Bank of Cyprus now a sustainably profitable organisation, says CEO

The significant improvement in the yield margins of yesterday’s issuance of AT1 capital bonds reflects the bank’s transition into a sustainable and profitable banking institution, according to Bank of Cyprus CEO Panicos Nicolaou.

On Tuesday, the Bank of Cyprus successfully refinanced its capital bonds through an international market issuance amounting to €220 million.

According to the bank’s announcement last night, the annual interest rate was set at 11.875 per cent, compared to 12.50 per cent of the corresponding 2018 issuance.

The coupon was compressed downwards due to the overwhelming demand, reaching €2.7 billion, surpassing the issuance by 12 times.

According to the bank, the final pricing was 62.5 basis points lower than the initial guidance.

Additionally, the credit spread (Euribor+9.1 per cent) was 350 basis points lower than the 2018 issuance (Euribor+12.6 per cent).

“The significant improvement in the bank’s credit spread by approximately 350 bps compared to the issuance of AT1 Capital Securities in 2018 reflects the successful transition of the bank into a well-capitalised, diversified, and sustainably profitable banking and financial institution,” Nicolaou said.

Nicolaou further noted that the issuance of the new bond follows communication with investors over the past months and the upgrade of their targets for 2023 and 2024 during the investor event held in London on June 8, 2023.

According to the announcement, the new capital bonds are expected to be rated B3 by Moody’s Investors Service Cyprus Limited.

They will be listed on the official list of the Luxembourg Stock Exchange and traded on the Euro MTF market of the Luxembourg Stock Exchange.

The net proceeds from the issuance of the New Capital Securities are intended to be provided as a loan by BOC Holdings to its subsidiary, Bank of Cyprus Public Company Limited, and will be used by the bank for general corporate purposes.

In addition, the loan is expected to meet the requirements to qualify as Additional Tier 1 Capital for the bank.

Furthermore, the issuance of the new capital bonds will maintain the optimal capital structure of the group and continue to contribute to the Group’s Total Capital Adequacy Ratio by approximately 220 bps.

The issuance is expected to be eligible for the Minimum Requirement for Own Funds and Eligible Liabilities (MREL), thereby contributing to the Bank’s MREL requirements.

Finally, it was reported that BofA Securities Europe SA and Goldman Sachs Europe Bank SE acted as Global Coordinators and Structural Advisers, while BNP Paribas and JP Morgan SE acted as Joint Lead Managers.