Gergely Szakacs

BUDAPEST, (Reuters) – OTP Bank will increase lending to Ukraine’s farmer this year as part of a Kyiv-backed program to assist them with financing difficulties due to Russia’s invasion. This was confirmed by Reuters by an executive from the Hungarian bank.

The largest central European independent lender has begun to reduce its activities in Russia as part of its plans for possible exit. Its chief executive stated that the prospects for Russia’s economy were not very good.

OTP earned 15.8% in profit last year due to combined Russian-Ukrainian units. According to OTP, the OTP reported that lending in Ukraine increased by 5% over the three previous months. However, Russian lending fell by 7%.

OTP anticipates that Ukraine’s new loans will be approximately 1 billion Ukrainian hryvnia ($34million), which is roughly a fifth the amount of total expected lending by the close of the planting season.

Andras Kuharszki (supervisory board chair of OTP’s Ukrainian division), stated that “part of the market was frozen up due to the war.” He also leases agricultural machinery.

“The war has caused a new environment, and this meant that supplementary financing was necessary for these clients in order to avoid the total collapse of the chain at its first link.”

Kuharszki indicated that the major Ukrainian banks like PrivatBank or Oshchadbank (the state-owned Oshchadbank) would be dominant in the programme. However, OTP saw it as a business opportunity.

“We have more clients than our competition, and we offer a smaller ticket,” he stated, adding that OTP focuses on rural farmers in the central and west Ukraine away from conflict frontlines.

OTP was forced to sell its Russian division by a Ukrainian bill, which targeted firms in Russia that have a higher rate of tax.

Kuharszki however stated that even though the bill had been approved it was still in uncertainty and wouldn’t trigger Russia’s withdrawal.

He stated that OTP was not a concern to him, partially because of the bank’s continued activity during the war.

($1 = 29.2500 hryvnias)