Bank of Cyprus is to offer up to EUR 1.5 bln in soft loans and simplified loan arrangements as part of its efforts to boost the economy, Group CEO Andreas Eliades said in announcing a package of five measures that will help the real estate/ construction sector, tourism and small to medium sized companies.
The bank will offer loans to first-time buyers at 5% with repayments terms of 45 years. Professionals will be able to borrow at 5.5% to acquire their offices or work facilities. Small to medium sized firms will be eligible to get access to working capital and reschedule their loans if they are experiencing short term slump in activity.
In an effort to help the hoteliers, Bank of Cyprus wants to offer interest-free loans to residents wishing to stay at local hotels. The fifth measure is an active participation by the bank in loan programmes offered by the European Investment Bank, in order to channel the money to businesses that qualify for such loans.
“The package should total about EUR 1.5 bln,” Eliades said.
Strong liquidity
Eliades said Bank of Cyprus will overcome the challenges of the global credit crisis because of its three main pillars, which are strong liquidity, adequate capital and satisfactory profitability.
The Group deposit to loans ratio in 2008 was 90%, which is considered very satisfactory with both operations in Cyprus and Greece as well as Uniastrum in Russia having more deposits than loans.
As at the end of 2008, the bank had EUR 9 bln in liquid funds, which will be strengthened further by EUR 4 bln when it issues securitized loans, having announced its participation in the Greek government’s liquidity support plan.
“The first lot is expected in April 2009,” said Yiannis Kypri, BOC Group Chief General Manager, who insisted that the bank will not require new capital from shareholders to boost its Tier 1 core capital from the current level of 6.5% to 7.3% by the end of 2009.
“We shall achieve the target by counting on the EUR 300-400 mln forecasted profits for 2009 and some technical moves such as placing money with higher credit rated banks, which will reduce our capital requirements,” Kypri told the Financial Mirror.
All profitable
Referring to the profitability of the Group, Eliades said that in the current uncertain environment, Bank of Cyprus, in addition to having strong liquidity and adequate capital, will also report satisfactory profits ranging EUR 300-400 mln for 2009.
“In all seven countries where we are active, we shall report profits,” he said, placing particular emphasis on its Russian operations and Uniastrum Bank, in which BOC took a 80% stake last year.
“Uniastrum is forecast to contribute EUR 25 mln in 2009 profits, on top of EUR 16 mln reported for 2008 of which EUR 5 mln was consolidated by Bank of Cyprus, being the fourth quarter profits following the takeover.”
Eliades said customer deposits with Uniastrum in December increased by 10% after it was announced that the bank is now a member of the Bank of Cyprus Group, dismissing doom and gloom theories and forecasts by analysts who had lowered their targets on the Group because of the takeover and expansion of activities in Russia.
“We know what we are doing, our liquidity is strong, we have no bad investments or exposure to toxic assets and believe me when I tell you that our non-performing loans are at very manageable levels,” Eliades said in further reassuring remarks that the bank’s future is secure and that its prospects are very good despite the extremely difficult market conditions.
