Bank of Cyprus seeks 500 mln short-term state aid

Bank of Cyprus, the island’s largest lender, said it will apply for temporary state capital support of 500 mln euros ($623.6 mln) to meet an end-June deadline to bolster its regulatory capital.
The bank said that it will hike its provisions for its troubled loan portfolios in Greece and Cyprus in the second quarter of 2012, “due to the continued negative environment in these markets.”
Cyprus has already applied for an EU bailout to aid its second-largest lender, Cyprus Popular Bank, which needs 1.8 bln euros in regulatory capital.
Bank of Cyprus said it would aim for the state support to be in the form of non-equity capital. It said earlier requests to the Central Bank of Cyprus for an extension of the deadline to meet capital requirements had not been granted.
The European Banking Authority had estimated Bank of Cyprus capital needs at 1.56 bln euros in late 2011.
The bank said it had raised “a significant part” of the sum through a rights and convertible securities exchange earlier this year, as well as disposal of assets and cost-cutting and was in consultation to sell its life and general insurance divisions, EuroLife and General Insurance Company.
The bank said in an announcement that it did not conclude efforts to sell or seek strategic alliances, with Deutsche Bank reportedly undertaking a due diligence report last month on behalf of an international insurer, ahead of strict Solvency II regulations that would hamper the bank’s capital requirements further.
Local insurer Trust is reportedly keen to take a 80% controlling stake in the insurance divisions, as it only operates in the general insurance sector, but has it own reinsurance business that would allow it to expand into the life business as well.
The bank also said that it remains “healthy with significant pre-provision profits and own capital.”