The increase was put to the vote at an EGM. Just over 87% of present shareholders voted in favour. Turnout was almost 42%.

Announcing the result of the shareholders’ vote, BoC chairman Christis Hassapis said that the approval marked the start of a new era for the bank and its customers, depositors and shareholders.

Foreign investors, including US-based Wilbur Ross and the European Bank of Reconstruction and Development, have signed up to the capital increase, designed to bolster regulatory capital ahead of Europe-wide stress tests later in the year.

“Strengthening our bank now… no doubt will allow us to accelerate its recovery (and) we will be able to engage with the wholesale market more easily,” CEO John Hourican told shareholders.

The issue, which executives said represented the single largest foreign investment made in Cyprus, would allow the bank to accelerate a restructuring plan after it was almost crippled by onerous terms of a bailout for Cyprus in early 2013.

BoC made history in the eurozone’s debt crisis as the first bank forced to convert uninsured deposits into equity as a condition for Cyprus to receive €10 billion in bailout aid from the EU and the International Monetary Fund.

The bank, badly hit by its exposure to debt-crippled Greece, was under the control of the island’s Central Bank for several months last year.

The issue will take BoC’s core Tier 1 capital to 15.1% from 11.3%.

A 75% majority was required for the capital increase to be approved, and speculation had been rife that some of the existing shareholders were opposed to the move and actively sought to overturn it, despite mounting non-performing loans, at 58% as of June, and ahead of October’s Europe-wide stress tests.

But none of the fears materialised, and the capital increase was approved with a clear margin.

Despite the negative tone ascribed to the EGM from early on, an eloquent impromptu soliloquy delivered nearthe end of the meeting by chief executive John Patrick Hourican, which could easily have backfired, proved sufficient to overshadow some of the less grounded opinions voiced during the meeting.

“Xenophobic remarks on the transfer of the bank to foreign hands are inappropriate and not modern in the international business context,” Hourican said, abandoning all attempts at diplomacy. “We have to change this debate from one of foreign investors coming in to loot our banks to one of serious foreign investors showing confidence in us and the prospects of our banks. As a foreigner myself, I take offence with this. The idea that funds are here to strip assets is nonsense. Some of the most sophisticated investors in the world have checked the numbers and decided that the Bank of Cyprus – and you, as a collective – are worth investing in. That is something to celebrate, not denigrate.”

Hourican’s comments were met with thunderous applause from an audience that had been hostile and scornful until mere moments earlier, and rather fittingly closed the Q&A session.

His tirade directly referenced comments made earlier – and implicitly endorsed by the shareholders present – by Evdokimos Xenophontos, former VP on the BoC board, who said that, while no foreign bank had been willing to support the Cyprus economy after the Turkish invasion of 1974, we are now “eager to transfer the bank to foreign interests”.

But a more likely explanation for Hourican’s outburst might well be explained by his depleting patience from everything he had heard since the start of the meeting from visibly frustrated old BoC shareholders, who apparently continue to grasp at straws in hopes of salvaging some of the wealth that dissipated as a result of the Eurogroup decisions in March 2013.

One of the more sober questions posed to board chairman Christis Hassapis came from an old shareholder who claimed to have suffered similar treatment at the hands of the Sudanese authorities 30 years ago.

“Our shares in a Sudanese bank were seized, and we received nothing in return,” he said. “But three years later we were made whole and the shares were returned to us.

So I ask you this: is there any chance, however slim, that we might recover some of our losses at any point in the future?”

Hassapis was unable to offer much more than apologetic platitudes in response, but the level of argumentation at the gathering quickly deteriorated.

The first few bouts of the Q&A session seemed like a warm-up to the more difficult conversations that lay ahead, with both Hassapis and Hourican fighting to keep their smiles and even throwing in the odd atmosphere-lightening joke. In response to an old shareholder’s remark, Hassapis made an ill-fated attempt to bolster his own credibility.

“I, too, am a ‘haircut’ shareholder – I mean, haircut but not haircut,” he said, pointing at his long hair.

At another point early in the session, Hassapis asked Hourican – seated next to him on the panel – to offer his views with regard to an issue raised by a shareholder.

The Irish banker stared briefly at a puzzled Hassapis before explaining that his headphone-translation of the chairman’s words was brought to him in a female voice, which threw him momentarily.

Both jokes fell flat, and both quickly reverted to avoiding light remarks and concentrated on offering as convincing answers as possible.

But their vision for a brighter future for the BoC was not of much interest to their audience, which insisted on accusing any and all involved in the lender’s plight and pointing out the injustice they were done.

After declaring his disapproval of the capital increase, one shareholder called on all old shareholders to leave the EGM. Shareholder, renowned lawyer and former government spokesman Kypros Chrysostomides suggested to the board that the projected 15.1% of core-tier 1 capital – after the €1 billion increase has been completed – is excessively high in light of Basel III’s minimum 9% capital buffers for banks, implying the capital increase is less than necessary. Another shareholder’s contribution included a demand for a commitment by the board that the new ‘foreign interests’ that would take over the bank would not sell off property owned by the bank – especially property owned in the Turkish-occupied areas – to Turkish interests, before agreeing to approve the capital increase.
 “This is no longer about money,” he said. “It is now about our homeland.”

And the most common of grievances from old shareholders to the bank’s management was none other than the issue of the few big borrowers with total NPLs of some reported €6 billion.

“What have you done with regard to these cases, all this time?” was a common inquiry. “How much have you collected?”

While we share your frustration, we have to be careful, was Hourican’s response. He suggested that Old-Testament style wrath and justice may not be the appropriate strategy in handling these cases.

“We need to handle these cases delicately,” he said. “These companies employ most of the workforce in Cyprus, and we need to make sure that there is a business environment in Cyprus when we’re done with them.”

Source: Cyprus Mail