The reason for converting the hybrid loan facility into Bank shares is a reduction in the Bank’s Core Tier I capital ratio as a result of the 2012 level of impairment losses and provisions being much higher than originally planned. The state’s in-kind contribution of €100 million will be shown in the 2012 audited report of OTP banka and the OTP banka Group, which will be released at the end of April. Following the conversion, the shareholders’ equity of the Bank will amount to €292.5 million, while the Core Tier I capital ratio of the Bank and the Group will stand at 7.62% and 7.57%, respectively (according to the EBA methodology).
An accelerated 'cleaning' of the loan portfolio, which took place last year, and thus an objective and realistic presentation of the financial position of the Group will help the Management Board hold impartial discussions with all stakeholders of OTP banka. As already publicly announced, the preparation activities related to the capital raising, which is expected to be completed by the end of June, are fully under way.
»Fresh capital will help the Bank consolidate its position in the financial markets, and will provide additional value to our customers and shareholders. The capital raising process is dealt with in a comprehensive and very competent manner, with focus on long-term stability of the Bank. Apart from capital raising preparations, we have taken necessary measures to improve our risk management system and the management of bad loans, while providing our customers with tailor-made services and solutions«, said Aleš Hauc, President of OTP banka's Management Board.
The selection of the arranger of the capital raising is in the final stage, after which all necessary procedures related to the increase in capital will be carried out in accordance with international practice and the action plan, including the presentation of the Bank and the Group to potential investors. In addition to a baseline scenario, the action plan includes a stress scenario that takes into consideration the deterioration in the quality of the loan portfolio, as well as uncertainties in the economic and political environment that may have an impact on the operations of the Bank and the Group. Further details regarding the Bank’s capital raising activities will be provided in a timely fashion and in accordance with the rules governing the operations of public limited companies.
