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Hellenic sees opportunity for expansion

01/12/2014 10:16
In an interview to Bloomberg Irena Georgiadou, Hellenic Bank’s chairwoman, expressed her conviction that amid the adverse economic conditions in Cyprus there is opportunity to expand and seize market share from competitors.

She said that although Hellenic is a small bank, it is the only systemic bank, not just in Cyprus, but in the region, that has not been bailed in or bailed out making it probably the right proxy for the recovery of Cyprus.

Hellenic became the second-biggest lender in the euro area’s third-smallest economy after last year’s international rescue forced Bank of Cyprus Pcl to absorb its nearest rival Cyprus Popular Bank Pcl. Founded in 1976 with backing from the Orthodox Church of Cyprus and Bank of America Corp., Hellenic has drawn foreign investors to shore up capital, skirting the seizure of deposits forced on Bank of Cyprus. Now it wants to boost loans and buy assets from rivals.

The bank is raising 220 million euros ($274 million) from investors in a rights offer after European Central Bank stress tests in October showed a 105 million-euro capital shortfall. Hedge –fund manager Daniel Loeb’s Third Point Hellenic Recovery Fund and Wargaming who are now the bank’s largest shareholders have said they will take up new shares they’re entitled to keep a 20 percent stake each.

The investors are betting on a recovery that hasn’t yet started. Hellenic reported a loss of 124.8 million euros in the nine months to Sept. 30 as it increased provisions for bad loans 56 percent amid falling property prices and a contracting economy.

Shares in the company, which trade on the Cyprus stock exchange, have dropped 43 percent this year, and now value the business at about 393 million euros.

The share price of Hellenic is currently trading 25% lower than the price its new Third Point and Wargaming paid about a year ago to participate in its share capital increase.
The International Monetary Fund, which part-financed the island’s rescue last year, in October said the economy is poised to shrink 3.2 percent this year, less than an earlier forecast of 4.2 percent, and expand 0.4 percent next year. That will benefit Hellenic, Georgiadou said.
With 7 percent of the lending market and 13 percent of deposits, Georgiadou said the bank can expand as the island emerges from a banking-sector collapse, budget cuts and the euro area’s only restrictions on the movement of capital.

Georgiadou says she plans to offer «consolidation loans» whereby Hellenic can bundle credit cards, loans and mortgages from different banks into one Hellenic Bank account.
«Only some monasteries and some churches have Hellenic Bank as their primary banker», she said. For “everyone else it’s their second or fourth banker».

Hellenic could consider acquiring loan portfolios from other banks, after putting in place an arrears-management unit, or possible branch networks to expand, she said.