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Hellenic Bank, one of the four Cyprus systemic banks that were subjected to capital stress tests by European banking authorities, is currently considering a fresh rights issue that will help it “more than cover” a €105 mln shortfall seen in the exercise.
Under the three-scenario tests conducted by the European Central Bank and the European Banking Authority, Hellenic Bank passed two of the benchmarks and failed in the third ‘adverse’ scenario with its Common Equity Tier 1 ratio (CET1) at 1.7%, far below the minimum required 5%. This results in a capital requirement of €277 mln.
However, the bank’s board, that drafted its first response to the ECB/EBA asset quality review over the weekend, said that it had raised €100 mln in a post-stress test capital raise in January this year, when New York hedge Fund Third Point, online developer Wargaming.net and local fund Demetra subscribed with fresh capital and subsequently took control of the bank.
It also proceeded with a rights issue, bond conversions of €24 mln and other actions worth a total €71 mln that will help reduce the overall capital shortfall. One of the actions included selling the banking operations in Russia (but maintaining a Moscow rep office) for a gain of €2 mln.
The Financial Mirror learned that the board will continue its meetings over the next few days and will conclude the capital plan that is expected to raise more funds than the reported shortfall.
The bank had declared earlier that it “is already at an advanced stage of raising capital through a rights issue, for an amount which will exceed the Comprehensive Assessment outcome.”
Chairman Irena Georgiadou said in her notes to the 9-month results, also approved by the board over the weekend, that deposits as at September 30 were up 11% year-on-year to €6.13 bln, from €5.51 bln in the same nine-month period last year. And this at a time when the Central Bank of Cyprus announced that September saw the highest deposits outflow from the banking system since July 2013, as total deposits fell by €850.6 mln.
Georgiadou said that pre-tax earnings from operations were up 39% at €119 mln, which allowed for higher provisions of €259 mln, which, however, resulted in pre-tax losses rising 73% to -140 mln or -124.1 mln attributable to shareholders.
Thus, losses per share were improved from -12.1c in 9M2013 to -3.8c in 9M2014.
The shares traded on the Cyprus Stock Exchange at 7.4c on Thursday, hovering the 7-8c range in recent weeks.
