(Adds more comment by a bank source in 13th paragraph and additional background)
By Stelios Orphanides
Bank of Cyprus chief executive officer John Hourican has submitted his resignation, citing personal reasons, the bank said today. He has given four months’ notice to give the bank time to find a replacement.
“The board of directors of Bank of Cyprus Public Company Ltd announces that the group chief executive officer, John Patrick Hourican, has submitted his notice of resignation, effective in four months,” Bank of Cyprus said in statement. As per his employment contract, Hourican has a contractual notice period of four months but he remains at the disposal of the board of directors. Hourican’s decision to leave the group is a personal one and he intends to relocate to his home country, Ireland”.
Hourican joined the bank in October 2013, seven months after Cyprus’s banking crisis and chaotic bailout. He worked at the Royal Bank of Scotland until February 2013. He played a key role in Bank of Cyprus’s €1bn capital issue last August which attracted US investor Wilbur Ross. Hourican also oversaw the relisting of the bank at the Cyprus Stock Exchange and Athens Exchange in December. Its share had been suspended in March 2013.
Hourican is also considered responsible for arranging the appointment of former Deutsche Bank boss Josef Ackermann as chairman of the bank.
The board “will discuss in due course issues arising from the resignation,” including his succession, the bank statement said. “The Bank’s strategy will continue to be implemented by the management team, under the guidance of the board of directors”.
In a separate statement, Bank of Cyprus said that Hourican’s decision to step down from his position has to do with his intention “to spend more time with his young family” and not “to take up another role elsewhere.”
“I have been very proud to be part of the Bank of Cyprus family during this period and to have led this chapter in the bank’s rehabilitation,” Hourican said in a statement. “It has been an honour to work with so many talented people and to play my part in laying the foundations for a better bank to serve the Cypriot economy into the future”.
Ackermann expressed his thanks to Hourican as well as his “appreciation for the remarkable progress achieved” under his leadership.
“He leaves behind a strong management team and a bank in a steadily improving financial shape, with restored employee, investor and customer confidence,” Ackermann said. “We wish him all the best in his future endeavours and we are looking forward to continuing to work with him in the months ahead.”
The lender said that “on his departure from the bank, Hourican will have spent nearly two years in Cyprus and led the Bank during an extraordinarily difficult chapter in its history. Today the bank is much better positioned to serve its customers, to offer opportunity to its employees and to create returns for its shareholders”.
Under the terms of Cyprus’s bailout, Bank of Cyprus merged with the failed lender Cyprus Popular Bank, also known as Laiki. Depositors at Bank of Cyprus saw almost half of their uninsured deposits turned into equity while those at Laiki lost all their deposits in excess of €100,000.
The lender’s share at the Cyprus Stock Exchange opened at €0.213 by 12:32 it fell to €0.208, 2.8 per cent compared with yesterday’s closing.
According to a person familiar with the situation who spoke to the Cyprus Business Mail on condition of anonymity, the lender is expected to go “head-hunting” in search for a replacement for the Irishman.
Under Hourican, the bank, which last year saw its non-performing loan ratio rise to 60 per cent of its overall loan portfolio and posted a €261m after tax loss, followed a “shrink to strength strategy,” which included the divestment of its non-core business abroad. These include its operations in Ukraine, its stake in Banca Transilvania, loans in Serbia, and the majority of Laiki’s loan portfolio in the UK. The disposal of its Russian unit Uniastrum Bank, a top priority of the bank, is still pending.
The lender managed to repay to the European Central Bank more than €2.5bn in emergency liquidity it inherited from Laiki.
The Irish banker did not fear controversy and with his no-nonsense approach he sought to tackle the lender’s non-performing loans by pressuring major Cypriot developers not servicing their loans to sell assets to pay their dues. He did not hesitate to clash with Ackermann’s predecessor, Christis Hassapis, over the bank’s strategy.
In February, Hourican drew fire from opposition parties over comments he made in an internal email that was leaked. In the email he criticised politicians for the “bemusing politicisation of the insolvency law”. Days later, a car owned by the bank and used by the Hourcan family, was destroyed by fire. Police suspected an arson attack. Holders of capital securities who saw their investment wiped out in March 2013 were angry with Hourican’s decision not to compensate them for their losses. They organised demonstrations outside the BoC headquarters on several occasions, which sometimes turned violent.
“Hourican couldn’t care less about criticism,” the source said and acknowledged that the timing of the decision — days after the parliament passed the insolvency legislation and ended the suspension of the foreclosures law, which practically allows Cyprus’s economic reform programme to continue– “was very bad”.
The funding from the ECB in the form of emergency liquidity assistance “has been dramatically reduced, and, importantly, €1bn of fresh equity has been raised to ensure that the bank is well capitalized amongst its European peers,” the lender said. “These initiatives will continue under the strong management team in place under the guidance of the new board of directors for the benefit of the bank’s depositors and borrowers and of the Cypriot economy in general”.