Bank of Cyprus loses 25 percent of value in debut after bailout trauma

Nicosia, 16 December 2014 (MIA) - Cypriot lender Bank of Cyprus lost a quarter of its value after making its bourse debut on Tuesday, hit by overall market turmoil and investors seeking an exit after reluctantly being roped in to recapitalise the bank two years ago.

Opening at 24 cents, the stock of the island’s largest bank ended the day down 25 percent at 18 cents. Trading was a heavy 8.6 million shares, Reuters reports.

Bank of Cyprus was forced to convert depositors' uninsured funds into equity in March 2013 after international lenders refused to channel aid to the island for the recapitalisation of commercial banks.

The conversion of 47.5 percent of cash over 100,000 euros into equity became a condition for the disbursement of aid totalling 10 billion euros to Cyprus by the European Union and the International Monetary Fund. It was the first bank forced to find its own funds to recapitalise, known as a bail-in.

"Apparently quite a few people who were previously depositors and now shareholders wanted to get their cash out," said Michael Sarris, an economist who was finance minister when Cyprus discussed bailout terms with lenders in March 2013.

"I would suggest patience, though, before drawing any conclusions for a few days."

Bank of Cyprus managed to successfully raise 1.0 billion euros in additional capital from U.S. and Russian investors earlier this year before further market volatility in Europe took hold. They bought into the bank at 24 cents per share.

"For me, it was worse than expected. I expected the stock to hold a little better, above 20 cents," said Michalis Florentiades, investment manager at XM Markets.

Some of the selling pressure could have conceivably come from smaller shareholders seeking to cut their losses, but the timing of the debut also played a role, he said.

"There is turbulence on financial markets in Europe and those are not ideal conditions," he said.

Global markets were jolted on Tuesday by oil's plunge below $60 and by the failure of Russia's huge emergency rate hike to stabilise the rouble.



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