(Bloomberg) -- Hungary’s largest lender has money to spend after a profit surge and plans to plow ahead with an acquisition spree that has turned it into a regional force, OTP BanK Nyrt. Chairman and Chief Executive Officer Sandor Csanyi said.
“We have to have further plans outside of Hungary, because Hungary is a small market,” Csanyi said in an interview in Budapest on Wednesday. “If there’s a bank for sale in a country where we have a presence, then we’re interested.”
The comments highlight how Csanyi, who’s been at the helm since 1992, is still not done doing deals. He has grown OTP rapidly by buying eleven lenders across eastern Europe since 2016, mostly in the Balkans, nearly tripling assets over that period to over €100 billion ($108 billion) at the end of September.
The expansion drive has turned OTP into the biggest bank by assets in four countries in the region outside Hungary, including Bulgaria and Slovenia, according to its latest investor presentation. Roughly 70% of its net interest income now comes from units outside Hungary.
Deals aren’t a one-way street as OTP is also seeking to exit from countries where its efforts to become one of the biggest banks have failed. The latest example is Romania, where OTP is just the 10th largest lender. It’s in advanced talks to sell its local business to Banca Transilvania SA, Bloomberg reported separately earlier on Thursday. OTP declined to comment on the potential sale.
Despite two acquisitions this year, OTP’s capital cushion has remained well above its regulatory requirements thanks to surging profits. The growing loan book has helped OTP benefit strongly from rising interest rates, driving its pretax profit up 71% in the first nine months of the year.
That means the bank has room to spend cash — for example on more acquisitions — without breaching any regulatory thresholds.
Another typical way of using cash is to return it to shareholders through dividends or buybacks. Many other European banks have opted to do that this year as their profitability has soared on rising interest rates.
OTP has paid out about $240 million in dividends this year, according to Bloomberg calculations. That’s predicted to rise to about $290 million next year, based on dividend forecasts compiled by Bloomberg.
The latest deal saw OTP close its first takeover outside Europe as it bought Ipoteka Bank in Uzbekistan earlier this year. That deal may have been just the opening salvo in a Central Asian expansion, Csanyi said in the interview. Future acquisitions could happen in Azerbaijan, Georgia and Kazakhstan, he said.
Read More: Ukraine Removes Hungarian OTP Bank From Its War Sponsors List
OTP still has operations in Russia even after Moscow’s invasion of Ukraine. The Hungarian lender has previously said that a Russian decree complicates the sale of the unit, and it announced in October it was going to extract about $100 million in dividends from the country.
OTP also has a business in Ukraine, which borders Hungary, and the bank would consider acquisitions there too, Csanyi said. In contrast, he ruled out deals in Poland for as long as the country’s banking industry hasn’t sorted out a decade-old legal issue over foreign-currency loans.
--With assistance from Veronika Gulyas.
©2023 Bloomberg L.P.