THE IMPACT OF PROBLEMATIC LOANS ON THE BANKING COMPETITIVENESS – case study of OTP group

Abstract

Credit risk as a risk in basic, traditional, and most important banking business – the bank loan, is one of the biggest financial risks, considering that borrowers (debtors) defaults, directly affect the bank’s financial result and capital, and thus its competitiveness in the market. The impact of problematic loans on banking operations will be discussed for 2019-2021 on the example of OTP banking Group operating in 11 countries, to find out if there is a relation between NPL volume and the banking competitiveness. A comparative analysis method has been applied, comparing the profit, the NPL rate and the market position within the banking sector of the country to which each Group member belongs. Results has shown that the reduction in the volume of non-performing loans affected the increase in the competitiveness of banks, as well as that member banks located in European Union countries have a lower percentage of non-performing loans in relation to the member banks of the group operating in countries outside the European Union. The reduction of the percentage of bad loans is certainly in harmonization with the regulations of the European Union, but also in their better implementation.