By Lefteris Adilinis and Fiona Mullen
Bank of Cyprus Chief Executive Officer John Hourican says that BoC and the Cyprus economy are “Siamese”. This is one reason why he is as ambitious for the economy as a whole as he is for BoC.
In an exclusive interview with the Cyprus Weekly, he set out his vision for the bank and the country.
Hourican says that government and lawmakers “have done a good job of putting in place the basics”.
“We have primary surplus, we have a Maastricht-compliant government – and not many governments in Europe can say that.”
“Putting that in place is the most important thing you do to create a platform such that you can build prosperity upon it.”
Taking lessons from Greece, where he says that the debate on austerity went on for too long, he believes, it is time to move to the next chapter. “Now let’s turn the conversation to building the future for the children of Cyprus,” he said.
“Cyprus now needs to move to creating a plan for the next five to 10 years with a clear vision of what we are trying to do…and to do so in a way that is about paying back the money we borrowed from our children.”
Set the ambition
Hourican draws parallels with his experience at BoC
“If I take running the bank, I set an ambition for equity which was beyond what everyone expected, we set an ambition for deleveraging beyond what people expected … and I think the country needs to do the same.”
These ambitions have certainly brought results. In 2014 profit before provisions rose by 28%, net interest income was up 10% and net fee and commission income rose by around 9%.
This would have led to an overall profit had the bank not made a conscious decision to take an early hit on deteriorating conditions in Russia, reducing the bank’s net exposure to just €163 million.
One ambition he suggests for Cyprus is to double tourism.
Hourican points to Mallorca, which has with a similar-sized population but attracts 11 million visitors per year, compared with 2.4 million for Cyprus.
“The tourist season in Mallorca is shorter than in Cyprus and the weather is nowhere near as good. But the connectivity is better. So I would start just there.”
Asked how this might be achieved he says “it involves opening the skies, it involves probably enlarging the use of the tourist estate beyond the subsidisation of a closed industry in the winter… how about subsidising it being open?”
This would bring in more tourists, which would raise the tourism spend and boost the industry.
Lengthening the tourism season for things like medical, convalescence and retirement tourism means “recognising that Cyprus has 300 days of sunshine a year”.
Cyprus is underutilising its resources
Hourican also recommends “broadbanding” the country and improving flight connectivity.
If we want Cyprus to be a serious business gateway, we need to set an ambition for visitor numbers … and we need to have a simple, well articulated plan for the major components.”
Asked if he felt there was the will to make the changes, he says people are more cautious in public than they are in private.
“There seems to be a reluctance for the conversation to be changed at a macro level. In groups people are very cautious about what they say for whatever reason. And in private they are less cautious.”
Hourican wants “a plan that people can get behind” to create “the discussion in the political circles about creating economic prosperity for Cyprus’children”.
Noting that a lot of economies cannot grow to fix their debt/GDP ratios, he says “Cyprus can, because Cyprus is underutilising its resources in my opinion. And that’s even before we mention hydrocarbons”.
“We need to change the mood of the country and we need to start to see some growth.”
With that in mind, BoC is supporting an incubator programme with the Cyprus International Institute of Management (CIIM).
“We need an entrepreneurial culture. We’ve got to get back to the future,” he says, adding that Cyprus needs to avoid the ‘scourge’ of emigration that has afflicted his native Ireland.
We are ready to lend
The CEO says that the bank is ready to lend.
“We absolutely want to lend money to businesses that are creditworthy. We have money to lend … we have the capital to lend.”
However, he says “there is an inconvenient truth in an economy entering its third year of contraction in that the demand for lending from viable businesses tends to be modest”.
Referring to the high level of non-performing loans (NPLs), he says the biggest issue facing the country, not just the bank, is that people need to meet their obligations.
“There has been a bit of an acceptance of people not meeting their obligations.”
Pointing out that the bank borrows money from depositors in order to lend, he says, “people like to point the finger at the bank. But if you substitute the word bank for depositors, it presents an entirely different picture.”