MARFIN Popular Bank’s (MPB) merger with Marfin Egnatia Bank (MEB) and the headquarters moving to Greece would not have a significant impact on the island’s economy, Finance Minister Charilaos Stavrakis said yesterday.
Speaking to state broadcaster CyBC from London, Stavrakis said: “We cannot ignore the fact that the departure of a large bank from Cyprus creates a negative picture in terms of Cyprus’ efforts to attract foreign investors, but I do not think there will be serious immediate economic consequences.”
Stavrakis said that he had already spoken with Marfin Investment Group Executive Vice-Chairman Andreas Vgenopoulos, who had told him that “his interest in Cyprus and the Cypriot economy from an investment viewpoint would continue, and that nothing significant would change in this respect.”
The Minister emphasised that he would maintain close contact with Vgenopoulos, and would continue to co-ordinate his efforts with the Cyprus Central Bank to ensure that the economic side-effects of the proposed merger would be minimised.
There should not be a negative impact on government tax revenues from MPB, as long as it continues to be profitable. This is because it is normal for a Cyprus-registered bank – which includes local subsidiaries of a foreign parent – to pay Cypriot taxes on operations in Cyprus, a Greek-registered bank to pay Greek taxes on operations in Greece, and so on.
In 2008, €258 million out of a total profit of €395 million declared by the banking group was generated in Cyprus, and MPB contributed €56 million to government revenues in the form of taxes.
However, there is likely to be a serious effect on the Cyprus Stock Exchange (CSE), as MPB is the second biggest company listed there. Currently, MEB is a wholly-owned subsidiary of MPB, and is not listed on any exchange.
Following the proposed merger, MEB would be listed on the Athens Stock Exchange, and its new subsidiary MPB would no longer be listed on the CSE. MPB shareholders would most likely be offered a straight one-for-one swap into MEB shares.
Investors are already positioning themselves to benefit from the new banking group’s plans for expansion. Yesterday MPB shares closed almost five per cent up on the previous day, on the basis of €5.3 million’s worth of trades, and contributed to a 2.3 per cent market rise overall.
It seems unlikely that the proposed Marfin merger will have a major effect on jobs within the bank in Cyprus. There is every possibility of some management processes being moved to Athens, which would affect senior managers. Under the current agreement with the banking union, those involved would most likely be offered the option of transferring to Athens or taking early retirement.
