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€960 mln to hit market as BOCY releases 3-month depos

30 January, 2014

 * Uniastrum sale on hold, Ukraine to go *

The Bank of Cyprus is releasing about 960 mln euros worth of time-deposits that had been blocked as part of the bail-in package imposed on uninsured savers holding more than 100,000 euros last summer, following the deposits-for-equity rescue deal.
The nearly 4.8 bln euros reaped from the depositors were frozen or subject to a near 40% write-down, with the resolution authority only allowing 12% to be released last July. The remaining 47.5% were blocked in 6-month, 9-month and 12-month deposits, with the bank allowed to roll-over the term if it so wished or if it feared a bank-run.
In a statement issued on Thursday, the bank said the board “decided the release of the six-month time deposits that were blocked as per the decrees relating to the recapitalisation of the bank in July 2013 and mature on 31 January 2014.”
“Despite the bank’s right for the automatic renewal of these deposits for another six months in accordance with the relevant decree, the board has proceeded with the release of deposits, following consultations with the Ministry of Finance and the Central Bank of Cyprus. The released funds will be subject to the general restrictive measures currently applicable in the Cypriot banking system.”
With bank officials stating recently that the outflow of capital had stabilised, perhaps the management is convinced that its capital base will not be eroded further by the release of the 6-month deposits.
“The bank’s improving liquidity position and the stabilising signs of its deposit base witnessed during the last few months are the decisive reasons for the release of deposits,” it said in the announcement, adding that “the improving trust and confidence” towards the bank should enhance the liquidity in the economy.
The Ministry of Finance and the Central Bank issued a joint statement saying that the move “suggests that the banking system is on a path to recovery and helps strengthen the public and investors’ trust in our banking system.”
New CEO John Hourican has headed a team of senior managers to try and recover as much of the non-performing loans as possible, especially from major corporate clients. The chief executive has expressed confidence recently that the bank would maintain its Core Tier 1 ratio of deposits at “well above” the 9% required by the European Central Bank. In early December, he had said it stood at 10.2-10.4%.
Meanwhile, parliament gave the green light on Monday for the government to issue guarantees worth 2.9 bln euros for bonds expected to be issued by BOCY to draw cash. The bank will use the issue to bolster its precautionary liquidity by freeing assets currently used as collateral to borrow from the Emergency Liquidity Assistance.
Apart from the recovery of loans, he bank has also started selling some of its non-core assets that are not deemed viable by its present leadership.
The subsidiary Bank Kipra PJSC in Ukraine is reportedly up for sale with bids expected at around 200-250 mln euros, while the bigger Uniastrum network in which it controls a 80% stake, will remain with the Group, for the time being, especially after the Russian’s bank’s founder and minority owner George Pyskov met with Hourican and BOCY chairman Christis Hasapis recently to work out their differences.
The bank has already announced that General Insurance of Cyprus, the wholly-owned insurance subsidiary, is to transfer the entirety of its client portfolio in Greece to ERGO General Insurance Company S.A. with which it already cooperates in Greece.
In an announcement, the company said that “the agreement provides for the gradual transfer to ERGO of existing insurance policies which were issued by Kyprou Asfalistiki, the branch of General Insurance of Cyprus in Greece. At the same time, the agreement also encompasses broader cooperation in the non-life insurance sector in Greece.”
ERGO is part of the Munich Re Group with whom General Insurance of Cyprus also collaborates in Cyprus, looking after the interests of their insured in the best way possible.
The company added that “the agreement does not affect the rights of customers who have insurance policies with Kyprou Asfalistiki, which will remain in force until their expiry. Additionally, it offers the best prospects since ERGO, a leading provider of insurance services in Greece, is the most dependable choice to meet the future insurance needs of Bank of Cyprus customers.”
Next under the hammer will probably be the CNP general and life insurance businesses inherited from the dissolved Laiki Popular bank, in which Bank of Cyprus now controls 49.8% with the balance, as well as management, in the hands of the French insurance giant.