During the informal gathering of Bank of Cyprus shareholders on Wednesday, the Chairman and the Executive Management team of the island’s largest financial group managed to give a very thorough presentation of the future direction of the group and at the same time put a stamp of authority over how such meetings are conducted.
Out went the chaotic meetings with which BOC had previously become accustomed and in came the new order whereby questions were politely answered but without allowing things to get out of hand.
BOC Chairman Vasilis Rologis passed his first test with flying colours of conducting a shareholders’ meeting through his thorough opening speech and the calm and delicate way with which he answered questions from the floor.
CEO Andreas Eliades, together with his top aides, Charilaos Stavrakis and Yiannis Kypri, also put in a superb performance that sent a powerful message to shareholders that BOC is keen on strengthening its foundations in Cyprus and Greece in order to be able to launch on an ambitious expansion drive abroad into the Balkans and Russia.
Stavrakis explained in detail how the Bank had orchestrated a major turnaround in Cyprus and how the cost cutting drive coupled with the introduction of user-friendly products was scoring a huge success. This was evident from the massive increase in profitability from the local operations, which surged 289% y/y to CYP 27 mln during the first nine months of the year and as BOC lifted its share of loans for the first time in more than a decade.
Kypri then gave a detailed explanation of the results of the Group and its future prospects, paying particular attention to the significant gains that the Group has achieved in boosting its net interest income, despite rate cuts in Cyprus and a highly competitive environment in Greece, while at the same time improving the return on capital.
Eliades then talked about the new vision of the Bank, about the culture change that the 6,000 staff employed by BOC have undergone, adding that in view of the tremendous improvements scored at all levels, the Group has decided to revise its targets for the new 2006-2008 period, with details to be announced in January.
Shareholders happy
The majority of shareholders expressed their satisfaction and admiration with the way the top management team has achieved the spectacular turnaround in results, which has been instrumental in boosting the share price by 70% since the start of the year.
The lone voice of discontent from one shareholder who wanted to revert to the issues that haunted the Group after the stock market crush were quickly answered and dealt with by the Chairman, who managed to convey the message to shareholders to look forward and realise where the island’s most powerful organisation is heading.
Rologis may have been tough on those who wanted to disrupt the meeting, but he showed a lot of consideration to other shareholders who were worried about the high level of provisions for doubtful debts, on how the bank was informing analysts, on the new lending criteria and future expansion drive.
Kypri explained that 45% of total non-performing loans, which currently make up 8.7% of the Group’s loan portfolio, are covered while for the remaining 55%, the Bank has guarantees and mortgages, which however may take up to 10-12 years to recover because of the existing legislation.
With the level of total provisions now hovering at 1.28% of loans, Rologis said the objective is to bring this to 1% in future years. On the matter of recoveries, Stavrakis informed shareholders that some CYP 55 mln of bad loans have been recovered so far this year and more is on the way.
Foreign funds
On analyst meetings, Kypri said the same material and presentation that has been given to shareholders regarding the Group’s results and its future prospects is also given to foreign analysts, some of whom like Deutsche Bank and UBS have issued investor recommendations on the Bank’s stock.
The investor recommendations and active purchases by the foreign funds through the ASE have been instrumental in pushing the Bank’s shares higher.
Rologis revealed that 8% of the Bank’s capital is now being held by foreign institutional funds, adding that in Greece, the percentage of foreign fund holding in Ethniki is 35%, in the case of Alpha 25% and something similar in the case of Eurobank.
On the matter of whether or not foreign funds may issue dubious reports, Stavrakis pointed that its illegal and punishable for a foreign analyst to issue an investment report for personal gain.
The coverage by foreign analysts was described as a welcome development by Eliades who said Management is more than happy to be under the constant watch of foreign analysts, as it enters into a new playing field and starts to compete head on with European banking giants.
Vision
Wrapping up the highly informative and cordial meeting was the vision of Eliades who together with his team have been instrumental in achieving the turnaround and for providing new direction for the Bank.
Eliades stressed that there was always a risk on how a Bank operates, especially so in the case of BOC, which was expanding rapidly in Greece, but he stressed that a special department was accessing the risk and things were under tight control.
The fact that in Greece, BOC manages to make each branch profitable in three years at a time when others also expanding are still in loss goes a lot to say about the mentality with which the group is progressing.
Having strengthened its foundations in Cyprus and Greece, the Group is now ready to take on the new challenge of entering the markets of the Balkans and Russia through organic growth.
