By Stelios Orphanides
The reduction of delinquent loans is key for the success of the Cyprus Cooperative Bank’s planned capital increase, a Co-op executive said, as it entered preliminary talks with potential strategic and institutional investors.
Announcement of a drastic reduction in non-performing loans in the third quarter — down by €0.5bn to €6.7bn, or 58 per cent of the total, compared to December 2016 — and expected further drop over the next quarters, is likely to help shape a more favourable environment for the second largest Cypriot bank, the Co-op executive said, speaking on condition of anonymity.
In the fourth quarter, the bank is expected to show a further reduction of non-performing loans of less than €400m and a similar pace in the first quarter of 2018, when Spain’s Altamira assumes the management of the bank’s delinquent loans, the source said.
“Over the coming quarters, the bank will need to create a track record and will have to deliver what it promises,” the source added. “As we are approaching the summer of 2018, things are different compared to the uncertainty we were facing four years ago. We have matured, our staff is more experienced, the bank has become bolder in offering solutions to its customers using its provisions for loan impairments to write off debt, while the macroeconomic environment is supportive”.
The deal with Altamira, which provides for the creation of a joint venture controlled by the Spanish specialist, is scheduled to begin on January 1, just weeks ahead of the presidential elections. Opposition politicians reject the bank’s cooperation with the Spanish company over fears it will lead to an increase in foreclosures.
The bank can no longer tap state-aid after it received €1.5bn in the form of capital injection in 2014 and another €175m in 2015.
It is committed to reducing the government’s shareholding of over 99 per cent, to below 25 per cent with successive capital increases after getting listed on the Cyprus Stock Exchange. The first stage of the capital increase is scheduled for the summer of 2018.
The Co-op, which posted a net profit of €7.1m last year and a loss of €63.3m in the first nine months of 2017, appointed US Citi Group as the coordinator of its capital increase and its management is already holding talks with potential investors.
“As time passes, contacts with investors are getting more concrete,” the Co-op source said, adding that the bank will ultimately be in position to attract both institutional and strategic investors from abroad.
More details about the terms of the capital increase will be announced in the first quarter of 2018 and will depend on investor interest.