The ratings on Hungary-based OTP Bank PLC are constrained by the ongoing asset quality and earnings pressure. In addition, currently, capitalization is only moderate due to depressed economic conditions in Hungary and most CEE markets. OTP is also exposed to heightened credit risk from its rapidly expanded loan portfolio, particularly that portion from outside OTP's domestic market, and a large amount of foreign currency lending to unhedged clients. Both of these are being tested under the difficult market conditions. That said, the ratings are supported by OTP's strong and relatively reliable domestic retail business model and franchise, particularly its solid granular retail deposit base, and leading position in collateralized housing loans. OTP's earnings and business diversification in the area of
