By Hamza Hendawi
HELLENIC BANK, a distant third behind the island’s two largest financial institutions, yesterday announced pre-tax profits of £3.61 million in the first six months of 1998, a 5.4 per cent increase over the same period last year.
Traders and analysts said the increase in profits exceeded expectations in view of the vast costs incurred by the bank as a result of its drive to full computerisation, the start of operations in Greece and redundancy payments arising from the 1996 acquisition of the Cyprus onshore operations of Barclays.
They, however, blamed what they described as the conservative and excessively cautious policies of Hellenic’s top management for the bank’s slow evolution and apparent lack of direction.
“The level of the profits in absolute terms is not huge. But they are not bad and, in fact, they are very healthy,” said Yiannos Andronikou of Suphire Stockbrokers. “We were expecting three to four per cent.”
The results, which included a six per cent interim dividend and after-tax profits of £2.37 million, were announced by Chairman and Chief Executive Panos Ghalanos in a news conference.
Results for the whole of 1998 were expected to match those of the first six months, said Ghalanos, whose announcement came after the end of trade in the Cyprus bourse. Hellenic shares closed down at £2.80 apiece.
“The management of Hellenic Bank is too conservative,” said Neofytos Neofytou of AAA United Stockbrokers. “It is still looking for direction and they have not shown the necessary management skills to expand.”
The 22-year-old Hellenic, once allied with Bank of America, saw its assets rise by 90 per cent and its staff and branch network leap by 50 per cent when it acquired Barclays in Cyprus in April 1996.
But while the much larger Bank of Cyprus and Cyprus Popular Bank realised early on the limitations of the domestic market and moved overseas in search of fresh pastures, Hellenic is yet to see the start of its operations in Greece, a country where the two other banks have already established lucrative niches for themselves.
Hellenic is believed to be only days or weeks away from starting operations in Greece. It already has a representative office in South Africa and plans two more, one in Moscow and one in London.
“It is not just a question of opening a branch in Greece that will change things,” said Neofytou. “It will take Hellenic at least a couple of years to see results from entering the Greek market.”
Others, however, believe that Hellenic’s late move into Greece may prove costly and that conditions there may not be as favourable now as they were when the Bank of Cyprus and the Popular Bank started there in the early 1990s.
“They may be moving to Greece too late and there may even be problems,” said one market analyst who did not wish to be named.
Stavros Agrotis, a senior broker with CISCO, the Bank of Cyprus’ investment and brokerage arm, agrees with the assessment of Hellenic’s management offered by Andronikou and Neophytou.
“One of their problems is that they don’t have enough strong people in top management positions,” he said. “They’ve also lost some of their best managers to other banks on the island.”
Hellenic’s shortcomings inevitably bring analogies with its rival big brothers.
“I will not be exaggerating if I say that the Bank of Cyprus and Popular Bank have two flamboyant chairmen (Solon Triantafyllides and Kikis Lazarides respectively) who are not afraid to take risks, and they made the right decision when they moved to Greece,” said Suphire’s Andronikou.
“In contrast, Hellenic’s (chairman) Ghalanos is a very conservative individual.”
Ghalanos yesterday appeared to counter criticism of the delay in the bank’s overseas expansion. “I believe that the important and well planned expansion out of Cyprus and the new restructuring of the group will be accomplished over a good length of time,” he said.
Widely viewed as the poor relation of the two larger banks, Hellenic has had a roller-coaster existence on the stock market. Because its shares are in short supply, they often shoot up when there is sudden demand, only to come down fast later, according to market traders.
The bank’s shares accounted for under six per cent of the stock market’s capitalisation, or £73.1 million, at the end of August, compared to 34.34 per cent and 22.70 per cent for the Bank of Cyprus and Popular Bank respectively.
While shares of the two larger banks gained between 20 and 25 per cent in value in the first eight months of 1998, Hellenic’s have had no such luck. They closed at £2.90 on December 30, 1997, 10 cents more than their price at the end of trade yesterday.
