Friday February 27, 2015 Search
Weather | Athens
11o C
6o 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)  
Greece to auction 875 mln euros of 6-month T-bills on March 4
Greece runs out of funding options despite eurozone reprieve
Next Greek aid deal will emerge in coming months, Moscovici says
Greek Finance Minister Varoufakis says EU deal a ´fig leaf´
Gov´t official: bill reinstating ERT, rehiring staff to go to Parlt on March 5
Draft legislation foreseeing the reinstatement of former state broadcaster ERT, which was abruptly closed down in June 2013 by the previous conservative-led administration, will be submitted...
Gov´t adviser suggests Greek MPs could vote on deal in separate bills
Even as other eurozone parliaments, including Germany's, held votes on an agreement between Greece and its creditors to extend the country's loan agreement, a senior adviser to Prime Ministe...
Inside News
SOCCER
Ten-man Olympiakos couldn´t overcome Dnipro
Olympiakos drew 2-2 with Dnipro from Ukraine at home on Thursday, playing almost the entire second half with a man down, to bow out of the Europa League, despite facing an opponent which on ...
BASKETBALL
Greens lose at Maccabi but preserve head-to-head advantage
Panathinaikos suffered its third loss in eight games at the second stage of the Euroleague going down 73-70 at Maccabi Tel Aviv on Thursday, but has preserved its better head-to-head record ...
Inside Sports
COMMENTARY
A breath of opportunity
We are still living in the Greece we know: The government is struggling to explain its retreat in the face of our creditors, the opposition (including dissidents in SYRIZA) smells blood, we ...
EDITORIAL
Give the green light
Foreign investment is a crucial component of economic recovery and Greece needs to start bringing it in fast. Instead, the government, like others before it, is scaring it off in a bid to sa...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. Greece to auction 875 mln euros of 6-month T-bills on March 4
2. Greece runs out of funding options despite eurozone reprieve
3. Next Greek aid deal will emerge in coming months, Moscovici says
4. Greek Finance Minister Varoufakis says EU deal a ´fig leaf´
5. Greek economy shrinks 0.4 percent q/q in last quarter of 2014
6. Gov´t official: bill reinstating ERT, rehiring staff to go to Parlt on March 5
more news
Today
This Week
1. Tsipras reversal draws Greek sympathy as party rumblings rise
2. German MPs begin debate on extending Greek bailout program
3. German lawmakers approve extension of bailout program for Greece
4. Restive Bundestag to approve Greek bailout extension
5. Prosecutor orders probe into claims of abuse at Amygdaleza migrant facility
6. Gov't adviser suggests Greek MPs could vote on deal in separate bills
Today
This Week
1. Greece prepares extension request for eurozone approval
2. Time for Alexis Tsipras to keep his nerve
3. Stubborn but not almighty
4. Greek bailout deal faces review by euro officials next week
5. Greece says eurozone deal won time as cash bled from banks
6. The ignorance of the West about the culture of Islam
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2015, H KAΘHMEPINH All Rights Reserved.