TIDMBOCH
RNS Number : 9830L
Bank of Cyprus Holdings PLC
18 January 2021
Announ cement
Agreement for sale of a portfolio of Non Performing Loans
Nicosia, 18 January 2021
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014.
Further to the agreement for the sale of Non Performing Loans
announced on 3 August 2020 ("Helix 2 Portfolio A"), Bank of Cyprus
Holdings Public Limited Company ("BOC Holdings" and, together with
its subsidiaries, the "Group") has reached agreement with funds
affiliated with Pacific Investment Management Company LLC
("PIMCO"), for the sale of an additional portfolio of Non
Performing Loans ("Portfolio B") with a gross book value of EUR545
mn(1,2) (known as "Helix 2 Portfolio B", or the "Transaction").
Portfolio B had a contractual balance of EUR783 mn(3) and
comprises c.16,000 loans, mainly to Retail and SME clients, secured
over c.4,000 real estate collaterals. The net book value of the
assets being sold amounts to EUR244 mn(1) . The gross consideration
amounts to 44%(1) of the gross book value and 31%(3) of the
contractual balance payable in cash, of which 50% is payable at
completion and the remaining 50% is deferred up to December 2025
without any conditions attached. The consideration can be increased
through an earnout arrangement, depending on the performance of
Portfolio B.
The Transaction represents another milestone in the delivery of
one of the Group's core strategic objectives of improving asset
quality through the reduction of NPEs. The Transaction reduces the
stock of NPEs by 22%(1,4) . Overall, the pro forma NPE reduction
for 2020 amounted to c.EUR2.1 bn(4) reducing NPEs to EUR1.8 bn(4)
and the NPE ratio to 16%(4) , including Helix 2 (Portfolios A and
B) and an organic NPE reduction of c.EUR600 mn.
At completion, the Transaction is expected to be broadly
neutral(1) to the Group's capital ratios. Upon the payment of the
deferred consideration and without taking account of any positive
impact from the earnout, the Transaction is expected to have a 14
bps(1) positive capital impact on the Group's CET1 ratio. The loan
credit losses on Portfolio B, expected to be recorded in 4Q2020, is
estimated at c.EUR27 mn.
The completion of Helix 2 Portfolio B will be aligned with the
completion of Helix 2 Portfolio A and is currently estimated to
occur early in 2H2021. The completion remains subject to a number
of conditions, including customary regulatory and other
approvals.
Following a transitional period where servicing will be retained
by the Bank, it is intended that the servicing of both Portfolios
will be carried out by a third party servicer selected and
appointed by the purchaser.
PIMCO is one of the world's premier fixed income investment
managers. With its launch in 1971 in Newport Beach, California,
PIMCO introduced investors to a total return approach to fixed
income investing. In the 45+ years since, the firm continued to
bring innovation and expertise to their partnership with clients
seeking the best investment solutions. Today PIMCO has offices
across the globe and 2,900+ professionals united by a single
purpose: creating opportunities for investors in every environment.
PIMCO is owned by Allianz SE, a leading global diversified
financial services provider.
Panicos Nicolaou, Group Chief Executive Officer, commented:
"I am pleased to announce the signing of the disposal of the
Helix 2 Portfolio B today, another milestone in our de-risking
strategy.
Despite the on-going challenging market conditions, the Bank has
signed the sale of EUR 1.4 bn(1) NPEs in the last six months (Helix
2 Portfolios A and B). Our combined de-risking actions have reduced
NPEs in the year 2020 by c.EUR2.1 bn(4) , from EUR3.9 bn to EUR1.8
bn(4) , and the NPE ratio from 30% to 16%(4) .
Overall, s ince the peak in 2014, we have now reduced the stock
of NPEs by EUR13.2 bn(4) or 88%(4) and the NPE ratio by 47
percentage points(4) , from 63% to 16%(4) .
As part of our broader strategic objectives to drive shareholder
value creation as set out with our medium term strategic targets
announced with our financial results for the nine months ended 30
September 2020, we remain committed to further de-risking the
balance sheet and we will continue to seek solutions, both organic
and inorganic, to achieve our target of a single digit NPE ratio by
the end of 2022. We will continue to assess the potential to
accelerate the decrease in NPEs on our balance sheet through
additional sales of NPEs in the future.
We are now better positioned to manage the challenges resulting
from the impact of the on-going COVID-19 crisis, and to support the
recovery of the Cypriot economy".
Morgan Stanley & Co. International plc and KPMG LLP acted as
financial advisors, Allen & Overy LLP acted as English legal
advisors and Chryssafinis & Polyviou LLC acted as Cypriot legal
advisors to the Bank in this Transaction.
For further information, please contact Investor Relations at
investors@bankofcyprus.com .
(1) Based on the Group Financial Results for the nine months
ended 30 September 2020.
(2) On balance sheet gross book value of which EUR529 mn(1)
relate to non-performing exposures or "NPEs". The gross book value
of EUR545 mn(1) includes properties of EUR9 mn(1) that will also be
transferred to the buyer.
(3) As at the portfolio reference date of 30 September 2019.
(4) Calculations on a pro forma basis assume legal completion of
both Helix 2 Portfolio A and Helix 2 Portfolio B.
Group Profile
The Bank of Cyprus Group is the leading banking and financial
services group in Cyprus, providing a wide range of financial
products and services which include retail and commercial banking,
finance, factoring, investment banking, brokerage, fund management,
private banking, life and general insurance. The Bank of Cyprus
Group operates through a total of 98 branches in Cyprus, of which
14 operate as cash offices. Bank of Cyprus also has representative
offices in Russia, Ukraine and China. The Bank of Cyprus Group
employs 3,577 staff worldwide. At 30 September 2020, the Group's
Total Assets amounted to EUR21.5 bn and Total Equity was EUR2.1 bn.
The Bank of Cyprus Group comprises Bank of Cyprus Holdings Public
Limited Company, its subsidiary Bank of Cyprus Public Company
Limited and its subsidiaries.
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