OTP BANK PLC.
SEPARATE FINANCIAL STATEMENTS
IN ACCORDANCE WITH
INTERNATIONAL FINANCIAL REPORTING STANDARDS
AS ADOPTED BY THE EUROPEAN UNION
FOR THE YEAR ENDED
31 DECEMBER 2021
2
OTP BANK PLC.
CONTENTS
SEPARATE STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2021 .................................... 5
SEPARATE STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 2021 ............. 6
SEPARATE STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER
2021 (in HUF mn) ............................................................................................................................. 7
SEPARATE STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED 31
DECEMBER 2021 (in HUF mn) ...................................................................................................... 8
SEPARATE STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2021 .................... 9
NOTE 1: ORGANIZATION AND BASIS OF FINANCIAL STATEMENTS ................................................ 11
1.1. General information ........................................................................................................................... 11
1.2. Basis of accounting ............................................................................................................................ 11
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ......................................................... 13
2.1. Basis of presentation .......................................................................................................................... 13
2.2. Foreign currency translation .............................................................................................................. 13
2.3. Consolidated financial statements ..................................................................................................... 13
2.4. Investments in subsidiaries, associated companies and other investments ........................................ 13
2.5. Securities at amortised cost................................................................................................................ 14
2.6. Financial assets at fair value through profit or loss ........................................................................... 14
2.7. Derivative financial instruments designated as a fair value or cash flow hedge ................................ 16
2.8. Offsetting ........................................................................................................................................... 16
2.9. Embedded derivatives ........................................................................................................................ 16
2.10. Securities at fair value through other comprehensive income (“FVOCI securities”) ........................ 17
2.11. Loans, placements with other banks, repo receivables and loss allowance for loan, placements and
repo receivables losses ....................................................................................................................... 17
2.12. Loss allowance .................................................................................................................................. 20
2.13. Option to designate a financial asset/liability measured at fair value through profit or loss (FVTPL
option) ................................................................................................................................................ 22
2.14. Sale and repurchase agreements, security lending ............................................................................. 22
2.15. Property, equipment and intangible assets ......................................................................................... 22
2.16. Inventories ......................................................................................................................................... 22
2.17. Investment properties ......................................................................................................................... 23
2.18. Financial liabilities............................................................................................................................. 23
2.19. Leases ................................................................................................................................................ 23
2.20. Share capital ...................................................................................................................................... 24
2.21. Treasury shares .................................................................................................................................. 24
2.22. Interest income, income similar to interest income and interest expense .......................................... 24
2.23. Fees and Commissions ...................................................................................................................... 24
2.24. Dividend income ................................................................................................................................ 25
2.25. Income tax ......................................................................................................................................... 25
2.26. Banking tax ........................................................................................................................................ 25
3
2.27. Off-balance sheet commitments and contingent liabilities, provisions .............................................. 26
2.28. Share-based payment and employee benefits .................................................................................... 26
2.29. Separate statement of cash flows ....................................................................................................... 27
2.30. Segment reporting .............................................................................................................................. 27
2.31. Comparative figures........................................................................................................................... 28
NOTE 3: SIGNIFICANT ACCOUNTING ESTIMATES AND DECISIONS IN THE APPLICATION OF
ACCOUNTING POLICIES .............................................................................................................. 29
3.1. Loss allowance on financial instruments ........................................................................................... 29
3.2. Valuation of instruments without direct quotations ........................................................................... 29
3.3. Provisions .......................................................................................................................................... 29
3.4. Business models ................................................................................................................................ 30
3.4. Contractual cash-flow characteristics of financial assets ................................................................... 30
NOTE 4: COVID-19 (in HUF mn) ................................................................................................................... 31
NOTE 5: CASH, AMOUNTS DUE FROM BANKS AND BALANCES WITH THE NATIONAL BANK OF
HUNGARY (in HUF mn) ................................................................................................................. 37
NOTE 6: PLACEMENTS WITH OTHER BANKS, NET OF ALLOWANCE FOR PLACEMENT LOSSES
(in HUF mn) ...................................................................................................................................... 38
NOTE 7: REPO RECEIVABLES (in HUF mn) ............................................................................................... 39
NOTE 8: FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (in HUF mn) .............. 40
NOTE 9: SECURITIES AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (in HUF
mn) ..................................................................................................................................................... 41
NOTE 10: SECURITIES AT AMORTISED COST (in HUF mn) ..................................................................... 43
NOTE 11: LOANS (in HUF mn) ........................................................................................................................ 44
NOTE 12: INVESTMENTS IN SUBSIDIARIES, ASSOCIATES, JOINT VENTURES AND OTHER
INVESTMENTS (in HUF mn) .......................................................................................................... 46
NOTE 13: PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS (in HUF mn) ...................................... 51
NOTE 14: INVESTMENT PROPERTIES (in HUF mn) .................................................................................... 53
NOTE 15: FAIR VALUE OF DERIVATIVE FINANCIAL ASSETS DESIGNATED AS HEDGE
ACCOUNTING (in HUF mn) ........................................................................................................... 53
NOTE 16: OTHER ASSETS (in HUF mn) ......................................................................................................... 54
NOTE 17: AMOUNTS DUE TO BANKS AND DEPOSITS FROM THE NATIONAL BANK OF HUNGARY
AND OTHER BANKS (in HUF mn) ................................................................................................ 55
NOTE 18: REPO LIABILITIES (in HUF mn) ................................................................................................... 55
NOTE 19: DEPOSITS FROM CUSTOMERS (in HUF mn) .............................................................................. 56
NOTE 20: LIABILITIES FROM ISSUED SECURITIES (in HUF mn) ............................................................ 56
NOTE 21: FINANCIAL LIABILITIES DESIGNATED AS FAIR VALUE THROUGH PROFIT OR LOSS (in
HUF mn) ............................................................................................................................................ 60
NOTE 22: HELD FOR TRADING DERIVATIVE FINANCIAL LIABILITIES (in HUF mn) ........................ 60
NOTE 23: FAIR VALUE OF DERIVATIVE FINANCIAL LIABLITIES DESIGNATED AS HEDGE
ACCOUNTING (in HUF mn) ........................................................................................................... 60
NOTE 24: OTHER LIABILITIES AND PROVISIONS (in HUF mn) .............................................................. 61
NOTE 25: SUBORDINATED BONDS AND LOANS (in HUF mn) ................................................................ 62
NOTE 26: SHARE CAPITAL (in HUF mn) ....................................................................................................... 62
NOTE 27: RETAINED EARNINGS AND RESERVES (in HUF mn) .............................................................. 63
NOTE 28: TREASURY SHARES (in HUF mn) ................................................................................................ 68
NOTE 29: INTEREST INCOME AND EXPENSES (in HUF mn) .................................................................... 69
NOTE 30: RISK COST (in HUF mn) ................................................................................................................. 70
4
NOTE 31: NET PROFIT FROM FEES AND COMMISSIONS (in HUF mn) .................................................. 70
NOTE 32: GAINS AND LOSSES (in HUF mn) ................................................................................................ 73
NOTE 33: OTHER OPERATING INCOME AND EXPENSES AND OTHER ADMINISTRATIVE
EXPENSES (in HUF mn) .................................................................................................................. 74
NOTE 34: INCOME TAX (in HUF mn)............................................................................................................. 75
NOTE 35: LEASE (in HUF mn) ......................................................................................................................... 77
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) ........................................................................ 78
36.1. Credit risk .......................................................................................................................................... 78
36.2. Maturity analysis of assets and liabilities and liquidity risk .............................................................. 92
36.3. Net foreign currency position and foreign currency risk ................................................................... 95
36.4. Interest rate risk management ........................................................................................................... 95
36.5. Market risk ....................................................................................................................................... 102
36.5.1. Market risk sensitivity analysis ........................................................................................................ 102
36.5.2. Foreign currency sensitivity analysis ............................................................................................... 103
36.5.3. Interest rate sensitivity analysis ....................................................................................................... 104
36.5.4. Equity price sensitivity analysis ...................................................................................................... 105
36.6. Capital management ........................................................................................................................ 105
NOTE 37: TRANSFER AND RECLASSIFICATION OF FINANCIAL INSTRUMENTS (in HUF mn) ...... 107
NOTE 38: OFF-BALANCE SHEET ITEMS (in HUF mn) .............................................................................. 108
NOTE 39: SHARE-BASED PAYMENT AND EMPLOYEE BENEFIT (in HUF mn) ................................... 109
NOTE 40: RELATED PARTY TRANSACTIONS (in HUF mn) .................................................................... 114
NOTE 41: TRUST ACTIVITIES (in HUF mn) ................................................................................................ 115
NOTE 42: CONCENTRATION OF ASSETS AND LIABILITIES ................................................................. 116
NOTE 43: EARNINGS PER SHARE ............................................................................................................... 117
NOTE 44: NET GAIN OR LOSS REALISED ON FINANCIAL INSTRUMENTS (in HUF mn) ................. 118
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) ................................................... 120
NOTE 46: SIGNIFICANT EVENTS DURING THE YEAR ENDED 31 DECEMBER 2021 ........................ 134
NOTE 47: SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD ................................................... 136
5
OTP BANK PLC.
SEPARATE STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2021
(in HUF mn)
Note
2021
2020
Reclassified
Cash, amounts due from banks and balances with the National Bank of
Hungary
5.
474,945
579,120
Placements with other banks, net of allowance for placement losses
6.
2,567,212
1,535,884
Repo receivables
7.
33,638
183,364
Financial assets at fair value through profit or loss
8.
246,462
160,483
Financial assets at fair value through other comprehensive income
9.
641,939
911,950
Securities at amortised cost
10.
3,071,038
2,007,692
Loans at amortised cost
11.
4,032,465
3,417,760
Loans mandatorily measured at fair value through profit or loss
11.
662,012
480,937
Investments in subsidiaries
12.
1,573,008
1,548,972
Property and equipment
13.
81,817
77,974
Intangible assets
13.
62,161
57,639
Right of use assets
35.
17,231
13,479
Investment properties
14.
4,328
1,936
Current tax assets
34.
-
593
Derivative financial assets designated as hedge accounting relationships
15.
17,727
6,817
Other assets
16.
224,488
169,794
TOTAL ASSETS
13,710,471
11,154,394
Amounts due to banks and deposits from the National Bank of Hungary and
other banks
17.
1,051,203
766,977
Repo liabilities
18.
86,580
109,612
Deposits from customers
19.
9,948,532
7,895,735
Leasing liabilities
35.
17,932
14,106
Liabilities from issued securities
20.
22,153
28,435
Financial liabilities at fair value through profit or loss
21.
20,133
25,902
Derivative financial liabilities designated as held for trading
22.
192,261
99,987
Derivative financial liabilities designated as hedge accounting relationships
23.
18,690
3,104
Deferred tax liabilities
34.
1,507
3,062
Current tax liabilities
34.
4,776
1,464
Provisions
24.
21,527
19,906
Other liabilities
24.
238,437
203,527
Subordinated bonds and loans
25.
271,776
304,243
TOTAL LIABILITIES
11,895,507
9,476,060
Share capital
26.
28,000
28,000
Retained earnings and reserves
27.
1,845,836
1,697,133
Treasury shares
28.
(58,872)
(46,799)
TOTAL SHAREHOLDERS' EQUITY
1,814,964
1,678,334
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
13,710,471
11,154,394
Budapest, 17 March 2022
Dr. Sándor Csányi
Chairman and Chief Executive Officer
6
OTP BANK PLC.
SEPARATE STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED
31 DECEMBER 2021
(in HUF mn)
Note
Year ended
31 December
2021
Year ended 31
December
2020
Reclassified
29.
302,373
239,633
29.
105,663
81,663
408,036
321,296
29.
(155,491)
(99,630)
252,545
221,666
6., 7., 11.,
30.
(38,841)
(57,671)
9., 10., 30.
(1,484)
(1,848)
24., 30.
(130)
(3,202)
45.4.
(16,255)
(405)
(56,710)
(63,126)
195,835
158,540
32.
(2,700)
(3,279)
4.
(7,017)
(17,358)
31.
300,803
259,781
31.
(52,276)
(40,750)
248,527
219,031
32.
(5,638)
(4,518)
32.
2,104
17,595
32.
(6,494)
(671)
32.
3,436
7,057
32.
99,037
60,973
33.
11,265
7,900
33.
(41,636)
(28,064)
62,074
60,272
33.
(136,126)
(118,498)
33.
(40,692)
(38,948)
33.
(178,611)
(154,165)
(355,429)
(311,611)
141,290
105,595
34.
(15,951)
(13,121)
125,339
92,474
43.
455
333
43.
455
333
7
OTP BANK PLC.
SEPARATE STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED
31 DECEMBER 2021
(in HUF mn)
Note
Year ended 31
December
2021
Year ended 31
December
2020
NET PROFIT FOR THE YEAR
125,339
92,474
Items that may be reclassified subsequently to profit or loss:
Fair value adjustment of debt instruments at fair value through other
comprehensive income
(37,163)
(14,459)
Deferred tax related to fair value adjustment of debt instruments at fair
value through other comprehensive income
34.
3,410
1,262
Gains / (Losses) on separated currency spread of financial instruments
designated as hedging instrument
1,681
(1,526)
Deferred tax related to (losses) / gains on separated currency spread of
financial instruments designated as hedging instrument
34.
(151)
137
(Losses) / Gains on derivative financial instruments designated as cash flow
hedge
(6,307)
(296)
Deferred tax related to gains on derivative financial instruments designated
as cash flow hedge
34.
-
27
Items that will not be reclassified to profit or loss:
Fair value adjustment of equity instruments at fair value through other
comprehensive income
1,407
(3,275)
Deferred tax related to equity instruments at fair value through other
comprehensive income
34.
(281)
310
Total
(37,404)
(17,820)
TOTAL COMPREHENSIVE INCOME
87,935
74,654
8
OTP BANK PLC.
SEPARATE STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED
31 DECEMBER 2021
(in HUF mn)
Note
Share Capital
Capital
reserve
Retained
earnings and
other reserves
Treasury
Shares
Total
Balance as at 1 January 2020
28,000
52
1,628,302
(2,636)
1,653,718
Net profit for the period
-
-
92,474
-
92,474
Other comprehensive income
-
-
(17,820)
-
(17,820)
Total comprehensive income
-
-
74,654
-
74,654
Share-based payment
39.
-
-
3,394
-
3,394
Payments to ICES holders
-
-
(4,853)
-
(4,853)
Sale of treasury shares
28.
-
-
-
41,759
41,759
Acquisition of treasury shares
28.
-
-
-
(85,922)
(85,922)
Loss on treasury shares
28.
-
-
(4,416)
-
(4,416)
Other transaction with owners
-
-
(5,875)
(44,163)
(50,038)
Balance as at 31 December 2020
28,000
52
1,697,081
(46,799)
1,678,334
Balance as at 1 January 2021
28,000
52
1,697,081
(46,799)
1,678,334
Other modification
-
-
1,034
-
1,034
Balance as at 1 January 2021
28,000
52
1,698,115
(46,799)
1,679,368
Net profit for the period
-
-
125,339
-
125,339
Other comprehensive income
-
-
(37,404)
-
(37,404)
Total comprehensive income
-
-
87,935
-
87,935
Share-based payment
39.
-
-
3,589
-
3,589
Payments to ICES holders
-
-
(3,734)
-
(3,734)
Increase due to termination of ICES bonds
-
-
75,422
-
75,422
Sale of treasury shares
28.
-
-
-
264,360
264,360
Acquisition of treasury shares
28.
-
-
-
(276,433)
(276,433)
Loss on sale of treasury shares
28.
-
-
(15,543)
-
(15,543)
Other transaction with owners
-
-
59,734
(12,073)
47,661
Balance as at 31 December 2021
28,000
52
1,845,784
(58,872)
1,814,964
9
OTP BANK PLC.
SEPARATE STATEMENT OF CASH FLOWS FOR THE YEAR ENDED
31 DECEMBER 2021
(in HUF mn)
Note
Year ended 31
December
2021
Year ended 31
December
2020
OPERATING ACTIVITIES
Profit before income tax
141,290
93,246
Net accrued interest
(2,205)
(34,365)
Depreciation and amortization
13.
40,784
38,997
Loss allowance on loans and placements
30.
38,841
61,310
(Release of loss allowance) / Loss allowance on securities at fair value
through other comprehensive income
9.
(551)
3
Impairment loss on investments in subsidiaries
12.
27,420
10,042
Loss allowance on securities at amortised cost
10.
2,035
1,845
(Release of loss allowance) / Loss allowance on other assets
16.
(961)
3,521
Provision on off-balance sheet commitments and contingent liabilities
24.
1,473
3,110
Share-based payment
39.
3,589
3,394
Unrealised losses / (gains) on fair value adjustment of financial instruments
at fair value through profit or loss
23,051
3,549
Unrealised losses on fair value adjustment of derivative financial
instruments
30,962
4,011
Gains on securities
6,212
(6,433)
Interest expense from leasing liabilities
(214)
(257)
Foreign exchange loss
35,136
(4,476)
Gains on sale of tangible and intangible assets
82
72
Net changing in assets and liabilities in operating activities
Net (increase) / decrease in placements with other banks and repo
receivables before allowance for placement losses
6.
(879,438)
(78,996)
Changes in held for trading securities
8.
(24,178)
34,976
Change in securities mandatorily measured at fair value through profit or
loss
8.
6,687
(7,278)
Changes in derivative financial instruments at fair value through profit or
loss
8.
(1,303)
2,895
Net increase in loans
11.
(835,520)
(499,065)
Increase in other assets, excluding advances for investments and before
provisions for losses
16.
(49,201)
(43,471)
Net increase / (decrease) in amounts due to banks and deposits from the
National Bank of Hungary and other banks and repo liabilities
17.
224,661
(363,140)
Net decrease of financial liabilities designated as fair value through profit
or loss
21.
(1,853)
(4,219)
Net increase in deposits from customers
19.
1,989,941
1,218,775
Increase/(decrease) in other liabilities
24.
114,259
(17,368)
Net increase in the compulsory reserve established by the National Bank of
Hungary
5.
(23,270)
(10,978)
Dividend income
12.
(99,037)
(60,913)
Income tax paid
(15,259)
(12,950)
Net cash provided by operating activities
753,433
335,837
10
OTP BANK PLC.
SEPARATE STATEMENT OF CASH FLOWS FOR THE YEAR ENDED
31 DECEMBER 2021
(in HUF mn) [continued]
Note
Year ended 31
December
2021
Year ended 31
December
2020
INVESTING ACTIVITIES
Purchase securities at fair value through other comprehensive income
9.
(850,030)
(1,079,151)
Proceeds from sale of securities at fair value through other comprehensive
income
9.
1,081,372
1,652,131
Change in derivative financial instruments designated as hedge accounting
1,341
(190)
Increase in investments in subsidiaries
12.
(51,456)
(32,961)
Decrease in investments in subsidiaries
12.
-
16,485
Dividend income
98,091
60,913
Increase in securities at amortised cost
10.
(1,253,830)
(680,089)
Redemption of securities at amortised cost
10.
214,963
122,146
Additions to property, equipment and intangible assets
13.
(46,081)
(68,885)
Disposal of property, equipment and intangible assets
13.
529
29,433
Net (increase) / decrease in investment properties
14.
(2,484)
396
Net (used in) / provided by cash investing activities
(807,585)
20,228
FINANCING ACTIVITIES
Leasing payments
(5,136)
(4,590)
Cash received from issuance of securities
20.
5,897
7,119
Cash used for redemption of issued securities
20.
(9,051)
(22,096)
Increase in subordinated bonds and loans
25.
1,874
773
Decrease in subordinated bonds and loans
25.
(35,518)
(5,373)
Payments to ICES holders
27.
(3,735)
(4,853)
Increase of Treasury shares
28.
(276,433)
(85,923)
Decrease of Treasury shares
28.
248,819
37,344
Dividends paid
27.
(10)
(10)
Net cash used in financing activities
(73,293)
(77,609)
Net (decrease) / increase in cash and cash equivalents
(127,445)
278,456
Cash and cash equivalents at the beginning of the year
503,087
224,631
Cash and cash equivalents at the end of the year
375,642
503,087
Interest received
345,504
306,646
Interest paid
98,395
88,237
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
11
NOTE 1: ORGANIZATION AND BASIS OF FINANCIAL STATEMENTS
1.1. General information
OTP Bank Plc. ("Bank" or "OTP Bank") was established on 31 December 1990, when the previously State-
owned company was transformed into a limited liability company.
The Bank’s registered office address is 16, Nádor Street, Budapest 1051. Internet homepage:
http://www.otpbank.hu/
Signatory of the separate financial statements is the Chief Executive Officer, dr. Sándor Csányi (Budapest).
The Bank’s owners have the power to amend the separate financial statements after issue if applicable.
These financial statements are authorised for issue on 17 March 2022 by the Board of Directors.
Responsible person for the control and management of accounting services: Zoltán Tuboly (Budapest),
Managing Director of Accounting and Financial Directorate, Registration Number: 177289, IFRS qualified
chartered accountant.
Due to Hungarian legislation audit services are statutory for OTP Bank. Disclosure information about the
auditor: Ernst & Young Audit Ltd. (001165), 1132 Budapest Váci Street 20. Registered under 01-09-267553 by
Budapest-Capital Regional Court, as registry court. Statutory registered auditor: Zsuzsanna Nagyváradiné
Szépfalvi, registration number: 005313.
Audit service fee agreed by the Annual General Meeting of the Bank for the year ended 2021 is an amount of
HUF 162 million + VAT.
All other fees charged by the Auditor for non-audit services during the financial year are disclosed in the
consolidated financial statements of the Bank.
In 1995, the shares of the Bank were introduced on the Budapest and the Luxembourg Stock Exchanges and
were also traded on the SEAQ board on the London Stock Exchange and PORTAL in the USA.
The structure of the Share capital by shareholders (%):
2021
2020
Domestic and foreign private and institutional investors
98%
97%
Employees
1%
1%
Treasury shares
1%
2%
Total
100%
100%
The Bank’s Registered Capital consists of 280.000.010 pieces of ordinary shares with the nominal value of HUF
100 each, representing the same rights to the shareholders.
The Bank provides a full range of commercial banking services through a nationwide network of 356 branches in
Hungary.
2021
2020
Number of employees
10,078
9,829
Average number of employees
9,934
9,654
1.2. Basis of accounting
These Separate Financial Statements were prepared based on the assumption of the Management that the Bank
will remain in business for the foreseeable future. The Bank will not be forced to halt operations and liquidate its
assets in the near term at what may be very low fire-sale prices.
The Bank maintains its accounting records and prepares their statutory accounts in accordance with the
commercial, banking and fiscal regulations prevailing in Hungary.
The presentation and functional currency of the Bank is the Hungarian Forint ("HUF").
The separate financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as adopted by the European Union (“EU”).
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
12
NOTE 1: ORGANIZATION AND BASIS OF FINANCIAL STATEMENTS [continued]
1.2.1. The effect of adopting new and revised IFRS standards effective from 1 January 2021
The following amendments to the existing standards and new interpretation issued by the International
Accounting Standards Board (IASB) and adopted by the EU are effective for the current reporting period:
• Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 “Interest Rate Benchmark Reform –
Phase 2 adopted by EU on 13 January 2021 (effective for annual periods beginning on or after 1 January
2021)
• Amendments to IFRS 4 “Insurance Contracts” – “Deferral of IFRS 9” - adopted by EU on 15
December 2020 (effective for annual periods beginning on or after 1 January 2021)
• IFRS 17 “Insurance Contracts” (effective for annual periods beginning on or after 1 January 2021),
• Amendments to IFRS 16 “Leases” – “Covid 19-Related Rent Concessions beyond 30 June 2021”
(effective for annual periods beginning on or after 1 April 2021),
The adoption of these amendments to the existing standards has not led to any material changes in these Separate
Financial Statements.
1.2.2. New and revised Standards and Interpretations issued by IASB and adopted by the EU but not
yet effective
• Amendments to IFRS 1 “First-time Adoption of International Financial Reporting Standards”, IFRS
9 “Financial Instruments”, IAS 41 “Agriculture”– “Annual Improvements to IFRSs 2018-2020 Cycle” -
adopted by EU on 28 June 2021 (effective for annual periods beginning on or after 1 January 2022),
• Amendments to IFRS 3 “Business Combinations”; IAS 16 “Property, Plant and Equipment”; IAS 37
“Provisions, Contingent Liabilities and Contingent Assets” – adopted by the EU on 28 June 2021
Annual Improvements (effective fog annual periods beginning on or after 1 January 2022)
• Amendments to IFRS 17 “Insurance Contracts” (effective for annual periods beginning on or after 1
January 2023),
1.2.3. Standards and Interpretations issued by IASB but not yet adopted by the EU
At present, IFRS as adopted by the EU do not significantly differ from regulations adopted by the IASB except
for the following new standards, amendments to the existing standards and new interpretation, which were not
endorsed for use in EU as at date of publication of these financial statements:
• Amendments to IAS 1 “Presentation of Financial Statements” - Classification of Liabilities as Current
or Non-Current (effective for annual periods beginning on or after 1 January 2023),
• Amendments to IAS 1 “Presentation of Financial Statements” and IFRS Practice Statement 2-
Disclosure of Accounting policies (effective for annual periods beginning on or after 1 January 2023),
• Amendments to IAS 8 “Accounting policies, Changes in Accounting Estimates and Errors” –
Definition of Accounting Estimates (effective for annual periods beginning on or after 1 January 2023),
• Amendments to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in
Associates and Joint Ventures” - Sale or Contribution of Assets between an Investor and its Associate or
Joint Venture and further amendments (effective date deferred indefinitely until the research project on the
equity method has been concluded).
• Amendments to IAS 12 “Income Taxes” – Deferred Tax related to Assets and Liabilities
arising from a
Single
Transaction (effective for annual periods beginning on or after 1 January 2023),
• Amendments to IFRS 17 “Insurance Contracts” – Initial application of IFRS 17 and IFRS 9 –
Comparative Information (effective date for annual periods beginning on or after 1 January 2023)
The Bank anticipates that the adoption of these new standards, amendments to the existing standards and new
interpretations will have no material impact on the financial statements of the Bank in the period of initial
application.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
13
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies applied in the preparation of the accompanying separate financial statements are
summarized below:
2.1. Basis of presentation
These separate financial statements have been prepared under the historical cost convention with the exception
of certain financial instruments, which are recorded at fair value. Revenues and expenses are recorded in the
period in which they are earned or incurred. The Bank does not offset assets and liabilities or income and
expenses unless it is required or permitted by an IFRS standard.
During the preparation of separate financial statements assets and liabilities, income and expenses are presented
separately, except in certain cases, when one of the IFRS standards prescribes net presenting related to certain
items. (See below 2.8.)
The presentation of separate financial statements in conformity with IFRS requires the Management of the Bank
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as at the date of the financial statements and their reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates.
Future changes in economic conditions, business strategies, regulatory requirements, accounting rules and other
factors could result in a change in estimates that could have a material impact on future separate financial
statements.
2.2. Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are translated into HUF that is the presentation
currency, at exchange rates quoted by the National Bank of Hungary ("NBH") as at the date of the separate
financial statements. Income and expenses arising in foreign currencies are converted at the rate of exchange on
the transaction date. Resulting foreign exchange gains or losses are recorded to the separate statement of profit or
loss.
2.3. Consolidated financial statements
These financial statements present the separate financial position and results of operations of the Bank.
Consolidated financial statements are prepared by the Bank and consolidated net profit for the year and
shareholders’ equity differs significantly from that presented in these separate financial statements. See Note 2.4
for the description of the method of accounting for investments in subsidiaries and associated companies in these
separate financial statements. The consolidated financial statements and the separate financial statements will be
published on the same date.
2.4. Investments in subsidiaries, associated companies and other investments
Investments in subsidiaries comprise those investments where OTP Bank, through direct and indirect ownership
interest, controls the investee. Control is achieved when the Bank has power over the investee, is exposed or has
rights, to variable returns from its involvement with the investee and has the ability to use its power to affect its
returns.
Investments in subsidiaries are recorded at the cost of acquisition, less impairment for permanent diminution in
value, when appropriate. After initial measurement investments in subsidiaries are measured at cost, in the case
of foreign currency denominated investments for the measurement the Bank uses the exchange rate at the date of
transaction.
Impairment is determined based on the future economic benefits of the subsidiary and macroeconomic factors.
OTP Bank calculates the fair value based on discounted cash flow model. The 3 year period explicit cash flow
model serves as a basis for the impairment test by which the Bank defines the impairment need on investment in
subsidiaries based on the strategic factors and financial data of its cash-generating units.
OTP Bank in its strategic plan has taken into consideration the cautious recovery of global economic situation
and outlook, the associated risks and their possible effect on the financial sector as well as the current and
expected availability of wholesale funding.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
14
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.5. Securities at amortised cost
The Bank measures at amortized cost those securities which are held for contractual cash collecting purposes,
and contractual terms of these securities give rise to cash flows that are solely payment of principal and interest
on the principal amount outstanding. The Bank initially recognises these securities at fair value. Securities at
amortised cost are subsequently measured using the effective interest (EIR) method and are subject to
impairment. The amortisation of any discount or premium on the acquisition of a security at amortized cost is
part of the amortized cost and is recognised as interest income so that the revenue recognized in each period
represents a constant yield on the investment. Securities at amortized cost are accounted for on a trade date basis.
Such securities comprise mainly securities issued by the Hungarian Government bonds and corporate bonds.
2.6. Financial assets at fair value through profit or loss
2.6.1. Securities held for trading
Investments in securities are accounted for on a trade date basis and are initially measured at fair value.
Securities held for trading are measured at subsequent reporting dates at fair value. Unrealised gains and losses
on held for trading securities are recognized in profit or loss and are included in the separate statement of profit
or loss for the period. The Bank holds held for trading securities within the business model to obtain short-term
gains, consequently realised and unrealised gains and losses are recognized in the net operating income, while
interest income is recognised in income similar to interest income. The Bank applies FIFO
1
inventory valuation
method for securities held for trading. Such securities consist of discounted and interest bearing Treasury bills,
Hungarian Government bonds, mortgage bonds, shares in non-financial commercial companies, shares in
investment funds, shares in venture capital funds and shares in financial institutions.
2.6.2. Derivative financial instruments
In the normal course of business, the Bank is a party to contracts for derivative financial instruments, which
represent a low initial investment compared to the notional value of the contract and their value depends on
value of underlying asset and are settled in the future. The derivative financial instruments used include interest
rate forward or swap agreements and currency forward or swap agreements and options. These financial
instruments are used by the Bank both for trading purposes and to hedge interest rate risk and currency
exposures associated with its transactions in the financial markets.
Derivative financial instruments are accounted for on a trade date basis and are initially measured at fair value
and at subsequent reporting dates also at fair value. Fair values are obtained from quoted market prices,
discounted cash flow models and option pricing models as appropriate. OTP Bank adopts multi curve valuation
approach for calculating the net present value of future cash flows – based on different curves used for
determining forward rates and used for discounting purposes. It shows the best estimation of such derivative
deals that are collateralised as OTP Bank has almost its entire open derivative transactions collateralised.
Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are
recognized in profit or loss and are included in the separate statement of profit or loss for the period. Each
derivative deal is determined as asset when fair value is positive and as liability when fair value is negative.
Certain derivative transactions, while providing effective economic hedges under risk management positions of
the Bank, do not qualify for hedge accounting under the specific rules of IFRS 9 and are therefore treated as
derivatives held for trading with fair value gains and losses charged directly to the separate statement of profit or
loss.
Foreign currency contracts
Foreign currency contracts are agreements to exchange specific amounts of currencies at a specified rate of
exchange, at a spot date (settlement occurs two days after the trade date) or at a forward date (settlement occurs
more than two days after the trade date). The notional amount of forward contracts does not represent the actual
market or credit risk associated with these contracts.
Foreign currency contracts are used by the Bank for risk management and trading purposes. The Bank’s risk
management foreign currency contracts were used to hedge the exchange rate fluctuations of loans and deposits
denominated in foreign currency.
1
First In First Out
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
15
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.6.2 Derivative financial instruments [continued]
Foreign exchange swaps and interest rate swaps
The Bank enters into foreign-exchange swap and interest rate swap (“IRS”) transactions. The swap transaction is
a complex agreement concerning the swap of certain financial instruments, which usually consists of a spot and
one or more forward contracts.
Interest rate swaps obligate two parties to exchange one or more payments calculated with reference to fixed or
periodically reset rates of interest applied to a specific notional principal amount (the base of the interest
calculation). Notional principal is the amount upon which interest rates are applied to determine the payment
streams under interest rate swaps.
Such notional principal amounts are often used to express the volume of these transactions but are not actually
exchanged between the counterparties. The Bank’s interest rate swap contracts can be hedging or held for
trading contracts.
Cross-currency interest rate swaps
The Bank enters into cross-currency interest rate swap (“CCIRS”) transactions which have special attributes, i.e.
the parties exchange the notional amount at the beginning and also at the maturity of the transaction. A special
type of these deals is the mark-to-market CCIRS agreements. At this kind of deals the parties – in accordance
with the foreign exchange prices – revalue the notional amount during lifetime of the transaction.
Equity and commodity swaps
Equity swaps obligate two parties to exchange more payments calculated with reference periodically reset rates
of interest and performance of indices. A specific notional principal amount is the base of the interest
calculation. The payment of index return is calculated on the basis of current market price compared to the
previous market price. In case of commodity swaps payments are calculated on the basis of the strike price of a
predefined commodity compared to its average market price in a period.
Forward rate agreements (“FRA”)
A forward rate agreement is an agreement to settle amounts at a specified future date based on the difference
between an interest rate index and an agreed upon fixed rate. Market risk arises from changes in the market value
of contractual positions caused by movements in interest rates.
The Bank limits its exposure to market risk by entering into generally matching or offsetting positions and by
establishing and monitoring limits on unmatched positions. Credit risk is managed through approval procedures
that establish specific limits for individual counter-parties. The Bank’s forward rate agreements were transacted
for management of interest rate exposures.
Foreign exchange options
A foreign exchange option is a derivative financial instrument that gives the owner the right to exchange money
denominated in one currency into another currency at a pre-agreed exchange rate at a specified future date. The
transaction, for a fee, guarantees a worst-case exchange rate for the futures purchase of one currency for another.
These options protect against unfavourable currency movements while preserving the ability to participate in
favourable movements.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
16
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.7. Derivative financial instruments designated as a fair value or cash flow hedge
Changes in the fair value of derivatives that are designated and qualify as hedging instruments fair value hedges
and that prove to be highly effective in relation to the hedged risk, are recorded in the separate statement of profit
or loss along with the corresponding change in fair value of the hedged asset or liability that is attributable to the
specific hedged risk. Changes in the fair value of the hedging instrument in fair value hedges are charged directly
to the separate statement of profit or loss. The conditions of hedge accounting applied by the Bank are the
following: formally designated as hedging relationship, proper hedge documentation is prepared, effectiveness
test is performed and based on it the hedge is qualified as effective.
Changes in fair value of derivatives that are designated and qualify as hedging instrument in cash flow hedges
and that prove to be highly effective in relation to hedged risk are recognized as reserve in other comprehensive
income. Amounts deferred in other comprehensive income are transferred to the separate statement of profit or
loss and classified as revenue or expense in the periods during which the hedged assets and liabilities effect the
separate statement of recognized and comprehensive income for the period. The ineffective element of the hedge
is charged directly to the separate statement of profit or loss. The Bank terminates the hedge accounting if the
hedging instrument expires or is sold, terminated, or exercised, or the hedge no longer meets the criteria for
hedge accounting. In case of cash flow hedges - in line with the standard – hedge accounting is still applied as
long as the underlying asset is derecognised.
2.8. Offsetting
Financial assets and liabilities may be offset and the net amount is reported in the statement of financial position
when the Bank has a legally enforceable right to set off the recognised amounts and the transactions are intended
to be reported in the statement of financial position on a net basis. In the case of the derivative financial
instruments the Bank applies offsetting and net presentation in the Statement of Financial Position when the
Bank has the right and the ability to settle the assets and liabilities on a net basis.
2.9. Embedded derivatives
Sometimes, a derivative may be a component of a combined or hybrid contract that includes a host contract and
a derivative (the embedded derivative) affecting cash flows or otherwise modifying the characteristics of the host
instrument. An embedded derivative must be separated from the host instrument and accounted for as a separate
derivative if, and only if:
- The economic characteristics and risks of the embedded derivative are not closely related to the
economic characteristics and risks of the host contract;
- A separate financial instrument with the same terms as the embedded derivative would meet the
definition of a derivative as a stand-alone instrument; and
- The host instrument is not measured at fair or is measured at fair value but changes in fair value are
recognised in other comprehensive income.
As long as a hybrid contract contains a host that is a financial asset the general accounting rules for
classification, recognition and measurement of financial assets are applicable for the whole contract and no
embedded derivative is separated.
Derivatives that are required to be separated are measured at fair value at initial recognition and subsequently. If
the Bank is unable to measure the embedded derivative separately either at acquisition or at the end of a
subsequent financial reporting period, the Group shall designate the entire hybrid contract as at fair value
through profit or loss. The Bank shall assess whether an embedded derivative is required to be separated from
the host contract and accounted for as a derivative when the Bank first becomes a party to the contract.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
17
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.10. Securities at fair value through other comprehensive income (“FVOCI securities”)
FVOCI securities are held within a business model whose objective is achieved by both collecting of contractual
cash flows and selling securities. Furthermore contractual terms of FVOCI securities give rise on specified dates
to cash flows that are solely payment of principal and interest on the principal amount outstanding.
Debt instruments
Investments in debt securities are accounted for on a trade date basis and are initially measured at fair value.
Securities at fair value through other comprehensive income are measured at subsequent reporting dates at fair
value. Unrealised gains and losses on FVOCI financial instruments are recognized in other comprehensive
income, except for interest and foreign exchange gains/losses on monetary items, unless such FVOCI security is
part of an effective hedge. Such gains and losses will be reported when realised in profit or loss for the
applicable period. The Bank applies FIFO
1
inventory valuation method for FVOCI securities.
For debt securities at fair value through other comprehensive income the loss allowance is calculated based on
expected credit loss model. The expected credit loss is accounted for against Other Comprehensive Income.
FVOCI securities are remeasured at fair value based on quoted prices or values derived from cash flow models.
In circumstances where the quoted market prices are not readily available, the fair value of debt securities is
estimated using the present value of the future cash flows and the fair value of any unquoted equity instruments
are calculated using the EPS ratio.
Fair value through other comprehensive income option for equity instruments
In some cases the Bank made an irrevocable election at initial recognition for certain non-trading investments in
an equity instrument to present subsequent changes in fair value of these securities in other comprehensive
income instead of in profit or loss.
The use of the fair value option is based only on direct decision of management of the Bank.
2.11. Loans, placements with other banks, repo receivables and loss allowance for loan, placements and
repo receivables losses
The Bank measures Loans, placements with other banks and repo receivables at amortised cost, which are held
to collect contractual cash flows, and contractual terms of these assets give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount outstanding. The Bank recognises
loans, which are not held for trading and do not give rise contractual cash flows that are solely payments of
principal and interest on the principal amount outstanding as loans measured at fair value through profit or loss
(“FVTPL loans”).
Loans, placements with other banks and repo receivables are accounted at amortised cost, stated at the principal
amounts outstanding including accrued interest, net of allowance for loan or placement losses, respectively.
In case of the above mentioned financial assets measured at amortised cost transaction fees and charges adjust
the carrying amount at initial recognition and are included in effective interest calculation. In case of FVTPL
loans fees and charges are recognised when incurred in the separate statement of profit or loss.
Loans, placements with other banks and repo receivables loans are derecognised when the contractual rights to
the cash flows expire or they are transferred. When a financial asset is derecognised the difference of the
carrying amount and the consideration received is recognised in the profit or loss. In case of the above mentioned
financial assets at amortised cost gains or losses from derecognition are presented in “Gains/losses arising from
derecognition of financial assets at amortised cost” line. In case of FVTPL loans gains or losses from
derecognition are presented in “Net operating income”.
Change in the fair value of FVTPL loans is broken down into two components and presented in the separate
statement of profit or loss as follows:
• Portion of the change in fair value arising from changes in credit risk are presented within “Risk cost”
as “Change in the fair value attributable to changes in the credit risk of loans mandatorily measured at
fair value through profit of loss”.
• The remaining component of the change is presented in fair value within “Net operating income” as
“Gains/(Losses) on financial instruments at fair value through profit or loss”.
1
First In First Out
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
18
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.11. Loans, placements with other banks, repo receivables and loss allowance for loan, placements and
repo receivables losses [continued]
Initially, financial assets shall be recognised at fair value which is usually equal to the transaction value in case
of loans and placements. However, when the amounts are not equal, the initial fair value difference should be
recognized.
If the fair value of financial assets is based on a valuation technique using only inputs observable in market
transactions, the Bank recognises the initial fair value difference in the Separate Statement of Profit or Loss.
When the fair value of financial assets is based on models for which inputs are not observable, the difference
between the transaction price and the fair value is deferred and only recognised in profit or loss when the
instrument is derecognised or the inputs became observable.
Initial fair value of loans lent at interest below market conditions is lower than their transaction price.
Allowance for losses on loans, placements with other banks and repo receivables represent management
assessment for potential losses in relation to these activities.
The Bank recognises a loss allowance for expected credit losses on a financial asset at each reporting date. The
loss allowance for a financial asset equals to 12-month expected credit loss or equals to the lifetime expected
credit losses. The maximum period over which expected credit losses shall be measured is the maximum
contractual period over which the Bank is exposed to credit risk.
If the credit risk on a financial asset has not increased significantly since initial recognition then 12-month
expected credit losses, otherwise (in case of significant credit risk increase) lifetime expected credit losses
should be calculated. The expected credit loss is the present value of the difference between the contractual cash
flows that are due to the Bank under the contract and the cash flows that the Bank expects to receive.
When the contractual cash flows of a financial asset are modified and the modification does not result in the
derecognition of the financial asset the Bank recalculate the gross carrying amount of the financial asset by
discounting the expected future cash flows with the original effective interest rate of the asset. The difference
between the carrying amount and the present value of the expected cash flows is recognised as a “Modification
gain or loss” in the statement of profit or loss. Interest income and amortised cost are accounted for using the
effective interest rate method.
Write-offs are generally recorded after all reasonable restructuring or collection activities have taken place and
the possibility of further recovery is considered to be remote. The loan is written off against the related account
“Loss allowance on loan, placement and repo receivables losses” in the Statement of Profit or loss.
OTP Bank applies partial or full write-off for loans based on the definitions and prescriptions of financial
instruments in accordance with IFRS 9. If OTP Bank has no reasonable expectations regarding a financial asset
(loan) to be recovered, it will be written off partially or fully at the time of emergence.
The gross amount and loss allowance of the loans shall be written off in the same amount to the estimated
maximum recovery amount while the net carrying value remains unchanged.
If there are reasonable expectations of recovery for a financial asset that is written-off fully or partially, OTP
Bank shall re-estimate cash flows of a financial asset and write-off reversal is applied in the financial statements.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
19
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.11. Loans, placements with other banks, repo receivables and loss allowance for loan, placements and
repo receivables losses [continued]
Modification of contractual cash flows
If the net present value of the contracted cash flows changes due to the modification of the contractual terms and
it is not qualified as derecognition, modification gain or loss should be calculated and accounted for in the
separate statement of profit or loss. Modification gain or loss is accounted in cases like restructuring – as defined
in internal policies of the Bank – prolongation, renewal with unchanged terms, renewal with shorter terms and
prescribing capital repayment rate, if it doesn’t exist or has not been earlier.
The changes of net present value should be calculated on portfolio level in case of retail exposures. Each retail
contract is restructured based on restructuring frameworks. The Bank has to evaluate these frameworks (and not
individual contracts). The changes of net present value should be calculated individually on contract level in case
of corporate portfolio.
Among the possible contract amendments, the Bank considers as a derecognition and a new recognition when
the discounted present value – discounted at the original effective interest rate – of the cash flows under the new
terms is at least 10 per cent different from the discounted present value of the remaining cash flows. In case of
derecognition and new recognition the unamortised fees of the derecognised asset should be presented as Income
similar to interest income. The newly recognised financial asset is initially measured at fair value and is placed in
stage 1 if the derecognised financial asset was in stage 1 or stage 2 portfolio. The newly recognised financial
asset will be purchased or originated credit impaired financial asset (“POCI”) if the derecognised financial asset
was in stage 3 portfolio or it was POCI.
The modification gain or loss shall be calculated at each contract amendments unless they are handled as a
derecognition and new recognition. In case of modification the Bank recalculates the gross carrying amount of
the financial asset. To do this, the new contractual cash flows should be discounted using the financial asset’s
original effective interest rate (or credit-adjusted effective interest rate for POCI financial asset). Any costs or
fees incurred adjust the carrying amount of the modified financial asset are amortized over the remaining term of
the modified financial asset.
Purchased or originated credit impaired financial assets
Purchased or originated financial assets are credit-impaired on initial recognition. A financial asset is credit-
impaired when one or more events that have a detrimental impact on the estimated future cash flows of that
financial asset have occurred.
A purchased credit-impaired asset is likely to be acquired at a deep discount. In unusual circumstances, it may be
possible that an entity originates a credit-impaired asset, for example, following a substantial modification of a
distressed financial asset that resulted in the derecognition of the original financial asset.
In the case of POCI financial assets, interest income is always recognized by applying the credit-adjusted
effective interest rate.
For POCI financial assets, in subsequent reporting periods an entity is required to recognize:
- the cumulative changes in lifetime expected credit losses since initial recognition as a loss allowance,
- the impairment gain or loss which is the amount of any change in lifetime expected credit losses.
An impairment gain is recognized (with the parallel increase of the net amortized cost of receivable) if due
to the favourable changes after initial recognition the lifetime expected credit loss estimation is becoming
lower than the original estimated credit losses at initial recognition.
The POCI qualification remains from initial recognition to derecognition in the Bank’s books.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
20
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.12. Loss allowance
Loss Allowance for loans and placements with other banks and repo receivables are recognised by the Bank
based on the expected credit loss model in accordance with IFRS 9. Based on the three stage model loss
allowance is recognised in amount of 12 month expected credit loss from the initial recognition. Financial assets
with significantly increased credit risk or credit impaired financial assets (based on objective evidences) loss
allowance is recognised in amount of lifetime expected credit loss.
In case of purchased or originated credit impaired financial assets loss allowance is recognised in amount of
lifetime expected credit loss since initial recognition. Impairment gain is recognised if lifetime expected credit
loss for purchased or originated credit impaired financial assets at measurement date are less than the estimated
credit loss at initial recognition.
Loss allowance for loan and placements are determined at a level that provides coverage for individually
identified credit losses. Collective impairment loss is recognised for loans with similar credit risk characteristics
when it is not possible to determine the amount of the individually identified credit loss in the absence of
objective evidence. The expected cash flows for loan portfolios are estimated based on historical loss experience.
At subsequent measurement the Bank recognises through “Loss allowance on loan, placement and repo
receivables losses” in the Statement of Profit or Loss impairment gain or loss as an amount of expected credit
losses or reversal that is required to adjust the loss allowance at the reporting date to the amount that is required
to be recognised in accordance with IFRS 9.
If a financial asset, which previously classified in the first stage, classified subsequently in the second or third
stage than loss allowance is adjusted to lifetime expected credit loss. If a financial asset, which previously
classified in the second or third stages, classified subsequently in the first stage than loss allowance is adjusted to
level of 12 month expected credit loss.
Classification into risk classes
According to the requirements of the IFRS9 standard, the Bank classifies financial assets measured at amortised
cost and fair value through other comprehensive income, and loan commitments and financial guarantees into
the following categories in accordance with IFRS9:
Stage 1
Performing
Stage 2
Performing, but compared to the initial recognition it shows significant increase in credit risk
Stage 3
Non-performing
POCI
Purchased or originated credit impaired
In the case of trade receivables, contract assets and lease receivables the Group applies the simplified approach
and calculates only lifetime expected credit loss. Simplified approach is the following:
• for the past 3 years the average annual balance of receivables under simplified approach is
calculated,
• the written-off receivables under simplified approach are determined in the past 3 years,
• the loss allowance ratio will be the sum of the written-off amounts divided by the sum of the
average balances,
• historical losses are adjusted to reflect information about current conditions and reasonable
forecasts of future economic conditions,
• the loss allowance is multiplied by the end-of-year balance and it will be the actual loss allowance
on these receivables,
• loss allowance should be recalculated annually.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
21
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.12. Loss allowance [continued]
Classification into risk classes [continued]
The Bank assumes that the credit risk on a financial instrument has not increased significantly since initial
recognition if the financial asset is determined to have low credit risk at the reporting date. This might occur if
the financial asset has a low risk of default, the borrower has a strong capacity to meet its contractual cash flow
obligations in the near term and adverse changes in economic and business conditions in the longer term may,
but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations. The
Bank considers souvereign exposures having low credit risk.
Credit risk of financial assets increases significantly at the following conditions:
• the payment delay exceeds 30 days,
• it is classified as performing forborne,
• based on individual decision, its currency suffered a significant "shock" since the disbursement of the
loan,
• the transaction/client rating exceeds a predefined value or falls into a determined range, or compared to
the historic value it deteriorates to a predefined degree,
• in the case household mortgage loans, the loan-to-value ratio (“LTV”) exceeds a predefined rate,
• default on another loan of the retail client, if no cross-default exists,
• in case of corporate and municipal clients:
o financial difficulty (capital requirements, liquidity, impairment of asset quality),
o significant decrease of activity and liquidity in the market of the asset,
o client’s rating reflects higher risk, but better than default,
o collateral value drops significantly, from which the client pays the loan,
o more than 50% decrease in owner’s equity due to net losses,
o client under dissolution,
o negative information from Central Credit Information System: the payment delay exceeds 30
days
Financial assets classifies as non-performing, if the following conditions are met:
• default,
• non-performing forborne exposures,
• in case of corporate and municipal clients:
o breach of contract terms and conditions
o critical financial difficulty of the client (capital requirements, liquidity, impairment of asset
quality),
o liquidation, dissolution or debt clearing procedures against client,
o forced deregistration procedures from company registry,
o terminated loans by the Bank,
o in case of fraud,
o negative information from Central Credit Information System: the payment delay exceeds 90
days,
o cessation of active markets of the financial asset,
o default of ISDA based contracts.
For lifetime expected credit losses, the Bank shall estimate the risk of a default occurring on the financial
instrument during its expected life. 12-month expected credit losses are a portion of the lifetime expected credit
losses and represent cash flow shortfalls that will result if a default occurs in the 12 months after the reporting
date (or a shorter period fi the expected life of the financial instrument is less than 12 months), weighted by the
probability of that default occurring.
Expected credit losses are measured in a way that reflects:
• an unbiased and probability-weighted amount that is determined by evaluating a range of possible
outcomes,
• the time value of money, and
reasonable and supportable information that is available without undue cost of effort at the reporting date about
past events, current conditions and forecasts of future economic conditions.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
22
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.13. Option to designate a financial asset/liability measured at fair value through profit or loss (FVTPL
option)
The Bank may, at initial recognition, irrevocably designate a financial asset or liability as measured at fair value
through profit or loss. The Bank may use FVTPL option in the following cases:
- if doing so eliminates or significantly reduces a measurement or recognition inconsistency (accounting
mismatch) that would otherwise arise from measuring assets or liabilities or recognising the gains and
losses on them on different bases
- if the group of financial liabilities or assets is managed and its performance is evaluated on a fair value
basis, in accordance with a documented risk management or investment strategy, and information about
the group is provided internally on that basis to the Bank’s key management personnel.
The use of the fair value option is limited only to special situations, and it can be based only on direct decision of
management of the Bank.
2.14. Sale and repurchase agreements, security lending
Where debt or equity securities are sold under a commitment to repurchase them at a pre-determined price, they
remain on the statement of financial position and the consideration received is recorded in Other liabilities or
Amounts due to banks and deposits from the National Bank of Hungary and other banks, or Deposits from
customers. Conversely, debt or equity securities purchased under a commitment to resell are not recognized in
the statement of financial position and the consideration paid is recorded either in Placements with other banks
or Deposits from customers. Interest is accrued evenly over the life of the repurchase agreement. In the case of
security lending transactions the Bank does not recognize or derecognize the securities because it is believed that
the transferor retains substantially all the risks and rewards of the ownership of the securities. Only a financial
liability or financial receivable is recognized for the consideration amount.
2.15. Property, equipment and intangible assets
Property, equipment and intangible assets are stated at cost, less accumulated depreciation and amortization and
impairment, if any. The depreciable amount (book value less residual value) of the non-current assets must be
allocated over their useful lives. Depreciation and amortization are calculated using the straight-line method over
the estimated useful lives of the assets based on the following annual percentages:
Intangible assets
Software
20-33.3%
Property rights
16.7-33.3%
Property
1-2%
Office equipment and vehicles
9-33.3%
Depreciation and amortization on properties, equipment and intangible assets starts on the day when such assets
are placed into service. At each balance sheet date, the Bank reviews the carrying value of its tangible and
intangible assets to determine if there is any indication that those assets have suffered an impairment loss.
If such indication exists, the recoverable amount of the asset is estimated to determine the extent (if any) of the
impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Bank
estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Where the carrying value of property, equipment, other tangible fixed assets and intangible assets is greater than
the estimated recoverable amount, it is impaired immediately to the estimated recoverable amount.
2.16. Inventories
The inventories shall be measured at the lower of cost and net realisable value. The cost of inventories shall
comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their
present location and condition. The Bank uses generally FIFO formulas to the measurement of inventories.
Inventories shall be removed from books when they are sold, unusable or destroyed. When inventories are sold,
the carrying amount of those inventories shall be recognized as an expense in the period in which the related
revenue is recognized. Repossessed assets are classified as inventories.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
23
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.17. Investment properties
Investment properties of the Bank are land, buildings, part of buildings which are held (as the owner or as the
lessee under a finance lease) to earn rentals or for capital appreciation or both, rather than for use in the
production or supply of services or for administrative purposes or sale in the ordinary course of business. The
Bank measures the investment properties at cost less accumulated depreciation and impairment, if any. The
depreciable amount (book value less residual value) of the investment properties must be allocated over their
useful lives. Depreciation and amortization are calculated using the straight-line method over the estimated
useful lives of the assets based on the 1-2% annual percentages.
The fair value of the investment properties is established mainly by external experts. According to the opinion of
the Management there is no significant difference between the fair value and the carrying value of these
properties.
2.18. Financial liabilities
The financial liabilities are presented within financial liabilities at fair value through profit or loss or financial
liabilities measured at amortised cost. In connection to the financial liabilities at fair value through profit or loss,
the Bank presents the amount of change in their fair value originated from the changes of market conditions and
business environment. Financial liabilities at fair value through profit or loss are either financial liabilities held
for trading or they are designated upon initial recognition as at fair value through profit or loss. In the case of
financial liabilities measured at amortised cost, fees and commissions related to the origination of the financial
liability are recognised through profit or loss during the maturity of the instrument. In certain cases the Bank
repurchases a part of financial liabilities (mainly issued securities or subordinated bonds) and the difference
between the carrying amount of the financial liability and the amount paid for it is recognised in the statement of
profit or loss and included in other operating income.
2.19. Leases
An agreement is a lease or contains a lease if it transfers the rights to control the use of an identified asset for a
given period in exchange for compensation.
Expenses related to the use of lease assets, the majority of which were previously recognised in external services
costs, will be currently classified as depreciation/amortisation and interest costs. Usufruct rights are depreciated
using a straight line method, while lease liabilities are settled using an effective discount rate.
Recognition of lease liabilities
The Bank will recognise lease liabilities related to leases which were previously classified as "operating leases"
in accordance with IAS 17 Leases. These liabilities will be measured at the present value of lease payments
receivable as at the date of commencement of the application of IFRS 16. Lease payments shall be discounted
using the interest rate implicit in the lease or, if that rate cannot be readily determined, the incremental
borrowing rate. Interest rate applied by the Bank: weighted average lessee’s incremental borrowing rate: ~1,62%
At their date of initial recognition, lease payments contained in the measurement of lease liabilities comprise the
following types of payments for the right to use the underlying asset for the life of the lease:
- fixed lease payments less any lease incentives,
- variable lease payments which are dependent on market indices,
- amounts expected to be payable by the lessee under residual value guarantees,
- the strike price of a purchase option, if it is reasonably certain that the option will be exercised, and
- payment of contractual penalties for terminating the lease, if the lease period reflects that the lessee
used the option of terminating the lease.
The Bank makes use of expedients with respect to short-term leases (less than 12 months) as well as in the case
of leases in respect of which the underlying asset has a low value (less than HUF 1.4 million) and for which
agreements it will not recognise financial liabilities nor any respective right-of-use assets. These types of lease
payments will be recognised as costs using the straight-line method during the life of the lease.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
24
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.20. Leases [continued]
Recognition of right-of-use assets
Right-of-use assets are initially measured at cost.
The cost of a right-of-use asset comprises:
- the amount of the initial measurement of lease liabilities,
- any lease payments made at or before the commencement date, less any lease incentives received,
- any initial direct costs incurred by the lessee,
- estimates of costs to be incurred by the lessee as a result of an obligation to disassemble and remove an
underlying asset or to carry out renovation/restoration.
Right-of-use assets are presented separately in the financial statements.
2.20. Share capital
Share capital is the capital determined in the Articles of Association and registered by the Budapest-Capital
Regional Court. Share capital is the capital the Bank raised by issuing common stocks at the date the shares were
issued. The amount of share capital has not changed over the current period.
2.21. Treasury shares
Treasury shares are shares which are purchased on the stock exchange and the over-the-counter market by the
Bank and are presented in the separate statement of financial position at acquisition cost as a deduction from
shareholders’ equity. Gains and losses on the sale of treasury shares are recognised directly to shareholder’s
equity. Derecognition of treasury shares is based on the FIFO method.
2.22. Interest income, income similar to interest income and interest expense
Interest income and expenses are recognised in profit or loss in the period to which they relate, using the
effective interest rate method.
For exposures categorized into stage 1 and stage 2 the interest income is recognized on a gross basis. For
exposures categorized into stage 3 (using effective interest rate) and for POCI (using credit-adjusted effective
interest rate) the interest income is recognized on a net basis.
The time-proportional income similar to interest income of derivative financial instruments calculated without
using the effective interest method and the positive fair value adjustment of interest rate swaps are also included
in income similar to interest income. Interest income of FVTPL loans is calculated based on interest fixed in the
contract and presented in “Income similar to interest income” line.
Interest from loans and deposits are accrued on a daily basis. Interest income and expense include certain
transaction cost and the amortisation of any discount and premium between the initial carrying amount of an
interest-bearing instrument and its amount at maturity calculated on an effective interest rate basis.
All interest income and expense recognised are arising from loans, placements with other banks, repo
receivables, securities at fair value through other comprehensive income, securities at amortised cost, and
amounts due to banks, repo liabilities, deposits from customers, liabilities from issued securities, subordinated
bonds and loans are presented under these lines of financial statements
2.23. Fees and Commissions
Fees and commissions that are not involved in the amortised cost model are recognised in the Separate Statement
of Profit or Loss on an accrual basis according to IFRS 15. These fees are related to deposits, cash withdrawal,
security trading, bank card, etc.
The Bank recognise income if performance obligations related to the certain goods or service are satisfied,
performed, and control over the asset is transferred to the customer, and it is probable that consideration payable
will probably flow to the entity. In case of those service, where the Bank transfer control over the asset
continuously, income is recognised on accrual basis. (For more details see note 31)
The Bank provides foreign exchange trading services to its customers, the profit margin achieved on these
transactions is presented as Net profit from fees and commissions in the Separate Statement of Profit or Loss.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
25
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.24. Dividend income
Dividend income refers to any distribution of entity’s earnings to shareholders from stocks or mutual funds that
is owned by the Bank. The Bank recognizes dividend income in the separate financial statements when its right
to receive the payment is established.
2.25. Income tax
The Bank considers corporate income tax and local business tax and the innovation contribution as income tax in
Hungary. The annual taxation charge is based on the tax payable under Hungarian fiscal law, adjusted for
deferred taxation. Deferred taxation is accounted for using the balance sheet liability method in respect of
temporary differences between the tax bases of assets and liabilities and their carrying value for financial
reporting purposes, measured at the tax rates that are expected to apply when the asset is realised or the liability
is settled.
Deferred tax assets and liabilities are presented in a net way in the statement of financial position. Current tax
asset or current tax liability is presented related to income tax and innovation contribution separately in the
statement of financial position.
Deferred tax assets are recognized by the Bank for the amounts of income tax that are recoverable in future
periods in respect of deductible temporary differences as well as the carry forward of unused tax losses and the
carryforward of unused tax credits.
The Bank recognizes a deferred tax asset for all deductible temporary differences arising from investments in
subsidiaries, branches and associates, and interests in joint arrangements, to the extent that, and only to the extent
that, it is probable that:
- the temporary difference will reverse in the foreseeable future; and
- taxable profit will be available against which the temporary difference can be utilised.
The Bank considers the availability of qualifying taxable temporary differences and the probability of other
future taxable profits to determine whether future taxable profits will be available.
The Bank recognizes a deferred tax liability for all taxable temporary differences associated with investments in
subsidiaries, branches and associates, and interests in joint arrangements, except to the extent that both of the
following conditions are satisfied:
- the Bank is able to control the timing of the reversal of the temporary difference, and
- it is probable that the temporary difference will not reverse in the foreseeable future.
The Bank only offsets its deferred tax liabilities against deferred tax assets when:
- there is a legally enforceable right to set-off current tax liabilities against current tax assets, and
- the taxes are levied by the same taxation authorities on either
• the same taxable entity or
• different taxable entities which intend to settle current tax liabilities and assets on a net basis.
2.26. Banking tax
The Bank is obliged to pay banking tax based on Act LIX of 2006. As the calculation is not based on the taxable
profit (but the adjusted Assets total calculated based on the Separate Financial Statements for the second period
preceding the current tax year), banking tax is not considered as income tax. Therefore, the banking tax is
considered as an other administrative expense, not as income tax.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
26
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.27. Off-balance sheet commitments and contingent liabilities, provisions
In the ordinary course of its business, the Bank has entered into off-balance sheet commitments such as
guarantees, commitments to extend credit, letters of credit and transactions with financial instruments. The
provision on off-balance sheet commitments and contingent liabilities is maintained at a level adequate to absorb
probable future losses which are probable and relate to present obligations.
Those commitments and contingent liabilities Management determines the adequacy of the provision based upon
reviews of individual items, recent loss experience, current economic conditions, the risk characteristics of the
various categories of transactions and other pertinent factors.
The Bank recognizes a provision for off-balance sheet commitment and contingent liabilities in accordance with
IAS 37 when it has a present obligation as a result of a past event; it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation; and a reliable estimate can be made of the
obligation.
Expected credit loss model is applied for given financial guarantees and loan commitments which are under
IFRS 9 the, when the provision is calculated (see more details in Note 2.12.). After initial recognition the Group
subsequently measures those contracts at a higher of the amount of the loss allowance or of the amount initially
recognised less the cumulative amount of income recognized in accordance with IFRS 15.
2.28. Share-based payment and employee benefits
The Bank has applied the requirements of IFRS 2 Share-based Payment.
The Bank issues equity-settled share-based payments to certain employees. Equity-settled share-based payments
are measured at fair value at the grant date. The fair value determined at the grant date of the equity-settled
share-based payments is expensed on a straight-line basis over the year, based on the Bank’s estimate of shares
that will eventually vest.
Fair value is measured by use of a binomial model. The expected life used in the model has been adjusted, based
on Management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural
considerations.
The Bank has applied the requirement of IAS 19 Employee Benefits. The Bank’s short-term employee benefits
are wages, salaries and bonuses, premium, paid annual leave and paid sick leave and other free services (health
care, reward holiday). Short-term employee benefits are expected to pay by the Bank within 12 month. These
benefits are recognised as an expense and liability undiscounted in the separate financial statements.
Long-term employee benefits are mostly the jubilee reward. Long-term employee benefits are recognised as an
expense and liability in the separate financial statements. Liabilities are regularly remeasured. Gains or losses
due to the remeasurement are recognised in the separate statement of profit or loss.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
27
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.29. Separate statement of cash flows
Cash flows arising from the operating, investing or financing activities are reported in the Statement of Cash-
Flows of the Bank primarily on a gross basis. Net basis reporting are applied by the Bank in the following cases:
▪ when the cash flows reflect the activities of the customer rather than those of the Bank, and
▪ for items in which the turnover is quick, the amounts are large, and the maturities are short.
For the purposes of reporting cash flows “Cash, due from banks and balances with the NBH” line item excluding
compulsory reserve are considered as cash and cash equivalents by the Bank. This line item shows balances of
HUF and foreign currency cash amounts, and sight depos from NBH and from other banks, furthermore balances
of current accounts.
Cash flows from hedging activities are classified in the same category as the item being hedged. The unrealised
gains and losses from the translation of monetary items to the closing foreign exchange rates and the unrealised
gains and losses from derivative financial instruments are presented separately net in the statement of cash flows
for the monetary items which have been revaluated.
2.30. Segment reporting
IFRS 8 Operating Segments requires operating segments to be identified on the basis of internal reports about
components of the Bank that are regularly reviewed by the chief operating decision maker in order to allocate
resources to the segments and to assess their performance.
At separate level, the Management does not separate and makes decisions based on different segments; the
segments are identified by the Bank only at consolidated level in line with IFRS 8 paragraph 4. At Group level
the segments identified by the Bank are the business and geographical segments.
The Group’s operating segments under IFRS 8 are therefore as follows: OTP Core Hungary, Russia, Ukraine,
Bulgaria, Romania, Serbia, Croatia, Montenegro, Albania, Moldova, Slovenia, Merkantil Group, Asset
Management subsidiaries, other subsidiaries, Corporate Centre.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
28
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued]
2.31. Comparative figures
Reclassification of certain local taxes
The Bank has reviewed prescriptions related to local taxes, the determination of their tax base and their effects
on payment obligation. As a result of the review the local business tax and innovation contribution have been
reclassified to income tax in line with banking industry practice. In the financial statements prepared for the year
ended 31 December 2021 the Bank presents these taxes as income tax and reclassified the financial information
for comparative periods.
Derecognition of financial assets at amortized cost is presented separately in the separate statement of profit or
loss. Those items are to be separated from those results which previously contained them. In the separate
financial position there is provision for conditional liability to be separated from other liabilities which
previously contained them. All these reclassifications were necessary to improve presentation.
The impact of the reclassification of comparative information is summarized in the following tables:
Statement of Financial Position
Line item
31 December
2021
31 December
2020 after
reclassification
Reclassification of
amounts related to
local taxes
31 December 2020
Previously
presented
Current tax liabilities
4,776
1,464
1,464
-
Other liabilities
238,437
223,433
(1,464)
224,897
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
13,710,471
11,154,394
-
11,154,394
Statement of Profit or Loss
Line item
Year ended 31
December
2021
Year ended 31
December 2020
After
reclassification
Reclassification of
amounts related to
local taxes
Year ended 31
December 2020
Previously
presented
Taxes, other than income tax
(81,171)
(73,384)
(12,349)
(85,733)
Other administrative expenses
(178,611)
(154,165)
(12,349)
(166,514)
OTHER ADMINISTRATIVE
EXPENSES
(355,429)
(311,611)
(12,349)
(323,960)
PROFIT BEFORE INCOME
TAX
141,290
105,595
(12,349)
93,246
Income tax
(15,951)
(13,121)
12,349
(772)
NET PROFIT FOR THE YEAR
125,339
92,474
-
92,474
Amendments to the information published in the supplementary annexes concerned the following
supplementary notes
Note
Name of the Note
24
Other liabilities and provisions
33
Other operating income and expenses and other administrative expenses
34
Income tax
The Bank has reclassified the presentation of the detailed notes to the amended statement of financial position
and statement of profit or loss line items for comparative information in accordance with the new values. These
amendments have been marked “Reclassified” by the Bank.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
29
NOTE 3: SIGNIFICANT ACCOUNTING ESTIMATES AND DECISIONS IN THE
APPLICATION OF ACCOUNTING POLICIES
The presentation of separate financial statements in conformity with IFRS requires the Management of the Bank
to make judgements about estimates and assumptions that affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities as at the date of the financial statements and their reported
amounts of revenues and expenses during the reporting period. The estimates and associated assumptions are
based on expected loss and other factors that are considered to be relevant. The estimates and underlying
assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognized in the period.
Actual results could differ from those estimates. Significant areas of subjective judgements include:
3.1. Loss allowance on financial instruments
The Bank regularly assesses its financial instruments for impairment. Management determines the adequacy of
the allowances based upon reviews of individual loans and placements, recent loss experience, current economic
conditions, the risk characteristics of the various categories of loans and other pertinent factors. The use of a
new, three stage model was implemented for IFRS 9 purposes. The new impairment methodology is used to
classify financial instruments in order to determine whether credit risk has significantly increased since initial
recognition and able to identify credit-impaired assets. For instruments with credit-impairment or significant
increase of credit risk lifetime expected losses will be recognized. (For details see note 36.1.1.)
3.2. Valuation of instruments without direct quotations
Financial instruments without direct quotations in an active market are valued using the valuation model
technique. The models are regularly reviewed and each model is calibrated for the most recent available market
data. While the models are built only on available data, their use is subject to certain assumptions and estimates
(e.g. for correlations, volatilities, etc). Changes in the model assumptions may affect the reported fair value of
the relevant financial instruments.
IFRS 13 Fair Value Measurement seeks to increase consistency and comparability in fair value measurements
and related disclosures through a 'fair value hierarchy'. The hierarchy categorises the inputs used in valuation
techniques into three levels. The hierarchy gives the highest priority to (unadjusted) quoted prices in active
markets for identical assets or liabilities and the lowest priority to unobservable inputs. The Bank evaluates the
levelling at each reporting period on an instrument-by-instrument basis and reclassifies instruments when
necessary, based on the facts at the beginning of the reporting period. The objective of a fair value measurement
is to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place
between market participants at the measurement date under current market conditions.
3.3. Provisions
Provision is recognised and measured for commitments to extend credit and for warranties arising from banking
activities based on IFRS 9 Financial Instruments. Provision for these instruments is recognised based on the
credit conversion factor, which shows the proportion of the undrawn credit line that will be probably drawn.
Other provision is recognised and measured based on IAS 37 Provisions, Contingent Liabilities and Contingent
Assets. The Bank is involved in a number of ongoing legal disputes. Based upon historical experience and expert
reports, the Bank assesses the developments in these cases, and the likelihood and the amount of potential
financial losses which are appropriately provided for. (See Note 24.)
Other provision for off-balance sheet items includes provision for litigation, provision for retirement and
expected liabilities and provision for Confirmed letter of credit.
A provision is recognised by the Bank when it has a present obligation as a result of a past event, it is probable
that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable
estimate can be made of the amount of the obligation.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
30
NOTE 3: SIGNIFICANT ACCOUNTING ESTIMATES AND DECISIONS IN THE
APPLICATION OF ACCOUNTING POLICIES [continued]
3.4. Business models
A business model refers how the Bank manages its financial instruments in order to generate cash flows. It is
determined at a level that reflects how groups of financial instruments are managed rather than at an instrument
level.
The financial assets held by the Bank are classified into three categories depending on the business model within
the financial assets are managed.
• Business model whose objective is to hold financial assets in order to collect contractual cash flows.
Some sales can be consistent with hold to collect business model and the Bank assesses the nature,
frequency and significance of any sales occurring. The Bank does not consider the sale frequent when at
least six months have elapsed between sales. The significant sales are those when the sales exceed 2%
of the total hold to collect portfolio. Within this business model the Bank manages mainly loans and
advances and long term securities and other financial assets.
• Business model whose objective is achieved by both collecting contractual cash flows and selling
financial assets. Within this business model the Bank only manages securities.
• Business model whose objective is to achieve gains in a short term period. Within this business model
the Bank manages securities and derivative financial instrument.
If cash flows are realised in a way that is different from the expectations at the date that the Bank assessed the
business model, that does not give rise to a prior error in the Bank’s financial statements nor does it change the
classification of the remaining financial assets held in that business model.
When, and only when the Bank changes its business model for managing financial assets it reclassifies all
affected assets. Such changes are determined by the Bank’s senior management as a result of external or internal
changes and must be significant to the Bank’s operations and demonstrable to external parties. The Bank shall
not reclassify any financial liability.
3.4. Contractual cash-flow characteristics of financial assets
Classification of a financial asset is based on the characteristics of its contractual cash flows if the financial asset
is held within a business model whose objective is to hold assets to collect contractual cash flows or within a
business model whose objective is achieved by both collecting contractual cash flows and selling financial
assets.
The Bank should determine whether the asset’s contractual cash flows are solely payments of principal and
interest on the principal amount outstanding (SPPI test). Contractual cash flows that are solely payments of
principal and interest on the principal amount outstanding are consistent with a basic lending arrangement.
Contractual terms that introduce exposure to risks or volatility in the contractual cash flows that is unrelated to a
basic lending arrangement, such as exposure to changes in equity prices or commodity prices, do not give rise to
contractual cash flows that are solely payments of principal and interest on the principal amount outstanding.
The Bank assesses whether contractual cash flows are solely payments of principal and interest on the principal
amount outstanding for the currency in which the financial asset is denominated.
Time value of money is the element of interest that provides consideration for only the passage of time.
However, in some cases, the time value of money element may be modified. In such cases, the Bank assesses the
modification to determine whether the contractual cash flows represent solely payments of principal and interest
on the principal amount outstanding.
When assessing a modified time value of money element, the objective is to determine how different the
undiscounted contractual cash flows could be from undiscounted cash flows that would arise if the time value of
money element was not modified (the benchmark cash flows). The benchmark instrument can be an actual or a
hypothetical financial asset. If the undiscounted contractual cash flows significantly – above 2% – differ from
the undiscounted benchmark cash flows, the financial asset should be subsequently measured at fair value
through profit or loss.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
31
NOTE 4: COVID-19 (in HUF mn)
Covid-19 has had substantial implications for the operations of the Bank during 2021. Below are some of the
more important Covid-19 related events that occurred in Hungary:
• Effective from 13 January 2021 the National Bank of Hungary extended the available amount for the Bond
Funding for Growth scheme by HUF 750 billion to HUF 1,150 billion. At the same time it decided to
increase the maximum maturity of corporate bonds that can be purchased by the central bank from 20 to 30
years. Also, the central bank’s exposure limit to a company group was revised from HUF 50 billion to HUF
70 billion.
• On 4 February 2021 the Prime Minister announced an interest-free loan programme for companies in trouble
in the wake of the pandemic. According to Government Resolution 1038/2021. (II. 5.) the programme will be
administered by the Hungarian Development Bank, and the available amount under the programme will be
HUF 100 billion. Companies can take out maximum HUF 10 million each for the purpose of covering wages
and social contributions, overhead costs, general operating expenses and inventory financing. Client interest
rate is 0%, the loan tenor can be up to 10 years, and the servicing of the loan will start after a 3 year grace
period. The scope of eligible entities was determined in agreement with the Hungarian Chamber of
Commerce and Industry.
• On 1 April 2021 Moody’s rating agency upgraded the outlook on the Hungarian banking sector from
negative to stable
• On 6 April 2021 the NBH raised the available amount for the Funding for Growth Go! Scheme by HUF 500
billion to HUF 3,000 billion.
• On 18 May 2021 the Hungarian Development Bank revealed that the interest-free, maximum HUF 10 million
loan for micro- and small enterprises (the so-called interest-free restart quick loan) can be applied for by
companies whose revenues in 2020 plummeted by more than 30%, irrespective of the scope of activities
(certain other criteria must be met).
• On 25 May 2021 the National Bank of Hungary did not touch the benchmark interest rates, but stressed that
the central bank is ready to tighten monetary conditions in a proactive manner to the extent necessary in order
to ensure price stability and to mitigate inflation risks.
• On 9 June 2021 Viktor Orbán Prime Minister announced that their actual personal income tax payments (up
to the tax burden of the average wage) will be refunded to families raising kids in early-2022 provided that
the 2021 GDP growth surpasses 5.5%.
• According to Government Decree No. 317/2021. (VI. 9.) released on 9 June 2021 the payment moratorium
was extended with unchanged conditions until 30 September 2021.
• On 9 June 2021 Viktor Orbán Prime Minister announced that once the central bank phases out its Funding
for Growth scheme, the government will have to shoulder the financial burden of providing cheap (not higher
than 0.5% interest rate) subsidized loans to domestic micro and small enterprises, through the Széchenyi
Card programme by KAVOSZ. On 9 June László Krisán, CEO of KAVOSZ revealed the details of the
Széchenyi Card GO! programme launched on 1 July 2021.
• On its 22 June 2021 meeting the Monetary Council embarked on a rate hike cycle: the base rate was
increased by 30 bps to 0.9%. Also, effective from 24 June 2021 the National Bank of Hungary raised the one-
week deposit rate to the level of the base rate.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
32
NOTE 4: COVID-19 (in HUF mn) [continued]
• The Monetary Council has started to transform the use of instruments having an effect at longer maturities.
Accordingly, with the exhaustion of the HUF 3,000 billion available amount, the Funding for Growth Go!
programme will be phased out. However, the central bank continues to consider the government securities
purchase programme to be crucial in its set of monetary policy instruments. The central bank will continue to
use the programme by maintaining a lasting presence in the market, taking a flexible approach to changing
the quantity and structure of weekly securities purchases, to the extent and for the time necessary.
• On 2 July 2021 the National Bank of Hungary recommended in its circular that financial institutions should
abstain from charging prepayment fees in the case of full or partial prepayment of deferred interest and fee
accumulated during the term of the moratorium. The central bank also recommended free of charge loan
contract modification if borrowers voluntarily undertake higher monthy instalments in order to shorten the
remaining maturity.
• On 6 July 2021 the National Bank of Hungary announced that with the aim of boosting green mortgage
lending, it decided to launch the Green Mortgage Bond Purchase Programme and the FGS Green Home
Programme as the first steps of the implementation of the new Green Monetary Policy Toolkit Strategy:
The strategic goal of the Green Mortgage Bond Purchase Programme is to contribute to the development of
the domestic green mortgage bond market through targeted purchases and, through this, encourage green
mortgage loan activities. The central bank will review the programme when the HUF 200 billion purchase
volume has been reached. Additionally, the central bank also decided to re-launch the Mortgage Bond
Rollover Facility for mortgage bonds without green rating.
The central bank will launch the Green Home Programme in October 2021 with a total limit of HUF 200
billion as part of the Funding for Growth Scheme (FGS). As in the previous phases of the FGS, the MNB
will provide refinancing operation to credit institutions at 0% interest, which will be lent to residential
customers at a maximum of 2.5%, fixed interest rate until the end of the maturity period. Under the scheme,
loans of up to HUF 70 million and a maximum term of 25 years can be granted for constructions or purchases
of new, highly energy-efficient residential real estates.
• On 23 July 2021 the European Central Bank announced that restrictions concerning dividend payments won’t
be prolonged beyond the previously effective deadline of 30 September 2021.
• A Government Decree was published on 23 July 2021 facilitating the VAT refund in the case of newly built
houses in brownfield sites.
• On 27 July 2021 the National Bank of Hungary raised the base rate by 30 bps to 1.2%, then on 29 July the
one-week deposit rate was hiked to the same level, by the same magnitude.
• On 30 July 2021 the results of the 2021 EU-wide stress test conducted by the European Banking Authority
were revealed. The fully loaded consolidated Common Equity Tier 1 (CET1) ratio of OTP Bank Plc. would
change to 16.3% under the baseline scenario and to 11.2% under the adverse scenario in 2023, compared to
14.2% as at the end of 2020.
• On 12 August 2021 the National Bank of Hungary announced that its management circular has been
reviewed. According to one of the amendments, the central bank extended the deadline concerning
restrictions on dividend payment and treasury share purchases until the end of 2021. Credit instititions might
be exempted from the dividend payment ban only if they meet certain strict conditions.
• On 24 August 2021 the National Bank of Hungary raised the base rate by 30 bps to 1.5%. Additionally, the
central bank decided to begin gradually withdrawing the government securities purchase programme while
considering aspects of maintaining market stability. Also, the central bank increased the available amount
under the Bond Funding for Growth scheme by HUF 400 billion to HUF 1,550 billion.
• Pursuant to Government Decree 536/2021. (IX. 15.) published on 15 September, the Government decided to
extend the debt repayment moratorium with the following conditions:
• The blanket moratorium was extended by an additional month, until the end of October, in an unchanged
form.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
33
NOTE 4: COVID-19 (in HUF mn) [continued]
• From the beginning of November 2021 until 30 June 2022 only the eligible borrowers can participate in the
moratorium provided that they submitted a request to their banks about their intention to stay. So, the
extension beyond October is not automatic: borrowers had to submit a notification to their bank (opt-in).
Eligible retail borrowers include private individuals whose income fell compared to the previous period,
unemployed people, fostered workers, families raising children below the age of 25 or expecting a baby, and
pensioners (for details see the relevant decree). Eligible companies shall fulfil the following criteria: more
than 25% decline in revenues in the 18 months period preceding the submission of the request to participate,
and if the company has not concluded a new subsidized loan contract since 18 March 2020.
• During the term of the one-month extension until the end of October, eligible clients could submit the
necessary documents to their banks in order to stay in the scheme until June 2022, so this one-month
lengthening could be regarded as technical.
• According to Government Decree 537/2021. (IX. 15.) published on 15 September, credit institutions shall re-
calculate the interest deferred during the period spent in the moratorium in the case of overdraft loans and
credit card exposures. The base for the re-calculation shall be the NBH’s statistical data for the average
annualized cash loan interest rate published for February 2020. The difference between the deferred interest
booked according to the original contract and the re-calculated amount shall be refunded to the borrowers by
way of crediting the borrowers’ account with the due amount.
• On 21 September 2021 the National Bank of Hungary hiked the base rate by 15 bps to 1.65%. Furthermore,
the NBH continued to gradually withdraw the government securities purchase programme.
• On 4 October 2021 the National Bank of Hungary launched the FGS Green Home Programme as part of its
green monetary policy toolkit strategy.
• On 19 October 2021 the National Bank of Hungary increased the base rate by 15 bps to 1.8%.
• On 16 November 2021 the Monetary Council of the NBH hiked the base rate by 30 bps to 2.1%. The Deputy
Governor of NBH stressed after the Monetary Council meeting that the NBH is ready to set the rate of the 1-
week central bank deposit above the level of the base rate already from 18 November. Accordingly, on 18
November the NBH raised the rate of the 1-week deposit facility to 2.5%, and the central bank accepted all
offers at the tender. Consequently, the 1-week deposit has become the effective rate for the banking sector
determining the marginal asset yields.
• On its weekly one-week deposit tender on 25 November 2021 the NBH offered an interest rate of 2.9%.
• On 30 November 2021 the NBH’s Monetary Council widened the interest rate corridor and also decided to
make it asymmetric. Accordingly, the lower bound of the corridor was raised by 45 bps and the upper one by
105 bps.
• On 2 December 2021 the NBH hiked the rate of the 1-week central bank deposit by 20 bps to 3.1%.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
34
NOTE 4: COVID-19 (in HUF mn) [continued]
• On 9 December 2021 the NBH hiked the rate of the 1-week central bank deposit by 20 bps to 3.3%.
• On 14 December 2021 the NBH’s Monetary Council raised the base rate by 30 bps to 2.4% and made a
decision to phase out both the Bond Funding for Growth programme and the government bond purchase
programme.
• On 16 December 2021 the NBH hiked the rate of the 1-week central bank deposit by 30 bps to 3.6%.
• Mr. Viktor Orbán Prime Minister announced on 22 December 2021 that the government will introduce an
interest rate cap for certain retail mortgage loans (for example whose pricing is linked to a reference rate, but
the legislation does not apply to those with longer fixation periods) for the period between 1 January and 30
June 2022. Accordingly, the affected mortgages’ reference rate cannot be higher than the relevant reference
rate as at 27 October 2021. Furthermore, banks had to inform their borrowers about the interest rate risk and
offer amendments to the contract until 31 January 2022. Details were laid down by Government Decree
782/2021 (XII. 24.) and Decree 1/2022 (I. 3.) by the Prime Minister’s Office.
• On 23 December 2021 the NBH hiked the rate of the 1-week central bank deposit by 20 bps to 3.8%.
• In its release published on 27 December 2021 the NBH said that from 1 January 2022 Hungarian credit
institutions can pay dividends and buy back shares with shareholder remuneration purposes again. Thus, the
NBH did not extend these restrictions in line with the similar step taken by the ECB at the end of September.
• On 30 December 2021 the NBH hiked the rate of the 1-week central bank deposit by 20 bps to 4.0%.
• Against the initially planned 2 pps social security contribution cut effective from July 2022, the government
reduced employers’ taxes by 4 pps already from 1 January 2022 (the 1.5% vocational training contribution
was abolished and the social contribution taxes were cut by 2.5 pps).
• On 25 January 2022 the NBH hiked the base rate by 50 bps to 2.9%.
• On 27 January 2022 the NBH hiked the rate of the 1-week central bank deposit by 30 bps to 4.3%.
• On 15 February 2022 the CSO revealed the final GDP growth figures: accordingly, in 4Q 2021 the quarterly
expansion of 2.1% was stronger than expected, lifting the annual growth rate to 7.1% in 2021 as a whole
(seasonally and working day adjusted). Mr. Mihály Varga (Minister of Finance) announced that the
government expects 5.9% growth for 2022.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
35
NOTE 4: COVID-19 (in HUF mn) [continued]
Interest rate cap
For the period between 1 January and 30 June 2022 the government introduced an interest rate cap for variable-
rate retail mortgage loans, and with its decision announced on 18 February, for housing purposes financial
leasing contracts, too. Accordingly, the affected exposures’ reference rate cannot be higher than the relevant
reference rate as at 27 October 2021.
The modification loss related to the interest rate cap for variable rate mortgage loans announced on 22 December
2021 was recognized in the Bank’s 2021 financial accounts. The extension of the interest rate cap to housing
purposes financial leasing contracts does not have a significant negative effect.
Moratorium one-off effect
In Hungary the first phase of the moratorium on loan payments was effective from 19 March 2020 to 31
December 2020. At the end of 2020 the moratorium was extended in unchanged form for the period between 1
January 2021 and 30 June 2021. Furthermore, according to Government Decree No. 317/2021. (VI. 9.) released
on 9 June 2021 the payment moratorium was extended with unchanged conditions until 30 September 2021.
Pursuant to Government Decree 536/2021. (IX. 15.) published on 15 September, the Government decided to
extend the debt repayment moratorium: the blanket moratorium was extended by an additional month, until the
end of October, in an unchanged form. Furthermore, from the beginning of November 2021 until 30 June 2022
only the eligible borrowers can participate in the moratorium provided that they submitted a request to their
banks about their intention to stay.
During the term of the moratorium OTP Bank accrues the unpaid interest in its statement of recognized income,
amongst the revenues. At the same time, due to the fact that interest cannot be charged on the unpaid interest,
and the unpaid interest will be repaid later, in the course of 2020 and 2021 altogether HUF 43.3 billion after tax
loss emerged in Hungary and Serbia altogether. Within that amount there was a -HUF 1.7 billion (after tax)
negative impact booked in December 2020 in relation to the Serbian deferral scheme, as the original interest
calculation method was changed by the local regulator (originally the compound interest method was allowed by
the law in Serbia, but charging interest on deferred interest was later retroactively disallowed by the regulator).
Loan volumes under the Hungarian payment holiday followed a declining trend till the end of October 2021,
then from November the participation dropped materially due to the changes to the structure. At the end of 2021
the total household and corporate exposures remaining under the moratorium comprised HUF 245 billion at OTP
Core and Merkantil Group, which made up 4.1% of the total gross loan portfolio of those two entities.
Participation in COVID moratorium as at 31 December 2021
Current volume in moratorium
Current participation ratio
OTP Bank
113,639
2.3%
Participation in COVID moratorium as at 31 December 2021
Current volume in moratorium
Current participation ratio
OTP Bank
1,059,428
26.2%
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
36
NOTE 4: COVID-19 (in HUF mn) [continued]
Financial assets modified during the year ended 31 December 2021 related to covid moratorium
Modification due to prolongation of deadline of covid moratoria till 30 September
Gross carrying amount before modification
668,312
Modification loss due to covid moratoria
(5,284)
Gross carrying amount after modification
663,028
Loss allowance before modification
(55,180)
Net amortised cost after modification
607,848
Modification due to prolongation of deadline of covid moratoria till 31 October
Gross carrying amount before modification
665,620
Modification loss due to covid moratoria
(1,292)
Gross carrying amount after modification
664,328
Loss allowance before modification
(58,412)
Net amortised cost after modification
605,916
In case of credit card and overdraft loans interest charged during the moratoria period should be refunded to
the debtors in amount determined as a difference between the charged interest and a premoratoria personal loan
interest at 11,99%. The Bank has managed this government measure as loan agreement modification in the
financial statements.
Gross carrying amount before modification
57,892
Modification loss due to covid moratoria
(1,983)
Gross carrying amount after modification
55,909
Loss allowance before modification
(9,234)
Net amortised cost after modification
46,675
Modification due to prolongation of deadline of covid moratoria till 30 June 2022
Gross carrying amount before modification
82,438
Modification loss due to covid moratoria
(1,614)
Gross carrying amount after modification
80,824
Loss allowance before modification
(23,516)
Net amortised cost after modification
57,308
On 24 December 2021 new regulation was issued on fixing of retail loan product’s interest, under that interest
rates of mortgage loans with variable interest shall be fixed at reference rates of 27 October 2021, predictably
till 30 June 2022.
Gross carrying amount before modification
67,108
Modification loss due to covid moratoria
(703)
Gross carrying amount after modification
66,405
Loss allowance before modification
(1,625)
Net amortised cost after modification
64,780
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
37
NOTE 5: CASH, AMOUNTS DUE FROM BANKS AND BALANCES WITH THE NATIONAL
BANK OF HUNGARY (in HUF mn)
2021
2020
Cash on hand:
In HUF
82,839
107,523
In foreign currency
21,182
18,899
104,021
126,422
Amounts due from banks and balances with National Bank of Hungary:
Within one year:
In HUF
81,512
204,942
In foreign currency
289,596
247,756
371,108
452,698
Loss allowance
(185)
-
Subtotal
474,944
579,120
Average amount of compulsory reserve
99,303
76,033
Total
375,641
503,087
Rate of the compulsory reserve
1%
1%
The Bank shall deposit compulsory reserve in a determined percent of its liabilities at NBH. Liabilities
considered in compulsory reserve calculation are as follows:
a) deposits and loans,
b) debt instruments,
c) repo transactions.
The amount of the compulsory reserve is the multiplication of the daily average of the liabilities considered in
the compulsory reserve calculation and compulsory reserve rate, which are determined by the NBH in a specific
decree. The Bank is required to complete compulsory reserve requirements in average in the second month after
the reserve calculation period, requirements shall be completed once a month on the last calendar day. The Bank
complies with the compulsory reserve requirements by the deposit of the adequate amount of cash as the
calculated compulsory reserve on the bank account at NBH in monthly average.
An analysis of the change in the loss allowance on placement losses is as follows:
2021
2020
Balance as at 1 January
-
-
Loss allowance
185
-
Closing balance
185
-
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
38
NOTE 6: PLACEMENTS WITH OTHER BANKS, NET OF ALLOWANCE FOR PLACEMENT
LOSSES (in HUF mn)
2021
2020
Within one year:
In HUF
1,388,709
905,241
In foreign currency
372,361
329,633
1,761,070
1,234,874
Over one year
In HUF
747,871
267,291
In foreign currency
65,761
39,538
813,632
306,829
Total placements
2,574,702
1,541,703
Loss allowance on placement losses
(7,490)
(5,819)
Total
2,567,212
1,535,884
An analysis of the change in the loss allowance on placement losses is as follows:
2021
2020
Balance as at 1 January
5,819
3,592
Loss allowance
20,524
12,548
Release of loss allowance
(18,911)
(10,497)
Use of loss allowance
(2)
-
FX movement
60
176
Closing balance
7,490
5,819
Interest conditions of placements with other banks (%):
2021
2020
Placements with other banks in HUF
0% - 5.9%
0% - 3.84%
Placements with other banks in foreign currency
(0.59%) - 29%
(0.76%) - 29%
Average interest of placements with other banks
1.63%
0.78%
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
39
NOTE 7: REPO RECEIVABLES (in HUF mn)
2021
2020
Within one year:
In HUF
33,710
183,656
33,710
183,656
Total gross amount
33,710
183,656
Loss allowance on repo receivables
(72)
(292)
Total repo receivables
33,638
183,364
An analysis of the change in the loss allowance on repo receivables is as follows:
2021
2020
Balance as at 1 January
292
6
Loss allowance
449
362
Release of loss allowance
(669)
(76)
Closing balance
72
292
Interest conditions of repo receivables (%):
2021
2020
Repo receivables in HUF
2%-3.2%
(0.1%) - 0.9%
Average interest of repo receivables
0.29%
0.09%
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
40
NOTE 8: FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (in HUF mn)
2021
2020
Held for trading securities:
Government bonds
30,827
6,031
Other non-interest bearing securities
1,134
1,964
Hungarian government discounted Treasury Bills
869
1,233
Corporate shares and investments
599
426
Mortgage bonds
116
-
Other securities
2,088
2,075
Subtotal
35,633
11,729
Securities mandatorily measured at fair value through profit or loss
Shares in investment funds
25,126
23,818
Bonds
-
5,342
Shares
2,935
2,776
Subtotal
28,061
31,936
Held for trading derivative financial instruments:
Foreign currency swaps
38,811
41,852
Interest rate swaps
59,097
34,256
CCIRS and mark-to-market CCIRS swaps
11,649
7,359
Other derivative transactions
73,211
33,351
Subtotal
182,768
116,818
Total
246,462
160,483
Interest conditions and the remaining maturities of securities held for trading are as follows:
2021
2020
Within one year:
variable interest
111
78
fixed interest
4,163
2,319
4,274
2,397
Over one year:
variable interest
1,544
1,355
fixed interest
28,083
5,587
29,627
6,942
Non-interest bearing securities
1,732
2,390
Total
35,633
11,729
Securities held for trading denominated in HUF
81%
71%
Securities held for trading denominated in foreign currency
19%
29%
Securities held for trading total
100%
100%
Government bonds denominated in HUF
83%
68%
Government bonds denominated in foreign currency
17%
32%
Government securities total
100%
100%
Interest rates on securities held for trading in HUF
0%-6.75%
0.5%-6.75%
Interest rates on securities held for trading in foreign currency
0%-5.75%
0.5%-6.375%
Average interest on securities held for trading
1.17%
0.63%
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
41
NOTE 8: FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (in HUF mn)
[continued]
Interest conditions and the remaining maturities of securities mandatorily measured at fair value through profit or
loss are as follows:
2021
2020
Within one year:
variable interest
-
28
Over one year:
variable interest
-
5,314
Non-interest bearing securities
28,061
26,594
Total
28,061
31,936
Securities mandatorily measured at fair value through profit or loss
denominated in HUF
67%
58%
Securities mandatorily measured at fair value through profit or loss
denominated in foreign currency
33%
42%
Securities mandatorily measured at fair value through profit or loss
total
100%
100%
Interest rates on securities mandatorily measured at fair value through profit
or loss
-
2.49%
Average interest on securities mandatorily measured at fair value through
profit or loss
-
2.49%
NOTE 9: SECURITIES AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
(in HUF mn)
2021
2020
Securities at fair value through other comprehensive income
Government bonds
278,876
488,459
Mortgage bonds
217,941
332,667
Interest bearing treasury bills
63,115
9,957
Other securities
64,870
65,136
listed securities
43,759
42,776
in HUF
2,896
2,968
in foreign currency
40,863
39,808
-non-listed securities
21,111
22,360
in HUF
15,487
16,782
in foreign currency
5,624
5,578
Subtotal
624,802
896,219
Non-trading equity instruments
-non-listed securities
17,137
15,731
in HUF
528
528
in foreign currency
16,609
15,203
17,137
15,731
Securities at fair value through other comprehensive income total
641,939
911,950
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
42
NOTE 9: SECURITIES AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
(in HUF mn) [continued]
Detailed information of the non-trading equity instruments to be measured at fair value through other
comprehensive income:
Name
Currency
2021
2020
Garantiqa
HUF
392
392
Hage / Közvil / Pénzügykut
HUF
136
136
OBS
EUR
13,221
12,081
VISA A Preferred
USD
3,388
3,122
Interest conditions and the remaining maturities of FVOCI securities can be analysed as follows:
2021
2020
Within one year:
variable interest
1,089
3,779
fixed interest
66,970
123,481
68,059
127,260
Over one year:
variable interest
71,344
101,555
fixed interest
485,398
667,404
556,742
768,959
Non-interest bearing securities
17,138
15,731
Total
641,939
911,950
FVOCI securities denominated in HUF
73%
83%
FVOCI securities denominated in foreign currency
27%
17%
FVOCI securities total
100%
100%
Interest rates on FVOCI securities denominated in HUF
1.25%-11%
0.5%-11%
Interest rates on FVOCI securities denominated in foreign currency
0%-16%
0.625%-7.25%
Average interest on FVOCI securities
2.85%
2.17%
Certain fixed-rate mortgage bonds and other securities are hedged against interest rate risk. (See Note 45.4.)
2021
2020
Net gain / (loss) reclassified from other comprehensive income to statement
of profit or loss
(26,440)
(2,008)
Fair value of the hedged securities:
Government bonds
201,530
399,441
201,530
399,441
During the year ended 31 December 2021 and 2020 the Bank didn’t sell any of equity instruments designated to
measure at fair value through other comprehensive income.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
43
NOTE 10: SECURITIES AT AMORTISED COST (in HUF mn)
2021
2020
Government bonds
2,863,259
1,947,821
Other bonds
190,155
63,159
Mortgage bonds
24,309
-
Subtotal
3,077,723
2,010,980
Loss allowance
(6,685)
(3,288)
Total
3,071,038
2,007,692
Interest conditions and the remaining maturities of securities at amortised cost can be analysed as follows:
2021
2020
Within one year:
variable interest
8,101
-
fixed interest
305,694
57,746
313,795
57,746
Over one year:
variable interest
5,122
-
fixed interest
2,758,806
1,953,234
2,763,928
1,953,234
Total
3,077,723
2,010,980
The distribution of the securities at amortised cost by currency (%):
2021
2020
Securities at amortised cost denominated in HUF
83%
99%
Securities at amortised cost denominated in foreign currency
17%
1%
Securities at amortised cost total
100%
100%
Interest rates on securities at amortised cost
0.1%-12.75%
0.5%-7%
Average interest on securities at amortised cost denominated in HUF
2.84%
2.42%
An analysis of change in the loss allowance on securities at amortised cost:
2021
2020
Balance as at 1 January
3,288
1,443
Reclassification
1,281
-
Balance as at 1 January
4,569
1,443
Loss allowance
4,404
4,820
Release of loss allowance
(2,370)
(2,977)
FX movement
82
2
Closing balance
6,685
3,288
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
44
NOTE 11: LOANS (in HUF mn)
Loans measured at fair value through profit or loss
2021
2020
Within one year
32,091
25,732
Over one year
629,921
455,205
Loans measured at fair value through profit or loss total
662,012
480,937
Loans measured at fair value through profit or loss are mandatorily measured at fair value through profit or loss.
Loans measured at amortised cost, net of allowance for loan losses
2021
2020
Within one year
2,125,908
1,793,352
Over one year
2,062,114
1,748,078
Loans at amortised cost gross total
4,188,022
3,541,430
Loss allowance on loan losses
(155,557)
(123,670)
Loans at amortised cost total
4,032,465
3,417,760
An analysis of the loan portfolio by currency (%):
2021
2020
In HUF
62%
61%
In foreign currency
38%
39%
Total
100%
100%
Interest rates of the loan portfolio mandatorily measured at fair value through profit or loss are as follows (%):
2021
2020
Loans denominated in HUF
1.5% - 9.85%
1.5% - 9.85%
Average interest on loans denominated in HUF
4.56%
4.20%
Interest rates of the loan portfolio measured at amortised cost are as follows (%):
2021
2020
Loans denominated in HUF
0%-37.5%
0%-37.5%
Loans denominated in foreign currency
(0.59%)-13%
(0.50%)-13%
Average interest on loans denominated in HUF
6.64%
6.41%
Average interest on loans denominated in foreign currency
1.48%
2.24%
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
45
NOTE 11: LOANS (in HUF mn) [continued]
For an analysis of the loan portfolio by type please see Note 36.1.
An analysis of the change in the loss allowance on loans at amortised cost is as follows:
2021
2020
Balance as at 1 January
123,670
72,066
Reclassification
(1,281)
-
Balance as at 1 January
122,389
72,066
Loss allowance
221,084
213,618
Release of loss allowance
(180,291)
(156,383)
Use of loss allowance
(6,951)
(6,228)
Partial write-off
(1,733)
(2,797)
FX movement
1,059
3,394
Closing balance
155,557
123,670
The Bank sells non-performing loans without recourse at estimated fair value to a wholly owned subsidiary, OTP
Factoring Ltd.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
46
NOTE 12: INVESTMENTS IN SUBSIDIARIES, ASSOCIATES, JOINT VENTURES AND
OTHER INVESTMENTS (in HUF mn)
2021
2020
Investments in subsidiaries:
Controlling interest
2,006,178
1,965,197
Other
16,086
8,938
Subtotal
2,022,264
1,974,135
Impairment loss
(449,256)
(425,163)
Total
1,573,008
1,548,972
Other investments contain certain securities accounted at cost. These instruments do not have a quoted market
price in an active market and whose fair value cannot be reliably measured.
Significant subsidiaries
Investments in companies in which the Bank has a controlling interest (direct) are detailed below. All companies
are incorporated in Hungary unless indicated otherwise:
2021
2020
% Held
(direct/indirect)
Gross book
value
% Held
(direct/indirect)
Gross book
value
OTP Bank JSC (Ukraine)
100%
311,390
100%
311,390
DSK Bank EAD (Bulgaria)
100%
280,692
100%
280,692
OTP banka Srbija akcionarsko drustvo Novi
Sad (Serbia)
100%
262,759
100%
131,164
OTP banka Hrvatska d.d. (Croatia)
100%
205,349
100%
205,349
OTP Bank Romania S.A. (Romania)
100%
167,764
100%
133,987
OTP Mortgage Bank Ltd.
100%
154,294
100%
154,294
SKB Banka d.d. Ljubljana (Slovenia)
100.00%
107,689
100%
107,689
JSC "OTP Bank" (Russia)
98%
74,337
98%
74,335
Crnogorska komercijalna banka a.d.
(Montenegro)
100%
72,784
100%
72,784
LLC Alliance Reserve (Russia)
100%
50,074
100%
50,074
Air-Invest Llc.
100%
39,248
100%
36,748
OTP Holding Malta Ltd.
100%
32,359
100%
32,359
Balansz Private Open-end Investment Fund
100%
29,150
100%
29,150
Bank Center No. 1. Ltd.
100%
26,063
100%
26,063
OTP Factoring Ltd.
100%
25,411
100%
25,411
OTP banka Srbija a.d. (Serbia)
-
-
100%
127,140
Other
166,815
166,568
Total
2,006,178
1,965,197
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
47
NOTE 12: INVESTMENTS IN SUBSIDIARIES, ASSOCIATES, JOINT VENTURES AND
OTHER INVESTMENTS (in HUF mn) [continued]
An analysis of the change in the impairment loss is as follows:
2021
2020
Balance as at 1 January
425,163
427,770
Impairment loss for the period
59,132
10,052
Reversal of impairment loss
(31,712)
(10)
Use of impairment loss
(3,327)
(12,649)
Closing balance
449,256
425,163
The Bank decided that the recoverable amount is determined based on fair value less cost of disposal. The Bank
prepared impairment tests of the subsidiaries based on two different net present value calculation methods that
show the same result; however they represent different economical logics. On one hand is the discount cash flow
method (“DCF”) that calculates the value of the subsidiaries by discounting their expected cash flow; on the
other hand the economic value added (“EVA”) method estimates the value of the subsidiaries from the initial
invested capital and the present value of the economic profit that the companies are expected to generate in the
future. Applying the EVA method was more practically than DCF method because it gives a more realistic
picture about how the explicit period and the residual value can contribute to the value of the company.
The Bank, in its strategic plan, has taken into consideration the effects of the present global economic situation,
the cautious recovery of economic situation and outlook, the associated risks and their possible effect on the
financial sector as well as the current and expected availability of wholesale funding.
An analysis of the impairment loss by significant subsidiaries is as follows:
2021
2020
OTP Bank JSC (Ukraine)
207,397
207,397
OTP Bank Romania S.A. (Romania)
77,962
38,416
OTP Mortgage Bank Ltd.
65,096
65,096
OTP banka Srbija a.d. (Serbia)
43,477
53,383
OTP Life Annuity Ltd.
10,969
10,969
Air-Invest Ltd.
10,491
10,491
Monicomp Ltd.
8,632
-
Crnogorska komercijalna banka a.d. (Montenegro)
6,697
23,324
Balansz Private Open-end Investment Fund
5,566
-
OTP Real Estate Ltd.
5,557
5,557
R.E. Four d.o.o. (Serbia)
3,763
3,763
OTP Buildings s.r.o (Romania)
-
3,327
Total
445,607
421,723
Dividend income from significant subsidiaries and shares held-for-trading and shares measured at fair
value through other comprehensive income is as follows:
2021
2020
OTP Factoring Ltd.
44,000
45,463
OTP Bank JSC (Ukraine)
12,853
-
OTP banka dioničko društvo (Croatia)
12,244
-
Inga Kettő Llc.
11,000
-
OTP Holding Malta Ltd.
5,531
4,823
OTP Real Estate Investment Fund Management Ltd.
3,500
4,000
Monicomp Ltd.
1,173
3,800
Other
4,741
2,827
Subtotal
95,042
60,913
Dividend from shares held-for-trading
3,844
8
Dividend from shares fair value through other comprehensive income
151
52
Total
99,037
60,973
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
48
NOTE 12: INVESTMENTS IN SUBSIDIARIES, ASSOCIATES, JOINT VENTURES AND
OTHER INVESTMENTS (in HUF mn) [continued]
Significant associates and joint ventures
The main figures of the Bank’s indirectly owned associates and joint ventures at cost
1
:
As at 31 December 2021
List of associated entities
Carrying
amount
Ownership
of OTP
Bank
Profit after
tax
Country /
Headquarter
Activity
OTP Kockázati Fund I.
526
44.12%
(52)
Hungary /Budapest
Trusts, funds and similar financial entities
OTP-DayOne Magvető Fund
288
22.00%
13
Hungary /Budapest
Trusts, funds and similar financial entities
D-ÉG Thermoset Ltd. 'u.l.'
-
46.99%
-
Hungary / Dunaújváros
Wholesale of hardware, plumbing and heating equipment and supplies
Company for Cash Services AD
392
25.00%
(183)
Bulgaria / Sofia
Other financial service activities, exc. insurance and pension funding
Edrone spółka z ograniczoną
odpowiedzialnością
779
17.34%
(293)
Poland / Krakow
Computer programming activities
Graboplast Closed Co. Plc.
700
7.00%
n.a.
Hungary / Győr
Manufacture of builders’ ware of plastic
NovaKid Inc.
2,006
4.17%
(4,621)
USA / San Francisco
Online kids English learning platform operator
Banzai Cloud Closed Co. Plc.
374
17.42%
n.a.
Hungary /Budapest
Computer programming activities
ClodeCool Ltd.
1,770
20.15%
1
Hungary /Budapest
Other education n.e.c.
Pepita.hu Closed Co. Plc.
516
34.00%
(132)
Hungary / Szeghalom
Retail sale via mail order houses or via Internet
Seon Holdings Ltd.
4,756
23.86%
(4)
UK / London
Computer programming activities
Starschema Ltd.
3,944
36.19%
n.a.
Hungary /Budapest
Computer consultancy activities
VCC Live Group Closed Co. Plc.
1,672
49.56%
(203)
Hungary /Budapest
Computer programming activities
Virtual Solutaion Ltd.
-
8.33%
n.a.
Hungary /Budapest
Computer programming activities
Yieldigo s.r.o.
76
1.97%
(168)
Czech Republic/Prague
Computer programming activities
Szallas.hu Closed Co. Plc.
2
8,809
51.19%
1,278
Hungary / Miskolc
Web portals
Cursor Insight LTD
146
6.75%
(247)
UK / London
Computer programming activities
Fabetker Ltd.
1
20.48%
132
Hungary / Nádudvar
Manufacture of concrete products for construction purposes
OneSoil Ag.
318
3.72%
(1,058)
Switzerland / Zurich
Computer programming activities
Packhelp Spółka Akcyjna
2,160
1.00%
(3,038)
Poland / Warsaw
Manufacture of corrugated paper and paperboard
and of containers of paper and paperboard
PHOENIX PLAY Invest closed Co. Plc.
3,081
21.69%
(1)
Hungary /Budapest
Activities of holding companies
ALGORITHMIQ Invest Closed Co. Plc.
8,996
21.69%
792
Hungary /Budapest
Activities of holding companies
NGY Propertiers Investment SRL
12,331
14.54%
(22,567)
Romania / Bucharest
Renting and operating of own or leased real estate
1
Based on unaudited financial statements.
2
The Group does not control the entity even though it holds more than half of the voting rights.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
49
NOTE 12: INVESTMENTS IN SUBSIDIARIES, ASSOCIATES, JOINT VENTURES AND
OTHER INVESTMENTS (in HUF mn) [continued]
Significant associates and joint ventures [continued]
As at 31 December 2020
List of associated entities
Carrying
amount
Ownership
of OTP
Bank
Profit after
tax
Country / Headquarter
Activity
OTP Kockázati Fund I.
531
44.12%
(2)
Hungary /Budapest
Trusts, funds and similar financial entities
OTP-DayOne Magvető Fund
674
22.00%
(37)
Hungary /Budapest
Trusts, funds and similar financial entities
D-ÉG Thermoset Ltd. 'u.l.'
-
46.99%
-
Hungary / Dunaújváros
Wholesale of hardware, plumbing and heating equipment and supplies
Company for Cash Services AD
392
25.00%
(254)
Bulgaria / Sofia
Other financial service activities,
except insurance and pension funding n.e.c.
Edrone spółka z ograniczoną
odpowiedzialnością
497
17.34%
(79)
Poland / Krakow
Computer programming activities
Graboplasr Closed Co. Plc.
711
7.00%
(1,349)
Hungary / Győr
Manufacture of builders’ ware of plastic
NovaKid Inc.
497
4.17%
(398)
USA / San Francisco
Online kids English learning platform operator
Banzai Cloud Closed Co. Plc.
1,008
17.42%
13,430
Hungary /Budapest
Computer programming activities
ClodeCool Ltd.
1,797
20.15%
132
Hungary /Budapest
Other education n.e.c.
Pepita.hu Closed Co. Plc.
575
34.00%
3
Hungary / Szeghalom
Retail sale via mail order houses or via Internet
Seon Holdings Ltd.
378
23.86%
37
UK / London
Computer programming activities
Starschema Ltd.
1,310
36.19%
454
Hungary /Budapest
Computer consultancy activities
Tresorit S.A.
1,501
7.77%
232
Luxembourg/Luxembourg
Activities of holding companies
VCC Live Group Closed Co. Plc.
1,599
49.56%
(58)
Hungary /Budapest
Computer programming activities
Virtual Solutaion Ltd.
72
8.33%
(86)
Hungary /Budapest
Computer programming activities
Yieldigo s.r.o.
79
1.97%
103
Czech Republic / Prague
Computer programming activities
Szallas.hu Closed Co. Plc.
1
7,456
51.19%
595
Hungary / Miskolc
Web portals
1
The Group does not control the entity even though it holds more than half of the voting rights.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
50
NOTE 12: INVESTMENTS IN SUBSIDIARIES, ASSOCIATES, JOINT VENTURES AND
OTHER INVESTMENTS (in HUF mn) [continued]
Significant event related to investments
The Romanian Court of Registration registered a capital increase at OTP Bank Romania SA, the Romanian
subsidiary of OTP Bank. Accordingly, the registered capital of the Romanian subsidiary of OTP Bank was
increased to RON 2,079,253,200 from RON 1,829,253,120.
TP Bank signed a share sale and purchase agreement on purchasing 100% shareholding of Nova KBM d.d. and
its subsidiaries, which are 80% owned by funds managed by affiliates of Apollo Global Management, Inc. and
20% by EBRD. With a market share of 20.5% by total assets as of December 2020, Nova KBM d.d. is the 2nd
largest bank in the Slovenian banking market and as a universal bank it has been active in the retail and
corporate segments as well.
Serbian Court of Registration registered a capital increase at OTP banka Srbija a.d. Novi Sad, the Serbian
subsidiary of OTP Bank. Accordingly, the registered capital of the Serbian subsidiary of OTP Bank was
increased to RSD 56,830,752,260 from RSD 55,330,780,140.
OTP Bank signed a non-binding Memorandum of Agreement regarding the potential acquisition of the majority
stake of Ipoteka Bank and its subsidiaries with the Ministry of Finance of the Republic of Uzbekistan. Ipoteka
Bank is the fifth largest bank in Uzbekistan, with a market share of 8.5% based on total assets at the end of July
2021, with more than 1.2 million retail customers and a large corporate clientele.
OTP Bank signed an acquisition agreement with Alpha International Holdings Single Member S.A. on
purchasing 100% shareholding of Alpha Bank SH.A., the Albanian subsidiary of the Greek Alpha Bank S.A.
The purchase price has been agreed at Euro 55 million.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
51
NOTE 13: PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS (in HUF mn)
For the year ended 31 December 2021
Intangible assets
Property
Office equipment
and vehicles
Vehicles
Construction in
progress
Right of use
assets
Total
Cost
Balance as at 1 January
164,875
72,277
93,878
160
9,421
22,443
363,054
Additions
52,130
4,074
13,434
87
20,394
8,675
98,794
Disposals
(28,152)
(1,845)
(3,843)
(48)
(20,390)
-
(54,278)
Balance as at 31 December
188,853
74,506
103,469
199
9,425
31,118
407,570
Depreciation and Amortization
Balance as at 1 January
107,236
25,789
71,899
74
-
8,964
213,962
Charge for the year
23,032
3,284
9,190
25
-
5,161
40,692
Disposals
(3,576)
(757)
(3,685)
(37)
-
(238)
(8,293)
Balance as at 31 December
126,692
28,316
77,404
62
-
13,887
246,361
Net book value
Balance as at 1 January
57,639
46,488
21,979
86
9,421
13,479
149,092
Balance as at 31 December
62,161
46,190
26,065
137
9,425
17,231
161,209
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
52
NOTE 13: PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS (in HUF mn) [continued]
For the year ended 31 December 2020
Intangible assets
Property
Office equipment
and vehicles
Vehicles
Construction in
progress
Right of use
assets
Total
Cost
Balance as at 1 January
139,026
69,380
87,235
126
10,523
17,827
324,117
Additions
54,651
3,858
10,766
35
13,556
4,764
87,630
Disposals
(28,802)
(961)
(4,123)
(1)
(14,658)
(148)
(48,693)
Balance as at 31 December
164,875
72,277
93,878
160
9,421
22,443
363,054
Depreciation and Amortization
Balance as at 1 January
85,744
22,948
66,506
56
-
4,220
179,474
Charge for the year
21,492
3,192
9,495
19
-
4,750
38,948
Disposals
-
(351)
(4,102)
(1)
-
(6)
(4,460)
Balance as at 31 December
107,236
25,789
71,899
74
-
8,964
213,962
Net book value
Balance as at 1 January
53,282
46,432
20,729
70
10,523
13,607
144,643
Balance as at 31 December
57,639
46,488
21,979
86
9,421
13,479
149,092
The Bank has no intangible assets with indefinite useful life.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
53
NOTE 14: INVESTMENT PROPERTIES (in HUF mn)
For the year ended 31 December 2021 and 2020, respectively
2021
2020
Cost
Balance as at 1 January
2,577
3,061
Additions result from subsequent expenditure
2,640
38
Disposals
(204)
(522)
Balance as at 31 December
5,013
2,577
Depreciation and Amortization
Balance as at 1 January
641
680
Charge for the period
92
51
Disposals
(48)
(90)
Balance as at 31 December
685
641
Net book value
Balance as at 1 January
1,936
2,381
Balance as at 31 December
4,328
1,936
According to the opinion of the Management there is no significant difference between the fair value and the
carrying value of these properties.
Income and Expenses
2021
2020
Rental income
6
6
Depreciation
92
49
NOTE 15: FAIR VALUE OF DERIVATIVE FINANCIAL ASSETS DESIGNATED AS HEDGE
ACCOUNTING (in HUF mn)
Positive fair value of derivative financial assets designated as hedge accounting:
2021
2020
Interest rate swaps designated as fair value hedge
13,276
637
CCIRS designated as fair value hedge
5,471
6,180
Interest rate swaps designated as cash flow hedge
(1,020)
-
Total
17,727
6,817
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
54
NOTE 16: OTHER ASSETS
1
(in HUF mn)
2021
2020
Other financial assets
Receivables from OTP Employee Stock Ownership Program (OTP ESOP)
84,304
53,338
Prepayments and accrued income
16,391
14,721
Receivables from investment services
16,074
9,472
Stock exchange deposit
11,643
9,667
Trade receivables
10,519
9,731
Receivables from card operations
10,423
8,453
Accrued day one gain of loans provided at below-market interest
-
14,465
Receivables from suppliers
5,812
5,885
Other
3,729
9,375
158,895
135,107
Loss allowance
(5,148)
(7,928)
Other financial assets total
153,747
127,179
Other non-financial assets
Prepayments and accrued income
44,411
17,732
Receivable related to Hungarian Government subsidies
14,281
10,622
Other
12,563
14,743
71,255
43,097
Provision for impairment on other assets
(514)
(482)
Other non-financial assets total
70,741
42,615
Total
224,488
169,794
An analysis of the movement in the loss allowance on other financial assets is as follows:
2021
2020
Balance as at 1 January
7,928
5,646
Charge for the period
3,888
6,663
Release of loss allowance
(5,972)
(3,971)
Use of loss allowance
(707)
(537)
FX movement
11
127
Balance as at 31 December
5,148
7,928
An analysis of the movement in the loss allowance on other non-financial assets is as follows:
2021
2020
Balance as at 1 January
482
464
Charge for the period
86
81
Release of provision
(74)
(67)
FX movement
20
4
Balance as at 31 December
514
482
1
Other assets are expected to be recovered or settled no more than twelve months after the reporting period.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
55
NOTE 17: AMOUNTS DUE TO BANKS AND DEPOSITS FROM THE NATIONAL BANK OF
HUNGARY AND OTHER BANKS (in HUF mn)
2021
2020
Within one year:
In HUF
354,647
172,799
In foreign currency
81,550
41,643
436,197
214,442
Over one year:
In HUF
588,161
457,882
In foreign currency
26,845
94,653
615,006
552,535
Subtotal
1,051,203
766,977
Total
1,051,203
766,977
Interest rates on amounts due to banks and deposits from the NBH and other banks are as follows (%):
2021
2020
Within one year:
In HUF
(2.4%) - 4.5%
0%-20%
In foreign currency
(2.4%) - 8.5%
(0.56%)-0.26%
Over one year:
In HUF
(2.4%) - 1.3%
(2.4%)-1.43%
In foreign currency
(2.4%) - 1.5%
2.4%)-4.84%
Average interest on amounts due to banks in HUF
1.26%
0.72%
Average interest on amounts due to banks in foreign currency
1.14%
1.42%
NOTE 18: REPO LIABILITIES (in HUF mn)
2021
2020
Within one year:
In HUF
49,726
-
49,726
-
Over one year:
In HUF
-
73
In foreign currency
36,854
109,539
36,854
109,612
Subtotal
86,580
109,612
Total
86,580
109,612
Interest rates on repo liabilities are as follows (%):
2021
2020
Within one year:
In HUF
1.5% - 2.8%
-
Over one year:
In foreign currency
(0.35%)
0.63%-3.85%
Average interest on repo liabilities in HUF
11.67%
1.21%
Average interest on repo liabilities in foreign currency
0.67%
1.05%
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
56
NOTE 19: DEPOSITS FROM CUSTOMERS (in HUF mn)
2021
2020
Within one year:
In HUF
7,823,118
6,412,897
In foreign currency
2,079,643
1,438,255
9,902,761
7,851,152
Over one year:
In HUF
45,771
44,583
45,771
44,583
Subtotal
9,948,532
7,895,735
Interest rates on deposits from customers are as follows (%):
2021
2020
Within one year in HUF
(2.48%)-7.96%
(4.58%)-7.96%
Over one year in HUF
0.01%-2.4%
0.01%-0.4%
In foreign currency
(0.6%)-17.2%
(0.58%)-15.5%
Average interest on deposits from customers in HUF
0.16%
(0.07%)
Average interest on deposits from customers in foreign currency
0.01%
(0.04%)
An analysis of deposits from customers by type, not including accrued interest, is as follows:
2021
2020
Retail deposits
4,475,933
45%
3,840,950
49%
Household deposits
4,475,933
45%
3,840,950
49%
Corporate deposits
5,472,599
55%
4,054,785
51%
Deposits to medium and large corporates
4,639,198
47%
3,301,434
42%
Municipality deposits
833,401
8%
753,351
10%
Total
9,948,532
100%
7,895,735
100%
NOTE 20: LIABILITIES FROM ISSUED SECURITIES (in HUF mn)
2021
2020
Within one year:
In HUF
12,048
11,115
In foreign currency
-
1,356
12,048
12,471
Over one year:
In HUF
10,105
15,964
10,105
15,964
Total
22,153
28,435
Interest rates on liabilities from issued securities are as follows (%):
2021
2020
Issued securities denominated in HUF
0%-1.7%
0%-1.7%
Issued securities denominated in foreign currency
-
0.01%-1.11%
Average interest on issued securities denominated in HUF
4.9%
1.03%
Average interest on issued securities denominated in foreign currency
-
1.12%
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
57
NOTE 20: LIABILITIES FROM ISSUED SECURITIES (in HUF mn) [continued]
Term Note Program in the value of HUF 200 billion for the year of 2021/2022
On 28 May 2021 the Bank initiated term note program in the value of HUF 200 billion with the intention of
issuing registered dematerialized bonds in public. The NBH approved on 8 July 2021 the prospectus of Term
Note Program. The prospectus is valid for 12 months following the disclosure.
The Issuer can initiate to introduce the bonds issued under the program to the Hungarian and to other stock
exchanges without any obligations.
Term Note Program in the value of HUF 200 billion for the year of 2020/2021
On 21 April 2020 the Bank initiated term note program in the value of HUF 200 billion with the intention of
issuing registered dematerialized bonds in public. The NBH approved on 9 July 2020 the prospectus of Term
Note Program and the disclosure as at 10 July 2020. The prospectus is valid for 12 months following the
disclosure.
The Issuer can initiate to introduce the bonds issued under the program to the Hungarian and to other stock
exchanges without any obligations.
Hedge accounting
Certain issued structured securities are hedged by the Bank with interest rate swaps (“IRS”) which exchange the
fixed and floating interest rate with the interest rate of the securities between the parties at a notional amount that
equals the nominal amount of the hedged securities. These are considered as fair value hedge relationships as
they cover the interest rate risk arising from the coupons of the hedged securities. OTP Bank does not intend to
be exposed to the risk embedded in the structured bonds, consequently as part of interest rate swap transaction
the structured interest payments are swapped to floating interest rate. This hedging relationship meets all of the
following hedge effectiveness requirements:
• there is an economic relationship between the hedged item and the hedging instrument
• the effect of credit risk does not dominate the value changes that result from that economic relationship
• the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged
item that the Bank actually hedges and the quantity of the hedging instrument that the Bank actually
uses to hedge that quantity of hedged item
The cash-flows of the fixed rate securities issued by the Bank are exposed to the changes in the HUF/EUR
foreign exchange rate and the volatility of the quoted interest rates of EUR and HUF. The interest rate risk and
foreign exchange risk related to these securities are hedged with EUR and HUF IRS transactions, where the
fixed interests were swapped to payments linked to 3 month HUF BUBOR and EURIBOR, resulting in a
decrease in the interest rate and foreign exchange exposure of issued securities.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
58
NOTE 20: LIABILITIES FROM ISSUED SECURITIES (in HUF mn) [continued]
Issued securities denominated in HUF as at 31 December 2021
Name
Date of
issuance
Maturity
Nominal value
in HUF million
Amortised cost in HUF
million
Interest
conditions
Hedged
1
OTP_DK_22/II
29/05/2020
31/05/2022
3,173
3,164
discount
2
OTPRF2022A
22/03/2012
23/03/2022
2,321
2,513
indexed
1.70
hedged
3
OTP_DK_25/3
31/05/2021
31/05/2025
1,216
1,138
discount
4
OTPRF2022B
22/03/2012
23/03/2022
934
1,011
indexed
1.70
hedged
5
OTP_DK_22/I
15/12/2018
31/05/2022
993
985
discount
6
OTP_DK_23/II
29/05/2020
31/05/2023
997
981
discount
7
OTPRF2023A
22/03/2013
24/03/2023
899
977
indexed
1.70
hedged
8
OTPRF2022E
29/10/2012
31/10/2022
862
933
indexed
1.70
hedged
9
OTP_DK_24/3
31/05/2021
31/05/2024
883
848
discount
10
OTPRF2022F
28/12/2012
28/12/2022
708
773
indexed
1.70
hedged
11
OTP_DK_27/II
31/05/2021
31/05/2027
795
703
discount
12
OTP_DK_23/I
15/12/2018
31/05/2023
717
694
discount
13
OTP_DK_26/II
31/05/2021
31/05/2026
707
644
discount
14
OTP_DK_24/II
29/05/2020
31/05/2024
592
573
discount
15
OTP_DK_28/I
31/05/2021
31/05/2028
669
572
discount
16
OTP_DK_25/II
29/05/2020
31/05/2025
592
564
discount
17
OTPX2022B
18/07/2012
18/07/2022
164
549
indexed
1.70
hedged
18
OTP_DK_24/I
30/05/2019
31/05/2024
426
400
discount
19
OTP_DK_26/I
29/05/2020
31/05/2026
392
366
discount
20
OTPX2023A
22/03/2013
24/03/2023
312
366
indexed
1.70
hedged
21
OTPX2024B
10/10/2014
16/10/2024
295
336
indexed
0.70
hedged
22
OTP_DK_29/I
31/05/2021
31/05/2029
403
332
discount
23
OTPRF2022D
28/06/2012
28/06/2022
286
324
indexed
1.70
hedged
24
OTPX2022C
29/10/2012
28/10/2022
177
317
indexed
1.70
hedged
25
OTPX2022D
28/12/2012
27/12/2022
238
290
indexed
1.70
hedged
26
OTPX2024A
18/06/2014
21/06/2024
241
277
indexed
1.30
hedged
27
OTPX2024C
15/12/2014
20/12/2024
242
275
indexed
0.60
hedged
28
OTPX2023B
28/06/2013
26/06/2023
198
272
indexed
0.60
hedged
29
OTPRF2022C
28/06/2012
28/06/2022
209
266
indexed
1.70
hedged
30
OTPX2022A
22/03/2012
23/03/2022
175
236
indexed
-
hedged
31
OTP_DK_25/I
30/05/2019
31/05/2025
104
94
discount
32
OTP_DK_27/I
29/05/2020
31/05/2027
95
87
discount
33
OTP_DK_30/I
31/05/2021
31/05/2030
104
82
discount
Other
211
211
indexed
Subtotal issued securities in HUF
21,330
22,153
Total
21,330
22,153
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
59
NOTE 20: LIABILITIES FROM ISSUED SECURITIES (in HUF mn) [continued]
Issued securities denominated in foreign currency as at 31 December 2020
Name
Date of
issuance
Maturity
Currency
Nominal
value in FX
million
Nominal
value in
HUF
million
Amortised
cost in FX
million
Amortised
cost in HUF
million
Interest
conditions
(in % actual)
hedged
1
OTP_VK1_21/1
20/02/2020
20/02/2021
USD
1.39
414
1.39
414
variable
0.01
2
OTP_VK1_21/2
02/04/2020
02/04/2021
USD
1.24
370
1.24
370
variable
0.01
3
OTP_VK1_21/3
14/05/2020
14/05/2021
USD
1.18
351
1.18
351
variable
0.01
4
OTP_VK1_21/4
18/06/2020
18/06/2021
USD
0.74
221
0.74
221
variable
0.01
Subtotal issued securities in foreign currency
4.55
1,356
4.55
1,356
Issued securities denominated in HUF as at 31 December 2020
Name
Date of
issuance
Maturity
Nominal value
in HUF million
Amortised cost in HUF
million
Interest
conditions
Hedged
1
OTP_DK_21/I
15/12/2018
31/05/2021
3,520
3,501
discount
2
OTP_DK_22/II
29/05/2020
31/05/2022
3,175
3,133
discount
3
OTPRF2021B
20/10/2011
25/10/2021
2,894
2,954
indexed
-
hedged
4
OTPRF2021A
05/07/2011
13/07/2021
2,607
2,807
indexed
-
hedged
5
OTPRF2022A
22/03/2012
23/03/2022
2,065
1,920
indexed
1.70
hedged
6
OTP_DK_23/II
29/05/2020
31/05/2023
997
970
discount
7
OTP_DK_22/I
15/12/2018
31/05/2022
993
965
discount
8
OTPRF2022B
22/03/2012
23/03/2022
831
772
indexed
1.70
hedged
9
OTPRF2023A
22/03/2013
24/03/2023
787
740
indexed
1.70
hedged
10
OTPRF2022E
29/10/2012
31/10/2022
761
715
indexed
1.70
hedged
11
OTP_DK_23/I
15/12/2018
31/05/2023
717
679
discount
12
OTPRF2022F
28/12/2012
28/12/2022
623
592
indexed
1.70
hedged
13
OTP_DK_24/II
29/05/2020
31/05/2024
592
566
discount
14
OTP_DK_25/II
29/05/2020
31/05/2025
592
555
discount
15
OTPRF2021C
21/12/2011
30/12/2021
527
544
indexed
-
hedged
16
OTPX2022B
18/07/2012
18/07/2022
172
440
indexed
1.70
hedged
17
OTP_DK_24/I
30/05/2019
31/05/2024
426
390
discount
18
OTPRF2021D
21/12/2011
30/12/2021
372
381
indexed
-
hedged
19
OTPX2021B
17/06/2011
21/06/2021
245
370
indexed
-
hedged
20
OTP_DK_26/I
29/05/2020
31/05/2026
392
361
discount
21
OTPX2023A
22/03/2013
24/03/2023
324
327
indexed
1.70
hedged
22
OTPX2021D
21/12/2011
27/12/2021
259
325
indexed
-
hedged
23
OTPX2022D
28/12/2012
27/12/2022
248
299
indexed
1.70
hedged
24
OTPX2024B
10/10/2014
16/10/2024
295
284
indexed
0.70
hedged
25
OTPRF2022D
28/06/2012
28/06/2022
260
251
indexed
1.70
hedged
26
OTPX2021A
01/04/2011
01/04/2021
183
246
indexed
-
hedged
27
OTPX2024A
18/06/2014
21/06/2024
241
237
indexed
1.30
hedged
28
OTPX2022C
29/10/2012
28/10/2022
201
233
indexed
1.70
hedged
29
OTPX2024C
15/12/2014
20/12/2024
242
232
indexed
0.60
hedged
30
OTPX2023B
28/06/2013
26/06/2023
198
225
indexed
0.60
hedged
31
OTPX2022A
22/03/2012
23/03/2022
201
214
indexed
-
hedged
32
OTPRF2022C
28/06/2012
28/06/2022
190
196
indexed
1.70
hedged
33
OTPX2021C
19/09/2011
24/09/2021
231
192
indexed
-
hedged
34
OTP_DK_25/I
30/05/2019
31/05/2025
104
91
discount
35
OTP_DK_27/I
29/05/2020
31/05/2027
95
85
discount
36
OTPRF2021E
21/12/2011
30/12/2021
76
74
indexed
-
hedged
37
Other
213
213
Subtotal issued securities in HUF
26,849
27,079
Total
28,205
28,435
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
60
NOTE 21: FINANCIAL LIABILITIES DESIGNATED AS FAIR VALUE THROUGH PROFIT OR
LOSS (in HUF mn)
2021
2020
Within one year:
In HUF
1,784
2,010
1,784
2,010
Over one year:
In HUF
18,349
23,892
18,349
23,892
Total
20,133
25,902
Contractual amount outstanding
21,479
23,332
Interest rates on financial liabilities designated as fair value through profit or loss are as follows (%):
2021
2020
Within one year:
In HUF
0.46%-2.46%
0.51% - 2.5%
Over one year:
In HUF
0.01%-2.9%
0% - 2.5%
Average interest on amounts due to banks in HUF
2.15%
2.46%
Certain MFB refinanced loan receivables are categorised as fair value through profit or loss based on SPPI test.
Related refinancing loans at the liability side are categorised as fair value through profit or loss based on fair
value option due to accounting mismatch as provided by the IFRS 9 standard.
NOTE 22: HELD FOR TRADING DERIVATIVE FINANCIAL LIABILITIES (in HUF mn)
Negative fair value of held for trading derivative financial liabilities by deal types:
2021
2020
Interest rate swaps
78,066
28,812
Foreign currency swaps
45,884
34,327
CCIRS and mark-to-market CCIRS
7,786
7,285
Other derivative contracts
60,525
29,563
Total
192,261
99,987
NOTE 23: FAIR VALUE OF DERIVATIVE FINANCIAL LIABLITIES DESIGNATED AS
HEDGE ACCOUNTING (in HUF mn)
Fair value of derivative financial liabilities designated as hedge accounting is detailed as follows:
2021
2020
IRS designated as fair value hedge
5,747
5,266
CCIRS designated as fair value hedge
5,325
5,865
IRS designated as cash flow hedge
7,618
(8,027)
Total
18,690
3,104
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
61
NOTE 24: OTHER LIABILITIES
1
AND PROVISIONS (in HUF mn)
2021
2020
Reclassified
Other financial liabilities
Liabilities from investment services
87,582
62,490
Accrued expenses
27,546
15,473
Accounts payable
18,754
24,121
Liabilities due to short positions
16,904
9,131
Liabilities from customer's credit card payments
14,574
11,195
Accrued day one gain of loan liabilities at below-market interest
-
14,391
Other
11,383
13,249
Other financial liabilities total
176,743
150,050
Other non-financial liabilities
Technical accounts
41,186
37,304
Current income tax payable
10,080
8,216
Social contribution
4,516
3,746
Accrued expenses
3,062
2,902
Other
2,850
1,309
Other non-financial liabilities total
61,694
53,477
Other liabilities total
238,437
203,527
The provision on other liabilities, off-balance sheet commitments and contingent liabilities are detailed as
follows:
2021
2020
Provision for losses on other off-balance sheet commitments and contingent
liabilities
17,768
17,490
Provisions in accordance with IFRS 9
17,768
17,490
Provision for litigation
259
199
Provision for retirement pension and severance pay
975
1,300
Provision on other long-term employee benefits
-
723
Provision on other liabilities
2,525
194
Provisions in accordance with IAS 37
3,759
2,416
Total
21,527
19,906
Movements in the provision for losses on commitments and contingent liabilities in accordance with IFRS 9 can
be summarized as follows:
2021
2020
Opening balance
17,490
14,288
Provision for the period
47,626
56,863
Release of provision for the period
(47,496)
(54,044)
FX revaluation
148
383
Closing balance
17,768
17,490
Movements in the provision for losses on commitments and contingent liabilities in accordance with IAS 37 can
be summarized as follows:
2021
2020
Opening balance
2,416
2,508
Provision for the period
14,286
20,970
Release of provision
(11,608)
(21,062)
Use of provision
(1,335)
-
Closing balance
3,759
2,416
1
Other liabilities are expected to be recovered or settled no more than twelve months after the reporting period.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
62
NOTE 25: SUBORDINATED BONDS AND LOANS (in HUF mn)
2021
2020
Within one year
In foreign currency
2,841
2,972
Over one year:
In foreign currency
268,935
301,271
Total
271,776
304,243
Interest rates on subordinated bonds and loans are as follows (%):
2021
2020
Subordinated bonds and loans denominated in foreign currency
2.5%-2.9%
2.5%-2.9%
Average interest on subordinated bonds and loans denominated in foreign currency
2.74%
2.85%
Subordinated loans and bonds are detailed as follows as at 31 December 2021:
Type
Nominal
value
Date of
issuance
Date of
maturity
Issue price
Interest conditions
Current
interest rate
Subordinated
bond
EUR 231
million
7 November
2006
Perpetual
99.375%
Three-month EURIBOR +
3%, variable (payable
quarterly)
2.428%
Subordinated
bond
EUR 500
million
15 July
2019
15 July
2029
99.738%
Fixed 2.875% annual in the
first 5 years and callable
after 5 years, variable after
year 5 (payable annually)
calculated as a sum of the
initial margin (320 basis
point) and the 5 year mid-
swap rate prevailing at the
and of the 5 year.
2.875%
NOTE 26: SHARE CAPITAL (in HUF mn)
2021
2020
Authorized, issued and fully paid:
Ordinary shares
28,000
28,000
The nominal value of the shares is HUF 100 per shares. All of the shares are ordinary shares representing the
same rights to the shareholders. Furthermore there are no restrictions on the distribution of dividends and the
repayment of capital.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
63
NOTE 27: RETAINED EARNINGS AND RESERVES (in HUF mn)
Based on the instructions of Act C of 2000 on accounting (“Act on Accounting”) financial statements of the
Bank are prepared in accordance with IFRS as issued by the IASB as adopted by the EU.
In 2021, the Bank did not pay dividend based on the earlier NBH warnings issued due to covid moratoria. In
2022 dividend of HUF 119 billion from the profit of the years 2019 and 2020 and HUF 1 billion from the profit
of the year 2021 (totally HUF 120 billion) are expected to be proposed by the Management, which means HUF
425,89 (for the year 2019 and 2020) and HUF 3,57 (for the year 2021) dividend per share payable to
shareholders. In the opinion of the Management dividend is still considered to be payable, which will be decided
on the Bank’s Board meeting in March taken in consideration the Russian-Ukrainian conflict.
Based on paragraph 114/B of Act on Accounting Equity Correlation Table is prepared and disclosed as a part of
the explanatory notes for the reporting date by the Bank.
On 19 October 2006 the Bank sold 14.5 million Treasury shares owned by OTP Group through an issue of
Income Certificates Exchangeable for Shares ("ICES"). Within the transaction 10 million shares owned by OTP
Bank and 4.5 million OTP shares owned by OTP Fund Management Ltd. were sold during the underwriting
period of ICES on the weighted average market price (HUF 7,080) of the Budapest Stock Exchange. The shares
have been purchased by Opus Securities S.A. ("OPUS"), which issued an exchangeable bond with a total face
value of EUR 514,274,000 backed by those shares. The exchangeable bonds have been sold at a 32% premium
over the selling price of the shares. The EUR denominated exchangeable bonds were perpetual and the investors
could exercise the conversion right between year 6 and 10. The bonds carry a fixed coupon of 3.95% during the
first 10 years thereafter the Issuer had the right to redeem the bonds at face value. Following the year 10, the
bonds carry a coupon of 3 month EURIBOR +3%. OTP Bank had discretional right to cancel the payments. The
interest payable was non-cumulative.
Due to the conditions described above, ICES was accounted as an equity instrument and therefore any payment
was accounted as equity distribution paid to ICES holders.
On 14 September 2021 the Bank claimed to terminate the subordinated swap agreement related to ICES
transaction as at 29 October 2021, and to exercise its option for repurchasing approximately 14.5 million OTP
ordinary shares held by Opus at market price based on the agreement. On the same day the Bank recognised
liability due to Opus as a reduction of EUR 514 million in the shareholder’s equity.
Treasury shares were repurchased on 29 October 2021 on a price HUF 18.118 and on the same day the swap
transaction was financially settled. As a result of the closure of the subordinated swap agreement the Bank’s
shareholder’s equity increased by HUF 75.422 million as follows:
in HUF mn
Recognition of liability against shareholder’s equity
179,767
equity decrease
Payment of price for treasury shares by Opus
262,648
equity increase
Tax effect accounted in retained earnings
7,459
equity decrease
Approximately 12 million treasury shares were sold to OTP SECOP I. (‘OTP Special Employee Stock
Ownership Program’) and OTP SECOP II.
Equity correlation table shall contain the opening and closing balances of the shareholder’s equity in accordance
with IFRS, furthermore deducted from this the opening and closing balances of the specified equity elements.
Equity correlation table shall contain also untied retained earnings available for the payment of dividends,
covering retained earnings from the last financial year for which accounts have been adopted comprising net
profit for the period of that financial year minus cumulative unrealized gains claimed in connection with any
increase in the fair value of investment properties, as provided in IAS 40 - Investment Property, reduced by the
cumulative income tax accounted for under IAS 12 - Income Taxes.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
64
NOTE 27: RETAINED EARNINGS AND RESERVES (in HUF mn) [continued]
Share capital
Share capital is the portion of the Bank’s equity that has been obtained by the issue of shares in the corporation
to a shareholder, usually for cash.
Share-based payment reserve
Share-based payment reserve represents the increase in the equity due to the goods or services were received by
the Bank in an equity-settled share-based payment transaction, valued at the fair value of the goods or services
received.
Retained earnings
Profit of previous years generated by the Bank that are not distributed to shareholders as dividends.
Put option reserve
OTP Bank Plc. and MOL Plc. entered into a share swap agreement in 16 April 2009, whereby OTP has changed
24,000,000 OTP ordinary shares for 5,010,501 „A series” MOL shares. The final maturity of the share swap
agreement is 11 July 2022, until which any party can initiate cash or physical settlement of the transaction.
Put option reserve represents the written put option over OTP ordinary shares were accounted as a deduction
from equity at the date of OTP-MOL share swap transaction.
Other comprehensive income
Other comprehensive income comprises items of income and expense (including reclassification adjustments)
that are not recognised in profit or loss as required or permitted by other IFRSs.
General reserve
The Bank shall place ten per cent of the after-tax profit of the year into general reserve prescribed by the Act
CCXXXVII of 2013 on Credit Institutions and Financial Enterprises. The Bank is allowed to use general
reserves only to cover operating losses arising from their activities.
Tied-up reserve
The tied-up reserve shall consist of sums tied up from the capital reserve and from the retained earnings.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
65
NOTE 27: RETAINED EARNINGS AND RESERVES (in HUF mn) [continued]
The equity correlation table of the Bank based on paragraph 114/B of Act on Accounting as at 31 December 2021:
31 December 2021
Closing balance
Share
Capital
Capital
reserve
Share-based
payment
reserve
Retained
earnings and
reserves
Option
reserve
Treasury
Shares
Revaluation
reserve
Tied-up
reserve
Net profit
for the year
Total
Components of Shareholder’s
equity in accordance with
IFRS
28,000
52
46,162
1,855,090
(55,468)
(58,872)
-
-
-
1,814,964
Unused portion of reserve for
developments
-
-
-
(497)
-
-
-
497
-
-
Other comprehensive income
-
-
-
(5,078)
-
-
5,078
-
-
-
Option reserve
-
(55,468)
-
-
55,468
-
-
-
-
-
Treasury shares
-
(58,872)
-
-
-
58,872
-
-
-
-
Share based payments
-
46,162
(46,162)
-
-
-
-
-
-
-
Net profit for the year
-
-
-
(125,339)
-
-
-
-
125,339
-
General reserve
-
-
-
(117,905)
-
-
-
117,905
-
-
Components of Shareholder’s
equity in accordance with
paragraph 114/B of Act on
Accounting
28,000
(68,126)
-
1,606,271
-
-
5,078
118,402
125,339
1,814,964
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
66
NOTE 27: RETAINED EARNINGS AND RESERVES (in HUF mn) [continued]
The equity correlation table of the Bank based on paragraph 114/B of Act on Accounting as at 1 January 2021:
1 January 2021
Opening balance
Share
Capital
Capital
reserve
Share-based
payment
reserve
Retained
earnings and
reserves
Option
reserve
Treasury
Shares
Revaluation
reserve
Tied-up
reserve
Net profit for
the year
Total
Components of Shareholder’s
equity in accordance with IFRS
28,000
52
42,573
1,709,976
(55,468)
(46,799)
-
-
-
1,678,334
Unused portion of reserve for
developments
-
-
-
(998)
-
-
-
998
-
-
Other comprehensive income
-
-
-
(44,356)
-
-
44,356
-
-
-
Portion of supplementary payment
recognised as an asset
-
-
-
-
-
-
-
-
-
-
Option reserve
-
(55,468)
-
-
55,468
-
-
-
-
-
Treasury shares
-
(46,799)
-
-
-
46,799
-
-
-
-
Share based payments
-
42,573
(42,573)
-
-
-
-
-
-
-
Net profit for the year
-
-
-
(92,474)
-
-
-
-
92,474
-
General reserve
-
-
-
(105,371)
-
-
-
105,371
-
-
Components of Shareholder’s
equity in accordance with
paragraph 114/B of Act on
Accounting
28,000
(59,642)
-
1,466,777
-
-
44,356
106,369
92,474
1,678,334
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
67
NOTE 27: RETAINED EARNINGS AND RESERVES (in HUF mn) [continued]
Calculated untied retained earnings in accordance with paragraph 114/B of Act on Accounting
2021
2020
Retained earnings
1,606,271
1,466,777
Net profit for the year
125,339
92,474
Untied retained earnings
1,731,610
1,559,251
Items of retained earnings and other reserves
2021
2020
Retained earnings
1,606,770
1,465,037
Capital reserve
52
52
Option reserve
(55,468)
(55,468)
Other reserves
117,903
105,370
Fair value reserve of financial instruments measured at fair value through
other comprehensive income
8,646
44,356
Share-based payment reserve
46,162
42,573
Fair value reserve of derivative financial instruments designated as cash-flow
hedge
(3,568)
2,739
Net profit for the period
125,339
92,474
Retained earnings and other reserves
1,845,836
1,697,133
Fair value adjustment of securities at fair value through other comprehensive income
2021
2020
Balance as at 1 January
36,441
51,011
Change of fair value adjustment
(34,484)
(22,069)
Deferred tax related to change of fair value adjustment
2,801
1,973
Other transfer to retained earnings
(5,070)
-
Deferred tax related to other transfer to retained earnings
457
-
Transfer to p/l due to derecognition
-
6,073
Deferred tax related to accumulated transfer to p/l
-
(547)
Closing balance
145
36,441
Expected credit loss on securities at fair value through other comprehensive income
2021
2020
Balance as at 1 January
1,714
1,702
Increase of loss allowance
1,103
795
Release of loss allowance
(1,654)
(783)
FX movement
11
-
Closing balance
1,174
1,714
Fair value changes of equity instruments as at fair value through other comprehensive income
2021
2020
Balance as at 1 January
6,201
10,262
Change of fair value correction
1,407
(3,276)
Deferred tax related to change of fair value correction
(281)
310
Transfer to retained earnings
-
(1,095)
Closing balance
7,327
6,201
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
68
NOTE 28: TREASURY SHARES (in HUF mn)
2021
2020
Nominal value (ordinary shares)
325
433
Carrying value at acquisition cost
58,872
46,799
The changes in the carrying value of treasury shares are due to repurchase and sale transactions on market
authorised by the General Assembly.
Change in number of shares:
2021
2020
Number of shares as at 1 January
4,331,169
320,165
Additions
16,251,451
8,296,388
Disposals
(17,332,636)
(4,285,384)
Number of shares at the end of the period
3,249,984
4,331,169
Change in carrying value:
2021
2020
Balance as at 1 January
46,799
2,636
Additions
276,433
85,922
Disposals
(264,360)
(41,759)
Closing Balance
58,872
46,799
2021
2020
Face value of treasury shares held by OTP Group members
766
1,959
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
69
NOTE 29: INTEREST INCOME AND EXPENSES (in HUF mn)
2021
2020
Interest income accounted for using the effective interest rate method from /
on
Loans at amortised cost
168,388
143,652
FVOCI securities
21,456
29,095
Securities at amortised cost
61,085
48,654
Placements with other banks
33,544
12,248
Financial liabilities
3,337
1,544
Amounts due from banks and balances with National Bank of Hungary
14,245
4,391
Repo receivables
318
49
Subtotal
302,373
239,633
Income similar to interest income
Loans mandatorily measured at fair value through profit or loss
26,045
15,094
Swap and forward deals related to Placements with other banks
68,975
56,341
Swap and forward deals related to Loans at amortised cost
11,487
14,011
Swap and forward deals related to FVOCI securities
(850)
(3,789)
Other
6
6
Subtotal
105,663
81,663
Interest income total
408,036
321,296
Interest expense due to / from / on
Amounts due to banks and deposits from the National Bank of Hungary and
other banks
107,928
67,747
Deposits from customers
33,403
19,598
Leasing liabilities
214
257
Liabilities from issued securities
377
414
Subordinated bonds and loans
7,890
8,327
Other
92
49
Financial assets
2,193
1,622
Repo liabilities
3,394
1,616
Subtotal
155,491
99,630
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
70
NOTE 30: RISK COST (in HUF mn)
2021
2020
Loss allowance of loans at amortised cost
Loss allowance
218,534
211,543
Release of loss allowance
(181,270)
(156,385)
37,264
55,158
Loss allowance of sight deposits and placements with other banks
Loss allowance
20,709
12,724
Release of loss allowance
(18,912)
(10,497)
1,797
2,227
Loss allowance of placements with other banks
Loss allowance
449
362
Release of loss allowance
(669)
(76)
(220)
286
Loss allowance of FVOCI securities
Loss allowance
1,103
2,119
Release of loss allowance
(1,654)
(2,116)
(551)
3
Loss allowance of securities at amortised cost
Loss allowance
4,404
4,822
Release of loss allowance
(2,369)
(2,977)
2,035
1,845
Provision on loan commitments and financial guarantees
Provision for the period
47,626
57,246
Release of provision
(47,496)
(54,044)
130
3,202
Change in the fair value attributable to changes in the credit risk of loans
mandatorily measured at fair value through profit of loss
16,255
405
Risk cost total
56,710
63,126
NOTE 31: NET PROFIT FROM FEES AND COMMISSIONS (in HUF mn)
Income from fees and commissions:
2021
2020
Fees and commissions related to lending
12,164
11,141
Deposit and account maintenance fees and commissions
123,800
106,341
Fees and commission related to the issued bank cards
89,243
77,115
Fees and commissions related to security trading
28,227
25,414
Fx margin
16,155
6,159
Fees and commissions paid by OTP Mortgage Bank Ltd.
11,187
8,725
Net insurance fee income
8,481
7,155
Other
11,546
17,731
Fees and commissions from contracts with customers
288,639
248,640
Total Income from fees and commissions:
300,803
259,781
Contract balances
2021
2020
Receivables, which are included in ‘other assets’
16,391
7,625
Loss allowance
196
(103)
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
71
NOTE 31: NET PROFIT FROM FEES AND COMMISSIONS (in HUF mn) [continued]
Performance obligations and revenue recognition policies:
Fee type
Nature and timing of satisfaction of performance
obligations, and the significant payment terms
Revenue recognition
under IFRS 15
Deposit and
account
maintenance fees
and commissions
The Bank provides a number of account management
services for both retail and corporate customers in which they
charge a fee. Fees related to these services can be typically
account transaction fees (money transfer fees, direct debit
fees, money standing order fees, etc.), internet banking fees
(e.g. OTP Direct fee), account control fees (e.g. sms fee), or
other fees for occasional services (account statement fees,
other administration fees, etc.).
Fees for ongoing account
management services are
charged on a monthly
basis during the period
when they are provided.
Transaction-based fees are
charged when the
transaction takes places or
charged monthly at the
end of the month.
Fees for ongoing account management services are charged
to the customer’s account on a monthly basis. The fees are
commonly fix amounts that can be vary per account package
and customer category.
In the case of the transaction based fees where the services
include money transfer the fee is charged when the
transaction takes place. The rate of the fee is typically
determined in a certain % of the transaction amount. In case
of other transaction-based fees (e.g. SMS fee), the fee is
settled monthly.
In case of occasional services the Bank basically charges the
fees when the services are used by the customer. The fees can
be fixed fees or they can be set in %.
The rates are reviewed by the Bank regularly.
Fees and
commission
related to the
issued bank cards
The Bank provides a variety of bank cards to its customers,
for which different fees are charged. The fees are basically
charged in connection with the issuance of cards and the
related card transactions.
Fees for ongoing services
are charged on a monthly
basis during the period
when they are provided.
Transaction-based fees are
charged when the
transaction takes places or
charged monthly at the
end of the month.
The annual fees of the cards are charged in advance in a fixed
amount. The amount of the annual card fee depends on the
type of card.
In case of transaction-based fees (e.g. cash
withdrawal/payment fee, merchant fee, interchange fee, etc.),
the settlement of the fees will take place immediately after
the transaction or on a monthly basis. The fee is typically
determined in % of the transaction with a fixed minimum
amount.
For all other cases where the Bank provides a continuous
service to the customers (e.g. card closing fee), the fees are
charged monthly. The fee is calculated in a fix amount.
The rates are reviewed by the Bank regularly.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
72
NOTE 31: NET PROFIT FROM FEES AND COMMISSIONS (in HUF mn) [continued]
Performance obligations and revenue recognition policies: [continued]
Fee type
Nature and timing of satisfaction of performance
obligations, and the significant payment terms
Revenue recognition
under IFRS 15
Fees and
commissions
related to security
account
management
services
The Bank provides its clients with security account
management services. Fees will be charged for account
management and transactions on accounts.
Fees for ongoing services
are charged quarterly or
annually during the period
when they are provided.
The fees are accrued
monthly.
Transaction-based fees are
charged when the
transaction takes places.
Account management fees are typically charged quarterly or
annually. The amount is determined in%, based on the stocks
of securities managed by the clients on the account in a given
period.
Fees for transactions on the securities account are charged
immediately after the transaction. They are determined in%,
based on the transaction amount.
Fees for complex services provided to clients (e.g. portfolio
management or custody) are typically charged monthly or
annually. The fees are fixed monthly amounts and in some
cases a bonus fee are charged.
Fees and
commissions paid
by OTP Mortgage
Bank Ltd.
The Bank provides a number of services to its subsidiaries, in
connection with fees are charged. These fees typically include
services related to various warranties and guarantees, credit
account management, agency activities, and marketing
activities.
Fees for ongoing services
are charged on a monthly
basis during the period
when they are provided.
Transaction-based fees are
charged when the
transaction takes places.
The credit account management fee granted to OTP Mortgage
Bank is settled on a monthly basis. It has a fixed part that is
based on the number of the managed credit accounts, and a
variable one determined by the profit split method.
The fees for the guarantee services provided by the Bank are
charged monthly. The fee is determined by% and based on
the stock being guaranteed.
Fees for agent services are charged monthly. The rate is %,
based on the products sold during the period.
Net insurance fee
income
Due to the fact that the Bank does not provide insurance
services to its clients, only acts as an agent, the fee income
charged to the customers and fees payable to the insurance
company are presented net in the fee income.
Fees for ongoing services
are charged on a monthly
basis during the period
when they are provided.
In addition, agency fee charged for the sale of insurance
contracts is also recorded in this line. The fee is charged on a
monthly basis and determined in %.
Other
Fees that are not significant in the Banks total income are
included in Other fees category. Such fees are safe lease,
special procedure fee, account rent fee, adlak service fee, fee
of a copy of document, etc.
Fees for ongoing services
are charged on a monthly
basis during the period
when they are provided.
Fees for ad hoc services
are charged when the
transaction takes places.
Other fees may include charges for continuous services or for
ad hoc administration services. Continuous fees are charged
monthly (e.g., safe lease fees) at the beginning of the period,
typically at a fixed rate. Fees for ad hoc services are charged
immediately after the service obligation had been met,
typically also in a fixed amount.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
73
NOTE 31: NET PROFIT FROM FEES AND COMMISSIONS (in HUF mn) [continued]
2021
2020
Other fees and commissions related to issued bank cards
39,835
31,701
Insurance fees
771
758
Fees and commissions related to lending
5,011
3,432
Fees and commissions related to security trading
618
1,584
Fees and commissions relating to deposits
2,610
1,355
Trust activities related to securities
1,652
566
Postal fees
224
202
Money market transaction fees and commissions
265
91
Other
1,290
1,061
Total
52,276
40,750
248,527
219,031
NOTE 32: GAINS AND LOSSES (in HUF mn)
2021
2020
Losses arising from derecognition of financial assets measured at amortised
cost
Gain from loans
93
894
Loss from loans
(818)
(4,533)
Gain from securities
968
360
Loss from securities
(2,520)
-
Other
(423)
-
Losses arising from derecognition of financial assets measured at amortised
cost
(2,700)
(3,279)
Additional information to Gains or losses from operating income:
2021
2020
Foreign exchange losses
Loss from foreign exchange
(5,875)
(5,302)
Margin gains
3,597
2,592
Margin losses
(3,360)
(1,808)
Total
(5,638)
(4,518)
2021
2020
Gains on derivative instruments, net
Gains on FX spot, swap and option deals
41,224
53,171
Losses from FX spot, swap and option deals
(34,716)
(46,329)
Fees received related to option deals
2,203
17,983
Fees paid related to option deals
(2,830)
(17,912)
Gains on commodity deals
91,487
22,122
Losses from commodity deals
(91,474)
(22,123)
Gains on futures transactions
580
1,555
Losses from futures transactions
(208)
(1,410)
Losses from credit valuation adjustment related to FX spot, swap and option deals
held for trading
(2,643)
-
Losses from credit valuation adjustment related to commodity deals held for
trading
(187)
-
Total
3,436
7,057
2021
2020
Losses on financial instruments at fair value through profit or loss
Gains on securities mandatorily measured at fair value through profit or loss
2,285
2,725
Gains on loans mandatorily measured at fair value through profit or loss
12,069
2,328
Losses on loans mandatorily measured at fair value through profit or loss
(24,760)
(4,453)
Gains on financial liabilities designated at fair value through profit or loss
4,353
2,443
Losses on financial liabilities designated at fair value through profit or loss
(438)
(3,713)
Total
(6,491)
(670)
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
74
NOTE 32: GAINS AND LOSSES (in HUF mn) [continued]
Additional information to Gains or losses from operating income: [continued]
2021
2020
Gains on securities, net
Interest income from held for trading securities
277
368
Gains on held for trading securities
8,018
5,948
Losses on held for trading securities
(3,646)
(3,697)
Gains on FVOCI securities
2,138
6,639
Losses on FVOCI securities
(6,797)
(566)
Gains on derecognition of investments in subsidiaries
1,311
23,028
Losses on derecognition of investments in subsidiaries
(1,963)
(16,485)
Gains/losses from other securities
2,766
2,360
Total
2,104
17,595
2021
2020
Dividend income
Distribution from investments in subsidiaries
95,042
60,913
Distribution from held for trading securities
3,844
8
Distribution from FVOCI equity instruments
151
52
Total
99,037
60,973
Total gains and losses from operating income (without other operating
income)
92,445
80,436
NOTE 33: OTHER OPERATING INCOME AND EXPENSES AND OTHER ADMINISTRATIVE
EXPENSES (in HUF mn)
Other operating income:
2021
2020
Intermediary and other services
2,272
2,677
Derecognition of financial liabilities at amortised cost
2,290
710
Non-repayable assets received
1,174
26
Income from lease of tangible assets
1,009
749
Gains on derecognition of deposits
281
710
Gains on discount from advertising agency fees
182
171
Income from written off receivables
281
206
Gains on sale of receivables
-
377
Gains on transactions related to property activities
239
266
Gains on IT services provided to subsidiaries
940
-
Other operating income from OTP Employee Stock Ownership Program
(OTP ESOP)
2,234
236
Gains on sale of tangible assets
(81)
150
Other
444
1,772
Total
11,265
7,900
Net other operating expenses:
2021
2020
Release of loss allowance on other assets
961
(3,521)
Non-repayable assets contributed
(862)
(4,055)
Release of provision for off-balance sheet commitments and contingent
liabilities
(1,343)
92
Financial support for sport association and organization of public utility
(10,960)
(7,999)
Losses on other assets
-
(697)
Loss allowance on investments in subsidiaries
(27,420)
(10,042)
Other
(2,012)
(1,842)
Total other operating expenses
(41,636)
(28,064)
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
75
NOTE 33: OTHER OPERATING INCOME AND EXPENSES AND OTHER ADMINISTRATIVE
EXPENSES (in HUF mn) [continued]
Other administrative expenses:
2021
2020
Reclassified
Personnel expenses:
Wages
105,176
89,705
Taxes related to personnel expenses
16,709
16,308
Other personnel expenses
14,241
12,485
Subtotal
136,126
118,498
Depreciation and amortization
40,692
38,948
Other administrative expenses:
Taxes, other than income tax
1
81,171
73,384
Services
57,290
41,590
Fees payable to authorities and other fees
17,362
13,769
Administration expenses, including rental fees
7,439
15,517
Professional fees
6,714
2,500
Advertising
8,635
7,405
Subtotal
178,611
154,165
Total
355,429
311,611
NOTE 34: INCOME TAX (in HUF mn)
The Bank is presently liable for income tax at a rate of 9% of taxable income, local taxes at a rate of 2.3% of
taxable revenue.
A breakdown of the income tax expense is:
2021
2020
Reclassified
Current tax expense
14,528
14,198
Deferred tax expense/(benefit)
1,423
(1,077)
Total
15,951
13,121
A reconciliation of the deferred tax liability is as follows:
2021
2020
Balance as at 1 January
(3,062)
(5,875)
Deferred tax (expense)/ benefit
(1,423)
1,077
Tax effect of fair value adjustment of FVOCI securities and ICES recognised
in comprehensive income
2,978
1,736
Closing balance
(1,507)
(3,062)
1
Special tax of financial institutions was paid by OTP Bank in the amount of HUF 13.1 and 11.6 billion for the for the year ended 31
December 2021 and 2020, recognized as an expense thus decreased the corporate tax base. For the year ended 31 December 2021 financial
transaction duty was paid by the Bank in the amount of HUF 68 billion.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
76
NOTE 34: INCOME TAX (in HUF mn) [continued]
A breakdown of the deferred tax liability is as follows:
2021
2020
Unused tax allowance
-
1,321
Provision for untaken leave
282
-
Provision for termination benefits and jubilee
644
-
Amounts unenforceable by tax law
-
247
Deferred tax asset
926
1,568
Fair value adjustment of held for trading and securities at fair value through
other comprehensive income
(1,312)
(4,199)
Difference in depreciation and amortization
(1,076)
(329)
Provision for developments
(45)
-
Amounts unenforceable by tax law
-
(102)
Deferred tax liabilities
(2,433)
(4,630)
Net deferred tax assets/(liabilities)
(1,507)
(3,062)
A reconciliation of the income tax (income) / expense is as follows:
2021
2020
Profit before income tax
141,290
93,246
Income tax at statutory tax rate (9%)
12,717
8,392
A reconciliation of effective tax rate as follows:
Share-based payment
323
305
Deferred use of tax allowance
90
-
Dividend income
(8,787)
(5,488)
Use of tax
(3,461)
(2,023)
Amounts unenforceable by tax law
(847)
(38)
Change due to accounting policy (Visa)
-
69
Use of tax losses
-
(167)
Deferred tax asset due to unused tax allowance
-
(1,039)
Other
1,618
761
Income tax
1,653
772
Effective tax rate
1.2%
0.8%
2021
2020
(as presented in the separate statement of financial position)
Current tax assets
-
593
Current tax liabilities
4,776
1,464
Net tax liabilities
(4,776)
(871)
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
77
NOTE 35: LEASE (in HUF mn)
The Bank as a lessee:
Amounts recognised in profit and loss
2021
2020
Interest expense on lease liabilities
214
257
Expense relating to short-term leases
2,143
2,128
Expense relating to variable lease payments not included in the measurement
of lease liabilities
1,271
1,084
Leasing liabilities by maturities:
2021
2020
Within one year
4,868
4,423
Over one year
13,064
9,683
Total
17,932
14,106
An analysis of movement in the carrying amount of right-of-use assets by category is as follows:
Gross carrying amount
Right-of-use of
real estate
Right-of-use of
machinery and
equipment
Total
Balance as at 1 January 2020
17,790
37
17,827
Additions due to new contracts
3,707
-
3,707
Derecognition due to matured contracts
(18)
-
(18)
Change due to revaluation and modification
927
-
927
Balance as at 31 December 2020
22,406
37
22,443
Additions due to new contracts
5,788
-
5,788
Derecognition due to matured contracts
(263)
-
(263)
Change due to revaluation and modification
3,150
-
3,150
Balance as at 31 December 2021
31,081
37
31,118
Depreciation
Balance as at 1 January
4,214
4,220
Depreciation charge
4,744
6
4,750
Derecognition due to matured contracts
(6)
-
(6)
Balance as at 31 December 2021
8,952
12
8,964
Depreciation charge
5,155
6
5,161
Derecognition due to matured contracts
(238)
-
(238)
Balance as at 31 December 2021
13,869
18
13,887
Net carrying amount
Balance as at 31 December 2020
13,454
25
13,479
Balance as at 31 December 2021
17,212
19
17,231
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
78
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn)
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or
equity instrument of another entity.
Financial instruments may result in certain risks to the Bank. The most significant risks the Bank faces include:
36.1. Credit risk
The Bank takes on exposure to credit risk which is the risk that a counter-party will be unable to pay amounts in
full when due. The Bank structures the levels of credit risk it undertakes by placing limits on the amount of risk
accepted in relation to one borrower, or banks of borrowers, and to geographical areas and loan types. Such risks
are monitored on a periodical basis and subject to an annual or more frequent review. The exposure to any
borrower including banks and brokers is further restricted by sublimit covering on- and off-balance sheet
exposures and daily delivery risk limits in relation to trading items such as forward foreign exchange contracts.
Actual exposures against limits are monitored daily.
Exposure to credit risk is managed through regular analysis of the ability of borrowers and potential borrowers to
meet interest and capital repayment obligations and by changing these lending limits when appropriate. Exposure
to credit risk is partly managed obtaining collateral, corporate and personal guarantees.
36.1.1. Financial instruments by stages
Defining the expected credit loss on individual and collective basis
On individual basis:
Individually assessed are the non-retail or micro- and small enterprise exposure of significant amount on a stand-
alone basis:
• exposure in stage 3,
• exposure in workout management
• purchased or originated credit-impaired instruments which are in accordance with the conditions
mentioned above
The calculation of impairment must be prepared and approved by the risk management functional areas. The
calculation, all relevant factors (amortised cost, original and current EIR, contracted and expected cash flows
(from business and/or collateral) for the individual periods of the entire lifecycle, other essential information
enforced during the valuation) and the criteria thereof (including the factors underlying the classification as stage
3) must be documented individually.
The expected credit loss of the exposure equals the difference of the receivable's AC (gross book value) on the
valuation date and the present value of the receivable's expected cash flows discounted to the valuation date by
the exposure's original effective interest rate (EIR) (calculated at the initial recognition, or in the case of variable
rate, recalculated due to the last interest rate change). The estimation of the expected future cash flows should be
forward looking, it must also contain the effects of the possible change of macroeconomic outlook.
At least two scenarios must be used for the estimation of the expected cash flow. At least one scenarios should
anticipate that realised cash flows will be significantly different from the contractual cash flows. Probability
weights must be allocated to the individual scenarios. The estimation must reflect the probability of the
occurrence and non-occurrence of the credit loss, even if the most probable result is the non-occurrence of the
loss.
On collective basis:
The following exposures are subject to collective assessment:
• retail exposure irrespective of the amount,
• micro and small enterprise exposures irrespective of the amount,
• all other exposure which are insignificant on a stand-alone basis and not part of the workout
management,
• exposure which are not in stage 3, significant on a stand-alone basis,
• purchased or originated credit-impaired instruments which are in accordance with the conditions
mentioned above.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
79
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
36.1.1. Financial instruments by stages [continued]
In the collective impairment methodology credit risk and the change of credit risk can be correctly captured by
understanding the risk characteristics of the portfolio. In order to achieve this the main risk drivers shall be
identified and used to form homogeneous segments having similar risk characteristics. The segmentation is
expected to stay stable from month to month however a regular (at least yearly) revision of the segmentation
process should be set up to capture the change of risk characteristics. The segmentation must be performed
separately for each parameter, since in each case different factors may have relevance.
The Bank's Headquarters Group Reserve Committee stipulates the guidelines related to the collective
impairment methodology at group level. In addition, it has right of agreement in respect of the risk parameters
(PD -probability of default, LGD - loss given default, EAD – exposure at default) and segmentation criteria
proposed by the group members.
The review of the parameters must be performed at least annually and the results should be approved by the
Group Reserve Committee. Local Risk Managements is responsible for parameter estimations and updates,
macroeconomic scenarios are calculated by OTP Bank Headquarters for each subsidiary and each parameter.
Based on the consensus proposal of Local Risk Management and OTP Bank Headquarters, the Group Reserve
Committee decides on the modification of parameters (all parameters for impairment calculation).
The impairment parameters should be backtested at least annually.
The expected loss calculation should be forward looking, including forecasts of future economic conditions. This
may be achieved by applying 3-5 different macroeconomic scenarios, which may be integrated in the PD, LGD
and EAD parameters.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
80
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
36.1.1. Financial instruments by stages [continued]
Gross carrying amount and accumulated loss allowance of financial assets at amortized cost and fair value through other comprehensive income by IFRS 9 stages as at 31 December 2021:
Carrying
amount/
Exposure
Gross carrying amount / Notional amount
Loss allowance
Write-off
Stage 1
Stage 2
Stage 3
Purchased or
originated credit
impaired
Total
Stage 1
Stage 2
Stage 3
Purchased or
originated credit
impaired
Total
Cash, amounts due from banks and balances
with the National Bank of Hungary
474,945
475,130
-
-
-
475,130
185
-
-
-
185
-
Placements with other banks, net of allowance
for placement losses
2,567,212
2,573,226
-
1,476
-
2,574,702
6,014
-
1,476
-
7,490
-
Repo receivables
33,638
33,710
-
-
-
33,710
72
-
-
-
72
-
Retail consumer loans
598,699
488,639
139,193
33,687
3
661,522
11,168
27,597
24,056
2
62,823
-
Mortgage loans
81,471
33,254
39,220
8,377
2,724
83,575
25
309
1,503
267
2,104
-
Municipal loans
71,328
70,311
1,346
-
-
71,657
223
106
-
-
329
-
Corporate loans
3,280,967
2,909,439
384,223
66,915
10,691
3,371,268
17,945
39,260
31,528
1,568
90,301
21,838
Loans at amortised cost
4,032,465
3,501,643
563,982
108,979
13,418
4,188,022
29,361
67,272
57,087
1,837
155,557
21,838
FVOCI securities
641,939
641,939
-
-
-
641,939
1,174
-
-
-
1,174
-
Securities at amortised cost
3,071,038
3,064,500
13,223
-
-
3,077,723
5,882
803
-
-
6,685
-
Other financial assets
153,748
119,174
38,964
735
23
158,896
1,696
2,840
598
14
5,148
-
Total as at 31 December 2021
10,974,985
10,409,322
616,169
111,190
13,441
11,150,122
44,384
70,915
59,161
1,851
176,311
21,838
Loan commitments
1,665,288
1,615,196
56,838
4,996
-
1,677,030
5,620
3,968
2,154
-
11,742
-
Financial guarantees
1,500,977
1,491,470
14,883
244
-
1,506,597
4,820
749
51
-
5,620
-
Factoring loan commitments
423,267
412,692
5,847
5,133
-
423,672
228
32
145
-
405
-
Bill of credit
30,380
30,381
-
-
-
30,381
1
-
-
-
1
-
Loan commitments and financial guarantees
total
3,619,912
3,549,739
77,568
10,373
-
3,637,680
10,669
4,749
2,350
-
17,768
-
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
81
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
36.1.1. Financial instruments by stages [continued]
Gross carrying amount and accumulated loss allowance of financial assets at amortized cost and fair value through other comprehensive income by IFRS 9 stages as at 31 December 2020:
Assets measured at amortised cost and
FVOCI as at 31 December 2020
Carrying
amount/
Exposure
Gross carrying amount / Notional amount
Loss allowance
Write-off
Stage 1
Stage 2
Stage 3
Purchased or
originated credit
impaired
Total
Stage 1
Stage 2
Stage 3
Purchased or
originated credit
impaired
Total
Cash, amounts due from banks and balances
with the National Bank of Hungary
579,120
579,120
-
-
-
579,120
-
-
-
-
-
-
Placements with other banks, net of allowance
for placement losses
1,535,884
1,540,240
2
1,461
-
1,541,703
4,356
2
1,461
-
5,819
-
Repo receivables
183,364
183,656
-
-
-
183,656
292
-
-
-
292
-
Retail consumer loans
531,115
456,034
98,027
10,632
5
564,698
5,945
20,866
6,770
2
33,583
-
Mortgage loans
95,762
29,857
58,609
6,602
2,909
97,977
20
688
1,313
194
2,215
-
Municipal loans
86,061
72,406
15,564
43
-
88,013
227
1,709
16
-
1,952
-
Corporate loans
2,704,822
2,361,979
380,458
37,177
11,128
2,790,742
16,314
43,034
25,127
1,445
85,920
25,720
Loans at amortised cost
3,417,760
2,920,276
552,658
54,454
14,042
3,541,430
22,506
66,297
33,226
1,641
123,670
25,720
FVOCI securities
911,950
911,950
-
-
-
911,950
1,714
-
-
-
1,714
-
Securities at amortised cost
2,007,692
2,010,980
-
-
-
2,010,980
3,288
-
-
-
3,288
-
Other financial assets
127,179
93,491
40,452
1,133
31
135,107
2,407
4,504
996
21
7,928
-
Total as at 31 December 2020
8,762,949
8,239,713
593,112
57,048
14,073
8,903,946
34,563
70,803
35,683
1,662
142,711
25,720
Loan commitments
1,429,732
1,369,379
69,998
1,683
-
1,441,060
5,442
5,047
839
-
11,328
-
Financial guarantees
1,412,663
1,409,766
8,609
161
-
1,418,536
5,087
738
48
-
5,873
-
Factoring loan commitments
304,993
299,908
3,551
1,810
-
305,269
175
35
66
-
276
-
Bill of credit
5,026
5,039
-
-
-
5,039
13
-
-
-
13
-
Loan commitments and financial guarantees
total
3,152,414
3,084,092
82,158
3,654
-
3,169,904
10,717
5,820
953
-
17,490
-
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
82
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
36.1.1. Financial instruments by stages [continued]
Changes in the Loss allowance of financial assets at amortised cost and fair value through other
comprehensive income by IFRS 9 stages
Loans at amortised cost
Stage 1
Stage 2
Stage 3
POCI
Total
Loss allowance as at 1 January 2020
26,777
18,678
25,841
770
72,066
Transfer to Stage 1
633
(612)
(21)
-
-
Transfer to Stage 2
(4,374)
5,682
(1,308)
-
-
Transfer to Stage 3
(188)
(1,683)
1,871
-
-
Net remeasurement of loss allowance
(2,736)
40,164
9,196
839
47,463
New financial assets originated or purchased
11,393
7,498
2,918
45
21,854
Financial assets derecognised (other than write-offs)
(8,975)
(3,354)
(3,717)
(11)
(16,057)
Unwind of discount
-
-
1,613
217
1,830
Write-offs
(24)
(76)
(3,167)
(219)
(3,486)
Loss allowance as at 31 December 2020
22,506
66,297
33,226
1,641
123,670
Modification
-
(1,281)
-
-
(1,281)
Loss allowance as at 31 December 2020
22,506
65,016
33,226
1,641
122,389
Transfer to Stage 1
12,289
(11,919)
(370)
-
-
Transfer to Stage 2
(1,867)
3,241
(1,374)
-
-
Transfer to Stage 3
(369)
(5,636)
6,005
-
-
Net remeasurement of loss allowance
(10,705)
18,125
20,779
221
28,420
New financial assets originated or purchased
15,197
6,326
4,292
1
25,816
Financial assets derecognised (other than write-offs)
(7,638)
(7,540)
(5,323)
(16)
(20,517)
Unwind of discount
-
-
947
9
956
Write-offs
(52)
(341)
(1,095)
(19)
(1,507)
Loss allowance as at 31 December 2021
29,361
67,272
57,087
1,837
155,557
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
83
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
36.1.1. Financial instruments by stages [continued]
Changes in the Loss allowance of financial assets at amortised cost and fair value through other
comprehensive income by IFRS 9 stages [continued]
Loan commitments and financial guarantees
Stage 1
Stage 2
Stage 3
Total
Provision as at 1 January 2020
11,564
1,077
1,647
14,288
Transfer to Stage 1
142
(125)
(17)
-
Transfer to Stage 2
(501)
522
(21)
-
Transfer to Stage 3
(9)
(28)
37
-
Net remeasurement of loss allowance
(939)
3,651
(642)
2,070
New financial assets originated or purchased
2,843
796
67
3,706
Decrease
(2,383)
(73)
(118)
(2,574)
Provision as at 31 December 2020
10,717
5,820
953
17,490
Transfer to Stage 1
2,910
(2,840)
(70)
-
Transfer to Stage 2
(200)
322
(122)
-
Transfer to Stage 3
(21)
(109)
130
-
Net remeasurement of loss allowance
(4,628)
1,371
1,500
(1,757)
New financial assets originated or purchased
3,215
904
98
4,217
Decrease
(1,324)
(719)
(139)
(2,182)
Loss allowance as at 31 December 2021
10,669
4,749
2,350
17,768
Placements with other banks, net of allowance for placement losses
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January 2020
3,590
2
-
3,592
Net remeasurement of loss allowance
515
-
-
515
New financial assets originated or purchased
2,321
-
1,461
3,782
Financial assets derecognised (other than write-offs)
(2,070)
-
-
(2,070)
Loss allowance as at 31 December 2020
4,356
2
1,461
5,819
Net remeasurement of loss allowance
(303)
-
15
(288)
New financial assets originated or purchased
4,566
-
-
4,566
Financial assets derecognised (other than write-offs)
(2,605)
(2)
-
(2,607)
Loss allowance as at 31 December 2021
6,014
-
1,476
7,490
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
84
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
36.1.1. Financial instruments by stages [continued]
Changes in the Loss allowance of financial assets at amortised cost and fair value through other
comprehensive income by IFRS 9 stages [continued]
Repo Receivables
Stage 1
Total
Loss allowance as at 1 January 2020
6
6
New financial assets originated or purchased
362
362
Financial assets derecognised (other than write-offs)
(76)
(76)
Loss allowance as at 31 December 2020
292
292
New financial assets originated or purchased
449
449
Financial assets derecognised (other than write-offs)
(669)
(669)
Loss allowance as at 31 December 2021
72
72
Securities at amortised cost
Stage 1
Stage 2
Total
Loss allowance as at 1 January 2020
1,443
-
1,443
Net remeasurement of loss allowance
1,334
-
1,334
New financial assets originated or purchased
595
-
595
Financial assets derecognised (other than write-offs)
(84)
-
(84)
Loss allowance as at 31 December 2020
3,288
-
3,288
Modification
-
1,281
1,281
Loss allowance as at 31 December 2020
3,288
1,281
4,569
Net remeasurement of loss allowance
898
(478)
420
New financial assets originated or purchased
1,761
-
1,761
Financial assets derecognised (other than write-offs)
(65)
-
(65)
Loss allowance as at 31 December 2021
5,882
803
6,685
FVOCI Securities
Stage 1
Total
Loss allowance as at 1 January 2020
1,702
1,702
Net remeasurement of loss allowance
286
286
New financial assets originated or purchased
509
509
Financial assets derecognised (other than write-offs)
(783)
(783)
Loss allowance as at 31 December 2020
1,714
1,714
Net remeasurement of loss allowance
(483)
(483)
New financial assets originated or purchased
348
348
Financial assets derecognised (other than write-offs)
(405)
(405)
Loss allowance as at 31 December 2021
1,174
1,174
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
85
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
36.1.1. Financial instruments by stages [continued]
Loan portfolio by internal ratings
Gross carrying amount
Internal rating grade
Stage1
Stage2
Stage3
POCI
Total
High grade (1-4)
1,930,488
215,519
-
224
2,146,231
Medium grade (5-7)
1,459,861
238,767
-
10,522
1,709,150
Low grade (8-9)
111,294
109,696
-
253
221,243
Non performing
-
-
108,979
2,419
111,398
Total
3,501,643
563,982
108,979
13,418
4,188,022
Accumulated loss allowance
Internal rating grade
Stage1
Stage2
Stage3
POCI
Total
High grade (1-4)
11,870
21,906
-
4
33,780
Medium grade (5-7)
15,929
24,853
-
1,234
42,016
Low grade (8-9)
1,562
20,513
-
12
22,087
Non performing
-
-
57,087
587
57,674
Total
29,361
67,272
57,087
1,837
155,557
Loan portfolio by countries
An analysis of carrying amount of the non-qualified and qualified gross loan portfolio by country is as follows:
31 December 2021
31 December 2020
Country
Gross loan and
placements with
other banks
portfolio
Loss allowance
Gross loan and
placements with
other banks
portfolio
Loss allowance
Hungary
5,039,601
(130,588)
3,797,729
(99,295)
Malta
792,943
(2,556)
759,425
(3,985)
Serbia
148,599
(2,048)
-
-
Romania
113,517
(3,695)
40,143
(4,220)
France
112,810
(321)
38,876
(8)
Bulgaria
105,899
(11,786)
102,067
(9,158)
Russia
85,420
(961)
124
(5)
Slovakia
76,373
(263)
73,808
(207)
Other
321,272
(10,901)
454,617
(12,903)
Loans, placements with other
banks and repo receivables
at amortised cost total
6,796,434
(163,119)
5,266,789
(129,781)
Hungary
662,008
-
480,933
-
Other
4
-
4
-
Loans at fair value total
662,012
-
480,937
-
Loans, placements with other
banks and repo receivables
total
7,458,446
(163,119)
5,747,726
(129,781)
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
86
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
Loan portfolio classification by economic activities
Loans at amortised cost by economic activities
31 December 2021
31 December 2020
Gross
amount
Loss
allowance
Gross
amount
Loss
allowance
Retail
708,355
63,843
647,323
34,289
Agriculture, forestry and fishing
177,202
4,976
152,152
2,074
Manufacturing, mining and quarrying
320,990
7,249
241,763
6,765
and other industry
172,441
4,919
136,353
3,626
Construction
657,273
18,490
506,561
16,813
Wholesale and retail trade, transportation and
23,072
1,136
19,846
681
storage accommodation and food service activities
211,292
9,444
147,849
11,338
Information and communication
305,100
13,143
291,475
13,595
Financial and insurance activities
136,876
3,109
105,159
1,979
Real estate activities
72,027
472
70,640
672
Professional, scientific, technical, administration
1,403,394
28,776
1,222,309
31,838
Total
4,188,022
155,557
3,541,430
123,670
36.1.2. Collaterals
The collateral value held by the Bank by collateral types is as follows (total collateral value). The collaterals
cover loans as well as off-balance sheet exposures.
Types of collateral
2021
2020
Mortgages
1,602,913
1,450,951
Guarantees and warranties
1,554,921
1,074,420
Deposit
229,041
191,268
from this: Cash
80,598
62,469
Securities
148,443
128,799
Other
387
563
Total
3,387,262
2,717,202
The collateral value held by the Bank by collateral types is as follows (to the extent of the exposures). The
collaterals cover loans as well as off-balance sheet exposures.
Types of collateral
2021
2020
Mortgage
753,222
687,688
Guarantees and warranties
1,196,385
836,874
Deposit
106,620
94,397
from this: Cash
12,756
8,204
Securities
93,864
86,193
Other
305
423
Total
2,056,532
1,619,382
The coverage level of loan portfolio to the extent of the exposures increased from 31.86% to 30.41% as at 2021,
while the coverage to the total collateral value decreased from 53.46% to 50.09%.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
87
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
The collateral value (total collateral value) held by the Bank related to impaired loan portfolio (Stage 3 and
POCI loans) is as follows:
For the year ended 31
December 2021
Gross carrying
amount
Loss allowance
Carrying amount
Collateral value
Retail consumer loans
33,690
(24,058)
9,632
387
Mortgage loans
11,101
(1,770)
9,331
39,263
Corporate loans
77,606
(33,096)
44,510
56,960
Total
122,397
(58,924)
63,473
96,610
For the year ended 31
December 2020
Gross carrying
amount
Loss allowance
Carrying amount
Collateral value
Retail consumer loans
10,637
(6,772)
3,865
128
Mortgage loans
9,511
(1,507)
8,004
32,302
Municipal loans
43
(16)
27
104
Corporate loans
48,305
(26,572)
21,733
46,210
Total
68,496
(34,867)
33,629
78,744
36.1.3. Restructured loans
31 December 2021
31 December 2020
Gross portfolio
Loss allowance
Gross portfolio
Loss allowance
Consumer loans
118,094
(21,816)
5,399
(2,575)
Mortgage loans
36,413
(266)
2,156
(68)
Corporate loans
193,571
(25,865)
27,963
(8,283)
SME loans
33,388
(4,487)
6,295
(1,278)
Municipal loans
-
-
41
(16)
Total
381,466
(52,434)
41,854
(12,220)
Restructured portfolio definition
The forborne definition used by the Group is based on EU regulation 2015/227. Restructuring (forbearance) is a
modification of the contract – initiated by either the client or the bank – that provides a concession or allowance
towards the client in respect to the client’s current or future financial difficulties. The table of restructured loans
contains exposures classified as performing forborne. An exposure is considered performing forborne if the
conditions of the non-performing status are not met at the time of the restructuring, or the exposure fulfilled the
requirements of the minimum one year cure period as non-performing forborne.
The significant increase of the performing forborne loan volume is due to the forborne classification rules set by
the MNB executive circulars of 21 January 2021 and 25 November 2021 for loans participating in phase 2 and
phase 3 of the moratoria. The loan volume classified as performing forborne exclusively due to moratoria
participation is HUF 290 billion. For the affected portfolios the earliest possible exit from the forborne status is 6
months after the exit from moratorium for retail and 2 years after the exit from moratorium for corporate
exposures.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
88
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
Financial instruments by rating categories
1
Held-for-trading securities as at 31 December 2021
A1
A2
A3
B1
Aa3
Ba2
Baa1
Baa2
Baa3
N/A
Total
Government bonds
-
16
-
-
-
3,634
-
26,024
1,153
-
30,827
Other bonds
-
-
485
-
-
-
-
1,348
97
158
2,088
Other non-interest bearing securities
-
-
-
-
-
-
-
-
-
1,134
1,134
Hungarian government discounted Treasury Bills
-
-
-
-
-
-
-
869
-
-
869
Shares
49
59
35
6
19
2
12
24
83
310
599
Mortgage bonds
-
-
-
-
-
-
-
16
-
100
116
Total
49
75
520
6
19
3,636
12
28,281
1,333
1,702
35,633
Held-for-trading securities 31 December 2020
A2
A3
B1
Ba2
Ba3
Baa1
Baa2
Baa3
N/A
Total
Other non-interest bearing securities
-
-
-
-
-
-
-
-
1,964
1,964
Government bonds
-
-
-
-
465
-
-
5,566
-
6,031
Mortgage bonds
-
-
-
-
-
-
-
-
-
-
Hungarian government discounted
Treasury Bills
-
-
-
-
-
-
-
1,233
-
1,233
Hungarian government interest bearing
Treasury Bills
-
-
-
-
-
-
-
-
-
-
Shares
36
33
5
7
-
45
7
36
257
426
Other bonds
-
495
-
-
-
-
-
998
582
2,075
Total
36
528
5
7
465
45
7
7,833
2,803
11,729
Securities mandatorily measured at fair value through profit or loss as at 31 December 2021
N/A
Total
Government bonds
25,126
25,126
Mortgage bonds
2,935
2,935
Total
28,061
28,061
1
Moody’s ratings
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
89
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
Financial instruments by rating categories
1
Securities mandatorily measured at fair value through profit or loss as at 31 December 2020
N/A
Total
Government bonds
23,818
23,818
Mortgage bonds
5,342
5,342
Shares
2,776
2,776
Total
31,936
31,936
FVOCI securities as at 31 December 2021
A1
A2
A3
Ba1
Ba2
Baa1
Baa2
Baa3
N/A
Total
Government bonds
740
2,471
-
15,209
6,784
5,032
182,439
66,201
-
278,876
Mortgage bonds
47,568
-
-
-
-
-
156,027
-
14,346
217,941
Other bonds
-
-
2,896
4,001
-
-
1,622
37,606
18,745
64,870
Hungarian Treasury Bills
-
-
-
-
-
-
63,115
-
-
63,115
Non-treading equity instruments
-
-
-
-
-
-
-
-
17,137
17,137
Total
48,308
2,471
2,896
19,210
6,784
5,032
403,203
103,807
50,228
641,939
FVOCI securities as at 31 December 2020
A2
A3
Ba1
Ba3
Baa2
Baa3
N/A
Total
Mortgage bonds
63,577
-
-
-
250,673
-
18,417
332,667
Government bonds
226
7,391
4,624
15,055
-
461,163
-
488,459
Hungarian interest bearing Treasury Bills
-
-
-
-
-
9,957
-
9,957
Shares
-
-
-
-
-
-
15,731
15,731
Other bonds
-
4,815
3,958
-
1,620
37,961
16,782
65,136
Total
63,803
12,206
8,582
15,055
252,293
509,081
50,930
911,950
1
Moody’s ratings
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
90
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
Financial instruments by rating categories
1
Securities at amortised cost as at 31 December 2021
A1
A2
Aaa
Ba1
Ba2
Baa1
Baa2
Baa3
N/A
Total
Government bonds
9,002
-
185,261
18,871
12,663
25,986
2,550,824
55,256
-
2,857,863
Corporate bonds
-
8,210
-
-
-
7,343
3,682
14,780
154,886
188,901
Mortgage bonds
12,992
-
-
-
-
-
-
-
11,282
24,274
Total
21,994
8,210
185,261
18,871
12,663
33,329
-
70,036
166,168
3,071,038
Securities at amortised cost as at 31 December 2020
Ba2
Baa3
N/A
Total
Government bonds
2,816
1,941,855
-
1,944,671
Mortgage bonds
-
14,579
48,442
63,021
Total
2,816
1,956,434
48,442
2,007,692
1
Moody’s ratings
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
91
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.1. Credit risk [continued]
An analysis of securities (held for trading, mandatorily FVTPL, FVOCI and amortised cost) in a country
breakdown is as follows:
Country
2021
2020
Gross carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
Hungary
2,709,786
(5,823)
1,986,362
(3,194)
United States of America
194,518
(149)
1,069
(4)
Portugal
36,268
(177)
-
-
Spain
33,659
(178)
-
-
Russia
32,901
(46)
2,757
(3)
Romania
22,527
(126)
-
-
Croatia
18,917
(46)
-
-
Luxembourg
-
-
20,792
(87)
Other
29,147
(140)
-
-
Securities at amortised cost total
3,077,723
(6,685)
2,010,980
(3,288)
Hungary
517,462
-
761,472
-
Russia
65,275
-
29,697
-
Croatia
15,209
-
-
-
Serbia
6,784
-
-
-
Spain
5,032
-
-
-
Luxembourg
-
-
85,006
-
Other
15,040
-
20,044
-
FVOCI securities total
624,802
-
896,219
-
Austria
13,223
-
3,122
-
United States of America
3,388
-
12,079
-
Other
526
-
530
-
Non-trading equity instruments designated to
measure at fair value through other
comprehensive income
17,137
-
15,731
-
Hungary
29,814
-
8,613
-
Serbia
3,634
-
465
-
Russia
1,278
-
808
-
Germany
420
-
410
-
Luxembourg
-
-
771
-
Other
487
-
662
-
Held for trading securities total
35,633
-
11,729
-
Hungary
18,807
-
18,470
-
Luxembourg
5,542
-
10,428
-
United States of America
2,935
-
2,776
-
Portugal
777
-
262
-
Securities mandatorily measured at fair value
through profit or loss
28,061
-
31,936
-
Securities total
3,783,356
(6,685)
2,966,595
(3,288)
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
92
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.2. Maturity analysis of assets and liabilities and liquidity risk
Liquidity risk is a measure of the extent to which the Bank may be required to raise funds to meet its
commitments associated with financial instruments. The Bank maintains its liquidity profiles in accordance with
regulations laid down by the NBH.
The essential aspect of the liquidity risk management strategy is to identify all relevant systemic and
idiosyncratic sources of liquidity risk and to measure the probability and severity of such events. During liquidity
risk management the Bank considers the effect of liquidity risk events caused by reasons arising in the bank
business line (deposit withdrawal), the national economy (exchange rate shock, yield curve shock) and the global
financial system (capital market shock).
In line with the Bank’s risk management policy liquidity risks are measured and managed on multiply hierarchy
levels and applying integrated unified VaR based methodology. The basic requirement is that the Bank must
keep high quality liquidity reserves by means it can fulfil all liabilities when they fall due without material
additional costs.
The liquidity reserves can be divided into two parts. There are separate decentralized liquid asset portfolios at
subsidiary level and a centralized flexible liquidity pool at Group level. The reserves at subsidiary levels are held
to cover the relevant shocks of the subsidiaries which may arise in local currencies (deposit withdrawal, local
capital market shock, unexpected business expansion), while the centralized liquidity pool is held to cover the
OTP Bank’s separate shocks (deposit-, yield curve- and exchange rate shocks) and all group member’s potential
shocks that may arise in foreign currencies (deposit withdrawal, capital market shock).
The recalculation of shocks is made at least quarterly while the recalibration of shock measurement models and
review of the risk management methodology is an annual process. The monitoring of liquidity reserves for both
centralized and decentralized liquid asset portfolio has been built into the daily reporting process.
Due to the balance sheet adjustment process (deleveraging) experienced in the last few years, the liquidity
reserves of the Bank increased significantly while the liquidity risk exposure has decreased considerably.
Currently the (over)coverage of risk liquidity risk exposure by high quality liquid assets is at all-time record
highs. There were no material changes in the liquidity risk management process for the year ended 31 December
2021.
The following tables provide an analysis of assets and liabilities about the non-discounted cash flow into relevant
maturity groupings based on the remaining period from the balance sheet date to the contractual maturity date. It
is presented under the most prudent consideration of maturity dates where options or repayment schedules allow
for early repayment possibilities.
The contractual amounts disclosed in the maturity analyses are the contractual undiscounted cash flows like
gross finance lease obligations (before deducting finance charges); prices specified in forward agreements to
purchase financial assets for cash; net amounts for pay-floating/receive-fixed interest rate swaps for which net
cash flows are exchanged; contractual amounts to be exchanged in a derivative financial instrument for which
gross cash flows are exchanged; gross loan commitments.
Such undiscounted cash flows differ from the amount included in the statement of financial position because the
amount in that statement is based on discounted cash flows. When the amount payable is not fixed, the amount
disclosed is determined by reference to the conditions existing at the end of the reporting period. For example,
when the amount payable varies with changes in an index, the amount disclosed may be based on the level of the
index at the end of the period.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
93
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.2. Maturity analysis of assets and liabilities and liquidity risk [continued]
As at 31 December 2021
Within 3
months
Within one
year and
over 3
months
Within 5
years and
over one
year
Over 5
years
Without
maturity
Total
Cash, amounts due from banks and balances with
the National Bank of Hungary
475,130
-
-
-
-
475,130
Placements with other banks, net of allowance for
placement losses
1,176,184
585,499
609,182
204,493
-
2,575,358
Repo receivables
33,710
-
-
-
-
33,710
Financial assets at fair value through profit or loss
908
3,709
19,804
10,259
29,794
64,474
Securities at fair value through other
comprehensive income
16,329
58,446
358,805
199,854
17,138
650,572
Loans at amortised cost
1,327,629
873,169
1,377,885
726,016
-
4,304,699
Loans mandatorily measured at fair value through
profit or loss
16,516
15,575
121,104
553,569
-
706,764
Securities at amortised cost
28,514
308,921
1,792,058
938,902
-
3,068,395
Investments in subsidiaries, associates and other
investments
-
-
-
-
1,573,008
1,573,008
Other financial assets
157,669
1,227
-
-
-
158,896
TOTAL ASSETS
3,232,589
1,846,546
4,278,838
2,633,093
1,619,940
13,611,006
Amounts due to banks and deposits from the
National Bank of Hungary and other banks
297,779
138,418
506,233
108,773
-
1,051,203
Deposits from customers
9,844,911
57,851
33,112
12,658
-
9,948,532
Repo liabilities
49,726
-
36,854
-
-
86,580
Liabilities from issued securities
5,258
6,812
8,812
2,065
-
22,947
Subordinated bonds and loans
2,841
-
-
269,698
-
272,539
Financial liabilities at fair value through profit or
loss
531
1,253
4,422
13,927
-
20,133
Leasing liabilities
1,078
3,791
9,356
3,707
-
17,932
Other financial liabilities
193,315
5,337
876
-
-
199,528
TOTAL LIABILITIES
10,395,439
213,462
599,665
410,828
-
11,619,394
NET POSITION
1
-7,162,850
1,633,084
3,679,173
2,222,265
1,619,940
1,991,612
Receivables from derivative financial instruments
classified as held for trading
4,573,312
1,957,498
339,869
135,728
-
7,006,407
Liabilities from derivative financial instruments
classified as held for trading
(4,581,312)
(1,951,622)
(328,607)
(132,345)
-
(6,993,886)
Net position of derivative financial instruments
classified as held for trading
(8,000)
5,876
11,262
3,383
-
12,521
Receivables from derivative financial instruments
designated as hedge accounting
5,693
37,436
580,280
16,195
-
639,604
Liabilities from derivative financial instruments
designated as hedge accounting
(7,658)
(46,925)
(595,692)
(16,417)
-
(666,692)
Net position of derivative financial instruments
designated as hedging accounting
(1,965)
(9,489)
(15,412)
(222)
-
(27,088)
Net position of derivative financial instruments
total
(9,965)
(3,613)
(4,150)
3,161
-
(14,567)
Commitments to extend credit
1,677,030
-
-
-
-
1,677,030
Confirmed letters of credit
30,381
-
-
-
-
30,381
Factoring loan commitment
423,673
-
-
-
-
423,673
Bank guarantees
133,460
189,747
247,886
936,824
-
1,507,917
Off-balance sheet commitments
2,264,544
189,747
247,886
936,824
-
3,639,001
1
Analysis for net position of assets and liabilities are calculated in accordance with IFRS 7, therefore certain financial instruments are
presented in the earliest period in which the Bank could be required to pay. On-demand deposits are presented in the earliest (within 3
month) period category, however based on Management’s discretion the Bank has appropriate liquidity reserves as maintenance and
management of liquidity risk.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
94
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.2. Maturity analysis of assets and liabilities and liquidity risk [continued]
As at 31 December 2020
Within 3
months
Within one
year and over
3 months
Within 5 years
and over one
year
Over 5
years
Without
maturity
Total
Cash, amounts due from banks and balances with
the National Bank of Hungary
579,120
-
-
-
-
579,120
Placements with other banks, net of allowance for
placement losses
578,907
656,143
273,834
33,027
-
1,541,911
Repo receivables
183,656
-
-
-
-
183,656
Financial assets at fair value through profit or loss
1,401
1,151
3,576
9,042
22,121
37,291
Securities at fair value through other
comprehensive income
14,453
111,117
402,797
305,507
15,731
849,605
Loans at amortised cost
1,134,542
728,410
1,132,083
645,980
-
3,641,015
Loans mandatorily measured at fair value through
profit or loss
14,850
11,674
85,000
383,775
-
495,299
Securities at amortised cost
19,735
37,950
1,354,479
559,171
-
1,971,335
Investment properties
-
-
-
-
1,936
1,936
Investments in subsidiaries, associates and other
investments
-
-
-
-
1,548,972
1,548,972
Other financial assets
133,832
1,277
-
-
-
135,109
TOTAL ASSETS
2,660,496
1,547,722
3,251,769
1,936,502
1,588,760
10,985,249
Amounts due to banks and deposits from the
National Bank of Hungary and other banks
152,633
62,871
492,291
73,574
-
781,369
Deposits from customers
7,716,000
131,890
30,628
14,115
-
7,892,633
Repo liabilities
-
-
109,612
-
-
109,612
Liabilities from issued securities
636
11,835
15,256
487
-
28,214
Subordinated bonds and loans
2,972
-
-
302,182
-
305,154
Financial liabilities at fair value through profit or
loss
3,159
1,421
6,115
15,207
-
25,902
Leasing liabilities
1,073
3,350
7,213
2,470
-
14,106
Other financial liabilities
161,652
4,877
1,417
-
-
167,946
TOTAL LIABILITIES
8,038,125
216,244
662,532
408,035
-
9,324,936
NET POSITION
1
(5,377,629)
1,331,478
2,589,237
1,528,467
1,588,760
1,660,313
Receivables from derivative financial instruments
classified as held for trading
160,910
3,156,604
552,687
270,557
-
4,140,758
Liabilities from derivative financial instruments
classified as held for trading
(88,685)
(3,774,109)
(490,468)
(226,529)
-
(4,579,791)
Net position of derivative financial instruments
classified as held for trading
72,225
(617,505)
62,219
44,028
-
(439,033)
Receivables from derivative financial instruments
designated as hedge accounting
183
7,286
168,912
173,109
-
349,490
Liabilities from derivative financial instruments
designated as hedge accounting
(40,485)
(114,512)
(472,245)
(88,720)
-
(715,962)
Net position of derivative financial instruments
designated as hedging accounting
(40,302)
(107,226)
(303,333)
84,389
-
(366,472)
Net position of derivative financial instruments
total
31,923
(724,731)
(241,114)
128,417
-
(805,505)
Commitments to extend credit
1,441,060
-
-
-
-
1,441,060
Confirmed letters of credit
5,039
-
-
-
-
5,039
Factoring loan commitment
305,269
-
-
-
-
305,269
Bank guarantees
115,485
136,569
305,714
861,775
-
1,419,543
Off-balance sheet commitments
1,866,853
136,569
305,714
861,775
-
3,170,911
1
Analysis for net position of assets and liabilities are calculated in accordance with IFRS 7, therefore certain financial instruments are
presented in the earliest period in which the Bank could be required to pay. On-demand deposits are presented in the earliest (within 3
month) period category, however based on Management’s discretion the Bank has appropriate liquidity reserves as maintenance and
management of liquidity risk.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
95
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.3. Net foreign currency position and foreign currency risk
As at 31 December 2021
USD
EUR
CHF
Others
Total
Assets
486,225
2,448,729
14,989
290,504
3,240,447
Liabilities
(296,903)
(2,121,543)
(42,590)
(59,350)
(2,520,386)
Derivative financial instruments
(197,080)
(321,377)
27,953
(229,089)
(719,593)
Net position
(7,758)
5,809
352
2,065
468
As at 31 December 2020
USD
EUR
CHF
Others
Total
Assets
174,993
1,929,758
17,509
251,877
2,374,137
Liabilities
(291,985)
(1,623,605)
(35,701)
(105,346)
(2,056,637)
Derivative financial instruments
116,987
(350,237)
18,614
(146,208)
(360,844)
Net position
(5)
(44,084)
422
323
(43,344)
The table above provides an analysis of the Bank’s main foreign currency exposures. The remaining foreign
currencies are shown within ‘Others’. The Bank monitors its foreign exchange position for compliance with the
regulatory requirements of the NBH and its own limit system established in respect of limits on open positions.
The measurement of the Bank’s open its currency position involves monitoring the VaR limit on the foreign
exchange exposure of the Bank.
In the table Derivative financial instruments are stated at fair value.
36.4. Interest rate risk management
Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest
rates. The length of time for which the rate of interest is fixed on a financial instrument, therefore, indicates to
what extent it is exposed to interest rate risk.
The majority of the Bank's interest bearing assets and liabilities are structured to match either short-term assets
and short-term liabilities, or long-term assets and liabilities with repricing opportunities within one year, or long-
term assets and corresponding liabilities where repricing is performed simultaneously.
In addition, the significant spread existing between the different types of interest bearing assets and liabilities
enables the Bank to benefit from a high level of flexibility in adjusting for its interest rate matching and interest
rate risk exposure.
The following table presents the interest repricing dates of the Bank. Variable yield assets and liabilities have
been reported in accordance with their next repricing date. Fixed income assets and liabilities have been reported
in accordance with their maturity.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
96
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.4. Interest rate risk management [continued]
As at 31 December 2021
within 1 month
within 3 months over 1
month
within 1 year over 3
months
within 2 years over 1
year
over 2 years
Non-interest -bearing
Total
Total
ASSETS
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
Cash, amounts due from
banks and balances
with the National Bank
of Hungary
31,228
289,008
-
-
-
-
-
-
-
-
133,053
21,655
164,281
310,663
474,944
fixed interest
31,228
289,008
-
-
-
-
-
-
-
-
-
-
31,228
289,008
320,236
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
133,053
21,655
133,053
21,655
154,708
Placements with other
banks
1,353,059
127,852
148,091
165,940
31,821
79,243
76,105
29,677
499,636
27,178
24,416
4,194
2,133,128
434,084
2,567,212
fixed interest
774,315
34,420
449
156,755
2,446
79,243
76,105
29,677
499,636
27,178
-
-
1,352,951
327,273
1,680,224
variable interest
578,744
93,432
147,642
9,185
29,375
-
-
-
-
-
-
-
755,761
102,617
858,378
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
24,416
4,194
24,416
4,194
28,610
Repo receivables
33,638
-
-
-
-
-
-
-
-
-
-
-
33,638
-
33,638
fixed interest
33,638
-
-
-
-
-
-
-
-
-
-
-
33,638
-
33,638
Securities held for
trading
1,237
-
664
-
2,481
1,242
360
3,508
22,931
1,478
1,200
532
28,873
6,760
35,633
fixed interest
32
-
487
-
2,208
1,242
360
3,508
22,931
1,478
-
-
26,018
6,228
32,246
variable interest
1,205
-
177
-
273
-
-
-
-
-
-
-
1,655
-
1,655
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
1,200
532
1,200
532
1,732
Securities mandatorily
measured at fair value
through profit or loss
-
-
-
-
-
-
-
-
-
-
18,807
9,254
18,807
9,254
28,061
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
18,807
9,254
18,807
9,254
28,061
Securities at fair value
through other
comprehensive income
50,774
-
22,420
-
65,666
432
40,185
39,228
289,634
116,463
528
16,609
469,207
172,732
641,939
fixed interest
2,437
-
6,897
-
57,092
432
40,185
39,228
289,634
116,463
-
-
396,245
156,123
552,368
variable interest
48,337
-
15,523
-
8,574
-
-
-
-
-
-
-
72,434
-
72,434
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
528
16,609
528
16,609
17,137
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
97
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.4. Interest rate risk management [continued]
As at 31 December 2021
within 1 month
within 3 months over 1
month
within 1 year over 3
months
within 2 years over 1
year
over 2 years
Non-interest -bearing
Total
Total
ASSETS [continued]
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
Loans measured at
amortised cost
639,477
339,611
424,299
1,161,425
53,018
126,963
185,264
10,912
829,049
89,993
121,277
51,177
2,252,384
1,780,081
4,032,465
fixed interest
295
286
894
9,746
13,723
57,602
183,818
10,912
819,629
89,993
-
-
1,018,359
168,539
1,186,898
variable interest
639,182
339,325
423,405
1,151,679
39,295
69,361
1,446
-
9,420
-
-
-
1,112,748
1,560,365
2,673,113
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
121,277
51,177
121,277
51,177
172,454
Loans mandatorily
measured at fair value
through profit or loss
19,371
-
136
-
829
-
755
-
640,921
-
-
-
662,012
-
662,012
variable interest
19,371
-
136
-
829
-
755
-
640,921
-
-
-
662,012
-
662,012
Securities at amortised
cost
-
7,609
-
4,811
304,051
1,069
215,615
343
2,044,502
493,038
-
-
2,564,168
506,870
3,071,038
fixed interest
-
-
-
-
304,051
1,069
215,615
343
2,044,502
493,038
-
-
2,564,168
494,450
3,058,618
variable interest
-
7,609
-
4,811
-
-
-
-
-
-
-
-
-
12,420
12,420
Other financial assets
-
-
-
-
-
-
-
-
-
-
133,896
19,852
133,896
19,852
153,748
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
133,896
19,852
133,896
19,852
153,748
Derivative financial
instruments
1,507,306
1,256,601
395,623
936,093
675,976
863,692
10,760
57,437
183,617
54,913
181,095
675,035
2,954,377
3,843,771
6,798,148
fixed interest
1,400,852
1,133,429
188,144
551,308
570,718
861,983
10,760
57,378
183,617
54,913
-
-
2,354,091
2,659,011
5,013,102
variable interest
106,454
123,172
207,479
384,785
105,258
1,709
-
59
-
-
-
-
419,191
509,725
928,916
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
181,095
675,035
181,095
675,035
856,130
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
98
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.4. Interest rate risk management [continued]
As at 31 December 2021
within 1 month
within 3 months over 1
month
within 1 year over 3
months
within 2 years over 1
year
over 2 years
Non-interest -bearing
Total
Total
LIABILITIES
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
Amounts due to banks
and deposits with the
National Bank of
Hungary and other
banks
151,809
95,432
12,344
10,405
52,872
577
224,479
1,140
471,620
-
29,684
841
942,808
108,395
1,051,203
fixed interest
106,028
22,624
12,344
10,405
52,872
577
224,479
1,140
471,620
-
-
-
867,343
34,746
902,089
variable interest
45,781
72,808
-
-
-
-
-
-
-
-
-
-
45,781
72,808
118,589
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
29,684
841
29,684
841
30,525
Financial liabilities
designated to measure
at fair value through
profit or loss
20,133
-
-
-
-
-
-
-
-
-
-
-
20,133
-
20,133
variable interest
20,133
-
-
-
-
-
-
-
-
-
-
-
20,133
-
20,133
Repo liabilities
49,726
36,854
-
-
-
-
-
-
-
-
-
-
49,726
36,854
86,580
fixed interest
49,726
36,854
-
-
-
-
-
-
-
-
-
-
49,726
36,854
86,580
Deposits from customers
7,628,098
2,039,650
197,780
18,468
30,063
11,066
-
-
-
-
12,948
10,459
7,868,889
2,079,643
9,948,532
fixed interest
496,069
131,836
197,780
18,468
30,063
11,066
-
-
-
-
-
-
723,912
161,370
885,282
variable interest
7,132,029
1,907,814
-
-
-
-
-
-
-
-
-
-
7,132,029
1,907,814
9,039,843
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
12,948
10,459
12,948
10,459
23,407
Liabilities from issued
securities
865
-
8,514
-
4,696
-
1,676
-
6,402
-
-
-
22,153
-
22,153
fixed interest
212
-
-
-
4,147
-
1,676
-
6,402
-
-
-
12,437
-
12,437
variable interest
653
-
8,514
-
549
-
-
-
-
-
-
-
9,716
-
9,716
Subordinated bonds and
loans
-
-
-
85,551
-
186,225
-
-
-
-
-
-
-
271,776
271,776
variable interest
-
-
-
85,551
-
186,225
-
-
-
-
-
-
-
271,776
271,776
Leasing liabilities
192
380
236
522
1,004
2,535
1,362
1,321
4,838
5,542
-
-
7,632
10,300
17,932
fixed interest
108
25
72
34
538
123
717
144
2,118
485
-
-
3,553
811
4,364
variable interest
84
355
164
488
466
2,412
645
1,177
2,720
5,057
-
-
4,079
9,489
13,568
Other financial liabilities
-
-
-
-
-
-
-
-
-
-
156,012
38,499
156,012
38,499
194,511
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
156,012
38,499
156,012
38,499
194,511
Derivative financial
instruments
840,797
2,004,808
220,053
1,083,211
709,776
870,457
12,937
54,862
96,350
73,700
411,167
430,486
2,291,080
4,517,524
6,808,604
fixed interest
728,548
1,814,645
151,791
579,843
525,835
868,689
12,360
54,789
96,350
73,700
-
-
1,514,884
3,391,666
4,906,550
variable interest
112,249
190,163
68,262
503,368
183,941
1,768
577
73
-
-
-
-
365,029
695,372
1,060,401
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
411,167
430,486
411,167
430,486
841,653
NET POSITION
(5,055,530)
(2,156,443)
552,306
1,070,112
335,431
1,781
288,590
83,782
3,931,080
703,821
4,461
318,023
56,338
21,076
77,414
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
99
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.4. Interest rate risk management [continued]
As at 31 December 2020
within 1 month
within 3 months over 1
month
within 1 year over 3
months
within 2 years over 1
year
over 2 years
Non-interest -bearing
Total
Total
ASSETS
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
Cash, amounts due from banks
and balances with the
National Bank of Hungary
144,030
239,960
-
-
-
-
-
-
-
-
168,435
26,695
312,465
266,655
579,120
fixed interest
144,030
239,960
-
-
-
-
-
-
-
-
-
-
144,030
239,960
383,990
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
168,435
26,695
168,435
26,695
195,130
Placements with other banks
783,024
80,732
177,155
189,231
43,239
64,447
23,378
3,629
122,035
27,080
19,194
2,740
1,168,025
367,859
1,535,884
fixed interest
220,175
17,719
15,106
179,174
13,934
64,447
23,378
3,629
122,035
27,080
-
-
394,628
292,049
686,677
variable interest
562,849
63,013
162,049
10,057
29,305
-
-
-
-
-
-
-
754,203
73,070
827,273
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
19,194
2,740
19,194
2,740
21,934
Repo receivables
183,364
-
-
-
-
-
-
-
-
-
-
-
183,364
-
183,364
fixed interest
183,364
-
-
-
-
-
-
-
-
-
-
-
183,364
-
183,364
Securities held for trading
1,260
526
287
567
608
465
1,250
298
2,983
1,095
1,926
464
8,314
3,415
11,729
fixed interest
354
-
287
567
608
465
1,250
298
2,983
1,095
-
-
5,482
2,425
7,907
variable interest
906
526
-
-
-
-
-
-
-
-
-
-
906
526
1,432
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
1,926
464
1,926
464
2,390
Securities mandatorily measured
at fair value through profit or
loss
-
5,342
-
-
-
-
-
-
-
-
18,470
8,124
18,470
13,466
31,936
variable interest
-
5,342
-
-
-
-
-
-
-
-
-
-
-
5,342
5,342
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
18,470
8,124
18,470
8,124
26,594
Securities at fair value through
other comprehensive income
79,240
5,717
16,218
-
111,153
10,223
3,533
19,578
551,328
99,229
528
15,203
762,000
149,950
911,950
fixed interest
600
5,717
673
-
100,003
10,223
3,533
19,578
551,328
99,229
-
-
656,137
134,747
790,884
variable interest
78,640
-
15,545
-
11,150
-
-
-
-
-
-
-
105,335
-
105,335
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
528
15,203
528
15,203
15,731
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
100
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.4. Interest rate risk management [continued]
As at 31 December 2020
within 1 month
within 3 months over 1
month
within 1 year over 3
months
within 2 years over 1
year
over 2 years
Non-interest -
bearing
Total
Total
ASSETS [continued]
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
Loans measured at amortised cost
555,311
252,682
391,295
1,112,003
54,263
66,998
45,539
15,984
709,929
56,172
125,861
31,723
1,882,198
1,535,562
3,417,760
fixed interest
2,769
8,967
1,285
74,088
11,731
8,970
33,604
15,984
700,585
56,172
-
-
749,974
164,181
914,155
variable interest
552,542
243,715
390,010
1,037,915
42,532
58,028
11,935
-
9,344
-
-
-
1,006,363
1,339,658
2,346,021
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
125,861
31,723
125,861
31,723
157,584
Loans mandatorily measured at
fair value through profit or loss
24,870
-
59
-
334
-
368
-
455,306
-
-
-
480,937
-
480,937
variable interest
24,870
-
59
-
334
-
368
-
455,306
-
-
-
480,937
-
480,937
Securities at amortised cost
-
-
-
1,065
38,112
-
393,442
1,092
1,551,614
22,367
-
-
1,983,168
24,524
2,007,692
fixed interest
-
-
-
1,065
38,112
-
393,442
1,092
1,551,614
22,367
-
-
1,983,168
24,524
2,007,692
Other financial assets
-
-
-
-
-
-
-
-
-
-
112,055
15,124
112,055
15,124
127,179
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
112,055
15,124
112,055
15,124
127,179
Derivative financial instruments
936,413
706,442
880,140
378,405
557,115
419,548
26,738
7,333
39,765
101,640
733,551
248,095
3,173,724
1,861,463
5,035,187
fixed interest
920,404
567,652
658,754
183,228
559,258
387,941
26,799
7,333
40,012
101,640
-
-
2,205,227
1,247,793
3,453,020
variable interest
16,010
138,790
221,387
195,178
(2,143)
31,607
(61)
-
(247)
-
-
-
234,945
365,575
600,520
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
733,551
248,095
733,551
248,095
981,646
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
101
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.4. Interest rate risk management [continued]
As at 31 December 2020
within 1 month
within 3 months over 1
month
within 1 year over 3
months
within 2 years over 1
year
over 2 years
Non-interest -bearing
Total
Total
LIABILITIES
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
HUF
foreign
currency
Amounts due to banks and
deposits with the National Bank
of Hungary and other banks
106,883
86,885
12,008
40,429
3,363
7,491
39,270
-
467,479
-
1,678
1,491
630,681
136,296
766,977
fixed interest
36,937
15,136
12,008
8,569
3,363
1,490
39,270
-
467,479
-
-
-
559,057
25,195
584,252
variable interest
69,946
71,749
-
31,860
-
6,001
-
-
-
-
-
-
69,946
109,610
179,556
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
1,678
1,491
1,678
1,491
3,169
Financial liabilities designated to
measure at fair value through
profit or loss
25,902
-
-
-
-
-
-
-
-
-
-
-
25,902
-
25,902
fixed interest
79
-
-
-
-
-
-
-
-
-
-
-
79
-
79
variable interest
25,823
-
-
-
-
-
-
-
-
-
-
-
25,823
-
25,823
Repo liabilities
-
-
-
-
-
109,612
-
-
-
-
-
-
-
109,612
109,612
variable interest
-
-
-
-
-
109,612
-
-
-
-
-
-
-
109,612
109,612
Deposits from customers
6,211,090
1,404,362
133,886
15,540
101,496
13,367
227
-
-
-
10,782
4,985
6,457,481
1,438,254
7,895,735
fixed interest
325,464
116,385
133,886
15,540
101,496
13,367
227
-
-
-
-
-
561,073
145,292
706,365
variable interest
5,885,626
1,287,977
-
-
-
-
-
-
-
-
-
-
5,885,626
1,287,977
7,173,603
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
10,782
4,985
10,782
4,985
15,767
Liabilities from issued securities
3,090
221
11,691
414
4,502
721
4,098
-
3,698
-
-
-
27,079
1,356
28,435
fixed interest
213
-
-
-
3,500
-
4,098
-
3,698
-
-
-
11,509
-
11,509
variable interest
2,877
221
11,691
414
1,002
721
-
-
-
-
-
-
15,570
1,356
16,926
Subordinated bonds and loans
-
-
-
120,153
-
184,090
-
-
-
-
-
-
-
304,243
304,243
variable interest
-
-
-
120,153
-
184,090
-
-
-
-
-
-
-
304,243
304,243
Leasing liabilities
149
187
260
477
1,267
2,082
1,333
1,233
5,747
1,371
-
-
8,756
5,350
14,106
fixed interest
103
11
69
40
528
170
707
65
2,796
37
-
-
4,203
323
4,526
variable interest
46
176
191
437
739
1,912
626
1,168
2,951
1,334
-
-
4,553
5,027
9,580
Other financial liabilities
-
-
-
-
-
-
-
-
-
-
138,508
29,032
138,508
29,032
167,540
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
138,508
29,032
138,508
29,032
167,540
Derivative financial instruments
1,264,723
383,260
1,035,481
206,796
479,506
492,403
9,453
24,907
49,757
89,983
724,945
253,430
3,563,865
1,450,778
5,014,643
fixed interest
1,111,371
376,748
648,762
188,722
481,293
469,699
9,514
24,907
50,004
89,802
-
-
2,300,945
1,149,878
3,450,822
variable interest
153,351
6,512
386,719
18,074
(1,787)
22,704
(61)
-
(247)
181
-
-
537,975
47,471
585,446
non-interest-bearing
-
-
-
-
-
-
-
-
-
-
724,945
253,430
724,945
253,430
978,374
NET POSITION
(4,904,324)
(583,514)
271,828
1,297,462
214,690
(248,085)
439,867
21,774
2,906,279
216,230
304,108
59,231
(767,552)
763,097
(4,455)
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
102
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.5. Market risk
The Bank takes on exposure to market risks. Market risks arise from open positions in interest rate, currency and
equity products, all of which are exposed to general and specific market movements. The Bank applies a Value-
at-Risk ("VaR") methodology to estimate the market risk of positions held and the maximum losses expected,
based upon a number of assumptions for various changes in market conditions. The Management Board sets
limits on the value of risk that may be accepted, which is monitored on a daily basis. (Analysis of liquidity risk,
foreign currency risk and interest rate risk is detailed in Notes 36.2, 36.3 and 36.4 respectively.)
36.5.1. Market risk sensitivity analysis
The VaR risk measure estimates the potential loss in pre-tax profit over a given holding period for a specified
confidence level. The VaR methodology is a statistically defined, probability-based approach that takes into
account market volatilities as well as risk diversification by recognizing offsetting positions and correlations
between products and markets. Risks can be measured consistently across all markets and products, and risk
measures can be aggregated to arrive at a single risk number. The one-day 99% VaR number used by the Group
reflects the 99% probability that the daily loss will not exceed the reported VaR.
VaR methodologies are employed to calculate daily risk numbers include the historical and variance-covariance
approach. The diversification effect has not been validated among the various market risk types when capital
calculation happens.
The VaR of the trading portfolio can be summarized as follows (in HUF mn):
Historical VaR (99%, one-day) by risk type
Average
2021
2020
Foreign exchange
1,560
1,507
Interest rate
135
77
Equity instruments
20
141
Diversification
-
-
Total VaR exposure
1,715
1,725
While VaR captures the OTP’s daily exposure to currency and interest rate risk, sensitivity analysis evaluates the
impact of a reasonably possible change in interest or foreign currency rates over a year. The longer time frame of
sensitivity analysis complements VaR and helps the OTP to assess its market risk exposures. Details of
sensitivity analysis for foreign currency risk are set out in Note 36.5.2., for interest rate risk in Note 36.5.3., and
for equity price sensitivity analysis in Note 36.5.4.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
103
NOTE 35: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.5. Market risk [continued]
36.5.2. Foreign currency sensitivity analysis
The Bank changed its methodology of foreign currency sensitivity analysis and has been using a
historical VaR calculation since 31 March 2021. The former Monte Carlo simulation represented the
Group’s sensitivity to the rise and fall in the HUF exchange rate against EUR, over a 3 months period.
The sensitivity analysis included only outstanding foreign currency denominated monetary items as
strategic open positions related to foreign activities. In line with the Management's intention, the former
EUR -310 million strategic open position was fully closed as of 31 March 2021.
Since the closing of the strategic open position, the Group has been using a historical VaR calculation
with 1 day holding period. The analysis includes the same net open foreign exchange position as used
under the internal capital adequacy assessment process (ICAAP). The VaR methodology is a statistically
defined, probability-based approach that takes into account market volatilities as well as risk
diversification by recognizing offsetting positions and correlations between products and markets.
Additionally, the Bank determines the foreign currency risk of assets evaluated through the Other
Comprehensive Income (OCI), which includes securities valuated on FVOCI and the foreign currency
translation reserves.
The following table shows the result of the foreign currency sensitivity analysis. Numbers below indicate
the expected daily profit or loss of the portfolio beside the given confidence level.
Probability
Effects to the P&L in 3 months period
2021
2020
In HUF billion
In HUF billion
1%
(178)
(274)
5%
(119)
(151)
25%
(39)
(44)
50%
2
4
25%
49
57
5%
126
157
1%
187
197
Notes:
(1) Historical VaR simulation is based on the empirical distribution of the historical exchange rate
movements between 31 December 2020 and 31 December 2021.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
104
NOTE 35: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.5. Market risk [continued]
36.5.3. Interest rate sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives
and non-derivative instruments at the balance sheet date. The analysis is prepared assuming the amount of assets
and liabilities outstanding at the balance sheet date was outstanding for the whole year. The analysis was
prepared by assuming only adverse interest rate changes. The main assumptions were as follows:
● Floating rate assets and liabilities were repriced to the modelled benchmark yields at the repricing
dates assuming the unchanged margin compared to the last repricing.
● Fixed rate assets and liabilities were repriced at the contractual maturity date.
● As for liabilities with discretionary repricing feature by the Bank were assumed to be repriced with
two-weeks delay, assuming no change in the margin compared to the last repricing date.
● Deposits with an interest rate lower than 0.3% even at high market rates were assumed to be
unchanged for the whole period.
The sensitivity of interest income to changes in BUBOR was analysed by assuming two interest rate path
scenarios:
(1) HUF base rate and BUBOR increases gradually by 100 bps over the next year (probable scenario)
(2) HUF base rate and BUBOR decreases gradually by 50 bps over the next year (alternative scenario)
The net interest income in a one year period after 1 January 2022 would be increased by HUF 1,238 million
(probable scenario) and decreased by HUF 919 million (alternative scenario) as a result of these simulation. The
same simulation indicated HUF 1,476 million (probable scenario) and HUF 6,420 million (alternative scenario)
decrease in the Net interest income in a one year period after 1 January 2021. This effect is counterbalanced by
capital gains HUF -619 million (or probable scenario), HUF 322 million (for alternative scenario) as at 31
December 2021 and (HUF 584 million for probable scenario, HUF 2,329 million for alternative scenario as at 31
December 2020) on the government bond portfolio held for hedging (economic).
Furthermore, the effects of an instant 10bps parallel shift of the HUF, EUR and USD yield-curves on net interest
income over a one-year period and on the market value of the hedge government bond portfolio booked against
capital was analysed. The results can be summarized as follows (in HUF million):
Description
2021
2020
Effects to the net
interest income
(one-year period)
Effects to the net
interest income (one-
year period)
Effects to the net
interest income
(one-year period)
Effects to the net
interest income
(one-year period)
HUF (0.1%) parallel shift
(25)
64
(1,991)
389
HUF 0.1% parallel shift
(40)
(64)
1,715
389
EUR (0.1%) parallel shift
(483)
-
(676)
-
USD (0.1%) parallel shift
(23)
-
(165)
-
Total
(546)
(64)
(2,832)
389
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
105
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.5. Market risk [continued]
36.5.4. Equity price sensitivity analysis
The following table shows the effect of the equity price sensitivity. The Bank uses VaR calculation with 1 day
holding period and a 99% confidence level. The VaR methodology is a statistically defined, probability-based
approach that takes into account market volatilities as well as risk diversification by recognizing offsetting
positions and correlations between products and markets. The daily loss will not exceed the reported VaR
number with 99% of probability.
The stress test assumes the largest price movement of the last year and calculates with it as the adverse direction.
These scenarios show the loss of the portfolio when all prices change with the maximum amount of the last year.
Description
2021
2020
VaR (99%, one day, million HUF)
12
141
Stress test (million HUF)
(21)
(233)
36.6. Capital management
Capital management
The primary objective of the capital management of the Bank is to ensure the prudent operation, the entire
compliance with the prescriptions of the regulator for a persistent business operation and maximising the
shareholder value, accompanied by an optimal financing structure.
The capital management of the Bank includes the management and evaluation of the shareholders` equity
available for hedging risks, other types of funds to be recorded in the equity and all material risks to be covered
by the capital.
The basis of the capital management of the Bank in the short run is the continuous monitoring of its capital
position, in the long run the strategic and the business planning, which includes the monitoring and forecast of
the capital position of the Bank.
The Bank maintains the capital adequacy required by the regulatory bodies and the planned risk taking mainly by
means of ensuring and developing its profitability. In case the planned risk level of the Bank exceeded its Core
and Supplementary capital, the Bank ensures the prudent operation by occasional measures. A further tool in the
capital management of the Bank is the dividend policy, and the transactions performed with the treasury shares.
Capital adequacy
The Capital Requirements Directive package (CRDIV/CRR) transposes the global standards on banking
regulation (commonly known as the Basel III agreement) into the EU legal framework. The rules are applied
from 1 January 2014. They set stronger prudential requirements for institutions, requiring them to keep sufficient
capital reserves and liquidity. This framework makes institutions in the EU more solid and strengthens their
capacity to adequately manage the risks linked to their activities, and absorb any losses they may incur in doing
business.
The Bank has entirely complied with the regulatory capital requirements in 2021 as well as in 2020.
The Bank’s capital adequacy calculation is in line with IFRS and based on Basel III as at 31 December 2021 and
2020. The Bank uses the standard method for determining the regulatory capital requirements of the credit risk
and market risk while in case of the operational risk the Advanced Measurement Approach (AMA).
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
106
NOTE 36: FINANCIAL RISK MANAGEMENT (in HUF mn) [continued]
36.6. Capital management [continued]
Capital adequacy [continued]
1
The calculation of the Capital Adequacy ratio as at 31 December 2021 and 2020 is as follows:
2021
2020
Basel III
Basel III
Core capital (Tier 1)
1,747,480
1,598,295
Primary core capital (CET1)
1,747,480
1,598,295
Supplementary capital (Tier 2)
264,396
295,795
Regulatory capital
2,011,876
1,894,090
Credit risk capital requirement
603,253
526,283
Market risk capital requirement
7,519
11,550
Operational risk capital requirement
31,629
27,597
Total eligible regulatory capital
642,401
565,430
Surplus capital
1,369,475
1,328,660
CET 1 ratio
21.76%
22.61%
Capital adequacy ratio
25.05%
26.80%
Basel III:
Common equity Tier 1 capital (CET1):
Issued capital, Capital reserve, useable part of Tied-up reserve, General reserve, Profit reserve, Profit for the
year, Treasury shares, Intangible assets, deductions due to investments, adjustments due to temporary disposals
Tier 2 capital:
Subsidiary loan capital, Subordinated loan capital, deductions due to repurchased loan capital and Subordinated
loan capital issued by the OTP Bank, adjustments due to temporary disposals.
1
The dividend amount planned to pay out after the profit of financial year 2019, 2020 and 2021 is also deducted from CET 1 capital.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
107
NOTE 37: TRANSFER AND RECLASSIFICATION OF FINANCIAL INSTRUMENTS (in HUF
mn)
Reclassification from securities held-for-trading to securities measured at fair value through other
comprehensive income
As at 31 December 2021
Date of
reclassification
Reason
Type of
securities
Nominal value
at
reclassification
Fair value at the
date of
reclassification
EIR at the date
of
reclassification
Interest
income
1 September
2018
Change in
business
model
retail
hungarian
government
bonds
1,069
1,087
2%-3%
38
During the year 2018, securities issued by the Hungarian Government with the nominal value of HUF 66.506
million were transferred from the trading portfolio to the securities measured at fair value through other
comprehensive income, of which HUF 1,087 million remaining amount was presented as at 31 December 2021.
The Bank has previously held retail government bonds in the portfolio measured at fair value through other
comprehensive income. During 2018 the Bank changed the business model of the retail government bonds to
manage all on the basis of a single business model aimed at collecting the future contractual cash flows and/or
selling them.
In 2018, the terms and conditions of sale of retail government bonds and the pricing environment have changed
significantly, as a result of which the Bank is no longer able to maintain its sole trading intent with these
securities that the Bank applied earlier. Furthermore there is an option-agreement between the Bank and the
Government Debt Management Agency (“GDMA”) that GDMA will buy back this portfolio therefore it has
been reclassified.
Financial assets transferred but not derecognised
2021
2020
Transferred
assets
Associated
liabilities
Transferred
assets
Associated
liabilities
Carrying amount
Financial assets at amortised cost
Debt securities
88,181
86,580
125,244
109,612
Total:
88,181
86,580
125,244
109,612
Total:
88,181
86,580
125,244
109,612
As at 31 December 2021 and 2020, the Bank had obligation from repurchase agreements about HUF 87 billion
and HUF 110 billion respectively. Securities sold temporarily under repurchase agreements will continue to be
recognized in the Statement of Financial Position of the Bank in the appropriate securities category. The related
liability is measured at amortized cost in the Statement of Financial Position as ’Amounts due to banks and
deposits from the National Bank of Hungary and other banks’. Under these repurchase agreements only
Hungarian and foreign government bonds were transferred.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
108
NOTE 38: OFF-BALANCE SHEET ITEMS (in HUF mn)
In the normal course of business, the Bank becomes a party to various financial transactions that are not reflected
on the statement of financial position and are referred to as off-balance sheet financial instruments. The
following represents notional amounts of these off-balance sheet financial instruments, unless stated otherwise.
Contingent liabilities and commitments
2021
2020
Loan commitments
1,677,030
1,441,060
Guarantees arising from banking activities
1,507,917
1,419,543
from this: Payment undertaking liabilities (related to issue of mortgage
bonds) of OTP Mortgage Bank
746,476
683,736
Factoring loan commitments
423,673
305,269
Confirmed letters of credit
30,381
5,039
Contingent liabilities and commitments total in accordance with IFRS 9
3,639,001
3,170,911
Legal disputes (disputed value)
3,204
4,720
Contingent liabilities related to payments from shares in venture capital fund
47,550
32,712
Other
408
602
Contingent liabilities and commitments total in accordance with IAS 37
51,162
38,034
Total
3,690,163
3,208,945
Legal disputes
At the balance sheet date the Bank was involved in various claims and legal proceedings of a nature considered
normal to its business. The level of these claims and legal proceedings corresponds to the level of claims and
legal proceedings in previous years.
The Bank believes that the various asserted claims and litigations in which it is involved will not materially
affect its financial position, future operating results or cash flows, although no assurance can be given with
respect to the ultimate outcome of any such claim or litigation.
Provision due to legal disputes was HUF 259 million and HUF 199 million as at 2021 and 2020, respectively.
(See Note 24.)
Commitments to extend credit, guarantees and letter of credit
The primary purpose of these instruments is to ensure that funds are available to a customer as required.
Guarantees and standby letters of credit, which represent irrevocable assurances that the Bank will make
payments in the event that a customer cannot meet its obligations to third parties, carry the same credit risk as
loans.
Documentary and commercial letters of credit, which are written undertakings by the Bank on behalf of a
customer authorising a third party to draw drafts on the Bank up to a stipulated amount under specific terms and
conditions, are collateralised by the underlying shipments of goods to which they relate and therefore carry less
risk than a direct borrowing.
Commitments to extend credit represent unused portions of authorisations to extend credit in the form of loans,
guarantees or letters of credit. With respect to credit risk on commitments to extend credit, the Bank is
potentially exposed to loss in an amount equal to the total unused commitments. However, the likely amount of
loss is less than the total unused commitments since most commitments to extend credit are contingent upon
customers maintaining specific credit standards.
Guarantees, irrevocable letters of credit and undrawn loan commitments are subject to similar credit risk
monitoring and credit policies as utilised in the extension of loans. The Management of the Bank believes the
market risk associated with guarantees, irrevocable letters of credit and undrawn loan commitments are minimal.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
109
NOTE 38: OFF-BALANCE SHEET ITEMS (in HUF mn) [continued]
Guarantees, payment undertakings arising from banking activities
Payment undertaking is a promise by the Bank to assume responsibility for the debt obligation of a borrower if
that borrower defaults until a determined amount and until a determined date, in case of fulfilling conditions,
without checking the underlying transactions. The guarantee’s liability is joint and primary with the principal, in
case of payment undertaking, while the Bank assumes the obligation derived from guarantee independently by
the conditions established by the Bank. A guarantee is most typically required when the ability of the primary
obligor or principal to perform its obligations under a contract is in question, or when there is some public or
private interest which requires protection from the consequences of the principal's default or delinquency. A
contract of guarantee is subject to the statute of frauds (or its equivalent local laws) and is only enforceable if
recorded in writing and signed by the surety and the principal.
If the surety is required to pay or perform due to the principal's failure to do so, the law will usually give the
surety a right of subrogation, allowing the surety to use the surety's contractual rights to recover the cost of
making payment or performing on the principal's behalf, even in the absence of an express agreement to that
effect between the surety and the principal.
Contingent liabilities related to OTP Mortgage Bank Ltd.
Under a syndication agreement with its wholly owned subsidiary, OTP Mortgage Bank Ltd., the Bank had
guaranteed, in return for an annual fee, to purchase all mortgage loans held by OTP Mortgage Bank Ltd. that
become non-performing. The repurchase guarantee contract of non-performing loans between OTP Mortgage
Bank Ltd. and OTP Bank Plc. was modified in 2010. According to the arrangement the repurchase guarantee
was cancelled and OTP Bank Plc. gives bail to the loans originated or purchased by the Bank.
NOTE 39: SHARE-BASED PAYMENT AND EMPLOYEE BENEFIT (in HUF mn)
Previously approved option program required a modification thanks to the introduction of the Bank Group Policy
on Payments accepted in resolution of Annual General Meeting regarding to the amendment of CRD III.
Directives and Act on Credit Institutions and Financial Enterprises.
Key management personnel affected by the Bank Group Policy receive compensation based on performance
assessment generally in the form of cash bonus and equity shares in a ratio of 50-50%. Assignment is based on
OTP shares, furthermore performance based payments are deferred in accordance with the rules of Credit
Institutions Act.
OTP Bank ensures the share-based payment part for the management personnel of OTP Group members.
During implementation of the Remuneration Policy of the Group it became apparent that in case of certain
foreign subsidiaries it is not possible to ensure the originally determined share-based payment because of legal
reasons – incompatible with relevant EU-directives –, therefore a decision was made to cancel the share-based
payment in affected countries, and virtual share based payment – cash payment fixed to share price - was made
from 2017. In case of foreign subsidiaries virtual share based payment was made uniformly from 2021 (in case
of payments related to 2021).
The quantity of usable shares for individuals calculated for settlement of share-based payment shall be
determined as the ratio of the amount of share-based payment and share price determined by Supervisory Board.
The value of the share-based payment at the performance assessment is determined within 10 days by
Supervisory Board based on the average of the three previous trade day’s middle rate of OTP Bank’s equity
shares fixed on the Budapest Stock Exchange.
At the same time the conditions of discounted share-based payment are determined, and share-based payment
shall contain maximum HUF 6,000 discount at the assessment date, and earnings for the shares at the payment
date is maximum HUF 12,000.
Employee benefits are all forms of consideration given by an entity in exchange for service rendered by
employees or for the termination of employment. IAS 19 Employee Benefits shall be applied in accounting for
all employee benefits, except those to which IFRS 2 Share-based Payment applies.
Short-term employee benefits are employee benefits (other than termination benefits) that are expected to be
settled wholly before twelve months after the end of the annual reporting period in which the employees render
the related service. Post-employment benefits are employee benefits (other than termination and short-term
employee benefits) that are payable after the completion of employment. Post-employment benefit plans are
formal or informal arrangements under which an entity provides post-employment benefits for one or more
employees. Post-employment benefit plans are classified as either defined contribution plans or defined benefit
plans, depending on the economic substance of the plan as derived from its principal terms and conditions.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
110
NOTE 39: SHARE-BASED PAYMENT AND EMPLOYEE BENEFIT (in HUF mn) [continued]
Termination benefits are employee benefits provided in exchange for the termination of an employee’s
employment as a result of either: an entity’s decision to terminate an employee’s employment before the normal
retirement date or an employee’s decision to accept an offer of benefits in exchange for the termination of
employment. Other long-term employee benefits are all employee benefits other than short-term employee
benefits, postemployment benefits and termination benefits.
The parameters for the share-based payment relating to ongoing years 2016-2020 by Supervisory Board for
periods of each year as follows:
Year
Share purchasing at a
discounted price
Price of
remuneration
exchanged to
share
Share purchasing at a
discounted price
Price of
remuneration
exchanged to
share
Share purchasing at a
discounted price
Price of
remuneration
exchanged to
share
Exercise
price
Maximum
earnings per
share
Exercise
price
Maximum
earnings per
share
Exercise
price
Maximum
earnings per
share
HUF per share
for the year 2016
for the year 2017
for the year 2018
2017
7,200
2,500
9,200
-
-
-
-
-
-
2018
7,200
3,000
9,200
8,064
3,000
10,064
-
-
-
2019
7,200
3,500
9,200
8,064
3,500
10,064
10,413
4,000
12,413
2020
7,200
4,000
9,200
8,064
4,000
10,064
10,413
4,000
12,413
2021
-
-
-
8,064
4,000
10,064
10,413
4,000
12,413
2022
-
-
-
8,064
4,000
10,064
10,913
4,000
12,413
2023
-
-
-
-
-
-
10,913
4,000
12,413
2024
-
-
-
-
-
-
10,913
4,000
12,413
2025
-
-
-
-
-
-
10,913
4,000
12,413
Year
Share purchasing at a discounted price
Price of remuneration
exchanged to share
Share purchasing at a discounted price
Price of remuneration
exchanged to share
Exercise price
Maximum earnings
per share
Exercise price
Maximum earnings
per share
HUF per share
for the year 2019
for the year 2020
2020
9,553
4,000
11,553
-
-
-
2021
9,553
4,000
11,553
12,644
9,000
16,644
2022
9,553
4,000
11,553
12,644
8,000
16,644
2023
9,553
4,000
11,553
13,644
8,000
16,644
2024
9,553
4,000
11,553
13,644
8,000
16,644
2025
9,553
4,000
11,553
13,644
8,000
16,644
2026
9,553
4,000
11,553
13,644
8,000
16,644
2027
-
-
-
13,644
8,000
16,644
Relevant factors considered during measurement of fair value related to share-based payment as follows:
Year
Reference
price
Assumed
volatility
Risk-free interest rate (HUF)
1Y
2Y
3Y
4Y
5Y
6Y
7Y
2017
9,200
21.3%
0.1%
0.5%
0.7%
1.0%
1.3%
1.3%
1.3%
2018
10,064
26.0%
0.2%
0.6%
1.0%
1.3%
1.6%
1.9%
2.1%
2019
12,413
19.2%
0.2%
0.7%
0.9%
1.1%
1.3%
1.4%
1.6%
2020
11,553
33.6%
0.6%
0.4%
0.5%
0.6%
0.8%
0.9%
1.0%
2021
16,644
28.6%
1.0%
1.6%
1.8%
1.9%
2.0%
2.1%
2.1%
Év
Expected dividends (HUF/Share)
Pricing
model
1Y
2Y
3Y
4Y
5Y
6Y
7Y
2017
219
219
252
290
334
384
442
Binomial
2018
219
219
219
219
219
219
219
Binomial
2019
252
290
333
383
440
507
583
Binomial
2020
219
252
290
333
383
440
507
Binomial
2021
371
321
357
393
432
475
523
Binomial
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
111
NOTE 39: SHARE-BASED PAYMENT AND EMPLOYEE BENEFIT (in HUF mn) [continued]
Based on parameters accepted by Supervisory Board, relating to the year 2016 effective pieces are follows As at 31
December 2021:
Approved
pieces of shares
Exercised until
31 December
2021
Weighted
average share
price at the
date of exercise
(in HUF)
Expired
pieces
Exercisable at 31
December 2021
Share-purchasing period started in 2017
147,984
147,984
9,544
-
-
Remuneration exchanged to share
provided in 2017
4,288
4,288
9,194
-
-
Share-purchasing period started in 2018
321,528
321,528
10,387
-
-
Remuneration exchanged to share
provided in 2018
8,241
8,241
10,098
-
-
Share-purchasing period started in 2019
161,446
161,446
12,415
-
-
Remuneration exchanged to share
provided in 2019
4,033
4,033
11,813
-
-
Share-purchasing period starting in 2020
166,231
166,231
13,629
-
-
Remuneration exchanged to share
applying in 2020
4,303
4,303
11,897
-
-
Based on parameters accepted by Supervisory Board, relating to the year 2017 effective pieces are follows As at 31
December 2021:
Approved
pieces of shares
Exercised until
31 December
2021
Weighted
average share
price at the
date of exercise
(in HUF)
Expired
pieces
Exercisable at 31
December 2021
Share-purchasing period started in 2018
108,243
108,243
11,005
-
-
Remuneration exchanged to share
provided in 2018
11,926
11,926
10,098
-
-
Share-purchasing period started in 2019
212,282
212,282
12,096
-
-
Remuneration exchanged to share
provided in 2019
26,538
26,538
11,813
-
-
Share-purchasing period starting in 2020
101,571
101,565
12,084
6
-
Remuneration exchanged to share
applying in 2020
11,584
11,584
11,897
-
-
Share-purchasing period starting in 2021
109,460
106,719
16,441
-
2,741
Remuneration exchanged to share
applying in 2021
11,531
11,531
16,477
-
-
Share-purchasing period starting in 2022
-
-
-
-
42,820
Remuneration exchanged to share
applying in 2022
-
-
-
-
3,003
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
112
NOTE 39: SHARE-BASED PAYMENT AND EMPLOYEE BENEFIT (in HUF mn) [continued]
Based on parameters accepted by Supervisory Board, relating to the year 2018 effective pieces are follows As at 31
December 2021:
Approved
pieces of shares
Exercised until
31 December
2021
Weighted
average share
price at the
date of exercise
(in HUF)
Expired
pieces
Exercisable at 31
December 2021
Share-purchasing period started in 2019
82,854
82,854
13,843
-
-
Remuneration exchanged to share
provided in 2019
17,017
17,017
11,829
-
-
Share-purchasing period starting in 2020
150,230
150,230
14,294
-
-
Remuneration exchanged to share
applying in 2020
33,024
33,024
11,897
-
-
Share-purchasing period starting in 2021
73,799
73,799
16,314
-
-
Remuneration exchanged to share
applying in 2021
14,618
14,618
16,468
-
-
Share-purchasing period starting in 2022
-
-
-
-
99,341
Remuneration exchanged to share
applying in 2022
-
-
-
-
17,042
Share-purchasing period starting in 2023
-
-
-
-
45,155
Remuneration exchanged to share
applying in 2023
-
-
-
-
4,114
Remuneration exchanged to share
applying in 2024
-
-
-
-
864
Remuneration exchanged to share
applying in 2025
-
-
-
-
432
Based on parameters accepted by Supervisory Board, relating to the year 2019 effective pieces are follows As at 31
December 2021:
Approved
pieces of shares
Exercised until
31 December
2021
Weighted
average share
price at the
date of exercise
(in HUF)
Expired
pieces
Exercisable at 31
December 2021
Share-purchasing period started in 2020
91,403
91,403
12,218
-
-
Remuneration exchanged to share
provided in 2020
22,806
22,806
11,897
-
-
Share-purchasing period starting in 2021
201,273
192,577
16,523
-
8,696
Remuneration exchanged to share
applying in 2021
30,834
30,834
17,618
-
-
Share-purchasing period starting in 2022
-
-
-
-
109,567
Remuneration exchanged to share
applying in 2022
-
-
-
-
15,554
Share-purchasing period starting in 2023
-
-
-
-
125,771
Remuneration exchanged to share
applying in 2023
-
-
-
-
18,025
Share-purchasing period starting in 2024
-
-
-
-
44,421
Remuneration exchanged to share
applying in 2024
-
-
-
-
6,279
Remuneration exchanged to share
applying in 2025
-
-
-
-
1,000
Remuneration exchanged to share
applying in 2026
-
-
-
-
500
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
113
NOTE 39: SHARE-BASED PAYMENT AND EMPLOYEE BENEFIT (in HUF mn) [continued]
Based on parameters accepted by Supervisory Board, relating to the year 2020 effective pieces are follows As at 31
December 2021:
Approved
pieces of shares
Exercised until
31 December
2021
Weighted
average share
price at the
date of exercise
(in HUF)
Expired
pieces
Exercisable at 31
December 2021
Share-purchasing period started in 2021
41,098
8,184
18,471
-
32,914
Remuneration exchanged to share
provided in 2021
17,881
17,881
17,498
-
-
Share-purchasing period starting in 2022
-
-
-
-
82,826
Remuneration exchanged to share
applying in 2022
-
-
-
-
19,390
Share-purchasing period starting in 2023
-
-
-
-
47,826
Remuneration exchanged to share
applying in 2023
-
-
-
-
9,292
Share-purchasing period starting in 2024
-
-
-
-
51,002
Remuneration exchanged to share
applying in 2024
-
-
-
-
9,518
Share-purchasing period starting in 2025
-
-
-
-
13,080
Remuneration exchanged to share
applying in 2025
-
-
-
-
3,443
Remuneration exchanged to share
applying in 2026
-
-
-
-
680
Remuneration exchanged to share
applying in 2027
-
-
-
-
680
Effective pieces relating to the periods starting in 2022-2027 settled during valuation of performance of year
2017-2020, can be modified based on risk assessment and personal changes.
In connection with the share-based compensation for Board of Directors and connecting compensation, shares
given as a part of payments detailed above and for the year 2021 based on performance assessment accounted as
equity-settled share based transactions HUF 3,589 million was recognized as expense for the year ended 31
December 2021.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
114
NOTE 40: RELATED PARTY TRANSACTIONS (in HUF mn)
Outstanding balances and transactions with related parties are summarized below in aggregate:
Statement of financial position
2021
2020
Associated
companies
and other
companies
Other
related
parties
Associated
companies
and other
companies
Other
related
parties
Cash, amounts due from banks and balances with the National
Bank of Hungary
1,675
-
7,301
-
Placements with other banks, net of allowance for placement
losses
1,557,437
-
1,177,504
-
Held for trading securities
16
-
526
-
Securities mandatorily measured at fair value through profit or
loss
-
-
5,342
-
Held for trading derivative financial instruments:
19,397
-
21,587
-
Financial assets at fair value through other comprehensive
income
156,162
-
250,673
-
Securities at amortised cost
-
596
-
590
Loans at amortised cost
960,288
105,503
834,555
92,889
Loans mandatorily measured at fair value through profit or loss
-
9
-
10
Right of use assets
5,713
-
6,567
-
Derivative financial assets designated as hedge accounting
relationships
(9)
-
-
-
Other assets
101,569
5
67,077
557
Total Assets
2,802,248
106,113
2,371,132
94,046
Amounts due to banks and deposits from the National Bank of
Hungary and other banks
(115,042)
-
(151,254)
-
Repo liabilities
(36,854)
-
-
-
Deposits from customers
(263,139)
(27,174)
(249,410)
(4,027)
Leasing liabilities
(5,926)
-
(6,736)
-
Liabilities from issued securities
(12,232)
-
(11,299)
-
Derivative financial liabilities designated as held for trading
(5,344)
-
(9,957)
-
Derivative financial liabilities designated as hedge accounting
relationships
(61)
-
-
-
Other liabilities
(4,599)
(551)
(7,014)
(400)
Total Liabilities
(443,197)
(27,725)
(435,670)
(4,427)
Off balance sheet items
Guarantees
(921,818)
-
(870,892)
-
Loan commitments
(85,810)
(44,812)
(96,032)
(37,051)
Factoring loan commitments
(1,475)
-
(37)
-
Total
(1,009,103)
(44,812)
(966,961)
(37,051)
Statement of Profit or Loss
2021
2020
Interest Income
42,706
39,193
Interest Expense
(11,449)
(11,186)
Risk cost
904
(1,925)
(Losses)/Gains arising from derecognition of financial assets
measured at amortised cost
(2,198)
914
Income from fees and commissions
33,128
28,951
Expenses from fees and commissions
(2,859)
(1,971)
Other administrative expenses
(7,570)
(8,465)
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
115
NOTE 40: RELATED PARTY TRANSACTIONS (in HUF mn) [continued]
Related party transactions with key management
The compensation of key management, such as the members of the Board of Directors, the members of the
Supervisory Board and the employees involved in the decision-making process in accordance with the
compensation categories defined in IAS 24 Related Party Disclosures, is summarised below:
2021
2020
Short-term employee benefits
2,957
2,923
Share-based payment
2,740
2,619
Long-term employee benefits (on the basis of IAS 19)
246
278
Total
5,943
5,820
2021
2021
Loans provided to companies owned by the Management (in the
normal course of business)
105,503
92,889
Commitments to extend credit and bank guarantees
44,812
37,051
An analysis of payment to Executives related to their activity in Board of Directors and Supervisory
Board is as follows (in HUF mn):
2021
2020
Members of Board of Directors
1,489
969
Members of Supervisory Board
173
57
Total
1,662
1,026
In the normal course of business, OTP Bank enters into other transactions with its subsidiaries, the amounts and
volumes of which are not significant to these financial statements taken as a whole.
NOTE 41: TRUST ACTIVITIES (in HUF mn)
The Bank acts as a trustee for certain loans granted by companies or employers to their employees, mainly for
housing purposes. The ultimate risk for these loans rests with the party advancing the funds. As these loans and
related funds are not considered to be assets or liabilities of the Bank, they have been excluded from the
accompanying separate statement of financial position.
2021
2020
Loans managed by the Bank as a trustee
27,532
28,055
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
116
NOTE 42: CONCENTRATION OF ASSETS AND LIABILITIES
2021
2020
In the percentage of the total assets
Receivables from, or securities issued by the Hungarian Government or the
NBH
22.79%
22.69%
Securities issued by the OTP Mortgage Bank Ltd.
1.77%
2.24%
Loans at amortised cost
6.51%
6.48%
There were no other significant concentrations of the assets or liabilities of the Bank as at 31 December 2021 or
31 December 2020.
OTP Bank continuously provides the Authority with reports on the extent of dependency on large depositors as
well as the exposure of the largest 50 depositors towards OTP Bank. Further to this obligatory reporting to the
Authority. OTP Bank pays particular attention on the exposure of its largest partners and cares for maintaining a
closer relationship with these partners in order to secure the stability of the level of deposits.
The organisational unit of OTP Bank in charge of partner-risk management analyses the largest partners on a
constant basis and sets limits on OTP Bank’s and the Group’s exposure separately partner-by-partner. If
necessary, it modifies partner-limits in due course thereby reducing the room for manoeuvring of the Treasury
and other business areas.
The Bank’s internal regulation (Limit-management regulation) controls risk management which related to
exposures of clients. Bank makes a difference between clients or clients who are economically connected with
each other, partners, partners operating in the same geographical region or in the same economic sector,
exposures from customers. Limit-management regulation includes a specific range provisions system used by
Bank to control risk exposures. This regulation has to be used by the Bank for its business (lending) risk-taking
activity in both the retail and corporate sector.
To specify credit risk limits, the Bank strives their clients get an acceptable margin of risk based on their
financial situation. In the Bank limit system a lower level decision-making delegation has to be provided.
If an OTP group member takes risk against a client or group of clients (either inside the local economy or
outside), the client will be qualified as a group level risk and these limits will be specified at group level.
The validity period of this policy is 12 months. The limit shall be reviewed prior to the expiry date but at least
once a year based on the relevant information required to limit calculations.
The maximum credit exposure to any client or counterparty among Loans at amortised cost was HUF 893 billion
and HUF 722 billion as at 31 December 2021 and 31 December 2020 respectively, before taking into account
collateral or other credit enhancements.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
117
NOTE 43: EARNINGS PER SHARE
Earnings per share attributable to the Bank’s ordinary shares are determined by dividing Net profit for the year
attributable to ordinary shareholders, after the deduction of declared preference dividends, by the weighted
average number of ordinary shares outstanding during the year. Dilutive potential ordinary shares are deemed to
have been converted into ordinary shares.
2021
2020
Net profit for the year attributable to ordinary shareholders (in HUF mn)
125,339
92,474
Weighted average number of ordinary shares outstanding during the year for
calculating basic EPS (number of share)
275,523,535
277,301,936
Basic Earnings per share (in HUF)
455
333
Separate net profit for the year attributable to ordinary shareholders (in HUF
mn)
125,339
92,474
Modified weighted average number of ordinary shares outstanding during the
year for calculating diluted EPS (number of share)
275,538,262
277,310,069
Diluted Earnings per share (in HUF)
455
333
2021
2020
Weighted average number of ordinary shares
280,000,010
280,000,010
Average number of Treasury shares
(4,476,475)
(2,698,074)
Weighted average number of ordinary shares outstanding during the
year for calculating basic EPS
275,523,535
277,301,936
Dilutive effect of options issued in accordance with the Remuneration Policy
/ Management Option Program and convertible into ordinary shares
1
14,727
8,133
The modified weighted average number of ordinary shares outstanding
during the year for calculating diluted EPS
275,538,262
277,310,069
The ICES bonds could potentially dilute basic EPS in the future, but were not included in the calculation of
diluted EPS because they are antidilutive for the period presented.
1
In 2021 and 2020 dilutive effect is in connection with the Remuneration Policy.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
118
NOTE 44: NET GAIN OR LOSS REALISED ON FINANCIAL INSTRUMENTS (in HUF mn)
Year ended 31 December 2021
Net interest
income and
expense
Net non-
interest gain
and loss
Loss
allowance
Other
comprehensive
income
Financial assets measured at amortised cost
Cash, amounts due from banks and balances with the
National Bank of Hungary
14,124
-
-
-
Placements with other banks, net of allowance for
placement losses
31,981
-
1,797
-
Repo receivables
315
-
(220)
-
Loans at amortised cost
167,882
13,591
37,264
-
Securities at amortised cost
61,085
(1,552)
2,035
-
Financial assets measured at amortised cost total
275,387
12,039
40,876
-
Financial assets measured at fair value
Securities held for trading
277
6,657
-
-
Securities at fair value through other comprehensive
income
21,456
(4,659)
1
(551)
(35,756)
Loans mandatorily measured at fair value through
profit or loss
26,045
(8,671)
16,255
-
Financial assets measured at fair value total
47,778
(6,673)
15,704
(35,756)
Financial liabilities measured at amortised cost
Amounts due to banks and deposits from the National
Bank of Hungary and other banks
(11,177)
-
-
-
Repo liabilities
(2,860)
-
-
-
Deposits from customers
(10,162)
170,598
-
-
Leasing liabilities
(214)
-
-
-
Liabilities from issued securities
(1,166)
-
-
-
Subordinated bonds and loans
(7,890)
-
-
-
Financial liabilities measured at amortised cost
total
(33,469)
170,598
-
-
Financial liabilities designated to measure at fair
value through profit or loss
(493)
3,916
-
-
Derivative financial instruments
2
(36,295)
3,436
-
-
Total
252,908
183,316
56,580
(35,756)
1
For the year ended 31 December 2021 HUF (4,659) million net non-interest gain on securities at fair value through other comprehensive
income was transferred from other comprehensive income to profit or loss.
2
Gains/losses from derivative financial instruments recognised in net interest income as Income similar to interest income.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
119
NOTE 44: NET GAIN OR LOSS REALISED ON FINANCIAL INSTRUMENTS
(in HUF mn) [continued]
Year ended 31 December 2020
Net interest
income and
expense
Net non-
interest gain
and loss
Loss
allowance
Other
comprehensive
income
Financial assets measured at amortised cost
Cash, amounts due from banks and balances with the
National Bank of Hungary
4,369
-
-
-
Placements with other banks, net of allowance for
placement losses
10,650
-
2,227
-
Repo receivables
49
-
286
-
Loans at amortised cost
143,650
23,298
55,444
-
Securities at amortised cost
48,654
360
1,845
-
Financial assets measured at amortised cost total
207,372
23,658
59,802
-
Financial assets measured at fair value
Securities held for trading
368
2,251
-
-
Securities at fair value through other comprehensive
income
29,095
6,073
1
3
(17,734)
Loans mandatorily measured at fair value through
profit or loss
15,094
2,125
-
-
Financial assets measured at fair value total
44,557
10,449
3
(17,734)
Financial liabilities measured at amortised cost
Amounts due to banks and deposits from the National
Bank of Hungary and other banks
(9,862)
-
-
-
Repo liabilities
(1,476)
-
-
-
Deposits from customers
(3,985)
216,512
-
-
Leasing liabilities
(244)
-
-
-
Liabilities from issued securities
(598)
-
-
-
Subordinated bonds and loans
(8,327)
-
-
-
Financial liabilities measured at amortised cost
total
(24,492)
216,512
-
-
Financial liabilities designated to measure at fair
value through profit or loss
(307)
1,270
-
-
Derivative financial instruments
2
(5,053)
5,818
-
-
Total
222,077
257,707
59,805
(17,734)
1
For the year ended 31 December 2020 HUF 6,073 million net non-interest gain on securities at fair value through other comprehensive
income was transferred from other comprehensive income to profit or loss.
2
Gains/losses from derivative financial instruments recognised in net interest income as Income similar to interest income.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
120
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn)
In determining the fair value of a financial asset or liability the Bank in the case of instruments that are quoted on
an active market uses the market price. In most cases market price is not publicly available so the Bank has to
make assumptions or use valuation techniques to determine the fair value of a financial instrument. See Note 45.
d) for more information about fair value classes applied for financial assets and liabilities measured at fair value
in these financial statements.
To provide a reliable estimate of the fair value of those financial instrument that are originally measured at
amortised cost, the Bank used the discounted cash flow analysis (loans, placements with other banks, amounts
due to banks, deposits from customers). The fair value of issued securities and subordinated bonds is based on
quoted prices (e,g, Reuters), Cash and amounts due from banks and balances with the National Bank of Hungary
represent amounts available immediately thus the fair value equals to the cost.
The assumptions used when calculating the fair value of financial assets and liabilities when using valuation
technique are the following:
• the discount rates are the risk free rates related to the denomination currency adjusted by the appropriate
risk premium as of the end of the reporting period,
• the contractual cash flows are considered for the performing loans and for the non-performing loans, the
amortised cost less impairment is considered as fair value,
• the future cash flows for floating interest rate instruments are estimated from the yield curves as of the
end of the reporting period,
• the fair value of the deposit which can be due in demand cannot be lower than the amount payable on
demand.
For classes of assets and liabilities not measured at fair value in the statement of financial position, the income
approach was used to convert future cash flows to a single current amount. Fair value of current assets is equal to
carrying amount, fair value of liabilities from issued securities and other bond-type classes of assets and
liabilities not measured at fair value measured based on Reuters market rates and, fair value of other classes not
measured at fair value of the statement of financial position are measured using the discounted cash flow
method. Fair value of loans, net of allowance for loan losses measured using discount rate adjustment technique,
the discount rate is derived from observed rates of return for comparable assets or liabilities that are traded in the
market.
Fair value measurements – in relation to instruments measured not at fair value – are categorized in level 3 of the
fair value hierarchy.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
121
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
a) Fair value of financial assets and liabilities
31 December 2021
31 December 2020
Carrying
amount
Fair value
Carrying amount
Fair value
Cash, amounts due from banks and balances with the
National Bank of Hungary
474,945
474,945
579,120
579,120
Placements with other banks, net of allowance for
placement losses
2,567,212
2,548,809
1,535,884
1,550,747
Repo receivables
33,638
33,707
183,364
183,664
Financial assets at fair value through profit or loss
246,462
246,462
160,483
160,483
Held for trading securities
35,633
35,633
11,729
11,729
Derivative financial instruments classified as held for
trading
182,768
182,768
116,818
116,818
Securities mandatorily measured at fair value through
profit or loss
28,061
28,061
31,936
31,936
Securities at fair value through other comprehensive
income
641,939
641,939
911,950
911,950
Securities at amortised cost
3,071,038
2,877,380
2,007,692
2,085,881
Loans at amortised cost
4,032,465
3,576,519
3,417,760
3,178,368
Loans mandatorily measured at fair value through profit
or loss
662,012
662,012
480,937
480,937
Derivative financial assets designated as hedge
accounting relationships
17,727
17,727
6,817
6,817
Other financial assets
153,747
153,747
127,179
127,179
FINANCIAL ASSETS TOTAL
11,901,185
11,233,248
9,411,186
9,265,147
Amounts due to banks, deposits from the National Bank
of Hungary and other banks
1,051,203
958,463
766,977
754,573
Repo liabilities
86,580
86,543
109,612
111,548
Deposits from customers
9,948,532
9,946,444
7,895,735
7,895,211
Leasing liabilities
17,932
17,928
14,106
14,105
Liabilities from issued securities
22,153
21,006
28,435
31,588
Financial liabilities at fair value through profit or loss
20,133
20,133
25,902
25,902
Derivative financial liabilities designated as held for
trading
192,261
192,261
99,987
99,987
Derivative financial liabilities designated as hedge
accounting relationships
18,690
18,690
3,104
3,104
Subordinated bonds and loans
271,776
278,151
304,243
295,218
Other financial liabilities
194,511
194,511
167,540
167,540
FINANCIAL LIABILITIES TOTAL
11,823,771
11,734,130
9,415,641
9,398,776
b) Derivative financial instruments
OTP Bank regularly enters into hedging transactions in order to decrease its financial risks. However some
economically hedging transaction do not meet the criteria to account for hedge accounting, therefore these
transactions were accounted as derivatives held for trading. Net investment hedge in foreign operations is not
applicable in separate financial statements.
The assessment of the hedge effectiveness (both for fair value hedges and cash flow hedges) to determine the
economic relationship between the hedged item and the hedging instrument is accomplished with prospective
scenario analysis via different rate shift scenarios of the relevant risk factor(s) of the hedged risk component(s).
The fair value change of the hedged item and the hedging instrument is compared in the different scenarios.
Economic relationship is justified if the change of the fair value of the hedged item and the hedging instrument
are in the opposite direction and the absolute changes are similar amounts. The hedge ratio is determined as the
ratio of the notional of the hedged item and the notional of the hedging instrument. The sources of hedge
ineffectiveness are the not hedged risk components (e,g, change of cross currency basis spreads in case of
interest rate risk hedges), slight differences in maturity dates and interest payment dates in case of fair value
hedges, and differences between the carrying amount of the hedged item and the carrying amount of the hedging
instrument in case of FX hedges (e,g, caused by interest rate risk components in the fair value of the hedging
instrument).
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
122
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
b) Derivative financial instruments [continued]
Fair value of derivative financial instruments
1
The Bank has the following held for trading derivatives and derivatives designated as hedge accounting:
31 December 2021
31 December 2020
Before netting
Netting
After netting
Before netting
Netting
After netting
Assets
Liabilities
Assets
Liabilities
Assets
Liabilities
Assets
Liabilities
Held for trading derivative financial instruments
Interest rate derivatives
Interest rate swaps
54,251
(53,720)
40,783
13,468
(12,937)
30,216
(28,474)
8,984
21,232
(19,490)
Cross currency interest rate swaps
7,207
(7,618)
-
7,207
(7,618)
7,315
(7,285)
-
7,315
(7,285)
OTC options
479
(479)
-
479
(479)
356
(356)
-
356
(356)
Total interest rate derivatives (OTC derivatives)
61,937
(61,817)
40,783
21,154
(21,034)
37,887
(36,115)
8,984
28,903
(27,131)
From this: Interest rate derivatives cleared by NBH
1,276
-
-
1,276
-
5
(72)
-
5
(72)
Foreign exchange derivatives
Foreign exchange swaps
36,896
(40,639)
-
36,896
(40,639)
39,644
(30,374)
-
39,644
(30,374)
Foreign exchange forward
8,854
(6,819)
-
8,854
(6,819)
6,990
(9,869)
-
6,990
(9,869)
OTC options
804
(180)
-
804
(180)
3,909
(3,836)
-
3,909
(3,836)
Foreign exchange spot conversion
175
(246)
-
175
(246)
619
(704)
-
619
(704)
Total foreign exchange derivatives (OTC derivatives)
46,729
(47,884)
-
46,729
(47,884)
51,162
(44,783)
-
51,162
(44,783)
From this: Foreign exchange derivatives cleared by NBH
3,447
(1,480)
-
3,447
(1,480)
5,211
(1,852)
-
5,211
(1,852)
1
Certain derivative financial assets and liabilities are offset and the net amount is presented in accordance with IAS 32 in the Statement of Financial Position. The Bank has the ability and the intention to settle those instruments
on a net basis, which are settled through the same clearing house.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
123
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
b) Derivative financial instruments [continued]
1
Fair value of derivative financial instruments [continued]
31 December 2021
31 December 2020
Before netting
Netting
After netting
Before netting
Netting
After netting
Assets
Liabilities
Assets
Liabilities
Assets
Liabilities
Assets
Liabilities
Equity stock and index derivatives
Commodity Swaps
52,197
(52,166)
-
52,197
(52,166)
13,999
(12,901)
-
13,999
(12,901)
Equity swaps
10,538
(357)
-
10,538
(357)
7,071
(560)
-
7,071
(560)
OTC derivatives
62,735
(52,523)
-
62,735
(52,523)
21,070
(13,461)
-
21,070
(13,461)
Exchange traded futures and options
164
(278)
-
164
(278)
379
(1,262)
-
379
(1,262)
Total equity stock and index derivatives
62,899
(52,801)
-
62,899
(52,801)
21,449
(14,723)
-
21,449
(14,723)
Derivatives held for risk management not designated in
hedges
Interest rate swaps
51,311
(70,811)
5,682
45,629
(65,129)
25,760
(22,058)
12,736
13,024
(9,322)
Foreign exchange swaps
1,915
(5,245)
-
1,915
(5,245)
2,208
(3,953)
-
2,208
(3,953)
Forward
-
-
-
-
-
28
(75)
-
28
(75)
Cross currency interest rate swaps
4,442
(168)
-
4,442
(168)
44
-
-
44
-
Total derivatives held for risk management not designated in
hedges
57,668
(76,224)
5,682
51,986
(70,542)
28,040
(26,086)
12,736
15,304
(13,350)
From this: Total derivatives cleared by NBH held for risk
management
35,226
(497)
-
35,226
(497)
759
(6,269)
-
759
(6,269)
Total Held for trading derivative financial instruments
229,233
(238,726)
46,465
182,768
(192,261)
138,538
(121,707)
21,720
116,818
(99,987)
Derivative financial instruments designated as hedge
accounting relationships
Derivatives designated in cash flow hedges
Interest rate swaps
-
(8,638)
1,020
(1,020)
(7,618)
8,027
-
8,027
-
8,027
Total derivatives designated in cash flow hedges
-
(8,638)
1,020
(1,020)
(7,618)
8,027
-
8,027
-
8,027
Derivatives designated in fair value hedges
Interest rate swaps
25,407
(17,878)
12,131
13,276
(5,747)
2,432
(7,061)
1,795
637
(5,266)
Cross currency interest rate swaps
5,471
(5,325)
-
5,471
(5,325)
6,180
(5,865)
-
6,180
(5,865)
Total derivatives designated in fair value hedges
30,878
(23,203)
12,131
18,747
(11,072)
8,612
(12,926)
1,795
6,817
(11,131)
From this: Total derivatives cleared by NBH held for hedging
-
(2,249)
-
-
(2,249)
-
(1,691)
-
-
(1,691)
Total derivatives held for risk management (OTC derivatives)
30,878
(31,841)
13,151
17,727
(18,690)
16,639
(12,926)
9,822
6,817
(3,104)
1
Certain derivative financial assets and liabilities are offset and the net amount is presented in accordance with IAS 32 in the Statement of Financial Position. The Bank has the ability and the intention to settle those instruments
on a net basis, which are settled through the same clearing house.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
124
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
c) Hedge accounting
Interest rate risk management is centralized at OTP Group. Interest rate risk exposures in major currencies are managed at
HQ on consolidated level. Although risk exposures in local currencies are managed at subsidiary level, the respective
decisions are subject to HQ approval. Interest rate risk is measured by simulating NII and EVE under different stress and
plan scenarios, the established risk limits are described in „OTP Bank’s Group-Level Regulations on the Management of
Liquidity Risk and Interest Rate Risk of Banking Book”. The interest rate risk management activity aims to stabilize NII
within the approved risk limits.
The risk management objective of these hedge relationships is to mitigate the risk of clean fair value (i.e. excluding accrued
interest) change of MIRS loans due to the change of interest rate reference indexes (BUBOR, EURIBOR, LIBOR, etc.) of
the respective currency.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
125
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
c) Hedge accounting [continued]
Amount, timing and uncertainty of future cash flows - hedging instruments as at 31 December 2021 (amounts in million currency)
31 December 2021
Type of hedge
Type of risk
Type of instrument
Within one
month
Within three
months and over
one month
Within one year
and over three
months
Within five years
and over one year
More than five
years
Total
Fair Value Hedge
Interest rate risk
Interest rate swap
HUF
Notional
-
2,000
900
(52,474)
42,950
(6,624)
Average Interest Rate (%)
-
1.09%
0.49%
1.65%
1.31%
EUR
Notional
-
-
1
111
50
162
Average Interest Rate (%)
-
-
0.23%
0.24%
0.05%
USD
Notional
-
-
-
119
47
166
Average Interest Rate (%)
-
-
-
2.54%
4.18%
JPY
Notional
-
-
-
4,500
-
4,500
Average Interest Rate (%)
-
-
-
0.22%
-
Fair Value Hedge
FX & IR risk
Cross currency interest rate swap
EUR/HUF
Notional
-
1
2
12
12
27
Average Interest Rate (%)
-
(1.68%)
(1.67%)
(1.69%)
(1.82%)
Average FX Rate
-
310.29
310.26
310.01
307.81
Fair Value Hedge
FX risk
Cross currency interest rate swap
EUR/HUF
Notional
-
-6
35
572
-
601
Average FX Rate
-
354.22
356.94
355.93
-
RON/HUF
Notional
-
-
200
2,225
-
2,425
Average FX Rate
-
-
66.21
73.08
-
RUB/HUF
Notional
-
-
-
11,200
-
11,200
Average FX Rate
-
-
-
4.15
-
JPY/HUF
Notional
-
-
-
4,500
-
4,500
Average FX Rate
-
-
-
2.79
-
USD/HUF
Notional
-
-
(3)
306
-
303
Average FX Rate
-
-
323.77
323.77
-
Fair Value Hedge
Other
Interest rate swap
HUF
Notional
-
3,345
1,823
3,093
-
8,261
Cash flow Hedge
Interest rate risk
Interest rate swap
HUF
Notional
-
-
-
7,819
28,027
35,846
Average FX Rate
-
-
-
1.80
2.46
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
126
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
c) Hedge accounting [continued]
Amount, timing and uncertainty of future cash flows - hedging instruments as at 31 December 2020 (amounts in million currency)
31 December 2020
Type of hedge
Type of risk
Type of instrument
Within one
month
Within three
months and over
one month
Within one year
and over three
months
Within five
years and over
one year
More than
five years
Total
Fair Value Hedge
Interest rate risk
Interest rate swap
HUF
Notional
-
-
60,000
(89,622)
173,810
144,188
Average Interest Rate (%)
-
-
1.31%
1.06%
1.35%
EUR
Notional
15
-
5
102
10
132
Average Interest Rate (%)
(0.11%)
-
0.09%
0.24%
0.22%
USD
Notional
-
-
21
171
29
221
Average Interest Rate (%)
-
-
2.00%
2.38%
2.35%
RUB
Notional
-
-
-
2,100
-
2,100
Average Interest Rate (%)
-
-
-
7.38%
-
Fair Value Hedge
FX & IR risk
Cross currency interest rate swap
EUR/HUF
Notional
-
-
2
12
14
28
Average Interest Rate (%)
-
-
(1.60%)
(1.63%)
(1.67%)
Average FX Rate
-
-
310.82
310.14
308.15
Fair Value Hedge
FX risk
Cross currency interest rate swap
EUR/HUF
Notional
1
92
123
613
-
829
Average FX Rate
360.19
354.92
360.47
356.03
-
RON/HUF
Notional
-
-
-
1,550
-
1,550
Average FX Rate
-
-
-
72.60
-
RUB/HUF
Notional
-
-
-
4,100
-
4,100
Average FX Rate
-
-
-
4.46
-
Fair Value Hedge
Other
Interest rate swap
HUF
Notional
-
(183)
6,940
8,342
-
15,099
Cash flow Hedge
Interest rate risk
Interest rate swap
HUF
Notional
-
-
-
12,194
28,027
40,221
Average FX Rate
-
-
-
1.77
2.46
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2021
127
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
c) Hedge accounting [continued]
Derivative financial instruments designated as hedge accounting as follows:
Type of instrument
Type of risk
Nominal amount of
the hedging
instrument
Carrying amount of the hedging instrument for the year
ended 31 December 2021
Line item in the statement of financial
position where the hedging instrument is
located
Changes in fair value used for
calculating hedge ineffectiveness for
the year ended 31 December 2021
Before netting
Netting
After netting
Assets
Liabilities
Assets
Liabilities
Fair value hedge
Interest rate swap
Interest rate risk
409,595
23,976
(17,878)
12,131
11,845
(5,747)
Derivative assets (liabilities) held for risk
management
6,494
Cross-currency swap
FX & IR risk
8,175
-
(2,249)
-
-
(2,249)
Derivative assets (liabilities) held for risk
management
4
Cross-currency swap
FX risk
566,936
5,471
(3,076)
-
5,471
(3,076)
Derivative assets (liabilities) held for risk
management
(1,687)
Interest rate swap
Other
8,261
1,431
-
-
1,431
-
Derivative assets (liabilities) held for risk
management
3
Cash flow hedge
Interest rate swap
Interest rate risk
35,846
-
(8,638)
1,020
(1,020)
(7,618)
Derivative assets (liabilities) held for risk
management
(101)
31 December 2021
Type of risk
Carrying amount of the hedged
item
Accumulated amount of fair value hedge
adjustments on the hedged item included
in the carrying amount of the hedged
item
Line item in the statement of financial position in
which the hedged item is included
Assets
Liabilities
Assets
Liabilities
Fair value hedges
- Loans
Interest rate risk
57,176
-
637
-
Loans
- Loans
Interest rate risk
-
142,649
-
(16,858)
Amounts due to banks and deposits from the National
Bank of Hungary and other banks
- Government bonds
Interest rate risk
13,921
-
1,230
-
Securities at amortised cost
- Government bonds
Interest rate risk
152,830
-
22,457
-
Securities at fair value through other comprehensive
income
- Government bonds
Interest rate risk
-
-
-
-
Financial assets at fair value through profit or loss
- Other securities
Interest rate risk
42,008
-
318
-
Securities at fair value through other comprehensive
income
- Loans
FX & IR risk
10,595
-
611
-
Loans
- Loans
FX risk
458,312
-
-
-
Loans
- Government bonds
FX risk
12,811
-
-
-
Securities at amortised cost
- Government bonds
FX risk
98,668
-
-
-
Securities at fair value through other comprehensive
income
- Other securities
Other risk
-
8,261
-
(161)
Liabilities from issued securities
Fair value hedges total
846,321
150,910
25,253
(17,019)
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2021
128
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
c) Hedge accounting [continued]
Derivative financial instruments designated as hedge accounting as follows:
For the year ended 31 December 2021 OCI related to cash flow hedges as follows:
Type of risk
Carrying amount of the
hedged item
Cash flow hedge reserve
Year ended 2021
Line item in the statement of
financial position in which
the hedged item is included
Assets
Liabilities
Interest rate
risk
35,965
-
3,568
Loans at amortised cost
For the year ended 31 December 2020 OCI related to cash flow hedges as follows:
Type of risk
Carrying amount of the
hedged item
Cash flow hedge reserve
Year ended 2021
Line item in the statement of
financial position in which
the hedged item is included
Assets
Liabilities
Interest rate
risk
40,221
-
(2,739)
Loans at amortised cost
For the year ended 31 December 2021 change in basis swap spread recognised in OCI related to fair value hedges as follows:
Type of risk
Carrying amount of the
hedged item
Items recognised in other
comprehensive income
Year ended 2021
Change in the items
recognized in other
comprehensive income Year
ended 2021
Line item in the statement
of financial position in
which the hedged item is
included
Assets
Liabilities
FX risk
458,312
-
(1,032)
(1,681)
Loans at amortised cost
FX risk
12,811
-
64
-
FVOCI securities
471,123
-
(968)
(1,681)
For the year ended 31 December 2020 change in basis swap spread recognised in OCI related to fair value hedges as follows:
Type of risk
Carrying amount of the
hedged item
Items recognised in other
comprehensive income
Year ended 2021
Change in the items
recognized in other
comprehensive income Year
ended 2021
Line item in the statement
of financial position in
which the hedged item is
included
Assets
Liabilities
FX risk
303,572
-
713
-
Loans at amortised cost
303,572
-
713
-
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2021
129
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
c) Hedge accounting [continued]
Derivative financial instruments designated as hedge accounting as follows:
Type of instrument
Type of risk
Nominal amount of
the hedging
instrument
Carrying amount of the hedging instrument for the year
ended 31 December 2020
Line item in the statement of financial
position where the hedging instrument is
located
Changes in fair value used for
calculating hedge ineffectiveness for
the year ended 31 December 2020
Before netting
Netting
After netting
Assets
Liabilities
Assets
Liabilities
Fair value hedge
Interest rate swap
Interest rate risk
468,574
1,900
(7,062)
1,795
105
(5,267)
Derivative assets (liabilities) held for risk
management
(370)
Cross-currency swap
FX & IR risk
8,874
-
(1,408)
-
-
(1,408)
Derivative assets (liabilities) held for risk
management
(36)
Cross-currency swap
FX risk
438,401
6,182
(4,456)
-
6,182
(4,456)
Derivative assets (liabilities) held for risk
management
(809)
Interest rate swap
Other
16,224
530
-
-
530
-
Derivative assets (liabilities) held for risk
management
2
Cash flow hedge
-
Interest rate swap
Interest rate risk
40,221
8,027
-
8,027
-
8,027
Derivative assets (liabilities) held for risk
management
(85)
31 December 2020
Type of risk
Carrying amount of the
hedged item
Accumulated amount of fair value
hedge adjustments on the hedged
item included in the carrying
amount of the hedged item
Line item in the statement of financial position in which
the hedged item is included
Assets
Liabilities
Assets
Liabilities
Fair value hedges
- Loans
Interest rate risk
35,256
-
1,679
-
Loans
- Loans
Interest rate risk
-
100,299
-
(235)
Loans
- Government bonds
Interest rate risk
8,678
-
(106)
-
Securities at amortised cost
- Government bonds
Interest rate risk
269,838
-
2,518
-
Securities at fair value through other comprehensive income
- Other securities
Interest rate risk
47,560
-
781
-
Securities at fair value through other comprehensive income
- Loans
FX & IR risk
10,378
-
284
-
Loans
- Loans
FX risk
303,572
-
-
-
Loans
- Other securities
Other risk
-
15,032
-
(528)
Liabilities from issued securities
Fair value hedges total
675,282
115,331
5,156
(763)
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2021
130
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
c) Hedge accounting [continued]
31 December 2021
Type of
instrument
Type of risk
Change in the value
of the hedging
instrument
recognised in cash
flow hedge reserve
Hedge ineffectiveness
recognised in profit or
loss
Line item in profit or loss that
includes hedge ineffectiveness
Interest rate
swap
Interest rate
risk
6,307
(101)
Interest Income from Placements
with other banks, net of
allowance for placement losses
For the year ended 31 December 2021 an amount HUF 171 million reclassified from cash flow hedge reserve to
profit or loss due to termination of hedging relationship.
31 December 2020
Type of
instrument
Type of risk
Change in the value
of the hedging
instrument
recognised in cash
flow hedge reserve
Hedge ineffectiveness
recognised in profit or
loss
Line item in profit or loss that
includes hedge ineffectiveness
Interest rate
swap
Interest rate
risk
296
(85)
Interest Income from Placements
with other banks, net of
allowance for placement losses
d) Fair value classes
Methods and significant assumptions used to determine fair value of the different classes of financial
instruments:
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
- Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or
liability either directly or indirectly, Fair value measurements – in relation with instruments
measured not at fair value – are categorized in level 2;
- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable
inputs).
The following table shows an analysis of financial instruments recorded at fair value by level of the fair value
hierarchy:
31 December 2021
Total
Level 1
Level 2
Level 3
Loans at fair value through other comprehensive income
662,012
-
-
662,012
Financial assets at fair value through profit or loss
246,462
37,537
189,501
19,424
from this: securities held for trading
35,633
18,566
17,067
-
from this: positive FVA of derivative financial instruments
designated as held for trading
182,768
164
172,434
10,170
from this: securities mandatorily measured at fair value
through profit or loss
28,061
18,807
-
9,254
Securities at fair value through other comprehensive income
641,939
315,147
326,792
-
Positive fair value of derivative financial instruments
designated as hedge accounting
17,727
-
17,727
-
Financial assets measured at fair value total
1,568,140
352,684
534,020
681,436
Financial liabilities at fair value through profit or loss
20,133
-
-
20,133
Negative fair value of derivative financial instruments
classified as held for trading
192,261
278
191,983
-
Short position
16,904
16,904
-
-
Negative fair value of derivative financial instruments
designated as hedge accounting
18,690
-
18,690
-
Financial liabilities measured at fair value total
247,988
17,182
210,673
20,133
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2021
131
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
d) Fair value classes [continued]
As at 31 December 2020
Total
Level 1
Level 2
Level 3
Loans at fair value through other comprehensive income
480,937
-
-
480,937
Financial assets at fair value through profit or loss
160,483
34,643
111,130
14,710
from this: securities held for trading
11,729
10,453
1,276
-
from this: positive FVA of derivative financial instruments
designated as held for trading
116,818
378
109,854
6,586
from this: securities mandatorily measured at fair value
through profit or loss
31,936
23,812
-
8,124
Securities at fair value through other comprehensive income
911,950
426,566
485,384
-
Positive fair value of derivative financial instruments
designated as hedge accounting
6,817
-
6,817
-
Financial assets measured at fair value total
1,560,187
461,209
603,331
495,647
Financial liabilities at fair value through profit or loss
25,902
-
-
25,902
Negative fair value of derivative financial instruments
classified as held for trading
99,987
1,263
98,724
-
Short position
9,131
9,131
-
-
Negative fair value of derivative financial instruments
designated as hedge accounting
3,104
-
3,104
-
Financial liabilities measured at fair value total
138,124
10,394
101,828
25,902
Valuation techniques and sensitivity analysis on Level 3 instruments
Sensitivity analysis is performed on products with significant unobservable inputs (Level 3) to generate a range
of reasonably possible alternative valuations. The sensitivity methodologies applied take account of the nature of
the valuation techniques used, as well as the availability and reliability of observable proxy and historical date
and the impact of using alternative models.
The calculation is based on range or spread data of reliable reference source or a scenario based on relevant
market analysis alongside the impact of using alternative models. Sensitivities are calculated without reflecting
the impact of any diversification in the portfolio.
Unobservable inputs used in measuring fair value
Type of financial
instrument
Valuation technique
Significant
unobservable input
Range of estimates for
unobservable input
VISA C shares
Market approach
combined with expert
judgement
Discount applied due to
illiquidity and
litigation
+/-12%
MFB refinancing loans
Discounted cash flow
model
Probability of default
+/- 20%
Subsidised personal loans
Discounted cash flow
model
Probability of default
+/- 20%
Subsidised personal loans
Discounted cash flow
model
Operational costs
+/- 20%
Subsidised personal loans
Discounted cash flow
model
Demography
Change in the cash
flow estimation +/- 5%
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2021
132
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
d) Fair value classes [continued]
The effect of unobservable inputs on fair value measurement
Although the Bank believes that its estimates of fair value are appropriate, the use of different methodologies or
assumptions could lead to different measurements of fair value. For fair value measurements in Level 3 changing
the assumptions used to reasonably possible alternative assumptions would have the following effects.
31 December 2021
Unobservable
inputs
Fair values
Effect on profit and loss
Favourable
Unfavourable
Favourable
Unfavourable
VISA C shares
Illiquidity
3,339
2,529
405
(405)
MFB refinancing loans
Probability of
default
19,218
18,972
123
(123)
Subsidised personal loans
Probability of
default
639,006
631,855
3,590
(3,561)
Subsidised personal loans
Operational costs
647,291
623,933
11,875
(11,483)
Subsidised personal loans
Demography
635,484
635,387
68
(29)
31 December 2020
Unobservable
inputs
Fair values
Effect on profit and loss
Favourable
Unfavourable
Favourable
Unfavourable
VISA C shares
Illiquidity
3,150
2,402
374
(374)
MFB refinancing loans
Probability of
default
24,876
24,690
93
(93)
Subsidised personal loans
Probability of
default
452,781
447,647
2,579
(2,555)
Subsidised personal loans
Operational costs
464,974
436,194
14,772
(14,008)
Subsidised personal loans
Demography
451,419
448,987
1,217
(1,215)
The favourable and unfavourable effects of using reasonably possible alternative assumptions for the valuation
of Visa C shares have been calculated by modifying the discount rate used for the valuation by +/-12% as being
the best estimates of the management as at 31 December 2021 and 2020 respectively.
In the case of MFB refinancing loans and subsidised personal loans the Bank calculated the favourable and
unfavourable effects of using reasonably possible alternative assumptions by modifying the rates of probability
of default by +/- 20% as one of the most significant unobservable input.
In case of subsidised personal loans operational cost and factors related to demography are considered as
unobservable inputs to the applied fair value calculation model in addition to credit risk.
The Bank calculated the favourable and unfavourable effects of using reasonably possible alternative
assumptions by modifying the rates of operational costs by +/- 20% as one of the most significant unobservable
input.
In case of subsidised personal loans cash flow estimation are based on assumption related to the future number
of childbirths performed by the debtors. According to the current assumptions 15% of the debtors will not fulfill
the conditions of the subsidy determined by the government after 5 years (“breach of conditions”), thereby
debtors will be obliged to pay back advanced interest subsidy given in advance. Furthermore, in this case
subsidised loans are converted to loans provided based on market conditions. Loans are prepaid by the
government as part of the subsidy after the second and the third childbirth following the signatory of the loan
contract. The Bank calculated the favourable and unfavourable effects of using reasonably possible alternative
assumptions by modifying the demographical assumption of breach of conditions by +/- 5% as one of the most
significant unobservable input in the cash flow estimation.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2021
133
NOTE 45: FAIR VALUE OF FINANCIAL INSTRUMENTS (in HUF mn) [continued]
d) Fair value classes [continued]
The effect of unobservable inputs on fair value measurement [continued]
Reconciliation of the opening and closing balances of Level 3 instruments for the year ended 31 December 2021
Opening
balance
Issuance/
Disbursement
Change in
FVA due to
credit risk
Change in FVA
due to market
factors
Settlement
Closing
balance
Loans mandatorily
measured at fair
value through profit
or loss
480,937
227,324
(16,255)
(12,692)
(17,302)
662,012
Securities mandatorily
measured at fair
value through profit
or loss
8,124
390
-
740
-
9,254
Derivative financial
instruments
designated as held
for trading
6,586
-
-
3,584
-
10,170
Financial liabilities at
fair value through
profit or loss
(25,902)
-
-
(3,916)
9,685
(20,133)
Total
469,745
227,714
(16,255)
(12,284)
(7,617)
661,303
Reconciliation of the opening and closing balances of Level 3 instruments for the year ended 31 December 2020
Opening
balance
Issuance/
Disbursement
Change in
FVA due to
credit risk
Change in
FVA due
to market
factors
Reclassification
Settlement
Closing
balance
Loans mandatorily
measured at fair
value through
profit or loss
238,538
257,055
(405)
(2,125)
-
(12,126)
480,937
Securities
mandatorily
measured at fair
value through
profit or loss
4,644
1,204
-
23
5,188
(2,935)
8,124
Securities at fair
value through
other
comprehensive
income
4,735
-
-
453
(5,188)
-
-
Derivative financial
instruments
designated as held
for trading
4,227
-
-
2,359
-
-
6,586
Financial liabilities at
fair value through
profit or loss
(28,861)
-
-
1,270
-
1,689
(25,902)
Total
223,283
258,259
(405)
1,980
-
(13,372)
469,745
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2021
134
NOTE 46: SIGNIFICANT EVENTS DURING THE YEAR ENDED 31 DECEMBER 2021
1) Capital increase in OTP Bank Romania
2) Acquisition at Slovenia
3) Capital increase in OTP Bank Srbija
4) Potential acquisition of Uzbek Ipoteka Bank
5) Acquisition of Alpha Banka
See details about the event above in Note 11.
6) Discontinuance of international arbitration proceedings
On 30th June 2021 OTP Bank Plc. has jointly with the Republic of Croatia requested the discontinuance of the
international arbitration proceedings - registered on 16th October 2020 relating to mandatory exchange of FX
loans and FX based consumer loans - from the Centre for Settlement of Investment Disputes (ICSID), due to the
fact that the parties have resolved their disputes by way of mutual consent. The ICSID Secretary has on 30th
June 2021 acknowledged receipt of the joint claim of the contending parties relating the discontinuance of the
proceedings. According to the request of the parties, ICSID shall also formerly confirmed the termination of the
litigation during 2021.
7) Termination of ICES bond
See details about the event above in Note 27.
8) Resolutions made at OTP Bank’s Extraordinary General Meeting
The Extraordinary General Meeting hold on 15 October, 2021 resolved that, the Bank shall sell its treasury
shares on the stock exchange to those two Special Employee Stock Ownership Program organizations being
established by the Bank employees (“OTP SECOP I.” and “OTP SECOP II.”).
The Extraordinary General Meeting decided that if additional SECOP organisations will be initiated, those will
be given one-off support on a yearly basis, under defined conditions, defined extent and in specified manner.
9) Interest benchmark reform
OTP Bank was actively involved in industry efforts supporting transition to IBOR alternatives. The bank has
taken extensive steps to prepare for the discontinuation of IBORs and worked closely with clients to ensure
awareness and support transition activities. As the transition is complex, time-consuming process and relevant
for the whole Group, the management of Bank has evaluated the impacts of the interest rate benchmarks reform,
preparing itself for the transition through a dedicated internal group-wide project. As LIBOR’s five currencies
(USD, GBP, EUR, JPY and CHF) and EONIA will be replaced by Risk Free Rates – which are different in
nature compared to IBOR rates – OTP Group has implemented the relevant rates into the IT systems, and
reached out the clients. The Bank’s priority was to ensure that the Bank can continue to offer clients the products
and services they need, while also supporting them in the transition to the new alternative Risk Free Rates.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2021
135
NOTE 46: SIGNIFICANT EVENTS DURING THE YEAR ENDED 31 DECEMBER 2021
[continued]
9) Interest benchmark reform
During the IBOR reform the Bank identified several risks at the beginning of 2021, which the project had to
manage and monitor closely. These risks include but are not limited to the following:
▪ The abolution of LIBOR affected several transactions that may require automated IT solutions,
▪ The new reference rates are different in nature from LIBOR that cause difficulties to settle the value
differences with the customers,
▪ It was necessary to implement new processes not to develop LIBOR based products, and to develop a
strategy for removing or modifying the affected products handled by the Bank,
▪ After termination of LIBOR, the Bank has to act under the "Fallback clauses", the clauses that regulate the
replacement of the reference interest rates in the contract and the use of an alternative interest as a
reference. The content of these clauses needs to be clearly defined and checked from a business point of
view, ie which reference interest rate will be applied instead of LIBOR for the given contract and whether it
is commercially appropriate. In defining the fallback clauses, efforts had to be made to provide a viable
alternative to the termination of LIBOR that would not result in a business loss for the Bank.
▪ Legal risks related to the termination of LIBOR. Such risks can arise when Fallback clauses are not
included in the contracts, or the law governing the contract doesn’t contain a statutory reference rate. In
these cases the contracts can be cancelled due to impossibility or the termination by either party.
▪ Missing of contractual interest rates can result in settlement disputes, compensation cases or litigation.
▪ Business risks of the termination of LIBOR. The most significant of these are
o the law governing the contract can set the applicable interest rate that can be result in a business loss
for the Bank,
o business loss due to negative customer experience,
o operational risk, when several unique contracts must be handled in a short time
Terminating interest rates ()
Alternative Reference Rates
LIBOR USD* (1 week and 2 months settings), FedFund Rate
SOFR
LIBOR GBP
SONIA
LIBOR JPY
TONA
LIBOR EUR
EURIBOR
LIBOR CHF**
SARON
EONIA
€STR
* The following USD LIBOR settings will be terminated after June 30, 2023: overnight and 1, 3, 6 and 12
Months. The affected USD LIBOR contracts will be handled on an ongoing basis until the remaining USD
LIBOR settings’ cessation date.
**In the case of CHF LIBOR, OTP Bank acts in accordance with the implementing regulation of the European
Commission (https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=PI_COM:C(2021)7488&from=EN).
Amounts effected by IBOR reform as at 31 December 2021
Reference rate
Type of the contract
Nominal value of the
contract
Pieces of contracts
USD LIBOR
Loan
49.116
12
USD LIBOR
Deposit
3.579
7
USD LIBOR
Derivatives
802.854
190
Other LIBOR
Loan
1.166
42
Other LIBOR
Deposit
25.864
98
Other LIBOR
Derivatives
25.464
4
Other LIBOR
Bonds (assets)
13.162
3
Total
921.205
356
The above LIBOR-based amounts outstanding as at 31 December 2021 will be managed at the first interest
period in 2022 therefore they do not cause a risk to the Bank or to the customers.
OTP BANK PLC.
NOTES TO SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2021
136
NOTE 47: SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD
In the second half of February 2022 the military conflict between Russia and Ukraine escalated.
It is difficult to quantify the effect of the Ukrainian-Russian conflict regarding the Ukrainian and the Russian
operations, the possible scenarios are covering a wide range of spectrum. According to the worst possible
scenario, the Bank may lose its control over its investments, which under extreme conditions could result in the
full write-off of the invested amount. These Consolidated Financial Statements do not contain any write-offs as
possible consequences of the Ukrainian-Russian conflict, the Group recognizes it as not adjusting, post balance
sheet event.
Ukraine
OTP Group’s Ukrainian operation incorporates the Ukrainian bank, as well as the leasing and factoring
companies. The country-consolidated Ukrainian total assets represented HUF 984 billion at the end of 2021
(3.6% of total consolidated assets), while net loans comprised HUF 614 billion (3.9% of consolidated net loans)
and shareholders’ equity HUF 160 billion (5.3% of the consolidated total equity). At the end of 2021 the book
value of the capital investment in the Ukrainian subsidiaries comprised HUF 105 billion; there was no goodwill
at all, it was already written down entirely in 2014.
The gross intragroup funding towards the Ukrainian operation represented HUF 72 billion, and taking into
account the Ukrainian deposits placed with the HQ, i.e. the net group funding represented HUF 29 billion
equivalent. According to the 28 February 2022 figures, the gross funding amounted to HUF 75 billion equivalent
and the net intragroup funding stood at HUF 9 billion equivalent.
The Ukrainian RWA (“risk-weighted asset”) was HUF 230 billion by the end of 2021 (2.9% of the total RWA).
The maximum capital effect on the potential write-off of the Ukrainian operation, taking into account the equity,
the intragroup funding and the Ukrainian risk weighted assets, is estimated at 148 bps on the CET1 ratio,
according to year-end figures.
Russia
The total assets of the Group’s Russian operation represented HUF 800 billion at the end of 2021 (2.9% of
consolidated total assets), while net loans comprised HUF 621 billion (3.9% of consolidated net loans) and
shareholders’ equity HUF 241 billion (7.9% of consolidated total equity). At the end of 2021 the book value of
the capital investment in the Russian subsidiaries comprised directly HUF 74 billion and indirectly HUF 50
billion.
The gross intragroup funding towards the Russian operation represented HUF 73 billion, and taking into account
the Russian deposits placed with the Headquarter, i.e. the net group funding represented HUF 14 billion
equivalent. On 28 February 2022 the gross intragroup funding reached HUF 52 billion equivalent, which
equalled the net figure because there was no deposit placement by the Russian operation at other Group
members.
The Russian RWA was HUF 276.6 billion by the end of 2021 (3.4% of the total RWA).
The capital maximum effect on the potential write-off of the Russian operation, taking into account the equity,
the intragroup funding and the Russian risk weighted assets, is estimated at 173 bps on the CET1 ratio, according
to year-end figures.
Although the impact of the Russian-Ukrainian conflict on the Group’s Russian and Ukrainian operations is
currently difficult to quantify, and as such uncertain, based on the current estimation of the Bank’s Management
the Ukrainian-Russian conflict does not have considerably negative impact on the business activity, financial
position, efficiency, liquidity and capital position of OTP Bank. Even after the recognition of the potential losses
and write-offs outlined above, the Group's capital adequacy remains above the expected regulatory level. There
is no sign of significant uncertainties having been arisen regarding carrying out its business as a going concern.
The Bank’s Management is monitoring the situation of the Ukrainian-Russian conflict continuously and will take
the necessary steps in order to moderate the business risk.