“We have been very close to selling for some weeks but selling a bank is not an easy thing to do”, bank sources said.
Inferring from the bank’s provisions announced at the end of 2014 and the first quarter of 2015, analysts have said that Uniastrum should be worth around €125 million.
Bank officials are negotiating the remaining details in an effort to minimise losses.
The Uniastrum sale is part of a broad restructuring plan that was required by the Troika of international lenders, the European Commission, the European Central Bank and the International Monetary Fund, as part of the bailout programme agreed in 2013. BoC was forced to ‘haircut’ 37.5% of deposits over €100,000 and sell all non-core business outside Cyprus.
Uniastrum was acquired by BoC in October 2008 for just over €500 million.
The timing of the deal has raised questions, given that it was closed just a month after global financial markets were sent reeling by the collapse of Lehman Brothers in the United States. BoC paid over €45 million to increase capital at the Russian bank and has also been pumping in millions in liquidity support.
This has been at a time when BoC had its own liquidity issues after absorbing €11 billion in Emergency Liquidity Assistance (ELA) from the now defunct Laiki. ELA has since been cut to €6.4 billion.
“It was one of the worst investments the bank made and probably the second only after buying Greek bonds a few months before the PSI eliminating them”, one analyst commented.
The PSI refers to the decision by eurozone leaders in 2012 to wipe 75% off the value of Greek government debt. This caught out Laiki and BoC, which had piled into Greek government bonds just as everyone else was selling them.
The PSI left Laiki effectively bankrupt and BoC short of capital, leading ultimately to the bail-in of Cypriot bank deposits.
The analyst said that BoC had never been able to have real control over Uniastrum because the former owners, who remained minority shareholders, retained their offices in the same premises and were able to influence local personnel.
Meanwhile, Cypriot bank personnel who were sent to Moscow could hardly speak the language or function in an environment that was new and unwelcoming for them.
BoC will be glad to see the back of an investment that has also attracted the attention of the police.
Cypriot police officers are currently investigating the Uniastrum purchase owing to evidence of wrongdoing and suspicions over bribes during the sale.
The investigation is currently focusing on transactions and accounts in Russia, Armenia, Switzerland and Central American country of Belize.
Five former senior executives of BoC will stand trial on June 16, 2015.
Source: InCyprus
