End of an era for Co-op as Hellenic starts new one

This week marked another milestone in the island’s banking landscape as the Cyprus Cooperative Bank took its place in the history books as a 100-year-old story ended with the takeover from Hellenic Bank. Despite Hellenic becoming overnight the second largest and biggest retail bank, the transition is seemingly moving along smoothly.

After the Co-op takeover, Hellenic along with Bank of Cyprus control almost 70% of banking activity as the only major hitters left in the ring. With Hellenic taking over the ‘good assets’ of the Co-op, which has had its banking license revoked as of the end of August, some 400,000 former Coop customer accounts have been transferred to the bank.

Talking to the Financial Mirror, a Hellenic Bank official said that the bank was ready not only to welcome customers but some 1,100 ex-Co-op employees. According to the official, the bank now employs some 2,500 people, while the Bank of Cyprus has 4,000 employees.

He said that preparations have been made and the current system’s capability to handle the enlarged workload is being tested. He also confirmed the Financial Mirror’s story that 43 former Co-op branches are to close by early October, while another 100 branches are to be gradually removed from the banking network over the next 15 months. At the end of the 15-month transition period, Hellenic will have around 125 branches.

Asked whether the 2,500 employees will be able to cover the workload of 125 branches when the BoC has some 4000 employees for 120 branches, he said that Hellenic has planned various synergies that will prove to be very profitable in the near future.

The source also added that changes may not be very visible as Hellenic will take its time in replacing signs at the Co-op branches to remain under its control as the bank is still in the process of evaluating which branches will be part of the final HB network.

Wanting to reassure Co-op customers that they have nothing to be concerned about, and they can go about their usual business, the source said that Co-op customers’ accounts, conditions agreed with the CCB regarding credit cards, overdrafts and loans are not affected.

But the new banking environment created finds Hellenic Bank battling with the Bank of Cyprus over market share.

The two systemic banks now hold 69% of deposits (BoC 37% and HB 32%), with BoC now having deposits worth EUR 16.48 bln while Hellenic Bank now has EUR 15.4 bln as at the end of June. Meanwhile, one in two loans in Cyprus belongs to BoC (30%) and HB (22%).

BoC has a loan portfolio worth EUR 18.31 bln. The former CBC had 15% of all loans, while the new HB has more than doubled its loans from EUR 4 bln to 8.7 bln.

Despite the transition moving along smoothly, former Co-op customers appeared unsure over the situation on their first visits to the now Hellenic Bank branches as signs of the historic bank’s demise were obvious. Although customers did not see any change on the outside of the branches, as HB has yet to change the signs, customers were faced with empty walls and benches as all CCB promotional material had been removed.

As reported by Stockwatch, people waiting in line expressed their disappointment and anger over the events which led to the bank’s closure, with some ex-Co-op clients expressing their desire to withdraw their money to deposit it at a bank of their own choice.

Others, according to the report, found HB CEO Ioannis Matsis’ argument that the now second largest bank does not have a history of bail-ins or bail-outs to be encouraging and said they will stay with Hellenic.

Former Co-op clients visiting branches in rural areas, which are among those to be closed, expressed concerns over the fact that their villages will be left without any bank.

An HB official commenting on the above concerns, said that as a first stage two mobile branches will be visiting some 40 villages mainly in mountain and remote areas.

“People will be informed of when the banks on wheels will be visiting their villages. We do not see why there should be any problem. We understand that people in these areas will need access to banking branches and we will make sure that they are provided with the services they need,” said the official.

The island’s now biggest retail bank opened its first branch in 1976 in Nicosia with just 33 employees. The bank grew in the 1990s with the acquisition of Barclays Bank PLC’s business in Cyprus, while also expanding to Greece and Moscow. However, during the 2013 banking crisis, Hellenic sold its subsidiary in Russia and its Greek branches to Piraeus Bank. In 2017 HB become the first bank to sell its NPL and property managing business to APS Cyprus.

When Laiki Bank was still around, Hellenic Bank was ranked fourth in terms of market share and its balance sheet. With the demise of Laiki in 2013, it became the third biggest banking institution on the island behind the Co-op.