Popular Bank considers Cyprus state aid

The Cyprus Popular Bank, the island's second largest lender, said it is in talks with the finance ministry and the central bank about state guarantees to raise fresh capital after being battered by the Greek debt writedown.

The bank, that was recently renamed Popular Laiki, needs a 1.8 bln euro ($2.33 bln) cash injection by a mid-year deadline to increase its regulatory capital to 9% to meet European Union requirements. The bank has said it would raise the amount via an equity issue, either through a rights issue to existing shareholders or via a private placement.

The bank said it was discussing the possibility of the Republic of Cyprus underwriting the capital issue, offering incentives for existing and new investors to participate. Earlier rumours had suggested Russia's giant VTB Group would be interested to take a stake, but the reports never materialised.

"It would achieve the maximum possible participation of the private sector and the smallest possible use of state funds," the bank said in a stock exchange filing.
Cyprus Popular held some 3.05 bln euros in Greek government bonds. Their nominal value was written down by 76.4% as a result of the Greek bailout.

The bank said it would issue a new announcement once consultations were finalised and the terms of the issue were approved by relevant authorities.