“There are opportunities for Cyprus to become a regional business centre,” the bank’s 38-year-old chairwoman Irena Georgiadou told the Cyprus Weekly in an interview.
Refocus on growth
One opportunity for growth has come from the implementation of the much delayed foreclosures legislation last week.
The legislation went through at the sametime as the insolvency package and paves the way for Cyprus to get back on track with its bailout programme as well as to re-access the international financial markets.
Parliament’s move is a “step to the right direction”, Georgiadou says.
The legal framework provides the condition for an “improvement of the loan restructuring process and will force strategic defaulters to start repaying their loans. At the same time the country should proceed as soon as possible with the approval of the regulations.” The end of the foreclosure saga is also allowing the bank to refocus on growth.
“NPLs were number one priority on our agenda and growth was number two. Now it’s the other way around,” she said.
Hellenic Bank’s non-performing loan ratio is currently 56% of the total and the bank reported a loss of €119 million in 2014 as it provisioned against bad loans.
The lending institution, which is comfortably liquid with more deposits than loans, is currently undergoing an internal restructuring process and looking at new ways to grow.
“We are chasing opportunities to grow as a bank,” she said. The Hellenic Bank chief believes that there are investment opportunities in Cypriot firms, pointing out that “for companies that have managed to survive the economic crisis, it means that there is something there”.
Tourism, shipping and financial services have proved to be more resilient than others but Georgiadou thinks that it is not a matter of specific sectors but of the individual business unit.
“There are companies in every sector that are worthy of finance,” she said.
Learning curve for businesses
Opportunities are improving as the economy is already benefiting from lower interest rates in the bond market and will benefit from the bond-buying programme of the European Central Bank. Yields on 10-year government bonds dropped to 3.83% on Monday.
Lending has become a completely new process for Cypriot entrepreneurs as institutions want to make sure that they will not add more non-performing loans.
“Companies have to learn that they cannot have everything 100% financed by the bank,” she said.
“We want to lend to the ones that have good management and a solid business plan. Now things like vision, projections and repayment ability matter more than things like security, which used to be more important in the past,” Georgiadou said.
Looking to the Middle East
At the same time the bank is looking to the Middle East for regional opportunities that could arise as Cyprus could serve as their stepping stone to Europe.
The Middle East is troubled with Islamic terrorism and civil wars but it is a region of great wealth and there are companies that could be interested in Cyprus, Georgiadou argues.
“But you need to have a reliable banking system and high-quality financial services,” she notes.
While looking for investment opportunities in the Middle East, the Hellenic Bank chairwoman dismissed any return to Greece, saying it is “too soon for such move. We are still focusing on growth in Cyprus and tightening up the bank rather than expanding back to Greece”.
Hellenic Bank shed its Greek operations in 2013.
Life in the big club
The bank itself is also in the process of a learning curve. Hellenic Bank is one of the smallest banks under the Single Supervisory Mechanism (SSM), the monitoring mechanism of the European Central Bank (ECB).
The ECB began its supervisory role in November 2014.
Within the eurozone, the regulation gives the ECB responsibility for roughly 130 financial institutions whose holdings account for around 85% of banking assets in the single currency area.
The ECB’s monitoring includes stress tests on financial institutions. If problems are found, the ECB is allowed to conduct early intervention in the bank to rectify the situation.
These big reporting requirements make things challenging, Georgiadou admits.
“You function under a highly regulated environment with everchanging regulations.
“But we have good relations and communication with our regulator in Frankfurt and we feel good about being in the big club.”
Source: InCyprus
