Country Awards for Excellence 2015: Cyprus
Best bank: Bank of Cyprus
It is no exaggeration to say Bank of Cyprus has staged an extraordinary turnaround during the period of these awards and is this year’s deserved winner of best bank in the country. Just two years after Cyprus’ €10 billion bailout by the EU and the IMF – and the unprecedented bail-in of unsecured depositors – this institution has begun to see net inflows of deposits, and a return to profitability.
A strategy of refocusing on strengths in its core market got off to a good start in April, as it sold its stake in Romania’s Banca Transilvania for €82 million, adding 0.2% to its core tier-1 ratio. Other sales of assets in the UK and Serbia added more props to its capital base. But the truly pivotal moment came in July, when the bank completed a €1 billion capital raising via a private placement of new shares to institutional investors. The deal brought its tier-1 ratio up to 15.1% and made it one of the best-capitalized banks in Europe. The bank says this was the biggest-ever single chunk of foreign direct investment in Cyprus. It included bids from US investor Wilbur Ross (now vice-chairman of Bank of Cyprus’ board of directors) and the European Bank for Reconstruction and Development.
In a second round of capital raising, existing shareholders were offered up to 20% of the total shares at the same price as the private placement, raising €104 million. Subsequently, in October, the institution passed the European Central Bank’s stress test in October.
Bank of Cyprus was able to reduce its reliance on the ECB’s Emergency Liquidity Assistance programme to €7.4 billion by the end of 2014, down from a high of €11.4 billion in April 2014. And in the fourth quarter of 2014, the bank saw its first quarterly increase in deposits in Cyprus since the bailout.
A return to normality continued in 2015 as the lender resumed trading on stock exchanges in Cyprus and Athens, offering retail investors 567,188 shares. The bank has further indicated an after-tax profit in the first quarter of 2015, after achieving a dramatically smaller loss in 2014 compared with 2013.
With the departure of John Hourican (formerly head of investment banking at RBS), Bank of Cyprus loses a chief executive whose contribution sees him named as Euromoney’s banker of the year. But the last year has seen the bank put in a more sustainable position, and after parliament passed new insolvency laws in April making it easier for lenders to realise collateral, the short and longer-term prospects for Cyprus’ banks are much improved.