Ack­er­mann takes charge at Bank of Cyprus AGM calls for “bet­ter bank”, sat­isfy de­mand

Financial Mirror (Cyprus) - - FRONT PAGE -

Josef Ack­er­mann has of­fi­cially taken charge of Bank of Cyprus, the one time jewel of the is­land’s econ­omy and now on a path to re­cov­ery, with in­ter­na­tional in­vestors back­ing his chair­man­ship after a rel­a­tively civil share­hold­ers’ meet­ing on Thurs­day.

The for­mer Deutsche Bank CEO, now prob­a­bly the low­est­paid bank­ing chair­man in Europe at 68,000 euros a year, presided over the first board meet­ing and im­me­di­ately em­barked on a hands-on feel of the bank, vis­it­ing branches and talk­ing to man­agers and clients.

One of his big­gest con­cerns will be how to deal with the stub­bornly high rate of non-per­form­ing loans (at present more than 50% of its loan book) and the bank’s in­abil­ity with re­cov­er­ies, as the is­land’s econ­omy has shrunk by 25% since the Eurogroup of Eu­ro­zone fi­nance min­is­ters im­posed a forced bail-in on de­pos­i­tors to res­cue now-de­funct Laiki Bank.

This was con­di­tional to the 10 bln euro bailout from the Troika of in­ter­na­tional lenders, as a re­sult of which BOCY was bur­dened with the 9 bln euros of emer­gency liq­uid­ity as­sis­tance (ELA) af­forded to Laiki, which the cur­rent CEO is rapidly try­ing to pay down and dis­pose of.

The AGM rep­re­sented by 46.4% of share­hold­ers, that voted on a set of res­o­lu­tions, in­clud­ing the elec­tion of a ten-man board pro­posed by bil­lion­aire in­vestor Wil­bur R. Ross Jr., also heard a num­ber of share­hold­ers ex­press their dis­con­tent at the way their de­posits were “robbed” by the bail-in plan, an ex­per­i­ment con­cocted by the Eurogroup and the Euro­pean Cen­tral Bank, which in hind­sight has been deemed as be­ing wrong.

Ross, whose group of funds pumped 400 mln euros as part of a1 bln cap­i­tal raise in Au­gust, is the new vice chair­man, to­gether with in­cum­bent deputy Vladimir Strzhalkovskiy.

Arne Berggren, nom­i­nated by the Euro­pean Bank for Re­con­struc­tion and De­vel­op­ment (EBRD) that in­jected 120 mln euros was also elected to the board, to­gether with Maxim Gold­man, Christodou­los Pat­salides and Michalis Spanos as new board mem­bers. CEO John Houri­can and two se­nior bank ex­ec­u­tives, Mar­ios Kalo­chori­tis and Ioan­nis Zo­graphakis were also up for re-elec­tion.

Zacharias Palexas, nom­i­nated by the for­mer Laiki Bank de­pos­i­tors (SYKALA), did not win enough pos­i­tive votes to get a seat on the board and rep­re­sent the in­ter­ests of the ‘Legacy Laiki’ de­pos­i­tors, who ac­count for 9.6% of BOCY shares, but un­der state ad­min­is­tra­tion.

Bank of Cyprus and ex-Laiki bond­hold­ers staged a protest in front of the bank’s head­quar­ters that at one stage turned rowdy and nearly dis­rupted the AGM as Houri­can was ad­dress­ing the share­hold­ers. The crowd later moved down street to the ad­ja­cent Cen­tral Bank de­mand­ing that the gov­ern­ment re­in­state their de­posits and shares.

After last year’s bail-in, where ‘Legacy Laiki’ was handed 18% of BOCY shares, un­se­cured de­posits of over 100,000 euros held by Bank of Cyprus cus­tomers saw 47.5% of their sav­ings ex­changed for eq­uity at 1 euro per share, with the bank’s old share­hold­ers di­luted at a rate of 100-to-1 and ac­count­ing for less than 1%. Now, after the new di­lu­tion of the share cap­i­tal and the in­jec­tion of 1 bln euros two months ago, BOCY shares are ex­pected to be re-listed on the Cyprus and Athens stock ex­changes, on or about De­cem­ber 19, but at a price of 24c a share, in other words a fur­ther 76% re­duc­tion of their al­ready-di­luted shares.

“I can say with sat­is­fac­tion that we are de­liv­er­ing to the share­hold­ers and the new board of direc­tors a bank with real and sub­stan­tial ca­pa­bil­i­ties,” said out­go­ing chair­man Chris­tis Has­apis, who also sent a warn­ing shot about the way the bank will re­cover mort­gaged as­sets, say­ing that “fore­clo­sures should be im­ple­mented with cau­tion only in the non-vi­able cases.” On a pos­i­tive note, Has­apis said that “the rate of growth of the Cyprus econ­omy will grad­u­ally rise to 2% by 2018,” echo­ing the fu­ture prospects sighted by Wil­bur Ross, who told the Fi­nan­cial Mir­ror in an ear­lier in­ter­view that he was in­vest­ing be­cause of the even­tual growth, re­cently dis­cov­ered en­ergy re­sources and pri­vati­sa­tion process ini­ti­ated by the gov­ern­ment.

In his state­ments, CEO Houri­can said that “the bank to­day stands vis­i­bly stronger than it did just twelve months ago,” when he took it over in tat­ters.

“Our bal­ance sheet has delever­aged sig­nif­i­cantly. The level of non-per­for­mance in our book, while still un­ac­cept­able, has been sta­bilised. We will con­tinue to nor­malise our fund­ing, fur­ther re­pay­ing ELA and hope­fully at­tract­ing de­pos­i­tors.”

He said that the bank will com­plete the share cap­i­tal in­crease with a re­tail of­fer of up to 100 mln shares.

“One year ago our bank was star­ing down the bar­rel of great un­cer­tainty. We suf­fered the in­dig­nity of be­ing the only bank and Eu­ro­zone sov­er­eign na­tion to bail in its de­pos­i­tors and im­pose cap­i­tal con­trols. We lost the con­fi­dence of our cus­tomers, our in­vestors, our staff and all stake­hold­ers,” he added.

“Although we re­main at war with cir­cum­stance, to­day the pic­ture could not be more dif­fer­ent. We be­lieve our long-term out­look is bright.”

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