Is Cyprus banking sector heading for a shake-up?

The Cypriot banking sector is in trouble, and it looks like Eurobank is on the verge of acquiring Hellenic Bank. Meanwhile, Astrobank and CDB Bank's relationship has shifted from a "flirtation" to an "appointment." CDB Bank has received Astrobank's acquisition proposal, and there might be developments by the end of September. If everything goes smoothly, Cyprus will have fewer banks, down from nine, by the end of 2024, with a significant reduction in employees and branches since 2012.

Regarding CDB Bank's deal with Astrobank, the numbers in Astrobank's proposal haven't impressed stakeholders, so they might need to come up with a better offer to satisfy CDB Bank. But why does Astrobank want CDB Bank? Astrobank sees growth opportunities in the Cypriot banking sector, particularly in absorbing smaller banks. They also have their eye on Ancoria Bank but haven't made a takeover proposal like they did with CDB Bank. CDB Bank mainly deals with business loans, aligning with Astrobank's 70% focus on business. This move may indicate Astrobank's future direction, emphasizing business actions.

Astrobank doesn't anticipate needing a capital increase if it acquires CDB Bank. They have substantial own funds, with a 2022 net profit of 12.2 million euros, own funds of 203.7 million euros, and a capital adequacy ratio of 17.96%. CDB Bank, on the other hand, had a net worth of 38.2 million euros in 2022, with a CET1 capital ratio of 16.04%. Customer deposits reached 487 million euros, while non-performing loans stood at 65.3 million euros. The proportion of good loans to bad loans was 26.2%, with provisions on loans reaching 46.9%. Their total borrowing by the end of 2022 amounted to 250 million euros, and their liquidity ratio was at 304%. The bank's total assets amounted to 548 million euros.

The Central Bank of Cyprus is aware of these developments, although it may not directly intervene. It follows the European Central Bank's supervisory guidelines, which aim for a smaller but stronger banking sector in member states. The collapse of the sector could align with these goals, although the focus remains on reducing problematic loans, with larger banks making more progress in this regard.

Eurobank is set to change by mid-2024 after acquiring the remaining shares of Hellenic Bank. Currently, Eurobank holds a 55.3% stake in Hellenic Bank, and it's unclear if they will merge Eurobank Cyprus and Hellenic Bank into a single entity or maintain both under separate names on the island.

[This article was translated from its Greek original]