MARFIN Popular yesterday posted a record full-year net loss of €2.5 billion — hit by a write-down on its Greek sovereign debt holdings and debt provisions – as the bank cleared the slate and announced a change in strategy that would see it focus on its home base.
“The losses are significant but they are fully manageable,” said group CEO Christos Stylianides, who also announced that the lender would be dropping Marfin from its name and revert to Cyprus Popular Bank “to mark the change of course.”
Marfin Popular was created through the three-way merger of Cyprus’ Popular Bank, and Greece’s Marfin and Egnatia banks in 2006.
The island’s second-largest lender said it had factored in a 60 per cent 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.
Provisions for the loans portfolio reached €1.151 billion, compared to €266 million in 2010.
Stylianides said the bank had voluntarily carried out a strict evaluation of its loan portfolio – loan by loan.
“We recognised the loss because we believe that to correct mistakes it is absolutely necessary to recognise them,” he told a news conference.
“It’s cleaning up and moving forward,” the CEO said, voicing his belief that the lender would come out of the crisis stronger.
He was echoed by the group’s non-executive chairman Michalis Sarris who was appointed to head the bank in December.
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 Sarris.
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 per cent 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.
Pressed on the matter yesterday, Stylianides remained tight-lipped. “There is interest from foreign strategic investors,” he said, “but there is nothing to announce, full stop.”
The bank will also raise €600 million through exchanging part of the group’s outstanding capital securities and subordinated debt into Core Tier 1 capital, and another 400 million which would include divestment of non-core business.
Politis newspaper reported that Russia’s second-biggest bank VTB had shown an interest in the bank.
VTB is active in Cyprus via the Russian Commercial Bank.
The bank will also look into cutting costs, especially in Greece where the cost to revenue ratio is 85 per cent, compared with 42 per cent in Cyprus.
It plans to close around 25 branches from some 180 in Greece. Around 10 branches are expected to go in Cyprus.
Stylianides did not speak of layoffs accompanying the closures but said no new personnel would be hired – not even to replace those retiring.
The announcement of the bank’s loss saw its share price climb, eventually closing at €0.291, recording a 19.75 per cent gain.
By George Psyllides
Published on March 1, 2012