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Concerns about bank consolidations

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Concerns about bank consolidations

Theano Thiopoulou

The banking system is in a phase of restructuring and cleaner balance sheets, mainly through the reduction of non-performing loans that took place in 2021 and which is expected to continue in 2022.

The second big bet of the banking administrations is the digital transformation, which became more urgent after the pandemic and is expected to further reduce the operating costs of the banks. Given the developments with the pandemic, for 2022 one can not predict with certainty what will be born with the consolidation of the banking system, especially at a time when regulatory requirements are increasing and cost reduction is sought.

However, the governor of the Central Bank, Konstantinos Herodotou, on December 6, 2021, speaking to the parliamentary Committee on Finance, left open the possibility of further “consolidation” of the banking sector, but without giving further details. Three months earlier, on September 3, 2021, the CEO of Bank of Cyprus, Panikos Nikolaou, had told the Bloomberg news agency that a new round of unification of the Cypriot banking sector could begin on the island. In fact, he had pointed out that the Bank of Cyprus will most likely have a role in any relevant initiative. More recently, in late November, in an interview with Forbes magazine, he said: “I can not know the plans of any other bank, but, in fact, we have long said that the Cypriot banking system is too small to have so many many banks. Especially in such a period, during which the incomes are constantly shrinking, the supervisory requirements increase and with them the relevant costs and the technological development entails large investments, the bank mergers are necessary and necessary, in order to create a more compact and durable banking system”.

However, from the latest banking events of 2021 stands out the approval of the Central Bank for the acquisition of 2.7% of Hellenic Bank of Cyprus by the Greek group Eurobank, which is added to the 9.9% already acquired last July, in a move surprise, which strengthens its presence in the Cypriot economy. Hellenic Bank is the second largest bank in Cyprus, operating in private and corporate banking and international banking, and Eurobank has 12.6% of the share capital. This investment is in line with the Eurobank Group's strategy to further strengthen its presence in all key markets in which it has a strategic interest.

The big event that happened in 2021 but will continue to play an important role in 2022 is the sale of a portfolio of non-performing loans by the Bank of Cyprus, under the name Hellix 3, reducing the index to 8.6% and the next big goal is the index to fall to 5%.

Another sale that will manage to significantly reduce problem loans in the banking system of Cyprus, is the one promoted by Hellenic Bank. Helliniki has at its disposal a portfolio of non-performing loans amounting to € 700 million and together with the portfolio of 700 million, the buyer can, if he wishes, also receive APS Cyprus, the company established by the bank to reduce non-performing loans.

For “Project Starlight”, as Elliniki calls the process for the sale of € 700 million, the bank had stated that the signing of the transaction is expected at the end of 2021 and its completion within 2022. But the sale of problem loans, through Project Sky, Alpha Bank Cyprus is also preparing, as recorded in the group's results, with the € 2 billion having a Cypriot signature. These NPLs are already considered outside the scope of € 4.4 billion that Cyprus has in its banking system, since they are “parked” in previous years in special purpose vehicles (SPV) and are no longer considered within the system.

For 2022, there is also the goal of transforming KEDIPES into a bad bank through the creation of a national asset management company and it will aim, among other things, at decongesting the banks' MED portfolios.

Source: www.philenews.com

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