(Updates with executive’s comments in seventh paragraph)
By Stelios Orphanides
The state-owned Cyprus Cooperative Bank has said that its delinquent loan portfolio dropped last year by €806m to €6.4bn at the end of 2017 compared to a year before, a decrease of 16 per cent.
The drop in the co-ops’ non-performing loans, which peaked at €7.7bn at the end of 2015, occurred in the second half of 2017 “amid the largest ever merger ever undertaken in Cyprus, overshooting initial supervisory targets,” the lender said in an emailed statement on Wednesday, two days after its partnership with Spain’s Altamira came in effect.
The Cyprus Cooperative Bank, owned more than 99 per cent by the government after the latter recapitalised the lender with almost €1.7bn in 2014 and 2015, outsourced the management of its delinquent loan portfolio, which accounted for 58.8 per cent of its total loans in September, to Altamira Asset Management Cyprus Ltd, a joint venture set up with the Spanish distressed asset recovery specialist.
The cooperation with Altamira aims at the comprehensive resolution of the bank’s delinquent loans issue as part of its ‘Agenda 2022’ –i.e. the co-op’s a complete transformation to a competitive bank–, which will no longer have to rely on non-performing loans to generate revenue, Cyprus’s second largest lender said.
The co-op is currently working on its listing at the Cyprus Stock Exchange as part of its plan to reduce the government’s shareholding to below 25 per cent with successive capital increases after it exhausted all margins for state aid. The first round of capital increase is scheduled for this summer and the bank aims at raising up to €300m in fresh capital.
While working on dealing with its bad loans legacy, the bank continues to work on its future plans which include “a full spectrum of bank services to its customers,” utilising its liquidity exceeding €3bn and its core equity tier 1 capital ratio which exceeds 15 per cent, the bank said.
Yiannos Stavrinides, the head of strategy and communication of the bank, said that the bank is expecting to enter more concrete negotiations with strategic and institutional investors after it posts its full year results, most likely in March. The results together with “a picture about Altamira’s performance,” in the first months of the year will allow the bank to offer more comprehensive information about the bank’s prospects ahead of the capital increase.
The co-op is looking forward to find out more about the price level at which non-performing loans are sold to third parties, Stavrinides said in a telephone interview, a day after Hellenic Bank announced an agreement to sell €145m in non-performing and terminated loans to Norway’s B2Holdings ASA for an undisclosed consideration.
The bank’s chief executive officer Nicholas Hadjiyiannis said on December 19, that the bank was considering also selling loans.