The impact of the COVID-19 pandemic on the portfolio quality of croatian banks - the case of "OTP banka"

Abstract

The COVID-19 pandemic had a significant impact on the Croatian banking sector, including OTP bank, one of the leading banks on the market. This work investigates the specific impact of the pandemic on the portfolio quality of the Croatian banking system with the example of OTP bank's portfolio analysis, emphasising the Bank's key guidelines and reactions to the challenges of the pandemic. The pandemic has caused economic uncertainty, job losses and reduced client incomes. This resulted in an increased risk of non-performing loans in the portfolio of Croatian banks, especially in the most affected sectors, such as tourism and retail. OTP bank reacted quickly to the pandemic and clients were offered loan repayment moratorium options to minimize their financial burdens during the crisis. This temporarily reduced the pressure on clients and the Bank, but at the same time delayed the assessment of the real risks in the portfolio. Croatian banks, including OTP bank, increased provisions for possible future losses from non-performing loans in order to better prepare for challenges. They also conducted stress tests to assess how different scenarios might affect their portfolio. The pandemic has stimulated a greater need for digital banking and online services. OTP bank has made efforts in the further digitization of operations to ensure continuity and better client service during and after the pandemic. Furthermore, OTP bank cooperated with regulatory authorities and followed the guidelines of the Croatian National Bank in order to ensure stability and compliance with regulations during the crisis.

Keywords

• covid-19 pandemic
• portfolio quality
• financial statements
• financial indicators
• nonperforming loans.