Hellenic Bank rumours back again in Cyprus

Hellenic Bank rumours back again in Cyprus


Future scenarios resurface

Intense activity during the past week on the shares of Hellenic Bank Public Co. Ltd. (HB) have revived talk of various scenarios regarding the bank’s future, while at the same time raising questions on the positioning of its major shareholders.
The announcement by Polys Polycarpou and related persons that their combined stake in HB increased from 4.97% to 5.06% caught market attention, but Financial Mirror investigations suggest that Polycarpou was simply reinstating his position back to last year’s levels.
At the time, Polycarpou held a 5.15% stake in HB’s capital, but this was diluted after the bank acquired 100% of Athena Investments through a share issue.
The real story seems to be elsewhere. The Financial Mirror has been monitoring the positioning of Credit Suisse First Boston (CS), that during the past few weeks has been aggressively buying shares and from a stake of around 3% last year, has increased its interest to 4%.
A year ago, CS snapped up a 3% stake in HB and a further 4% was bought by another Swiss bank, UBS AG. Financial Mirror research shows that both stakes were accumulated in HB last year at levels of around EUR 1.15. With the share price recently having declined to around EUR 1.20-1.25, CS was spotted buying.
The Financial Mirror calculates that CS bought at least 4 mln more shares lifting its total holding to 11 mln, based on movement seen on the bank’s share register.
UBS AG is holding 12.47 mln shares of HB. Among other international investors, Morgan Stanley & Co ranks 11th among the major shareholders and owns 4 mln shares.

TAKEOVER TALK
Takeover talk on HB is nothing new and has become fashionable, with Bank of Cyprus rumoured to top the list of “suspects”, while in the past Marfin Laiki Bank strongman Andreas Vgenopoulos also showed keen interest in the bank.
Informed sources say a deal between BOC and HB was close last year, but collapsed at the last minute when the Archbishop Chrysostomos II objected and did not approve the deal. Officially, all sides denied such rumours.
The Archbishopric is HB’s single largest shareholder with a 13.75% direct stake. The other major shareholders are Bank of Cyprus Group with a 5.10% stake and Universal Life with a 5.03%.
“Nobody knows who is behind the buying interest of the two Swiss banks and how those stakes (combined 8%) will be played if there is a move on HB,” said an informed source.
Many analysts insist HB makes a perfect fit for BOC, while others quash such speculation and say that with BOC busy with its Russia expansion drive, HB may become the target of a Sovereign Wealth Fund or wealthy foreign investors keen to get a foothold in an EU bank.
Hellenic Bank insiders, meanwhile, hotly deny that there is any deal in the making, insisting that the bank is keen to continue on its current path of steady expansion and organic growth after HB received license to commence operations in Russia last year.
The keen interest by foreign and local investors to buy and hold their stakes in the bank is described by HB insiders as evidence that investors have full confidence in the management team headed by Makis Kervanos (whose contract was recently renewed), amid expectations that the situation in Greece has at last turned for the better.
Hellenic Bank’s conservative lending policies over the years, which saw it lose some market share to others, also appears to support the management, since HB’s non-performing loans are expected to be lower this year.

GOOD PERFORMANCE
The ordinary shareholders of HB, meanwhile, are very happy at the buying interest shown by foreign and local investors in the bank since it has shielded HB’s share price from losses.
In fact, while the share price of BOC and MPB are down by 10% on average since the beginning of 2010, the share price of HB is up 5%.
Based on the nine-month 2009 results, HB’s share price is trading at a price to book value of 0.78 times, which indicates the share price, currently trading at EUR 1.25, is around 25% undervalued compared to its book value of EUR 1.62/share.
HB will report its 2009 preliminary results on February 25.

Financial Mirror