Bank of Cyprus, the island’s biggest lender twice rescued by investors and shareholders alike, is close to fully repaying the EUR 1 bln it still owes European authorities, but has yet to decide when (or even if) it will seek a listing on the London Stock Exchange.
The bank has already established an Irish holding company in its effort to secure a smooth listing on the LSE, with the aim of attracting new investors and reviving interest in the stock, currently stuck at 13.5c.
This move would have in turn attracted fresh funds to boost the bank’s capital base, not that it needs it, according to its chief executive, but it would strengthen its financial position and help tackle its vast portfolio of non-performing loans, the scourge of all Cyprus banks following the 2013 economic crisis.
CEO John Hourican told shareholders at the annual meeting in Nicosia on Tuesday that the bank maintains a satisfactory level of capital to support its strategy and thus does not expect any need will arise for additional capital. He added that the bank is reviewing the possibility of a secondary capital issue to enhance the healthy balance sheet and capital base, which as at June 30 showed a core equity tier 1 (CET1) ratio of 14.4%.
As regards listing on the London market, he said that the timeframe remains unclear and that the bank’s management is in talks with the interested parties in this complex project.
On the issue of problem loans, Hourican said that the bank will continue to encourage the government and parliament to proceed with the necessary reforms so as to overcome the hurdle of the economic crisis, suggesting legislators need to speed up improvements to the foreclosures and insolvency laws, with concerns that politicians would succumb to public pressure and strengthen the primary home protection from foreclosures.
Banking reforms would also ensure a stability of the island’s institutional framework, amid growing fears that parliament could decide to compensate bondholders whose investments were wiped out in the bail-in. Already, disgruntled bondholders and former shareholders who have seen their stake reduced to a hundredth, have threatened public activism ahead of the presidential elections in 2018.
Addressing the AGM, Chairman Joseph Ackermann said the Bank of Cyprus has set six basic targets.
Summarising the basic aims, he said these were the reduction of NPLs and the improvement of the balance sheet quality, the full repayment of ELA and the stabilisation of the financing structure, maintaining the right capital adequacy, focusing on the Cyprus market, as well as the UK operations, listing on the London stock exchange and achieving a more functional operating model.
Ackermann said that the strategic restructuring of the bank has started to bear fruit and referred to the sale of the toxic Russian subsidiary Uniastrum, the restructuring and reduction of NPLs, attracting new depositors, the limitation of the operational costs, enhancing the capital base, resumption of profitability and the increase in credit facilities.
As regards capital, he said in the past the capital base had been adequate, considering the risk profile, the balance of NPLs the macro-economic environment and the prevailing regulatory requirements.
Returning to the issue of a London listing, Hourican said this would serve to further strengthen the bank’s balance sheet, adding that “we are carefully exploring the possibility of introducing tier 2 capital to augment the strength of our balance sheet and supplement our equity capital base”.
Announcing its first-half results at the end of August, the bank said that it had reduced its problem loans by EUR 1 bln in the quarter and 2 bln for the first six months, that its deposits were up by EUR 619 mln in the second quarter and the Emergency Liquidity Assistance (ELA) was reduced to EUR 1.5 bln, maintained a CET1 ratio of 14.4% and saw profit after tax of EUR 6 mln for the second quarter and 56 mln for the first half.
During the AGM, the 167 shareholders representing 39.43% of the total issued share capital approved the board’s Remuneration Report and maintained the remuneration of the members at last year’s levels, re-appointed Ernst & Young as auditors for 2016, and re-elected Maksim Goldman, Michael Spanos, Arne Berggren, Dr Michael Heger and Lyn Grobler to the board of directors.
