By Stelios Orphanides
BANK of Cyprus (BoC) is ‘still at war with circumstance’, its Chief Executive Officer (CEO) John Hourican said yesterday as shareholders elected a new board and disgruntled protesters scuffled with police outside the bank’s headquarters in Nicosia.
Inside, shareholders elected former Deutsche Bank chairman Josef Ackermann, US billionaire Wilbur Ross, Marios Kalochoritis, Vladimir Strzhalkovskiy, Ioannis Zographakis, Arne Berggren, Maksim Goldman, Christodoulos Patsalides, Michalis Spanos and Hourican in to the lender’s new board.
After the shareholders meeting, the new board met and handed the top chair to Ackermann, as proposed by Ross when he first put forward the names for election a month ago. Wilbur Ross and Strzhalkovskiy will be the new co-deputy chairmen of the board.
Outgoing chairman Christis Hassapis, referring to the proposal that Ackermann take the chairmanship said “it constitutes an important step in the efforts to successfully deal with the challenges the bank faces and its capability to continue to play its traditional role in funding the real economy as the country’s largest bank”.
Taking into account the state the bank was in when the current leadership took over and where it was today, Hassapis added: “I feel great satisfaction with what has been achieved”.
“We are handing over to the shareholders, the new board of directors, a bank with concrete capabilities”, he added.
During the meeting, Hourican told shareholders the lender was still “at war with circumstance,” as its ratio of non-performing loans (NPLs) remains “still unacceptable” even after it stabilised.
He said the lender, which last week revealed its plans to re-list on the Cyprus Stock Exchange and the Athens Exchange by the end of the year, “will continue to delicate extraordinary effort to tackling the very high level of arrears and non-performing loans.”
The bank saw its NPL ratio rise to 58 per cent by the end of June compared to 55 per cent in March and 53 per cent last December. Last year, Bank of Cyprus posted after tax losses of less than €2.1bn, compared to €2.2bn in losses the year before.
Bank of Cyprus has made good progress in its “shrink to strength strategy” after selling operations abroad, Hourican said, and added that the lender saw its balance sheet “significantly” deleveraged. “Poorly deployed overseas capital and liquidity” was repatriated and helped reduce the outstanding amount of emergency liquidity assistance from the European Central Bank by almost €4bn from its highest point, he added.
After the bank raised €1bn “from sophisticated international investors to significantly strengthen” its capital base and successfully completed the ECB asset quality review less than a month ago, several challenges remain on the agenda, including adopting “international best practices in risk management and corporate governance” to help regenerate the Cypriot economy, the CEO said.
“We will complete our overseas disposal programme, repatriating capital and liquidity to serve our core Cyprus operations; we will continue to normalise our fund, increasingly accessing wholesale markets, further repaying ELA and hopefully attracting investors to our bank,” Hourican added.
From the ‘big three’ Ackermann, Ross and Strzhalkovskiy, the former is the ex chairman of the management board and the group executive committee at Deutsche Bank. Prior to that, Ackermann was president of Schweizerische Kreditanstalt (SKA), today’s Credit Suisse and has held numerous board positions.
Ross is Chairman of WL Ross & Co. LLC, one of the world’s best known corporate revitalising firms. Over the past 40 years, Ross has personally helped turn around banks and other businesses, including the Bank of Ireland, Virgin Money, Kansai Sawayaka Bank in Japan, Bank United in Florida (which ranks as the largest ever US bank IPO), as well as banks in New Jersey, the US Midwest and the US Pacific Northwest. Most recently, his firm invested in Eurobank in Greece and organised an €500+ million investment in the Bank of Cyprus. Previously, Ross sold his steel company to ArcelorMittal, of which he remains a director.
Strzhalkovskiy was already serving as vice chairman of the board of Bank of Cyprus. He has held the position of Deputy Minister of the Ministry of Economic Development of the Russian Federation, Chairman of the executive board of the World Tourism Organisation and head of the Federal Agency Tourism Organisation among other high-profile positions.
It is “great that politicians will not have as much influence in the biggest bank of the country as they did before and that supervision will be taking place from the ECB,” Alexander Michaelides, who heads the department of finance at the Imperial College in London, said in an email interview.
“If politicians and independent officials up their game and learn something from the crisis that action is less costly than inaction and that they must be perceived, as well as be, without any conflicts of interest, then that would be even better news for the country,” Michaelides said.
He added that the presence of Ackermann, Ross and the EBRD in the bank is a “great positive signal that people with calibre have been convinced to participate”.
By Stelios Orphanides