Cyprus Mail

Hellenic Bank minority shareholders concerned about poor performance

Investors received with concern yesterday’s announcement of a €10.5m after-tax loss in the first quarter by Hellenic Bank and warned that the bank needs to improve the area of governance.

“In terms of efficiency, we have the same situation as we had when the Church was in charge,” said Andreas Leonidou, the top executive of Prochoice Chrimatistiriaki, a Larnaca-based investment firm. “Provisions are raised continuously. It’s strange for an economy rising at a 3 per cent rate to see an increase in provisions”.

“Either they had been withholding information about bad debtors or there is something wrong with the management,” he continued. “There can be no other explanation”.

Hellenic Bank, until four years ago dominated by the Church of Cyprus, is the only Cypriot lender that survived the 2013 banking crisis without resorting to a bail-in or a bailout. It posted last year an after-tax loss of €63.5m. In the first quarter of 2017, it increased its provisions for loan impairment by €27.3m to almost €1.4bn against €916.5m in the respective quarter of 2014, a year after the culmination of the banking crisis.

From January to March this year, the bank’s cost-to-income ratio, an indicator reflecting a lender’s financial soundness, rose to 69.6 per cent compared to 40.7 per cent in the first quarter of 2014.

“Up to 130 new workers have been hired over the past two years without reducing the number of big salary earners,” Leonidou continued, adding that unlike Bank of Cyprus, which offered in recent years three voluntary-exit schemes to reduce its staff levels, Hellenic failed to do so.

The only exception was the scheme of June to September 2013, which allowed the bank to reduce its staff level by 165. It employed at the end of March 1,652 workers compared with 1,403 three years earlier, with staff cost rising to €20.9m in the first quarter of 2017 from €19.7m three years before.

Leonidou said that the bank has hardly increased its customer loans over the past years, even as it attracted more customer deposits, resulting in the bank parking €2bn in excess liquidity at the European Central Bank (ECB) at an annual cost of 0.4 per cent, or €8m.

“These are funds that could have been invested in securities with even zero yield such as German government bonds or those of countries rated AAA,” Leonidou continued, adding that inefficiencies also result in slow response times in opening customer accounts.

“Hellenic Bank still requires guarantors to extend mortgage credit,” he said, adding that the bank remains “stuck to old mentalities”.
“Instead of being the first to launch aggressive mortgage schemes, even Bank of Cyprus, with a 100-per-cent loans-to-deposits ratio, offers better terms,” he said.

Leonidou attributed the blame to Hellenic’s board, dominated by the New York-based hedge fund Third Point and the Nicosia-based entertainment software developer, with 26.2 per cent and 24.9 per cent shareholding, respectively.

“They are promising over the past years to better manage these funds and it looks like they cannot,” he said. “Third Point and Wargaming are demonstrating some kind of indifference and we don’t know the reasons”.

On Wednesday, Hellenic’s chief executive officer Ioannis Matsis, who got the ECB’s approval last month, said that the bank’s management is aware of the challenges lying ahead in reducing its bad loan portfolio, which fell to 57 per cent in the first quarter compared with 58 per cent in the previous quarter.

The bank’s chairwoman Irena Georgiadou announced yesterday her decision to step down and remain member of the board, citing personal reasons.

Related posts

Man attempts to rob kiosk at gunpoint

Annette Chrysostomou

Third man arrested for kidnapping and robbery

Annette Chrysostomou

Coronavirus: 917 inspections, 40 booked

Annette Chrysostomou

80 per cent of rubbish on Cyprus beaches is plastic

Annette Chrysostomou

Paphos parking gets ‘smart’

Bejay Browne

Turkey dispatches Oruc Reis to eastern Med, raises tensions (Updated)

Staff Reporter