Many in the business world would have been surprised by the appointment of Panicos Nicolaou as the new CEO of the Bank of Cyprus, especially after John Hourican’s successful spell. When Hourican announced that he would be leaving his post this year, to take up a job abroad, there was a lot of speculation that the bank would look outside Cyprus for his replacement. It did look abroad but, according to outgoing chairman Josef Ackermann, “after a thorough international search process, Panicos emerged from a strong field as our choice to lead the Group in its next chapter.”
In the end, a Bank of Cyprus insider was chosen. Nicolaou entered the bank in 2001, working as a customer relations officer and rose in the ranks, becoming director of the corporate banking division in June 2016. He has been managing the corporate banking centres, including the international corporate banking centres and the factoring unit. With 2,500 corporate clients under his supervision, he is very well-acquainted with the island’s business sector, which would have weighed heavily in his favour when job candidates were interviewed. There is, however, little doubt that this was a meritocratic appointment, the board ignoring the discredited, union-imposed principle of seniority in making its choice.
Nicolaou’s appointment is still subject to the approval of the ECB, but once this is secured there will be a regime change at the Bank of Cyprus. Apart from a new CEO, Greek banker Takis Arapoglu will replace Ackermann as the new chairman of the board. The ship may have been steadied after the haircut of 2013, with €2.7 billion worth of NPLs scheduled to be sold off by the end of the year, Laiki’s ELA debt settled and a return to profitability – €95 million for the first quarter in 2019 – but the new leadership faces new challenges.
The main target will be to cut high costs that are eating away at the bank’s profitability. Digital banking has already been introduced, but there are still too many branches and over-staffing combined with high wage costs. There are reports the board had already taken the decision to lay off a large number of staff, something that will be resisted by the powerful Etyk union and could require months for an agreement to be reached by the two sides. It will be a messy dispute that will probably turn nasty, but seems unavoidable.
Nicoalou will be working with Hourican for a few months but it will be up to him to stamp his authority if confronted by Etyk, which has been accustomed to calling the shots at the Cypriot banks. This could be his first big test and if he passes it he will have paved the way for a successful stint as CEO.