BoC’s Hourican “annoyed and impatient” with strategic defaulters


By Stelios Orphanides

Bank of Cyprus’s chief executive John Patrick Hourican said that he is beginning to grow impatient with those borrowers who are able to repay their debt but opt not to do so, as the bank, having completed its post crisis shrink-to-strength strategy now wants to grow.

Hourican who was commenting in an interview with the Cyprus News Agency (CNA) on Sunday, said that a minority of borrowers not servicing their loans delay doing so in an attempt to benefit from the property market recovery at a later stage.

“And that does make me impatient and makes me annoyed because we had four years and they should have come to the table and they should be in our offices trying to do a deal with us, not trying to buy more time, not trying sort of time us out in the way the legislation allows it and the courts allow it,” he said, and repeated his latest appeal to Cypriot society not to tolerate strategic defaulters any more. “This country still has a stain on its reputation for the sheer non-payment of loans and the offended parties in the non-payment of loans are the depositors of the bank”.

Bank of Cyprus, the island’s largest lender, pioneered the reduction in non-performing loans by setting up months after the banking and fiscal crisis of 2013 a specialised recovery and restructuring unit. As a result, the lender reduced its non-performing loans stock in June to €9.7bn, or half of its total loan book from over €15bn in September 2014. Moody’s Investors Service said two years ago that it estimates that up to one in five borrowers in Cyprus may be a strategic defaulter taking advantage of the island’s legislation.

The Irish banker who joined the bank in late 2013, months after it completed its recapitalisation by converting almost half of the uninsured customer deposits into equity, said that the lender will need years to organically reduce its remaining non-performing loans stock. After initially successfully completing restructuring agreements with major corporate borrowers and with the economy expanding for the third consecutive year, Hourican acknowledged that the remaining cases of small and medium size enterprises and retail customers are more difficult as four in ten restructured loans re-default.

“The stress in households is still real and still in the system,” he said.

According to the Ministry of Finance’s latest forecast, the Cypriot economy, which exited in 2015 a prolonged recession, is expected to expand 3.6 per cent this year after growing 2.8 per cent last year, helping reduce the unemployment rate from around 11 per cent this year to 9.5 per cent next year.

Still, the lender, which increased in August its accumulated provisions to €4.6bn or 48 per cent of its non-performing loans, is not necessarily considering resorting to the sale of loans to reduce its delinquent loan stock, even as it remains on the table, Hourican added. While it could remove faster bad loans from the bank’s balance sheet, it could not be the right thing for the country and society, he said.

“We posted an additional €500m of our capital against our non-performing loans in order to create the possibility of loan sales because we can protect the bank’s capital more by slowly marching down non-performing loans but that takes a long time,” he said.

“We have to make sure the debt is well serviced, that it is sustainable, that the bank can survive and that there is price taker on the other side,” he remarked. “The sale of non-performing loans is a tool but the sale of non-performing loans is an easy to say word and a very difficult thing to achieve”.

He also said that “ultimately” it was he and the bank’s board of directors who took the decision to increase provisioning levels “because we thought it was the right thing to do given the progress we have made to this date”.

“We posted the additional €500m million in order to create a further option to explore potential trades because they will be more expensive than the natural organic march down and some of that pressure would have come from the European Central Bank no question”.

“It is a decision that I and the Board took because we thought it was the right thing to do given the progress we have made to this date,” he said.

Hourican, known for not mincing his words often and angering Cypriot politicians in the past who expressed fears over the provisions of the law on the sale of loans passed by the parliament less than two years ago as part of Cyprus’s bailout terms, dismissed this type of concerns.

“Words like vulture funds etc are politically convenient tag names that are used by people who don’t want things to change and actually have to grow up a little bit more,” he said adding that the lender will have to take into account in addition to its social responsibility and the mood of the society, the fact that its depositors were bailed in four years ago.

The bank which generated last year a €64m after tax profit compared to a €438m after tax loss the year before, posted in the first six months of the year a €554m loss, largely caused by the increase in provisions, expects to return next year to profitability.

After having sold most of its non-core business abroad, as part of its shrink-to-strength strategy, the bank seeks to exploit opportunities at home as economic growth is consolidating, Hourican said.

Already, Bank of Cyprus, which in January had its stock listed on the London Stock Exchange, extended €1bn in fresh lending last year and another €845m in the first six months of 2017 alone, he said.

“I would expect that trend to continue and our balance sheet to stop shrinking as we head into 2018,” the former Royal Bank of Scotland executive said.

For now, a figure that currently is on the rise in the bank’s balance sheet is its stock in immovable property –a by-product of debt-to-asset swaps–, may continue to rise as Bank of Cyprus will continue on-boarding real estate as part of restructuring agreements, Hourican said.

While their value rose meanwhile to €1.5bn and the bank’s real estate management unit (REMU) which sold assets worth €155m alone in 2016, almost doubled the amount this year, the bank is considering other possibilities to further speed up the reduction of this type of assets, he said.

“We think there are some really smart solutions we can bring, I am not ready to announce them but we are having a look at further accelerating the reduction of real estate exposures,” Hourican said. “I am not in the business of owning real estate. I am accidentally owning real estate because of the bad behaviour of my borrowers”.

The full video of the interview to CNA is available here.


About Author

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

  • Evergreen

    Then do something!!!

    • Bystander

      To be able to ‘do’ in this context, one must have certain authority (apart from responsibility).

      • Evergreen

        His job description contains only some sophisticated consultancy then with NO executive powers? It is a great posting then.No accountability.Just a great salary.

        • cyprus observer

          It’s the “Cypriot Way” that prevents him. Until that changes, nothing will improve on that rock.

      • SuzieQ

        Doesn’t a chief executive have ANY powers? Is he just paying lip service to the problem?

        • Evergreen

          It is astonishing that the Chief Executive has no powers? I believe that BOC is screwed up by her all management .All are share-holders – just talkers and nothing in real action.

        • Mike

          Sadly dearest the CEO and the board have to work within the law, it would be great if they were permitted not to but sadly they do hence the impotence.

          • SuzieQ

            I know you’re right–just wishful thinking on my part!

        • Bystander

          Doubt so. Usually all decisions go through executive board meeting and that’s where all Mr. Hourican’s good intentions are being stopped.

  • Alex

    Try owing me money for this long, see what I do and you get……

    • Mike

      I agree with you Alex but unfortunately our Cypriot laws prohibit any reasonable recouping of outstanding loans.

  • Terryw45

    I’ll try again,
    ‘Just hit ‘primary residences’ and especially ‘guarantors’ and watch what suddenly appears out of the woodwork!’

    • Barry White

      Indeed, there will be hundreds of millions in cash appearing out of the woodwork. Name and shame and move out a few dozens of guarantors and NPL’ers to the hundreds of rental properties sitting idle and their illusion of prosperity and “bigness” will vanish, if they don’t repay.

      Most will repay very quickly.

    • Mike

      Guarantors include politico’s so there is more chance of swimming to the moon than that happening. Soon Guarantors will not be liable for loans thay have guaranteed – at least if some have their way.

  • Pete

    ….. and Alpha bank still refuse to chase the guarantors of the Liasides Loans !!!

  • hornet

    name and shame…. if you have the guts

    • Bilbo Bawbag

      Hourican said. “I am not in the business of owning real estate. I am
      accidentally owning real estate because of the bad behaviour of my
      I think that at least, in part, this refers to Mr Aristodemou and his white Elephant ‘Venus Rock/Secret Valley Golf Course’ which the bank has had to take off him in lieu of loans. Now the bank is stuck with the problem of finding a new investor.
      And IMO if they find an interested party, the authorities will probably do everything in their power to stop them taking over. In another 5-10 years Mr A. will buy it back at half the original debt.

  • xenonx

    Enough of their posturing, take a stand, call their bluff and start auctioning strategic defaulters properties.

  • Costas Apacket

    Time to publish a list of strategic defaulters.

    You know who they are, it is those who are the ones driving around in new Mercedes.

    • Mike

      You probably have no idea how close to the truth that comment is. Driving to the apartment rented out on Airbnb

  • Bystander

    Another day in paradise. I think it is absolutely fantastic – being able not to repay your loans. Where else could that be?
    After all, you take someone’s money for a period of time, but you have to give your money back and forever!

  • Theo Dorotheou

    hmmm just a simple passing thought: has boc paid back what it owes the taxpayers and citizens who were robbed during the crisis.

  • Douglas

    No more fantasy island let’s get real,it’s only fair to the conscientious mortgage payers.

    • The banks will comply kicking and screaming they know it’s all overpriced. They don’t want the properties 😉

      • Mike

        Overpriced by a mile and all held as collateral on loans – disasterous.

    • Mike

      If only. Trouble is some see the inaction as a green light to invest on other property to secure further income – all hidden from officialdom of course. It helps having wives, husbands and children.

  • JS Gost

    Is this the same BoC that lent billions, never claimed a penny back because of their special relationships (driven by corruption), let the debtor company go under whilst the directors took millions and now want to bill the unsuspecting house owners ? Mr Hourican, if you are looking for sympathy just go onto you computer system and look up ‘Golden Land Developers’. YOUR bank has continues to make peoples lives a complete misery for 4 years whilst YOU have been at the helm.

    • Evergreen

      The whole management seems to be comoromised .Just a camoflauge of their own lack of interest in any serious improvement at managerial level when any of them comes out grumbling. This ED should resign as a protest if he is really clean but helpless and is not interested in his fat salary without doing anything.

  • Bubble

    Yes lets take the money from the good guys (depositors) but leave those who are not paying their loans to get away with it. If you can’t afford a loan you don’t deserve one. The property must be re-possessed and people live in affordable accommodation. This is the real world not some kamikazee economy…