Greece is very close to recovering investment grade, a prospect that will bolster robust growth in economic activity and support the development of banking operations and the profitability of the banking system. it appreciates you his interview with “K” Chairman of the Board of Directors of the Bank of Cyprus, Takis Arapoglunoting that the successful completion of the reconstruction Greek banks by eliminating bad loans, capital adequacy and liquidity and improving their operational efficiency, contributes to the reduction of the state of its participation in banks.

– Greek banks are completing their restructuring with great success after a particularly difficult period, and the strong upward trend in their shares is the best evidence of this. This is due not only to the current rise in interest rates, as many people think. Liquidation red loans, capital and liquidity adequacy, improvements in their operational efficiency and significantly enhanced corporate governance and oversight have already attracted the attention of all investors, boosting demand for their shares. This will certainly make it much easier for the state to reduce its participation in banks.

– The strengthening of the Greek economy in recent years has led to a serious increase in its investment profile, consistently attracting significant amounts of foreign direct investment. This has already been recognized by the markets, having made money cheaper for the country’s external borrowings. I believe that very soon Greece will restore the investment level, further reduce the cost of borrowing, and this will make it even more attractive place for long-term investment. Greece, like any country and business, needs stability and predictability in order to continue its successful course, now gaining universal respect.

We may be nearing the end of a rate hike cycle. However, inflationary pressure remains strong.

This, in turn, will contribute to a steady increase in economic activity, which will support the growth of banking operations. Clearly, a recovery in investment grade would also significantly boost the value of the Greek bank government bond portfolio (which may have already been discounted to some extent in today’s valuations), further boosting their yields.

– The general conditions of euphoria, great global economic growth and the opening of the economies of Central and Eastern Europe that we experienced at the beginning of the century and which supported such investment initiatives in these countries no longer exist, and logically it does not seem that we will see them again, at least least in the near future. Moreover, bank valuations in these areas may not offer as much opportunity today as they did then.

Experience has shown that, with few exceptions, these initiatives have not been sustainable because of the large differences, administrative and other differences in these developing countries. Nevertheless, new similar initiatives on the free market cannot be ruled out.

As for the rumors about any interest on the part of the National Bank and Alfa-Bank, I can assure you that they are not true.

But what has also changed drastically from the past is the vastly increased reason why supervisors will now have the approval of such transactions, and which today primarily support bank mergers within each country and less cross-border initiatives. The aim is to progressively harmonize the operation of local banking systems, which will allow for more effective control and pave the way for the creation of a common pan-European deposit guarantee fund as part of broader European integration.

“It is still too early to predict with certainty how much and for how long this will affect the demand for loans at the European level. In addition, we have a recent crisis of confidence in the banking system, and we do not know how much this will affect the interest rate policy of central banks, whose primary task is to reduce inflation. However, following the recent hikes in interest rates by European and US central banks, there have been signs that we may be nearing the end of this cycle of hikes. However, inflationary pressure remains strong.

For the Cypriot economy, all signs are particularly positive, and we predict that it will suffer much less than the economies of most European countries, demonstrating strong resilience. In any case, as I mentioned earlier, the growth of the bank’s loan portfolio in the narrow sense has ceased to be our main goal of generating new income. We take a client’s creditworthiness very seriously, evaluate credit accordingly, and view it as a means of developing a broader relationship with them to meet all kinds of financial needs.

In addition, with the development of our new Jinius digital platform, we aim to gain a correspondingly larger market share as direct intermediaries in all payments related to the purchases of products and services by our business-to-business (B2B) and business-to-consumer (B2C) customers. ). ) level. For us, this is a great strategic investment.

We don’t care about competition. On the contrary, we see it as an opportunity to improve.

“In our view, Lone Star’s efforts were clearly opportunistic. He correctly stated that the bank’s shares were then still heavily undervalued and expressed interest in a takeover. However, the board, based on its own assessments, was convinced that the implementation of the business plan approved by it, which was already in a very successful development, justifies a significant increase – an adjustment to the bank’s assessment. Based on this, the Board of Directors considered that it was not in the best interests of TK shareholders to accept Lone Star’s proposals. As it turned out very quickly, this decision was absolutely correct, since the share price has since risen by more than 150%. It is difficult to predict whether there will be other interested parties to buy T.K. in future. Of course, it is not the bank that is being sold, but the Board of Directors. is obliged to evaluate each proposal and each time make decisions based on the interests of its shareholders.

As for the rumors about any interest on the part of the National Bank and Alfa-Bank, I can assure you that they are not true.

– Increasing the market share of loans has long ceased to be our main goal. Loans alone are not the most efficient way to use a bank’s regulatory capital. We focus on increasing our share of the total financial costs of each client (customer wallet), i.e. loans, as well as increasing the amount of collateral in our loan products that we sell to each client. This greatly increases the return on our oversight funds, which is our primary goal. This process requires a radical change in the philosophy of approach to customers on the part of our employees, which also requires a parallel very serious update of our supporting digital platform.
In addition, the technological upgrades we are developing will allow us, if we wish, to operate outside the narrow geographic boundaries of Cyprus in the long term, without having to be physically present.

The key is trust

– The recent bank failures in the US and Europe were isolated incidents and the result of poor risk management and inadequate oversight. Banking is based on trust, and it is very easy for the psychology and fear of depositors to override logic and prompt them to immediately withdraw their deposits from a bank in trouble, as they did. Solutions were finally found, and the relevant supervisory authorities, in cooperation with other larger banks, offered significant solutions to the problems that had arisen with relatively manageable losses on the part of depositors. However, the structure and rules of operation of the respective depositor protection systems in such crises should be reviewed to better deal with similar situations in the future, which cannot be avoided by the very nature of banking. Banks in Cyprus, following their recent restructuring, are well protected, have surplus capital and liquidity and have developed highly effective risk management systems in cooperation with supervisors. In addition, they are not associated with bankrupts. Given these facts, I believe that there is no reason to worry about any negative impact of these events on the Cypriot banking sector.