Marfin Popula Bank moving base from Cyrpus to Greece

Marfin Popular Bank will be transferring its headquarters from Cyprus to Greece, due to the “conservative” legislative framework in Cyprus, its Executive Vice President Andreas Vgenopoulos said Tuesday.
“The board has taken the painful decision to start the process of transferring the base from Cyprus to Greece, a process that will be completed after four months,” he said.
Vgenopoulos explained that the reason for the move was that the regulatory and monitoring framework in Cyprus was not in line with the aims of the Group to become one of the largest banks in the Balkans.
“The regulations in Cyprus do not allow for a financial organisation such as Marfin to proceed with a dynamic expansion drive in other markets,” he said.
Vgenopoulos acknowledged that the shift will have tax implications of up to EUR 30 mln a year as the tax rate in Greece is 35% compared to a more favourable 10% in Cyprus, but he said this would be balanced by the release of up to EUR 3 bln in capital following different interpretation of the takeover rules in Greece, which takes into consideration the goodwill consideration whereas in Cyprus the whole amount is deducted from the capital by the authorities here.
“The mechanisms and attitudes existing are not appropriate for a financial centre,” Vgenopoulos added.
He furthermore added that he had no problems with Governor of the Central Bank of Cyprus Athanasios Orphanides, stressing that Cyprus would remain the focus of his interest and that he would be assuming the presidency of Marfin Popular Bank Cyprus.
Past press reports had suggested a rift between Vgenopoulos and Orphanides over the Governor’s decision not to allow Marfin Popular’s largest shareholder to increase its direct controlling stake in the bank to 30%.
The valuations of the merger will be based on the first half accounts to be prepared at the end of June with Vgenopoulos telling the Financial Mirror that since Marfin Egnatia (MEB) is a 97% subsidiary of MPB, “it does not make a difference for the shareholders at what exact level the changes are made.”
The proposed merger of the two banks through the absorption of MPB by MEB with the valuations based on June 30, 2009 results, which needs two-thirds shareholder approval when it is presented during an EGM, aims to:
1) improve the Group’s strategic flexibility in view of its strategic plan to expand in both Greece and the broader SEE region;
2) strengthen the Group’s capital base, corresponding to 82 bps improvement on the Group’s total capital ratio from 11.3% to approximately 12%; and,
3) benefit from the provision of the Greek Law to carry out share buyback programmes.
In addition, the merger will enable the Group’s major shareholders to execute unrestricted transactions on the bank’s stock, as opposed by the restrictions of the closed period according to Cyprus law.
According to the bank’s management, the proposed merger is expected to strengthen the Group’s medium-term profitability due to the enhancement of it’s capital base which will improve the bank’s lending capacity. The current market caps of the company and Marfin Egantia Bank total EUR 1.8 bln and EUR 667 mln, respectively. As a result of the merger, higher revenues will offset the potential higher effective tax rate in the company’s tax status.
Upon completion of the merger, the company will seek to establish a Cyprus-based banking subsidiary for the new operations on the island under the supervision of the Central Bank of Cyprus.
“There will be absolutely no change. Its business as usual with the only difference that we shall be operating through a more flexible environment,” said Vgenopoulos.
For the average shareholder, Vgenopoulos admitted that there could be a 8% withholding tax on the traditional classic dividends when these are declared, which would be overcome through constructive dividends and as profits would increase once the extra EUR 3 bln in released capital is put to use, either to acquire other banks or be given out as loans.