Banks vie for a piece of their market share
The Cooperative Credit Societies, also known by their Greek acronym SPE, are the target of an all-out attack by the island’s commercial banks, eager to grab a piece of their attractive market share in loans and deposits, which the major Coops are likely to resist and go on the counter-offensive.
Recent data reveal that during 2005, the Coops controlled 33.63% of the CYP 587 mln in advances given during the year in Cyprus pounds, while including foreign exchange loans given to residents, their share was still a respectable 29.53% of the CYP 950 mln in total loans. They hold a similar 30% share of total loans amounting to CYP 13.5 bln.
What’s striking to many analysts is how the Coops managed to lift their share of loans by 18% year-on-year, at a time when loan growth amounted to 7% and among the majors only Bank of Cyprus lifted its share. The only other gainer among the commercial banks was Alpha. In foreign currency loans, the banks had the upper hand as BOC commanded a 35.5% share of new loans, Laiki Bank 22.4% and Hellenic Bank 11%.
The banks also fared much better in attracting deposits, forcing the share of the Coops to 24.4% of 2005 deposits, at a time when BOC saw its share climb to 31.8%, Laiki 20.1%, HB 10.8% and Alpha 4.98%.
The banks were also far ahead in their ability to attract deposits in foreign currency, with BOC controlling 48% share, Laiki 27%, HB 15.5%, Alpha 6.4%, while the Coops trailed far behind with only a 0.3% share.
Flexibility
The secret why the Coops have and continue to remain popular with the public is because of their personal service, flexibility and comparatively low pricing.
Any banker will relate the advantage of the Coops to the fact that when a customer is late in loan payments, the Coops are not as strict as the commercial banks.
But bankers say they need to be strict because they are under the supervision of the Central Bank, which since the beginning of January has further tightened the classification of problematic loans to mean any loan overdue for more than three months.
The Coops at the same time have stayed out of the supervision of the Central Bank, allowing them to implement a more competitively priced strategy with reports indicating that some are giving advances at Base plus 1%, while other Coops are paying 4.3% on deposits under CYP 20,000.
Analysts agree, however, that the war for market share will pit the banks against the Coops during 2006, with the next offensive from the banks expected to target the small and medium size enterprises, who in their majority are all banking with the Coops.
