The AGM was told that Irishman John Patrick Hourican will continue as the bank’s Managing Director for the next two years and will sign a contract with effect as of February 1, 2016.
Speaking to the AGM, the Chairman of the Board of Directors Joseph Ackermann said “our immediate top priority remains the further enhancement of the quality of our assets through a steep reduction in the outstanding stock of NPLs and continued deleveraging of non-core assets,” adding however the bank has come a long way since March 2013, when as a result of the Eurogroup decisions, the bank was forced to seize 47.5% of deposits over €100,000 to cover its capital shortfall.
Noting that “we are fully aware of the challenges the difficult economic situation has created for all bank borrowers, especially for individual households and Small Medium Sized Enterprises,” Ackerman made clear that “it is not our intention to resort to widespread foreclosures as now allowed under the new legal framework.”
“But to achieve accelerated progress in restructuring non-performing loans we need first and foremost a stronger commitment by individual borrowers, both large and small, to cooperate with the banks and to the principle that borrowers should respect their financial obligations” he said, adding that “an endorsement of this principle by the authorities is essential.”
He also acknowledged that “in specific cases of genuine hardship by the borrowers, we recognize the need for a fair burden sharing, while always remembering that we are dealing with depositors’ money.”
The Swiss former head of the Deutsch Bank also praised Hourican’s decision to stay as the bank`s executive chief. Hourican gave a resignation notice early last summer although the Board has asked him to remain on board.
“John has done a remarkable job in leading the Bank over the past two years. He has literally put Bank of Cyprus on the global financial map,” Ackermann said noting “in a nutshell, he has, in a short period of time, instilled self-confidence and motivated a rather discouraged staff, established rigorous and effective management structures, empowered a team of talented young executives to respond to the new challenges and implemented a demanding restructuring plan, establishing a new, dedicated loan restructuring and recovery division.”
We still have much to do
On his part, Hourican reflected on Cyprus’ largest lender’s path since the financial meltdown in 2013 which prompted Cyprus to request a bailout from the EU and the IMF, noting that deposit base has been stabilising and the NPLs have entered a downward path, whereas ECB emergency funding dropped to €4.3 billion from €11.4 bln high in 2013.
“We recognise that we still have much to do to normalise the Bank’s loan quality and reducing NPLs remains the overwhelming and number one priority of the Bank’s Management today and into 2016,” he stressed, pointing out that these loans attract excess capital that we would prefer to see in productive use in the economy and we need all regulatory, legislative and societal help to reduce them.
Recalling the bank’s shares have been re-listed in Cyprus and Athens Exchanges in December 2014, Hourican noted that “our stock performance has admittedly been disappointing, despite the fact the Bank’s financial performance and risk position has been improving.”
“Although, we are frustrated that markets are not yet rewarding us for improved performance, we do expect that the strength and quality of the underlying business, and its value, will come through over the longer term,” he went on to say.
Hourican announced the bank contests assumptions on risk management put forward by the ECB`s annual Supervisory Review and Evaluation Process discussions.
“The ECB would like to see greater levels of provisioning against certain portfolios of assets and we are not necessarily in agreement that the evidence supports this” he said, noting the bank “disclosed the issue and the disagreement.”
But he noted that “even were we to conclude that such an adjustment should be considered, the Bank’s capital is sufficient for the risks it manages and we do not believe that any further capital raising is required.”
Furthermore, both Ackermann and Hourican made clear once again the bank would not compensate the bank’s older shareholders and the bond holders that have been bailed in as part of the conditions of Cyprus’ €10 billion bailout.
“What has happened is very difficult. We are engaged in a dialogue with all stakeholders, but the legal situation does not allow us to change the attitude. There is no legal ground, we simply cannot afford it, this bank is still a very fragile one,” Ackermann said.
On his part, Polys Poliviou, the bank`s legal adviser said the decisions to imposed losses on previous shareholders, bond holders and depositors have been imposed by the Eurogroup and were approved by the government and were enacted by the parliament as laws, noting that the bank has to comply with the state’s decisions.
Source: Famagusta Gazette
