CONSOLIDATED Annual report 2020. Content 2 Annual report 2020. 01 4 OTP Group 02 8 A word from the management 03 10 OTP Bank Serbia A.D. Beograd 04 12 Macroeconomic overview for 2020 05 16 Retail Banking Division 06 20 Corporate banking division 07 24 Financial market activities 08 26 Human Resources Department 09 32 Corporate social responsibility 10 38 Risk management 11 42 Liquidity and interest rate risk management 12 46 Capital management and capital adequacy indicators 13 50 Consolidated financial indicators of the bank 14 56 Future development of the Bank 15 60 Affiliates OTP banka Srbija A.D. Beograd 3 01 OTP Group • 1,700 branches • 5,000 ATMs • 40.000 employees • 20 million clients 4 Annual report 2020. OTP Group provides high-quality financial Digitalization solutions to meet the needs of almost 20 million private and corporate clients in The Group is a pioneer in digitalization the Central and Eastern European region, and has been proactive for 25 years in through nearly 1,700 branches and 5,000 the field of digital transformation of its ATMs, internet and electronic channels, operations and implementation of new and with its almost 40,000 employees. technologies in the financial market. The Among the European banking groups, it strategic orientation towards innovations boast one of the best capital and liquid- has opened the possibility of working with ity positions and is always able to pro- almost 900 start-up companies, with 30 vide conditions for stable operations and pilot projects already realized. The fourth growth. The profitability of operations is a OTP Start-up Partnership Program is key precondition for continued growth and underway, which is the most comprehen- sustainable renewal. OTP Group currently sive innovation program of the Group so operates in Albania (Banka OTP Albania), far, as all members of the group, includ- Bulgaria (DSK banka, Expressbank), Cro- ing Vojvodjanska and OTP banka, are atia (OTP banka Hrvatska), Romania (OTP looking for start-up partners who sup- banka Romania), Serbia (Vojvodjanska port their business goals. banka, OTP banka Srbija), Slovenia (SKB banka), Ukraine (CJSC OTP banka), Russia OTP Group in Serbia (OAO OTP Bank), Moldova (Mobiasbanca) and Montenegro (Crnogorska komerci- OTP Group in Serbia is present through jalna banka, Podgorička banka) via its the operations of Vojvodjanska banka and subsidiaries. The banking group holds OTP banka, which are currently in the pro- market leader or near market leader cess of integration which will last until position in Bulgaria, Hungary, Montene- mid-2021, and which will result in the gro, and Serbia. creation of one of the leading financial institutions in Serbia in terms of assets, Results number of branches, and size of credit and deposit portfolio. In the previous year, the OTP Group achieved a record high consolidated profit Goals of EUR 1.2 billion, ending the third quar- ter of 2020 with a consolidated profit of The strategic goal of the OTP Group is EUR 515 million after tax. All banks oper- to become the most successful univer- ated profitably within the group and par- sal banking group in Central and East- ticipated with 50% in the total profit of the ern Europe. The banking group spares Group, with increased market share in no effort to constantly evolve in order to all key segments in Hungary and Serbia. provide unique, convenient and contem- Adjusted consolidated profit in the first porary services to both retail and corpo- nine months was almost EUR 637 million, rate sector, services that are easier and while adjusted return on equity (ROE) for faster to access and that facilitate meet- that period increased to 13.2%. ing the challenges of the digital age and customer expectations. OTP banka Srbija A.D. Beograd 5 01 6 Annual report 2020. History The predecessor of OTP Bank, called the National Savings Bank (OTP Bank) was established in 1949 as a nation-wide, state-owned, banking entity providing retail deposits and loans. In the ensuing years, its activities and the scope of its authority gradually widened. In 1990, the National Savings Bank became a pub- lic company with a share capital of HUF 23 billion. Its name was changed to the National Savings and Commercial Bank. Subsequently, non-banking activities were separated from the bank, along with their supporting organisational units. OTP Bank’s privatisation began in 1995. Currently the bank is characterized by dispersed ownership of mostly private and institutional (financial) investors. It started its international expansion in the countries of the CEE region, which offer great economic growth potentials simi- lar to that in Hungary. It has completed several successful acquisitions in the past years, becoming a key player in the region. OTP banka Srbija A.D. Beograd 7 02 A word from the management In the coming period, we continue to strategically develop even better customer experience, innovation, and business stability, which, after our merger with Vojvodjanska banka, will be the basis for building a leading bank in the domestic market. 8 Annual report 2020. The year 2020 was in many ways different ing the program of the Government of from all the previous ones. We walked into Serbia, during which the entire financial it fully committed to the project of integra- sector proved to be a reliable and efficient tion with Vojvodjanska banka, a member partner to the state and society when it is of the OTP group, and already in March most needed. Also, our goal was to main- we faced the COVID-19 pandemic. The tain loan activities in line with our cus- new circumstances have brought uncer- tomers’ needs and to support companies tain times for everyone, which require a to successfully overcome the challenges thoughtful and a quick reaction, adjust- posed by crisis circumstances. ment and making responsible decisions. We also provided support to the Ser- The pandemic put us all to various tests. bian health care system when it was Above all, to the tests of humanity and most needed, by donating the necessary solidarity, and also of the readiness to delivery vehicle to the Torlak Institute of transform our business in a very short Virology, Vaccines and Sera, as well as by time in order to protect everyone’s health donating funds to a group of six key health and reorganize our life and business cir- care institutions across the country. cumstances in line with the challenges we face for the first time in recent history. We continued our strategic cooperation with innovation and creative hubs and We remained a true support to our clients organized the Generator project for the and directed them to our digital channels, fourth time, with which we invest in inno- such as our online branch, where they can vations in entrepreneurship. This year, safely and without a physical contact with we have awarded technological solu- a banker arrange a cash loan, overdraft, tions that directly help small and medi- buy insurance, etc. We have been moti- um-sized businesses overcome the cri- vated to invest even more in the digi- sis through the digitalization of business. talization of our products and services. For our customers who use iPhones, we The changes that have taken place this have enabled Apple Pay for mobile pay- year have brought us many obstacles ments, while the customers who use that we have overcome, good practices Android phones have already had the that we adhere to today and the results mCard payment option at their disposal. that we proudly stand behind. In the com- The latest novelty was the arrangement ing period, we continue to strategically of cash loans by mobile phone, using the develop even better customer experi- mCash option in the m-banking applica- ence, innovation, and business stabil- tion. Owing to the strong support of the ity, which, after our merger with Vojvod- National Bank of Serbia, we have imple- janska banka, will be the basis for building mented an instant payment system and a leading bank in the domestic market. enabled citizens to make fast transac- tions and pay with the IPS QR code. Together, we move forward. Our priority was to successfully support Predrag Mihajlović, Chairman of the the economy and citizens by implement- Executive Board of OTP bank Srbija OTP banka Srbija A.D. Beograd 9 03 OTP Bank Serbia A.D. Beograd • 1.315 employees • 94 branches 10 Annual report 2020. Availability to customers Next steps With the full commitment of our 1,315 Integration with Vojvodjanska banka employees, OTP Bank provides qual- is currently underway, expected to be ity service and a diverse offer of prod- completed in mid-2021. This merger will ucts to our customers, natural persons result in the creation of one of the leading and legal entities - large private and banks in the Serbian market by size, num- state companies, national and multina- ber of branches, loans and deposits. Until tional companies, financial institutions, then, we will operate as separate legal and sector of small and medium-sized entities, and our clients will have over enterprises, microenterprises and entre- 300 ATMs of both banks in the territory preneurs. Our imperative is to meet the of Serbia at their disposal for withdrawing customers’ needs where it suits them - cash free of charge. The strategic vision of in one of our 94 branches across Serbia, the management is to create a company at our contemporary e-banking platform, that will focus on innovation and further or via mobile applications. Growth and improve the products, services and cus- development, dedication to customers tomer experience of our clients. and product and service improvements remain the Bank’s priorities, with strong support from the OTP Group.