3rd Aug 2020 11:11
(Alliance News) - Bank of Cyprus Holdings PLC on Monday said it has reached an agreement with funds associated with Pacific Investment Management Company LLC to sell EUR916 million in non-performing loans.
The bank said the portfolio has a contractual balance of EUR1.46 billion and comprises 22,224 loans, mainly to retail and small-business clients secured over 5,616 real estate collaterals. It added that the sale price equals 46% of the gross book value and 29% of the contractual balance payable in cash, of which 35% is payable at completion and the remaining 65% is deferred without any conditions attached.
The net book value of the assets being sold amounts to EUR440 million. It noted the purchase amount can be increased through an earn-out arrangement, depending on the performance of the portfolio.
Bank of Cyprus said the transaction accelerates its strategy of de-risking its balance sheet by reducing its stock of non-performing exposures by 24% and its NPE ratio by 5 percentage points.
The lender said remains committed to further de-risking its balance sheet, adding that it estimates additional loan credit losses of EUR21 million the second quarter of 2020 as a result of potential further NPE sales in the future. In the fourth quarter of 2019, loan credit losses of EUR75 million were recorded as a result of the anticipated balance sheet de-risking at the time.
The bank's Common Equity Tier 1 capital ratio at June 30 is expected to remain broadly unchanged compared to the CET1 ratio of 14.3% as at March 31.
The sale is expected to complete in the first half of 2021.
"I am pleased to announce the signing of another significant disposal of non-performing loans by the bank, despite the challenging market conditions resulting from the outbreak of Covid-19. This transaction marks further progress against delivering on our strategic objectives of becoming a stronger, safer and more focused institution. We are now better positioned to manage the challenges resulting from the impact of the ongoing Covid-19 crisis, and to support the recovery of the Cypriot economy," said Chief Executive Panicos Nicolaou.
Shares in Bank of Cyprus were trading flat at EUR0.50 each on Monday morning in London.
By Ife Taiwo; [email protected]
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