Вы находитесь на странице: 1из 176

OTP Bank

Annual Report
2014

2014 angol.indd 70

5/18/15 12:46 PM

Financial Statements

2014 angol.indd 71

5/18/15 12:46 PM

72

2014 angol.indd 72

OTP Bank Annual Report 2014

5/18/15 12:46 PM

IFRS consolidated nancial statements

2014 angol.indd 73

73

5/18/15 12:46 PM

Statement of nancial position


(consolidated, based on IFRS, as at 31 December 2014, in HUF million)

Cash, amounts due from banks and balances with the National Banks
Placements with other banks, net of allowance for placement losses
Financial assets at fair value through profit or loss
Securities available-for-sale
Loans, net of allowance for loan losses
Associates and other investments
Securities held-to-maturity
Property and equipment
Intangible assets
Other assets
TOTAL ASSETS
Amounts due to banks, the Hungarian Government, deposits from
the National Banks and other banks
Deposits from customers
Liabilities from issued securities
Financial liabilities at fair value through profit or loss
Other liabilities
Subordinated bonds and loans
TOTAL LIABILITIES
Share capital
Retained earnings and reserves
Treasury shares
Non-controlling interest
TOTAL SHAREHOLDERS EQUITY
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY

Note
4.
5.
6.
7.
8.
9.
10.
11.
11.
12.

2014
2,307,632
281,006
289,275
839,152
5,864,241
23,381
709,369
206,440
158,721
291,835
10,971,052

2013
539,125
273,479
415,605
1,637,255
6,245,210
23,837
580,051
261,523
193,721
211,241
10,381,047

13.

708,274

784,212

14.
15.
16.
17.
18.

7,673,478
267,084
183,994
592,088
281,968
9,706,886
28,000
1,288,757
(55,940)
3,349
1,264,166
10,971,052

6,866,606
445,218
87,164
421,353
267,162
8,871,715
28,000
1,532,164
(55,599)
4,767
1,509,332
10,381,047

19.
21.
22.

Budapest, 17 March 2015


The accompanying notes to consolidated nancial statements on pages 78 to 163 form an integral part of these Consolidated Financial
Statements prepared in accordance with International Financial Reporting Standards.

74

2014 angol.indd 74

OTP Bank Annual Report 2014

5/18/15 12:46 PM

Statement of recognized income


(consolidated, based on IFRS, for the year ended 31 December 2014, in HUF million)
Note
Interest Income
Loans
Placements with other banks
Securities available-for-sale
Securities held-to-maturity
Amounts due from banks and balances with the National Banks
Securities held for trading
Other
Total Interest Income
Interest Expense
Amounts due to banks, the Hungarian Government, deposits from
the National Banks and other banks
Deposits from customers
Liabilities from issued securities
Subordinated bonds and loans
Other
Total Interest Expense
NET INTEREST INCOME
Provision for impairment on loan and placement losses
NET INTEREST INCOME AFTER PROVISION FOR IMPAIRMENT ON LOAN
AND PLACEMENT LOSSES
Income from fees and commissions
Expense from fees and commissions
Net prot from fees and commissions
Foreign exchange gains, net
Gains on securities, net
Dividend income
(Provision)/Release of provision on securities available-for-sale
and held-to-maturity
Other operating income
Other operating expense
from this: provision on contingent liabilities due to regulations
related to customer loans
Net operating (loss)/gain
Personnel expenses
Depreciation and amortization
Other administrative expenses
Other administrative expenses
(LOSS)/PROFIT BEFORE INCOME TAX
Income tax
NET (LOSS)/PROFIT FOR THE YEAR
From this, attributable to:
Non-controlling interest
Owners of the company
Consolidated earnings per share (in HUF)
Basic
Diluted

2014

2013

708,873
94,941
41,969
39,934
16,498

7,015
909,230

771,542
207,951
71,743
33,002
4,207
924

1,089,369

100,615

189,539

138,179
13,826
13,883
6,630
273,133
636,097
446,830

197,236
34,896
11,412
2,558
435,641
653,728
262,569

189,267

391,159

265,392
49,736
215,656
156,918
6,911
4,824

257,135
55,378
201,757
18,279
11,546
2,474

(297)

11

25.
25.

14,379
(232,609)

26,392
(39,795)

25.

(194,798)

(49,874)
206,335
65,947
236,410
508,692
(153,643)
51,385
(102,258)

18,907
204,277
78,017
244,477
526,771
85,052
(20,944)
64,108

(273)
(101,985)

(91)
64,199

(382)
(382)

241
240

2014
(102,258)
13,019
507
(4,489)
(108,057)
(6)
(201,284)

2013
64,108
(1,721)
531
(1,357)
(33,159)
(39)
28,363

(1,418)
(199,866)

(1,016)
29,379

5., 8., 23.

24.
24.

11.
25.
26.

38.
38.

Statement of comprehensive income


(consolidated, based on IFRS, for the year ended 31 December 2014, in HUF million)

NET (LOSS)/PROFIT FOR THE YEAR


Fair value adjustment of securities available-for-sale
Derivative financial instruments designated as Cash-flow hedge
Net investment hedge in foreign operations
Foreign currency translation difference
Change of actuarial losses related to employee benefits
NET COMPREHENSIVE INCOME
From this, attributable to:
Non-controlling interest
Owners of the company

The accompanying notes to consolidated nancial statements on pages 78 to 163 form an integral part of these Consolidated Financial
Statements prepared in accordance with International Financial Reporting Standards.

IFRS consolidated nancial statements

2014 angol.indd 75

75

5/18/15 12:46 PM

Statement of cash-ows
(consolidated, based on IFRS, for the year ended 31 December 2014, in HUF million)
OPERATING ACTIVITIES
(Loss)/Profit before income tax
Goodwill impairment
Depreciation and amortization
Provision/(Release of provision) for impairment on securities
Provision for impairment on loan and placement losses
Provision for impairment on investments
Provision for impairment on other assets
Provision on assets subject to operating leases
Provision on investment properties
Provision for impairment on off-balance sheet commitments and contingent liabilities
Share-based payment
Change of actuarial losses related to employee benefits
Unrealized (losses)/gains on fair value change of securities held for trading
Unrealized (losses)/gains on fair value change of derivative financial instruments
Net changes in assets and liabilities in operating activities
Changes in financial assets at fair value through profit or loss
Net increase in loans, net of allowance for loan losses
Increase in other assets before provisions for impairment
Increase in assets subject to operating lease before provisions for impairment
Increase in investment properties before provision for impairment
Net increase in deposits from customers
Decrease in other liabilities
Net (increase)/decrease in compulsory reserves at the National Banks
Dividend income
Income tax paid
Net Cash Provided by Operating Activities
INVESTING ACTIVITIES
Net (increase)/decrease in placement with other banks before allowance
for placements losses
Increase in securities available-for-sale
Decrease in securities available-for-sale
Net decrease/(increase) in investments in subsidiaries
Net increase in investments in associates
Buy-out of non-controlling interests
Dividend income
Increase in securities held-to-maturity
Decrease in securities held-to-maturity
Additions to property, equipment and intangible assets
Disposals of property, equipment and intangible assets
Net increase in advances for investments included in other assets
Net Cash Provided by/(Used in) Investing Activities
FINANCING ACTIVITIES
Net (decrease)/increase in amounts due to banks, the Hungarian Government, deposits
from the National Banks and other banks
Cash received from issuance of securities
Cash used for redemption of issued securities
Increase/(Decrease) in subordinated bonds and loans
Decrease in non-controlling interest
Foreign currency translation
Payments to ICES holders*
Net change in Treasury shares
Dividend paid
Net Cash Used in Financing Activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
Analysis of cash and cash equivalents
Cash, amounts due from banks and balances with the National Banks
Compulsory reserve established by the National Banks
Cash and cash equivalents at the beginning of the period
Cash, amounts due from banks and balances with the National Banks
Net cash outow due to acquisition
Compulsory reserve established by the National Banks
Cash and cash equivalents at the end of the period

Note
11.
11.
7., 10.
5., 8.
9.
12.

17.
2., 29.

4.
31.
4.

2014
(153,643)
22,225
43,722
297
446,830
1,244
5,066
1,048
3,612
195,310
4,393
(6)
(2,907)
(33,140)

2013
85,052
30,819
47,198
(11)
262,569
1,370
4,313

3,990
5,704
(39)
859
4,921

250,821
(48,611)
20,557
(24,442)
(27,034)
806,872
(26,908)
(41,130)
(4,824)
(20,571)
1,418,781

(219,517)
(113,672)
(67,833)

315,898
(1,785)
7,414
(2,474)
(21,739)
343,037

(7,537)

83,761

(15,402,966)
16,213,064
2,490
(3,278)

4,824
(156,594)
31,094
11,526
12,455
(27)
705,051

(24,460,762)
24,233,421
(2,711)
(14,560)
(1,124)
2,474
(161,411)
10,673
(59,286)
15,190
(29)
(354,364)

(75,938)

249,888

56,165
(234,299)
14,806
(1,418)
(106,925)
(4,003)
(4,249)
(40,594)
(396,455)
1,727,377
275,947
2,003,324

72,186
(270,091)
(24,333)
(1,016)
(32,270)
(4,111)
(1,316)
(33,592)
(44,655)
(55,982)
331,929
275,947

539,125
(263,178)
275,947
2,310,476
(2,844)
(304,308)
2,003,324

602,521
(270,592)
331,929
539,125

(263,178)
275,947

The accompanying notes to consolidated nancial statements on pages 78 to 163 form an integral part of these Consolidated Financial
Statements prepared in accordance with International Financial Reporting Standards.
* See more details in Note 20.

76

2014 angol.indd 76

OTP Bank Annual Report 2014

5/18/15 12:46 PM

Statement of changes in shareholders equity


(consolidated, based on IFRS, for the year ended 31 December 2014, in HUF million)
Note

Balance as at 1 January 2013


Net profit for the year
Other Comprehensive Income
Share-based payment
Dividend for the year 2012
Sale of Treasury shares
Treasury shares
gain on sale
acquisition
Payments to ICES holders
Buy-out of non-controlling
interests
Balance as at 31 December 2013
Net profit for the year
Other Comprehensive Income
Share-based payment
Dividend for the year 2013
Sale of Treasury shares
Treasury shares
loss on sale
acquisition
Payments to ICES holders
Balance as at 31 December 2014

21.

28,000

52

Share-based
Payment
reserve
10,800

5,704

21.
20.

481

(3,248)

(19,740)

481
(19,740)
(3,248)

(1,124)

(1,124)

28,000

52

16,504

4,393

1,571,076
(101,985)
(97,881)

(40,600)

(55,468)

(55,599)

27,180

4,767
(273)
(1,145)

1,509,332
(102,258)
(99,026)
4,393
(40,600)
27,180

28,000

52

20,897

(3,908)

(3,425)
1,323,277

(55,468)

(27,522)

(55,941)

3,349

(3,908)
(27,522)
(3,425)
1,264,166

29.

29.
21.

21.
20.

Share Capital
capital reserve

Retained
earnings and
reserves
1,579,188
64,199
(34,820)

(33,600)

Put
option
reserve
(55,468)

Treasury
shares
(53,802)

17,943

Noncontrolling
interest
5,783
(91)
(925)

1,514,553
64,108
(35,745)
5,704
(33,600)
17,943

Total

The accompanying notes to consolidated nancial statements on pages 78 to 163 form an integral part of these Consolidated Financial
Statements prepared in accordance with International Financial Reporting Standards.

IFRS consolidated nancial statements

2014 angol.indd 77

77

5/18/15 12:46 PM

N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L
S TAT E M E N T S F O R T H E Y E A R E N D E D
31 DECEMBER 2014

NOTE 1:

ORGANIZATION AND BASIS OF CONSOLIDATED FINANCIAL


STATEMENTS

1.1 General information

In 1995, the shares of the Bank were listed


on the Budapest and the Luxembourg Stock

OTP Bank Plc. (the Bank or OTP) was

Exchanges and were also listed on the SEAQ

established on 31 December 1990, when the

board on the London Stock Exchange and

previously State-owned company was

PORTAL in the USA.

transformed into a public liability company.


These Consolidated Financial Statements
The Banks registered office address is

were approved by the Board of Directors and

16 Ndor Street, Budapest 1051.

authorised for issue on 17 March 2015.

The structure of the Share capital by shareholders:


Domestic and foreign private and institutional investors
Employees
Treasury shares
Total

2014

2013

97%
2%
1%
100%

97%
2%
1%
100%

The Bank and its subsidiaries (Entities of the

network of 1,434 branches. The Group has operat-

Group, together the Group) provide a full range

ions in Hungary, Bulgaria, Russia, Ukraine, Croatia,

of commercial banking services through a wide

Romania, Slovakia, Serbia and Montenegro.

The number of employees at the Group:


The number of employees at the Group
The average number of employees at the Group

1.2 Base of Accounting

2014

2013

35,919
35,796

38,203
37,487

Due to the fact that the Bank is listed on


international and national stock exchanges,

The Entities of the Group maintain their

the Bank is obliged to present its nancial

accounting records and prepare its statutory

position in accordance with International

accounts in accordance with the commercial,

Financial Reporting Standards (IFRS).

banking and scal regulations prevailing in


Hungary and in case of foreign subsidiaries in

Certain adjustments have been made

accordance with the local commercial, banking

to the entities statutory accounts in order

and scal regulations.

to present the Consolidated Financial


Position and Statement of Recognized

78

2014 angol.indd 78

The Groups presentation currency is the

and Comprehensive Income of the

Hungarian forint (HUF).

Bank in accordance with all standards and

OTP Bank Annual Report 2014

5/18/15 12:46 PM

interpretations approved by the International


Accounting Standards Board (IASB).

Amendments to IFRS 10 Consolidated


Financial Statements, IFRS 11 Joint
Arrangements and IFRS 12 Disclosures

The Consolidated Financial Statements have been

of Interests in Other Entities Transition

prepared in accordance with IFRS as adopted by

Guidance, adopted by the EU on 4 April 2013

the European Union (the EU). IFRS as adopted

(effective for annual periods beginning on or

by the EU do not currently differ from IFRS as


issued by the IASB, except for portfolio hedge

after 1 January 2014),


Amendments to IFRS 10 Consolidated

accounting under IAS 39 Financial Instruments:

Financial Statements, IFRS 12 Disclosures

Recognition and Measurement (IAS 39) which

of Interests in Other Entities and IAS

has not been approved by the EU. As the Group

27 (revised in 2011) Separate Financial

does not apply portfolio hedge accounting under

Statements Investment Entities, adopted

IAS 39, there would be no impact on these

by the EU on 20 November 2013 (effective

Consolidated Financial Statements, had it been

for annual periods beginning on or after

approved by the EU before the preparation of


these nancial statement.

1 January 2014),
Amendments to IAS 32 Financial
instruments: presentation Offsetting
Financial Assets and Financial Liabilities,

1.2.1 The effect of adopting new


and revised International Financial
Reporting Standards effective from
1 January 2014

adopted by the EU on 13 December 2012


(effective for annual periods beginning
on or after 1 January 2014),
Amendments to IAS 36 Impairment of
assets Recoverable Amount Disclosures

The following standards, amendments to the

for Non-Financial Assets, adopted by the EU

existing standards and interpretations issued by

on 19 December 2013 (effective for annual

the IASB and adopted by the EU are effective for

periods beginning on or after 1 January

the current period:

2014),
Amendments to IAS 39 Financial

IFRS 10 Consolidated Financial Statements,

Instruments: Recognition and Measurement

adopted by the EU on 11 December 2012

Novation of Derivatives and Continuation of

(effective for annual periods beginning on or

Hedge Accounting, adopted by the EU on 19

after 1 January 2014),

December 2013 (effective for annual periods

IFRS 11 Joint Arrangements, adopted

beginning on or after 1 January 2014).

by the EU on 11 December 2012 (effective


for annual periods beginning on or after

The adoption of these amendments to the

1 January 2014),

existing standards has not led to any changes in

IFRS 12 Disclosures of Interests in Other

the Groups accounting policies.

Entities, adopted by the EU on 11 December


2012 (effective for annual periods beginning
on or after 1 January 2014),
IAS 27 (revised in 2011) Separate Financial
Statements, adopted by the EU on
11 December 2012 (effective for annual

1.2.2 New and revised Standards


and Interpretations issued by IASB
and adopted by the EU but not yet
effective

periods beginning on or after 1 January 2014),


IAS 28 (revised in 2011) Investments in

At the date of authorization of these nancial

Associates and Joint Ventures, adopted by

statements, the following standards,

the EU on 11 December 2012 (effective for

amendments to the existing standards and

annual periods beginning on or after

interpretations issued by IASB and adopted by

1 January 2014),

the EU were in issue but not yet effective:

IFRS consolidated nancial statements

2014 angol.indd 79

79

5/18/15 12:46 PM

Amendments to various standards

Amendments to IFRS 10 Consolidated

Improvements to IFRSs (cycle 20102012)

Financial Statements, IFRS 12 Disclosure

resulting from the annual improvement

of Interests in Other Entities and IAS

project of IFRS (IFRS 2, IFRS 3, IFRS 8, IFRS

28 Investments in Associates and Joint

13, IAS 16, IAS 24 and IAS 38) primarily

Ventures Investment Entities: Applying

with a view to removing inconsistencies and

the Consolidation Exception (effective

clarifying wording adopted by the EU on

for annual periods beginning on or after

17 December 2014 (amendments are to be

1 January 2016),

applied for annual periods beginning on or


after 1 February 2015),
Amendments to various standards
Improvements to IFRSs (cycle 20112013)
resulting from the annual improvement

Amendments to IFRS 11 Joint Arrangements


Accounting for Acquisitions of Interests in
Joint Operations (effective for annual periods
beginning on or after 1 January 2016),
Amendments to IAS 1 Presentation of

project of IFRS (IFRS 1, IFRS 3, IFRS 13 and

Financial Statements Disclosure Initiative

IAS 40) primarily with a view to removing

(effective for annual periods beginning on or

inconsistencies and clarifying wording

after 1 January 2016),

adopted by the EU on 18 December 2014

- Amendments to IAS 16 Property, Plant and

(amendments are to be applied for annual

Equipment and IAS 38 Intangible Assets

periods beginning on or after 1 January 2015),

Clarication of Acceptable Methods of

Amendments to IAS 19 Employee Benets

Depreciation and Amortisation (effective for

Dened Benet Plans: Employee

annual periods beginning on or after

Contributions adopted by the EU on 17

1 January 2016),

December 2014 (effective for annual periods


beginning on or after 1 February 2015),
IFRIC 21 Levies adopted by the EU on 13
June 2014 (effective for annual periods
beginning on or after 17 June 2014).

Amendments to IAS 16 Property, Plant


and Equipment and IAS 41 Agriculture
Agriculture: Bearer Plants (effective for
annual periods beginning on or after
1 January 2016),
Amendments to IAS 27 Separate Financial
Statements Equity Method in Separate

1.2.3 Standards and Interpretations


issued by IASB, but not yet adopted
by the EU

Financial Statements (effective for


annual periods beginning on or after
1 January 2016),
Amendments to various standards

IFRS 9 Financial Instruments (effective

Improvements to IFRSs (cycle 20122014)

for annual periods beginning on or after

resulting from the annual improvement

1 January 2018),

project of IFRS (IFRS 5, IFRS 7,

IFRS 14 Regulatory Deferral Accounts

IAS 19 and IAS 34) primarily with a view

(effective for annual periods beginning on or

to removing inconsistencies and clarifying

after 1 January 2016),

wording (amendments are to be applied

IFRS 15 Revenue from Contracts with


Customers (effective for annual periods

for annual periods beginning on or after


1 July 2016).

beginning on or after 1 January 2017),


Amendments to IFRS 10 Consolidated

80

2014 angol.indd 80

The hedge accounting regarding the portfolio

Financial Statements and IAS 28

of nancial assets and liabilities, whose

Investments in Associates and Joint

principles have not been adopted by the EU,

Ventures Sale or Contribution of Assets

is still unregulated.

between an Investor and its Associate or

According to the Groups estimates, application

Joint Venture (effective for annual periods

of hedge accounting for the portfolio of nancial

beginning on or after 1 January 2016),

assets or liabilities pursuant to IAS 39:

OTP Bank Annual Report 2014

5/18/15 12:46 PM

NOTE 2:

Financial Instruments: Recognition and

have no signicant impact on the Consolidated

Measurement, would not signicantly impact

Financial Statements except of the application

the nancial statements, if applied as at the

of IFRS 9 which might have signicant

balance sheet date.

impact on the Group Consolidated Financial

The adoption of the above presented Amendments

Statements, the Group will analyse the impact

and new Standards and Interpretations would

after the adoption of the standard by EU.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Signicant accounting policies applied in the

currency are translated into HUF are recognized

preparation of the accompanying Consolidated

at the rates of exchange prevailing at the

Financial Statements are summarized below:

dates of the transactions. At the end of each


reporting period, monetary items denominated
in foreign currencies are retranslated at the

2.1 Basis of Presentation

exchange rates quoted by the National Bank


of Hungary (NBH), or if there is no official

These Consolidated Financial Statements

rate, at exchange rates quoted by OTP as at the

have been prepared under the historical

date of the Consolidated Financial Statements.

cost convention with the exception of certain

Non-monetary items carried at fair value that

nancial instruments, which are recorded at

are denominated in foreign currencies are

fair value. Revenues and expenses are recorded

retranslated at the rates prevailing at the date

in the period in which they are earned or

when the fair value was determined. Non-

incurred.

monetary items that are measured in terms


of historical cost in a foreign currency are not

The presentation of Consolidated Financial

retranslated.

Statements in conformity with IFRS requires


the Management of the Group to make

Exchange differences on monetary items are

estimates and assumptions that affect the

recognized in prot or loss in the period in

reported amounts of assets and liabilities and

which they arise except for:

disclosure of contingent assets and liabilities as

exchange differences on foreign currency

of the date of the nancial statements and their

borrowings relating to assets under

reported amounts of revenues and expenses

construction for future productive use, which

during the reporting period. Actual results could

are included in the cost of those assets

differ from those estimates.

when they are regarded as an adjustment

Future changes in economic conditions,

to interest costs on those foreign currency

business strategies, regulatory requirements,


accounting rules and other factors could result

borrowings;
exchange differences on transactions

in a change in estimates that could have a

entered into in order to hedge certain foreign

material impact on future nancial statements.

currency risks (see Note 2.7 below for


hedging accounting policies); and
exchange differences on monetary items

2.2 Foreign currency translation

receivable from or payable to a foreign


operation for which settlement is neither

In preparing the nancial statements of

planned nor likely to occur (therefore

each individual group entity, transactions in

forming part of the net investment in the

currencies other than the entitys presentation

foreign operation), which are recognized

IFRS consolidated nancial statements

2014 angol.indd 81

81

5/18/15 12:46 PM

initially in Other Comprehensive Income and

are treated as assets and liabilities of the

reclassied from equity to prot or loss on

foreign operation and translated at the rate

repayment of the monetary items.

of exchange prevailing at the end of each


reporting period. Exchange differences arising

For the purposes of presenting Consolidated

are recognized in Other Comprehensive Income

Financial Statements, the assets and liabilities

and accumulated in equity.

of the Groups foreign operations are translated


into HUF using exchange rates prevailing at
the end of each reporting period. Income and

2.3 Principles of consolidation

expense items are translated at the average


exchange rates for the period, unless exchange

Included in these Consolidated Financial

rates uctuate signicantly during that period,

Statements are the accounts of those

in which case the exchange rates at the

subsidiaries in which the Bank exercises

dates of the transactions are used. Exchange

control. The list of the major fully consolidated

differences arising, if any, are recognized in

subsidiaries, the percentage of issued capital

Other Comprehensive Income and accumulated

owned by the Bank and the description of their

in equity (attributed to non-controlling interests

activities is provided in Note 31. However,

as appropriate).

certain subsidiaries in which the Bank holds a


signicant interest have not been consolidated

On the disposal of a foreign operation

because the effect of consolidating such

(i.e. a disposal of the Groups entire interest

companies is not material to the Consolidated

in a foreign operation, or a disposal involving

Financial Statements as a whole (see Note 2.13).

loss of control over a subsidiary that includes

As the ultimate parent, the Bank is preparing

a foreign operation, a disposal involving loss

consolidated nancial statement of the Group.

of joint control over a jointly controlled entity


that includes a foreign operation, or a disposal
involving loss of signicant inuence over an

2.4 Accounting for acquisitions

associate that includes a foreign operation), all


of the exchange differences accumulated in

Business combinations are accounted for using

equity in respect of that operation attributable

purchase method of accounting. Any goodwill

to the owners of the Group are reclassied to

arising on acquisition is recognized in the

prot or loss.

Consolidated Statement of Financial Position


and accounted for as indicated below.

In addition, in relation to a partial disposal

The acquisition date is the date on which

of a subsidiary that does not result in the

the acquirer effectively obtains control over

Group losing control over the subsidiary, the

the acquiree. Before this date, it should be

proportionate share of accumulated exchange

presented as Advance for investments within

differences are re-attributed to non-controlling

Other assets.

interests and are not recognized in prot or

Goodwill, which represents the residual cost of

loss. For all other partial disposals (i.e. partial

the acquisition after obtaining the control over

disposals of associates or jointly controlled

the acquiree in the fair value of the identiable

entities that do not result in the Group losing

assets, liabilities and contingent liabilities

signicant inuence or joint control), the pro-

acquired, is held as an intangible asset

portionate share of the accumulated exchange

and recorded at cost less any accumulated

differences is reclassied to prot or loss.

impairment losses in the Consolidated Financial


Statements.

Goodwill and fair value adjustments on

82

2014 angol.indd 82

identiable assets and liabilities acquired

If the Group loses control of a subsidiary,

arising on the acquisition of a foreign operation

derecognizes the assets (including any

OTP Bank Annual Report 2014

5/18/15 12:46 PM

goodwill) and liabilities of the subsidiary at their

held-to-maturity security is aggregated with

carrying amounts at the date when control is

other investment income receivable over the

lost and recognizes any difference as a gain

term of the investment so that the revenue

or loss on the sale attributable to the parent in

recognized in each period represents a constant

Statement of Recognized Income.

yield on the investment.

Goodwill acquired in a business combination

Such securities comprise mainly securities

is tested for impairment annually or

issued by the Hungarian and foreign

more frequently if events or changes in

Government, discounted Treasury bills,

circumstances indicate. The goodwill is

mortgage bonds and corporate bonds.

allocated to the cost generating units that are


expected to benet from the synergies of the
combinations.
The Group calculates the fair value based on

2.6 Financial assets at fair value


through prot or loss

discounted cash-ow model. The 5 year period


explicit cash-ow model serves as a basis for

2.6.1 Securities held for trading

the impairment test by which the Group denes


the impairment need on goodwill based on

Investments in securities are accounted for

the strategic factors and nancial data of its

on a settlement date basis and are initially

cash-generating units.

measured at fair value. Securities held for

The Group, in its strategic plan, has taken into

trading are measured at subsequent reporting

consideration the effects of the present global

dates at fair value. Unrealized gains and losses

economic situation, the cautious recovery of

on held for trading securities are recognized in

economic situation and outlook, the associated

prot or loss and included in the Consolidated

risks and their possible effect on the nancial

Statement of Recognized Income for the period.

sector as well as the current and expected

Such securities consist of corporate shares,

availability of wholesale funding.

Hungarian and foreign government bonds,


discounted treasury bills and other securities.

Negative goodwill (gain from bargain purchase),


when the interest of the acquirer in the net fair
value of the acquired identiable net assets
exceeds the cost of the business combination,

2.6.2 Derivative nancial


instruments

is recognized immediately in the Consolidated


Statement of Recognized Income as other

In the normal course of business, the Group

income.

is a party to contracts for derivative nancial


instruments, which represent a very low initial
investment compared to the notional value

2.5 Securities held-to-maturity

of the contract and their value depends on


value of underlying asset and are settled in

Investments in securities, traded in active

the future. The derivative nancial instruments

market (with xed or determinable cash-ows)

used include interest rate forward or swap

are accounted for on a settlement date basis

agreements and currency forward or swap

and are initially measured at fair value.

agreements and options. These nancial

At subsequent reporting dates, securities that

instruments are used by the Group both for

the Group has the expressed intention and

trading purposes and to hedge interest rate

ability to hold to maturity are measured at

risk and currency exposures associated with its

amortised cost, less any impairment losses

transactions in the nancial markets.

recognized to reect irrecoverable amounts.


The annual amortisation of any discount

Derivative nancial instruments are accounted

or premium on the acquisition of a

for on a trade date basis and are initially

IFRS consolidated nancial statements

2014 angol.indd 83

83

5/18/15 12:46 PM

measured at fair value and at subsequent

prepared, effectiveness test is performed and

reporting dates also at fair value. Fair values

based on it the hedge is qualied as effective.

are obtained from quoted market prices,


discounted cash-ow models and option pricing

Changes in fair value of derivatives that are

models as appropriate. The Group adopts multi

designated and qualify as cash-ow hedges and

curve valuation approach for calculating the net

that prove to be highly effective in relation to the

present value of future cash-ows based on

hedged risk are recognized as reserve in other

different curves used for determining forward

comprehensive income. Amounts deferred

rates and used for discounting purposes.

in equity are transferred to the Consolidated

It shows the best estimation of such derivative

Statement of Recognized Income and classied

deals that are collateralised as the Group has

as revenue or expense in the periods during

almost all of its open derivative transactions

which the hedged assets and liabilities effect

collateralised.

the Consolidated Statement of Recognized

Changes in the fair value of derivative nancial

Income for the period. The ineffective element

instruments that do not qualify for hedge

of the hedge is charged directly to the

accounting are recognized in prot or loss and

Consolidated Statement of Recognized Income.

are included in the Consolidated Statement

The Group terminates the hedge accounting

of Recognized Income for the period. Each

if the hedging instrument expires or is sold,

derivative deal is determined as asset when fair

terminated or exercised, or the hedge no longer

value is positive and as liability when fair value

meets the criteria for hedge accounting or the

is negative.

Group revokes the designation.

Certain derivative transactions, while providing


effective economic hedges under the risk

2.8 Offsetting

management policy of the Group, do not qualify


for hedge accounting under the specic rules of

Financial assets and liabilities may be

IAS 39 and are therefore treated as derivatives

offset and the net amount is reported in the

held for trading with fair value gains and losses

Consolidated Statement of Financial Position

charged directly to the Consolidated Statement

when the Group has a legally enforceable right

of Recognized Income.

to set off the recognized amounts and the


transactions are intended to be reported in the
Consolidated Statement of Financial Position

2.7 Derivative nancial instruments


designated as a fair-value
or cash-ow hedge

on a net basis. The Group does not offset any

Changes in the fair value of derivatives that are

2.9 Embedded derivatives

nancial assets and nancial liabilities.

designated and qualify as fair value hedges and


that prove to be highly effective in relation to the

Sometimes, a derivative may be a component

hedged risk, are recorded in the Consolidated

of a combined nancial instrument that

Statement of Recognized Income along with

includes a host contract and a derivative (the

the corresponding change in fair value of the

embedded derivative) effecting cash-ows or

hedged asset or liability that is attributable

otherwise modifying the characteristics of the

to the specic hedged risk. The ineffective

host instrument. An embedded derivative must

element of the hedge is charged directly to the

be separated from the host instrument and

Consolidated Statement of Recognized Income.

accounted for as a separate derivative if, and

The conditions of hedge accounting applied by

only if:

the Bank are the following: formally designed

The economic characteristics and risks of the

as hedge, proper hedge documentation is

84

2014 angol.indd 84

embedded derivative are not closely related

OTP Bank Annual Report 2014

5/18/15 12:46 PM

to the economic characteristics and risks of

of future cash-ows and the fair value of any

the host contract;

unquoted equity instruments are calculated

A separate nancial instrument with the

using the EPS ratio.

same terms as the embedded derivative


would meet the denition of a derivative as a

Those available-for-sale nancial assets that

stand-alone instrument; and

do not have a quoted market price and whose

The host instrument is not measured at fair

fair value cannot be reliably measured by

or is measured at fair value but changes

other models mentioned above, are measured

in fair value are recognized in Other

at cost, less provision for impairment, when

Comprehensive Income.

appropriate. This exception is related only


to equity instruments. Impairment on equity
available-for-sale securities is accounted only

2.10 Securities available-for-sale

if there is a signicant or prolonged decrease in


the market value. Impairment losses recognised

Investments in securities are accounted for on a

in prot or loss for equity AFS securities is not

settlement date basis and are initially measured

reversed through prot or loss.

at fair value. Securities available-for-sale


are measured at subsequent reporting dates
at fair value. Unrealized gains and losses on
available-for-sale nancial instruments are
recognized directly in Other Comprehensive

2.11 Loans, placements with other


banks and allowance for loan and
placement losses

Income, except for interest and foreign exchange


gains/losses on monetary items, unless such

Loans and placements with other banks are

available-for-sale security is part of an effective

accounted at amortized cost, stated at the

hedge. Such gains and losses will be reported

principal amounts outstanding (including

when realized in Consolidated Statement of

accrued interest), net of allowance for loan or

Recognized Income for the applicable period.

placement losses, respectively. Transaction fees

Such securities consist of Hungarian and

and charges should adjust the carrying amount

foreign government bonds, corporate bonds,

at initial recognition and be included in effective

discounted Treasury bills and other securities.

interest calculation. Loans and placements

Other securities include shares in investment

with other banks are derecognised when the

funds, shares in non-nancing companies and

contractual rights to the cash-ows expire or

venture capital fund bonds.

they are transferred. Interest and amortised


cost are accounted using effective interest rate

The provision for impairment is calculated

method.

based on discounted cash-ow methodology

When a borrower is unable to meet payments

for debt instruments and calculated based on

as they fall due or, in the opinion of the

fair valuation on equity instruments, using the

Management, there is an indication that a

expected future cash-ow and original effective

borrower may be unable to meet payments as

interest rate if there is objective evidence of

they fall due, all unpaid interest is impaired.

impairment based on signicant or prolonged


decrease in fair value.

According to IAS 39, initially nancial asset


shall be recognized at fair value which is

Securities available-for-sale are remeasured

usually equal to transaction value of loans

at fair value based on quoted prices or

and receivables. Initial fair value of loans and

amounts derived from cash-ow models. In

receivables lent at interest below market

circumstances where the quoted market prices

conditions is lower than their transaction

are not readily available, the fair value of debt

price. As a consequence the Bank is deferring

securities is estimated using the present value

the difference between the fair value at initial

IFRS consolidated nancial statements

2014 angol.indd 85

85

5/18/15 12:46 PM

recognition and the transaction price relating

cost would have been had the impairment not

to loans and receivables because input data for

been recognised at the date the impairment is

measuring the fair values are not available on

reversed.

observable markets.
Write-offs are generally recorded after all
The amount of allowance is the difference

reasonable restructuring or collection

between the carrying amount and the

activities have taken place and the possibility

recoverable amount, being the present value

of further recovery is considered to be remote.

of the expected cash-ows, including amounts

The loan is written off against the related

recoverable from guarantees and collateral,

account Provision for impairment on loan

discounted at the original effective interest rate.

and placement losses in the Consolidated


Statement of Recognized Income.

Allowance for loan and placement losses


with other banks represent Management

The Group applies partial or full write-off for

assessment for potential losses in relation

loans based on the denitions and prescriptions

to these activities.

of nancial instruments in accordance with IAS

The allowances for loan and placement losses

39. If the Group has no reasonable expectations

are maintained to cover losses that have been

regarding a nancial asset (loan) to be

specically identied. Collective impairment

recovered, it will be written off partially or fully

losses of portfolios of loans, for which no

at the time of emergence. A loan will be written

objective evidence of impairment has been

off if it has overdued or was terminated by the

identied on an individual basis, are maintained

Group.

to reduce the carrying amount of the portfolios

The gross amount and impairment loss of the

of nancial assets with similar credit risk

loans shall be written off in the same amount to

characteristics to their estimated recoverable

the estimated maximum recovery amount while

amounts at the balance sheet date. The

the net carrying value remains unchanged. In

expected cash-ows for portfolios of similar

these cases there is no reasonable expectation

assets are estimated based on historical loss

from the clients to complete contractual cash

experience. Historical loss experience is the

ows therefore the Group does not accrue

basis for calculating the expected loss, which

interest income in case of write-off.

is adjusted by the loss conrmation period,

Loan receivables legally demanded from clients

which represents the average time lag between

are equal to the former gross amount of the

occurrence of a loss event and conrmation of

loan before the write-off.

the loss. This concept enables recognition of


those losses that have occurred in the portfolio
at the balance sheet date.
If the reason for provisioning is no longer

2.12 Sale and repurchase


agreements, security lending

deemed appropriate, the redundant

86

2014 angol.indd 86

provisioning charge is released into net

Where debt or equity securities are sold under

operating income. If, in a subsequent period,

a commitment to repurchase them at a pre-

the amount of the impairment loss decreases

determined price, they remain on Statement

and the decrease can be related objectively

of Financial Position and the consideration

to an event occurring after the impairment

received is recorded in Other liabilities

was recognised (such as an improvement

or Amounts due to banks, the Hungarian

in the debtors credit rating), the previously

Government, deposits from the National Banks

recognised impairment loss shall be reversed

and other banks. Conversely, debt or equity

by adjusting an allowance account. The reversal

securities purchased under a commitment to

shall not result in a carrying amount of the

resell are not recognized in the Statement of

nancial asset that exceeds what the amortised

Financial Position and the consideration paid

OTP Bank Annual Report 2014

5/18/15 12:46 PM

is recorded either in Placements with other

estimated useful lives of the assets based on

banks or Deposits from customers. Interest is

the following annual percentages:

accrued evenly over the life of the repurchase


agreement.

Intangible assets

In the case of security lending transactions the

Software

Group doesnt recognize or derecognize the

Property rights

securities because believes that the transferor

Property

retains substantially all the risks and rewards

Office equipment and vehicles

3.3350%
150%
150%
2.550%

of the ownership of the securities. Only a


nancial liability or nancial receivable is

Depreciation and amortization on Property and

recognized for the consideration amount.

equipment and Intangible assets commence on


the day such assets are placed into service.
At each balance sheet date, the Group

2.13 Associates and other


investments

reviews the carrying value of its Property


and equipment and Intangible assets to
determine if there is any indication that those

Companies where the Bank has the ability to

assets have suffered an impairment loss.

exercise signicant inuence are accounted

If any such indication exists, the recoverable

for using the equity method. However, certain

amount of the asset is estimated to determine

associated companies in which the Bank holds

the extent (if any) of the impairment loss.

a signicant interest have not been accounted

Where it is not possible to estimate the

for in accordance with the equity method

recoverable amount of an individual asset,

because the effect of using the equity method

the Group estimates the recoverable amount

to account for such companies is not material

of the cash-generating unit to which the asset

to the Consolidated Financial Statements as a

belongs.

whole.
Where the carrying value of Property and
Unconsolidated subsidiaries and associated

equipment and Intangible assets is greater

companies that were not accounted for using

than the estimated recoverable amount, it is

the equity method and other investments where

impaired immediately to the estimated

the Bank does not hold a signicant interest are

recoverable amount.

recorded according to IAS 39, when appropriate.


Gains and losses on the sale of investments

The Group may conclude contracts for

are determined on the basis of the specic

purchasing property, equipment and intangible

identication of the cost of each investment.

assets, where the purchase price is settled


in foreign currency. By entering into such
agreements, rm commitment in foreign

2.14 Property and equipment,


Intangible assets

currency due on a specied future date arises


at the Group.
Reducing the foreign currency risk caused

Property and equipment and Intangible

by rm commitment, forward foreign currency

assets are stated at cost, less accumulated

contracts may be concluded to ensure the

depreciation and amortization and impairment,

amount payable in foreign currency on a

if any. The depreciable amount (book value less

specied future date on one hand and to

residual value) of the non-current assets must

eliminate the foreign currency risk arising

be allocated over the useful lives.

until settlement date of the contract on the


other hand.

Depreciation and amortization are computed

In the case of effective hedge the realised

using the straight-line method over the

prot or loss of hedging instrument is stated

IFRS consolidated nancial statements

2014 angol.indd 87

87

5/18/15 12:46 PM

as the part of the cost of the hedged asset as it

rate of return on the net investment outstanding

has arisen until recognising the asset and it is

of the Group in respect of the leases. Direct

tightly connecting to the purchasing.

costs such as commissions are included in


the initial measurement of the nance lease
receivables.

2.15 Financial liabilities

Rental income from operating leases is


recognized on a straight-line basis over the

The nancial liabilities are presented within

term of the relevant lease.

nancial liabilities at fair value through prot


or loss or nancial liabilities measured at
amortized costs. In connection to the nancial

The Group as a lessee

liabilities at fair value through prot or loss,


the Group presents the amount of change in

Assets held under nance leases, which confer

their fair value originated from the changes of

rights and obligations similar to those attached

market conditions and business environment.

to owned assets, are capitalised at their fair

Financial liabilities at fair value through prot

value and depreciated over the useful lives of

or loss are either nancial liabilities held for

assets. The principal element of each future

trading or they are designated upon initial

lease obligation is recorded as a liability,

recognition as at fair value through prot or

while the interest elements are charged to

loss. In the case of nancial liabilities measured

the Consolidated Statement of Recognized

at amortized cost fees and commissions related

Income over the period of the leases to produce

to the origination of the nancial liability are

a constant rate of charge on the balance of

recognized through prot or loss during the

principal payments outstanding.

maturity of the instrument. In certain cases the


Group repurchases a part of nancial liabilities

Payments made under operating leases

(mainly issued securities or subordinated

are charged to the Consolidated Statement

bonds) and the difference between the carrying

of Recognized and Comprehensive Income

amount of the nancial liability and the amount

on a straight-line basis over the term of the

paid for it is recognized in the net prot or loss

lease. When an operating lease is terminated

for the period and included in other operating

before the lease period has expired,

income.

any payment required to be made to the


lessor by way of penalty is recognized as an
expense in the period in which termination

2.16 Leases

takes place.

Leases are classied as nance leases


whenever the terms of the lease transfer

2.17 Investment properties

substantially all the risks and rewards of


ownership to the lessee. All other leases are

Investment properties of the Group are

classied as operating leases.

land, buildings, part of buildings which held


(as the owner or as the lessee under a nance
lease) to earn rentals or for capital appreciation

The Group as a lessor

or both, rather than for use in the production


or supply of services or for administrative

88

2014 angol.indd 88

Amounts due from lessees under nance

purposes or sale in the ordinary course

leases are recorded as other receivables at the

of business. The Group measures the

amount of the net investment in the lease of

investment properties at amortized cost

the Group. Finance lease income is allocated to

and according to the opinion of the Management

accounting periods so as to reect a constant

there isnt signicant difference between the

OTP Bank Annual Report 2014

5/18/15 12:46 PM

fair value and the carrying value of the these

to provisions of IAS 39, when they relate and

properties.

have to be included in amortized cost model.


Certain fees and commissions that are not
involved in the amortized cost model are

2.18 Treasury shares

recognized in the Consolidated Statement of


Recognized Income on an accrual basis based

Treasury shares are shares which are purchased

on IAS 18.

on the stock exchange and the over-the-counter


market by the Bank and its subsidiaries
and are presented in the Consolidated

2.21 Dividend income

Financial Position at cost as a deduction from


Consolidated Shareholders Equity.

The Group recognizes dividend income in the

Gains and losses on the sale of treasury

Consolidated Financial Statements when its

shares are credited or charged directly to

right to receive payment is established.

shareholders equity. Derecognition of treasury


shares is based on the FIFO method.

2.22 Income tax


2.19 Interest income and interest
expense

The annual taxation charge is based on the tax


payable under scal regulations prevailing in
the country where the company is incorporated,

Interest income and expenses are recognized in

adjusted for deferred taxation.

prot or loss in the period to which they relate,


using the effective interest rate method. Interest

Deferred taxation is accounted for using the

from loans and deposits are accrued on a daily

balance sheet liability method in respect of

basis. Interest income and expenses include

temporary differences between the tax bases

relevant transaction costs and the amortisation

of assets and liabilities and their carrying value

of any discount or premium between the

for nancial reporting purposes, measured

initial carrying amount of an interest-bearing

at the tax rates that apply to the future period

instrument and its amount at maturity

when the asset is expected to be realized or the

calculated on an effective interest rate basis.

liability is settled.

The Group recognizes interest income when


assumes that the interest associated with the

Deferred tax assets are recognized

transaction will ow to the Group and the amount

by the Group for the amounts of income

of the revenue can reasonably be measured.

taxes that are recoverable in future periods

All interest income and expense recognized

in respect of deductible temporary differences

are arising from loans, placements with other

as well as the carryforward of unused tax

banks, securities held for trading, securities

losses and the carryforward of unused tax

available-for-sale, securities held-to-maturity

credits.

and amounts due to banks, deposits from


customers, liabilities from issued securities,
under these lines of nancial statements.

2.23 Off-balance sheet


commitments and contingent
liabilities

2.20 Fees and Commissions

In the ordinary course of its business, the Group

subordinated bond and loans are presented

enters into off-balance sheet commitments


Fees and commissions are recognized

such as guarantees, letters of credit,

using the effective interest method referring

commitments to extend credit and transactions

IFRS consolidated nancial statements

2014 angol.indd 89

89

5/18/15 12:46 PM

with nancial instruments. The provision for


impairment on off-balance sheet commitments

2.25 Consolidated Statement


of Cash-ows

and contingent liabilities is maintained at a level


adequate to absorb future cash outows which

For the purposes of reporting Consolidated

are probable and relate to present obligations.

Statement of Cash-ows, cash and cash

Management determines the adequacy of the

equivalents include cash, due from banks and

allowance based upon reviews of individual

balances with the National Banks, excluding the

items, recent loss experience, current economic

compulsory reserve established by the National

conditions, the risk characteristics of the

Banks. Consolidated cash-ows from hedging

various categories of transactions and other

activities are classied in the same category

pertinent factors.

as the item being hedged. The unrealized gains


and losses from the translation of monetary

The Group recognizes provision when it has a

items to the closing foreign exchange rates and

present obligation as a result of a past event;

unrealized gains and losses from derivative

it is probable that an outow of resources

nancial instruments are presented net in the

embodying economic benets will be required

statement of cash-ows for the monetary items

to settle the obligation; and a reliable estimate

which were being revaluated.

can be made of the obligation.

2.26 Segment reporting


2.24 Share-based payment
and employee benet

IFRS 8 Operating Segments requires operating


segments to be identied on the basis of

The Bank has applied the requirements of IFRS

internal reports about components of the

2 Share-based Payment.

Group that are regularly reviewed by the chief


operating decision maker in order to allocate

The Bank issues equity-settled share-based

resources to the segments and to assess their

payment to certain employees. Equity-settled

performance.

share-based payment is measured at fair

Based on the above, the segments identied by

value at the grant date. The fair value

the Group are the business and geographical

determined at the grant date of the equity-settled

segments.

share-based payment is expensed on a

The Groups operating segments under IFRS 8

straight-line basis over the year, based on the

are therefore as follows: OTP Core Hungary,

Banks estimate of shares that will eventually

Russia, Ukraine, Bulgaria, Romania, Serbia,

vest. Share-based payment is recorded in

Croatia, Slovakia, Montenegro, Leasing

Consolidated Statement of Recognized Income

subsidiaries, Asset Management subsidiaries,

as Personnel expenses.

Other subsidiaries, Corporate Center.

Fair value is measured by use of a binomial


model. The expected life used in the model

2.27 Comparative gures

has been adjusted, based on Managements

90

2014 angol.indd 90

best estimate, for the effects of

There were no changes in prior period data

non-transferability, exercise restrictions,

due to either prior period error or change in

and behavioural considerations. The Group has

accounting policies. In some notes certain

applied the requirement of IAS 19 Employee

amounts in the Consolidated Financial

Benets. IAS 19 requires to recognise

Statements for the year ended 31 December 2014

employee benets to be paid as a liability and

have been restructured within the particular note

as an expense in the Consolidated Financial

to conform with the current year presentation

Statements.

and these amounts are not signicant.

OTP Bank Annual Report 2014

5/18/15 12:46 PM

2.28 Government measures related


to customer loan contracts

HUF 1,776 million during the year 2013.


Based on unilateral amendment of contractual
clauses being assumed unfair, the Group, based

Act XXXVIII of 2014 on Settlement of certain

on estimation of the amount of expected

issues concerning the Uniformity Decision

obligation related to loans under legal

of the Supreme Court related to customer loan

proceeding, recognised provision for

agreements provided by nancial institutions

impairment in the amount of HUF 127.6 billion.

(Curia Law) was promulgated on 18 July 2014.

In case of these amounts, provision for

The Hungarian Parliament has adopted on

impairment on mortgage loans concerned in

24 September 2014 the Act XL of 2014 on

conversion into HUF was recognised at foreign

Rules of the settlement and certain other

exchange rates applied in conversion into HUF

issues put in Act XXXVIII of 2014 on Settlement

in nancial statements as at 31 December

of certain issues concerning the Uniformity

2014 (CHF: 256.47; EUR: 308.97; JPY: 2.163).

Decision of the Supreme Court related to

In case of loans not concerned in conversion

customer loan agreements provided by

into HUF mostly foreign currency customer

nancial institutions (Act on Settlement),

loans the provision for impairment was

based on that nancial institutions need to

recognized at foreign exchange rates

settle up with their clients on account of

according to NBH as at 31 December 2014 in

overpayments arisen from invalidity of the

these nancial statements.

bid-ask exchange rate spread and unilateral

The Group is recognising the provision

amendment of contractual clauses.

on contingent liabilities related to Act on

Act on Settlement has specied the regulations

Settlement among the other off-balance

of Curia Law; obligation of settlement does not

sheet commitments and contingent liabilities

apply to credit cards, current account loans and

in the IFRS Consolidated Statements.

mortgage housing loans supported by State.


Furthermore amount due to customers can be

b) Act on Conversion into HUF

reduced by total amount of allowances.

Based on the Act on Conversion into HUF,

Act LXXVII of 2014 on Settlement of certain

in case of mortgage loans concerned in

issues concerning the modication of the

conversion into HUF, the Group records

currency and interest conditions related to

the foreign currency loans, provision for

customer loan agreements was promulgated.

impairment, accrued interest and provision at

The act includes regulations about the

foreign exchange rates applied in conversion

conversion of foreign currency customer

into HUF in IFRS nancial statements as at

mortgage loans into HUF which became

31 December 2014.

legally effective on 1 February 2015 (Act on


Conversion into HUF). Hereinafter three acts

The foreign currency loans concerned in

together are called as Acts on Customer Loans.

conversion into HUF and the relating fees need


to be derecognised at the time of conversion

Based on these regulations the Group

into HUF from IFRS nancial statements

recognised the following items in the nancial

and the HUF loans need to be recognised as

statements as at 31 December 2014:

newly granted loans. According to IFRS, HUF


loans shall be recognised initially at fair value

a) Act on Settlement

and for the new loans below-market interest

The Groups reimbursement obligation

test should be prepared. Based on expected

related to invalidity of the bid-ask exchange

negative fair value of loans, and due to the

rate spread will be prospectively in amount

conversion into HUF of foreign currency loans,

of HUF 32.4 billion. Related to bid-ask

provision for impairment was recognised for

exchange rate spread the Group recognised

covering the expected loss of the hedging

provision for impairment in the amount of

positions broken up in the amount of

Uncovered consumer loans and covered retail mortgage and mortgage backed loans, excluding SME loans are considered as
customer loans.

IFRS consolidated nancial statements

2014 angol.indd 91

91

5/18/15 12:46 PM

HUF 36,598 million in the Groups Consolidated

amendment was recognised up to the

IFRS Financial Statements.

Banks standalone expected losses


in the Banks nancial statements as at

c) Effect of the Acts on Customer Loans

31 December 2014. Provision on

on the Group

expected losses in case of subsidiaries is

Provision on losses expected from

recognised by subsidiaries in their nancial

bid-ask exchange rate spread and unilateral

statements.

In the level of the Group provision recognised due to Act on Settlement is the following
(in HUF mn):
Bid-ask
exchange rate
spread

Unilateral
amendment
of interests

Unilateral
amendment
of fees

Total

7,377
13,978
9,480
1,107
462
32,404

34,926
74,493
5,622
537
4,501
120,079

1,824
66
4,964
639

7,493

44,127
88,537
20,066
2,283
4,963
159,976

OTP Bank Plc.


OTP Mortgage Bank Ltd.
Merkantil Bank Ltd.
Merkantil Car Ltd.
OTP Real Estate Leasing Ltd.
Subtotal
Provision for impairment on foreign
currency customer loans concerned
in conversion into HUF
Total

36,598
196,574

In order to eliminate the negative effects of the Acts on its subsidiaries nancial position
and to secure the continuous capital adequacy, OTP provided capital contribution in amount
of HUF 78,304 million in December 2014. At the same amount investment in subsidiaries
were increased:
HUF million
56,581
16,826
4,897
78,304

OTP Mortgage Bank Ltd.


Merkantil Bank Ltd.
OTP Real Estate Leasing Ltd.
Total

In the same amount provision for

calculated for clients overpayments

impairment on investment in subsidiaries

relating to customer loan agreements in

was recognised.

the form of corporate tax, special tax of


business partnerships, local business

The Group still maintains the point of view

tax, innovation contribution, special tax of

that the group members keep completely the

nancial institutions, up to the tax declared

effective regulations during its loan activity

and paid for the 20082014 tax years.

practice.

Tax receivable shall be deducted from the


amount of corporate tax payable for the

d) Introduction of deferred tax relating to Acts

2015 and the following tax years.

on Customer Loans

92

2014 angol.indd 92

Prescription 29/ZS of the Act LXXXI of

Furthermore prescription 29/ZS of the

19962 enables based on accounting

Act LXXXI of 1996 enables to provide

regulations in 44 of Act on Settlement

non-repayable nancial support or grant

to recognise tax difference (tax receivables)

for subsidiaries, for covering the costs and

On Corporate Tax and Dividend Tax.

OTP Bank Annual Report 2014

5/18/15 12:46 PM

expenses directly incurred in connection


with implementation of the Act on Settlement.

e) Derivative deals contracted due to the


obligations in relation with the act on

This support has been claimed as expense

customers loan agreements

during calculation of corporate tax.

The Bank hedged its theoretically opened

OTP Bank proposes to provide nancial

position due to the effect of Act on Settlement

support for its subsidiaries to cover their

and Act on Conversion into HUF with spot

losses.

and derivative deals contracted with NBH.


With those subsidiaries which were affected

NOTE 3:

The Bank recognized 33.2 billion HUF deferred

by the Act on Settlement the Bank concluded

tax receivable in the separate nancial

further derivative deals to have been covered

statements prepared for year 2014 due to

all the opened foreign exchange positions of

the expecting tax receivable based on Act on

the subsidiaries, so all the opened foreign

Settlement and considering the contribution

exchange position was covered on Group

provided to the subsidiaries.

level by EUR/CHF market transactions.

SIGNIFICANT ACCOUNTING ESTIMATES


AND DECISIONS IN THE APPLICATION
OF ACCOUNTING POLICIES
The presentation of nancial statements

reviews of individual loans and placements,

in conformity with IFRS requires the

recent loss experience, current economic

Management of the Group to make judgement

conditions, the risk characteristics of the

about estimates and assumptions that

various categories of loans and other

affect the reported amounts of assets and

pertinent factors. Provisioning involves

liabilities and the disclosure of contingent

many uncertainties about the outcome

assets and liabilities as at the date of the

of those risks and requires the Management

nancial statements and their reported

of the Group to make many subjective

amounts of revenues and expenses during

judgements in estimating the loss amounts.

the reporting period. The estimates and

An impairment loss is incurred when there is

associated assumptions are based on

objective evidence of impairment due to one

historical experience and other factors that

or more events that occurred after the initial

are considered to be relevant. The estimates

recognition of the asset (a loss event),

and underlying assumptions are reviewed

when the loss has a reliably measurable

on ongoing basis. Revisions to accounting

impact on the expected future cash ows

estimates are recognized in the period.

from the nancial asset or group of nancial

Actual results could differ from those

assets. Future cash ows are assessed by

estimates. Signicant areas of subjective

the Group on the basis of estimates based

judgement include:

on historical parameters. The adopted


methodology used for estimating impairment
allowances will be developed in line with

3.1 Impairment on loans and


placements

the further possibilities of accumulations of


historic impairment data from the existing
information systems and applications.

The Group regularly assesses its loan portfolio

As a consequence, acquiring new data by the

for impairment. Management determines

Group could affect the level of impairment

the adequacy of the allowances based upon

allowances in the future.

IFRS consolidated nancial statements

2014 angol.indd 93

93

5/18/15 12:46 PM

3.2 Valuation of instruments


without direct quotations

amount of potential nancial losses which are


appropriately provided for (see Note 17.)

Financial instruments without direct quotations


in an active market are valued using the

A provision is recognized by the Group when

valuation model technique. The models are

it has a present obligation as a result of a past

regularly reviewed and each model is calibrated

event, it is probable that an outow of resources

for the most recent available market data. While

embodying economic benets will be required

the models are built only on available data,

to settle the obligation, and a reliable estimate

their use is subject to certain assumptions and

can be made of the amount of the obligation.

estimates (e.g. correlations, volatilities, etc.).

Provision for off-balance sheet items includes

Changes in the model assumptions may affect

provision for litigation, provision for retirement

the reported fair value of the relevant nancial

and expected liabilities, for commitments to

instruments.

extend credit, provision for warranties arising

IFRS 13 Fair Value Measurement seeks to

from banking activities and provision for

increase consistency and comparability in fair

conrmed letter of credit.

value measurements and related disclosures


through a fair value hierarchy. The hierarchy
categorises the inputs used in valuation

3.4 Impairment on goodwill

techniques into three levels. The hierarchy


gives the highest priority to (unadjusted)

Goodwill acquired in a business combination

quoted prices in active markets for identical

is tested for impairment annually or more

assets or liabilities and the lowest priority to

frequently when there is an indication that the

unobservable inputs. The objective of a fair

unit might be impaired, in accordance with IAS

value measurement is to estimate the price

36 Impairment of assets.

at which an orderly transaction to sell the

The Group calculates the fair value based on

asset or to transfer the liability would take

discounted cash-ow model. The 5 year period

place between market participants at the

explicit cash-ow model serves as a basis for

measurement date under current market

the impairment test by which the Group denes

conditions.

the impairment need on goodwill based on


the strategic factors and nancial data of its
cash-generating units. In the calculation of the

3.3 Provisions

goodwill impairment, also the expectations


about possible variations in the amount or

94

2014 angol.indd 94

Provisions are recognized and measured based

timing of those future cash-ows, the time

on IAS 37 Provisions, Contingent Liabilities

value of money, represented by the current

and Contingent Assets. The Group is involved

market risk-free rate of interest and other

in a number of ongoing legal disputes. Based

factors are reected. Goodwill impairment

upon historical experience and expert reports,

is recorded among the Depreciation and

the Group assesses the developments in

amortization in the Consolidated Statement

these cases, and the likelihood and the

of Recognized Income.

OTP Bank Annual Report 2014

5/18/15 12:46 PM

NOTE 4:

CASH, AMOUNTS DUE FROM BANKS AND BALANCES WITH


THE NATIONAL BANKS (in HUF mn)
Cash on hand
In HUF
In foreign currency
Amounts due from banks and balances with the National Banks
Within one year:
In HUF*
In foreign currency
Over one year:
In HUF
In foreign currency
Accrued interest
Total
Compulsory reserve set by the National Banks

NOTE 5:

2014

2013

66,332
143,668
210,000

68,063
120,069
188,132

1,798,959
298,035
2,096,994

51,807
298,528
350,335

638
2,097,632
2,307,632
304,308

435
435
223
350,993
539,125
263,178

PLACEMENTS WITH OTHER BANKS, NET OF ALLOWANCE


FOR PLACEMENT LOSSES (in HUF mn)
Within one year:
In HUF
In foreign currency
Over one year:
In HUF
In foreign currency
Accrued interest
Provision for impairment on placement losses
Total

2014

2013

12,522
266,384
278,906

32,424
235,898
268,322

2,032
2,032
115
(47)
281,006

4,911
4,911
277
(31)
273,479

An analysis of the change in the provision for impairment on placement with other banks, net of
allowance for placement losses is as follows:
Balance as at 1 January
Provision for the year
Release of provision for the year
Use of provision
Foreign currency translation difference
Closing balance

2014
31
874
(854)

(4)
47

2013
1,111
28
(367)
(712)
(29)
31

2014
0.4%6.6%
0.01%14.9%
1.22%

2013
0.1%9.0%
0.01%11.9%
1.48%

Interest conditions of placements with other banks:


In HUF
In foreign currency
Average interest rates on placements with other banks

* Securities issued by the NBH were changed into two-weeks NBH deposit during the year ended 31 December 2014.

IFRS consolidated nancial statements

2014 angol.indd 95

95

5/18/15 12:46 PM

NOTE 6:

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT


OR LOSS (in HUF mn)

Securities held for trading:


Shares
Government bonds
Discounted Treasury bills
Securities issued by the NBH*
Other securities
Other non-interest bearing securities
Accrued interest
Total

2014
59,231
22,942
3,414

4,439
3,989
94,015
625
94,640

2013
73,703
34,817
2,159
209,347
14,615
5,912
340,553
987
341,540

Positive fair value of derivative nancial instruments classied held for trading:
CCIRS and mark-to-market CCIRS** classied as held for trading
Foreign exchange swaps classied as held for trading
Interest rate swaps classied as held for trading
Option contracts classified as held for trading
Foreign exchange forward contracts classied as held for trading
Other derivative transactions classied as held for trading
Total

2014
85,010
48,636
43,401
7,128
6,237
4,223
194,635
289,275

2013
8,444
5,357
53,667

104
6,493
74,065
415,605

2014
81.7%
18.3%
100.0%

2013
86.9%
13.1%
100.0%

2014
54.0%
46.0%
100.0%
1.5%11.0%
2.06%

2013
9.5%
90.5%
100.0%
2.9%13.0%
1.46%

An analysis of securities held for trading portfolio by currency:


Denominated in HUF
Denominated in foreign currency
Total

An analysis of government bond portfolio by currency:


Denominated in HUF
Denominated in foreign currency
Total
Interest rates on securities held for trading
Average interest rates on securities held for trading

* Securities issued by the NBH were changed into two-weeks NBH deposit during the year ended 31 December 2014.
** CCIRS: Cross Currency Interest Rate Swaps (see Note 28.).

96

2014 angol.indd 96

OTP Bank Annual Report 2014

5/18/15 12:46 PM

Interest conditions and the remaining maturities of securities held for trading
can be analysed as follows:
Within ve years:
With variable interest
With xed interest
Over ve years:
With variable interest
With xed interest
Non-interest bearing securities
Total

NOTE 7:

2014

2013

1,125
23,466
24,591

7,245
249,085
256,330

6
6,198
6,204
63,220
94,015

663
3,945
4,608
79,615
340,553

SECURITIES AVAILABLE-FOR-SALE (in HUF mn)


Government bonds
Discounted Treasury bills
Corporate bonds
From this:
Listed securities:
In HUF
In foreign currency
Non-listed securities:
In HUF
In foreign currency
Bonds issued by NBH*
Other securities
Other non-interest bearing securities
From this:
Listed securities:
In HUF
In foreign currency
Non-listed securities:
In HUF
In foreign currency

Accrued interest
Provision for impairment on securities available-for-sale
Total

2014
680,323
42,168
37,457

2013
318,263
38,088
71,148

11,598
11,598

67,930
67,930

3,261
22,598
25,859

21,138
43,646

3,218

3,218
1,151,208
8,562
41,702

7,114
7,114

6,521
6,521

28,346
8,186
36,532
824,732
15,694
(1,274)
839,152

27,013
8,168
35,181
1,628,971
9,250
(966)
1,637,255

* Securities issued by the NBH were changed into two-weeks NBH deposit during the year ended 31 December 2014.

IFRS consolidated nancial statements

2014 angol.indd 97

97

5/18/15 12:46 PM

An analysis of securities available-for sale by currency:


Denominated in HUF
Denominated in foreign currency
Total

2014
84.6%
15.4%
100.0%

2013
82.6%
17.4%
100.0%

2014
81.2%
18.8%
100.0%

2013
47.1%
52.9%
100.0%

2014
1.7%8.0%

2013
2.9%8.0%

0.3%28.0%

0.3%22.0%

3.07%

4.10%

5.85%

9.12%

An analysis of government bonds by currency:


Denominated in HUF
Denominated in foreign currency
Total

Interest rates on securities available-for-sale denominated in HUF


Interest rates on securities available-for-sale denominated
in foreign currency
Average interest rates on securities available-for-sale denominated
in HUF
Average interest rates on securities available-for-sale denominated
in foreign currency

Interest conditions and the remaining maturities of available-for-sale nancial assets


can be analysed as follows:
Within ve years:
With variable interest
With xed interest
Over ve years:
With variable interest
With xed interest
Non-interest bearing securities
Total

2014

2013

2,701
616,404
619,105

4,258
1,500,316
1,504,574

117
161,864
161,981
43,646
824,732

3,730
78,965
82,695
41,702
1,628,971

2014
966
297

11
1,274

2013
1,226
1
(1)
(265)
5
966

An analysis of the change in the provision for impairment on securities


available-for-sale is as follows:
Balance as at 1 January
Provision for the year
Release of provision
Use of provision
Foreign currency translation difference
Closing balance

Certain securities are hedged against interest rate risk. See Note 40.

NOTE 8:

LOANS, NET OF ALLOWANCE FOR LOAN LOSSES (in HUF mn)


Short-term loans and promissory notes (within one year)
Long-term loans and promissory notes (over one year)
Accrued interest
Provision for impairment on loan losses
Total

98

2014 angol.indd 98

2014
2,245,818
4,690,266
6,936,084
57,242
(1,129,085)
5,864,241

2013
2,537,167
4,875,633
7,412,800
68,044
(1,235,634)
6,245,210

OTP Bank Annual Report 2014

5/18/15 12:46 PM

An analysis of the loan portfolio by currency:


In HUF
In foreign currency
Total

2014
29%
71%
100%

2013
27%
73%
100%

2014
0.04%42.0%
0.04%42.0%
0.01%64.9%
0.01%66.9%
4.68%
16.23%
17.9%

2013
0.3%40.4%
0.3%40.4%
0.01%66%
0.01%64.9%
4.94%
16.54%
18.4%

Interest rates of the loan portfolio are as follows:


Short-term loans denominated in HUF
Long-term loans denominated in HUF
Short-term loans denominated in foreign currency
Long-term loans denominated in foreign currency
Average interest rates on loans denominated in HUF
Average interest rates on loans denominated in foreign currency
Gross loan portfolio on which interest to customers is not being accrued

An analysis of the change in the provision for impairment on loan losses is as follows:
2014
1,235,634
708,743
(319,393)
(237,593)
772
(85,494)
(173,584)
1,129,085

Balance as at 1 January
Provision for the year
Release of provision
Partial write-off*
Increase due to acquisition
Use of provision
Foreign currency translation difference
Closing balance

2013
1,154,176
514,614
(328,859)

(79,996)
(24,301)
1,235,634

Provision for impairment on loan and placement losses is summarized as below:


Provision for impairment (Release of provision) on placement losses
Provision for impairment on loan losses
Total

NOTE 9:

2014
10
446,820
446,830

2013
(374)
262,943
262,569

ASSOCIATES AND OTHER INVESTMENTS (in HUF mn)


Investments
Investments in associates (non-listed)
Other investments (non-listed) at cost**
Provision for impairment on investments
Total

2014

2013

17,768
8,917
26,685
(3,304)
23,381

15,583
12,485
28,068
(4,231)
23,837

An analysis of the change in the provision for impairment on investments is as follows:


Balance as at 1 January
Provision for the year
Change due to merge
Use of provision
Foreign currency translation difference
Closing balance

2014
4,231
1,244
(1,927)
(245)
1
3,304

2013
2,968
1,370

(132)
25
4,231

* See details in Note 2.11.


** These instruments do not have a quoted market price in an active market and whose fair value cannot be reliably measured.

IFRS consolidated nancial statements

2014 angol.indd 99

99

5/18/15 12:46 PM

NOTE 10:

SECURITIES HELD-TO-MATURITY (in HUF mn)


2014
692,410
522
519
7
693,458
16,725
(814)
709,369

Government bonds
Mortgage bonds
Discounted Treasury bills
Corporate bonds
Accrued interest
Provision for impairment on securities held-to-maturity
Total

2013
564,522
493
457
1,070
566,542
14,284
(775)
580,051

Interest conditions and the remaining maturities of securities held-to-maturity


can be analysed as follows:
Within ve years:
With variable interest
With xed interest
Over ve years:
With variable interest
With xed interest
Total

2014

2013

7,438
375,972
383,410

16,457
212,112
228,569

310,048
310,048
693,458

337,973
337,973
566,542

2014
92.7%
7.3%
100%

2013
89.8%
10.2%
100%

An analysis of securities held-to-maturity by currency:


Denominated in HUF
Denominated in foreign currency
Total

In most cases, interest on variable rate bonds is

semi-annually. Interest on xed rate and

based on the interest rates of 90 day Hungarian

variable rate securities is, in most cases, paid

government Treasury bills and is adjusted

semi-annually.

Interest rates of securities held-to-maturity with variable interest


Interest rates of securities held-to-maturity with xed interest
Average interest rates on securities held-to-maturity

2014
0.02%2.5%
0.9%12.0%
6.34%

2013
0.02%4.25%
2.6%10.9%
6.71%

An analysis of the change in the provision for impairment on securities held-to-maturity


is as follows:
Balance as at 1 January
Provision for the year
Release of provision
Foreign currency translation difference
Closing balance

100

2014
775

39
814

2013
770
21
(32)
16
775

OTP Bank Annual Report 2014

2014 angol.indd 100

5/18/15 12:46 PM

NOTE 11:

PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS


(in HUF mn)

For the year ended 31 December 2014:


Intangible assets
and goodwill

Property

Office
equipmen
and vehicles

Construction
in progress

Total

374,911
41,354
252
(20,986)
(49,075)
(628)
27
345,855

222,634
7,292
1,472
(3,887)
(2,398)
(28,190)
196,923

188,906
14,785
430
(5,142)
(16,275)
(20,939)
90
161,855

26,341
18,246
2
165
(32,777)

6
11,983

812,792
81,677
2,156
(29,850)
(100,525)
(49,757)
123
716,616

181,190
22,614
22,225
3,207
(41,945)
(179)
22
187,134

49,799
5,346

(1,311)
(180)
(6,909)

46,745

126,559
15,762

(4,219)
(13,168)
(7,403)
45
117,576

357,548
43,722
22,225
(2,323)
(55,293)
(14,491)
67
351,455

193,721
158,721

172,835
150,178

62,347
44,279

26,341
11,983

455,244
365,161

Cost
Balance as at 1 January
Additions
Acquisition
Foreign currency translation differences
Disposals
Transfer*
Change in consolidation scope
Balance as at 31 December
Depreciation and Amortization
Balance as at 1 January
Charge for the year (without goodwill impairment)
Goodwill impairment
Foreign currency translation differences
Disposals
Transfer*
Change in consolidation scope
Balance as at 31 December
Net book value
Balance as at 1 January
Balance as at 31 December

An analysis of the changes in the goodwill for the six month period ended 31 December 2014
is as follows:
Goodwill
Cost
Balance as at 1 January
Additions
Foreign currency translation difference
Impairment for the current period
Balance as at 31 December
Net book value
Balance as at 1 January
Balance as at 31 December

145,564

(22,277)
(22,225)
101,062
145,564
101,062

Book value of the goodwill allocated to the appropriate cash generation units:
List of units
JSC OTP Bank (Russia)
DSK Bank EAD
OTP banka Hrvatska d.d.
OTP Bank Romania S.A.
Monicomp Ltd.
OTP Banka Slovensko a.s.
Other**
Total

HUF million
41,806
28,541
18,280
6,257
5,732
93
353
101,062

The Bank prepared the IFRS goodwill impairment

that shows the same result; however they

tests of the subsidiaries based on two

represent different economical logics. On one

different net present value calculation methods

hand is the discount cash-ow method (DCF)

* Assets subject to operating lease and investment properties are differentiated according to their purposes for use so they had been
transferred from tangible and intangible assets to other assets (see more details in Note 12.).
** Other category includes: OTP Real Estate Leasing Ltd., Nimo 2002 Ltd., POK DSK-Rodina a.d.

IFRS consolidated nancial statements

2014 angol.indd 101

101

5/18/15 12:46 PM

that calculates the value of the subsidiaries by

The values of the subsidiaries in the DCF

discounting their expected cash-ow; on the

method were then calculated as the sum of

other hand the economic value added (EVA)

the discounted cash-ows of the explicit period,

method estimates the value of the subsidiaries

the present value of the terminal values and the

from the initial invested capital and the present

initial free capital assuming an effective capital

value of the economic prot that the companies

structure.

are expected to generate in the future.


Present value calculation with the EVA method
The Bank applied a cash-ow model with an

A company creates positive economic prot/

explicit period between 20152017, except in

value if the protability of the invested capital

the case of OTP Bank JSC (Russia) and JSC

is higher than the normal prot the prot that

OTP Bank (Ukraine) where the explicit period

can be usually generated in the banking sector ,

was 20152019, where for 2015 the actual,

which means that the companys protability

accepted annual nancial plans are included

exceeds the expected yield. The economic prot

and the actual nancial strategic plans

of the subsidiaries was calculated by deducting

(20162017) were used as forecasts for the

the cost of invested capital from the net prot

period between 2018 and 2019.

for the year. The applied discount factor and


the indicators used for calculating the residual

Present value calculation with the DCF method

value (long-term cost of capital and growth

The Bank calculated the expected cash-ow

rate) are the same that are used in the DCF

for the given period based on the expected

method.

after-tax prot of the companies. For calculating


the discount factor it was considered the base

Summary of the impairment test for the year

rates of the national banks in the actual macro

ended 31 December 2014

forecasts as risk free rates and the Group

Based on the valuations of the subsidiaries,

calculated risk premiums by modifying the

the total IFRS goodwill, recorded for OTP Bank

country risk premiums that are published on

JSC (Ukraine) as at the balance sheet date, was

damodaran.com with the CDS of the different

impaired, which meant HUF 22,225 million

countries spread as at 31 December 2014.

consolidated IFRS goodwill impairment as at


31 December 2014.

For the year ended 31 December 2013:

Cost
Balance as at 1 January
Additions
Foreign currency translation differences
Disposals
Change in consolidation scope
Balance as at 31 December
Depreciation and Amortization
Balance as at 1 January
Charge for the year (without goodwill impairment)
Goodwill impairment
Foreign currency translation differences
Disposals
Change in consolidation scope
Balance as at 31 December
Net book value
Balance as at 1 January
Balance as at 31 December

102

Intangible assets
and goodwill

Property

Office
equipmen
and vehicles

Construction
in progress

Total

363,524
32,622
(7,438)
(13,939)
142
374,911

214,736
11,394
(901)
(2,605)
10
222,634

187,618
22,509
(893)
(20,562)
234
188,906

18,928
29,217
97
(22,755)
854
26,341

784,806
95,742
(9,135)
(59,861)
1,240
812,792

125,775
22,192
30,819
6,164
(3,818)
58
181,190

44,867
5,644

173
(963)
78
49,799

125,022
19,362

(776)
(17,135)
86
126,559

295,664
47,198
30,819
5,561
(21,916)
222
357,548

237,749
193,721

169,869
172,835

62,596
62,347

18,928
26,341

489,142
455,244

OTP Bank Annual Report 2014

2014 angol.indd 102

5/18/15 12:46 PM

An analysis of the changes in the goodwill for the year ended 31 December 2013 is as follows:
Goodwill
Cost
Balance as at 1 January
Additions
Foreign currency translation difference
Impairment for the current period
Balance as at 31 December
Net book value
Balance as at 1 January
Balance as at 31 December

189,619

(13,236)
(30,819)
145,564
189,619
145,564

Book value of the goodwill allocated to the appropriate cash generation units:
List of units
JSC OTP Bank (Russia)
DSK Bank EAD
OTP Bank JSC (Ukraine)
OTP banka Hrvatska d.d.
OTP Bank Romania S.A.
Monicomp Ltd.
OTP Banka Slovensko a.s.
Other*
Total

HUF million
61,534
28,541
26,179
17,236
5,900
5,732
88
354
145,564

Summary of the impairment test for the year ended 31 December 2013
Based on the valuations of the subsidiaries HUF 30,819 million consolidated IFRS goodwill
impairment was recorded for OTP Bank JSC (Ukraine).

NOTE 12:

OTHER ASSETS** (in HUF mn)


Deferred tax receivables
Investment properties***
Assets subject to operating lease***
Inventories
Fair value of derivative nancial instrument designated as fair value hedge
Prepayments and accrued income
Trade receivables
Receivable from the National Asset Management
Receivables from card operations****
Current income tax receivable
Other advances
Variation margin
Receivables from investment services
Receivables due from pension funds and investment funds
Loans sold under deferred payment scheme
Other receivables from Hungarian Government
Receivables from leasing activities
Advances for securities and investments
Other
Subtotal
Provision for impairment on other assets*****
Total

2014
61,009
31,322
24,668
43,936
30,454
24,513
12,121
9,718
9,615
8,843
5,695
3,996
3,960
3,874
2,299
2,233
1,086
691
44,704
324,737
(32,902)
291,835

2013
5,286

63,136
26,803
19,305
14,581
12,295

6,938
8,426
3,623
3,155
2,115

5,042
976
664
62,143
234,488
(23,247)
211,241

* Other category includes: OTP Real Estate Leasing Ltd., Nimo 2002 Ltd., POK DSK-Rodina a.d.
** Other assets except income tax receivable and fair value of derivative nancial instruments designated as fair value hedge
are expected to be recovered or settled no more than twelve months after the reporting period. Income tax receivable will
be enforced in the tax return for the year 2014. Unrealised gains/losses on derivative nancial instruments are recovering in
accordance with their maturity.
*** Assets subject to operating lease and investment properties are differentiated according to their purposes for use so they had
been transferred from tangible and intangible assets to other assets (see more details in Note 11.).
**** Accounting of receivables from card operations recognized due to different timing of cash settlement has changed for the year
ended 31 December 2014.
***** Provision for impairment on other assets mainly consists of provision for impairment on investment properties and inventories.

IFRS consolidated nancial statements

2014 angol.indd 103

103

5/18/15 12:46 PM

Positive fair value of derivative nancial instruments designated as fair value hedge:
Interest rate swaps designated as fair value hedge
CCIRS and mark-to-market CCIRS designated as fair value hedge
Foreign exchange swaps designated as fair value hedge
Forward security agreements designated as fair value hedge
Other transactions designated as fair value hedge
Total

2014
14,032
13,940
2,437

45
30,454

2013
9,733
15,472
1,520
44
34
26,803

An analysis of the movement in the provision for impairment on other assets is as follows:
Balance as at 1 January
Provision for the year
Provision due to transfer*
Use of provision
Foreign currency translation difference
Closing balance

NOTE 13:

2014
23,247
9,726
2,353
(2,573)
149
32,902

2013
21,265
4,313

(2,422)
91
23,247

AMOUNTS DUE TO BANKS, THE HUNGARIAN GOVERNMENT,


DEPOSITS FROM THE NATIONAL BANKS AND OTHER BANKS
(in HUF mn)
Within one year:
In HUF
In foreign currency
Over one year:
In HUF
In foreign currency
Accrued interest
Total**

2014

2013

148,264
302,971
451,235

352,641
162,714
515,355

150,012
106,137
256,149
890
708,274

139,958
127,436
267,394
1,463
784,212

Interest rates on amounts due to banks, the Hungarian Government, deposits from
the National Banks and other banks are as follows:
Within one year:
In HUF
In foreign currency
Over one year:
In HUF
In foreign currency
Average interest rates on amounts due to banks, the Hungarian
Government, deposits from the National Banks and other banks

2014

2013

1.2%5.2%
0.05%18.8%

0.2%5.8%
0.02%8.9%

0.1%5.2%
0.1%18.0%

0.2%5.2%
0.1%18.0%

1.72%

2.13%

* Provisions on assets subject to operating lease and investment properties which were transferred from tangible and intangible
assets to the other assets (see more details in Note 11 and Note 25.).
** It contains loans lent among the frame of Funding for Growth Scheme, which are accounted as government grant regulated by IAS
20 standard. See more details in Note 44.

104

OTP Bank Annual Report 2014

2014 angol.indd 104

5/18/15 12:46 PM

NOTE 14:

DEPOSITS FROM CUSTOMERS (in HUF mn)


Within one year:
In HUF
In foreign currency
Over one year:
In HUF
In foreign currency
Accrued interest
Total

2014

2013

3,716,886
3,667,694
7,384,580

3,045,371
3,518,242
6,563,613

101,733
158,624
260,357
28,541
7,673,478

140,582
124,008
264,590
38,403
6,866,606

2014

2013

0.01%10.3%
0.01%29.0%

0.01%10.3%
0.01%27.0%

0.01%3.1%
0.01%26.0%
0.80%

0.01%5.0%
0.01%28.5%
1.62%

5.52%

6.98%

Interest rates on deposits from customers are as follows:


Within one year:
In HUF
In foreign currency
Over one year:
In HUF
In foreign currency
Average interest rates on deposits from customers denominated
in HUF
Average interest rates on deposits from customers denominated
in foreign currency

An analysis of deposits from customers by type, is as follows*:


2014
Retail deposits
Corporate deposits
Municipality deposits
Total

NOTE 15:

4,566,737
2,693,704
384,496
7,644,937

2013
60%
35%
5%
100%

4,269,711
2,235,522
322,970
6,828,203

62%
33%
5%
100%

LIABILITIES FROM ISSUED SECURITIES (in HUF mn)


With original maturity
Within one year:
In HUF
In foreign currency
Over one year:
In HUF
In foreign currency
Accrued interest
Total

2014

2013

28,812
53,225
82,037

50,795
163,580
214,375

162,582
13,051
175,633
9,414
267,084

175,889
43,806
219,695
11,148
445,218

2014
0.10%10.0%
0.23%10.5%
4.01%

2013
0.25%10.0%
0.44%4.0%
6.61%

Interest rates on liabilities from issued securities are as follows:


Issued securities denominated in HUF
Issued securities denominated in foreign currency
Average interest rates on issued securities

* Without accrued interest liability.

IFRS consolidated nancial statements

2014 angol.indd 105

105

5/18/15 12:46 PM

Issued securities denominated in HUF as at 31 December 2014:


Name

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.

106

OTP TBSZ 2015/I


OTP TBSZ 2016/I
OTP TBSZ 2016/II
OTP TBSZ 4 2015/I
OTP TBSZ 4 2015/II
OTP TBSZ 4 2016/I
OTP TBSZ 6 2017/I
OTP 2015/Ax
OTP 2015/Bx
OTP 2015/Dx
OTP 2015/Ex
OTP 2015/Hx
OTP 2016/Ax
OTP 2016/Bx
OTP 2016/Ex
OTP 2016/Fx
OTP 2017/Ax
OTP 2017/Bx
OTP 2017/Cx
OTP 2017/Dx
OTP 2017/Ex
OTP 2018/Ax
OTP 2018/Bx
OTP 2018/Cx
OTP 2018/Dx
OTP 2018/Ex
OTP 2019/Ax
OTP 2019/Bx
OTP 2019/Cx
OTP 2019/Dx
OTP 2019/Ex
OTP 2020/Ax
OTP 2020/Bx
OTP 2020/Cx
OTP 2020/Dx
OTP 2020/Ex
OTP 2020/Fx
OTP 2020/Gx
OTP 2021/Ax
OTP 2021/Bx
OTP 2021/Cx
OTP 2021/Dx
OTP 2022/Ax
OTP 2022/Bx
OTP 2022/Cx
OTP 2022/Dx
OTP 2023/Ax
OTP 2023/Bx
OTP 2024/Ax
OTP 2024/Bx
OTP 2024/Cx
OTP 2020/RF/A
OTP 2020/RF/B
OTP 2020/RF/C
OTP 2021/RF/A
OTP 2021/RF/B
OTP 2021/RF/C
OTP 2021/RF/D
OTP 2021/RF/E
OTP 2022/RF/A
OTP 2022/RF/B
OTP 2022/RF/C
OTP 2022/RF/D
OTP 2022/RF/E

Date of issue

Maturity

26/02/201028/12/2010
14/01/201105/08/2011
26/08/201129/12/2011
13/01/201222/06/2012
21/12/2012
18/01/201315/02/2013
13/01/201222/06/2012
25/03/2010
28/06/2010
22/03/2012
18/07/2012
28/12/2012
11/11/2010
16/12/2010
28/12/2012
22/03/2013
01/04/2011
17/06/2011
19/09/2011
20/10/2011
21/12/2011
03/01/2012
22/03/2012
18/07/2012
29/10/2012
28/12/2012
25/06/2009
05/10/200905/02/2010
14/12/2009
22/03/2013
28/06/2013
25/03/2010
28/06/2010
11/11/2010
16/12/2010
18/06/2014
10/10/2014
15/12/2014
01/04/2011
17/06/2011
19/09/2011
21/12/2011
22/03/2012
18/07/2012
29/10/2012
28/12/2012
22/03/2013
28/06/2013
18/06/2014
10/10/2014
15/12/2014
12/07/2010
12/07/2010
11/11/2010
05/07/2011
20/10/2011
21/12/2011
21/12/2011
21/12/2011
22/03/2012
22/03/2012
28/06/2012
28/06/2012
29/10/2012

30/12/2015
15/12/2016
15/12/2016
15/12/2015
15/12/2015
15/12/2016
15/12/2017
30/03/2015
09/07/2015
23/03/2015
20/07/2015
27/12/2015
03/11/2016
19/12/2016
27/12/2016
24/03/2016
31/03/2017
20/06/2017
25/09/2017
19/10/2017
28/12/2017
09/01/2018
22/03/2018
18/07/2018
26/10/2018
28/12/2018
01/07/2019
14/10/2019
20/12/2019
21/03/2019
24/06/2019
30/03/2020
09/07/2020
05/11/2020
18/12/2020
22/06/2020
16/10/2020
21/12/2020
01/04/2021
21/06/2021
24/09/2021
27/12/2021
23/03/2022
18/07/2022
28/10/2022
27/12/2022
24/03/2023
26/06/2023
21/06/2024
16/10/2024
20/12/2024
20/07/2020
20/07/2020
05/11/2020
13/07/2021
25/10/2021
30/12/2021
30/12/2021
30/12/2021
23/03/2022
23/03/2022
28/06/2022
28/06/2022
31/10/2022

Nominal
value
(in HUF mn)
5,438
1,176
638
471
48
157
233
4,429
4,060
385
376
170
3,654
2,786
332
670
4,347
4,243
3,186
475
3,449
702
4,091
3,523
2,930
3,029
263
368
314
4,400
3,344
340
362
234
215
4,100
3,500
3,250
289
332
300
365
280
265
296
343
395
280
270
400
320
2,370
1,131
2,475
1,946
1,961
385
256
34
1,053
351
124
155
331

Interest conditions
(in % p.a.)
5.5
5.5
5.5
6.5
6
5
6.5
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed
indexed

xed
fixed
fixed
fixed
fixed
fixed
fixed
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
oating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
floating
oating
floating
floating
floating

Hedged

hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged

OTP Bank Annual Report 2014

2014 angol.indd 106

5/18/15 12:46 PM

Name

65.
66.
67.
68.
69.
70.
71.
72.
73.
74.
75.
76.
77.
78.
79.
80.

Date of issue

OTP 2022/RF/F
28/12/2012
OTP 2023/RF/A
22/03/2013
OTP DNT HUF 150107 4%
30/06/2014
OTP EK 2015/I
29/07/2013
OTP OJK 2016/I
26/08/201121/12/2011
OTP OJK 2017/I
27/01/201213/07/2012
OJB 2015/I
10/06/2005
OJB 2015/J
28/01/2005
OJB 2016/I
03/02/2006
OJB 2016/II
31/08/2006
OJB 2016/J
18/04/2006
OJB 2019/I
17/03/2004
OJB 2019/II
25/05/2011
OJB 2020/I
19/11/2004
OJB 2020/II
25/05/2011
Other*
Subtotal issued securities in HUF
Unamortized premium
Fair value adjustment
Total issued securities in HUF

Maturity

28/12/2022
24/03/2023
07/01/2015
29/01/2015
26/08/2016
27/01/2017
10/06/2015
28/01/2015
03/02/2016
31/08/2016
28/09/2016
18/03/2019
18/03/2019
12/11/2020
12/11/2020

Nominal
value
(in HUF mn)
236
231
615
5,467
106
22
3,218
7
1,249
4,685
114
31,517
1,079
5,503
1,486
33,976
181,906
(3,889)
13,377
191,394

Interest conditions
(in % p.a.)
indexed
indexed
indexed
4.25
6.14
7
7.7
8.69
7.5
10
7.59
9.48
9.48
9
9

floating
floating
floating
fixed
fixed
fixed
fixed
fixed
fixed
fixed
fixed
fixed
fixed
fixed
xed

Hedged

hedged
hedged
hedged

* From the total amount HUF 33,745 million is mobil deposits of Merkantil Bank.

IFRS consolidated nancial statements

2014 angol.indd 107

107

5/18/15 12:46 PM

Issued securities denominated in foreign currency as at 31 December 2014:


Name
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.

108

OTP EUR 1 2015/I


OTP EUR 1 2015/II
OTP EUR 1 2015/III
OTP EUR 1 2015/IV
OTP EUR 1 2015/V
OTP EUR 1 2015/VI
OTP EUR 1 2015/VII
OTP EUR 1 2015/VIII
OTP EUR 1 2015/IX
OTP EUR 1 2015/X
OTP EUR 1 2015/XI
OTP EUR 1 2015/XII
OTP EUR 1 2015/XIII
OTP EUR 1 2015/XIV
OTP EUR 1 2015/XV
OTP EUR 1 2015/XVI
OTP EUR 1 2015/XVII
OTP EUR 1 2015/XVIII
OTP EUR 1 2015/XIX
OTP EUR 1 2015/XX
OTP EUR 1 2015/XXI
OTP EUR 1 2015/XXII
OTP EUR 1 2015/XXIII
OTP EUR 1 2015/XXIV
OTP EUR 1 2015/XXV
OTP EUR 2 2015/I
OTP EUR 2 2015/II
OTP EUR 2 2015/III
OTP EUR 2 2015/IV
OTP EUR 2 2015/V
OTP EUR 2 2015/VI
OTP EUR 2 2015/VII
OTP EUR 2 2015/VIII
OTP EUR 2 2015/IX
OTP EUR 2 2015/X
OTP EUR 2 2015/XI
OTP EUR 2 2015/XII
OTP EUR 2 2015/XIII
OTP EUR 2 2015/XIV
OTP EUR 2 2015/XV
OTP EUR 2 2015/XVI
OTP EUR 2 2015/XVII
OTP EUR 2 2015/XVIII
OTP EUR 2 2015/XIX
OTP EUR 2 2015/XX
OTP EUR 2 2015/XXI
OTP EUR 2 2015/XXII
OTP EUR 2 2015/XXIII
OTP EUR 2 2015/XXIV
OTP EUR 2 2016/I
OTP EUR 2 2016/II
OTP EUR 2 2016/III
OTP EUR 2 2016/IV
OTP EUR 2 2016/V
OTP EUR 2 2016/VI
OTP EUR 2 2016/VII
OTP EUR 2 2016/VIII
OTP EUR 2 2016/IX
OTP EUR 2 2016/X
OTP EUR 2 2016/XI
OTP EUR 2 2016/XII
OTP EUR 2 2016/XIII
OTP EUR 2 2016/XIV
OTP EUR 2 2016/XV
OTP EUR 2 2016/XVI
OTP EUR 2 2016/XVII
OTP EUR 2 2016/XVIII

Date of issue

Maturity

Type of FX

20/12/2013
17/01/2014
31/01/2014
14/02/2014
28/02/2014
14/03/2014
21/03/2014
11/04/2014
18/04/2014
09/05/2014
23/05/2014
06/06/2014
20/06/2014
04/07/2014
18/07/2014
30/07/2014
08/08/2014
29/08/2014
12/09/2014
03/10/2014
22/10/2014
31/10/2014
14/11/2014
28/11/2014
19/12/2014
11/01/2013
25/01/2013
01/02/2013
15/02/2013
01/03/2013
22/03/2013
05/04/2013
19/04/2013
10/05/2013
24/05/2013
07/06/2013
21/06/2013
28/06/2013
12/07/2013
26/07/2013
16/08/2013
30/08/2013
13/09/2013
27/09/2013
11/10/2013
31/10/2013
15/11/2013
29/11/2013
20/12/2013
17/01/2014
31/01/2014
14/02/2014
28/02/2014
14/03/2014
21/03/2014
11/04/2014
18/04/2014
09/05/2014
23/05/2014
06/06/2014
20/06/2014
04/07/2014
18/07/2014
30/07/2014
08/08/2014
29/08/2014
12/09/2014

10/01/2015
31/01/2015
14/02/2015
28/02/2015
14/03/2015
28/03/2015
04/04/2015
25/04/2015
02/05/2015
23/05/2015
06/06/2015
20/06/2015
04/07/2015
18/07/2015
01/08/2015
13/08/2015
22/08/2015
12/09/2015
26/09/2015
17/10/2015
05/11/2015
14/11/2015
28/11/2015
12/12/2015
02/01/2016
11/01/2015
25/01/2015
01/02/2015
15/02/2015
01/03/2015
22/03/2015
05/04/2015
19/04/2015
10/05/2015
24/05/2015
07/06/2015
21/06/2015
28/06/2015
12/07/2015
26/07/2015
16/08/2015
30/08/2015
13/09/2015
27/09/2015
11/10/2015
31/10/2015
15/11/2015
29/11/2015
20/12/2015
17/01/2016
31/01/2016
14/02/2016
28/02/2016
14/03/2016
21/03/2016
11/04/2016
18/04/2016
09/05/2016
23/05/2016
06/06/2016
20/06/2016
04/07/2016
18/07/2016
30/07/2016
08/08/2016
29/08/2016
12/09/2016

EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR

Nominal value
(FX mn) (HUF mn)
6.93
2,183
4.89
1,541
4.40
1,384
4.07
1,281
3.41
1,074
3.97
1,250
0.84
263
4.34
1,368
1.00
315
3.85
1,212
4.59
1,444
2.75
867
2.28
719
2.67
839
1.78
560
3.80
1,195
3.24
1,020
10.49
3,305
5.45
1,716
13.24
4,168
8.44
2,659
3.12
984
5.52
1,739
5.19
1,635
9.43
2,969
0.16
51
0.17
52
0.16
50
0.15
46
0.26
83
0.20
62
0.31
99
0.30
94
0.73
230
0.36
112
0.39
123
0.21
66
0.27
86
0.12
39
0.63
198
0.78
246
0.42
133
0.64
202
0.51
159
0.30
94
2.32
732
1.16
364
1.26
398
1.55
488
0.90
282
0.87
274
0.96
303
0.69
217
0.74
233
0.21
66
0.74
232
0.20
63
0.66
207
0.60
189
0.64
201
0.64
202
0.46
145
0.31
99
1.58
498
0.37
116
1.32
417
1.01
319

Interest conditions
(in % p.a.)
1.65
xed
1.65
fixed
1.65
fixed
1.65
fixed
1.5
fixed
1.5
fixed
1.5
fixed
1.5
fixed
1.5
fixed
1.5
fixed
1.5
fixed
1.5
fixed
1.5
fixed
1.25
fixed
1.25
fixed
1.5
fixed
1.25
fixed
1.25
fixed
1.25
fixed
1.25
fixed
1
fixed
1
fixed
1
fixed
1
fixed
1
fixed
3
fixed
2.75
fixed
2.75
fixed
2.75
fixed
2.75
fixed
2.75
fixed
2.75
fixed
2.75
fixed
2.75
fixed
2.5
fixed
2.5
fixed
2.5
fixed
2.5
fixed
2.25
fixed
2.25
fixed
2.25
fixed
2.25
fixed
2.25
fixed
2.25
fixed
2.25
fixed
2.25
fixed
2.25
fixed
2
fixed
2
fixed
2
fixed
2
fixed
2
fixed
1.9
fixed
1.8
fixed
1.8
fixed
1.8
fixed
1.8
fixed
1.8
fixed
1.8
fixed
1.8
fixed
1.5
fixed
1.5
fixed
1.5
fixed
1.5
fixed
1.5
xed
1.5
fixed
1.5
fixed

Hedged

OTP Bank Annual Report 2014

2014 angol.indd 108

5/18/15 12:46 PM

Name
68.
69.
70.
71.
72.
73.
74.
75.
76.
77.
78.
79.
80.

Date of issue

OTP EUR 2 2016/XIX


03/10/2014
OTP 2015/Cx
27/12/2010
OTP 2015/Fx
21/12/2012
OTP 2016/Cx
22/04/2011
OTP 2016/Dx
22/12/2011
OTP 2017/Fx
19/06/2012
OTP 2018/Fx
19/12/2013
OTP_VK_USD_2_2016/1
28/11/2014
OMB2015_I
30/08/2012
Mortgage bonds OTP VII
21/12/2005
Mortgage bonds OTP XXV
28/09/2012
OTPRU 15/03
06/03/2012
Other*
Subtotal issued securities in FX
Unamortized premium
Fair value adjustment
Total issued securities in FX
Accrued interest
Total issued securities

Maturity

Type of FX

03/10/2016
29/12/2015
23/12/2015
22/04/2016
29/12/2016
16/06/2017
21/12/2018
28/11/2016
06/03/2015
21/12/2015
28/09/2016
03/03/2015

EUR
EUR
EUR
EUR
EUR
EUR
EUR
USD
EUR
EUR
EUR
RUB

Nominal value
(FX mn) (HUF mn)
1.92
605
0.85
267
2.07
653
1.42
448
1.08
341
0.78
245
0.62
195
1.40
362
5
1,575
22.47
7,076
7.96
2,507
299.71
1,334
4,493
66,061
139
76
66,276
9,414
267,084

Interest conditions
(in % p.a.)
1.25
fixed
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
1.1
fixed
4.1
floating
0.23
floating
4.0
fixed
10.5
fixed

Hedged

hedged
hedged
hedged
hedged
hedged
hedged
hedged

Term Note Program in the value of HUF 500 billion for the year

The Issuer can initiate to introduce the bonds issued under the

of 2013/2014

program to the Budapest, Slovakian, Romanian and Bulgarian

On 9 July 2013 the Bank initiated term note program in the

Stock Exchange.

value of HUF 500 billion with the intention of issuing registered


dematerialized bonds in public. The Authority approved on

Certain structured bonds are hedged by interest rate swaps

30 July 2013 the prospectus of Term Note Program and the

(IRS) which may transfer to a transferee a xed rate and enter

disclosure as at 17 July 2013. The prospectus is valid for

into an interest rate swap with the transferee to receive a xed

12 months following the disclosure.

interest rate and pay a variable interest rate and amount of

The Issuer can initiate to introduce the bonds issued under the

the structure if any based on a notional amount which is equal

program to the Budapest, Slovakian, Romanian and Bulgarian

to the notional amount of the hedged bond. In certain cases

Stock Exchange.

amount of the structure is hedged by options which give the

54,204 pieces of xed bonds with nominal value of EUR 100

owner the right to get amount of the structure which is equal to

each in the total nominal amount of EUR 5,420,400 have been

the structure of the hedged bond. The hedge is highly effective

introduced to the Budapest Stock Exchange. On 10 September

if changes in fair value or cash-ows attributable to the hedged

2014 the NBH approved the disclosure and the prospectus as at

risk during the period for which the hedge is designated are

27 August 2014.

within a range of 80125 per cent.


The cash-ows of the xed rate securities issued by the Bank

Term Note Program in the value of HUF 500 billion for the year

are exposed to the change in the HUF/EUR foreign exchange

of 2014/2015

rate and the risk of change in the quoted interest rates of

On 8 July 2014 the Bank initiated term note program in the

EUR and HUF. The interest rate risk and foreign exchange

value of HUF 500 billion with the intention of issuing registered

risk related to these securities are hedged with EUR and HUF

dematerialized bonds in public. The NBH approved on 29 July

IRS transactions, where the xed interests were swapped

2014 the prospectus of Term Note Program and the disclosure

to payments linked to 3 month HUF BUBOR and EURIBOR,

as at 25 July 2014. The prospectus is valid for 12 months

resulting a decrease in the interest rate and foreign exchange

following the disclosure.

exposure of issued securities.

* Other category includes promissory notes issued by OTP Banka Slovensko a.s. in the amount of HUF 1,133 million and by JSC OTP Bank (Russia) in the amount of HUF 3,360 million.

IFRS consolidated nancial statements

2014 angol.indd 109

109

5/18/15 12:46 PM

NOTE 16:

FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT


OR LOSS (in HUF mn)

Negative fair value of derivative nancial instruments classied as held for trading
by type of contracts:
Interest rate swaps classied as held for trading
CCIRS and mark-to-market CCIRS classied as held for trading
Foreign exchange swaps classied as held for trading
Option contracts classied as held for trading
Foreign exchange forward contracts classied as held for trading
Forward security agreements classied as held for trading
Forward rate agreements classied as held for trading (FRA)
Other transactions classied as held for trading
Total

NOTE 17:

2014
63,691
53,724
51,537
6,215
5,582
478
61
2,706
183,994

2013
67,881
7,521
5,316
3,047
1,989
394
369
647
87,164

2014

2013

217,351

22,180

85,679

74,695

56,445
41,264
33,015
25,583
22,700
22,373
14,707
13,119
9,855
7,284
3,266
1,080
909
738
244
140
36,102
591,854
234
592,088

71,548
53,068
32,701
26,111
21,475
18,231
21,786
7,964
17,559
8,135
2,546
1,235
1,044
774
105
133
39,892
421,182
171
421,353

OTHER LIABILITIES* (in HUF mn)


Provision for impairment on off-balance sheet commitments
and contingent liabilities
Fair value of derivative nancial instruments designated
as fair value hedge
Financial liabilities from OTPMOL share swap transaction**
Liabilities from investment services
Accrued expenses
Salaries and social security payable
Liabilities connected to Cafeteria benets
Accounts payable
Current income tax payable
Giro clearing accounts
Deferred tax liabilities
Clearing, settlement and pending accounts
Advances received from customers
Liabilities connected to leasing activities
Liabilities connected to loans for collection
Loans from government
Liabilities related to housing loans
Dividend payable
Other
Subtotal
Accrued interest
Total

* Other liabilities except nancial liabilities from OTPMOL share swap transaction, deferred tax liabilities and fair value of
derivative nancial instruments designated as fair value hedge are expected to be recovered or settled no more than twelve
months after the reporting period. Unrealised gains/losses on OTPMOL share swap transaction is settled in June of each year
until the maturity date. The fair value of amount being settled in 2014 is HUF 423 million as at 31 December 2014. Unrealised
gains/losses on derivative nancial instruments is recovering in accordance with their maturity. Besides the total other liabilities
mentioned above which are expected to be recovered or settled more than twelve months after the reporting period it should be
mentioned accrued contractual liabilities, compulsory pension reserve, guarantee deposits in relation with leasing activities, loans
from government and liabilities from preferential dividend shares.
** On 16 April 2009 OTP Bank Plc. and MOL Hungarian Oil and Gas Plc. entered into a 3 years share swap transaction. MOL obtained
24 million pieces of Banks ordinary shares (8.57% of the ordinary shares) and OTP obtained approximately 5 million pieces of MOL
shares. Both parties were granted by an American style call and put option to initiate the gross physical settlement of shares back
to the issuer until 11 July 2012. On 11 July 2012 the parties amended the nal maturity of the share swap agreement for 11 July
2017 until which any party can initiate cash or physical settlement of the transaction. There is no compulsory settlement of shares
at the maturity of the swap agreement. The agreement contains additional settlement provisions in case of certain movement of
relative share prices of the parties subject to net cash or net share settlement. Due to the loss of control over the Treasury shares,
the Treasury shares were derecognized and MOL shares were recognized as held for trading securities. The written put option
over OTP ordinary shares were accounted as a deduction from equity with the amount of HUF 55.5 billion and a recognition of
a corresponding liability. As at 31 December 2014 and 2013 HUF 56,445 and HUF 71,548 million liability was presented in other
liabilities. The measurement is based on the fair value of MOL shares to be delivered at the potential exercise of the call and put
options adjusted with the expected present value of the net cash or net share settlement due to certain movement of relative share
prices.

110

OTP Bank Annual Report 2014

2014 angol.indd 110

5/18/15 12:46 PM

The provision for losses on off-balance sheet commitments and contingent liabilities
are detailed as follows:
Provision on contingent liabilities due to regulations related to customer loans*
Provision for litigation
Provision for losses on other off-balance sheet commitments and contingent
liabilities related to lending
Provision for expected pension commitments
Provision for other liabilities
Total

2014
196,574
7,454
3,566

2013

3,267
10,189

3,430
6,327
217,351

1,253
7,471
22,180

The movements of provision for losses on off-balance sheet commitments and contingent
liabilities can be summarized as follows:
2014
22,180
195,310
1,756
(1,031)
(864)
217,351

Balance as at 1 January
Provision for the year
Change due to acquisition
Use of provision
Foreign currency translation differences
Closing balance

2013
19,727
3,990

(1,498)
(39)
22,180

The negative fair value of derivative nancial instruments designated as fair value hedge
by type of contracts:
2014
79,940
3,463
2,276

85,679

2013
71,512
2,639
499
45
74,695

2014

2013

16,779
16,779

72
72

264,018
264,018
1,171
281,968

263,884
263,884
3,206
267,162

2014
0.6%8.25%
5.10%

2013
0.8%8.25%
4.13%

CCIRS and mark-to-market CCIRS designated as fair value hedge


Interest rate swaps designated as fair value hedge
Foreign exchange swaps designated as fair value hedge
Forward security agreements designated as fair value hedge
Total

NOTE 18:

SUBORDINATED BONDS AND LOANS (in HUF mn)


Within one year:
In HUF
In foreign currency
Over one year:
In HUF
In foreign currency
Accrued interest
Total

Interest rates on subordinated bonds and loans are as follows:


Denominated in foreign currency
Average interest rates on subordinated bonds and loans

* See details in Note 2.28.

IFRS consolidated nancial statements

2014 angol.indd 111

111

5/18/15 12:46 PM

Subordinated bonds and loans can be detailed as follows:


Type

Subordinated bond

Nominal
value

Date
of issuance

Date
of maturity

Issue price

Interest
conditions

Interest rate
as at 31 December
2014

EUR 93.45 million

04/03/2005

04/03/2015

100%

Three-month
EURIBOR + 0.55% quarterly

99.375%

Fixed 5.875% annual in the first


10 years (payable annually),
three-month EURIBOR + 3%,
variable after year 10 (payable
quarterly)

Subordinated bond

EUR 247.7 million

07/11/2006

Perpetual, but
callable after
10 years

Subordinated bond
(under EMTN*
program)

EUR 300 million

19/09/2006

19/09/2016

100%

Fixed 5.27% annual

5.27%

Subordinated bond
(under EMTN*
program)

EUR 200 million

26/02/2007

19/09/2016

100%

Fixed 5.27% annual

5.27%

Subordinated loan

USD 65 million

21/04/2008

13/10/2015

100%

Variable, six-month
LIBOR + 1.4%

1.72%

Subordinated bond

RUB 4.2 million

30/04/2004

21/06/2015

100%

Variable monthly,
based on the Russian National
Banks interest rate

8.25%

NOTE 19:

SHARE CAPITAL (in HUF mn)


Authorized, issued and fully paid:
Ordinary shares

NOTE 20:

2014

2013

28,000

28,000

RETAINED EARNINGS AND RESERVES (in HUF mn)

The reserves of the Bank under Hungarian Accounting Standards (HAS) are as follows
(the reserves under IFRS are detailed in consolidated statement of changes in equity):
Capital reserve
General reserve
Retained earnings
Tied-up reserve
Total

2014
52
153,935
814,399
8,558
976,944

2013
52
153,935
870,357
8,287
1,032,631

The legal reserves (general reserve and tied-up

dividend by share to the shareholders. In 2015

reserve) are not available for distribution.

dividend of HUF 40,600 million are expected

The dividend has been determined on the basis

to be proposed by the Management from the

of the net prot for the year determined in the

prot of the year 2014, which means 145 HUF

separate nancial statements in accordance

payable dividends by share to the shareholders.

with the HAS.


These Financial Statements subject to approval

The retained earnings and reserves according

by the Board of Directors in the Annual General

to IFRS contains the retained earnings

Meeting in March 2015. In 2014 the Bank paid

(HUF 686,000 million and HUF 664,856 million) and

dividend of HUF 40,600 million from the prot

reserves (HUF 602,757 million and HUF 867,308

of the year 2013, which meant 145 HUF payable

million) as at 31 December 2014 and 2013

* European Medium Term Note Program.

112

OTP Bank Annual Report 2014

2014 angol.indd 112

5/18/15 12:46 PM

respectively. The reserves include mainly net

4.5 million shares owned by OTP Group were

prot for the year attributable to the owners

sold during the underwriting period of ICES on

of the company, the fair value adjustment of

the weighted average market price

securities available-for-sale, additional reserves

(HUF 7,080) of the Budapest Stock Exchange.

of Income Certicates Exchangeable for Shares

The shares have been purchased by Opus

(ICES), changes in equity accumulated in the

Securities S.A. (OPUS), which issued an

previous year at the subsidiaries, changes due

exchangeable bond with a total face value of

to consolidation and exchange differences.

EUR 514,274,000 backed by those shares.

In the Consolidated Financial Statement the

The exchangeable bonds have been sold at

Group recognizes the non-monetary items

a 32% premium over the selling price of the

on historical cost. The difference between

shares. The EUR denominated exchangeable

the historical cost of the non-monetary items

bonds are perpetual and the investors can

in forint amount and the translated foreign

exercise the conversion right between year

currencies into the presentation currency using

6 and 10. The bonds carry a xed coupon of

the exchange rate at the balance sheet date,

3.95% during the rst 10 years, thereafter

is presented among the shareholders equity

the Issuer has the right to redeem the bonds

as difference of translation. The accumulated

at face value. Following the year 10, the

amounts of exchange differences were

bonds carry a coupon of 3 month EURIBOR

HUF 121,306 million and HUF 14,381 million as

+3%. OTP has discretional right to cancel the

at 31 December 2014 and 2013 respectively.

interest payments. The interest payable is noncumulative.

NOTE 21:

On 19 October 2006, the Bank sold 14.5 million

Due to the conditions described above, ICES

Treasury shares owned by the Group through

was accounted as an equity instrument and

an issue of ICES. Within the transaction

therefore any payment was accounted as equity

10 million shares owned by OTP, and further

distribution paid to ICES holders.

TREASURY SHARES ((in HUF mn)


2014
1,818
55,940

Nominal value (Ordinary shares)


Carrying value at acquisition cost

2013
1,797
55,599

The changes in the carrying value of treasury

transactions on market authorised by the

shares are due to repurchase and sale

General Assembly.

Change in number of shares:


Number of shares as at 1 January
Additions
Disposals
Closing number of shares
Change in carrying value:
Balance as at 1 January
Additions
Disposals
Closing balance

2014
17,972,405
6,474,942
(6,272,000)
18,175,347

2013
18,755,373
4,247,043
(5,030,011)
17,972,405

2014
55,599
27,522
(27,181)
55,940

2013
53,802
19,740
(17,943)
55,599

IFRS consolidated nancial statements

2014 angol.indd 113

113

5/18/15 12:46 PM

NOTE 22:

NON-CONTROLLING INTEREST (in HUF mn)


Balance as at 1 January
Changes due to ownership structure
Non-controlling interest included in net prot for the year
Foreign currency translation difference
Closing balance

NOTE 23:

2013
5,783
(423)
(91)
(502)
4,767

2014

2013

708,743
(319,393)
57,470
446,820

514,614
(328,859)
77,188
262,943

874
(854)
(10)
10
446,830

28
(367)
(35)
(374)
262,569

PROVISION FOR IMPAIRMENT ON LOAN


AND PLACEMENT LOSSES (in HUF mn)
Provision for impairment on loan losses
Provision for the year
Release of provision
Provision for impairment on loan losses
Provision for impairment/(Release of provision)
on placement losses
Provision for the year
Release of provision
Release of provision for impairment on placement losses
Provision for impairment on loan and placement losses

NOTE 24:

2014
4,767
(177)
(273)
(968)
3,349

NET PROFIT FROM FEES AND COMMISSIONS (in HUF mn)


Income from fees and commissions:
Deposit and account maintenance fees and commissions
Fees and commissions related to the issued bank cards
Fees related to cash withdrawal
Fees and commissions related to lending
Fees and commissions related to fund management
Fees and commissions related to security trading
Other
Total

2014
109,765
45,997
29,477
21,495
20,215
12,643
25,800
265,392

2013
98,726
50,757
32,757
21,336
15,168
10,961
27,430
257,135

2014
12,489
11,907
7,351
2,856
2,579
2,158
1,610
836
794
532
6,624
49,736
215,656

2013
14,023
8,780
10,356
5,601
2,428
2,970
1,152
836
1,074
1,860
6,298
55,378
201,757

Expense from fees and commissions:


Fees and commissions paid on loans
Fees and commissions related to issued bank cards
Interchange fees
Fees and commissions related to collection of loans
Fees and commissions related to deposits
Cash withdrawal transaction fees
Fees and commissions related to security trading
Postal fees
Money market transaction fees and commissions
Insurance fees
Other
Total
Net prot from fees and commissions

114

OTP Bank Annual Report 2014

2014 angol.indd 114

5/18/15 12:46 PM

NOTE 25:

OTHER OPERATING INCOME AND EXPENSES AND OTHER


ADMINISTRATIVE EXPENSES (in HUF mn)
Other operating income
Gains on real estate transactions
Other income from non-nancial activities
Total
Other operating expenses
Provision on contingent liabilities due to regulations related
to customer loans*
Provision for impairment on other assets
Provision for assets subject to operating lease**
Provision for investment properties**
Provision for impairment on investments***
Provision for off-balance sheet commitments and contingent liabilities
Other expense from non-nancial activities
Other operating costs
Total

NOTE 26:

2014
734
13,645
14,379

2013
1,552
24,840
26,392

2014

2013

194,798

5,066
1,048
3,612
1,244
512
19,975
6,354
232,609

4,313

1,370
3,990
19,366
10,756
39,795

Other administrative expenses


Personnel expenses
Wages
Taxes related to personnel expenses
Other personnel expenses
Subtotal
Depreciation and amortization****

2014

2013

151,467
41,319
13,549
206,335
65,947

150,462
40,677
13,138
204,277
78,017

Other administrative expenses


Taxes, other than income tax*****
Administration expenses, including rental fees
Services
Professional fees
Advertising
Subtotal
Total

2014
116,148
51,119
40,515
16,892
11,736
236,410
508,692

2013
121,002
50,775
44,831
14,490
13,379
244,477
526,771

INCOME TAX (in HUF mn)


The Group is presently liable for income tax at

12,5% in Cyprus, 15% in Serbia, 16% in

rates between 9% and 35% of taxable income.

Romania, 18% in Ukraine, 19% in Hungary,


20% in Croatia, Russia and the United

Deferred tax is calculated at the income

Kingdom, 22% in Slovakia and 25% in the

tax rate of 9% in Montenegro, 10% in Bulgaria,

Netherlands.

The breakdown of the income tax expense is:


Current tax expense
Deferred tax benet
Total

2014
16,520
(67,905)
(51,385)

2013
24,542
(3,598)
20,944

* See details in Note 2.28.


** Provisions on assets subject to operating lease and investment properties which were transferred from tangible and intangible
assets to the other assets (see more details in Note 12.).
*** See details in Note 9.
**** See details in Note 11.
***** Special tax of financial institutions was paid by the Group in the amount of HUF 37 billion and HUF 36.9 billion for the year 2014
and 2013 respectively, recognized as an expense thus decreased the corporate tax base. In the year period ended 31 December
2014 financial transaction duty was paid by the Bank in the amount of HUF 44 billion.

IFRS consolidated nancial statements

2014 angol.indd 115

115

5/18/15 12:46 PM

A reconciliation of the net deferred tax asset/liability is as follows:


Balance as at 1 January
Deferred tax benet
Deferred tax related to items recognized directly in equity
and in Other Comprehensive Income
Foreign currency translation difference
Closing balance

2014
(12,273)
67,905

2013
(17,295)
3,598

(1,418)

1,173

(3,060)
51,154

251
(12,273)

2014
33,226
15,207
10,705

2013

3,114

8,704

6,626

4,176

4,458

593

313

177
177
73
8

23,167
96,213

306

8
5,572
6,176
26,573

(16,193)

(10,255)

(5,051)
(5,031)
(3,992)
(2,681)
(2,380)
(1,817)
(1,333)

(8,835)
(1,987)
(66)
(2,934)
(2,063)
(1,741)
(1,912)

(110)

(23)
(6,448)
(45,059)
51,154

(215)
(8,838)
(38,846)
(12,273)

2014
(153,643)
(26,793)

2013
85,052
22,603

A breakdown of the deferred tax assets and liabilities are as follows:


Refundable tax in accordance with Acts on Customer Loans*
Tax loss carry forward
Provision for impairment on investments (Goodwill)
Fair value adjustment of securities held for trading and securities
available-for-sale
Repurchase agreement and security lending
Provision for off-balance sheet commitments and contingent liabilities,
derivative nancial instruments
Premium and discount amortization on bonds
Difference in accounting for leases
Difference in depreciation and amortization
Fair value adjustment of derivative nancial instruments
Adjustment from effective interest rate method
Other
Deferred tax asset
Fair value adjustment of securities held for trading and securities
available-for-sale
Difference in depreciation and amortization
Fair value adjustment of derivative nancial instruments
Difference in accounting for leases
Net effect of treasury share transactions
Adjustment from effective interest rate method
Temporary differences arising on consolidation
Accounting of equity instrument (ICES)
Provision for off-balance sheet commitments and contingent liabilities,
derivative nancial instruments
Premium and discount amortization on bonds
Other
Deferred tax liabilities
Net deferred tax asset/(liability)

A reconciliation of the income tax income/expense is as follows:


(Loss)/Prot before income tax
Income tax (income)/expense at statutory tax rates

* See details in Note 2.28.

116

OTP Bank Annual Report 2014

2014 angol.indd 116

5/18/15 12:46 PM

Income tax adjustments due to permanent differences are as follows:


Differences in carrying value of subsidiaries
Share-based payment
Reversal of statutory general provision
Amount removed from statutory general provision to retained earnings
OTPMOL share swap transaction
Revaluation of investments denominated in foreign currency
to historical cost
Difference of accounting of equity instrument (ICES)
Treasury share transactions
Use of tax allowance in the current year
Deferred use of tax allowance*
Tax refund in accordance with Acts on Customer Loans
Other
Income tax (income)/expense
Effective tax rate**

NOTE 27:

2014
14,982
835

(80)

2013
3,267
1,084
1,198
5,533
(186)

(185)

3,243

(211)
(917)
(2,479)
(6,335)
(28,306)
(1,896)
(51,385)
33.44%

49
113
(9,523)
(459)

(5,978)
20,944
24.62%

FINANCIAL RISK MANAGEMENT (in HUF mn)


A nancial instrument is any contract that

Exposure to credit risk is managed through

gives rise to a nancial asset of one entity and

regular analysis of the ability of borrowers

a nancial liability or equity instrument of

and potential borrowers to meet interest

another entity.

and principal repayment obligations and by

Financial instruments may result in certain

changing these lending limits when appropriate.

risks to the Group. The most signicant risks

Exposure to credit risk is managed by obtaining

the Group faces include:

collateral, corporate and personal guarantees.

27.1 Credit risk

27.1.1 Analysis by loan types


and by DPD categories

The Group takes on exposure to credit risk


which is the risk that a counter-party will be

Classication into DPD categories

unable to pay amounts in full when due.


The Group structures the levels of credit risk

The Group presents the performing loan

it undertakes by placing limits on the amount

portfolio according delay of payment above

of risk accepted in relation to one borrower,

90 days past due. When determining the

or banks of borrowers, and to geographical

impairment beside the delay of payment other

and loan types. Such risks are monitored on

information available for the Group is also

a periodical basis and subject to an annual or

taking into consideration. The foreseeable

more frequent review. The exposure to any

risks and expected losses are considered,

borrower including banks and brokers is further

when the Group during determining the result

restricted by sub-limits covering on and

of the current year, calculates and accounts

off-balance sheet exposures and daily delivery

impairment and credits provisions.

risk limits in relation to trading items such as

The impairments and provisions are accounted

forward foreign exchange contracts. Actual

notwithstanding whether the result recognized

exposures against limits are monitored daily.

in the current year is gain or loss. The Group

* From year 2011 legal regulation has allowed to recognize the financial support provided to sight-team sport as extraordinary
expense and corporate tax allowance in the financial statements prepared on the base of HAS. The Bank couldnt apply this tax
allowance in the financial statements prepared according to the HAS in 2012, since the tax base for year 2012 was negative. In IFRS
financial statements this amount was settled as deferred tax.
** Effective tax rate has changed due to deferred tax receivable recognized in relation with the expecting tax receivable based on Act
on Settlement and considering the contribution provided to the subsidiaries.

IFRS consolidated nancial statements

2014 angol.indd 117

117

5/18/15 12:46 PM

when calculates the impairment of the loans

income-generating capacity affected by the

applies the requirement of IFRS and the

nancial or investment service and issuer of

principles dened in the impairment policy of


the Group.

the security, and any changes thereto;


compliance with the rules of repayment
(delay): delays in the repayment of the loan

Exposures with small amounts are subject


to collective valuation method, which is a
simplied assessment. The exposures subject
to collective valuation method are classied
into ve valuation groups which have been

principal and its interests, regularity of the


fulllment of payment obligations;
the status of the restructuring (renegotiating)
of risk taking contracts;
the country risk relating to the customer

formed based on past due days from which

(both political and transfer risks) and any

there classes were presented (A: 090 days

changes thereto;

past due DPD, B: 91360 DPD, C: over 360

the value of collaterals, their liquidity and

days past due). The three new groups do not

accessibility, and any changes therein;

match one by one to the earlier used risk

the transferability and liquidity of the

classes, the composition of the classes has

exposures (the market conditions of supply

changed due to the different criteria.

and demand, the available market prices

The Group intends where enough large

and participation in the shareholders

number of items and enough long experiences

equity of the issuer in proportion to the

are available applying models on statistical

investment);

bases. The impairment is calculated according


to the possibility of listing the loan into default

the future payment obligation recognized


as a loss arising from the exposure.

categories examined on the base of objective


valuation criteria (delay of payment, change of

The expected future losses of the individually

exchange) and the expected recovery from the

assessed item are determined by taking into

collecting. If the loss of the exposure cant be

considerations the above listed objective

modelled reliably, the impairment is determined

valuation aspects. The expected loss, the

by expert keys.

volume of the necessary reserve is dened by


taking into account the value of the collaterals,

Impairment on claims above the limit are under

comparing with the value of the collaterals

individual assessment method. Depending on

relating to the exposure. The expected recovery

the incurred loss of each item is determined

is calculated by applying the effective interest

based on the consideration of all of the

rate method and the discounted cash-ow

following criteria:

method. The impairment accounted for the item


before should be completed to this level by

the credit rating of the customer or the


partner: the nancial position, stability and

118

increasing the amount of the impairment or by


releasing the provision accounted before.

OTP Bank Annual Report 2014

2014 angol.indd 118

5/18/15 12:46 PM

An analysis of the gross loan portfolio by loan types and DPD categories is as follows:
As at 31 December 2014:
Loan type

Up to
90 days
2,014,737
1,565,654
1,389,289
329,030
175,980
117,988
5,592,678
280,917
4,193
5,877,788
(169,562)
(26)
(169,588)
5,708,200

Mortgage loans
Corporate loans
Consumer loans
SME loans
Car-finance loans
Municipal loans
Gross portfolio
Placement with other banks
Bill of exchange
Total gross portfolio
Allowance for loans
Allowance for placements
Total allowance
Total net portfolio
Accrued interest
for loans
for placements
Total accrued interest
Total net loans
Total net placements
Total net exposures

91360
days
95,472
49,286
115,644
15,931
17,755
262
294,350
12

294,362
(180,880)
(12)
(180,892)
113,470

Above
360 days
480,123
242,997
155,581
129,515
36,584
63
1,044,863
9

1,044,872
(778,643)
(9)
(778,652)
266,220

Total carrying
amount/allowance
2,590,332
1,857,937
1,660,514
474,476
230,319
118,313
6,931,891
280,938
4,193
7,217,022
(1,129,085)
(47)
(1,129,132)
6,087,890
57,242
115
57,357
5,864,242
281,006
6,145,248

As at 31 December 2013:
Loan type
Mortgage loans
Corporate loans
Consumer loans
SME loans
Car-finance loans
Municipal loans
Gross portfolio
Placement with other banks
Bill of exchange
Total gross portfolio
Allowance for loans
Allowance for placements
Total allowance
Total net portfolio
Accrued interest
for loans
for placements
Total accrued interest
Total net loans
Total net placements
Total net exposures

Up to
90 days
2,061,992
1,566,018
1,550,838
306,767
188,221
271,379
5,945,215
273,224
3,940
6,222,379
(198,928)
(23)
(198,951)
6,023,428

91360
days
97,883
49,897
108,550
11,967
13,286
106
281,689

281,689
(156,362)

(156,362)
125,327

Above
360 days
463,222
288,784
256,894
133,497
38,594
965
1,181,956
9

1,181,965
(880,344)
(8)
(880,352)
301,613

Total carrying
amount/allowance
2,623,097
1,904,699
1,916,282
452,231
240,101
272,450
7,408,860
273,233
3,940
7,686,033
(1,235,634)
(31)
(1,235,665)
6,450,368
68,044
277
68,321
6,245,210
273,479
6,518,689

The Groups loan portfolio decreased by

31 December 2014 comparing with the

6.1% in year 2014. Analysing the contribution

previous year. As a consequence of

of loan types to the loan portfolio, the share

the economic situation, the qualication

of the mortgage loan types slightly increased,

of the loan portfolio deteriorated in the

the consumer and municipal loan type

previous year, but for the end of 2014

slightly decreased, while the other types of

the ratio of the more than 90 days past due

loans remained almost the same as at

to the above 360 days past due loans

IFRS consolidated nancial statements

2014 angol.indd 119

119

5/18/15 12:46 PM

compared to the gross loan portfolio

The Group has a prudent provisioning policy,

decreased from 19% to 18.6%. Among the

the indicator which describes the coverage

qualied loan portfolio, the loans classied

of loans by provision for impairment on

to the risk class of more than 90 until

loans classied as Above 360 days, was the

360 days past due expanded at the

same 74.5% as at 31 December 2014 and

fastest level.

31 December 2013 respectively.

Not impaired loan portfolio


The loan portfolio analysis of the gross values of the loans that are not impaired, not past due
and past due is as follows:
As at 31 December 2014:
Loan type

Not past due

Mortgage loans
Corporate loans
Consumer loans
Placement with other banks
SME loans
Municipal loans
Car-finance loans
Total

1,254,458
839,949
374,485
280,891
182,352
97,866
52,772
3,082,773

Up to
90 days
150,032
13,341
57,522

8,557
263
20,917
250,632

91360
days
6,170
886
207

1,305
19
128
8,715

Above
360 days
7,526
1,566
166

1,403
34
3
10,698

Up to
90 days
174,115
18,792
62,689
20
10,848

25,179
291,643

91360
days
6,044
406
494

1,328
14
236
8,522

Above
360 days
6,134
1,205
201

2,130
33
1
9,704

Total
1,418,186
855,742
432,380
280,891
193,617
98,182
73,820
3,352,818

As at 31 December 2013:
Loan type

Not past due

Mortgage loans
Corporate loans
Consumer loans
Placement with other banks
SME loans
Municipal loans
Car-finance loans
Total

1,227,900
822,027
402,625
246,744
191,023
210,005
34,343
3,134,667

Total
1,414,193
842,430
466,009
246,764
205,329
210,052
59,759
3,444,536

Loans not past due or past due, but not

loan type. In the other loan types the low

impaired cover only balance sheet items.

level of loans past due but not impaired

The ratio of the gross value of the loans neither

is a consequence of the prudent provisioning

past due nor impaired compared to the whole

policy of the Group.

portfolio slightly increased from 40.85% to


42.72% as at 31 December 2014 comparing to
the end of the previous year. The ratio of the
mortgage loans and placements with other

Loans individually assessed


for provision

banks compared to the portfolio of loans neither


past due nor impaired increased slightly during

The individually rated exposures contain

year 2014, while the ratio of the municipal loans

both the loans and the off-balance sheet

decreased mostly.

commitments. The rating has been


performed based on the factors used at

120

The loans that are past due but not impaired

determining the provision for impairment

are concentrated mainly in the mortgage

for them.

OTP Bank Annual Report 2014

2014 angol.indd 120

5/18/15 12:46 PM

An analysis of nancial assets that are individually determined to be impaired, the factors
taken into consideration at the assessment, the provision for impairment for them and
the collaterals considered as at 31 December 2014 and 31 December 2013 is as follows:
As at 31 December 2014:
Considered factors

Carrying
value

Allowance
for
impairment

Collateral
value

Off-balance
sheet
commitments

Delay of payment
Decrease of client classification
Legal proceedings
Regularity of payment
Loan characteristics
Country risk
Cross default
Business lines risks
Restructuring
Other
Corporate total
Delay of payment
Legal proceedings
Decrease of client classification
Other
Municipal total
Placements with other banks
Total

300,591
182,472
78,037
48,373
39,370
33,145
28,229
16,125
1,954
10,061
738,357
8,895
592
234
96
9,817

748,174

192,597
49,221
54,745
37,290
1,975
7,935
4,498
3,670
1,014
2,030
354,975
468
235
122
1
826

355,801

148,144
137,716
48,845
12,790
27,341
13,752
12,188
8,454
1,054
10,402
420,686
4,927
1,267

6,194

426,880

850
11,041
84

590
12,639

4,721
29,925

3
381
384

30,309

Considered factors

Carrying
value

Allowance
for
impairment

Collateral
value

Off-balance
sheet
commitments

Delay of payment
Decrease of client classification
Legal proceedings
Regularity of payment
Loan characteristics
Country risk
Cross default
Business lines risks
Restructuring
Other
Corporate total
Delay of payment
Legal proceedings
Decrease of client classification
Restructuring
Regularity of payment
Cross default
Other
Municipal total
Placements with other banks
Total

246,409
158,892
179,831
472
54,200
3,425
12,906
12,062
1,716
22,159
692,072
1,695
856
3,170
4,746
1,221
882
14,583
27,153

719,225

152,413
39,529
132,950
196
7,448
1,224
5,695
3,130
243
7,399
350,227
517
460
164
47
12
124
456
1,780

352,007

187,509
119,532
67,360
222
19,775
2,687
4,592
4,645
561
16,714
423,597
4,053
996

3,667

8,716

432,313

54
7,510
190

1,396
5,399

6,000
20,549

99

1,044
1,143

21,692

Provision for
off-balance
sheet
commitments
121
3,835
47

51
390

161
4,605

4
4

4,609

As at 31 December 2013:
Provision for
off-balance
sheet
commitments
1
4,369
94

219
143

379
5,205

10
11

5,216

By 31 December 2014 the volume of the

payment and country risk. The decrease is

individually rated portfolio increased

more signicant in the municipal loan portfolio,

by 6.7% in the corporate loan type. Among

where the decrease is mostly based on the

the rating factors of the corporate loan type,

improving regularity of payment, restructuring,

the decrease is mostly based on the legal

and on the improving client classication.

proceedings and loan characteristics,

The increase is based only on the delay

while increase is based on the regularity of

of payment.

IFRS consolidated nancial statements

2014 angol.indd 121

121

5/18/15 12:46 PM

Transactions with high level of risk

Business lines risks

Loans to customers are classied by using this

Transactions are classied by using this

category name if the clients are performing

category name, if the client works in a business

according to the contracts but the risks of the

line which was most exposed to the nancial

transactions are higher than usual (balloon

crisis (vehicle industry, building industry, real

payment, using loan to nance the monetary

estate services, metal processing, nancial

expenditures in the phase of investment).

services).

Loan portfolio by countries


An analysis of the non-qualied and qualied gross loan portfolio in a country breakdown
is as follows:
Country

Hungary
Bulgaria
Russia
Ukraine
Croatia
Romania
Slovakia
Montenegro
United Kingdom
Serbia
Cyprus
Germany
United States of America
Austria
Switzerland
Czech Republic
France
Seychelles
Norway
Italy
Turkey
Denmark
Poland
The Netherlands
Sweden
Ireland
Kazakhstan
Japan
Belgium
Latvia
Spain
Australia
Island
Canada
Egypt
Luxembourg
Other*
Total**

2014
Carrying amount of gross
loan and placement with
other banks portfolio
2,888,007
1,220,609
588,601
578,876
510,344
484,602
370,649
186,890
123,716
112,822
47,333
22,440
24,387
9,981
8,267
6,829
5,284
4,877
4,649
4,598
1,812
1,660
1,454
1,067
263
193
171
157
86
58
57
55
41
38
685

1,271
7,212,829

Allowance

357,121
160,427
101,079
254,910
39,442
69,475
22,920
71,542
2,075
33,037
10,476
91
51
5
149
13
1
4,855
25
3
8

21
8
69
30

6
32
1

29

480

751
1,129,132

2013
Carrying amount of gross
loan and placement with
other banks portfolio
3,216,051
1,183,984
859,917
673,677
417,850
474,080
335,866
200,175
54,179
108,274
50,082
28,289
11,611
8,655
6,480
6,299
14,772
4,624
1,404
180
1,228
1,062
3,417
4,828
1,759
209
191
126
11,506
44
28
107
39
128
685
3
284
7,682,093

Allowance

436,238
202,410
163,704
183,574
30,892
63,308
22,824
80,312
1,867
36,998
10,412
81
33
4
2

2,317
2
1

4
8
66
25

1
28

27

480
2
45
1,235,665

** Other category in the year of 2014 includes e.g.: Bosnia and Herzegovina, Greece, Hong Kong, Vietnam, Moldova, Macedonia, United Arab Emirates, Brazil, Israel, Slovenia,
India, South Korea, Finland, Morocco, Armenia and Kyrgyzstan.
** Without the amount of bill of exchange.

122

OTP Bank Annual Report 2014

2014 angol.indd 122

5/18/15 12:46 PM

The loan portfolio decreased mostly in

loan portfolio but there were no signicant

Russia, Ukraine and Hungary, and increased

movements in none of the other countries.

in the Croatia and Slovakia but there were


no signicant changes in the other countries

In some countries the stock of provision

of Group members. Their stock of provision

increased due to local regulations on

increased mostly in Ukraine, Croatia

the base of which it is compulsory to account

and Romania, decreased in Russia, Bulgaria

x rate of provision on the non-qualied

and Hungary due to the slightly decreased

portfolio.

27.1.2 Collaterals
The values of collaterals held by the Group by

The collaterals cover loans as well as

types are as follows (total collaterals).

off-balance sheet exposures.

Types of collaterals
Mortgages
Assignments (revenue or other receivables)
Guarantees of state or organizations owned by state
Guarantees and warranties
Cash deposits
Securities
Other
Total

2014
5,323,528
407,051
277,260
114,034
74,435
34,508
793,137
7,023,953

2013
5,899,371
380,540
273,258
109,589
83,890
56,813
842,311
7,645,772

The values of collaterals held by the Group

exposures). The collaterals cover loans

by types are as follows (to the extent of the

as well as off-balance sheet exposures.

Types of collaterals
Mortgages
Assignments (revenue or other receivables)
Guarantees of state or organizations owned by state
Guarantees and warranties
Cash deposits
Securities
Other
Total

2014
2,737,324
330,466
207,379
86,475
42,956
16,723
455,811
3,877,134

2013
3,064,157
320,435
220,281
91,271
50,080
12,054
524,689
4,282,967

The coverage level of the loan portfolio (total

coverage level to the extent of the exposures

collaterals) decreased by 0.7%, as well as the

decreased by 1.05% as at 31 December 2014.

IFRS consolidated nancial statements

2014 angol.indd 123

123

5/18/15 12:46 PM

The fair value of collaterals related


to past due, but not impaired loans
An analysis of the fair value of collaterals related to past due, but not impaired loans,
total collaterals and to the extent of the exposures as at 31 December 2014 and
31 December 2013 is as follows:
Fair value of the collaterals (total collaterals)
Mortgage loans
Corporate loans
SME loans
Car-nance loans
Consumer loans
Municipal loans
Placements with other banks
Total

2014
268,137
47,563
46,095
17,640
4,020
88

383,543

2013
310,271
53,944
51,357
20,507
3,367
64

439,510

Fair value of the collaterals (to the extent of the exposures)


Mortgage loans
Corporate loans
SME loans
Car-nance loans
Consumer loans
Municipal loans
Placements with other banks
Total

2014
151,743
14,788
10,822
13,012
1,320
253

191,938

2013
173,702
18,728
13,747
16,115
760
32

223,084

The collaterals above are related to only on-balance sheet exposures.

27.1.3 Restructured loans

Corporate loans
Retail loans
SME loans
Municipal loans
Total

Gross
portfolio
197,382
76,124
14,046
71
287,623

2014
Allowance
43,685
6,636
2,018
3
52,342

Gross
portfolio
266,418
95,370
16,381
1,386
379,555

2013
Allowance
80,658
9,094
1,954
28
91,734

Restructured portfolio denition:

Restructured portfolio for corporate/SME/

Restructured portfolio for retail business

municipal business line contains every loan

line contains every loan which is relevant

which is relevant restructured and less than

restructured and less than 91 days delinquent.

91 days delinquent. Loan is considered as

Loan is considered as relevant restructured if:

relevant restructured if:

it was restructured in the last 12 months, or

independently from the date of the

it was restructured more than 12 months

restructuring the following restructuring tool

ago, but the connected preferential period is

was applied:

not expired or expired in the last 12 months.

cancellation of principal outstanding


(cancelled or partially cancelled principal

Hungarian FX mortgage loans in the xed


exchange rate scheme are not included.

124

receivables);
it was restructured in the last 12 months or the

In case of loans that have been restructured

loan was restructured more than 12 months

more than once the last restructuring is

ago, but the connected preferential period is

considered.

not expired or expired in the last 12 months,

OTP Bank Annual Report 2014

2014 angol.indd 124

5/18/15 12:46 PM

and any of the following restructuring tools

or more instalments within the original

were applied:

term or with extension of the term

cancellation of interest rate (nal or

simultaneously).

temporary reduction of the interest margin,


cancellation of due interest), or

Other modications of contract not mentioned

restructuring of interest payments

above are not considered as restructuring

(postponement of the interest payment,

(i.e. modifying the collateral structure,

capitalization of the interest), or

modication of the credit purpose).

restructuring of principal repayment

In case of loans that have been restructured

(partial or full postponement of repayment

more than once the last restructuring is

of a given instalment, rescheduling one

considered.

27.1.4 Financial instruments


by rating categories*

Securities held for trading as at 31 December 2014:

Shares
Government bonds
Discounted Treasury bills
Other securities
Other non-interest bearing
securities
Total
Accrued interest
Total

Aaa

Aa3

A1

A2

A3

Baa1

Baa2

Baa3

Ba1

Ba3

Not
rated
58,309 **

264

633
1,044

12

138

10

41

21

67
4,072
3,127

5,093

12,733
287
4,175

1,672

1,677

12

138

10

41

21

7,266

6,765

Total
59,231
22,942
3,414
4,439

18

2,299

3,989

17,195

18

60,872

94,015
625
94,640

Securities available-for-sale as at 31 December 2014:

Government bonds
Discounted Treasury bills
Corporate bonds
Other securities
Other non-interest bearing
securities
Total
Accrued interest
Total

Aaa

A1

322

48

22

370

22

Baa2

Ba1

Ba3

B1

Caa1

Caa3

40,092 210,045 418,796

9,873 32,295
79

5,542

20,826

2,412

10

526

1,078

40,171 220,401 477,459

2,412

10

526

Baa3

483

117

Not
rated
10,195

28,566
312

Total
680,323
42,168
37,457
21,138

43,093

43,646

1,078

117

82,166

824,732
15,694
840,426

Not
rated
691

173
7
871

Total

Securities held-to-maturity as at 31 December 2014:

Government bonds
Mortgage bonds
Discounted Treasury bills
Corporate bonds
Total
Accrued interest
Total

Aaa

A1

A2

Baa2

Baa3

Ba1

Caa3

4,497

4,497

522

522

22,681

22,681

1,184

1,184

11,065

11,065

641,644

346

641,990

10,648

10,648

692,410
522
519
7
693,458
16,725
710,183

** Moodys ratings.
** These contain mostly corporate shares listed on Budapest Stock Exchange.

IFRS consolidated nancial statements

2014 angol.indd 125

125

5/18/15 12:46 PM

27.2 Market risk

The VaR methodology is a statistically dened,


probability-based approach that takes into

The Group takes on exposure to market risks.

account market volatilities as well as risk

Market risks arise from open positions in

diversication by recognizing offsetting

interest rate, currency and equity products,

positions and correlations between

all of which are exposed to general and specic

products and markets.

market movements. The Group applies a

Risks can be measured consistently across

Value-at-Risk methodology to estimate the

all markets and products, and risk measures

market risk of positions held and the maximum

can be aggregated to arrive at a single risk

losses expected, based upon a number of

number. The one-day 99% VaR number

assumptions for various changes in market

used by the Group reects the 99% probability

conditions. The Management Board sets

that the daily loss will not exceed the

limits on the value of risk that may be accepted,

reported VaR.

which is monitored on a daily basis.


(Analysis of liquidity risk is detailed in Note 35.)

VaR methodologies are employed to


calculate daily risk numbers include the
historical and variance-covariance approach.

27.2.1 Market Risk sensitivity


analysis

In addition to these two methodologies,


Monte Carlo simulations are applied to the
various portfolios on a monthly basis to

The VaR risk measure estimates the potential

determine potential future exposure.

loss in pre-tax prot over a given holding

The FX Var rose due to signicant increase

period for a specied condence level.

of USD/RUB volatility.

The VaR of the trading portfolio can be summarized as follows:


Historical VaR (99%, one-day) by risk type

Foreign exchange
Interest rate
Equity instruments
Diversication
Total VaR exposure

While VaR captures the Groups daily


exposure to currency and interest rate risk,

Average
in HUF million
2014
1,263
391
12
(278)
1,388

2013
241
488
14
(181)
562

27.2.2 Foreign currency sensitivity


analysis

sensitivity analysis evaluates the impact

126

of a reasonably possible change in interest

The following table details the Groups

or foreign currency rates over a year.

sensitivity to an increase and decrease in the

The longer time frame of sensitivity analysis

HUF exchange rate against the EUR, over a

complements VaR and helps the Group to

3 months period. Monte Carlo simulation is used

assess its market risk exposures. Details

when reporting foreign currency risk internally

of sensitivity analysis for foreign currency

to key management personnel and represents

risk are set out in Note 27.2.2, for interest

Managements assessment of the reasonably

rate risk in Note 27.2.3, and for equity price

possible change in foreign exchange rates.

sensitivity analysis in Note 27.2.4 below.

The sensitivity analysis includes only outstanding

OTP Bank Annual Report 2014

2014 angol.indd 126

5/18/15 12:46 PM

foreign currency denominated monetary items

and so FX risk affects the Groups other

as strategic open positions related to foreign

comprehensive income and not its earnings.

activities.
The strategic open position related to the foreign

A positive number below indicates an increase

operations was short, amounted to EUR 310 million

in prot where the HUF strengthens against

and was long amounted to1.9 million CHF as

the EUR. For a weakening of the HUF against

at 31 December 2014. High portion of strategic

the EUR, there would be an equal and opposite

positions is considered as effective hedge of future

impact on the prot, and the balances below

prot inows of investment of foreign subsidiaries,

would be negative.

Probability
1%
5%
25%
50%
25%
5%
1%

Effects to the Consolidated Statement of Recognized Income in 3 months period


2014 (in HUF billion)
2013 (in HUF billion)
(15.2)
(12.7)
(10.6)
(8.7)
(4.6)
(3.6)
(0.8)
(0.3)
2.9
2.8
7.9
7.0
11.7
9.9

Notes:

repriced with two-weeks delay, assuming no

(1) The short-term loss on the strategic open

change in the margin compared to the last

position is compensated by the long-term


exchange rate gain on the foreign operations.
(2) The HUF/EUR volatility remained at its
long-term average, so the probability of
losses or gains has not changed signicantly.
(3) Monte Carlo simulation is based on the

repricing date.
Assets and liabilities with an interest rate
lower than 0.3% were assumed to be
unchanged for the whole period.
The sensitivity of interest income to changes
in BUBOR is analyzed.

empirical distribution of the historical exchange


rate movements between 2002 and 2014.

The simulations were prepared by assuming


two scenarios:
(1) HUF base rate decreases gradually to 1.5%

27.2.3 Interest rate sensitivity


analysis

(probable scenario)
(2) HUF base rate decreases gradually to 0.1%
(alternative scenario)

The sensitivity analyses below have been


determined based on the exposure to interest

The net interest income in a one year period

rates for both derivatives and non-derivative

after 31 December 2014 would be decreased by

instruments at the balance sheet date.

HUF 1,030 million (probable scenario) and

The analysis is prepared assuming the amount

HUF 4,098 million (alternative scenario) as a

of assets and liabilities outstanding at the

result of these simulation. The same simulation

balance sheet date were outstanding for the

indicated HUF 2,208 million (probable scenario)

whole year. The analysis was prepared by

and HUF 3,432 million (alternative scenario)

assuming only adverse interest rate changes.

decrease in the Net interest income in a one

The main assumptions were as follows:

year period after 31 December 2013.

Floating rate assets and liabilities were

This effect is counterbalanced by capital

repriced to the modelled benchmark yields at

gains (HUF 899 million for probable scenario,

the repricing dates assuming the unchanged

HUF 3,689 million for alternative scenario) as

margin compared to the last repricing.

at 31 December 2014 and (HUF 1,344 million

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

for probable scenario, HUF 1,978 million for


alternative scenario) as at 31 December 2013
on the government bond portfolio held for
hedging (economic).

IFRS consolidated nancial statements

2014 angol.indd 127

127

5/18/15 12:46 PM

The effects of the parallel shifts of the yield-curves to the net interest income on a one-year
period and to the market value of the hedge government bond portfolio booked against capital
can be summarized as follows:
2014
Description

Effects to the net


interest income
(one-year period)
(361)
(503)
(50)
(914)

HUF (0.1%) parallel shift


EUR (0.1%) parallel shift
USD (0.1%) parallel shift
Total

Effects to capital
(Price change of AFS
government bonds)
374

374

27.2.4 Equity price sensitivity


analysis

2013
Effects to the net
interest income
(one-year period)
(410)
(451)
(3)
(864)

Effects to capital
(Price change of AFS
government bonds)
240

240

recognizing offsetting positions and correlations


between products and markets. The daily loss
will not exceed the reported VaR number with

The following table shows the effect of the

99% of probability.

equity price sensitivity. The Group uses VaR

The stress test assumes the largest price

calculation with 1 day holding period and

movement of the last year and calculates with

a 99% condence level. The VaR methodology

it as the adverse direction. These scenarios

is a statistically dened, probability-based

show the loss of the portfolio when all prices

approach that takes into account market

change with the maximum amount of the

volatilities as well as risk diversication by

last year.

Description
VaR (99%, one day, HUF million)
Stress test (HUF million)

27.2.5 Capital management

2014
13
(43)

2013
14
(60)

the planned risk taking mainly by means


of ensuring and developing their protability.

Capital management

In case the planned risk level of a Group

The primary objective of the capital management

member exceeded its Core and the previously

of the Group is to ensure the prudent operation,

raised Supplementary capital, it ensures the

the entire compliance with the prescriptions of

prudent operation by occasional measures.

the regulator for a persistent business operation

A further tool in the capital management of the

and maximising the shareholder value,

Bank is the dividend policy, and the transactions

accompanied by an optimal nancing structure.

performed with the treasury shares.

The capital management of the Group members

128

includes the management and evaluation of

Capital adequacy

the shareholders equity available for hedging

The Capital Requirements Directive

risks, other types of funds to be recorded in the

package (CRDIV/CRR) transposes the new

equity and all material risks to be covered by

global standards on banking regulation

the capital.

(known as the Basel III agreement) into the

The basis of the capital management of

EU legal framework. The new rules are applied

the Group members in the short run is the

from 1 January 2014. They set stronger

continuous monitoring of their capital position,

prudential requirements for institutions,

in the long run the strategic and the business

requiring them to keep sufficient capital

planning, which includes the monitoring and

reserves and liquidity. This new framework

forecast of the capital position.

makes institutions in the EU more solid and

The Group members maintain the capital

strengthens their capacity to adequately

adequacy required by the regulatory bodies and

manage the risks linked to their activities,

OTP Bank Annual Report 2014

2014 angol.indd 128

5/18/15 12:46 PM

and absorb any losses they may incur in doing

the Group calculated the Regulatory capital

business.

based on IFRS data, and the consolidated

The capital adequacy of the Group is supervised

Capital adequacy ratio based on this.

based on the nancial statements data

The capital adequacy calculations of the Group

prepared in accordance with IFRS applying the

were prepared in accordance with Basel II at

current directives, rulings and indicators from

the end of 2013, while due to the modications

1 January 2014.

of the regulations it was calculated on the

The Group has entirely complied with the

base of Basel III as at 31 December 2014.

regulatory capital requirements in 2014 as well

The Capital adequacy ratio of the Group

as in 2013.

(Basel III) was 17.5%, the Regulatory capital

The Group uses the standard method for

was HUF 1,201,874 million and the

determining the regulatory capital

Total regulatory capital requirement was

requirements of the credit risk and market

HUF 548,755 million as at 31 December 2014.

risk, and parallel to that, the base indicator

The same ratios calculated as at 31 December

method and the advanced method (AMA)

2013 according to Basel II were the

in case of the operational risk.

following: 19.9%, HUF 1,440,962 million and

For international comparison purposes,

HUF 579,408 million.

Calculation on IFRS basis


Core capital (Tier1) = Common Equity Tier1 (CET1)

2014
Basel III
969,935

Issued capital
Reserves
Other capital components
Fair value corrections
Non-controlling interests
Treasury shares
Goodwill and other intangible assets
Other adjustments
Additional Tier1 (AT1)
Supplementary capital (Tier2)
Subordinated bonds and loans
Other issued capital components
Components recognized in T2 capital issued
by subsidiaries

28,000
1,280,396
(113,047)
25,389
736
(55,940)
(158,681)
(36,918)

231,939
133,217
96,019

Regulatory capital*
Credit risk capital requirement
Market risk capital requirement
Operational risk capital requirement
Total requirement regulatory capital
Surplus capital
CET1 ratio
Tier1 ratio
Capital adequacy ratio

1,201,874
450,073
26,848
71,834
548,755
653,119
14.1%
14.1%
17.5%

Core capital (Tier1)


Positive components
Issued capital
Reserves
Other issued capital components
Negative components
Treasury shares
Goodwill and other intangible assets

2013
Basel II
1,264,286
1,513,448
28,000
1,385,423
100,025
(249,162)
(55,599)
(193,563)

Supplementary capital (Tier2)


Subordinated bonds and loans
Fair value corrections

177,043
164,393
12,650

Deductions
Regulatory capital
Credit risk capital requirement
Market risk capital requirement
Operational risk capital requirement
Total requirement regulatory capital
Surplus capital
CET1 ratio
Tier1 ratio
Capital adequacy ratio

(367)
1,440,962
461,765
37,295
80,348
579,408
861,554

17.5%
19.9%

2,703

* The regulatory capital doesnt contain the payable dividend from the result of 2014 in accordance with ITS 680/2014/EU.

IFRS consolidated nancial statements

2014 angol.indd 129

129

5/18/15 12:46 PM

Basel II

Basel III

The positive components of the Core capital

The components of the Common Equity Tier1

are the following: Issued capital, Other

capital (CET1) are the following: Issued capital,

reserve, Prot reserve, Changes in the equity

Reserves (Prot reserves, Other reserves,

of subsidiaries, Changes due to consolidation,

Changes in the equity of subsidiaries, Prot for

Prot for the year, Other issued capital

the year, Changes due to consolidation) Fair

components.

value adjustments, Other capital components,

The negative components of the Core capital

(Revaluation reserves, Share based payments,

are the following: Treasury shares, Goodwill

Cash-ow hedges, Net investment hedge in

and other Intangible assets, Dividends.

foreign operations), Non-controlling interest,

The components of the Supplementary capital

Treasury shares, Goodwill and other Intangible

are the following: Supplementary loan capital,

assets, other adjustments (due to prudential

Subordinated loan capital, Revaluation reserves,

lters, due to deferred tax receivables, due to

Fair value adjustments, Share based payments,

temporary regulations).

Cash-ow hedges, Net investment hedge in

Supplementary capital (Tier2): Subordinated

foreign operations (in Supplementary Capital),

loan capital, Supplementary loan capital,

Other issued capital.

Other issued capital components,

The components of the Deductions: deductions

Components recognized in T2 capital issued

due to investments.

by subsidiaries.

The capital adequacy of the foreign subsidiary banks prescribed by the local regulator,
and the compliance with these prescriptions is as follows:
Subsidiary bank
JSC OTP Bank (Russia)
OTP Bank JSC (Ukraine)
DSK Bank EAD
OTP Bank Romania S.A.
OTP banka Srbija a.d.
OTP banka Hrvatska d.d.
OTP Banka Slovensko a. s.
Crnogorska komercijalna banka a.d.

Country
Russia
Ukraine
Bulgaria
Romania
Serbia
Croatia
Slovakia
Montenegro

2014
12.1%
10.4%
18.0%
12.7%
31.5%
15.0%
13.5%
15.8%

2013
14.0%
20.6%
16.4%
12.7%
37.8%
16.7%
10.6%
14.4%

The ratios of the foreign subsidiaries exceed the requirements of the local regulations
in every cases.

130

OTP Bank Annual Report 2014

2014 angol.indd 130

5/18/15 12:46 PM

NOTE 28:

OFF-BALANCE SHEET ITEMS AND DERIVATIVE FINANCIAL


INSTRUMENTS (in HUF mn)
In the normal course of business, the

and are referred to as off-balance sheet

Group becomes a party to various nancial

nancial instruments. The following represent

transactions that are not reected on the

notional amounts of these off-balance sheet

Consolidated Statement of Financial Position

nancial instruments, unless stated otherwise.

Contingent liabilities:
Commitments to extend credit
Guarantees arising from banking activities
Contingent liabilities ordered by law related to customer loans*
from this: obligation related to application of the bid-ask
exchange rate spread
from this: obligation related to unilateral amendment of
contractual clauses
Legal disputes (disputed value)
Confirmed letters of credit
Other
Total

Legal disputes

2014
999,732
368,670
157,693

2013
1,266,185
312,994

31,297

126,396

71,808
25,581
208,915
1,832,399

66,988
25,919
138,422
1,810,508

The Bank considers the claim is entirely unfounded


as it is conrmed by the court of rst instance.

At the balance sheet date the Group was


involved in various claims and legal

The Competition Council of the Hungarian

proceedings of a nature considered normal to

Competition Authority with its resolution

its business. The level of these claims and legal

issued on 18 June 2014 established that

proceedings corresponds to the level of claims

OTP committed a violation of law, therefore

and legal proceedings in previous years.

the company was obliged to pay a ne in the


amount of HUF 38 million.

The Group believes that the various asserted


claims and litigations in which it is involved
will not materially affect its nancial position,
future operating results or cash-ows, although

Commitments to extend credit,


guarantees and letters of credit

no assurance can be given with respect to the


ultimate outcome of any such claim or litigation.

The primary purpose of these instruments

Provisions due to legal disputes were

is to ensure that funds are available to a

HUF 7,454 million and HUF 3,267 million as at

customer as required. Guarantees and standby

31 December 2014 and 2013, respectively

letters of credit, which represent irrevocable

(see Note 17.).

assurances that the Group will make payments


in the event that a customer cannot meet

Complying with Act CXX of 2001 on the capital

its obligations to third parties, carry the same

market, the Bank announces that action for

credit risk as loans.

damages initiated by DOO VEKTRA JAKIC in


bankruptcy in the amount of EUR 80 million

Documentary and commercial letters of credit,

against OTP before the Commercial Court in

which are written undertakings by the Group on

Bijelo Polje (Montenegro) has been dismissed

behalf of a customer authorising a third party

entirely and the court decided in favour of OTP.

to draw drafts on the Group up to a stipulated

The decision of the court is subject to appeal.

amount under specic terms and conditions,

* See details in Note 2.28.

IFRS consolidated nancial statements

2014 angol.indd 131

131

5/18/15 12:46 PM

are collateralised by the underlying shipments

in writing and signed by the surety and the

of goods to which they relate and therefore

principal.

carry less risk than a direct borrowing.

If the surety is required to pay or perform due


to the principals failure to do so, the law will

Commitments to extend credit represent unused

usually give the surety a right of subrogation,

portions of authorisations to extend credit in the

allowing the surety to use the suretys

form of loans, guarantees or letters of credit.

contractual rights to recover the cost of making

With respect to credit risk on commitments to

payment or performing on the principals behalf,

extend credit, the Group is potentially exposed

even in the absence of an express agreement to

to loss in an amount equal to the total unused

that effect between the surety and the principal.

commitments. However, the likely amount of


loss is less than the total unused commitments
since most commitments to extend credit are

Derivatives

contingent upon customers maintaining specic


credit standards.

The Group maintains strict control limits on


net open derivative positions, i.e. the difference

Guarantees, irrevocable letters of credit and

between purchase and sale contracts, by both

undrawn loan commitments are subject

amount and term. At any one time the amount

to similar credit risk monitoring and credit

subject to credit risk is limited to the current fair

policies as utilised in the extension of loans.

value of instruments that are favourable to the

The Management of the Group believes the

Group (i.e. assets), which in relation to derivatives

market risk associated with guarantees,

is only a small fraction of the contract or notional

irrevocable letters of credit and undrawn loan

values used to express the volume of instruments

commitments are minimal.

outstanding. This credit risk exposure is


managed as part of the overall lending limits
with customers, together with potential

Guarantees, payment undertakings


arising from banking activities

exposures from market movements. Collateral


or other security is not usually obtained for
credit risk exposures on these instruments,

Payment undertaking is a promise by the Group

except for trading with clients, where the Group

to assume responsibility for the debt obligation

in most of the cases requires margin deposits.

of a borrower if that borrower defaults until a


determined amount, until a determined date,
in case of fullling conditions, without checking

Foreign currency contracts

the undermined transactions. The guarantees


liability is joint and primary with the principal,

Foreign currency contracts are agreements

in case of payment undertaking, while the

to exchange specic amounts of currencies

Group assumes the obligation derived from

at a specied rate of exchange, at a spot date

guarantee independently by the conditions

(settlement occurs two days after the trade

established by the Group.

date) or at a forward date (settlement occurs

A guarantee is most typically required when

more than two days after the trade date).

the ability of the primary obligor or principal

The notional amount of these spot contracts

to perform its obligations under a contract is

does not represent the actual market or credit

in question, or when there is some public or

risk associated with these contracts.

private interest which requires protection from

132

the consequences of the principals default or

Foreign currency contracts are used by

delinquency. A contract of guarantee is subject

the Group for risk management and trading

to the statute of frauds (or its equivalent local

purposes. The risk management foreign

laws) and is only enforceable if recorded

currency contracts of the Group were used to

OTP Bank Annual Report 2014

2014 angol.indd 132

5/18/15 12:46 PM

hedge the exchange rate uctuations of loans

periodically reset rates of interest and

and deposits to credit institutions denominated

performance of indexes. A specic notional

in foreign currency.

principal amount is the base of the interest


calculation. The payment of index return is
calculated on the basis of current market

Foreign exchange swaps


and interest rate swaps

price compared to the previous market price.


In case of commodity swaps payments are
calculated on the basis of the strike price of a

The Group enters into foreign exchange swap

predened commodity compared to its average

and interest rate swap transactions. The swap

market price in a period.

transaction is a complex agreement concerning


the swap of certain nancial instruments, which
usually consists of a prompt and one or more

Forward rate agreements (FRA)

forward contracts.
A forward rate agreement is an agreement to
Interest rate swaps oblige two parties to

settle amounts at a specied future date based

exchange one or more payments calculated

on the difference between an interest rate index

with reference to xed or periodically reset

and an agreed upon xed rate. Market risk

rates of interest applied to a specic notional

arises from changes in the market value

principal amount (the base of the interest

of contractual positions caused by movements

calculation). Notional principal is the amount

in interest rates.

upon which interest rates are applied to


determine the payment streams under interest

The Group limits its exposure to market

rate swaps. Such notional principal amounts

risk by entering into generally matching or

often are used to express the volume of these

offsetting positions and by establishing

transactions but are not actually exchanged

and monitoring limits on unmatched positions.

between the counterparties.

Credit risk is managed through approval

The interest rate swaps are used by the Group

procedures that establish specic limits

for risk management and trading purposes.

for individual counterparties. The Groups


forward rate agreements were transacted
for management of interest rate exposures

Cross-currency interest rate swaps

and have been accounted for at mark-to-market


fair value.

The Bank enters into cross-currency interest


rate swap (CCIRS) transactions which have
special attributes, i.e. the parties exchange the

Foreign exchange options

notional amount at the beginning and also at


the maturity of the transaction. A special type

A foreign exchange option is a derivative

of these deals is the mark-to-market CCIRS

nancial instrument that gives the owner

agreements. At this kind of deals the parties

the right to exchange money denominated

in accordance with the foreign exchange

in one currency into another currency

prices revalue the notional amount during

at a pre-agreed exchange rate at a specied

lifetime of the transaction.

future date. The transaction, for a fee,


guarantees a worst-case exchange rate
for the futures purchase of one currency

Equity and commodity swaps

for another. These options protect against


unfavourable currency movements while

Equity swaps obligate two parties to exchange

preserving the ability to participate

more payments calculated with reference

in favourable movements.

IFRS consolidated nancial statements

2014 angol.indd 133

133

5/18/15 12:46 PM

NOTE 29:

SHARE-BASED PAYMENTS AND EMPLOYEE BENEFITS


(in HUF mn)
Previously approved option program required

Employee benets are all forms of

a modication thanks to the introduction of the

consideration given by an entity in exchange

Bank Group Policy on Payments accepted in

for service rendered by employees or for the

9/2011 resolution of Annual General Meeting

termination of employment. IAS 19 Employee

regarding to the amendment of CRD III.

Benets shall be applied in accounting for

directives and Act on Credit Institutions and

all employee benets, except those to which

Financial Enterprises.

IFRS 2 Share-based Payment applies. In case

Key management personnel affected by the

of the jubilee benets both standards contain

Bank Group Policy receive compensation based

regulations.

on performance assessment generally in the

Short-term employee benets are employee

form of cash bonus and equity shares in a ratio

benets (other than termination benets) that

of 5050%. Assignment is based on OTP shares,

are expected to be settled wholly before twelve

furthermore performance based payments

months after the end of the annual reporting

are deferred in accordance with the rules

period in which the employees render the

of Credit Institutions Act.

related service. Post-employment benets

The Bank ensures the share-based payment

are employee benets (other than termination

part for the management personnel of the

and short-term employee benets) that are

Group members.

payable after the completion of employment.

The value of the discounted share-based

Post-employment benet plans are formal

payment at the performance assessment is

or informal arrangements under which an

determined by Board of Directors based on

entity provides post-employment benets for

the average of the three previous trade days

one or more employees. Post-employment

middle rate of the Banks equity shares xed on

benet plans are classied as either dened

the Budapest Stock Exchange.

contribution plans or dened benet plans,

Discounted share-based payment shall

depending on the economic substance of the

contain maximum HUF 2,000 discount at the

plan as derived from its principal terms and

assessment date, and earnings for the shares

conditions.

at the payment date is determined by Board

Termination benets are employee benets

of Directors, maximum HUF 4,000.

provided in exchange for the termination


of an employees employment as a result

134

During implementation of the Remuneration

of either: an entitys decision to terminate an

Policy of the Group appeared that in case of

employees employment before the normal

certain foreign subsidiaries it is not possible to

retirement date or an employees decision

ensure the originally determined share-based

to accept an offer of benets in exchange for

payment because of legal reasons

the termination of employment. Other long-term

incompatible with concerning EU-directives ,

employee benets are all employee benets

therefore the Board of Directors made a

other than short-term employee benets,

decision to cancel the share-based payment

postemployment benets and termination

in the referred countries.

benets.

OTP Bank Annual Report 2014

2014 angol.indd 134

5/18/15 12:46 PM

Board of Directors determined the parameters for the share-based payment relating to the year
20102013 for periods of each year as follows:
Year

2011
2012
2013
2014
2015
2016
2017

Exercise
Maximum
price
earnings
per share
per share
for the year 2010
3,946
2,500
3,946
3,000
4,446
3,500
4,946
3,500

Exercise
Maximum
price
earnings
per share
per share
for the year 2011

1,370
3,000
1,870
3,000
1,870
4,000
1,870
4,000

Exercise
Maximum
price
earnings
per share
per share
for the year 2012

2,886
3,000
2,886
3,000
2,886
3,000
2,886
3,500

Exercise
Maximum
price
earnings
per share
per share
for the year 2013

2,522
2,500
2,522
3,000
2,522
3,500
2,522
3,500

Based on parameters accepted by Board of Directors relating to the year 2010 effective pieces
are follows as at 31 December 2014:
Effective
pieces
Share purchasing period started in 2011
Share purchasing period started in 2012
Share purchasing period started in 2013
Share purchasing period started in 2014

497,451

Approved
pieces
of shares
340,950
735,722
419,479
497,451

Exercised until
31 December
2014
11,622
714,791
31,789

Weighted average
share price at the date
of exercise (in HUF)
5,731
4,593
4,808

Expired pieces

329,328
20,931
387,690

Effective pieces are follows in exercise periods of each year relating to the year 2011
as at 31 December 2014:
Effective
pieces
Share purchasing period started in 2012
Share purchasing period started in 2013
Share purchasing period started in 2014
Share purchasing period starting in 2015

214,805
724,886

Approved
pieces
of shares
471,240
1,267,173
609,137

Exercised until
31 December
2014
464,753
1,256,529
394,332

Weighted average
share price at the date
of exercise (in HUF)
3,758
4,886
4,491

Expired pieces

6,487
10,644

Effective pieces are follows in exercise periods of each year relating to the year 2012
as at 31 December 2014:
Effective
pieces
Share purchasing period started in 2013
Share purchasing period started in 2014
Share purchasing period starting in 2015
Share purchasing period starting in 2016

720,281
649,653
688,990

Approved
pieces
of shares
450,861
1,156,631

Exercised until
31 December
2014
445,671
436,350

Weighted average
share price at the date
of exercise (in HUF)
4,413
4,502

Expired pieces

5,190

Effective pieces are follows in exercise periods of each year relating to the year 2013
as at 31 December 2014:
Effective
pieces
Share purchasing period started in 2014
Share purchasing period starting in 2015
Share purchasing period starting in 2016
Share purchasing period starting in 2017

843,340
495,340
549,909

Approved
pieces
of shares
406,044

Exercised until
31 December
2014
404,263

Weighted average
share price at the date
of exercise (in HUF)
4,369

Expired pieces

1,781

IFRS consolidated nancial statements

2014 angol.indd 135

135

5/18/15 12:46 PM

Effective pieces relating to the periods

resolution of Annual General Meeting and

starting in 20152017 settled during valuation

the share-based compensation for Board of

of performance of year 20112013, can be

Directors detailed in 8/2013 resolution of Annual

modied based on risk assessment and

General Meeting and connecting compensation

personal changes.

based on performance assessment accounted


as equity-settled share based transactions,

NOTE 30:

In connection with shares as a part of the Bank

HUF 4,393 million was recognized as expense

Group Policy on Payments modied by 7/2013

as at 31 December 2014.

RELATED PARTY TRANSACTIONS (in HUF mn)


The compensation of key management

subsidiaries involved in the decision-making

personnel, such as the members of the Board

process in accordance with the compensation

of Directors, members of the Supervisory

categories dened in IAS 24 Related Party

Board, key employees of the Bank and its major

Disclosures, is summarised below:

Compensations
Short-term employee benefits
Share-based payment
Other long-term employee benefits
Termination benefits
Total
Commitments to extend credit and guarantees
Loans provided to companies owned by the Management
(normal course of business)
Credit lines of the members of Board of Directors and the Supervisory
Board and their close family members (at normal market conditions)
Loans provided to unconsolidated subsidiaries

2014
8,373
2,937
739
135
12,184

2013
9,534
3,297
965
89
13,885

15,690

1,221

13,357

38,828

334

559

1,304

1,124

The members of the Board of Directors,

owned credit line A in the amount of

members of the Supervisory Board, chief

HUF 164.3 million and HUF 175.4 million as at

executives and their close family members

31 December 2014 and as at 31 December 2013.

An analysis of credit limit related to MasterCard Gold is as follows:


Members of Board of Directors and their close family members
Members of Supervisory Board
Chief executives

2014
24
4
2

2013
26
4

2014
38

2013
51
3

An analysis of credit limit related to Visa Card is as follows:


Members of Board of Directors and their close family members
Members of Supervisory Board

136

OTP Bank Annual Report 2014

2014 angol.indd 136

5/18/15 12:46 PM

One member of Board of Directors and its

and their close family members owned AMEX

family member owned AMEX Blue credit card

Platinum credit card loan in the amount of

loan in the amount of HUF 0.6 million as at 2014

HUF 23.5 and 10.5 million, respectively as at

and 31 December 2013, respectively.

31 December 2014 and 31 December 2013.

Chief executives owned AMEX Gold credit card

Members of Board of Directors, members of

loan in the amount of HUF 3.5 million as at 2014

Supervisory Board and chief executives owned

and 31 December 2013, respectively.

other kinds of credit card loan, which are not


listed above in the amount of HUF 18.2 and

The members of the Board of Directors, members

35.4 million as at 2014 and 31 December 2013,

of the Supervisory Board, chief executives

respectively.

An analysis of payment to chief executives of the Bank related to their activity


in Board of Directors and Supervisory Board is as follows:
2014
539
73
612

Members of Board of Directors


Members of Supervisory Board
Total

NOTE 31:

In the normal course of business,

volumes of which are not signicant

the Bank enters into other transactions

to these nancial statements taken

with its subsidiaries, the amounts and

as a whole.

ACQUISITION (in HUF mn)


a) Purchase and consolidation

a 98.37% stake in the bank. The transaction

of subsidiaries

was closed by setting the purchase price

On 31 January 2014 OTP banka Hrvatska

on 24 April 2014. The acquisition contributes

d.d. signed a purchase agreement with the

to a more optimal economies of scale of the

Croatian Banco Popolare d.d. on acquiring

Bank in Croatia.

IFRS consolidated nancial statements

2014 angol.indd 137

2013
545
71
616

137

5/18/15 12:46 PM

The fair value of the assets and liabilities acquired, and the related negative goodwill
(gain from bargain purchase) is as follows:
Cash, amounts due from banks and balances with the National Banks
Placements with other banks, net of allowance for placement losses
Financial assets at fair value through profit or loss
Securities available-for-sale
Loans, net of allowance for loan losses
Associates and other investments
Securities held-to-maturity
Property and equipment
Intangible assets
Other assets
Amounts due to banks, the Hungarian Government, deposits from
the National Banks and other banks
Deposits from customers
Liabilities from issued securities
Financial liabilities at fair value through profit or loss
Other liabilities
Subordinated bonds and loans
Net assets
Non-controlling interest
Negative goodwill
Cash consideration

2014
1,719
26,797

4,555
52,566

2,320
248
188
(4,067)
(72,565)

(2,798)

8,963

(4,400)
4,563

b) Analysis of net outow of cash in respect


of purchase of subsidiaries
2014
(4,563)
1,719
(2,844)

Cash consideration
Cash acquired
Net cash outflow

NOTE 32:

138

SIGNIFICANT SUBSIDIARIES AND ASSOCIATES (in HUF mn)


Investments in companies in which the Bank

incorporated in Hungary unless otherwise

has a signicant interest are detailed below.

stated. The Bank considers the subsidiaries as

They are fully consolidated companies and

cash generating units.

OTP Bank Annual Report 2014

2014 angol.indd 138

5/18/15 12:46 PM

Signicant subsidiaries
Name
DSK Bank EAD (Bulgaria)
OTP Bank JSC (Ukraine)
JSC OTP Bank (Russia)
OTP banka Hrvatska d.d. (Croatia)
OTP Bank Romania S.A. (Romania)
OTP banka Srbija a.d. (Serbia)
OTP Banka Slovensko a. s. (Slovakia)
OTP Financing Malta Company Ltd. (Malta)
OTP Factoring Ltd.
OTP Mortgage Bank Ltd.
OTP Real Estate Ltd.
Merkantil Bank Ltd.
Merkantil Car Ltd.
OTP Building Society Ltd.
OTP Fund Management Ltd.
Crnogorska komercijalna banka a.d. (Montenegro)
OTP Financing Netherlands B.V. (the Netherlands)
OTP Holding Ltd. (Cyprus)/OTP Financing Cyprus
Bank Center No. 1. Ltd.
Inga Kett Ltd.
OTP Funds Servicing and Consulting Ltd.
OTP Real Estate Leasing Ltd. (previously OTP Flat Lease Ltd.)
OTP Life Annuity Ltd.

Ownership (Direct and Indirect)


2014
2013
100.00%
100.00%
100.00%
100.00%
97.86%
97.81%
100.00%
100.00%
100.00%
100.00%
97.90%
97.56%
99.26%
99.21%
100.00%

100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%

Activity
commercial banking services
commercial banking services
commercial banking services
commercial banking services
commercial banking services
commercial banking services
commercial banking services
refinancing activities
work-out
mortgage lending
real estate management and development
finance lease
finance lease
flat finance and reconstruction
fund management
commercial banking services
refinancing activities
refinancing activities
real estate lease
property management
fund services
real estate leasing
life annuity services

Signicant associates*
Most signicant indicators of associates which are accounted or not accounted for using
the equity method is as follows:
As at 31 December 2014:
KITE Mezgazdasgi
Szolgltat s
Kereskedelmi Ltd.

D-G
Thermoset Ltd.

Company for Cash


Services Ltd.

Suzuki Pnzgyi
Szolgltat Ltd.

Total

56,717

5,758
4,465
1,293
7,268

2,292
106
2,186
1,144

587
3
584
21

65,354
28,211
37,143
253,803

D-G
Thermoset Ltd.

Company for Cash


Services Ltd.

Suzuki Pnzgyi
Szolgltat Ltd.

Total

5,961
4,540
1,421
6,412

2,130
83
2,047
1,017

636
9
627
37

57,444
23,406
34,038
228,927

Total assets
Total liabilities
Shareholders equity
Total revenues

23,637
33,080
245,370

As at 31 December 2013:

Total assets
Total liabilities
Shareholders equity
Total revenues

KITE Mezgazdasgi
Szolgltat s
Kereskedelmi Ltd.
48,717
18,774
29,943
221,461

* Based on unaudited financial statements.

IFRS consolidated nancial statements

2014 angol.indd 139

139

5/18/15 12:46 PM

NOTE 33:

TRUST ACTIVITIES (in HUF mn)


The Bank acts as a trustee for certain loans

As these loans and related funds are not

granted by companies or employers to their

considered to be assets or liabilities

employees, mainly for housing purposes.

of the Group, they have been excluded from

The ultimate risk for these loans rests with

the accompanying Consolidated Statement

the party advancing the funds.

of Financial Position.

The amount of loans managed by the Group as a trustee

NOTE 34:

2014
39,706

2013
42,345

2014

2013

27.9%

21.0%

CONCENTRATION OF ASSETS AND LIABILITIES


In the percentage of the total assets
Receivables from, or securities issued by the Hungarian
Government or the NBH*

There were no other signicant concentrations

these partners in order to secure the stability of

of the assets or liabilities of the Group as at

the level of deposits.

31 December 2014 or as at 31 December 2013.


The organisational unit of the Group in charge

NOTE 35:

The Group continuously provides the Authority

of partner-risk management analyses

with reports on the extent of dependency on

the biggest partners on a constant basis

large depositors as well as the exposure of the

and sets limits on the Banks and the Groups

biggest 50 depositors towards the Group.

exposure separately partner-by-partner.

Further to this obligatory reporting to the

If necessary, it modies partner-limits

Authority, the Group pays particular attention

in due course thereby reducing the room

on the exposure of its largest partners and

for manoeuvring of the Treasury and other

cares for maintaining a closer relationship with

business areas.

MATURITY ANALYSIS OF LIABILITIES AND LIQUIDITY RISK


(in HUF mn)
Liquidity risk is a measure of the extent to

business line (deposit withdrawal), the national

which the Group may be required to raise funds

economy (exchange rate shock yield curve

to meet its commitments associated with

shock) and the global nancial system (capital

nancial instruments. The Group maintains its

market shock).

liquidity proles in accordance with regulations


prescribed by the NBH.

In line with the Groups risk management


policy liquidity risks are measured

The essential of the liquidity risk management

and managed on multiply hierarchy levels

strategy is to identify all relevant systemic and

and applying integrated unied VaR based

idiosyncratic sources of liquidity risk and to

methodology. The basic requirement is that

measure the probability and severity of such

the Group must keep high quality liquidity

events. During liquidity risk management the

reserves by means it can fulll all liabilities

Group considers the effect of liquidity risk

when they fall due without material

events caused by reasons arising in the bank

additional costs.

* Securities issued by the NBH were changed into two-weeks NBH deposit during the year ended 31 December 2014.

140

OTP Bank Annual Report 2014

2014 angol.indd 140

5/18/15 12:46 PM

The liquidity reserves can be divided to two

The contractual amounts disclosed in the maturity

parts. There are separate decentralized liquid

analyses are the contractual undiscounted

asset portfolios at subsidiary level and a

cash-ows like gross nance lease obligations

centralized exible liquidity pool at Groups

(before deducting nance charges); prices

level. The reserves at subsidiary levels are held

specied in forward agreements to purchase

to cover the relevant shocks of the subsidiaries

nancial assets for cash; net amounts for

which may arise in local currencies (deposit

pay-oating/receive-xed interest rate swaps

withdrawal, local capital market shock,

for which net cash-ows are exchanged;

unexpected business expansion), while the

contractual amounts to be exchanged in a

centralized liquidity pool is held to cover the

derivative nancial instrument for which

Banks separate shocks (deposit-, yield curve-

gross cash-ows are exchanged; gross loan

and exchange rate shocks) and all group

commitments.

members potential shocks that may arise in

Such undiscounted cash-ows differ

foreign currencies (deposit withdrawal, capital

from the amount included in the statement

market shock).

of nancial position because the amount


in that statement is based on discounted

The recalculation of shocks is made at least

cash-ows. When the amount payable

quarterly while the recalibration of shock

is not xed, the amount disclosed is determined

measurement models and review of the

by reference to the conditions existing at the

risk management methodology is an annual

end of the reporting period. For example,

process. The monitoring of liquidity reserves for

when the amount payable varies with changes

both centralized and decentralized liquid asset

in an index, the amount disclosed may be

portfolio has been built in the daily reporting

based on the level of the index at the end

process.

of the period.

Due to the balance sheet adjustment process

The following tables provide an analysis of

(deleveraging) experienced in the last few years,

liabilities about the non-discounted cash-ow

the liquidity reserves of the Group increased

into relevant maturity groupings based on the

signicantly while the liquidity risk exposure

remaining period from the balance sheet date

has decreased considerably. Currently the (over)

to the contractual maturity date. It is presented

coverage of risk liquidity risk exposure by high

under the most prudent consideration of

quality liquid assets is in all-time record highs.

maturity dates where options or repayment

In 2014 there were no material changes in

schedules allow for early repayment

liquidity risk management process.

possibilities.

IFRS consolidated nancial statements

2014 angol.indd 141

141

5/18/15 12:46 PM

As at 31 December 2014:

Amounts due to banks, the Hungarian


Government, deposits from the National Banks
and other banks
Deposits from customers
Liabilities from issued securities
Other liabilities*
Subordinated bonds and loans
TOTAL LIABILITIES
Receivables from derivative financial instruments
classified as held for trading
Liabilities from derivative financial instruments
classified as held for trading
Net notional value of financial instruments
classified as held for trading
Receivables from derivative financial instruments
designated as fair value hedge
Liabilities from derivative financial instruments
designated as fair value hedge
Net notional value of financial instruments
designated as fair value hedge
Net notional value of derivative financial
instruments total
Commitments to extend credit
Bank guarantees
Off-balance sheet commitments

Within
3 months

Within
one year and
over 3 months

Within
5 year and
over one year

Over
5 years

Without
maturity

Total

413,402

42,767

98,259

166,929

721,357

6,219,811
35,666
417,716
30,593
7,117,188

1,223,544
52,087
151,980
17,897
1,488,275

251,098
130,622
4,718
140,051
624,748

19,366
23,422
2,444

212,161

1,480,795

339,420

47,408

19,340

1,886,963

(1,393,686)

(304,425)

(9,408)

(5,578)

(1,713,097)

87,109

34,995

38,000

13,762

173,866

203,857

552,775

338,138

3,898

1,098,668

(199,337)

(500,996)

(308,413)

(3,273)

(1,012,019)

4,520

51,779

29,725

625

86,649

111,191 **
111,191

7,713,819
241,797
576,858
299,732
9,553,563

91,629

86,774

67,725

14,387

260,515

414,398
61,818
476,216

411,093
82,014
493,107

115,034
64,519
179,553

59,207
160,319
219,526

999,732
368,670
1,368,402

Within
3 months

Within
one year and
over 3 months

Within
5 year and
over one year

Over
5 years

Without
maturity

Total

467,393

60,220

197,362

84,786

809,761

5,515,729
65,351
329,973
3,211
6,381,657

1,110,320
211,232
15,572
4,311
1,401,655

264,421
111,567
12,223
178,764
764,337

23,144
65,940
1,222

175,092

741,284

103,784

56,205

14,920

916,193

(772,367)

(114,122)

(94,783)

(32,048)

(1,013,320)

(31,083)

(10,338)

(38,578)

(17,128)

(97,127)

250,813

249,030

688,987

3,942

1,192,772

(261,502)

(264,224)

(735,838)

(2,579)

(1,264,143)

(10,689)

(15,194)

(46,851)

1,363

(71,371)

(41,772)

(25,532)

(85,429)

(15,765)

(168,498)

652,949
53,902
706,851

379,707
78,177
457,884

158,340
154,536
312,876

69,161
25,876
95,037

6,028
503
6,531

1,266,185
312,994
1,579,179

As at 31 December 2013:

Amounts due to banks, the Hungarian


Government, deposits from the National Banks
and other banks
Deposits from customers
Liabilities from issued securities
Other liabilities*
Subordinated bonds and loans
TOTAL LIABILITIES
Receivables from derivative financial instruments
classified as held for trading
Liabilities from derivative financial instruments
classified as held for trading
Net notional value of financial instruments
classified as held for trading
Receivables from derivative financial instruments
designated as fair value hedge
Liabilities from derivative financial instruments
designated as fair value hedge
Net notional value of financial instruments
designated as fair value hedge
Net notional value of derivative financial
instruments total
Commitments to extend credit
Bank guarantees
Off-balance sheet commitments

104,842 **
104,842

6,913,614
454,090
358,990
291,128
8,827,583

* Without derivative financial instruments designated as fair value hedge.


** See Note 18.

142

OTP Bank Annual Report 2014

2014 angol.indd 142

5/18/15 12:46 PM

NOTE 36:

NET FOREIGN CURRENCY POSITION AND FOREIGN


CURRENCY RISK (in HUF mn)

As at 31 December 2014
Assets
from this: loans concerned in conversion
into HUF*
Liabilities
from this: provision for loans concerned
in conversion into HUF*
Off-balance sheet assets and liabilities, net
Net position
As at 31 December 2013
Assets
Liabilities
Off-balance sheet assets and liabilities, net
Net position

NOTE 37:

USD
434,794

EUR
1,887,373

CHF
817,241

Others
2,278,135

Total
5,417,543

27,842

402,150

74,704

504,696

(428,962)

(1,887,894)

(139,131)

(2,263,759)

(4,719,746)

(1,531)

(73,854)

(3,870)

(79,255)

(9,117)
(3,285)

(40,166)
(40,687)

(277,512)
400,598

55,425
69,801

(271,370)
1,124,224

USD
490,095
(423,536)
44,933
111,492

EUR
1,523,379
(1,477,154)
(2,758)
43,467

CHF
934,116
(209,899)
(743,924)
(19,707)

Others
2,620,053
(2,312,443)
(109,072)
198,538

Total
5,567,643
(4,423,032)
(810,821)
333,790

The table above provides an analysis of the

regulatory requirements of the National Banks

main foreign currency exposures of the Group.

and own limit system established in respect

The remaining foreign currencies are shown

of limits on open positions. The measurement

within Others. Others category contains

of the open foreign currency position of the

mainly foreign currencies in RON, UAH, RUB

Group involves monitoring the Value-at-Risk

and BGN. Whilst the Group monitors its foreign

(VaR) limit on the foreign exchange exposure

exchange position for compliance with the

of the Group.

INTEREST RATE RISK MANAGEMENT (in HUF mn)


Interest rate risk is the risk that the value

In addition, the signicant spread existing

of a nancial instrument will uctuate due to

between the different types of interest bearing

changes in market interest rates. The length of

assets and liabilities enables the Group

time for which the rate of interest is xed on

to benet from a high level of exibility in

a nancial instrument, therefore, indicates to

adjusting for its interest rate matching and

what extent it is exposed to interest rate risk.

interest rate risk exposure.

The majority of the interest bearing assets

The following table presents the interest

and liabilities of the Group are structured to

repricing dates of the Group. Variable

match either short-term assets and short-term

yield assets and liabilities have been

liabilities, or long-term assets and liabilities

reported in accordance with their next

with repricing opportunities within one year, or

repricing date. Fixed income assets and

long-term assets and corresponding liabilities

liabilities have been reported in accordance

where repricing is performed simultaneously.

with their maturity.

* Loans were converted into HUF at foreign exchange rates applied in conversion due to Acts on Customer loans, so these do not bear further foreign currency risk or exposure.
Loans denominated in JPY are included by others. See Note 2.28.

IFRS consolidated nancial statements

2014 angol.indd 143

143

5/18/15 12:46 PM

As at 31 December 2014:
Within 1 month

Over 1 month and


within 3 months
Currency
HUF Currency

HUF

Over 3 moths and


within 12 months
HUF Currency

Over 1 year and


within 2 years
HUF Currency

Over 2 years
HUF

Currency

Non-interestbearing
HUF Currency

Total
Total
HUF

Currency

ASSETS
Cash, amounts due from banks and
balances with the National Banks
fixed rate
variable rate

1,798,973

69,581

105

105

16

66,822

372,030 1,865,900

441,732 2,307,632

1,796,928
2,045

30,478

16

16

1,796,928

30,510 1,827,438

39,103

105

89

2,150

39,192

41,342

66,822

372,030

66,822

372,030

438,852

12,497

149,304

23

78,015

15,303

1,079

994

70

23,721

12,590

268,416

281,006

808

68,411

23

6,729

1,924

1,079

831

78,147

78,978

11,689

80,893

71,286

13,379

990

11,689

166,548

178,237

non-interest-bearing
Placements with other banks, net of
allowance for placements losses
fixed rate
variable rate
non-interest-bearing

70

23,721

70

23,721

23,791

752

28

1,381

2,922

3,866

3,251

87

407

11,431

7,171

59,710

3,634

77,227

17,413

94,640

fixed rate

179

28

1,252

2,922

3,052

3,143

87

407

11,431

7,171

16,001

13,671

29,672

variable rate

573

129

814

108

1,516

108

1,624

59,710

3,634

59,710

3,634

63,344

2,427

14,087

18,832

36,295

25,771

48,118

9,377

42,792

503,653

77,539

39,896

20,365

599,956

239,196

839,152

2,427

11,732

18,832

36,295

25,771

47,656

9,377

42,792

503,653

77,539

560,060

216,014

776,074

variable rate

2,355

462

2,817

2,817

non-interest-bearing

39,896

20,365

39,896

20,365

60,261

774,424 2,567,850 236,522

Securities held for trading

non-interest-bearing
Securities available-for-sale
fixed rate

Loans, net of allowance


for loan losses
fixed rate
variable rate

367,622

83,801

354,337

89,224

207,272

399,251

433,738

38,733

5,392

79,611

23,311

252,269

35,647

164,949

88,045

353,642

767,576 2,284,478 231,130

288,011

60,490

102,068

53,577

42,323

311,206

80,096

1,423,979 2,796,976 4,220,955

6,848

non-interest-bearing

283,372

311,467 1,621,955 4,242,286 5,864,241


159,243 1,133,843 1,293,086

38,733

311,467

38,733

311,467

350,200

10,860

63,374

5,076

1,527

1,481

36,902

2,541

542,000

30,974

14,036

598

657,839

51,530

709,369

fixed rate

10,648

56,697

4,553

1,527

1,454

36,902

2,541

542,000

30,974

637,126

50,170

687,296

variable rate

212

6,677

523

27

6,677

762

7,439

non-interest-bearing

14,036

598

14,036

598

14,634

889,464 1,377,086 873,489 2,361,421

Securities held-to-maturity

Derivative financial instruments

136,282

812,239

8,578

19,996

31,973

41,671

819,747

85,034

809,065

8,578

19,996

31,973

41,671

222,616 752,057 1,541,674

51,248

3,174

1,181,317 1,767,464 2,948,781

fixed rate

511,452 1,154,470 121,432

variable rate

378,012

non-interest-bearing

34,609 1,939,786 4,647,022 6,586,808


758,469 2,844,949 3,603,418

34,609

34,609

34,609

As at 31 December 2014:
Within 1 month
HUF

Currency

Over 1 month and


within 3 months
HUF Currency

Over 3 moths and


within 12 months
HUF Currency

Over 1 year and


within 2 years
HUF Currency

Over 2 years
HUF

Currency

Non-interestbearing
HUF Currency

Total
Total
HUF

Currency

21,809

238,720

469,554

LIABILITIES
Amounts due to banks,
the Hungarian Government,
deposits from the National Bank
of Hungary and other banks
fixed rate
variable rate
non-interest-bearing
Deposits from customers
fixed rate
variable rate
non-interest-bearing
Liabilities from issued securities
fixed rate

48,545

379,132

2,698

43,788

35,659

14,911

5,144

4,051

146,454

5,863

48,545

241,159

1,209

137,973

1,489

220

708,274

17,169

9,371

13,890

5,144

4,051

146,454

5,863

210,723

282,132

492,855

26,619

26,288

1,021

27,777

165,613

193,390

21,809

220

21,809

22,029

220

1,976,745 2,380,597

449,672

367,013

178,753

604,481

37,652

68,263 1,172,388

264,464

9,572

163,878 3,824,782 3,848,696 7,673,478

1,557,114

980,269

441,702

349,788

178,753

588,534

37,652

54,368

41,176

26,410

2,256,397 1,999,369 4,255,766

419,631 1,400,328

7,970

17,225

15,947

13,895 1,131,212

238,054

1,558,813 1,685,449 3,244,262

9,572

163,878

9,572

163,878

173,450

6,142

5,995

5,683

15,831

12,544

32,782

21,526

11,148

144,393

506

8,022

2,512

198,310

68,774

267,084
247,111

6,142

5,384

5,683

7,365

12,544

32,420

21,526

11,148

144,393

506

190,288

56,823

variable rate

611

8,466

362

9,439

9,439

non-interest-bearing

8,022

2,512

8,022

2,512

10,534

Derivative financial instruments

794,288 1,514,836

982,978 2,318,214

193,875

732,283

6,698

19,847

23,515

41,313

26

fixed rate

628,184 1,033,097

172,690 1,013,732

190,851

701,466

6,698

19,847

23,515

41,313

1,021,938 2,809,455 3,831,393

variable rate

166,104

481,739

810,288 1,304,482

3,024

30,817

26

3,635

26

3,635

3,661

29,375

16,779

234,642

1,172

281,968

281,968

fixed rate

234,642

234,642

234,642

variable rate

29,375

16,779

46,154

46,154

non-interest-bearing

1,172

1,172

1,172

77,235 (169,584) (166,491)

73,148

170,778

1,558

45,299 201,427

573,418

512,061

non-interest-bearing
Subordinated bonds and loans

Net position

144

652,817

(91,764) (247,305)

3,635 2,001,380 4,630,128 6,631,508


979,416 1,817,038 2,796,454

608,475 1,120,536

OTP Bank Annual Report 2014

2014 angol.indd 144

5/18/15 12:46 PM

As at 31 December 2013:
Within 1 month

Over 1 month and


within 3 months
Currency
HUF Currency

HUF

Over 3 moths and


within 12 months
HUF Currency

Over 1 year and


within 2 years
HUF Currency

Over 2 years
HUF

Currency

Non-interestbearing
HUF Currency

Total
Total
HUF

Currency

ASSETS
Cash, amounts due from banks and
balances with the National Banks
fixed rate
variable rate

51,834

51,999

49,234

15,062

2,600

36,937

32,423

non-interest-bearing
Placements with other banks, net of
allowance for placements losses
fixed rate

208

143

54

84

68,122

366,681

120,164

418,961

539,125

14

54

84

49,248

15,209

64,457

194

134

2,794

37,071

39,865

68,122

366,681

68,122

366,681

434,803

189,021

27,182

919

4,804

1,033

18,097

33,456

240,023

273,479

32,423

168,781

7,059

919

4,677

32,423

181,436

213,859

variable rate

20,240

20,123

127

40,490

40,490

non-interest-bearing

1,033

18,097

1,033

18,097

19,130

211,318

81

2,515

2,104

4,629

6,019

604

2,019

3,562

28,279

73,201

7,209

295,829

45,711

341,540
260,586

Securities held for trading


fixed rate

211,318

81

2,327

2,104

4,484

5,808

604

2,019

3,562

28,279

222,295

38,291

variable rate

188

145

211

333

211

544

non-interest-bearing

73,201

7,209

73,201

7,209

80,410

1,152,169

38,649

10,449

36,614

26,967

52,259

37,793

48,589

87,696

96,282

30,794

18,994 1,345,868

291,387 1,637,255

1,152,169

36,443

10,449

35,109

26,967

52,259

37,793

48,066

87,696

96,282

1,315,074

268,159 1,583,233

variable rate

2,206

1,505

523

4,234

4,234

non-interest-bearing

30,794

18,994

30,794

18,994

49,788

927,001 2,354,717 267,460

Securities available-for-sale
fixed rate

Loans, net of allowance


for loan losses
fixed rate
variable rate

884,164

58,677

401,809

38,844

193,812

305,968

496,783

53,295

8,559

136,371

13,891

350,547

4,400

191,254

31,227

461,702

924,652 2,018,621 258,901

747,793

44,786

51,262

34,444

2,558

274,741

35,081

1,537,524 2,855,315 4,392,839

2,349

non-interest-bearing

336,096

262,680 1,651,245 4,593,965 6,245,210


60,426 1,475,970 1,536,396

53,295

262,680

53,295

262,680

315,975

1,653

10,682

2,692

5,368

25,977

57,681

1,301

434,086

26,693

12,782

1,136

520,599

59,452

580,051

fixed rate

1,429

2,199

341

25,946

57,681

1,301

434,086

26,693

492,108

57,568

549,676

variable rate

224

10,682

493

5,027

31

15,709

748

16,457

non-interest-bearing

12,782

1,136

12,782

1,136

13,918

577,139 1,217,265 473,140 1,004,215

75,883

100,740

12,228

28,152

30,284

21,430

fixed rate

255,095

787,732

30,759

189,203

52,259

97,755

12,149

28,152

30,284

21,430

380,546 1,124,272 1,504,818

variable rate

322,044

429,533 442,381

815,012

23,624

2,985

79

788,128 1,247,530 2,035,658

666

Securities held-to-maturity

Derivative financial instruments

non-interest-bearing

666 1,168,674 2,372,468 3,541,142

666

666

As at 31 December 2013:
Within 1 month

Over 1 month and


within 3 months
Currency
HUF Currency

HUF

Over 3 moths and


within 12 months
HUF Currency

Over 1 year and


within 2 years
HUF Currency

Over 2 years
HUF

Currency

Non-interestbearing
HUF Currency

Total
Total
HUF

Currency

LIABILITIES
Amounts due to banks,
the Hungarian Government,
deposits from the National Bank
of Hungary and other banks
fixed rate
variable rate
non-interest-bearing
Deposits from customers
fixed rate
variable rate
non-interest-bearing
Liabilities from issued securities
fixed rate
variable rate
non-interest-bearing
Derivative financial instruments
fixed rate
variable rate
non-interest-bearing
Subordinated bonds and loans

328,326

169,044

10,336

315,291

135,680

6,548

13,035

33,364

3,788

60,570

67,457

11,223

798

10,264

85,647

26,184

12,323

2,040

504,887

279,325

784,212

1,839

1,041

9,822

798

10,171

85,647

25,541

409,325

183,053

592,378

58,731

66,416

1,401

93

643

83,239

94,232

177,471

2,040

12,323

2,040

14,363

12,323

1,485,295 1,972,383 483,898

472,617

208,557

727,571

106,210

85,970

900,609

239,337

9,022

175,137 3,193,591 3,673,015 6,866,606

1,119,266

1,913,754 2,079,925 3,993,679

917,332 463,338

366,029 1,055,051

463,968

208,450

595,679

106,210

73,423

16,490

29,523

20,560

8,649

107

131,892

12,547

884,119

209,814

1,270,815 1,417,953 2,688,768

9,022

175,137

9,022

175,137

184,159

6,767

3,510

17,874

33,748

21,372

126,792

26,578

39,431

153,519

3,610

8,556

3,461

234,666

210,552

445,218

6,436

3,510

17,729

21,524

20,713

126,792

25,040

39,431

121,923

3,610

191,841

194,867

386,708

331

145

12,224

659

1,538

31,596

34,269

12,224

46,493

8,556

3,461

8,556

3,461

12,017

434,554 1,368,756

64,868 1,459,170

44,510

129,093

28,699

28,541

22,221

21,096

624

434,025

593,255

63,836

155,299

40,519

106,518

28,699

28,541

22,221

21,096

529

775,501

1,032 1,303,871

3,991

22,575

594,852 3,007,280 3,602,132


589,300

904,709 1,494,009

5,552 2,101,947 2,107,499

624

624

624

100

27,746

15,117

221,041

3,158

267,162

267,162

fixed rate

221,041

221,041

221,041

variable rate

100

27,746

15,117

42,963

42,963

non-interest-bearing

3,158

3,158

3,158

(96,737) (170,372) (422,019)

(15,135)

163,003 209,326

491,043

607,839

Net position

696,942

339,592 187,478

109,751 (300,400)

584,633 1,192,472

IFRS consolidated nancial statements

2014 angol.indd 145

145

5/18/15 12:46 PM

NOTE 38:

CONSOLIDATED EARNINGS PER SHARE (in HUF mn)


Consolidated Earnings per share attributable

preference dividends, by the weighted

to the ordinary shares of the Group are

average number of ordinary shares outstanding

determined by dividing consolidated

during the year. Dilutive potential ordinary

Net prot for the year attributable to ordinary

shares are deemed to have been converted into

shareholders, after the deduction of declared

ordinary shares.

Consolidated net profit for the year attributable to ordinary


shareholders (in HUF mn)
Weighted average number of ordinary shares outstanding during
the year for calculating basic EPS (number of share)
Basic Earnings per share (in HUF)
Consolidated net profit for the year attributable to ordinary
shareholders (in HUF mn)
Modified weighted average number of ordinary shares outstanding
during the year for calculating diluted EPS (number of share)
Diluted Earnings per share (in HUF)
Weighted average number of ordinary shares
Average number of Treasury shares
Weighted average number of ordinary shares outstanding
during the year for calculating basic EPS
Dilutive effects of options issued in accordance with the
Remuneration Policy/Management Option Program and
convertible into ordinary shares*
The modified weighted average number of ordinary shares
outstanding during the year for calculating diluted EPS

NOTE 39:

2014

2013

(101,985)

64,199

267,035,159

266,914,990

(382)

241

(101,985)

64,199

267,323,299

267,148,860

(382)

240

280,000,010
12,964,851

280,000,010
13,085,020

267,035,159

266,914,990

288,140

233,870

267,323,299

267,148,860

The ICES bonds could potentially dilute basic

calculation of diluted EPS because they are

EPS in the future, but were not included in the

antidilutive for the year presented.

NET GAIN OR LOSS REALIZED ON FINANCIAL INSTRUMENTS


(in HUF mn)

As at 31 December 2014:

Cash, amounts due from banks and balances


with the National Banks
Placements with other banks, net of allowance
for placements losses
Securities held for trading
Securities available-for-sale
Loans, net of allowance for loan losses
Securities held-to-maturity
Other assets
Derivative financial instruments
Amounts due to banks , the Hungarian Government,
deposits from the National Banks and other banks
Deposits from customers
Liabilities from issued securities
Subordinated bonds and loans
Total

Net interest
gain and loss

Net non-interest
gain and loss

Provision for
impairment

Other
Comprehensive
Income

16,498

3,683

(10)

41,969
700,265
39,934
2,549
6,529

4,275
4,299
9,007

(162)

(297)
(446,820)

16,073

(12,541)

(135,080)
(13,826)
(13,883)
636,097

161,242

178,661

(447,127)

16,073

* The dilutive effect is in connection with the Remuneration Policy.

146

OTP Bank Annual Report 2014

2014 angol.indd 146

5/18/15 12:47 PM

As at 31 December 2013:

Cash, amounts due from banks and balances


with the National Banks
Placements with other banks, net of allowance
for placements losses
Securities held for trading
Securities available-for-sale
Loans, net of allowance for loan losses
Securities held-to-maturity
Derivative financial instruments
Amounts due to banks , the Hungarian Government,
deposits from the National Banks and other banks
Deposits from customers
Liabilities from issued securities
Subordinated bonds and loans
Total

Net interest
gain and loss

Net non-interest
gain and loss

Provision for
impairment

Other
Comprehensive
Income

4,207

5,151

374

924
71,743
765,042
33,002
25,307

313
7,936
7,312
(87)
(1,569)

(262,943)
11

(2,125)

(13,826)

(191,514)
(34,896)
(11,412)
653,728

157,707

171,612

(262,558)

(2,125)

IFRS consolidated nancial statements

2014 angol.indd 147

147

5/18/15 12:47 PM

NOTE 40:

FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn)

In determining the fair value of a nancial asset

the contractual cash-ows are considered

or liability the Group in the case of instruments

for the performing loans and for the

that are quoted on an active market uses the

non-performing loans, the amortized cost

market price. In most cases market price

less impairment is considered as fair value,

is not publicly available so the Group has

the future cash-ows for oating interest rate

to make assumptions or use valuation

instruments are estimated from the yield

techniques to determine the fair value of a

curves as of the end of the reporting period,

nancial instrument. See Note 40. e) for more

the fair value of the deposit which can be due

information about fair value classes applied for

in demand cannot be lower than the amount

nancial assets and liabilities measured at fair

payable on demand.

value in these nancial statements.

148

To provide a reliable estimate of the fair value

Classes of assets and liabilities not measured

of those nancial instrument that are originally

at fair value in the statement of nancial

measured at amortized cost, the Group used

position, income approach was used to convert

the discounted cash-ow analyses (loans,

future cash-ows to a single current amount.

placements with other banks, amounts due

Fair value of current assets is equal to carrying

to banks, deposits from customers). The fair

amount, fair value of liabilities from issued

value of issued securities and subordinated

securities and other bond-type classes of

bonds is based on quoted prices (e.g. Reuters).

assets and liabilities not measured at fair value

Cash and amounts due from banks and

measured based on Reuters market rates,

balances with the National Banks represent

fair value of other classes not measured at

amounts available immediately thus the fair

fair value of the statement of nancial position

value equals to the cost.

measured at discounted cash-ow method.

The assumptions used when calculating

Fair value of loans, net of allowance for loan

the fair value of nancial assets and liabilities

losses measured at discount rate adjustment

when using valuation technique are the

technique, the discount rate is derived from

following:

observed rates of return for comparable assets

the discount rates are the risk free rates

or liabilities that are traded in the market.

related to the denomination currency

Fair value measurements in relation with

adjusted by the appropriate risk premium as

instruments measured not at fair value are

of the end of the reporting period,

categorized in level 2 of the fair value hierarchy.

OTP Bank Annual Report 2014

2014 angol.indd 148

5/18/15 12:47 PM

a) Fair value of nancial assets and liabilities


2014

Cash, amounts due from banks and balances with the


National Banks
Placements with other banks, net of allowance for
placements losses
Financial assets at fair value through profit or loss
Securities held for trading
Fair value of derivative financial instruments
classified as held for trading
Securities available-for-sale
Loans, net of allowance for loan losses
Securities held-to-maturity
Fair value of derivative financial instruments
designated as fair value hedge
Financial assets total
Amounts due to banks, the Hungarian Government,
deposits from the National Banks and other banks
Deposits from customers
Liabilities from issued securities
Fair value of derivative financial instruments
designated as fair value hedge
Fair value of derivative financial instruments classified
as held for trading
Subordinated bonds and loans
Financial liabilities total

2013

Carrying
amount

Fair value

Carrying
amount

Fair value

2,307,632

2,307,632

539,125

539,125

281,006

280,999

273,479

280,984

289,275
94,640

289,275
94,640

415,605
341,540

415,605
341,540

194,635

194,635

74,065

74,065

839,152
5,864,241
709,369

839,152
6,506,922
704,875

1,637,255
6,245,210
580,051

1,637,255
6,635,614
588,899

30,454

30,454

26,803

26,803

10,321,129

10,959,309

9,717,528

10,124,285

708,274

708,284

784,212

765,467

7,673,478
267,084

7,672,819
317,834

6,866,606
445,218

6,874,230
461,956

85,679

85,679

74,695

74,695

183,994

183,994

87,164

87,164

281,968
9,200,477

281,968
9,250,578

267,162
8,525,057

247,605
8,511,117

b) Fair value of derivative instruments


Fair value
Interest rate swaps classified as held for trading
Positive fair value of interest rate swaps classified as held for trading
Negative fair value of interest rate swaps classified as held for trading
Foreign exchange swaps classified as held for trading
Positive fair value of foreign exchange swaps classified as held for trading
Negative fair value of foreign exchange swaps classified as held for trading
Interest rate swaps designated as fair value hedge
Positive fair value of interest rate swaps designated as fair value hedge
Negative fair value of interest rate swaps designated as fair value hedge
Foreign exchange swaps designated as fair value hedge
Positive fair value of foreign exchange swaps designated as fair value hedge
Negative fair value of foreign exchange swaps designated as fair value hedge
CCIRS classified as held for trading
Positive fair value of CCIRS classified as held for trading
Negative fair value of CCIRS classified as held for trading
Mark-to-market CCIRS classified as held for trading
Positive fair value of mark-to-market CCIRS classified as held for trading
Negative fair value of mark-to-market CCIRS classified as held for trading
CCIRS designated as fair value hedge
Positive fair value of CCIRS designated as fair value hedge
Negative fair value of CCIRS designated as fair value hedge
Mark-to-market CCIRS designated as fair value hedge
Positive fair value of mark-to-market CCIRS designated as fair value hedge
Negative fair value of mark-to-market CCIRS designated as fair value hedge
Other derivative contracts designated as fair value hedge
Positive fair value of other derivative contracts designated as fair value hedge
Negative fair value of other derivative contracts designated as fair value hedge
Other derivative contracts classified as held for trading
Positive fair value of other derivative contracts classified as held for trading
Negative fair value of other derivative contracts classified as held for trading
Derivative financial assets total
Derivative financial liabilities total
Derivative financial instruments total

Notional value, net


2014
2013

2014

2013

43,401
(63,691)

53,667
(67,881)

45,929
(67,678)

59,566
(74,603)

48,636
(51,537)

5,357
(5,316)

42,458
(48,154)

5,512
(5,876)

14,032
(3,463)

9,733
(2,639)

8,539
(4,602)

5,836
682

2,437
(2,276)

1,520
(499)

2,276
(2,066)

2,097
(587)

85,010
(53,724)

8,133
(7,521)

83,611
(51,012)

8,883
(9,126)

311

171

13,940
(70,364)

13,934
(68,742)

14,095
(70,124)

13,826
(70,004)

(9,576)

1,538
(2,770)

(9,856)

1,295
(3,339)

45

78
(45)

39

2,617
(547)

17,588
(15,042)
225,089
(269,673)
(44,584)

6,597
(6,446)
100,868
(161,859)
(60,991)

14,592
(11,844)
211,539
(265,336)
(53,797)

2,845
(15,041)
102,648
(178,441)
(75,793)

IFRS consolidated nancial statements

2014 angol.indd 149

149

5/18/15 12:47 PM

c) Hedge accounting
The Group regularly enters into hedging trans-

action do not meet the criteria to account for

actions in order to decrease its nancial risks.

hedge accounting, therefore these transactions

However some economically hedging trans-

were accounted as derivatives held for trading.

The summary of the hedging transactions of the Group are as follows:


As at 31 December 2014:
Types of the hedges
Cash-flow hedges
Fair value hedges
Net investment hedge
in foreign operations*

Description of the
hedging instrument

IRS/Index option
CCIRS and issued
securities

Fair value of the


hedging instrument

HUF 10,578 million

The nature of the


risk being hedged

Interest rate

HUF (5,575) million

Foreign exchange

Fair value of the


hedging instrument

HUF 7,095 million

The nature of the


risk being hedged

Interest rate

HUF (1,743) million

Foreign exchange

As at 31 December 2013:
Types of the hedges
Cash-flow hedges
Fair value hedges
Net investment hedge
in foreign operations*

Description of the
hedging instrument

IRS/Index option
CCIRS and issued
securities

d) Fair value hedges


1. Deposits from customers

the interest rate risk of the interest payments


the Group entered into interest rate swap

The interest payment cash-ows of some

transactions, where the risk of the cash-ows

structured deposits of the Group denominated

from the structured deposits were swapped

in HUF and EUR are exposed to the change

to payments linked to 3 month BUBOR or

of equity prices, equity indices or the change

EURIBOR, resulting in a decrease in the fair

of EUR/HUF exchange rate. In order to hedge

value exposure of the deposits from customers.

Fair value of the hedging instruments

2. Securities available-for-sale

2014
107

2013
101

In order to hedge the interest rate risk of


the cash-ows the Group entered into pay

The Group holds xed interest rate securities

xed-receive oater interest rate swap

denominated in foreign currencies and xed

transactions, where the risk from the

interest rate government bonds denominated

cash-ows of the securities are swapped to

in HUF within the available-for-sale

payments linked to 3 or 12 month EURIBOR

portfolio. These xed interest rate securities

and the risk from the cash-ows of the bonds

and bonds are exposed to the fair value risk

are swapped to payments linked to 6 month

driven by the changes in the risk-free interest

BUBOR, resulting in a decrease in the fair value

rates.

exposure of the securities available-for-sale.

Fair value of the hedging instruments

2014
(2,570)

2013
(879)

* The objective of these hedge relationships is to mitigate the risk of changes in value of net investments in foreign subsidiaries
(namely: OTP Banka Slovensko a.s., DSK Bank EAD, Crnogorska komercijalna banka a.d., OTP banka Hrvatska d.d.) due to change in
foreign exchange rates.

150

OTP Bank Annual Report 2014

2014 angol.indd 150

5/18/15 12:47 PM

3. Loans to customers

cash-ows the Group entered into pay-xed,


receive-oater interest rate swap transactions,

The Group has xed interest rate loans

where the risk of the payments from the loans

denominated in various currencies. These xed

are swapped to payments linked to 3 month

interest rate loans are exposed to fair value risk

EURIBOR or BUBOR resulting in a decrease in

of changes of risk-free interest rates.

the interest rate fair value exposure of the loans

In order to hedge the interest rate risk of the

to customers.
2014
(417)

Fair value of the hedging instruments

4. Issued securities

2013
(518)

transactions. In the case of IRS transactions the


xed cash-ows were swapped to payments

The cash-ows of the xed rate securities

linked to 3 month EURIBOR or BUBOR, resulting

issued by the Group are exposed to the change

a decrease in the interest rate and foreign

in the EUR/HUF foreign exchange rate and the

exchange exposure of issued securities.

risk of change in the risk-free interest rates of

Certain structured bonds are hedged by options

EUR and HUF. The interest rate risk and foreign

which give the owner the right to get amount

exchange risk related to these securities are

of the structure which is equal to the structure

hedged with EUR and HUF IRS and index option

of the hedged bond.

Fair value of the hedging IRS instruments


Fair value of the hedging index option instruments

2014
13,449
9

2013
8,379
12

As at 31 December 2014:
Types of hedged items

Securities available-for-sale
Loans to customers
Deposits from customers
Liabilities from issued securities
Liabilities from issued securities

Types of
hedging
instruments
IRS
IRS
IRS
IRS
Index option

Fair value
of the
hedged items
HUF 286,344 million
HUF 12,158 million
HUF 1,627 million
HUF 88,309 million
HUF 651 million

Fair value
of the hedging
instruments
HUF (2,570) million
HUF (417) million
HUF 107 million
HUF 13,449 million
HUF 9 million

Gains/Losses
on the hedged
on hedging
items
instruments
HUF 1,691 million
HUF (1,691) million
HUF (101) million
HUF 101 million
HUF (6) million
HUF 6 million
HUF (5,070) million
HUF 5,070 million
HUF 3 million
HUF (3) million

Types of
hedging
instruments
IRS
IRS
IRS
IRS
Index option

Fair value
of the
hedged items
HUF 23,629 million
HUF 12,866 million
HUF 5,224 million
HUF 94,344 million
HUF 644 million

Fair value
of the hedging
instruments
HUF (879) million
HUF (518) million
HUF 101 million
HUF 8,379 million
HUF 12 million

Gains/Losses
on the hedged
on hedging
items
instruments
HUF (388) million
HUF 388 million
HUF (540) million
HUF 540 million
HUF (197) million
HUF 197 million
HUF (6,640) million
HUF 6,640 million
HUF (8) million
HUF 8 million

As at 31 December 2013:
Types of hedged items

Securities available-for-sale
Loans to customers
Deposits from customers
Liabilities from issued securities
Liabilities from issued securities

IFRS consolidated nancial statements

2014 angol.indd 151

151

5/18/15 12:47 PM

e) Fair value classes


Methods and signicant assumptions used to

observable for the asset or liability

determine fair value of the different classes of

either directly or indirectly. Fair value

nancial instruments:

measurements in relation with

Level 1: quoted prices (unadjusted) in active

instruments measured not at fair value

markets for identical assets or


liabilities;

are categorized in level 2;


Level 3: inputs for the asset or liability that are

Level 2: inputs other than quoted prices

not based on observable market data

included within Level 1, that are

(unobservable inputs).

The following table shows an analysis of nancial instruments recorded at fair value by level of
the fair value hierarchy:
As at 31 December 2014
Financial assets at fair value through profit
or loss
from this: securities held for trading
from this: positive fair value of derivative
financial instruments classified
as held for trading
Securities available-for-sale
Positive fair value of derivative financial
instruments designated as fair value hedge
Financial assets measured at fair value total
Negative fair value of derivative financial
instruments classified as held for trading
Negative fair value of derivative financial
instruments designated as fair value hedge
Financial liabilities measured at fair
value total
As at 31 December 2013
Financial assets at fair value through profit
or loss
from this: securities held for trading
from this: positive fair value of derivative
financial instruments classified
as held for trading
Securities available-for-sale
Positive fair value of derivative financial
instruments designated as fair value hedge
Financial assets measured at fair value total
Negative fair value of derivative financial
instruments classified as held for trading
Negative fair value of derivative financial
instruments designated as fair value hedge
Financial liabilities measured at fair
value total

Total

Level 1

Level 2

Level 3

288,650

90,053

198,597

94,015

89,496

4,519

194,635

557

194,078

823,458

721,957

97,154

4,347

30,454

30,454

1,142,562

812,010

326,205

4,347

183,994

1,220

182,774

85,679

85,679

269,673

1,220

268,453

Total

Level 1

Level 2

Level 3

414,618

321,194

93,424

340,553

321,133

19,420

74,065

61

74,004

1,628,005

1,474,724

153,254

27

26,803

26,796

2,069,426

1,795,925

273,474

27

87,164

18

87,146

74,695

74,695

161,859

18

161,841

There were no transfers from and to Level 3 among the nancial instruments in year 2014 and 2013.

152

OTP Bank Annual Report 2014

2014 angol.indd 152

5/18/15 12:47 PM

Movements in Level 3 nancial instruments measured at fair value


The following table shows a reconciliation of the opening and closing amount of
Level 3 securities available-for-sale which are recorded at fair value:
Movement on securities available-for-sale
in Level 3
OTP Factoring Ltd.
OTP Factoring Ukarine LLC
DSK Bank EAD
OTP banka Srbija a.d.

Opening
balance

27

Increase
2,103
1,175
967
75

Closing
balance
2,103
1,175
967
102

27

4,320

4,347

Total

NOTE 41:

SEGMENT REPORTING BY BUSINESS AND GEOGRAPHICAL


SEGMENTS (in HUF mn)
The Group distinguishes business and

OTP Real Estate Ltd., OTP Life Annuity Ltd.,

geographical segments. The report on the base

OTP Funds Servicing and Consulting Ltd.,

of the business and geographical segments is

Monicomp Ltd., OTP Building s.r.o., OTP Real

reported bellow.

Slovensko s.r.o.

The reportable segments of the Group on the


base of IFRS 8 are the following:

The reportable business and geographical

OTP Core Hungary, Russia, Ukraine, Bulgaria,

segments of the Group are those components

Romania, Serbia, Croatia, Slovakia, Montenegro,

where:

Leasing subsidiaries, Asset Management

separated incomes and expenses, assets and

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 consolidated nancial statements of the
companies engaged in the Groups underlying

liabilities can be identied 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 nancial information is available.

banking operation in Hungary. These companies


include OTP Bank Hungary Plc., OTP Mortgage
Bank Ltd., OTP Building Society Ltd., OTP
Factoring Ltd., OTP Financing Netherlands Ltd.,

Goodwill/investment impairment
and their tax saving effect:

OTP Holding Ltd., OTP Financing Cyprus and


OTP Financing Solutions B.V. Corporate Centre:

HUF 22,225 million goodwill impairment was

it is separated from OTP Core consolidated

recognized as at 31 December 2014 for

nancial statements, this is a virtual entity

OTP Bank JSC (Ukraine), while at the end of 2013

responsible for rendering debt and capital market

HUF 30,819 million was the effect of goodwill

related to services to the subsidiaries across

impairment after-tax for the same company.

the Group, mainly in the form of capital and


credit nancing.

The tax saving effect was HUF (17,210) million

The results of OTP Factoring Ukraine LLC,

in relation with goodwill and investment

OTP Factoring SRL, OTP Factoring Bulgaria LLC,

impairment of OTP Bank JSC (Ukraine) in the

OTP Factoring Serbia d.o.o., OTP Factoring

year ended as at 31 December 2014. The total

Montenegro d.o.o. and OTP Factoring Slovensko

saving effect was HUF (5,015) million in the

s.r.o. are included into the foreign banks segment.

year 2014 while the same effect at the same

The activities of the other subsidiaries are out of

company was recognized in the amount of

the leasing and fund management activity, like:

HUF (29,440) in year 2013.


IFRS consolidated nancial statements

2014 angol.indd 153

153

5/18/15 12:47 PM

Information regarding the Groups reportable segments is presented below:


As at 31 December 2014:
Main components of the Consolidated
Statement of Recognized Income
in HUF million

OTP Group consolidated


in the Consolidated
Statement of Recognized
Income structure
of accounting reports

Adjustements
on the
accounting in
Recognized
Income

Net profit for the year

(102,258)

Adjustments (total)

OTP Group consolidated


in the Consolidated
Statement of Recognized
Income structure
of management reports
1=a+b
1=2+3+12+16+17

Foreign
banks
subtotal
(without
adjustments)

JSC
OTP Bank
(Russia)

OTP Bank
JSC
(Ukraine)

DSK Bank
EAD
(Bulgaria)

3=4+...+11

(102,258)
(220,273)

(220,273)

Dividends and net cash transfers


(after income tax)

191

191

Goodwill/investment impairment
(after income tax)

(5,015)

(5,015)

Bank tax on financial institutions


(after income tax)

(30,193)

(30,193)

Effect of Banco Popolare acquisition


(after income tax)

OTP CORE
(Hungary)

4,131

4,131

Impact of the expected refund


obligation stemming from
the invalidity of using FX margin
in Hungary (after income tax)

(26,923)

(26,923)

Potential refund obligation


stemming from the presumed
unfairness of unilateral
amendments to loan contracts in
Hungary (after income tax)

(128,985)

(128,985)

(7,943)

(7,943)

(25,536)

(25,536)

(102,258)

220,272

118,014

137,418

(17,196)

(14,541)

(43,166)

39,170

(153,643)

295,983

142,340

161,097

(19,237)

(17,678)

(47,322)

43,587

293,187

121,346

414,533

181,952

219,065

101,028

27,269

62,392

801,879

24,180

826,059

375,668

419,716

179,392

52,078

102,238

Risk cost created toward Crimean


exposures in 2014 (after income tax)
Risk cost created toward exposues
to Donetsk and Luhansk in 2014
(after income tax)
Consolidated adjusted net profit
for the year
Profit before income tax
Adjusted operating profit
Adjusted total income
Adjusted net interest income

636,097

73

636,170

266,329

349,904

158,972

45,327

79,116

Adjusted net profit from fees


and commissions

215,656

(46,076)

169,580

94,244

67,306

21,378

10,306

20,262

Adjusted other net non-interest


income

(49,874)

70,183

20,309

15,095

2,506

(958)

(3,555)

2,860

Adjusted other administrative


expenses
Total risk costs
Adjusted provision for impairment
on loan and placement losses
(without the effect of revaluation
of FX)
Other provision (adjustment)
Total other adjustments
(one-off items)*
Income tax
Total Assets
Total Liabilities

(508,692)

97,166

(411,526)

(193,716)

(200,651)

(78,364)

(24,809)

(39,846)

(446,830)

172,081

(274,749)

(23,411)

(238,302)

(118,706)

(74,591)

(18,805)

(446,830)

183,318

(263,512)

(22,088)

(231,272)

(117,623)

(71,947)

(17,526)

(11,237)

(11,237)

(1,323)

(7,030)

(1,083)

(2,644)

(1,279)

2,556

2,556

2,556

51,385

(75,711)

(24,326)

(23,679)

2,041

3,137

4,156

(4,417)

10,971,052

10,971,052

7,251,833

4,678,642

750,747

423,363

1,603,812

9,706,886

9,706,886

5,932,448

4,122,494

638,968

417,903

1,355,819

( ) used at: provisions, impairment and expenses.


* * One-off items consist of: revaluation result of FX swap at OTP Core in the amount of HUF (824) million; result of the treasury share swap agreement in the amount of
HUF 3,380 million.

154

OTP Bank Annual Report 2014

2014 angol.indd 154

5/18/15 12:47 PM

OTP Bank
Romania S.A.
(Romania)

OTP banka
Srbija a.d.
(Serbia)

OTP banka
Hrvatska d.d.
(Croatia)

OTP Banka
Slovensko a.s.
(Slovakia)

Crnogorska
komercijalna
banka a.d.
(Montenegro)

Non-banking
subsidiaries
subtotal

Leasing
subsidiaries

Asset
Management
subsidiaries

Other
subsidiaries

Corporate
Centre

Eliminations
and
adjustments

10

11

12=13+14+15

13

14

15

16

17

765

49

103

33

391

(1,172)

(1,588)

5,529

(5,113)

(1,210)

174

765

45

627

367

372

793

(1,508)

6,753

(4,452)

(1,433)

1,120

9,807

1,358

7,527

5,895

3,789

13,404

5,970

6,704

730

(1,433)

1,545

23,410

8,555

25,426

17,099

11,518

43,483

14,073

9,041

20,369

(1,175)

(11,633)

19,388

6,612

17,923

14,207

8,359

21,675

17,405

81

4,189

(1,175)

(563)

2,429

1,851

5,203

3,000

2,877

7,934

(2,611)

9,895

650

96

1,593

92

2,300

(108)

282

13,874

(721)

(935)

15,530

(11,166)

(13,603)

(7,197)

(17,899)

(11,204)

(7,729)

(30,079)

(8,103)

(2,337)

(19,639)

(258)

13,178

(9,042)

(1,313)

(6,900)

(5,528)

(3,417)

(12,611)

(7,478)

49

(5,182)

(425)

(8,881)

(1,202)

(5,747)

(5,277)

(3,069)

(9,682)

(8,312)

(1,371)

(470)

(161)

(111)

(1,153)

(251)

(348)

(2,929)

834

48

(3,811)

45

(524)

(334)

19

(1,965)

(80)

(1,224)

(661)

223

(946)

476,352

109,509

654,793

464,296

195,770

370,127

362,858

513

6,756

1,668,257

(2,997,807)

441,371

79,312

583,637

432,554

172,930

345,423

339,162

69

6,192

830,085

(1,523,564)

IFRS consolidated nancial statements

2014 angol.indd 155

155

5/18/15 12:47 PM

As at 31 December 2013:
Main components of the Consolidated
Statement of Recognized Income
in HUF million

OTP Group consolidated


in the Consolidated
Statement of Recognized
Income structure
of accounting reports

Adjustements
on the
accounting in
Recognized
Income

Net profit for the year

64,108

Adjustments (total)

OTP Group consolidated


in the Consolidated
Statement of Recognized
Income structure
of management reports
1=a+b
1=2+3+12+16+17

OTP CORE
(Hungary)

Foreign
banks
subtotal
(without
adjustments)

JSC
"OTP Bank"
(Russia)

OTP Bank
JSC
(Ukraine)

DSK Bank
EAD
(Bulgaria)

3=4+...+11

26,066

2,356

6,715

30,222

64,108
(81,775)

(81,775)

Dividends and net cash transfers


(after income tax)

(406)

(406)

Goodwill/investment impairment
(after income tax)

(29,440)

(29,440)

Bank tax on financial institutions


(after income tax)

(43,219)

(43,219)

Fine imposed by the Hungarian


Competition Authority
(after income tax)

(3,177)

(3,177)

Corporate tax impact of the transfer


of general risk reserves to retained
earnings

(5,533)

(5,533)

81,773

145,882

114,879

Consolidated adjusted net profit


for the year
Profit before income tax

64,108
85,052

99,841

184,894

143,836

36,051

3,409

11,162

33,758

347,621

100,088

447,710

194,390

242,667

124,223

40,285

55,089

874,392

(9,482)

864,910

384,587

449,345

207,493

72,811

92,965

Adjusted net interest income

653,728

(602)

653,126

273,276

365,043

184,041

53,385

72,908

Adjusted net profit from fees


and commissions

201,757

(34,821)

166,936

91,507

71,612

21,990

17,020

18,208

18,907

25,941

44,848

19,804

12,690

1,462

2,406

1,849

Adjusted operating profit


Adjusted total income

Adjusted other net non-interest


income
Adjusted other administrative
expenses
Total risk costs
Adjusted provision for impairment
on loan and placement losses
(without the effect of revaluation
of FX)
Other provision (adjustment)
Total other adjustments
(one-off items)*
Income tax
Total Assets
Total Liabilities

(526,771)

109,570

(417,201)

(190,197)

(206,678)

(83,270)

(32,526)

(37,876)

(262,569)

(9,890)

(272,459)

(54,093)

(206,616)

(120,814)

(29,123)

(21,331)

(262,569)

28

(262,541)

(48,899)

(204,318)

(121,310)

(27,431)

(20,723)

(9,918)

(9,918)

(5,194)

(2,298)

496

(1,692)

(608)

9,643

9,643

3,539

(20,944)

(18,068)

(39,012)

(28,957)

(9,985)

(1,053)

(4,447)

(3,536)

10,381,047

10,381,047

6,454,938

4,597,110

940,320

617,730

1,343,595

8,871,715

8,871,715

5,210,465

3,921,006

762,414

504,495

1,122,843

( ) used at: provisions, impairment and expenses.


* * One-off items consist of: revaluation result of FX swap at OTP Core in the amount of HUF 715 million; gain on the repurchase of own upper and lower Tier2 capital in the amount
of HUF 6,104 million; result of the treasury share swap agreement in the amount of HUF 2,824 million.

156

OTP Bank Annual Report 2014

2014 angol.indd 156

5/18/15 12:47 PM

OTP Bank
Romania S.A.
(Romania)

OTP banka
Srbija a.d.
(Serbia)

OTP banka
Hrvatska d.d.
(Croatia)

OTP Banka
Slovensko a.s.
(Slovakia)

Crnogorska
komercijalna
banka a.d.
(Montenegro)

Non-banking
subsidiaries
subtotal

Leasing
subsidiaries

Asset
Management
subsidiaries

Other
subsidiaries

Corporate
Centre

Eliminations
and
adjustments

10

11

12=13+14+15

13

14

15

16

17

(4,143)

(13,246)

2,209

1,152

801

1,038

2,286

3,681

(4,929)

2,398

1,501

(4,143)

(13,235)

2,796

1,503

801

2,005

2,357

4,284

(4,636)

2,832

170

7,147

409

7,909

4,099

3,506

12,688

6,566

4,226

1,896

(3,272)

1,237

20,375

7,580

22,696

14,909

10,516

46,423

17,447

6,692

22,284

(3,105)

(12,340)

14,254

4,553

16,010

12,088

7,804

20,042

15,490

66

4,486

(3,105)

(2,130)

2,269

1,671

4,878

3,101

2,475

3,876

(2,555)

6,690

(259)

(59)

3,852

1,356

1,808

(280)

237

22,505

4,512

(64)

18,057

(10,151)

(13,228)

(7,171)

(14,787)

(10,810)

(7,010)

(33,735)

(10,881)

(2,466)

(20,388)

(167)

13,576

(11,290)

(13,644)

(5,113)

(2,596)

(2,705)

(10,683)

(4,209)

58

(6,532)

(1,067)

(11,109)

(13,002)

(5,142)

(2,594)

(3,007)

(7,544)

(4,413)

(3,131)

(1,780)

(181)

(642)

29

(2)

302

(3,139)

204

58

(3,401)

713

6,104

(11)

(587)

(351)

(967)

(71)

(603)

(293)

(434)

1,331

449,789

86,136

538,112

425,219

196,209

552,425

325,716

9,742

216,967

1,561,552

(2,784,978)

420,689

62,086

475,231

398,191

175,057

444,291

294,859

2,315

147,117

865,010

(1,569,057)

IFRS consolidated nancial statements

2014 angol.indd 157

157

5/18/15 12:47 PM

NOTE 42:

SIGNIFICANT EVENTS DURING THE YEAR ENDED


31 DECEMBER 2014
1) Government measures related
to customer loan contracts

4) Incorporation of OTP Financing


Malta Company Ltd.

See details in Note 2.28.

On 29 October 2014 OTP Financing


Malta Company Ltd. was incorporated
in Malta. The company has a share capital

2) Acquisition in Croatia

of EUR 105,000,000 and is under


100% ownership (direct and indirect)

By setting the purchase price on 24 April 2014,

of the Bank.

the Group accomplished its Croatian acquisition.


On 31 January 2014 OTP banka Hrvatska d.d.
signed a purchase agreement with the Croatian
Banco Popolare d.d. on acquiring a 98.37% stake

5) Incorporation of OTP Holding


Malta Ltd.

in the bank. Following the submission of all the


relevant documents the Croatian Central Bank

On 30 June 2014 OTP Holding Malta Limited

approved the purchase of the majority stake.

has been registered by the Registrar

OTP banka Hrvatska accomplished the merge

of Companies. The registered capital of

with Banco Popolare in December, 2014. The

the Company EUR 104.95 million and the

Group gained whole control over the company

direct and indirect ownership ratio of OTP Bank

and will be fully consolidated from January, 2015.

is 100%.

As a result of the deal OTP banka Hrvatska d.d.


will enhance its presence in Northern Croatia,
Zagreb and Slavonia in particular, mainly in the

6) Term Note Program

retail segment.
See details in Note 15.

3) Purchase of Banco Comercial


Portugus
On 30 July 2014 OTP Bank Romania S.A. signed

7) Judgment of the Competition


Council of the Hungarian
Competition Authority

an agreement in Bucharest with Banco Comercial


Portugus on the purchase of its 100% ownership

See details in Note 28.

in its Romanian subsidiary. The purchase price


was EUR 39 million. As a result of the acquisition
the market share of OTP Bank Romania S.A. will

8) Legal dispute in Montenegro

th

rise to 2.1% elevating the bank into the 11 place


amongst the Romanian banks.

158

See details in Note 28.

OTP Bank Annual Report 2014

2014 angol.indd 158

5/18/15 12:47 PM

NOTE 43:

POST BALANCE SHEET EVENTS


1) Act on Fair banking

the law on conversion, thus clients under the


scope of the conversion law did not experience

Act LXXVIII of 2014 known as Act on Fair

any negative effect of the CHF strengthening.

banking was promulgated that modied the

The Bank fully hedged the open EUR/HUF

Act CLXII of 2009 on Consumer Credit.

positions derived from the conversion of FX

The Act on Fair banking is aimed at making the

mortgage loans to HUF on the FX tenders of the

variation in interest of customer loan contracts

NBH, while the open EUR/CHF and EUR/JPY

transparent and traceable. Regulations of the

positions were hedged on the market until the

act are effective from 1 February 2015.

end of 2014.

The Act includes new regulations for

Within the Hungarian household loan portfolio at

modication of loan contracts, rules for

the end of 2014 the net volume of CHF customer

uncharged cancellation by clients, special

loans at OTP Core stood at HUF 12 billion

directions for foreign currency loans and

equivalent, and the net volume of CHF car

rules of change for new contract conditions.

nancing loans at Merkantil Bank Ltd. reached

The Act prescribes in relation with unilateral

HUF 82 billion equivalent. The car nancing

amendment of contractual clauses that

loans are not subject to the conversion law.

interest, spread, cost and fee can be solely

However, the monthly instalments increase

modied disadvantageously. Disadvantageous

due to the CHF strengthening may be mitigated

amendment for clients is not allowed in other

(to a different extent at individual clients) by the

conditions.

reduction in the nominal interest rate according


to Curia Law and Act on Settlement, and the
compensation may lower the loan principal.

2) The impact of CHF strengthening


started in January 2015 on the Group

In Romania the subsidiary of the Bank had


HUF 134 billion equivalent net CHF mortgage
loan volumes at the end of 2014. OTP Bank

On 15 January 2015 the Swiss National Bank

Romania S.A. was the rst one to react to the

announced the abandonment of the CHFs

step of the Swiss National Bank abolishing

exchange rate oor set at 1.2 against the

the peg to the euro: on 16 January 2015 the

euro. After the decision, the CHF sharply and

Romanian subsidiary announced that in

substantially strengthened against the EUR and

order to mitigate the negative impact of CHF

other foreign currencies in the CEE region:

appreciation on monthly instalments the interest

the CHF appreciated against the EUR from

margin will be reduced by 1.5 ppts for 3 months

1.2 CHF/EUR to under the parity, then it went

for those customers who had variable-rate CHF

up to 1.08 until 19 February. According to NBHs

mortgage loans (in accordance with effective

data the CHF strengthened by 20% against

conditions and depending on the antecedents

the HUF on the day of the announcement, the

of the loans). Clients can apply for this scheme

devaluation moderated to 7% until 19 February.

until 27 February 2015 in the branches.

In Hungary, according to the Act on Conversion

By 12 February the take-up ratio reached 40%

into HUF the CHF mortgage loans are to be

of performing CHF mortgage loan volumes.

converted to forint loans at 256.47 CHF/HUF

The Croatian subsidiary held HUF 22 billion

exchange rate. The conversion became legally

equivalent net CHF mortgage loan volumes

effective on 1 February 2015. (A customer may

on its balance sheet at the end of 2014.

initiate on opt-out if meeting the criteria set

On 19 January 2015 the Croatian Government

by the law.) Starting from 1 January 2015 the

announced that the CHF/HRK rate will be xed

monthly instalments of the FX mortgage loans

at 6.39 for 12 months. The measure took effect

must be calculated with the xed rates set in

on 26 January.

IFRS consolidated nancial statements

2014 angol.indd 159

159

5/18/15 12:47 PM

NOTE 44:

STATEMENT OF ECONOMIC SITUATION AND IMPLICATIONS


ON THE GROUPS FINANCIALS
In 2014, economic developments in Hungary

to a turnaround in private investments too,

were shaped by sluggish external demand,

helping housing-related lending and housing

supportive international money market

investments start to rise.

environment, and intensifying domestic

Following a record low of 1.7% in 2013, ination

demand. The Eurozones economy picked up

fell further: consumer prices dropped by

speed in the second half of the year, and a

0.2% in 2014. In addition to the governments

number of Eurozone periphery countries came

measures, the favourable development in

out of recession. Money market background

agricultural product prices, and oil prices

was supportive even though the Fed started

plunge in the last four months of the year all

phasing out its Quantitative Easing, the Bank

contributed to the lower ination rate.

of Japan and the European Central Bank

A steady fall in ination justied the

introduced further monetary stimuli measures.

continuation of the rate cut cycle in the rst half

The dollars rming, the plunging commodity

of the year, which ended with a 20-basis-point

prices and the Russian conict adversely

cut in July, at 2.1%. In the supportive

affected emerging markets, but this had little

international backdrop (abundance of liquidity),

effect on the less commodity-oriented Central

government bond yields fell further.

and Eastern European region.


Hungarys economy grew by 3.5% in 2014,

Funding for Growth Scheme

stronger than the 1.5% expansion in 2013.

160

Last year broke the trend of the preceding

On 11 September 2013 the National Bank

years, when the main driving force of growth

of Hungary decided on extending the Funding

was net exports. Instead, an increase in

for Growth Scheme with a second phase

investments became the key driver in 2014,

which is to be open from 1 October 2013

while net exports contribution to growth

till 31 December 2015. The total amount of

became negative for the rst time after a long

renancing available for banks in the second

while. In addition to investments, consumption

phase was originally set at HUF 500 billion, in

also picked up: the consumption expenditure of

September 2014 the total amount of available

households rose about 1.5% in 2014, following

funding was lifted to HUF 1,000 billion. The limit

the stagnation in 2013.

can be increased to a maximum of HUF 2,000

As a combined effect of the election year and

billion by the Monetary Council. Similarly to the

the end of the seven-year EU budget, public

rst phase, the central bank renancing carries

investments surged at an extraordinary pace,

zero interest rate, a maximum 10-year tenor

but gross xed capital formation also started

and can be lend over to SMEs by applying a

to increase in the private sector. The key drivers

maximum interest margin of 2.5%.

in the latter were mostly car manufacturing,

The goal of the rst pillar is to originate

and the related capacity increasing projects

new loans, whereas the second pillar is

in the supplier network.

for renancing forint or foreign currency

Picking up from the stagnation in 2013, the

denominated liabilities of SMEs. The share of

households consumption expenditure could

loan contracts concluded under the second

go up in 2014. But its rise lagged behind that of

pillar must not surpass 10% of the total amount

real income, allowing retail savings to expand

of contracts concluded under the two pillars.

faster. The improvement on the labour market

The maximum available amount of loans for

was pronounced mostly in the rst half-year,

SMEs is limited at HUF 10 billion in each pillar.

the increase in employment came to a halt

Under the second phase of the Programme

by the end of the year. The low interest rate

the Group already contracted in the amount

environment and the higher real incomes led

of more than HUF 117 billion until the end of

OTP Bank Annual Report 2014

2014 angol.indd 160

5/18/15 12:47 PM

2014, moreover loan applications in the pipeline

between the end of 2013 and 2014 (to 66%).

exceeded HUF 38 billion.

In February 2015 the expansion and extension


of the IMF programme was announced.

The macroeconomic outlook of Russia and

Originally the credit facility amounted to

Ukraine signicantly deteriorated last year.

USD 27 billion, of which USD 17 billion was

The sanctions imposed because of the

provided by the IMF. According to the IMF the

escalating Russia-Ukraine conict, coupled

credit line will be widened to USD 40 billion.

with the dramatic fall in crude oil prices have

In the meantime the Ukrainian government

signicantly slowed down Russias GDP growth,

downgraded its GDP growth forecast for 2015:

to 0.5%. The roubles weakening pushed the

the economy is estimated to contract by 5.5%

USD/RUB to 58 by December, up from

against the previous forecast of 4.3%.

37 in September. Although the 76% y-o-y


depreciation offsets the lower oil prices
effect on budgetary and export revenues

The Banks operation in Russia

(in rouble terms), it projects considerable


recession through multiple factors. First, in

Since the second half of 2013 the Bank has

an attempt to fend off market turbulence, the

put particular emphasis on the improvement

Central Bank of Russia raised its benchmark

of consumer loan products protability, in

rate by 10.5 percentage points, to 17% which,

line with the ne-tuning of the risk prole of

together with the higher instalment burden of

these portfolios and the efficiency of collection

companies foreign currency loans, holds back

activities. Both the stricter underwriting rules

investment activity. The Russian economys

applied by the Bank, the measures introduced

foreign currency exposure is clearly low and

by the supervisory authorities, the economic

the country can exploit its competitiveness

slowdown and the cyclical setback of the

advantages in the medium term, but the weaker

consumer loan market eventually resulted

currency comes at a price: y-o-y ination reached

in moderated loan dynamics in 2014. As a

11.4% in December. This will lead to a rare

reaction to the deterioration of the operating

decrease in real wages, damaging consumption.

environment in the fourth quarter of 2014

Russias balance of payments position

(signicant weakening of the rouble,

remained stable, but the USD 131 billion net

900 bps base rate hike in total) the Bank halted

capital outow in 2014 is a red ag.

or limited new loan disbursement and made

The central banks reserves stood at

certain pricing steps. Since October no new

USD 389 billion at the end of December, about

credit cards have been sent out and the Bank

four times the reserve requirement.

cut back part of the card limits in December.

In Ukraine, the revolution at the beginning of

Due to the market turbulences, since the middle

2014 ousted President Viktor Yanukovych.

of December cash loan disbursement has been

In response, Russia de facto separated the

suspended.

Crimean peninsula from Ukraine and provided

The total FX-adjusted deposit base

support to separatists in Eastern Ukraine,

dropped by 10% in the rst quarter of 2014

which lead to warfare in the Donetsk and

quarter-over-quarter, than it remained stable

Luhansk regions. Because of capital ight

in the second quarter and grew already both

and despite the IMF loan, Ukraines currency,

in the third and fourth quarter, thus the yearly

the hryvnia depreciated by 92% over the year.

FX-adjusted decrease was 4% altogether. In the

Ukraines central bank lifted its base rate by

fourth quarter the Bank managed to increase

7.5 percentage points to 14% in 2014. Industrial

its deposit base (+3% quarter-over-quarter,

production and GDP may have contracted by

FX-adjusted) despite the unfavourable

10.7% and 7.5% y-o-y, respectively.

market environment deposit rates were

By December, ination grew to 24.9% y-o-y,

increased in line with market trends at the

partly because of the hike in the retail price of

end of December in order to reverse the deposit

natural gas in April. Public debt ratio doubled

outows.

IFRS consolidated nancial statements

2014 angol.indd 161

161

5/18/15 12:47 PM

In the course of 2014 the deposit base of

might decrease in 2015. The operating

JSC OTP Bank (Russia) increased nominally

environment is not expected to improve

by 7% in RUB terms due to the devaluation

materially, thus with respect to elevated risk

of RUB. Due to the fact that the liquidity

costs no material turnaround is expected in

demand of maturing capital market instruments

2015. The Russian operation is expected to

and the funding need of higher loan

remain loss-making in 2015.

volumes increased, the net funding provided


by the Partner Company to the Russian
bank grew to USD 320 million by the end of

The Banks operation in Ukraine

2014 from USD 204 million in 2013 (which


practically meant that JSC OTP Bank (Russia)

In 2014 both the retail and corporate lending

was net lender to the Group in 2013).

activity of the Ukrainian banking group became

It is important to note that the partner company

muted. In the consumer lending segment more

funding provided at the end of 2014 contained

stringent lending standards were introduced

a signicant safety buffer due to the long

already in the rst quarter of 2014. Cash loan

Russian holiday period and the uncertainties

disbursement was suspended from 9 April

stemming from the market turbulences.

2014. However, it was resumed in the second

This is proved well by the fact that the net

half of August, but since then newly sold cash

partner company funding dropped to

loan volumes signicantly lagged behind those

USD 9 million at the end of January 2015.

in the base period (in the fourth quarter the

In 2015 JSC OTP Bank (Russia) will have

volume of new disbursements reached only

RUB 300 million capital market redemptions

14% that a year ago). From the second quarter

(this is the total outstanding amount of issued

of 2014 the cross-sale of credit cards declined

bonds), so from a liquidity perspective the

to practically zero. As for the retail lending the

emphasis will be put on keeping the loan

Bank has remained active only in the point of

and deposit volume developments in balance.

sale (POS) loan segment. As a consequence

Given that the deposit of JSC OTP Bank

of stricter lending conditions new POS loan

(Russia) deposit base remained stable despite

origination melted down by more than 40%

the liquidity shock the Russian banking system

year-over-year in 2014. Regarding corporate

suffered, the liquidity risks are deemed to be

lending the activity is focused rather on using

moderate in 2015, too.

existing credit limits.

The Bank paid back issued bonds in the amount

Customer deposit volumes showed a 9% year-

of RUB 13.3 billion in 2014, out of which

over-year increase (adjusted for the FX-effect).

RUB 1.1 billion matured in the fourth quarter

After the 7% FX-adjusted quarter-over-quarter

of 2014. In the fourth quarter the Russian

decline in the rst quarter, the second quarter

subsidiary received RUB 3 billion subordinated

saw a 7% increase followed by a 4% expansion

loan with 10 years maturity from the Partner

in the third quarter and a 5% growth in the

Company, whereas in 2014 JSC OTP Bank

fourth quarter of 2014. The net loan to deposit

(Russia) repaid altogether RUB 1.2 billion

ratio came down to 137% at the end of 2014,

equivalent subordinated debt to the parent

which marks multi-year low.

company. The capital adequacy ratio of JSC

The decline of USD deposits did not cause

OTP Bank (Russia) stood at 12.1% at the

liquidity problems, because this coincided with

end of 2014.

the decline of FX loan volumes. Latter was


attributable not only to the loan repayments, but

162

In 2015 the DPD090 loan portfolio is expected

to the elevated provisioning, too, which required

to decline, which, together with a stable deposit

the Bank to purchase USD from its UAH liquidity

base might result in improving liquidity

reserves. Both the USD liquidity generated

position, but lower revenues. Due to the

through these transactions and the FX liquidity

increased funding cost net interest income

coming from repayments of performing FX

OTP Bank Annual Report 2014

2014 angol.indd 162

5/18/15 12:47 PM

loans was used by the Ukrainian banking group

of 2014. Leasing and Factoring companies are

(including the bank, the Leasing and Factoring

exempt from banks capital adequacy rules.

company) to repay partner company nancing,

The Ukrainian Factoring company that received

which declined by altogether USD 445 million

HUF 19 billion equivalent capital increase in

in 2014 (without subordinated debt). In January

September 2014 (through converting debt

2015 an additional USD 30 million intragroup

into equity). In 2015 the equity of the Factoring

funding was paid back by OTP Bank JSC

Company is expected to be raised by converting

(Ukraine).

partner company nancing into equity.

The UAH liquidity is managed in Ukraine and

In the second quarter of 2014 the Bank decided

the Ukrainian bank has to prepare for any

to close down its business in the Crimea,

UAH liquidity needs. The excess UAH liquidity

8 branches were closed there. In Donetsk and

is invested typically in assets maturing within

Luhansk counties where special circumstances

1 month, mainly central bank instruments,

prevail the Bank closed altogether 15 branches,

collateralized money market instruments

thus the number of banking outlets declined

(FX swap, repo). The excess liquidity can be

to 2 at the end of 2014. Signicant additional

invested in uncollateralized instruments only

risk cost was created both in Crimea and

in small amount, with strict counterparty risk

the Eastern Ukrainian region (Donetsk

limits and a maturity of 17 days. In 2014 the

and Luhansk), as a result the provision

maturing Ukrainian government bonds were

coverage of total gross loans reached 100% in

not rolled over, at the beginning of 2015 the

Crimea and went up to 99.4% in case of gross

amount of Ukrainian government bonds kept on

loan exposures toward Donetsk and Luhansk

the balance sheet reached only UAH 26 million.

regions.

The UAH liquidity has to safely cover at all times

The Ukrainian market and operating

the UAH money market and capital market

environment was volatile, especially in the time

redemptions within 3 months as well as the

period between the end of 2014 and the writing

potential UAH deposit shocks.

of the report: after the conict intensied again


the parties reached a cease-re accord and

The shareholders equity of the Ukrainian

the IMF assistance programme is likely to be

banking group under IFRS consists of the

expanded, but despite all of these the UAH

impact of the conversion of UAH 800 million

weakened further against the dollar. This points

equivalent subordinated debt into equity

to further losses in Ukraine in 2015 both in case

booked in the fourth quarter of 2014.

of OTP Bank JSC (Ukraine) and the Factoring

The decision about the capital increase was

company. By the end of 2014 the large majority

signed on 12 December 2014, which meant

of exposures toward Crimea, Donetsk and

issue of additional 64,563 pieces of ordinary

Luhansk counties were covered by provisions. If

shares. Compared to December 2013 the

the territorial conict did not escalate, and if the

shareholders equity of the Ukrainian banking

operating environment changed in the positive

group in HUF terms dropped as a result of

direction in Donetsk and Luhansk counties

weakening UAH against HUF, whereas losses

paving the way for banks to operate normally,

realized in 2014 had a negative impact on

that could create the possibility to release part

equity, too. The Ukrainian shareholders equity

of the provision already created there. The

includes that of 3 entities: the Bank, the Leasing

key focus areas are the optimisation of the

and Factoring companies. The standalone

operation and the gradual reduction of OTPs

capital adequacy ratio of the Bank under local

exposures. The funds expected to be granted

regulation stood at 10.4% at the end of 2014,

to the country by supranational institutions as

thus it exceeded the regulatory minimum.

well as the related requirements to implement

This capital adequacy ratio under local

structural changes in the economy might

regulation did not incorporate the impact of the

stabilize the economic situation and the

capital conversion booked in the fourth quarter

exchange rate of the UAH.

IFRS consolidated nancial statements

2014 angol.indd 163

163

5/18/15 12:47 PM

164

OTP Bank Annual Report 2014

2014 angol.indd 164

5/18/15 12:47 PM

IFRS separate nancial statements

2014 angol.indd 165

165

5/18/15 12:47 PM

Statement of nancial position


(separate, based on IFRS, as at 31 December 2014, in HUF million)

Cash, amounts due from banks and balances with the National Bank of Hungary
Placements with other banks, net of allowance for placement losses
Financial assets at fair value through profit or loss
Securities available-for-sale
Loans, net of allowance for loan losses
Investments in subsidiaries, associates and other investments
Securities held-to-maturity
Property and equipment
Intangible assets
Other assets
TOTAL ASSETS
Amounts due to banks and Hungarian Government, deposits from
the National Bank of Hungary and other banks
Deposits from customers
Liabilities from issued securities
Financial liabilities at fair value through profit or loss
Other liabilities
Subordinated bonds and loans
TOTAL LIABILITIES
Share capital
Retained earnings and reserves
Treasury shares
TOTAL SHAREHOLDERS EQUITY
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY

Note
4.
5.
6.
7.
8.
9.
10.
11.
11.
12.

2014
1,897,778
712,112
351,753
1,215,907
1,908,631
604,209
662,947
68,114
36,091
97,930
7,555,472

2013
140,521
632,899
396,565
1,997,491
2,144,701
669,322
525,049
85,447
31,554
49,486
6,673,035

13.

1,142,491

902,744

14.
15.
16.
17.
18.

4,235,256
162,667
375,363
253,952
294,612
6,464,341
28,000
1,070,204
(7,073)
1,091,131
7,555,472

3,677,450
170,779
204,517
242,444
278,241
5,476,175
28,000
1,175,591
(6,731)
1,196,860
6,673,035

19.
20.
21.

Budapest, 17 March 2015


The accompanying notes to separate nancial statements on pages 170 to 245 form an integral part of these separate nancial
statements.

166

OTP Bank Annual Report 2014

2014 angol.indd 166

5/18/15 12:47 PM

Statement of recognized income


(separate, based on IFRS, for the year ended 31 December 2014, in HUF million)
Note
Interest Income
Loans
Placements with other banks, net of allowance for placement losses
Securities available-for-sale
Securities held-to-maturity
Amounts due from banks and balances with National Bank of Hungary
Total Interest Income
Interest Expense
Amounts due to banks and Hungarian Government, deposits from
the National Bank of Hungary and other banks
Deposits from customers
Liabilities from issued securities
Subordinated bonds and loans
Total Interest Expense
NET INTEREST INCOME
Provision for impairment on loan and placement losses
NET INTEREST INCOME AFTER PROVISION FOR IMPAIRMENT ON LOAN AND
PLACEMENT LOSSES
Income from fees and commissions
Expenses from fees and commissions
Net prot from fees and commissions
Foreign exchange gains
Gains on securities, net
Dividend income
Other operating income
Net other operating expenses
from this: provision for impairment on investments in subsidiaries
from this: provision on contingent liabilities due to regulations related
to customer loans
Net operating income
Personnel expenses
Depreciation and amortization
Other administrative expenses
Other administrative expenses
(LOSS)/PROFIT BEFORE INCOME TAX
Income tax (benet)/expense
NET (LOSS)/PROFIT FOR THE YEAR
Earnings per share (in HUF)
Basic
Diluted

2014

2013

162,533
128,444
72,056
36,518
15,556
415,107

189,073
246,968
102,376
30,027
3,720
572,164

127,809

237,984

52,544
4,206
16,825
201,384
213,723
23,213

96,199
15,241
16,922
366,346
205,818
30,533

190,510

175,285

9.
24.
24.
9.

169,041
22,495
146,546
20,581
8,752
42,795
3,294
(285,883)
(226,730)

157,994
24,053
133,941
5,901
12,423
47,583
3,672
(78,663)
(52,550)

2.26, 24.

(43,795)

(210,461)
87,458
22,177
134,793
244,428
(117,833)
(43,364)
(74,469)

(9,084)
85,760
21,657
138,392
245,809
54,333
6,442
47,891

(268)
(267)

172
172

2014
(74,469)
12,777
(61,692)

2013
47,891
1,024
48,915

5., 8., 22.

23.
23.

24.
24.
24.

25.

35.
35.

Statement of comprehensive income


(separate, based on IFRS, for the year ended 31 December 2014, in HUF million)

NET (LOSS)/PROFIT FOR THE YEAR


Fair value adjustment of securities available-for-sale
NET COMPREHENSIVE INCOME

The accompanying notes to separate nancial statements on pages 170 to 245 form an integral part of these separate nancial
statements.

IFRS separate nancial statements

2014 angol.indd 167

167

5/18/15 12:47 PM

Statement of cash-ows
(separate, based on IFRS, for the year ended 31 December 2014, in HUF million)
OPERATING ACTIVITIES
(Loss)/profit before income tax
Depreciation and amortization
Provision for impairment on loan and placement losses
Provision for impairment on investments in subsidiaries
Provision for impairment on other assets
Provision on off-balance sheet commitments and contingent liabilities
Share-based payment
(Unrealised losses)/gains on fair value adjustment of securities
available-for-sale and held for trading
Unrealised gains on fair value adjustment of derivative financial instruments
Net changes in assets and liabilities in operating activities
Changes in financial assets at fair value through profit or loss
Changes in financial liabilities at fair value through profit or loss
Net decrease in loans, net of allowance for loan losses
Increase in other assets, excluding advances for investments
and before provisions for losses
Net increase in deposits from customers
(Decrease)/increase in other liabilities
Net (increase)/decrease in the compulsory reserve established
by the National Bank of Hungary
Dividend income
Income tax paid
Net cash provided by operating activities
INVESTING ACTIVITIES
Net (increase)/decrease in placements with other banks before
allowance for placement losses
Increase in securities available-for-sale
Decrease in securities available-for-sale
Net increase in investments in subsidiaries
Dividend income
Increase in securities held-to-maturity
Decrease in securities held-to-maturity
Additions to property, equipment and intangible assets
Disposal to property, equipment and intangible assets
Net increase in advances for investments included in other assets
Net cash provided by/(used in) investing activities
FINANCING ACTIVITIES
Net increase in amounts due to banks and Hungarian Government,
deposits from the National Bank of Hungary and other banks
Cash received from issuance of securities
Cash used for redemption of issued securities
Increase/(decrease) in subordinated bonds and loans
Payments to ICES holders
Net change in Treasury shares
Dividend paid
Net cash provided by/(used in) nancing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year*
Analysis of cash and cash equivalents
Cash, amounts due from banks and balances with the National Bank of Hungary
Compulsory reserve established by the National Bank of Hungary
Cash and cash equivalents at the beginning of the year
Cash, amounts due from banks and balances with the National Bank of Hungary
Compulsory reserve established by the National Bank of Hungary
Cash and cash equivalents at the end of the year

Note

5., 8., 22.


9.
12.
17.
28.

20.

4.
4.

2014
(117,833)
22,177
23,213
226,730
2,763
42,683
4,393

2013
54,333
21,657
30,533
52,550
281
3,021
5,704

(2,903)

863

5,401

12,629

219,463
(1,990)
205,341

(199,419)
408
158,480

(14,009)

(12,839)

557,789
(17,335)

176,857
10,694

(57,365)

3,477

(42,795)
(2,864)
1,052,859

(47,583)
(5,370)
266,276

(79,217)

32,496

(14,729,107)
15,525,643
(161,617)
42,795
(154,743)
20,663
(18,426)
7,185
(36)
453,140

(23,239,766)
23,193,007
(60,520)
47,583
(151,139)
2,097
(47,794)
16,941
(11)
(207,106)

239,747

75,776

56,165
(69,387)
16,371
(4,159)
(4,250)
(40,594)
193,893
1,699,892
62,835
1,762,727

72,186
(243,974)
(25,509)
(4,288)
(1,316)
(33,595)
(160,720)
(101,550)
164,385
62,835

140,521
(77,686)
62,835
1,897,778
(135,051)
1,762,727

245,548
(81,163)
164,385
140,521
(77,686)
62,835

The accompanying notes to separate nancial statements on pages 170 to 245 form an integral part of these separate nancial
statements.

* See Note 4 and 5.

168

OTP Bank Annual Report 2014

2014 angol.indd 168

5/18/15 12:47 PM

Statement of changes in shareholders equity


(separate, based on IFRS, for the year ended 31 December 2014, in HUF million)
Note

Balance as at 1 January 2013


Net profit for the year
Other comprehensive income
Share-based payment
Payments to ICES holders
Sale of treasury shares
Loss on sale of treasury shares
Acquisition of treasury shares
Dividend for the year 2012
Balance as at 31 December 2013
Net loss for the year
Other comprehensive income
Share-based payment
Payments to ICES holders
Sale of treasury shares
Loss on sale of treasury shares
Acquisition of treasury shares
Dividend for the year 2013
Balance as at 31 December 2014

28.
21.
21.

28.
21.
21.

Share
Capital

Capital
reserve

28,000

28,000

28,000

52

52

52

Share-based
payment
reserve
10,800

5,704

16,504

4,393

20,897

Retained
earnings and
reserves
1,202,132
47,891
1,024

(3,425)

481

(33,600)
1,214,503
(74,469)
12,777

(3,580)

(3,908)

(40,600)
1,104,723

Option
reserve

Treasury
Shares

Total

(55,468)

(55,468)

(55,468)

(4,934)

17,943

(19,740)

(6,731)

27,180

(27,522)

(7,073)

1,180,582
47,871
1,024
5,704
(3,425)
17,943
481
(19,740)
(33,600)
1,196,860
(74,469)
12,777
4,393
(3,580)
27,180
(3,908)
(27,522)
(40,600)
1,091,131

The accompanying notes to separate nancial statements on pages 170 to 245 form an integral part of these separate nancial
statements.

IFRS separate nancial statements

2014 angol.indd 169

169

5/18/15 12:47 PM

N O T E S T O S E PA R AT E F I N A N C I A L
S TAT E M E N T S F O R T H E Y E A R E N D E D
31 DECEMBER 2014

NOTE 1:

ORGANIZATION AND BASIS OF FINANCIAL STATEMENTS

1.1 General information

In 1995, the shares of the Bank were listed


on the Budapest and the Luxembourg Stock

OTP Bank Plc. (the Bank or OTP Bank)

Exchanges and were also listed on the SEAQ

was established on 31 December 1990, when

board on the London Stock Exchange and

the previously State-owned company was

PORTAL in the USA.

transformed into a limited liability company.


These nancial statements were approved by
The Banks registered office address is

the board of directors and authorised for issue

16 Ndor Street, Budapest 1051.

on 17 March 2015.

The structure of the Share capital by shareholders:


Domestic and foreign private and institutional investors
Employees
Treasury shares
Total

2014

2013

97%
2%
1%
100%

97%
2%
1%
100%

The Bank provides a full range of commercial banking services through a nationwide network of 381
branches in Hungary.

Number of the employees of the Bank:


Number of employees
Average number of employees

1.2 Accounting

2014

2013

8,016
8,004

8,133
8,074

Financial Reporting Standards (IFRS). Certain


adjustments have been made to the Banks

The Bank maintains its accounting records

Hungarian separate statutory accounts (see

and prepares its statutory accounts in

Note 38.), in order to present the separate

accordance with the commercial, banking

nancial position and results of operations of

and scal regulations prevailing in Hungary.

the Bank in accordance with all standards and


interpretations approved by the International

The presentation currency of the Bank is the

Accounting Standards Board (IASB).

Hungarian forint (HUF).


The separate nancial statements have been

170

Some of the accounting principles prescribed

prepared in accordance with IFRS as adopted

for statutory purposes are different from those

by the European Union (the EU). IFRS as

generally recognized in international nancial

adopted by the EU do not currently differ from

standards. Due to the fact that the Bank is listed

IFRS as issued by the IASB, except for portfolio

on international and national stock exchanges,

hedge accounting under IAS 39 Financial

the Bank is obliged to present its nancial

Instruments: Recognition and Measurement

position in accordance with the International

(IAS 39) which has not been approved by the EU.

OTP Bank Annual Report 2014

2014 angol.indd 170

5/18/15 12:47 PM

As the Bank does not apply portfolio hedge

by the EU on 20 November 2013 (effective

accounting under IAS 39, there would be no

for annual periods beginning on or after

impact on these separate nancial statements,


had it been approved by the EU before the
preparation of these nancial statements.

1 January 2014),
Amendments to IAS 32 Financial
instruments: presentation Offsetting
Financial Assets and Financial Liabilities,
adopted by the EU on 13 December 2012

1.2.1 The effect of adopting new


and revised International Financial
Reporting Standards effective from
1 January 2014

(effective for annual periods beginning


on or after 1 January 2014),
Amendments to IAS 36 Impairment of
assets Recoverable Amount Disclosures
for Non-Financial Assets, adopted by the EU

The following standards, amendments to the

on 19 December 2013 (effective for annual

existing standards and interpretations issued by

periods beginning on or after 1 January 2014),

the IASB and adopted by the EU are effective for


the current period:
IFRS 10 Consolidated Financial Statements,

Amendments to IAS 39 Financial


Instruments: Recognition and Measurement
Novation of Derivatives and Continuation

adopted by the EU on 11 December 2012

of Hedge Accounting, adopted by the EU

(effective for annual periods beginning

on 19 December 2013 (effective for annual

on or after 1 January 2014),

periods beginning on or after 1 January 2014).

IFRS 11 Joint Arrangements, adopted


by the EU on 11 December 2012 (effective

The adoption of these amendments to the

for annual periods beginning on or after

existing standards has not led to any changes in

1 January 2014),

the Entitys accounting policies.

IFRS 12 Disclosures of Interests in Other


Entities, adopted by the EU on 11 December
2012 (effective for annual periods beginning
on or after 1 January 2014),
IAS 27 (revised in 2011) Separate Financial
Statements, adopted by the EU on

1.2.2 New and revised Standards


and Interpretations issued by IASB
and adopted by the EU but not yet
effective

11 December 2012 (effective for annual


periods beginning on or after 1 January 2014),
IAS 28 (revised in 2011) Investments in

At the date of authorisation of these nancial


statements the following standards,

Associates and Joint Ventures, adopted

amendments to the existing standards and

by the EU on 11 December 2012 (effective

interpretations issued by IASB and adopted by

for annual periods beginning on or after

the EU were in issue but not yet effective:

1 January 2014),

Amendments to various standards

Amendments to IFRS 10 Consolidated

Improvements to IFRSs (cycle 20102012)

Financial Statements, IFRS 11 Joint

resulting from the annual improvement

Arrangements and IFRS 12 Disclosures

project of IFRS (IFRS 2, IFRS 3, IFRS 8, IFRS

of Interests in Other Entities Transition

13, IAS 16, IAS 24 and IAS 38) primarily

Guidance, adopted by the EU on 4 April 2013

with a view to removing inconsistencies and

(effective for annual periods beginning on or

clarifying wording adopted by the EU on

after 1 January 2014),

17 December 2014 (amendments are to be

Amendments to IFRS 10 Consolidated


Financial Statements, IFRS 12 Disclosures
of Interests in Other Entities and IAS 27

applied for annual periods beginning on or


after 1 February 2015),
Amendments to various standards

(revised in 2011) Separate Financial

Improvements to IFRSs (cycle 20112013)

Statements Investment Entities, adopted

resulting from the annual improvement

IFRS separate nancial statements

2014 angol.indd 171

171

5/18/15 12:47 PM

project of IFRS (IFRS 1, IFRS 3, IFRS 13 and

Amendments to IAS 1 Presentation of

IAS 40) primarily with a view to removing

Financial Statements Disclosure Initiative

inconsistencies and clarifying wording

(effective for annual periods beginning

adopted by the EU on 18 December 2014

on or after 1 January 2016),

(amendments are to be applied for annual


periods beginning on or after 1 January 2015),
Amendments to IAS 19 Employee Benets

Amendments to IAS 16 Property, Plant and


Equipment and IAS 38 Intangible Assets
Clarication of Acceptable Methods

Dened Benet Plans: Employee Contributions

of Depreciation and Amortisation (effective

adopted by the EU on 17 December 2014

for annual periods beginning on or after

(effective for annual periods beginning on or

1 January 2016),

after 1 February 2015),


IFRIC 21 Levies adopted by the EU on

Amendments to IAS 16 Property, Plant and


Equipment and IAS 41 Agriculture

13 June 2014 (effective for annual periods

Agriculture: Bearer Plants (effective

beginning on or after 17 June 2014).

for annual periods beginning on or after


1 January 2016),
Amendments to IAS 27 Separate Financial

1.2.3 Standards and Interpretations


issued by IASB but not yet adopted
by the EU

Statements Equity Method in Separate


Financial Statements (effective for annual
periods beginning on or after 1 January 2016),
Amendments to various standards

IFRS 9 Financial Instruments (effective

Improvements to IFRSs (cycle 20122014)

for annual periods beginning on or after

resulting from the annual improvement

1 January 2018),

project of IFRS (IFRS 5, IFRS 7, IAS 19 and

IFRS 14 Regulatory Deferral Accounts

IAS 34) primarily with a view to removing

(effective for annual periods beginning

inconsistencies and clarifying wording

on or after 1 January 2016),

(amendments are to be applied for annual

IFRS 15 Revenue from Contracts with

periods beginning on or after 1 January 2016).

Customers (effective for annual periods


beginning on or after 1 January 2017),
Amendments to IFRS 10 Consolidated

Hedge accounting regarding the portfolio of


nancial assets and liabilities, whose principles

Financial Statements and IAS 28

have not been adopted by the EU, is still

Investments in Associates and Joint

unregulated.

Ventures Sale or Contribution of Assets

According to the Entitys estimates, application

between an Investor and its Associate or

of hedge accounting for the portfolio of

Joint Venture (effective for annual periods

nancial assets or liabilities pursuant to IAS 39:

beginning on or after 1 January 2016),

Financial Instruments: Recognition and

Amendments to IFRS 10 Consolidated

Measurement, would not signicantly impact

Financial Statements, IFRS 12 Disclosure

the nancial statements, if applied as at the

of Interests in Other Entities and IAS 28

balance sheet date.

Investments in Associates and Joint


Ventures Investment Entities: Applying

The adoption of the above presented

the Consolidation Exception (effective

Amendments and new Standards and

for annual periods beginning on or after

Interpretations would have no signicant

1 January 2016),

impact on the separate nancial statements

- Amendments to IFRS 11 Joint

172

except of the application of IFRS 9 which might

Arrangements Accounting for Acquisitions

have signicant impact on the Bank separate

of Interests in Joint Operations (effective

nancial statements, the Bank will analyse

for annual periods beginning on or after

the impact after the adoption of the standard

1 January 2016),

by EU.

OTP Bank Annual Report 2014

2014 angol.indd 172

5/18/15 12:47 PM

NOTE 2:

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Signicant accounting policies applied
in the preparation of the accompanying

2.3 Consolidated nancial


statements

separate nancial statements are


summarized below:

These nancial statements present the


separate nancial position and results of
operations of the Bank. Consolidated nancial

2.1 Basis of presentation

statements are currently being prepared by the


Bank and consolidated net prot for the year

These separate nancial statements have been

and shareholders equity differs signicantly

prepared under the historical cost convention

from that presented in these separate nancial

with the exception of certain nancial

statements. See Note 2.4 for the description of

instruments, which are recorded at fair value.

the method of accounting for investments in

Revenues and expenses are recorded in the

subsidiaries and associated companies in these

period in which they are earned or incurred.

separate nancial statements. The consolidated


nancial statements and the separate nancial

The presentation of separate nancial

statements will be published on the same date.

statements in conformity with IFRS requires

As the ultimate parent, OTP Bank is preparing

the Management of the Bank to make estimates

consolidated nancial statement of OTP Group.

and assumptions that affect the reported


amounts of assets and liabilities and disclosure
of contingent assets and liabilities as at the date

2.4 Investments in subsidiaries

of the nancial statements and their reported


amounts of revenues and expenses during the

Investments in subsidiaries comprise those

reporting period. Actual results could differ

investments where OTP Bank, through direct

from those estimates.

and indirect ownership interest, controls the


nancial and operating policies of the investee.

Future changes in economic conditions,


business strategies, regulatory requirements,

Investments in subsidiaries are recorded

accounting rules and other factors could result

at the cost of acquisition, less impairment

in a change in estimates that could have a

for permanent diminution in value, when

material impact on future separate nancial

appropriate. After initial measurement

statements.

investments in subsidiaries are measured


at cost, in the case of foreign currency
denominated investments for the measurement

2.2 Foreign currency translation

the Bank uses the exchange rate at the


date of transaction.

Monetary assets and liabilities denominated

Impairment is determined based on the future

in foreign currencies are translated into

economic benets of the subsidiary and

HUF that is the presentation currency, at

macroeconomic factors.

exchange rates quoted by the National Bank


of Hungary (NBH) as at the date of the

OTP Bank calculates the fair value based on

separate nancial statements. Income

discounted cash-ow model. The 5 year period

and expenses arising in foreign currencies

explicit cash-ow model serves as a basis

are converted at the rate of exchange on

for the impairment test by which the Bank

the transaction date. Resulting foreign

denes the impairment need on investment in

exchange gains or losses are recorded to the

subsidiaries based on the strategic factors and

separate statement of recognized income.

nancial data of its cash-generating units.

IFRS separate nancial statements

2014 angol.indd 173

173

5/18/15 12:47 PM

OTP Bank in its strategic plan has taken into

Such securities consist of discounted and

consideration the cautious recovery of global

interest bearing Treasury bills, Hungarian

economic situation and outlook, the associated

Government bonds, mortgage bonds, shares in

risks and their possible effect on the nancial

non-nancial commercial companies, shares

sector as well as the current and expected

in investment funds, shares in venture capital

availability of wholesale funding.

funds and shares in nancial institutions.

2.5 Securities held-to-maturity

2.6.2 Derivative nancial


instruments

Investments in securities, traded in active


market (with xed or determinable cash-ows)

In the normal course of business, the

are accounted for on a settlement date basis

Bank is a party to contracts for derivative

and are initially measured at fair value.

nancial instruments, which represent

At subsequent reporting dates, securities that

a very low initial investment compared to

the Bank has the expressed intention and ability

the notional value of the contract and their

to hold to maturity (securities held-to-maturity)

value depends on value of underlying asset

are measured at amortised cost, less any

and are settled in the future. The derivative

impairment losses recognized to reect

nancial instruments used include interest

irrecoverable amounts. The annual amortisation

rate forward or swap agreements and currency

of any discount or premium on the acquisition

forward or swap agreements and options.

of a held-to-maturity security is aggregated

These nancial instruments are used by

with other investment income receivables over

the Bank both for trading purposes and

the term of the investment so that the revenue

to hedge interest rate risk and currency

recognized in each period represents a constant

exposures associated with its transactions

yield on the investment.

in the nancial markets.

Such securities comprise mainly securities


issued by the Hungarian Government, mortgage

Derivative nancial instruments are accounted

bonds and Hungarian Government discounted

for on a trade date basis and are initially

Treasury Bills.

measured at fair value and at subsequent


reporting dates also at fair value. Fair values
are obtained from quoted market prices,

2.6 Financial assets at fair value


through prot or loss

discounted cash-ow models and option pricing


models as appropriate. OTP Bank adopts multi
curve valuation approach for calculating the net

2.6.1 Securities held for trading

present value of future cash-ows based on


different curves used for determining forward

174

Investments in securities are accounted for on a

rates and used for discounting purposes.

settlement date basis and are initially measured

It shows the best estimation of such derivative

at fair value. Securities held for trading are

deals that are collateralised as OTP Bank has

measured at subsequent reporting dates at fair

almost its entire open derivative transactions

value. Unrealised gains and losses on held for

collateralised. Changes in the fair value of

trading securities are recognized in prot or

derivative nancial instruments that do not

loss and are included in the separate statement

qualify for hedge accounting are recognized in

of recognized income for the period. The Bank

prot or loss and are included in the separate

mainly holds these securities to obtain short-term

statement of recognized income for the period.

gains consequently realised and unrealised

Each derivative deal is determined as asset

gains and losses are recognized in the net

when fair value is positive and as liability when

operating income since 31 December 2013.

fair value is negative.

OTP Bank Annual Report 2014

2014 angol.indd 174

5/18/15 12:47 PM

Certain derivative transactions, while

2.8 Offsetting

providing effective economic hedges under


risk management positions of the Bank,

Financial assets and liabilities may be offset

do not qualify for hedge accounting under

and the net amount is reported in the statement

the specic rules of IAS 39 and are therefore

of nancial position when the Bank has a legally

treated as derivatives held for trading with

enforceable right to set off the recognised

fair value gains and losses charged directly

amounts and the transactions are intended

to the separate statement of recognized

to be reported in the statement of nancial

income.

position on a net basis. The Bank does not offset


any nancial assets and nancial liabilities.

2.7 Derivative nancial instruments


designated as a fair value or
cash-ow hedge

2.9 Embedded derivatives


Sometimes, a derivative may be a component

Changes in the fair value of derivatives that are

of a combined nancial instrument that includes

designated and qualify as fair value hedges and

a host contract and a derivative (the embedded

that prove to be highly effective in relation to

derivative) affecting cash-ows or otherwise

the hedged risk, are recorded in the separate

modifying the characteristics of the host

statement of recognized income along with

instrument. An embedded derivative must be

the corresponding change in fair value of the

separated from the host instrument and accounted

hedged asset or liability that is attributable to

for as a separate derivative if, and only if:

the specic hedged risk. The ineffective element

The economic characteristics and risks of the

of the hedge is charged directly to the separate

embedded derivative are not closely related

statement of recognized income. The conditions

to the economic characteristics and risks of

of hedge accounting applied by the Bank are the

the host contract;

following: formally designed as hedge, proper


hedge documentation is prepared, effectiveness

A separate nancial instrument with


the same terms as the embedded derivative

test is performed and based on it the hedge is

would meet the denition of a derivative as

qualied as effective.

a stand-alone instrument; and

Changes in fair value of derivatives that are

The host instrument is not measured at fair

designated and qualify as cash-ow hedges and

or is measured at fair value but changes

that prove to be highly effective in relation to

in fair value are recognised in other

hedged risk are recognized as reserve in other

comprehensive income.

comprehensive income. Amounts deferred


in equity are transferred to the separate
statement of recognized income and classied

2.10 Securities available-for-sale

as revenue or expense in the periods during


which the hedged assets and liabilities effect

Investments in securities are accounted

the separate statement of recognized and

for on a settlement date basis and are initially

comprehensive income for the period.

measured at fair value. Available-for-sale

The ineffective element of the hedge is charged

securities are measured at subsequent

directly to the separate statement of recognized

reporting dates at fair value. Unrealised gains

income.

and losses on available-for-sale nancial

The Bank terminates the hedge accounting

instruments are recognized in other

if the hedging instrument expires or is sold,

comprehensive income, except for interest and

terminated or exercised, or the hedge no longer

foreign exchange gains/losses on monetary

meets the criteria for hedge accounting or the

items, unless such available-for-sale security is

Bank revokes the designation.

part of an effective hedge.

IFRS separate nancial statements

2014 angol.indd 175

175

5/18/15 12:47 PM

Such gains and losses will be reported when

at initial recognition and be included in effective

realised in prot or loss for the applicable

interest calculation. Loans and placements

period. Securities available-for-sale consists

with other banks are derecognised when the

of Hungarian Government bonds, mortgage

contractual rights to the cash-ows expire or

bonds and other securities. Other securities

they are transferred. Interest and amortised

include shares in investment funds and venture

cost are accounted using effective interest rate

capital funds, corporate bonds and foreign

method. When a borrower is unable to meet

securities.

payments as they fall due or, in the opinion

The provision for impairment is calculated

of the Management, there is an indication that

based on discounted cash-ow methodology

a borrower may be unable to meet payments

for debt instruments and calculated based

as they fall due, all unpaid interest becomes

on fair value on equity instruments, using the

impaired.

expected future cash-ow and original effective

According to IAS 39, initially nancial assets

interest rate if there is objective evidence of

shall be recognized at fair value which is

impairment based on signicant or prolonged

usually equal to transaction value of loans

decrease on fair value.

and receivables. Initial fair value of loans and

Available-for-sale securities are remeasured

receivables lent at interest below market

at fair value based on quoted prices or values

conditions is lower than their transaction

derived from cash-ow models.

price. As a consequence the Bank is deferring

In circumstances where the quoted market

the difference between the fair value at initial

prices are not readily available, the fair value of

recognition and the transaction price relating

debt securities is estimated using the present

to loans and receivables because input data for

value of the future cash-ows and the fair

measuring the fair values is not available on

value of any unquoted equity instruments are

observable markets.

calculated using the EPS ratio.

The amount of allowance is the difference

Those available-for-sale nancial assets that

between the carrying amount and the

do not have a quoted market price and whose

recoverable amount, being the present value

fair value cannot be reliably measured by

of the expected cash-ows, including amounts

other models mentioned above are measured

recoverable from guarantees and collaterals,

at cost, less provision for impairment when

discounted at the original effective interest rate.

appropriate. This exception is related only

Allowance for losses on loans and placements

to equity instruments. Impairment on equity

with other banks represent management

AFS securities is accounted only if there is a

assessment for potential losses in relation to

signicant or prolonged decrease in the market

these activities.

value. Impairment losses recognised in prot

The allowances for loan and placement losses

or loss for equity AFS securities is not reversed

are maintained to cover losses that have been

through prot or loss.

specically identied. Collective impairment


losses of portfolios of loans, for which no
objective evidence of impairment has been

2.11 Loans, placements with other


banks and allowance for loan and
placement losses

identied on an individual basis, are maintained


to reduce the carrying amount of the portfolios
of nancial assets with similar credit risk
characteristics to their estimated recoverable

176

Loans and placements with other banks are

amounts at the balance sheet date.

accounted at amortised cost, stated at the

The expected cash-ows for portfolios of

principal amounts outstanding including

similar assets are estimated based on historical

accrued interest, net of allowance for loan or

loss experience. Historical loss experience is

placement losses, respectively. Transaction fees

the basis for calculating the expected loss,

and charges should adjust the carrying amount

which is adjusted by the loss conrmation

OTP Bank Annual Report 2014

2014 angol.indd 176

5/18/15 12:47 PM

period, which represents the average time


lag between occurrence of a loss event and

2.12 Sale and repurchase


agreements, security lending

conrmation of the loss. This concept enables


recognition of those losses that have occurred

Where debt or equity securities are sold under

in the portfolio at the balance sheet date.

a commitment to repurchase them at a

If the reason for provisioning is no longer

pre-determined price, they remain on the

deemed appropriate, the redundant

statement of nancial position and the

provisioning charge is released into income.

consideration received is recorded in Other

If, in a subsequent period, the amount of the

liabilities or Amounts due to banks and

impairment loss decreases and the decrease

the Hungarian Government, deposits from the

can be related objectively to an event occurring

National Bank of Hungary and other banks,

after the impairment was recognised (such as

or Deposits from customers. Conversely, debt or

an improvement in the debtors credit rating),

equity securities purchased under a commitment

the previously recognised impairment loss shall

to resell are not recognized in the statement of

be reversed by adjusting an allowance account.

nancial position and the consideration paid is

The reversal shall not result in a carrying

recorded either in Placements with other banks

amount of the nancial asset that exceeds what

or Deposits from customers. Interest is accrued

the amortised cost would have been had the

evenly over the life of the repurchase agreement.

impairment not been recognised at the date the

In the case of security lending transactions

impairment is reversed.

the Bank does not recognize or derecognize


the securities because it is believed that the

Write-offs are generally recorded after all

transferor retains substantially all the risks

reasonable restructuring or collection

and rewards of the ownership of the securities.

activities have taken place and the possibility

Only a nancial liability or nancial receivable is

of further recovery is considered to be remote.

recognized for the consideration amount.

The loan is written off against the related


account Provisions for impairment on loan
recognized income.

2.13 Property, equipment


and intangible assets

OTP Bank applies partial or full write-off for loans

Property, equipment and intangible assets are

based on the denitions and prescriptions of

stated at cost, less accumulated depreciation

nancial instruments in accordance with IAS 39.

and amortization and impairment, if any.

If OTP Bank has no reasonable expectations

The depreciable amount (book value less

regarding a nancial asset (loan) to be recovered,

residual value) of the non-current assets must

it will be written off partially or fully at the time

be allocated over their useful lives. Depreciation

of emergence. A loan will be written off if it has

and amortization are calculated using the

overdued or was terminated by the Bank.

straight-line method over the estimated useful

The gross amount and impairment loss of the

lives of the assets based on the following

loans shall be written off in the same amount to

annual percentages:

and placement losses in the statement of

the estimated maximum recovery amount while


the net carrying value remains unchanged. In

Intangible assets

these cases there is no reasonable expectation

Software

from the clients to complete contractual

Property rights

cash-ows therefore OTP Bank does not accrue

Property

interest income in case of partial write-off.

Office equipment and vehicles

1533.3%
16.7%
12%
933.3%

Loan receivables legally demanded from clients


are equal to the former gross amount of the

Depreciation and amortization on properties,

loan before the partial write-off.

equipment and intangible assets starts on the

IFRS separate nancial statements

2014 angol.indd 177

177

5/18/15 12:47 PM

day when such assets are placed into service.

market conditions and business environment.

At each balance sheet date, the Bank reviews

Financial liabilities at fair value through prot

the carrying value of its tangible and intangible

or loss are either nancial liabilities held for

assets to determine if there is any indication that

trading or they are designated upon initial

those assets have suffered an impairment loss.

recognition as at fair value through prot or


loss. In the case of nancial liabilities measured

If such indication exists, the recoverable amount

at amortized cost, fees and commissions related

of the asset is estimated to determine the extent

to the origination of the nancial liability are

(if any) of the impairment loss. Where it is not

recognized through prot or loss during the

possible to estimate the recoverable amount

maturity of the instrument. In certain cases the

of an individual asset, the Bank estimates the

Bank repurchases a part of nancial liabilities

recoverable amount of the cash-generating unit

(mainly issued securities or subordinated bonds)

to which the asset belongs.

and the difference between the carrying amount

Where the carrying value of property,

of the nancial liability and the amount paid for

equipment, other tangible xed assets and

it is recognized in the net prot or loss for the

intangible assets is greater than the estimated

period and included in other operating income.

recoverable amount, it is impaired immediately


to the estimated recoverable amount.

2.15 Leases
The Bank may conclude contracts for

178

purchasing property, equipment and intangible

Assets held under nance leases, which confer

assets, where the purchase price is settled

rights and obligations similar to those attached to

in foreign currency. By entering into such

owned assets, are capitalised at their fair value

agreements, rm commitment in foreign

and depreciated over the useful lives of assets.

currency due on a specied future date arises

The capital element of each future lease

at the Bank.

obligation is recorded as a liability, while the

Reducing the foreign currency risk caused by

interest elements are charged to the separate

rm commitment, forward foreign currency

statement of recognized income over the period

contracts may be concluded to ensure the

of the leases to produce a constant rate of charge

amount payable in foreign currency on a

on the balance of capital payments outstanding.

specied future date on one hand and to

Payments made under operating leases are

eliminate the foreign currency risk arising until

charged to the separate statement of recognized

settlement date of the contract on the other hand.

income on a straight-line basis over the life of

In the case of effective hedge the realised

the lease terms. When an operating lease is

prot or loss of hedging instrument is stated

terminated before the lease period has expired,

as the part of the cost of the hedged asset

any payment required to be made to the lessor

as it has arisen until recognising the asset and

by way of penalty is recognized as an expense

it is tightly connecting to the purchasing.

in the period in which termination takes place.

2.14 Financial liabilities

2.16 Treasury shares

The nancial liabilities are presented within

Treasury shares are shares which are

nancial liabilities at fair value through prot

purchased on the stock exchange and the

or loss or nancial liabilities measured at

over-the-counter market by the Bank and are

amortized costs. In connection to the nancial

presented in the separate statement of nancial

liabilities at fair value through prot or loss,

position at acquisition cost as a deduction from

the Bank presents the amount of change in

shareholders equity. Gains and losses on the

their fair value originated from the changes of

sale of treasury shares are credited or charged

OTP Bank Annual Report 2014

2014 angol.indd 178

5/18/15 12:47 PM

directly to shareholders equity in the treasury

2.20 Income tax

shares. Derecognition of treasury shares is


based on the FIFO method.

The annual taxation charge is based on the tax


payable under Hungarian scal law, adjusted
for deferred taxation. Deferred taxation is

2.17 Interest income and interest


expense

accounted for using the balance sheet liability


method in respect of temporary differences
between the tax bases of assets and liabilities

Interest income and expenses are recognised

and their carrying value for nancial reporting

in prot or loss in the period to which they

purposes, measured at the tax rates that are

relate, using the effective interest rate method.

expected to apply when the asset is realised

Interest from loans and deposits are accrued

or the liability is settled. Deferred tax assets

on a daily basis. Interest income and expenses

are recognized by the Bank for the amounts

include relevant transaction costs and the

of income tax that are recoverable in future

amortisation of any discount or premium

periods in respect of deductible temporary

between the initial carrying amount of an

differences as well as the carryforward

interest-bearing instrument and its amount at

of unused tax losses and the carryforward

maturity calculated on an effective interest rate

of unused tax credits.

basis. The Bank recognizes interest income


when it is assumed that the interest associated
with the transaction will ow to the Bank and
the amount of the revenue can be reasonably

2.21 Off-balance sheet commitments and contingent liabilities

measured. All interest income and expense


arising from loans, placements with other

In the ordinary course of its business, the Bank

banks, securities held for trading, securities

has entered into off-balance sheet commitments

available-for-sale, securities held to maturity

such as guarantees, commitments to extend

and amounts due to banks, deposits from

credit, letters of credit and transactions with

customers, liabilities from issued securities,

nancial instruments. The provision on

subordinated bond and loans are presented

off-balance sheet commitments and contingent

under these lines of nancial statement.

liabilities is maintained at a level adequate to


absorb probable future losses. Management
determines the adequacy of the provision based

2.18 Fees and Commissions

upon reviews of individual items, recent loss


experience, current economic conditions, the

Fees and commissions are recognised using

risk characteristics of the various categories of

effective interest method referring to provisions

transactions and other pertinent factors.

of IAS 39, when they relate and have to be

The Bank recognizes a provision when it has a

included in the amortised cost model. Certain

present obligation as a result of a past event;

fees and commissions that are not involved in

it is probable that an outow of resources

the amortised cost model are recognised in the

embodying economic benets will be required

separate statement of recognised income on an

to settle the obligation; and a reliable estimate

accrual basis based on IAS 18.

can be made of the obligation.

2.19 Dividend income

2.22 Share-based payment and


employee benet

The Bank recognizes dividend income in the


separate nancial statements when its right to

The Bank has applied the requirements

receive the payment is established.

of IFRS 2 Share-based Payment.

IFRS separate nancial statements

2014 angol.indd 179

179

5/18/15 12:47 PM

The Bank issues equity-settled share-based

At separate level, the Management does not

payments to certain employees. Equity-settled

separate and makes decisions based on

share-based payments are measured at

different segments; the segments are identied

fair value at the grant date. The fair value

by the Bank only at consolidated level in

determined at the grant date of the equity-settled

line with IFRS 8 paragraph 4. At Group level

share-based payments is expensed on a

the segments identied by the Bank are the

straight-line basis over the year, based

business and geographical segments.

on the Banks estimate of shares that will

The Groups operating segments under IFRS 8

eventually vest. Fair value is measured by use

are therefore as follows: OTP Core Hungary,

of a binomial model. The expected life used

Russia, Ukraine, Bulgaria, Romania, Serbia,

in the model has been adjusted, based on

Croatia, Slovakia, Montenegro, Leasing

Managements best estimate, for the effects

subsidiaries, Asset Management subsidiaries,

of non-transferability, exercise restrictions,

other subsidiaries, Corporate Centre.

and behavioural considerations. The Bank has


applied the requirement of IAS 19 Employee
Benets. IAS 19 requires to recognise employee

2.25 Comparative gures

benets to be paid as a liability and as an


expense in nancial statements.

There were no changes in prior period data


due to either prior period error or change in
accounting policies. In some notes certain

2.23 Separate statement


of cash-ows

amounts in the separate nancial statements


for the year ended 31 December 2014 have
been restructured within the particular note to

For the purposes of reporting cash-ows,

conform to the current year presentation but

cash and cash equivalents include cash,

these amounts are not signicant.

due from banks and balances with the NBH.


Cash-ows from hedging activities are
classied in the same category as the item
being hedged. The unrealised gains and losses

2.26 Government measures related


to customer loan contracts

from the translation of monetary items to


the closing foreign exchange rates and the

Act XXXVIII of 2014 on Settlement of certain

unrealised gains and losses from derivative

issues concerning the Uniformity Decision of

nancial instruments are presented net in the

the Supreme Court related to customer loan

statement of cash-ows for the monetary items

agreements1 provided by nancial institutions

which were being revaluated.

(Curia Law) was promulgated on 18 July 2014.


The Hungarian Parliament has adopted on
24 September 2014 the Act XL of 2014 on Rules

2.24 Segment reporting

of the settlement and certain other issues put


in Act XXXVIII of 2014 on Settlement of certain

IFRS 8 Operating Segments requires operating

issues concerning the Uniformity Decision of

segments to be identied on the basis of

the Supreme Court related to customer loan

internal reports about components of the

agreements provided by nancial institutions

Bank that are regularly reviewed by the chief

(Act on Settlement), based on that nancial

operating decision maker in order to allocate

institutions need to settle up with their clients on

resources to the segments and to assess their

account of overpayments arisen from invalidity

performance.

of the bid-ask exchange rate spread and

Based on the above, the segments identied

unilateral amendment of contractual clauses.

by the Bank are the business and geographical

Act on Settlement has specied the regulations

segments.

of Curia Law; obligation of settlement does not

180

Uncovered consumer loans and covered retail mortgage and mortgage backed loans, excluding SME loans are considered as
customer loans.

OTP Bank Annual Report 2014

2014 angol.indd 180

5/18/15 12:47 PM

apply to credit cards, current account loans and

loans the provision for impairment was

mortgage housing loans supported by State.

recognized at foreign exchange rates

Furthermore amount due to consumers can be

according to NBH as at 31 December 2014

reduced by total amount of allowances.

in these nancial statements.

Act LXXVII of 2014 on Settlement of certain

OTP Bank is recognising the provision

issues concerning the modication of the

on contingent liabilities related to Act on

currency and interest conditions related to

Settlement among the provision on other

customer loan agreements was promulgated.

liabilities, off-balance sheet commitments

The act includes regulations about the

and contingent liabilities in the IFRS nancial

conversion of foreign currency consumer

statements.

mortgage loans into HUF which became


legally effective on 1 February 2015 (Act on

b) Act on Conversion into HUF

Conversion into HUF). Hereinafter three acts

Based on the Act on Conversion into HUF,

together are called as Acts on Customer Loans.

in case of mortgage loans concerned in


conversion into HUF, OTP Bank records

Based on these regulations OTP Bank

the foreign currency loans, provision for

recognised the following items in the nancial

impairment, accrued interest and provision at

statements as at 31 December 2014:

foreign exchange rates applied in conversion


into HUF in IFRS nancial statements as at

a) Act on Settlement

31 December 2014.

OTP Banks reimbursement obligation

The foreign currency loans concerned in

related to invalidity of the bid-ask exchange

conversion into HUF need to be derecognised

rate spread will be prospectively in amount

at the time of conversion into HUF from IFRS

of HUF 7.4 billion. Related to bid-ask

nancial statements and the HUF loans need

exchange rate spread OTP Bank recognised

to be recognised as new loans. According to

provision for impairment in the amount of

IFRS, HUF loans shall be recognised initially

HUF 332 million during the year 2013.

at fair value. Based on expected negative fair

Based on unilateral amendment of

value of loans, provision for impairment was

contractual clauses being assumed unfair,

recognised in the amount of HUF 456 million

OTP Bank, based on estimation of the amount

in the Banks separate IFRS nancial

of expected obligation related to loans under

statements.

legal proceeding, recognised provision for


impairment in the amount of HUF 36.7 billion.

c) Effect of the Acts on Customer Loans

In case of these amounts, provision for

on the Group

impairment on mortgage loans concerned

Provision on losses expected from bid-ask

in conversion into HUF was recognised at

exchange rate spread and unilateral

foreign exchange rates applied in conversion

amendment was recognised up to

into HUF in nancial statements as at

OTP Banks separate expected losses

31 December 2014 (CHF: 256.47;

in the Banks nancial statements as at

EUR: 308.97; JPY: 2.163).

31 December 2014. Provision on expected

In case of loans not concerned in conversion

losses in case of subsidiaries is recognised

into HUF mostly foreign currency customer

by subsidiaries in their nancial statements.

IFRS separate nancial statements

2014 angol.indd 181

181

5/18/15 12:47 PM

In the level of the Group provision recognised due to Act on Settlement is the following:
in HUF mn
44,127
88,537
20,066
2,283
4,963
159,976

OTP Bank Plc.


OTP Mortgage Ltd.
Merkantil Bank Ltd.
Merkantil Car Ltd.
OTP Real Estate Leasing Ltd.
Total

In order to eliminate the negative effects of the Acts on its subsidiaries nancial position and
to secure the continuous capital adequacy, OTP Bank provided capital contribution in amount
of HUF 78,304 million in December 2014. At the same amount investment in subsidiaries were
increased:
in HUF mn
56,581
16,826
4,897
78,304

OTP Mortgage Bank Ltd.


Merkantil Bank Ltd.
OTP Real Estate Leasing Ltd.
Total

At the same amount provision for impairment

expenses directly incurred in connection with

on investment in subsidiaries was recognised.

implementation of the Act on Settlement.


This support has been claimed as expense

OTP Group still maintains the point of view

during calculation of corporate tax. OTP Bank

that the group members keep completely the

proposes to provide nancial support for its

effective regulations during its loan activity

subsidiaries to cover their losses.

practice.
The Bank recognized 30.5 billion HUF
d) Introduction of deferred tax relating to acts

deferred tax receivable in the separate

on customer loans

nancial statements prepared for year 2014


2

Prescription 29/ZS of the Act LXXXI of 1996

due to the expecting tax receivable based

enables based on accounting regulations in

on act on settlement and considering the

44 of Act on Settlement to recognise tax

contribution provided to the subsidiaries.

difference (tax receivables) calculated for


clients overpayments relating to customer
loan agreements in the form of corporate

e) Derivative deals contracted due to the


obligations in relation with the act on

tax, special tax of business partnerships,

customer loan agreements

local business tax, innovation contribution,

The Bank hedged its theoretically opened

special tax of nancial institutions, up to the

position due to the effect of Act on Settlement

tax declared and paid for the 20082014 tax

and Act on Conversion into HUF with spot

years. Tax receivable shall be deducted from

and derivative deals contracted with NBH.

the amount of corporate tax payable for the

With those subsidiaries which were affected

2015 and the following tax years.

by the Act on Settlement the Bank concluded


further derivative deals to have been covered

182

Furthermore prescription 29/ZS of the

all the opened foreign exchange positions of

Act LXXXI of 1996 enables to provide

the subsidiaries, so all the opened foreign

non-repayable nancial support or grant

exchange position was covered on Group

for subsidiaries, for covering the costs and

level by EUR/CHF market transactions.

On Corporate Tax and Dividend Tax.

OTP Bank Annual Report 2014

2014 angol.indd 182

5/18/15 12:47 PM

NOTE 3:

SIGNIFICANT ACCOUNTING ESTIMATES AND DECISIONS


IN THE APPLICATION OF ACCOUNTING POLICIES
The presentation of separate nancial statements

systems and applications. As a consequence,

in conformity with IFRS requires the Management

acquiring new data by the Bank could affect the

of the Group to make judgements about

level of impairment allowances in the future.

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 nancial statements and

3.2 Valuation of instruments


without direct quotations

their reported amounts of revenues and expenses


during the reporting period. The estimates and

Financial instruments without direct quotations

associated assumptions are based on historical

in an active market are valued using the valuation

experience and other factors that are considered

model technique. The models are regularly

to be relevant. The estimates and underlying

reviewed and each model is calibrated for the

assumptions are reviewed on an on-going

most recent available market data. While the

basis. Revisions to accounting estimates are

models are built only on available data, their use

recognized in the period. Actual results could

is subject to certain assumptions and estimates

differ from those estimates. Signicant areas of

(e.g. for correlations, volatilities, etc). Changes in

subjective judgements include:

the model assumptions may affect the reported


fair value of the relevant nancial instruments.
IFRS 13 Fair Value Measurement seeks to

3.1 Impairment on loans


and placements

increase consistency and comparability in fair


value measurements and related disclosures
through a fair value hierarchy. The hierarchy

The Bank regularly assesses its loan portfolio

categorises the inputs used in valuation

for impairment. Management determines the

techniques into three levels. The hierarchy

adequacy of the allowances based upon reviews

gives the highest priority to (unadjusted)

of individual loans and placements, recent loss

quoted prices in active markets for identical

experience, current economic conditions, the

assets or liabilities and the lowest priority to

risk characteristics of the various categories of

unobservable inputs. The objective of a fair

loans and other pertinent factors. Provisioning

value measurement is to estimate the price at

involves many uncertainties about the outcome

which an orderly transaction to sell the asset

of those risks and requires the Management of

or to transfer the liability would take place

the Bank to make many subjective judgements

between market participants at the measurement

in estimating the loss amounts. An impairment

date under current market conditions.

loss is incurred when there is objective


evidence of impairment due to one or more
events that occurred after the initial recognition

3.3 Provisions

of the asset (a loss event), when the loss has


a reliably measurable impact on the expected

Provision is recognized and measured based

future cash ows from the nancial asset or

on IAS 37 Provisions, Contingent Liabilities

group of nancial assets. Future cash ows are

and Contingent Assets. The Bank is involved

assessed by the Bank on the basis of estimates

in a number of ongoing legal disputes.

based on historical parameters. The adopted

Based upon historical experience and expert

methodology used for estimating impairment

reports, the Bank assesses the developments

allowances will be developed in line with the

in these cases, and the likelihood and the

further possibilities of accumulations of historic

amount of potential nancial losses which are

impairment data from the existing information

appropriately provided for (see Note 17.).

IFRS separate nancial statements

2014 angol.indd 183

183

5/18/15 12:47 PM

NOTE 4:

A provision is recognized by the Bank when it

Provision for off-balance sheet items includes

has a present obligation as a result of a past

provision for litigation, provision for retirement

event, it is probable that an outow of resources

and expected liabilities, for commitments to

embodying economic benets will be required

extend credit, provision for warranties arising

to settle the obligation, and a reliable estimate

from banking activities and provision for

can be made of the amount of the obligation.

Conrmed letter of credit.

CASH, AMOUNTS DUE FROM BANKS AND BALANCES


WITH THE NATIONAL BANK OF HUNGARY (in HUF mn)
Cash on hand:
In HUF
In foreign currency
Amounts due from banks and balances with National Bank of Hungary*
Within one year:
In HUF
In foreign currency
Accrued interest
Total
Compulsory reserve
Rate of the compulsory reserve

NOTE 5:

2014

2013

65,059
5,579
70,638

67,325
5,223
72,548

1,795,868
30,640
1,826,508
632
1,897,778
135,051
3%

48,235
19,529
67,764
209
140,521
77,686
2%

PLACEMENTS WITH OTHER BANKS, NET OF ALLOWANCE


FOR PLACEMENT LOSSES (in HUF mn)
Within one year:
In HUF
In foreign currency
Over one year:
In HUF
In foreign currency
Total placements
Accrued interest
Provision for impairment on placement losses
Total

2014

2013

294,712
302,186
596,898

224,619
336,912
561,531

5,000
108,586
113,586
710,484
1,654
(26)
712,112

40,000
29,222
69,222
630,753
2,168
(22)
632,899

An analysis of the change in the provision for impairment on placement losses is as follows:
Balance as at 1 January
Provision for the year
Balance as at 31 December

2014
22
4
26

2013

22
22

* Securities issued by the NBH were changed into two-weeks NBH deposit during the year ended 31 December 2014.

184

OTP Bank Annual Report 2014

2014 angol.indd 184

5/18/15 12:47 PM

Interest conditions of placements with other banks:


Placements with other banks in HUF
Placements with other banks in foreign currency
Average interest of placements with other banks

NOTE 6:

2014
3%6.6%
0.58%13%
2.19%

2013
2.5%7.49%
0.26%11.9%
3.26%

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS


(in HUF mn)

Securities held for trading:


Shares
Government bonds
Hungarian government interest bearing Treasury Bills
Hungarian government discounted Treasury Bills
Mortgage bonds
Securities issued by credit institutions
Securities issued by the NBH*
Other securities
Subtotal
Accrued interest
Total

2014
58,559
13,777
4,175
288
71
67

216
77,153
434
77,587

2013
73,256
4,090
6,466
2,159
237
1,162
209,347
26
296,743
105
296,848

2014
152,540
60,833
43,538
17,255
274,166
351,753

2013
32,763
6,637
53,728
6,589
99,717
396,565

Derivative nancial instruments:


CCIRS and mark-to-market CCIRS**
Foreign currency swaps
Interest rate swaps
Other derivative transactions***
Subtotal
Total

Interest conditions and the remaining maturities of securities held for trading are as follows:
Within ve years:
variable interest
xed interest
Over ve years:
variable interest
xed interest
Non-interest bearing securities
Total

Securities held for trading denominated in HUF


Securities held for trading denominated in foreign currency
Securities held for trading total
Government bonds denominated in HUF
Government bonds denominated in foreign currency
Government securities total
Interest rates on securities held for trading
Average interest on securities held for trading

2014

2013

1,125
13,878
15,003

357
222,261
222,618

6
3,566
3,572
58,578
77,153

843
843
73,282
296,743

2014
97.65%
2.35%
100%
90%
10%
100%
1.74%10%
2.48%

2013
99.65%
0.35%
100%
81%
19%
100%
2.91%13%
3.67%

* Securities issued by the NBH were changed into two-weeks NBH deposit during the year ended 31 December 2014.
** CCIRS: Cross Currency Interest Rate Swap (see Note 27.).
*** Incl.: FX, equity, commodity and index futures; FX forward; commodity and equity swap; FRA; FX option.

IFRS separate nancial statements

2014 angol.indd 185

185

5/18/15 12:47 PM

NOTE 7:

SECURITIES AVAILABLE-FOR-SALE (in HUF mn)


Mortgage bonds
Government bonds
Bonds issued by NBH*
Other securities
listed securities
in HUF
in foreign currency
non-listed securities
in HUF
in foreign currency
Subtotal
Accrued interest
Securities available-for-sale total

Securities available-for-sale denominated in HUF


Securities available-for-sale denominated in foreign currency
Securities available-for-sale total
Interest rates on securities available-for-sale denominated
in HUF
Interest rates on securities available-for-sale denominated
in foreign currency
Average interest on securities available-for-sale

2014
741,567
375,040

64,593

2013
789,419
90,177
1,021,825
67,264

31,535

31,535
33,058
27,397
5,661
1,181,200
34,707
1,215,907

36,883

36,883
30,381
26,589
3,792
1,968,685
28,806
1,997,491

2014
67%
33%
100%
3.5%11%

2013
77%
23%
100%
4.5%11%

1.99%5.88%

2.12%10.5%

4.67%

5.36%

Interest conditions and the remaining maturities of available-for-sale securities


can be analysed as follows:
Within ve years:
variable interest
xed interest*
Over ve years:
variable interest
xed interest
Non-interest bearing securities
Total

2014

2013

320,729
571,816
892,545

358,664
1,362,990
1,721,654

4,587
251,803
256,390
32,265
1,181,200

3,730
213,460
217,190
29,841
1,968,685

Certain xed-rate mortgage bonds and other securities are hedged against interest rate risk
(see Note 37.).

Net gain/(loss) reclassied from equity to statement


of recognized income
Fair value of the hedged securities:
Government bonds
Corporate bonds

2014

2013

2,995

(388)

261,608
24,736

23,648

* Securities issued by the NBH were changed into two-weeks NBH deposit during the year ended 31 December 2014.

186

OTP Bank Annual Report 2014

2014 angol.indd 186

5/18/15 12:47 PM

NOTE 8:

LOANS, NET OF ALLOWANCE FOR LOAN LOSSES (in HUF mn)


Short-term loans and promissory notes (within one year)
Long-term loans and promissory notes (over one year)
Loans gross total
Accrued interest
Provision for impairment on loan losses*
Total

2014
1,014,363
972,626
1,986,989
7,039
(85,397)
1,908,631

2013
941,428
1,343,444
2,284,872
10,342
(150,513)
2,144,701

2014
43%
57%
100%

2013
40%
60%
100%

2014
5.6%28.8%
2.1%18.5%
1.8%14%
11.72%
3.91%
11.3%

2013
6.5%25.3%
2.8%24.8%
1.8%14%
13.14%
4.71%
10.80%

An analysis of the loan portfolio by currency:


In HUF
In foreign currency
Total

Interest rates of the loan portfolio are as follows:


Loans denominated in HUF, with a maturity within one year
Loans denominated in HUF, with a maturity over one year
Loans denominated in foreign currency
Average interest on loans denominated in HUF
Average interest on loans denominated in foreign currency
Gross loan portfolio on which interest to customers is not being accrued

An analysis of the gross loan portfolio by type, before provision for impairment on loan losses,
is as follows:
2014
Retail loans
Retail consumer loans
Retail mortgage backed loans**
SME loans
Corporate loans
Loans to medium and large corporates
Municipality loans
Loans to the State
Total

518,058
291,497
112,358
114,203
1,468,931
1,420,631
28,471
19,829
1,986,989

2013
26%
15%
5%
6%
74%
71%
2%
1%
100%

539,340
309,476
123,592
106,272
1,745,532
1,537,655
105,725
102,152
2,284,872

24%
14%
5%
5%
76%
67%
5%
4%
100%

Through debt consolidation the central

Furthermore the debt consolidation of

government provided a non-refundable

municipalities with more than ve thousands in

subsidy to municipalities with less than ve

habitants was completed by end of June 2013,

thousands inhabitants for the total repayment

which was carried out from three sources:

of their outstanding obligations

subsidy provided by the Hungarian Treasury,

(loans, bonds, bills of exchange) as at

funds of the Government Debt Management

12 December 2012. In case of OTP Bank

Agency (GDMA), long-term loan originated

HUF 28.8 billion total debt of 957 municipalities

by OTP Bank for the GDMA.

was repaid (at exchange rates as of

On 28 February 2014 municipality debt in the

27 December 2012).

amount of HUF 101.7 billion was paid off.

* The provision was decreased due to Partial Write-off. For details see Note 2.11.
** Incl. housing loans.

IFRS separate nancial statements

2014 angol.indd 187

187

5/18/15 12:47 PM

An analysis of the change in the provision for impairment on loan losses is as follows:
Balance as at 1 January
Provision for the year
Release of provision
Partial write-off*
Structural difference relating to provision for previous years
Balance as at 31 December

2014
150,513
52,096
(54,793)
(62,419)

85,397

2013
153,370
83,796
(82,134)

(4,519)
150,513

Provision for impairment on loan and placement losses is summarized as below:


2014
4
23,209
23,213

Provision for impairment on placement losses


Provision for impairment on loan losses
Total

NOTE 9:

2013
22
30,511
30,533

The Bank sells non-performing loans

wholly owned subsidiary, OTP Factoring Ltd.

without recourse at estimated fair value to a

(see Note 29.).

INVESTMENTS IN SUBSIDIARIES, ASSOCIATES


AND OTHER INVESTMENTS (in HUF mn)
Investments in subsidiaries
Controlling interest
Other investments
Subtotal
Provision for impairment
Total

2014

2013

1,147,839
681
1,148,520
(544,311)
604,209

985,892
1,011
986,903
(317,581)
669,322

Other investments contain certain securities

active market and whose fair value cannot

accounted at cost. These instruments

be reliably measured.

do not have a quoted market price in an

* See Note 2.11.

188

OTP Bank Annual Report 2014

2014 angol.indd 188

5/18/15 12:47 PM

Signicant subsidiaries
Investments in companies in which the Bank

All companies are incorporated in Hungary

has a controlling interest are detailed below.

unless indicated otherwise:

2014

OTP Bank JSC (Ukraine)


OTP Mortgage Bank Ltd.
OTP banka Srbija a.d. (Serbia)
DSK Bank EAD (Bulgaria)
JSC OTP Bank (Russia)
OTP banka Hrvatska d.d. (Croatia)
OTP Bank Romania S.A. (Romania)
OTP Factoring Ltd.
Crnogorska komercijalna banka a.d. (Montenegro)
LLC Alliance Reserve (Russia)
OTP Holding Malta Ltd. (Malta)
Balansz Real Estate Institute Fund
Merkantil Bank Ltd.
Inga Kett Ltd.
OTP Banka Slovensko a.s. (Slovakia)
Bank Center No. 1. Ltd.
OTP Life Annuity Ltd.
Air-Invest Ltd.
OTP Real Estate Ltd.
Monicomp Ltd.
OTP Real Estate Leasing Ltd.
OTP Funds Servicing and Consulting Ltd.
OTP Holding Ltd. (Cyprus)
OTP Building Society Ltd.
OTP Fund Management Ltd.
Fordulat Venture Capital Fund
OTP Real Estate Investment Fund Management Ltd.
CIL Babr Ltd.
OTP Financing Netherlands B.V. (the Netherlands)
OTP Card Factory Ltd.
Portfolion Ltd.
HIF Ltd. (United Kingdom)
OTP Financing Malta Ltd. (Malta)
Other
Total

% Held
(direct and
indirect)
100%
100%
97.90%
100%
97.86%
100%
100%
100%
100%
100%
100%
100%
100%
100%
99.26%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%
100%
100%
100%
100%

2013
Gross book
value
279,469
126,839
91,153
86,832
74,318
72,940
61,081
60,192
58,484
50,074
32,359
18,520
18,426
17,892
16,706
16,063
15,300
9,698
9,520
9,234
9,118
2,469
2,000
1,950
1,653
1,555
1,352
1,225
481
450
150
81
31
224
1,147,839

% Held
(direct and
indirect)
100%
100%
97.56%
100%
97.81%
100%
100%
100%
100%
100%

100%
100%
100%
99.21%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%
100%
100%
100%

Gross book
value

2014
317,581
226,730
544,311

2013
265,031
52,550
317,581

266,513
70,257
84,727
86,832
74,296
72,940
57,638
40,825
58,484
50,074

18,370
1,600
17,892
13,649
16,063
15,300
9,698
4,777
9,234
3,671
2,469
2,000
1,950
1,653
1,050
1,352
1,225
481
450
150
81

191
985,892

An analysis of the change in the provision for impairment is as follows:


Balance as at 1 January
Provision for the year
Balance as at 31 December

The Bank calculates the fair value based on

The Bank, in its strategic plan, has taken into

discounted cash-ow model. The 5 year period

consideration the effects of the present global

explicit cash-ow model serves as a basis for

economic situation, the cautious recovery of

the impairment test by which the Group denes

economic situation and outlook, the associated

the impairment need on goodwill based on

risks and their possible effect on the nancial

the strategic factors and nancial data of its

sector as well as the current and expected

cash-generating units.

availability of wholesale funding.

IFRS separate nancial statements

2014 angol.indd 189

189

5/18/15 12:47 PM

An analysis of the provision for impairment by signicant subsidiaries is as follows:


2014
252,411
99,838
63,233
58,781
26,714
16,826
9,232
8,949
535,984

OTP Bank JSC (Ukraine)*


OTP Mortgage Bank Ltd.**
OTP banka Srbija a.d. (Serbia)
OTP Factoring Ltd.
Crnogorska komercijalna banka a.d. (Montenegro)
Merkantil Bank Ltd.
OTP banka Hrvatska d.d. (Croatia)
OTP Real Estate Leasing Ltd.
Total

2013
125,903
43,257
63,233
40,825
26,714

9,232
3,442
312,606

Dividend income from signicant subsidiaries and shares held-for-trading is as follows:


2014
25,054
5,097
3,355
3,024
2,100
1,134
39,764
3,031
42,795

DSK Bank EAD (Bulgaria)


OTP Mortgage Bank Ltd.
OTP Holding Ltd. (Cyprus)
OTP Fund Management Ltd.
OTP Building Society Ltd.
Other
Subtotal
Dividend from shares held-for-trading
Total

2013
23,086
10,000
4,500
1,477
4,000
2,137
45,200
2,383
47,583

Signicant associates

The main gures of the Banks indirectly owned associates that are not consolidated using
equity-method at cost***:
As at 31 December 2014:

Assets
Liabilities
Shareholders equity
Total income

KITE Mezgazdasgi
Szolgltat s
Kereskedelmi Ltd.
56,717
23,637
33,080
245,370

D-G
Thermoset Ltd.

Company for Cash


Services LLC

Suzuki Pnzgyi
Szolgltat Ltd.

Total

5,758
4,465
1,293
7,268

2,292
106
2,186
1,144

587
3
584
21

65,354
28,211
37,143
253,803

D-G
Thermoset Ltd.

Company for Cash


Services LLC

Suzuki Pnzgyi
Szolgltat Ltd.

Total

5,961
4,540
1,421
6,412

2,130
83
2,047
1,017

636
9
627
37

57,444
23,406
34,038
228,927

As at 31 December 2013:

Assets
Liabilities
Shareholders equity
Total income

KITE Mezgazdasgi
Szolgltat s
Kereskedelmi Ltd.
48,717
18,774
29,943
221,461

* Based on the valuation of the OTP Bank JSC (Ukraine) the total IFRS goodwill was impaired. Ukrainian situation is disclosed in Note 41.
** Given subsidy. See details in Note 2.26.
*** Based on unaudited nancial statements.

190

OTP Bank Annual Report 2014

2014 angol.indd 190

5/18/15 12:47 PM

In accordance with the resolution adopted by

Company EUR 104.95 million and the direct and

the board of directors in February 2014, capital

indirect ownership ratio of OTP Bank is 100%.

settlement package of OTP Real Estate Ltd.


and its subsidiaries was approved at group

On 30 July 2014 OTP Bank Romania signed

level. The purpose of the capital settlement is

an agreement in Bucharest with Banco

to meet regulations applying to minimal capital

Comercial Portugus on the purchase of its

criteria and to guarantee the self-supporting

100% ownership in its Romanian subsidiary.

nancing structure.

The purchase price was EUR 39 million.


As a result of the acquisition the market share

On 28 February 2014 OTP Bank increased

of OTP Bank Romania will rise to 2.1% elevating

the registered capital of OTP banka Srbija a.d.

the bank into the 11th place amongst the

by RSD 2,311,635,480. As a consequence the

Romanian banks.

registered capital of OTP banka Srbija a.d. has


increased from RSD 14,389,735,180 to

On 29 October 2014 OTP Financing Malta

RSD 16,701,370,660. The ownership ratio of

Company Limited was incorporated in Malta.

OTP Bank is 97.9%.

The company has a share capital of EUR


105,000,000 and is under 100% ownership

By setting the purchase price on 24 April

(direct and indirect) of OTP Bank.

2014, OTP Group accomplished its Croatian


acquisition.

On 28 November 2014 OTP Bank announced

On 31 January 2014 OTP banka Hrvatska d.d.

that the Slovakian Court of Registration

(OBH) signed a purchase agreement with

registered a capital increase in the amount of

the Croatian Banco Popolare d.d. on acquiring

EUR 10,031,209 at OTP Banka Slovensko a.s.,

a 98.37% stake in the bank. Following the

the Slovakian subsidiary of OTP Bank.

submission of all the relevant documents the

The registered capital of OTP Banka Slovensko

Croatian Central Bank approved the purchase

a.s. was increased to EUR 88,539,106.84 from

of the majority stake at its meeting on 18 April

EUR 78,507,897.84 and the ownership ratio of

2014; as a result OTP Bank got all the necessary

OTP Bank represents 99.26%.

approvals for completing the transaction.


As a result of the deal OBH will enhance its

On 11 December 2014 OTP Bank became

presence in Northern Croatia, Zagreb and

the sole owner of OTP Factoring Ltd. with the

Slavonia in particular, mainly in the retail

buy-out of the stake of OTP Real Estate Ltd.

segment. The purchase price was HRK


106,977,375. Following the transaction

On 21 January 2015 OTP Bank announces

OTP Group can serve 440 thousands customers

that the Romanian Court of Registration

in the Croatian market, possesses more than

registered a capital increase at OTP Bank

250 ATMs and its network of branches has

Romania SA., the Romanian subsidiary

increased by 33 to 130.

of OTP Bank. Accordingly, the registered


capital of OTP Bank Romania was increased to

On 30 June 2014 OTP Holding Malta Limited

RON 958,252,800 from RON 782,908,800 and

has been registered by the Registrar of

the ownership ratio of OTP Bank represents

Companies. The registered capital of the

99.99% currently.

IFRS separate nancial statements

2014 angol.indd 191

191

5/18/15 12:47 PM

NOTE 10:

SECURITIES HELD-TO-MATURITY (in HUF mn)


2014
641,645
4,756
346
646,747
16,200
662,947

Government bonds
Mortgage bonds
Hungarian government discounted Treasury bills
Subtotal
Accrued interest
Total

2013
506,808
4,770
341
511,919
13,130
525,049

Interest conditions and the remaining maturities of held-to-maturity investments


can be analysed as follows:
Within ve years:
variable interest
xed interest
Over ve years:
xed interest
Total

2014

2013

6,677
352,702
359,379

15,041
174,611
189,652

287,368
287,368
646,747

322,267
322,267
511,919

2014
100%
100%
2.5%9.5%
6.3%

2013
100%
100%
3.9%9.5%
7.35%

The distribution of the held-to-maturity securities by currency:


Securities held-to-maturity denominated in HUF
Securities held-to-maturity total
Interest rates on securities held-to-maturity
Average interest on securities held-to-maturity denominated in HUF

NOTE 11:

In most cases, interest on variable

Treasury bills and is adjusted semi-annually.

rate securities is based on the interest

Interest on xed rate and variable rate

rates of 90 day Hungarian government

securities is, in most cases, paid semi-annually.

PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS (in HUF mn)

For the year ended 31 December 2014:

Cost
Balance as at 1 January
Additions
Disposals
Balance as at 31 December
Depreciation and Amortization
Balance as at 1 January
Charge for the year
Disposals
Balance as at 31 December
Net book value
Balance as at 1 January
Balance as at 31 December

192

Intangible
assets

Property

Office
equipment
and vehicles

Construction
in progress

Total

137,349
25,133
(8,429)
154,053

69,829
1,562
(563)
70,828

73,012
4,681
(7,709)
69,984

16,815
5,541
(20,351)
2,005

297,005
36,917
(37,052)
296,870

105,795
14,416
(2,249)
117,962

17,246
1,846
(160)
18,932

56,963
5,915
(7,107)
55,771

180,004
22,177
(9,516)
192,665

31,554
36,091

52,583
51,896

16,049
14,213

16,815
2,005

117,001
104,205

OTP Bank Annual Report 2014

2014 angol.indd 192

5/18/15 12:47 PM

For the year ended 31 December 2013:

Cost
Balance as at 1 January
Additions
Disposals
Balance as at 31 December
Depreciation and Amortization
Balance as at 1 January
Charge for the year
Disposals
Balance as at 31 December
Net book value
Balance as at 1 January
Balance as at 31 December

NOTE 12:

Intangible
assets

Property

Office
equipment
and vehicles

Construction
in progress

Total

124,248
23,463
(10,362)
137,349

67,327
3,059
(557)
69,829

74,547
5,844
(7,379)
73,012

10,325
15,428
(8,938)
16,815

276,447
47,794
(27,236)
297,005

92,651
14,000
(856)
105,795

15,622
1,776
(152)
17,246

58,525
5,881
(7,443)
56,963

166,798
21,657
(8,451)
180,004

31,597
31,554

51,705
52,583

16,022
16,049

10,325
16,815

109,649
117,001

OTHER ASSETS* (in HUF mn)


Deferred tax assets**
Prepayments and accrued income
Fair value of derivative nancial instruments designated
as fair value hedge
Receivables from card operations***
Receivables from investment services
Trade receivables
Variation margin
Current income tax receivable
Other advances
Due from Hungarian Government from interest subsidies
Receivables from OTP Mortgage Bank Ltd.****
Advances for securities and investments
Inventories
Other
Subtotal
Accrued interest
Provision for impairment on other assets*****
Total

2014
33,557
17,974

2013

14,164

14,041

9,734

9,615
5,923
4,162
3,970
2,561
1,283
837
773
634
632
6,407
102,369

(4,439)
97,930

4,814
4,752
3,623
415
1,288
1,172
2,969
598
1,060
6,564
51,153
9
(1,676)
49,486

Positive fair value of derivative nancial instruments designated as fair value hedge:
Interest rate swaps designated as fair value hedge
Other
Total

2014
14,032
9
14,041

2013
9,722
12
9,734

* Other assets except income tax receivable and fair value of derivative nancial instruments designated as fair value hedge
are expected to be recovered or settled no more than twelve months after the reporting period. Income tax receivable will
be enforced in the tax return for the year 2014. Unrealised gains/losses on derivative nancial instruments are recovering in
accordance with their maturity.
** See Note 25.
*** Accounting of receivables from card operations recognized due to different timing of cash settlement has changed for the year
ended 31 December 2014.
**** The Bank, under a syndication agreement administrated mortgage loans with recourse to OTP Mortgage Bank Ltd.
***** Provision for impairment on other assets mainly consists of provision for trade receivables and inventories.

IFRS separate nancial statements

2014 angol.indd 193

193

5/18/15 12:47 PM

An analysis of the movement in the provision for impairment on other assets is as follows:
Balance as at 1 January
Charge for the year
Release of provision
Balance as at 31 December

NOTE 13:

2014
1,676
3,589
(826)
4,439

2013
1,641
623
(588)
1,676

AMOUNTS DUE TO BANKS AND HUNGARIAN GOVERNMENT,


DEPOSITS FROM THE NATIONAL BANK OF HUNGARY
AND OTHER BANKS (in HUF mn)
Within one year:
In HUF
In foreign currency
Over one year:
In HUF
In foreign currency
Subtotal
Accrued interest
Total*

2014

2013

321,228
685,318
1,006,546

403,166
311,788
714,954

92,169
42,961
135,130
1,141,676
815
1,142,491

116,313
70,114
186,427
901,381
1,363
902,744

Interest rates on amounts due to banks and Hungarian Government, deposits from the NBH and
other banks are as follows:
Within one year:
In HUF
In foreign currency
Over one year:
In HUF
In foreign currency
Average interest on amounts due to banks in HUF
Average interest on amounts due to banks in foreign currency

NOTE 14:

2014

2013

2.21%5.24%
4.18%7%

0.22%5.31%
0.37%7.05%

0.08%3.08%
0.1%4.48%
1.7%
1.09%

0.22%5.24%
0.1%7%
1.45%
2.59%

2014

2013

3,600,806
599,127
4,199,933

2,985,237
660,166
3,645,403

31,419
31,419
4,231,352
3,904
4,235,256

25,646
25,646
3,671,049
6,401
3,677,450

DEPOSITS FROM CUSTOMERS (in HUF mn)


Within one year:
In HUF
In foreign currency
Over one year:
In HUF
Subtotal
Accrued interest
Total

* It contains the loans lent among the frame of Funding for Growth Scheme, which are accounted as government grant regulated by
IAS 20 Standard. See details in Note 41.

194

OTP Bank Annual Report 2014

2014 angol.indd 194

5/18/15 12:47 PM

Interest rates on deposits from customers are as follows:


2014
0.01%10.3%
0.01%3.1%
0.01%6.6%
1.23%
0.9%

Within one year in HUF


Over one year in HUF
In foreign currency
Average interest on deposits from customers in HUF
Average interest on deposits from customers in foreign currency

2013
0.01%10.3%
0.01%5%
0.01%6.7%
2.62%
1.29%

An analysis of deposits from customers by type, not included accrued interest, is as follows:
2014
Retail deposits
Household deposits
SME deposits
Corporate deposits
Deposits to medium
and large corporates
Municipality deposits
Total

NOTE 15:

2013

2,242,240
1,860,109
382,131
1,989,112

53%
44%
9%
47%

2,069,291
1,748,210
321,081
1,601,758

57%
48%
9%
43%

1,659,484

39%

1,329,032

36%

329,628
4,231,352

8%
100%

272,726
3,671,049

7%
100%

LIABILITIES FROM ISSUED SECURITIES (in HUF mn)


Within one year:
In HUF
In foreign currency
Over one year:
In HUF
In foreign currency
Subtotal
Accrued interest
Total

2014

2013

24,280
39,024
63,304

35,322
33,034
68,356

86,781
10,061
96,842
160,146
2,521
162,667

93,713
8,200
101,913
170,269
510
170,779

2014
0.1%7%
1.1%3%
2.66%
2.24%

2013
0.25%7%
1.7%4%
5.07%
3.15%

Interest rates on liabilities from issued securities are as follows:


Issued securities denominated in HUF
Issued securities denominated in foreign currency
Average interest on issued securities denominated in HUF
Average interest on issued securities denominated in foreign currency

IFRS separate nancial statements

2014 angol.indd 195

195

5/18/15 12:47 PM

Issued securities denominated in foreign currency as at 31 December 2014:


Name

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.

196

OTP EUR 1 2015/XX


OTP EUR 1 2015/XVIII
OTP EUR 1 2015/XXV
OTP EUR 1 2015/XXI
OTP EUR 1 2015/I
OTP EUR 1 2015/XXIII
OTP EUR 1 2015/XIX
OTP EUR 1 2015/XXIV
OTP EUR 1 2015/II
OTP EUR 1 2015/XI
OTP EUR 1 2015/III
OTP EUR 1 2015/VIII
OTP EUR 1 2015/IV
OTP EUR 1 2015/VI
OTP EUR 1 2015/X
OTP EUR 1 2015/XVI
OTP EUR 1 2015/V
OTP EUR 1 2015/XVII
OTP EUR 1 2015/XXII
OTP EUR 1 2015/XII
OTP EUR 1 2015/XIV
OTP EUR 2 2015/XXI
OTP EUR 1 2015/XIII
OTP 2015/Fx
OTP EUR 2 2016/XIX
OTP EUR 1 2015/XV
OTP EUR 2 2016/XV
OTP EUR 2 2015/XXIV
OTP 2016/Cx
OTP EUR 2 2016/XVII
OTP EUR 2 2015/XXIII
OTP EUR 2 2015/XXII
OTP_VK_USD_2_2016/1
OTP 2016/Dx
OTP EUR 2 2016/XVIII
OTP EUR 1 2015/IX
OTP EUR 2 2016/III
OTP EUR 2 2016/I
OTP EUR 2 2016/II
OTP 2015/Cx
OTP EUR 1 2015/VII
OTP EUR 2 2015/XVI
OTP 2017/Fx
OTP EUR 2 2016/V
OTP EUR 2 2016/VII
OTP EUR 2 2015/IX
OTP EUR 2 2016/IV
OTP EUR 2 2016/IX
OTP EUR 2 2015/XVIII
OTP EUR 2 2016/XII
OTP EUR 2 2016/XI
OTP EUR 2 2015/XV
OTP 2018/Fx
OTP EUR 2 2016/X
OTP EUR 2 2015/XIX
OTP EUR 2 2016/XIII
OTP EUR 2 2015/XVII
OTP EUR 2 2015/XI
OTP EUR 2 2016/XVI
OTP EUR 2 2015/X
OTP EUR 2 2015/VII
OTP EUR 2 2016/XIV

Date of
issuance

Maturity

Currency

03/10/2014
29/08/2014
19/12/2014
22/10/2014
20/12/2013
14/11/2014
12/09/2014
28/11/2014
17/01/2014
23/05/2014
31/01/2014
11/04/2014
14/02/2014
14/03/2014
09/05/2014
30/07/2014
28/02/2014
08/08/2014
31/10/2014
06/06/2014
04/07/2014
31/10/2013
20/06/2014
21/12/2012
03/10/2014
18/07/2014
30/07/2014
20/12/2013
22/04/2011
29/08/2014
29/11/2013
15/11/2013
28/11/2014
22/12/2011
12/09/2014
18/04/2014
14/02/2014
17/01/2014
31/01/2014
27/12/2010
21/03/2014
16/08/2013
19/06/2012
14/03/2014
11/04/2014
10/05/2013
28/02/2014
09/05/2014
13/09/2013
20/06/2014
06/06/2014
26/07/2013
19/12/2013
23/05/2014
27/09/2013
04/07/2014
30/08/2013
07/06/2013
08/08/2014
24/05/2013
05/04/2013
18/07/2014

17/10/2015
12/09/2015
02/01/2016
05/11/2015
10/01/2015
28/11/2015
26/09/2015
12/12/2015
31/01/2015
06/06/2015
14/02/2015
25/04/2015
28/02/2015
28/03/2015
23/05/2015
13/08/2015
14/03/2015
22/08/2015
14/11/2015
20/06/2015
18/07/2015
31/10/2015
04/07/2015
23/12/2015
03/10/2016
01/08/2015
30/07/2016
20/12/2015
22/04/2016
29/08/2016
29/11/2015
15/11/2015
28/11/2016
29/12/2016
12/09/2016
02/05/2015
14/02/2016
17/01/2016
31/01/2016
29/12/2015
04/04/2015
16/08/2015
16/06/2017
14/03/2016
11/04/2016
10/05/2015
28/02/2016
09/05/2016
13/09/2015
20/06/2016
06/06/2016
26/07/2015
21/12/2018
23/05/2016
27/09/2015
04/07/2016
30/08/2015
07/06/2015
08/08/2016
24/05/2015
05/04/2015
18/07/2016

EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
USD
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR

Nominal value in
FX
HUF
million
million
13.24
4,168
10.49
3,305
9.43
2,969
8.44
2,659
6.93
2,183
5.52
1,739
5.45
1,716
5.19
1,635
4.89
1,541
4.59
1,444
4.40
1,384
4.34
1,368
4.07
1,281
3.97
1,250
3.85
1,212
3.80
1,195
3.41
1,074
3.24
1,020
3.12
984
2.75
867
2.67
839
2.32
732
2.28
719
2.07
653
1.92
605
1.78
560
1.58
498
1.55
488
1.42
448
1.32
417
1.26
398
1.16
364
1.40
362
1.08
341
1.01
319
1.00
315
0.96
303
0.90
282
0.87
274
0.85
267
0.84
263
0.78
246
0.78
245
0.74
233
0.74
232
0.73
230
0.69
217
0.66
207
0.64
202
0.64
202
0.64
201
0.63
198
0.62
195
0.60
189
0.51
159
0.46
145
0.42
133
0.39
123
0.37
116
0.36
112
0.31
99
0.31
99

Interest
conditions
(in % actual)
1.25
xed
1.25
fixed
1
fixed
1
fixed
1.65
fixed
1
fixed
1.25
fixed
1
fixed
1.65
fixed
1.5
fixed
1.65
fixed
1.5
fixed
1.65
fixed
1.5
fixed
1.5
fixed
1.5
fixed
1.5
fixed
1.25
fixed
1
fixed
1.5
fixed
1.25
fixed
2.25
fixed
1.5
fixed
indexed floating
1.25
fixed
1.25
fixed
1.5
fixed
2
fixed
indexed floating
1.5
fixed
2
fixed
2.25
fixed
1.1
fixed
indexed floating
1.5
fixed
1.5
fixed
2
fixed
2
fixed
2
fixed
indexed floating
1.5
fixed
2.25
fixed
indexed floating
1.8
fixed
1.8
fixed
2.75
fixed
1.9
fixed
1.8
fixed
2.25
fixed
1.5
fixed
1.8
fixed
2.25
fixed
indexed floating
1.8
fixed
2.25
fixed
1.5
fixed
2.25
fixed
2.5
fixed
1.5
fixed
2.5
fixed
2.75
fixed
1.5
fixed

Hedged

hedged

hedged

hedged

hedged

hedged

hedged

OTP Bank Annual Report 2014

2014 angol.indd 196

5/18/15 12:47 PM

Name

63.
64.
65.
66.
67.
68.
69.
70.
71.
72.
73.
74.
75.

Date of
issuance

OTP EUR 2 2015/XX


11/10/2013
OTP EUR 2 2015/VIII
19/04/2013
OTP EUR 2 2015/XIII
28/06/2013
OTP EUR 2 2015/V
01/03/2013
OTP EUR 2 2015/XII
21/06/2013
OTP EUR 2 2016/VI
21/03/2014
OTP EUR 2 2016/VIII
18/04/2014
OTP EUR 2 2015/VI
22/03/2013
OTP EUR 2 2015/II
25/01/2013
OTP EUR 2 2015/I
11/01/2013
OTP EUR 2 2015/III
01/02/2013
OTP EUR 2 2015/IV
15/02/2013
OTP EUR 2 2015/XIV
12/07/2013
Subtotal issued securities in FX
Unamortized premium
Fair value hedge adjustment
Total

Maturity

Currency

11/10/2015
19/04/2015
28/06/2015
01/03/2015
21/06/2015
21/03/2016
18/04/2016
22/03/2015
25/01/2015
11/01/2015
01/02/2015
15/02/2015
12/07/2015

EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR

Nominal value in
FX
HUF
million
million
0.30
94
0.30
94
0.27
86
0.26
83
0.21
66
0.21
66
0.20
63
0.20
62
0.17
52
0.16
51
0.16
50
0.15
46
0.12
39
49,076
(67)
76
49,085

Interest
conditions
(in % actual)
2.25
fixed
2.75
fixed
2.5
fixed
2.75
fixed
2.5
fixed
1.8
fixed
1.8
fixed
2.75
fixed
2.75
fixed
3
fixed
2.75
fixed
2.75
fixed
2.25
fixed

Hedged

Term Note Program in the value of

issued under the program to the Budapest,

HUF 500 billion for the year of 2013/2014

Slovakian, Romanian and Bulgarian Stock

On 9 July 2013 OTP Bank initiated term note

Exchange.

program in the value of HUF 500 billion with the


intention of issuing registered dematerialized

Certain structured bonds are hedged by interest

bonds in public. The Authority approved on

rate swaps which may transfer to a transferee

30 July 2013 the prospectus of Term Note

a xed interest rate and enter into an interest

Program and the disclosure as at 17 July 2013.

rate swap with the transferee to receive a xed

The prospectus is valid for 12 months following

interest rate and pay a variable interest rate

the disclosure.

and amount of the structure if any based on a

The Issuer can initiate to introduce the bonds

notional amount which is equal to the notional

issued under the program to the Budapest,

amount of the hedged bond. In certain cases

Slovakian, Romanian and Bulgarian Stock

amount of the structure is hedged by options

Exchange.

which give the owner the right to get amount of

54,204 pieces of xed bonds with nominal value

the structure which is equal to the structure of

of EUR 100 each in the total nominal amount

the hedged bond. The hedge is highly effective if

of EUR 5,420,400 have been introduced to the

changes in fair value or cash-ows attributable

Budapest Stock Exchange. On 10 September

to the hedged risk during the period for which

2014 the NBH approved the disclosure and the

the hedge is designated are within a range of

prospectus as at 27 August 2014.

80125 per cent.

Term Note Program in the value of

issued by the Bank are exposed to the change

HUF 500 billion for the year of 2014/2015

in the HUF/EUR foreign exchange rate and the

On 8 July 2014 OTP Bank initiated term

risk of change in the quoted interest rates of

note program in the value of HUF 500 billion

EUR and HUF. The interest rate risk and foreign

with the intention of issuing registered

exchange risk related to these securities are

dematerialized bonds in public. The NBH

hedged with EUR and HUF interest rate swap

approved on 29 July 2014 the prospectus

(IRS) transactions, where the xed interests

of Term Note Program and the disclosure

were swapped to payments linked to 3 month

as at 25 July 2014. The prospectus is valid

HUF BUBOR and EURIBOR, resulted a decrease

for 12 months following the disclosure.

in the interest rate and foreign exchange

The Issuer can initiate to introduce the bonds

exposure of issued securities.

The cash-ows of the xed rate securities

IFRS separate nancial statements

2014 angol.indd 197

197

5/18/15 12:47 PM

Issued securities denominated in HUF as at 31 December 2014:


Name

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.

198

OTP EK 2015/I
OTP TBSZ2015/I
OTP 2015/Ax
OTP 2019/Dx
OTP 2017/Ax
OTP 2017/Bx
OTP 2020/Ex
OTP 2018/Bx
OTP 2015/Bx
OTP 2016/Ax
OTP 2018/Cx
OTP 2020/Fx
OTP 2017/Ex
OTP 2019/Ex
OTP 2020/Gx
OTP 2017/Cx
OTP 2018/Ex
OTP 2018/Dx
OTP 2016/Bx
OTP 2020/RF/C
OTP 2020/RF/A
OTP 2021/RF/B
OTP 2021/RF/A
OTP TBSZ2016/I
OTP 2020/RF/B
OTP 2022/RF/A
OTP 2018/Ax
OTP 2016/Fx
OTP TBSZ2016/II
OTP DNT HUF 150107 4%
OTP 2017/Dx
OTP TBSZ 4 2015/I
OTP 2024/Bx
OTP 2023/Ax
OTP 2021/RF/C
OTP 2015/Dx
OTP 2015/Ex
OTP 2019/Bx
OTP 2021/Dx
OTP 2020/Bx
OTP 2022/RF/B
OTP 2022/Dx
OTP 2020/Ax
OTP 2021/Bx
OTP 2016/Ex
OTP 2022/RF/E
OTP 2024/Cx
OTP 2019/Cx
OTP 2021/Cx
OTP 2022/Cx
OTP 2021/Ax
OTP 2022/Ax
OTP 2023/Bx
OTP 2024/Ax
OTP 2022/Bx
OTP 2019/Ax
OTP 2021/RF/D
OTP 2022/RF/F
OTP 2020/Cx
OTP TBSZ6 2017/I
OTP 2023/RF/A
OTP 2020/Dx

Date of issuance

29/07/2013
26/02/2010
25/03/2010
22/03/2013
01/04/2011
17/06/2011
18/06/2014
22/03/2012
28/06/2010
11/11/2010
18/07/2012
10/10/2014
21/12/2011
28/06/2013
15/12/2014
19/09/2011
28/12/2012
29/10/2012
16/12/2010
11/11/2010
12/07/2010
20/10/2011
05/07/2011
14/01/2011
12/07/2010
22/03/2012
03/01/2012
22/03/2013
26/08/2011
30/06/2014
20/10/2011
13/01/2012
10/10/2014
22/03/2013
21/12/2011
22/03/2012
18/07/2012
05/10/2009
21/12/2011
28/06/2010
22/03/2012
28/12/2012
25/03/2010
17/06/2011
28/12/2012
29/10/2012
15/12/2014
14/12/2009
19/09/2011
29/10/2012
01/04/2011
22/03/2012
28/06/2013
18/06/2014
18/07/2012
25/06/2009
21/12/2011
28/12/2012
11/11/2010
13/01/2012
22/03/2013
16/12/2010

28/12/2010

05/08/2011

29/12/2011

22/06/2012

05/02/2010

22/06/2012

Maturity

29/01/2015
30/12/2015
30/03/2015
21/03/2019
31/03/2017
20/06/2017
22/06/2020
22/03/2018
09/07/2015
03/11/2016
18/07/2018
16/10/2020
28/12/2017
24/06/2019
21/12/2020
25/09/2017
28/12/2018
26/10/2018
19/12/2016
05/11/2020
20/07/2020
25/10/2021
13/07/2021
15/12/2016
20/07/2020
23/03/2022
09/01/2018
24/03/2016
15/12/2016
07/01/2015
19/10/2017
15/12/2015
16/10/2024
24/03/2023
30/12/2021
23/03/2015
20/07/2015
14/10/2019
27/12/2021
09/07/2020
23/03/2022
27/12/2022
30/03/2020
21/06/2021
27/12/2016
31/10/2022
20/12/2024
20/12/2019
24/09/2021
28/10/2022
01/04/2021
23/03/2022
26/06/2023
21/06/2024
18/07/2022
01/07/2019
30/12/2021
28/12/2022
05/11/2020
15/12/2017
24/03/2023
18/12/2020

Nominal
value in
HUF million
5,467
5,438
4,429
4,400
4,347
4,243
4,100
4,091
4,060
3,654
3,523
3,500
3,449
3,344
3,250
3,186
3,029
2,930
2,786
2,475
2,370
1,961
1,946
1,176
1,131
1,053
702
670
638
615
475
471
400
395
385
385
376
368
365
362
351
343
340
332
332
331
320
314
300
296
289
280
280
270
265
263
256
236
234
233
231
215

Interest
conditions
(in % actual)
4.25
xed
5.5
fixed
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
5.5
fixed
indexed
floating
indexed
floating
indexed
floating
indexed
floating
5.5
fixed
indexed
floating
indexed
floating
6.5
fixed
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
oating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
indexed
floating
6.5
fixed
indexed
floating
indexed
floating

Hedged

hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged

hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged
hedged

OTP Bank Annual Report 2014

2014 angol.indd 198

5/18/15 12:47 PM

Name

63.
64.
65.
66.
67.
68.
69.
70.
71.

Date of issuance

OTP 2015/Hx
28/12/2012
OTP TBSZ 4 2016/I
18/01/2013
OTP 2022/RF/D
28/06/2012
OTP 2022/RF/C
28/06/2012
OTP OJK 2016/I
26/08/2011
OTP TBSZ 4 2015/II
21/12/2012
OTP 2021/RF/E
21/12/2011
OTP OJK 2017/I
27/01/2012
Other

Subtotal issued securities in HUF


Unamortized premium
Fair value hedge adjustment
Total issued securities in HUF
Accrued interest
Total issued securities

NOTE 16:

15/02/2013

21/12/2011

13/07/2012

Maturity

27/12/2015
15/12/2016
28/06/2022
28/06/2022
26/08/2016
15/12/2015
30/12/2021
27/01/2017

Nominal
value in
HUF million
170
157
155
124
106
48
34
22
231
99,303
(1,620)
13,378
111,061
2,521
162,667

Interest
conditions
(in % actual)
indexed
floating
5
fixed
indexed
floating
indexed
floating
6.14
fixed
6
fixed
indexed
floating
7
fixed

Hedged

hedged
hedged
hedged

hedged

FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT


OR LOSS (in HUF mn)

Negative fair value of nancial liabilities at fair value through prot or loss classied as held
for trading by deal types:
CCIRS and mark-to-market CCIRS
IRS
Foreign currency swaps
Other derivative contracts*
Total

2014
236,743
63,670
60,110
14,840
375,363

2013
124,556
67,854
5,744
6,363
204,517

* Incl.: FX, equity, commodity and index futures; FX forward; commodity and equity swap; FRA; FX option.

IFRS separate nancial statements

2014 angol.indd 199

199

5/18/15 12:47 PM

NOTE 17:

OTHER LIABILITIES* (in HUF mn)


Financial liabilities from OTPMOL share swap transaction**
Provision on other liabilities, off-balance sheet commitments,
contingent liabilities
Liabilities from investment services
Accrued expenses
Salaries and social security payable
Accounts payable
Current income tax payable
Short-term liabilities due to repurchase agreement transactions
Giro clearing accounts
HUF denominated liabilities from purchase of customers with cards
Fair value of derivative nancial instruments designated as fair value
hedge (interest rate swap transactions)
Suspended liabilities
Liabilities connected to loans for collection
Liabilities related to housing loans
Deferred tax liabilities
Other
Total

2014
56,445

2013
71,548

55,596

12,913

41,853
32,353
17,266
11,479
7,789
6,980
5,671
4,992

53,068
30,179
18,330
8,641
10,431
10,133
4,189
3,500

3,463
1,852
909
216

7,088
253,952

2,639
2,294
1,044
105
9,672
3,758
242,444

The provision on other liabilities, off-balance sheet commitments and contingent liabilities
are detailed as follows:
Provision on contingent liabilities due to regulations related
to customer loans***
Provision on promissory obligation
Provision for losses on other off-balance sheet commitments
and contingent liabilities
Provision for taxation
Provision for litigation
Provision for retirement pension and severance pay
Provision on other liabilities
Total

2014

2013

44,127

3,525

4,040

3,365

2,949

1,000
998
426
2,155
55,596

2,000
554
2,500
870
12,913

Movements in the provision for losses on commitments and contingent liabilities


can be summarized as follows:
Balance as at 1 January
Provision for the year
Release of provision
Provision for impairment on promissory obligation
Balance as at 31 December

2014
12,913
50,923
(7,724)
(516)
55,596

2013
5,373
13,441
(10,420)
4,519
12,913

* Other liabilities except nancial liabilities from OTPMOL share swap transaction, deferred tax liabilities and fair value of
derivative nancial instruments designated as fair value hedge are expected to be recovered or settled no more than twelve
months after the reporting period. Unrealised gains/losses on OTPMOL share swap transaction is settled in June of each year
until the maturity date. The fair value adjustment of swap transaction is HUF 423 million as at 31 December 2014. Unrealised
gains/losses on derivative nancial instruments is recovering in accordance with their maturity.
** On 16 April 2009, OTP Bank Plc. and MOL Hungarian Oil and Gas Plc. entered into a 3 years share swap transaction. MOL obtained
24 million pieces of Banks ordinary shares (8.57% of the ordinary shares) and OTP obtained approximately 5 million pieces of
MOL shares. Both parties were granted by an American style call and put option to initiate the gross physical settlement of shares
back to the issuer until 11 July 2012. On 11 July 2012 the parties amended the nal maturity of the share swap agreement for
11 July 2017 until which any party can initiate cash or physical settlement of the transaction. There is no compulsory settlement
of shares at the maturity of the swap agreement. The agreement contains additional settlement provisions in case of certain
movement of relative share prices of the parties subject to net cash or net share settlement. Due to the loss of control over
the Treasury shares, the Treasury shares were derecognized and MOL shares were recognized as held for trading securities.
The written put option over OTP ordinary shares were accounted as a deduction from equity with the amount of HUF 55.5 billion
and a recognition of a corresponding liability. As at 31 December 2014 and 2013 HUF 56,445 and HUF 71,548 million liability was
presented in other liabilities. The measurement is based on the fair value of MOL shares to be delivered at the potential exercise of
the call and put options adjusted with the expected present value of the net cash or net share settlement due to certain movement
of relative share prices.
*** See Note 2.26.

200

OTP Bank Annual Report 2014

2014 angol.indd 200

5/18/15 12:47 PM

NOTE 18:

SUBORDINATED BONDS AND LOANS (in HUF mn)


2014

2013

29,375
29,375

263,843
263,843
293,218
1,394
294,612

274,817
274,817
274,817
3,424
278,241

2014
0.6%5.9%

2013
0.8%5.9%

5.41%

6.12%

Within one year:


In foreign currency
Over one year:
In foreign currency
Subtotal
Accrued interest
Total

Interest rates on subordinated bonds and loans are as follows:


Subordinated bonds and loans denominated in foreign currency
Average interest on subordinated bonds and loans denominated
in foreign currency

Subordinated loans and bonds are detailed as follows as at 31 December 2014:


Type

Nominal
value

Date of
issuance

Date of
maturity

Issue price

Subordinated bond

EUR 93.45 million

04/03/2005

04/03/2015

100%

Subordinated bond

EUR 353.1 million

07/11/2006

Perpetual bond

99.375%

EUR 300 million

19/09/2006

19/09/2016

100%

Fixed 5.27% annual

5.27%

EUR 200 million

26/02/2007

19/09/2016

100%

Fixed 5.27% annual

5.27%

Subordinated bond
(under EMTN* program)
Subordinated bond
(under EMTN* program)

NOTE 19:

Interest
conditions

Interest rate as
of 31 December
2014

three-month EURIBOR + 0.55%


quarterly
Fixed 5.875% annual in
the first 10 years (payable
annually), three-month
EURIBOR + 3%, variable after
year 10 (payable quarterly)

SHARE CAPITAL (in HUF mn)


Authorized, issued and fully paid:
Ordinary shares

2014

2013

28,000

28,000

* European Medium Term Note Program.

IFRS separate nancial statements

2014 angol.indd 201

201

5/18/15 12:47 PM

NOTE 20:

RETAINED EARNINGS AND RESERVES (in HUF mn)

The reserves of the Bank under Hungarian Accounting Standards (HAS)*:


2014
52
112,217
814,399
8,558
935,226

Capital reserve
General reserve
Retained earnings
Tied-up reserve
Total

2013
52
153,935
870,357
8,287
1,032,631

The legal reserves (general reserve and tied-up

average market price (HUF 7,080) of the

reserve) are not available for distribution.

Budapest Stock Exchange. The shares have

Dividend was calculated on the bases of the

been purchased by Opus Securities S.A.

separate annual net prot according to HAS.

(OPUS), which issued an exchangeable bond


with a total face value of EUR 514,274,000

These Financial Statements subject to approval

backed by those shares. The exchangeable

by the Board of Directors in the Annual General

bonds have been sold at a 32% premium

Meeting in March 2015. In 2014 the Bank

over the selling price of the shares.

paid dividend of HUF 40,600 million from the

The EUR denominated exchangeable bonds

prot of the year 2013. In 2015 dividend of

are perpetual and the investors can exercise

HUF 40,600 million are expected to be proposed

the conversion right between year 6 and 10.

by the Management from the prot of the year

The bonds carry a xed coupon of 3.95% during

2014, which means 145 HUF payable dividends

the rst 10 years thereafter the Issuer has

by share to the shareholders.

the right to redeem the bonds at face value.


Following the year 10, the bonds carry a coupon

On 19 October 2006 the Bank sold 14.5 million

of 3 month EURIBOR +3%. OTP Bank has

Treasury shares owned by OTP Group through

discretional right to cancel the payments.

an issue of Income Certicates Exchangeable

The interest payable is non-cumulative.

for Shares (ICES). Within the transaction


10 million shares owned by OTP Bank and

Due to the conditions described above, ICES

4.5 million OTP shares owned by OTP Fund

was accounted as an equity instrument and

Management Ltd. were sold during the

therefore any payment was accounted as equity

underwriting period of ICES on the weighted

distribution paid to ICES holders.

* The reserves under IFRS are detailed in statement of changes in shareholders equity.

202

OTP Bank Annual Report 2014

2014 angol.indd 202

5/18/15 12:47 PM

NOTE 21:

TREASURY SHARES (in HUF mn)


2014
161
7,073

Nominal value (ordinary shares)


Carrying value at acquisition cost

2013
140
6,731

The changes in the carrying value of treasury

transactions on market authorised by

shares are due to repurchase and sale

the General Assembly.

Change in number of shares:


Number of shares as at 1 January
Additions
Disposals
Number of shares as at 31 December

2014
1,402,369
6,474,942
(6,272,000)
1,605,311

2013
2,185,337
4,247,043
(5,030,011)
1,402,369

2014
6,731
27,522
(27,180)
7,073

2013
4,934
19,740
(17,943)
6,731

Change in carrying value:


Balance as at 1 January
Additions
Disposals
Balance as at 31 December

NOTE 22:

PROVISION FOR IMPAIRMENT ON LOAN AND PLACEMENT


LOSSES (in HUF mn)
Provision for impairment on loan losses
Provision for the year
Release of provision
Provision on loan losses
Provision for impairment on placement losses
Provision for the year
Provision for impairment on loan and placement losses

NOTE 23:

2014

2013

52,096
(54,793)
25,906
23,209

83,796
(82,132)
28,847
30,511

4
4
23,213

22
22
30,533

NET PROFIT FROM FEES AND COMMISSIONS (in HUF mn)


Income from fees and commissions:
Deposit and account maintenance fees and commissions
Fees and commissions related to the issued bank cards
Fees and commissions related to security trading
Fees related to the cash withdrawal
Fees and commissions related to lending
Fees and commissions received from OTP Mortgage Bank Ltd.
Net fee income related to card insurance services
and loan agreements
Other
Total

2014
74,584
26,795
23,046
22,171
6,462
6,204

2013
63,801
26,626
19,505
25,709
5,042
8,112

1,962

1,879

7,817
169,041

7,320
157,994

IFRS separate nancial statements

2014 angol.indd 203

203

5/18/15 12:47 PM

Expenses from fees and commissions:


Fees and commissions related to issued bank cards
Interchange fee
Fees and commissions related to lending
Cash withdrawal transaction fees
Fees and commissions relating to deposits
Fees and commissions related to security trading
Insurance fees
Money market transaction fees and commissions
Postal fees
Other
Total
Net prot from fees and commissions

NOTE 24:

2014
9,331
3,439
3,150
1,186
855
713
491
425
297
2,608
22,495
146,546

2013
6,466
6,107
2,897
1,511
723
557
1,827
561
569
2,835
24,053
133,941

OTHER OPERATING INCOME AND EXPENSES


AND OTHER ADMINISTRATIVE EXPENSES (in HUF mn)
Other operating income
Income from non-nancing services
Gains on transactions related to property activities
Other
Total
Net other operating expenses
Provision for impairment on investments in subsidiaries
Provision on contingent liabilities due to regulations related
to customer loans*
Financial support for sport association and organization of public utility
Provision for impairment on other assets
Expenses from promissory obligation to OTP Financing Solutions B.V.
Fine imposed by Competition Authority
(Release of provision)/provision for off-balance sheet commitments
and contingent liabilities
Other
Total
Other administrative expenses
Personnel expenses
Wages
Taxes related to personnel expenses
Other personnel expenses
Subtotal
Depreciation and amortization
Other administrative expenses
Taxes, other than income tax**
Administration expenses, including rental fees
Services
Advertising
Professional fees
Subtotal
Total

2014
1,922
87
1,285
3,294

2013
1,242
79
2,351
3,672

2014
226,730

2013
52,550

43,795

5,643
2,811
948
38

10,743
281
2,249
3,922

(1,112)

3,021

7,030
285,883

5,897
78,663

2014

2013

59,510
19,238
8,710
87,458
22,177

59,036
18,645
8,079
85,760
21,657

2014
84,637
21,524
18,325
5,566
4,741
134,793
244,428

2013
88,888
20,514
19,205
6,335
3,450
138,392
245,809

* See Note 2.26.


** Special tax of nancial institutions was paid by OTP Bank in the amount of HUF 24 billion for the year 2014 and 2013, recognized
as an expense thus decreased the corporate tax base. In the year ended 31 December 2014 nancial transaction duty was paid by
the Bank in the amount of HUF 44 billion.

204

OTP Bank Annual Report 2014

2014 angol.indd 204

5/18/15 12:47 PM

NOTE 25:

INCOME TAX (in HUF mn)


The Bank is presently liable for income tax at a rate of 19% of taxable income.

A breakdown of the income tax expense is:


Current tax expense
Deferred tax income
Total

2014
2,284
(45,548)
(43,364)

2013
7,802
(1,360)
6,442

2014
(9,672)
45,648

2013
(11,655)
1,360

(2,419)

623

33,557

(9,672)

2014
30,596
10,705
6,794
4,176
1,517
182
166
54,136
(11,048)
(2,681)
(1,957)
(1,902)
(1,658)
(1,333)
(20,579)
33,557

2013

459
4,458
1,672
766
285
7,640
(7,322)
(2,934)
(1,968)
(1,254)
(1,922)
(1,912)
(17,312)
(9,672)

2014
(117,833)
(22,388)

2013
54,333
10,323

A reconciliation of the deferred tax liability/asset is as follows:


Balance as at 1 January
Deferred tax income
Tax effect of fair value adjustment of available-for-sale securities
recognized in other comprehensive income and ICES
Balance as at 31 December

A breakdown of the deferred tax asset/liability is as follows:


Refundable tax in accordance with Acts on Customer Loans*
Provision for impairment on investments
Unused tax allowance**
Repurchase agreements and security lending
Tax accrual caused by negative taxable income
Amounts unenforceable by tax law
Difference in accounting for nance leases
Deferred tax assets
Fair value adjustment of held for trading and available-for-sale securities
Effect of redemption of issued securities
Difference in depreciation and amortization
Fair value adjustment of derivative nancial instruments
Effect of using effective interest rate method
Valuation of equity instrument (ICES)
Deferred tax liabilities
Net deferred tax asset/(liability)

A reconciliation of the income tax expense is as follows:


(Loss)/prot before income tax
Income tax at statutory tax rate (19%)

* See Note 2.26.


** Since 2011 legal regulation has allowed to recognize the nancial support for sight-team sport as extraordinary expense and tax
allowance in the nancial statements in accordance with the HAS. In 2014 the Bank could apply with limits the tax allowance in the
HAS nancial statements. Deferred tax asset was recorded in the amount of unused tax allowance in IFRS nancial statements.

IFRS separate nancial statements

2014 angol.indd 205

205

5/18/15 12:48 PM

Income tax adjustments due to permanent differences are as follows:


Differences in carrying value of subsidiaries
Share-based payment
Amounts unenforceable by tax law
OTPMOL share swap transaction
Revaluation of investments denominated in foreign currency
to historical cost
Accounting of equity instrument (ICES)
Treasury share transaction
Use of tax allowance in the current year
Deferred use of tax allowance*
Dividend income
Tax refund in accordance with Acts on Customer Loans
Amount removed from statutory general provision to retained earnings
Reversal of statutory general provision
Tax accrual caused by negative taxable income
Other
Income tax
Effective tax rate**

NOTE 26:

2014
14,982
835
584
(80)

2013
3,267
1,084
(766)
(186)

(185)

3,215

(211)
(917)
(2,479)
(6,335)
(8,115)
(22,189)

3,134
(43,364)
36.8%

49
113
(9,523)
(459)
(8,984)

5,533
1,198
(472)
2,050
6,442
11.9%

FINANCIAL RISK MANAGEMENT (in HUF mn)


A nancial instrument is any contract that

foreign exchange contracts. Actual exposures

gives rise to a nancial asset of one entity and a

against limits are monitored daily.

nancial liability or equity instrument of another


entity.

Exposure to credit risk is managed through

Financial instruments may result in certain

regular analysis of the ability of borrowers and

risks to the Bank. The most signicant risks the

potential borrowers to meet interest and capital

Bank faces include:

repayment obligations and by changing these


lending limits when appropriate. Exposure
to credit risk is partly managed obtaining

26.1 Credit risk

collateral, corporate and personal guarantees.

The Bank takes on exposure to credit risk which


is the risk that a counter-party will be unable

26.1.1 Analysis by loan types

to pay amounts in full when due. The Bank


structures the levels of credit risk it undertakes

Classication into risk classes

by placing limits on the amount of risk accepted

Exposures with small amounts (retail and

in relation to one borrower, or banks of

SME sector) are subject to collective valuation

borrowers, and to geographical areas and loan

method which is a simplied assessment.

types. Such risks are monitored on a periodical


basis and subject to an annual or more frequent

Exposures with small amounts are subject

review. The exposure to any borrower including

to collective valuation method, which is a

banks and brokers is further restricted by

simplied assessment. The exposures subject

sublimit covering on- and off-balance sheet

to collective valuation method are classied into

exposures and daily delivery risk limits in

ve valuation groups which have been formed

relation to trading items such as forward

based on past due days from which there

* Since 2011 legal regulation has allowed to recognize the nancial support for sight-team sport as extraordinary expense and tax
allowance in the nancial statements in accordance with the HAS. In 2014 the Bank could apply with limits the tax allowance in the
HAS nancial statements. Deferred tax asset was recorded in the amount of unused tax allowance in IFRS nancial statements.
** Effective tax rate has changed due to deferred tax receivable recognized in relation to the expecting tax receivable based on act on
settlement and considering the contribution provided to the subsidiaries.

206

OTP Bank Annual Report 2014

2014 angol.indd 206

5/18/15 12:48 PM

classes were presented (A: 090 days past


due DPD, B: 91360 DPD, C: over 360 days
past due).

the country risk relating to the customer


(both political and transfer risks) and any
changes thereto;
the value of collaterals, their liquidity and

The Bank intends where enough large


number of items and enough long experiences

accessibility, and any changes therein;


the transferability and liquidity of the

are available applying models on statistical

exposures (the market conditions of supply

bases. The impairment is calculated according

and demand, the available market prices and

to the possibility of listing the loan into default

participation in the shareholders equity of

categories examined on the base of objective

the issuer in proportion to the investment);

valuation criteria (delay of payment, change of


exchange) and the expected recovery from the

the future payment obligation recognized


as a loss arising from the exposure.

collecting. If the loss of the exposure cant be


modelled reliably, the impairment is determined

The expected future losses of the individually

by expert keys.

assessed item are determined by taking


into considerations the above listed objective

When applying the individual evaluation

valuation aspects. The expected loss,

method, the incurred loss of each item is

the volume of the necessary reserve is

determined based on the consideration of all of

dened by taking into account the value

the following criteria:

of the collaterals, comparing with the value

the credit rating of the customer or the

of the collaterals relating to the exposure.

partner: the nancial position, stability and

The expected recovery is calculated by applying

income-generating capacity affected by the

the effective interest rate method and the

nancial or investment service and issuer of

discounted cash-ow method. The impairment

the security, and any changes thereto;

accounted for the item before should be

compliance with the rules of repayment

completed to this level by increasing the

(delay): delays in the repayment of the loan

amount of the impairment or by releasing

principal and its interests;

the provision accounted before.

IFRS separate nancial statements

2014 angol.indd 207

207

5/18/15 12:48 PM

An analysis of the gross loan portfolio by loan types and DPD categories is as follows:
As at 31 December 2014:
Loan type

DPD 090

DPD 91360

DPD 360+

Placements with other banks


Total placements with other banks
Allowance on placements with other banks
Consumer loans
Mortgage and housing loans
SME loans
Loans to medium and large corporates
Municipal loans
Gross loan portfolio total
Allowance on loans
Net portfolio total
Accrued interest
Placements with other banks
Loans
Total accrued interest
Total placements with other banks
Total loans
Total

710,484
710,484
(26)
281,923
90,467
112,970
1,363,904
48,220
1,897,484
(37,088)
2,570,854

7,888
6,749
928
12,918
28
28,511
(15,613)
12,898

1,686
15,142
305
43,809
52
60,994
(32,696)
28,298

Total carrying
amount/
allowance
710,484
710,484
(26)
291,497
112,358
114,203
1,420,631
48,300
1,986,989
(85,397)
2,612,050
1,654
7,039
8,693
712,112
1,908,631
2,620,743

As at 31 December 2013:
Loan type

DPD 090

DPD 91360

DPD 360+

Placements with other banks


Total placements with other banks
Allowance on placements with other banks
Consumer loans
Mortgage and housing loans
SME loans
Loans to medium and large corporates
Municipal loans
Gross loan portfolio total
Allowance on loans
Net portfolio total
Accrued interest
Placements with other banks
Loans
Total accrued interest
Total placements with other banks
Total loans
Total

630,753
630,753
(22)
302,826
101,622
104,381
1,466,272
206,857
2,181,958
(83,289)
2,729,400

5,395
7,987
1,439
10,490
105
25,416
(13,210)
12,206

1,255
13,983
452
60,893
915
77,498
(54,014)
23,484

208

Total carrying
amount/
allowance
630,753
630,753
(22)
309,476
123,592
106,272
1,537,655
207,877
2,284,872
(150,513)
2,765,090
2,168
10,342
12,510
632,899
2,144,701
2,777,600

The Banks gross loan portfolio decreased

2014, while the ratio of DPD90+ loans in

by 7.5% in the year ended 31 December 2014.

gross loan portfolio decreased from

Analysing the contribution of loan types

3.53% to 3.32%.

to the loan portfolio, the share of several

The Bank has a prudent provisioning policy,

business lines hardly changed.

although the coverage of loans by provision

The ratio of the DPD090 loans compared

for impairment on DPD90+ loans decreased

to the gross loan portfolio increased slightly

from 65.32% to 53.97% in the year ended

from 96.47% to 96.68% as at 31 December

31 December 2014.

OTP Bank Annual Report 2014

2014 angol.indd 208

5/18/15 12:48 PM

Not impaired loan portfolio

An analysis of the credit classication of the gross value of the loans that are not impaired,
not past due and past due is as follows:
As at 31 December 2014:
Loan type
Placements with other banks
Consumer loans
Mortgage and housing loans
SME loans
Loans to medium and large corporates
Municipal loans
Total

Not past due


710,458
221,734
55,858
109,552
1,151,217
48,455
2,297,274

DPD 090

38,324
7,592
706
272
263
47,157

DPD 91360

109
2,089
22
47
19
2,286

DPD 360+

37
5,423

5
34
5,499

Total
710,458
260,204
70,962
110,280
1,151,541
48,771
2,352,216

Not past due


630,731
220,113
62,298
98,439
1,202,456
164,611
2,378,648

DPD 090

49,210
10,028
847
627

60,712

DPD 91360

60
2,097
21
5
14
2,197

DPD 360+

11
3,783

100
33
3,927

Total
630,731
269,394
78,206
99,307
1,203,188
164,658
2,445,484

As at 31 December 2013:
Loan type
Placements with other banks
Consumer loans
Mortgage and housing loans
SME loans
Loans to medium and large corporates
Municipal loans
Total

The ratio of the gross value of the loans neither

because of endorsing collaterals considering

past due nor impaired compared to the whole

during the individual evaluation. In the other

portfolio increased from 81.58% to 85.16%

loan types the low level of loans past due but

as at 31 December 2014 compared to

not impaired is a consequence of the prudent

31 December 2013. The loans that are neither

provisioning policy of the Bank. Among the

past due nor impaired are concentrated in

past due loans, the share of certain loan types

the corporate business line. The ratio of the

changed insignicantly as at 31 December 2014

gross value of the loans past due not impaired

compared to 31 December 2013.

compared to the whole portfolio decreased


from 2.29% to 2.04%. The loans that are past
due but not impaired are concentrated in the
retail business line. During collective valuation

Loans individually assessed


for provision

method the Bank recognizes provision for


impairment on loans over a 30 day delay.

The individually rated exposures contain

Those loans which are guaranteed by state

both the loans and the off-balance sheet

and are past due 30 days not impaired due

commitments. The rating has been performed

to the state guarantee. The level of corporate

based on the factors used at determining the

loans past due but not impaired is possible

provision for impairment for them.

IFRS separate nancial statements

2014 angol.indd 209

209

5/18/15 12:48 PM

As at 31 December 2014:
Considered factors

Carrying
value

Allowance for
impairment

Collateral
value

Off-balance sheet
commitments

Delay of repayment
Regularity of payment
Legal proceedings
Decrease of client classification
Loan characteristics
Business lines risks
Refinancing of subsidiaries portfolio
Cross default
Other
Corporate total
Delay of repayment
Regularity of payment
Legal proceedings
Decrease of client classification
Cross default
Other
Municipal total
Placements with other banks
Total

73,344
429
45,467
88,896
39,370
44,219

13,250
10,066
315,041

96
100

315,141

61,928
162
37,774
15,971
1,975
5,052

3,781
2,082
128,725

1
5

128,730

17,941
394
14,099
53,294
27,341
8,454

5,708
5,228
132,459

132,459

84
12,300

16,004
120,664
441
4,925
154,418

381
384

154,802

Considered factors

Carrying
value

Allowance for
impairment

Collateral
value

Off-balance sheet
commitments

Delay of repayment
Regularity of payment
Legal proceedings
Decrease of client classification
Loan characteristics
Business lines risks
Refinancing of subsidiaries portfolio
Cross default
Other
Corporate total
Delay of repayment
Regularity of payment
Legal proceedings
Decrease of client classification
Cross default
Other
Municipal total
Placements with other banks
Total

67,281
472
41,367
96,873
54,200
48,520

4,118
11,034
323,865
70
1,221
334
2,937
882
14,583
20,027

343,892

55,433
196
33,931
19,359
7,448
10,176

1,337
998
128,878
70
12
334
129
124
456
1,125

130,003

18,675
222
12,611
59,442
19,775
7,842

2,313
11,852
132,732

298
305

133,037

190
8,046

8,558
124,517
1,372
4,660
147,343

99

1,044
1,143

148,486

Provision for losses


on off balance sheet
contingent liabilities

47
592

508
3,525
51
183
4,906

4
4

4,910

As at 31 December 2013:

Regarding corporate business line in the

Provision for losses


on off balance sheet
contingent liabilities

94
290

467
4,040
219
138
5,248

10
11

5,259

Transactions with high level of risk:

individually rated portfolio the ratio of the

Loans to customers are classied by using this

carrying value of loans classied due to

category name if the clients are performing

cross default increased signicantly

according to the contracts but the risks of the

as at 31 December 2014 compared to

transactions are higher than usual (balloon

31 December 2013, while the carrying value

payment, using loan to nance the monetary

of loans classied due to loan characteristics

expenditures in the phase of investment).

decreased by 27.4% as at 31 December 2014.


Business lines risks:

210

Renancing of retail loans at the

Transactions are classied by using this

subsidiaries:

category name, if the client works in the branch

The gross value was HUF 120.6 billion as at

which had been accused by the nancial crisis

31 December 2014, the actual exposure of

(vehicle industry, building industry, real estate

non-performing loans is HUF 13.7 billion.

services, metal processing and nancial services).

OTP Bank Annual Report 2014

2014 angol.indd 210

5/18/15 12:48 PM

Loan portfolio by countries

An analysis of carrying amount of the non-qualied and qualied gross loan portfolio
in a country breakdown is as follows:
2014
Country

Gross loan and


placement with other
banks portfolio
Hungary
1,837,626
Belgium
1
Bulgaria
66,575
Croatia
33,339
Cyprus
47,276
Egypt

France
5,237
Germany
10,109
Luxembourg

Montenegro
51,932
the Netherlands
90,122
Norway
4,405
Poland
1,426
Romania
104,882
Russia
100,562
Serbia
9,777
Seychelles
4,877
Slovakia
32,768
Switzerland
3,065
Ukraine
165,150
United Kingdom
118,514
United States of America
2,376
Other
7,454*
Total
2,697,473

2013
Allowance

38,764
1
750
639
10,443

20,561
1

6,363
2,611
2
4,855
148
149
42
26
44
20
85,423

Gross loan and


placement with other
banks portfolio
2,044,718
11,418
53,455
24,831
46,109
685
14,741
23,127
3
62,773
5,510
1,205
1,199
221,346
37,023
23,757
4,624
37,854
1,946
242,449
49,186
2,971
4,695*
2,915,625

Allowance

96,890

730
190
10,381
480

5
2
30,477

6,156
2,699
1
2,317
150
2
2
14
33
6
150,535

The non-performing loans connected to the

non-performing loans is HUF 13.7 billion as at

OTP Financing Solutions B.V. (the Netherlands)

31 December 2014, from that HUF 2.9 billion is

are related to the renancing of retail loans at

related to non-performing corporate loans and

the subsidiaries, the actual exposure of

HUF 10.9 billion to retail ones.

26.1.2 Collaterals
The collateral value held by the Bank by collateral

The collaterals cover loans as well as

types is as follows (total collateral value).

off-balance sheet exposures.

Types of collateral
Mortgages
Guarantees and warranties
Deposit
from this: Cash
Securities
Other
Assignment
Other
Total

2014
716,079
217,022
59,587
41,966
16,492
1,129
1,886
861
995,435

2013
701,682
203,324
54,609
48,076
5,144
1,389
3,643
815
964,073

* Austria, Czech Republic, Denmark, Italy, Sweden, Turkey and other.

IFRS separate nancial statements

2014 angol.indd 211

211

5/18/15 12:48 PM

The collateral value held by the Bank by

the exposures). The collaterals cover loans as

collateral types is as follows (to the extent of

well as off-balance sheet exposures.

Types of collateral
Mortgage
Guarantees and warranties
Deposit
from this: Cash
Securities
Other
Assignment
Other
Total

2014
326,062
132,803
26,179
18,927
6,529
723
527
793
486,364

2013
298,493
133,005
25,760
22,364
2,455
941
1,400
638
459,296

The coverage level of loan portfolio to

as well as coverage to the total

the extent of the exposures increased from

collateral value improved from 33.07% to

15.75% to 18.03% as at 31 December 2014,

36.90%.

The fair value of collaterals related


to past due, but not impaired loans

An analysis of the fair value of collaterals related to past due, but not impaired loans to total
collateral value and to the extent of the exposures is as follows:
Types of collateral (total collateral value)
Mortgage and housing loans
Loans to medium and large corporates
SME loans
Municipal loans
Consumer loans
Total

2014
22,221
450
701

45
23,417

2013
28,717
1,163
773
64
31
30,748

Types of collateral (to the extent of the exposures)


Mortgage and housing loans
SME loans
Loans to medium and large corporates
Municipal loans
Consumer loans
Total

2014
12,025
553
243

43
12,864

2013
12,334
604
544
32
29
13,543

The above collaterals are only related to on balance sheet exposures.

26.1.3 Restructured loans

Retail loans
Loans to medium and large
corporates*
SME loans
Municipality loans
Total

Gross portfolio
13,027

2014
Allowance
1,286

Gross portfolio
18,895

2013
Allowance
2,394

88,715

20,761

143,207

56,960

2,005
21
103,768

32

22,079

4,186
1,374
167,662

660
21
60,035

* Incl.: project and syndicated loans.

212

OTP Bank Annual Report 2014

2014 angol.indd 212

5/18/15 12:48 PM

Restructured portfolio denition

it was restructured in the last 12 months


or the loan was restructured more than

Restructured portfolio for retail business

12 months ago, but the connected

line contains every loan which is relevant

preferential period is not expired or expired in

restructured and less than 91 days delinquent.

the last 12 months, and any of the following

Loan is considered as relevant restructured if:

restructuring tools were applied:

it was restructured in the last 12 months, or

cancellation of interest rate (nal or

it was restructured more than 12 months

temporary reduction of the interest margin,

ago, but the connected preferential period is

cancellation of due interest), or

not expired or expired in the last 12 months.

restructuring of interest payments


(postponement of the interest payment,

Hungarian FX mortgage loans in the xed

capitalisation of the interest), or

exchange rate scheme are not included.

restructuring of principal repayment

In case of loans that have been restructured

(partial or full postponement of repayment

more than once the last restructuring is

of a given instalment, rescheduling one

considered.

or more instalments within the original


term or with extension of the term

Restructured portfolio for corporate/SME/

simultaneously).

municipal business line contains every loan


which is relevant restructured and less than

Other modications of contract not

91 days delinquent. Loan is considered as

mentioned above are not considered as

relevant restructured if:

restructuring (i.e. modifying the collateral

independently from the date of the

structure, modication of the credit

restructuring the following restructuring

purpose).

tool was applied:


cancellation of principal outstanding

In case of loans that have been restructured

(cancelled or partially cancelled principal

more than once the last restructuring is

receivables);

considered.

Financial instruments by rating categories*

Held-for-trading securities as at 31 December 2014:


Shares
Government bonds
Mortgage bonds
Hungarian government
discounted Treasury Bills
Hungarian government interest
bearing Treasury Bills
Securities issued by credit
institutions
Other securities
Total
Accrued interest
Total

A1
138

A2
10

A3
41

Aa3
12

Aaa

1,044

Ba1

12,733

Ba3

Baa1
20

Baa2
67

71

Not rated
58,271 **

Total
58,559
13,777
71

288

288

4,175

4,175

17

50

67

138

10

41

12

1,044

17,196

17

20

138

216
58,537

216
77,153
434
77,587

* Moodys ratings.
** Corporate shares listed on Budapest Stock Exchange.

IFRS separate nancial statements

2014 angol.indd 213

213

5/18/15 12:48 PM

Available-for-sale securities as at 31 December 2014:


Mortgage bonds
Government bonds
Other securities
Total
Accrued interest
Total

Ba1

375,040

375,040

Baa2
733,659 *

733,659

Not rated
7,908

64,593
72,501

Total
741,567
375,040
64,593
1,181,200
34,707
1,215,907

Baa3

4,756

4,756

Total
641,645
4,756
346
646,747
16,200
662,947

Held-to-maturity securities as at 31 December 2014:


Government bonds
Mortgage bonds
Hungarian government discounted Treasury bills
Subtotal
Accrued interest
Total

Ba1
641,645

346
641,991

An analysis of securities (held for trading, available-for-sale and held-to-maturity)


in a country breakdown is as follows:
Country
Hungary
Slovakia
Austria
Luxembourg
United States of America
Germany
Russia
Total

26.2 Market risk

2014
1,883,103
7,908
7,055
5,660
1,235
139

1,905,100

2013
2,744,702
15,077
6,408
3,792
13
138
7,217
2,777,347

period for a specied condence level.


The VaR methodology is a statistically dened,

The Bank takes on exposure to market risks.

probability-based approach that takes into

Market risks arise from open positions in

account market volatilities as well as risk

interest rate, currency and equity products, all

diversication by recognizing offsetting

of which are exposed to general and specic

positions and correlations between products

market movements. The Bank applies a

and markets. Risks can be measured

Value-at-Risk (VaR) methodology to estimate

consistently across all markets and products,

the market risk of positions held and the

and risk measures can be aggregated to arrive

maximum losses expected, based upon

at a single risk number. The one-day 99% VaR

a number of assumptions for various changes

number used by the Bank reects the 99%

in market conditions. The Management Board

probability that the daily loss will not exceed

sets limits on the value of risk that may be

the reported VaR.

accepted, which is monitored on a daily basis.

VaR methodologies are applied to calculate

(Analysis of liquidity risk is detailed in Note 32.)

daily risk numbers include the historical and


variance-covariance approaches. In addition

26.2.1 Market risk sensitivity analysis

to these two methodologies, Monte Carlo


simulations are applied to the various portfolios

The VaR risk measure estimates the potential

on a monthly basis to determine potential

loss in pre-taxation prot over a given holding

future exposure.

* The whole portfolio was issued by OTP Mortgage Bank Ltd.

214

OTP Bank Annual Report 2014

2014 angol.indd 214

5/18/15 12:48 PM

The VaR of the trading portfolio can be summarized as follows:


Historical VaR (99%, one-day) by risk type

Average
in HUF million
2014
184
75
12
(62)
209

Foreign exchange
Interest rate
Equity instruments
Diversication
Total VaR exposure

2013
229
522
14
(176)
589

While VaR captures the Banks daily exposure

key management personnel and represents

to currency and interest rate risk, sensitivity

Managements assessment of the reasonably

analysis evaluates the impact of a reasonably

possible change in foreign exchange rates.

possible change in interest or foreign currency

The sensitivity analysis includes only

rates over a year. The longer time frame of

outstanding foreign currency denominated

sensitivity analysis complements VaR and helps

monetary items as strategic open positions

the Bank to assess its market risk exposures.

related to foreign activities. The strategic open

Details of sensitivity analysis for foreign

position related to the foreign operations was

currency risk are set out in Note 26.2.2 below

short, amounted to EUR 310 million as of

and, for interest rate risk, in Note 26.2.3 below.

31 December 2014. High portion of strategic


positions is considered as effective hedge
of the net investment in foreign subsidiaries,

26.2.2 Foreign currency sensitivity


analysis

and so FX risk affects the Banks other


comprehensive income and not its income.
A positive number below indicates an increase

The following table details the Banks sensitivity

in prot where the HUF strengthens against

to an increase and decrease in the HUF

the EUR. For a weakening of the HUF against

exchange rate against EUR, over a 3 months

the EUR, there would be an equal and opposite

period. Monte Carlo simulation is used when

impact on the prot, and the balances below

reporting foreign currency risk internally to

would be negative.

Probability

1%
5%
25%
50%
25%
5%
1%

Notes:
(1) The short-term loss on the strategic open

Effects to the P&L in 3 months period


In HUF billion
2014
2013
(15.0)
(12.7)
(10.5)
(8.7)
(4.5)
(3.6)
(0.6)
(0.3)
3.2
2.8
8.2
7.0
11.8
9.9

26.2.3 Interest rate sensitivity


analysis

position is compensated by the long-term ex


change rate gain on the foreign operations.
(2) The HUF/EUR volatility remained at its

The sensitivity analyses below have been


determined based on the exposure to interest

long-term average, so potential losses or

rates for both derivatives and non-derivative

gains have not changed signicantly.

instruments at the balance sheet date. The

(3) Monte Carlo simulation is based on the

analysis is prepared assuming the amount of

empirical distribution of the historical

assets and liabilities outstanding at the balance

exchange rate movements between 2002

sheet date were outstanding for the whole year.

and 2014.

The analysis was prepared by assuming only

IFRS separate nancial statements

2014 angol.indd 215

215

5/18/15 12:48 PM

the adverting interest rate changes. The main

The simulation was prepared by assuming two

assumptions were as follows:

scenarios:

Floating-rate assets and liabilities were

1. HUF base rate decreases gradually to 1.5%

repriced to the modelled benchmark yields at


the repricing dates assuming the unchanged

(probable scenario)
2. HUF base rate decreases gradually to 0.1%

margin compared to the last repricing.

(alternative scenario)

Fixed-rate assets and liabilities were repriced


at the contractual maturity date.

The net interest income in a one year

As for liabilities with discretionary repricing

period beginning with 1 January 2015

feature by the Bank were assumed to be

would be decreased by HUF 438 million

repriced with two-weeks delay, assuming no

(probable scenario) and HUF 2,069 million

change in the margin compared to the last

(alternative scenario) as a result of these

repricing date.

simulations. This effect is counterbalanced

The assets and liabilities with interest rate

by capital gains (HUF 899 million for

lower than 0.3% assumed to be unchanged

probable scenario, HUF 3,689 million for

during the whole period.

alternative scenario) on the government

The sensitivity of interest income to changes


in BUBOR is analysed.

bond portfolio held for hedging


(economic).

The effects of the parallel shifts of the yield-curves to the net interest income on a one-year
period and to the market value of the hedge government bond portfolio booked against capital
can be summarized as follows:
2014
Description

HUF (0.1%) parallel shift


EUR (0.1%) parallel shift
USD 0.1% parallel shift
Total

2013

Effects to the
net interest income
(one-year period)

Effects to OCI
(Price change of
AFS government
bonds)

Effects to the
net interest income
(one-year period)

Effects to OCI
(Price change of
AFS government
bonds)

(138)
(134)
(73)
(345)

374

374

(195)
(161)
(43)
(399)

240

240

26.2.4 Equity price sensitivity


analysis

risk diversication by recognizing offsetting


positions and correlations between products
and markets. The daily loss will not exceed the

The following table shows the effect of the equity

reported VaR number with 99% of probability.

price sensitivity. The Bank uses VaR calculation

The stress test assumes the largest price

with 1 day holding period and 99% condence

movement of the last year and calculates with

level. The VaR methodology is a statistically

it as the adverse direction. This scenario shows

dened, probability-based approach that takes

the loss of the portfolio when all prices change

into account market volatilities as well as

with the maximum amount of the last year.

Description
VaR (99%, one day, million HUF)
Stress test (million HUF)

216

2014
13
(43)

2013
14
(60)

OTP Bank Annual Report 2014

2014 angol.indd 216

5/18/15 12:48 PM

26.2.5 Capital management

Capital adequacy
The Capital Requirements Directive package

Capital management

(CRDIV/CRR) transposes the new global

The primary objective of the capital

standards on banking regulation (commonly

management of the Bank is to ensure the

known as the Basel III agreement) into the EU

prudent operation, the entire compliance

legal framework. The new rules are applied

with the prescriptions of the regulator for a

from 1 January 2014. They set stronger

persistent business operation and maximising

prudential requirements for institutions,

the shareholder value, accompanied by an

requiring them to keep sufficient capital

optimal nancing structure.

reserves and liquidity. This new framework

The capital management of the Bank includes

makes institutions in the EU more solid and

the management and evaluation of the

strengthens their capacity to adequately

shareholders equity available for hedging

manage the risks linked to their activities, and

risks, other types of funds to be recorded in the

absorb any losses they may incur in doing

equity and all material risks to be covered by

business. The capital adequacy of the Bank is

the capital.

supervised based on the nancial statements

The basis of the capital management of

data prepared in accordance with HAS applying

the Bank in the short run is the continuous

the current directives, rulings and indicators

monitoring of its capital position, in the long run

from 1 January 2014.

the strategic and the business planning, which

The Bank has entirely complied with the

includes the monitoring and forecast of the

regulatory capital requirements in 2014 as well

capital position of the Bank.

as in 2013.

The Bank maintains the capital adequacy

The capital adequacy calculations of the Bank

required by the regulatory bodies and the

in accordance with HAS are prepared based

planned risk taking mainly by means of

on the Basel II for the year ended 31 December

ensuring and developing its protability.

2013 and based on Basel III as at 31 December

In case the planned risk level of the Bank

2014 due to modication of the regulation.

exceeded its Core and Supplementary capital,

The Bank uses the standard method

the Bank ensures the prudent operation by

for determining the regulatory capital

occasional measures. A further tool in the

requirements of the credit risk and market

capital management of the Bank is the dividend

risk while in case of the operational risk the

policy, and the transactions performed with the

Advanced Measurement Approach (AMA) is

treasury shares.

applied since 31 December 2012.

IFRS separate nancial statements

2014 angol.indd 217

217

5/18/15 12:48 PM

The calculation of the Capital Adequacy ratio as at 31 December 2014 and 2013 is as follows:

Tier1 capital
Common equity Tier1 capital (CET1)
Additional Tier1 capital (AT1)
Tier2 capital
Regulatory capital
Credit risk capital requirement
Market risk capital requirement
Operational risk capital requirement
Total requirement regulatory capital
Surplus capital
CET1 ratio
Capital adequacy ratio

NOTE 27:

2014
Basel III
525,849
525,849

146,471
672,320
217,891
43,188
22,650
283,729
388,591
14.83%
18.96%

Core capital
Supplementary capital
Deductions
Deductions due to PIBB* investments
Deductions due to limit breaches
Regulatory capital
Credit risk capital requirement
Market risk capital requirement
Operational risk capital requirement
Total requirement regulatory capital
Surplus capital
Tier1 ratio
Capital adequacy ratio

2013
Basel II
994,715
215,902
(460,870)
(413,220)
(47,650)
749,747
201,729
32,942
25,972
260,643
489,104
23.01%
23%

Basel II

Basel III

The positive components of the Core capital

Common equity Tier1 capital (CET1): Issued

are: Issued capital, Capital reserve, Tied-up

capital, Capital reserve, useable part of Tied-up

reserve, General reserve, Prot reserve, Prot

reserve, General reserve, Prot reserve, Prot

for the year, General risk reserve.

for the year, Treasury shares, Intangible assets,

The negative components of the Core capital

deductions due to investments, adjustments

are: Treasury shares, Intangible assets.

due to temporary disposals

The positive components of the

Tier2 capital: Subsidiary loan capital,

Supplementary capital are: Subsidiary loan

Subordinated loan capital, deductions due to

capital, Subordinated loan capital.

repurchased loan capital and Subordinated loan

Deductions: PIBB investments, limit

capital issued by the OTP Bank, adjustments

breaches.

due to temporary disposals.

OFF-BALANCE SHEET ITEMS AND DERIVATIVE FINANCIAL


INSTRUMENTS (in HUF mn)
In the normal course of business, the Bank

to as off-balance sheet nancial instruments.

becomes a party to various nancial

The following represents notional amounts of

transactions that are not reected on the

these off-balance sheet nancial instruments,

statement of nancial position and are referred

unless stated otherwise.

Contingent liabilities and commitments


Commitments to extend credit
Guarantees arising from banking activities
from this: Payment undertaking liabilities (related to issue
of mortgage bonds) of OTP Mortgage Bank
Promissory obligation to OTP Financing Solutions B.V.
Legal disputes (disputed value)
Contingent liabilities ordered by law related to customer loans**
Confirmed letters of credit
Other
Total

2014
753,152
366,756

2013
650,300
420,166

102,133

115,328

120,664
53,729
44,127
108
33,428
1,371,964

124,517
49,944

470
26,995
1,272,392

* PIBB: Financial Institutions, Investing Enterprises, Insurance Companies.


** See Note 2.26.

218

OTP Bank Annual Report 2014

2014 angol.indd 218

5/18/15 12:48 PM

Legal disputes

Documentary and commercial letters of credit,


which are written undertakings by the Bank on

At the balance sheet date the Bank was involved

behalf of a customer authorising a third party

in various claims and legal proceedings

to draw drafts on the Bank up to a stipulated

of a nature considered normal to its business.

amount under specic terms and conditions,

The level of these claims and legal proceedings

are collateralised by the underlying shipments

corresponds to the level of claims and legal

of goods to which they relate and therefore

proceedings in previous years.

carry less risk than a direct borrowing.

The Bank believes that the various asserted

Commitments to extend credit represent

claims and litigations in which it is involved

unused portions of authorisations to extend

will not materially affect its nancial position,

credit in the form of loans, guarantees or

future operating results or cash-ows, although

letters of credit. With respect to credit risk on

no assurance can be given with respect to the

commitments to extend credit, the Bank is

ultimate outcome of any such claim or litigation.

potentially exposed to loss in an amount equal

Provision due to legal disputes was HUF 998

to the total unused commitments. However,

million and HUF 554 million as at 31 December

the likely amount of loss is less than the total

2014 and 2013, respectively (see Note 17.).

unused commitments since most commitments


to extend credit are contingent upon customers

Complying with Act CXX of 2001 on the capital

maintaining specic credit standards.

market, OTP Bank announces that action for


damages initiated by DOO VEKTRA JAKIC in

Guarantees, irrevocable letters of credit

bankruptcy in the amount of EUR 80 million

and undrawn loan commitments are subject

against OTP Bank before the Commercial Court

to similar credit risk monitoring and credit

in Bijelo Polje (Montenegro) has been dismissed

policies as utilised in the extension of loans.

entirely and the court decided in favour of

The Management of the Bank believes the

OTP Bank. The decision of the court is subject to

market risk associated with guarantees,

appeal. OTP Bank considers the claim is entirely

irrevocable letters of credit and undrawn loan

unfounded as it is conrmed by the court of rst

commitments are minimal.

instance.
The Competition Council of the Hungarian
Competition Authority with its resolution issued

Guarantees, payment undertakings


arising from banking activities

on 18 June 2014 established that OTP Bank


committed a violation of law; therefore

Payment undertaking is a promise by the Bank

the company was obliged to pay a ne in the

to assume responsibility for the debt obligation

amount of HUF 38 million.

of a borrower if that borrower defaults until


a determined amount and until a determined
date, in case of fullling conditions, without

Commitments to extend credit,


guarantees and letter of credit

checking the undermined transactions.


The guarantees liability is joint and primary
with the principal, in case of payment

The primary purpose of these instruments is to

undertaking, while the Bank assumes the

ensure that funds are available to a customer as

obligation derived from guarantee

required. Guarantees and standby letters of credit,

independently by the conditions established

which represent irrevocable assurances that

by the Bank. A guarantee is most typically

the Bank will make payments in the event that

required when the ability of the primary obligor

a customer cannot meet its obligations to third

or principal to perform its obligations under

parties, carry the same credit risk as loans.

a contract is in question, or when there is

IFRS separate nancial statements

2014 angol.indd 219

219

5/18/15 12:48 PM

some public or private interest which requires

potential exposures from market movements.

protection from the consequences of the

Collateral or other security is not usually

principals default or delinquency. A contract

obtained for credit risk exposures on these

of guarantee is subject to the statute of frauds

instruments, except for trading with clients,

(or its equivalent local laws) and is only

where the Bank in most of the cases requires

enforceable if recorded in writing and signed

margin deposits.

by the surety and the principal.


If the surety is required to pay or perform due
to the principals failure to do so, the law will

Foreign currency contracts

usually give the surety a right of subrogation,


allowing the surety to use the suretys

Foreign currency contracts are agreements

contractual rights to recover the cost of making

to exchange specic amounts of currencies

payment or performing on the principals

at a specied rate of exchange, at a spot date

behalf, even in the absence of an express

(settlement occurs two days after the trade

agreement to that effect between the surety

date) or at a forward date (settlement occurs

and the principal.

more than two days after the trade date).


The notional amount of spot contracts does
not represent the actual market or credit risk

Contingent liabilities related


to OTP Mortgage Bank Ltd.

associated with these contracts.


Foreign currency contracts are used by

Under a syndication agreement with its wholly

the Bank for risk management and trading

owned subsidiary, OTP Mortgage Bank Ltd.,

purposes. The Banks risk management

the Bank had guaranteed, in return for an

foreign currency contracts were used to hedge

annual fee, to purchase all mortgage loans

the exchange rate uctuations of loans and

held by OTP Mortgage Bank Ltd. that become

deposits denominated in foreign currency.

non-performing. The repurchase guarantee


contract of non-performing loans between
OTP Mortgage Bank Ltd. and OTP Bank Plc.
was modied in 2010. According to the new

Foreign exchange swaps


and interest rate swaps

arrangement the repurchase guarantee was


cancelled and OTP Bank Plc. gives bail to the

The Bank enters into foreign-exchange swap

loans originated or purchased by the Bank.

and interest rate swap transactions. The swap


transaction is a complex agreement concerning
the swap of certain nancial instruments, which

Derivatives

usually consist of a prompt and one or more


forward contracts.

The Bank maintains strict control limits on net

Interest rate swaps obligate two parties to

open derivative positions, i.e. the difference

exchange one or more payments calculated

between purchase and sale contracts, by both

with reference to xed or periodically reset

amount and term. At any time the amount

rates of interest applied to a specic notional

subject to credit risk is limited to the current

principal amount (the base of the interest

fair value of instruments that are favourable

calculation). Notional principal is the amount

to the Bank (i.e. assets), which in relation

upon which interest rates are applied to

to derivatives is only a small fraction of the

determine the payment streams under interest

contract or notional values used to express the

rate swaps.

volume of instruments outstanding. This credit

220

risk exposure is managed as part of the overall

Such notional principal amounts are often used

lending limits with customers, together with

to express the volume of these transactions

OTP Bank Annual Report 2014

2014 angol.indd 220

5/18/15 12:48 PM

but are not actually exchanged between the

Forward rate agreements (FRA)

counterparties. The Banks interest rate swap


contracts can be hedging or held for trading

A forward rate agreement is an agreement to

contracts.

settle amounts at a specied future date based


on the difference between an interest rate
index and an agreed upon xed rate. Market

Cross-currency interest rate swaps

risk arises from changes in the market value of


contractual positions caused by movements in

The Bank enters into cross-currency interest

interest rates.

rate swap (CCIRS) transactions which have

The Bank limits its exposure to market risk by

special attributes, i.e. the parties exchange the

entering into generally matching or offsetting

notional amount at the beginning and also at

positions and by establishing and monitoring

the maturity of the transaction. A special type

limits on unmatched positions. Credit risk

of these deals is the mark-to-market CCIRS

is managed through approval procedures

agreements. At this kind of deals the parties

that establish specic limits for individual

in accordance with the foreign exchange

counter-parties. The Banks forward rate

prices revalue the notional amount during

agreements were transacted for management

lifetime of the transaction.

of interest rate exposures.

Equity and commodity swaps

Foreign exchange options

Equity swaps obligate two parties to exchange

A foreign exchange option is a derivative

more payments calculated with reference

nancial instrument that gives the owner

periodically reset rates of interest and

the right to exchange money denominated

performance of indexes. A specic notional

in one currency into another currency at

principal amount is the base of the interest

a pre-agreed exchange rate at a specied

calculation. The payment of index return is

future date. The transaction, for a fee,

calculated on the basis of current market price

guarantees a worst-case exchange rate

compared to the previous market price. In case

for the futures purchase of one currency

of commodity swaps payments are calculated

for another. These options protect against

on the basis of the strike price of a predened

unfavourable currency movements while

commodity compared to its average market

preserving the ability to participate in

price in a period.

favourable movements.

IFRS separate nancial statements

2014 angol.indd 221

221

5/18/15 12:48 PM

NOTE 28:

SHARE-BASED PAYMENT AND EMPLOYEE BENEFIT (in HUF mn)


Previously approved option program required

Employee benets are all forms of

a modication thanks to the introduction of the

consideration given by an entity in exchange

Bank Group Policy on Payments accepted in

for service rendered by employees or for the

resolution of Annual General Meeting regarding

termination of employment. IAS 19 Employee

to the amendment of CRD III. Directives and Act

Benets shall be applied in accounting for

on Credit Institutions and Financial Enterprises.

all employee benets, except those to which


IFRS 2 Share-based Payment applies. In case

Key management personnel affected by the

of the jubilee benets both standards contain

Bank Group Policy receive compensation based

regulations.

on performance assessment generally in the


form of cash bonus and equity shares in a ratio

Short-term employee benets are employee

of 5050%. Assignment is based on OTP shares,

benets (other than termination benets)

furthermore performance based payments are

that are expected to be settled wholly before

deferred in accordance with the rules of Credit

twelve months after the end of the annual

Institutions Act.

reporting period in which the employees


render the related service. Post-employment

OTP Bank ensures the share-based

benets are employee benets (other than

payment part for the management personnel

termination and short-term employee benets)

of OTP Group members.

that are payable after the completion


of employment. Post-employment benet plans

The value of the discounted share-based

are formal or informal arrangements under

payment at the performance assessment is

which an entity provides post-employment

determined by Board of Directors based on

benets for one or more employees.

the average of the three previous trade days

Post-employment benet plans are classied

middle rate of OTP Banks equity shares xed

as either dened contribution plans or dened

on the Budapest Stock Exchange.

benet plans, depending on the economic

Discounted share-based payment shall

substance of the plan as derived from its

contain maximum HUF 2,000 discount at the

principal terms and conditions.

assessment date, and earnings for the shares


at the payment date is determined by Board of

Termination benets are employee benets

Directors, maximum HUF 4,000.

provided in exchange for the termination


of an employees employment as a result

222

During implementation of the Remuneration

of either: an entitys decision to terminate an

Policy of the Group appeared that in case of

employees employment before the normal

certain foreign subsidiaries it is not possible

retirement date or an employees decision

to ensure the originally determined

to accept an offer of benets in exchange for

share-based payment because of legal reasons

the termination of employment. Other long-term

incompatible with concerning EU-directives ,

employee benets are all employee benets

therefore the Board of Directors made a

other than short-term employee benets,

decision to cancel the share-based payment in

postemployment benets and termination

referred countries.

benets.

OTP Bank Annual Report 2014

2014 angol.indd 222

5/18/15 12:48 PM

Board of Directors determined the parameters for the share-based payment relating
to the year 20102013 for periods of each year as follows:
Year

2011
2012
2013
2014
2015
2016
2017

Exercise
Maximum
price per
earnings
share
per share
for the year 2010
3,946
2,500
3,946
3,000
4,446
3,500
4,946
3,500

Exercise
Maximum
price per
earnings
share
per share
for the year 2011

1,370
3,000
1,870
3,000
1,870
4,000
1,870
4,000

Exercise
Maximum
price per
earnings
share
per share
for the year 2012

2,886
3,000
2,886
3,000
2,886
3,000
2,886
3,500

Exercise
Maximum
price per
earnings
share
per share
for the year 2013

2,522
2,500
2,522
3,000
2,522
3,500
2,522
3,500

Based on parameters accepted by Board of Directors, relating to the year 2010 effective pieces
are follows as at 31 December 2014:
Effective
pieces
Share-purchasing period started in 2011
Share-purchasing period started in 2012
Share-purchasing period started in 2013
Share-purchasing period started in 2014

497,451

Approved
pieces
of shares
340,950
735,722
419,479
497,451

Exercised until
31 December
2014
11,622
714,791
31,789

Weighted average
share price at the date
of exercise (in HUF)
5,731
4,593
4,808

Expired pieces

329,328
20,931
387,690

Effective pieces are follows in exercise periods of each year relating to the year 2011
as at 31 December 2014:
Effective
pieces
Share-purchasing period started in 2012
Share-purchasing period started in 2013
Share-purchasing period started in 2014
Share-purchasing period starting in 2015

214,805
724,886

Approved
pieces
of shares
471,240
1,267,173
609,137

Exercised until
31 December
2014
464,753
1,256,529
394,332

Weighted average
share price at the date
of exercise (in HUF)
3,758
4,886
4,491

Expired pieces

6,487
10,644

Effective pieces are follows in exercise periods of each year relating to the year 2012
as at 31 December 2014:
Effective
pieces
Share-purchasing period started in 2013
Share-purchasing period started in 2014
Share-purchasing period starting in 2015
Share-purchasing period starting in 2016

720,281
649,653
688,990

Approved
pieces
of shares
450,861
1,156,631

Exercised until
31 December
2014
445,671
436,350

Weighted average
share price at the date
of exercise (in HUF)
4,413
4,502

Expired pieces

5,190

Effective pieces are follows in exercise periods of each year relating to the year 2013
as at 31 December 2014:
Effective
pieces
Share-purchasing period started in 2014
Share-purchasing period starting in 2015
Share-purchasing period starting in 2016
Share-purchasing period starting in 2017

843,340
495,340
549,909

Approved
pieces
of shares
406,044

Exercised until
31 December
2014
404,263

Weighted average
share price at the date
of exercise (in HUF)
4,369

Expired pieces

1,781

IFRS separate nancial statements

2014 angol.indd 223

223

5/18/15 12:48 PM

Effective pieces relating to the periods starting

by 7/2013 resolution of Annual General Meeting

in 20152017 settled during valuation

and the share-based compensation for Board

of performance of year 20112013, can be

of Directors detailed in 8/2013 resolution

modied based on risk assessment and

of Annual General Meeting and connecting

personal changes.

compensation based on performance


assessment accounted as equity-settled share

NOTE 29:

In connection with shares as a part of

based transactions, HUF 4,393 million was

the Bank Group Policy on Payments modied

recognized as expense as at 31 December 2014.

RELATED PARTY TRANSACTIONS (in HUF mn)


The Bank provides loans to related parties, and collects deposits.

Transactions with related parties (subsidiaries), other than increases in share capital
or dividend received, are summarized below:
a) Loans provided to related parties
OTP Mortgage Bank Ltd.
OTP Factoring Ltd.
Merkantil Bank Ltd.
OTP Holding Ltd./OTP Financing Cyprus Co. Ltd. (Cyprus)
OTP Financing Solutions B.V. (the Netherlands)
OTP Financing Netherlands B.V. (the Netherlands)
JSC OTP Bank (Russia)
OTP Real Estate Leasing Ltd.
OTP Leasing d.d. (Croatia)
Merkantil Lease Ltd.
OTP Leasing Ukraine
DSK Leasing AD (Bulgaria)
OTP Factoring Slovensko a.s. (Slovakia)
Inga Kett Ltd.
OTP Bank JSC (Ukraine)
Bank Center Ltd.
OTP banka Hrvatska Group (Croatia)
D-G Thermoset Ltd.
Merkantil Car Ltd.
Other
Total

2014
300,562
174,422
159,847
149,086
120,664
82,453
68,625
27,518
26,591
21,356
17,744
17,319
10,506
10,281
7,750
6,000
3,716
2,886
1,040
848
1,209,214

2013
237,163
165,310
176,993
215,101
124,478
100,714
14,735
25,706
20,914
16,625
15,256
15,142

19,281
12,550
10,000
3,504
2,925
8,721
7,115
1,192,233

* Associate company.

224

OTP Bank Annual Report 2014

2014 angol.indd 224

5/18/15 12:48 PM

b) Deposits from related parties


DSK Bank EAD (Bulgaria)
OTP Mortgage Bank Ltd.
OTP Banka Slovensko a.s. (Slovakia)
OTP Building Society Ltd.
OTP Funds Servicing and Consulting Ltd.
OTP Bank Romania S.A. (Romania)
OTP banka Hrvatska d.d. (Croatia)
JSC OTP Bank (Russia)
Crnogorska komercijalna banka a.d (Montenegro)
OTP Factoring Ltd.
Merkantil Bank Ltd.
OTP Real Estate Leasing Ltd.
OTP banka Srbija a.d. (Serbia)
OTP Life Annuity Ltd.
OTP Holding Ltd./OTP Financing Cyprus Co. Ltd. (Cyprus)
Bank Center Ltd.
Balansz Real Estate Institute Fund
OTP Financing Malta Ltd. (Malta)
OTP Financing Netherlands B. V. (the Netherlands)
Monicomp Ltd.
Other
Total

2014
330,829
148,124
63,001
33,312
26,369
24,114
19,225
19,126
15,876
13,438
13,018
5,700
3,922
3,195
2,591
2,506
2,436
1,679
1,384
1,292
2,183
733,320

2013
127,443
62,335
3,833
29,333
25,094
7,840
1,793
51,894
11,894
5,598
11,386
596
626

105
4,014
1,930

1,724
894
3,421
351,753

2014
8,716
5,711
5,627
4,912
3,557
2,141
1,697
936
766
542
426
356
273
264
260
187
152
96
91
549
37,259

2013
9,331
9,916
5,807
5,658
4,784
5,993
2,046
584
1,132
583
473
507
110

12
184
213
332
213
528
48,406

c) Interests received by the Bank*


OTP Holding Ltd./OTP Financing Cyprus Co. Ltd. (Cyprus)
OTP Mortgage Bank Ltd.
OTP Financing Solutions B.V. (the Netherlands)
Merkantil Bank Ltd.
OTP Factoring Ltd.
OTP Financing Netherlands B.V. (the Netherlands)
JSC OTP Bank (Russia)
OTP Leasing Ukraine
Merkantil Lease Ltd.
OTP Leasing d.d. (Croatia)
OTP Real Estate Leasing Ltd.
DSK Leasing AD (Bulgaria)
Bank Center Ltd.
OTP Factoring Slovensko a.s. (Slovakia)
OTP Banka Slovensko a.s. (Slovakia)
OTP banka Hrvatska Group (Croatia)
D-G Thermoset Ltd.**
Merkantil Car Ltd.
Inga Kett Ltd.
Other
Total

* Derivatives and interest on securities are not included.


** Associate company.

IFRS separate nancial statements

2014 angol.indd 225

225

5/18/15 12:48 PM

d) Interests paid by the Bank*


DSK Bank EAD (Bulgaria)
OTP Mortgage Bank Ltd.
Merkantil Lease Ltd.
OTP Funds Servicing and Consulting Ltd.
OTP Banka Slovensko a.s. (Slovakia)
OTP Building Society Ltd.
JSC OTP Bank (Russia)
Crnogorska komercijalna banka a.d (Montenegro)
OTP Bank Romania S.A. (Romania)
OTP Factoring Ltd.
Merkantil Bank Ltd.
OTP Life Annuity Ltd.
Bank Center Ltd.
OTP banka Srbija a.d. (Serbia)
Balansz Real Estate Institute Fund
OTP Real Estate Leasing Ltd.
Other
Total

2014
2,811
1,799
1,278
715
664
559
460
284
244
139
111
91
80
45
32
14
299
9,625

2013
2,422
1,069
1,669
1,368
126
947
2,162
1,914
608

143

117
88
173
101
114
13,021

2014
10,476

2013
8,302

2,973

2,241

e) Commissions received by the Bank


From OTP Fund Management Ltd. in relation to trading activity
From OTP Building Society Ltd. (agency fee in relation
to nalised customer contracts)
From OTP Bank JSC (Ukraine) in relation to lending activity
From OTP Real Estate Investment Fund Management Ltd.
in relation to trading activity
From OTP Funds Servicing and Consulting Ltd.
in relation to banking
From OTP Fund Management Ltd. in relation to custody activity
Total

1,666

630

592

263

419

67
16,193

265
11,701

2014

2013

244

295

124

150

368

445

2014

2013

5,967

8,179

1,440

1,351

1,440

1,350

f) Commissions paid by the Bank


OTP Bank Romania S.A. (Romania) related to loan portfolio
handling
Crnogorska komercijalna banka a.d. (Montenegro) related
to loan portfolio handling
Total

g) Transactions related to OTP Mortgage Bank Ltd.


Fees and commissions received from OTP Mortgage Bank Ltd.
relating to the loans
Loans sold to OTP Mortgage Bank Ltd. with recourse
(including interest)
The gross book value of the loans sold

* Derivatives and interest on securities are not included.

226

OTP Bank Annual Report 2014

2014 angol.indd 226

5/18/15 12:48 PM

h) Transactions related to OTP Factoring Ltd.


The gross book value of the loans sold
Provision for loan losses on the loans sold
Loans sold to OTP Factoring Ltd. without recourse
(including interest)
Loss on these transaction (recorded in the separate financial
statements as loan and placement loss)

2014
24,605
12,667

2013
40,828
21,023

7,261

13,584

4,677

6,221

The underlying mortgage rights were also transferred to OTP Factoring Ltd.

i) Transactions related to OTP Banka Slovensko a.s. (Slovakia)


Securities issued by OTP Banka Slovensko a.s. (Slovakia) held
by OTP Bank (nominal value in HUF million)

2014

2013

7,872

14,846

2014
5,913
2,775

2013

2014
31,293
31,506

2013

j) Transactions related to OTP Factoring Montenegro d.o.o. (Montenegro)


The gross book value of the loans sold
The selling price of the loans sold

k) Transactions related to OTP Financing Malta Ltd. (Malta)


The gross book value of the loans sold
The selling price of the loans sold (including interest and premium)

l) Related party transactions with key management


The compensation of key management,

decision-making process in accordance

such as the members of the Board of Directors,

with the compensation categories dened

the members of the Supervisory Board

in IAS 24 Related Party Disclosures, is

and the employees involved in the

summarised below:

Compensations
Short-term employee benets
Share-based payment
Long-term employee benets (on the basis of IAS 19)
Total

Loans provided to companies owned by the Management


(in the normal course of business)
Commitments to extend credit and bank guarantees
Credit lines of the members of Board of Directors and
the Supervisory Board and their close family members
(at market conditions)

2014
3,453
2,937
443
6,833

2013
4,658
3,297
701
8,656

2014

2013

11,854

38,538

15,545

1,030

136

131

The members of the Board of Directors,

owned credit line A in the amount of

members of the Supervisory Board, chief

HUF 139.7 and 133.3 million as at 31 December

executives and their close family members

2014 and 2013.

IFRS separate nancial statements

2014 angol.indd 227

227

5/18/15 12:48 PM

An analysis of credit limit related to MasterCard Gold is as follows:


Members of Board of Directors and their close family members
Members of Supervisory Board
Chief executive

2014
18
4
2

2013
18
4

The family member of a member of the

of HUF 3.5 million as at 31 December 2014.

Board of Directors owned AMEX Blue credit

Member of Board of Directors, members of

card loan in the amount of HUF 0.6 million

Supervisory Board and chief executives with

as at 31 December 2014.

their close family members owned AMEX

Chief executives owned AMEX Gold

Platinum credit card loan in the amount

loading card loan in the amount

of HUF 23.5 million as at 31 December 2014.

An analysis of payment to chief executives related to their activity in Board of Directors and
Supervisory Board is as follows:
2014
539
73
612

Members of Board of Directors


Members of Supervisory Board
Total

NOTE 30:

In the normal course of business,

and volumes of which are not signicant

OTP Bank enters into other transactions

to these nancial statements taken

with its subsidiaries, the amounts

as a whole.

TRUST ACTIVITIES (in HUF mn)


The Bank acts as a trustee for certain loans granted

funds. As these loans and related funds are not

by companies or employers to their employees,

considered to be assets or liabilities of the Bank,

mainly for housing purposes. The ultimate risk for

they have been excluded from the accompanying

these loans rests with the party advancing the

separate statement of nancial position.


2014
39,618

Loans managed by the Bank as a trustee

NOTE 31:

2013
545
71
616

2013
42,280

CONCENTRATION OF ASSETS AND LIABILITIES


In the percentage of the total assets
Receivables from, or securities issued by
the Hungarian Government or the NBH*
Securities issued by the OTP Mortgage Bank Ltd.

2014

2013

44%

30%

9.77%

11.68%

There were no other signicant concentrations

on large depositors as well as the exposure

of the assets or liabilities of the Bank as at

of the biggest 50 depositors towards OTP Bank.

31 December 2014 or 2013.

Further to this obligatory reporting to the


Authority, OTP Bank pays particular attention

OTP Bank continuously provides the Authority

on the exposure of its largest partners and

with reports on the extent of dependency

cares for maintaining a closer relationship with

* Securities issued by the NBH were changed into two-weeks NBH deposit during the year ended 31 December 2014.

228

OTP Bank Annual Report 2014

2014 angol.indd 228

5/18/15 12:48 PM

these partners in order to secure the stability

sets limits on OTP Banks and the Groups

of the level of deposits.

exposure separately partner-by-partner.


If necessary, it modies partner-limits

NOTE 32:

The organisational unit of OTP Bank in

in due course thereby reducing the room

charge of partner-risk management analyses

for manoeuvring of the Treasury and other

the biggest partners on a constant basis and

business areas.

MATURITY ANALYSIS LIABILITIES AND LIQUIDITY RISK (in HUF mn)


Liquidity risk is a measure of the extent to

The recalculation of shocks is made at least

which the Bank may be required to raise funds

quarterly while the recalibration of shock

to meet its commitments associated with

measurement models and review of the risk

nancial instruments. The Bank maintains its

management methodology is an annual process.

liquidity proles in accordance with regulations

The monitoring of liquidity reserves for both

laid down by the NBH.

centralized and decentralized liquid asset


portfolio has been built in the daily reporting

The essential of the liquidity risk management

process.

strategy it to identify all relevant systemic and


idiosyncratic sources of liquidity risk and to

Due to the balance sheet adjustment process

measure the probability and severity of such

(deleveraging) experienced in the last few years,

events. During liquidity risk management the

the liquidity reserves of the Bank increased

Bank considers the effect of liquidity risk events

signicantly while the liquidity risk exposure

caused by reasons arising in the bank business

has decreased considerably. Currently the (over)

line (deposit withdrawal), the national economy

coverage of risk liquidity risk exposure by high

(exchange rate shock, yield curve shock) and the

quality liquid assets is in all-time record highs.

global nancial system (capital market shock).

In 2014 there were no material changes in


liquidity risk management process.

In line with the Banks risk management policy


liquidity risks are measured and managed

The following tables provide an analysis of

on multiply hierarchy levels and applying

liabilities about the non-discounted cash-ow

integrated unied VaR based methodology.

into relevant maturity groupings based on the

The basic requirement is that the Bank must

remaining period from the balance sheet date

keep high quality liquidity reserves by means it

to the contractual maturity date. It is presented

can full all liabilities when they fall due without

under the most prudent consideration of maturity

material additional costs.

dates where options or repayment schedules


allow for early repayment possibilities.

The liquidity reserves can be divided to two parts.


There are separate decentralized liquid asset

The contractual amounts disclosed in

portfolios at subsidiary level and a centralized

the maturity analyses are the contractual

exible liquidity pool at Groups level. The

undiscounted cash-ows like gross nance

reserves at subsidiary levels are held to cover

lease obligations (before deducting nance

the relevant shocks of the subsidiaries which may

charges); prices specied in forward agreements

arise in local currencies (deposit withdrawal,

to purchase nancial assets for cash;

local capital market shock, unexpected business

net amounts for pay-oating/receive-xed

expansion), while the centralized liquidity pool

interest rate swaps for which net cash-ows

is held to cover the OTP Banks separate

are exchanged; contractual amounts

shocks (deposit-, yield curve- and exchange

to be exchanged in a derivative nancial

rate shocks) and all group members potential

instrument for which gross cash-ows are

shocks that may arise in foreign currencies

exchanged; gross loan commitments.

(deposit withdrawal, capital market shock).

Such undiscounted cash-ows differ from


IFRS separate nancial statements

2014 angol.indd 229

229

5/18/15 12:48 PM

the amount included in the statement of

to the conditions existing at the end of the

nancial position because the amount in that

reporting period. For example, when the

statement is based on discounted cash-ows.

amount payable varies with changes in an

When the amount payable is not xed, the

index, the amount disclosed may be based on

amount disclosed is determined by reference

the level of the index at the end of the period.

As at 31 December 2014:

Amounts due to banks and Hungarian Government,


deposits from the National Bank of Hungary
and other banks
Deposits from customers
Liabilities from issued securities
Other liabilities*
Subordinated bonds and loans
TOTAL LIABILITIES
Receivables from derivative financial instruments
classified as held for trading
Liabilities from derivative financial instruments
classified as held for trading
Net notional value of financial instruments classified
as held for trading
Receivables from derivative financial instruments
designated as fair value hedge
Liabilities from derivative financial instruments
designated as fair value hedge
Net notional value of financial instruments
designated as fair value hedge
Net notional value of derivative financial
instruments total
Commitments to extend credit
Bank guarantees
Off-balance sheet commitments

Within
3 months

Within
one year and
over 3 months

Within
5 years and
over one year

Over
5 years

Without
maturity

Total

950,833

56,734

85,328

61,561

1,154,456

3,952,755
22,705
215,057
30,820
5,172,170

251,993
41,355
102,572

452,654

17,039
57,667

168,481
328,515

13,208
29,174

103,943

2,202,779

968,403

566,209

5,578

3,742,969

(2,334,158)

(1,086,572)

(668,861)

(19,340)

(4,108,931)

(131,379)

(118,169)

(102,652)

(13,762)

(365,962)

202

16,050

3,273

19,525

(1)

(710)

(19,518)

(3,898)

(24,127)

(1)

(508)

(3,468)

(625)

(4,602)

(131,380)

(118,677)

(106,120)

(14,387)

(370,564)

220,283
44,380
264,663

434,835
76,055
510,890

66,152
42,793
108,945

31,882
203,528
235,410

753,152
366,756
1,119,908

Within
3 months

Within
one year and
over 3 months

Within
5 years and
over one year

Over
5 years

Without
maturity

Total

674,084

42,185

146,937

48,804

912,010

3,427,471
20,423
234,546
3,424
4,359,948

224,959
48,476
145

315,765

21,461
79,890

187,091
435,379

10,870
26,357

86,031

1,106,691

418,829

1,078,210

14,337

2,618,067

(1,148,354)

(452,579)

(1,200,157)

(31,459)

(2,832,549)

(41,663)

(33,750)

(121,947)

(17,122)

(214,482)

19

2,680

3,942

6,642

(1)

(24)

(3,355)

(2,579)

(5,959)

(5)

(675)

1,363

683

(41,663)

(33,755)

(122,622)

(15,759)

(213,799)

72,976
26,657
99,633

410,673
56,408
467,081

115,809
134,827
250,636

50,842
202,274
253,116

650,300
420,166
1,070,466

111,191 **
111,191

4,234,995
150,901
317,629
310,492
6,168,473

As at 31 December 2013:

Amounts due to banks and Hungarian Government,


deposits from the National Bank of Hungary
and other banks
Deposits from customers
Liabilities from issued securities
Other liabilities*
Subordinated bonds and loans
TOTAL LIABILITIES
Receivables from derivative financial instruments
classified as held for trading
Liabilities from derivative financial instruments
classified as held for trading
Net notional value of financial instruments classified
as held for trading
Receivables from derivative financial instruments
designated as fair value hedge
Liabilities from derivative financial instruments
designated as fair value hedge
Net notional value of financial instruments
designated as fair value hedge
Net notional value of derivative financial
instruments total
Commitments to extend credit
Bank guarantees
Off-balance sheet commitments

104,842 **
104,842

3,684,761
175,146
234,691
295,357
5,301,965

** Derivative financial instruments designated as fair value hedge are not included.
** See Note 18.

230

OTP Bank Annual Report 2014

2014 angol.indd 230

5/18/15 12:48 PM

NOTE 33:

NET FOREIGN CURRENCY POSITION AND FOREIGN


CURRENCY RISK (in HUF mn)

As at 31 December 2014
Assets*
from this: loans concerned in conversion
into HUF**
Liabilities
from this: provision for loans concerned
in conversion into HUF**
Off-balance sheet assets and liabilities, net
Net position
As at 31 December 2013
Assets*
Liabilities
Off-balance sheet assets and liabilities, net
Net position

NOTE 34:

USD
279,394

EUR
1,105,039

CHF
476,074

Others
99,485

Total
1,959,992

820

46,338

49

47,207

(191,873)

(1,186,305)

(92,377)

(69,823)

(1,540,378)

(118)

(6,833)

(401)

(7,352)

(40,738)
46,783

(56,494)
(137,760)

(277,512)
106,185

(13,483)
16,179

(388,227)
31,387

USD
293,385
(279,143)
49,057
63,299

EUR
1,219,825
(1,043,770)
(391,718)
(215,663)

CHF
527,580
(117,690)
(409,898)
(8)

Others
76,540
(36,259)
(38,855)
1,426

Total
2,117,330
(1,476,862)
(791,414)
(150,946)

The table above provides an analysis

NBH and own limit system established

of the Banks main foreign currency exposures.

in respect of limits on open positions.

The remaining foreign currencies are shown

The measurement of the Banks open foreign

within Others. Whilst the Bank monitors

currency position involves monitoring the

its foreign exchange position for compliance

VaR limit on the foreign exchange exposure

with the regulatory requirements of the

of the Bank.

INTEREST RATE RISK MANAGEMENT (in HUF mn)


Interest rate risk is the risk that the value

In addition, the signicant spread existing

of a nancial instrument will uctuate due to

between the different types of interest

changes in market interest rates. The length of

bearing assets and liabilities enables the

time for which the rate of interest is xed on

Bank to benet from a high level of exibility

a nancial instrument, therefore, indicates to

in adjusting for its interest rate matching

what extent it is exposed to interest rate risk.

and interest rate risk exposure.

The majority of the Banks interest bearing

The following table presents the interest

assets and liabilities are structured to match

repricing dates of the Bank. Variable yield

either short-term assets and short-term

assets and liabilities have been reported

liabilities, or long-term assets and liabilities

in accordance with their next repricing

with repricing opportunities within one year, or

date. Fixed income assets and liabilities

long-term assets and corresponding liabilities

have been reported in accordance with

where repricing is performed simultaneously.

their maturity.

* The assets category contains foreign currency investments in subsidiaries that are measured at cost, and are deducted from the
net position calculation.
** Loans were converted into HUF at foreign exchange rates applied in conversion due to Acts on Customer loans so these do not bear
further foreign currency risk or exposure. Loans denominated in JPY are included by others. See Note 26.2.

IFRS separate nancial statements

2014 angol.indd 231

231

5/18/15 12:48 PM

As at 31 December 2014:
Within 1 month

Over 1 month and


within 3 months
Currency
HUF Currency

HUF

Over 3 moths and


within 12 months
HUF Currency

Over 1 year and


within 2 years
HUF Currency

Over 2 years
HUF

Currency

Non-interestbearing
HUF
Currency

Total
Total
HUF

Currency

ASSETS
Cash, amounts due from banks
and balances with the
National Bank of Hungary
fixed interest

1,795,868

30,640

1,795,868

30,640

244,689

155,569

5,023

241,423

50,000

13,754

non-interest-bearing
Placements with other banks
fixed interest
variable interest

fixed interest
variable interest

5,579

1,861,559

36,219 1,897,778

1,795,868

30,640 1,826,508

65,691

5,579

65,691

5,579

71,270

1,293

361

301,005

411,107

712,112

9,504

41,481

23

89,459

50,000

798

59,527

131,738

191,265

235,185

114,088

5,000

151,964

12,956

240,185

279,008

519,193

1,293

361

1,293

361

1,654

251

1,362

66

3,894

124

94

64

11,488

1,232

58,671

341

75,760

1,827

77,587

165

1,241

66

3,080

16

94

64

11,488

1,232

16,068

1,378

17,446

86

121

814

108

1,021

108

1,129

58,671

341

58,671

341

59,012

non-interest-bearing
Securities held for trading

65,691

non-interest-bearing
Securities available-for-sale

153,169

171,458

64,475

21,475

162,483

9,493

539,770

26,612

56,956

10,016

823,684

fixed interest

3,897

64,475

21,475

162,483

9,493

539,770

26,612

766,728

61,477

828,205

variable interest

153,169

167,561

320,730

320,730

non-interest-bearing

56,956

10,016

56,956

10,016

66,972

389,547 157,059

Loans, net of allowance


for loan losses
fixed interest
variable interest

562,470

617,098

28,882

40,575

23,298

5,650

63,678

13,335

4,085

2,954

4,287

1,408

25,805

32,701

23,298

5,650

63,678

13,335

118,820

389,151 152,772

615,690

3,077

7,874

716,567 1,012,715 1,729,282

1,752

396

560,718

non-interest-bearing

392,223 1,215,907

839,472 1,069,159 1,908,631


53,490

172,310

4,085

2,954

4,085

2,954

7,039

63,374

346

36,271

546,756

16,200

662,947

662,947

fixed interest

56,697

346

36,271

546,756

640,070

640,070

variable interest

6,677

6,677

6,677

non-interest-bearing

16,200

16,200

16,200

Securities held-to-maturity

Derivative financial instruments

892,417 1,380,421 899,135 2,425,913

136,282

812,239

8,578

19,996

31,973

41,671

1,300

fixed interest

514,405 1,148,879 147,078 1,009,941

85,034

809,065

8,578

19,996

31,973

41,671

787,068 3,029,552 3,816,620

variable interest

378,012

51,248

3,174

1,181,317 1,650,688 2,832,005

1,300

non-interest-bearing

231,542 752,057 1,415,972

1,968,385 4,681,540 6,649,925

1,300

1,300

As at 31 December 2014:
Within 1 month

Over 1 month and


within 3 months
HUF Currency

HUF

Currency

488,536

465,214

26,437

15,430

488,536

301,144

24,964

164,070

1,473

Over 3 moths and


within 12 months
HUF Currency

Over 1 year and


within 2 years
HUF Currency

HUF

Over 2 years
Currency

Non-interestbearing
Currency

HUF

Total
Total
HUF

Currency

LIABILITIES
Amounts due to banks and
Hungarian Government, deposits
from the National Bank of Hungary
and other banks
fixed interest
variable interest
non-interest-bearing
Deposits from customers
fixed interest
variable interest
non-interest-bearing
Liabilities from issued securities
fixed interest

37,198

5,875

5,109

3,646

88,368

5,863

12,386

9,371

5,834

5,109

3,646

88,368

5,863

3,044

27,827

41

429

386

646,077

496,414 1,142,491

616,348

328,873

945,221

29,300

167,155

196,455

386

815

429

386

429

2,026,492

216,669 318,340

122,814

146,518

98,188

4,056

1,136,819

161,456

3,473

431

3,635,698

599,558 4,235,256

1,564,995

210,633 307,855

122,220

146,518

98,188

4,056

5,607

2,029,031

431,041 2,460,072

461,497

6,036

10,485

594

1,131,212

161,456

1,603,194

168,086 1,771,280

3,473

431

3,473

431

3,904

6,082

3,827

5,544

5,230

11,397

31,069

13,862

8,520

74,176

439

174

2,347

111,235

51,432

162,667
159,784

6,082

3,827

5,544

5,230

11,397

30,707

13,862

8,520

74,176

439

111,061

48,723

variable interest

362

362

362

non-interest-bearing

174

2,347

174

2,347

2,521

618,118 1,696,937 675,674 2,636,782

286,480

732,283

6,698

19,847

23,515

41,313

26

2,871

1,610,511 5,130,033 6,740,544

617,938 1,043,376 152,869 1,023,806

283,456

701,466

6,698

19,847

23,515

41,313

1,084,476 2,829,808 3,914,284

3,024

30,817

526,009 2,297,354 2,823,363

Derivative financial instruments


fixed interest
variable interest
non-interest-bearing

180

653,561 522,805 1,612,976

26

2,871

26

2,871

2,897

29,375

263,843

1,394

294,612

294,612

fixed interest

263,843

263,843

263,843

variable interest

29,375

29,375

29,375

non-interest-bearing

1,394

1,394

1,394

356,467 (273,301)

99,958

646,327 (197,714)

20,752

200,999

3,190 (129,213) (390,064) 198,794

13,122

529,291

20,026

549,317

Subordinated bonds and loans

NET POSITION

232

OTP Bank Annual Report 2014

2014 angol.indd 232

5/18/15 12:48 PM

As at 31 December 2013:
Within 1 month

Over 1 month and


within 3 months
Currency
HUF Currency

HUF

Over 3 moths and


within 12 months
HUF Currency

Over 1 year and


within 2 years
HUF Currency

Over 2 years
HUF

Currency

Non-interestbearing
HUF
Currency

Total
Total
HUF

Currency

ASSETS
Cash, amounts due from banks
and balances with the
National Bank of Hungary
fixed interest

48,235

19,529

48,235

19,529

67,534

222,029

182,597

6,910

150,096

680

32,646

35,000

773

1,532

36,049

182,597

1,910

1,960

680

32,646

35,000

773

185,980

5,000

148,136

variable interest
Placements with other banks
fixed interest
variable interest
non-interest-bearing
Securities held for trading
fixed interest

67,534

5,223

115,769

24,752

140,521

48,235

19,529

67,764

5,223

67,534

5,223

72,757

636

266,151

366,748

632,899

73,639

217,976

291,615

190,980

148,136

339,116

1,532

636

1,532

636

2,168

211,318

81

2,344

4,658

436

638

34

3,607

345

73,215

172

295,780

1,068

296,848
223,105

211,318

81

2,344

4,513

225

638

34

3,607

345

222,420

685

variable interest

145

211

145

211

356

non-interest-bearing

73,215

172

73,215

172

73,387

1,021,825

150,238

217,824

21,994

80,925

30,711

382,525

32,802

48,852

9,795

1,534,127

1,021,825

9,397

21,994

80,925

30,711

382,525

32,802

1,485,275

variable interest

140,841

217,824

358,665

358,665

non-interest-bearing

48,852

9,795

48,852

9,795

58,647

423,095 169,397

Securities available-for-sale
fixed interest

Loans, net of allowance


for loan losses
fixed interest
variable interest

670,550

671,680

13,680

103,065

8,303

30,396

32,702

11,491

4,879

5,463

1,268

14,943

6,907

11,196

8,303

30,396

32,702

8,748

423,026 168,129

656,737

6,773

91,869

2,743

430
670,120

non-interest-bearing

69

463,364 1,997,491
94,904 1,580,179

899,511 1,245,190 2,144,701


49,610

65,352

114,962

845,022 1,174,375 2,019,397

4,879

5,463

4,879

5,463

10,342

10,014

5,368

57,681

438,856

13,130

525,049

525,049

fixed interest

341

57,681

438,856

496,878

496,878

variable interest

10,014

5,027

15,041

15,041

non-interest-bearing

13,130

13,130

13,130

612,614 1,368,827 600,760 1,124,073

74,466

105,302

12,228

28,316

30,284

22,587

660

fixed interest

259,204

791,521

30,759

190,769

50,842

102,317

12,149

28,316

30,284

22,587

383,238 1,135,510 1,518,748

variable interest

353,410

577,306 570,001

933,304

23,624

2,985

79

947,114 1,513,595 2,460,709

660

Securities held-to-maturity

Derivative financial instruments

non-interest-bearing

1,330,352 2,649,765 3,980,117

660

660

As at 31 December 2013:
Within 1 month

Over 1 month and


within 3 months
HUF Currency

HUF

Currency

376,793

308,524

10,417

59,271

365,718

260,785

6,658

11,075

47,739

3,759

Over 3 moths and


within 12 months
HUF Currency

Over 1 year and


within 2 years
HUF Currency

Over 2 years
HUF

Currency

Non-interestbearing
Currency

HUF

Total
Total
HUF

Currency

LIABILITIES
Amounts due to banks and
Hungarian Government, deposits
from the National Bank of Hungary
and other banks
fixed interest
variable interest
non-interest-bearing
Deposits from customers
fixed interest
variable interest
non-interest-bearing
Liabilities from issued securities
fixed interest
variable interest
non-interest-bearing
Derivative financial instruments
fixed interest
variable interest
non-interest-bearing

69,975

3,028

798

5,669

61,496

5,410

618

745

520,097

382,647

902,744

23,225

1,041

2,969

798

5,669

61,496

5,410

435,711

298,058

733,769

36,046

68,934

59

83,768

83,844

167,612

618

745

618

745

1,363

1,499,986

293,191 463,072

180,222

156,755

53,170

4,284

886,786

133,583

5,406

995

3,016,289

661,161 3,677,450

1,129,330

288,725 440,204

180,222

156,755

53,170

4,284

2,667

1,733,240

522,117 2,255,357

370,656

4,466

22,868

884,119

133,583

1,277,643

138,049 1,415,692

5,406

995

5,406

995

6,401

6,674

1,872

4,245

4,407

20,739

26,663

18,079

7,046

79,298

1,246

495

15

129,530

41,249

170,779

6,436

1,872

4,245

4,407

20,739

26,663

18,079

7,046

79,298

1,246

128,797

41,234

170,031

238

238

238

495

15

495

15

510

423,640 1,575,964

64,868 1,635,778

44,510

132,077

126,788

28,595

22,221

22,757

624

423,111

629,717

63,836

155,154

40,519

109,502

126,788

28,595

22,221

22,757

529

946,247

1,032 1,480,624

3,991

22,575

682,027 3,395,795 4,077,822


676,475

945,725 1,622,200

5,552 2,449,446 2,454,998

624

624

624

27,746

247,071

3,424

278,241

278,241

fixed interest

247,071

247,071

247,071

variable interest

27,746

27,746

27,746

non-interest-bearing

3,424

3,424

3,424

256,249 (193,127)

48,505

44,826

48,920 (161,827) (342,842) 202,623

16,146

618,796

(8,206)

610,590

Subordinated bonds and loans

NET POSITION

479,478

(35,184) 246,823

IFRS separate nancial statements

2014 angol.indd 233

233

5/18/15 12:48 PM

NOTE 35:

EARNINGS PER SHARE


Earnings per share attributable to the

by the weighted average number of

Banks ordinary shares are determined

ordinary shares outstanding during the

by dividing Net prot for the year attributable

year. Dilutive potential ordinary shares are

to ordinary shareholders, after the deduction

deemed to have been converted into

of declared preference dividends,

ordinary shares.

Net (loss)/profit for the year attributable to ordinary shareholders


(in HUF mn)
Weighted average number of ordinary shares outstanding during
the year for calculating basic EPS (number of share)
Basic Earnings per share (in HUF)
Separate net (loss)/profit for the year attributable to ordinary
shareholders (in HUF mn)
Modified weighted average number of ordinary shares outstanding
during the year for calculating diluted EPS (number of share)
Diluted Earnings per share (in HUF)

Weighted average number of ordinary shares


Average number of Treasury shares
Weighted average number of ordinary shares outstanding
during the year for calculating basic EPS
Dilutive effect of options issued in accordance with the
Remuneration Policy/Management Option Program and
convertible into ordinary shares*
The modified weighted average number of ordinary shares
outstanding during the year for calculating diluted EPS

NOTE 36:

2014

2013

(74,469)

47,891

278,355,195

278,235,026

(268)

172

(74,469)

47,891

278,643,335

278,468,896

(267)

172

2014
280,000,010
(1,644,815)

2013
280,000,010
(1,764,984)

278,355,195

278,235,026

288,140

233,870

278,643,335

278,468,896

The ICES bonds could potentially dilute basic

calculation of diluted EPS because they are

EPS in the future, but were not included in the

antidilutive for the period presented.

NET GAIN OR LOSS REALISED ON FINANCIAL INSTRUMENTS


(in HUF mn)

As at 31 December 2014:

Cash, amounts due from banks and balances


with the National Bank of Hungary
Placements with other banks, net of allowance for
placement losses
Securities held for trading
Securities available-for-sale
Loans, net of allowance for loan losses
Securities held-to-maturity
Derivative financial instruments
Amounts due to banks and Hungarian Government,
deposits from the National Bank of Hungary
and other banks
Deposits from customers
Liabilities from issued securities
Subordinated bonds and loans
Total

Net interest
income and
expense

Net non-interest
gain and loss

Provision for
impairment

Other
comprehensive
income

15,556

14,689

(4)

72,056
153,501
36,518
3,636

4,283
4,947
9,280

(67)

2,696

51,404

(14,779)

(46,423)
(4,206)
(16,825)
213,723

108,737

127,180

2,692

51,404

* In 2014 and 2013 dilutive effect is in connection with the Remuneration Policy.

234

OTP Bank Annual Report 2014

2014 angol.indd 234

5/18/15 12:48 PM

As at 31 December 2013:

Cash, amounts due from banks and balances


with the National Bank of Hungary
Placements with other banks, net of allowance
for placement losses
Securities held for trading
Securities available-for-sale
Loans, net of allowance for loan losses
Securities held-to-maturity
Derivative financial instruments
Amounts due to banks and Hungarian Government,
deposits from the National Bank of Hungary
and other banks
Deposits from customers
Liabilities from issued securities
Subordinated bonds and loans
Total

NOTE 37:

Net interest
income and
expense

Net non-interest
gain and loss

Provision for
impairment

Other
comprehensive
income

3,720

20,583

(22)

102,376
181,341
30,027
4,664

313
9,769
10,258
(87)
(1,099)

(1,533)

38,199

(17,388)

(87,342)
(15,241)
(16,922)
205,818

101,329

120,483

(1,555)

38,199

FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn)


In determining the fair value of a nancial

non-performing loans, the amortised cost

asset or liability the Bank in the case of

less impairment is considered as fair value,

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

the future cash-ows for oating 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

techniques to determine the fair value of a

in demand cannot be lower than the amount

nancial instrument. See Note 37. e) for more

payable on demand.

information about fair value classes applied for


nancial assets and liabilities measured at fair

Classes of assets and liabilities not measured

value in these nancial statements.

at fair value in the statement of nancial

To provide a reliable estimate of the fair value

position, income approach was used to convert

of those nancial instrument that are originally

future cash-ows to a single current amount.

measured at amortised cost, the Bank used the

Fair value of current assets is equal to carrying

discounted cash-ow analysis (loans, placements

amount, fair value of liabilities from issued

with other banks, amounts due to banks, deposits

securities and other bond-type classes of

from customers). The fair value of issued

assets and liabilities not measured at fair

securities and subordinated bonds is based on

value measured based on Reuters market

quoted prices (e.g. Reuters). Cash and amounts

rates, fair value of other classes not measured

due from banks and balances with the National

at fair value of the statement of nancial

Bank of Hungary represent amounts available

position measured at discounted cash-ow

immediately thus the fair value equals to the cost.

method. Fair value of loans, net of allowance

The assumptions used when calculating the fair

for loan losses measured at discount rate

value of nancial assets and liabilities when

adjustment technique, the discount rate is

using valuation technique are the following:

derived from observed rates of return for

the discount rates are the risk free rates

comparable assets or liabilities that are

related to the denomination currency

traded in the market.

adjusted by the appropriate risk premium as

Fair value measurements in relation with

of the end of the reporting period,

instruments measured not at fair value

the contractual cash-ows are considered for


the performing loans and for the

are categorized in level 2 of the fair value


hierarchy.
IFRS separate nancial statements

2014 angol.indd 235

235

5/18/15 12:48 PM

* In 2014 and 2013 dilutive effect is in connection with the Remuneration Policy.

a) Fair value of nancial assets and liabilities


2014

Cash, amounts due from banks and balances


with the National Bank of Hungary
Placements with other banks, net of allowance
for placement losses
Financial assets at fair value through profit or loss
Held for trading securities
Derivative financial instruments classified
as held for trading
Securities available-for-sale
Loans, net of allowance for loan losses*
Securities held-to-maturity
Derivative financial instruments designated
as hedging instruments
FINANCIAL ASSETS TOTAL
Amounts due to banks and Hungarian Government,
deposits from the National Bank of Hungary
and other banks
Deposits from customers
Liabilities from issued securities
Derivative financial instruments designated
as hedging instruments
Financial liabilities at fair value through profit or loss
Financial liabilities from OTPMOL transaction
Subordinated bonds and loans
FINANCIAL LIABILITIES TOTAL

2013

Carrying
amount

Fair value

Carrying
amount

Fair value

1,897,778

1,897,778

140,521

140,521

712,112

746,469

632,899

640,404

351,753
77,587

351,753
77,587

396,565
296,848

396,565
296,848

274,166

274,166

99,717

99,717

1,215,907
1,908,631
662,947

1,215,907
2,277,701
721,436

1,997,491
2,144,701
525,049

1,997,491
2,466,835
533,609

14,041

14,041

9,734

9,734

6,763,169

7,225,085

5,846,960

6,185,159

1,142,491

1,128,655

902,744

883,999

4,235,256
162,667

4,242,841
171,909

3,677,450
170,779

3,681,927
187,925

3,463

3,463

2,639

2,639

375,363
56,445
294,612
6,270,297

375,363
56,445
292,746
6,271,422

204,517
71,548
278,241
5,307,918

204,517
71,548
258,684
5,291,239

b) Fair value of derivative instruments


Fair value
Interest rate swaps classified as held for trading
Positive fair value of interest rate swaps classified as held for trading
Negative fair value of interest rate swaps classified as held for trading
Foreign exchange swaps classified as held for trading
Positive fair value of foreign exchange swaps classified as held for trading
Negative fair value of foreign exchange swaps classified as held for trading
Interest rate swaps designated as fair value hedge
Positive fair value of interest rate swaps designated in fair value hedge
Negative fair value of interest rate swaps designated in fair value hedge
CCIRS classified as held for trading
Positive fair value of CCIRS classified as held for trading
Negative fair value of CCIRS classified as held for trading
Mark-to-market CCIRS classified as held for trading
Positive fair value of mark-to-market CCIRS classified as held for trading
Negative fair value of mark-to-market CCIRS classified as held for trading
Other derivative contracts classified as held for trading
Positive fair value of other derivative contracts classified as held for trading
Negative fair value of other derivative contracts classified as held for trading
Other derivative contracts designated as fair value hedge
Positive fair value of other derivative contracts designated in fair value hedge
Negative fair value of other derivative contracts designated in fair value hedge
Derivative financial assets total
Derivative financial liabilities total
Derivative financial instruments total

Notional value, net


2014
2013

2014

2013

43,538
(63,670)

53,728
(67,854)

46,128
(66,510)

59,680
(74,699)

60,833
(60,110)

6,637
(5,744)

57,280
(55,697)

6,876
(5,917)

14,032
(3,463)

9,722
(2,639)

8,539
(4,602)

4,491
682

152,540
(227,167)

30,914
(121,786)

144,886
(222,373)

33,067
(117,113)

(9,576)

1,849
(2,770)

(9,856)

1,466
(3,339)

17,255
(14,840)

6,589
(6,363)

14,088
(11,526)

2,849
(13,575)

288,207
(378,826)
(90,619)

12

109,451
(207,156)
(97,705)

270,925
(370,564)
(99,639)

(37)

108,392
(213,961)
(105,569)

* Fair value of loans increased in the year ended 31 December 2014 due to decrease of short-term and long-term interests.

236

OTP Bank Annual Report 2014

2014 angol.indd 236

5/18/15 12:48 PM

c) Hedge accounting
OTP Bank regularly enters into hedging trans-

hedge accounting, therefore these transactions

actions in order to decrease its nancial risks.

were accounted as derivatives held for trading.

However some economically hedging trans-

Net investment hedge in foreign operations is

action do not meet the criteria to account for

not applicable in separate nancial statements.

The summary of the hedging transactions of the Bank are as follows:


As at 31 December 2014:
Types of the hedges

Cash-flow hedges
Fair value hedges

Description of
the hedging
instrument

IRS/Index option

Fair value
of the hedging
instrument

HUF 10,578 million

The nature
of the risk
being hedged

Interest rate

Description of
the hedging
instrument

IRS/Index option

Fair value
of the hedging
instrument

HUF 7,095 million

The nature
of the risk
being hedged

Interest rate

As at 31 December 2013:
Types of the hedges

Cash-flow hedges
Fair value hedges

d) Fair value hedges


1. Deposits from customers

the interest rate risk of the interest payments


OTP Bank entered into interest rate swap

The interest payment cash-ows of some

transactions, where the risk of the cash-ows

structured deposits of OTP Bank denominated

from the structured deposits were swapped to

in HUF and EUR are exposed to the change

payments linked to 3 month BUBOR or EURIBOR,

of equity prices, equity indices or the change

resulting in a decrease in the fair value exposure

of HUF/EUR exchange rate. In order to hedge

of the deposits from customers.

Fair value of the hedging instruments

2014
107

2013
101

2. Securities available-for-sale

to hedge the interest rate risk of the cash-ows

OTP Bank holds xed interest rate securities

interest rate swap transactions, where the risk

denominated in foreign currencies and xed

from the cash-ows of the securities are swapped

interest rate government bonds denominated

to payments linked to 3 or 12 month EURIBOR

in HUF within the available-for-sale portfolio.

and the risk from the cash-ows of the bonds

These xed interest rate securities and bonds

are swapped to payments linked to 6 month

are exposed to the fair value risk driven by the

BUBOR, resulting in a decrease in the fair value

changes in the risk-free interest rates. In order

exposure of the securities available-for-sale.

OTP Bank entered into pay xed-receive oater

Fair value of the hedging instruments

2014
(2,570)

IFRS separate nancial statements

2014 angol.indd 237

2013
(879)

237

5/18/15 12:48 PM

3. Loans to customers

cash-ows OTP Bank entered into pay-xed,


receive-oater interest rate swap transactions,

OTP Bank has xed interest rate loans

where the risk of the payments from the loans

denominated in various currencies. These

are swapped to payments linked to 3 month

xed interest rate loans are exposed to fair

EURIBOR or BUBOR resulting in a decrease

value risk of changes of risk-free interest rates.

in the interest rate fair value exposure of

In order to hedge the interest rate risk of the

the loans to customers.


2014
(417)

Fair value of the hedging instruments

4. Issued securities

2013
(518)

transactions. In the case of IRS transactions the


xed cash-ows were swapped to payments

The cash-ows of the xed rate securities

linked to 3 month EURIBOR or BUBOR, resulted

issued by OTP Bank are exposed to the change

a decrease in the interest rate and foreign

in the HUF/EUR foreign exchange rate and the

exchange exposure of issued securities.

risk of change in the risk-free interest rates of

Certain structured bonds are hedged by options

EUR and HUF. The interest rate risk and foreign

which give the owner the right to get amount

exchange risk related to these securities are

of the structure which is equal to the structure

hedged with EUR and HUF IRS and index option

of the hedged bond.

Fair value of the hedging IRS instruments


Fair value of the hedging index option instruments

2014
13,449
9

2013
8,379
12

As at 31 December 2014:
Types of hedged items

Types of
hedging
instruments

Fair value
of the hedged
items

Fair value
of the hedging
instruments

Securities available-for-sale
Loans to customers
Deposits from customers
Liabilities from issued securities
Liabilities from issued securities

IRS
IRS
IRS
IRS
Index option

HUF 286,344 million


HUF 12,158 million
HUF 1,627 million
HUF 88,309 million
HUF 651 million

HUF (2,570) million


HUF (417) million
HUF 107 million
HUF 13,449 million
HUF 9 million

Types of hedged items

Types of
hedging
instruments

Fair value
of the hedged
items

Fair value
of the hedging
instruments

Securities available-for-sale
Loans to customers
Deposits from customers
Liabilities from issued securities
Liabilities from issued securities

IRS
IRS
IRS
IRS
Index option

HUF 23,629 million


HUF 12,866 million
HUF 5,224 million
HUF 94,344 million
HUF 644 million

HUF (879) million


HUF (518) million
HUF 101 million
HUF 8,379 million
HUF 12 million

Gains/losses attributable
to the hedged risk
on the hedged
on the hedging
items
instruments
HUF 1,691 million HUF (1,691) million
HUF (101) million
HUF 101 million
HUF (6) million
HUF 6 million
HUF (5,070) million
HUF 5,070 million
HUF 3 million
HUF (3) million

As at 31 December 2013:

238

Gains/losses attributable
to the hedged risk
on the hedged
on the hedging
items
instruments
HUF (388) million
HUF 388 million
HUF (540) million
HUF 540 million
HUF (197) million
HUF 197 million
HUF (6,640) million
HUF 6,640 million
HUF (8) million
HUF 8 million

OTP Bank Annual Report 2014

2014 angol.indd 238

5/18/15 12:48 PM

e) Fair value classes


Methods and signicant assumptions used

observable for the asset or liability

to determine fair value of the different classes

either directly or indirectly. Fair value

of nancial instruments:

measurements in relation with

Level 1: quoted prices (unadjusted) in active

instruments measured not at fair value

markets for identical assets or


liabilities;

are categorized in level 2;


Level 3: inputs for the asset or liability that are

Level 2: inputs other than quoted prices

not based on observable market data

included within Level 1 that are

(unobservable inputs).

The following table shows an analysis of nancial instruments recorded at fair value
by level of the fair value hierarchy:
As at 31 December 2014:
Total
Financial assets at fair value through profit
or loss
from this: securities held for trading
from this: positive fair value of derivative
financial instruments classified
as held for trading
Securities available-for-sale
Positive fair value of derivative financial
instruments designated as fair value hedge
Financial assets measured at fair value total
Negative fair value of derivative financial
instruments classified as held for trading
Negative fair value of derivative financial
instruments designated as fair value hedge
Financial liabilities measured at fair value
total

Level 1

Level 2

Level 3

351,319

73,090

278,229

77,153

72,634

4,519

274,166

456

273,710

1,181,200

342,629

838,571

14,041

14,041

1,546,560

415,719

1,130,841

375,363

478

374,885

3,463

3,463

378,826

478

378,348

As at 31 December 2013:
Financial assets at fair value through profit
or loss
from this: securities held for trading
from this: positive fair value of derivative
financial instruments classified
as held for trading
Securities available-for-sale
Positive fair value of derivative financial
instruments designated as fair value hedge
Financial assets measured at fair value total
Negative fair value of derivative financial
instruments classified as held for trading
Negative fair value of derivative financial
instruments designated as fair value hedge
Financial liabilities measured at fair value
total

Total

Level 1

Level 2

Level 3

396,460

289,558

106,902

296,743

289,497

7,246

99,717

61

99,656

1,968,685

1,051,818

916,867

9,734

9,734

2,374,879

1,341,376

1,033,503

204,517

204,508

2,639

2,639

207,156

207,147

IFRS separate nancial statements

2014 angol.indd 239

239

5/18/15 12:48 PM

NOTE 38:

RECONCILIATION OF FINANCIAL STATEMENTS PREPARED


UNDER HAS AND FINANCIAL STATEMENTS PREPARED
UNDER IFRS (in HUF mn)

Financial Statements in accordance with HAS


Premium and discount amortization of financial
instruments measured at amortised cost
Effect of redemption of issued securities
Differences in carrying value of subsidiaries
Difference in accounting for finance leases
Effects of using effective interest rate method
Fair value adjustment of held for trading
and available-for-sale financial assets
Fair value adjustment of derivative financial
instruments
Reversal of statutory goodwill
Revaluation of investments denominated
in foreign currency to historical cost
Difference in accounting of security lending
Treasury share transaction
Share-based payment
Payments to ICES holders
OTPMOL share swap transaction
Provision for exchange of customer loans to HUF
Deferred taxation
Dividend paid by Monicomp in advance
Dividend paid for 2013
Dividend payable in 2014
Financial Statements in accordance with IFRS

NOTE 39:

Retained
Earnings and
Reserves
1 January 2014
1,101,998

Net loss for


the year ended
31 December
2014
(41,718)

Dividend

Direct
Movements
on Reserves

(40,600)

(78,854)

Retained Earnings
and Reserves as
at 31 December
2014
940,826

3,640

23

(866)

2,797

15,442
34,115
(1,499)
6,475

(1,331)
(78,854)
626
(541)

78,854

14,111
34,115
(873)
5,934

38,532

2,968

16,641

58,141

6,599

3,412

10,011

40,596

40,596

(33,647)

976

(32,671)

(23,460)

10,061
(54,489)

(9,672)
300
40,600

1,175,591

1,479
3,908
(4,393)
1,112
422
(7,906)
45,648
(300)

(74,469)

(40,600)
40,600
(40,600)

(3,908)
4,393
(4,159)

(2,419)

9,682

(21,981)

7,014
(54,067)
(7,906)
33,557

40,600
1,070,204

SIGNIFICANT EVENTS DURING THE YEAR ENDED


31 DECEMBER 2014
1) Government measures related
to customer loan contracts

6) Purchase of Banco Comercial


Portugus

See details in Note 2.26.

See details in Note 9.

2) Capital settlement package


of OTP Real Estate Ltd. and its
subsidiaries

7) Incorporation of
OTP Financing Malta Company
Limited

See details in Note 9.

See details in Note 9.

3) Capital increase at
OTP banka Srbija

8) Capital increase at
OTP Banka Slovensko

See details in Note 9.

See details in Note 9.

4) Acquisition in Croatia

9) Change in ownership structure


of OTP Factoring

See details in Note 9.

See details in Note 9.

240

5) Incorporation of OTP Holding


Malta Limited

10) Term Note Program

See details in Note 9.

See details in Note 15.

OTP Bank Annual Report 2014

2014 angol.indd 240

5/18/15 12:48 PM

11) Judgment of the Competition


Council of the Hungarian
Competition Authority

12) Legal dispute in Montenegro


See details in Note 27.

See details in Note 27.

NOTE 40:

POST BALANCE SHEET EVENTS


1) Capital increase at
OTP Bank Romania

20% against the HUF on the day of the

See details in Note 9.

to 7% until 19 February.

announcement, the devaluation moderated


In Hungary, according to the Act on Conversion
into HUF, the CHF mortgage loans are to be

2) Act on Fair banking

converted to HUF loans at 256.47 CHF/HUF


exchange rate. The conversion became legally

Act LXXVIII of 2014 known as Act on Fair

effective on 1 February 2015. (A customer may

banking was promulgated that modied the Act

initiate on opt-out if meeting the criteria set

CLXII of 2009 on Consumer Credit. The Act

by the law.) Starting from 1 January 2015 the

on Fair banking is aimed at making the

monthly instalments of the FX mortgage loans

variation in interest of customer loan contracts

must be calculated with the xed rates set in

transparent and traceable. Regulations of the

the law on conversion, thus clients under the

act are effective from 1 February 2015.

scope of the conversion law did not experience

The Act includes new regulations for

any negative effect of the CHF strengthening.

modication of loan contracts, rules for

OTP Bank fully hedged the open EUR/HUF

uncharged cancellation by clients, special

positions derived from the conversion of FX

directions for foreign currency loans and rules

mortgage loans to HUF on the FX tenders of the

of change for new contract conditions. The Act

NBH, while the open EUR/CHF and EUR/JPY

prescribes in relation with unilateral amendment

positions were hedged on the market until the

of contractual clauses that interest, spread, cost

end of 2014.

and fee can be solely modied disadvantageously.

Within the Hungarian household loan portfolio

Disadvantageous amendment for clients is not

at the end of 2014 the net volume of CHF

allowed in other conditions.

consumer loans at OTP Core stood at


HUF 12 billion equivalent, and the net volume
of CHF car nancing loans at Merkantil Bank Ltd.

3) The impact of CHF strengthening


started in January 2015
on OTP Bank

reached HUF 82 billion equivalent. The car


nancing loans are not subject to the conversion
law. However, the monthly instalments
increase due to the CHF strengthening may be

On 15 January 2015 the Swiss National Bank

mitigated (to a different extent at individual

announced the abandonment of the CHFs

clients) by the reduction in the nominal interest

exchange rate oor set at 1.2 against the

rate according to Curia Law and Act on

euro. After the decision, the CHF sharply and

Settlement, and the compensation may lower

substantially strengthened against the EUR

the loan principal.

and other foreign currencies in the CEE region:

In Romania the subsidiary of OTP Bank had

the CHF appreciated against the EUR from

HUF 134 billion equivalent net CHF mortgage

1.2 CHF/EUR to under the parity and then it

loan volumes at the end of 2014. OTP Bank

went up to 1.08 until 19 February. According

Romania S.A. was the rst one to react to the

to NBHs data the CHF strengthened by

step of the Swiss National Bank abolishing the

IFRS separate nancial statements

2014 angol.indd 241

241

5/18/15 12:48 PM

NOTE 41:

peg to the euro: on 16 January 2015

until 27 February 2015 in the branches.

the Romanian subsidiary announced that

By 12 February the take-up ratio reached 40%

in order to mitigate the negative impact

of performing CHF mortgage loan volumes.

of CHF appreciation on monthly instalments

The Croatian subsidiary held HUF 22 billion

the interest margin will be reduced by

equivalent net CHF mortgage loan volumes

1.5 ppts for 3 months for those customers

on its balance sheet at the end of 2014.

who had variable-rate CHF mortgage loans

On 19 January 2015 the Croatian Government

(in accordance with effective conditions

announced that the CHF/HRK rate will be xed

and depending on the antecedents of the

at 6.39 for 12 months. The measure took effect

loans). Clients can apply for this scheme

on 26 January.

STATEMENT OF ECONOMIC SITUATION AND IMPLICATIONS


ON THE BANKS FINANCIALS
In 2014, economic developments in Hungary

investments surged at an extraordinary pace,

were shaped by sluggish external demand,

but gross xed capital formation also started

supportive international money market

to increase in the private sector. The key drivers

environment, and intensifying domestic

in the latter were mostly car manufacturing,

demand. The Eurozones economy picked

and the related capacity increasing projects

up speed in the second half of the year,

in the supplier network.

and a number of Eurozone periphery countries

Picking up from the stagnation in 2013,

came out of recession. Money market

the households consumption expenditure

background was supportive even though

could go up in 2014. But its rise lagged

the Fed started phasing out its Quantitative

behind that of real income, allowing retail

Easing, the Bank of Japan and the European

savings to expand faster. The improvement

Central Bank introduced further monetary

on the labour market was pronounced

easing. The dollars rming, the plunging

mostly in the rst half-year, the increase

commodity prices and the Russian conict

in employment came to a halt by the end of

adversely affected emerging markets,

the year. The low interest rate environment

but this had little effect on the less

and the higher real incomes led to a

commodity-oriented Central and Eastern

turnaround in private investments too,

European region.

helping housing-related lending and housing

Hungarys economy grew by 3.5% in 2014,

investments start to rise.

stronger than the 1.5% expansion in 2013.

Following a record low of 1.7% in 2013,

Last year broke the trend of the preceding

ination fell further: consumer prices

years, when the main driving force of growth

dropped by 0.2% in 2014. In addition to the

was net exports. Instead, an increase in

governments measures, the favourable

investments became the key driver in 2014,

development in agricultural product prices,

while net exports contribution to growth

and oil prices plunge in the last four

became negative for the rst time after a long

months of the year all contributed to the

while. In addition to investments, consumption

lower ination rate.

also picked up: the consumption expenditure of

A steady fall in ination justied the continuation

households rose about 1.5% in 2014, following

of the rate cut cycle in the rst half of the year,

the stagnation in 2013.

which ended with a 20-basis-point cut in July,


at 2.1%. In the supportive international backdrop

242

As a combined effect of the election year and

(abundance of liquidity), government bond

the end of the seven-year EU budget, public

yields fell further.

OTP Bank Annual Report 2014

2014 angol.indd 242

5/18/15 12:48 PM

OTP Banks operation in Ukraine

The UAH liquidity is managed in Ukraine


and OTP Bank JSC (Ukraine) has to prepare

In 2014 both the retail and corporate lending

for any UAH liquidity needs. The excess

activity of the Ukrainian banking group became

UAH liquidity is invested typically in assets

muted. In the consumer lending segment more

maturing within 1 month, mainly central bank

stringent lending standards were introduced

instruments, collateralized money market

already in the rst quarter of 2014.

instruments (FX swap, repo). The excess

Cash loan disbursement was suspended from

liquidity can be invested in uncollateralized

9 April 2014. However, it was resumed in the

instruments only in small amount, with strict

second half of August, but since then newly sold

counterparty risk limits and a maturity of

cash loan volumes signicantly lagged behind

17 days. In 2014 the maturing Ukrainian

those in the base period (in the fourth quarter

government bonds were not rolled over,

the volume of new disbursements reached only

at the beginning of 2015 the amount of

14% that a year ago). From the second quarter

Ukrainian government bonds kept on the

of 2014 the cross-sale of credit cards declined

balance sheet reached only UAH 26 million.

to practically zero. As for the retail lending the

The UAH liquidity has to safely cover at all times

Bank has remained active only in the point of

the UAH money market and capital market

sale (POS) loan segment. As a consequence

redemptions within 3 months as well as the

of stricter lending conditions new POS loan

potential UAH deposit shocks.

origination melted down by more than 40%

UAH 800 million equivalent subordinated

year-over-year in 2014. Regarding corporate

debt was converted into equity booked

lending the activity is focused rather on using

in the fourth quarter of 2014. Compared

existing credit limits.

to December 2013 the shareholders equity

Customer deposit volumes showed a 9%

of the Ukrainian banking group in HUF terms

year-over-year increase (adjusted for the FX-effect).

dropped as a result of weakening UAH

After the 7% FX-adjusted quarter-over-quarter

against HUF, whereas losses realized in

decline in the rst quarter, the second quarter

2014 had a negative impact on equity, too.

saw a 7% increase followed by a 4% expansion

The Ukrainian shareholders equity includes

in the third quarter and a 5% growth in the

that of 3 entities: the Bank, the Leasing

fourth quarter of 2014. The net loan to deposit

and Factoring companies. The standalone

ratio came down to 137% at the end of 2014,

capital adequacy ratio of the Bank under local

which marks multi-year low.

regulation stood at 10.4% at the end of 2014,

The decline of USD deposits did not cause

thus it exceeded the regulatory minimum.

liquidity problems, because this coincided with

This capital adequacy ratio under local

the decline of FX loan volumes. Latter was

regulation did not incorporate the impact

attributable not only to the loan repayments, but

of the capital conversion booked in the fourth

to the elevated provisioning, too, which required

quarter of 2014. Leasing and Factoring

the Bank to purchase USD from its UAH liquidity

companies are exempt from banks capital

reserves. Both the USD liquidity generated

adequacy rules. The Ukrainian Factoring

through these transactions and the FX liquidity

company received HUF 19 billion equivalent

coming from repayments of performing FX

capital increase in September 2014 (through

loans was used by the Ukrainian banking group

converting debt into equity).

(including the Bank, the Leasing and Factoring

In 2015 the equity of the Factoring Company

company) to repay mother company nancing,

is expected to be raised by converting mother

which declined by altogether USD 445 million

company nancing into equity.

in 2014 (without subordinated debt). In January


2015 an additional USD 30 million intragroup

In the second quarter of 2014 OTP Bank decided

funding was paid back by the OTP Bank JSC

to close down its business in the Crimea,

(Ukraine).

8 branches were closed there. In Donetsk and

IFRS separate nancial statements

2014 angol.indd 243

243

5/18/15 12:48 PM

Luhansk counties where special circumstances

the measures introduced by the supervisory

prevail the Bank closed altogether 15 branches,

authorities, the economic slowdown and the

thus the number of banking outlets declined

cyclical setback of the consumer loan market

to 2 at the end of 2014. Signicant additional

eventually resulted in moderated loan dynamics

risk cost was created both in Crimea and

in 2014. As a reaction to the deterioration of

the Eastern Ukrainian region (Donetsk and

the operating environment in the fourth quarter

Luhansk), as a result the provision coverage

of 2014 (signicant weakening of the rouble,

of total gross loans reached 100% in Crimea

900 bps base rate hike in total) the Bank

and went up to 99.4% in case of gross loan

halted or limited new loan disbursement

exposures toward Donetsk and Luhansk

and made certain pricing steps. Since

regions.

October no new credit cards have been

The Ukrainian market and operating environment

sent out and the Bank cut back part of the

was volatile, especially in the time period

card limits in December. Due to the market

between the end of 2014 and the writing of

turbulences, since the middle of December

the report: after the conict intensied again

cash loan disbursement has been

the parties reached a cease-re accord and

suspended.

the IMF assistance programme is likely to be

The total FX-adjusted deposit base

expanded, but despite all of these the UAH

dropped by 10% in the rst quarter of 2014

weakened further against the dollar. This points

quarter-over-quarter, than it remained stable

to further losses in Ukraine in 2015 both in case

in the second quarter and grew already both

of the Bank and the Factoring company. By the

in the third and fourth quarter, thus the yearly

end of 2014 the large majority of exposures

FX-adjusted decrease was 4% altogether. In the

toward Crimea, Donetsk and Luhansk counties

fourth quarter the Bank managed to increase

were covered by provisions. If the territorial

its deposit base (+3% quarter-over-quarter,

conict did not escalate, and if the operating

FX-adjusted) despite the unfavourable market

environment changed in the positive direction in

environment deposit rates were increased in

Donetsk and Luhansk counties paving the way

line with market trends at the end of December

for banks to operate normally, that could create

in order to reverse the deposit outows.

the possibility to release part of the provision

In the course of 2014 the deposit base of JSC

already created there. The key focus areas

OTP Bank (Russia) increased nominally by

are the optimisation of the operation and the

7% in RUB terms due to the devaluation of

gradual reduction of OTP Banks exposures.

RUB. Due to the fact that the liquidity demand

The funds expected to be granted to the country

of maturing capital market instruments and

by supranational institutions as well as the

the funding need of higher loan volumes

related requirements to implement structural

increased, the net funding provided by the

changes in the economy might stabilize

Mother Company to the Russian Bank grew

the economic situation and the exchange

to USD 320 million by the end of 2014 from

rate of the UAH.

USD 204 million in 2013 (which practically


meant that OTP Russia was net lender to the
Group in 2013). It is important to note that the

OTP Banks operation in Russia

mother company funding provided at the end


of 2014 contained a signicant safety buffer

244

Since the second half of 2013 the Bank has

due to the long Russian holiday period and

put particular emphasis on the improvement

the uncertainties stemming from the market

of consumer loan products protability,

turbulences. This is proved well by the fact that

in line with the ne-tuning of the risk

the net mother company funding dropped to

prole of these portfolios and the efficiency

USD 9 million at the end of January 2015.

of collection activities. Both the stricter

In 2015 JSC OTP Bank (Russia) will have

underwriting rules applied by the Bank,

RUB 300 million capital market redemptions

OTP Bank Annual Report 2014

2014 angol.indd 244

5/18/15 12:48 PM

(this is the total outstanding amount of

Funding for Growth Scheme

issued bonds), so from a liquidity perspective


the emphasis will be put on keeping the loan

On 11 September 2013 the National Bank of

and deposit volume developments in balance.

Hungary decided on extending the Funding

Given that JSC OTP Bank (Russia)s deposit

for Growth Scheme with a second phase

base remained stable despite the liquidity

which is to be open from 1 October 2013

shock the Russian banking system suffered,

till 31 December 2015. The total amount of

the liquidity risks are deemed to be moderate

renancing available for banks in the second

in 2015, too.

phase was originally set at HUF 500 billion; in

The Bank paid back issued bonds in the amount

September 2014 the total amount of available

of RUB 13.3 billion in 2014, out of which RUB 1.1

funding was lifted to HUF 1,000 billion.

billion matured in the fourth quarter of 2014.

The limit can be increased to a maximum of

In the fourth quarter the Russian subsidiary

HUF 2,000 billion by the Monetary Council.

received RUB 3 billion subordinated loan with

Similarly to the rst phase, the central bank

10 years maturity from the Mother Company,

renancing carries zero interest rate, a

whereas in 2014 JSC OTP Bank (Russia)

maximum 10-year tenor and can be lend over

repaid altogether RUB 1.2 billion equivalent

to SMEs by applying a maximum interest

subordinated debt to the Mother Company. The

margin of 2.5%. The goal of the rst pillar is

Banks capital adequacy ratio stood at 12.1% at

to originate new loans, whereas the second

the end of 2014.

pillar is for renancing HUF or foreign currency

In 2015 the DPD090 loan portfolio is expected

denominated liabilities of SMEs. The share of

to decline, which, together with a stable deposit

loan contracts concluded under the second

base might result in improving liquidity position,

pillar must not surpass 10% of the total amount

but lower revenues. Due to the increased

of contracts concluded under the two pillars.

funding cost net interest income might

The maximum available amount of loans for

decrease in 2015. The operating environment

SMEs is limited at HUF 10 billion in each pillar.

is not expected to improve materially, thus

Under the second phase of the Programme

with respect to elevated risk costs no material

OTP Group already contracted in the amount

turnaround is expected in 2015.

of more than HUF 117 billion until the end of

The Russian operation is expected to remain

2014, moreover loan applications in the pipeline

loss-making in 2015.

exceeded HUF 38 billion.

IFRS separate nancial statements

2014 angol.indd 245

245

5/18/15 12:48 PM