Astrobank announced this week that it is opening a new branch in the Dali area in Nicosia, bucking the trend of shrinking branch networks, noting that this is an underserved location with no existing banking facilities.

This decision was announced by Astrobnak CEO Aristides Vourakis, who noted that if this decision proves to be successful, the bank will consider expanding to other selected areas.

During a meeting with journalists, Vourakis also revealed that the bank will seek regulatory approval from the Central Bank of Cyprus (CBC) to distribute dividends.

He also stated that by July, the ratio of non-performing loans (NPLs) compared to total loans is expected to reach single digits, a significant achievement for the bank.

Vourakis highlighted that following the 2023 results, the bank is in a robust position, not only due to the high-interest-rate environment but also because of improvements in its balance sheet metrics.

As of December 2023, Astrobank boasts a capital adequacy ratio of 23.7%, one of the highest in Cyprus, and has already met the Minimum Requirements for Own Funds and Eligible Liabilities (MREL) a year ahead of schedule.

Looking ahead to 2024, Vourakis expressed optimism, predicting an equally good or better year, partly because the bank will not incur the unique expenses of 2023.

The previous year’s expenses included €7 million for a voluntary retirement scheme and €0.9 million in amortisation costs from the acquisition of the NPL management company Quant.

Regarding the new branch in Dali, Vourakis said that a survey of Cyprus identified certain areas as lacking in banking services, such as the Kokkinochoria region, excluding Ayia Napa.

“The first branch is a pilot,” he said, adding that if the Dali branch, set to open in June, performs well, they may evaluate expanding to these areas by year-end.

He noted that the cost of a branch “is not significant,” and there are benefits in serving elderly customers and those needing in-person services like loan agreements. Currently, the bank operates 14 branches across Cyprus.

On the issue of NPLs, Vourakis stated that the rate of such loans has dropped below 15 per cent of total loans, and by the end of July, they aim to reach single digits. He explained that this was a significant achievement and a major goal for the management over the past three years.

Furthermore, he emphasised that Astrobank resolves NPL issues through internal restructuring processes without selling portfolios to credit acquisition companies, resulting in win-win solutions for both the bank and borrowers.

Regarding the aforementioned dividend, for which the bank will request regulatory approval, Vourakis said that shareholders of all banks have not received dividends for over a decade, and it is fair for them to expect this return.

Regarding the changes in the Cypriot banking sector due to acquisitions, Vourakis viewed these moves positively, as mergers create larger banking organisations with greater investment capabilities, better products, and improved risk management.

He recalled that Astrobank emerged from the merger of Piraeus Bank and USB Bank and maintained that any transactions would be evaluated strictly on economic criteria.

Last year, the bank considered acquiring CDB Bank, but the deal was not completed. Vourakis affirmed that they are open to all possibilities, evaluating each option to benefit customers, shareholders, and the economy.

Finally, when asked about the potential interest in future sales of performing loan portfolios by state-owned asset management company Kedipes, Vourakis confirmed the bank’s interest in transactions aligned with its size.

He mentioned that while the bank reviewed the ‘Ledra 1’ package offered by Kedipes, the “figure was substantial”.

He concluded by saying that Astrobank will consider any new packages, applying stringent financial criteria, while making note of potential offerings from Themis and GoGordian, indicating that such transactions might occur soon.