Lone Star’s Cyprus pullback might not be the end
The things that attracted Lone Star to Bank of Cyprus are present in banks in Greece and elsewhere in peripheral Europe. If other private equity-like investors take an interest, domestic political blessing could be the key to success.
Lone Star’s decision not to launch a formal offer for Bank of Cyprus, after the bank rejected three earlier unsolicited offers, ends a short but diverting chapter for the Cypriot lender, at least for now. Under Irish takeover rules, unless another acquirer emerges, Lone Star can only come back with an offer after six months.
Yet even if Lone Star does not make another bid, this may not be the end of private equity and strategic interest in Cypriot, Greek and other peripheral eurozone lenders – and it could presage other deals.
In Greece, as in Cyprus, investors suffered huge losses in the last decade and they are worried about a re-run of the 2008 crash and a eurozone crisis because of the Ukraine war.
Today, Greek and Cypriot banks suffer from rock-bottom valuations despite impressive balance-sheet clean-ups and cost cutting; surprisingly robust local economies; little pick up in non-performing loans as a result of the energy crisis so far – and, above all, despite rising profitability in the back of higher eurozone interest rates.
Discount-to-book values of more than 50%, despite all this, may be partly because these banks have restructured – and shrunk – to such an extent that it is hard for them to attract the attention and interest of mainstream international investors.