What Bank Of Cyprus Has To Sell: Real Estate Portfolio Accounts For 40% Of Loans

04.10.2013 By Anelis Baciu , Ciprian Botea

The tension generated among clients by the closure of the Bucharest unit has not become apparent yet.

The decision of the Cypriot central bank to extend by two weeks the suspension of operations at the Romanian branch of Bank of Cyprus had a limited impact on the bank’s clients, who are waiting to get back their money, currently frozen in their deposit accounts.

Clients have the comfort of being able to use their cards to withdraw money from ATMs, but up to 4,000 lei per day unless the client and the bank agreed to a different maximum limit when signing the contract. They can also make withdrawals at a zero cost from Banca Transilvania ATMs.

“I am not concerned about the suspension of operations being extended. I think problems will be solved one way or another, I am confident the bank will be sold.  My deposits at the bank are lower than EUR100,000 anyway and I am not worried. I have conducted ATM transactions these last few days and have not had any problems doing so,” said a client who was at the Bucharest headquarters of Bank of Cyprus on Calea Dorobantilor Tuesday morning.

The central bank of Cyprus decided on Sunday to extend until April 22 the suspension of operations of the Bucharest branch, which had initially closed down for a week.

Bank of Cyprus announced that this week it would start negotiations with banks interested in taking over its client portfolio. Market sources initially said three buyers were analyzing the portfolio of the Cypriot bank, but the latest information shows two of them have since withdrawn.

Bank of Cyprus Romania had a total loan portfolio of EUR570 million at the end of September 2012, with EUR70 million being included in the “default” category and deposits of around EUR245 million. According to some information, the bank has now been left with deposits of just EUR100 million.

Figures published for the first nine months of 2012 indicated a significant exposure to real estate and tourism. The volume of real estate loans granted amounted to EUR225 million, i.e. 40% of the total. However, real estate exposure has declined by 65% against the end of 2011.

Loans granted to small firms amounted to just EUR56 million, while individual clients had loans of EUR43 million, around 40% of which were mortgage-secured. Exposure to leu-denominated government securities corresponded to EUR57 million, only EUR6 million of which were investments held to maturity.

Bank of Cyprus entered the Romanian market relatively late, in 2007, after previously operating through a representative office, so it has remained a discreet presence on the market.

The bank only has a few thousand clients and it has focused on the corporate segment. The low number of clients is one of the reasons why the tensions generated by the suspension of activity of the Bucharest branch have not surfaced.

However, ZF readers have signaled transaction-related problems in the last week.

“Electronic promissory notes submitted on Friday [March 29] after 11 o’clock were no longer paid, clients were not notified about this and did not have access to their bank statements,” a client of the bank wrote on www.zf.ro.

Bank of Cyprus Romania operates as a branch of the parent bank in Nicosia and is subject to the regulation of the Cypriot central bank, with its deposits being guaranteed through the guarantee scheme of the Cypriot system. The bank had managed to keep its level of deposits attracted from clients relatively steady in the past few years, by paying interest rates significantly above market average.

(English version by Daniela Stoican)