OTP Bank PLC

Ratings Score Snapshot Irrespective of the duration of military hostilities, sanctions and related political risks are likely to remain in place for some time. Potential effects could include dislocated commodities markets--notably for oil and gas--supply chain disruptions, inflationary pressures, weaker growth, and capital market volatility. As the situation evolves, we will update our assumptions and estimates accordingly. See our macroeconomic and credit updates here: Russia-Ukraine Macro, Market,&Credit Risks. Note that the timing of publication for rating decisions on European issuers is subject to European regulatory requirements. The stable outlook on OTP reflects our view that over the next 12-24 months the bank will withstand the fallout from the escalating Russia-Ukraine conflict given its otherwise good earnings generation across

...OTP Bank PLC (OTP)'s business position will remain a strength compared to most peers despite the ongoing Russia-Ukraine conflict. OTP has maintained its strong customer franchise and leading market position during the conflict and through 2021, despite its Ukraine and Russia businesses being important profit contributors in the past. Strong pricing power, expertise in operations in developing countries, and high geographical revenue diversification support the business profile. OTP's earnings metrics remained strong, in our view, demonstrated by a return on equity (ROE) of 18.5% in 2021, which is above average for many banks in western and central Europe. However, we believe that operating conditions will remain challenging for the bank this year, given Russia's military intervention in Ukraine, and expect a lower ROE for 2022. We expect the bank's asset quality in Ukraine to significantly deteriorate, with a possible moderate reduction in capitalization. Together with the build-up of sizeable...

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