Tuesday Jul 29, 2014 Search
Weather | Athens
31o C
23o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
Bailed-in Bank of Cyprus depositors prepare for share-sale blow

By Georgios Georgiou and Nikos Chrysoloras

Less than a year after the conversion of almost half their deposits over 100,000 euros ($136,000) into equity, Bank of Cyprus Pcl shareholders face another potential blow as the lender weighs a stock sale.

The board of directors of the Mediterranean nation’s biggest bank convenes for a second time in two weeks on Friday to decide on a capital increase of at least 1 billion euros, following an ultimatum issued on July 1 by the governor of the central bank, Chrystalla Georghadji.

Shareholders fret their stakes will be diluted, especially if the stock is sold at a low price and they lack the time to gather enough cash to participate in the offering, said a senior Bank of Cyprus official who asked not be identified because the discussions with investors are private.

Some shareholders are asking board members to seek a delay, possibly until Aug. 25, to allow them to raise sufficient funds to maintain their stakes, the official said. They also told the board that a price of less than 30 cents in the offering would be unacceptable, the official said. The depositors’ funds were converted to equity at 1 euro a share.

“These people didn’t want to become shareholders,” said Spyros Stavrinakis, former deputy governor of the country’s central bank. “They were forced to do so” with the conversion of uninsured deposits into shares last year.

Now, with the value of their holdings depreciating amid a surge in bad loans and trading in the shares suspended, they face dilution from the stock sale, Stavrinakis said in an interview in Nicosia on Thursday. External capital controls remain in place to provide a bulwark against financial collapse.

Bad Loans

As part of the nation’s 10 billion-euro rescue package in 2013, Bank of Cyprus absorbed its nearest rival, Cyprus Popular Bank Pcl, and was recapitalized last July through the conversion of deposits into shares.

Bank of Cyprus’s liabilities toward euro-area central banks total almost 60 percent of Cypriot gross domestic product, according an International Monetary Fund report released on July 2. The bank has “limited collateral buffers,” the report said, and the island’s government has committed to provide additional guarantees of almost 3 billion euros to help the lender obtain liquidity.

Doubtful loans ballooned to about 55 percent of its gross loans, or 14.5 billion euros, in the first quarter of this year, according to a European Commission report on Cyprus, also published this week.

Pressuring Board

That hasn’t stopped investors from expressing interest in buying a stake, according to a central bank official. Record low interest rates have flooded Europe’s most troubled economies with funds. The official said Bank of Cyprus, which reported a 2 billion-euro loss in 2013, should ride the wave of abundant cash to raise capital and ensure a strong result in euro-area stress tests this year.

Cypriot media published a scanned copy of a letter earlier this week signed by Georghadji, the central bank governor, asking the chairman of the lender’s board, Christis Hassapis, to confirm within three days that the bank would raise at least 1 billion euros in capital by Aug. 8.

Chief Executive Officer John Hourican, who joined last year after previously working at Royal Bank of Scotland Group Plc, said in May that souring loans are the biggest impediment to the country’s banking system and economic recovery.

The Bank of Cyprus official said some shareholders are concerned hedge funds that have expressed their willingness to participate in the offering will securitize these loans and buy them at low prices. The two officials didn’t say which hedge funds have shown interest in the capital increase.

Last month, Cyprus became the euro area’s final bailed-out nation to return to international markets amid a surge in demand for the region’s higher-yielding debt. It raised 750 million euros in a sale of five-year notes.

Georghadji said she’s confident the island’s banks will pass the stress test, even as the economy is projected to contract by 4 percent this year and commercial lenders still need to build effective mechanisms to deal with bad loans.

[Bloomberg]

ekathimerini.com , Friday Jul 4, 2014 (12:42)  
Great margin for growth in exports
Parliament’s Budget Office says third bailout may be needed
Ryanair ‘not particularly interested’ in Cyprus Air
August 2 expected to be Greek tourism’s D-day
Ministry appeals to keep limit on prescriptions
Faced with the prospect that its attempts to rein in spending on medicines will be scuppered, the Health Ministry appealed on Monday against a Council of State ruling to temporarily suspend ...
Universities aghast at new schools opening
University officials have decried the government’s decision to open two new departments at the same time that funding for the tertiary institutions continues to be slashed. It emerged that t...
Inside News
VOLLEYBALL
Volleyball national team second in European League
Much as the national volleyball team tried to repeat in the finals of the European League the feat it had achieved in the semifinals, it failed to overturn the advantage Montenegro had got f...
SOCCER
Ranieri says he has little to change in Greek national team
The Hellenic Football Federation (EPO) presented Claudio Ranieri as the new Greece coach for the next couple of years, after the Italian manager signed his contract in Athens on Friday. “I l...
Inside Sports
COMMENTARY
Weighing all the factors
Certain people in the know continue to believe that snap elections will take place in the fall. Prime Minister Antonis Samaras is obviously aware of this trend, which is why he told Parliame...
EDITORIAL
Clear rules, for everyone
If we want to deal with the economic crisis, we need clear rules. A large number of individuals and businesses have amassed huge debts they cannot service. And some worrying symptoms have al...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. Ministry appeals to keep limit on prescriptions
2. Great margin for growth in exports
3. Universities aghast at new schools opening
4. Greece to hold next talks with troika in Paris, not Athens
5. Anastasiades sees lack of progress on Cyprus talks
6. Supreme Court deputy prosecutor says ex-finance chief should be tried over ‘Lagarde list’
more news
Today
This Week
1. Defense Minister Avramopoulos to represent Greece at European Commission
2. Tree collapses in village square, killing nine-year-old boy
3. Euro inflation seen testing ECB patience as stimulus takes time
4. Minister mulls fixing food and drink prices at non-private beaches
5. Maziotis moved to Diavata Prison in Thessaloniki
6. Multi-bill containing prior actions ready for Parliament
Today
This Week
1. Climber dies in Mount Olympus fall
2. Unequal after death
3. Greek sovereign debt at 174.1 percent of GDP in first quarter
4. Hedge fund Dromeus turns Greek tragedy to triumph with 160 pct gain
5. Quadriplegic woman on life support 'dies due to unpaid power bills'
6. Front-line threats
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2014, H KAΘHMEPINH All Rights Reserved.