BOCY sells Ker­mia, LSE list­ing ‘right thing to do’

Financial Mirror (Cyprus) - - FRONT PAGE -

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.

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