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FINANCE: Foreign capital invested in Cyprus banks takes a battering

02 January, 2019

Foreign investors who put money in Cyprus banks have got little in return, with some seeing the value of their initial investment more than halved.


Despite a promising upturn predicted for Cyprus banks, hedge funds and foreign investors have lost up to 70% of their initial investment.

Hellenic Bank investors have seen the value of shares acquired in recent years shrink by 60% -70%, despite an increase of 21% in 2018, partially due to the acquisition of the good asset portfolio of the Cyprus Co-op Bank.

Namely, Wargaming, Third Point, Demetra Investments and the EBRD have invested some EUR 150 mln in Hellenic recently

The current shareholders of HB will have the opportunity to cut their losses by participating in the capital increase of another EUR 150 mln by the end of March.

New shares are expected to be issued at a discounted price of EUR 0.70, against the current value of EUR 0.75.

However, they will suffer a reduction in their share percentage due to the participation of new shareholders and the allocation of part of their first-choice rights.

Bank of Cyprus on the other hand has seen its share devalue by 37% compared to last year with foreign shareholders losing more or less the same as Hellenic investors.

Major shareholders of Bank of Cyprus Lamesa Holdings, TD Asset Management, EBRD, Renova Group and Bolerstone Trading invested EUR 508 mln during the bank's recapitalization process in 2014 (total issue of EUR 1 bln).

The average value of their investments is down 66% according to news website Stockwatch.

While Lamesa Holding have reinvested in BoC in 2015 and 2016 to cut losses, the rest of the bank’s major stakeholders did not reinvest after 2014.

Some of them, however, are expected to cut their losses with their participation in bonds issued in 2017 and 2018 with high yield rates.

BoC’ latest bond issue of EUR 220 mln carries an interest rate of 12.5%, the highest issued by a European Bank.

Despite challenges posed by Brexit and a general downward trend in European banks’ equity value, local banks anticipate that with the reduction of their NPLs portfolio, and efforts to sell off assets acquired through repossessions or debt restructuring their profitability will increase.