2020 Cyprus Country Report

Banking
Sector Profile
TOTAL DEPOSITS
€47.9
billion
(August 2020)
of June 2020, and the bank has come a long way
since the 2013 financial crisis. Since the 2014
peak, BoC has reduced its stock of non-performing
exposures (NPEs) by €12.4 billion or 83% to
€2.6 billion and its NPE ratio is now reduced to
22% on a pro forma basis, from 30% as of yearend
2019. The lender remains committed to
further de-risking and its capital and liquidity
position remains good and in excess of regulatory
requirements. A considerable boost to BoC’s
balance sheet came in August 2020, with the sale
of almost €1 billion in NPLs to investment firm
PIMCO. The sale is expected to be completed in
the first half of 2021, and will reduce the bank’s
NPE ratio by five percentage points, a credit positive.
The Cyprus Cooperative Bank (CCB) was
one of the top three banks, until the healthy
assets of the state-owned lender were acquired by
Hellenic Bank in June 2018. As part of the deal,
Hellenic Bank (HB) acquired CCBs total deposits
amounting to €9.7 billion and took on €10.3
billion in assets consisting of performing loans,
bonds and cash, and around €500 million in nonperforming
loans. While assets worth approximately
€8.2 billion were transferred to the state,
with the so-called bad assets managed by stateowned
Cyprus Asset Management Company
(KEDIPES), which is managed by the Cyprus
arm of Spanish company Altamira.
The acquisition strengthened Hellenic Bank’s
status as a major player in the market. Following
the 2013 financial crisis, Hellenic Bank was successfully
recapitalised through private funds, and
also led the way in 2017 in becoming the first
financial institution to join forces with an asset
management company, APS Holdings, to manage
its NPLs. The agreement with the Czech debtservicing
specialist, whose clients include Merrill
Lynch, Bank of America, Unicredit, Fortis Bank,
Banco Populari and Deutsche Bank, is of strategic
importance for HB and is part of the group’s
strategy of reorganising and transforming its
business model. APS Cyprus currently services a
portfolio of NPLs and real estate assets of around
€2.6 billion that consists of non-performing loan
assets and real estate assets.
RCB Bank has been a solid player in the
Cyprus banking landscape for 25 years and
has maintained a very low level of non-performing
exposures and high level of coverage.
Headquartered in Limassol, RCB has sound
capitalisation and good asset quality according
to credit ratings agency S&P, giving the bank a
strong position to weather the macroeconomic
effects of the Covid-19 storm.
With the European Central Bank (ECB)
calling for more consolidation in the EU banking
sector, one Cyprus bank in particular has been
making moves in the local market. Consolidation
and strategic new investment came in 2017 with
a group of international investors led by Lebanese
banker Maurice Sehnaoui acquiring the majority
stake of the Cyprus subsidiary of Greece’s largest
lender Piraeus Bank. Now rebranded AstroBank,
the lender, who cites growth as a top priority in its
strategy, has taken bold steps to expand its opera-
Sector Structure and Regulation
The key
opportunity is
our country's
transition
to the era of
the fourth
industrial revolution. The
digital revolution is no longer
an abstraction. Bank of Cyprus
is constantly upgrading and
expanding its range of digital
products and services and
cultivating digital culture
among its staff and customers.
Our actions come under of the
philosophy “CYON” (Cyprus On)
and go beyond banking. Beyond
Banking is about services and
products that traditionally
were not associated with
the industry however recent
technological innovations open
up a variety of opportunities
through Digital Channels.
Panicos Nicolaou
CEO
Bank of Cyprus
Cyprus’ banking sector is comprised of two tiers: domestically-oriented banks
and international banks. International banks have long been attracted to the
island for its fiscal regime and to use the country as a launch pad into high-growth
and emerging markets. The list of banks of foreign origin in Cyprus consists
of over 30 institutions, which mainly carry out international banking business
and have limited interaction with the domestic economy. Beyond the traditional
deposit and lending services to households, corporations and SMEs, banks in
Cyprus operate under the ‘universal banking model’ and offer a diverse range of
products and services. Deposits from customers have traditionally been the main
source of funding for banks. Banking in Cyprus is regulated by the Central Bank
of Cyprus and is fully harmonised with EU legislation and directives. Changes
introduced by the EU’s Single Supervisory Mechanism (SSM) saw the transfer
of supervision of all the eurozone’s largest banks to the European Central
Bank (ECB) in 2014, harmonising the landscape for all big banks in Europe.
58 Country Report CYPRUS 2020