Bank of Cyprus to sell UK arm to Cynergy Capital

Bank of Cyprus Holdings has signed a binding agreement to sell its wholly-owned UK banking subsidiary, Bank of Cyprus UK, and its subsidiary Bank of Cyprus Financial Services, to Cynergy Capital, it announced on Tuesday.

The group said the sale was expected to be completed by the end of 2018, and remained subject to approval by the regulators of both the company and Bank of Cyprus UK.

It said the sale consideration of £103m (€117m) was subject to customary purchase price adjustments for the period up to completion, and would be payable in cash, of which half would be deferred over 24 months from completion without any performance conditions attached.

On completion, the total value of the sale was expected to have a positive impact of around 65 basis points on the group's CET1 ratio, and 60 basis points on its total capital ratio.

The accounting profit from the sale was estimated at €3m.

Bank of Cyprus said it would provide an update on the financial impact at completion.

The transaction was expected to have a negligible impact on the group income statement, with the organic earnings per share guidance of 40 euro cents for the year maintained.

Other than a €2bn reduction in the balance sheet size, the group said its targets for the year and medium term guidance remained unchanged, and continued to exclude any impact from any possible accelerated risk-reduction transactions.

The board said the decision to sell the UK group was in line with its strategy of delivering value for shareholders, and focusing principally on supporting the growing Cypriot economy.

Further to the transaction, the group and Bank of Cyprus UK would sign a cooperation agreement, which would see both organisations cooperating in a number of key areas going forward, including continuity of servicing for existing customers.

Following completion, Bank of Cyprus UK was expected to be rebranded to "Cynergy Bank", a name chosen to reflect the bank's Cypriot heritage, combined with a “modern and energetic” focus.

“This is another positive step in our journey back to strength,” said Bank of Cyprus group chief executive John Patrick Hourican.

“The transaction will further simplify the group and deliver good value to shareholders.

“The equity realised will be deployed in pursuit of our core activity in Cyprus to continue to support the recovery of the Cypriot economy.”

Hourican said that, whilst Bank of Cyprus UK had been part of the group for some time, it had become increasingly clear that the UK business would benefit from the greater scale that could be achieved through the support of Cynergy.

“We expect this change in ownership to drive greater value for customers, colleagues and group shareholders.

“The transaction will allow the bank in the UK to grow faster, thereby achieving the ambition for this business with new partners.

“We are excited about the cooperation agreement which provides for a strong channel of connectivity post-Brexit and into the future, and will support group customer requirements for UK banking, as well as delivering commercial benefits for both organisations.”

Nick Fahy, chief executive officer of Bank of Cyprus UK, agreed it was a “positive development” for the UK bank.

He said the sale to Cynergy would enable the UK bank to focus on growing its franchise across enterprising business owners and savers in the UK, including the underserved property and SME market.

“We have worked for decades with UK-Cypriot customers and businesses and are immensely proud of our history - we will continue to stay true to this heritage.

“I look forward to working with Cynergy and further developing Cynergy Bank into one of the leading specialist banks in the UK.”