Bank of Lithuania: OTP's Russia operations raise justified questions in Luminor takeover review

Lithuania's central bank stated on Tuesday that Hungarian lender OTP Bank's ongoing operations in Russia raise 'justified questions' as regulators commence the review of its planned acquisition of Baltic banking group Luminor. The Bank of Lithuania noted that the transaction, announced on Monday, is still in its early stages and that it has not yet received the formal documentation required to start its assessment.

The proposed acquisition will be evaluated by the European Central Bank in coordination with Estonia's Financial Supervision and Business Restructuring Authority and in consultation with the Bank of Lithuania. The Lithuanian regulator said the review will examine OTP's reputation, financial strength, corporate governance, risk management, compliance with international sanctions and anti-money laundering requirements, as well as other factors relevant to financial stability.

Budapest-based OTP serves about 2 million retail customers in Russia through its subsidiary JSC OTP Bank. The lender has stated it explored options to exit the Russian market after Moscow's full-scale invasion of Ukraine but concluded that no legally, morally and economically acceptable solution was available. OTP argues that selling its Russian business under current conditions would yield only about 5% of its market value. The bank says its Russian operations account for only about 0.3% of the country's banking market. According to public disclosures, OTP operates at about 800 locations across Russia and ranks among the country's 50 largest banks. The lender has also participated as a partner in the St Petersburg International Economic Forum, a flagship business event backed by Russian President Vladimir Putin. Last year, OTP's Russian operations generated more than 558 million euros, representing nearly one-fifth of the group's consolidated net profit.

Marius Jurgilas, a former member of the Bank of Lithuania's board and founder of fintech company Axiology, said the key question for Lithuanian regulators would be OTP's long-term strategy if the acquisition is approved. He believes OTP sees Luminor as a platform for expanding across the Baltic region rather than as an investment to be sold later, a strategy that could increase competition in mortgage lending, corporate finance and retail banking.

Darius Klimašauskas, managing director of financial advisory firm Talisman, said the European Central Bank would ultimately decide whether to approve the acquisition and would take OTP's continued presence in Russia into account. OTP announced on Monday that it had signed an agreement to acquire Luminor from a consortium led by US private equity firm Blackstone and Norway's DNB Bank. The deal remains subject to regulatory approvals. OTP Group operates in 11 countries across Central and Eastern Europe, serving about 17.5 million customers and managing more than 130 billion euros in assets. Blackstone has owned an 80% stake in Luminor since 2022, while DNB holds the remaining 20%.