Hourican to clamp down on strategic defaulters, asks for society’s help (Update-1)

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(Updates with more comment in thirteenth paragraph)

By Stelios Orphanides

Bank of Cyprus’s chief executive officer John Hourican said that the island’s high levels of delinquent loans of roughly half of the banking system’s total loans requires a change in the values of Cypriot society as they pose a fragility for the economy.

“Non-performing loans and general delinquency, albeit reducing, continue to be a blight on the bank and a stain on the country’s image,” the Irish banker told shareholders at the bank’s annual general meeting on Tuesday, hours after the bank posted €554m in net losses caused mainly by increased provisions for loan impairments.

He added that the bank continues to work on “innovative solutions that bring individuals’ and companies’ loan servicing obligations more current and in line with the changing economic and financial circumstances of co-operating borrowers,” Hourican said. “At the same time, we are intensifying our pursuit of strategic and other defaulted borrowers more generally; it remains entirely unacceptable for those who have the means to settle exposures to continue to be in default of their obligations”.

“We would entreat (the Cypriot) society to more universally regard as unacceptable the deliberate default on obligations to repay borrowings,” Hourican said. “We should not forget that it is the depositors of the predecessor banks that are carrying the cost of this behaviour. We must return to a normal expectation that the obligation to repay our debts is a fundamental foundation on which modern and progressive democracy is built.”

Still, the bank has managed to reduce its problematic loan portfolio by 35 per cent, or 5.2bn since December 2014, when the current methodology of classifying non-performing loans came into force, he said. The overall reduction of Bank of Cyprus’s non-performing loans accounts for 83 per cent of the overall reduction of non-performing loans in the banking system and makes up 28 per cent of Cyprus’s economy.

Hourican said that the bank continues to explore ways to speed up the reduction of non-performing loans, including a “potential sell-down of delinquent loans”.

“We will continue to ensure we play our part in protecting vulnerable groups in society but we will be increasingly active in pushing for some non-traditional measures to accelerate non-performing exposure reduction,” he said.

The bank will continue working on premium listing on the London Stock Exchange (LSE) where the bank’s stock is trading since January, the Bank of Cyprus CEO said.

“The listing on the LSE enabled us to fulfil a long-standing commitment to our shareholders. The London listing has increased the visibility of the bank, made it easier for shareholders to trade, and increased the bank’s potential future access to capital”.

This was demonstrated with the sale of half of the stake the defunct Cyprus Popular Bank, also known as Laiki, in May, Hourican said.

He added that that bank, which issued in January a €250m 10-year tier 2 security, is considering further issues.

“During the coming twelve months, we will continue to examine the possibility of incremental capital efficient AT-1 (additional tier 1) or tier 2 issuance,” he said.

Hourican who joined the bank in late 2013 and oversaw its consolidation made a special reference to the increasing effectiveness of the bank’s Real Estate Management Unit (REMU) which manages properties acquired by the bank mainly via loan restructuring agreements and foreclosures.

While in 2016, the REMU sold properties worth €155m, in the first six months of 2017 alone, its sales rose to €184m “at average prices above book value,” Hourican said.

“Sales momentum in the second half of 2017 is increasing with a promising sales pipeline,” he said. “We are also actively exploring a number of innovative ideas to further accelerate the reduction in our real estate exposures”.

Since its inception in early 2016 until June 2017, the REMU on-boarded properties worth €1.3bn and manages properties worth €1.5bn, he said.

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About Author

Stelios Orphanides is a journalist at CyprusBusinessMail.com. To contact Stelios Orphanides: [email protected]

  • I’llbeback

    Didnt he say this 2 years ago?

    • xenonx

      I’m sure he did but he obviously got his knuckles rapped……. or was it a car bomb?

      • Neroli

        Definitely the car bomb! After that I’m suprised he decided to stay on!

        • I’llbeback

          He’s Irish lol!!! From Belfast! He’s probably seen more car bombs growing up than the average person.

      • I’llbeback

        Think the police said it was spontaneous combustion.

  • CyprusNewsReport.Com

    Wasn’t the biggest strategic defaulter Laiki Bank? At what point will the banks take responsibility for causing the financial crash through their lack of risk management, and start putting back the cash they drained from the economy?

    • Pc

      What you are asking is the equivalent of waiting for your dead friend to pay you back.

      • Barry White

        And then there is Godot. He will pay his NPL’s ‘ real soon’.

    • hornet

      this money left the country a long time ago…. when laiki was asking for ELA; it was about 10 billion!!!!
      the late incredible mr vgenopoulos (if indeed late) could have said more

      • Neroli

        Indeed if late!!

        • peemdubya

          Absolutely!!!!

  • Paranam Kid

    Hourican is right that those people need to be reigned in, no doubt about it.

    But what I don’t understand is how we got here in the 1st place. Before extending a loan to someone, the bank is supposed to do a thorough creditworthiness check. But in its greed to rope in as many people as possible to milk them to the maximum, credit was extended to anybody who walked into the BoC with a smile on his/her face & asked for a loan.

    Has the bank been reigned in? Have individuals who were/are responsible or this been held accountable?

    • Neroli

      Yes I agree in part, when Mr Aristocrat was president the bank gave away money to family friends and all who entered ! And all the banks did it Laiki, Co op. But majority of people here just think you don’t have to repay the loans, and why not – don’t forget you didn’t lose your primary dwelling then in a repossession so all the secondary holidays homes were down as daughter/sons primary dwelling. I don’t think they’re doing that much about repos even now!

      • Cydee

        Re your final sentence, I think that is what Mr H. is pointing at.

    • I’llbeback

      Not to anyone. Big loans were only given to members of the club.

      • Neroli

        Don’t forget all the loans for football clubs as well, – clubs of the political parties

    • peemdubya

      “Before extending a loan to someone, the bank is supposed to do a thorough creditworthiness check.” – PK, c’mon, this is Cyprooos, what do you expect????

      • Paranam Kid

        True PMW, but Hourican was put there to, among other things, lift the bank’s practices to European standards. And although he was not in this position prior to the financial crisis, he should hold people accountable & kick the useless ones out.

        But, I must admit, most, if not all the big UK & US banks have not changed their behaviour in essence since the crisis.

        • Neroli

          I think they have! My son applied for a mortgage and they went through their spending with a tooth comb, asking how many times they ate out etc!

          • Paranam Kid

            Ah, that sounds like they (BoC) now really have their act together. Did they also ask him how often he went to Disney park?

          • Neroli

            Noooooo! This was in UK!

          • Paranam Kid

            OK, sorry, but that confirms my earlier comment about banks in the UK.

  • Mist

    Trying to change the mindset of Cypriots? He is having a giggle. Excommunication is the only threat that may work.

  • Eye on Cyprus

    Call in Shacolas as a consultant. He knows how to make a silk purse out of a pig’s anus.

    • Neroli

      Doesn’t he just!

    • peemdubya

      Too busy with his libel case to do any actual work………….lol!!

  • dewdroppings

    How about if the banks stop paying regal salaries to the employees and bank managers not acting like u r stealing their money f u want to withdraw money?

  • Bob Ellis

    Maybe Mr. H should look in his own house and its very murky history before pointing fingers or blaming anyone. BoC lent money to developers to build homes. They built them, sold them, took the money, hid the money, then went bankrupt. The BoC did not, as most banks do in the real world, create contractual obligations for the developers to pay back loans as they sold the collateral. Now the BoC and others are preparing bills for unsuspecting owners to pay off the debts of their now defunct developers. All this while they are secretly repocessing hundreds of properties and selling them for lower than market prices to a very small closed circle. It is very ironic that Mr H is saying society should change as BoC is indicative of Cyprus society ; corrupt, going out of business and blaming everybody else.

    • Neroli

      That was way before his time though!

      • Bob Ellis

        He took the job. He is the one leading the charge to make the victims of his banks history of lies and misselling suffer once again, to make up for the banks ongoing failings; lets not forget he has been there 4 years now. A friend has a house in Polis, built by a developer who is now defunct (who borrowed millions for 7 years and never made a single repayment, nice debt management by BoC). The directors have another business that is once again endbted to BoC in the same way as before and my friends development owes millions to the BoC and the Inland Revenue. BoC have claimed back two unsold properties which were sold without being advertised to people who flaunt how little they paid for it. At this time BoC is preparing invoices to all the owners! Major corporates are up to their necks in debt, still selling properties and not paying back loans. Actively show you are doing something about Mr.H an then maybe you can persecute the real victims a little more.

        • Neroli

          Yes I agree with you and it happened to a friend of mine and 2 banks went after her house because the developer went ‘bust’ – she had paid cash for the house, so had no loans herself

          • Bob Ellis

            So these people have to loose everything before the large corporates are touched or con artist directors are tackled. The old Cyprus game of easy money…….. Really good for our reputation.

  • Attila

    It would help if those who had their deposits stolen in alleged exchange for “shares” were to be actually contacted and provided with the aforementioned shares – as one, I have heard nothing, know nothing, and when I asked at my Branch was in effect told, well you have them, even if you do not know how many.

  • Kevin Ingham

    It ‘s all getting a bit silly now given that the whole country is up to it’s collective eyeballs in debt .

    It’s not just a case of strategic defaulters- lots of ordinary people who are seeing their wages squeezed are under pressure too.

    The government should be setting the standards of course.

    It should have passed a credible insolvency law that allowed the banks to go after the strategic defaulters and it should also be putting it’s own house in order and paying off it’s debts. No one who is struggling to pay their loans is going to do so if they believe a raft of tax hikes to pay back government borrowings are on the horizon

    There has been a lot of talk about the banks recently- they are in a mess, they and the government have not resolved that mess and there is a day of reckoning coming .

    The Bank Of Cyprus had a rather dubious relationship between it’s chairman, the island’s biggest developer and the bank’s biggest? customer -at one stage they were all one and the same person !!!!!!

    If anyone wants to try and fathom out any of BoC’s current financing arrangements you will encounter a tangled web between Wilbur Ross, Viktor Vekselberg and the Trump family that would leave most normal observers a bit curious and conspiracy theorists foaming at the mouth.

    • Bob Ellis

      The whole Wilbur Ross deal is par for the course when it comes to Cyprus business. I’m sure, like most things, people will be paid and the paperork lost; all at the expense of Cyprus and whta is left of its reputation.

  • hornet

    strategic defaulters include the big so called ‘developers’ – one of which even served as president of the bank and some well known big businesses in bed with politicians and contributors to political parties….

    when all these crooks applied for huge loans their political friends made sure the bank did not demand adequate collateral or did not carry out a proper credit assessment…

    • Neroli

      See my comment above

  • This is the public muted down version, i suggest reading between the lines.

  • Bruce

    Hourican’s plea for cultural change has to come from bankers like himself and strategic-debt defaulting and tax-evading politicians. If REMU is doing so well why not seize the property of the former BOC CEO to reflect a change in policies and attitude? And if the laws are not sufficient to do so politicians must change their behavior to bring about legislation to accomplish such seizures.

    • Neroli

      Are you talking of Aristodemou? If so the bank have a lot of the land and the golf club at Secret Valley as assets they didn’t take his house though!

      • peemdubya

        Can’t leave him homeless!!! Of course, he could go and live in one of the numerous empty shells which his company are still throwing up willy-nilly…….

      • desres

        They have loaned him another 20 mill to build a golf course in Kividhes!

        • Neroli

          Well they would do wouldn’t they! He has help from above!

    • dewdroppings

      with the legal procedure seizures take up to 5 years I am told.