By Elias Hazou
BANK OF Cyprus (BoC) is expected to open the book for offers on new shares by the end of this week or on Monday at the latest, as the island’s largest lender seeks to raise around €1bn ahead of an EU-wide stress test.
The process of the capital increase is currently in its first, exploratory phase, with interested investors seeking details and obtaining answers from BoC.
The opening of the book – where investors submit binding offers – is expected on Friday or Monday, industry sources said. That process will last a few hours.
Through the capital increase the bank aims to raise its core tier 1 capital – a measure of a bank’s capital adequacy – from 10.6 per cent to just under 15 per cent.
The scheme allows existing shareholders to participate in three phases. The capital increase is expected to be approved by an extraordinary general meeting of shareholders in August.
The subscription price for the shares will be the same at all phases and for both new investors and existing shareholders.
Present shareholders, including a mix of major local and Russian depositors who represent 80 per cent and the pre-bail-in shareholders whose stake has been diluted to just 0.5 per cent, will be able to take part in up to 20 per cent of the new capital increase.
BoC as well as other local banks are under pressure to beef up their core tier 1 ratio as they try to deal with rising levels of non-performing loans, often reaching 45 to 50 per cent of portfolios.
Local lenders are finding it hard to recover delinquent loans amid an austerity-hit and credit-starved economy, where unemployment stands at close to 20 per cent.
The EU-wide stress tests of 128 systemic banks within the eurozone will be announced in October.
BoC launched an investors’ ‘road show’ for the new shares issue two weeks ago. HSBC and Credit Suisse have been advising the bank on its recapitalisation plans and will also be arranging the sale of new shares between July 18 and 28. Joining them will be Deutsche Bank and VTB Capital.