Bank of Cyprus, the island’s largest lender, has agreed to sell its UK subsidiary to British retail and property entrepreneurs for EUR 117 mln to help reinforce its Cypriot operation.
The announcement comes 48 hours after parliament pushed through legislation to approve Hellenic's controversial acquisition of the troubled Co-op, but sources said the two issues were unrelated.
“The sale consideration of £103 mln (€117 mln) is subject to customary purchase price adjustments for the period up to completion. The consideration is payable in cash, of which half is deferred over 24 months from completion, without any performance conditions attached,” said BOC in a statement Tuesday.
It said the accounting profit from the sale is estimated at €3 mln.
The sale to Cynergy Capital is expected to be completed by the end of 2018 and is subject to approval by Cyprus and UK regulators.
The bank said the decision to sell its seven UK offices is in line with BOC’s strategy of delivering value for shareholders and focusing principally on supporting the growing Cypriot economy.
Positive step
Group CEO John Patrick Hourican called it another “another positive step in our journey back to strength”.
“The equity realised will be deployed in pursuit of our core activity in Cyprus to continue to support the recovery of the Cypriot economy.”
He said in the view of Brexit the deal would also facilitate a smoother running of the UK operation and faster growth.
“It has become increasingly clear that the UK business will benefit from the greater scale that can be achieved through the support of Cynergy. We expect this change in ownership to drive greater value for customers, colleagues and Group shareholders,” said Hourican.
And the bank assured the UK sale would ensure continuity of servicing for existing customers.
Once the deal is complete, BOC UK is expected to be rebranded “Cynergy Bank”, a name chosen to reflect the bank’s Cypriot heritage, combined with a modern and energetic focus.
BOC UK currently operates a predominantly retail funded franchise through seven locations across the Britain.
Negligible Impact
“On completion, the total value of the sale is expected to have a positive impact of on the Group’s CET1 ratio and on the Group’s Total Capital ratio,” said the bank.
The transaction is expected to have a “negligible impact” on the Group income statement and the organic EPS guidance of €0.40 for the year is maintained.
“Other than a €2 bln reduction in balance sheet size, the Group’s targets for the year and medium-term guidance remain unchanged and continue to exclude any impact from any possible accelerated risk-reduction transactions.”
Nick Fahy, CEO of BOC UK said: “The sale to Cynergy will enable us to focus on growing our franchise across enterprising business owners and savers in the UK, including the underserved property and SME market.”
“We have worked for decades with UK-Cypriot customers and businesses and are immensely proud of our history – we will continue to stay true to this heritage.”
Cynergy director Bal Sohal said there were “significant opportunities” for growth and to better address the needs of small businesses in the UK, including those of the Cypriot community.
“Cynergy’s focus will be on delivering sustainable growth for the UK bank. We plan to support the existing management team to deliver on the strategy it has for the bank and are committed to investing further capital to develop the business in the coming years.”
As at 31 March 2018, BOC UK had gross loans of £1.52 bln (€1.73 bln) accounting for 9% of Group total gross loans, deposits of £1.66 bln (€1.89 bn1) accounting for 11% of Group total deposits and risk weighted assets of £0.8 bn (€1.0 bln).
Cynergy
Cynergy is a consortium of experienced business owners in the UK, focused on the retail and SME sectors.
It is led by a consortium comprising Pradip Dhamecha (OBE), Balbinder (Bal) Sohal, John Coulter and Ann Jones.
In March 2013, Cyprus clinched a 10-billion-euro loan from the European Union and International Monetary Fund to bail out its troubled economy and oversized banking system.
Under the terms of the deal, the government was required to close the island's second-largest bank, Laiki, and impose a 47.5% haircut on deposits above €100,000 at BOC.
The bank has since undergone a major restructuring, which included absorbing the good assets of the former Laiki Bank and selling assets.
It listed on the London Stock Exchange in January to underscore its comeback from the brink.
