Enemy at the gates again…but war chest protects
It seems that every 2-3 years, Russian-Ukrainian tensions emerge. This time, many Russian troops have approached the Ukrainian border and Russian officials said they could intervene if the situation worsens and separatists would be under assault by Ukraine. It is a question whether this time it could lead to a similar situation like in 2014-2015 or not. The risk increased but this is not our base case so far. In our coverage universe OTP and RBI would be affected with the developments in Ukraine. Everyone can recall the massive red figures back in 2014-2015 of OTP and RBI in these segments. We believe if a conflict occurs between Ukraine and Russia, the former segment would be more severely wounded. The impact on Russia could be via potential future sanctions rather than fundamentals as back in the previous war, oil price collapsed and thus we believe the weaker Russian subsidiary performances were attributed to this fact rather than the war itself. Below we elaborate on the value at risk in case of OTP and RBI but we should emphasize that materialization of these are rather unlikely in our view.
OTP Bank is a financial institution based in Hungary. Co. is engaged in retail banking (account management, bankcards and Electronic sevices - OTPdirekt) corporate banking and private banking. In Hungary traditional banking operations are performed by Co. while specialized services, including car leasing, investment funds and insurance are developed and offered by Co.'s subsidiaries. Co. expands its operations throughout the region via its foreign subsidiaries. As of Dec 31 2011, Co. had total assets of HUF10,200,527,000,000 and deposits of HUF6,398,853,000,000.
Raiffeisen Bank International is a universal bank focusing on corporate and retail customers in Central and Eastern Europe (CEE) and on corporate customers in Austria. In CEE, Co. consists of a network of banks, leasing companies and financial service providers. In Austria, Co. is involved in corporate finance and export and trade finance banks. Co. provides services to customers in 2,800 branch offices. In the retail banking business, Co.'s product and service portfolio comprises inter alia credit services (mortgages, credit cards and personal loans), as well as payment transaction and current account package services. As of Dec 31 2014, Co.'s total assets amounted to Euro121.6 million
Concorde Securities Ltd. is Hungary’s leading independent company engaged in investment banking activities. It provides its clients with integrated financial services, including securities trading, research, corporate financing advisory, capital market transactions, wealth management and investment advisory. The operational management of the company is the responsibility of the CEO, while the owners/managers (who control one-third of the company through their shares and options) are in charge of its strategic governance. Concorde Securities Ltd. is a member of the Budapest, Frankfurt, Warsaw and Bucharest stock exchanges, as well as of the Hungarian Association of Investment Service Providers.
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