Bank of Cyprus to get 950m state injection

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Bank of Cyprus, the island’s former finance giant that has been brought to its knees by a painful bailout plan following years of bad management, edged closer to returning to normalcy when it was announced it would get a state cash injection of EUR 950mln.

But the lender, that announced EUR 31 mln in first quarter profits, is still in need of fresh capital and is still contemplating plans of a capital increase of up to EUR 1 bln and further assets sales, as proposed by advisors HSBC and Credit Suisse.

The government, acting through the Public Debt Management Office that has been handling the recent successful return to markets after a three year absence, has decided to pay back some EUR 950 mln owed to the bank after it was forced to absorb the now-defunct Laiki Popular Bank, itself the victim of crooked bosses and state incompetence. The amount matches the EUR 944 mln in outflow in customer deposits during the first quarter, with Bank of Cyprus depositors still jittery over the future of their savings.

The refund is part of the EUR 1.8 bln rescue package the government threw at Laiki Popular in 2012 and subsequently nationalised the island’s second biggest and oldest lender, a lifeline that came too late to close the black hole created by unsecured lending and excessive investments in toxic Greek government bonds.

When BOCY absorbed Laiki, it also undertook the burden of the EUR 1.8 bln, as well as 9.5 bln in Emergency Liquidity Assistance that had accumulated there and which the Bank of Cyprus has been paying down in recent months.