Daily Press Review - 5/8/2019

Supervisory questions about ETYK’s investment in Hellenic

The formalisation of bank employees’ union ETYK’s participation in Hellenic Bank by investing a large part of its provident fund has raised questions. ETYK’s move to acquire a large package of shares in HB, which falls under the union’s long-standing policy of participating in the banks’ Boards of Directors, has become a point of reference in discussions among the managements of the two systemic banks especially. At the same time, there are questions over whether the extent of ETYK’s investment falls within the provisions of the relevant law or not. Either way, Bank of Cyprus as well as Hellenic appear to have serious reservations about the whole affair and are not approaching it in a positive light, as they feel that the involvement of the union in the Board of its members’ employers will create a new state of affairs, which the local banking system has no desire to have to manage. At the same time, the supervisors of occupational retirement funds, which cover provident funds, are expecting a full update from the management committee of ETYK’s provident fund. ETYK acquired 6.3% of HB’s share capital through the investment fund 7Q. The fund in question had acquired 9% of HB’s share capital as part of the bank’s share capital increase, of which 6.3% was from ETYK’s provident fund. With this percentage, ETYK became the fifth largest shareholder in Hellenic Bank, after Demetra, Wargaming, PIMCO and ThirdPoint.



Banks: Profitability continues

Profitability continued for the fifth consecutive month in the banking system, according to the most recent data released by the Central Bank of Cyprus (CBC). The majority of banks (systemic or not) recorded profits, with total profits in the banking system over the past five quarters reaching €693m. Hellenic Bank as well as Bank of Cyprus recorded profits in the first quarter of 2019. The same goes for RCB Bank, which announced profits at the end of 2018, while Eurobank and Astrobank also recorded profits. Specifically, BoC’s profits in Q1 of 2019 reached €95m, while Hellenic’s were €14.8m. RCB had profits of €76.4m at end-2018, Eurobank had €42.4m and Astrobank €9.9m. However, the deleveraging of the banks’ large volume of NPLs remains their biggest challenge. Based on current data, 30% of the banks’ total loan portfolio is non-performing, and this percentage needs to drop to 10% by the end of the year, based on the SSM’s requirements. As regards the systemic banks, BoC has 35% NPLs and Hellenic Bank 26.5%.



€4b of loans put to auction

Parliament’s decision on Friday to accept the President’s veto on the second foreclosures law has restored peace in the banking system and has allowed BoC and HB to proceed with their plans to sell €4b’s worth of NPLs over the next few weeks. Just a few hours after the House plenary vote, Bloomberg revealed that HB is preparing to sell NPLs worth €1.5b in September, with PIMCO already having submitted a binding offer. The sale of loans worth €4b combined with the implementation of Estia that has the capacity to cover loans worth €3b will bring total loans in the Cypriot banking system down to €3b. A validation of the abovementioned plans will bring the percentage of red loans in the banks’ balance sheets down to single-digit levels.



Negative interest for deposits by SGOs and provident funds

After increasing their charges, the banks are proceeding for the first time with the imposition of a negative interest rate for their big customers, Haravgi reports citing sources. The new measure, which has already started being implemented by Hellenic Bank and is being examined by the other banks, mainly concerns semi-government organisations (SGOs) and large provident funds that have millions in deposits. Specifically, the abovementioned customers, instead of gaining revenue from the interest on their deposits, they will have to pay the bank fees. According to HB’s decision, these customers will be charged the same percentage that the banks pay for their deposits to the European Central Bank – namely 0.4%. A source from the bank tells the paper that the above measure only applies to big customers with millions’ worth of deposits, and not small and medium sized households and businesses.



How morals change with the times

On the topic above, Haravgi comments that it cannot believe what it is seeing or hearing. It wonders why these SGOs and Funds would want to save their deposits at Hellenic Bank. Why not move them to Swiss banks? Or why not invest their funds elsewhere instead of the banks? For example, in land. Or in their employees’ welfare or training? The question is, when will the bank monopolies and exploitation of mere mortals end? And we are yet to see what charges will be imposed this autumn. Just like pensioners are being charged to cash in their checks, workers will have to pay to get their salaries, it says.



10,500 foreclosure letters

Main opposition AKEL took the opportunity of Friday’s plenary vote on the vetoed foreclosures law to launch a scathing attack against ruling DISY and opposition DIKO over their economic policy, and highlight the inconsistencies and failure to live up to commitments and obligations to protect borrowers and the primary residences of vulnerable members of the public. AKEL MP Aristos Damianou revealed that the number of actual foreclosures may be limited, however the banks have sent 10,500 “Type 1” warning letters to borrowers, which is the final step before an auction is scheduled.



Governor announced promotion of new mechanism in September  

Central Bank of Cyprus Governor Constantinos Herodotou announced that a new mechanism would be launched in September for checking whether the CBC’s Code of Conduct is being respected by the banks, during a House Finance Committee session that was held prior to the plenary vote on the foreclosures law. Haravgi reports that the Governor’s announcement effectively makes clear that the CBC considers any changes that have been made to the foreclosures framework as temporary. Herodotou said the new mechanism will be ready in September and that it will include three main characteristics: it will be in line with supervisory requirements, it will give borrowers the ability to seek justice and it will not cause delays in foreclosure procedures.



Returning in the autumn

All eyes are now on Central Bank of Cyprus (CBC) Governor Constantinos Herodotou, following parliament’s approval last Friday of the DIKO proposal on foreclosures. After another summer was spent focusing on foreclosures – last year due to the Co-op deal – Herodotou is expected to return to the House in the autumn with new suggestions on how to improve the framework for NPL restructuring. The governor considered DIKO’s proposal, which he was involved in preparing, as the most painless solution to the deadlock that had been reached between the House and the government. His aim now is to tweak the proposal after studying it more closely and of course consulting with the ECB and SSM, and to come back with a proposal that will please both borrowers and the banks. The banks’ main concern is to get rid of their NPLs. One of the most effective tools they have is the sale of NPLs. More developments are expected in this respect in the last leg of the year. Just a few hours after parliament’s decision, Bloomberg reported that Pacific Investment Management Co Pimco had submitted an offer to Hellenic Bank to purchase loans worth €1.5b. According to the site’s sources, the offer is not binding as the binding offers procedure will be launched in September.



You believed, You proposed, We supported

CSR feature: Hellenic Bank believes in the power of each individual and their ability to make their dreams and ambitions come true. In April, it launched a huge campaign, focusing on the individual and what we can achieve if we believe in one another. As part of the campaign, the site www.exeistidynami.com was created, which enabled visitors up until the end of June to propose people who they believed needed support and encouragement to carry out something they did not have faith in themselves they could do.



We support society

As part of the above action, HB has recently created a mini-documentary to highlight the people, unseen heroes, who contribute towards bettering our society. People who believed in and supported other people who needed it and who managed to make a difference in society through their actions. The bank’s other CSR activities move along the same lines and aim to achieve the UN’s Sustainable Development Goals, so as to make the world a better place. These actions include the Scholarships Program, Emathisis, Green Offices, Ecological Schools and mobile banking units.



CSR guides us into a common, sustainable future

CSR feature: The correct implementation of CSR programmes and strategies are the tools necessary to achieve long-term sustainable growth, says Constantinos Pittalis, Hellenic Bank’s Investor Relations Manager. He says CSR activities are fully incorporated in HB’s activities, which include the programme emathisis and the mobile banking units.



If it sells up, it is sorted

The fact that Hellenic Bank planned to sell loans of over €1b has been a known fact since the end of last year. However, Bloomberg on Friday reported that it has received a non-binding offer from its major shareholder Pimco. This means that the bank has proceeded with a competition, even though HB’s CEO assured three weeks ago that Hellenic is a far way off from selling loans and that it is in no hurry. Kathimerini Economy comments that if HB does sell €1.5b of NPLs that’s it sorted. It will be left with less than €1b’s worth of NPLs, of which €300m will participate in the Estia Scheme; which means they are very likely to start being serviced.



Central Bank regains its prestige

The CBC had more than just a little involvement in shaping the proposal by DIKO that was approved by the House plenum last Friday regarding the foreclosures framework. The involvement of CBC Governor Constantinos Herodotou proved definitive in resolving the deadlock that had been reached. At the same time, however, it also contributed towards boosting ailing relations between the Central Bank and the executive as well as legislative branches. Characteristic of this was a statement by House Finance Committee Chairman Angelos Votsis, that a “new air” is blowing at the CBC, and that he has started to see signs of a more active involvement of the CBC governor in matters relating to the banking sector, as opposed to his predecessor. Erodotou promised that he would return by October the latest with a proposal-checking mechanism, which will fine tune the DIKO proposal and satisfy all sides.



Next phase for foreclosures in the autumn

The future of the new law on foreclosures is now in the hands of President Nicos Anastasiades. Even though a compromise was reached with the parliamentary vote last Friday, not everything has been settled, Phileleftheros Economy reports. In anticipation of the Law Office’s advice on whether the law is constitutional, the President is keeping his cards close to his chest. The Law Office has already expressed some reservations, with a representative telling a recent House Finance Committee session that he had reservations over whether the Financial Ombudsman can take on cases and powers that belong to another independent authority (Central Bank). Finance Minister Harris Georgaides, meanwhile, described DIKO’s proposal as an improvement, but added that it did not solve all the problems. He said the Estia Scheme should have been implemented before any other changes were made to the foreclosures framework, while he stressed that the aim was to rid the banks of NPLs.







Τhe 2019 deals that have changed the state of affairs

There have been some major deals – commercial and not – in the first seven months of 2019, as a result of trends prevailing in certain sectors of the economy. From retail trade, to real estate, the banks to even insurance companies, many sectors of the Cyprus economy are being reshuffled which has inevitably led to important acquisitions; and it appears this phenomenon is set to continue. Of the commercial deals of 2019, the acquisition of the majority package of Tryfon Tseriotis by a Maltese group stands out, as does the acquisition of Hilton Hotel by Pangea, the acquisition of USB bank by AstroBank, and the French giant CNP Assurances, which acquired 49.9% of the shares Bank of Cyprus had in insurance companies CNP Cyprialife and CNP Asfalistiki, for €97.5m.



They are not all strategic defaulters

Article by Financial Advisor/Insolvency Advisor Marios Ieropoulou, who writes that half-truths are even worse than non-truths, referring to statements he has heard over the past few weeks as regards the foreclosures laws.  The truth is that there are still a number of loans in Cyprus that need to be corrected, he writes. The financial ombudsman has often referred to errors in loans’ and current accounts’ interest rates. The majority of these have primary residences as collateral. The new law provides borrowers the right, provided there is good reason, to seek a correction of their debt.



We expect to see some results

Phileleftheros Economy comments that certain political powers are attempting to provide super-powers to the Financial Ombudsman, who has worked by priority on Co-op loans. The ombudsman has built his entire political chapter on the excessive charges the Co-op imposed on customers but he has never made any case involving the other banks public, says the paper. At least announce one case involving the banks that was investigated so we can see that there is hope that something is being done. Unless he was only appointed the ombudsman for the Co-op. Of course, there may be some hope now as he will be in charge of deciding whether the banks are violating the CBC code of conduct on loan restructuring. We expect to see some results, says the paper. The public have great expectations from him.



Cyprus of money-laundering

Politis reports that an article published a few days ago on the website Politico was indicative of the reputation Cyprus has in Brussels. Specifically, it contained fresh allegations by US businessman Bill Browder about money-laundering practices in Cyprus. Despite the measures the state is taking to fight money-laundering, writes the paper, its reputation as a money-laundering destination is not easy to change, especially following the European Commission’s recent warnings over the citizenship-by-investment scheme.



New round of NPLs sales

Phileleftheros reports that Cyprus’ two banks, are intending to sell more loan portfolios to foreign investment funds. If these planned sales are implemented by the end of the year, around €3.5-4b worth of loans will leave the banking sector. This second round of sales, comes one year after the Bank of Cyprus sold off €2.7b-worth of loans. Pacific Investment Management, better known as Pimco is ready to purchase Hellenic’s NPLs, worth €1.5b. A Bloomberg article reports that Hellenic Bank is preparing to sell off an important NPLs package. Phileleftheros notes that the ECB had noted its great concern that the changes to the foreclosures laws, would hinder the banks’ successful NPLs sales. This is because the investors are searching for a steady legal framework, which allows them to correctly invoice potential agreements. The ECB argues that the prolonged period needed to sell the collateral according to the new foreclosures framework would evidently impact on the price of these portfolios. As it comes to Hellenic Bank, Bloomberg’s story refers to two people who are experts on the subject. Pimco, which already owns 17.3% of Hellenic’s shares, submitted a non-binding offer for the portfolio of the bank, according to anonymous sources. The binding offers phase, will likely take place in September. Pimco looks to strengthen its investments in Southern Europe, after purchasing securitised red loans worth €2b at Eurobank in June, as well as assets of the Italian UniCredit SpA. Hellenic Bank, had proceeded to a small-scale NPLs sale in the start of 2018 and it was the first bank to have proceeded to this type of move. Subsequently, they didn’t hide their interest for a new sale. The bank is looking to dispose a big part of the NPLs it has in its balance sheet, so that its NPLs ratio will stand well below 10%. Such a move seems to be viable due to the prevailing conditions in the bank, due to the recent share capital increase and the anticipated profitability increase over the next quarters. At the same time, the article reports, the Bank of Cyprus is already preparing for Helix 2, which is the bank’s second project for the sale of red loans worth over €2b. The bank also aims to reduce its NPLs ratio to below 10%. As it is well-known, Alpha Bank is currently searching for a NPLs servicer, for its NPLs portfolio that amounts to a total €4b. The bank’s portfolio will mostly likely be taken up by Altamira. Central Bank data shows that the banks still have a long way to go in order to consolidate their balance sheets. In the end of March, the NPLs were reduced by €151m, standing at €10.144m compared to €10.295m in February.



Hellenic Bank selling off NPLs package

As above, Economy Today reports that Hellenic Bank is preparing to unload the biggest part of its NPLs portfolio. According to Bloomberg, Pimco has submitted a non-binding offer (€1.5b), while the binding offer procedure will open in September. Pimco (which owns a 17.3% stake in Hellenic Bank) intends to boost its investments in Southern Europe. The article reports that in the meantime, Hellenic Bank has notified its customers, that have multi-million deposits that their interest rate will become negative. This means that effectively, the depositors will not make a profit out of their deposits, but will conversely be paying the Bank. Sources told Sigma that this mainly concerns semi-governmental organisations and large provident funds. This measure is not valid for household and SME depositors, but a number of customers with multi-million euro deposits. The negative interest rate has been set at -0.4%, which is what the ECB charges banks for increased liquidity. As such, the bank is trying to limit its costs due to the increased liquidity it maintains.



Bank of Cyprus-Hellenic Bank implement charges in effort to boost e-banking operations

Brief.com.cy reports that Cypriot banks are proceeding with significant moves in order to catch up with international developments as it comes to e-banking. In order to achieve this significant goal and in an effort to reduce their customers’ visits to the counters, they are charging even for the simplest, most basic services such as cash withdrawals. The Bank of Cyprus and Hellenic Bank are leading this effort as they have the biggest client base. Bank of Cyprus has already proceeded to charge for banking services from 1 June, while Hellenic Bank will implement its charges from 16 September. The charges, depending on the service that is carried out at the counter of the branches, differ and start from 50 cents, while most stand between €2-3. The article goes on to report on the charges of Bank of Cyprus and Hellenic Bank. Hellenic Bank’s charges, will be put forward on 16 September and will be valid both from the Bank’s customers as well as the customers of the former Co-op, which by this date will become Hellenic Bank customers. In order to count/deposit/withdraw coins up to €50, Hellenic Bank will not charge anything, but for bigger sums it will charge 1.5% with the minimum sum being €3. For cash withdrawals from the Counters up to €10.000, Hellenic will charge €2 (€1 for retirees), while for sums in excess of €10.000, the charge will be €5. The charge will be implemented in January 2020. For cashing cheques at the Counter, the bank will charge €2 per cheque from January 2020, while for the payment of utilities it will charge €2 per payment/account. For copies of cheques it will charge €3 per cheque, while for copies of official statements, acts, directives, loans documents, valuations etc, it will be charging €10 per copy. For the issuance of interest statement it will charge €3, while for each issuance of an interest rate statement/overdraft limit statement, the bank will charge €50. For the issuance of other Account Certificates, the bank will charge €5 each. For the transfer of money between the accounts of a customer, the bank will charge €2, while it will charge €5 for the transfer of money between different customers. For depositing foreign currency or their exchange and payment in euro, the bank will charge 1.5%, with a €6 minimum. For depositing to an account with foreign currency the charge will stand at 0.5% for Pound Sterling and US Dollars, and 1% for the rest.



Plots in Nicosia for sale by Altamira

New fields, plots and apartments from €14.000-€880.000, are being sold-off by Altamira. The previous week, Altamira updated its property list, while new properties are expected to be announced at www.altamirarealestate.com.cy. The most expensive properties that are being sold-off, includes a commercial plot of a total 748sqm area, 340 metres south of the Digenis Akrita Ave. is being sold €463.000. At Montparnasse, around 640 metres, west of the Hilton Park Nicosia hotel, a 3-bedroom apartment is up for sale. The total covered area stands at 121sqm and the attic is 98sqm. Its price is €374.000.



Drop in arrival of tourists through cruises

The Deputy Ministry of Tourism has expressed optimism over Cyprus’ potential in the cruise tourism sector for the next few years. Even though there has been a significant decrease in the number of tourist arrivals through cruises over the past five years, it is believed that the coordinated action that is currently being taken can turn Cyprus back into a popular cruise destination. Based on data by the deputy ministry, in 2014, around 135,000 tourists arrived by cruise to Cyprus. By last year, the number dropped to 61,000; which means there was over a 50% drop in the space of five years. Limassol port takes the lead when it comes to cruise numbers, followed by Larnaca and to a much lesser degree Paphos. Deputy Minister of Tourism Savvas Perdios said that from 2010 until present, the island has lost a large number of cruise tourists due to the instability in the region. This does not mean, however, that tourists’ interest in cruises has diminished, he said, as they turned their attention to the Western Mediterranean. At the moment though, that region is currently overbooked, and so tourists are turning back to our region, he said. Perdios explained that during Cyprus’ absence, tourists’ expectations and demands have increased. For example, tourists want to go on organised trips when they disembark at the port, which Cyprus has a comparative advantage in due to its particularities and the small distances. He said that we have a duty to leave the best impressions that will give impetus for the years to come, once we re-join the sector, said Perdios. He said the numbers were encouraging for this year, while a further increase is anticipated for next year. A significant number of cruise companies have been approaching the Cypriot ports, including the so called “mega ships” that carry over 2,000 passengers, as well as small and medium sized luxury cruise ships. Cyprus is currently not considered a “marquee cruise destination”, like Egypt, Greece, Italy and Malta. In the short term, the deputy ministry aims among other to provide touristic information on all cruise ships and to sponsor welcoming events for passengers at the ports, promote Cyprus as a home port for international cruise companies, increase cruises to Cyprus, and attract more tourists through “Fly, Cruise & Stay”. At the same time, the cooperation it has developed with DP World Limassol, the Cyprus Ports Authority and tour operators abroad that include cruises to Cyprus in their programmes, is also believed to have positive results.



Issue with cats at Limassol port

Saturday’s coverage of the topic above, with the papers reporting that the Animal Party had informed the Limassol District Veterinary Services about the situation, and that it received reassurances from the Limassol port operators that there may be an issue with stray cats, however there are definitely no plans to make the cats disappear.



Common packages with other countries

Cyprus’ Tourism Deputy Ministry said on Friday it has agreed to promote joint tourist packages with Israel, Egypt, Jordan and Lebanon to attract visitors from the US, Canada, China Japan and France. It said consultations are ongoing with Greece and should be completed soon. The packages include thematic tours, promoting key characteristics and sightseeing places of the countries involved, such as areas of natural beauty, cultural monuments, large events, which visitors can enjoy as part of a single tour package. Joint packages include the following thematic tours: Dive into Aphrodite’s sea; A contemporary take on arts, traditions and handicrafts; Following the footsteps of St Paul; Mediterranean and Middle Eastern Gastronomy; Thrills on wheels; The hidden treasures of the Phoenicians’ route; Following the footsteps of Goddess Aphrodite; A photographic journey through the natural beauty of the East Med; The next step will be to brief tourist operators on the packages. These will also be offered for excursions in Cyprus to cruise passengers.



Rich and poor tourists

On the topic above, Politis reports that Cyprus’ best customers in May 2019 were Lebanese visitors, who spent €140.33 per capita a day and €631.50 throughout the course of their stay. They were followed by Israeli tourists, who spent €107.84 a day and €420.58 throughout their 3-4-day stay. French, Belgian and Russian tourists stayed for an average of eight days. The Belgians spent €103.07 a day and €865.51 in total, the French spent €82.68 a day and €719.69 in total, and the Russians spent €74.28 a day and €638.77 in total.



Malls are increasing and expanding

Kathimerini Economy reports on the shopping malls of Cyprus, saying that these will cover a total 280.000sqm area by 2020. There are many new developments as well as expansions of current complexes. The number of malls is increasing around Cyprus, while the multi-million-euro investments and battles in the retail sector are unstoppable. The article reports that My Mall in Limassol will be expanded. According to MyMall’s CEO, the mall recorded an increase in sales in the first semester of 2019, compared with the first semester of 2018, while the number of visitors remained stable. It should be noted, the article says, that the casino-resort is currently being constructed very close to the Mall and will be ready in 2021, while the completion of high-rises will positively contribute in the increase of the number of visitors to Western Limassol.



Huge investments in Karnagio

24h reports that foundation work for the Limassol Blu Marine, Leptos Group’s leading project has already begun, while the development of the three multi-storey buildings in Loel’s plot will soon be agreed. At the same time, an Indian company now owns the SOPAP factory. There is great investment interest for the area, stated the Mayor of Limassol Nicos Nicolaides. The Municipality, stated Mr. Nicolaides, through a long-term area master plan in cooperation with the responsible Government departments, is proceeding with the enhancement and rejuvenation of the entire western coast with the reconstruction and the redevelopment of the ‘Aktea Odos’ giving the city further potential and a new dynamic. The rejuvenation plan will connect the city centre with the marina and West Limassol through Aktea Odos, with pavements, bicycle routes and a seaside park, while in the framework of development, projects worth many millions, have already been completed or are under construction (e.g. Dubai World, Cruise Terminal, City of Dreams Casino Resort).