BOCY sells Kermia, LSE listing ‘right thing to do’
It’s been a busy week for the Bank of Cyprus, the island’s main lender bailed out by depositors and foreign investors in 2014, that has lowered its debt, disposed of its last major non-core asset and is on track for a listing on the London Stock Exchange.
A premium listing on the LSE main market, advised by HSBC, is the right thing to do, the bank’s turnaround CEO John Hourican told the press on Tuesday.
“We think it is great for Bank of Cyprus to be listed in one of the world’s most i mportant exchange and for the transparency and good governance objectives that we have been pursuing,” he said, noting that BOCY will retain its listing on the ‘ home’ bourse of the Cyprus Stock Exchange, but, as announced last week, will delist from the Athens Stock Exchange after a presence there of 16 years.
Hourican said that “we have to create a mechanism to get good liquidity and value discovery in the stock.”
As regards the voluntary retirement scheme that did not meet the expected target in order to achieve further cost cutting, Hourican said “we are looking at all other mechanisms” to see how important commercial objectives can be reached.
In all, 76 employees applied for voluntary retirement, far less than the target of 200-250. But Hourican said that the bank would not present a more generous plan like the one Greek subsidiary Alpha Bank offered its Cyprus staff.
Continuing with Hourican’s favourite phrase of “deleveraging”, the bank also announced it had reached an agreement for the disposal of Kermia Hotels Ltd. and adjacent land in Ayia Napa for a sale consideration of EUR 26.5 mln that will result in a profit after tax of EIR 1.8 mln.
The sale is in line with the Group’s strategy of deleveraging through the disposal of non-core exposures that has seen the disposal of office space, inherited from now defunct Laiki, making savings of at least EUR 5 mln a year.
Kermia Hotels was sold to Aesara Investment Ltd., selected as the successful bidder following a competitive process. The buyer is controlled by Vasilis Nicolaides and Demetris Nicolaides, shareholders of Atlantica Leisure Group Ltd.
Meanwhile, as regards the LSE listing, the bank’s Finance Director Christakis Patsalides had earlier said that this would be a “turning point” for the lender.
“Three years ago, the bank was under resolution, we were the only bank to be subject to a bail-in and aiming for a listing on the main market of the London Stock Exchange three years later surely constitutes the culmination of our efforts, a vote of confidence and an acknowledgement that we are on the right track,” Patsalides told the Cyprus News Agency last week.
With EUR 3.9 bln in deposits converted to equity and wiped out overnight, the bank absorbed Laiki, the island’s second largest lender, along with its ECB emergency liquidity assistance amounting to EUR 9 bln, expanding the Bank of Cyprus total exposure to ECB emergency funding to EUR 11.4 bln. Through prudent management, however, and EUR 1 bln raised from foreign strategic investors, it has reduced that emergency liquidity assistance (ELA) to 3.3 bln, and plans to repay it fully by end-2017.
The LSE listing is expected to take place in the second half of 2016, “to improve the bank’s visibility and share liquidity. We believe this will have many benefits for our shareholders and the economy in the medium term,” Patsalides said.
With a market cap of EUR 1.3 bln at present, Bank of Cyprus is expected to join FTSE250.
Meanwhile, Bank of Cyprus announced its final audited results for 2015 with profit before provisions of EUR 624 mln and provisions for impairment of customer loans of EUR 959 mln, resulting in a loss after tax from continuing operations and loss after tax for FY2015 of EUR 394 mln and 438 mln, respectively.
The bank said it has achieved good progress in tackling delinquent loans, reduced by EUR 1.3 bln or 10% to 11.33 bln (50% of its loanbook) due to restructuring activity and deleveraging. It maintains a strong capital position with a CET 1 ratio (transitional basis) of 14.0%, well above the minimum regulatory requirement of 11.75%, while customer deposits (adjusting for the disposal of the Russian operations) have increased by EUR 1.6 bn or 12% during FY2015. Thus, it has improved the loans to deposits ratio (L/D) by 11 percentage points in 4Q2015 to 121% as at 31 December 2015.