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Hellenic hires to bring down NPLs in race against time, Pijls says

By Stelios Orphanides

Hellenic Bank is in a race against time to reduce its high stock of non-performing loans and has increased its staff levels in order accelerate loan restructurings and loan collection, the bank’s top executive said.

“Our absolute worst enemy is time,” Chief Executive Officer Bert Pijls said in an interview. “Every day we lose is a day lost for the customers to focus on their business and a day lost with the bank in terms of reducing the non-performing loan problem. I do think that things are going too slowly and also the machinery of the new legislation, such as the foreclosures, is too slow”.

Bert Pijls April 2015“Even if we went at light-speed I would want to break the law of physics and go faster,” he said. “Nothing hurts us more than time”.

The first foreclosures are scheduled to take place this month based on the modernised foreclosure legislation enacted in August, Pijls said.

The parliament passed the new foreclosure law, which was part of Cyprus’s bailout terms and aims at speeding up procedures that previously took up to 10 years or longer to complete, and encouraged strategic default. In September 2014 opposition lawmakers suspended implementation of the unpopular law four months but later agreed in April 2015 to allow it to enter into force.

“There are a lot of things happening internally that started to show,” the Dutch banker said.

Hellenic Bank saw its non-performing loans drop to €2.5bn in March which is 58.3 per cent of its loan portfolio, from €2.6bn in December or 5.9 per cent. In March, the lender reported a significant drop in its common equity tier 1 ratio to 13.81 per cent from 14.75 per cent at the end of 2015. This was well above the minimum required by the supervisor, reflecting mainly the impact of the classification of risk-weighted assets.

The number of the bank’s employees rose to 1,580 in March from 1,555 in December 2015 and 1,423 at the end of 2014, when Pijls joined Hellenic. Staff costs rose to €20.6m in the first quarter, in which the bank posted a net profit of €0.3m, from €20.4m in the fourth quarter and €19.7m in January to March of 2015. The increase in staff levels comes as Bank of Cyprus, the largest lender in Cyprus, is in the process of further reducing its workforce with a voluntary retirement scheme.

The bank, which last year generated a €13m profit after booking €71m in additional provisions in the fourth quarter, is currently “adequately provisioned,” Hellenic’s chief banker said.

“Managing non-performing loans requires more work than managing a performing loan,” he said. “The hiring of new staff to help reduce non-performing loans was an investment and we got a return”.

While Hellenic’s cost basis – as well as that of competitors – “is too high,” the bank’s ability to reduce it in the short term remains limited given the magnitude and urgency of the non-performing loan problem, he said. “But if the banking sector returns to a normal level of non-performing loans, you can’t maintain the same level of infrastructure”.

Recent data on the economy of Cyprus, which grew last year 1.6 per cent and is expected to expand this year 2.2 per cent, are encouraging news, according to Pijls, as “nothing cures a non-performing loans problem like a bit of economic growth”.

Hellenic’s chief banker said that the bank which wants to gainfully utilise its liquidity is currently seeking opportunities abroad and in particular shipping to expand its business as competition in “overbanked” Cyprus, offers limited opportunities for sustainable organic growth.

“We have shipping clients for almost 40 years and shipping on our books and that’s an area where we want to grow,” Pijls continued. Therefore, “we are investigating now opportunities of obtaining assets where the client is outside Cyprus, and shipping is a good example given that we are the only bank with a dedicated shipping centre in Limassol. We may have shipping companies in Malta or Greece and do the lending in Cyprus”.

The relatively large number of banks operating in retail banking in Cyprus stresses the need for “some consolidation” which will make the sector “sustainable and healthy in the long-term,” said the CEO of Hellenic Bank, which a year ago walked out of takeover talks with the Cyprus subsidiary of Greece’s Bank of Piraeus. He did not specify why. “How, when and who are questions I don’t know”.

While the implementation of structural reforms in the past three years as part of Cyprus’s adjustment programme, which was completed in March allowed the economy to recover on a boost offered by an increase in tourist arrivals as a result of geopolitics, Pijls warned Cypriots not to rest on their laurels or rely on the development of hydrocarbon resources, as energy prices remain low.

“The risk is that we become complacent and believe that these people will continue visiting Cyprus,” he said.” Let’s be honest, many are coming to us because the countries around us are having issues. If those issues disappear many of these people may start visiting again those countries”.

A possible decision by British voters to leave the European Union in the referendum on June 23, will not have “an immediate impact” on tourist arrivals, he said.

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