Depositors caught in bailout cash out at a discount.
Bank of Cyprus customers whose deposits were seized as part of an extraordinary move to rescue the island from financial collapse are cutting their losses and selling stakes in the bank at discount.
Shares in the bank are trading at low double-digit cents on the euro, according to London-based broker Exito Capital, which has matched a small number of buyers and sellers in deals of up to €30m. A number of trades have also included cash deposits locked in fixed-term accounts and sold at a small discount to face value.
Last year, thousands of customers with money in Bank of Cyprus, including many British and Russians, became unwilling shareholders in the lender when their deposits were turned into equity as part of a controversial €10bn emergency rescue.
Depositors saw 47.5 per cent of their money above a €100,000 threshold turned into equity.
More than a third of their cash was then locked into six, nine and 12-month accounts. Shares in Bank of Cyprus have been suspended on the Athens and Nicosia stock exchanges since early 2013 and only one of the fixed term cash accounts has released all of the money due to customers.
Exito’s Ben Rosenberger and Michele Del Bo, who have previously arranged the sale of Lehman Brothers and Icelandic bank distressed debt, said that sellers had so far been mostly international clients who wanted to extract their money from the island by selling their deposits and shares to distressed debt funds.
“When we talked to clients they are extremely frustrated”, Mr Rosenberger said. “It is not clear how long restrictions are going to last”.
In the wake of the bailout, the Mediterranean island introduced the strictest capital controls ever imposed by a country in the European Union, limiting account withdrawals to €300 and preventing Cypriots from taking more than €3,000 off the island.
Domestic restrictions have now been lifted but approval is still required to transfer more than €1m overseas.
A growing number of shareholders and depositors in Bank of Cyprus are showing interest in selling out following news that Bank of Cyprus is planning to raise at least €1bn in new capital before euro-area bank stress tests, according to Nicosia-based bankers and lawyers.
Cypriot savers and businesses are trying cope with capital controls and a severe economic recession following a botched €10bn international bailout for the island
Some shareholders fear the move will dilute their stakes.
“Russian shareholders in particular aren’t happy. They’ve expressed concern about the impact of dilution and some are now looking for alternative solutions,” a Nicosia-based banker said on Friday.
A source close to Bank of Cyprus was keen to play down the sales, calling the transactions insignificant relative to the number of shares in issue.
Russian and Ukrainian companies that kept funds in Cyprus emerged unwillingly as the bank’s biggest shareholders with a combined stake of more than 30 per cent, after their deposits were turned into equity.
The bank’s situation is still precarious even though it has returned to profit, with non-performing loans at 55 per cent but provisioning of only 35 per cent.
“The pricing of the new offering will be the deciding factor in my clients’ decision (on whether to cut losses and sell). But they also have issues with the continuing capital controls,” said a Cypriot lawyer representing several Russian shareholders.