BANK of Cyprus’ (BoC) total exposure to risky loans could run in the billions, with developers being among the worst corporate customers, according to an internal bank memo leaked by Politis.
The paper published the purported bank memo in its Sunday edition, showing that a series of loans issued originally in the period 2005-2008 were being refinanced into 2011 and beyond, even though it should have become obvious by then that they had turned toxic.
BoC’s non-performing loans – which according to some estimates may be in the region of €6bn – is the single largest threat faced by the lender. There are fears that the bad loans could deplete the bank’s equity after the lender was recapitalised by seizing customers’ deposits.
According to the leaked BoC memo, up until June 2013 the Dolphin Group – part of the Aristo Group of developers – owed the bank €300m. In 2011 Aristo Group’s liabilities had amounted to €198m, and to just €24.5m in January 2006.
An annotation notes that the bank, “swayed by the climate of prevailing economic euphoria, issued substantial loans for large developments without taking into account the possibility of a recession or at least a stagnation in the market…”
The Leptos Group, the leading property developer, surpassed even Aristo: in the summer of this year its liabilities to BoC came to €510m. In 2011 it owed the bank €235m, and in January 2006, €84m.
On Leptos, the memo notes that “despite the group’s problematic transaction performance [inability to service the interest on the loans], the bank continued to increase its loan exposure with the group without ensuring repayment.”
Meanwhile in 2012 Shacolas Group is shown to owe €336m, which was somewhat decreased after the group sold its stake in telecoms provider MTN earlier this year.
The Tsokkos Group (hotels) had pending loans amounting to €230m.
Politis said the memo was requested by the bank’s new leadership, which has pledged to examine all the risky loans one by one.
Hi Peter
nice to read your comments, hope you are enjoying Life back in the UK, get in Touch.
Max
@ron – I cannot say whether the figure you have been charged is correct. Leptos (unlike your friend) will be paying Immovable Property Tax at the highest rate of 1.9% this year on the 1980 value of your property. Last year the top rate was 0.8% – and the year before that 0.4%.
You need to ask Leptos to supply you with records of the amount paid as Immovable Property Tax (IPT) and a certificate showing the rate of IPT applicable to the property – please refer to this letter from the Interior Ministry.
Also, see how Immovable Property Tax is levied and your contractual obligations at Cyprus Immovable Property Tax.
I was in Paphos in October and wanted to pay this new property tax .not having a bill I asked a neighbour how he had got on with his. Oh I went to the tax office and paid it he said. About €250 I think he said. I decided to go to the Leptos office and see if I could get any more information on it to be told that would be in touch with me in due course. Anyway I got a bill today from Leptos for €1038 itemised at €432 for this year and €606 for previous years. Do you think this is right. Somehow it doesn’t to me. Your comments please. R
Hi Ron thank you for your comments, but unfortunately you are on a site where people air there grievances. Cyprus is a wonderful place to live but we all recognize there are some serious problems that need to be addressed, and it seems that the present government are dealing with this – unfortunately Rome was not built in a day and many people on this site want all problems fixed immediately! Many commentators and I think that I can include Nigel in this, can see that significant progress is being made.
Where is this Utopia that people are looking for? buyers are scammed in the UK, maybe Egypt was a good place to buy? What about Spain where it is now estimated that 100,000 people will have their houses demolished because of illegal planning permits? The present government aided by the Troika are slowly resolving the property problems in this county – but it will take time as there is a lifetime of corruption and bad management to overcome.
This is a wonderful country and good friendly people, and taking care with a property purchase can bring many rewards – at least an illegal property is not knocked down!! It is December and in the day time we can still sit outside. Good to see a positive comment on this site.
ron richardson.
You’re living in a total fool’s paradise and are in for a very rude awakening.
Mr. Richardson, I admire your optimism but I can only assume that your experience of the depths to which the banks, lawyers and developers will sink must be limited. Beware!
If you look around the world you will find a lot of worse places to live. I’ve owned a place in Cyprus for 7 yrs. love it and may retire there shortly. At the moment I’m in the UK. What I do notice is a lot of wingers and negativity in Cyprus though. Some people you can never please.
@ Mr Ron Richardson.
No one with any sense, ( unless they are totally brain dead!) will now touch any property in Cyprus ( or elsewhere!) without full, clean / un-encumbered and immediate Title Deeds at point of sale / exchange of contracts, end of story. RB.
Sorry Ron Richardson, but you may not be proved to be correct on this issue. There are so many other options open to potential buyers at far lower prices. In countries where their money will go further. Very few will opt for the Cyprus market because of the well known and documented problems in Government, Banks, Solicitors and Developers.
You may have forgot, that even when the market was booming, these developers owed the banks a sizable sum. The difference now is the market’s disappeared, the only thing that can sort this mess out is time. The recession ends, the world moves on, the Chinese buy a number of properties, the Brits return, the sun shines and the world keeps on turning. It takes time but it will happen eventually.
Frank – sadly business in Cyprus, at least at the top end, is riddled and fueled by nepotism and cronyism. There is no problem for those in the know or within the circus as others, including the taxpayer, will pick up the bill. Apathy and a degree of ignorance feeds the circus. The ignorance is by design as the population is drip fed terminological inexactitudes (lies to you and me) by those charged to look after their interests, it is no reflection on the population as a whole who are fundamentally honest and hard working but it is nothing new and I am sorry to say not just restricted to Cyprus. Other countries are just more adept at hiding the fact. You are correct in your observation however in that giving developers the presidential ear is tantamount to placing a fox in charge of the chicken shed. Unbelievably naive and foolhardy but it may be that the analysis is that the developers are just too big to be permitted to fail. In which case be prepared to foot the bill.
Can it be only 6 days since Nigel published “Developers seek support for large projects” on 21/11/13?
That report was summarised: “Development is the key to pulling the country out of the recession.” Really? This latest article suggests that the developers are actually a major cause of harm to the Cyprus economy.
The earlier article further reports that: “Association chairman Theodoros Aristodemou said he was satisfied with the understanding showed by the president (Anastasiades) and his readiness to help further development projects.”
Theodoros Aristodemou is, of course, Chairman of Aristo Developers: named above as being €300m in debt (unserviced?) to Bank of Cyprus. He was formerly that bank’s Chairman. It appears that his conflicting interests led to an incestuous relationship. Should Aristodemou even have President Anastasiades’s ear? Can he truly pretend that developers are the solution to the problems which they largely created?
I am having trouble to see the list of company names that are published. Any chance you could write the full list of company names on site here please?
I shouldn’t think for one minute that the Troika teams ‘missed’ what seems to have been blindingly obvious, the massive ‘non-performing’ (equals Bad in most cases!) debts racked up, most of them with the ‘blessings’ of the banks, certainly not just BoC, by ‘more than a handful’ of large Developers.
Troika too have to play the Eurozone game of ‘kicking the can down the road’, they will drip-feed the realities when they, and their partner organisations, ‘see fit’. I still stand by my Forecast(s) made long before March, 2013 :’ the the overall ‘deficit’ and therefore one way or another the bail-out figure will be well in excess of €20bn. It will be interesting to see how the Clean Up specialist from RBS starts to tackle these massive, inter-related .cans of worms’!
Wasn’t the Chairman of Aristo also the Chairman of BoC during this orgy of dodgy lending?
Also BoC is not the only bank lending to Leptos – by the way, didn’t a banner at the Leptos Buyer Action Group demo against them call them something else?
What price for Neopolis now? – time for another Hitler spoof Nigel?
So how come the Troika, IMF etc miss this when deciding on whether to bail Cyprus out?
It’s getting almost like groudhog day every time we read something.