CYPRUS’ second-largest lender said it had factored in a 60 percent impairment in the value of its Greek bonds, writing off some €1.9 billion in their nominal value.
Marfin is the most heavily exposed among Cyprus’ three major banks to Greek debt. Last week, Bank of Cyprus announced a €1.0 billion loss on a 60 per cent write-down on its Greek debt holdings.
Adding a goodwill impairment charge related to Greek operations, the bank said total losses after tax reached €3.33 billion. The bank said the goodwill impairment did not affect the group’s regulatory capital position.
The bank also referred to ongoing poor Greek macroeconomic conditions.
Unlike its peers, Marfin failed to factor in losses from the higher private sector involvement (PSI) agreed by the eurozone last year when it announced its nine-month results in November.
“We have acknowledged the problem in full transparency which enables us to embark on a new beginning,” said Michael Sarris, the non-executive chairman appointed to head the bank in December.
Adding to its damaging Greek exposure, Marfin needs some €1.35 billion in new capital to reach EBA requirements of a Core Tier 1 capital ratio of 9 percent by the end of June.
The bank said it planned to raise €1.35 billion through a rights issue, or a private placement, or both. Bank executives have confirmed they are talking to potential new investors, but have failed to be more specific.
“The Group has received serious interest from a number of credible strategic investors,” the bank said.
Politis newspaper reported that Russia’s second-biggest bank VTB had shown an interest in the bank. A Marfin executive declined to comment.
VTB is active in Cyprus via the Russian Commercial Bank. (Reuters)
Editor’s comments
The exposure of the Cypriot banks to Greek government bonds is the prime reason for bringing the Island’s credit rating to near junk status.
Yesterday the European Central Bank reacted to Standard & Poor’s decision to downgrade Greece to “selective default” by temporarily suspending authorisation for Greek bonds to be used as collateral by banks seeking funds from the central bank.
Although this is a first step to recognising the poor actual position of their bank’s balance sheet (albeit perhaps only because there was a new Chairman in December with his sweeping brush), I wonder when they will properly and fully account for the non-performing developer loans?
This sounds catastrophic. announcing a “new beginning” hardly draws a line under the bank’s recent poor, nay disastrous? performance; a €1.35m Rights Issue looks unlikely to succeed; a Private Placement seems much more likely and it comes as no surprise that one – or likely more – Russian banks ‘may be interested’.
Neither a Government nor Eurozone bail-out seems likely and neither a Government or Eurozone bail-out seems likely either.
Not the place surely at present to keep anything other than day-to-day funds ?