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* Higher writedown provisions in Greece push losses to 134 mln *
Bank of Cyprus reported increased first-half losses of 134 mln euros on Thursday, hit by a Greek debt writedown and higher provisions for non-performing loans in Cyprus and Greece. The losses were higher than the 107 mln euros reported in the first half of 2011 and far greater than the 114 mln euros expected from a Financial Mirror poll of analysts.
The provisions for loan impairments shot up by 220% to 568 mln euros, from 183 mln in the same period a year ago, and will probably force the island’s biggest lender to seek some 730 mln euros in government aid, far more than the 500m mln bailout need announced in June.
The Cyprus Popular Bank was nationalised with the state taking an 88% stake in the island’s second biggest lender in exchange for a 1.79 bln euro bailout due to its heavy exposure to Greek debt. Popular will announce its first half results later Friday.
Bank of Cyprus said earlier in August it was looking at swapping part of its loan book with a Greek bank operating on the island, probably Alpha Bank, as part of moves to strengthen its capital base and ringfence operations in Greece.
The news could not have come at a worse time for the bank’s new management, recently promoted CEO Yiannis Kypri and new chairman Andreas Artemi who stepped in this week after Theodoros Aristodemou resigned for health reasons.
This follows the departure in summer of CEO Andreas Eliades, as losses in Greece have compounded the bank’s troubles, including a takeover in Russian that is now being scrutinised.
The bank needs to untangle itself from reports of inadequacies in the due diligence report conducted for the takeover of Uniastrum Bank in Russia, while the pressure remains for the removal of high-ranking officials, supposedly for rejecting favourable loan deals to pro-administration corporations and associations.
Following the departure of former CEO Eliades, some reports have been critical of his compensation package, while others have suggested he took out large loans at favourable rates.
Adding to all this, the Bank of Cyprus has to rebuild its reputation and revive the trust of the public after it was revealed earlier in summer that branch managers may have convinced customers to invest in securities that have seen thaeir values nearly wiped out.
The Cyprus Securities and Exchange Commission had said that the public documents for the issue of the securities was legitimate, while the Central Bank of Cyprus announced it had hired professional services firm Alvarez & Marsal to investigate why the two largest banks had to seek state support. However, it said that it could not force the two banks to return the money lost by the investors.
