Gold Magazine June - July 2013, Issue 27 | Page 32

HELLENIC BANK

For Cyprus Popular Bank and Bank of Cyprus, which ended up in
resolution and a painful restructuring respectively in March, the
downfall started on 26 October 2011: the date when EU leaders
decided to implement a ‘haircut’ on Greek Government Bonds
(GGBs) which, in turn, led to huge losses to private investors and
banks which had them on their balance sheets as part of their valuable Core Tier-1 Capital. For Hellenic Bank, the then third biggest
lender on the island, the events of 26 October were harsh but, as
has since been proven, not disastrous. Today, the date might justifiably be seen as the one on which Hellenic confirmed the prudence
of its management style over the previous few years.

A

t the end of 2011, a
few months after the
EU leaders’ decision
to impose PSI (Private
Sector Involvement),
Hellenic Bank had in
its possession GGBs
with nominal value of €110 million, classified on its balance sheet as “held to maturity”. Following the finalisation of the terms
of agreement on 21 February 2012, the
Group recognized a total amount of impairment of €77 million which represented
70% of the nominal value of the bonds.
Today the Bank has zero exposure to GGBs,
having sold them in October 2012.
In a fragile banking environment characterised by multiple credit rating downgrades
of the Cypriot Government and its banks,
as well as the continuing crisis in Greece
and the notorious incident at the Evangelos
Florakis Naval Base which plunged the
economy into a deep recession, Hellenic
Bank remained adequately capitalised and

HELLENIC
BANK
TIMELINE

avoided receiving capital state aid of any
kind, or worse, being nationalised.
The infamous PIMCO due diligence
exercise demanded by the Troika, which
diagnosed a capital shortfall for Bank of Cyprus and Cyprus Popular Bank of €5,616
million (base scenario) and €7,795 million
(adverse scenario), was not devastating for
Hellenic. According to PIMCO, Hellenic
Bank had excess capital of €23 million under the base scenario and a shortfall of €333
million under the extreme scenario (without
taking into account capital savings from the
sale of the branch network in Greece).
The harsh Eurogroup decisions of 25
March 2013 affected the whole spectrum of
the Cypriot banking sector and the economy. Consequently, Hellenic Bank does face
a number of challenges, given the unstable
economic environment and capital control
measures imposed as a reaction to the recent
developments, but it remains independent
and is not involved in any resolution or
restructuring measures. Moreover, the bank

is not controlled by the Resolution Authority (i.e. Central Bank of Cyprus), hence
the “privilege” to negotiate the sale of its
branch network in Greece to Piraeus Bank,
as requested by the Troika, on its own. In
the first quarter of 2013, the bank booked
a €10.3 million loss as a consequence of its
discontinued Greek operations. The total
cost to Piraeus Bank for the acquisition of
the Greek operations of Hellenic Bank, Cyprus Popular Bank and Bank of Cyprus was
€524 million.
For Hellenic Bank, what is still pending
is the fulfilment of the Troika’s demand
to satisfy the PIMCO-diagnosed capital
shortfall of €330 million. Under the terms
of the Memorandum of Understanding
(MoU) with the Troika, this must be satisfied by the end of September 2013. Hellenic
Bank says that it is evaluating its options in
order to draw up the most appropriate plan
under the circumstances and in the given
timeframe to ensure compliance with the
required capital requirements. It says some-

1976 The Bank begins operations 1990 • The Insurance Services
with a branch in Nicosia and 33
Department is founded, repreemployees.
senting a number of insurance
companies offering a wide choice
1985 The subsidiary company,
of insurance products. • The first
Hellenic Bank (Finance) Ltd, is
International Business Centre of
founded, providing asset finance. its kind is founded in Limassol.
1986 The subsidiary company,
1991 The network of Automatic
Hellenic Bank (Investments) Ltd,
Teller Machines (ATMs) estabis founded, providing investment
lished, providing a 24-hour service.
services.

30 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

1994 Following the success of
the Limassol International Business Centre, a new centre in Nicosia begins operations.
1996 The Group acquires the
onshore facilities of Barclays Bank
PLC in Cyprus. Recognising the
ongoing evolution of the Internet, the Group launches its own
website.