EBRD stake in Hellenic Bank to help deal with NPLs
The European Bank for Reconstruction and Development (EBRD) has taken an equity stake in Hellenic Bank, the second largest commercial bank in Cyprus, investing EUR 20 mln in newly-issued shares.
This is the second major investment by the EU growth fund that has already pumped about EUR 120 mln in Bank of Cyprus for a 5% stake when the island’s main lender was twice recapitalised and now includes shareholders controlled by funds managed by investor billionaire Wilbur R Ross Jr.
EBRD opened an office in Cyprus last year and announced plans to pump up to EUR 100 mln a year over a 7-year development, mainly in the financial, services and energy sectors, as well as in the privatisation process.
In the deal signed on Wednesday, the EBRD will hold 5.4% of Hellenic’s share capital and voting rights and the funds will be mainly used for growth and restructuring of non-performing loans, that presently account for more than 50% of the banking system’s loan portfolio.
Present at the ceremony were Finance Minister Haris Georgiades, Hellenic Bank Chair Irena Georgiadou and EBRD Cyprus Director Libor Krkoska.
Hellenic Bank, formerly controlled by the then-wealthy Church of Cyprus, is listed on the Cyprus Stock Exchange and boasts New York-based Third Point and the online gaming company Wargaming.net as its major shareholders. The only other major shareholder with a bigger stake than EBRD is the Demetra Fund, publicly owned with a significant control by the Cooperative movement.
During the 2013/14 financial crisis, when Bank of Cyprus sought EUR 4 bln in a depositors’ bail-in to stay afloat after absorbing now-defunct Popular Laiki Bank, and when the Cyprus government rescued the Cooperative Central Bank to the tune of EUR 1.5 bln, Hellenic Bank avoided support or European Central Bank funding, as it’s exposure to toxic Greek government bonds (GGBs) that spelled disastrous to others, was a mere EUR 100 mln, quickly written off.
“By becoming a shareholder in Hellenic Bank the EBRD is taking a further important step to stabilise the Cypriot banking sector,” said Lucyna Staƒczak-Wuczyƒska, EBRD Director for Financial Institutions and EU Banks.
?Our focus will be on NPL restructuring, balance sheet repair and operational efficiencies. Successful NPL management will allow the bank to return to profitability and further develop its business model for the benefit of private and corporate clients.”
Hellenic Bank’s CEO Bert Pijls added that the additional capital raised aims to support the bank’s growth and contribute to the resolution of NPLs.
The bank’s board announced last week the go-ahead to sign an agreement with the EU’s development bank for the acquisition of 10.7 mln new ordinary shares for a total amount of EUR 20 mln.
Back in February, the board had approved increasing the share capital by EUR 35 mln in order to attract new shareholders.
The additional capital raised will strengthen the bank’s Common Equity Tier 1 Ratio (CET1) by 50 basis points, taking it to 14%.