EBRD stake in Hel­lenic Bank to help deal with NPLs

Financial Mirror (Cyprus) - - FRONT PAGE -

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%.

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