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articles | 26 March 2014

BoC sale of Ukrainian Bank on track

Bank of Cyprus's €225 million sale of its Ukrainian bank is on track to happen within weeks, assures Chief Executive John Hourican.

The bank announced on January 31 that its Ukrainian operations would be sold to Russia's Alfa Group. Since then tensions have flared between Ukraine and Russia over Moscow's seizure of Crimea. "We're still expecting, and I'm touching wood, the Ukrainian deal to complete in the coming weeks on the terms that we agreed," said Hourican, who was formerly head of Royal Bank of Scotland's investment bank.

"We're in regular contact, we are going through the mechanics of completion and those mechanics of completion are suggesting that the other party is serious about completing with us." Hourican added that US sanctions against Russia had not affected Bank of Cyprus's customers or operations, but the rescued bank does not see itself as a long-term owner of significant Russian assets. Bank of Cyprus counts six Russians on its 15-person board of directors after it dramatically converted large deposits, many of them held by Russians, into equity to save itself from collapse a year ago.

"So far, the sanctions have not impacted the companies or businesses who do business with us in Cyprus," Hourican told Reuters, referring to Russians who take advantage of tax treaties and other legal structures that give them incentives to put money through Cyprus. "Of course we're keeping a very careful watching brief to ensure that we understand that business," said the Irishman, who was appointed chief executive in October. Cyprus and Russia have close financial links going back decades, with Russians using the Mediterranean island as a safe haven for their money since the Soviet Union collapsed in 1991. Bank of Cyprus's largest international subsidiary, Uniastrum, is based in Russia with €1.5 billion in assets and a staff of 2,500, against the group's total assets of €30.4b at the end of 2013.

Even before the current standoff between Russia and the West over Moscow's annexation of the Ukrainian peninsula of Crimea, Bank of Cyprus had been considering selling its Russian business as part of a general retrenchment to shore up its balance sheet. Hourican, who will travel to Russia for a scheduled Bank of Cyprus board meeting, said the bank's Russian unit was self-contained, with two-thirds of its funding coming from local deposits and the remainder funded by its parent.

Source: InCyprus

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