The agreement, scheduled to be signed on Wednesday, will allowthe two banks to jointly finance grand scale projects in Cyprus, the source with knowledge of the situation said.

“They will want to finance projects here which may require a banking institution for this purpose and this is what we want to be,” the source said.

EBRD will also offer counter guarantees that will be accepted abroad to Cypriot companies which want to expand their operations outside Cyprus and are not in position to utilise guarantees issued by Hellenic, or any other Cypriot bank, as their rating remains below investment grade, the source added.

On September 24, Hellenic Bank announced the allotment of 10,666,666 new shares to EBRD at a price of €1.875 per share which accounts to a 5.4% stake in Hellenic. EBRD is also holder of 5% of Bank of Cyprus’ share capital.

The agreement will also provide for the transfer of knowhow from EBRD to Hellenic Bank, which continues to struggle with a rising non-performing loan ratio, the source said.

Hellenic saw its share in the overall loan portfolio rise to 60.5% in June from 58% in December or by €82 million to over €2.6 billion.

The source said that the increase in the bank’s bad loans was mainly on “a change in the methodology” as a result of which a total of €150 million in loans from the Church of Cyprus became non-performing.

Source: Cyprus Mail