Hellenic established as ‘leading retail/SME bank’ after Co-op deal
The transition of the Cyprus Co-operative Bank’s operations and transfer of its healthy assets to Hellenic Bank earlier this week has established the new entity as the island’s ‘leading retail and SME bank’.
Hellenic released a video showing CCB card-holders being offered free transactions on the first day of the integration, with a number of Co-op customers filling up their cars with free fuel at a rural petrol station.
Monday was the first day when the two bank’s merged systems were tested and seemed to have passed with flying colours, almost.
While the Department of Lands and Surveys praised the “smooth integration” of some 50,000 mortgages from the beginning of August, the union of municipalities said there were teething problems, with some local authorities that had outstanding accounts or non-performing loans, saying that their accounts were frozen or written down from their debts.
“Fortunately, many of these municipalities also had alternative accounts with other banks and were able to conclude payments,” the union’s chairman, Larnaca Mayor Andreas Vyras told CyBC radio.
A Hellenic Bank official told the Financial Mirror that initially, the municipalities’ accounts were not to be included in the transfer agreement and that their current accounts, as well as loans, would remain with the ‘old’ Co-op whose banking license would not be revoked. However, the supervisory European Central Bank clarified in mid-August that the CCB’s license would be suspended at the end of August and all current accounts were thus transferred to Hellenic, without the loans.
As a result, a handful of “insignificant” local authority accounts, mostly in rural areas, were greatly overdrawn or their loans were long deemed as non-performing, and could not be transferred.
The final merger details were announced on August 22 when the Hellenic Bank’s shareholders approved a EUR 150 mln rights issue that will fund the takeover. These include transferring 1,100 staff to the Hellenic payroll, shutting down 100 branches within 15 months of the duration of the integration programme and boosting Hellenic’s balance sheet by about EUR 10 bln, making it two and a half times bigger than prior to the announcement.
As a first measure, 43 full-time and part-time branches are being shut down until the end of September, including 11 ATM points, as “the daily volume of transactions does not justify their existence,” Hellenic had explained.
As reported by the Financial Mirror last week, Hellenic will also introduce two mobile branches, aka “banks on wheels” to serve outlying rural areas.
The new merged bank claims to have “a better liquidity ratio than any other major bank in Cyprus,” has enjoyed a “significant reduction of the NPE ratio and reduction of the balance sheet risk”, due mostly to the government undertaking the high-risk NPLs that are transferred to the new state ‘bad bank’, and the “biggest branch and ATM network in Cyprus” after the takeover, with a total of 125 outlets, one more than Bank of Cyprus.
A Hellenic Bank announcement said “the agreement concerns the acquisition of the balance sheet, as well as specific operations of the CCB. The balance sheet comprises of a portfolio of primarily performing loans, Cyprus Government Bonds, cash and customer deposits.”
“After the completion of the capital increase, the capital position of the bank will be significantly strengthened, with the Common Equity Tier (CET) 1 ratio and the total capital ratio exceeding 14% and 17%, respectively,” the announcement added.
The merged operations include more than 550,000 customer accounts, a deposit market share rising from 12% to 32%, a performing loan market share increasing from 7% to 22% and an NPL ratio (excluding those covered by the Asset Protection Scheme) slashed from 52% to 25%.
Bank of Cyprus, the island’s largest lender with a 30% market share of all performing loans, estimated at EUR 26.5 bln, and a 37% share of the country’s EUR 49.4 bln deposits, said this week that it opened 12,300 new accounts in July and August, directly linked to the Co-op bank’s collapse.
“The acquisition is expected to accelerate the bank’s strategy of strengthening its banking franchise across Cyprus with an enlarged and diversified customer base. This expansion establishes Hellenic Bank as the leading retail and SME bank in Cyprus,” Hellenic’s CEO Ioannis Matsis said in a statement.
“Through the acquisition, we achieve a significant improvement in the quality and structure of the bank’s assets and hence in its financial profile, allowing it to concentrate on achieving its strategic goals. Welcoming our new clients, I want to assure them that we will work hard so that the transition to the new era is as smooth and seamless as possible.”