OTP Bank : GM - Proposals

DOCUMENTS FOR THE ANNUAL GENERAL MEETING

ANNUAL GENERAL MEETING OF

OTP BANK PLC.

26 APRIL 2024

AGENDA ITEMS OF THE ANNUAL GENERAL MEETING

1. THE COMPANY'S PARENT COMPANY'S FINANCIAL STATEMENTS AND CONSOLIDATED FINANCIAL STATEMENTS IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS FOR THE YEAR ENDED 2023, AS WELL AS THE PROPOSAL FOR THE USE OF PROFIT AFTER TAX OF THE PARENT COMPANY:

• THE REPORT OF THE BOARD OF DIRECTORS ON THE COMPANY'S BUSINESS

OPERATIONS IN 2023

3

• PROPOSAL ON THE COMPANY'S PARENT COMPANY'S FINANCIAL STATEMENTS IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS FOR THE

YEAR ENDED 2023 (STATEMENT OF FINANCIAL POSITION, STATEMENT OF PROFIT OR
LOSS, STATEMENT OF COMPREHENSIVE INCOME, STATEMENT OF CHANGES IN EQUITY,
STATEMENT OF CASH-FLOWS, NOTES TO THE FINANCIAL STATEMENTS	229

• PROPOSAL FOR THE USE OF THE PROFIT AFTER TAX OF THE PARENT COMPANY AND

FOR DIVIDEND PAYMENT

382

• PROPOSAL ON THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS FOR THE YEAR ENDED 2023 (STATEMENT OF FINANCIAL POSITION, STATEMENT OF PROFIT OR LOSS, STATEMENT OF COMPREHENSIVE INCOME, STATEMENT OF CHANGES IN EQUITY,

STATEMENT OF CASH-FLOWS, NOTES TO THE FINANCIAL STATEMENTS)

384

• REPORT OF THE SUPERVISORY BOARD ON THE ANNUAL FINANCIAL STATEMENTS FOR

2023 AND ITS PROPOSAL REGARDING THE USE OF PROFIT AFTER TAX

610

• AUDIT COMMITTEE'S REPORT ON THE ANNUAL FINANCIAL STATEMENT FOR 2023 AND

PROPOSAL FOR THE USE OF PROFIT AFTER TAX	614
• RESULTS OF THE INDEPENDENT AUDITOR'S REPORT FOR THE YEAR ENDED 2023	618
2. APPROVAL OF THE CORPORATE GOVERNANCE REPORT FOR THE YEAR 2023	644

3. EVALUATION OF THE ACTIVITY OF THE EXECUTIVE OFFICERS PERFORMED IN THE PAST

BUSINESS YEAR, DECISION ON THE GRANTING OF DISCHARGE OF LIABILITY

694

4. ELECTION OF THE COMPANY'S AUDIT FIRM, THE DETERMINATION OF THE AUDIT REMUNERATION, AND DETERMINATION OF THE SUBSTANTIVE CONTENT OF THE CONTRACT

TO BE CONCLUDED WITH THE AUDITOR

698

5. PROPOSAL ON THE AMENDMENT OF ARTICLE 6 SECTION 6 AND ARTICLE 9 SECTION 12

OF THE OTP BANK PLC.'S ARTICLES OF ASSOCIATION

701

6. PROPOSAL ON THE REMUNERATION POLICY UNDER THE LAW ON ENCOURAGING

LONG-TERM SHAREHOLDER ENGAGEMENT AND GROUP-LEVEL REMUNERATION
GUIDELINES OF OTP BANK PLC	704

7. DETERMINATION OF THE REMUNERATION OF THE MEMBERS OF THE BOARD OF

DIRECTORS, THE SUPERVISORY BOARD AND THE AUDIT COMMITTEE

734

8. INFORMATION OF THE BOARD OF DIRECTORS ON THE AQUIRING OF OWN SHARES SINCE

ANNUAL GENERAL MEETING OF 2022; AUTHORIZATION OF THE BOARD OF DIRECTORS
TO ACQUIRE THE COMPAY'S OWN SHARES	737

THE REPORTS OF THE BOARD OF DIRECTORS ON THE COMPANY'S BUSINESS OPERATIONS IN 2023

PROPOSALS FOR THE 2024 ANNUAL GENERAL MEETING

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BUSINESS REPORT

OTP BANK (SEPARATE)

PROPOSALS FOR THE 2024 ANNUAL GENERAL MEETING

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OTP BANK PLC.BUSINESS REPORT (SEPARATE)

SEPARATE STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2023

(in HUF million)	Note	31 December 2023	31 December 2022
Cash, amounts due from banks and balances
with the National Bank of Hungary	5.	2,708,232	1,092,198
Placements with other banks	6.	2,702,433	2,899,829
Repo receivables	7.	201,658	246,529
Financial assets at fair value through profit or
loss	8.	257,535	410,012
Financial assets at fair value through other
comprehensive income	9.	559,527	797,175
Securities at amortised cost	10.	2,710,848	3,282,373
Loans at amortised cost	11.	4,681,359	4,825,040
Loans mandatorily measured at fair value
through profit or loss	11.	934,848	793,242
Investments in subsidiaries	12.	2,001,952	1,596,717
Property and equipment	13.	107,306	94,564
Intangible assets	13.	98,115	69,480
Right of use assets		66,222	39,882
Investment properties	14.	4,203	4,207
Deferred tax assets	34.	408	35,742
Current tax assets	34.	-	1,569
Derivative financial assets designated as hedge
accounting relationships	15.	21,628	47,220
Non-current assets held for sale	46.	130,718	-
Other assets	16.	365,961	329,752
TOTAL ASSETS		17,552,953	16,565,531
Amounts due to banks and deposits from the
National Bank of Hungary and other banks	17.	1,761,579	1,736,128
Repo liabilities	18.	443,694	408,366
Deposits from customers	19.	10,734,325	11,119,158
Leasing liabilities		68,282	41,464
Liabilities from issued securities	20.	1,163,109	498,709
Financial liabilities designated at fair value
through profit or loss	21.	19,786	16,576
Derivative financial liabilities designated as held
for trading	22.	183,565	373,401
Derivative financial liabilities designated as
hedge accounting relationships	23.	27,423	50,623
Deferred tax liabilities	34.	-	-
Current tax liabilities	34.	14,393	3,199
Provisions	24.	22,497	29,656
Other liabilities	24.	295,399	313,188
Subordinated bonds and loans	25.	520,296	294,186
TOTAL LIABILITIES		15,254,348	14,884,654
Share capital	26.	28,000	28,000
Retained earnings and reserves	27.	2,276,759	1,655,601
Treasury shares	28.	(6,154)	(2,724)
TOTAL SHAREHOLDERS' EQUITY		2,298,605	1,680,877
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY		17,552,953	16,565,531

PROPOSALS FOR THE 2024 ANNUAL GENERAL MEETING

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OTP BANK PLC.

BUSINESS REPORT (SEPARATE)

SEPARATE STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 2023

		Year ended 31	Year ended 31
(in HUF million)	Note	December 2023	December 2022
Interest Income:
Interest income calculated using the effective interest
method	29.	1,227,173	721,679
Income similar to interest income	29.	795,906	377,231
Interest income and similar to interest income total		2,023,079	1,098,910
Interest Expense:
Interest expenses total	29.	(1,556,361)	(802,020)
NET INTEREST INCOME		466,718	296,890
(Release of loss allowance) / Loss allowance on loan,
placement and repo receivables losses	6., 7., 11., 30.	8,616	(47,687)
(Release of loss allowance) / Loss allowance on securities
at fair value through other comprehensive income and on
securities at amortised cost	9., 10., 30.	11,879	(53,238)
(Release of provision) / Provision for loan commitments
and financial guarantees given	24., 30.	7,172	(5,541)
Change in the fair value attributable to changes in the
credit risk of loans mandatorily measured at fair value
through profit of loss	45.4.	(980)	11,872
Risk cost total		26,687	(94,594)
NET INTEREST INCOME AFTER RISK COST		493,405	202,296
LOSSES ARISING FROM DERECOGNITION OF
FINANCIAL ASSETS MEASURED AT AMORTISED
COST		(19,707)	(56,195)
MODIFICATION LOSS	4.	(9,017)	(14,856)
Income from fees and commissions	31.	402,885	362,444
Expenses from fees and commissions	31.	(78,755)	(66,087)
NET PROFIT FROM FEES AND COMMISSIONS		324,130	296,357
Foreign exchange (losses) and gains	32.	(12,269)	541
Gains and (losses) on securities, net	32.	7,073	(10,605)
Gains / (losses) on financial instruments at fair value
through profit or loss	32.	91,268	(18,790)
Net results on derivative instruments and hedge
relationships	32.	13,055	9,917
Dividend income	32.	275,705	194,526
Other operating income	33.	26,184	13,775
Other operating expenses	33.	63,590	(131,942)
NET OPERATING INCOME		464,606	57,422
Personnel expenses	33.	(195,404)	(154,303)
Depreciation and amortization	33.	(50,814)	(46,738)
Other administrative expenses	33.	(281,918)	(290,989)
OTHER ADMINISTRATIVE EXPENSES		(528,136)	(492,030)
PROFIT BEFORE INCOME TAX		725,281	(7,006)
Income tax	34.	(70,293)	13,638
PROFIT AFTER INCOME TAX		654,988	6,632
Earnings per share (in HUF)
Basic	43.	2,344	24
Diluted	43.	2,344	24

PROPOSALS FOR THE 2024 ANNUAL GENERAL MEETING

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OTP BANK PLC.

BUSINESS REPORT (SEPARATE)

SEPARATE STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2023

		Year ended	Year ended
		31 December	31 December
(in HUF million)	Note	2023	2022
PROFIT AFTER INCOME TAX		654,988	6,632
Items that may be reclassified subsequently to profit or loss:

Fair value adjustment of debt instruments at fair value through other comprehensive income

Deferred tax related to fair value adjustment of debt instruments at fair value through other comprehensive income

Gains / (Losses) on separated currency spread of financial instruments designated as hedging instrument

Deferred tax related to (losses) / gains on separated currency spread of financial instruments designated as hedging instrument

(Losses) / Gains on derivative financial instruments designated as cash flow hedge

Deferred tax related to gains on derivative financial instruments designated as cash flow hedge

Items that will not be reclassified to profit or loss:

Gains on equity instruments at fair value through other comprehensive income

Fair value adjustment of equity instruments at fair value through other comprehensive income

Deferred tax related to equity instruments at fair value through other comprehensive income

	37,917	(55,804)
34.	(3,503)	5,186
	3,752	(4,887)
34.	(338)	440
	5,700	(5,641)
34.	-	-

	-	2,675
	3,308	61
34.	(374)	(41)

Total	46,462	(58,011)
TOTAL COMPREHENSIVE INCOME	701,450	(51,379)

PROPOSALS FOR THE 2024 ANNUAL GENERAL MEETING

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OTP BANK PLC.

BUSINESS REPORT (SEPARATE)

POST-BALANCE SHEET EVENTS

Post-balance sheet event cover the period until 20 February 2024.

Hungary

• On 23 January 2023 OTP Bank announced that notes were issued with a value date of 31 January 2024, in the aggregate nominal amount of EUR 600 million. The 5 years, Non-Call 4 years Senior Preferred Notes were priced on 23 January 2024.
• On 26 January 2024 Scope Ratings affirmed Hungary's long-term local- and foreign-currency issuer and senior unsecured debt ratings at 'BBB' with stable outlook.
• On 29 January 2024 the Ministry for National Economy announced that following discussions between the

Government and the Banking Association, based on the banks' voluntary commitment, from 1 February to 1 May 2024, the interest margin above BUBOR rate for newly contracted Hungarian Forint- based, variable-rate corporate loan contracts (regardless of the purpose of the loan) will be 0%, and the margin will remain at 0% for 6 months from the date of disbursement of the loan, after which it may return to the normal level. At the same time, the Government indicated that the rate cap on outstanding variable rate MSE loans, which expires on 1 April 2024 according to the current legislation, will not be further extended.

• On 30 January 2024 the National Bank of Hungary cut its key policy rate by 75 bps to 10.0%.
• On 2 February 2024 OTP Bank announced that it decided to terminate the project aiming at establishing a consumer finance joint venture company with its partners in China with a 15%shareholding, as the condition precedents were not fulfilled until the pertaining contractual deadlines.
• On 9 February 2024 OTP Bank announced that it concluded a share sale and purchase agreement to sell its directly and indirectly owned 100% shareholding in OTP Bank Romania S.A. to Banca Transilvania S.A.
  ('BT'). OTP Group is also selling its 100% shareholdings in its other Romanian subsidiaries, OTP Leasing Romania IFN S.A. and OTP Asset Management S.A.I. S.A. to BT under the transaction. The financial closing of the transaction is expected in 2024 subject to the necessary regulatory approvals.
• On 12 February 2024 OTP Bank received a single permission from the Hungarian National Bank for the repurchase of treasury shares, accordingly the Bank is entitled to repurchase its own shares in the amount of HUF 60 billion until 31 December 2024. The total amount specified in the permission shall immediately be deducted from the own funds in accordance with the law.

PROPOSALS FOR THE 2024 ANNUAL GENERAL MEETING

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OTP BANK PLC.

BUSINESS REPORT (SEPARATE)

ACQUISITIONS

On 31 May 2021 OTP Bank signed a share sale and purchase agreement on purchasing 100% shareholding of OTP Luxembourg S.a.r.l. and its subsidiaries - Nova KBM d.d. and Aleja Finance d.o.o., which are 80% owned by funds managed by affiliates of Apollo Global Management, Inc. and 20% by EBRD. The financial closing of the transaction took place on 6 February 2023, after obtaining all the necessary reg ulatory approvals.

In line with the sale and purchase agreement concluded on 12 December 2022 between OTP Bank and the Ministry of Economy and Finance of the Republic of Uzbekistan, the first step of the Ipoteka Bank acquisition was completed on 13 June 2023. Consequently, OTP Bank became the majority shareholder of Ipoteka Bank by acquiring a 73.71% stake and became indirect shareholder of Ipoteka Bank's wholly -owned subsidiaries. In the second step of the transaction, the shares that remained in the ownership of the Ministry will be bought three years after the first step.

MACROECONOMIC OVERVIEW

Following the rapid recovery after the Covid crisis and the outbreak of the Russian-Ukrainian war, inflation has already started to fall in advanced economies in 2023 and, as the year was nearing its end, the debate on the possible timing of an interest rate cut has begun. Meanwhile, the labour market remained tight, with low unemployment and strong wage dynamics. Developed markets' long yields fell sharply by the end of 2023, from the multi-decade highs hit in the autumn.

However, economic growth printed different patterns on the two sides of the Atlantic. In the USA, 2023 brought a much stronger-than-expected economic performance, and growth shifted into higher gear in the second half of the year. The robust figures were driven by supportive fiscal policy, a surge in household savings during the pandemic, and low interest rates on loans. Headline inflation peaked in June 2022 (+8.9%), but the subsequent decline briefly stalled in the middle of 2023. However, core inflation continued to fall, easing to 3.9% (y-o-y) by the end of 2023. The very loose fiscal policy, which raised the budget deficit from around 5% to 8% of GDP, required very tight monetary policy to bring inflation down. The Fed has aggressively raised the base rate to 5.25-5.5% while beginning to shrink its balance sheet.

The energy crisis brought the euro area to its knees, and the economy has been unable to recover from it: amid high inflation and high interest rates, output has been practically stagnant since the 3Q of 2022. Countries with industries that used to rely heavily on Russian energy (e.g. Germany) were hit particularly hard. High interest rates have led to a slowdown in lending, which has also weighed on growth in Europe. Disinflation was very strong in the euro area in 2023: headline and core inflation fell to 2.8% and 3.3%, respectively by the end of the year. The biggest concern in this context is services sector CPI, which has been stagnant at 4.0% (y-o-y) since November 2023. Despite all the weakness in the economy and strong disinflation, the ECB has not yet considered cutting interest rates, and the euro area ended last year with a deposit rate of 4% and a lending rate of 4.5%.

Hungary's economy fell into a longer and deeper recession than the rest of the CEE region in 2023 (GDP y-o-y:1Q:-0.9%;2Q:-2.4%;3Q:-0.4%). However, the recession ended in the third quarter, as growth started to pick up on quarterly basis, helped by the base effect of an unprecedented poor agriculture season in 2022. Inflation peaked at 25.7%, 10%points higher than the region's average, before disinflation started in the spring. From the middle of the year, real wages started to rise again on a monthly basis, but this was only very moderately passed on to consumer spending. Following an over 8% current account deficit in 2022, Hungary's external balance turned into surplus last year, as gas prices collapsed and imports fell, due to a drop in domestic demand. The initial budget deficit target of 3.9% of GDP turned out to be unsustainable and ended up near 6% of GDP in 2023. The MNB cut the effective interest rate in several steps by 725 basis points, to 10.75% by the end of the year, which had been raised to 18% in autumn 2022, and the base rate regained its role in September, when the former overnight deposit facility was phased out. The EUR/HUF fell from around 400 at the beginning of the year to below 370 at one point in the summer, but stabilized around 380 by the end of 2023.

Progress on EU funds was made at the end of last year when the European Commission approved the so-called horizontal enabling conditions for the judicial reform in December. The government was able to unblock about EUR 11 billion of EU funds, thanks to a range of measures implemented last year.

PROPOSALS FOR THE 2024 ANNUAL GENERAL MEETING

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OTP BANK PLC.

BUSINESS REPORT (SEPARATE)

DIGITAL AND IT INNOVATIONS

OTP Bank broadens the range of remotely available services continually. The number of our digitally active retail clients has far exceeded 2 million, and most of our clients now contact our Bank through mobile banking.

Through the mobile application, in addition to the daily banking functions, our clients can purchase investment funds, bonds, car prize deposits, or apply for a new home savings product or travel insurance. In addition, thanks to the piggy bank function, our customers can set up savings goals and put money aside little by little for it, while selecting 'Split the Bill', they can easily allocate the costs of a dinner among the participants.

The Bank focuses on the continuous upgrades of the Personal Finance Management (PFM) toolset, which supports our users in making more conscious financial decisions. The expense tracker service is already capable of handling user generated, personalized categories as well.

The constant ascent in the ratio of our digitally active clients is supported by targeted online campaigns and continuous user education. Machine learning algorithms help the Bank processing all digital data for displaying relevant, personalized offers to the clients.

By the end of 2023, nearly 2 million of our retail customers have registered for the new Digital Contract which allows them to apply for digital services via fully online processes. Several products are available via end-to-end online processes for example: retail clients can open a new account with selfie -identification, or contract for a personal loan or travel insurance digitally.

VideoBank provides consulting service and application process for mortgages as well. We received numerous positive feedback from clients using the channel. Our customers have access to the chat feature on the website, via our internet banking service and in the mobile application as well, therefore we serve client needs also via identified conversations.

We are constantly improving our fraud prevention platform to better identify and prevent fraudulent activity targeting our digital service.

In addition to our internet and mobile banking developments, in 2023 we have created a so -called Merchant Portal for partners holding card acceptance contracts, where they can reach analytics, statements and all related documents of card transactions made with us.

PROPOSALS FOR THE 2024 ANNUAL GENERAL MEETING

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