Deal almost crashed

Ending months of nightmare scenarios, reminiscent of the days when Laiki Bank collapsed in 2012 and was forcibly absorbed into Bank of Cyprus the following year, malicious rumours spread about the stability of the Co-op forcing the state to guarantee some EUR 2.5 bln of non-performing loans to prevent further capital flight.

By December 2017 alone, it is estimated that about EUR 1 bln of deposits were taken out of the Co-op, most of which returned in 2018.

The state guarantee followed the initial capital injection of EUR 1.67 bln in the Coop making the government its biggest shareholder.

A deal was made possible after Hellenic had raised an extra EUR 150 mln with a capital increase, enabling the government to hand over the bank’s good assets.

Initially it was thought HB required EUR 450-500 mln, but the amount dropped significantly after government plans to issue a supplementary bond issue to facilitate the deal.

Details of the agreement have not been made public, but according to sources close to the procedure, the state will guarantee loans of EUR 800 mln through an Asset Protection Scheme.

The Co-op Bank announced late on Friday that “the board has called an extraordinary meeting of shareholders in order to review the (Hellenic) proposal and to take the relevant decision.” The EGM has been scheduled for 6.30 pm on Monday, June 18.

While the deal appears to be a good one for HB, leading economist and Head of the Bank of Cyprus Economic Research Department Ioannis Tirkides, said that the takeover of the CCB’s good asset portfolio should prove beneficial for the island’s banking system, aid competition and hence consumers.

Furthermore, the economist said, the agreement with the government will see the creation of an NPL managing body which

The deal almost went up in smoke on Friday morning, as Hellenic had not communicated, as agreed, their new shareholder structure to the government. Uncertainty over whether the bank had raised the money needed remained until the cabinet meeting later in the day, called to rubber-stamp the deal.

The week saw Hellenic Bank’s board meet for hours almost every day to decide on the next moves and how the bank is to prepare its infrastructure ahead of completing the transaction.

With the final touches been made, all that was left was the approval of the contributing parties to participate in the EUR 150 mln capital increase needed for the Co-op deal to go through.

Reportedly, the board was searching for a