Emporiki Bank Group S.A. of Greece announced that it has reached a memorandum of understanding with two Cypriot investors to sell its 75.02% stake in its local subsidiary, Emporiki Bank (Cyprus) Ltd.
The deal, that is subject to regulatory approval, is expected to benefit consumers as well as the overbanked and already saturated market, as it is could bring about a new air of competition in the oligopolistic sector dominated by Bank of Cyprus and Laiki.
Sources close to the deal told the Financial Mirror that Emporiki has set October 1 as the deadline for the two Cypriot investors to secure the regulatory approval, come up with the money and possibly find a new name for the bank.
Emporiki announced that it will sell its controlling stake in its Cyprus subsidiary to investors Hagop Keheyan and Pericles Manglis for an undisclosed amount and become a minority shareholder.
The sale is in line with Group policy to dispose of overseas assets with a low profit margin and after it became obvious that its ambitious target of attaining a 5% share of the Cyprus banking market with a 45 branch network was not feasible.
Banking sector analysts told the Financial Mirror that the two investors may need to raise as much as CYP 15 mln to wrest control of Emporiki Bank (Cyprus) and thereafter inject at least CYP 5 mln in fresh capital.
They need to finalise the necessary documentation by October 1, the date set by existing shareholder and Glory Financial Services Chairman Nasos Ktorides, otherwise he would be allowed to make a bid for the bank.
Ktorides told the Financial Mirror that according to a previous deal reached with Emporiki, Glory has first option to buy the Emporiki S.A. shares in the Cyprus operations of the bank, adding that he waived his right in good faith in order to allow the two Cypriot investors to finalise their plans.
Central Bank sources confirmed that the new bidders had to submit their plans for regulatory approval and secure the necessary paperwork by September by September 30 in order to commence operations as a new entity from October 1.
Emporiki Bank (Cyprus) Ltd.’s market share of deposits and
advances as at May 31, 2005, stood at 0.6% and 1.2%, respectively, operating through 12 branches. A handful of other brand new branches have been ready to operate for some time but have yet to open subject to the outcome of recent talks with Societe Generale for a possible sale, which collapsed after the French group balked at the bank’s high labour costs.
The current shareholders of Emporiki Bank (Cyprus) Ltd. are: Commercial Bank of Greece S.A. (75.02%), Glory Financial Services (9.99%), Efthyvoulos Paraskevaides (9.99%) and Dakis Stelios Ioannou (5%).
Emporiki was first established in Cyprus in 1994 with an initial capital of CYP 10 mln. It last reported net losses of CYP 642,000 for the first half of 2004, for which there are available data.
The Financial Mirror has learned that if the duo of Keheyan and Manglis do not complete their buyout plan by October 1, then a new bidder could step in.
Informed sources also told the Financial Mirror that in most likelihood, Hagop Keheyan, who established the Lombard Bank in 1960 with a group of local investors, later renamed Lombard NatWest, until it was successfully sold to Alpha Bank, will become the new Chairman of the bank, while executive duties will be assumed by Pericles Manglis, a wealthy investor with substantial real estate holdings and other stakes in many companies.
