By Hamza Hendawi in Athens
DERIDED BY market traders as something of a rudderless institution, Hellenic Bank brushed aside the criticism and threw a lavish party in Athens to celebrate the official launch of its much-heralded operation in Greece.
The bank’s first branch in Greece, a prestige address just a stone’s throw away from parliament in central Athens, was officially opened on Thursday by Chairman and Chief Executive Panos Ghalanos. The branch is manned by 26 staff and, according to senior bank officials, will be the first of four to open in the next 18 months in Greece.
Ghalanos told assembled dignitaries that the bank aimed “gradually to introduce a whole range of products and services to cater for Greek entrepreneurs, investors and consumers”. Hellenic’s presence in Greece, he added, “will give us practical knowledge on operating in a fully- liberalised environment”.
But Hellenic’s detractors say the move to Greece may have come too late, and they question the bank’s ability to capture a niche in the market there. They insist that the 22-year-old bank needed a top management shake- up and a policy change to shake off its image as the poor relation of the much bigger Bank of Cyprus and the Cyprus Popular Bank.
Senior Bank officials, however, dismiss the criticism as unfair and see it as a result of the short-term high expectations usually found on stock market floors the world over. They maintain that the critics are not paying enough attention to the realities of the bank’s progress in recent years.
Hellenic’s entry into the Greek market, the officials said, was a carefully weighed move that could not have come a day sooner.
“We cannot do everything on the brokers’ wish list, but our medium and long- term prospects are very promising,” said Hellenic’s Marketing Manager Yiannis Telonis. “Going to Greece earlier would have been a gamble,” he told The Sunday Mail.
“We are now embarking on a major expansion to which we could not commit the resources earlier without putting shareholders’ interests at risk,” he said.
“We had to get a good share of the local market before we expand outside Cyprus. We are just one-sixth of the size of the Bank of Cyprus.”
Hellenic at present has an estimated 15 per cent share of the Cyprus market in terms of local currency deposits and, according to the bank’s chief economist, Marios Clerides, there was still potential for growth.
“Bank of Cyprus and Popular Bank had to expand in Greece when they saw that there was no room for further expansion in Cyprus. We still have growth potential locally, but the potential is much greater in Greece,” Clerides told The Sunday Mail.
Clerides’ reading of prospects in Greece is viewed by some to be on the optimistic side, although one trader, Harris Savvides of Laiki Investments, sees some benefit in Hellenic’s move to Greece.
“Anything they get there will be a bonus since the market in Cyprus is saturated,” Savvides told The Sunday Mail.
The move to Greece, Telonis said, had cost Hellenic £4 million pounds in capital alone, a sum which he said could not have been spared soon after the 1996 acquisition of the onshore operations in Cyprus of Barclays Bank.
That acquisition nearly doubled the number of employees to more than 1,100 and increased deposits by nearly 90 per cent, but Telonis said it has now been absorbed. “It was more like a merger because it was a marriage of equals. We needed time to absorb it before we could embark on such a major undertaking like expanding into Greece.
That undertaking, according to traders and economists, might take several years before it begins to bear fruit.
“They’ll have to wait at least a couple of years before they start getting results,” said Laiki Investments’ Savvides. Others also making a living on the trading floor of the Cyprus Stock Exchange share his view, and offer a rather harsh scenario for the motive behind the Greece move.
“Hellenic has been under so much pressure from major shareholders to expand or diversify that I suspect the move to Greece was partly designed to shut them up,” said Neofytos Neofytou of AAA United Stockbrokers. The wish list of shareholders, he said, included expanding into the insurance business.
Stavros Agrotis, a senior broker with CISCO, the Bank of Cyprus’ brokerage and investment banking arm, said Hellenic was still ironing out some of the bumps left by the 1996 acquisition of Barclays. The task, he said, should have been given priority over a move to Greece.
“They are stuck with a number of highly-paid former Barclays employees and their first post-acquisition voluntary redundancy scheme was not a success, ” Agrotis told The Sunday Mail.
Clerides and Telonis disagree and say that Hellenic identified medium and small-size businesses in Greece as a neglected niche which the bank would swiftly move to fill.
“Not only that, but we shall also provide a hell of a service to businessmen in those categories,” said Telonis, who pointed out that Hellenic researched the move to Greece for 18 months before it made the decision to expand there.
Hellenic, which made £3.61 million in pre-tax profits in the first six months of 1998, appears to have given a measure of credibility to its detractors when it announced in a vaguely-worded statement on December 2 that substantial structural changes and improvements in work methods in the bank were in the offing. The upgrading of the bank’s technology and the introduction of new ones were in their final stages, it added.
Ghalanos, Hellenic’s chairman, later told the Financial Mirror that a voluntary redundancy scheme was now in place for employees with 12 years of service left before they reached their official retirement age.
About 100 employees were expected to take up the offer, he said. Those who did, he said, would be compensated with 48.88 monthly salaries, but he declined to say how much the scheme would cost and whether it would have an impact on earnings.
But the Hellenic critics remain unconvinced and, if the performance of the bank’s share is anything to go by, they may have some ground to stand on.
Hellenic Bank shares, which traded at around £2.75 this week, have depreciated by about five per cent since the beginning of the year, while those of the Bank of Cyprus and the Cyprus Popular Bank rose by about 25 per cent and 20 per cent respectively.
Traders say many brokerages and investment companies have reduced positions in the Hellenic titles and that buyers’ interest in the share has been at a low ebb for some time.
“We have been net sellers of Hellenic for some time now,” said one trader, who did not want to be named.
Popular Bank’s Chief Economist Yiannos Tirkides offered a different diagnosis of Hellenic’s ills. “As a small bank, you must identify a direction or a speciality and stick to it,” he told The Sunday Mail.
