Another day, another departure. Bank of Cyprus’s (BoC) move to delist from London in favour of a return to the Athens Stock Exchange will inevitably be seen as another example of London’s struggle to attract and maintain listings.
BoC abandoned its Athens listing in favour of London in 2016. Liquidity in London at the time made the UK city appear more attractive as a listing destination for international banks and others – and certainly more than it does today.
Yet there are Greece- and Cyprus-specific factors at play, too. Exposure to Greek sovereign bonds triggered a crisis in Cypriot banks culminating in a 2013 depositor bail-in. Then came the election victory of the anti-austerity Syriza party in Greece in 2015, along with fear about Grexit and an even deeper banking crisis.
With a population of around one million, Cyprus would never have had the audacity to pick a fight with its creditors, and – especially while Syriza was in power – the last thing BoC wanted was an association with Greek banks.
Bank of Cyprus’s return on equity is higher than any of the big Greek banks, at over 20%
Nowadays, things have changed. Greece, like the rest of southern Europe, is enjoying something of a financial renaissance relative to the north. Greece’s economy will grow by around 2.2% in 2024, compared with 0.1% in Germany. Last October, Standard & Poor’s became the first ratings agency to make Greece investment grade again. A centre-right government is delighting investment bankers. Earlier this year, Athens Airport became the country’s biggest-ever IPO.
Meanwhile, Greek banks – like their Italian cousins – have offloaded a mountain of non-performing loans since the mid 2010s. This summer, the big four Greek lenders gained supervisory approval for their first dividend pay-outs since 2008. Healthy lending volumes, reflecting the economic backdrop, has fuelled hope that an interest-income bonanza can outlast looser monetary policy.
BoC and the Cypriot economy are also posting relatively good numbers. The bank’s new lending rose by 10% in the first half of 2024. It restarted dividend payments last year. Its return on equity is higher than any of the big Greek banks, at over 20%. Its common equity tier-1 capital ratio is similar to or higher than Greek peers. And yet, on a price-to-earnings basis, Greek banks are better valued than BoC.
Attention
BoC moved to London in the first place to try to improve its liquidity. But a continued lack of attention among mainstream investors loomed large in an opportunistic bid by US private equity company Lone Star in 2022, even if a takeover never materialized.
Fundamentally, there is a question about whether Greek banks are sufficiently large and fast-growing to attract enough international investor attention. The days when they could leverage up and look to the Balkans for growth are over.
That is partly why a tie-up between Alpha Bank and UniCredit attracted so much attention last year. Although the latter’s chief executive, Andrea Orcel, says a full takeover is not on the table for now, a Greek move by Intesa Sanpaolo could also solve its problem of a lack of scope for further M&A in Italy.
But trading in BoC stock – typically less than £1 million a day in London – is relatively thin even by comparison with Greek banks. This makes it impossible for some investors to participate.
Despite some interesting digital initiatives, there is not much more BoC can do other than grow with the small local economy. Its market share in Cyprus is already around 40% of loans and deposits. Earlier this summer, according to Bloomberg, CarVal Investors and Caius Capital drew interest from Alpha Bank in potential sales of a combined 15% stake in BoC. Yet a full takeover would be much harder now that Athens-based Eurobank has already gained a majority in Hellenic Bank, the island’s second biggest bank.
For BoC, listing in Athens allows a degree of union with Greek banks as a group, without the political and operational complexity of an actual merger with any one of them.