OTP Bank has been an unavoidable and stable player in Hungarian banking history for many decades. In the course of its operation, it has become an important actor not only in the Hungarian, but also in the regional banking sector. It has been expanding in Central and Eastern European countries since the early 2000s, with a presence in 10 countries other than Hungary. It had been a player in the Romanian banking market for almost 20 years from 2004, but the bank’s decision-makers have made a decision about exiting some time ago. In this analysis, we will look at OTP Bank’s activities in the region and two decades of operations in Romania, with an eye to future prospects.

From the First National Savings Bank of Pest to OTP Bank

At the beginning of the 19th century, the period of the founding of financial institutions reached Hungary, together with the actual development of lending practices. This had already taken place much earlier in Western European countries, so the situation of the mainly German and Austrian banks could serve as a kind of example for the Hungarian founders. Until banks and other financial institutions appeared, both the supply of credit and the demand for credit were low. Those who did borrow money did so mainly from acquaintances and family members, with extremely high interest rates of 20-25% (Tomka, 2000). This figure is blatantly high, since the usury law of the early 18th century already capped the interest rate at 6% (Balogh, 1905). However, due to the lack of credit laws, and thus of a legal background, there was usually no prosecution for high interest rates. After the Napoleonic Wars, from 1815 onwards, the circle of creditors began to widen: not only private individuals and usurers, but also merchants joined the circle of creditors. By this time, a system of private banks had been established not only in Western European countries, but also in the hereditary provinces of the Habsburg Empire; in Hungary, however, the process only began afterwards. One of the first steps was taken when the Austrian National Bank opened a bank of exchange in Buda in 1818. Lending, however, did not yet gain momentum as a result, and no loans were granted from this branch (Tomka, 2000).

In 1825, András Fáy, “the all-rounder of the nation“, began to promote the idea of savings banks as well as their dissemination and founding. Even István Széchenyi himself was sceptical about the initial plans, and the politicians of the time did not believe that there was a future for them in Hungary. Indeed, for a long time no progress was made, but in 1839 Fáy’s plan finally gained momentum. He drew up a detailed proposal, which he submitted to the Pest County Assembly on 19 March 1839, and the Assembly adopted it on 10 June (Fáy, 1839). Following this, the establishment of the bank accelerated: on 2 January 1840, the First National Savings Bank of Pest (Pesti Hazai Első Takarékpénztár) began operations on the basis of András Fáy’s plans. The institution, which at that time was organised with a philanthropic approach, was headed by a general assembly of 18 members, appointed by the board of governors. The minimum deposit was set at 20 krajcárs and the maximum at 100 forints. The interest on these was set at 5%. The Savings Bank’s services also extended to lending, up to a maximum of 10,000 forints on real estate in Pest County, on which interest was charged at 6% (Fenyvessy – Menczel, 1940). A few years later, in 1845, the company was transformed into a joint-stock company, but its activities remained the same: it mainly provided loans for real estate and, as a consequence of the abundance of money, it also started to provide corporate loans, which were in demand in several sectors (Kövér, 1982). The Revolution and War of Independence of 1848/1849 affected the institution mainly in that, following the emancipation of the serfs, the debts of the landowners concerned were prolonged, which led the Savings Bank to apply to the government twice for loans of 100,000 forints (Tomka, 2000). The economic boom began in the second half of the 1860s, mainly as a result of the Austro-Hungarian Compromise of 1867.

Between 1867 and 1873, 552 credit institutions and 170 industrial joint-stock companies were founded, showing that the emergence of banks and financial institutions, as well as large corporations began to gain momentum during this period (Jirkovsky, 1945). The Vienna Stock Exchange crash of 1873 did indeed bring heavy losses (50 banks went bankrupt in Hungary, most of which were joint-stock banks), but from the end of the decade until the early 1890s the framework was established that facilitated a significant economic expansion in the following decade. Similarly, the integration of Hungarian financial life was able to make significant progress towards integration in the 1880s: the number of banks and financial institutions grew throughout the country, and they now included a good number of foreign-owned companies as well as domestic ones. There was a growing interconnection between the institutions in the capital and the countryside. Economic growth also had a positive impact on the development of the First National Savings Bank of Pest. Its capital base quadrupled from 1 million forints in 1869 to 4 million forints in 1890. It also established branches in Kolozsvár and Érsekújvár, and further expanded its international contacts, mainly with German and Austrian banks. It was one of the first to set up a network of branches, operating 9 in the countryside and 15 in Budapest by 1913 (Fenyvessy – Menczel, 1940). Their primary role was to raise capital, and they therefore mainly dealt with passive business.

However, at the beginning of the 20th century, the forerunner of war was already being felt, economically, socially and politically. There had been a kind of tension in stock markets since 1911, but it was not until the last six months before the First World War that exchange rates began to fall (Tomka, 2000). During the war, the state’s influence in the economies grew, and the consequence for banks and financial institutions was that private lending began to shrink. In the Austro-Hungarian Monarchy, instead of introducing direct taxes, the state opted primarily for lending to cover war costs, which later had drastic consequences for the indebtedness of the empire (Teleszky, 1927). The end of the war posed new challenges for the Hungarian banking system, including the First National Savings Bank of Pest. The impact of the Trianon decisions, the nationalisation attempts of the Károlyi government, the maintenance of international relations, the end of the gold standard system, the dysfunctionality of capital imports all made it difficult to recover from the already critical economic situation after the war.

Thus, the 1920s and 1930s, until the Second World War, were marked by the Great Depression and survival under the new system. The banks’ interest in industrial companies was significantly reduced due to the crisis. While in 1924 the Budapest-based banks’ interest in industrial enterprises was 20.2%, by 1937 it had fallen to 3.2% (Tomka, 2000). The economic crisis highlighted the risk that the banks’ industrial interest could be a source of danger for them in the event of another crisis. Although bank failures did not occur in Hungary on the same scale as in other European countries, the establishment of banking supervision continued to be pursued by the economic actors of the time. Overall, by 1935 the banking situation had begun to return to pre-crisis levels, but even this was still well below peacetime levels. The verifiable net profits of credit institutions in 1938 were still below the levels of 1913.

The need for money for the Second World War and the war economy that came with it began in 1941, and from March 1944 it could be solved almost exclusively by issuing unbacked banknotes. The situation of the banks deteriorated with the war hopes, and the German occupation, numerus clausus and other anti-Jewish laws added to the difficulties. The Soviet occupation after the end of the war and the nationalisation based on the Soviet model could not escape the banks either. By the end of 1947, the big banks had been nationalised and the one-bank system had begun to be established, following the example of the Soviet Gosbank (Tomka, 2000). The First National Savings Bank of Pest merged with its subsidiary, the Domestic Bank (Hazai Bank), and the merger resulted in the creation of the National Savings Bank Enterprise (Országos Takarékpénztár Nemzeti Vállalat), the direct predecessor of the OTP Bank, on 1 March 1949. Until the 1990s, the bank’s services were mainly concentrated on retail deposit taking and lending. From the 1970s, they were supplemented by the management of council finances, and from the late 1980s the bank was also involved in the coordination of corporate finance (Tomka, 2000). After the change of regime and the market liberalisation in the 1990s, the company was transformed into a joint stock company. Its range of activities became increasingly broad: in addition to general services, it also operates in the areas of mortgage banking, housing savings, factoring, leasing, fund management, pension funds and health funds through its subsidiaries.

The privatisation process of OTP Bank was completed by 1999. The company’s shares are held by both Hungarian and foreign investors, as well as private investors. The bank has been committed to digitalisation and technological development from the very beginning. Since the 1990s, they have paid increased attention to electronic channels, and their direct services serve not only retail but also corporate clients. The OTP Group’s (OTP Csoport) subsidiaries are active in many fields not only abroad, but also in Hungary.

• Merkantil Csoport – vehicle and asset finance;
• OTP Jelzálogbank – mortgage lending, real estate sales, mortgage bond issuance, refinancing;
• OTP Lakástakarék – savings options;
• OTP Faktoring – receivables management;
• OTP Ingatlanlízing – leasing of new and used residential property;
• OTP Alapkezelő – investment offers;
• OTP Ingatlan Alapkezelő – managing the portfolio of the OTP Real Estate Investment Fund (OTP Ingatlanbefektetési Alap);
• OTP Ingatlan – real estate investment, sales, valuation, consulting, operation;
• PortfoLion – capital financing opportunities for companies;
• OTP Mobil – innovative payment solutions;
• OTP Hungaro-Projekt – strategic advice on the use of EU funds;
• OTP Pénztárszolgáltató – fringe benefits;
• OTP Pénzügyi Pont – brokerage, non-banking activities;
• OTP Ingatlanpont – national network of real estate brokerage;
• OTP Travel – travel agency;
• OTP Egészségpénztár (strategic partner) – health services;
• OTP Önkéntes Nyugdíjpénztár (strategic partner) – pension solutions;
• OTP Életjáradék Ingatlanbefektető – real estate management and real estate utilisation activities;
• OTP Otthon – helping property seekers and providers find solutions;
• Foglaljorvost – practice management solutions and a digital private health appointment booking system for patients (OTP Bank, 2024).

Today, OTP Group has 16.3 million customers and 1,750 branches in 11 countries.

International market entry – a theoretical overview

In the literature on the subject, there is no single agreed definition of what we call the internationalisation of a large company. There are, however, a number of theories that can help us to understand both the ways and conditions of international market entry and the internationalisation of a large company. The simplest formulation of international market entry is that of Welch and Luostarinen. They argue that internationalisation is the process of a company’s increasing involvement in international operations (Welch – Luostarinen, 1988). The simplicity of this definition also implies an overly broad interpretation, since, as Sass and Antalóczy point out, this increasing involvement in operations can be an increase in exports or even the opening of a subsidiary (Sass – Antalóczy, 2011).

Theories on the internationalisation of companies can be grouped into three categories, based on a study by Sass and Antalóczy (Sass – Antalóczy, 2011). Some of them belong to the stage group, which is that companies go through stages to achieve internationalisation. This theory is well illustrated by the Uppsala model. The model is based on the idea that the successive stages all contribute to the entry of a large company into a foreign market and its internationalisation. First, the company engages in exports, then sets up sales companies abroad, then concludes licensing or subcontracting agreements with foreign partners, and finally establishes a foreign production subsidiary. In particular, the model involves the continuous acquisition and learning of knowledge based on experience abroad (Sass – Antalóczy, 2011). Other models, such as the systematic planning theory-based model, according to Root, involve market research, marketing planning, selection of entry mode, and planning of implementation before entering the market (Root, 1994). The process is described by the respective theories in six- or ten-step models (Miller, 1993; Yip et al., 2000). There may also be an innovation element to internationalisation, where theories compare the process to the stages of launching a new product (Gemser et al., 2004).

Another group of theories is the network group. This is also based on the Uppsala model, taking into account the role of the firm in corporate networks (Johansson – Mattson, 1988; Johansson – Vahlne, 1990). In this theory, internationalisation is described as a form of “networkisation”, where the process is enhanced by the development of financial, technological and commercial links with other actors in the network. The authors classify internationalising firms into four types: early, late, solitary and incidental internationalising firms. Osarenkhoe also points out that companies that are actively involved not only in the local but also in the international network are more successful (Osarankhoe, 2008). Network theory also defines internationalisation differently. According to this theory, companies are internationalised if their network of contacts extends to companies in other nations. Several theoretical economists attribute a significant role to social and societal relations in this process (Gemser et al., 2004; Madsen – Servais, 1997).

As practice does not always follow theory, the models and theories outlined have also been subject to a number of criticisms. Andersen argues that internationalisation is determined by a single factor, market knowledge (Andersen, 1993). Buckley et al. argue that some companies may skip a stage, while others may get stuck at one (Buckley et al., 1979). In the case of Hungarian companies, the study by Antalóczy and Éltető concludes that staged internationalisation is more prevalent here (Antalóczy – Éltető, 2002).

The best-known model of the economic approach was outlined by Dunning in the OLI paradigm. The theory builds on several earlier studies, such as the internalisation and transaction cost theories (Buckley – Casson, 1995; Williamson, 1975). The OLI paradigm consists of three components: company-specific ownership advantages, locational advantages and internalisation advantages. The model can be implemented if the investing company holds the company-specific ownership and internalisation advantages, while the host country holds the locational advantages. If only two or one of the three components can be realised, the company can internationalise in other ways, for example through exports (Dunning, 1993). However, according to Gemser et al., this model is only applicable to the entry of small and medium-sized enterprises into foreign markets (Gemser et al., 2004).

The motivation for international expansion is another much researched area, yet it is Harry Dunning again who has written about it in a way that is still applicable today. Dunning divides companies seeking to enter foreign markets into four sub-types:

1. Resource seekers – these companies aim to rationalise business costs, for example by entering foreign markets for better tax or labour cost conditions.
2. Market takers – these companies are attracted by the vast opportunities of international markets and the commercial opportunities they offer.
3. Efficiency seekers – similar to the previous one, with the difference that economies of scale are more important.
4. Strategic advantage seekers – seeking to establish a longer, more sustainable growth path through internationalisation (Dunning, 1993; Pásztor, 2022).

The direction of expansion depends to a large extent on the company’s original location. For Western European countries, the states of Central and Eastern Europe became an attractive investment location after the regime change of the 1990s, due to their high skill levels and cheap labour. For Central and Eastern European countries, it was the Western European regions that became the focus of attention. However, catching up and development were essential, and many companies were forced to close foreign interests after entering the market. Today, more and more firms in Hungary are opting for internationalisation, not only at the level of large companies, but also at the level of medium-sized enterprises. In addition to the three big flagship companies – OTP Bank, Richter, MOL –, the EU common market offers opportunities for small and medium-sized enterprises to compete with foreign competitors.

The main motivation for internationalisation usually determines the way of market entry. Greenfield investments involve construction and infrastructure building in previously unused areas, at higher costs. This type of market entry is usually undertaken by multinational companies, as their resources allow them to do so. Brownfield investments, on the other hand, involve the re-use of built environment that was once used. Compared to greenfield investments, the disadvantage is that the environment is only suitable for the activities for which it was originally built and used (Pásztor, 2022).

Finally, the necessary form of operation on the foreign market must be taken into account. Closely related to this is the creation of competition alliances. In a competition alliance, the partners form a cooperation in order to achieve a better position in the competitive market. Forms of competition alliances can include simple production cooperation, joint venture formation, foreign licensing, franchising and contract production (Rekettye et al., 2016).

The process of the internationalisation of banks, like that of other large corporations, in our region took place mainly in the 1990s-2000s. Foreign banks’ activities were particularly significant at the end of the 1990s and in the years following the turn of the millennium, as well as during 2006-2007 (Claessens – van Horen, 2012), reflecting the reforms and economic openings in the countries concerned, and the strong growth of financial globalisation in general. Today, the internationalisation process is much more complex than the former follow your customer approach, which was mostly about the bank helping a large company to expand abroad.

The global economic crisis of 2008-2009 also had a significant impact on the internationalisation of banks. Practices changed after the crisis years, as problems shaped by the so-called ‘megabanks’ surfaced during this period (Papp, 2015). The crisis led to a decline in the ratio of global financial assets to GDP and, in general, balance sheet reduction was carried out by all foreign banks. The economic collapse led to a sharp decline in the number of new foreign banks entering the market in almost all countries, with an average of 14% in the regions studied (Claessens – van Horen, 2015). In 2007, an average of 56% of foreign bank assets were held by foreign banks headquartered in the same region as the host country, while in 2012 this share rose to 60% (Claessens – van Horen, 2015). Tighter capital and liquidity requirements and a stricter regulatory regime were introduced in an attempt to contain the next potential crisis. The adjustment of local competitors also changed. While foreign subsidiary banks used to provide a sense of direction, local institutions are now able to develop and disseminate technologies of similar quality (Papp, 2015). Foreign banks have increasingly started to focus on self-financing, the territorial expansion of Japanese and Chinese banks has accelerated, and cross-border lending by companies has decreased. The past decade and a half has highlighted the vulnerabilities of the banking world, and this has also brought a sense of reform to the fore.

All in all, entering a foreign market and internationalisation are a huge step in the life of a company, but it is not in itself a guarantee of success in an external market. Many other factors influence the success of foreign production or services in a given region. Market research, surveys and other studies of demand needs are therefore an essential part of internationalisation.

OTP Bank’s entry into foreign markets – the national champion theory

Among the large companies in Hungary, we can list three that have set up foreign production subsidiaries and are operating successfully both at home and abroad. MOL, Richter and OTP Bank all decided to expand abroad after the end of the market liberalisation period in the 1990s. Of these, MOL and OTP Bank can be considered the so-called “national champions”. One of the definitions of a national champion company is: ‘those firms that are large and strong enough to compete with other large players in the global economy‘ (Riess-Välilä, 2006). Understandably, for a company to reach this level, it is essential that it has the support of the state. As Altman describes it, ‘a national champion is an industrial giant that is often kept alive by its government through an intravenous cash drip‘ (Altman, 2005). This characterisation is relatively extreme and not always true, but the meaning behind it is easy to understand. The relationship between the state and the company in question, the national champion, cannot be loose; it is always close.

In the historical overview already presented, we have already briefly described the monopoly position of the National Savings Bank Enterprise, the immediate predecessor of OTP Bank, after the Second World War. The status of national champion thus started from here, as with a minimum of effort it was and remained for a long time in a position that made it unavoidable on the banking market. In the years before the change of regime, with the emergence of the two-tier banking system, the company already had a competitor in Postabank, and the gradual emergence of Western European banks from the 1990s onwards increased domestic competition (Várhegyi, 2011). Even then, OTP managed to maintain its position as national champion, and this helped it to receive special treatment during the bank privatisation process of 1994-1997 (Várhegyi, 2011). The turn of the millennium and the following few years were also of particular importance for OTP: it started its regional expansion, and thus sought to replace its position as national champion with that of regional champion.

The first countries conquered – Slovakia, Bulgaria, Romania

In its regional expansion, OTP Bank sought to establish itself primarily in countries that offered economic development opportunities similar to those in Hungary. The neighbouring countries and the countries of the wider Eastern European region were suitable for this purpose.

The Hungarian company first expanded in Slovakia in 2001. During the foreign acquisition, it bought the Slovakian IRB institute, paying HUF 4.2 billion for the deal, acquiring a 92.6% stake. IRB Bank was considered a medium-sized financial institution in Slovakia and its corporate reputation had deteriorated considerably by the time it was taken over by OTP. The former Slovakian financial institution had failed to catch up with the rhythm and management of Western European banks in the years following the regime change, therefore OTP rebranded it following the acquisition. In contrast to the practice in other countries, whereby individual subsidiaries are completely transformed into the image of the parent company, OTP followed and still follows a different strategy. It does not aim for the foreign subsidiary to be identical to the parent company; it merely has to fit into the institutional structure and image of the group. OTP had learned from the mistake that several large Western European companies made in Hungary in the 1990s. It was common for them to try to use the same image here as in their home country, but they were unable to attract customers with it, and thus the subsidiary’s operations ran into many more obstacles. For this reason, OTP has not followed this principle with its subsidiaries in foreign markets, but has instead adapted its new image to local conditions, which still bears the classic OTP hallmarks.

Following the Slovak acquisition, the Hungarian bank entered the Bulgarian banking market two years later, in May 2003, and less than a year later, in April 2004, the Romanian banking market. In Bulgaria, it acquired DSK bank, acquiring a 100% stake for HUF 76.1 billion. In Romania, it took over RoBank, also with a full stake, but at a much lower price of HUF 9.9 billion (OTP Bank, 2024). The Bulgarian DSK bank, like OTP Bank’s predecessor, was a savings bank founded in 1951 and transformed into a joint stock company in the late 1990s. DSK was the oldest bank in Bulgaria with the largest customer base, and of the three countries, OTP reached the highest market share here. Following the acquisition of DSK, another Bulgarian bank, Societe Generale Expressbank (SGEB) and its subsidiaries were brought under the wing of OTP in 2018-2019, bringing SGEB under the ownership of DSK EAD, increasing its market share by 6.4% (OTP Bank, 2019).

Figure 1: Adjusted after-tax results of OTP Bank’s subsidiaries in 2022 and 2023 (in millions of HUF) Source of data: OTP Bank, Integrated Annual Report 2023, 2024.

In both the Romanian and Slovakian markets, the bank’s subsidiary achieved modest results. In Slovakia, it exited in 2020, with 99.44% of its shares bought by the Belgian-based KBC Group (OTP Bank, 2020).

The case of Romania was similar: the share that would have made it worthwhile to maintain the subsidiaries in the long run was not achieved here either. Expansion progress was made in 2014, when OTP Bank acquired Millenium Bank, but the 0.8% market share it gained was not sufficient subsequently (Maszol, 2014). The news of the sale was announced in February 2024, with the bank stating that a sales contract had been signed with Banca Transilvania for EUR 347.5 million. OTP Bank’s share of the Romanian market was 2.64%, covering 420,000 retail and 22,000 corporate customers. OTP could only have achieved further growth through additional acquisitions in Romania, which was not envisaged. The acquirer, Banca Transilvania, is one of the largest banks in Romania and Southeast Europe, with a 20% market share in the country, serving 4 million customers with its 10,000 employees every day (OTP Bank, 2024).

Balkan expansion – Croatia, Serbia, Montenegro, Albania

OTP Bank is present in four of the Balkan countries. At the end of 2004, OTP Bank acquired Nova Banka in Croatia for a purchase price of EUR 236 million, giving OTP a 95.59% stake in the bank and the seventh largest bank in the Croatian banking market. Nova Banka served 300,000 customers in 2004, giving it a market share of around 5% at the time of the acquisition. Following the acquisition, OTP Bank outlined its further plans for the new subsidiary: in addition to developing retail and corporate products, it would focus on network and IT upgrades and aim to achieve a 10% market share by 2010. Although the 2010 target date for increasing market share was not met, the target was reached and exceeded by 2017. As a result of the acquisitions of Banco Poplare Croatia in 2014 and Splitska Banka in 2016, OTP banka Hrvatska became the fourth largest financial institution in the country, with a market share of 11% (Portfolio, 2016). Following the acquisitions, OTP had 500,000 customers in Croatia by 2018, putting it in a leading position in the market.

The Croatian market was followed by Serbia, where OTP made several acquisitions in a short period of time. The acquisition of Niska Banka was announced at the end of 2005, followed by Zepter Banka in April 2006 and Kulska banca in July of the same year. The three acquisitions cost HUF 45.9 billion and resulted in OTP gaining a 3% market share in Serbia. After the three merged institutions, there were no further acquisitions for a long time, until two more banks were taken over by the group in 2017-2018. After the merger of Vojvođanska banka and SocGen Serbia, the integration of Vojvođanska banka and OTP banka Srbija into the common system was completed by 2021. OTP banka Srbija, which comprises all the acquisitions in Serbia so far, has become the institution with the largest share in the Serbian credit market and the second largest bank in the country with a balance sheet total of 5.6 billion (OTP Bank, 2021). The integration also marks a milestone in the life of the banking group, confirming the effectiveness of its regional expansion and the implementation of the strategy it had previously set out to achieve.

Figure 2: Number of employees and other data of OTP Bank subsidiaries, based on 31 December 2023 values. Source of data: Integrated Annual Report 2023, OTP Bank. (Russian and Ukrainian data exclude agents employed).

Following the Serbian acquisition, OTP announced its expansion into Montenegro in August 2006. CKB, established in 1997, was acquired by OTP for HUF 28.9 billion with 100% ownership. At the end of 2007, the bank had a balance sheet total of HUF 260,5 billion. The majority of gross customer loans (65.5%) were business loans and 31.3% were retail loans. During 2007, the subsidiary realised a profit before tax of HUF 2.4 billion (OTP Bank, 2007). The number of customers exceeded 268,000, which is a significant proportion compared to the total population of 615,000. With this transaction, OTP became the owner of Montenegro’s leading bank, which was a further important step in regional expansion alongside its strategic objectives. In 2019, OTP initiated a new acquisition in Montenegro, to take over the local interests of SocGen Banka Montenegro. Societe Generale Montenegro had a market share of 11.9% in the country and was considered the third largest bank in the state. Founded in 1906, the institution is a long-standing player in Montenegrin banking, combining modernity and dynamic financial opportunities. Through the acquisition, OTP Bank has maintained its position as the market leader and increased its market share to 28% in the country (OTP Bank, 2019).

Acquisitions and market entries in the region did not stop with Montenegro, with a continuation in Albania in 2018. OTP acquired an 88.89% stake in Banka Societe Generale Albania SH, making it the majority owner of the country’s fifth largest bank with a 6% market share. As with most countries, OTP has been continuously looking for opportunities for further growth and expansion, so it was not surprising that a few years later, the acquisition of another institution was announced. The acquisition of Alpha Bank Albania, the Albanian subsidiary of the Greek Alpha Bank, was completed by December 2022. Alpha Bank is the eighth largest bank in Albania, serving both retail and corporate customers. OTP paid EUR 55 million for the acquisition, giving it an additional 5% share of the Albanian banking market (OTP Bank, 2021).

Expansion in the four countries has enabled OTP to create one of the most stable and active financial groups in the Balkans. The acquisitions have also enabled it to achieve a leading position in the Montenegrin and Serbian markets, which will facilitate its further expansion, both in those countries and in other areas of the Balkans.

Back to the East! – Ukraine, Russia, Moldova, Uzbekistan

At the same time as expanding into the Balkans, OTP started to open up again to Eastern European countries, primarily neighbouring Ukraine as well as Russia, followed by Moldova. OTP entered Ukraine in June 2006, when Raiffeisen’s Ukrainian subsidiary changed hands for a purchase price of EUR 650 million. The size of the acquisition was much larger than previous acquisitions, proving promising for investors. At the same time, the question was raised as to when OTP would be able to make the further acquisitions envisaged in the future, given the high purchase price. The bank closed 2005 with a balance sheet total of €1.2 billion, giving it a 3.6% market share of the Ukrainian banking market. As the seventh largest bank in Ukraine, it had equity capital of EUR 139 billion and a pre-tax profit of EUR 39.7 million at the end of 2005. Through the acquisition, OTP Bank’s Ukrainian subsidiary brought its customer base in 2006 to around 1,900 large corporate customers and 3,600 small and medium-sized enterprises (Portfolio, 2006). Here too, further expansion was a long-term goal for OTP Bank, but this was delayed first by the events in Crimea in 2014 and then by the Russian-Ukrainian war in 2022. As the group started its activities in Russia in 2006 and continued them after the events of 2022, OTP was blacklisted in Ukraine from spring 2022 to autumn 2023. Following the delisting, the possibility arose that OTP would further increase its stake in Ukraine through further acquisitions. The institutions in question are Sense Bank and Ukrgasbank, both state-owned financial and credit institutions, but no concrete statement on the acquisition has been made by OTP in either case. The acquisition of Sense Bank by OTP would have several advantages for the Hungarian-owned company. First, the merger of OTP’s subsidiaries and Sense’s branches would create the fourth largest bank in Ukraine. Second, OTP would be able to operate the new group at a lower cost, as Sense is one of the most developed banks in the country (Index, 2024). In a previous press release, OTP Bank pointed out that its primary objective in Ukraine is to preserve financial stability and infrastructure, for which it has provided millions of euros in support, material donations, humanitarian fundraising and the housing of 160 refugees for its clients and staff. The OTP Group continues to operate its subsidiary banks, but no financing is provided to them in Russia and the distribution of Russian government securities in Ukraine has been suspended (Adó Online, 2022).

Figure 3: OTP Bank’s expansion in the countries of Central and Eastern Europe and the Balkans to date. Source of data: own collection, OTP Bank.

By Nikoletta Szigethy-Ambrus, Oeconomus

OTP also entered Russia in 2006, with its first acquisition being Investberbank, where it acquired a 96.4% stake. The Hungarian side paid USD 477 million for the acquisition, making it the second most valuable acquisition in the history of the banking group. Barely a year later, in 2007, another bank was acquired by OTP Group, this time the 100% ownership of Donskoy Narodny Bank. The bank, located in the Rostov region, had a balance sheet total of USD 89.3 million at the end of 2006, making it the dominant bank in the region. The acquired bank’s primary target is the retail segment, with 170,000 retail deposit accounts and 50,000 loan contracts under management at the time of acquisition (Index, 2007). Both Donskoy Narodny Bank and Investberbank, the first bank to be acquired, fit well into the OTP Group structure. The events in Ukraine in 2014 and 2022 have raised questions about the ability of the Hungarian subsidiary in Russia to continue its activities. One of the most important problems was brought to OTP’s attention by the MNB. According to the MNB, there could be a number of risks related to operations and payment flows in Russia, as the Russian and EU positions differ on a number of points in the areas of economic sanctions, anti-money laundering and counter-terrorism financing activities, as well as compliance with various legislation (MNB, 2024). According to a previous OTP Bank statement, the OTP Group fully subordinates the operations of its Russian subsidiary to international sanctions regulations. Their corporate loan portfolio is gradually being reduced, they are not investing in Russian government securities and their distribution is being suspended throughout the entire international group. In addition, OTP Bank Nyrt. is not providing funding to its subsidiary bank in Russia and the need for further restrictions is under constant consideration. The possible conditions and consequences of leaving the Russian market are also under analysis, but no preparatory steps have been taken so far (Adó Online, 2022). The detailed data of the Integrated Annual Report 2023 also show that in 2023 there was a slight decrease in the number of branches, ATMs and POS terminals compared to the previous year (see Figure 4).

Figure 4: Headcount and other data for OTP Bank in Russia in 2022 and 2023 (excluding employed agents). Source of data: OTP Bank, Integrated Annual Report 2023, 2024.

Expansion in Eastern Europe continued in 2019 with Moldova. OTP Group announced the acquisition of the banking network formerly known as Mobiasbanca in February 2019. With the acquisition of a 96.69% stake, OTP gained a 13.8% market share in the Moldovan banking market, making it the owner of the fourth largest institution. Mobiasbanca operates as a universal bank, serving both retail and corporate clients (OTP Bank, 2019). The Moldovan acquisition has achieved positive results since its purchase: based on data for 2023, operating profit increased by 3% year-on-year, while net interest income grew by 2% (OTP Bank Moldova, 2023). Considering the economic difficulties in 2020-2023 and the shock caused by the Russian-Ukrainian war, as well as the performance of the Moldovan economy, the results of the previous year are encouraging.

After the conquest of Eastern Europe, there was no question that OTP would also seek to gain a foothold in Central Asia. Negotiations with the Uzbek government about the participation of the OTP Group in the privatisation of the banking sector started already at the end of 2020. Almost two years after the start of negotiations, the parties reached an agreement under which OTP Bank acquired Ipoteka Bank, owned by the Uzbek Ministry of Economy and Finance, in two steps (OTP Bank, 2023). Ipoteka is the fifth largest bank in Uzbekistan, with a market share of 8.5% and more than 1.6 million retail customers (OTP Bank, 2022). The transaction also included two subsidiaries of Ipoteka Bank, Ipoteka Leasing and Imkonsugurta, which deals with insurance. Both the old and the new management of the company hope that the acquisition will help to develop and strengthen competition in the Uzbek market, improve the quality of corporate governance and enhance the quality of banking services (OTP Bank, 2022).

Expansion in the East has proved successful for OTP, as the company has managed to keep its Ukrainian and Russian subsidiaries stable despite the war, and has also expanded into Central Asia. The participation in the Uzbek privatisation is of particular importance, as is the fact that this is where OTP first set up its operations in the region.

Direct impact of the war on Russian and Ukrainian subsidiaries

In the description of the Russian and Ukrainian subsidiaries, we have already discussed the steps taken by OTP Bank in response to the international sanctions, but it is also worth mentioning the opportunities that it can expect if the war continues. According to the report published in 2023, there were three main factors that contributed significantly to the negative result in 2022. One was the impairment of HUF 35 billion on the Russian government securities of OTP Core and DSK Bank. The other was the tax effect of goodwill amortisation and investment impairment, which amounted to HUF 59 billion. Thus, the direct impact of the war resulted in a total loss of HUF 94 billion for the group (Növekedés.hu, 2023). The profit of the Russian subsidiary bank decreased, with a 57% drop in 2022 in rouble terms. Customer deposits increased by 19% and OTP’s Russian equity amounted to RUB 60 billion in 2022. The Ukrainian branches also made a loss in 2022: the Ukrainian subsidiary’s profit after tax was HUF 15.9 billion. Customer deposits increased by 21% and gross loans decreased by 16%. The Ukrainian subsidiary’s equity in 2022 was HUF 122 billion (Növekedés.hu, 2023). 2023 was a significantly better year for most of the regional subsidiaries, with the bank’s numbers starting to see improvements in Ukraine and Russia too.

Another acquisition in Slovenia

So far, OTP has not made any acquisitions in the classic Western European countries, but it has been present in Slovenia since 2019. In its initial market entry, it acquired the Slovenian SKB Banka, together with its subsidiaries. SKB Banka was the fourth largest bank in Slovenia with a 9% market share, and it operated as a universal bank. Its products and services are highly innovative and competitive, and in some cases its digital solutions have pioneered the development of the Slovenian banking system (OTP Bank, 2019). Relatively early after the transaction, negotiations were launched in 2022 for a further acquisition, the acquisition of Nova KBM bank. Regulatory approvals for the sale were finalised in February 2023, allowing the integration of Nova KBM and SKB Banka, which had previously been acquired by OTP, to begin. With the acquisition of Nova KBM, the OTP Group has reached a 30% market share in Slovenia and is the leading bank in the country in terms of deposits and loans. OTP’s expansion has made it the market leader in five countries, confirming the success and soundness of its strategic decisions in previous years. In the meantime, the two banks merged in August this year and are now operating as OTP Banka. The merger is a milestone not only in the life of OTP, but also in Slovenian banking history, as no other bank integration of this scale has taken place in Slovenia.

Summary, conclusions

András Fáy’s idea has come a long way from the mid-19th century to the present day. Over the past decades, OTP Bank has been transformed and modernised several times, constantly following the latest trends. It has achieved a leading position in the market not only in Hungary, but also in other countries. This, however, required a number of strategic decisions that were well taken and, even if not in all countries, were successful in most of them in the long run. The withdrawals from Romania and Slovakia suggest that OTP was unable to gain a sufficiently high market share in these countries and it was therefore not worth maintaining its subsidiaries in the long term. OTP’s objective for its foreign subsidiaries is to become the market leader and to achieve the highest possible market share in a relatively short period of time. The entries into both the Uzbek and the Slovenian markets reflect this approach, with the vision of a very active, dynamically growing large company.

Today, OTP Bank is a dominant institution in Hungary. In addition to its status as a national champion, it can also be considered a regional champion. Moreover, it also deals with a wide range of social issues. Among its main objectives are the creation of equal opportunities and the promotion of culture and sport. It has several partnerships with foundations, with which it works to promote the recovery and help of sick and disadvantaged children. Emphasis is also placed on promoting proper education for young people. All of this has helped it to make a mark not only as a financial institution but also in terms of social responsibility (OTP Bank, 2024).

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Szigethy-Ambrus Nikoletta

Elemző | Published writings

• Neutral economies I – European perspectives
• A forgotten industry – Hungarian textile manufacturing