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After years, the gossip and gossip in the market about the share flirtation of Greek banks with Cypriot banks returns. Flirting that is not new, but counts years ago, with different protagonists and market conditions.
The interest in mergers of Greek and Cypriot banks was cut in 2013 by the troika, in an attempt to cut off any economic connection between Greece and Cyprus, mainly in the banking sector, at the time of its memorandum adjustment. country and the problems that had arisen.
For almost nine years the gossip had stopped and every bank in Greece and Cyprus was trying to strengthen its capital, to clear its balance sheet from problem loans and to strengthen its organic profitability. Now it seems that the conditions have changed, after the big clearing that was done in the bank balance sheets and the share flirting is back but with different banks in the foreground. The necessary changes in the business model of the banks, the shift to green & nbsp; growth and the increase of profitability also mark the new era of the banks. with Bank of Cyprus
The situations compared to 2013 are completely different. Banks have capital and liquidity, they have reduced their troubled loan portfolio, but have recently been hit by the effects of the pandemic due to the special circumstances prevailing in the economy. Now they face another major challenge, that of the Russo-Ukrainian war, and the fear is that the energy crisis and precision will create a new wave of red loans, which will plague their portfolio.
They want revenue < Banks, having largely consolidated their portfolios of non-performing loans, are gradually turning to the faster implementation of their digital transformation and the planning of the next day of the banking system.
What the Cypriot and Greek banks want beyond the digital transformation is the opening to new markets, so that they can expand their income cycle. Revenue is quite difficult to increase if it comes only from the local market, which is why the center of gravity is transferred to the cost reduction. So, in terms of revenue, things are very limited, while in terms of expenses, the policy of the banking administrations usually focuses on staff reductions and closing of stores.
Market players
The protagonists of the Cypriot market are Bank of Cyprus and Hellenic, two banks that control over 55% of the market share in the field of loans and over 60% in deposits. Last week, Greek online media reported that Bank of Cyprus was discussing a merger with the National Bank of Greece. Something that was denied the same day on the Athens Stock Exchange by the National Bank. The article even talked about advanced negotiations and that there are few points left to be clarified, while the name of the “strategic investor” was said to be a “seven-sealed secret”. The refutation put an end to this banking scenario. The Managing Director of Bank of Cyprus Panikos Nikolaou, in the presentation of the results of the first quarter of 2022, last Thursday, stated that he does not comment on rumors, especially when the National Bank officially denied the acquisition scenario and therefore the issue is over.
< p> Interest from & nbsp; Eurobank
The interest, however, is in the second largest bank in Cyprus, in Elliniki, and for whether there will be a common future with Eurobank. Because, apart from the market whispers, which maintain the issue, there are also tangible developments, as the Greek group is a shareholder in Elliniki.
Last July, Eurobank announced that it had entered into a share purchase agreement with the Third Point Hellenic Recovery Fund, for the acquisition of an additional 2.7% stake, with a stake of 12.6%. In the announcement, the Greek group had stated, a year ago, that “Hellenic Bank is the second largest bank in Cyprus, which operates in private and corporate banking and international banking. This investment is in line with the Eurobank Group's strategy to further strengthen its presence in all key markets in which it maintains strategic interest. Having a very good knowledge of the domestic market, through its 100% subsidiary Eurobank Cyprus and taking into account the positive prospects of the Cypriot economy, Eurobank believes that Hellenic Bank, with its management, capital structure and loyal customer base, is in advantageous position, to take advantage of existing prospects and seize future opportunities. In this context, Eurobank looks forward to working closely with the other shareholders and the Board of Directors of Hellenic Bank and is committed to contributing positively and constructively in this direction. “
Despite the fact that the percentage of Eurobank has not increased for a year, the climate of interest is maintained by the Greek media, but also by the banking wells in Greece and Cyprus, which are seeing developments. One and a half months ago it was written that the management of Eurobank was in advanced discussions with Wargaming, the second largest shareholder of Elliniki, with a percentage of 20.2%, who wants to withdraw from the banking investment. A reputation that is maintained over time without any denials or confirmations from either side. Bank wells believe that Wargaming wants to leave the investment, but the issue is the price that will sell the shares. If Eurobank acquired 20.2% of Wargaming, it would have control of 32.8% of Hellenic Bank and would be essentially the main strategic investor. However, according to the law, if the percentage exceeds 30%, it will have to submit a public offer to all shareholders.
Bank sizes and shareholders
< Cypriot banks are very small compared to Greek ones. The capitalization of Bank of Cyprus (prices Wednesday, May 18) on the CSE was € 450.66 million, the number of shares was 446,199,933 and the closing price was € 1.01.
The market value of Elliniki & nbsp; is € 309.60 million, the number of shares € 412,805,230 and the closing price € 0.75.
The market value of Ethniki ATHEX is € 3.03 billion, the number of shares 914.715.153 and the closing price € 3.35.
The capitalization of Eurobank on the ATHEX is € 3.36 billion, the number of shares 3.709.161.852 and the price on the ATHEX € 0.91.
The largest shareholder of Eurobank is the Financial Stability Fund (FSF) with 51.23%, Fairfax Financial Holding Limited with 33%, Capital Group Companies (CGC) with 5.06%, the other institutional domestic investors with 3 , 21%, other foreign institutional investors with 1.4% and non-institutional investors (other legal entities and private investors) & nbsp; with 6.1%.
At the National Bank of Greece, the Financial Stability Fund holds 40.39% of the Bank & nbsp; equity. 45.14% is distributed to institutional and private investors abroad and 7.81% to private domestic investors. 6.14% are owned by private individuals, legal entities and other institutional investors and 0.52% by domestic pension funds and other shareholders.
Supervisors are in favor of the mergers
Since 2020, when the COVID 19 pandemic started and European banks began to face difficulties, the Head of the European Supervisory Mechanism (SSM) of the ECB, Andrea Enria, was in favor of cross-border acquisitions and mergers without any political obstacles. In December 2021, the Governor of the Central Bank, Konstantinos Herodotou, also referred to banking mergers, describing an environment of challenges that favors mergers in the domestic banking sector. Both Mr. Enria and Mr. Herodotus made statements about banking mergers before the Russo-Ukrainian war broke out and the challenges of the banking sector increased. At the beginning of 2021, the European Central Bank, wanting to facilitate bank mergers, proposed a supervisory approach that does not impose higher capital requirements.
