By Stelios Orphanides
The head of the finance ministry’s unit which manages the government’s investment in the Cooperative Central Bank said that the co-op’s chances of repurchasing its share in the bailed out lender are slim.
“Buying back the share capital stake in the hands of the Republic of Cyprus by the cooperative sector appears very difficult,” Dionysios Dionysiou said in a telephone interview on Thursday.
The possibility of a re-acquisition by its original shareholders of the Cooperative Central Bank’s which went over to the government after it injected as part of the 2013 bailout agreement initially €1.5bn in taxpayer’s money before giving an additional capital boost of €175m in late 2015, was included in a clause in the first decree issued by the finance minister. In order to get back their bank, original shareholders, whose stake subsequently shrank to 1 per cent, they would have to use the bank’s profit in excess of a 10 per cent dividend on the government investment.
The Cooperattive Central Bank generated an after tax loss of €122.7m in 2015 compared to an after tax profit of €42.9m in 2014. In January to September last year, the Co-op posted €62.1m in net earnings.
The increase in the Cooperative Central Bank’s non-performing loans stock to over €7.2bn -roughly two fifths of its loan portfolio-, and the subsequent need to increase provisions for loan impairments to address supervisory requirements, will further reduce the bank’s ability to generate funds that will help its old owners regain ownership, Dionysiou said.
“The government can no longer recapitalise the Co-op,” Dionysiou said citing the new European bank resolution framework which provides for losses on shareholders, bondholders and depositors before the state can jump in.
The Cooperative Central Bank is currently preparing its listing on the Cyprus Stock Exchange where it plans to attract private investors through consecutive capital issues that will ultimately reduce the government’s stake to 25 per cent.
Finance minister Harris Georgiades said in December that the government was considering handing over shares of the Cooperative Central Bank to various groups, including Co-op-workers, customers or persons affected by the banking crisis.