* AGM calls for “better bank”, satisfy demand *
Josef Ackermann has officially taken charge of Bank of Cyprus, the one time jewel of the island’s economy and now on a path to recovery, with international investors backing his chairmanship after a relatively civil shareholders’ meeting on Thursday.
The former Deutsche Bank CEO, now probably the lowest-paid banking chairman in Europe at 68,000 euros a year, presided over the first board meeting and is expected to get a hands-on feel of the bank, visiting branches and talking to managers and clients over the next few days.
One of his biggest concerns will be how to deal with the stubbornly high rate of non-performing loans (at present more than 50% of its loan book) and the bank’s inability for recovery, as the island’s economy has shrunk by 25% since the Eurogroup of Eurozone finance ministers imposed a forced bail-in on depositors to rescue now-defunct Laiki Bank.
This was conditional to the 10 bln euro bailout from the Troika of international lenders, as a result of which BOCY was burdened with the 9 bln euros of emergency liquidity assistance (ELA) afforded to Laiki, which the current CEO is rapidly trying to pay down and dispose of.
The AGM represented by 46.4% of shareholders, that voted on a set of resolutions, including the election of a ten-man board proposed by billionaire investor Wilbur R. Ross Jr., also heard a number of shareholders express their discontent at the way their deposits were “robbed” by the bail-in plan, an experiment concocted by the Eurogroup and the European Central Bank, which in hindsight has been deemed as being wrong.
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Ross (photo at left), whose group of funds pumped 400 mln euros as part of a 1 bln capital raise in August, is the new vice chairman, together with incumbent deputy Vladimir Strzhalkovskiy.
Arne Berggren, nominated by the European Bank for Reconstruction and Development (EBRD) that injected 120 mln euros was also elected to the board, together with Maxim Goldman, Christodoulos Patsalides and Michalis Spanos as new board members. CEO John Hourican and two senior bank executives, Marios Kalochoritis and Ioannis Zographakis were also up for re-election.
Zacharias Palexas, nominated by the former Laiki Bank depositors (SYKALA), did not win enough positive votes to get a seat on the board and represent the interests of the ‘Legacy Laiki’ depositors, who account for 9.6% of BOCY shares, but under state administration.
Bank of Cyprus and ex-Laiki bondholders staged a protest in front of the bank’s headquarters from 8.30am, that at one stage turned rowdy and nearly disrupted the AGM as Hourican was addressing the shareholders. The crowd later moved down street to the adjacent Central Bank demanding that the government reinstate their deposits and shares.
After last year’s bail-in, where ‘Legacy Laiki’ was handed 18% of BOCY shares, unsecured deposits of over 100,000 euros held by Bank of Cyprus customers saw 47.5% of their savings exchanged for equity at 1 euro per share, with the bank’s old shareholders diluted at a rate of 100-to-1 and accounting for less than 1%. Now, after the dilution of the share capital and the injection of 1 bln euros two months ago, BOCY shares are expected to be re-listed on the Cyprus and Athens stock exchanges, on or about December 19, but at a price of 24c a share, in other words a further 76% reduction of their already-diluted shares.
Other AGM resolutions approved include lowering the number of board members to 7-to-13, approving the consolidated financial statements for 2013, that had been pending due to the takeover of the now-defunct Laiki and the loss of both banks’ Greek operations, as part of the bailout plan and writedown of toxic Greek government bonds.
The agenda also included retaining EY (Ernst & Young) as auditors, maintaining last year’s remuneration level for board members (Chairman EUR 68,000, Vice-Chairman 51,000, non-executive members 13,000 and committee members 2,100-6,300) and a host of special resolutions, such as five board members comprising a quorum, and other decisions to allow for a smoother functioning of the bank.
“I can say with satisfaction that we are delivering to the shareholders and the new board of directors a bank with real and substantial capabilities,” said outgoing chairman Christis Hasapis, who also sent a warning shot about the way the bank will recover mortgaged assets, saying that “foreclosures should be implemented with caution only in the non-viable cases.”
On a positive note, Hasapis said that “the rate of growth of the Cyprus economy will gradually rise to 2% by 2018,” echoing the future prospects sighted by Wilbur Ross, who told the Financial Mirror in an earlier interview that he was investing because of the eventual growth, recently discovered energy resources and privatisation process initiated by the government.
In his statements, CEO Hourican said that “the bank today stands visibly stronger than it did just twelve months ago,” when he took it over in tatters.
“Our balance sheet has deleveraged significantly. The level of non-performance in our book, while still unacceptable, has been stabilised. We will continue to normalise our funding, further repaying ELA and hopefully attracting depositors.”
He said that the bank will complete the share capital increase with a retail offer of up to 100 mln shares.
“One year ago our bank was staring down the barrel of great uncertainty. We suffered the indignity of being the only bank and Eurozone sovereign nation to bail in its depositors and impose capital controls. We lost the confidence of our customers, our investors, our staff and all stakeholders,” he added.
“Although we remain at war with circumstance, today the picture could not be more different. We believe our long-term outlook is bright.”
