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The Cyprus Banking System

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Presentation on theme: "The Cyprus Banking System"— Presentation transcript:

1

2 The Cyprus Banking System
Miltos Michaelas, Director - International Business Banking The Cyprus Banking System

3 Cyprus ratings The most recent 10-year CY bond which
was Issued in February 2010 is now trading at 121 bps spread.

4 Cyprus EU member & Euro zone member Proven versatility in crisis
Milder effects from the economic crisis Inflation within control Stable, conservative Central Banking System and effective regulatory framework The financial sector withstood the global crisis and no public recapitalization or government support was necessary Cyprus is in the OECD white list

5 Extracts from Deutsche Bank report on the Banking Industry in Greece and Cyprus (21/01/09)
From a macroeconomic perspective, we agree with most economists that Cyprus is, relative to other world economies and Greece in particular, in a healthier position to sail through the current storm. Our view is supported by the island`s positive budget balance and relatively low public indebtedness. It is important to point out that, as opposed to Greece, the Cyprus Government has the economic resources to boost the real economy if needed.”

6 CBC Governor comments “That said, I should point out that the budget deficit estimate for 2009 puts Cyprus in the middle of the range for the euro area as a whole. The situation is clearly not as dire as in some other euro area countries. To some degree this is because the recession we experienced in 2009 was not as deep as in other regions of the euro area. A comparison with the Greek economy is not warranted. Our budget finances are in better shape and our debt to GDP ratio is considerably smaller.” Athanasios Orphanides, Governor of the Central Bank of Cyprus, Interview with Bloomberg, 11 February 2010

7 Qatar's Emir, Sheikh Hamad bin Khalifa al-Thani Nicosia 21.4.2010
Cyprus going strong in 2010 Total deposits ιn Cyprus increased by €4,1 billion during the first 4 months of 2010 (7,0% to €62,2 billion) - reflecting the "safe-heaven" qualities of the market. Property sales rising Qatar agreement: a $500M joint project in hospitality/property sectors confirming Cyprus economic potential "Our decision to proceed with such a large investment in Cyprus is due to the fact that the Cypriot economy has not been affected to a great extent by the (world) financial crisis. The Cypriot economy has opportunities for growth." Qatar's Emir, Sheikh Hamad bin Khalifa al-Thani Nicosia

8 Cyprus Banking

9 Cyprus Banking A market driven system based on English law, a legacy of the British colonial rule Marfin Laiki Bank, BOC – more than 100 years old Legal and Banking structures (still) reflect British equivalents Corporations Act Marfin Laiki is number 1 on Register of Companies Open, competitive, multivariate, multidimensional, even multicultural Banking Industry Well capitalised and profitable banks

10 A Multitude of Banks of past and present
LISTED BANKS Marfin Popular Bank Public Co Ltd Bank of Cyprus Public Company Ltd Hellenic Bank Public Company Ltd USB Bank Plc OTHER BANKS Co-operative Central Bank Ltd The Cyprus Development Bank Public Company Ltd Housing Finance Corporation Mortgage Bank of Cyprus Ltd BRANCHES OF BANKS OF COUNTRIES OTHER THAN EU BankMed s.a.l.  Arab Jordan Investment Bank SA BANQUE BEMO SAL  Bank of Beirut SAL BBAC SAL  BLOM Bank SAL  Byblos Bank SAL  Credit Libanais SAL  FBME Bank Ltd Open joint-stock company AvtoVAZbank  OJSC Promsvyazbank Jordan Kuwait Bank PLC  Jordan Ahli Bank plc Lebanon and Gulf Bank SAL  Lloyds TSB Offshore Limited Privatbank Commercial Bank IBL Bank sal  SUBSIDIARIES OF FOREIGN BANKS Αlpha Bank Cyprus Ltd BNP Paribas Cyprus Ltd Emporiki Bank – Cyprus Limited Kommunalkredit International Bank Ltd National Bank of Greece (Cyprus) Ltd  Russian Commercial Bank (Cyprus) Ltd Societe Generale Cyprus Ltd Piraeus Bank (Cyprus) Ltd Eurobank EFG Cyprus Ltd  BRANCHES OF BANKS OF EU COUNTRIES Barclays Bank PLC Banque SBA SA First Investment Bank Ltd  Joint Stock Company “Trasta Komercbanka” National Bank of Greece S.A. Central Cooperative Bank PLC Banca Transilvania S.A. Joint Stock Company Akciju Komercbanka "Baltikums" REPRESENTATIVE OFFICES UBS AG Atlasmont Banka A.D. 

11 Central Bank of Cyprus (CBC)
Cyprus joined euro area on 1 January 2008 Interest rate management is now the responsibility of the European Central Bank (ECB) Governor is a member of the Board of ECB The primary objective of the ECB is to ensure price stability, which means keeping inflation rates below, but close to, 2% The CBC has supervision over the commercial banks

12 An Effective Supervisory Mechanism
Proven track record in setting Monetary Policy and safeguarding the Banking system IMF’s Assessment of Financial Sector Supervision Report: “Supervision is strong, effective and in compliance with International Standards” Full adoption of European Regulation Use of non-interest rate tools proactively: Tight(er) liquidity requirements – only 30% of FX deposits can be lend out by Banks Managed “cooling off” of the propertymarket: tightened LVRs since mid 2007, to 70%.

13 More deposits than loans
Cyprus is self sufficient in liquidity, post (liquidity) crisis No deposit withdrawals by international customers Loan growth under control April 2010 Loans/deposits 95% €4,1bn increase in deposits in first 4 months of 2010 (7% increase) €bn Euro deposits growing faster than FX since mid 2006 Time deposits grew faster than demand after Sep 2008 €bn

14 A Competitive Banking Market
Commercial Banking 8 local Banks and other credit Institutions 9 subsidiaries of Foreign Banks 27 International Banks operate branches Very open & automatic for EU Banks 462 branches plus 33 IBUs Supervised by the Central Bank of Cyprus Large Cooperative sector 111 co-ops Supervised by the Cooperative Central Bank

15 Experiences from Abroad
1970 1980 1990 2005 Entry to CEE was a calculated move to extend products and services to existing (international) client base Banking experiences in UK, Australia, USA, South Africa, Canada Entry of main Cypriot banks in Greek Market solidified international strengths and experiences Targeting Greek & Cypriot populations in developed countries

16 Commercial Banking Highly educated human resources
Strong Banking Fundamentals Adoption of Basel II Conservative Lending Practices Good breakdown of operations between markets Very good profitability record No exposure to “Toxic Assets” Limited exposure to CEE Healthy Capital and Liquidity positions

17 Solid Financial Package attracts International businesses
Benign low tax environment Extensive Array of Double Taxation treaties Mature Legal and Accounting practices Strong Banking Sector Euro shields against currency crisis provides access to ECB arsenal of support expands the attractiveness of the Banking system for foreign deposits and transactions Attraction of International Businesses expands banking client base

18 Government Crisis Support
Was not needed for Cyprus Banks given their strengths and reasonable risk exposures In fact, the Cyprus Government did not have to “bail out” or provide direct support to any private organisation. Government has the means for direct support but their use has been unnecessary in the global crisis of 2008/09 Fiscal stimulus package being implemented The Central Bank of Cyprus offers and operates a Deposit Protection Scheme up to € per person or legal entity per Bank.

19 Update on Cyprus Banking System
“Despite negative developments in the real economy, our banking system remains in very good condition. Our banks are healthy, robust and have a strong capital base with a capital adequacy ratio of 11.9% at December 21, 2009, well above the minimum requirement of 8%. The ratio of non-performing loans, which was declining steadily over time, may have increased in 2009 but is still within acceptable levels. Please note that satisfactory provision for bad debts has been set aside for these loans. Regarding the profitability of banks, this has been satisfactory in During the year under review, which was a difficult year, banks have remained profitable, but with a smaller profit than that of 2008” Athanasios Orphanides, Governor of Central Bank of Cyprus, Press Conference, Nicosia 3 May 2010

20 A good Example Marfin Laiki Bank

21 Group Profile – 109 Years Old
Marfin Laiki Bank (MLB) is strategically positioned as an emerging regional player with two home markets, Greece & Cyprus, and operations spanning in 11 countries in Emerging Europe, UK, Australia, Malta, Russia & Ukraine Regional bank with focus on corporate banking, wealth management and international business banking Ten years of robust growth both organically and through a series of mergers & acquisitions and strategic alliances Successful management track record and entrepreneurial culture Head-Office in Cyprus 507 branches, over staff

22 Credit Ratings Credit Ratings Their Comments
“The rating derives from the bank’s very strong position in its domicile market, its expanding franchise in Greece due to the consolidation of the group’s three banking subsidiaries and its improving financial fundamentals” “The ratings of (MLB) reflect its sound franchise in Cyprus and to a lesser extent Greece, its adequate funding profile supported by a large deposit base, good cost management and improved capitalisation… Following a period of rapid loan growth and international expansion, including the integration of Athens-based subsidiary Marfin Egnatia Bank (MEB; rated ‘BBB+’ Outlook Negative), the bank is now focusing on containing asset-quality deterioration, maintaining sound liquidity and improving cost efficiency. The latter should be helped by the planned merger of MEB into MLB, likely in Q210.” Long term Bank deposits A3 Senior unsecured debt A3 Subordinate Debt Baa1 Bank financial strength C- Short term P-1 Long term Issuer Default rating BBB+ Short Term Issuer Default rating F2 Individual Rating C Support Rating

23 Strong Shareholders-Allies
MLB shares are listed on the Athens and the Cyprus Stock Exchanges Biggest shareholder is Dubai Investment Fund with 18,81% No exposure to Dubai fund or Dubai economy – confirmed by press release and Rating Agencies comments Other key shareholders proposed purchase of stake 2nd biggest is Marfin Investment Group (MIG) with 9,55% Listed in Athens Stock Exchange €5,19bn capital raising through private placement completed in July 2007 Most recent investment: Olympic Airlines

24 Financial Information
Key balance sheet items (€m) FY08 FY09 1Q10 Loans to customers (net) 23.427 25.082 26.041 Total assets 38.367 41.828 42.311 Customer deposits 24.828 23.886 24.791 Total equity 3.430 3.636 3.674 Tangible equity 2.165 2.358 2.388 Key ratios Tier 1 8,6% 9,7% 10,1% Capital adequacy ratio 10,6% 11,8% 12,1% Cost/income 54,5% 58,1% 56,8% NIM 2,4% 1,72% 1,81% Loans/Deposits 94,4% 104,0% 105,0% NPLs 4,3% 6,1% 6,33% Provisioning 61 bps 105 bps 108 bps

25 Comments on 2009 Results UBS Cheuvreux Unexpectedly good results
Marfin delivered better than expected earnings of €30m: Marfin’s fourth quarter earnings beat our estimates by 32%, coming in at €30m versus our expectation for €23m. The beat came from lower impairments, while fees also surprised positively. Earnings for the full year amounted to €174m, down 56% y/y (€187m, down 44% adj). Overall a good set of results, with positive trends in asset quality and equity levels, though deposits were down q/q. UBS Unexpectedly good results Q4 bottom line significantly beats our estimates Surprise came from stronger NII (particularly in Greek operations) improving fee generation and higher trading. The solid top line performance more than offset the higher than expected costs in Q4. Cheuvreux

26 Recent issue of capital securities (April 2010) Hybrid Tier I Notes
Size of issue: Through a private placement up to €200 m with an option to extent Application process closed on Friday, 7th May 2010 Oversubscribed to €250 m The proceeds to be used to further strengthen the Banks Tier I capital June 2010-Public offer for €50m under way

27 Marfin Laiki Bank Achievements
“Quality Recognition for Outstanding Achievement Award, ” (Best in Class STP Rates) Awarded by “JP Morgan” “Best Investment Services Provided, Cyprus 2008” Awarded by “World Finance of Reuters” – (first time awarded to a Cypriot Bank) “Special 10 Year Recognition Award for the period ” For the quality of US payments Awarded by “JP Morgan” – (first time awarded to a Cypriot Bank) “Straight-through Processing (STP) Excellence Award” Awarded by “Deutsche Bank” “Best Internet Bank, Consumer Bank in Cyprus, 2009” and “Best Sub Custodian Bank in Cyprus, 2009” Awarded by “Global Finance” “Innovation Award- Cyprus” Awarded by “Money Markets 2008 International Custody Awards” “Best Bank in Cyprus in 2009” Awarded by “World Finance”

28 ROSPROMBANK, Russia

29 Presence Throughout Russia
Branches: Sub-branches: 12 Employees: As of 31/05/2010 Credit Portfolio: € 117 m Total Assets: € 458 m Equity: € 59 m

30 HIGHLIGHTS Commercial Bank “ROSPROMBANK” (LLC) was founded in In February 2008 it became part of the MARFIN POPULAR BANK PUBLIC CO LTD. ROSPROMBANK (RPB) provides the full range of banking operations (all regular banking operations, ForEx, cash collection, etc.). Clients count on RPB for fast delivery of a wide spectrum of personalized commercial banking products and services. RPB offers: - Treasury Services - Short and Long Term Financing including: Project Financing, Working Capital Financing, revolving/non-revolving Credit Lines and Overdrafts - Trade Financing, Letters of Guarantee and Letters of Credit - Leasing - Factoring - Corporate and personal Credit Cards RPB also provides a wide array of Deposit products, as well as Payroll distribution products, for corporate, commercial and retail customers. Today RPB renders services to over companies.

31 Contact Us

32 Contact Us International Business Banking Tel: , Fax: Mailing Address: PO Box , CY Nicosia, Cyprus Nicosia International Business Centre 1 (178) Tel: , Fax: Nicosia International Business Centre 2 (168) Tel: , Fax: Limassol International Business Centre 1 (179) Tel: , Fax: Limassol International Business Centre 2 (158) Tel: , Fax:

33 Contact Us cont… 35/2 Miasnitskaya Street
Larnaca International Business Centre Tel: , Fax: Paphos International Business Centre Tel: , Fax: International Lending Tel: , Fax: International Corporate Banking Unit Tel: , Fax: Moscow Representative Office Tel: , Fax: , 35/2 Miasnitskaya Street Moscow, Russia +7 (495)

34 DISCLAIMER Recipients of this presentation in jurisdictions outside the UK or the US should inform themselves about and observe any applicable legal requirements. This presentation is only being made available to interested parties on the basis that: (A) if they are UK persons, they are (i) persons who are "Investment Professionals", as described in Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Financial Promotion Order"), (ii) persons falling within any of the categories of persons described in Article 49 of the Financial Promotion Order, (iii) persons to whom this Memorandum may otherwise lawfully be made available; (B) if they are United States persons, they are ‘accredited investors’ as defined under Rule 501(a) promulgated under the United States Securities Act of 1933, as amended; or (C) are outside the United Kingdom and the United States and eligible under local law to receive this Memorandum (all such persons collectively being referred to as “Relevant Persons”). By accepting this document you represent and warrant that you are such a person. This document must not be acted on or relied on and should be returned to Marfin Popular Bank by persons who are not Relevant Persons. Any investment or investment activity to which this communication relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. Each person that receives a copy, by acceptance thereof, represents and agrees that he/she will not distribute or otherwise make available this document to any other person. This presentation contains forward-looking statements, which include comments, statements and opinions with respect to our objectives and strategies, and the results of our operations and our business, considering environment and risk conditions. However, by their nature, these forward-looking statements involve numerous assumptions, uncertainties and opportunities, both general and specific. We caution that these statements represent the Group’s judgments and future expectations and that we have based these forward-looking statements on our current expectations and projections about future events. The risk exists that these statements may differ materially from actual future results or events and may not be fulfilled. We caution readers of this presentation not to place undue reliance on these forward-looking statements as a number of factors could cause future Group results to differ materially from these targets. Forward-looking statements may be influenced in particular by factors such as movements in local and international securities markets, fluctuations in interest rates and exchange rates, the effects of competition in the areas in which we operate, general market, macroeconomic, governmental and regulatory trends and changes in economic, regulatory and technological conditions. We caution that the foregoing list is not exhaustive. When relying on forward-looking statements to make decisions, investors should carefully consider the aforementioned factors as well as other uncertainties and events. Any statements regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. All forward - looking statements are based on information available to Marfin Popular Bank Public Co Ltd. on the date of this presentation and Marfin Popular Bank Public Co Ltd. assumes no obligation to update such statements, unless otherwise required by applicable law. Nothing on this presentation should be construed as a solicitation or offer, or recommendation, to acquire or dispose of any investment or to engage in any other transaction. Neither this presentation nor a copy of it may be taken or transmitted into Australia, Canada or Japan, or distributed, directly or indirectly, in Australia, Canada or Japan. Any failure to comply with this restriction may constitute a violation of Australian, Canadian or Japanese securities law. The distribution of this presentation in other jurisdictions may be restricted by law and persons into whose possession this presentation comes should inform themselves about, and observe, any such restrictions.


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