Bloomberg: Hungary’s OTP Bank considers a full Russia exit as regulators review its purchase of Baltic lender Luminor

According to Bloomberg, Hungary's OTP Bank is contemplating a complete withdrawal from Russia. The bank has maintained operations there since Russia's invasion of Ukraine, but its Russian operations may complicate the approval of its planned acquisition of Baltic lender Luminor Bank. OTP Group CEO Peter Csanyi stated to Bloomberg that the bank is reevaluating its strategy in Russia, driven partly by expansion plans abroad.

However, OTP acknowledges the challenges: a sale is "virtually impossible" at present. The owners of its Russian business would only receive 5% of its value in a sale, and any buyer must be acceptable to both the Kremlin and European authorities. The decision regarding the Russian business is particularly crucial for OTP due to the Luminor deal.

In July, the bank agreed to purchase the Baltic lender from funds managed by Blackstone and DNB, which would expand OTP's presence in Estonia, Latvia, and Lithuania, increasing its assets by over 10%. The Baltic countries' regulators are closely scrutinizing OTP's Russian presence, with the European Central Bank and Estonia's banking regulator scheduled to rule on the acquisition in the coming weeks.

Bloomberg discovered that companies linked to Gazprom and Russian state entities are among OTP's Russian clients, though there is no evidence of any violations by the bank. For instance, one OTP client received funds from the History of the Fatherland foundation, of which Sergey Naryshkin, head of Russia's Foreign Intelligence Service, is the chairman.

Documents also mention the U.S.- and U.K.-sanctioned Tsargrad Society, with Konstantin Malofeev reportedly planning to transfer 33.5 million rubles to his OTP account. However, Bloomberg could not verify if the transfer occurred. While OTP is a minor player in Russia, accounting for just 0.4% of the country's banking assets, its Russian business has grown more profitable since the invasion, with profits rising more than fivefold from $95 million in 2021 to $635 million.

OTP has transferred around $880 million in dividends from Russia in recent years, attributing the increase to the difficulty of international payments. The bank processes euro payments abroad for compliance with sanctions, but does not handle dollar transactions.