Bank of Cyprus Holdings Public Limited Company announces that it has signed a binding agreement to sell its wholly owned subsidiary bank in the UK, Bank of Cyprus UK Limited (“BOC UK”) and its subsidiary Bank of Cyprus Financial Services Ltd (“BOC FS”, and together the “UK Group”) to Cynergy Capital Limited (“Cynergy”). The sale is expected to be completed by the end of 2018 and is subject to approval by the regulators of both the Group and BOC UK.

According to a Bank’s press release, the sale consideration of £103 mn (c. €117 mn1) is subject to customary purchase price adjustments for the period up to completion. The consideration is payable in cash, of which half is deferred over 24 months from completion, without any performance conditions attached.

On completion, the total value of the sale is expected to have a positive impact of c.65 bps2 on the Group’s CET1 ratio and c.60 bps2 on the Group’s Total Capital ratio. The accounting profit from the sale is estimated at c.€3 mn. The Group will provide an update on the financial impact at completion.

The transaction is expected to have a negligible impact on the Group income statement and the organic EPS guidance of c.€0.40 for the year is maintained. Other than a c.€2 bn reduction in balance sheet size, the Group’s targets for the year and medium term guidance remain unchanged and continue to exclude any impact from any possible accelerated risk-reduction transactions.

According to the Bank, the decision to sell the UK Group is in line with the Group’s strategy of delivering value for shareholders and focusing principally on supporting the growing Cypriot economy.

Further to this transaction, the Group and BOC UK will sign a cooperation agreement, which will see both organisations cooperating in a number of key areas going forward, including continuity of servicing for existing customers.

Following completion, BOC UK is expected to be rebranded to “Cynergy Bank”, a name chosen to reflect the bank’s Cypriot heritage, combined with a modern and energetic focus.

“This is another positive step in our journey back to strength. The transaction will further simplify the Group and deliver good value to shareholders. The equity realised will be deployed in pursuit of our core activity in Cyprus to continue to support the recovery of the Cypriot economy”, said CEO of the Group John Patrick Hourican.

He also said he expected that change in ownership to drive greater value for customers, colleagues and Group shareholders.

“The transaction will allow the bank in the UK to grow faster, thereby achieving the ambition for this business with new partners. We are excited about the cooperation agreement which provides for a strong channel of connectivity post-Brexit and into the future, and will support Group customer requirements for UK banking, as well as delivering commercial benefits for both organisations,” he said.

CEO of BOC UK Nick Fahy said that the sale to Cynergy would enable the bank to focus on growing the franchise across enterprising business owners and savers in the UK, including the underserved property and SME market.

“We have worked for decades with UK-Cypriot customers and businesses and are immensely proud of our history – we will continue to stay true to this heritage. I look forward to working with Cynergy and further developing Cynergy Bank into one of the leading specialist banks in the UK,” he said.

Cynergy is led by British businessmen  Pradip Dhamecha, co-owner of a London family cash and carry business the Dhamecha Group and Balbinder Sohal, a director of Group Seven investments and Group Seven Properties.

Director of Cynergy Bal Sohal,  said that the company had been actively looking to invest in the UK banking sector, where they saw significant opportunities for growth and to better address the needs of small businesses in the UK, including those of the Cypriot community.

“Cynergy’s focus will be on delivering sustainable growth for the UK bank.  We plan to support the existing management team to deliver on the strategy it has for the bank and are committed to investing further capital to develop the business in the coming years,” he said.

HSBC acted as financial advisor and Norton Rose Fulbright as legal advisor to the Group in connection with this transaction. PwC acted as financial advisor and Eversheds Sutherland as legal advisor to Cynergy.