29,321
8,379
79,047
8,379
Over one year
In HUF
-
-
In foreign currency
-
109,612
-
109,612
Total
79,047
117,991
1
The highest interest rate for due to banks relate to loans taken from EBRD in Ukraine.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
67
NOTE 18: REPO LIABILITIES (in HUF mn) [continued]
Interest rates on repo liabilities are as follows:
2021
2020
Interest rates on repo liabilities
denominated in HUF (%)
0.00% - 2.80%
-
Interest rates on repo liabilities
denominated in foreign currency (%)
(0.95)% - 0.00%
0.00% - 3.85%
NOTE 19: FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR
LOSS (in HUF mn)
2021
2020
Within one year
In HUF
1,784
2,010
In foreign currency
-
-
1,784
2,010
Over one year
In HUF
39,400
29,886
In foreign currency
-
2,235
39,400
32,121
Total
41,184
34,131
Contractual amount outstanding
21,479
23,332
Interest conditions of financial liabilities designated at fair value through profit or loss can be analysed as
follows:
2021
2020
Interest rates on financial liabilities designated at
fair value denominated in HUF within one year
0.46% - 2.46%
0.51% - 2.50%
Interest rates on financial liabilities designated at
fair value denominated in HUF over one year
0.01% - 2.90%
0.00% - 2.50%
Certain MFB (“Hungarian Development Bank”) refinanced loan receivables are categorised as fair value through
profit or loss based on SPPI test. Related refinancing loans at the liability side are categorised as fair value
through profit or loss based on fair value option due to accounting mismatch as provided by the IFRS 9 standard.
The Group controls capital funds where it does not hold the 100% of the owner rights. The related non-
controlling interest is treated as financial liability designated at fair value through profit or loss as it is not
considered equity under IAS 32.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
68
NOTE 20: DEPOSITS FROM CUSTOMERS (in HUF mn)
2021
2020
Within one year
In HUF
7,829,595
6,383,882
In foreign currency
12,758,360
10,990,543
20,587,955
17,374,425
Over one year
In HUF
293,606
327,165
In foreign currency
187,083
189,273
480,689
516,438
Total
21,068,644
17,890,863
Interest rates on deposits from customers are as follows:
2021
2020
Within one year
In HUF
(2.48)% - 7.96%
(4,58)% - 7.96%
In foreign currency
(1.01)% - 17.20%
1
(0.58)% - 16.50%
Over one year
In HUF
0.01% - 3.00%
0.01% - 3.00%
In foreign currency
0.00% - 8.90%
0.00% - 7.75%
2021
2020
Average interest rates on deposits from customers
denominated in HUF
0.18%
0.10%
Average interest rates on deposits from customers
denominated in foreign currency
0.34%
0.49%
An analysis of deposits from customers by type is as follows:
2021
2020
Retail deposits
11,982,784
56.88%
10,695,792
59.78%
Corporate deposits
8,093,206
38.41%
6,298,143
35.20%
Municipality deposits
992,654
4.71%
896,928
5.01%
Total
21,068,644
100.00%
17,890,863
100.00%
1
The highest interest rate regarding foreign currency deposits for the current year relate to treasury deposit in Turkish lira in Hungary, in the
previous year relate to individually agreed deposits in Ukraine.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
69
NOTE 21: LIABILITIES FROM ISSUED SECURITIES (in HUF mn)
2021
2020
With original maturity
Within one year
In HUF
9,332
130,676
In foreign currency
13
1,366
9,345
132,042
Over one year
In HUF
426,929
332,125
In foreign currency
51
46
426,980
332,171
Total
436,325
464,213
Interest rates on liabilities from issued securities are as follows:
2021
2020
Issued securities denominated in HUF
0.60% - 4.26%
0.00% - 2.50%
Issued securities denominated in foreign currency
0.74% - 5.00%
0.01% - 1.11%
2021
2020
Average interest rates on issued securities
denominated in HUF
2.20%
1.83%
Average interest rates on issued securities
denominated in foreign currency
0.25%
1.32%
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
70
NOTE 21: LIABILITIES FROM ISSUED SECURITIES (in HUF mn) [continued]
Issued securities denominated in HUF as at 31 December 2021 (in HUF mn)
Name
Date of issue
Maturity
Nominal
value
Amortized
cost
Interest conditions
Hedged
(in HUF
mn)
(in HUF
mn)
(actual interest rate in
% p.a.)
1
OTPX2022A
22/03/2012
23/03/2022
175
236
indexed
-
hedged
2
OTPX2022B
18/07/2012
18/07/2022
164
549
indexed
1.70
hedged
3
OTPX2022C
29/10/2012
28/10/2022
177
317
indexed
1.70
hedged
4
OTPX2022D
28/12/2012
27/12/2022
238
290
indexed
1.70
hedged
5
OTPX2023A
22/03/2013
24/03/2023
312
366
indexed
1.70
hedged
6
OTPX2023B
28/06/2013
26/06/2023
198
272
indexed
0.60
hedged
7
OTPX2024A
18/06/2014
21/06/2024
241
277
indexed
1.30
hedged
8
OTPX2024B
10/10/2014
16/10/2024
295
336
indexed
0.70
hedged
9
OTPX2024C
15/12/2014
20/12/2024
242
275
indexed
0.60
hedged
10
OTPRF2022A
22/03/2012
23/03/2022
2,321
2,513
indexed
1.70
hedged
11
OTPRF2022B
22/03/2012
23/03/2022
934
1011
indexed
1.70
hedged
12
OTPRF2022C
28/06/2012
28/06/2022
209
266
indexed
1.70
hedged
13
OTPRF2022D
28/06/2012
28/06/2022
286
324
indexed
1.70
hedged
14
OTPRF2022E
29/10/2012
31/10/2022
862
933
indexed
1.70
hedged
15
OTPRF2022F
28/12/2012
28/12/2022
708
773
indexed
1.70
hedged
16
OTPRF2023A
22/03/2013
24/03/2023
899
977
indexed
1.70
hedged
17
OJB2023_I
05/04/2018
24/11/2023
44,120
42,300
1.75
fix
18
OJB2024_A
17/09/2018
20/05/2024
57,067
57,010
4.26
floating
19
OJB2024_C
24/02/2020
24/10/2024
80,125
79,972
3.95
floating
20
OJB2024_II
10/10/2018
24/10/2024
96,800
89,138
2.50
fix
21
OJB2025_II
03/02/2020
26/11/2025
22,550
20,003
1.50
fix
hedged
22
OJB2027_I
23/07/2020
27/10/2027
76,850
67,257
1.25
fix
23
OJB2031_I
18/08/2021
22/10/2031
82,000
70,655
2.50
fix
24
Other
211
211
Total issued securities in HUF
467,984
436,261
Issued securities denominated in foreign currency are promissory notes issued by JSC “OTP Bank” (Russia) in
the amount of HUF 64 million as at 31 December 2021.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
71
NOTE 21: LIABILITIES FROM ISSUED SECURITIES (in HUF mn) [continued]
Issued securities denominated in HUF as at 31 December 2020 (in HUF mn)
Name
Date of issue
Maturity
Nominal
value
Amortized
cost
Interest conditions
Hedged
(in HUF
mn)
(in HUF
mn)
(actual interest rate in
% p.a.)
1
OTPX2021A
01/04/2011
01/04/2021
183
246
indexed
NaN
hedged
2
OTPX2021B
17/06/2011
21/06/2021
245
370
indexed
NaN
hedged
3
OTPX2021C
19/09/2011
24/09/2021
231
192
indexed
NaN
hedged
4
OTPX2021D
21/12/2011
27/12/2021
259
325
indexed
NaN
hedged
5
OTPX2022A
22/03/2012
23/03/2022
201
214
indexed
NaN
hedged
6
OTPX2022B
18/07/2012
18/07/2022
172
440
indexed
1.70
hedged
7
OTPX2022C
29/10/2012
28/10/2022
201
233
indexed
1.70
hedged
8
OTPX2022D
28/12/2012
27/12/2022
248
299
indexed
1.70
hedged
9
OTPX2023A
22/03/2013
24/03/2023
324
327
indexed
1.70
hedged
10
OTPX2023B
28/06/2013
26/06/2023
198
225
indexed
0.60
hedged
11
OTPX2024A
18/06/2014
21/06/2024
241
237
indexed
1.30
hedged
12
OTPX2024B
10/10/2014
16/10/2024
295
284
indexed
0.70
hedged
13
OTPX2024C
15/12/2014
20/12/2024
242
232
indexed
0.60
hedged
14
OTPRF2021A
05/07/2011
13/07/2021
2,607
2,807
indexed
NaN
hedged
15
OTPRF2021B
20/10/2011
25/10/2021
2,894
2,954
indexed
NaN
hedged
16
OTPRF2021C
21/12/2011
30/12/2021
527
544
indexed
NaN
hedged
17
OTPRF2021D
21/12/2011
30/12/2021
372
381
indexed
NaN
hedged
18
OTPRF2021E
21/12/2011
30/12/2021
76
74
indexed
NaN
hedged
19
OTPRF2022A
22/03/2012
23/03/2022
2,065
1,920
indexed
1.70
hedged
20
OTPRF2022B
22/03/2012
23/03/2022
831
772
indexed
1.70
hedged
21
OTPRF2022C
28/06/2012
28/06/2022
190
196
indexed
1.70
hedged
22
OTPRF2022D
28/06/2012
28/06/2022
260
251
indexed
1.70
hedged
23
OTPRF2022E
29/10/2012
31/10/2022
761
715
indexed
1.70
hedged
24
OTPRF2022F
28/12/2012
28/12/2022
623
592
indexed
1.70
hedged
25
OTPRF2023A
22/03/2013
24/03/2023
787
740
indexed
1.70
hedged
26
OJB2021_I
15/02/2017
27/10/2021
114,000
113,732
2.00
fix
27
OJB2023_I
05/04/2018
24/11/2023
44,120
44,623
1.75
fix
28
OJB2024_A
17/09/2018
20/05/2024
46,771
46,639
1.35
floating
29
OJB2024_C
24/02/2020
24/10/2024
64,379
64,175
1.05
floating
30
OJB2024_II
10/10/2018
24/10/2024
96,800
95,645
2.50
fix
31
OJB2025_II
03/02/2020
26/11/2025
17,650
17,499
1.50
fix
hedged
32
OJB2027_I
23/07/2020
27/10/2027
65,800
64,705
1.25
fix
33
Other
213
213
Total issued securities in HUF
464,766
462,801
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
72
NOTE 21: LIABILITIES FROM ISSUED SECURITIES (in HUF mn) [continued]
Issued securities denominated in foreign currency as at 31 December 2020 (in HUF mn)
Name
Date of
issue
Maturity
Type
of FX
Nominal value
Amortized cost
Interest
conditions
(FX
mn)
(HUF
mn)
(FX
mn)
(HUF
mn)
(actual interest rate
in % p.a.)
1
OTP_VK1_21/1
20/02/2020
20/02/2021
USD
1.39
414
1.39
414
1.1
floating
2
OTP_VK1_21/2
02/04/2020
02/04/2021
USD
1.24
370
1.24
370
0.1
floating
3
OTP_VK1_21/3
14/05/2020
14/05/2021
USD
1.18
351
1.18
351
0.01
floating
4
OTP_VK1_21/4
18/06/2020
18/06/2021
USD
0.74
221
0.74
221
1.1
floating
5
Other
1
12
47
14
56
Total issued securities in FX
16.55
1,403
18.55
1,412
Total issued securities
464,213
Hedge accounting
Certain issued structured securities are hedged by the Bank with interest rate swaps (“IRS”) which exchange the
fixed and floating interest rate with the interest rate of the securities between the parties at a notional amount that
equals the nominal amount of the hedged securities. These are considered as fair value hedge relationships as
they cover the interest rate risk arising from the coupons of the hedged securities. OTP Bank does not intend to
be exposed to the risk embedded in the structured bonds, consequently as part of interest rate swap transaction
the structured interest payments are swapped to floating interest rate.
This hedging relationship meets all of the following hedge effectiveness requirements:
• there is an economic relationship between the hedged item and the hedging instrument
• the effect of credit risk does not dominate the value changes that result from that economic relationship
• the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged
item that the Bank actually hedges and the quantity of the hedging instrument that the Bank actually uses
to hedge that quantity of hedged item
The cash-flows of the fixed rate securities issued by the Bank are exposed to the changes in the HUF/EUR
foreign exchange rate and the volatility of the quoted interest rates of EUR and HUF. The interest rate risk and
foreign exchange risk related to these securities are hedged with EUR and HUF IRS transactions, where the
fixed interests were swapped to payments linked to 3 month HUF BUBOR and EURIBOR, resulting in a
decrease in the interest rate and foreign exchange exposure of issued securities.
Term Note Program in the value of HUF 200 billion for the year of 2021/2022
On 28 May 2021 the Bank initiated term note program in the value of HUF 200 billion with the intention of
issuing registered dematerialized bonds in public. On 8 July 2021, the National Bank of Hungary approved the
prospectus of Term Note Program and the disclosure as at 9 July 2021. The prospectus is valid for 12 months
following the disclosure.
The Issuer can initiate to introduce the bonds issued under the program to the Hungarian and to other stock
exchanges without any obligations.
Term Note Program in the value of HUF 200 billion for the year of 2020/2021
On 21 April 2020 the Bank initiated term note program in the value of HUF 200 billion with the intention of
issuing registered dematerialized bonds in public. On 9 July 2020, the National Bank of Hungary approved the
prospectus of Term Note Program and the disclosure as at 10 July 2020. The prospectus is valid for 12 months
following the disclosure.
The Issuer can initiate to introduce the bonds issued under the program to the Hungarian and to other stock
exchanges without any obligations.
1
Other category includes promissory notes issued by JSC “OTP Bank” (Russia) in the amount of HUF 56 million as at 31 December 2020.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
73
NOTE 22: DERIVATIVE FINANCIAL LIABILITIES HELD FOR TRADING (in HUF mn)
Negative fair value of derivative financial liabilities held for trading by type of contracts
2021
2020
Foreign exchange swaps held for trading
46,380
39,103
Commodity swaps
51,508
8,269
Interest rate swaps held for trading
87,945
32,960
Foreign exchange forward contracts
held-for-trading
7,738
10,750
CCIRS and mark-to-market CCIRS
held for trading
7,789
7,419
Held for trading option contracts
479
3,843
Held-for-trading forward security agreement
13
116
Other derivative transactions held for trading
1
864
2,363
Total
202,716
104,823
NOTE 23: DERIVATIVE FINANCIAL LIABILITIES DESIGNATED AS HEDGE ACCOUNTING
(in HUF mn)
Negative fair value of derivative financial liabilities designated as hedge accounting by type of contracts
2021
2020
CCIRS and mark-to-market CCIRS designated
as fair value hedge
5,451
6,007
Interest rate swaps designated as fair value hedge
5,777
5,334
Total
11,228
11,341
1
Other category includes: fx spot, equity swaps, options and index futures.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
74
NOTE 24: PROVISIONS AND OTHER LIABILITIES
1
(in HUF mn)
2021
2020
Reclassified
Other financial liabilities
Liabilities connected to Cafeteria benefits
114,867
121,711
Liabilities from investment services
92,612
62,667
Accrued expenses on other financial liabilities
58,247
42,212
Liabilities from card transactions
31,484
20,402
Accounts payable
46,243
41,460
Liabilities due to short positions
16,904
9,131
Giro clearing accounts
14,830
14,589
Advances received from customers
11,903
11,259
Liabilities from wages and other salary related payments
13,092
17,784
Loans from government
5,851
3,435
Accrued day one gain of loan liabilities
at below-market interest
-
14,391
Dividend payable
135
119
Other financial liabilities
79,603
48,526
Subtotal
485,771
407,686
Other non-financial liabilities
2021
2020
Reclassified
Clearing and giro settlement accounts
48,715
38,912
Liabilities from social security contributions
11,853
7,423
Accrued expenses on other non-financial liabilities
13,029
6,997
Liabilities related to housing loans
11,428
8,868
Insurance technical reserve
3,416
4,545
Other non-financial liabilities
23,869
14,995
Subtotal
112,310
81,740
Total
598,081
489,426
1
Other liabilities are expected to be recovered or settled no more than twelve months after the reporting period. Besides the total other
liabilities mentioned above, which are expected to be recovered or settled more than twelve months after the reporting period are the
following: accrued contractual liabilities, compulsory pension reserve, loans from government and liabilities from preferential dividend
shares.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
75
NOTE 24: PROVISIONS AND OTHER LIABILITIES
1
(in HUF mn) [continued]
The provisions are detailed as follows:
2021
2020
Commitments and guarantees given
51,990
54,810
Total provision according to IFRS 9
51,990
54,810
Pending legal issues and tax litigation
35,354
34,894
Pensions and other retirement
benefit obligations
9,308
10,975
Other long-term employee benefits
910
2,396
Restructuring
1,801
1,531
Provision due to CHF loans conversion
at foreign subsidiaries
1,285
1,949
Other provision
19,151
9,912
Total provision according to IAS 37
67,809
61,657
Total
119,799
116,467
The movements of provisions according to IFRS 9 can be summarized as follows:
2021
2020
Balance as at 1 January
54,810
48,662
Provision for the period
28,869
98,703
Release of provision for the period
(28,770)
(90,041)
Use of provision
(7)
(2,276)
Transfer
(4,426)
-
Foreign currency translation differences
1,514
(238)
Closing balance
51,990
54,810
The movements of provisions according to IAS 37 can be summarized as follows:
2021
2020
Balance as at 1 January
61,657
55,772
Provision for the period
37,924
23,381
Release of provision for the period
(27,167)
(17,251)
Use of provision
(10,953)
(4,501)
Change due to actuarial gains or losses
related to employee benefits
(42)
(144)
Unwinding of the discounted amount
7
-
Transfer
4,426
-
Foreign currency translation differences
1,957
4,400
Closing balance
67,809
61,657
1
Other liabilities are expected to be recovered or settled no more than twelve months after the reporting period. Besides the total other
liabilities mentioned above, which are expected to be recovered or settled more than twelve months after the reporting period are the
following: accrued contractual liabilities, compulsory pension reserve, loans from government and liabilities from preferential dividend
shares.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
76
NOTE 25: SUBORDINATED BONDS AND LOANS (in HUF mn)
2021
2020
Within one year
In HUF
-
-
In foreign currency
2,841
2,843
2,841
2,843
Over one year
In HUF
-
-
In foreign currency
275,493
271,861
275,493
271,861
Total
278,334
274,704
Types of subordinated bonds and loans are as follows:
2021
2020
Debt securities issued
6,558
269,566
Loan received
271,776
5,138
Total
278,334
274,704
Interest rates on subordinated bonds and loans are as follows:
2021
2020
Denominated in HUF
-
-
Denominated in foreign currency
2.50% - 5.00%
2.50% - 5.00%
2021
2020
Average interest rates on
subordinated bonds and loans
2.75%
2.94%
Subordinated bonds and loans can be detailed as follows:
Type
Nominal
value
Date of
issuance
Date of
maturity
Issue
price
Interest conditions
Interest rate as
at 31 December
2021
Subordinated
bond
EUR 231
million
07/11/2006
Perpetual
99.375%
Three-month EURIBOR +
3%, variable after year 10
(payable quarterly)
2.428%
Subordinated
bond
EUR 500
million
15/07/2019
15/07/2029
99.738%
Fixed 2.875% annual in
the first 5 years and
callable after 5 years,
starting from year 6 fix
coupon (payable annually)
is calculated as a sum of
the initial margin (320
basis point) and the 5 year
mid-swap rate prevailing
at the end of the 5 year.
2.875%
Subordinated
loan
USD 17.0
million
05/06/2018
30/06/2025
100.00%
Bullet repayment, once at
the end of the loan
agreement
5.00%
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
77
NOTE 26: SHARE CAPITAL (in HUF mn)
2021
2020
Authorized, issued and fully paid:
Ordinary shares
28,000
28,000
The nominal value of the shares is HUF 100 per shares. All of the shares are ordinary shares representing the
same rights to the shareholders. Furthermore there are no restrictions on the distribution of dividends and the
repayment of capital.
NOTE 27: RETAINED EARNINGS AND RESERVES
1
(in HUF mn)
In 2021, the Bank did not pay dividend based on the earlier NBH warnings issued due to covid moratoria. In
2022 dividend of HUF 119 billion from the profit of years 2019 and 2020 and HUF 1 billion from the profit of
year 2021 (totally HUF 120 billion) are expected to be proposed by the Management, which means HUF 425,89
(for the year 2019 and 2020) and HUF 3,57 (for the year 2021) dividend per share payable to shareholders,
respectively. In the opinion of the Management dividend is still considered to be payable, which will be decided
on the Bank’s Board meeting in March taken in consideration the Russian-Ukrainian conflict.
The retained earnings and reserves according to IFRS contains the retained earnings (HUF 841,261 million and
HUF 744,802 million) and reserves (HUF 2,265,262 million and HUF 1,884,274 million) as at 31 December
2021 and 31 December 2020 respectively. The reserves include mainly the option reserve, other reserves, the fair
value adjustment of financial instruments at fair value through other comprehensive income, share-based
payment reserve, fair value of hedge transactions, additional reserves of Income Certificates Exchangeable for
Shares (“ICES”), changes in equity accumulated in the previous years at the subsidiaries and due to
consolidation as well as translation of foreign exchange differences.
In the Consolidated Financial Statements the Group recognizes the non-monetary items at historical cost. The
difference between the historical cost of the non-monetary items in forint amount and the translated foreign
currencies into the presentation currency using the exchange rate at the balance sheet date, is presented in the
shareholders’ equity as a translation difference. The accumulated amounts of exchange differences were HUF
58,164 million and HUF (3,369) million as at 31 December 2021 and 2020, respectively.
On 19 October 2006, the Bank sold 14.5 million Treasury shares owned by the Group through an issue of ICES.
Within the transaction 10 million shares owned by OTP Bank, and a further 4.5 million shares owned by the
Group were sold during the underwriting period of ICES on the weighted average market price (HUF 7,080) of
the Budapest Stock Exchange. The shares have been purchased by Opus Securities S.A. (“OPUS”), which issued
an exchangeable bond with a total face value of EUR 514,274,000 backed by those shares. The exchangeable
bonds have been sold at a 32% premium over the selling price of the shares. The EUR denominated
exchangeable bonds were perpetual and the investors could have exercised the conversion right between years 6
and 10. The bonds carried a fixed coupon of 3.95% during the first 10 years, and thereafter the Issuer had the
right to redeem the bonds at face value. Following year 10, the bonds carried a coupon of 3 month EURIBOR
+3%. OTP Bank had a discretional right to cancel the interest payments. The interest payable was non-
cumulative.
Due to the conditions described above, ICES was accounted as an equity instrument and therefore any payment
was accounted as equity distribution paid to ICES holders.
On 14 September 2021 the Bank decided to terminate the subordinated swap agreement related to ICES
transaction as at 29 October 2021, and to exercise its option for repurchasing approximately 14.5 million OTP
ordinary shares held by Opus at market price based on the swap agreement. On the same day, the Bank
recognised liability due to Opus as a reduction of EUR 514 million in the shareholder’s equity.
Treasury shares were repurchased on 29 October 2021 on a price HUF 18,118 and on the same day the swap
transaction was financially settled. As a result of the closure of the subordinated swap agreement the Bank’s
shareholder’s equity increased by HUF 75,421 million, the Group’s shareholders’ equity increased by HUF
35,063 million.
Approximately 12 million pieces of treasury shares were sold to OTP SECOP I. (“OTP Special Employee Stock
Ownership Program”) and OTP SECOP II.
1
See more details in the Consolidated Statement of Comprehensive Income and in the Consolidated statement of Changes in equity on page
6 and 7.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
78
NOTE 27: RETAINED EARNINGS AND RESERVES
1
(in HUF mn) [continued]
Share capital
Share capital is the portion of the Bank’s equity that has been obtained by the issue of shares in the corporation
to a shareholder, usually for cash.
Retained earnings
Profit of previous years generated by the Group that are not distributed to shareholders as dividends.
Other reserves
The other reserves contain separated reserves due to statutory provisions.
Option reserve
OTP Bank Plc. and MOL Plc. entered into a share swap agreement in 16 April 2009, whereby OTP has changed
24,000,000 OTP ordinary shares for 5,010,501 „A series” MOL shares. The final maturity of the share swap
agreement is 11 July 2022, until which any party can initiate cash or physical settlement of the transaction.
Option reserve represents the written put option over OTP ordinary shares were accounted as a deduction from
equity at the date of OTP-MOL share swap transaction.
Share-based payment reserve
Share-based payment reserve represents the increase in the equity due to the goods or services were received by
the Bank in an equity-settled share-based payment transaction, valued at the fair value of the goods or services
received (see details in Note 40).
Other comprehensive income
Other comprehensive income comprises items of income and expense (including reclassification adjustments)
that are not recognized in profit or loss as required or permitted by other IFRSs.
Net investment hedge in foreign operations
Reserve presented as net investment hedge in foreign operations in the sharholders’ equity is related to DSK
Bank EAD, OTP banka d.d. and Crnogorska komercijalna banka a.d.
Extra reserves
The result of ICES bond issuance was presented as extra reserve, any payment to the owner of the ICES was
booked as decreaseing item in the extra reserve in the consolidation books until the termination of the
subordinated swap agreement related to ICES transaction as it was detailed above in this note when the whole
extra reserve presented here was transferred to retained earnings.
1
See more details in the Consolidated Statement of Comprehensive Income and in the Consolidated statement of Changes in equity on page
6 and 7.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
79
NOTE 27: RETAINED EARNINGS AND RESERVES
1
(in HUF mn) [continued]
Changes in equity accumulated in the previous year at the subsidiaries and due to consolidation
The accumulated changes at the subsidiaries contain the accumulated gains and losses of the subsidiaries from
the first day when they were included in the consolidation process. The changes due to consolidation contain the
effect on the result of the eliminations in the consolidation process of the previous years.
2021
2020
Retained earnings
844,343
744,802
Capital reserve
52
52
Option reserve
(55,468)
(55,468)
Other reserves
129,208
93,569
Actuarial loss related to employee defined benefits
(471)
(513)
Fair value of financial instruments measured
at fair value through other comprehensive income
11,690
61,396
Share-based payment reserve
46,162
42,573
Fair value of derivative financial instruments
designated as cash-flow hedge
-
-
Net investment hedge in foreign operations
(27,405)
(27,405)
Extra reserves
-
89,935
Net profit for the period
455,592
259,416
Changes in equity accumulated in the previous
year at the subsidiaries and due to consolidation
1,647,642
1,424,088
Foreign currency translation differences
58,164
(3,369)
Retained earnings and other reserves
3,109,509
2,629,076
Fair value adjustment of securities at fair value
through other comprehensive income
2021
2020
Balance as at 1 January
43,958
50,272
Change of fair value
(49,621)
(10,897)
Deferred tax related to change of fair value
3,035
1,403
Transfer to profit or loss due to
reclassification to FVTPL securities
-
(144)
Other transfer to retained earnings
(5,070)
-
Deferred tax related to other transfer to retained earnings
457
-
Transfer to profit or loss due to derecognition
(2,547)
3,329
Deferred tax related to transfer to proft or loss
491
(472)
Foreign currency translation difference
1,644
467
Closing balance
(7,653)
43,958
Expected credit loss on securities at fair value
through other comprehensive income
2021
2020
Balance as at 1 January
6,984
2,927
Increase of loss allowance
4,414
6,303
Release of loss allowance
(3,453)
(1,441)
Decrease due to sale, derecognition
(1,749)
(724)
Foreign currency translation difference
514
(81)
Closing balance
6,710
6,984
1
See more details in the Consolidated Statement of Comprehensive Income and in the Consolidated statement of Changes in equity on page
6 and 7.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
80
NOTE 27: RETAINED EARNINGS AND RESERVES
1
(in HUF mn) [continued]
Fair value changes of equity instruments as
at fair value through other comprehensive income
2021
2020
Balance as at 1 January
10,454
15,115
Change of fair value
2,465
(3,336)
Deferred tax related to change of fair value
(361)
363
Transfer to retained earnings due to derecognition
(207)
(1,746)
Foreign currency translation difference
282
58
Closing balance
12,633
10,454
Net investment hedge in foreign operations
2021
2020
Balance as at 1 January
(27,405)
(18,814)
Change of fair value on hedging item
-
(9,440)
Deferred tax related to change of fair value
-
849
Closing balance
(27,405)
(27,405)
Actuarial loss related to employee benefits
2021
2020
Balance as at 1 January
(513)
(640)
Change of actuarial loss related to
employee benefits
98
126
Deferred tax related to change of actuarial loss related to
employee benefits
(11)
1
Foreign currency translation difference
(45)
-
Closing balance
(471)
(513)
Foreign currency translation difference
2021
2020
Balance as at 1 January
(3,369)
(72,404)
Change of foreign currency translation
61,533
69,035
Closing balance
58,164
(3,369)
1
See more details in the Consolidated Statement of Comprehensive Income and in the Consolidated statement of Changes in equity on page
6 and 7.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
81
NOTE 28: TREASURY SHARES (in HUF mn)
2021
2020
Nominal value (Ordinary shares)
1,091
2,392
Carrying value at acquisition cost
106,941
124,080
The changes in the carrying value of treasury shares are due to repurchase and sale transactions on market
authorised by the General Assembly.
Change in number of shares:
2021
2020
Number of shares as at 1 January
23,924,900
17,779,845
Additions
16,251,451
8,296,388
Disposals
(29,269,470)
(2,151,333)
Closing number of shares
10,906,881
23,924,900
Change in carrying value:
2021
2020
Balance as at 1 January
124,080
60,931
Additions
276,433
85,922
Disposals
(293,572)
(22,773)
Closing balance
106,941
124,080
NOTE 29: NON-CONTROLLING INTEREST (in HUF mn)
2021
2020
Balance as at 1 January
4,116
4,956
Increase due to business combination
1,041
-
Non-controlling interest included in net profit for the period
836
221
Purchase of non-controlling interest
-
(382)
Decrease due to discontinued operation
-
(235)
Foreign currency translation difference
205
(444)
Closing balance
6,198
4,116
The non-controlling interest is not significant in respect of the whole OTP Group.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
82
NOTE 30: INTEREST INCOME, INCOME SIMILAR TO INTEREST INCOME AND EXPENSE
(in HUF mn)
2021
2020
Interest income calculated using
the effective interest method from / on
loans
692,432
658,579
securities at amortized cost
79,602
69,905
finance lease receivables
59,084
54,046
securities at fair value through other
comprehensive income
49,473
44,782
banks and balances with the National Banks
16,527
5,103
placements with other banks
20,922
7,572
liabilities (negative interest expense)
3,672
1,628
repo receivables
827
286
Subtotal
922,539
841,901
Income similar to interest income from
swap deals related to placements with other banks
128,519
78,577
loans mandatorily at fair value through profit or loss
40,131
28,251
swap deals related to credit institutions
15,557
20,322
rental income
8,964
8,363
non-trading securities mandatorily at fair value
through profit or loss
1,749
473
Subtotal
194,920
135,986
Total interest income and incomes similar
to interest income
1,117,459
977,887
2021
2020
Interest expense due to / from / on
swaps related to banks, National Governments
and to deposits from the National Banks
116,895
82,301
deposits from customers
50,645
53,196
swaps related to deposits from customers
23,860
17,226
banks, National Governments and on deposits
from the National Banks
17,467
13,785
issued securities
9,822
7,750
subordinated and supplementary bonds and loans
7,598
7,718
financial assets (negative interest income)
7,275
5,014
depreciation of assets subject to operating lease
and investment properties
5,325
5,624
leases
1,556
1,623
repo liabilities
2,299
653
other
407
326
Total interest expense
243,149
195,216
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
83
NOTE 31: LOSS ALLOWANCES / IMPAIRMENT / PROVISIONS (in HUF mn)
2021
2020
Reclassified
Loss allowance on loans
Loss allowance for the period
546,284
650,165
Release of loss allowance
(475,067)
(390,102)
Income from loan recoveries
(51,876)
(98,300)
Change in the fair value attributable to changes in the
credit risk of loans mandatorily measured
at fair value through profit of loss
16,289
3,262
Loss allowance on finance lease
20,694
23,807
Release of loss allowance on finance lease
(14,918)
(13,835)
41,406
174,997
Loss allowance on due from banks, balances with National
Banks, on placements and on repo receivables
Allowance for the period
27,341
16,476
Release of allowance
(24,737)
(15,691)
2,604
785
Loss allowance on securities
at fair value through other comprehensive income
and on securities at amortized cost
Allowance for the period
11,048
13,166
Release of allowance
(7,074)
(5,857)
3,974
7,309
Release of impairment of intangible,
tangible assets subject to operating lease
and of investment properties
Impairment for the period
63
178
Release of impairment
(501)
(1,056)
(438)
(878)
Provision for
commitments and guarantees given
Provision for the period
28,869
98,703
Release of provision
(28,770)
(90,041)
99
8,662
Loss allowances / Impairment and provisions
47,645
190,875
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
84
NOTE 32: NET PROFIT FROM FEES AND COMMISSIONS (in HUF mn)
Income from fees and commissions
2021
2020
Fees and commissions related to lending
1
36,999
33,233
Deposit and account maintenance
fees and commissions
198,145
173,578
Fees and commissions related to
the issued bank cards
99,766
83,474
Currency exchange gains and losses
47,843
46,290
Fees related to cash withdrawal
46,143
39,120
Fees and commissions related
to security trading
30,224
25,830
Fees and commissions related to fund management
23,553
28,800
Insurance fee income
16,974
13,603
Other
54,466
42,601
Fees and commissions from contracts with customers
517,114
453,296
Total
554,113
486,529
Fee type
Nature and timing of obligation settlement, and the significant
payment terms
Revenue recognition
under IFRS 15
Deposit and
account
maintenance
fees and
commissions
and fees
related to cash
withdrawal
The Group provides a number of account management services for
both retail and corporate customers in which they charge a fee. Fees
related to these services can be typically account transaction fees
(money transfer fees, direct debit fees, money standing order fees,
etc.), internet banking fees (e.g. OTP Direct fee), account control fees
(e.g. sms fee), or other fees for occasional services (account
statement fees, other administration fees, etc.).
Fees for ongoing account
management services are
charged on a monthly
basis during the period
when they are provided.
Transaction-based fees
are charged when the
transaction takes place or
charged monthly at the
end of the month.
Fees for ongoing account management services are charged to the
customer’s account on a monthly basis. The fees are commonly fixed
amounts that can be vary per account package and customer category.
In the case of the transaction based fees where the services include
money transfer the fee is charged when the transaction takes place.
The rate of the fee is typically determined in a certain % of the
transaction amount. In the case of other transaction-based fees (e.g.
SMS fee), the fee is settled monthly.
In the case of occasional services the Group basically charges the
fees when the services are used by the customer. The fees can be
fixed fees or they can be set in %.
The rates are reviewed by the Group regularly.
1
Such kinds of fees and commissions related to lending which aren’t included in the effective interest rate calculation due to their nature.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
85
NOTE 32: NET PROFIT FROM FEES AND COMMISSIONS (in HUF mn) [continued]
Fee type
Nature and timing of obligation settlement, and the significant
payment terms
Revenue recognition
under IFRS 15
Fees and
commission
related to the
issued bank
cards
The Group provides a variety of bank cards to its customers, for
which different fees are charged. The fees are basically charged in
connection with the issuance of cards and the related card
transactions.
Fees for ongoing services
are charged on a monthly
basis during the period
when they are provided.
Transaction-based fees
are charged when the
transaction takes place or
charged monthly at the
end of the month.
The annual fees of the cards are charged in advance in a fixed
amount. The amount of the annual card fee depends on the type of
card.
In case of transaction-based fees (e.g. cash withdrawal/payment fee,
merchant fee, interchange fee, etc.), the settlement of the fees will
take place immediately after the transaction or on a monthly basis.
The fee is typically determined in % of the transaction with a fixed
minimum amount.
For all other cases where the Group provides a continuous service to
the customers (e.g. card closing fee), the fees are charged monthly.
The fee is calculated in a fix amount.
The rates are reviewed by the Group regularly.
Fees and
commissions
related to
security
account
management
services
The Group provides its clients security account management services.
Fees will be charged for account management and transactions on
accounts.
Fees for ongoing services
are charged quarterly or
annually during the
period when they are
provided. The fees are
accrued monthly.
Transaction-based fees
are charged when the
transaction takes place.
Account management fees are typically charged quarterly or
annually. The amount is determined in %, based on the stocks of
securities managed by the clients on the account in a given period.
Fees for transactions on the securities account are charged
immediately after the transaction. They are determined in %, based
on the transaction amount.
Fees for complex services provided to clients (e.g. portfolio
management or custody) are typically charged monthly or annually.
The fees are fixed monthly amounts and in some cases a bonus fee
are charged.
Fees and
commissions
related to fund
management
Fees from fund management services provided to investment funds
and from portfolio management provided to insurance companies,
funds. The fee income are calculated on the basis of net asset value of
the portfolio and by the fee rates determined in the contracts about
portfolio management.
Fees for ongoing services
are charged usually on
monthly (mutual funds)
or semi-annually (venture
capital funds) during the
period when they are
provided but accrued
monthly.
Net insurance
fee income
Due to the fact that the Group rarely provides insurance services to
its clients, only acts as an agent, the fee income charged to the
customers and fees payable to the insurance company are presented
net in the fee income.
In addition, agency fee charged for the sale of insurance contracts is
also recorded in this line. The fee is charged on a monthly basis and
determined in %.
Fees for ongoing services
are charged on a monthly
basis during the period
when they are provided.
Other
Fees that are not significant in the Group total income are included in
Other fees category. Such fees are safe lease, special procedure fee,
account rent fee, fee of a copy of document, etc.
Other fees may include charges for continuous services or for ad hoc
administration services. Continuous fees are charged monthly (e.g.,
safe lease fees) at the beginning of the period, typically at a fixed
rate. Fees for ad hoc services are charged immediately after the
service obligation were met, usually in a fixed amount.
Fees for ongoing services
are charged on a monthly
basis during the period
when they are provided.
Fees for ad hoc services
are charged when the
transaction takes place.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
86
NOTE 32: NET PROFIT FROM FEES AND COMMISSIONS (in HUF mn) [continued]
Expense from fees and commissions
2021
2020
Fees and commissions related to issued bank cards
42,662
32,487
Interchange fees
22,831
18,958
Fees and commissions paid on loans
9,502
6,974
Fees and commissions related to deposits
7,467
7,000
Cash withdrawal transaction fees
4,063
3,696
Fees and commissions related to security trading
3,730
3,776
Insurance fees
1,413
1,036
Fees and commissions related to collection of loans
830
1,447
Postal fees
590
714
Money market transaction fees and commissions
281
113
Other
18,570
12,695
Total
111,939
88,896
Net profit from fees and commissions
442,174
397,633
NOTE 33: GAIN AND LOSSES BY TRANSACTIONS (in HUF mn)
Gains and losses by transactions
2021
2020
Reclassified
Gain by transactions
5,662
6,479
Loss by transactions
(4,808)
(4,501)
Gain from sale of loans, placements, finance lease
854
1,978
Gain by transactions
3,552
1,402
Loss by transactions
(2,521)
-
Gain from derecognition of securities at amortized cost
1,031
1,402
Gain from derecognition of financial assets
at amortized cost, net
1,885
3,380
Foreign exchange result consists revaluation difference from converting assets and liabilities in foreign
currencies into the presentation currency of the consolidation financial statements.
Gains and losses by transactions
2021
2020
Reclassified
Gain by transactions
9,553
4,855
Loss by transactions
(4,537)
(2,110)
Fx gain on securities at fair value through profit or loss
5,016
2,745
Gain by transactions
2,405
-
Loss by transactions
(1,889)
-
Fx gain on derecognition of investment
in subsidiaries, associates
516
-
Gain by transactions
10,505
8,831
Loss by transactions
(13,092)
(6,506)
Fx (loss) / gain on securities at fair value
through other comprehensive income
(2,587)
2,325
Gain by transactions
2,847
10,486
Loss by transactions
(232)
(8,091)
Fx gain on other securities
2,615
2,395
Gains on securities, net
5,560
7,465
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
87
NOTE 33: GAINS AND LOSSES (in HUF mn) [continued]
Gains and losses by transactions
2021
2020
Reclassified
Gain by transactions
5,835
14,781
Loss by transactions
(1,023)
(7,542)
Gain on non-trading securities mandatorily
at fair value through profit or loss
4,812
7,239
Gain by transactions
36,591
999
Loss by transactions
(44,346)
(2,125)
Loss on loans mandatorily at fair value through profit
or loss (adjustment resulting from
change in market factors)
(7,755)
(1,126)
Gain by transactions
2,868
-
Loss by transactions
(457)
(1,270)
Gain/ (Loss) on financial assets and liabilities
designated at fair value through profit or loss
2,411
(1,270)
Fair value adjustment on financial instruments measured
at fair value through profit or loss
(532)
4,843
Gains and losses by transactions
2021
2020
Reclassified
Gain by transactions
74,582
63,574
Loss by transactions
(64,034)
(52,890)
Gain from fx swap, swap and option deals
10,548
10,684
Gain by transactions
2,684
619
Loss by transactions
(3,005)
(50)
(Loss) / Gain from option deals
(321)
569
Gain by transactions
94,639
5,237
Loss by transactions
(95,794)
(5,264)
Loss from commodities deals
(1,155)
(27)
Gain by transactions
745
155
Loss by transactions
(3,019)
(41)
(Loss) / Gain from futures deals
(2,274)
114
Gain on derivative instruments, net
6,798
11,340
NOTE 34: OTHER OPERATING INCOME AND EXPENSES AND OTHER ADMINISTRATIVE
EXPENSES (in HUF mn)
Other operating income
2021
2020
Income from agricultural activity
42,526
-
Income from tourism activity
8,588
-
Gains on transactions related to property activities
6,424
3,631
Rental income
2,132
1,835
Income from computer programming
1,113
1,529
Fair value adjustment of biological assets and agricultural produce
(2,551)
-
Income from real estate management
-
1,092
Gains on transactions related to insurance activity
657
721
Non-repayable assets received
165
65
Negative goodwill due to acquisition
31
7,504
Other income from non-financial activities
22,243
17,084
Total
81,328
33,461
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
88
NOTE 34: OTHER OPERATING INCOME AND EXPENSES AND OTHER ADMINISTRATIVE
EXPENSES (in HUF mn) [continued]
Other operating expenses
2021
2020
Expense related to agricultural activity
30,392
-
Provision for off-balance sheet commitments
and contingent liabilities
11,395
6,336
Financial support for sport association and
organization of public utility
11,111
12,080
Expenses related to tourism activity
7,928
Loss allowance and loan losses on
other financial assets
2,624
6,036
Expenses from losses due to foreign currency
loan conversion at foreign subsidiaries
949
224
Impairment / (Release of impairment) on investments
1
6,640
(381)
Non-repayable assets contributed
881
688
Impairment on tangible and intangible assets
2,967
51
(Release of impairment) / Impairment, loan losses on
other non-financial assets and assets measured under IAS 2
(638)
1,537
Release of provision due to foreign currency
loan conversion at foreign subsidiaries
(638)
(206)
Other
12,121
13,082
Other expenses from non-financial activities
5,613
5,576
Other costs
6,508
7,506
Total
85,732
39,447
Other administrative expenses
2021
2020
Personnel expenses
Wages
271,497
242,970
Taxes related to personnel expenses
44,049
42,576
Other personnel expenses
25,138
23,096
Subtotal
340,684
308,642
Depreciation, amortization of tangible, intangible assets,
right-of-use assets and goodwill impairment
2
94,996
92,761
Other general expenses
Taxes, other than income tax
3
93,678
84,317
Services
113,400
105,384
Professional fees
21,775
17,583
Fees payable to authorities and other fees
44,113
44,542
Advertising
19,457
17,913
Administration expenses
14,662
15,100
Rental fees
4,847
4,883
Subtotal
311,932
289,722
Total
747,612
691,125
1
See details in Note 12.
2
See details in Note 13 and Note 36.
3
Special tax of financial institutions was paid by the Group in the amount of HUF 19,652 million for the year 2021 and HUF 17,665 million
for the year 2020, recognized as an expense thus decreased the corporate tax base. For the year ended 31 December 2021 financial
transaction duty was paid by the Bank in the amount of HUF 68 billion while for the year ended 31 December 2020 the same dutiy was HUF
60 billion.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
89
NOTE 34: OTHER OPERATING INCOME AND EXPENSES AND OTHER ADMINISTRATIVE
EXPENSES (in HUF mn) [continued]
The table below contains the detailing of the fees for audit and non-audit services:
Ernst & Young Audit Ltd.
2021
In thousand EUR
OTP – annual audit – separate financial statements
458
OTP – annual audit – consolidated financial statements
659
Other audit services based on statutory provisions to
OTP Group members
1,050
Other services providing assurance
1,575
Other non-audit services
316
Total
4,058
Ernst & Young Network
2021
In thousand EUR
Audit based on statutory provisions
1,788
Other services providing assurance
-
Tax consulting services
29
Other non-audit services
209
Total
2,026
NOTE 35: INCOME TAXES (in HUF mn)
The Group is presently liable for income tax at rates between 9% and 35% of taxable income.
Deferred tax is calculated at the income tax rate of 9% in Hungary and Montenegro, 10% in Bulgaria, 12% in
Moldova, 12.5% in Cyprus, 15% in Serbia and Albania, 16% in Romania, 18% in Ukraine and Croatia, 19% in
Slovenia, 20% in Russia, 25.5% in the Netherlands and 35% in Malta.
The breakdown of the income tax expense is:
2021
2020
Reclassified
Current tax expense
65,692
42,085
Deferred tax expense
6,431
1,833
Total
72,123
43,918
A reconciliation of the net deferred tax asset/liability is as follows:
2021
2020
Balance as at 1 January
(3,673)
(2,652)
Deferred tax expense in profit or loss
(6,431)
(1,833)
Deferred tax receivable related to items
recognized directly in equity and in Comprehensive Income
1,294
3,555
Due to merge of subsidiary
-
(919)
Due to acquisition of subsidiary
(737)
-
Foreign currency translation difference
611
(1,824)
Closing balance
(8,936)
(3,673)
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
90
NOTE 35: INCOME TAXES (in HUF mn) [continued]
A breakdown of the deferred tax assets are as follows:
2021
2020
Loss allowance on granted loans
8,244
9,048
Provision for off-balance sheet commitments and
contingent liabilities, derivative financial instruments
7,688
6,469
Securities at amortized cost
9
4,394
Difference in depreciation of tangible assets
3,636
3,323
Fair value adjustment of non-trading instruments
mandatorily at fair value though profit or loss
256
2,053
Fair value adjustment of derivative financial instruments
992
1,302
Provision on other financial, non-financial liabilities
1,073
1,091
Difference in accounting for leases
999
801
Fair value adjustment of securities at fair value
through other comprehensive income
202
-
Unused tax allowance
-
1,552
Loss allowance / impairment on other
financial, non-financial assets
2,427
1,824
Tax accrual caused by negative taxable income
152
237
Loss allowance on investment (goodwill)
77
71
Fair value adjustment of securities at fair value
through profit or loss
95
9
Amounts unenforceable by tax law
-
247
Other
4,198
5,238
Deferred tax asset
30,048
37,659
A breakdown of the deferred tax liabilities are as follows:
2021
2020
Difference in depreciation of tangible assets
(10,245)
(8,115)
Fair value adjustment of securities at fair value
through other comprehensive income
(6,569)
(2,779)
Fair value adjustment of securities at fair value
through profit or loss
(2,781)
(9,053)
Loss allowance on investment (goodwill)
(1,142)
(769)
Fair value adjustment of non-trading instruments
mandatorily at fair value though profit or loss
-
(233)
Securities at amortized cost
(210)
-
Provision for off-balance sheet commitments
and contingent liabilities, derivative financial instruments
(559)
(630)
Loss allowance on granted loans
(944)
(450)
Interbank placements and receivables
(491)
(322)
Fair value adjustment of derivative financial instruments
(214)
(317)
Amounts unenforceable by tax law
-
(102)
Loss allowance / impairment on other
financial, non-financial assets
(2,261)
(82)
Repurchase agreement and security lending
-
(1)
Provision on other financial, non-financial liabilities
(1,875)
(1)
Other
(11,693)
(18,478)
Deferred tax liabilities
(38,984)
(41,332)
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
91
NOTE 35: INCOME TAXES (in HUF mn) [continued]
A breakdown of the deferred tax liabilities are as follows [continued]
2021
2020
Net deferred tax liability
(8,936)
(3,673)
(amounts presented in the consolidated statement
of financial position)
Deferred tax assets
15,109
22,317
Deferred tax liabilities
(24,045)
(25,990)
Among deferred tax assets the tax accruals are included the following accruals by entities:
Tax accrual caused by negative
2021
2020
Date until
it can be used
taxable income
Merkantil Bank Ltd.
40
181
31/12/2030
OTP Real Estate Leasing Ltd.
55
56
31/12/2030
Nagisz Ltd.
57
-
31/12/2030
152
237
A reconciliation of the income tax income / expense is as follows:
2021
2020
Reclassified
Profit before income tax
528,435
297,964
Income tax expense at statutory tax rates
68,823
36,847
Income tax adjustments due to permanent
differences are as follows:
Deferred use of tax allowance
(8)
(1,039)
Tax effect of transaction costs related to share-based payment
recognized directly in shareholders' equity
323
305
Correction on tax basis due to change of accounting policy
-
230
Permanent differences from unused tax losses
(103)
(167)
Amounts unenforceable by tax law
(846)
(38)
Use of tax allowance in the current year
(4,036)
(2,023)
Other
(11,250)
(6,739)
Income tax expense
52,903
27,376
Effective tax rate
10.01%
9.19%
Business tax and innovation contribution
19,220
16,542
Total income tax expense
72,123
43,918
2021
2020
Net current tax (liability) / asset
(6,603)
9,643
(amounts presented in the consolidated statement
of financial position)
Current income tax receivables
29,978
39,171
Current income tax payable
(36,581)
(29,528)
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
92
NOTE 36: LEASES (in HUF mn)
The Group as a lessee:
Right-of-use assets by class of underlying assets as at 31 December 2021:
2021
Property
Office equipment
and vehicles
Total
Depreciation expense of right-of-use assets
15,710
355
16,065
Additions to right-of-use assets
13,915
245
14,160
Carrying amount of right-of-use assets
at the end of the reporting period
50,265
461
50,726
Right-of-use assets by class of underlying assets as at 31 December 2020:
2020
Property
Office equipment
and vehicles
Total
Depreciation expense of right-of-use assets
15,933
514
16,447
Additions to right-of-use assets
17,999
250
18,249
Carrying amount of right-of-use assets
at the end of the reporting period
45,642
641
46,283
The total cash outflow for leases was HUF 19,663 million as at 31 December 2021 and HUF 23,028 million as at
31 December 2020.
The Group mainly leases real estate, a significant part of its right-of-use assets are related to branch offices, a
smaller part to office buildings and office space.
Leasing liabilities by maturities:
2021
2020
Within one year
11,761
10,937
Over one year
41,525
37,514
Total
53,286
48,451
Lease liabilities by payments:
2021
2020
Arising from fixed lease payments
36,047
35,018
Arising from variable lease payments
17,239
13,433
Total
53,286
48,451
On 31 December 2021 and 2020 HUF 123 million and HUF 126 million is the lease payment respectively to be
paid in the future due to leases not yet commenced to which the Group is committed. The future lease payment
not taken into account would be HUF 4,041 million arising from extension options if they had been taken into
account.
The most typical indexes/rates on which the variable lease payments depend are: Consumer Price Index,
Inflation Rate, BUBOR, EURIBOR.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
93
NOTE 36: LEASES (in HUF mn) [continued]
The Group as a lessee:
Amounts recognised in profit and loss
2021
2020
Interest expense on lease liabilities
1,556
1,623
Expense relating to short-term leases
3,885
3,857
Expense relating to leases of low value assets
694
721
Expense relating to variable lease payments not included
in the measurement of lease liabilities
-
2
Income from subleasing right-of-use assets
11
405
Gains or losses arising from sale and leaseback transactions
-
-
The Group as a lessor:
The Group’s leasing activities are most significant in Hungary, Bulgaria, Slovenia, Ukraine and Croatia. The
main activity of the leasing companies is finance leasing. About half of the underlying assets are passenger cars,
besides this the Group leases mainly agricultural machinery, commercial vehicles, vessels and construction
machinery.
The Group manages the risk associated with the rights held in the underlying assets by, inter alia, buy-back
agreements, determining the residual values on level lower than future market values and registering pledge on
the underlying asset.
The Group as a lessor, finance lease:
Amounts receivable under finance leases
2021
2020
In less than 1 year
469,646
410,639
Between 1 and 2 years
332,360
298,354
Between 2 and 3 years
241,217
211,257
Between 3 and 4 years
159,306
127,052
Between 4 and 5 years
90,548
71,428
More than 5 years
60,000
44,473
Total receivables from undiscounted lease payments
1,353,077
1,163,203
Unguaranteed residual values
692
796
Gross investment in the lease
1,353,769
1,163,999
Less: unearned finance income
(141,138)
(88,257)
Present value of minimum lease payments receivable
1,212,631
1,075,742
Loss allowance
(30,003)
(24,602)
Net investment in the lease
1,182,628
1,051,140
An analysis of the change in the gross values on finance receivables is as follows:
2021
2020
Balance as at 1 January
1,075,742
982,853
Additions due to new contracts
656,055
372,664
Additions due to interest income and amortized fees
64,168
54,110
Decrease due to write-off
(543)
(349)
Decrease due to repossession of the asset
(3,174)
(4,422)
Decrease due to sale
(3,864)
(3,924)
Decrease due to early repayment
(59,246)
(52,703)
Decrease due to regular lease payment
(530,157)
(328,357)
Foreign currency translation difference
13,650
55,870
Closing balance
1,212,631
1,075,742
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
94
NOTE 36: LEASES (in HUF mn) [continued]
The Group as a lessor [continued]:
The Group as a lessor, finance lease [continued]:
An analysis of the change in the loss allowance on finance receivables is as follows:
2021
2020
Balance as at 1 January
24,602
13,590
Loss allowance for the period
20,694
23,807
Release of loss allowance
(14,918)
(13,240)
Use of loss allowance
(257)
(21)
Partial write-off
-
(50)
Decrease due to sale
(513)
-
Foreign currency translation difference
395
516
Closing balance
30,003
24,602
Result from finance leases
2021
2020
Selling profit or loss
325
249
Finance income on the net investment in the lease
59,084
54,046
Income relating to variable lease payments not included
in the measurement of the net investment in the lease
-
-
The Group as a lessor, operating lease:
Amounts receivable under operating leases
2021
2020
In less than 1 year
10,383
11,285
Between 1 and 2 years
5,172
8,634
Between 2 and 3 years
3,527
4,856
Between 3 and 4 years
2,704
2,692
Between 4 and 5 years
2,019
1,653
More than 5 years
904
20
Total receivables from undiscounted lease payments
24,709
29,140
Result from operating leases
2021
2020
Lease income
10,791
9,861
Therein lease income relating to variable lease
payments that do not depend on an index or a rate
-
-
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
95
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn)
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or
equity instrument of another entity.
Financial instruments may result in certain risks to the Group. The most significant risks the Group faces
include:
37.1. Credit risk
The Group takes on exposure to credit risk which is the risk that a counter-party will be unable to pay amounts in
full when due. The Group structures the levels of credit risk it undertakes by placing limits on the amount of risk
accepted in relation to one borrower, or banks of borrowers, and to geographical areas and loan types. Such risks
are monitored on a periodical basis and are subject to an annual or more frequent review. The exposure to any
borrower including banks and brokers is further restricted by sub-limits covering on and off-balance sheet
exposures and daily delivery risk limits in relation to trading items such as forward foreign exchange contracts.
Actual exposures against limits are monitored daily.
Exposure to credit risk is managed through regular analysis of the ability of borrowers and potential borrowers to
meet interest and principal repayment obligations and by changing these lending limits when appropriate.
Exposure to credit risk is managed by obtaining collateral, corporate and personal guarantees.
Defining the expected credit loss on individual and collective basis
On individual basis:
Individually assessed are the non-retail or non- micro- and small enterprise exposure of significant amount on a
stand-alone basis:
exposure in stage 3,
exposure in workout management
purchased or originated credit-impaired instruments which are in accordance with the conditions
mentioned above
The calculation of impairment must be prepared and approved by the risk management functional areas. The
calculation, all relevant factors (amortized cost, original and current EIR, contracted and expected cash flows
(from business and/or collateral) for the individual periods of the entire lifecycle, other essential information
enforced during the valuation) and the criteria thereof (including the factors underlying the classification as stage
3) must be documented individually.
The expected credit loss of the exposure equals the difference of the items’ AC (gross book value) on the
valuation date and the present value of the receivable's expected cash flows discounted to the valuation date by
the exposure's original effective interest rate (EIR) (calculated at the initial recognition, or in the case of variable
rate, recalculated due to the last interest rate change). The estimation of the expected future cash flows should be
forward looking, it must also contain the effects of the possible change of macroeconomic outlook.
At least two scenarios must be used for the estimation of the expected cash flow. It should be at least one
scenario in which the entity anticipates that realized cash flows will be significantly different from the
contractual cash flows. Probability weights must be allocated to the individual scenarios. The estimation must
reflect the probability of the occurrence and non-occurrence of the credit loss, even if the most probable result is
the non-occurrence of the loss.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
96
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.1. Credit risk [continued]
Defining the expected credit loss on individual and collective basis [continued]
On collective basis:
The following exposures are subject to collective assessment:
retail exposure irrespective of the amount,
micro and small enterprise exposures irrespective of the amount,
all other exposure which are insignificant on a stand-alone basis and not part of the workout
management,
exposure which are not in stage 3, significant on a stand-alone basis,
purchased or originated credit-impaired instruments which are in accordance with the conditions
mentioned above.
In the collective impairment methodology credit risk and the change of credit risk can be correctly captured by
understanding the risk characteristics of the portfolio. In order to achieve this the main risk drivers shall be
identified and used to form homogeneous segments having similar risk characteristics. The segmentation is
expected to stay stable from month to month, however a regular (at least yearly) revision of the segmentation
process should be set up to capture the change of risk characteristics. The segmentation must be performed
separately for each parameter, since in each case different factors may have relevance.
The Bank's Headquarter Group Reserve Committee stipulates the guidelines related to the collective impairment
methodology at group level. In addition, it has right of agreement in respect of the risk parameters (PD -
probability of default, LGD - loss given default, EAD – exposure at default) and segmentation criteria proposed
by the group members.
The review of the parameters must be performed at least annually and the results should be approved by the
Group Reserve Committee. Local Risk Managements are responsible for parameter estimations / updates,
macroeconomic scenarios are calculated by OTP Bank Headquarter for each subsidiary and each parameter.
Based on the consensus proposal of Local Risk Management and OTP Bank Headquarter, the Group Reserve
Committee decides on the modification of parameters (all parameters for impairment calculation).
At least on a yearly basis the impairment parameters should be back tested as well.
The expected loss calculation should be forward looking, including forecasts of future economic conditions. This
may be achieved by applying 3-5 different macroeconomic scenarios, which may be integrated in the PD, LGD
and EAD parameters.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
97
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.1. Credit risk [continued]
37.1.1. Financial instruments by stages
Gross carrying amount and accumulated loss allowance of financial assets at amortized cost and of interest bearing securities at fair value through other comprehensive
income and financial commitments and provision on them by stages as at 31 December 2021:
Gross carrying amount / Notinal value
Accumulated loss allowance / Provision
2021
Carrying
amount /
Exposure
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
Placements with other banks
1,584,861
1,587,827
-
28
-
1,587,855
2,966
-
28
-
2,994
Repo receivables
61,052
61,342
-
-
-
61,342
290
-
-
-
290
Mortgage loans
3,822,426
3,173,491
559,939
178,066
57,988
3,969,484
10,450
25,590
84,937
26,081
147,058
Loans to medium
and large corporates
5,294,170
4,680,180
657,586
158,773
24,117
5,520,656
51,724
69,724
98,017
7,021
226,486
Consumer loans
2,963,112
2,585,014
422,975
356,485
12,856
3,377,330
49,104
84,158
274,098
6,858
414,218
Loans to micro
and small enterprises
500,991
412,247
76,131
54,458
2,339
545,175
4,751
9,707
28,351
1,375
44,184
Car-finance loans
446,341
370,790
79,965
9,675
2,452
462,882
2,988
4,978
6,508
2,067
16,541
Municipal loans
466,143
444,944
23,890
816
-
469,650
1,372
1,475
660
-
3,507
Loans at amortized cost
13,493,183
11,666,666
1,820,486
758,273
99,752
14,345,177
120,389
195,632
492,571
43,402
851,994
Finance lease receivable
1,182,628
959,361
210,955
41,944
371
1,212,631
4,432
11,140
14,243
188
30,003
Interest bearing securities at
fair value through other
comprehensive income
1
2,189,534
2,187,835
1,699
-
-
2,189,534
6,566
144
-
-
6,710
Securities at amortized cost
3,891,335
3,879,749
20,699
-
-
3,900,448
7,789
1,324
-
-
9,113
Financial assets total
22,402,593
20,342,780
2,053,839
800,245
100,123
23,296,987
142,432
208,240
506,842
43,590
901,104
Loan commitments given
3,776,768
3,665,153
128,603
14,805
211
3,808,772
20,539
7,482
3,961
22
32,004
Financial guarantees given
913,038
887,585
35,648
4,568
7
927,808
11,814
1,408
1,542
6
14,770
Other commitments given
1,174,462
1,127,354
44,064
8,260
-
1,179,678
3,170
1,140
906
-
5,216
Financial liabilities total
5,864,268
5,680,092
208,315
27,633
218
5,916,258
35,523
10,030
6,409
28
51,990
1
Interest bearing securities at fair value through other comprehensive income are recognized in the Consolidated statement of financial position as at fair value (see in Note 9). Loss allowances for securities at fair value
through other comprehensive income that are in Stage 1 and / or in Stage 2 is recognized in the Other comprehensive income. It is included in the accumulated loss allowance of this table showed above.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
98
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.1. Credit risk [continued]
37.1.1. Financial instruments by stages [continued]
Gross carrying amount and accumulated loss allowance of financial assets at amortized cost and of interest bearing securities at fair value through other comprehensive
income and financial commitments and provision on them by stages as at 31 December 2020:
Gross carrying amount / Notinal value
Accumulated loss allowance / Provision
2020
Carrying
amount /
Exposure
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
Placements with other banks
1,148,743
1,150,113
1
118
-
1,150,232
1,377
1
111
-
1,489
Repo receivables
190,849
191,141
-
-
-
191,141
292
-
-
-
292
Mortgage loans
3,311,651
2,729,387
522,312
174,137
70,809
3,496,645
10,486
29,970
101,972
42,566
184,994
Loans to medium
and large corporates
4,342,003
3,758,377
604,480
167,402
31,744
4,562,003
43,544
67,479
98,800
10,177
220,000
Consumer loans
2,689,621
2,317,004
397,170
318,448
13,988
3,046,610
42,050
75,111
232,138
7,690
356,989
Loans to micro
and small enterprises
521,578
391,810
141,197
34,721
4,105
571,833
5,671
17,982
24,654
1,948
50,255
Car-finance loans
362,425
292,973
71,576
8,370
3,219
376,138
1,732
3,746
5,735
2,500
13,713
Municipal loans
447,564
445,039
5,501
616
-
451,156
2,668
653
271
-
3,592
Loans at amortized cost
11,674,842
9,934,590
1,742,236
703,694
123,865
12,504,385
106,151
194,941
463,570
64,881
829,543
Finance lease receivable
1,051,140
857,452
183,719
33,606
965
1,075,742
4,141
8,103
12,188
170
24,602
Interest bearing securities at
fair value through other
comprehensive income
1
2,101,384
2,099,713
1,671
-
-
2,101,384
6,856
128
-
-
6,984
Securities at amortized cost
2,624,920
2,629,778
-
799
-
2,630,577
4,858
-
799
-
5,657
Financial assets total
18,791,878
16,862,787
1,927,627
738,217
124,830
19,653,461
123,675
203,173
476,668
65,051
868,567
Loan commitments given
3,151,051
3,034,782
141,527
5,827
-
3,182,136
19,914
8,632
2,539
-
31,085
Financial guarantees given
796,961
777,513
28,646
5,065
-
811,224
10,044
1,450
2,769
-
14,263
Other commitments given
954,544
931,515
28,214
4,277
-
964,006
7,339
973
1,150
-
9,462
Financial liabilities total
4,902,556
4,743,810
198,387
15,169
-
4,957,366
37,297
11,055
6,458
-
54,810
1
Interest bearing securities at fair value through other comprehensive income are recognized in the Consolidated statement of financial position as at fair value (see in Note 9). Loss allowances for securities at fair
value through other comprehensive income that are in Stage 1 and / or in Stage 2 is recognized in the Other comprehensive income. It is included in the accumulated loss allowance of this table showed above.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
99
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.1. Credit risk [continued]
37.1.2. Movement table of loss allowance / provision on financial instruments
Movement of loss allowance on financial assets at amortized cost and on interest bearing securities at fair value through other comprehensive income and of provision of
financial commitments as at 31 December 2021:
2021
Opening
balance
Modi-
fication
Increases
due to
origination
and
acquisition
Decreases due
to
derecognition
Transfers
between
stages (net)
Changes due to
change in credit
risk (net)
Changes due to
modifications
without
derecognition
(net)
Decrease in loss
allowance
account due to
write-offs
Other
adjustments
Closing
balance
Stage 1
123,675
-
141,894
(37,619)
(103,930)
25,663
(4,885)
(102)
(2,264)
142,432
Placements with other banks
1,377
-
24,635
(4,383)
-
(18,854)
-
-
191
2,966
Repo receivables
292
-
667
-
-
(669)
-
-
-
290
Loans at amortized cost
106,151
-
109,970
(29,761)
(91,303)
33,215
(4,442)
(102)
(3,339)
120,389
Finance lease receivables
4,141
-
2,643
(255)
(12,106)
10,426
(443)
-
26
4,432
Interest bearing securities at fair value through
other comprehensive income and securities
at amortized cost
11,714
-
3,979
(3,220)
(521)
1,545
-
-
858
14,355
Stage 2
203,173
-
29,705
(21,813)
9,826
(27,800)
8,202
(498)
7,445
208,240
Placements with other banks
1
-
-
-
-
-
-
(1)
-
-
Repo receivables
-
-
-
-
-
-
-
-
-
-
Loans at amortized cost
194,941
(1,281)
26,947
(21,200)
3,766
(23,004)
8,550
(497)
7,410
195,632
Finance lease receivables
8,103
-
2,696
(613)
5,539
(4,229)
(348)
(8)
11,140
Interest bearing securities at fair value through
other comprehensive income and securities
at amortized cost
128
1,281
62
-
521
(567)
-
-
43
1,468
Stage 3
476,668
-
19,133
(44,871)
94,104
21,425
8,856
(69,523)
1,050
506,842
Placements with other banks
111
-
-
-
-
46
-
(240)
111
28
Repo receivables
-
-
-
-
-
-
-
-
-
-
Loans at amortized cost
463,570
-
17,649
(43,539)
87,537
25,360
9,852
(67,453)
(405)
492,571
Finance lease receivables
12,188
-
1,484
(1,332)
6,567
(3,981)
(996)
(1,022)
1,335
14,243
Interest bearing securities at fair value through
other comprehensive income and securities
at amortized cost
799
-
-
-
-
-
-
(808)
9
-
Loss allowance on financial assets subtotal
803,516
-
190,732
(104,303)
-
19,288
12,173
(70,123)
6,231
857,514
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
100
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.1. Credit risk [continued]
37.1.2. Movement table of loss allowance / provision on financial instruments [continued]
Movement of loss allowance on financial assets at amortized cost and on interest bearing securities at fair value through other comprehensive income and of provision of
financial commitments as at 31 December 2021 [continued]:
2021
Opening
balance
Modi-
fication
Increases
due to
origination
and
acquisition
Decreases due
to
derecognition
Transfers
between
stages (net)
Changes due to
change in credit
risk (net)
Changes due to
modifications
without
derecognition
(net)
Decrease in loss
allowance
account due to
write-offs
Other
adjustments
Closing
balance
POCI
65,051
-
-
(2,929)
-
(17,138)
(129)
(4,370)
3,105
43,590
Placements with other banks
-
-
-
(2,929)
-
6,004
(129)
(4,370)
1,424
-
Repo receivables
-
-
-
-
-
-
-
-
-
-
Loans at amortized cost
64,881
-
-
-
-
(23,142)
-
-
1,663
43,402
Finance lease receivables
170
-
-
-
-
-
-
-
18
188
Interest bearing securities at fair value through
other comprehensive income and securities
at amortized cost
-
-
-
-
-
-
-
-
-
-
Loss allowance on financial assets total
868,567
-
190,652
(90,565)
-
2,150
12,044
(74,493)
(7,251)
901,104
Loan commitments and financial guarantees
given - stage 1
37,297
-
23,514
(5,522)
1,446
(20,069)
(1,031)
-
(112)
35,523
Loan commitments and financial guarantees
given - stage 2
11,055
-
3,804
(791)
(2,173)
(2,216)
436
-
(85)
10,030
Loan commitments and financial guarantees
given - stage 3
6,458
-
932
(1,337)
727
196
(65)
-
(502)
6,409
Loan commitments and financial guarantees
given - poci
-
-
31
(4)
-
3
(1)
-
(1)
28
Provision on financial liabilities total
54,810
-
28,281
(7,654)
-
(22,086)
(661)
-
(700)
51,990
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
101
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.1. Credit risk [continued]
37.1.2. Movement table of loss allowance / provision on financial instruments [continued]
Movement of loss allowance on financial assets at amortized cost and on interest bearing securities at fair value through other comprehensive income and of provision of
financial commitments as at 31 December 2020:
2020
Opening
balance
Increases
due to
origination
and
acquisition
Decreases due
to
derecognition
Transfers
between
stages (net)
Changes due to
change in credit
risk (net)
Changes due to
modifications
without
derecognition
(net)
Decrease in loss
allowance
account due to
write-offs
Other
adjustments
Closing
balance
Stage 1
119,180
141,735
(42,569)
(185,201)
84,111
(4,294)
(56)
10,769
123,675
Placements with other banks
451
10,430
(263)
-
(12,805)
-
-
3,564
1,377
Repo receivables
62
306
-
-
(76)
-
-
-
292
Loans at amortized cost
109,921
125,137
(40,604)
(183,599)
92,372
(4,132)
(55)
7,111
106,151
Finance lease receivables
3,805
1,884
(739)
(1,602)
1,034
(162)
(1)
(78)
4,141
Interest bearing securities at fair value through
other comprehensive income and securities
at amortized cost
4,941
3,978
(963)
-
3,586
-
-
172
11,714
Stage 2
68,778
57,383
(15,678)
83,013
3,297
6,130
(98)
348
203,173
Placements with other banks
5
-
-
-
-
-
-
(4)
1
Repo receivables
-
-
-
-
-
-
-
-
-
Loans at amortized cost
66,390
53,445
(15,537)
81,777
2,802
6,208
(98)
(46)
194,941
Finance lease receivables
2,383
3,938
(141)
1,236
367
(78)
-
398
8,103
Interest bearing securities at fair value through
other comprehensive income and securities
at amortized cost
-
-
-
-
128
-
-
-
128
Stage 3
464,313
119,894
(99,345)
99,117
(15,385)
364
(92,476)
186
476,668
Placements with other banks
22
-
-
-
45
-
-
44
111
Repo receivables
-
-
-
-
-
-
-
-
-
Loans at amortized cost
456,246
117,198
(98,810)
98,813
(15,913)
373
(92,226)
(2,111)
463,570
Finance lease receivables
7,320
2,696
(535)
304
483
(9)
(250)
2,179
12,188
Interest bearing securities at fair value through
other comprehensive income and securities
at amortized cost
725
-
-
-
-
-
-
74
799
Loss allowance on financial assets subtotal
652,271
319,012
(157,592)
(3,071)
72,023
2,200
(92,630)
11,303
803,516
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
102
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.1. Credit risk [continued]
37.1.2. Movement table of loss allowance / provision on financial instruments [continued]
Movement of loss allowance on financial assets at amortized cost and on interest bearing securities at fair value through other comprehensive income and of provision of
financial commitments as at 31 December 2020 [continued]:
2020
Opening
balance
Increases
due to
origination
and
acquisition
Decreases due
to
derecognition
Transfers
between
stages (net)
Changes due to
change in credit
risk (net)
Changes due to
modifications
without
derecognition
(net)
Decrease in loss
allowance
account due to
write-offs
Other
adjustments
Closing
balance
POCI
51,844
16,933
(11,752)
3,071
1,527
489
(735)
3,674
65,051
Placements with other banks
-
-
-
-
-
-
-
-
-
Repo receivables
-
-
-
-
-
-
-
-
-
Loans at amortized cost
51,762
16,933
(11,752)
3,009
1,501
489
(735)
3,674
64,881
Finance lease receivables
82
-
-
62
26
-
-
-
170
Interest bearing securities at fair value through
other comprehensive income and securities
at amortized cost
-
-
-
-
-
-
-
-
-
Loss allowance on financial assets total
704,115
335,945
(169,344)
-
73,550
2,689
(93,365)
14,977
868,567
Loan commitments and financial guarantees
given - stage 1
36,497
20,712
(2,118)
(900)
(15,344)
(453)
(1,785)
688
37,297
Loan commitments and financial guarantees
given - stage 2
2,728
3,984
(458)
351
4,474
237
-
(261)
11,055
Loan commitments and financial guarantees
given - stage 3
7,508
1,071
(570)
549
(3,545)
257
-
1,188
6,458
Provision on financial liabilities total
46,733
25,767
(3,146)
-
(14,415)
41
(1,785)
1,615
54,810
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
103
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.1. Credit risk [continued]
37.1.3. Loan portfolio by internal ratings
2021
Gross carrying amount
Internal rating grade
Stage 1
Stage 2
Stage 3
POCI
Total
Low risk grade (1-4)
7,644,341
631,138
-
2,921
8,278,400
Medium risk grade (5-7)
4,692,656
869,200
-
46,708
5,608,564
High risk grade (8-9)
289,030
526,928
-
2,563
818,521
Non performing
-
4,175
800,217
47,931
852,323
Total loans at amortized cost
and finance lease receivable
12,626,027
2,031,441
800,217
100,123
15,557,808
2021
Accumulated loss allowance
Internal rating grade
Stage 1
Stage 2
Stage 3
POCI
Total
Low risk grade (1-4)
52,654
42,988
-
129
95,771
Medium risk grade (5-7)
57,421
81,894
-
13,009
152,324
High risk grade (8-9)
14,746
78,111
-
375
93,232
Non performing
-
3,779
506,814
30,077
540,670
Total loans at amortized cost
and finance lease receivable
124,821
206,772
506,814
43,590
881,997
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
104
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.1.4. Loan portfolio by countries
An analysis of the non-qualified and qualified gross loan portfolio by country is as follows:
2021
2020
Country
Gross amount of loan,
finance lease receivable
at amortized cost,
placement with other
banks and repo
receivable portfolio
Loss
allowance
Gross amount of loan,
finance lease receivable
at amortized cost,
placement with other
banks and repo
receivable portfolio
Loss
allowance
Hungary
5,528,516
215,911
4,513,208
209,216
Bulgaria
2,972,390
206,233
2,722,998
202,018
Croatia
1,826,233
101,067
1,663,534
101,640
Serbia
1,729,147
47,085
1,557,129
48,429
Romania
1,076,696
57,665
915,030
52,016
Slovenia
981,307
16,244
905,881
14,022
Russia
812,070
137,920
626,269
133,293
Ukraine
684,030
52,678
449,503
50,393
Montenegro
385,342
24,930
376,351
23,440
France
182,850
725
231,122
645
Albania
233,391
10,551
185,711
8,243
Moldova
166,720
5,025
132,163
4,586
Germany
84,164
675
151,101
485
Belgium
80,434
328
49,401
119
Austria
40,426
201
54,009
58
Slovakia
80,117
319
74,614
225
The Netherlands
36,858
622
31,144
497
Switzerland
80,611
1,701
61,804
615
United Kingdom
21,209
1,763
21,692
1,282
United States of America
106,347
419
70,901
67
Luxembourg
33,251
1,271
25,062
46
Poland
19,203
239
2,006
119
Italy
10,558
239
25,614
164
Ireland
5,375
106
14,053
211
Cyprus
8,646
562
16,890
3,102
Denmark
339
16
5,817
15
Czech Republic
899
12
902
9
Canada
4,823
16
17,026
5
Australia
3,164
10
3,649
1
Greece
1,808
192
989
141
Turkey
1,810
95
1,567
93
Spain
1,095
25
996
55
Israel
1,174
15
455
5
Bosnia and Herzegovina
467
76
795
248
Sweden
810
63
536
54
Norway
334
23
7,525
39
Saudi Arabia
239
9
424
7
United Arab Emirates
532
30
388
31
Egypt
582
15
78
6
Kazakhstan
209
15
193
8
Iceland
1
-
56
56
Latvia
46
26
34
20
Other
1
2,782
164
2,880
202
Total
17,207,005
885,281
14,921,500
855,926
1
Other category as at 31 December 2021 mainly includes e.g.: Georgia, Japan, Saudi Arabia, Macedonia, Portugal, China, Brazil, Lithuania, Republic of South-
Africa, Algeria, Armenia, Belorussia, Finland, Tunisia, Morocco, South-Korea, Jordan, India, Iran, Estonia, Nigeria, Malta, Syria, Vietnam, Republic of
Pakistan, Kyrgyzstan and other countries.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
105
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.1. Credit risk [continued]
37.1.4. Loan portfolio by countries [continued]
2021
2020
Country
Loans at fair value
Hungary
1,067,830
798,981
Croatia
281
1,089
Bosnia-Herzegovina
-
2,535
Total
1,068,111
802,605
37.1.5. Loan portfolio classification by economic activities
Gross loan at amortized cost and finance lease
2021
2020
receivable portfolio by economic activities
Retail
7,392,496
6,575,162
Agriculture, forestry and fishing
607,122
508,175
Manufacturing, mining and quarrying
and other industry
1,721,170
1,436,038
Construction
593,682
481,402
Wholesale and retail trade, transportation and
storage accommodation and food service activities
2,474,616
2,133,063
Information and communication
195,561
155,055
Financial and insurance activities
268,748
217,982
Real estate activities
562,227
524,665
Professional, scientific, technical, administration
and support service activities
440,381
370,454
Public administration, defence, education,
human health and social work activities
416,634
401,932
Other services
885,171
776,199
Total gross loans and finance lease receivable
15,557,808
13,580,127
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
106
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.1. Credit risk [continued]
37.1.5. Loan portfolio classification by economic activities [continued]
Loss allowance on loans at amortized cost and
2021
2020
finance lease receivable by economic activities
Retail
523,065
493,759
Agriculture, forestry and fishing
17,547
15,013
Manufacturing, mining and quarrying
and other industry
60,054
57,804
Construction
19,382
18,170
Wholesale and retail trade, transportation and
storage accommodation and food service activities
92,934
84,141
Information and communication
4,880
4,457
Financial and insurance activities
12,798
14,773
Real estate activities
20,783
24,058
Professional, scientific, technical, administration
and support service activities
10,789
11,245
Public administration, defence, education,
human health and social work activities
4,310
4,821
Other services
115,455
125,904
Total loss allowance on loans and
finance lease receivable
881,997
854,145
37.1.6. Collateral
The values of collateral received and held by the Group by type are as follows (total collateral). The collateral
covers loans as well as off-balance sheet exposures.
Types of collateral
2021
2020
Mortgages
13,367,891
12,346,773
Guarantees and warranties
1,296,415
178,139
Guarantees of state or organizations owned by state
1,070,479
731,529
Assignments (revenue or other receivables)
422,030
486,670
Securities
237,076
156,857
Cash deposits
187,934
163,489
Other
2,211,671
2,159,894
Total
18,793,496
16,223,351
The values of collateral received and held by the Group by type are as follows (to the extent of the exposures).
The collaterals cover loans as well as off-balance sheet exposures.
Types of collateral
2021
2020
Mortgages
6,479,871
5,902,854
Guarantees of state or organizations owned by state
832,432
190,700
Guarantees and warranties
799,775
984,532
Assignments (revenue or other receivables)
290,066
344,716
Securities
156,715
115,269
Cash deposits
76,338
67,158
Other
1,295,740
1,244,771
Total
9,930,937
8,850,000
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
107
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.1. Credit risk [continued]
37.1.6. Collateral [continued]
The coverage level of the loan portfolio (total collateral) increased by 2.74% and the coverage level to the extent
of the exposures was almost the same as at 31 December 2021.
The values of collateral given and held by the Group according to which financial asset is recognized as
collateral are as follows:
Financial assets as collaterals recognized
in the consolidated statement of financial position
2021
2020
Cash, amounts due from banks and balances
with the National Banks
15,791
-
Placements with other banks
9,590
830
Repo receivables
35,826
-
Securities at fair value through other comprehensive income
16,546
54,948
Securities at amortized cost
42,233
11,071
Loans at amortized cost
1,089,614
-
Finance lease receivables
32,553
12,561
Other financial assets
-
3,443
Total
1,242,153
82,853
37.1.7. Restructured loans
2021
2020
Gross
portfolio
Loss
allowance
Gross
portfolio
Loss
allowance
Retail mortgage loans
269,700
(8,779)
15,159
(2,754)
Loans to medium and large corporations
276,796
(44,197)
58,271
(12,260)
Retail consumer loans
149,469
(32,850)
31,108
(14,714)
Loans to micro and small enterprises
57,403
(7,668)
11,782
(1,237)
Municipal
75
(8)
41
(16)
Other loans
27,092
(2,555)
4,412
(791)
Total
780,535
(96,057)
120,773
(31,772)
The forborne definition used by the Group is based on EU 2015/227 regulation.
Restructuring (forbearance) is a modification of the contract – initiated by either the client or the bank – that
provides a concession or allowance towards the client in respect to the client’s current or future financial
difficulties. The table of restructured loans contains exposures classified as performing forborne. An exposure is
considered performing forborne if the conditions of the non-performing status are not met at the time of the
restructuring, or the exposure fulfilled the requirements of the minimum one-year cure period as non-performing
forborne.
The significant increase of the performing forborne loan volume is due to the forborne classification rules set by
the NBH executive circulars of 21 January 2021 and 25 November 2021 for loans participating in phase 2 and
phase 3 of the moratoria. The loan volume classified as performing forborne exclusively due to moratoria
participation is in the Group: HUF 544 bn (in OTP Core: HUF 503 bn, in OTP Bank: HUF 290 bn, in OTP
Mortgage Bank Ltd.: HUF 208 bn, in OTP Building Society Ltd.: HUF 5 bn). For the affected portfolios the
earliest possible exit from the forborne status is 6 months after the exit from moratorium for retail and 2 years
after the exit from moratorium for corporate exposures.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
108
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.1. Credit risk [continued]
37.1.8. Financial instruments by rating categories
1
Securities held for trading as at fair value through profit or loss as at 31 December 2021
2021
Aaa
Aa3
A1
A2
A3
Baa1
Baa2
Baa3
Ba1
Ba2
B1
B3
Not
rated
Total
Government bonds
-
-
-
16
-
18,747
26,024
11,282
10,156
31,306
-
-
-
97,531
Equity instruments and fund units
569
19
49
59
35
12
24
83
-
2
6
-
315
1,173
Corporate bonds
-
-
-
-
485
-
-
97
-
-
-
-
158
740
Discounted Treasury bills
-
-
-
-
-
-
869
-
-
-
-
54
-
923
Mortgage bonds
-
-
-
-
-
-
-
-
-
-
-
101
101
Other interest bearing securities
-
-
-
-
-
-
1,347
-
-
-
-
-
-
1,347
Other non-interest
bearing securities
561
-
-
-
-
-
-
-
-
-
-
-
1,134
1,695
Total
1,130
19
49
75
520
18,759
28,264
11,462
10,156
31,308
6
54
1,708
103,510
Non-trading securities mandatorily at fair value through profit or loss as at 31 December 2021
2021
Aa3
Baa3
Ba1
Not rated
Total
Non-trading equity instruments mandatorily at
fair value through profit or loss
-
-
7,811
37,083
44,894
Non-trading debt instruments mandatorily at
fair value through profit or loss
3,498
1,043
56
3,912
8,509
Total
3,498
1,043
7,867
40,995
53,403
1
Moody’s ratings
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
109
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.1. Credit risk [continued]
37.1.8. Financial instruments by rating categories
1
[continued]
Securities at fair value through other comprehensive income as at 31 December 2021
2021
Aaa
Aa2
Aa3
A1
A2
A3
Baa1
Baa2
Baa3
Ba1
Ba2
Ba3
B1
B3
Caa1
Not
rated
Total
Government bonds
21,728
7,849
-
17,808
28,492
99,425
203,172
495,231
372,198
188,395
162,477
-
76,732
91,487
178
-
1,765,172
Corporate bonds
-
-
-
-
-
2,896
-
6,152
44,606
4,144
12,630
-
-
-
-
18,091
88,519
Mortgage bonds
-
-
-
47,568
-
-
-
-
-
-
-
-
-
-
-
15,504
63,072
Discounted Treasury bills
-
-
-
-
-
-
-
44,924
-
51,701
-
-
-
-
-
-
96,625
National Bank of
Hungary bonds
-
-
-
-
-
-
-
-
-
-
-
109,774
-
-
-
-
109,774
Interest bearing treasury bills
-
-
-
-
-
-
-
63,115
-
-
-
-
-
-
-
-
63,115
Other securities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,257
3,257
Non-trading
equity instruments
-
-
6,112
349
-
-
-
-
305
-
-
-
-
-
-
28,210
34,976
Total
21,728
7,849
6,112
65,725
28,492
102,321
203,172
609,422
417,109
244,240
175,107
109,774
76,732
91,487
178
65,062
2,224,510
Securities at amortized cost as at 31 December2021
2021
Aaa
Aa2
A1
A2
A3
Baa1
Baa2
Baa3
Ba1
Ba2
B1
B3
Not
rated
Total
Government bonds
185,261
45,392
20,043
-
31,892
172,502
2,858,111
174,929
26,544
12,617
25,587
91,423
-
3,644,301
Corporate bonds
-
-
-
-
-
-
-
32,013
-
-
-
-
138,862
170,875
Discounted Treasury bills
-
-
-
-
-
-
6
-
-
-
-
15,696
-
15,702
Mortgage bonds
-
-
12,992
-
-
-
-
47
-
-
-
-
11,282
24,321
Other securities
298
-
-
8,210
-
7,343
3,682
-
-
-
-
-
16,603
36,136
Total
185,559
45,392
33,035
8,210
31,892
179,845
2,861,799
206,989
26,544
12,617
25,587
107,119
166,747
3,891,335
1
Moody’s ratings
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
110
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.1. Credit risk [continued]
37.1.8. Financial instruments by rating categories
1
[continued]
Securities held for trading as at fair value through profit or loss as at 31 December 2020
2020
Aaa
A2
A3
Baa1
Baa2
Baa3
Ba1
Ba2
Ba3
B1
Not
rated
Total
Government bonds
-
-
-
9,138
2,155
5,734
7,247
-
13,762
-
-
38,036
Discounted Treasury bills
-
-
-
-
-
1,233
-
-
11,428
-
60
12,721
Equity instruments
and fund units
535
36
33
45
7
36
-
7
-
5
3,036
3,740
Other interest bearing securities
-
-
495
-
-
998
-
-
-
-
582
2,075
Total
535
36
528
9,183
2,162
8,001
7,247
7
25,190
5
3,678
56,572
Non-trading securities mandatorily at fair value through profit or loss as at 31 December 2020
2020
Aa3
A1
Baa3
Not rated
Total
Non-trading equity instruments mandatorily at
fair value through profit or loss
-
-
-
46,063
46,063
Non-trading debt instruments mandatorily at
fair value through profit or loss
2,794
-
1,457
7,263
11,514
Debt securities designated
at fair value through profit or loss
-
2,235
-
-
2,235
Total
2,794
2,235
1,457
53,326
59,812
1
Moody’s ratings
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
111
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.1. Credit risk [continued]
37.1.8. Financial instruments by rating categories
1
[continued]
Securities at fair value through other comprehensive income as at 31 December 2020
2020
Aaa
Aa2
Aa3
A2
A3
Baa1
Baa2
Baa3
Ba1
Ba2
Ba3
B1
B3
Caa1
C
Not
rated
Total
Government bonds
20,639
8,215
-
37,195
120,112
192,994
-
959,133
182,685
-
200,478
18,166
69,248
145
46,124
-
1,855,134
Mortgage bonds
-
-
-
63,577
-
-
-
-
-
-
-
-
-
-
-
24,695
88,272
Corporate bonds
-
-
-
-
4,815
-
2,336
39,179
4,997
979
12,532
-
-
-
-
16,782
81,620
Discounted Treasury bills
-
-
-
-
-
-
-
9,957
66,401
-
-
-
-
-
-
-
76,358
Non-trading
equity instruments
-
-
3,875
-
-
47
-
898
-
-
-
-
-
-
-
30,505
35,325
Total
20,639
8,215
3,875
100,772
124,927
193,041
2,336
1,009,167
254,083
979
213,010
18,166
69,248
145
46,124
71,982
2,136,709
Securities at amortized cost as at 31 December 2020
2020
Aa2
A1
A3
Baa1
Baa3
Ba1
Ba3
B1
B3
Not
rated
Total
Government bonds
45,975
10,939
38,987
38,573
2,306,821
9,922
4,147
9,961
74,743
-
2,540,068
Corporate bonds
-
-
-
-
14,605
10,517
-
-
-
49,372
74,494
Discounted Treasury bills
-
-
-
-
-
-
-
-
10,358
-
10,358
Total
45,975
10,939
38,987
38,573
2,321,426
20,439
4,147
9,961
85,101
49,372
2,624,920
1
Moody’s ratings
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
112
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.2. Maturity analysis of assets, liabilities and liquidity risk
Liquidity risk is a measure of the extent to which the Group may be required to raise funds to meet its
commitments associated with financial instruments. The Group maintains its liquidity profiles in accordance
with regulations prescribed by the NBH.
The essential aspect of the liquidity risk management strategy is to identify all relevant systemic and
idiosyncratic sources of liquidity risk and to measure the probability and severity of such events. During liquidity
risk management the Group considers the effect of liquidity risk events caused by reasons arising in the bank
business line (deposit withdrawal), the national economy (exchange rate shock yield curve shock) and the global
financial system (capital market shock).
In line with the Group’s risk management policy liquidity risks are measured and managed on multiply hierarchy
levels and applying integrated unified VaR based methodology. The basic requirement is that the Group must
keep high quality liquidity reserves which means it can fulfill all liabilities when they fall due without material
additional costs.
The liquidity reserves can be divided in two parts. There are separate decentralized liquid asset portfolios at
subsidiary level and a centralized flexible liquidity pool at a Group level. The reserves at subsidiary levels are
held to cover the relevant shocks of the subsidiaries which may arise in local currencies (deposit withdrawal,
local capital market shock, unexpected business expansion), while the centralized liquidity pool is held to cover
the Bank’s separate shocks (deposit-, yield curve- and exchange rate shocks) and all group member’s potential
shocks that may arise in foreign currencies (deposit withdrawal, capital market shock).
The recalculation of shocks is made at least quarterly while the recalibration of shock measurement models and
review of the risk management methodology is an annual process. The monitoring of liquidity reserves for both
centralized and decentralized liquid asset portfolio has been built into the daily reporting process.
Due to the balance sheet adjustment process (deleveraging) experienced in the last few years, the liquidity
reserves of the Group increased significantly while the liquidity risk exposure has decreased considerably.
Currently the (over)coverage of potential liquidity risk exposure by high quality liquid assets is high. There were
no material changes in the liquidity risk management process for the year ended 31 December 2021.
The contractual amounts disclosed in the maturity analyses are the contractual undiscounted cash-flows like
gross finance lease obligations (before deducting finance charges); prices specified in forward agreements to
purchase financial assets for cash; net amounts for pay-floating/receive-fixed interest rate swaps for which net
cash-flows are exchanged; contractual amounts to be exchanged in a derivative financial instrument for which
gross cash-flows are exchanged; gross loan commitments.
Such undiscounted cash-flows differ from the amount included in the Consolidated Statement of Financial
Position because the amount in that statement is based on discounted cash-flows. When the amount payable is
not fixed, the amount disclosed is determined by reference to the conditions existing at the end of the reporting
period. For example, when the amount payable varies with changes in an index, the amount disclosed may be
based on the level of the index at the end of the period.
The following tables provide an analysis of assets and liabilities about the non-discounted cash-flow into
relevant maturity groupings based on the remaining period from the balance sheet date to the contractual
maturity date. It is presented under the most prudent consideration of maturity dates where options or repayment
schedules allow for early repayment possibilities.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
113
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.2. Maturity analysis of assets, liabilities and liquidity risk [continued]
2021
Within 3
months
Within one year
and over 3 months
Within 5 years
and over one year
Over 5 years
Without
maturity
Total
Cash, amounts due from banks and balances with the National Banks
2,557,092
51
-
-
-
2,557,143
Placements with other banks, net of loss allowance for placements
1,314,523
61,455
145,180
67,764
-
1,588,922
Repo receivables
61,373
-
-
-
-
61,373
Trading securities at fair value through profit or loss
29,714
21,975
37,345
13,530
1,738
104,302
Non-trading instruments mandatorily at fair value through profit or loss
-
-
9,769
19
43,615
53,403
Securities at fair value through other comprehensive income
295,977
249,131
1,114,027
544,167
40,798
2,244,100
Securities at amortized cost
34,190
482,530
2,146,652
1,202,747
-
3,866,119
Loans at amortized cost
1,827,131
2,599,854
5,897,202
4,742,146
136,975
15,203,308
Finance lease receivable
124,074
307,745
770,154
48,636
-
1,250,609
Loans measured at fair value through profit or loss
30,164
31,662
221,069
835,014
-
1,117,909
Associates and other investments
-
-
-
-
79,736
79,736
Other financial assets
1
130,133
3,244
6,265
3,270
9,804
152,716
TOTAL ASSETS
6,404,371
3,757,647
10,347,663
7,457,293
312,666
28,279,640
Amounts due to banks, the National Governments,
deposits from the National Banks and other banks
332,330
173,171
704,505
366,025
-
1,576,031
Repo liabilities
79,045
-
2
-
-
79,047
Financial liabilities designated at fair value through profit or loss
530
1,253
4,421
34,980
-
41,184
Deposits from customers
19,593,347
997,565
336,246
148,580
-
21,075,738
Liabilities from issued securities
6,702
2,664
303,223
159,139
-
471,728
Leasing liabilities
3,060
9,058
27,307
15,530
-
54,955
Other financial liabilities
1
465,022
26,311
10,312
674
6,235
508,554
Subordinated bonds and loans
2,886
-
7,495
269,698
-
280,079
TOTAL LIABILITIES
20,482,922
1,210,022
1,393,511
994,626
6,235
24,087,316
NET POSITION
(14,078,551)
2
2,547,625
8,954,152
6,462,667
298,142
4,184,035
1
Without derivative financial instruments
2
Analysis for net position of assets and liabilities are calculated in accordance with IFRS 7, therefore certain financial instruments are presented in the earliest period in which the Group could be required to pay. On-demand
deposits are presented in the earliest (within 3 month) period category, however based on the Management’s discretion the Group has appropriate liquidity reserves as maintenance and management of liquidity risk.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
114
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.2. Maturity analysis of assets, liabilities and liquidity risk [continued]
2021
Within 3
months
Within one year
and over 3 months
Within 5 years
and over one year
Over 5 years
Without
maturity
Total
Receivables from derivative financial instruments held for trading
4,396,050
1,993,311
302,924
151,959
-
6,844,244
Liabilities from derivative financial instruments held for trading
(4,349,598)
(1,991,763)
(296,648)
(146,398)
-
(6,784,407)
Net position of financial instruments
held for trading
46,452
1,548
6,276
5,561
-
59,837
Receivables from derivative financial instruments
designated as hedge accounting
5,693
37,815
580,489
16,195
-
640,192
Liabilities from derivative financial instruments
designated as hedge accounting
(7,765)
(47,374)
(595,938)
(16,417)
-
(667,494)
Net position of financial instruments designated
as hedge accounting
(2,072)
(9,559)
(15,449)
(222)
-
(27,302)
Net position of derivative financial instruments total
44,380
(8,011)
(9,173)
5,339
-
32,535
Commitments to extend credit
3,749,199
234,503
74,915
6,385
-
4,065,002
Bank guarantees
532,445
347,448
307,030
106,918
-
1,293,841
Confirmed letters of credit
61,124
2,937
853
163
-
65,077
Factoring loan commitment
464,341
-
-
-
-
464,341
Off-balance sheet commitments
4,807,109
584,888
382,798
113,466
-
5,888,261
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
115
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.2. Maturity analysis of assets, liabilities and liquidity risk [continued]
2020
Within 3
months
Within one year
and over 3 months
Within 5 years
and over one year
Over 5 years
Without
maturity
Total
Cash, amounts due from banks and balances with the National Banks
2,370,130
36
41,471
20,675
-
2,432,312
Placements with other banks, net of loss allowance for placements
902,977
77,646
134,780
34,502
635
1,150,540
Repo receivables
191,143
-
-
-
-
191,143
Trading securities at fair value through profit or loss
14,546
16,163
15,093
8,032
777
54,611
Non-trading instruments mandatorily at fair value through profit or loss
28
-
-
9,590
42,879
52,497
Debt securities designated at fair value through profit or loss
2,235
-
-
-
-
2,235
Securities at fair value through other comprehensive income
136,746
278,017
984,596
644,612
31,688
2,075,659
Securities at amortized cost
121,993
47,251
1,577,822
819,600
-
2,566,666
Loans at amortized cost
1,720,314
2,130,394
5,190,401
4,219,165
-
13,260,274
Finance lease receivable
127,856
274,143
659,682
42,439
-
1,104,120
Loans measured at fair value through profit or loss
24,352
25,193
159,934
607,274
-
816,753
Associates and other investments
-
-
-
-
58,307
58,307
Other financial assets
1
134,672
3,520
4,551
1,902
14,376
159,021
TOTAL ASSETS
5,746,992
2,852,363
8,768,330
6,407,791
148,662
23,924,138
Amounts due to banks, the National Governments,
deposits from the National Banks and other banks
165,619
86,991
695,707
254,897
-
1,203,214
Repo liabilities
8,379
-
109,612
-
-
117,991
Financial liabilities designated at fair value through profit or loss
3,159
1,421
8,350
21,201
-
34,131
Deposits from customers
15,065,456
2,300,365
305,074
221,028
-
17,891,923
Liabilities from issued securities
1,971
130,445
269,133
65,841
-
467,390
Leasing liabilities
2,859
8,163
27,776
11,169
-
49,967
Other financial liabilities
1
374,525
19,447
3,239
89
10,496
407,796
Subordinated bonds and loans
2,843
-
6,838
267,083
-
276,764
TOTAL LIABILITIES
15,624,811
2,546,832
1,425,729
841,308
10,496
20,449,176
NET POSITION
(9,877,819)
2
305,531
7,342,601
5,566,483
138,166
3,474,962
1
Without derivative financial instruments
2
Analysis for net position of assets and liabilities are calculated in accordance with IFRS 7, therefore certain financial instruments are presented in the earliest period in which the Group could be required to pay. On-demand
deposits are presented in the earliest (within 3 month) period category, however based on the Management’s discretion the Group has appropriate liquidity reserves as maintenance and management of liquidity risk.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
116
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.2. Maturity analysis of assets, liabilities and liquidity risk [continued]
2020
Within 3
months
Within one year
and over 3 months
Within 5 years
and over one year
Over 5 years
Without
maturity
Total
Receivables from derivative financial instruments held for trading
594,663
3,080,660
532,012
246,922
-
4,454,257
Liabilities from derivative financial instruments held for trading
(473,510)
(3,302,801)
(441,330)
(200,525)
(31)
(4,418,197)
Net position of financial instruments
121,153
(222,141)
90,682
46,397
(31)
36,060
held for trading
Receivables from derivative financial instruments
designated as hedge accounting
186
8,082
169,339
173,109
-
350,716
Liabilities from derivative financial instruments
designated as hedge accounting
(41,382)
(118,914)
(468,378)
(88,720)
-
(717,394)
Net position of financial instruments designated
as hedge accounting
(41,196)
(110,832)
(299,039)
84,389
-
(366,678)
Net position of derivative financial instruments total
79,957
(332,973)
(208,357)
130,786
(31)
(330,618)
Commitments to extend credit
2,375,279
609,431
350,195
85,813
-
3,420,718
Bank guarantees
225,440
280,625
416,293
137,739
99,602
1,159,699
Confirmed letters of credit
13,670
8,916
1,476
11,377
276
35,715
Factoring loan commitment
305,269
-
-
-
-
305,269
Off-balance sheet commitments
2,919,658
898,972
767,964
234,929
99,878
4,921,401
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
117
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.3. Net foreign currency position and foreign currency risk
2021
USD
EUR
CHF
Egyéb
Total
Assets
1,163,960
7,661,460
88,639
7,677,060
16,591,119
Liabilities
(1,013,972)
(6,769,472)
(107,902)
(5,971,941)
(13,863,287)
Derivative financial
instruments
(186,774)
(371,225)
32,021
(101,951)
(627,929)
Net position
(36,786)
520,763
12,758
1,603,168
2,099,903
2020
USD
EUR
CHF
Egyéb
Total
Assets
717,819
7,003,090
73,344
6,435,309
14,229,562
Liabilities
(878,916)
(5,926,666)
(87,551)
(5,195,693)
(12,088,826)
Derivative financial
instruments
259,993
(921,666)
32,905
(147,436)
(776,204)
Net position
98,896
154,758
18,698
1,092,180
1,364,532
The table above provides an analysis of the main foreign currency exposures of the Group that arise in the non-
functional currency of the entities constituting the Group. The remaining foreign currencies are shown within
‘Others’. ‘Others’ category contains mainly foreign currencies in RON, RSD, HRK, UAH, RUB, BGN, ALL
and MDL. The Group monitors its foreign exchange position for compliance with the regulatory requirements of
the National Banks and its own limit system established in respect of limits on open positions. The measurement
of the open foreign currency position of the Group involves monitoring the “VaR” limit on the foreign exchange
exposure of the Group. The derivative financial instruments detailed in the table above are presented at fair
value.
37.4. Interest rate risk management
Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest
rates. The length of time for which the rate of interest is fixed on a financial instrument, therefore, indicates to
what extent it is exposed to interest rate risk.
The majority of the interest bearing assets and liabilities of the Group are structured to match either short-term
assets and short-term liabilities, or long-term assets and liabilities with repricing opportunities within one year,
or long-term assets and corresponding liabilities where repricing is performed simultaneously.
In addition, the significant spread existing between the different types of interest bearing assets and liabilities
enables the Group to benefit from a high level of flexibility in adjusting for its interest rate matching and interest
rate risk exposure.
The following table presents the interest repricing dates of the Group. Variable yield assets and liabilities have
been reported in accordance with their next repricing date. Fixed income assets and liabilities have been reported
in accordance with their maturity.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
118
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.4. Interest rate risk management [continued]
As at 31 Deceember 2021
ASSETS
Within 1 month
Over 1 month and
Within 3 months
Over 3 months and
Within 12 months
Over 1 year and
Within 2 years
Over 2 years
Non-interest-bearing
Total
Total
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
Cash, amounts due from banks
and balances with the
National Banks
37,712
821,501
-
28,183
-
12,391
-
6,697
-
12,423
133,248
1,503,880
170,960
2,385,075
2,556,035
fixed rate
36,376
661,318
-
28,183
-
12,391
-
6,697
-
12,423
-
-
36,376
721,012
757,388
variable rate
1,336
160,183
-
-
-
-
-
-
-
-
-
-
1,336
160,183
161,519
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
133,248
1,503,880
133,248
1,503,880
1,637,128
Placements with other banks,
net of allowance for placements
losses
435,888
360,795
67,304
109,822
30,509
50,770
49,632
27,234
405,437
17,202
24,415
5,853
1,013,185
571,676
1,584,861
fixed rate
271,734
134,382
449
96,918
1,007
50,238
49,632
27,234
254,065
17,202
-
-
576,887
325,974
902,861
variable rate
164,154
226,413
66,855
12,904
29,502
532
-
-
151,372
-
-
-
411,883
239,849
651,732
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
24,415
5,853
24,415
5,853
30,268
Repo receivables
33,638
21,535
-
5,828
-
-
-
-
-
-
-
51
33,638
27,414
61,052
fixed rate
33,638
21,535
-
5,828
-
-
-
-
-
-
-
-
33,638
27,363
61,001
variable rate
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
-
51
-
51
51
Trading instruments at fair
value through profit or loss
1,237
7,034
664
26,796
2,506
16,960
360
6,634
25,036
13,415
1,770
1,098
31,573
71,937
103,510
fixed rate
32
7,034
487
26,796
2,233
16,960
360
6,634
25,036
13,415
-
-
28,148
70,839
98,987
variable rate
1,205
-
177
-
273
-
-
-
-
-
-
-
1,655
-
1,655
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
1,770
1,098
1,770
1,098
2,868
Non-trading instruments
mandatorily at fair value
through profit or loss
-
-
-
-
-
-
-
-
-
-
28,074
25,329
28,074
25,329
53,403
fixed rate
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
variable rate
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
28,074
25,329
28,074
25,329
53,403
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
119
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.4. Interest rate risk management [continued]
As at 31 Deceember 2021 [continued]
ASSETS [continued]
Within 1 month
Over 1 month and
Within 3 months
Over 3 months and
Within 12 months
Over 1 year and
Within 2 years
Over 2 years
Non-interest-bearing
Total
Total
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
Securities at fair value through
other comprehensive income
205,473
291,988
22,420
92,258
97,202
202,157
40,289
177,681
362,610
697,456
(353)
35,329
727,641
1,496,869
2,224,510
fixed rate
157,136
291,987
6,897
92,258
88,628
202,157
40,289
177,681
395,460
684,739
-
-
688,410
1,448,822
2,137,232
variable rate
48,337
1
15,523
-
8,574
-
-
-
(32,850)
12,717
-
-
39,584
12,718
52,302
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
(353)
35,329
(353)
35,329
34,976
Securities at amortized cost
117
124,634
-
24,325
365,576
28,559
264,200
56,712
2,305,098
722,114
-
-
2,934,991
956,344
3,891,335
fixed rate
-
117,026
-
19,513
365,576
28,559
264,200
56,712
2,305,098
722,114
-
-
2,934,874
943,924
3,878,798
variable rate
117
7,608
-
4,812
-
-
-
-
-
-
-
-
117
12,420
12,537
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Loans at amortized cost, net of
allowance for loan losses
800,665
5,419,263
534,858
1,525,057
60,259
1,431,981
264,434
410,199
1,636,001
1,180,170
121,187
109,109
3,417,404
10,075,779
13,493,183
fixed rate
51,410
1,029,075
2,075
260,668
16,048
683,927
187,209
374,260
942,294
835,327
-
-
1,199,036
3,183,257
4,382,293
variable rate
749,255
4,390,188
532,783
1,264,389
44,211
748,054
77,225
35,939
693,707
344,843
-
-
2,097,181
6,783,413
8,880,594
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
121,187
109,109
121,187
109,109
230,296
Finance lease receivables
117,384
304,444
16,580
131,417
5,736
161,672
20,288
88,194
197,583
137,387
-
1,943
357,571
825,057
1,182,628
fixed rate
6,555
118,251
440
8,408
5,736
37,140
20,288
40,715
188,967
64,125
-
-
221,986
268,639
490,625
variable rate
110,829
186,193
16,140
123,009
-
124,532
-
47,479
8,616
73,262
-
-
135,585
554,475
690,060
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
-
1,943
-
1,943
1,943
Loans mandatorily at fair value
through profit or loss
27,185
281
11,172
-
73,893
-
29,473
-
926,107
-
-
-
1,067,830
281
1,068,111
fixed rate
2
-
-
-
-
-
-
-
-
-
-
-
2
-
2
variable rate
27,183
281
11,172
-
73,893
-
29,473
-
926,107
-
-
-
1,067,828
281
1,068,109
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Fair value adjustment of
derivative financial instruments
1,516,897
1,249,024
395,951
937,234
680,161
863,886
10,760
57,580
221,053
17,693
181,110
672,531
3,005,932
3,797,948
6,803,880
fixed rate
1,409,585
1,125,415
188,029
551,410
574,143
862,177
10,760
57,521
221,053
17,681
-
-
2,403,570
2,614,204
5,017,774
variable rate
107,312
123,609
207,922
385,824
106,018
1,709
-
59
-
12
-
-
421,252
511,213
932,465
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
181,110
672,531
181,110
672,531
853,641
Other financial assets
3,395
13,864
1,261
19
-
212
-
-
-
128
49,086
67,951
53,742
82,174
135,916
fixed rate
3,393
4,860
1,155
13
-
12
-
-
-
103
-
-
4,548
4,988
9,536
variable rate
2
9,004
106
6
-
200
-
-
-
25
-
-
108
9,235
9,343
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
49,086
67,951
49,086
67,951
117,037
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
120
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.4. Interest rate risk management [continued]
As at 31 Deceember 2021 [continued]
LIABILITIES
Within 1 month
Over 1 month and
Within 3 months
Over 3 months and
Within 12 months
Over 1 year and
Within 2 years
Over 2 years
Non-interest-bearing
Total
Total
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
Amounts due to banks, the
Hungarian Government,
deposits
from the National Bank of
Hungary and other banks
103,123
200,292
41,404
56,912
26,730
79,200
355,132
26,401
616,005
12,724
35,951
13,474
1,178,345
389,003
1,567,348
fixed rate
58,913
103,240
12,367
23,208
26,730
52,310
355,132
26,356
615,961
12,724
-
-
1,069,103
217,838
1,286,941
variable rate
44,210
97,052
29,037
33,704
-
26,890
-
45
44
-
-
-
73,291
157,691
230,982
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
35,951
13,474
35,951
13,474
49,425
Repo liabilities
49,726
29,321
-
-
-
-
-
-
-
-
-
-
49,726
29,321
79,047
fixed rate
49,726
29,321
-
-
-
-
-
-
-
-
-
-
49,726
29,321
79,047
variable rate
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Financial liabilities designated
at fair value through profit or
loss
20,133
-
-
-
-
-
-
-
-
-
21,051
-
41,184
-
41,184
fixed rate
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
variable rate
20,133
-
-
-
-
-
-
-
-
-
-
-
20,133
-
20,133
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
21,051
-
21,051
-
21,051
Deposits from customers
7,533,566
10,675,265
198,955
456,849
94,140
735,911
31,975
75,104
248,209
120,403
16,356
881,911
8,123,201
12,945,443
21,068,644
fixed rate
463,512
4,039,568
198,955
456,849
92,653
735,911
31,975
74,680
248,209
120,403
-
-
1,035,304
5,427,411
6,462,715
variable rate
7,070,054
6,635,697
-
-
1,487
-
-
424
-
-
-
-
7,071,541
6,636,121
13,707,662
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
16,356
881,911
16,356
881,911
898,267
Liabilities from issued securities
864
-
8,514
-
170,732
-
-
51
256,151
-
-
13
436,261
64
436,325
fixed rate
211
-
-
-
-
-
-
51
256,151
-
-
-
256,362
51
256,413
variable rate
653
-
8,514
-
170,732
-
-
-
-
-
-
-
179,899
-
179,899
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
-
13
-
13
13
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
121
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.4. Interest rate risk management [continued]
As at 31 Deceember 2021 [continued]
LIABILITIES [continued]
Within 1 month
Over 1 month and
Within 3 months
Over 3 months and
Within 12 months
Over 1 year and
Within 2 years
Over 2 years
Non-interest-bearing
Total
Total
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
Fair value adjustment of
derivative financial instruments
941,607
1,905,033
220,057
1,084,185
709,948
870,647
12,943
54,920
96,381
77,044
453,672
388,146
2,434,608
4,379,975
6,814,583
fixed rate
721,374
1,714,718
151,795
579,964
526,007
868,848
12,398
54,847
96,558
77,044
-
-
1,508,132
3,295,421
4,803,553
variable rate
220,233
190,315
68,262
504,221
183,941
1,799
545
73
(177)
-
-
-
472,804
696,408
1,169,212
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
453,672
388,146
453,672
388,146
841,818
Leasing liabilities
916
7,401
353
1,076
483
5,359
892
4,534
1,011
24,823
-
6,438
3,655
49,631
53,286
fixed rate
830
6,948
72
435
7
1,757
319
2,582
1,011
17,403
-
-
2,239
29,125
31,364
variable rate
86
453
281
641
476
3,602
573
1,952
-
7,420
-
-
1,416
14,068
15,484
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
-
6,438
-
6,438
6,438
Other financial liabilities
117,189
50,063
2,518
672
-
479
-
133
-
103
173,503
141,111
293,210
192,561
485,771
fixed rate
117,185
50,046
907
564
-
211
-
133
-
67
-
-
118,092
51,021
169,113
variable rate
4
17
1,611
108
-
268
-
-
-
36
-
-
1,615
429
2,044
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
173,503
141,111
173,503
141,111
314,614
Subordinated bonds and loans
-
-
-
85,551
-
186,225
-
-
-
6,514
-
44
-
278,334
278,334
fixed rate
-
-
-
-
-
-
-
-
-
6,514
-
-
-
6,514
6,514
variable rate
-
-
-
85,551
-
186,225
-
-
-
-
-
-
-
271,776
271,776
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
-
44
-
44
44
Net position
(5,587,533)
(4,253,012)
578,409
1,195,694
313,809
890,767
278,494
669,788
4,861,168
2,556,377
(161,996)
991,937
282,351
2,051,551
2,333,902
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
122
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.4. Interest rate risk management [continued]
As at 31 December 2020
ASSETS
Within 1 month
Over 1 month and
Within 3 months
Over 3 months and
Within 12 months
Over 1 year and
Within 2 years
Over 2 years
Non-interest-bearing
Total
Total
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
Cash, amounts due from banks
and balances with the
National Banks
150,707
777,104
1
4,647
2,008
14,793
-
9,277
-
21,056
168,850
1,283,869
321,566
2,110,746
2,432,312
fixed rate
149,701
679,634
-
4,647
2,008
14,793
-
9,277
-
21,056
-
-
151,709
729,407
881,116
variable rate
1,006
97,470
1
-
-
-
-
-
-
-
-
-
1,007
97,470
98,477
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
168,850
1,283,869
168,850
1,283,869
1,452,719
Placements with other banks,
net of allowance for placements
losses
240,397
339,537
104
103,038
665
194,919
2,003
5
124,478
7,633
19,253
116,711
386,900
761,843
1,148,743
fixed rate
220,155
197,680
104
102,080
665
194,919
2,003
5
-
5,750
-
-
222,927
500,434
723,361
variable rate
20,242
141,857
-
958
-
-
-
-
124,478
1,883
-
-
144,720
144,698
289,418
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
19,253
116,711
19,253
116,711
135,964
Repo receivables
183,364
7,485
-
-
-
-
-
-
-
-
-
-
183,364
7,485
190,849
fixed rate
183,364
7,485
-
-
-
-
-
-
-
-
-
-
183,364
7,485
190,849
variable rate
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Trading instruments at fair
value through profit or loss
1,261
9,247
287
9,013
614
14,644
1,280
2,753
5,270
8,463
2,473
1,267
11,185
45,387
56,572
fixed rate
355
8,721
287
9,013
614
14,644
1,280
2,753
5,254
8,463
-
-
7,790
43,594
51,384
variable rate
906
526
-
-
-
-
-
-
16
-
-
-
922
526
1,448
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
2,473
1,267
2,473
1,267
3,740
Non-trading instruments
mandatorily at fair value
through profit or loss
-
4,487
-
1,006
-
-
-
-
-
-
30,674
21,410
30,674
26,903
57,577
fixed rate
-
4,459
-
1,006
-
-
-
-
-
-
-
-
-
5,465
5,465
variable rate
-
28
-
-
-
-
-
-
-
-
-
-
-
28
28
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
30,674
21,410
30,674
21,410
52,084
Financial assets designated at
fair value through profit or loss
-
-
-
-
-
-
-
-
-
2,235
-
-
-
2,235
2,235
fixed rate
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
variable rate
-
-
-
-
-
-
-
-
-
2,235
-
-
-
2,235
2,235
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
123
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.4. Interest rate risk management [continued]
As at 31 December 2020 [continued]
ASSETS [continued]
Within 1 month
Over 1 month and
Within 3 months
Over 3 months and
Within 12 months
Over 1 year and
Within 2 years
Over 2 years
Non-interest-bearing
Total
Total
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
Securities at fair value through
other comprehensive income
47,073
11,706
673
95,897
118,558
183,940
49,095
200,651
567,675
826,116
536
34,789
783,610
1,353,099
2,136,709
fixed rate
600
11,706
673
83,363
117,558
183,940
49,095
200,631
567,675
819,295
-
-
735,601
1,298,935
2,034,536
variable rate
46,473
-
-
12,534
1,000
-
-
20
-
6,821
-
-
47,473
19,375
66,848
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
536
34,789
536
34,789
35,325
Securities at amortized cost
-
79,401
-
21,055
37,771
4,574
398,158
40,066
1,844,129
199,766
-
-
2,280,058
344,862
2,624,920
fixed rate
-
79,401
-
21,055
37,771
4,574
398,158
40,066
1,837,731
199,766
-
-
2,273,660
344,862
2,618,522
variable rate
-
-
-
-
-
-
-
-
6,398
-
-
-
6,398
-
6,398
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Loans at amortized cost, net of
allowance for loan losses
656,665
4,758,061
340,558
1,115,958
52,487
998,326
49,217
349,978
1,723,813
1,442,688
125,865
61,226
2,948,605
8,726,237
11,674,842
fixed rate
68,714
854,962
2,048
264,431
13,026
488,106
36,198
288,272
772,219
806,553
-
-
892,205
2,702,324
3,594,529
variable rate
587,951
3,903,099
338,510
851,527
39,461
510,220
13,019
61,706
951,594
636,135
-
-
1,930,535
5,962,687
7,893,222
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
125,865
61,226
125,865
61,226
187,091
Finance lease receivables
285,219
281,683
34,926
134,848
18
134,266
-
69,096
5,685
103,954
-
1,445
325,848
725,292
1,051,140
fixed rate
167,083
113,778
8,141
6,117
18
26,854
-
25,036
-
41,005
-
-
175,242
212,790
388,032
variable rate
118,136
167,905
26,785
128,731
-
107,412
-
44,060
5,685
62,949
-
-
150,606
511,057
661,663
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
-
1,445
-
1,445
1,445
Loans mandatorily at fair value
through profit or loss
24,871
1,159
68
141
498
634
710
218
772,833
1,473
-
-
798,980
3,625
802,605
fixed rate
-
70
-
141
-
634
-
218
-
1,473
-
-
-
2,536
2,536
variable rate
24,871
1,089
68
-
498
-
710
-
772,833
-
-
-
798,980
1,089
800,069
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Fair value adjustment of
derivative financial instruments
945,704
699,341
880,168
378,971
557,280
416,304
26,776
5,084
40,243
97,805
742,345
245,973
3,192,516
1,843,478
5,035,994
fixed rate
929,702
561,503
658,754
183,337
559,388
387,848
26,799
5,084
40,490
97,487
-
-
2,215,133
1,235,259
3,450,392
variable rate
16,002
137,838
221,414
195,634
(2,108)
28,456
(23)
-
(247)
318
-
-
235,038
362,246
597,284
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
742,345
245,973
742,345
245,973
988,318
Other financial assets
10,221
16,335
155
16
-
270
-
-
-
47
50,991
62,527
61,367
79,195
140,562
fixed rate
10,221
10,982
-
14
-
19
-
-
-
-
-
-
10,221
11,015
21,236
variable rate
-
5,353
155
2
-
251
-
-
-
47
-
-
155
5,653
5,808
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
50,991
62,527
50,991
62,527
113,518
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
124
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.4. Interest rate risk management [continued]
As at 31 December 2020 [continued]
LIABILITIES
Within 1 month
Over 1 month and
Within 3 months
Over 3 months and
Within 12 months
Over 1 year and
Within 2 years
Over 2 years
Non-interest-bearing
Total
Total
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
Amounts due to banks, the
Hungarian Government,
deposits
from the National Bank of
Hungary and other banks
75,420
72,092
12,005
109,125
3,741
78,752
39,270
13,770
742,198
27,016
114
11,812
872,748
312,567
1,185,315
fixed rate
6,185
41,403
12,005
78,467
3,422
17,551
39,270
13,770
735,267
24,708
-
-
796,149
175,899
972,048
variable rate
69,235
30,689
-
30,658
319
61,201
-
-
6,931
2,308
-
-
76,485
124,856
201,341
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
114
11,812
114
11,812
11,926
Repo liabilities
-
2,019
-
6,360
-
109,612
-
-
-
-
-
-
-
117,991
117,991
fixed rate
-
2,019
-
6,360
-
-
-
-
-
-
-
-
-
8,379
8,379
variable rate
-
-
-
-
-
109,612
-
-
-
-
-
-
-
109,612
109,612
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Financial liabilities designated
at fair value through profit or
loss
25,902
-
-
-
5,994
-
-
-
-
2,235
-
-
31,896
2,235
34,131
fixed rate
79
-
-
-
5,994
-
-
-
-
-
-
-
6,073
-
6,073
variable rate
25,823
-
-
-
-
-
-
-
-
2,235
-
-
25,823
2,235
28,058
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Deposits from customers
6,143,610
8,390,678
101,521
633,365
142,203
880,099
68,741
171,992
239,805
502,668
15,169
601,012
6,711,049
11,179,814
17,890,863
fixed rate
413,308
2,873,541
101,521
633,233
142,203
879,857
68,741
171,989
239,805
502,658
-
-
965,578
5,061,278
6,026,856
variable rate
5,730,302
5,517,137
-
132
-
242
-
3
-
10
-
-
5,730,302
5,517,524
11,247,826
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
15,169
601,012
15,169
601,012
616,181
Liabilities from issued securities
3,090
221
11,691
414
223,762
721
46,451
-
177,807
46
-
10
462,801
1,412
464,213
fixed rate
213
-
-
-
111,565
-
46,451
-
177,807
46
-
-
336,036
46
336,082
variable rate
2,877
221
11,691
414
112,197
721
-
-
-
-
-
-
126,765
1,356
128,121
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
-
10
-
10
10
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
125
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.4. Interest rate risk management [continued]
As at 31 December 2020 [continued]
LIABILITIES [continued]
Within 1 month
Over 1 month and
Within 3 months
Over 3 months and
Within 12 months
Over 1 year and
Within 2 years
Over 2 years
Non-interest-bearing
Total
Total
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
HUF
Currency
Fair value adjustment of
derivative financial instruments
1,264,893
385,359
1,035,006
208,880
479,592
492,998
9,260
24,904
48,555
90,112
732,937
255,219
3,570,243
1,457,472
5,027,715
fixed rate
1,111,465
376,893
648,487
189,185
481,603
469,867
9,321
24,904
48,802
89,931
-
-
2,299,678
1,150,780
3,450,458
variable rate
153,428
8,466
386,519
19,695
(2,011)
23,131
(61)
-
(247)
181
-
-
537,628
51,473
589,101
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
732,937
255,219
732,937
255,219
988,156
Leasing liabilities
1,131
6,748
465
739
536
6,823
467
5,388
1,213
19,644
-
5,297
3,812
44,639
48,451
fixed rate
1,085
6,572
401
322
536
4,911
467
4,219
433
18,310
-
-
2,922
34,334
37,256
variable rate
46
176
64
417
-
1,912
-
1,169
780
1,334
-
-
890
5,008
5,898
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
-
5,297
-
5,297
5,297
Other financial liabilities
4,091
30,795
512
234
-
333
-
417
-
255
261,223
92,042
265,826
124,076
389,902
fixed rate
4,072
30,762
-
228
-
148
-
417
-
87
-
-
4,072
31,642
35,714
variable rate
19
33
512
6
-
185
-
-
-
168
-
-
531
392
923
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
261,223
92,042
261,223
92,042
353,265
Subordinated bonds and loans
-
-
-
84,833
-
184,090
-
-
-
5,781
-
-
-
274,704
274,704
fixed rate
-
-
-
-
-
-
-
-
-
5,684
-
-
-
5,684
5,684
variable rate
-
-
-
84,833
-
184,090
-
-
-
97
-
-
-
269,020
269,020
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net position
(4,972,655)
(1,902,366)
95,740
820,640
(85,929)
209,242
363,050
460,657
3,874,548
2,063,479
131,544
863,825
(593,702)
2,515,477
1,921,775
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
126
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.5. Market risk
The Group takes on exposure to market risks. Market risks arise from open positions in interest rate, currency
and equity products, all of which are exposed to general and specific market movements. The Group applies a
‘Value-at-Risk’ (VaR) methodology to estimate the market risk of positions held and the maximum losses
expected, based upon a number of assumptions for various changes in market conditions. The Management
Board sets limits on the value of risk that may be accepted, which is monitored on a daily basis. (Analysis of
liquidity risk, foreign currency risk and interest rate risk is detailed in Notes 37.2., 37.3. and 37.4., respectively.)
37.5.1. Market Risk sensitivity analysis
The VaR risk measure estimates the potential loss in pre-tax profit over a given holding period for a specified
confidence level.
The VaR methodology is a statistically defined, probability-based approach that takes into account market
volatilities as well as risk diversification by recognizing offsetting positions and correlations between products
and markets. Risks can be measured consistently across all markets and products, and risk measures can be
aggregated to arrive at a single risk number. The one-day 99% VaR number used by the Group reflects the 99%
probability that the daily loss will not exceed the reported VaR.
VaR methodologies are employed to calculate daily risk numbers include the historical and variance-covariance
approach. The diversification effect has not been validated among the various market risk types when capital
calculation happens.
In addition to these two methodologies, Monte Carlo simulations are applied to the various portfolios on a
monthly basis to determine potential future exposure.
The VaR of the trading portfolio can be summarized as follows (in HUF mn):
Historical VaR (99%, one-day) by risk type
Average VaR
2021
2020
Foreign exchange
1,691
1,530
Interest rate
212
146
Equity instruments
20
141
Diversification
-
-
Total VaR exposure
1,923
1,817
The table above shows the VaR figures by asset classes. Since processes driving the value of the major asset
classes are not independent (for example the depreciation of HUF against the EUR mostly coincide with the
increase of the yields of Hungarian Government Bonds), a diversification impact emerges, so the overall VaR is
less than the sum of the VaR of each individual asset class.
While VaR captures the Group’s daily exposure to currency and interest rate risk, sensitivity analysis evaluates
the impact of a reasonably possible change in interest or foreign currency rates over a year. The longer time
frame of sensitivity analysis complements VaR and helps the Group to assess its market risk exposures. Details
of sensitivity analysis for foreign currency risk are set out in Note 37.5.2., for interest rate risk in Note 37.5.3.,
and for equity price sensitivity analysis in Note 37.5.4.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
127
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.5. Market risk [continued]
37.5.2. Foreign currency sensitivity analysis
The Bank changed its methodology of foreign currency sensitivity analysis and has been using a historical VaR
calculation since 31 March 2021. The former Monte Carlo simulation represented the Group’s sensitivity to the
rise and fall in the HUF exchange rate against EUR, over a 3 months period. The sensitivity analysis included
only outstanding foreign currency denominated monetary items as strategic open positions related to foreign
activities. In line with the Management's intention, the former EUR (310) million strategic open position was
fully closed as at 31 March 2021.
Since the closing of the strategic open position, the Group has been using a historical VaR calculation with a 1
day holding period. The analysis includes the same net open foreign exchange position as used under the internal
capital adequacy assessment process (ICAAP). The VaR methodology is a statistically defined, probability-
based approach that takes into account market volatilities as well as risk diversification by recognizing offsetting
positions and correlations between products and markets.
Additionally, the Bank determines the foreign currency risk of assets evaluated through the Other
Comprehensive Income, which includes securities valuated on fair value through other comprehensive income
and the foreign currency translation reserves.
The following table shows the result of the foreign currency sensitivity analysis.
The numbers below indicate the expected daily profit or loss of the portfolio beside the given confidence level.
Probability
Effects to the consolidated statement
of profit or loss
Effects to the consolidated statement
of other comprehensive income
In HUF million
In HUF million
In HUF million
In HUF million
2021
2020
2021
2020
1%
(194)
(522)
(1,707)
(5,239)
5%
(132)
(388)
(1,038)
(2,261)
25%
(50)
(173)
(398)
(896)
50%
(1)
(14)
98
(227)
25%
53
111
531
584
5%
142
352
1,215
1,918
1%
221
696
1,509
2,981
Note:
(1) Historical VaR simulation is based on the empirical distribution of the historical exchange rate movements
between 31 December 2021 and 31December 2020.
37.5.3. Interest rate sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives
and non-derivative instruments at the balance sheet date. The analysis is prepared assuming the amount of assets
and liabilities outstanding at the balance sheet date was outstanding for the whole year. The analysis was
prepared by assuming only adverse interest rate changes. The main assumptions were as follows:
Floating rate assets and liabilities were repriced to the modelled benchmark yields at the repricing dates
assuming the unchanged margin compared to the last repricing.
Fixed rate assets and liabilities were repriced at the contractual maturity date.
As for liabilities with discretionary repricing feature by the Bank were assumed to be repriced with two-
weeks delay, assuming no change in the margin compared to the last repricing date.
Deposits with an interest rate lower than 0.3% even at high market rates were assumed to be unchanged
for the whole period.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
128
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.5. Market risk [continued]
37.5.3. Interest rate sensitivity analysis [continued]
The sensitivity of interest income to changes in BUBOR was analysed by assuming two interest rate path
scenarios:
(1) HUF base rate and BUBOR increases gradually by 100 bps over the next year (probable scenario)
(2) HUF base rate and BUBOR decreases gradually by 50 bps over the next year (alternative scenario)
The net interest income in a one year period after 1 January 2022 would be increased by HUF 1,487 million
(probable scenario) and decreased by HUF 1,025 million (alternative scenario) as a result of these simulation. A
similar simulation indicated HUF 1,301 million (probable scenario) and HUF 5,732 million (alternative
scenario) decrease in the Net interest income in a one year period after 1 January 2021.
This effect is counterbalanced by capital gains HUF (619) million (for probable scenario), HUF 322 million (for
alternative scenario) as at 31 December 2021 and (HUF 584 million for probable scenario, HUF 2,329 million
for alternative scenario as at 31 Decmeber 2020) on the government bond portfolio held for hedging (economic).
Furthermore, the effects of an instant 10bps parallel shift of the HUF, EUR and USD yield-curves on net interest
income over a one-year period and on the market value of the hedge government bond portfolio booked against
capital was analysed. The results can be summarized as follows (in HUF million):
2021
2020
Description
Effects to
the net
interest
income (one-
year period)
Effects to capital
(Price change of
government bonds
at fair value
through other
comprehensive
income)
Effects to
the net
interest
income (one-
year period)
Effects to capital
(Price change of
government bonds
at fair value
through other
comprehensive
income)
HUF (0.1%) parallel shift
(105)
64
(1,809)
389
EUR (0.1%) parallel shift
(1,989)
-
(2,179)
-
USD (0.1%) parallel shift
(257)
-
(497)
-
Total
(2,351)
64
(4,485)
389
37.5.4. Equity price sensitivity analysis
The following table shows the effect of the equity price sensitivity. The Group uses VaR calculation with 1 day
holding period and a 99% confidence level. The VaR methodology is a statistically defined, probability-based
approach that takes into account market volatilities as well as risk diversification by recognizing offsetting
positions and correlations between products and markets. The daily loss will not exceed the reported VaR
number with 99% of probability.
The stress test assumes the largest price movement of the last year and calculates with it as the adverse direction.
These scenarios show the loss of the portfolio when all prices change with the maximum amount of the last year.
Description
2021
2020
VaR (99%, one day, HUF million)
12
141
Stress test (HUF million)
(21)
(233)
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
129
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.6. Capital management
Capital management
The primary objective of the capital management of the Group is to ensure the prudent operation, the entire
compliance with the prescriptions of the regulator for a persistent business operation and maximising the
shareholder value, accompanied by an optimal financing structure.
The capital management of the Group members includes the management and evaluation of the shareholders`
equity available for hedging risks, other types of funds to be recorded in the equity and all material risks to be
covered by the capital.
The basis of the capital management of the Group members in the short run is the continuous monitoring of their
capital position, in the long run the strategic and the business planning, which includes the monitoring and
forecast of the capital position.
The Group members maintain the capital adequacy required by the regulatory bodies and the planned risk taking
mainly by means of ensuring and developing their profitability. In the event that the planned risk level of a
Group member exceeded its Core and the previously raised Supplementary capital, it ensures the prudent
operation by occasional measures. A further tool in the capital management of the Bank is the dividend policy,
and the transactions performed with the treasury shares.
Capital adequacy
The Capital Requirements Directive package (CRDIV/CRR) transposes the new global standards on banking
regulation (known as the Basel III agreement) into the EU legal framework. The new rules are applied from 1
January 2014. They set stronger prudential requirements for institutions, requiring them to keep sufficient capital
reserves and liquidity. This new framework makes institutions in the EU more solid and strengthens their
capacity to adequately manage the risks linked to their activities, and absorb any losses they may incur in doing
business.
The capital adequacy of the Group is supervised based on the financial statements data prepared in accordance
with IFRS applying the current directives, rulings and indicators from 1 January 2014.
The Group uses the standard method for determining the regulatory capital requirements of the credit risk and
market risk, and parallel to that, the base indicator method and the advanced method (“AMA”) in case of the
operational risk.
For international comparison purposes, the Group calculated the Regulatory capital based on IFRS data as
adopted by the EU, and the consolidated Capital adequacy ratio based on this in accordance with the regulations
of Basel III. The Capital adequacy ratio of the Group (IFRS) was 19.1%, the Regulatory capital was HUF
3,191,765 million and the Total regulatory capital requirement was HUF 1,335,305 million as at 31 December
2021. The same ratios calculated as at 31 December 2020 were the following: 17.7%, HUF 2,669,806 million
and HUF 1,203,751 million.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
130
NOTE 37: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
37.6. Capital management [continued]
Capital adequacy [continued]
Calculation on IFRS basis (in HUF million)
2021
2020
Core capital (Tier 1) =
2,926,882
2,316,118
Common Equity Tier 1 (CET 1)
Issued capital
28,000
28,000
Reserves
1
2,896,118
2,342,166
Fair value adjustments
(15,715)
33,991
Other capital components
104,326
39,204
Non-controlling interests
1,996
1,795
Treasury shares
(121,941)
(145,939)
Goodwill and other intangible assets
(183,440)
(174,997)
Other adjustments
217,538
191,898
Additional Tier 1 (AT1)
-
Supplementary capital (Tier 2)
264,883
353,688
Subordinated bonds and loans
264,397
263,439
Other issued capital components
-
89,935
Components recognized in T2 capital
issued by subsidiaries
486
314
Regulatory capital
3,191,765
2,669,806
Credit risk capital requirement
1,199,423
1,071,163
Market risk capital requirement
13,440
19,170
Operational risk capital requirement
122,442
113,418
Total requirement regulatory capital
1,335,305
1,203,751
Surplus capital
1,856,460
1,466,055
CET 1 ratio
17.50%
15.40%
Tier 1 ratio
17.50%
15.40%
Capital adequacy ratio
19.10%
17.70%
Basel III
The components of the Common Equity Tier 1 capital (CET 1) are the following: Issued capital, Reserves (Profit
reserves, Other reserves, Changes in the equity of subsidiaries, Net Profit for the year, Changes due to
consolidation) Fair value adjustments, Other capital components, (Revaluation reserves, Share based payments,
Cash-flow hedges, Net investment hedge in foreign operations), Non-controlling interest, Treasury shares,
Goodwill and other Intangible assets, other adjustments (due to prudential filters, due to deferred tax receivables,
due to temporary regulations).
Supplementary capital (Tier 2): Subordinated loan capital, Supplementary loan capital, Other issued capital
components, Components recognized in T2 capital issued by subsidiaries.
For regulatory compliance the capital adequacy ratios according to regulatory scope of consolidation are
relevant. The Pillar3 Disclosure of OTP Group contains the capital adequacy ratios calculated under regulatory
scope of consolidation.
The Group has entirely complied with the regulatory capital requirements in 2021 as well as in 2020.
1
The dividend amount planned to pay out after the profit of financial years 2019 , 2020 and 2021 is also deducted from reserves.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
131
NOTE 38: RECLASSIFICATION AND TRANSFER OF FINANCIAL INSTRUMENTS (in HUF mn)
Reclassification from securities held for trading to securities at fair value through other comprehensive income:
As at 31 December 2021
Date of
reclassification
Reason for
reclassification
Type of
securities
Nominal
value at
reclassification
Fair value
at the date of
reclassification
EIR at the
date of
reclassification
Interest
income
1 September
2018
Change in
business model
Retail
Hungarian
government
bonds
1,069
1,087
2%-3%
38
During 2018, securities issued by the Hungarian Government with the nominal value of HUF 66,506 million
were transferred from the trading portfolio to the securities at fair value through other comprehensive income of
which HUF 1,087 million remaining amount was presented as at 31 December 2021. The Bank has previously
held retail government bonds in the portfolio at fair value through other comprehensive income. During 2018,
the Bank changed the business model of the retail government bonds to manage all on the basis of a single
business model aimed at collecting the future contractual cash flows and/or selling them.
In 2018, the terms and conditions of sale of retail government bonds and the pricing environment have changed
significantly, as a result of which the Bank is no longer able to maintain its sole trading intent with these
securities that the Bank applied earlier. Furthermore, there is an option-agreement between the Bank and the
Government Debt Management Agency (“GDMA”) that GDMA will buy back this portfolio therefore it has
been reclassified.
Financial assets transferred but not derecognized
Transferred
assets
Associated
liabilities
Transferred
assets
Associated
liabilities
Carrying amount
Carrying amount
2021
2020
Financial assets at fair value
through other comprehensive income
Debt securities
52,371
45,484
48,176
44,287
Total
52,371
45,484
48,176
44,287
Financial assets at amortized cost
Debt securities
92,765
90,986
136,316
119,789
Loans and advances
833
1,056
1,171
-
Total
93,598
92,042
137,487
119,789
Total
145,969
137,526
185,663
164,076
As at 31 December 2021 and 2020, the Group had an obligation from repurchase agreements (repo liability) of
HUF 79,045 million and HUF 109,612 million respectively. Securities sold temporarily under repurchase
agreements will continue to be recognized in the Consolidated Statement of Financial Position of the Group in
the appropriate securities category. The related liability is measured at amortized cost in the Consolidated
Statement of Financial Position as “Amounts due to the National Governments, to the National Banks and other
banks and repo liabilities”.
Financial assets transferred, derecognized with continuing involvement
Financial assets which would have been derecognized but would be represented the continuing involvement are
not recognized in the Consolidated Statement of Financial Position as at 31 December 2021 or 2020.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
132
NOTE 39: OFF-BALANCE SHEET ITEMS AND DERIVATIVE FINANCIAL INSTRUMENTS (in
HUF mn)
In the normal course of business, the Group becomes a party to various financial transactions that are not
reflected on the Consolidated statement of financial position and are referred to as off-balance sheet financial
instruments. The following represent notional amounts of these off-balance sheet financial instruments, unless
stated otherwise.
Contingent liabilities
2021
2020
Commitments to extend credit
4,065,002
3,420,718
Guarantees arising from banking activities
1,293,841
1,159,699
Factoring loan commitment
464,341
305,269
Confirmed letters of credit
65,077
35,715
Other
27,997
35,965
Contingent liabilities and commitments total
in accordance with IFRS 9
5,916,258
4,957,366
Legal disputes (disputed value)
75,453
53,486
Other
5,410
22,164
Contingent liabilities and commitments
total in accordance with IAS 37
80,863
75,650
Total
5,997,121
5,033,016
Legal disputes
At the balance sheet date the Group was involved in various claims and legal proceedings of a nature considered
normal to its business. The level of these claims and legal proceedings corresponds to the level of claims and
legal proceedings in previous years.
The Group believes that the various asserted claims and litigations in which it is involved will not materially
affect its financial position, future operating results or cash-flows, although no assurance can be given with
respect to the ultimate outcome of any such claim or litigation. Provisions due to legal disputes were HUF
35,354 million as at 31 December 2021 and HUF 34,894 million as at 31 December 2020, respectively. (See
Note 24.)
Commitments to extend credit, guarantees and letters of credit
The primary purpose of these instruments is to ensure that funds are available to a customer as required.
Guarantees and standby letters of credit, which represent irrevocable assurances that the Group will make
payments in the event that a customer cannot meet its obligations to third parties, carry the same credit risk as
loans.
Documentary and commercial letters of credit, which are written undertakings by the Group on behalf of a
customer authorising a third party to draw drafts on the Group up to a stipulated amount under specific terms and
conditions, are collateralised by the underlying shipments of goods to which they relate and therefore carry less
risk than a direct borrowing.
Commitments to extend credit represent unused portions of authorisations to extend credit in the form of loans,
guarantees or letters of credit. With respect to credit risk on commitments to extend credit, the Group is
potentially exposed to loss in an amount equal to the total unused commitments. However, the likely amount of
loss is less than the total unused commitments since most commitments to extend credit are contingent upon
customers maintaining specific credit standards.
Guarantees, irrevocable letters of credit and undrawn loan commitments are subject to similar credit risk
monitoring and credit policies as utilised in the extension of loans. The Management of the Group believes the
market risk associated with guarantees, irrevocable letters of credit and undrawn loan commitments are minimal.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
133
NOTE 39: OFF-BALANCE SHEET ITEMS AND DERIVATIVE FINANCIAL INSTRUMENTS (in
HUF mn) [continued]
Guarantees, payment undertakings arising from banking activities
Payment undertaking is a promise by the Group to assume responsibility for the debt obligation of a borrower if
that borrower defaults until a determined amount, until a determined date, in case of fulfilling conditions,
without checking the underlying transactions. The guarantee’s liability is joint and primary with the principal, in
case of payment undertaking, while the Group assumes the obligation derived from guarantee independently by
the conditions established by the Group. A guarantee is most typically required when the ability of the primary
obligor or principal to perform its obligations under a contract is in question, or when there is some public or
private interest which requires protection from the consequences of the principal's default or delinquency.
A contract of guarantee is subject to the statute of frauds (or its equivalent local laws) and is only enforceable if
recorded in writing and signed by the surety and the principal.
If the surety is required to pay or perform due to the principal's failure to do so, the law will usually give the
surety a right of subrogation, allowing the surety to use the surety's contractual rights to recover the cost of
making payment or performing on the principal's behalf, even in the absence of an express agreement to that
effect between the surety and the principal.
Derivatives
The Group maintains strict control limits on net open derivative positions, i.e. the difference between purchase
and sale contracts, by both amount and term. At any time the amount subject to credit risk is limited to the
current fair value of instruments that are favourable to the Group (i.e. assets), which in relation to derivatives is
only a small fraction of the contract or notional values used to express the volume of instruments outstanding.
This credit risk exposure is managed as part of the overall lending limits with customers, together with potential
exposures from market movements. Collateral or other security is not usually obtained for credit risk exposures
on these instruments, except for trading with clients, where the Group in most of the cases requires margin
deposits.
NOTE 40: SHARE-BASED PAYMENTS AND EMPLOYEE BENEFITS (in HUF mn)
Previously approved option program required a modification thanks to the introduction of the Bank Group Policy
on Payments accepted in resolution of Annual General Meeting regarding to the amendment of CRD III.
Directives and Act on Credit Institutions and Financial Enterprises.
Key management personnel affected by the Bank Group Policy receive compensation based on performance
assessment generally in the form of cash bonus and equity shares in a ratio of 50-50%. Assignment is based on
OTP shares, furthermore performance based payments are deferred in accordance with the rules of Credit
Institutions Act.
The Bank ensures the share-based payment part for the management personnel of the Group members.
During implementation of the Remuneration Policy of the Group appeared that in case of certain foreign
subsidiaries it is not possible to ensure the originally determined share-based payment because of legal reasons –
incompatible with relevant EU-directives –, therefore a decision was made to cancel the share-based payment in
affected countries, and virtual share based payment – cash payment fixed to share price - was made from 2017.
In case of foreign subsidiaries virtual share based payment was made uniformly from 2021 (in the case of
payments related to 2021).
The quantity of usable shares for individuals calculated for settlement of share-based payment shall be
determined as the ratio of the amount of share-based payment and share price determined by Supervisory Board
1
.
The value of the share-based payment at the performance assessment is determined within 10 days by
Supervisory Board based on the average of the three previous trade day’s middle rate of OTP Bank’s equity
shares fixed on the Budapest Stock Exchange.
At the same time the conditions of discounted share-based payment are determined, and share-based payment
shall contain maximum HUF 6,000 discount at the assessment date, and earnings for the shares at the payment
date is maximum HUF 12,000. Employee benefits are all forms of consideration given by an entity in exchange
for service rendered by employees or for the termination of employment. IAS 19 Employee Benefits shall be
applied in accounting for all employee benefits, except those to which IFRS 2 Share-based Payment applies.
1
Until the end of 2014 Board of Directors
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
134
NOTE 40: SHARE-BASED PAYMENTS AND EMPLOYEE BENEFITS (in HUF mn) [continued]
The parameters for the share-based payment relating to ongoing years 2016-2020 by the Supervisory Board for
periods of each year as follows:
Year
Share purchasing at a
discounted price
Price of
remuneration
exchanged to
share
Share purchasing at a
discounted price
Price of
remuneration
exchanged to
share
Share purchasing at
a
discounted price
Price of
remuneration
exchanged to
share
Exercise
price
Maximum
earnings
Exercise
price
Maximum
earnings
Exercis
e price
Maximum
earnings
HUF per share
for the year 2016
for the year 2017
for the year 2018
2017
7,200
2,500
9,200
-
-
-
-
-
-
2018
7,200
3,000
9,200
8,064
3,000
10,064
-
-
-
2019
7,200
3,500
9,200
8,064
3,500
10,064
10,413
4,000
12,413
2020
7,200
4,000
9,200
8,064
4,000
10,064
10,413
4,000
12,413
2021
-
-
-
8,064
4,000
10,064
10,413
4,000
12,413
2022
-
-
-
8,064
4,000
10,064
10,913
4,000
12,413
2023
-
-
-
-
-
-
10,913
4,000
12,413
2024
-
-
-
-
-
-
10,913
4,000
12,413
2025
-
-
-
-
-
-
10,913
4,000
12,413
Year
Share purchasing at a
discounted price
Price of
remuneration
exchanged to
share
Share purchasing at a discounted price
Price of
remuneration
exchanged to share
Exercise price
Maximum
earnings
Exercise price
Maximum earnings
HUF per share
for the year 2019
for the year 2020
2020
9,553
4,000
11,553
-
-
-
2021
9,553
4,000
11,553
12,644
9,000
16,644
2022
9,553
4,000
11,553
12,644
8,000
16,644
2023
9,553
4,000
11,553
13,644
8,000
16,644
2024
9,553
4,000
11,553
13,644
8,000
16,644
2025
9,553
4,000
11,553
13,644
8,000
16,644
2026
9,553
4,000
11,553
13,644
8,000
16,644
2027
-
-
-
13,644
8,000
16,644
Relevant factors considered during measurement of fair value related to share-based payment as follows:
Year
Expected dividends (HUF/Share)
Pricing model
1 -year
2-year
3-year
4-year
5-year
6-year
7-year
2017
219
219
252
290
334
384
442
Binomial
2018
219
219
219
219
219
219
219
Binomial
2019
252
290
333
383
440
507
583
Binomial
2020
219
252
290
333
383
440
507
Binomial
2021
371
321
357
393
432
475
523
Binomial
Year
Reference
price
Assumed
volatility
Risk-free interest rate (HUF)
1-year
2-year
3-year
4-year
5-year
6-year
7-year
2017
9,200
21.3%
0.1%
0.5%
0.7%
1.0%
1.3%
1.3%
1.3%
2018
10,064
26.0%
0.2%
0.6%
1.0%
1.3%
1.6%
1.9%
2.1%
2019
12,413
19.2%
0.2%
0.7%
0.9%
1.1%
1.3%
1.4%
1.6%
2020
11,553
33.6%
0.6%
0.4%
0.5%
0.6%
0.8%
0.9%
1.0%
2021
16,644
28.6%
1.0%
1.6%
1.8%
1.9%
2.0%
2.1%
2.1%
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
135
NOTE 40: SHARE-BASED PAYMENTS AND EMPLOYEE BENEFITS (in HUF mn) [continued]
Based on parameters accepted by Supervisory Board relating to the year 2016 effective pieces are as follows as
at 31 December 2021:
Approved
pieces of
shares
Exercised until
31 December
2021
Weighted average
share price at the
date of exercise
(in HUF)
Expired
pieces
Exercisable as
at 31
December
2021
Share purchasing period
started in 2017
147,984
147,984
9,544
-
-
Remuneration exchanged to share
provided in 2017
4,288
4,288
9,194
-
-
Share purchasing period
started in 2018
321,528
321,528
10,387
-
-
Remuneration exchanged to share
provided in 2018
8,241
8,241
10,098
-
-
Share purchasing period
started in 2019
161,446
161,446
12,415
-
-
Remuneration exchanged to share
provided in 2019
4,033
4,033
11,813
-
-
Share purchasing period
started in 2020
166,231
166,231
13,629
-
-
Remuneration exchanged to share
provided in 2020
4,303
4,303
11,897
-
-
Based on parameters accepted by Supervisory Board relating to the year 2017 effective pieces are as follows as
at 31 December 2021:
Approved
pieces of
shares
Exercised until
31 December
2021
Weighted average
share price at the
date of exercise
(in HUF)
Expired
pieces
Exercisable as
at 31
December
2021
Share purchasing period
started in 2018
108,243
108,243
11,005
-
-
Remuneration exchanged to share
provided in 2018
11,926
11,926
10,098
-
-
Share purchasing period
started in 2019
212,282
212,282
12,096
-
-
Remuneration exchanged to share
provided in 2019
26,538
26,538
11,813
-
-
Share purchasing period
started in 2020
101,571
101,565
12,084
6
-
Remuneration exchanged to share
provided in 2020
11,584
11,584
11,897
-
-
Share purchasing period
started in 2021
109,460
106,719
16,441
-
2,741
Remuneration exchanged to share
provided in 2021
11,531
11,531
16,477
-
-
Share purchasing period
starting in 2022
-
-
-
-
42,820
Remuneration exchanged to share
applying in 2022
-
-
-
-
3,003
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
136
NOTE 40: SHARE-BASED PAYMENTS AND EMPLOYEE BENEFITS (in HUF mn) [continued]
Based on parameters accepted by Supervisory Board relating to the year 2018 effective pieces are as follows as
at 31 December 2021:
Approved
pieces of
shares
Exercised until
31 December
2021
Weighted average
share price at the
date of exercise
(in HUF)
Expired
pieces
Exercisable as
at 31
December
2021
Share purchasing period
started in 2019
82,854
82,854
13,843
-
-
Remuneration exchanged to share
provided in 2019
17,017
17,017
11,829
-
-
Share purchasing period
started in 2020
150,230
150,230
14,294
-
-
Remuneration exchanged to share
provided in 2020
33,024
33,024
11,897
-
-
Share purchasing period
started in 2021
73,799
73,799
16,314
-
-
Remuneration exchanged to share
provided in 2021
14,618
14,618
16,468
-
-
Share purchasing period
starting in 2022
-
-
-
-
99,341
Remuneration exchanged to share
applying in 2022
-
-
-
-
17,042
Share purchasing period
starting in 2023
-
-
-
-
45,155
Remuneration exchanged to share
applying in 2023
-
-
-
-
4,114
Remuneration exchanged to share
applying in 2024
-
-
-
-
864
Remuneration exchanged to share
applying in 2025
-
-
-
-
432
Based on parameters accepted by Supervisory Board relating to the year 2019 effective pieces are as follows as
at 31 December 2021:
Approved
pieces of
shares
Exercised until
31 December
2021
Weighted average
share price at the
date of exercise
(in HUF)
Expired
pieces
Exercisable as
at 31
December
2021
Share purchasing period
started in 2020
91,403
91,403
12,218
-
-
Remuneration exchanged to share
provided in 2020
22,806
22,806
11,897
-
-
Share purchasing period
started in 2021
201,273
192,577
16,523
-
8,696
Remuneration exchanged to share
provided in 2021
30,834
30,834
17,618
-
-
Share purchasing period
starting in 2022
-
-
-
-
109,567
Remuneration exchanged to share
applying in 2022
-
-
-
-
15,554
Share purchasing period
starting in 2023
-
-
-
-
125,771
Remuneration exchanged to share
applying in 2023
-
-
-
-
18,025
Share purchasing period
starting in 2024
-
-
-
-
44,421
Remuneration exchanged to share
applying in 2024
-
-
-
-
6,279
Remuneration exchanged to share
applying in 2025
-
-
-
-
1,000
Remuneration exchanged to share
applying in 2026
-
-
-
-
500
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
137
NOTE 40: SHARE-BASED PAYMENTS AND EMPLOYEE BENEFITS (in HUF mn) [continued]
Based on parameters accepted by Supervisory Board relating to the year 2020 effective pieces are as follows as
at 31 December 2021:
Approved
pieces of
shares
Exercised until
31 December
2021
Weighted average
share price at the
date of exercise
(in HUF)
Expired
pieces
Exercisable as
at 31
December
2021
Share purchasing period
started in 2021
41,098
8,194
18,471
-
32,914
Remuneration exchanged to share
provided in 2021
17,881
17,881
17,498
-
-
Share purchasing period
starting in 2022
-
-
-
-
82,826
Remuneration exchanged to share
applying in 2022
-
-
-
-
19,390
Share purchasing period
starting in 2023
-
-
-
-
47,826
Remuneration exchanged to share
applying in 2023
-
-
-
-
9,292
Share purchasing period
starting in 2024
-
-
-
-
51,002
Remuneration exchanged to share
applying in 2024
-
-
-
-
9,518
Share purchasing period
starting in 2025
-
-
-
-
13,080
Remuneration exchanged to share
applying in 2025
-
-
-
-
3,443
Remuneration exchanged to share
applying in 2026
-
-
-
-
680
Remuneration exchanged to share
applying in 2027
-
-
-
-
680
Effective pieces relating to the periods starting in 2022-2027 settled during valuation of performance of year
2017-2020, can be modified based on risk assessment and personal changes.
In connection with the share-based compensation for Board of Directors and connecting compensation, shares
given as a part of payments detailed above and for the year 2021 based on performance assessment accounted as
equity-settled share based transactions, HUF 3,589 million and HUF 3,394 million was recognized as expense
for the year ended 31 December 2021 and 2020 respectively.
Defined benefit plan
Defined benefit plan is post‑employment benefit plans other than defined contribution plan. The Group's net
obligation is calculated by estimating the amount of employee's future benefit based on their servicies for the
current and prior periods. The future value of benefit is being discounted to present value.
The Group has small number of plans and mainly in Bulgaria, Serbia, Montenegro, Croatia and Slovenia. These
plans are providing retirement benefits upon pension age as lump-sum payment based either on fixed amounts or
certain months of salary.
These plans are unfunded consequently there are no significant plan assets associated with these plans.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
138
NOTE 40: SHARE-BASED PAYMENTS AND EMPLOYEE BENEFITS (in HUF mn) [continued]
Defined benefit plan [continued]
The movements of defined benefit obligation can be summarized as follows:
2021
2020
Balance as at 1 January
5,022
4,809
Current service cost
457
402
Interest cost
61
66
Actuarial gains from changes
in demographic assumptions
(6)
(14)
Actuarial gains from
changes in financial assumptions
(122)
(203)
Benefits paid
(225)
(261)
Past service cost
(164)
(274)
Other increases
241
497
Closing balance
5,264
5,022
Amounts recognized in profit and loss
2021
2020
Current service cost
457
402
Net interest expense
61
66
Past service cost
(164)
(274)
Actuarial losses
(78)
14
Other cost
44
-
Total
320
208
Actuarial assumptions
2021
2020
Discount rate
0.35% - 4.50%
0.46%-3.00%
Future salary increases
0.75% - 8.00%
0.40%-5.00%
Since plan asset is not recognized in the Consolidated Financial Statements, the effect of the asset ceiling, the
effect of changes in foreign exchange rates and the return on plan assets, excluding amounts included in interest
accounts are also not recognized and therefore not presented.
Based on the current information of not presenting plan assets the expected contributions to the plan for the next
annual reporting period are also without value.
OTP Group made an insignificant amount of contribution to the defined benefit plans during 2021 and 2020.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
139
NOTE 41: RELATED PARTY TRANSACTIONS (in HUF mn)
The compensation of key management personnel, such as the members of the Board of Directors, members of
the Supervisory Board, key employees of the Bank and its major subsidiaries involved in the decision-making
process in accordance with the compensation categories defined in IAS 24 Related Party Disclosures, is
summarised below:
Compensations
2021
2020
Short-term employee benefits
8,881
8,901
Share-based payment
3,110
2,619
Other long-term employee benefits
743
827
Termination benefits
-
472
Post-employment benefits
112
-
Total
12,846
12,819
Share based compensations to the members of the Board of Directors, Supervisory Board or key employees of
the Bank and its major subsidiaries are detailed in Note 40 Share-based payments.
An analysis of payment to executives of the Group related to their activity in Board of Directors and Supervisory
Board is as follows:
2021
2020
Members of Board of Directors
3,023
2,502
Members of Supervisory Board
283
204
Total
3,306
2,706
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
140
NOTE 41: RELATED PARTY TRANSACTIONS (in HUF mn) [continued]
Connections with related party (key management personnel and their close family member and companies) by which line of the consolidated statement of financial position and off-
balance sheet is presented:
2021
2020
Assets
Other
related
parties
Associated
companies
Other
companies
Total
Other
related
parties
Associated
companies
Other
companies
Total
Securities
596
-
-
596
725
-
-
725
Loans at amortized cost (gross value)
111,529
1,828
1,798
115,155
104,795
1,169
16,414
122,378
Loss allowance on loans at amortized cost
(3,197)
(669)
(6)
(3,872)
(4,530)
(646)
(19)
(5,195)
Loans at fair value through profit or loss
108
-
-
108
102
-
-
102
Total assets
109,036
1,159
1,792
111,987
101,092
523
16,395
118,010
Liabilities
Deposits from customers and loan liabilities
39,872
4,280
2,732
46,884
29,186
80
6,541
35,807
Total liabilities
39,872
4,280
2,732
46,884
29,186
80
6,541
35,807
2021
2020
Off-balance sheet items
Other
related
parties
Associated
companies
Other
companies
Total
Other
related
parties
Associated
companies
Other
companies
Total
Undrawn line of credit
30,369
1,913
1,176
33,458
24,932
350
2,314
27,596
Bank Guarantee
6,220
-
551
6,771
6,641
-
1,337
7,978
Total off-balance sheet items
36,589
1,913
1,727
40,229
31,573
350
3,651
35,574
In the normal course of business, the Bank enters into other transactions with its unconsolidated subsidiaries of the Group, the amounts and volumes of which are not significant to
these Consolidated Financial Statements taken as a whole. Related party transactions were made on terms equivalent to those that prevail in arm’s length transactions and such terms
can be substantiated.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
141
NOTE 42: SIGNIFICANT SUBSIDIARIES AND ASSOCIATES (in HUF mn)
The control is established when the Group has the right and exposure over the variable positive yield of the
investee but the same time put up with the consequences of the negative returns and the Group by its decisions is
able to influence the extent of the yields.
The Group primarily considering the following factors in the process of determining the existing of the control:
- investigation of the decision making mechanism of the entity,
- authority of the Board of Directors, Supervisory Board and General meeting based on the deed of association,
- existence of investments with preferential voting rights.
If the control can’t be obviously determined then it should be supposed that the control does not exist.
Significant influence is presumed by the Group to exist – unless the contrary case is proven – when the Group
holds 20% or more of the voting power of an investee but does not have a control.
Investments in companies in which the Bank has a controlling interest are detailed below. They are fully
consolidated companies and incorporated in Hungary unless otherwise stated. The Group considers a subsidiary
significant when it is a financial institution or when the subsidiary contributes to the Groups’ total balance sheet
with higher amount. The Bank considers the subsidiaries as cash generating units.
Name
Ownership (Direct and
Indirect)
Activity
2021
2020
DSK Bank EAD (Bulgaria)
99.91%
99.91%
commercial banking services
OTP Bank JSC (Ukraine)
100.00%
100.00%
commercial banking services
JSC “OTP Bank” (Russia)
97.92%
97.91%
commercial banking services
OTP banka d.d. (Croatia)
100.00%
100.00%
commercial banking services
OTP Bank Romania S.A. (Romania)
100.00%
100.00%
commercial banking services
OTP banka Srbija a.d. Novi Sad (previously:
Vojvodjanska banka a.d. Novi Sad) (Serbia)
100.00%
100.00%
commercial banking services
Crnogorska komercijalna banka a.d.
(Montenegro)
100.00%
100.00%
commercial banking services
Banka OTP Albania SH.A. (Albania)
100.00%
100.00%
commercial banking services
OTP Bank S.A. (previously:
Mobiasbanca - OTP Group S.A.) (Moldova)
98.26%
98.26%
commercial banking services
SKB Banka d.d. Ljubljana (Slovenia)
100.00%
100.00%
commercial banking services
OTP Financing Malta
Company Ltd. (Malta)
100.00%
100.00%
refinancing activities
OTP Financing Netherlands B.V.
(the Netherlands)
100.00%
100.00%
refinancing activities
OTP Holding Ltd. (Cyprus)
100.00%
100.00%
refinancing activities
OTP Financing Cyprus Ltd. (Cyprus)
-
100.00%
refinancing activities
OTP Factoring Ltd.
100.00%
100.00%
work-out
OTP Mortgage Bank Ltd.
100.00%
100.00%
mortgage lending
OTP Real Estate Ltd.
100.00%
100.00%
real estate management and
development
Merkantil Bank Ltd.
100.00%
100.00%
finance lease
OTP Building Society Ltd.
100.00%
100.00%
housing savings and loan
OTP Fund Management Ltd.
100.00%
100.00%
fund management
Bank Center No. 1. Ltd.
100.00%
100.00%
real estate lease
Inga Kettő Ltd.
100.00%
100.00%
property management
OTP Funds Servicing and
Consulting Ltd.
100.00%
100.00%
fund services
OTP Real Estate Leasing Ltd.
100.00%
100.00%
real estate leasing
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
142
NOTE 42: SIGNIFICANT SUBSIDIARIES AND ASSOCIATES (in HUF mn) [continued]
Significant associates and joint ventures
Summarized financial and non-financial information of associates and joint ventures which are not significant on Group level and are accounted according to IAS 28 or accounted
on cost is as follows:
As at 31 December 2021
List of associated entities
Carrying
amount
Ownership
of OTP
Bank
Profit after
tax
Country /
Headquarter
Activity
OTP Kockázati Fund I.
526
44.12%
(52)
Hungary /Budapest
Trusts, funds and similar financial entities
OTP-DayOne Magvető Fund
288
22.00%
13
Hungary /Budapest
Trusts, funds and similar financial entities
D-ÉG Thermoset Ltd. 'u.l.'
-
46.99%
-
Hungary / Dunaújváros
Wholesale of hardware, plumbing and heating equipment and supplies
Company for Cash Services AD
392
25.00%
(183)
Bulgaria / Sofia
Other financial service activities, exc. insurance and pension funding
Edrone spółka z ograniczoną
odpowiedzialnością
779
17.34%
(293)
Poland / Krakow
Computer programming activities
Graboplasr Closed Co. Plc.
700
7.00%
n.a.
Hungary / Győr
Manufacture of builders’ ware of plastic
NovaKid Inc.
2,006
4.17%
(4,621)
USA / San Francisco
Online kids English learning platform operator
Banzai Cloud Closed Co. Plc.
374
17.42%
n.a.
Hungary /Budapest
Computer programming activities
ClodeCool Ltd.
1,770
20.15%
1
Hungary /Budapest
Other education n.e.c.
Papita.hu Closed Co. Plc.
516
34.00%
(132)
Hungary / Szeghalom
Retail sale via mail order houses or via Internet
Seon Holdings Ltd.
4,756
23.86%
(4)
UK / London
Computer programming activities
Starschema Ltd.
3,944
36.19%
n.a.
Hungary /Budapest
Computer consultancy activities
VCC Live Group Closed Co. Plc.
1,672
49.56%
(203)
Hungary /Budapest
Computer programming activities
Virtual Solutaion Ltd.
-
8.33%
n.a.
Hungary /Budapest
Computer programming activities
Yieldigo s.r.o.
76
1.97%
(168)
Czech Republic/Prague
Computer programming activities
Szallas.hu Closed Co. Plc.
8,809
51.19%
1
1,278
Hungary / Miskolc
Web portals
Cursor Insight LTD
146
6.75%
(247)
UK / London
Computer programming activities
Fabetker Ltd.
1
20.48%
132
Hungary / Nádudvar
Manufacture of concrete products for construction purposes
OneSoil Ag.
318
3.72%
(1,058)
Switzerland / Zurich
Computer programming activities
Packhelp Spółka Akcyjna
2,160
1.00%
(3,038)
Poland / Warsaw
Manufacture of corrugated paper and paperboard
and of containers of paper and paperboard
1
The Group does not control the entity even though it holds more than half of the voting rights.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
143
NOTE 42: SIGNIFICANT SUBSIDIARIES AND ASSOCIATES (in HUF mn) [continued]
Significant associates and joint ventures [continued]
The Group made significant investments into associates during 2021. Venture capital funds under the control of the Group obtained ownership interest in Phoenix Play Invest
Co.Plc., in Algorithmiq Invest Closed Co. Plc. and in NGY Propertiers Investment SRL.
As at 31 December 2021 [continued]
List of associated entities
Carrying
amount
Ownership of
OTP Bank
Profit
after tax
Country / Headquarter
Activity
Phoenix Play Invest closed Co. Plc.
3,081
21.69%
(1)
Hungary /Budapest
Activities of holding companies
Algorithmiq Invest Closed Co. Plc.
8,996
21.69%
792
Hungary /Budapest
Activities of holding companies
NGY Propertiers Investment SRL
12,331
14.54%
(22,567)
Romania / Bucharest
Renting and operating of own or leased real estate
As at 31 December 2020
List of associated entities
Carrying
amount
Ownership of
OTP Bank
Profit
after tax
Country / Headquarter
Activity
OTP Kockázati Fund I.
531
44.12%
(2)
Hungary /Budapest
Trusts, funds and similar financial entities
OTP-DayOne Magvető Fund
674
22.00%
(37)
Hungary /Budapest
Trusts, funds and similar financial entities
D-ÉG Thermoset Ltd. 'u.l.'
-
46.99%
-
Hungary / Dunaújváros
Wholesale of hardware, plumbing and heating
equipment and supplies
Company for Cash Services AD
392
25.00%
(254)
Bulgaria / Sofia
Other financial service activities,
except insurance and pension funding n.e.c.
Edrone spółka z ograniczoną
odpowiedzialnością
497
17.34%
(79)
Poland / Krakow
Computer programming activities
Graboplasr Closed Co. Plc.
711
7.00%
(1,349)
Hungary / Győr
Manufacture of builders’ ware of plastic
NovaKid Inc.
497
4.17%
(398)
USA / San Francisco
Online kids English learning platform operator
Banzai Cloud Closed Co. Plc.
1,008
17.42%
13,430
Hungary /Budapest
Computer programming activities
ClodeCool Ltd.
1,797
20.15%
132
Hungary /Budapest
Other education n.e.c.
Pepita.hu Closed Co. Plc.
575
34.00%
3
Hungary / Szeghalom
Retail sale via mail order houses or via Internet
Seon Holdings Ltd.
378
23.86%
37
UK / London
Computer programming activities
Starschema Ltd.
1,310
36.19%
454
Hungary /Budapest
Computer consultancy activities
Tresorit S.A.
1,501
7.77%
232
Luxembourg/Luxembourg
Activities of holding companies
VCC Live Group Closed Co. Plc.
1,599
49.56%
(58)
Hungary /Budapest
Computer programming activities
Virtual Solutaion Ltd.
72
8.33%
(86)
Hungary /Budapest
Computer programming activities
Yieldigo s.r.o.
79
1.97%
103
Czech Republic / Prague
Computer programming activities
Szallas.hu Closed Co. Plc.
1
7,456
51.19%
595
Hungary / Miskolc
Web portals
1
The Group does not control the entity even though it holds more than half of the voting rights.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
144
NOTE 43: TRUST ACTIVITIES (in HUF mn)
The Bank acts as a trustee for certain loans granted by companies or employers to their employees, mainly for
housing purposes. The ultimate risk for these loans rests with the party advancing the funds. As these loans and
related funds are not considered to be assets or liabilities of the Group, they have been excluded from the
accompanying Consolidated statement of financial position.
2021
2020
The amount of loans managed by the Group as a trustee
36,517
36,811
NOTE 44: CONCENTRATION OF ASSETS AND LIABILITIES
2021
2020
In the percentage of the total assets
Receivables from, or securities issued by
the Hungarian Government or the NBH
15.87%
14.45%
There were no other significant concentrations of the assets or liabilities of the Group either as at 31 December
2021 or 2020 respectively.
The Group continuously provides the NBH with reports on the extent of dependency on large depositors as well
as the exposure of the biggest 50 depositors towards the Group.
Further to this obligatory reporting to the NBH, the Group pays particular attention on the exposure of its largest
partners and cares for maintaining a closer relationship with these partners in order to secure the stability of the
level of deposits.
The organisational unit of the Bank in charge of partner-risk management analyses the biggest partners on a
constant basis and sets limits on the Bank’s and the Group’s exposure separately partner-by-partner. If necessary,
it modifies partner-limits in due course thereby reducing the room for manoeuvring of the Treasury and other
business areas.
The Bank’s internal regulation (Limit-management regulation) controls risk management related to exposures of
clients. The Bank makes a difference between clients or clients who are economically connected with each other,
partners, partners operating in the same geographical region or in the same economic sector, exposures from
customers. Limit-management regulation includes a specific range provision system used by the Bank to control
risk exposures. This regulation has to be used by the Bank for its business (lending) risk-taking activity both in
retail and corporate sector.
To specify credit risk limits Group strives their clients get an acceptable margin of risk based on their financial
situation. In the Group limit system has to be provided a lower level decision-making delegation.
If a Group member takes risk against a client or group of clients (either inside the local economy or outside), the
client will be qualified as a group level risk and these limits will be specified at group level.
The validity period of this policy is 12 months. The limit shall be reviewed prior to the expiry date but at least
once a year - based on the relevant information required to limit calculations.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
145
NOTE 45: EARNINGS PER SHARE (in HUF mn)
Consolidated Earnings per share attributable to the ordinary shares of the Group are determined by dividing
consolidated Net profit for the year attributable to ordinary shareholders, after the deduction of declared
preference dividends, by the weighted average number of ordinary shares outstanding during the year. Dilutive
potential ordinary shares are deemed to have been converted into ordinary shares.
Earnings per share from continuing
and discontinued operations
2021
2020
Consolidated net profit for the period attributable
to ordinary shareholders (in HUF mn)
455,592
259,416
Weighted average number of ordinary shares outstanding
during the year for calculating basic EPS (number of share)
262,017,836
258,461,554
Basic Earnings per share (in HUF)
1,738
1,004
Consolidated net profit for the period attributable
to ordinary shareholders (in HUF mn)
455,592
259,416
Modified weighted average number of
ordinary shares outstanding during the year
for calculating diluted EPS (number of share)
262,094,958
258,543,088
Diluted Earnings per share (in HUF)
1,738
1,003
Earnings per share from continuing operations
2021
2020
Consolidated net profit for the period attributable
to ordinary shareholders (in HUF mn)
455,476
253,826
Weighted average number of ordinary shares outstanding
during the year for calculating basic EPS (number of share)
262,017,836
258,461,554
Basic Earnings per share (in HUF)
1,738
982
Consolidated net profit for the period attributable
to ordinary shareholders (in HUF mn)
455,476
253,826
Modified weighted average number of
ordinary shares outstanding during the year
for calculating diluted EPS (number of share)
262,094,958
258,543,088
Diluted Earnings per share (in HUF)
1,738
982
Earnings per share from discontinued operations
2021
2020
Consolidated net profit for the period attributable
to ordinary shareholders (in HUF mn)
116
5,590
Weighted average number of ordinary shares outstanding
during the year for calculating basic EPS (number of share)
262,017,836
258,461,554
Basic Earnings per share (in HUF)
-
22
Consolidated net profit for the period attributable
to ordinary shareholders (in HUF mn)
116
5,590
Modified weighted average number of
ordinary shares outstanding during the year
for calculating diluted EPS (number of share)
262,094,958
258,543,088
Diluted Earnings per share (in HUF)
-
22
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
146
NOTE 45: EARNINGS PER SHARE (in HUF mn) [continued]
2021
2020
Weighted average number of ordinary shares
280,000,010
280,000,010
Average number of Treasury shares
17,982,174
21,538,456
Weighted average number of ordinary shares outstanding
during the year for calculating basic EPS
262,017,836
258,461,554
Dilutive effects of options issued in accordance with the
remuneration policy and convertible into ordinary shares
1
77,122
81,534
The modified weighted average number of ordinary shares
outstanding during the year for calculating diluted EPS
262,094,958
258,543,088
NOTE 46: NET GAIN OR LOSS REALIZED ON FINANCIAL INSTRUMENTS (in HUF mn)
2021
Net interest /
similar to
interest gain and
loss
Net non-
interest
gain and
loss
Loss
allowance
Other
Compre-
hensive
Income
Cash, amounts due from banks and
balances with the National Banks
16,527
-
(952)
-
Placements with other banks,
net of loss allowance for placements
24,594
-
(1,664)
-
Repo receivables
827
-
12
-
Trading securities at fair value through profit or loss
-
5,016
-
-
Non-trading instruments mandatorily
at fair value through profit or loss
1,749
4,812
-
-
Securities at fair value through
other comprehensive income
49,473
(2,587)
2
(961)
(44,877)
Securities at amortized cost
79,602
1,031
(3,013)
-
Loans at amortized cost
692,432
26,354
(32,159)
-
Finance lease receivables
59,084
-
(5,776)
-
Loans mandatorily at fair value
through profit or loss
40,131
4,459
(16,289)
-
Other financial assets
3,639
3
-
438
-
Derivative financial instruments
3,321
2
9,412
-
-
Total result on financial assets
971,379
48,497
(60,364)
(44,877)
Amounts due to banks, the National Governments,
deposits from the National Banks and other banks
(25,235)
-
-
-
Repo liabilities
(2,299)
-
-
-
Financial liabilities designated
at fair value through profit or loss
493
(3,916)
-
-
Deposits from customers
(51,052)
267,033
-
-
Liabilities from issued securities
(9,822)
-
-
-
Leasing liabilities
(1,556)
-
-
-
Subordinated bonds and loans
(7,598)
-
-
-
Total result on financial liabilities
(97,069)
263,117
-
-
Total result on financial instruments
874,310
311,614
(60,364)
(44,877)
1
Both in the year 2022 and in the year 2021 the dilutive effect is in connection with the Remuneration Policy and the Management Option
Program.
2
For the year of 2021 HUF (2,587) million net non-interest gain on securities at fair value through other comprehensive income was
transferred from other comprehensive income to profit or loss.
3
Gains from other financial assets and derivative financial instruments recognized in net interest income as Income similar to interest
income.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
147
NOTE 46: NET GAIN OR LOSS REALIZED ON FINANCIAL INSTRUMENTS (in HUF mn)
[continued]
2020
Net interest /
similar to
interest gain and
loss
Net non-
interest
gain and
loss
Loss
allowance
Other
Compre-
hensive
Income
Cash, amounts due from banks and
balances with the National Banks
5,103
-
-
-
Placements with other banks,
net of loss allowance for placements
9,200
-
(851)
-
Repo receivables
286
-
62
-
Trading securities at fair value through profit or loss
-
2,745
-
-
Non-trading instruments mandatorily
at fair value through profit or loss
473
7,239
-
-
Securities at fair value through
other comprehensive income
44,782
2,325
1
(4,507)
(6,931)
Securities at amortized cost
69,905
1,402
(2,802)
-
Loans at amortized cost
658,579
26,254
(189,554)
-
Finance lease receivables
54,046
-
(9,972)
-
Loans mandatorily at fair value
through profit or loss
28,251
2,125
(3,262)
-
Other financial assets
2,739
2
-
878
-
Derivative financial instruments
(628)
2
13,734
-
-
Total result on financial assets
872,736
55,824
(210,008)
(6,931)
Amounts due to banks, the National Governments,
deposits from the National Banks and other banks
(18,492)
-
-
-
Repo liabilities
(653)
-
-
-
Financial liabilities designated
at fair value through profit or loss
(307)
1,270
-
-
Deposits from customers
(53,522)
234,030
-
-
Liabilities from issued securities
(7,750)
-
-
-
Leasing liabilities
(1,623)
-
-
-
Subordinated bonds and loans
(7,718)
-
-
-
Total result on financial liabilities
(90,065)
235,300
-
-
Total result on financial instruments
782,671
291,124
(210,008)
(6,931)
1
For the year 2020 HUF 2,325 million net non-interest gain on securities at fair value through other comprehensive income was transferred
from other comprehensive income to profit or loss.
2
Gains from other financial assets and derivative financial instruments recognized in net interest income as Income similar to interest
income.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
148
NOTE 47: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn)
In determining the fair value of a financial asset or liability the Group uses the market price in the case of
instruments that are quoted on an active market. In most cases market price is not publicly available so the
Group has to make assumptions or use valuation techniques to determine the fair value of a financial instrument.
See Note 47. d) for more information about fair value classes applied for financial assets and liabilities measured
at fair value in these financial statements.
To provide a reliable estimate of the fair value of those financial instrument that are originally measured at
amortized cost, the Group used the discounted cash-flow analyses (loans, placements with other banks, repo
receivables, amounts due to banks, repo liabilities, deposits from customers). The fair value of issued securities
and subordinated bonds is based on quoted prices (e.g. Reuters). Cash and amounts due from banks and balances
with the National Banks represent amounts available immediately thus the fair value equals to the cost.
The assumptions used when calculating the fair value of financial assets and liabilities when using valuation
technique are the following:
the discount rates are the risk free rates related to the denomination currency adjusted by the appropriate
risk premium as of the end of the reporting period,
the contractual cash-flows are considered for the performing loans and for the non-performing loans,
the amortized cost less impairment is considered as fair value,
the future cash-flows for floating interest rate instruments are estimated from the yield curves as of the
end of the reporting period,
the fair value of the deposit which can be due in demand cannot be lower than the amount payable on
demand.
Classes of assets and liabilities not measured at fair value in the Consolidated Statement of Financial Position,
the income approach was used to convert future cash-flows to a single current amount. Fair value of current
assets is equal to carrying amount, fair value of liabilities from issued securities and other bond-type classes of
assets and liabilities not measured at fair value measured based on Reuters market rates, and the fair value of
other classes not measured at fair value of the Consolidated Statement of Financial Position is measured at
discounted cash-flow method. Fair value of loans, net of loss allowance for loans measured at discount rate
adjustment technique, the discount rate is derived from observed rates of return for comparable assets or
liabilities that are traded in the market.
Fair value measurements – in relation to instruments measured not at fair value – are mainly categorized in level
3 of the fair value hierarchy.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
149
NOTE 47: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
a) Fair value of financial assets and liabilities
2021
2020
Carrying amount
Fair value
Carrying
amount
Fair value
Cash, amounts due from banks and balances with the National Banks
2,556,035
2,556,035
2,432,312
2,432,312
Placements with other banks, net of loss allowance for placements
1,584,861
1,566,458
1,148,743
1,150,081
Repo receivables
61,052
61,121
190,849
191,149
Financial assets at fair value through profit or loss
341,397
341,397
234,007
234,007
Trading securities at fair value through profit or loss
103,510
103,510
56,572
56,572
Fair value of derivative financial assets held for trading
184,484
184,484
117,623
117,623
Non-trading instruments mandatorily at fair value through profit or loss
53,403
53,403
57,577
57,577
Financial assets designated at fair value through profit or loss
-
-
2,235
2,235
Securities at fair value through other comprehensive income
2,224,510
2,224,510
2,136,709
2,136,709
Securities at amortized cost
3,891,335
3,645,046
2,624,920
2,384,933
Loans at amortized cost
1
13,493,183
13,106,425
11,674,842
12,303,182
Finance lease receivables
1,182,628
1,183,089
1,051,140
1,070,528
Loans measured at fair value through profit or loss
1,068,111
1,068,111
802,605
802,605
Derivative financial assets designated as hedge accounting
18,757
18,757
6,820
6,820
Other financial assets
135,916
135,916
140,562
140,562
Financial assets total
26,557,785
25,906,865
22,443,509
22,852,888
Amounts due to the National Governments, to the National Banks and other banks
1,567,348
1,446,036
1,185,315
1,172,036
Repo liabilities
79,047
79,010
117,991
119,927
Financial liabilities designated at fair value through profit or loss
41,184
41,184
34,131
34,131
Deposits from customers
21,068,644
21,002,125
17,890,863
17,905,676
Liabilities from issued securities
436,325
400,071
464,213
529,723
Held for trading derivative financial liabilities
202,716
202,716
104,823
104,823
Derivative financial liabilities designated as hedge accounting
11,228
11,228
11,341
11,341
Leasing liabilities
53,286
53,447
48,451
48,451
Other financial liabilities
485,771
485,771
389,902
389,902
Subordinated bonds and loans
278,334
284,709
274,704
265,679
Financial liabilities total
24,223,883
24,006,297
20,521,734
20,581,689
1
Higher discount rate due to the lower yield environment resulted in higher fair value comparing to the carrying values.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
150
NOTE 47: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
b) Fair value of derivative instruments
The Group regularly enters into hedging transactions in order to decrease its financial risks. However some
economically hedging transaction do not meet the criteria to qualify as hedge accounting, therefore these
transactions were accounted for as derivatives held for trading.
The assessment of the hedge effectiveness (both for fair value hedges and cash flow hedges) to determine the
economic relationship between the hedged item and the hedging instrument is accomplished with prospective
scenario analysis via different rate shift scenarios of the relevant risk factor(s) of the hedged risk component(s). The
fair value change of the hedged item and the hedging instrument is compared in the different scenarios. Economic
relationship is justified if the change of the fair value of the hedged item and the hedging instrument are in the
opposite direction and the absolute changes are similar amounts. The hedge ratio is determined as the ratio of the
notional of the hedged item and the notional of the hedging instrument. The sources of hedge ineffectiveness are the
not hedged risk components (e.g. change of cross currency basis spreads in case of interest rate risk hedges), slight
differences in maturity dates and interest payment dates in case of fair value hedges, and differences between the
carrying amount of the hedged item and the carrying amount of the hedging instrument in case of FX hedges (e.g.
caused by interest rate risk components in the fair value of the hedging instrument).
The summary of the derivatives held for trading and derivatives designated as hedge accounting of the Group are as
follows:
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
151
NOTE 47: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
b) Fair value of derivative instruments [continued]
2021
2020
Before netting
Netting
After netting
Before netting
Netting
After netting
Assets
Liabilities
Assets
Liabilities
Assets
Liabilities
Assets
Liabilities
Held for trading derivative financial instruments
Interest rate derivatives
Interest rate swaps
58,512
(56,070)
40,783
17,729
(15,287)
33,963
(33,736)
8,984
24,979
(24,752)
Cross currency interest rate swaps
7,316
(7,621)
-
7,316
(7,621)
7,315
(7,419)
-
7,315
(7,419)
OTC options
484
(299)
-
484
(299)
359
(8)
-
359
(8)
Forward rate agreement
-
-
-
-
-
-
-
-
-
-
Total interest rate derivatives (OTC derivatives)
66,312
(63,990)
40,783
25,529
(23,207)
41,637
(41,163)
8,984
32,653
(32,179)
Foreign exchange derivatives
Foreign exchange swaps
37,638
(42,272)
-
37,638
(42,272)
41,838
(35,537)
-
41,838
(35,537)
Foreign exchange forward contracts
10,790
(7,738)
-
10,790
(7,738)
8,689
(10,750)
-
8,689
(10,750)
OTC options
801
(180)
-
801
(180)
3,909
(3,835)
-
3,909
(3,835)
Foreign exchange spot conversion
187
(242)
-
187
(242)
553
(657)
-
553
(657)
Total foreign exchange derivatives
(OTC derivatives)
49,416
(50,432)
-
49,416
(50,432)
54,989
(50,779)
-
54,989
(50,779)
Equity stock and index derivatives
Commodity Swaps
51,523
(51,508)
-
51,523
(51,508)
9,695
(8,269)
-
9,695
(8,269)
Equity swaps
10,538
(357)
-
10,538
(357)
7,071
(560)
-
7,071
(560)
OTC derivatives total
62,061
(51,865)
-
62,061
(51,865)
16,766
(8,829)
-
16,766
(8,829)
Exchange traded futures and options
171
(278)
-
171
(278)
379
(1,262)
-
379
(1,262)
Total equity stock and index derivatives
62,232
(52,143)
-
62,232
(52,143)
17,145
(10,091)
-
17,145
(10,091)
Derivatives held for risk management
not designated in hedge
Interest rate swaps
47,457
(78,340)
5,682
41,775
(72,658)
24,679
(20,944)
12,736
11,943
(8,208)
Foreign exchange swaps
1,090
(4,108)
-
1,090
(4,108)
808
(3,566)
-
808
(3,566)
Foreign exchange spot
-
-
-
-
-
-
-
-
-
-
Forward contracts
-
-
-
-
-
41
-
-
41
-
Cross currency interest rate swaps
4,442
(168)
-
4,442
(168)
44
-
-
44
-
Total derivatives held for risk
management not designated in hedge
52,989
(82,616)
5,682
47,307
(76,934)
25,572
(24,510)
12,736
12,836
(11,774)
Total held for trading derivative
financial instruments
230,949
(249,181)
46,465
184,484
(202,716)
139,343
(126,543)
21,720
117,623
(104,823)
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
152
NOTE 47: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
b) Fair value of derivative instruments [continued]
2021
2020
Before netting
Netting
After netting
Before netting
Netting
After netting
Assets
Liabilities
Assets
Liabilities
Assets
Liabilities
Assets
Liabilities
Derivative financial instruments designated
as hedge accounting
Derivatives designated in cash flow hedges
Interest rate swaps
1,020
(1,020)
1,020
-
-
8,027
(8,027)
8,027
-
-
Total derivatives designated in cash flow hedges
1,020
(1,020)
1,020
-
-
8,027
(8,027)
8,027
-
-
Derivatives designated in fair value hedges
Interest rate swaps
25,417
(17,908)
12,131
13,286
(5,777)
2,436
(7,129)
1,795
641
(5,334)
Cross currency interest rate swaps
5,471
(5,451)
-
5,471
(5,451)
6,179
(6,007)
-
6,179
(6,007)
Foreign exchange swaps
-
-
-
-
-
-
-
-
-
-
Total derivatives designated in fair value hedges
30,888
(23,359)
12,131
18,757
(11,228)
8,615
(13,136)
1,795
6,820
(11,341)
Total derivatives held for risk management
(OTC derivatives)
31,908
(24,379)
13,151
18,757
(11,228)
16,642
(21,163)
9,822
6,820
(11,341)
c) Types of hedge accounting
Interest rate risk management is centralized at the Group. Interest rate risk exposures in major currencies are managed at OTP Headquarter on a consolidated level. Although
risk exposures in local currencies are managed at subsidiary level, the respective decisions are subject to Headquarter ALCO approval. Interest rate risk is measured by
simulating NII and EVE under different stress and plan scenarios, the established risk limits are described in „OTP Bank’s Group-Level Regulations on the Management of
Liquidity Risk and Interest Rate Risk of Banking Book”. The interest rate risk management activity aims to stabilize NII within the approved risk limits
The risk management objective of these hedge relationships is to mitigate the risk of clean fair value (i.e. excluding accrued interest) change of MIRS loans due to the change
of interest rate reference indices (BUBOR, EURIBOR, LIBOR, etc.) of the respective currency.
The ineffective part of fair value hedge accounting is presented on Interest income / Interest expense in the Consolidated Statement of Profit or Loss.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
153
NOTE 47: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
c) Types of hedge accounting [continued]
Amount, timing and uncertainty of future cash flows – hedging instruments as at 31 December 2021 (in fx million)
Type of
hedge
Type of risk
Type of instrument
Within one
month
Within three
months and over
one month
Within one year
and over three
months
Within five years
and over one year
More than
five years
Total
Fair Value
Hedge
Interest rate
risk
Interest rate swap
HUF
Notional
-
2,000
900
(52,474)
42,950
(6,624)
Average Interest Rate (%)
-
1.09%
0.49%
1.65%
1.31%
EUR
Notional
-
-
1
111
50
162
Average Interest Rate (%)
-
-
0.23%
0.24%
0.05%
USD
Notional
-
-
-
119
47
166
Average Interest Rate (%)
-
-
-
2.54%
4.18%
JPY
Notional
-
-
-
4,500
-
4,500
Average Interest Rate (%)
-
-
-
0.22%
-
Fair Value
Hedge
Foreign
exchange &
Interest rate
risk
Cross currency interest rate
swap
EUR/HUF
Notional
-
1
2
12
12
27
Average Interest Rate (%)
(1.64)%
(1.68)%
(1.67%)
(1.69%)
(1.82%)
Average FX Rate
310.41
310.29
310.26
310.01
307.81
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
154
NOTE 47: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
c) Types of hedge accounting [continued]
Amount, timing and uncertainty of future cash flows – hedging instruments as at 31 December 2021 (in fx million) [continued]
Type of
hedge
Type of risk
Type of instrument
Within one
month
Within three
months and over
one month
Within one year
and over three
months
Within five years
and over one year
More than
five years
Total
Fair Value
Hedge
Foreign
exchange
risk
Cross currency interest rate
swap
EUR/HUF
Notional
-
(6)
35
572
-
601
Average FX Rate
363.88
354.22
356.94
355.93
-
RON/HUF
Notional
-
-
200
2,225
-
2,425
Average FX Rate
-
-
66.21
73.08
-
RUB/HUF
Notional
-
-
-
11,200
-
11,200
Average FX Rate
-
-
-
4.15
-
JPY/HUF
Notional
-
-
-
4,500
-
4,500
Average FX Rate
-
-
-
2.79
-
USD/HUF
Notional
-
-
(3)
306
-
303
Average FX Rate
-
323.77
323.77
323.77
-
Other
Interest rate swap
HUF
Notional
-
3,345
1,823
3,093
-
8,261
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
155
NOTE 47: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
c) Types of hedge accounting [continued]
Amount, timing and uncertainty of future cash flows – hedging instruments as at 31 December 2020 (in fx million)
Type of
hedge
Type of risk
Type of instrument
Within one
month
Within three
months and over
one month
Within one year
and over three
months
Within five years
and over one year
More than
five years
Total
Fair Value
Hedge
Interest rate
risk
Interest rate swap
HUF
Notional
-
-
60,000
(89,622)
173,810
144,188
Average Interest Rate (%)
-
-
1.31%
1.06%
1.35%
EUR
Notional
15
-
5
102
10
132
Average Interest Rate (%)
(0.11)%
-
0.09%
0.24%
0.22%
USD
Notional
-
-
21
171
29
221
Average Interest Rate (%)
-
-
2.00%
2.38%
2.35%
RUB
Notional
-
-
-
2,100
-
2,100
Average Interest Rate (%)
-
-
-
7.38%
-
Fair Value
Hedge
Foreign
exchange &
Interest rate
risk
Cross currency interest rate
swap
EUR/HUF
Notional
-
-
2
12
14
28
Average Interest Rate (%)
(1.55)%
(1.59)%
(1.60)%
(1.63)%
(1.67)%
Average FX Rate
311.08
310.95
310.82
310.14
308.15
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
156
NOTE 47: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
c) Types of hedge accounting [continued]
Amount, timing and uncertainty of future cash flows – hedging instruments as at 31 December 2020 (in fx million) [continued]
Type of
hedge
Type of risk
Type of instrument
Within one
month
Within three
months and over
one month
Within one year
and over three
months
Within five years
and over one year
More than
five years
Total
Fair Value
Hedge
Foreign
exchange
risk
Cross currency interest rate
swap
EUR/HUF
Notional
1
92
123
613
-
829
Average FX Rate
360.19
354.92
360.47
356.03
-
RON/HUF
Notional
-
-
-
1,550
-
1,550
Average FX Rate
-
-
-
72.60
-
RUB/HUF
Notional
-
-
-
4,100
-
4,100
Average FX Rate
-
-
-
4.46
-
Other
Interest rate swap
HUF
Notional
-
(183)
6,940
8,342
-
15,099
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
157
NOTE 47: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
c) Types of hedge accounting [continued]
As at 31 December 2021 is as follows:
Type of
hedge
Type of
instrument
Type of
risk
Nominal
amount of
the hedging
instrument
Carrying amount of the hedging instrument as at 31 December 2021
Line item in the consolidated
statement of financial position
where the hedging instrument
is located
Changes in fair value
used for calculating
hedge ineffectiveness
for the year ended as
at 31 December 2021
Before netting
Netting
After netting
Assets
Liabilities
Assets
Liabilities
Fair value
hedge
Interest rate
swap
Interest rate
risk
409,595
23,986
(17,908)
12,131
11,855
(5,777)
Derivative financial instruments
6,494
designated as hedge accounting
Cross-
currency swap
FX & IR
risk
8,175
-
(2,375)
-
-
(2,375)
Derivative financial instruments
4
designated as hedge accounting
Cross-
currency swap
FX risk
566,936
5,471
(3,076)
-
5,471
(3,076)
Derivative financial instruments
(1,687)
designated as hedge accounting
Interest rate
swap
Other
8,261
1,431
-
-
1,431
-
Derivative financial instruments
3
designated as hedge accounting
Fair value hedges total
992,967
30,888
(23,359)
12,131
18,757
(11,228)
4,814
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
158
NOTE 47: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
c) Types of hedge accounting [continued]
As at 31 December 2020 is as follows:
Type of
hedge
Type of
instrument
Type of
risk
Nominal
amount of
the hedging
instrument
Carrying amount of the hedging instrument as at 31 December 2020
Line item in the consolidated
statement of financial position
where the hedging instrument
is located
Changes in fair value
used for calculating
hedge ineffectiveness
for the year ended as
at 31 December 2020
Before netting
Netting
After netting
Assets
Liabilities
Assets
Liabilities
Fair value
hedge
Interest rate
swap
Interest rate
risk
468,574
1,839
(7,065)
1,795
44
(5,270)
Derivative financial instruments
(370)
designated as hedge accounting
Cross-currency
swap
FX & IR
risk
8,874
-
(1,615)
-
-
(1,615)
Derivative financial instruments
(36)
designated as hedge accounting
Cross-currency
swap
FX risk
438,401
6,246
(4,456)
-
6,246
(4,456)
Derivative financial instruments
(809)
designated as hedge accounting
Interest rate
swap
Other
16,224
530
-
-
530
-
Derivative financial instruments
2
designated as hedge accounting
Fair value hedges total
932,073
8,615
(13,136)
1,795
6,820
(11,341)
(1,213)
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
159
NOTE 47: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
c) Types of hedge accounting [continued]
As at 31 December 2021 is as follows:
Type of hedge
Type of risk
Carrying amount of the
hedged item as at 31
December 2021
Accumulated amount of fair value
hedge adjustments on the hedged
item included in the carrying amount
of the hedged item for the year ended
31 December 2021
Line item in the consolidated
statement of financial position in
which the hedged item is included
Assets
Liabilities
Assets
Liabilities
Fair value hedges
- Loans
Interest rate risk
57,176
-
637
-
Loans
- Loans
Interest rate risk
-
142,649
-
(16,858)
Amounts due to banks, the National
Governments, deposits from the
National Banks and other banks
- Government bonds
Interest rate risk
13,921
-
(1,230)
-
Securities at amortized cost
- Government bonds
Interest rate risk
152,830
-
(22,457)
-
Securities at fair value through
other comprehensive income
- Other securities
Interest rate risk
42,008
-
318
-
Securities at fair value through
other comprehensive income
- Loans
Foreign exchange &
Interest rate risk
101,934
-
611
(1,114)
Loans
- Loans
Foreign exchange risk
458,312
-
-
-
Loans
- Government bonds
Foreign exchange risk
12,811
-
-
-
Securities at fair value through
other comprehensive income
- Government bonds
Foreign exchange risk
98,668
-
-
-
Securities at amortized cost
- Other securities
Other risk
-
8,261
-
(161)
Liabilities from issued securities
Fair value hedges total
937,660
150,910
(22,121)
(18,133)
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
160
NOTE 47: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
c) Types of hedge accounting [continued]
As at 31 December 2020 is as follows:
Type of hedge
Type of risk
Carrying amount of the
hedged item as at 31
December 2020
Accumulated amount of fair value
hedge adjustments on the hedged
item included in the carrying amount
of the hedged item for the year ended
31 December 2020
Line item in the consolidated
statement of financial position in
which the hedged item is included
Assets
Liabilities
Assets
Liabilities
Fair value hedges
- Loans
Interest rate risk
35,256
-
1,679
-
Loans
- Loans
Interest rate risk
-
100,299
-
(235)
Loans
- Government bonds
Interest rate risk
8,678
-
(106)
-
Securities at amortized cost
- Government bonds
Interest rate risk
269,838
-
2,518
-
Securities at fair value through
other comprehensive income
- Other securities
Interest rate risk
47,560
-
781
-
Securities at fair value through
- Loans
Foreign exchange &
other comprehensive income
Interest rate risk
96,972
-
284
(1,634)
Loans
- Loans
Foreign exchange risk
303,572
-
-
-
Loans
- Other securities
Other risk
-
15,032
-
(528)
Liabilities from issued securities
Fair value hedges
total
761,876
115,331
5,156
(2,397)
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
161
NOTE 47: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
c) Types of hedge accounting [continued]
Change in basis swap spread recognised in the consolidated other comprehensive income related fair value hedges as follows:
Type of risk
Carrying amount of the hedged item
Items recognised in the
consolidated other comprehensive
income for the
year 2021
Change in the items
recognized in other
comprehensive income
for the year 2021
Line item in the consolidated
statement of financial position in
which the hedged item is included
Assets
Liabilities
FX risk
458,312
-
(1,032)
(1,681)
Loans at amortised cost
FX risk
12,811
-
64
-
Securities at fair value through other
comprehensive income
471,123
-
(968)
(1,681)
Type of risk
Carrying amount of the hedged item
Items recognised in the
consolidated other comprehensive
income for the
year 2020
Change in the items
recognized in other
comprehensive income
for the year 2020
Line item in the consolidated
statement of financial position in
which the hedged item is included
Assets
Liabilities
FX risk
303,572
-
713
-
Loans at amortised cost
303,572
-
713
-
On Group level there weren’t any cash-flow hedges for the year ended 31 December 2021 and 2020.
According to the strategic direction designated by the Management Committee, a decision was made about closing in accounting meaning the former EUR 310 million
strategic open position which was presented at the end of 2019 in the Consolidated Financial Statements, so at the end of 2020 regarding net investment hedges for foreign
subsidiaries there aren’t any disclosure requirements to be presented.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
162
NOTE 47: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
d) Fair value levels
Methods and significant assumptions used to determine fair value of the different levels of financial instruments:
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
- Level 2: inputs other than quoted prices included within Level 1, that are observable for the asset or
liability either directly or indirectly. Fair value measurements – in relation with instruments measured
not at fair value – are categorized in level 2;
- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable
inputs).
The following table shows an analysis of financial instruments recorded at fair value by level of the fair value
hierarchy:
2021
Total
Level 1
Level 2
Level 3
Financial assets at fair value through profit or loss
341,397
90,877
227,153
23,367
Trading securities at fair value through profit or loss
103,510
58,727
44,777
6
Positive fair value of derivative
financial assets held for trading
184,484
171
174,143
10,170
Non-trading instruments mandatorily
at fair value through profit or loss
53,403
31,979
8,233
13,191
1
Securities at fair value through
other comprehensive income
2,224,510
910,324
1,250,833
63,353
2
Loans mandatorily measured at fair
value through profit or loss
1,068,111
281
-
1,067,830
Positive fair value of derivative financial
assets designated as fair value hedge
18,757
-
18,757
-
Financial assets measured at fair value total
3,652,775
1,001,482
1,496,743
1,154,550
Financial liabilities designated at
fair value through profit or loss
41,184
-
-
41,184
Negative fair value of held-for-trading
derivative financial liabilities
202,716
278
202,438
-
Negative fair value of derivative financial
liabilities designated as fair value hedge
11,228
-
11,228
-
Financial liabilities measured at fair value total
255,128
278
213,666
41,184
1
The portfolio includes Visa C shares.
2
The portfolio includes mainly HUF 55,476 million Ukrainian government bonds.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
163
NOTE 47: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
d) Fair value levels [continued]
2020
Total
Level 1
Level 2
Level 3
Financial assets at fair value through profit or loss
234,007
62,472
149,504
22,031
Trading securities at fair value through profit or loss
56,572
30,333
26,227
12
Positive fair value of derivative
financial assets held for trading
117,623
388
110,649
6,586
Non-trading instruments mandatorily
at fair value through profit or loss
57,577
31,751
10,393
15,433
1
Financial assets designated
at fair value through profit or loss
2,235
-
2,235
-
Securities at fair value through
other comprehensive income
2,136,709
1,137,821
941,982
56,906
2
Loans mandatorily measured at fair
value through profit or loss
802,605
1,089
2,535
798,981
Positive fair value of derivative financial
assets designated as fair value hedge
6,820
-
6,820
-
Financial assets measured at fair value total
3,180,141
1,201,382
1,100,841
877,918
Financial liabilities designated at
fair value through profit or loss
34,131
-
2,235
31,896
Negative fair value of held-for-trading
derivative financial liabilities
104,823
1,386
103,437
-
Negative fair value of derivative financial
liabilities designated as fair value hedge
11,341
-
11,341
-
Financial liabilities measured at fair value total
150,295
1,386
117,013
31,896
1
The portfolio includes mainly Visa C shares.
2
The portfolio includes mainly HUF 46,124 million Albanian government bonds.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
164
NOTE 47: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
d) Fair value levels [continued]
Movements in Level 3 financial instruments measured at fair value
The following table shows a reconciliation of the opening and closing amount of Level 3 financial assets and liabilities which are recorded at fair value:
2021
Opening
balance
Purchase
(+)
Issuance
/Disbursement
(+)
Settlement
/ Close (-)
Sale (-)
FVA (+/-)
Transfer
(+/-)
Fx effect /
Revaluation
Other
Closing
balance
Trading securities at fair value
through profit or loss
12
-
-
-
-
-
-
-
(6)
6
Positive fair value of derivative
financial assets held for trading
6,586
-
-
-
-
3,584
-
-
-
10,170
Nont-trading securities mandatorily
at fair value through profit or loss
15,433
-
390
-
(4,501)
640
(57)
256
1,030
13,191
Securities at fair value through
other comprehensive income
56,906
81,795
-
(5,544)
(2,018)
(91)
(69,636)
1,813
128
63,353
Loans mandatorily measured at
fair value through profit or loss
798,981
-
333,931
(41,038)
-
(24,044)
1
-
-
-
1,067,830
Financial assets measured
at fair value total
877,918
81,795
334,321
(46,582)
(6,519)
(19,911)
(69,693)
2,069
1,152
1,154,550
Financial liabilities
designated at fair value
through profit or loss
31,896
-
-
(7,223)
-
1,454
-
-
15,057
41,184
Financial liabilities designated
at fair value total
31,896
-
-
(7,223)
-
1,454
-
-
15,057
41,184
1
FVA change for the current year consists of HUF 16,289 million adjustment resulting from risk factors and HUF 7,755 million adjustment resulting from market factors.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
165
NOTE 47: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
d) Fair value levels [continued]
Movements in Level 3 financial instruments measured at fair value [continued]
The following table shows a reconciliation of the opening and closing amount of Level 3 financial assets and liabilities which are recorded at fair value:
2020
Opening
balance
Purchase
(+)
Issuance
/Disbursement
(+)
Settlement
/ Close (-)
Sale (-)
FVA (+/-)
Transfer
(+/-)
Fx effect /
Revaluation
Other
Closing
balance
Trading securities at fair value
through profit or loss
-
-
-
-
-
-
12
-
-
12
Positive fair value of derivative
financial assets held for trading
4,227
-
-
-
-
2,359
-
-
-
6,586
Nont-trading securities mandatorily
at fair value through profit or loss
8,155
-
1,204
(5,043)
-
(862)
9,961
2,018
-
15,433
Securities at fair value through
other comprehensive income
59,695
11,076
-
(9,398)
(162)
1,637
(10,812)
4,870
-
56,906
Loans mandatorily measured at
fair value through profit or loss
493,207
-
333,908
(21,397)
-
(6,737)
-
-
-
798,981
Financial assets measured
at fair value total
565,284
11,076
335,112
(35,838)
(162)
(3,603)
(839)
6,888
-
877,918
Financial liabilities
designated at fair value
through profit or loss
28,861
-
(1,689)
-
-
(1,270)
-
-
5,994
31,896
Financial liabilities designated
fair value total
28,861
-
(1,689)
-
-
(1,270)
-
-
5,994
31,896
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
166
NOTE 47: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
d) Fair value levels [continued]
Valuation techniques and sensitivity analysis on Level 3 instruments
Sensitivity analysis is performed on products with significant unobservable inputs (Level 3) to generate a range
of reasonably possible alternative valuations. The sensitivity methodologies applied take account of the nature of
the valuation techniques used, as well as the availability and reliability of observable proxy and historical date
and the impact of using alternative models.
The calculation is based on a range or spread data of reliable reference source or a scenario based on relevant
market analysis alongside the impact of using alternative models. Sensitivities are calculated without reflecting
the impact of any diversification in the portfolio.
Unobservable inputs used in measuring fair value
Type of financial
instrument
Valuation technique
Significant unobservable input
Range of estimates
for
unobservable
input
VISA C shares
Market approach combined with
expert judgement.
Discount applied due to illiquidity
and litigation.
+12% / (12%)
MFB refinancing loans
Discounted cash flow model
Probability of default
+/- 20%
Subsidised personal
loans
Discounted cash flow model
Probability of default
+/- 20%
Subsidised personal
loans
Discounted cash flow model
Operational costs
+/- 20%
Subsidised personal
loans
Discounted cash flow model
Demography
Change in the cash
flow estimation
The effect of unobservable inputs on fair value measurement
Although the Group believes that its estimates of fair value are appropriate, the use of different methodologies or
assumptions could lead to different measurements of fair value. For fair value measurements in Level 3 changing
the assumptions used to reasonably possible alternative assumptions would have the following effects.
2021
Unobservable inputs
Fair values
Effect on profit and loss
Favourable
Unfavourable
Favourable
Unfavourable
VISA C shares
Illiquidity
6,704
5,079
813
(813)
Loans mandatorily
at fair value
throuhg profit or loss
Probability of default
406,362
405,266
549
(547)
Loans mandatorily
at fair value
throuhg profit or loss
Operational costs
412,868
399,020
7,054
(6,794)
Subsidised personal loans
Probability of default
639,007
631,856
3,590
(3,561)
Subsidised personal loans
Operational costs
647,292
623,934
11,875
(11,483)
Subsidised personal loans
Demography
635,484
635,387
68
(29)
MFB refinancing loans
Probability of default
19,218
18,972
123
(123)
Total
2,766,935
2,719,514
24,072
(23,350)
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
167
NOTE 47: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
d) Fair value levels [continued]
The effect of unobservable inputs on fair value measurement [continued]
2020
Unobservable inputs
Fair values
Effect on profit and loss
Favourable
Unfavourable
Favourable
Unfavourable
VISA C shares
Illiquidity
6,324
4,821
751
(751)
Loans mandatorily
at fair value
throuhg profit or loss
Probability of default
319,857
316,251
1,813
(1,793)
Loans mandatorily
at fair value
throuhg profit or loss
Operational costs
324,845
311,525
6,801
(6,519)
Subsidised personal loans
Probability of default
452,782
447,647
2,579
(2,555)
Subsidised personal loans
Operational costs
464,974
436,194
14,772
(14,008)
Subsidised personal loans
Demography
451,419
448,987
1,217
(1,215)
MFB refinancing loans
Probability of default
24,876
24,690
93
(93)
Total
2,045,077
1,990,115
28,026
(26,934)
The favourable and unfavourable effects of using reasonably possible alternative assumptions for the valuation
of Visa C shares have been calculated by modifying the discount rate used for the valuation by +/-12% as being
the best estimates of the management as at 31 December 2021 and 2020 respectively.
In the case of Hungarian Development Bank (“MFB”) refinancing loans and subsidised personal loans the Bank
calculated the favourable and unfavourable effects of using reasonably possible alternative assumptions by
modifying the rates of probability of default by +/- 20% as one of the most significant unobservable input.
In case of subsidised personal loans operational cost and factors related to demography are considered as
unobservable inputs to the applied fair value calculation model.
The Bank calculated the favourable and unfavourable effects of using reasonably possible alternative
assumptions by modifying the rates of operational costs by +/- 20% as one of the most significant unobservable
inputs.
Cash flow estimation are based on assumption related to the future number of childbirths performed by the
debtors. According to the current assumptions 15% of the debtors will not fulfill the conditions of the subsidy
determined by the government after 5 years (“breach of conditions”), thereby debtors will be obliged to pay back
the interest subsidy given before. Furthermore, in this case subsidised loans are converted to loans provided
based on market conditions. Loans are prepaid by the government as part of the subsidy after the second and the
third childbirth following the signatory of the loan contract. The Bank calculated the favourable and
unfavourable effects of using reasonably possible alternative assumptions by modifying the demographical
assumption of breach of conditions by +/- 5% as the most significant unobservable input in the cash flow
estimation.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
168
NOTE 48: SEGMENT REPORTING BY BUSINESS AND GEOGRAPHICAL SEGMENTS (in
HUF mn)
The Group distinguishes business and geographical segments. The report on the base of the business and
geographical segments is reported below.
The operations in the Slovakian segment and the Croatian insurance operation were discontinued. The segment
information reported on the next pages does not include any amounts for these discontinued operations neither
for this period nor for the previous year, which are described in more details in Note 49.
The reportable segments of the Group on the base of IFRS 8 are as the follows:
OTP Core Hungary, Russia, Ukraine, Bulgaria, Romania, Serbia, Croatia, Montenegro, Albania, Moldova,
Slovenia, Merkantil Group, Asset Management subsidiaries, Other subsidiaries and Corporate Center.
OTP Core is an economic unit for measuring the result of core business activity of the Group in Hungary.
Financials for OTP Core are calculated from the partially Consolidated Financial Statements of the companies
engaged in the Group’s underlying banking operation in Hungary. These companies include OTP Bank Hungary
Plc., OTP Mortgage Bank Ltd., OTP Building Society Ltd., OTP Factoring Ltd., OTP Financial Point Ltd., and
companies providing intragroup financing. The Bank Employee Stock Ownership Plan Organization was
included from the fourth quarter of 2016; OTP Card Factory Ltd., OTP Facility Management Llc., Monicomp
Ltd. and OTP Real Estate Lease Ltd. were included from the first quarter of 2017 (from the first quarter of 2019
OTP Real Estate Lease Ltd. was eliminated from OTP Core); OTP Mobile Service Llc., OTP Ingatlanpont Llc.
were included from the first quarter of 2019, OTP eBIZ Ltd from the first quarter of 2020 and OTP Home
Solutions Ltd. was included from the second quarter of 2021. The consolidated accounting results of these
companies are segmented into OTP Core and Corporate Centre. The latter is a virtual entity.
Within the Group, the Corporate Centre acts as a virtual entity established by the equity investment of OTP Core
for managing the wholesale financing activity for all the subsidiaries within the Group but outside OTP Core.
Therefore the balance sheet of the Corporate Centre is funded by the equity and intragroup lending received from
OTP Core, the intragroup lending received from other subsidiaries, and the subordinated debt and senior notes
arranged by OTP under its running EMTN program.
From this funding pool, the Corporate Centre is to provide intragroup lending to, and hold equity stakes in OTP
subsidiaries outside OTP Core. Main subsidiaries financed by Corporate Centre are as follows: Hungarians:
Merkantil Bank Ltd, Merkantil Leasing Ltd, OTP Fund Management Ltd, OTP Real Estate Fund Management
Ltd, OTP Life Annuity Ltd; foreigners: banks, leasing companies, factoring companies.
The results of OTP Factoring Ukraine LLC, OTP Factoring SRL, OTP Factoring Bulgaria LLC, OTP Factoring
Serbia d.o.o., and OTP Debt Collection d.o.o. (formerly known as: OTP Factoring Montenegro d.o.o.) are
included into the foreign banks segment.
From the first quarter of 2019 Expressbank AD and its subsidiaries, OTP Leasing EOOD and Express Factoring
EOOD (altogether: Express Group) were included into the Bulgarian operation, so from the first quarter of 2019
the statement of recognized income and balance sheet of DSK Leasing AD was included into this segment too.
The Bulgarian Expressbank AD merged with its parent DSK Bank AD in April 2020.
The Serbian segment, OTP banka Srbija AD Beograd and Vojvodjanska Banka a.d. Novi Sad includes from the
first quarter of 2019 the statements of profit or loss and financial positions of OTP Lizing d.o.o, OTP Services
d.o.o. and from the third quarter of 2019 the financial position of the newly acquired OTP banka Srbija AD
Beograd and from the fourth quarter of 2019 its statement of profit or loss too. OTP banka Srbija a.d. merged
with its parent bank in April 2021.
The Montenegrin segment, Crnogorska Komercijalna Banka a.d. and Podgoricka banka a.d. includes from the
third quarter of 2019 the statement of profit or loss and financial position of the newly acquired Podgoricka
banka a.d. In December 2020 Podgoricka banka a.d. merged into Crnogorska Komercijalna Banka a.d.
In the first quarter of 2019 the Albanian, and from the second half of year 2019 the Moldovan and Slovenian
segments were included as new segments in the consolidated segment report.
The activities of the other subsidiaries are out of the leasing and fund management and factoring activity, such
as: OTP Real Estate Ltd., OTP Life Annuity Ltd, OTP Funds Servicing and Consulting Ltd., OTP Building
s.r.o., OTP Real Slovensko s.r.o.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
169
NOTE 48: SEGMENT REPORTING BY BUSINESS AND GEOGRAPHICAL SEGMENTS (in
HUF mn) [continued]
The reportable business and geographical segments of the Group are those components where:
- separated income and ex penses, assets and liabilities can be identified and assignable to the segments,
- transactions between the different segments were eliminated,
- the main decisive board of the Group regularly controls the operating results,
- separated financial information is available.
Adjustments
Goodwill / investment impairment and their tax saving effect:
As at 31 December 2021 HUF 39,546 million impairment was booked on the investment in OTP Bank Romania
S.A. on which HUF 3,559 million positive tax effect was recognized, HUF 9,906 million impairment release was
booked on OTP Banka Srbija a.d. on which HUF 892 million negative tax effect was recognized, 16,628 million
impairment release was booked on Crnogorska komercjalna banka a.d. on which HUF 1,496 million negative tax
effect was recognized, 8,463 million impairment was booked on Monicomp Ltd. on which HUF 763 million
positive tax effect was recognized.
As at 31 December 2020 HUF 9,841 million impairment was booked on the investment in OTP Bank Romania
S.A. on which HUF 886 million positive tax effect was recognized.
Special tax on financial institutions (after income tax):
Special tax on financial institutions includes the special tax paid by the Hungarian financial institutions, the net
present value effect of the one-off additional banking tax payable into the pandemic fund in 2020 (the payments
are deductible from future banking taxes), the banking tax paid by the Romanian bank, subsidiary of OTP Group
and as well as for 2020 the Slovakian banking levy. Besides, it also contained for 2020 the Slovakian Deposit
Protection Fund contributions being introduced again in 2014, and the contribution into the Resolution Fund in
Slovakia, too.
Effect of acquisitions (after income tax):
The following main items appear on this line: the negative goodwill related to acquisitions which improves the
accounting result, integration costs of the newly acquired banks and other direct effects due to the acquisitions
(such as customer base value amortisation) and effects related to the sale of the Slovakian bank for the end of
2020.
Explanation to the segments in the following table below:
2; 3; 8: The segments distinguished by geographical basis contain banks in that country and sometimes other
financial institutions (like leasing or factoring companies) or other companies. The incomes mainly arises from
providing financial services like: collecting deposits, granting loans, leasing and treasury activities, payment and
investment services and other financial services.
16: Merkantil Group, is responsible for Hungarian leasing activities, originates its income from providing
leasing services (financing cars and production equipment).
17: Incomes arising in this segment is mainly fee income of fund management companies in Hungary, Bulgaria,
Romania, Ukraine based on capital in investment funds or assets in funds.
18: The activities of other Hungarian and foreign subsidiaries are very divergent so the incomes can be also
originated from different sources. The main part of the income in this segment comes from the activities of OTP
Funds Servicing and Consulting, OTP Real Estate and the investments of OTP Real Estate Fund Management
and Portfolion Funds.
19: Net interest income of Corporate Center includes interest expense on received resources and interest income
on assets exposed.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
170
NOTE 48: SEGMENT REPORTING BY BUSINESS AND GEOGRAPHICAL SEGMENTS
(in HUF mn) [continued]
Information regarding the Group’s reportable segments is presented below:
As at 31 December 2021
Main components of the consolidated statement of profit
or loss in HUF million
OTP Group - in the
consolidated statement of
profit or loss - structure of
accounting reports
Adjustments on the
accounting in
Recognized Income
OTP Group - in the consolidated
statement of profit or loss -
structure of management reports
OTP CORE
(Hungary)
Foreign banks in EU
subtotal (without
adjustments)
DSK Bank AD
(Bulgaria)
OTP banka d.d.
(Croatia)
SKB Banka d.d.
(Slovenia)
OTP Bank Romania
S.A. (Romania)
a
b
1=a+b; 1= 2+3+8+15+19+20
2
3=4+…+7
4
5
6
7
Net profit for the year from continued and
discontinued operations
456,428
456,428
Net profit for the year from discontinued operations
116
116
Net profit for the year from continued opearations
456,312
456,312
Adjustments (total)
(40,475)
(40,475)
Dividends and net cash transfers (after income tax)
729
729
Goodwill /investment impairment (after income tax)
1,909
1,909
Bank tax on financial institutions (after income tax)
(18,893)
(18,893)
Effect of acquisition (after income tax)
(15,506)
(15,506)
Expected one-off negative effect of the debt repayment
moratorium in Hungary (after income tax)
(15,040)
(15,040)
Result of the treasury share swap agreement
at OTP Core (after income tax)
6,326
6,326
Consolidated adjusted net profit for the year
456,312
44,071
500,383
213,378
131,309
76,789
33,446
16,822
4,252
Profit before income tax
528,435
62,899
591,334
253,972
152,663
85,243
41,064
20,660
5,696
Adjusted operating profit
597,770
61,589
659,359
256,151
178,192
106,240
43,421
19,595
8,936
Adjusted total income
1,345,382
(33,290)
1,312,092
545,185
356,257
178,470
88,735
42,354
46,698
Adjusted net interest income
874,310
9,702
884,012
369,309
237,745
112,869
60,933
27,673
36,270
Adjusted net profit
from fees and commissions
442,174
(116,626)
325,548
150,578
90,092
54,508
18,183
13,258
4,143
Adjusted other net non-interest income
28,898
73,634
102,532
25,298
28,420
11,093
9,619
1,423
6,285
Adjusted other administrative expenses
(747,612)
94,879
(652,733)
(289,034)
(178,065)
(72,230)
(45,314)
(22,759)
(37,762)
Personnel expenses
(340,684)
483
(340,201)
(143,234)
(91,350)
(34,284)
(23,111)
(13,015)
(20,940)
Depreciation and amortization
(94,996)
22,180
(72,816)
(36,926)
(16,383)
(7,160)
(4,392)
(1,350)
(3,481)
Other general expenses
(311,932)
72,216
(239,716)
(108,874)
(70,332)
(30,786)
(17,811)
(8,394)
(13,341)
Gains from derecognition of
financial assets at amortized cost
1,885
(1)
1,884
(1,598)
1,814
1,893
1,449
-
(1,528)
Modification loss
(13,672)
10,131
(3,541)
(3,397)
(14)
-
-
(14)
-
Total risk costs
(57,548)
(8,820)
(66,368)
2,816
(27,329)
(22,890)
(3,806)
1,079
(1,712)
Adjusted loss allowance on
loan and placement losses
(without the effect of revaluation of FX)
(47,645)
7,809
(39,836)
4,910
(23,973)
(20,831)
318
1,833
(5,293)
Other impairment (adjustment)
(9,903)
(16,629)
(26,532)
(2,094)
(3,356)
(2,059)
(4,124)
(754)
3,581
Adjusted impairment under IAS 36
(9,903)
437
(9,466)
70
(3,001)
(2,401)
(135)
-
(465)
Income tax
(72,123)
(18,828)
(90,951)
(40,594)
(21,354)
(8,454)
(7,618)
(3,838)
(1,444)
Total Assets
1
27,551,338
-
27,551,338
14,205,354
10,075,267
4,627,132
2,576,445
1,433,206
1,438,484
Total Liabilities
24,516,618
-
24,516,618
12,195,467
8,680,440
3,927,757
2,225,422
1,253,691
1,273,570
( ) used at: provisions, impairment and expenses
1
Relating to the discontinued operations the assets were HUF 2,046 million.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
171
NOTE 48: SEGMENT REPORTING BY BUSINESS AND GEOGRAPHICAL SEGMENTS
(in HUF mn) [continued]
Information regarding the Group’s reportable segments is presented below [continued]:
As at 31 December 2021 [continued]
Main components of the consolidated statement of profit
or loss in HUF million [continued]
Foreign banks
not in EU
subtotal
(without
adjustments)
OTP banka
Srbija a.d.
(Serbia)
OTP Bank
JSC (Ukraine)
JSC "OTP
Bank"
(Russia) and
Touch Bank
Crnogorska
komercijalna
banka a.d.
(Montenegro)
Banka OTP
Albania SHA
(Albania)
OTP Bank
S.A.
(Moldova)
Non-banking
subsidiaries
subtotal
Merkantil
Group
(Hungary)
Asset
Management
subsidiaries
Other
subsidiaries
Corporate
Centre
Eliminations
and
adjustments
8=9+…+14
9
10
11
12
13
14
15=16+17+18
16
17
18
19
20
Net profit for the year from continued and
discontinued operations
Net profit for the year from discontinued operations
Net profit for the year from continued opearations
Adjustments (total)
Dividends and net cash transfers (after income tax)
Goodwill /investment impairment (after income tax)
Bank tax on financial institutions (after income tax)
Effect of acquisition (after income tax)
Expected one-off negative effect of the debt repayment
moratorium in Hungary (after income tax)
Result of the treasury share swap agreement
at OTP Core (after income tax)
Consolidated adjusted net profit for the year
124,272
32,104
39,025
37,624
4,139
5,521
5,859
24,573
7,998
6,321
10,254
2,887
3,964
Profit before income tax
148,419
35,714
47,267
47,314
4,956
6,507
6,661
27,831
8,916
7,138
11,777
3,000
5,449
Adjusted operating profit
183,171
40,754
54,761
62,368
10,240
7,212
7,836
43,040
11,961
7,141
23,938
240
(1,435)
Adjusted total income
335,934
83,493
83,567
118,158
22,046
13,398
15,272
85,568
23,291
11,064
51,213
1,260
(12,112)
Adjusted net interest income
252,782
62,497
62,051
91,364
16,553
10,619
9,698
22,019
20,680
4
1,335
1,260
897
Adjusted net profit
from fees and commissions
63,699
14,410
14,494
25,728
4,880
1,843
2,344
26,456
116
10,786
15,554
-
(5,277)
Adjusted other net non-interest income
19,453
6,586
7,022
1,066
613
936
3,230
37,093
2,495
274
34,324
-
(7,732)
Adjusted other administrative expenses
(152,763)
(42,739)
(28,806)
(55,790)
(11,806)
(6,186)
(7,436)
(42,528)
(11,330)
(3,923)
(27,275)
(1,020)
10,677
Personnel expenses
(85,606)
(22,569)
(16,580)
(33,773)
(5,805)
(2,794)
(4,085)
(20,628)
(4,654)
(2,443)
(13,531)
(95)
712
Depreciation and amortization
(13,966)
(2,820)
(2,131)
(6,263)
(1,461)
(559)
(732)
(5,160)
(1,428)
(231)
(3,501)
(2)
(380)
Other general expenses
(53,191)
(17,350)
(10,095)
(15,754)
(4,540)
(2,833)
(2,619)
(16,740)
(5,248)
(1,249)
(10,243)
(923)
10,345
Gains from derecognition of
financial assets at amortized cost
1,862
554
916
467
(31)
(33)
(11)
(193)
(193)
-
-
-
(1)
Modification loss
(130)
-
(130)
-
-
-
-
-
-
-
-
-
-
Total risk costs
(36,484)
(5,594)
(8,280)
(15,521)
(5,253)
(672)
(1,164)
(15,016)
(2,852)
(3)
(12,161)
2,760
6,885
Adjusted loss allowance on
loan and placement losses
(without the effect of revaluation of FX)
(21,918)
(941)
(6,613)
(13,542)
677
(847)
(652)
(2,900)
(2,900)
-
-
-
4,045
Other impairment (adjustment)
(14,566)
(4,653)
(1,667)
(1,979)
(5,930)
175
(512)
(12,116)
48
(3)
(12,161)
2,760
2,840
Adjusted impairment under IAS 36
(274)
(245)
(3)
24
(51)
1
-
(6,260)
179
(14)
(6,425)
-
(1)
Income tax
(24,147)
(3,610)
(8,242)
(9,690)
(817)
(986)
(802)
(3,258)
(918)
(817)
(1,523)
(113)
(1,485)
Total Assets
1
5,183,118
2,224,715
983,557
799,965
513,522
350,848
310,511
1,322,717
782,222
27,753
512,742
3,109,369
(6,344,487)
Total Liabilities
4,316,145
1,918,085
823,801
559,241
431,495
315,713
267,810
972,287
722,976
12,610
236,701
1,693,363
(3,341,084)
( ) used at: provisions, impairment and expenses
1
Relating to the discontinued operations the assets were HUF 2,046 million.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
172
NOTE 48: SEGMENT REPORTING BY BUSINESS AND GEOGRAPHICAL SEGMENTS
(in HUF mn) [continued]
Information regarding the Group’s reportable segments is presented below [continued]:
As at 31 December 2020
Main components of the consolidated statement of profit
or loss in HUF million
OTP Group - in the
consolidated statement of
profit or loss - structure of
accounting reports
Adjustments on the
accounting in
Recognized Income
OTP Group - in the consolidated
statement of profit or loss -
structure of management reports
OTP CORE
(Hungary)
Foreign banks in EU
subtotal (without
adjustments)
DSK Group including
Expressbank AD
(Bulgaria)
OTP banka Hrvatska
d.d. (Croatia)
SKB Banka
(Slovenia)
OTP Bank Romania
S.A. (Romania)
a
b
1=a+b; 1= 2+3+8+15+19+20
2
3=4+…+7
4
5
6
7
Net profit for the year from continued and
discontinued operations
259,636
259,636
Net profit for the year from discontinued operations
5,590
5,590
Net profit for the year from continued opearations
254,046
254,046
Adjustments (total)
(53,860)
(53,860)
Dividends and net cash transfers (after income tax)
213
213
Goodwill /investment impairment (after income tax)
886
886
Bank tax on financial institutions (after income tax)
(17,365)
(17,365)
Effect of acquisition (after income tax)
(12,441)
(12,441)
Impact of fines imposed by the Hungarian
Competition Authority (after income tax)
749
749
Expected one-off negative effect of the debt re-
payment moratorium in Hungary (after income tax)
(28,262)
(28,262)
Result of the treasury share swap agreement
at OTP Core (after income tax)
2,360
2,360
Consolidated adjusted net profit for the year
254,046
57,072
311,118
156,273
69,777
42,735
15,466
10,126
1,450
Profit before income tax
297,964
71,230
369,194
189,373
78,603
46,442
18,237
12,565
1,359
Adjusted operating profit
516,439
37,538
553,977
197,720
161,700
89,774
40,329
19,787
11,810
Adjusted total income
1,207,564
(37,646)
1,169,918
453,635
335,709
166,667
84,907
40,388
43,747
Adjusted net interest income
782,671
5,408
788,079
286,448
230,280
111,239
58,199
28,103
32,739
Adjusted net profit
from fees and commissions
397,633
(104,523)
293,110
130,470
76,486
45,453
16,093
11,127
3,813
Adjusted other net non-interest income
27,260
61,469
88,729
36,717
28,943
9,975
10,615
1,158
7,195
Adjusted other administrative expenses
(691,125)
75,184
(615,941)
(255,915)
(174,009)
(76,893)
(44,578)
(20,601)
(31,937)
Personnel expenses
(308,642)
(3,853)
(312,495)
(125,949)
(85,252)
(34,033)
(21,772)
(12,060)
(17,387)
Depreciation and amortization
(92,761)
22,475
(70,286)
(35,935)
(16,447)
(8,385)
(4,098)
(1,296)
(2,668)
Other general expenses
(289,722)
56,562
(233,160)
(94,031)
(72,310)
(34,475)
(18,708)
(7,245)
(11,882)
Gains from derecognition of
financial assets at amortized cost
3,380
62
3,442
(669)
2,790
1,778
637
482
(107)
Modification loss
(29,773)
29,543
(230)
-
(20)
-
-
(20)
-
Total risk costs
(192,082)
4,087
(187,995)
(7,678)
(85,867)
(45,110)
(22,729)
(7,684)
(10,344)
Adjusted loss allowance on
loan and placement losses
(without the effect of revaluation of FX)
(190,875)
32,454
(158,421)
2,374
(78,450)
(44,875)
(19,491)
(6,244)
(7,840)
Other impairment (adjustment)
(1,207)
(28,367)
(29,574)
(10,052)
(7,417)
(235)
(3,238)
(1,440)
(2,504)
Adjusted impairment under IAS 36
(1,207)
720
(487)
(30)
(441)
(278)
(9)
-
(154)
Income tax
(43,918)
(14,158)
(58,076)
(33,100)
(8,826)
(3,707)
(2,771)
(2,439)
91
Total Assets
1
23,329,771
-
23,329,771
11,492,949
9,125,249
4,283,625
2,325,669
1,353,772
1,162,183
Total Liabilities
2
20,793,243
-
20,793,243
9,726,310
7,883,344
3,663,247
1,997,504
1,187,648
1,034,945
( ) used at: provisions, impairment and expenses
1
Relating to the discontinued operations the assets were HUF 6,070 million.
2
Relating to the discontinued operations the liabilities were HUF 5,486 million.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
173
NOTE 48: SEGMENT REPORTING BY BUSINESS AND GEOGRAPHICAL SEGMENTS
(in HUF mn) [continued]
Information regarding the Group’s reportable segments is presented below [continued]:
As at 31 December 2020 [continued]
Main components of the consolidated statement of profit
or loss in HUF million [continued]
Foreign banks
not in EU
subtotal
(without
adjustments)
Vojvodjanska
banka a.d. +
OTP Banka
Srbija AD.
Beograd
(Szerbia)
OTP Bank
JSC (Ukraine)
JSC "OTP
Bank"
(Russia) and
Touch Bank
Crnogorska
komercijalna
banka a.d. +
Podgorička
banka AD
(Montenegro)
Banka OTP
Albania SHA
(Albania)
Mobiasbanca -
OTP Group
S.A.
(Moldova)
Non-banking
subsidiaries
subtotal
Merkantil
Bank
(Hungary)
Asset
Management
subsidiaries
Other
subsidiaries
Corporate
Centre
Eliminations
and
adjustments
8=9+…+14
9
10
11
12
13
14
15=16+17+18
16
17
18
19
20
Net profit for the year from continued and
discontinued operations
Net profit for the year from discontinued operations
Net profit for the year from continued opearations
Adjustments (total)
Dividends and net cash transfers (after income tax)
Goodwill /investment impairment (after income tax)
Bank tax on financial institutions (after income tax)
Effect of acquisition (after income tax)
Impact of fines imposed by the Hungarian
Competition Authority (after income tax)
Expected one-off negative effect of the debt re-
payment moratorium in Hungary (after income tax)
Result of the treasury share swap agreement
at OTP Core (after income tax)
Consolidated adjusted net profit for the year
61,048
7,739
26,815
18,205
3,413
1,656
3,220
25,792
7,623
9,824
8,345
(569)
(1,203)
Profit before income tax
74,113
8,896
32,300
23,297
3,715
2,145
3,760
28,445
8,579
10,749
9,117
(526)
(814)
Adjusted operating profit
164,960
35,899
42,030
65,068
8,352
5,904
7,707
28,889
10,279
10,765
7,845
(526)
1,234
Adjusted total income
317,872
79,001
67,385
123,198
22,095
11,597
14,596
59,158
21,283
15,248
22,627
419
3,125
Adjusted net interest income
243,868
59,514
48,581
99,872
17,188
9,824
8,889
19,020
17,688
5
1,327
419
8,044
Adjusted net profit
from fees and commissions
58,670
14,766
13,540
22,503
4,446
1,278
2,137
25,212
40
14,883
10,289
-
2,272
Adjusted other net non-interest income
15,334
4,721
5,264
823
461
495
3,570
14,926
3,555
360
11,011
-
(7,191)
Adjusted other administrative expenses
(152,912)
(43,102)
(25,355)
(58,130)
(13,743)
(5,693)
(6,889)
(30,269)
(11,004)
(4,483)
(14,782)
(945)
(1,891)
Personnel expenses
(83,401)
(21,652)
(14,535)
(34,139)
(6,681)
(2,565)
(3,829)
(12,418)
(4,297)
(2,853)
(5,268)
(91)
(5,384)
Depreciation and amortization
(13,054)
(3,181)
(1,362)
(5,855)
(1,479)
(475)
(702)
(3,110)
(1,666)
(197)
(1,247)
(2)
(1,738)
Other general expenses
(56,457)
(18,269)
(9,458)
(18,136)
(5,583)
(2,653)
(2,358)
(14,741)
(5,041)
(1,433)
(8,267)
(852)
5,231
Gains from derecognition of
financial assets at amortized cost
1,298
440
921
1,888
(894)
(304)
(753)
(38)
(38)
-
-
-
61
Modification loss
(210)
-
(210)
-
-
-
-
-
-
-
-
-
-
Total risk costs
(91,935)
(27,443)
(10,441)
(43,659)
(3,743)
(3,455)
(3,194)
(406)
(1,662)
(16)
1,272
-
(2,109)
Adjusted loss allowance on
loan and placement losses
(without the effect of revaluation of FX)
(78,260)
(22,170)
(6,286)
(41,160)
(3,434)
(2,515)
(2,695)
(1,487)
(1,491)
-
4
-
(2,598)
Other impairment (adjustment)
(13,675)
(5,273)
(4,155)
(2,499)
(309)
(940)
(499)
1,081
(171)
(16)
1,268
-
489
Adjusted impairment under IAS 36
(989)
(251)
(39)
79
(457)
(301)
(20)
549
(79)
-
628
-
424
Income tax
(13,065)
(1,157)
(5,485)
(5,092)
(302)
(489)
(540)
(2,653)
(956)
(925)
(772)
(43)
(389)
Total Assets
1
4,484,527
2,052,332
729,012
688,980
477,676
286,606
249,921
1,118,927
667,120
35,584
416,223
2,865,511
(5,757,392)
Total Liabilities
2
3,768,384
1,779,286
611,941
505,578
401,119
257,826
212,634
842,473
614,566
17,052
210,855
1,504,289
(2,931,557)
1
Relating to the discontinued operations the assets were HUF 6,070 million.
2
Relating to the discontinued operations the liabilities were HUF 5,486 million.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
174
NOTE 49: DISCONTINUED OPERATIONS (in HUF mn)
The Serbian Pevec d.o.o. Beograd company as the investment of OTP Factoring Ltd. was classified as asset held-
for-sale by the Group as at 31 December, 2021. This investment was not revalued in the Consolidated Financial
Statements. Classification as asset held-for-sale was needed due to the purchase agreement had been concluded
already in 2021 for the real estates in the ownership of Pevec. In 2022, the purchase price was paid out and the
transfer of ownership happened. The purchase price of the real estate was EUR 9,928,667, the estimated value of
those real estates which weren’t sold was defined in the amount of EUR 300,000 according to their present
condition by a value assessment in January 2021.
2021
2020
Assets classified as held-for-sale
2,046
-
Equity instrument as at fair value through other
comprehensive income
-
2,046
On 31 December 2020, the Group classifies the operations of its Croatian subsidiary, OTP Osiguranje d.d. as
disposal groups classified as held-for-sale. The classification was needed because there is intention for the sale.
These operations, which are expected to be sold within 12 months, have been classified as a discontinued
operation, so the assets, liabilities of these discontinued operations and their losses are presented separately in
both the Consolidated Statement of Financial Position and Consolidated Statement of Profit or Loss.
The major classes of assets and liabilities comprising the operations classified as held for sale are as follows:
2021
2020
Cash, amounts due from banks and balances
with the National Banks
-
2
Placements with other banks, net of
loss allowance for placements, net of repo receivables
-
244
Non-trading instruments mandatorily
at fair value through profit or loss
-
1,188
Securities at fair value through
other comprehensive income
-
3,410
Securities at amortized cost
-
1,031
Tangible assets on net value
-
92
Right-of-use assets on net value
-
42
Other assets on net value
-
61
Non-current assets and disposal group
classified as held-for-sale
6,070
Leasing liabilities
-
44
Other liabilities
-
5,442
Disposal group liabilities classified as held-for-sale
5,486
2021
2020
Income
-
1,548
Expense
-
(1,334)
Profit before income tax
-
214
Income tax expense of OTP Osiguranje d.d.
-
(15)
Gain from non-current assets and disposal group
classified as held-fo-sale
-
199
The Croatian insurance company cash-flow contributed to the Group’s operating activity with HUF 431 million,
to the Group’s investing activity with HUF 327 million, and in respect of the Group’s financing activity with
HUF 232 million which were modified by the eliminations during the consolidation by HUF (988) million as at
31 December 2020.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
175
NOTE 49: DISCONTINUED OPERATIONS (in HUF mn) [continued]
The financial transaction regarding the sale of the Slovakian subsidiary was closed, presented in those
Consolidated Financial Statements for the end of 2020 as discontinued operations.
The results of the discontinued operations, which have been included in the profit for the previous year, were as
follows:
2021
2020
Income
-
15,503
Expense
-
(17,216)
Profit before income tax
-
(1,713)
Income tax expense of OTP Banka Slovensko a.s.
-
(142)
Realized gain of the sale of
OTP Banka Slovensko a.s.
-
7,887
Income tax effect of the discontinued operation
-
(641)
Gain from sale of the Slovakian subsidiary
-
5,391
The Slovakian subsidiary bank cash-flow contributed to the Group’s operating activity with HUF (8,231)
million, to the Group’s investing activity with HUF (9,653) million, and in respect of the Group’s financing
activity with HUF 86,281 million which were modified by the eliminations during the consolidation by HUF
(67,767) million as at 31 December 2020.
NOTE 50: SIGNIFICANT EVENTS DURING THE YEAR ENDED 31 DECEMBER 2021
1) Term Note Program
See details in Note 21.
2) Purchase of new bank in Albania
On 6 December 2021, OTP Bank signed an acquisition agreement with Alpha International Holdings Single
Member S.A. on purchasing 100% shareholding of Alpha Bank SH.A., the Albanian subsidiary of the Greek
Alpha Bank S.A. The purchase price has been agreed at Euro 55 million. With a total asset-based market share
of almost 5%, Alpha Bank is the 8th largest bank on the Albanian banking market, and as a universal bank it has
been active in the retail and corporate segment as well. The financial closing of the transaction is expected by the
end of the second quarter of 2022 subject to obtaining all the necessary regulatory approvals
3) Potential acquisition of majority stake in Uzbek Ipoteka Bank
On 29 September 2021, OTP Bank signed a non-binding Memorandum of Agreement regarding the potential
acquisition of the majority stake of Ipoteka Bank and its subsidiaries with the Ministry of Finance of the
Republic of Uzbekistan. Ipoteka Bank is the fifth largest bank in Uzbekistan, with a market share of 8.5% based
on total assets at the end of July 2021, with more than 1.2 million retail customers and a large corporate clientele.
4) Purchase of new bank in Slovenia
On 31 May 2021, OTP Bank signed a share sale and purchase agreement on purchasing 100% shareholding of
Nova KBM d.d. and its subsidiaries, which are 80% owned by funds managed by affiliates of Apollo Global
Management, Inc. and 20% by EBRD. With a market share of 20.5% by total assets as of December 2020, Nova
KBM d.d. is the 2nd largest bank in the Slovenian banking market and as a universal bank it has been active in
the retail and corporate segments as well. The financial closing of the transaction is estimated in the second
quarter of 2022 subject to obtaining all the necessary regulatory approvals.
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
176
NOTE 50: SIGNIFICANT EVENTS DURING THE YEAR ENDED 31 DECEMBER 2021
[continued]
5) Closure of the sale of OTP Osiguranje d.d.
On 31 August 2021, the Croatian OTP Osiguranje d.d transaction was financially closed, as a result of which
Groupama Biztosító Zrt. has acquired 100% ownership of the insurance company from OTP Banka d.d., the
Croatian subsidiary of OTP Bank.
6) The discontinuance of the international arbitration proceedings
On 30 June 2021, OTP Bank Plc. has jointly with the Republic of Croatia requested the discontinuance of the
international arbitration proceedings - registered on 16th October 2020 relating to mandatory exchange of FX
loans and FX based consumer loans - from the Centre for Settlement of Investment Disputes (ICSID), due to the
fact that the parties have resolved their disputes by way of mutual consent. The ICSID Secretary has on 30 June
2021 acknowledged receipt of the joint claim of the contending parties relating the discontinuance of the
proceedings. According to the request of the parties, ICSID formerly confirmed the termination of the litigation
during 2021.
7) Termination of ICES bonds and repurchase of OTP shares
See details in Note 27.
8) Resolutions made at OTP Bank’s Extraordinary General Meeting
The Extraordinary General Meeting hold on 15 October, 2021 resolved that, the Bank had sold its treasury shares
on the stock exchange to those two Special Employee Stock Ownership Program organizations having been
established by the Bank employees (“OTP SECOP I.” and “OTP SECOP II.”).
The Extraordinary General Meeting decided that if additional SECOP organisations would be initiated, those
would be given one-off support on a yearly basis, under defined conditions, defined extent and in specified
manner.
9) Interest benchmark reform
The Group was actively involved in industry efforts supporting transition to IBOR alternatives. The Group has
taken extensive steps to prepare for the discontinuation of IBORs and worked closely with clients to ensure
awareness and support transition activities. As the transition is complex, time-consuming process and relevant
for the whole Group, the management of Group has evaluated the impacts of the interest rate benchmarks
reform, preparing itself for the transition through a dedicated internal group-wide project. As LIBOR’s five
currencies (USD, GBP, EUR, JPY and CHF) and EONIA will be replaced by Risk Free Rates – which are
different in nature compared to IBOR rates – OTP Group has implemented the relevant rates into the IT systems,
and reached out the clients. The Group’s priority was to ensure that the Group can continue to offer clients the
products and services they need, while also supporting them in the transition to the new alternative Risk Free
Rates.
During the IBOR reform the Group identified several risks at the beginning of 2021, which the project had to
manage and monitor closely. These risks include but are not limited to the following:
The abolution of LIBOR affected several transactions that may require automated IT solitions,
The new reference rates are different in nature from LIBOR that cause difficulties to settle the value
differencies with the customers,
It was necessary to implement new processes not to develop LIBOR based products, and to develop a
strategy for removing or modifying the affected products handled by the Group,
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
177
NOTE 50: SIGNIFICANT EVENTS DURING THE YEAR ENDED 31 DECEMBER 2021
[continued]
9) Interest benchmark reform [continued]
After the termination of LIBOR, the Group has to act under the "Fallback clauses", the clauses that regulate
the replacement of the reference interest rates in the contract and the use of an alternative interest as a
reference. The content of these clauses needs to be clearly defined and checked from a business point of
view, ie which reference interest rate will be applied instead of LIBOR for the given contract and whether it
is commercially appropriate. In defining the fallback clauses, efforts had to be made to provide a viable
alternative to the termination of LIBOR that would not result in a business loss for the Group.
Legal risks related to the termination of LIBOR. Such risks can arise when Fallback clauses are not
included in the contracts, or the law governing the contract doesn’t contain a statutory reference rate. In
these cases the contracts can be cancelled due to impossibility or the termination by either party.
Missing of contractual interest rates can result in settlement disputes, compensation cases or litigation.
Business risks of the termination of LIBOR. The most significant of these are:
the law governing the contract can set the applicable interest rate that can be result in a bussiness loss
for the Group,
obussiness loss due to negative customer experience,
ooperational risk, when several unique contracts must be handled in a short time.
Terminating interest rates ()
Alternative Reference Rates
LIBOR USD* (1 week and 2 months settings), FedFund Rate
SOFR
LIBOR GBP
SONIA
LIBOR JPY
TONA
LIBOR EUR
EURIBOR
LIBOR CHF**
SARON
EONIA
€STR
* The following USD LIBOR settings will be terminated after June 30, 2023: overnight and 1, 3, 6 and 12 Months. The affected USD
LIBOR contracts will be handled on an ongoing basis until the remaining USD LIBOR settings’ cessation date.
**In the case of CHF LIBOR, OTP Bank acts in accordance with the implementing regulation of the European Commission (https://eur-
lex.europa.eu/legal-content/EN/TXT/PDF/?uri=PI_COM:C(2021)7488&from=EN).
Amounts effected by IBOR reform as at 31 December 2021
Reference rate
Type of the contract
Nominal value of the
contract
Pieces of contracts
USD LIBOR
Loan
158,747
2,747
USD LIBOR
Deposit
13,851
27
USD LIBOR
Derivatives
699,066
170
Other LIBOR
Loan
75,060
3,853
Other LIBOR
Deposit
25,864
98
Other LIBOR
Derivatives
25,464
4
Other LIBOR
Bonds (assets)
13,162
3
Total
1,011,214
6,902
The above LIBOR-based amounts outstanding as at 31 December 2021 will be managed at the first interest
period in 2022 therefore they do not cause a risk to he Bank or to the customers
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
178
NOTE 51: POST BALANCE SHEET EVENTS
1) Decision in Slovenia about distribution of foreign exchange risk concerning loan agreement in Swiss
francs
On 2 February 2022, the Slovenian Parliament passed the "Law on limitation and distribution of foreign
exchange risk between creditors and borrowers concerning loan agreements in Swiss francs" (the "Law").
The Law affects all loan agreements denominated in Swiss francs between 28 June 2004 and 31 December 2010.
The law sets a currency cap that is activated by more than 10% change of the exchange rate between the CHF
and EUR from the day of drawing of the loan. During the period of validity of the currency cap, the value of
instalments and other payments is equal to the amount at which the currency cap limit was established. The law
requires creditors to calculate the remaining debt, prepare a new annuity plan and prepare a draft contract on the
regulation of mutual relations. In the event of overpayment, the lender is obliged to reimburse the borrower the
default interest, which runs from the date of occurrence of the overpayment to the date of payment of the
overpayment.
2) Ukrainian-Russian conflict
In the second half of February 2022 the military conflict between Russia and Ukraine escalated
It is difficult to quantify the effect of the Ukrainian-Russian conflict regarding the Ukrainian and the Russian
operations, the possible scenarios are covering a wide range of spectrum. According to the worst possible
scenario, the Bank may lose its control over its investments, which under extreme conditions could result in the
full write-off of the invested amount. These Consolidated Financial Statements do not contain any write-offs as
possible consequences of the Ukrainian-Russian conflict, the Group recognizes it as not adjusting, post balance
sheet event.
Ukraine
OTP Group’s Ukrainian operation incorporates the Ukrainian bank, as well as the leasing and factoring
companies. The country-consolidated Ukrainian total assets represented HUF 984 billion at the end of 2021
(3.6% of total consolidated assets), while net loans comprised HUF 614 billion (3.9% of consolidated net loans)
and shareholders’ equity HUF 160 billion (5.3% of the consolidated total equity). At the end of 2021 the book
value of the capital investment in the Ukrainian subsidiaries comprised HUF 105 billion; there was no goodwill
at all, it was already written down entirely in 2014.
The gross intragroup funding towards the Ukrainian operation represented HUF 72 billion, and taking into
account the Ukrainian deposits placed with the HQ, i.e. the net group funding represented HUF 29 billion
equivalent. According to the 28 February 2022 figures, the gross funding amounted to HUF 75 billion equivalent
and the net intragroup funding stood at HUF 9 billion equivalent.
The Ukrainian sub-consolidated RWA (“risk-weighted asset”) was HUF 1,115 billion by the end of 2021 (6.7%
of the total consolidated RWA).
The consolidated maximum capital effect on the potential write-off of the Ukrainian operation, taking into
account the equity, the intragroup funding and the Ukrainian risk weighted assets, is estimated at 27 bps on the
consolidated CET1 ratio, according to year-end figures.
The Ukrainian operation posted HUF 39.0 billion adjusted profit in 2021 which represented 7.9% of OTP
Group’s adjusted annual profit.
Russia
The total assets of the Group’s Russian operation represented HUF 800 billion at the end of 2021 (2.9% of
consolidated total assets), while net loans comprised HUF 621 billion (3.9% of consolidated net loans) and
shareholders’ equity HUF 241 billion (7.9% of consolidated total equity). At the end of 2021 the book value of
the capital investment in the Russian subsidiaries comprised directly HUF 74 billion and indirectly HUF 50
billion.
The gross intragroup funding towards the Russian operation represented HUF 73 billion, and taking into account
the Russian deposits placed with the Headquarter, i.e. the net group funding represented HUF 14 billion
equivalent. On 28 February 2022 the gross intragroup funding reached HUF 52 billion equivalent, which
equalled the net figure because there was no deposit placement by the Russian operation at other Group
members.
The Russian sub-consolidated RWA was HUF 822 billion by the end of 2021 (4.9% of the total consolidated
RWA).
OTP BANK PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
179
NOTE 51: POST BALANCE SHEET EVENTS [continued]
2) Ukrainian-Russian conflict [continued]
Russia [continued]
The consolidated capital maximum effect on the potential write-off of the Russian operation, taking into account
the equity, the intragroup funding and the Russian risk weighted assets, is estimated at 116 bps on the
consolidated CET1 ratio, according to year-end figures.
The Russian operation posted HUF 37.6 billion adjusted profit in 2021 which represented 7.9% of OTP Group’s
adjusted annual profit.
Although the impact of the Russian-Ukrainian conflict on the Group’s Russian and Ukrainian operations is
currently difficult to quantify, and as such uncertain, based on the current estimation of the Bank’s Management
the Ukrainian-Russian conflict does not have considerably negative impact on the business activity, financial
position, efficiency, liquidity and capital position of OTP Bank. Even after the recognition of the potential losses
and write-offs outlined above, the Group's capital adequacy remains above the expected regulatory level. There
is no sign of significant uncertainties having been arisen regarding carrying out its business as a going concern.
The Bank’s Management is monitoring the situation of the Ukrainian-Russian conflict continuously and will take
the necessary steps in order to moderate the business risk.
ANNUAL REPORT 2021
OTHER INFORMATIONS
OTP BANK OTHER INFORMATIONS
ANNUAL REPORT 2021
OWNERSHIP STRUCTURE OF OTP BANK PLC.
Description of owner
Total equity
1 January 2021 31 December 2021
Ownership
share
Voting
rights
1
Quantity
Ownership
share
Voting
rights
1
Quantity
Domestic institution/company 20.93% 21.26% 58,605,628 26.66% 26.97% 74,637,180
Foreign institution/company 71.60% 72.73% 200,480,153 66.69% 67.47% 186,733,858
Domestic individual 4.79% 4.87% 13,424,090 4.57% 4.63% 12,805,389
Foreign individual 0.11% 0.12% 319,346 0.11% 0.12% 319,712
Employees, senior officers 0.85% 0.87% 2,393,390 0.69% 0.70% 1,941,018
Treasury shares
2
1.55% 0.00% 4,334,140 1.16% 0.00% 3,251,484
Government held owner 0.08% 0.08% 219,800 0.07% 0.07% 188,326
International Development Institutions 0.04% 0.04% 108,981 0.04% 0.04% 120,871
Other
3
0.04% 0.04% 114,482 0.00% 0.00% 2,172
TOTAL 100.00% 100.00% 280,000,010 100.00% 100.00% 280,000,010
1
Voting rights in the General Meeting of the Issuer for participation in decision-making.
2
Treasury shares do not include the OTP shares held by ESOP (OTP Bank Employee Stock Ownership Plan Organization). Pursuant to Act V of 2013 on
the Civil Code, OTP shares held by the ESOP are not classified as treasury shares, but the ESOP must be consolidated in accordance with IFRS 10
Consolidated Financial Statements standard. On 31 December 2021 ESOP owned 7,656,897 OTP shares.
3
Non-identified shareholders according to the shareholders’ registry.
NUMBER OF TREASURY SHARES HELD IN THE YEAR UNDER REVIEW (2021)
1 January 31 March 30 June 30 September 31 December
OTP Bank 4,334,140 4,330,609 1,120,786 1,077,322 3,251,484
Subsidiaries 0 0 0 0 0
TOTAL 4,334,140 4,330,609 1,120,786 1,077,322 3,251,484
SHAREHOLDERS WITH OVER/AROUND 5% STAKE AS AT 31 DECEMBER 2021
Name Nationality
1
Activity
2
Number of
shares
Ownership
3
Voting
rights
3,4
Notes
5
MOL (Hungarian Oil and Gas Company Plc.) D C 24,000,000 8.57% 8.67% -
KAFIJAT Group D C 19,661,409 7.02% 7.10% -
KAFIJAT Ltd. D C 9,839,918 3.51% 3.56% -
MGTR Alliance Ltd. D C 9,836,491 3.51% 3.55% -
Groupama Group F/D C 14,311,769 5.11% 5.17% -
Groupama Gan Vie SA F C 14,140,000 5.05% 5.11% -
Groupama Biztosító Ltd. D C 171,769 0.06% 0.06% -
1
Domestic (D), Foreign (F).
2
Custodian (CU), Public Institution (PU), International Development Institutions (ID), Institutional (I), Company (C), Private (PR),
Employee or senior officer (E).
3
Rounded to two decimals.
4
Voting rights in the General Meeting of the Issuer for participation in decision-making.
5
Eg: professional investor, financial investor, etc.
Senior officers, strategic employees and their shareholding of OTP shares as at 31 December 2021
Type
1
Name Position
Commencement
date of the term
Expiration/termination
of the term
Number of
shares
IT dr. Sándor Csányi
2
Chairman and CEO 15/05/1992 2026 293,907
IT Tamás Erdei Deputy Chairman 27/04/2012 2026 32,285
IT Gabriella Balogh member 16/04/2021 2026 1,393
IT Mihály Baumstark member 29/04/1999 2026 44,000
IT Péter Csányi member, Deputy CEO 16/04/2021 2026 1
IT dr. István Gresa member 27/04/2012 2026 173,258
IT Antal Kovács member, Deputy CEO 15/04/2016 2026 79,244
IT György Nagy
3
member 16/04/2021 2026 0
IT dr. Márton Gellért Vági member 16/04/2021 2026 0
IT dr. József Vörös member 15/05/1992 2026 171,114
IT László Wolf member, Deputy CEO 15/04/2016 2026 532,143
FB Tibor Tolnay Chairman 15/05/1992 2023 54
FB dr. Gábor Horváth Deputy Chairman 19/05/1995 2023 0
FB Klára Bella member 12/04/2019 2023 344
FB dr. Tamás Gudra member 16/04/2021 2023 0
FB András Michnai member 25/04/2008 2023 100
FB Olivier Péqueux member 13/04/2018 2023 0
SP László Bencsik Deputy CEO 10,038
SP György Kiss-Haypál Deputy CEO 3,137
TOTAL No. of shares held by management: 1,341,018
1
Employee in strategic position (SP), Board Member (IT), Supervisory Board Member (FB)
2
Number of OTP shares owned by Dr. Sándor Csányi directly or indirectly: 4,080,034
3
Number of OTP shares owned by György Nagy directly or indirectly: 600,000
OTP BANK OTHER INFORMATIONS
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Board of Directors
Executive members:
Dr. Sándor Csányi
Chairman of the BoD
Chairman & CEO
He graduated from the College of Finance and Accounting in 1974 with a bachelor’s degree in
business administration and in 1980 from the Karl Marx University of Economic Sciences (now:
Corvinus University) with a master in economics and finance, where he also obtained his doctorate
in finance between 1981-1983. He is a chartered auditor – certified in 1982 at the Ministry of Finance.
After graduation he worked at the Tax Revenue Directorate and then at the Secretariat (Bank
Supervision Section) of the Ministry of Finance. Between 1983 and 1986, he was a departmental
head at the Ministry of Agriculture and Food Industry. From 1986 to 1989 he worked as a senior
head of department at Hungarian Credit Bank (MHB). He was Deputy CEO of K&H Bank from 1989
to 1992.
He has been the Chairman & CEO of OTP Bank Plc. since 1992.
He is Vice Chairman of the Board of Directors of MOL Plc. and Co-Chairman of the Chinese-
Hungarian Business Council.
He is one of the largest investors in agriculture and food industry in the CEE region through Bonafarm
Group and KITE generating aggregated annual revenue of EUR 2 billion with over 9.000 employees
and with 40.000 hectares cultivated land in total. Bonafarm Group is vertically integrated whereby
agriculture companies produce the raw materials for food processors. He has significant investments
in real estate through his minority holding in Gránit Pólus and Limedale (portfolio of USD 1 bn), in
VC (Bonitás Venture Capital Fund) and asset management (CSAM in Singapore).
He has been the President of the Hungarian Football Association (MLSZ) since 2010, and a member
of the UEFA Executive Committee since March 2015; and the Vice President of the UEFA Executive
Committee since 2019. Since 2017 he has been a member of the FIFA Council and the Vice
President of the FIFA Council since 2018. Within UEFA he is also the Chairman of the UEFA National
Team Competition Committee, a member of the UEFA Finance Committee and the UEFA
Professional Football Strategy Council.
He has been the owner of Pick Szeged Handball Club since 2011. He has been the Honorary Vice
President of the International Judo Federation since 2008.
Since 1995 he has been the Vice President of the Board of Trustees of the International Children’s
Safety Service, and since 2003 he has been the Chairman of the Board of Trustees of the Prima
Primissima Foundation. In 2005, he established the Csányi Foundation for Children from his own
assets. Since 2009, he has been a member of the Board of Trustees of the Media Union for Social
Awareness Formation Foundations. Since 2020, he has been the Chairman of the Board of Trustees
of the Pro Sopron University Foundation. In 2021, he became Chairman of the Board of Trustees of
the Foundation for the Hungarian Agricultural and Life Sciences University (MATE).
As of 31 December 2021 he held 293,907 ordinary OTP shares (while the total number of OTP
shares held by him directly and indirectly was 4,080,034).
Péter Csányi
member of the BoD
Deputy CEO
Digital Division
He graduated from City University London in 2006 with a bachelor’s degree in economics, then in
2007 with a master’s degree in finance from the IE Business School in Madrid. In 2015, he received
the Master of Business Administration (MBA) diploma from Kellogg School of Management in the
USA.
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He began his career in 2006 at Merrill Lynch’s London office as an intern and he was working on
corporate finance projects for financial institutions.
From 2007 to 2011, he worked at Deutsche Bank's London office, first as an analyst and later as an
associate in the field of corporate finance (for Central and Eastern European corporate customers).
From 2011-2016, he worked for McKinsey & Company Inc. as an associate mostly working on
banking related projects.
He joined OTP Bank in 2016 as Managing Director of the Digital Sales and Development Directorate.
After the agile transformation at the Bank, he became responsible for the management of the
Omnichannel Tribe from 2019. In addition, since January 2021, he has been the head of the Daily
Banking Tribe.
From March 2021, he is the Deputy CEO of OTP Bank, the head of the IT Division (As of 1 May
2021 Digital Division).
From 2020 he has been Chairman of the Supervisory Board of OTP banka d.d. in Croatia. He is also
a member of the OTP Mobil Kft. Supervisory Board and the head of the Digitization Working Group
of the Hungarian Banking Association. He is member of the Mastercard European Advisory Board.
He has been a member of OTP Bank's Board of Directors since 16 April 2021.
As of 31 December 2021 he held 1 ordinary OTP share.
Antal György Kovács
member of the BoD
Deputy CEO
Retail Division
He graduated from the Karl Marx University of Economic Sciences with a degree in economics.
He began his professional career in 1990 at the Nagyatád branch of K&H Bank, where he worked
as a branch manager between 1993 and 1995.
He has been working at OTP Bank Plc. since 1995, first as a county director and from 1998 as the
executive director of OTP Bank’s South Transdanubian Region. Since 1 July 2007 he has been OTP
Bank’s Deputy CEO.
He has received additional training at the International Training Centre for Bankers and on various
courses held by the World Trade Institute.
Between April 2007 and April 2012 he was Chairman of the Supervisory Board of OTP banka
Hrvatska d.d.
He has been Chairman of the Supervisory Board of OTP Bank Romania SA since 12 December
2012. He has been Chairman of the Board of Directors of OTP Mortgage Bank Ltd. and OTP Building
Society Ltd. since 24 April 2014. He is Chairman of the Supervisory Board of OTP Fund Management
and OTP Home Solutions Ltd.
He was a member of OTP Bank’s Supervisory Board from 2004 to 14 April 2016.
He has been a member of OTP Bank's Board of Directors since 15 April 2016.
As of 31 December 2021 he held 79,244 ordinary OTP shares.
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László Wolf
member of the BoD
Deputy CEO
Commercial Banking Division
He graduated from the Karl Marx University of Economic Sciences in 1983. After graduation, he
worked at the Bank Relations Department of the National Bank of Hungary for 8 years, and then he
was head of Treasury at BNP-KH-Dresdner Bank between 1991 and 1993.
From April 1993 he was managing director of OTP Bank’s Treasury Directorate, and since 1994 he
has been Deputy CEO of the Commercial Banking Division. Member of DSK Bank’s Supervisory
Board.
He has been Chairman of the Board of Directors of OTP banka Srbija since 10 December 2010.
He has been a member of OTP Bank's Board of Directors since 15 April 2016.
As of 31 December 2021 he held 532,143 ordinary OTP shares.
Non-executive members:
Gabriella Balogh
member of the BoD
MSc Economics, specialization in marketing
She graduated as organizing chemical engineer from the University of Veszprém in 1993 and as
marketing economist from the University of Economics, Budapest in 1997.
She worked as a marketing associate between 1993 and 1998, as director of the Marketing
Department from 1998 to 2005 and as managing director of the Marketing and Sales Directorate
between 2005 and 2008 at OTP Bank Plc.
She has been managing director of GoodStep Consulting Kft. since 2008. She fulfilled group
management tasks as a Board of Directors member at the Central European Media and Publishing
Company between 2010 and 2017.
She has been co-owner and Board of Directors member of Net Media Plc. since 2016. She is
Presidium member and Chairwoman of the Marketing and Media Board of the Hungarian Football
Association.
She has been a member of OTP Bank's Board of Directors since 16 April 2021.
As of 31 December 2021 she held 1,393 ordinary OTP shares.
Mihály Baumstark
member of the BoD
BSc Agricultural Business Administration,
MSc Economics
He graduated with a degree in agricultural business administration at Gödöllő University of
Agriculture (1973), and went on to do a masters in economics at the Karl Marx University of
Economic Science (1981).
He was employed by the Ministry of Agriculture and Food Industry between 1978 and 1989. When
he left the Ministry he was Deputy head of the Investment Policy Department. Then he was managing
director of Hubertus Bt., and from 1999 to 2011 he was deputy CEO and then Chairman & CEO of
Villányi Winery Ltd. (now Csányi Winery Ltd.). He is currently retired.
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He was a member of OTP Bank’s Supervisory Board from 1992 to 1999, and has been a non-
executive member of OTP Bank’s Board of Directors since 1999.
He has been Chairman of OTP Bank's Ethics Committee since 2010, as well as a member of its
Remuneration Committee since 2011. He was the member of the Nomination Committee between
2014 and 2020.
As of 31 December 2021 he held 44,000 ordinary OTP shares.
Dr. Tibor Bíró
1
College Associate Professor
He graduated from the College of Finance and Accountancy (1974) and from the Karl Marx
University of Economics (1978) with a degree in business administration. He has been a certified
auditor and chartered accountant since 1986.
He was the Head of the Financial Department of the City Council of Tatabánya from 1978 to 1982.
From 1982, he was a professor at the College of Finance and Accounting, and between 1990 and
2013 head of department at the Budapest Business School. Since his retirement in 2015, he has
been a visiting lecturer, and working actively in his auditing and consulting company.
From 2000 onwards, for a period of ten years, he was a member of the Presidium of the Budapest
branch of the Chamber of Hungarian Auditors, and also worked as a member of the Chamber’s
Education Committee for five years.
He was a non-executive member of OTP Bank’s Board of Directors from 1992. He was a member
of OTP Bank's Remuneration Committee from 2009, and he was the chairman of the Nomination
Committee between 2014 and 2020.
Tamás György Erdei
Deputy Chairman of the BoD
BSc Business Administration
He graduated in 1978 with a degree from the College of Finance and Accounting. He began his
professional career at OTP, in a variety of administrative roles (his last position was branch
manager), before going on to work at the Ministry of Finance in the area of bank supervision.
From 1983 he was employed by the Hungarian Foreign Trade Bank (today MKB), where he gradually
worked his way up through the ranks. In 1985 he became managing director, in 1990 he was
appointed Deputy CEO, then in 1994 he became CEO, and from 1997 until the end of March 2012
he was Chairman & CEO.
Between 1997 and 2008, and between 2009 and 2011, he was the elected president of the
Hungarian Banking Association.
He is the Chairman of the Supervisory Board of the International Children’s Safety Service.
He has been a member of OTP Bank’s Board of Directors since 27 April 2012. He has been the
Chairman of OTP Bank's Risk Assumption and Risk Management Committee, and he was a member
of the Nomination Committee between 2014 and 2020. He has been the Deputy Chairman of the
Board of Directors of OTP Bank Plc. since April 2019 and the Chairman of the Work-out Committee
since October 2019.
He has been Chairman of the Board of Directors at OTP Factoring Ltd. since December 2019.
As of 31 December 2021 he held 32,285 ordinary OTP shares.
1
His mandate expired on 16 April 2021.
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Dr. István Gresa
member of the BoD
PhD Business Administration and Economics
He graduated from the College of Finance and Accountancy in 1974 and received a degree in
economics from the Karl Marx University of Economic Sciences in 1980. He earned a PhD from the
University of Economic Sciences in 1983.
He has worked in the banking sector since 1989. Between 1989 and 1993 he was branch manager
of Budapest Bank’s Zalaegerszeg branch.
From 1993 he was director of OTP Bank’s Zala County Directorate, and from 1998 he was the
managing director of the Bank’s West Transdanubian Region.
From 1 March 2006 until 14 April 2016 – when he retired – he was Deputy CEO of the Credit Approval
and Risk Management Division. He was Chairman of the Board of Directors at OTP Factoring Ltd.
between 2006 and 2017.
He has been a member of OTP Bank’s Board of Directors since 27 April 2012.
As of 31 December 2020 he held 173,258 ordinary OTP shares.
Dr. Antal Pongrácz
2
PhD Economics
He graduated from the Karl Marx University of Economic Sciences in 1969 and earned a PhD in
1971.
From 1969 he worked as an analyst at the Petrochemical Investment Company, then as a group
manager at the Revenue Directorate until 1975. From 1976 he held various executive positions at
the Ministry of Finance. After that, he was the first Deputy Chairman of the State Office for Youth
and Sports.
Between 1988 and 1990 he was the first Deputy CEO of OTP Bank. Between 1991 and 1994 he
was CEO, and then Chairman & CEO, of the European Commercial Bank Rt. Between 1994 and
1998 he was Chairman & CEO of Szerencsejáték Rt, then in 1998-99 he served as CEO of
Hungarian flagship carrier, Malév. Since 2001 he has been managing director of OTP Bank’s Staff
Division and more recently – up until his retirement on 14 April 2016 – Deputy CEO.
1992-1999: Chairman of the Supervisory Board of Gemenc Zrt., 2002-2010: Chairman of the Board
of Directors, 1999-2007: Chairman of the Supervisory Board of British American Tobacco (BAT),
2002-2008: Chairman of the Board of Directors of Casinos Hungary.
Between 2007-2012, he was Chairman of OTP Bank Romania’s Supervisory Board.
He was Chairman of the Supervisory Board of OTP banka Hrvatska d.d. from 12 April 2012, and
was Chairman of the Supervisory Board of Splitska banka from 2 May 2017 until its successful
integration (on 30 November 2018).
He was a member of OTP Bank’s Board of Directors from 2002. He was Deputy Chairman of OTP
Bank’s Board of Directors from 9 June 2009 to 14 April 2016.
2
His mandate expired on 16 April 2021.
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Dr. László Utassy
3
Chairman & CEO
Merkantil Bank Zrt.
He graduated from the Faculty of Law of Eötvös Loránd University in Budapest in 1978.
He held various positions at the State Insurance Company between 1978 and 1995 and then went
on to work at ÁB-Aegon Rt. He was Chairman & CEO of OTP Garancia Insurance from 1996 to
2008. He was managing director of OTP Bank between 2009 and 2010. Since 1 January 2011 he
has been Chairman & CEO of Merkantil Bank Ltd.
He was a member of OTP Bank’s Board of Directors from 2001. He was a member of OTP Bank's
Risk Assumption and Risk Management Committee from 2014. He has been Chairman of the Board
of Directors of OTP Real Estate Leasing Ltd. since 28 November 2019.
György Nagy
member of the BoD
Msc International Economics
He graduated from the Department of International Foreign Economics of University of International
Relations (Moscow) in 1989.
He was a founding owner of Wallis Holding (founded in 1990) and he managed the Wallis Group as
CEO until 2000.
He founded Westbay Holding Kft. in 2004, the company’s portfolio includes several successful
investments.
He has been the Chairman of the Hungarian Shooting Federation since 2012, Presidium member of
the European Shooting Confederation (ESC) since 2013 and Council member of the International
Shooting Sport Federation (ISSF) since 2019 and he was elected the Vice President of ESC in 2021.
He has been a member of OTP Bank's Board of Directors since 16 April 2021.
As of 31 December 2021 he held no ordinary OTP shares (while the total number of OTP shares
held by him directly and indirectly was 600,000).
Dr. Márton Gellért Vági
member of the BoD
General Secretary
Hungarian Football Association
He graduated in 1987 from the department of foreign economics at the Karl Marx University of
Economic Science
From 1987 to 2000 he was lecturer at University of Economic Science of Budapest (today Corvinus
University of Budapest) and from 1994 onwards associate professor and head of department. He
has a university doctorate and a PhD in economics. He has authored or co-authored more than 80
studies, essays and books.
Between 2000 and 2006 he worked at the State Holding and Privatisation Co. (ÁPV Zrt.), as
managing director, Deputy CEO and then CEO.
Between 2006 and 2010 he was Chairman of the National Development Agency.
Since 2010 he has been general secretary of the Hungarian Football Association.
In various periods between 2000 and 2010, he was the Chairman of the Board of Directors of Magyar
Villamos Művek, Paks Nuclear Power Plant and the National Textbook Publishing House. Between
3
His mandate expired on 16 April 2021.
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2002 and 2010, he was a member of the Board of Directors of Földhitel és Jelzálogbank Nyrt., and
the Chairman of the Board of Directors for 4 years
He has been a member of UEFA’s HatTrick Financial Assistance Committee since 2011. He has
been a member of FIFA’s Financial Committee since 2017.
He was a member of OTP Bank’s Supervisory Board between 2011-2021.He was a member of OTP
Bank’s Audit Committee between 2014-2021.
He was a member of OTP Bank’s Nomination Committee between 2020-2021.
He has been a member of OTP Bank's Board of Directors since 16 April 2021.
As of 31 December 2021 he held no ordinary OTP shares.
Dr. József Zoltán Vörös
member of the BoD
Professor emeritus, academician
University of Pécs
He earned a degree in economics from the Karl Marx University of Economic Sciences in 1974. In
1984 he earned a PhD in economics from the Hungarian Academy of Sciences, and a Doctor of
Science degree in 1993. He has been a member of the Hungarian Academy of Sciences since 2013.
Between 1990 and 1993 he was the dean of the Faculty of Business and Economics, Janus
Pannonius University (JPTE) in Pécs. In 1993 he attended a course in management for senior
executives at Harvard University.
From 1994 he was a professor at JPTE, from 2021 he has been professor emeritus. He was the
senior Vice Rector of the University from 2004-2007, between 2007 and 2011 he was Chairman of
the Economic Council of the University of Pécs.
He has been a non-executive member of OTP Bank’s Board of Directors since 1992. He has been
Chairman of OTP Bank's Remuneration Committee since 2009, and member of its Risk Assumption
and Risk Management Committee since 2014.
Supervisory Board
Independent members:
Tibor Tolnay
Chairman of the SB
He graduated from Budapest University of Technology as a qualified civil engineering in 1978, and
in 1983 he obtained a degree in economic engineering. In 1993 he finished his studies as specialized
economist at Budapest University of Economics.
From 1989 to 1994, he was Director of State Construction Company No. 21. From 1994 to 2015 he
was Chairman & CEO of the already privatized Magyar Építő Joint Stock Company.
He has been the managing director of Érték Ltd. since 1994. Since 2020 he has been the managing
director of Fenyves Garden Ltd.
From 2018 to 2021 he was President of the National Association of Entrepreneurs and Employers,
since 2021 co-President.
Since 1992 he has been a member of OTP Bank's Supervisory Board, and Chairman of the
Supervisory Board since 1999. He was a member and Deputy Chairman of OTP Bank’s Audit
Committee between 2007 and 2011, and has been again since 2014. He has been the Chairman of
OTP Bank’s Nomination Committee since 2020.
As of 31 December 2021 he held 54 ordinary OTP shares.
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Dr. József Gábor Horváth
Deputy Chairman of the SB
Lawyer
He earned a degree in law from Eötvös Loránd University in Budapest in 1980.
From 1983 he worked for the Hungarian State Development Bank He has been a lawyer since 1986,
and since 1990 has run his own law firm, which specialises in corporate finance and corporate
governance.
He has been a member of the Supervisory Board of OTP Bank since 1995, and was a member of
MOL Plc.’s Board of Directors between 1999 and 2014.
He has been Deputy Chairman of OTP Bank's Supervisory Board since 2007.
He was Chairman of OTP Bank's Audit Committee between 2007 and 2011, and has been again
since 2014.
He has been a member of OTP Bank’s Nomination Committee since 2020. He was a member of the
Board of Directors of INA Industrija Nafte d.d. from 2014 to 2018.
As of 31 December 2021 he held no ordinary OTP shares.
Dr. Tamás Gudra
Member of the SB
BSc Business Administration, Lawyer
He graduated as business administrator in 1993 from the College of Commerce and Catering. He is
a Hungarian chartered auditor since 1997. He also obtained a university degree in 2010 as a lawyer
at the Faculty of Law of Janus Pannonius University in Pécs.
He worked as an auditor from 1993 to 2001 at Deloitte & Touche. Between 2001 and 2003 he was
an accounting expert of subsidiaries at the Accounting and Tax Directorate of the Hungarian Oil and
Gas Public Limited Company (MOL Rt). Then he was managing director at the Auditor, Financial
and Accounting Directorate of the National Privatization and Asset Manager Plc. (ÁPV Zrt.) between
2003 and 2007 and became the director of Controlling Directorate at the Hungarian National Asset
Manager Plc. (MNV Zrt.) from 2008 to 2010.
Following these assignments, he worked as the CFO of the Hungarian Football Association from
2011 until June of 2020. As of July 2020, he became the group-level CFO of Bonafarm Zrt.
He was a member of the Supervisory Board of OTP Lakástakarék Zrt. between 2012 and 2021 and
he is Chairman of the Hungarian Paralympic Committee’s Supervisory Board since 2016. Since 2021
he has been property inspector of Hungarian University of Agriculture and Life Sciences, member of
the Executive Committee of Pick Szeged Zrt., SOLE-Mizo Zrt and MCS Vágóhíd Zrt.
He has been a member of the Supervisory Board and Audit Committee of OTP Bank since 16 April
2021.
As of 31 December 2021 he held no ordinary OTP shares.
Olivier Péqueux
Member of the SB
Groupama International SA
He graduated from Institute of Actuaries of France, Polytechnique School and ENSAE Paris Tech.
Started to work in 1998 as an insurance commissioner for the French Insurance Supervisory
Authority. In 2003, he joined the French Ministry of Finance to take part in the pension law reform
OTP BANK OTHER INFORMATIONS
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and the setup of a pension fund for French civil servants. Then he became technical adviser to the
French Minister of health and pensions.
In 2005 he joined Groupama Group, first in charge of the actuary and accounting department of Gan
Patrimoine, a life insurance company, and then in 2007 as Chief Financial Officer of Groupama Paris
Val de Loire.
He moved to China in March 2011 as Deputy General Manager of Groupama China, in charge of
finance, actuary and investments in the joint venture between AVIC and Groupama.
From 2015 to 2017, he was the General Manager of Groupama AVIC. He has been the Chief
International Officer of Groupama Assurances Mutuelles since March 2018. He has been Groupama
Assurances Mutuelles Deputy CEO since September 2020.
He has been a member of OTP Bank’s Supervisory Board, and Audit Committee since 2018.
As of 31 December 2021 he held no ordinary OTP shares.
Dr. Márton Gellért Vági
4
member of the SB
General Secretary
Hungarian Football Association
Employee delegates:
Klára Bella
Member of the SB
Director
Large Corporate Department
She graduated from the College of Finance and Accountancy and later obtained a degree from the
Budapest University of Economic Sciences.
From 1992 to 1994 she worked as a clerk at the Fertőszentmiklós branch of OTP Bank.
From 1994 to 1995 she was a lending consultant at Polgári Bank.
From 1995 to 1996 she worked as a risk manager at the Central Branch of OTP Bank.
From 1996 to 1997 she was authorizer in the Credit Approval and Risk Management Division.
From 1997 to 2010 she was Deputy Managing Director at the Central Branch.
From 2010 to 2016 she was Director at the Central Branch.
Between 2017 and 2020, she was Director of the Corporate Directorate.
Since 1 July 2020, she has been the Director of the Large Corporate Department of the Specialised
Finance Directorate.
She has been a member of OTP Bank’s Supervisory Board, and representative of the Bank’s
employees since 12 April 2019.
As of 31 December 2021 she held 344 ordinary OTP shares.
4
His position on the Supervisory Board was terminated on 16 April 2021, and since that date he has been a member of the Board of
Directors of OTP.
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András Michnai
Member of the SB
Managing Director
He graduated in 1981 from the College of Finance and Accounting with a degree in business
administration.
He has been an employee of the Bank since 1974, and until 1981 held a variety of posts in the
branch network. Following this he held a management position in the central network coordination
department before returning to work in the branch network. From 1994, as deputy managing director,
he participated in the central coordination of the branch network. Between 2005 and 2014 he was
the managing director of the Bank’s Compliance Department.
He further expanded his professional skills, obtaining a Master’s degree at the Budapest Business
School, and is a registered tax advisor.
He has been a member of OTP Bank’s Supervisory Board, and representative of the Bank’s
employees, since 2008. He has been Secretary of OTP Bank’s Employees’ Trade Union since
December 2011.
As of 31 December 2021 he held 100 ordinary OTP shares.
Members of OTP Bank Plc.’s senior management:
Dr. Sándor Csányi
Chairman & CEO
László Bencsik
Chief Strategic and Financial Officer, Deputy CEO
Strategy and Finance Division
In 1996, he graduated from the Faculty of Business Administration at the Budapest University of
Economic Sciences, and in 1999 he obtained a Master’s in Business Administration (MBA) from
INSEAD Business School in France.
Between 1996 and 2000 he worked as a consultant at Andersen Consulting (now Accenture).
From 2000 to 2003 he was a project manager at consulting firm McKinsey & Company.
He joined OTP Bank in 2003, when he became managing director of the Bank Operations
Management Directorate, and the manager with overall responsibility for controlling and planning.
He has been deputy CEO of OTP Bank, and head of the Strategy and Finance Division, since August
2009.
Since 13 March 2012 he has been Chairman of the Supervisory Board of DSK Bank.
As of 31 December 2021 he held 10,038 ordinary OTP shares.
Péter Csányi
Member of the Board of Directors, Deputy CEO
Digital Division
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Tibor András Johancsik
Deputy CEO until 12 March 2021
IT Division
He graduated from the Budapest Technical University with a degree in electrical engineering in 1988,
and then in 1993 earned a further degree in foreign trade business administration from the College
of Foreign Trade. He began his professional career at as a researcher in the field of industrial
automation at the Hungarian Academy of Sciences Institute for Computer Science and Control (MTA
SZTAKI). From 1994 onwards he held management positions at the Hungarian subsidiaries of
international IT development companies (ICL, Unisys, Cap Gemini).
From 2001 he worked as an advisor in the fields of IT and organisational development, then from
2003, as managing director of JET-SOL Kft., he participated in the development of numerous
systems in Hungary and abroad.
Since 24 February 2016 he has been Deputy CEO in charge of OTP Bank’s IT Division.
He has been Chairman of the Supervisory Board of Monicomp Zrt. since 1 April 2016.
György Kiss-Haypál
Deputy CEO
Credit Approval and Risk Management Division
He is a qualified economist. He graduated from the Budapest University of Economic Sciences in
1996.
He started his career as a project finance analyst for Budapest Bank Plc., and by 2007 he had been
appointed head of the bank’s risk management department.
Between 2002 and 2006 he also worked in Ireland as corporate credit risk portfolio manager for GE
Consumer Finance Europe, and in Austria as GE Money Bank’s consumer loans portfolio manager.
Between 2008 and 2015 he was member of the Board of Directors of Budapest Bank.
From 2015 he was deputy head of the Credit Approval and Risk Management Division of OTP Bank
Plc., and was then appointed acting head of the Division.
Since 3 May 2017, he has been deputy CEO of the Credit Approval and Risk Management Division.
As of 31 December 2021 he held 3,137 ordinary OTP shares.
Antal György Kovács
Member of the Board of Directors, Deputy CEO
Retail Division
László Wolf
Member of the Board of Directors, Deputy CEO
Commercial Banking Division
Personal and organizational changes
On 12 March 2021, the labour contract of Mr. Tibor Johancsik, Deputy CEO in charge of IT had been terminated
by mutual agreement. The new head of the Digital Division (IT Division until 1 May 2021) is Mr. Péter Csányi,
who had been in charge of digital developments and sales as managing director until his appointment. Key task
of the area in transition is going to be the efficient support of the Bank’s digital transformation through further
improving customer experience. The new strategy of the division is aimed at creating such an IT that has
business competence, but also serving as a platform for other business areas while setting the pace of
digitalization in accordance with the National Bank of Hungary’s digital recommendations.
OTP BANK OTHER INFORMATIONS
ANNUAL REPORT 2021
On 16 April 2016 the Board of Directors acting in the competency of the Annual General Meeting elected Ernst
& Young Ltd. as the Bank’s auditor concerning the audit of OTP Bank Plc.’s separate and consolidated annual
financial statements in accordance with International Financial Reporting Standards for the year 2021, from
1 May 2021 until 30 April 2022.
On 16 April the Board of Directors acting in the competency of the Annual General Meeting, elects Dr. Tamás
Gudra as member of the Supervisory Board (SB) and of Audit Committee (AC) of the Company until the Annual
General Meeting of the Company closing the 2022 business year, but not later than 30 April 2023.
On 16 April 2021 the Board of Directors acting in the competency of the Annual General Meeting, elects
Dr. Sándor Csányi
Mr. Antal György Kovács
Mr. László Wolf
Mr. Tamás György Erdei
Mr. Mihály Baumstark
Dr. István Gresa
Dr. József Zoltán Vörös
Mr. Péter Csányi
Mrs. Gabriella Balogh
Mr. György Nagy
Dr. Gellért Márton Vági
as members of the Board of Directors (BoD) of the Company until the Annual General Meeting of the Company
closing the 2025 business year, but not later than 30 April 2026.
On 16 April 2021, Dr. Sándor Csányi was elected as Chairman of the Bank’s Board of Directors and in
accordance with subsection 4 of section 9 of the Articles of Association of the Company as Chief Executive
Officer (Chairman & CEO).
Dr. Sándor Csányi performs his duties until the closing AGM of the fiscal year 2025 but latest until 30 April 2026.
On 16 April 2021 Mr. Tamás György Erdei, the member of the Board of Directors, was elected a Deputy
Chairman of the Board of Directors.
Mr. Tamás György Erdei performs his duties until the closing AGM of the fiscal year 2025 but latest until
30 April 2026
