Bank of Cyprus announced on Friday that it had completed the sale of both its Ukrainian business and stake in the Romanian Banca Transilvania as part of its overseas deleveraging process. Both transactions have been achieved ahead of plan, contributing to a further de-risking of the bank’s balance sheet and enhancement of its liquidity position, the bank said in an announcement.
The sale of the bank’s loss-making operations in Ukraine to the Russian Alfa Group was completed with the sale consideration revised down by 10% from EUR 225 mln to 202.5 mln.
The accounting loss is approximately EUR 153 mln, the bank said, adding that “an amount of EUR 102.5 mln has already been received with the remaining amount of 100 mln due to be received in March 2015. The sale enhances liquidity through the repatriation of funding and has been achieved at a cost of 0.3 percentage points of core tier 1 capital ratio, it said.
In the case of the Romanian Banca Transilvania, the bank sold 9.99% of the total issued share capital for EUR 82 mln achieving a realised gain of 47 mln. The proceeds from the sale will enhance the liquidity of the Group and the transaction will have a positive impact of EUR 55 mln on the core tier 1 capital, with the core tier 1 capital ratio increasing by 0.2 percentage points, the bank announcement said.
In a statement regarding both transactions, Group CEO John Hourican said:
“We are making good progress with the implementation of our restructuring plan and today’s announcement marks an important milestone in our efforts to return Bank of Cyprus to a position of financial strength and stability where it is capable of supporting the recovery of the Cypriot economy.
“I am pleased that both transactions have been completed at a faster pace than anticipated and in particular that we completed the sale of our Ukrainian business at an acceptable price despite the country’s current uncertain economic and political environment.
“Overall, the bank remains on track in the delivery of its broader strategic objectives, supported by a gradual improvement in the economic and operating conditions in Cyprus.”
Earlier this month, that bank had said that “a revised consideration has been offered by the Alfa Group that is viewed positively by the board of directors.”
It is believed that the downward revision was related to the crisis in Ukraine and the higher risk of Russian-owned businesses.
The Bank of Cyprus had announced on January 31 January that “as part of its deleveraging strategy, the bank has reached an agreement to sell its Ukrainian business to ABH Ukraine Limited, a member of the Alfa Group [of Russia].”
The bank had explained at the time that the sale of the Ukrainian arm falls under the Group’s strategy of focusing on core businesses and markets and disposing operations that are considered as non-core. Already, some key properties in Cyprus have been put on the block with the prospect for a quick sale and recovery of capital investments.
Bank officials were in Russia in March to review the operations of the Uniastrum subsidiary, in which it controls a 80% stake, but management had said in earlier comments that it would consider keeping it, if the network started contributing to Group earnings once again.
Bank of Cyprus had bought the controlling stake in Uniastrum for 371 mln euros in 2008, which has since seen its deposits and turnover dwindle, with the deal being raised during last year’s investigation into the collapse of the island’s banking system and amounts paid by both Bank of Cyprus and Laiki Popular for their overseas investments that left them exposed.