Uncertainty forced sale of RCB loan portfolio

The €556 million loan portfolio sale by RCB Bank to Hellenic Bank on Tuesday served to fulfil a dual purpose – bolstering the latter bank’s portfolio with high-quality assets, while at the same time allowing the sanctions-affected RCB to manoeuvre away from a more chaotic path – most analysts have said

At the same time, the somewhat orderly restructuring of RCB Bank also spares the Cypriot banking system from more severe ramifications, which could have threatened to curtail its long but steady recovery from the 2013 financial crisis.

There is an admission, however, that the sale of a big and healthy loan portfolio would not have happened under normal circumstances. It was forced into doing so to strengthen its liquidity, allowing it to both be able to service its current client base, but also to create a buffer in anticipation of an uncertain future.

RCB’s attempt to become a Cypriot-owned bank through the purchase, by Cyprus-registered companies owned by its management who are now Cypriot citizens, of the 46.29 per cent shareholding of the Russian state bank VTB, was not approved by the ECB’s Single Supervisory Mechanism. The sale was announced on February 24, the day Russia invaded Ukraine, in what was widely seen as an attempt to avoid possible sanctions.

The paper has learned that the portfolio sale marks a change in the business model of RCB Bank, which is expected to stop offering banking services and operate as an asset management company.

While the bank’s retail banking services were already somewhat limited, in comparison with the entirety of its operations, there is rampant speculation it may be obliged to abandon it altogether.

Such a change to the bank’s business model could increase the likelihood that the ECB’s SSM approves the pending changes to the bank’s shareholder structure.

A possible rejection by the SSM was brought up by ratings agency S&P, which recently downgraded the bank’s rating.