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Is Bank of Cyprus ready for CSE comeback?

24 January, 2014

 * Misses end-January target ; Deposit outflow stabilised, NPLs at 40% *

The Bank of Cyprus, which, together with the defunct Laiki Popular used to account for 80% of the volume traded on the Cyprus Stock Exchange, is struggling to return to a state of normalcy by getting its shares listed on the local stock market after an absence of nine months.
But the initial end-of-January deadline suggested by the bank’s current management will definitely be missed, as the bourse regulator has not yet received a prospectus for the listing of the new shares.
The Exchange, too, will have its hands full as it must update the share register prior to any listing, with the current data comprising only the old shareholders before last year’s restructuring and recapitalisation, who, after the dilution of their securities, presently account for only 1% of all new shareholders.
Demetra Kalogirou, chairman of the Securities and Exchange Commission (CySEC), is expected to meet with the bank’s board and top management on Thursday or Friday to secure a timeframe of when the prospectus for the new shares that arose out of the Eurogroup-imposed bail-in could be completed and submitted.
Kalogirou said that CySEC is currently faced with two options: to extend the suspension of the stock for a further “reasonable” period of time or delist the company altogether. She did not elaborate on what she considered as “reasonable.”
But the delay has created frustration among old and new shareholders, as well as potential investors, who do not see the delay of re-listing the shares too kindly. Many are desperate for cash and want the stock reinstated on the CSE board in order to liquidate their assets and pay down their loans or other obligations, suggesting that the shares could be under pressure for a while.
On the other hand, others see this as an opportunity and are waiting to sweep the floor with their buys, which, however, will still not be enough to support the stock and the bottom could fall out from the outset.
In any case, the bank is reportedly satisfied that the outflow of capital has stopped, with senior officials saying that the deposit base has stabilised, as has the rate of non-performing loans outstanding for more than 90 days.
The bank’s next big test will be the release at the end of the month of some 900 mln euros worth of 6-month deposits, one of the three instruments introduced last summer to prevent a bank-run. Although the bank maintains the right to roll over the 6-month, 9-month and 12-month deposits created from the obligatory conversion of nearly 45% of all deposits, the current management does not seem to want to do that as it is confident that the outflow will stop.
On Monday, Finance Minister Haris Georgiades said that the Bank of Cyprus had entered a phase of normalisation, adding “we have reached a point where we can say we feel much more confident for the stabilisation of our banking system.”
He was briefed by the bank’s chairman Christis Hassapis and CEO John Hourican on the progress with regard to the implementation of its restructuring plan. Georgiades’ meeting with the BOCY executives came just a week before the arrival of a Troika mission for the third review of the implementation of the Cyprus adjustment programme.
Hassapis said after the meeting that the bank is ahead of its restructuring plan as it has done much more than expected.
He said the bank is working to contain the rise of non-performing loans (NPLs) that had exceeded 40% by last September.
“I think we will have positive results in that area as well,” he added, noting, “there has been a stabilisation of these loans and we believe that there will be a clear reduction of the NPLs in the next period.”
The island’s banking sector came to the brink of collapse last year, when the government reached a 10 bln euro bailout agreement with the Troika which featured a haircut on uninsured deposits to recapitalise the Bank of Cyprus to the tune of 4.8 bln euros.