Bank of Cyprus move to secure a premium listing on the London Stock Exchange (LSE) could be considered a turning point for Cyprus` largest lender, the bank`s Finance Director Christakis Patsalides has said.
Three years following the economic meltdown and subsequent bailout, the bank`s decision to pursue an LSE listing represents the culmination of a difficult path to recovery. If successful, Bank of Cyprus will be the first Cypriot financial institution to list in a major stock exchange with vast liquidity and global reach.
“Consider where we were three years ago; the bank was under resolution, we were the only bank to be subject to a bail-in and aiming for a listing on the main market of the London Stock Exchange three years later surely constitutes the culmination of our efforts, a vote of confidence and an acknowledgement that we are on the right track,” Patsalides told the Cyprus News Agency, following the bank`s announcement on Thursday.
As part of the bailout, Bank of Cyprus depositors saw 47.5% of their deposits over €100,000 converted to equity, wiping out €3.9 billion of deposits over night. Bank of Cyprus also absorbed the operations of Laiki Bank, Cyprus` second largest lender, along with its ECB emergency liquidity assistance amounting to €9 billion, which bloated total exposure to ECB emergency funding to €11.4 billion. However, the bank raised €1 billion from foreign investors, it passed the ECB stress test in 2014 and raised its provisions for delinquent loans to 50% without resorting to new capital raise. At the same time it reduced its ELA by €8.1 billion, aiming at repaying it in total by the end of 2017.
“We are not at the end of the road just yet but we are on track for recovery and securing an approval for a listing on the Premium segment and the possibility of a FTSE inclusion will be a great achievement for Cyprus in general since this development, apart from Bank of Cyprus, it will grant credibility to the banking system as a whole,” Patsalides added.
The listing is expected to take place in the second half of 2016, subject to relevant approvals, technical issues and market conditions, the bank announced.
“The primary reason to pursue a London listing is to improve the Bank’s visibility and the share liquidity. We believe this will have many benefits for our shareholders and the economy in the medium term” he said.
Bank of Cyprus market capitalisation currently stands at €1.3 billion.
“We want our share valuation to reflect the bank`s fundamentals and this is not the case in the Cyprus Stock Exchange which is illiquid,” he said.
Patsalides said the presence on the LSE and the consequent access to the FTSE indices would open new avenues for the bank, as these indices have a global reach and are monitored by institutional investors which usually have placements in most shares listed in such indices.
Under the current market capitalisation, Bank of Cyprus is expected to join FTSE250, subject to meeting the eligibility criteria.
Moreover a FTSE inclusion will increase the bank`s profile but is also associated with constant scrutiny and supervision both regarding performance as well as risk taking.
Premium listing entails a broader scope of supervision and compliance as in addition to EU legislation, a participating company should also comply with the UK corporate governance code and with the requirements of the Financial Conduct Authority which in many respects are stricter than the European equivalent requirements.
Achieving a Premium listing adds an additional layer of supervision, Patsalides added, pointing out that apart from the ECB Single Supervisory Mechanism and the Cyprus Securities and Exchange Commission the Bank of Cyprus will also be supervised by the UK Financial Conduct Authority.
“Therefore we will be regulated by one more supervisor and I believe we have everything to gain as a bank and a country from such a supervisor,” he said.
Patsalides said that before joining the London Stock Exchange the bank will terminate its listing in the Athens Stock Exchange, ending a 16-year continuous presence in Greece, since it no longer has any Greek operations.
After joining the London Stock Exchange, the bank`s presence in London capital market will be considered as the primary listing with Cyprus being the secondary one.
HSBC will act as a sponsor, while the London Stock Exchange listing will require shareholders’ approval and court sanctioning. (CNA)