OTP, Hungary's largest bank, is considering a complete withdrawal from Russia

Hungary’s largest bank, OTP, is looking for ways to exit Russia to avoid reputational risks amid a major deal to acquire the Baltic bank Luminor, Bloomberg reports. According to documents reviewed by the agency, OTP’s clients in Russia included companies that, among other things, provided services to Russian state-owned enterprises.

During trading on September 28, OTP shares fell 3.8% in Budapest—the sharpest decline since March, according to Bloomberg.

OTP is one of the few European banks to have maintained its operations in Russia since the start of the full-scale war against Ukraine in 2022. However, according to documents reviewed by Bloomberg, the Hungarian bank is now scaling back its operations in Russia and, more broadly, “has begun reviewing its strategy [in that country], including a potential complete withdrawal from Russia.” OTP Group CEO Péter Csányi told the agency about this.

Specifically, according to an OTP statement cited by Bloomberg, the Hungarian bank has already halted lending to local companies and restricted some cross-border payments, but continues to serve retail customers for now. The bank expects to finalize its strategy review regarding Russia by the end of the year.

The Hungarian bank took these steps after coming under scrutiny from European regulators due to its plans to acquire the Baltic-based Luminor Bank, Bloomberg explains. The acquisition could be the largest in OTP’s history and strengthen its position in the eurozone. In the coming weeks, the European Central Bank and the Estonian banking regulator are expected to rule on the proposed deal. Luminor’s assets exceeded €15 billion ($17.3 billion) at the end of last year, Bloomberg notes. In July, the central banks of Latvia and Lithuania expressed concern about OTP’s operations in Russia, while Estonian Finance Minister Jürgen Ligi called its activities in the country a “moral disgrace.”

In response, OTP stated that the bank is committed to complying with anti-Russian sanctions. OTP’s market share in the country is about 0.4% in terms of total assets, making it a minor player in Russia compared to competitors UniCredit and Raiffeisen Bank, Bloomberg notes.

Bank representatives also reported that they had reduced their workforce in Russia by 25% and their branch network by 40%, while maintaining a stronger presence in Ukraine.

In July, OTP Bank had already noted that, following the outbreak of the war against Ukraine, the scope of its operations in Russia had been scaled back, and no violations of international sanctions had been identified. In a new statement to Bloomberg, OTP noted that, as one of the few banks considered reliable from the EU’s perspective, it continues to facilitate financial transactions for Western companies that remain active in Russia. However, according to documents obtained by Bloomberg, OTP’s clients in Russia included, among others, organizations that provide services to Russian government agencies. Among them are firms controlled by the Russian gas giant Gazprom, — as well as an organization linked to a businessman who is under sanctions for spreading propaganda and financing Russia’s annexation of Crimea in 2014, Bloomberg reports (the agency clarifies that this refers to the media outlet “Tsargrad” and businessman Konstantin Malofeev, while emphasizing, however, that these documents do not indicate any violations on the part of OTP).

The bank entered the Russian market 20 years ago, but after Russia launched its full-scale invasion of Ukraine, its business in the country became more profitable, according to Bloomberg. OTP’s net profit in Russia increased more than fivefold compared to 2021—reaching approximately 202 billion forints ($635 million) last year—while the volume of customer deposits grew sevenfold, the agency notes.

This article was AI-translated and verified by a human editor