By Margit Feher

BUDAPEST--OTP Bank Nyrt. (OTP.BU), Hungary's largest bank by assets and market share, expects the deterioration in the quality of its loan stock to slow this year, the bank said Friday.

Deposits could expand this year in sync with an expected rise in lending, though operating costs could increase about 5% from last year, the bank said in a forecast released before a press conference on its fourth-quarter earnings.

The total amount of loans adjusted for the different currencies in the countries where OTP operates could increase moderately this year, with two-digit growth forecast in consumer loans in Russia, Ukraine, Romania, Serbia and Slovakia as well as in corporate loans, and farm-sector loans in particular, in Hungary, OTP added.

OTP said earlier in the day that group net profit was 26.15 billion forints ($113.9 million) in the fourth quarter, compared with a year-earlier net loss of HUF25.84 billion - the latter was caused by retail foreign-currency mortgage loan repayments and the booking of a special bank tax.

The latest fourth-quarter net profit was below the HUF30.0 billion profit forecast in a poll of 18 analysts provided by the company, as provisioning for expected loan losses was higher than analysts had forecast.

Write to Margit Feher at margit.feher@dowjones.com

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