Lombard Bank major shareholder in refinancing talks due to Greek exposure

Lombard Bank Malta's major shareholder Marfin Popular Bank, of Cyprus, in negotiations with the Cypriot government over possible state financing to help it recapitalise from exposure to Greek toxic debt.

In February the bank had announced a record net loss of €3.3 billion in 2011 after incorporating a 62% "haircut" on toxic Greek bonds.

Cyprus's Popular Bank is the local bank most exposed to the Greek debt crisis, needing to raise an estimated €1.5 billion or more in additional capital buffers as required from the European financial authorities.

In a statement it issued Monday, the bank said it was discussing with the Cyprus Central Bank and the finance ministry government support for the recapitalisation process. Marfin is Cypru's second biggest bank.

The cash-strapped Cyprus government has said it is willing to financially support the banks but has not elaborated on how it will do so. It has not ruled out asking for an EU cash bailout or seeking a cheap interest loan as it has done with Russia for €2.5 billion.

Marfin Popular Bank acquired a stake in Lombard Bank Malta plc in 2007, and its equity has grown to 48.9% since then. It's the second largest bank in Cyprus and the fifth largest bank in Greece, listed on both countries' stock exchanges. Its largest shareholder is Dubai Financial, a member of Dubai Investment Group, the Gulf emirate's investment arm.

Lombard Bank is also the majority shareholder (67%) in Maltapost, the island's only postal service.

The Marfin group holds Greek government bonds with a nominal value €3 billion. But in February it announced net losses of €2.5 billion due to Greek government bond restructuring. Apart from the Greek debt write-down, a €796 million "goodwill impairment" related to Greek operations was also taken into account, making total losses after tax of €3.335 billion for 2011.