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By noon on Thursday, the Bank of Cyprus will have a new chairman and board, determined to continue with the restructuring plan and aiming to reinstate the stock on the Cyprus and Greek bourses by the end of next month, all signs of stability and confidence returning to the island’s leading lender.
The AGM at 9am will probably elect the tenman board proposed by billionaire fund manager Wilbur L. Ross Jr., with former Deutsche Bank CEO Josef Ackermann taking the reins as new chairman.
They will have their plate full as it will be difficult to return to profitability in an economy dominated by over-lending stubbornly high levels of non-performing loans, mostly housing mortgages.
Next on the agenda will be the fate of the subsidiary bank in Russia, Uniastrum, which the new shareholders and board have to determine if it fits within the asset mix in order to develop it further (highly unlikely in the present state of the Russian economy) or maintain it and eventually get rid of it.
A similar fate awaits the insurance subsidiary CNP Asfalistiki, which even the French principals are not too keen on retaining because of the recessionary state of the Cyprus economy.
But one area where the new board and current CEO John Hourican are in total agreement is the continued paying down of the European Liquidity Assistance funds, last estimated by Moody’s at EUR 8.9 bln or 29% of the bank’s assets of EUR 28.6 bln, having dropped from 37% in March this year.
“Reducing ELA reliance is credit positive for the bank and a sign that it is healthy,” said a banking analyst on condition of anonymity, adding that the recent capital increase was also seen as credit positive by the rating agencies, while the presence of the new shareholders and nominee board members strengthens confidence in the bank.
“The biggest concern will have to be to reduce the exposure to NPLs, presently half the loan book. This, combined with the further relaxation of capital controls, the stabilisation of the level of NPLs and their gradual reduction through effective means of recovery and restructuring, will put the bank on a healthy path once again.”
Bank of Cyprus was one of four systemic banks that passed the Europe-wide capital stress tests last month, having raised EUR 1 bln three months ago and subsequently paid down part of the bailout debt imposed on now defunct Laiki Popular Bank, which it was