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Bank of Cyprus lowers ELA, rids of loans in Serbia

22 May, 2014

The Bank of Cyprus (BOCY) has lowered its dependence on the Emergency Liquidity Assistance (ELA) by €100 mln in April to €9.4 bln, according to data published by the Central Bank of Cyprus.


This was the second highest reduction of ELA funding from European Central Bank’s pool of bailout money for banks, ever since the island’s biggest lender was forced to take over the defunct Popular Laiki Bank in March last year, burdened with an additional €9 bln at the time.
The bank’s new management that came in last October, headed by former RBS executive John Hourican, after a €4 bln bail-in by unsecured depositors that changed the ownership structure, has been trying to lower costs and sell off assets in order to control the record rate of non-performing loans that has reached a worrying 50% of its loan portfolio.
After several waves of voluntary redundancy programmes, slashing its branch network by half and lowering its exposure to risky investments, the Bank of Cyprus lowered some €224 mln from its dependence on ELA funding last December.
On the other hand, the dependence of the Cypriot banking system on open market operations (Eurosystem) in April was €1.4 bln, the same level as in March.
The dependence of Cypriot banks on ELA had peaked at €11.4 bln in March last year when the Eurogroup of Eurozone finance ministers experimented with the bail-in programme as part of a €10 bln bailout for the bankrupt Cyprus government from the Troika of international lenders – ECB, EU and IMF.
The Bank of Cyprus has been reducing its overseas risk by selling banking and insurance operations from its former eastern European network, with the latest being the timely offloading of a subsidiary bank in Ukraine, just as the Crimea crisis blew up.
On Thursday, the bank said it had sold its loan portfolio held by the Serbian real estate management company Robne Kuce Beograd to Piraeus Bank S.A. of Greece, the same bank that took over the Greek banking operations of all three Cypriot banks (BOCY, Popular Laiki and Hellenic) last summer in a controversial deal concocted by the central banks of Cyprus and Greece.
In an announcement, BOCY said that the sale consideration for the Serbian loan deal “amounts to €165 mln which has enhanced the bank’s liquidity position. The realised accounting gain from the transaction is €27 mln and there is a positive impact of €46 mln or 0.2 percentage points on the Group’s core tier 1 capital ratio due to the realised gain recorded and the reduction of risk weighted assets.”

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