Hellenic Bank, until recently the third biggest lender in Cyprus, propelled up to second place after the two largest were forced to merge as part of a rescue plan, believes it can recapitalise on its own without any state aid.
Hellenic is expected to meet its 9% Core Tier 1 requirement through a combination of new bond issues and conversion of older ones, raising its capital by 294 mln euros by the end of September. It’s current Core Tier 1 ratio is 8.3% and is considered manageable by senior bank officials.
The bank’s board decided on Thursday to issue new shares to current shareholders to raise 168 mln euros in fresh funds and convert 126 mln euros of bonds to new ones that, if the capitalisation fails to reach the 9% target, will then be converted to full shares.
Chief Financial Officer Antonis Rouvas told a press briefing on Friday that the bank has implemented “a realistic plan to keep the bank as a healthy institution.”
Rouvas said that although deposits were lower following the Eurogroup decision to impose a bail-in on unsecured deposits at peers Bank of Cyprus and Popular Laiki, the net loans-to-deposit ratio at Hellenic was still at a healthy 59%.
“Even if we don’t raise a single cent in fresh funds, we can recapitalise the bank on our own and still meet the capital adequacy ratio.”
The bank’s CFO explained that despite losing its branch network franchise in Greece, as a result of the rescue package of the troubled larger two banks, Hellenic also wrote off its 110 mln euros worth of toxic Greek Government Bonds over the past three years.
“We were innocent bystanders in the whole crisis,” Rouvas said, adding that Hellenic was the only bank to avoid a bail-in imposed by the Troika of international lenders.
“We are a viable bank and will be able to recapitalise without the contribution of our depositors,” he said, adding that the authorised share capital will also be increased and the stock’s nominal price lowered to better reflect the current share price of about 10c traded on the Cyprus Stock Exchange.
Group chief executive Makis Keravnos, who has been critical of both international lenders and the failings of the Cyprus authorities to support the banking system, said that Hellenic Bank has not asked for any funds from the European Liquidity Assistance (ELA) mechanism.
However, CEO Keravnos told the Financial Mirror that depositors and clients want reassurances from the highest authority that the island’s banking system is being restructured and that the economy will begin to recover from the crisis after six years.
“The majority of our customers are satisfied with Cyprus as a financial services centre. It’s just that they have to be told that [the biggest] Bank of Cyprus will exit the resolution state very soon.”
Group Deputy CEO Marios Clerides said that he was not very confident with the “hand grenade” measures imposed by the Troika (EU, ECB, IMF) and that as a ‘viable’ bank, Hellenic would not need to convert all bonds into shares, but rather into a secondary form of capital in order to satisfy adequacy ratios.
He added that unsubstantiated talk by politicians, commentators and parts of the media was causing greater harm to the island’s banking sector and its impending recovery by undermining all efforts for a speedy recovery.
He also said that such rumours were also affecting the Cooperative sector, where nearly a quarter of all deposits are based.
“The cooperatives do not have shareholders, so they will have to raise funds on their own, as they have been saying all along. If they fail, only then will they seek state aid for which there is a provision of an amount from the rescue funds.”
“There is no issue of a haircut on Cooperative deposits,” Clerides said, putting an end to the rumours.
