Tuesday, October 27, 2015

Bank of Cyprus on the road to recovery



In addition to Mr. Ackermann, the Bank of Cyprus has attracted a surprising number of financial industry heavyweights to the island, which has a population of about 1.2 million and is geographically closer to the Middle East than to Europe.

Its main investors include Wilbur L. Ross Jr., an American billionaire who specializes in buying distressed assets, and who late last year persuaded Mr. Ackermann to oversee Bank of Cyprus. The Renova Group, a Russian conglomerate controlled by Viktor Vekselberg, one of Russia’s most powerful businessmen, is the bank’s largest foreign shareholder, with a 6.2 percent stake. Mr. Ackermann also has connections to Renova; he is a member of the board of a unit that controls the company’s holdings outside Russia.

The bank has some huge names behind it. These type of people do not get involved with "hopes and prayers". They get involved with situations that have a high probability of a favorable outcome. Wilbur Ross speculated on the Bank of Ireland and saw a 3X return on his money. The crisis situation is over in Cyprus and the economy is slowly recovering. The bank has seen a peak in its non-performing loans and this should decrease over time as they work with borrowers to restructure loans. It will take some time but I see no reason that the Bank of Cyprus cannot be a three bagger over the next 18-24 months. Buying now actually gets you in at around a 30% discount to what Wilbur Ross paid.

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