Cyprus Mail

Staggering array of big business risky loans

BANK of Cyprus’ (BoC) total exposure to risky loans could run in the billions, with developers being among the worst corporate customers, according to an internal bank memo leaked by Politis.

The paper published the purported bank memo in its Sunday edition, showing that a series of loans issued originally in the period 2005-2008 were being refinanced into 2011 and beyond, even though it should have become obvious by then that they had turned toxic.

BoC’s non-performing loans – which according to some estimates may be in the region of €6bn – is the single largest threat faced by the lender. There are fears that the bad loans could deplete the bank’s equity after the lender was recapitalised by seizing customers’ deposits.

According to the leaked BoC memo, up until June 2013 the Dolphin Group – part of the Aristo Group of developers – owed the bank €300m. In 2011 Aristo Group’s liabilities had amounted to €198m, and to just €24.5m in January 2006.

An annotation notes that the bank, “swayed by the climate of prevailing economic euphoria, issued substantial loans for large developments without taking into account the possibility of a recession or at least a stagnation in the market…”

The Leptos Group, the leading property developer, surpassed even Aristo: in the summer of this year its liabilities to BoC came to €510m. In 2011 it owed the bank €235m, and in January 2006, €84m.
On Leptos, the memo notes that “despite the group’s problematic transaction performance [inability to service the interest on the loans], the bank continued to increase its loan exposure with the group without ensuring repayment.”

Meanwhile in 2012 Shacolas Group is shown to owe €336m, which was somewhat decreased after the group sold its stake in telecoms provider MTN earlier this year.

The Tsokkos Group (hotels) had pending loans amounting to €230m.

Politis said the memo was requested by the bank’s new leadership, which has pledged to examine all the risky loans one by one.

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