The Hungarian National Bank (MNB) has told OTP Bank it should take "precautionary measures" over its Russian business.

The financial market watchdog proposed that OTP reduce its corporate loans in Russia, keep its retail loan portfolio at current levels and reduce deposits.

OTP says its Russian business accounted for 4.2% of total assets at group level in the first quarter. The Russian business has just 0.14% market share, it added.

OTP Russia has reduced its corporate loan portfolio by 85% since the beginning of 2022, while the lender's branch network in Russia has contracted by 39% and headcount has fallen by 25%.

OTP Group has also "significantly limited" its international payment services from and to Russia.

In its letter, the MNB also recommended that the bank's compliance unit establish and continuously update a set of criteria for international transfers that the banking group deems acceptable risk.

Western banks that have continued operations in Russia, including OTP, made €3bn profit last year, marking a threefold increase from pre-war levels and taxes paid rose fourfold to more than €800mn, the Financial Times reported a month ago. 

The largest taxpayer was Raiffeisen, which paid €464mn in taxes on €1.8bn profit. OTP Bank, ranked third, increased its profits in Russia from €128mn in 2021 to €338mn, while taxes paid grew from €26mn to €90mn.

At the AGM on April 25, chairman-CEO Sandor Csanyi told shareholders OTP would be willing to sell its business in Russia at the imposed discount of up to 50%, cutting its value to $400mn, but after the Kremlin's exit tax it could receive just $280mn.

In Ukraine, the Hungarian lender is ready to expand its market presence with further acquisitions, as the privatisation of state banks in Ukraine is imminent, Csanyi said.

Ukraine had put OTP on its "sponsors of war"  blacklist for its continuing presence in Russia, but the bank has been suspended from the list after Budapest used this as an excuse to block EU aid.