12° Nicosia,
29 May, 2024

The landscape of bank equity is changing in Cyprus

The success of Eurobank's upcoming internal moves will depend heavily on Pimco

Panayiotis Rougalas

Panayiotis Rougalas

A day before 2022 came to an end, Eurobank made the announcement that it had added 3.2% more shares of Hellenic Bank, bringing its total to 29.2% (pending regulatory approval), and altering the bank's balance "for good". If Hellenic Bank underwent a lot of changes in 2022, the group will experience a flurry of changes in 2023 as Eurobank is close to acquiring more than 30% of the company.  Eurobank did not purchase the remaining 0.8% of Hellenic shares from any shareholder on purpose, as it needed to be certain that the other shareholders will accept the public offer it will make. At this point, it may not have had the support of the other shareholders, but Eurobank should get it right sooner or later. Aside from Third Point, which provided Eurobank with the platform to enter Hellenic's share capital and has no other shares left, Wargaming and Senvest are thought to be willing to approve a public offer from Eurobank.  After all, they were one of the two who entered into an agreement with Eurobank to sell Hellenic shares they owned. The question now is whether discussions have already taken place with Pimco, Hellenic Bank's other major shareholder, and what its intentions are. Pimco, the shareholder known within the bank as "Poppy Sarl," which owns 17.3% of Helleniki's share capital, will be crucial to further move by Eurobank within the bank in the near future. It should also be noted that Wargaming still owns 7.2% of Hellenic, while Senvest owns 1.8%.

Estimates for the 50% plus

The question now is whether or not discussions have already taken place with Pimco, Hellenic's other major shareholder, and what its intentions are.

The above exercises raise concerns about who will complete the 51% puzzle for Eurobank to launch a successful public takeover bid. Eurobank should be expected to receive the necessary approvals to acquire 29.2% of Hellenic Bank. If one does the math, Eurobank will reach 38.2% by acquiring Wargaming's 7.2% and Senvest's 1.8% in the future. However, with Pimco's approval, Eurobank's stake rises to 55.5%. According to banking sources, Pimco may soon give Eurobank the go-ahead to acquire the entire Greek bank, as Pimco's "business" has improved.  With the purchase of the healthy portion of Synergatis in 2018, Pimco entered the market and invested €50 million in Hellenic Bank's capital increase. Since then, the bank has purchased three sizable loan packages from the island's two major banks -  Cyprus Bank and Hellenic. It purchased Helix 2 and Helix 3 from the Bank of Cyprus and received approximately 2 - 2.1 billion in non-performing loans. It purchased 700 million bad loans from Hellenic Bank, making it the largest buyer of NPLs in Cyprus. Our renowned Themis is the organization in charge of overseeing all of these non-performing loans by Cypriot standards.

From there, it will be interesting to see what course other shareholders, such as the Cyprus Bank Employees Welfare Fund (CBCWF), bank employees, and the BOC omnimus account, will take. They hold approximately 40 million shares out of the total 412 million shares issued, accounting for 9 - 10% of Hellenic's shares. They are referred to as "others" in the Bank's shareholding structure. Hellenic's 'other' shareholders own 23.5% of the company.

Eurobank acquired 13.2 million shares in Hellenic Bank on December 30, 2022, from investment funds managed by Senvest Management LLC. Senvest Master Fund LP and Senvest Global (KY) LP, both managed by Senvest Management LLC, hold 1.2% and 0.6%, respectively, for a total holding of 1.8%. Wargaming Group Limited agreed to sell 13.41% (55,337,721 shares) of its shareholding in Hellenic Bank to Eurobank S.A. on November 30, 2022. for a total of €70 million (1,265 euros per share). Following the completion of the agreed-upon sale and purchase agreement, the Company will retain a 7.2% stake in Hellenic Bank.

The position taken by the former major shareholder of Hellenic, Dimitra Investment, which, together with Logicom, which has a connection, owns 24.5% of the bank, will also be of great interest.

The most beneficial scenario

The share sales, and thus Eurobank's large and tangible interest in Hellenic, comes at a time when Hellenic has announced large profits, plans to pay interest to MAK holders and is preparing to pay dividends. Hellenic Public Bank announced in late December that its board of directors had approved its new strategic plan, which forecasts pre-tax profits of more than €200 million in 2023.  At the same time, the bank has indicated that it will apply to regulators to begin paying dividends in 2023, subject to supervisory approval. Meanwhile, Hellenic Bank has announced that it will begin paying interest on its MAK 1 and MAK 2 Convertible Capital Securities before the end of 2022. The preceding picture raises legitimate concerns about why investors sold shares while a "dreamy" 2023 for the Hellenic Bank that will finally deliver returns is on the horizon.

[This article was first published in Kathimerini's 'Oikonomiki' edition and translated from its Greek original]

Cyprus  |  banks

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