Countdown begins as Co-op bank investors submit their bids
Monday marked the countdown for what is hoped to be the transformation of the Cyprus Co-operative Bank into a more efficient and healthier institution, as potential investors for the lender were reported to start arriving on the island. The bank’s management team is expected to hold meetings all through next week, with investors who are currently on the island with the aim of obtaining information on the bank’s financial state.
On March 19 the CCB launched a tender for the expression of interest offering two options: acquiring a controlling stake in the bank’s share capital, currently owned by the state, or acquiring assets and liabilities. At the time, CCB sources said that the institution had received interest both from local financial entities and global financial and strategic investors.
According to the same sources, seven to eight of the investors showing initial interest are expected to arrive throughout the week for the presentations and then file their interest by putting forward their bids for either the whole of the bank or just the ‘good part’.
Potential investors will have until the end of the month to complete their appraisal of the bank’s assets. On the last day of April, interested bidders will have to put in their bid and their terms.
Potential bidders were initially put off by the cash withdrawals from the bank due to rumours circulating about the future of the institution, that climaxed just prior to the presidential elections earlier this year. With things looking rather gloomy, the state stepped in and deposited EUR 2.5 bln, essentially in return for the bank’s bad portfolio. As far as the bank’s non-performing loans are concerned, they amounted to EUR 7 bln in 2014, reaching a peak of EUR 7.7 bln to retreat to EUR 6.2 bln today.
The state’s intervention came at a time when rumours regarding the institution’s future and viability, have reached their peak. Just in the run-up to the presidential elections, starting from November 2017, the Co-op’s woes resulted in as much as EUR 1 bln in deposits transferred to other banks, even invested in real estate and consumer goods (household items, white goods, cars, etc.).
The EUR 2.5 bln deposit stopped the cash withdrawals from the bank, while announcements made last week by the Finance Minister, with regards to the creation of a ‘bad bank’ or, as the government is calling it, a managing body which is to absorb the cooperative bank’s NPLs, are expected to encourage investors even more as less capital will be required. The minister said that even in the case that the segregation of the bank does not go ahead, the government still has plans to create a ‘bad bank’ which will absorb the NPLs of Cyprus’ banking system.
With state plans to create a ‘bad bank’, or a managing body as it prefers to call it, almost certain to go ahead, investors will be concentrating on the bank’s good portfolio. However, even with the bad portfolio out of the way, potential investors will still need to raise a significant amount