The ratings on Hungary-based OTP Bank Rt. reflect its 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 consumer, small and midsize enterprise (SME) financing, and in certain parts of CEE are beneficial to a lesser extent. The ratings are constrained by a high possibility that OTP's asset quality and earnings are likely, in our view, to show continual material deterioration over the next two years. In addition, currently, capitalization is only moderate due to rapidly worsening economic conditions in Hungary and most CEE markets. OTP is also exposed to heightened credit risk from its rapid
