Wargaming: From Tanks to Banks, The Untold Financial Story (Part III of IV)

Part III: No One Told Me This Bank Could Tank

 

Logo of Hellenic Bank.jpg

In Part III, we will discuss the present state and future of the Hellenic Bank of Cyprus, which WG owns a 26.2% stake in.  Part III will reveal a dark and sinister side of the lovely little island country referred to as “Treasure Island,” and “Russia’s Laundromat.”  It is not a pretty picture, but the story must be told.

Certain parts of this will be bland for some and will involve analyzing financial statements.  I will do my best to try to explain what is going on and what it means for the bank.  The truth will make you question the safety of your bank account, your investments, and everything you know about the world we live in.

This will be a very long read, therefore I will discuss how Donald Trump might find himself entangled in the mess going on at the banks in Cyprus and their links to Russian money laundering in an augmented Part III.V of IV that will follow instead.  We will also talk about what might happen to Cyprus if they don’t make the changes necessary to their banking system as pressure mounts from the EU and US as I wanted to leave this discussion about WG and its financial circumstances.

The current state of the Hellenic Bank of Cyprus (all numbers in Euros)…

The bank currently has a market cap of 108.7 million, an enterprise value of negative 2 billion (yes negative), and a share price of 0.616.  In the first half of 2017, the bank lost 23.4m.  This loss includes writing off 82m for bad debts, and restructuring 296m of other debts.

“In March, the bank’s non-performing loans ratio was 57 per cent.”  “Customer deposits stood at €5.8bn in June down from €6.1bn in March while total gross loans were €4.2bn against from €4.3bn three months before, Hellenic said.”

http://cyprusbusinessmail.com/?p=52240

Explanation of the above section:  The market cap is the value of all outstanding shares, it is figured out by multiplying the stock price (in this case 0.616) to the total number of shares.  Wargamming owns 24.8% of the bank and they have 49,458,709 shares with a total cash value of $30.5 million, and there are approximately 200m total shares outstanding.  The enterprise value is the value of a company including its debt.  The bank has a lot of debt and therefore if someone were to buy it, this is what they would be taking on, because the debt would transfer to them.  The writing off of 82m in bad debts are for loans that are impaired and are essentially written off to get them off the books and offset income (if there is any) to reduce corporate tax at the end of the year.  The 57 per cent non-performing loans ratio is the amount of debts they are holding which are impaired in some way and not up to date on the repayment terms.  When you do some math on the total gross loans above (57% x 4.2bn), you can see this number is very high at 2.4bn.  That’s right, 2.4bn of their 4.2bn in loans are impaired.

Looking at financial statements is boring, but you get to know which numbers mean the most and can really set off the alarm.  The above section is bad enough, but when you look at the statement of cash flows for 2016, you see two things that stand out as being especially bad (page 27 in the link below).

2016 2015
Net decrease in cash and cash equivalents: (303,733) (339,464)
Cash & cash equivalents at years end: 2,482,051 2,785,784

http://www.stockwatch.com.cy/media/announce_pdf/03-2017/ANNOUNCEMENTS/Mar31_2017_HB.pdf

Note: All numbers are in 1,000s, so add 3 more digits to the end of both of these numbers on their financial statements.  The net decrease in cash and cash equivalents is 303,733,000 (303.7m) and the cash and cash equivalents at the end of the year is 2,482,051,000 (2.48bn).  They are bleeding cash, most likely due to trying to balance their debt write-offs each year with their income, so they come close to even.

The bad news:

1) As you know from Part II, Hellenic Bank was hit with a penalty for weaknesses in the “know your customer” framework.

https://www.thenationalherald.com/130430/cyprus-hellenic-bank-hit-with-big-penalty/

2) “The Cyprus Consumer Protection Service has ruled that the Hellenic Bank violated consumer rights with abusive clauses in mortgage contracts and imposed charges for early debt repayments.”  Isn’t that lovely?
How would you like this to happen to your account?
“The probe launched by its director also found that the bank charge the consumer’s accounts, at the absolute discretion of the bank, for dues owed to it, linking their accounts to obligations they have towards the bank, and offsetting/ transferring money to any account.”

3) Hellenic Bank lost its Cyprus Investment Firm (CIF) license.  “As of this date, the bank is no longer licensed and regulated by CySEC and cannot provide financial or ancillary services. The regulator gave Hellenic Bank three months from that date to settle its obligations(…)”

What is a CIF license and what will it affect?
4) Hellenic Bank made the top 50 list of banks who are involved in money laundering:
https://qz.com/938504/the-top-50-global-banks-allegedly-involved-in-the-20-8-billion-russian-laundromat-money-laundering-scheme/

The really bad news:

The bank has a lot of bad debt.  They took it upon themselves to sell off some of the debt to other companies.  They also transferred some of their employees there who held a strike due to the possibility of losing seniority or other job related benefits.

http://www.news.cyprus-property-buyers.com/wp-content/uploads/2017/07/Hellenic_bank_sells_NPLs.pdf

“It is noted that the Bank retains the ownership of the said non-performing loan and real estate portfolio.  The contract is priced at arms’ length following a two stage competitive auction process.  APS Cyprus is 51% owned by APS Holding and 49% by the Bank.”

When you look at the wording of this deal, which lasts for tens years,  you get the impression that the bank is trying hard to transfer the worst of its bad debt from its books and really is nothing more than a dirty trick.  APS Cyprus was a newly formed company from the parent company APS Holding.  It is a private company and will not be under the same financial reporting requirements as a public company like Hellenic Bank would. They conveniently did this in 2017 because there will be a new financial requirement in 2018 that is mandatory for public companies, which will change the way impaired debt is classified and reported on financial statements (more on that in the “bag of shit on your front lawn news” section below).

They did another sale of bad debt early in 2018, for an undisclosed amount to another firm, this one to Norway’s B2Holdings ASA.

This deal “will reduce by 6.2 per cent the bank’s non-performing loans.”  My take on this is that these debts were most likely sold to this company at a fraction of their of book value (maybe 15-33%).  They are likely to be debt that doesn’t involve loans to Russia or other questionable entities that would raise any concerns.

The bag of shit on your front lawn news:

Why is Hellenic Bank in such a rush to sell off so much of its bad debt and restructure the rest?

Hellenic bank is a public company, and public companies have to adhere to financial reporting standards.  Those standards were developed by an organization called the International Accounting Standards Board (IASB), and they created the International Financial Reporting Standards (IFRS) protocol.  In 2018, there is a big change to one very important protocol as far as banks are concerned.  It is called IFRS 9, and it involves the reporting of loan impairment, of which Hellenic Banks has a whopping 2.4bn.

Under the old protocol, a bank could offset the yearly impairment against that year’s gains.  For example, lets say Joe Shmoe owes the bank $1,000 a month for 30 years and pays nothing for the first year, the bank could write off $12,000 for the year as bad debt and forget about the other 29 years Joe owes on the loan until next year comes and then write off another $12,000, even though that loan is most likely going to be impaired for its entire duration.  With the new standard, the entirety of the loan has to be evaluated for impairment and a fair assessment made.

This new standard is why Hellenic Bank has been selling off bad debt at a fast rate this year and trying to tidy up the books.  They transferred a lot of the bad debt to a newly created Cyprus company recently and retain “arms length” control over it.  Anyway you look at it though, this looks like an absolute mess the next time they gather around the table to see what the numbers look like.

I wouldn’t want my money in the Hellenic Bank and the section below explains why.  Hold on to your hats, hide the kids, take the dog for a stroll and wash your ass, because this is going to take a turn for the worse.

The nightmare scenario nobody wants to admit or accept news:

OK, breathe.  Clear your mind.  Your money at the local bank is safe right?  After all, it has FDIC insurance, it has to be safe.  Your checking and savings accounts should be safe up to the monetary limit ($100,000 Euros in Cyprus, and $250,000 in the US).  That is, unless there is a financial crisis and the government decides they want to keep the bank closed to prevent a bank run (like what happened in Cyprus), and when the bank finally re-opens, a percentage of your funds are confiscated/stolen.  The government can change the rules at any time and there has been talk of trying to convert the money in your account to stock in the bank (which would be worthless if the bank is tanking) when a crisis hits.  This would be similar to Executive Order 6102 signed in 1933, which made it illegal to own gold in the US, and if you had any, you would have to bring it in to be converted to US dollars for $20.67 per Troy ounce.  You would be forced to sell something of value for useless dollars or bank stock.  The best advice is to get your money out of the bank and put it under your mattress or buy gold if the economy crashes or a major financial crisis occurs.

Checking and savings accounts = SOMEWHAT SAFE ( with monetary limits and possible emergency forfeiture)

Stocks, bonds, 401ks = NOT SAFE

Stocks, bonds, 401ks are not safe.  Imagine a bank like the Hellenic Bank or any other bank in the world holding on to your money.  Now imagine this.  FDIC insurance (in the US) does not cover bank fraud.  Read it and weep.  FDIC insurance essentially lets banks regulate themselves.  Your safety deposit box, not covered. Annuities and US Treasury securities, not them either.  If those funds were embezzled, you might get reimbursed, but then again, you might not.

“Robberies and Other Thefts – Stolen funds may be covered by what’s called a banker’s blanket bond, which is a multi-purpose insurance policy a bank purchases to protect itself from fire, flood, earthquake, robbery, defalcation, embezzlement and other causes of disappearing funds. In any event, an occurrence such as a fire or bank robbery may result in a loss to the bank but should not result in a loss to the bank’s customers.”

https://www.fdic.gov/deposit/covered/notinsured.html#other_situations

What a shitty thing to think about.

Why is any of this important in terms of Hellenic Bank?

Well, this is my theory.  The bank has 2.4 billion in impaired loans.  It also has 5.8 billion in customer deposits.  Who are those loans to?  Are they to Russian shell companies created by the bank or some other criminal entity?  Did they essentially loan out all of the money to fake Russian companies who they own and then default on those loans to the bank because they weren’t designed to be repaid?

“The ratings agency Moody’s estimates that there is about $31bn (£21bn) of Russian money in Cypriot bank accounts – $12bn from banks and $19bn from businesses and individuals.  Moody’s also estimates that about $40bn has been loaned to Russian companies based in Cyprus.

http://www.bbc.com/news/business-21831943

Let this sink in a minute.  Imagine owning a bank and being in charge of who you lend money to.  The money isn’t yours, but that doesn’t matter.  You create some phony companies in your homeland and lend them money.  The loans are all going to be impaired because you never intended to pay them back in the first place.  You simply write it off on your financial statements as bad loan expense.  You legally steal money, at least in the eyes of outsiders.

It really can’t get any worse than this.  The sad part is, the people who will pay for this fraud are the owners of an account at the bank and the taxpayers, as the EU deposits guarantee will come from bank insurance (if any exists) and eventually taxpayer money.  In essence, taxpayers and people with money in the bank will be paying for the mishandling of money and fraud by the people in ownership of the bank.

What a kick in the ass!  A truly sad spectacle and something everyone who has their hard earned money at a bank in any country should be weary of.  It can’t get much worse than this.  Time will tell what is going to happen, but with the new regulations and pressure from the EU and US increasing on Cyprus, this house of cards could come crumbling down soon.

In Part III.V, “Kaiser Don, the Money Laundering Con,” I will discuss how Donald Trump might find himself entangled in the mess going on at the banks in Cyprus and their links to Russian money laundering, along with what might happen to Cyprus if they don’t make the changes necessary to their banking system as pressure mounts from the EU and US to come clean on dirty money.

Disclaimer: My name is John Smith but you can call me Bubba. Everything I have said and will say in this series is only my opinion and is for entertainment purposes only. My current location is on a small boat docked next to a small island (not Cyprus) in a yet undiscovered island chain which lies in a large body of water.

16 Responses

  1. Thing 1 says:

    Well, well, well…they take over a 25% interest in the bank and run it into the fucking dirt. Sounds about right.

    This makes PERFECT fucking sense when paired up with our original article. Think about it: they bought into the bank to extend their access to finance. Then they fucked it up so badly with bad investments that they stopped filing financial reports at all.

    That got Wargaming kicked off the stock exchange.

    So then they start pilfering accounts in the bank to bleed off any money they can because they’re fucking destitute. At the same time, they start firing EVERYBODY, pretty much all development on the game stops, customer service stops, all of it.

    Now they own a 25% stake in a broke bank that can’t even make investments anymore it’s so fucking corrupt. All of a sudden they start merging servers in North America, cutting back even more on what little services they had left…

    It’s the textbook example of a sinking ship. They’ve pilfered just about every god damn thing they could pilfer.

    The whole fucking thing is going tits up.

  2. Zeedox says:

    I find these a fascinating read.
    “At the same time, they start firing EVERYBODY, pretty much all development on the game stops, customer service stops, all of it……………….They’ve pilfered just about every god damn thing they could pilfer.”

    hmmm – do certain US states have business relocation subsidies?

  3. Thing 1 says:

    They fucking all do, but I’m sure Wargaming doesn’t qualify.

    It’s this simple: You can rent an office building in Texas for about 5% of the cost you pay in California. What’s more, Texas has lower tax rates as well.

    Pay scale is a shit ton lower in Texas as well. If you’re making 75,000 dollars a year in California, that same job will pay 50,000 a year in Texas if that.

  4. Mr_Alex says:

    Does this mean it is the end of Wargamming and their games?

  5. Thing 1 says:

    It certainly means that all those rumored billions we thought was pure bullshit is in fact pure bullshit.

    Wargaming have flat out fucked up everything they’ve touched. Every company they bought is gone. Everything they got involved with has failed.

    Fucking ALL of it.

    Rather than just stick to World of Tanks and do a good job with it, they got fucking greedy, thought they were world players, and fucked up EVERYTHING.

    That’s why they’re on the back foot now: hiding, closing locations, laying off people hand over fist, closing down servers…and on and fucking on.

  6. Mr_Alex says:

    @Thing1

    Will that mean it will soon be the end of World of Tanks, Warships and warplanes?

  7. Thing 1 says:

    I don’t think so. You have to remember that they are still making money. So long as they are making money the games aren’t going to go anywhere, especially since they’re the ONLY thing making Wargaming any money at all. It just means their overall finances are complete shit and will be for the foreseeable future.

    The only thing that would change that is if they went completely tits up bankrupt, which is possible given all the shit we’re finding out. If that happens, the players will be the first to know. They’ll go to log in and the servers will not respond. They’ll go to the forums to posts and they too will be gone.

    Then we’ll all know what happened and pretty much why.

  8. Gomez_Adams says:

    Well, this certainly confirms what we’ve been saying all along: that Wargaming does NOT have the financial windfall income they falsely advertise through paid articles and that their business dealings are, to say the very least, more than a bit suspect.

    None of it surprises me one single bit.

  9. Shadora says:

    The most important part of the article, besides how bad the bank is doing, is the fact that all of the banks in Cyprus might be insolvent. They have been hijacked and gutted and only show assets on the books, where none might exist. They most likely loaned out the money to fake companies they created in Russia or other countries and never repaid the loans.

    The new accounting rule IFRS 9 most likely is the EU trying to push the issue with Cyprus banks to see if it cracks and if criminal charges will be filed in the future when APS Holding or one of the major banks is raided and documents seized.

    The article got very long, so I didn’t want to add a backstory to APS Holding, but when you look at the countries they do business in, many have money laundering problems.

    After I do a short augmented article on III.V for Trump and friends, I am going to try and create a 2017 income statement for WG in Part IV with rough estimates of income and expenses from various projects in the company as a whole.

    Spoiler: I believe they made money in 2017, but if not for loot boxes, they would have broke even or had a loss. So expect to see loot boxes all year long in some fashion for other holidays and events.

    Another note. The one year they reported income of roughly 212 million and showed a 206 million expense to only have 6 million profit seems highly suspect.

    Imagine starting a game that takes off beyond your wildest dreams and in the same year you spend almost all of it. In the US buying companies or studios, are not expenses you write off in the year of purchase, but rather capital expenditures, which are amortized over time I find that very fishy to say the least, but perhaps Cyprus lets you do things differently. I have looked at their accounting rules, but I want to take a second look at them for specifically this.

    When I do Part IV I will try to predict where this company is heading in the near future. With the HD changes and subsequent loss of several maps, as only 25 will be introduced as compared to the 39 available now, and higher demand on computers to run the game in many poorer countries, this could be a make or break year for them. They are putting it all on the line.

  10. Thing 1 says:

    Man, don’t take this the wrong way but…I’m glad you’re doing all the leg work on that shit and not me.

  11. Shadora says:

    I don’t mind doing it because it is interesting and I really don’t despise WG or Victor. They have been mismanaged and almost run into the ground with bad decision making and trying to expand into other games and businesses that I feel they don’t fully understand.

    An example is Master of Orion (MOO). 4X games like MOO have faded slightly and if you are the Civilization series, expect most people to play that instead as they are basically the same game in that genre, which has many copy cats.

    I understand the logic. Buy the intellectual property cheap from bankruptcy and build a solid game and maybe sell the intellectual property to someone else for a profit, but its high risk.

    The people making business decisions at the company, like developing HD maps for 3 years while ignoring players requests for new maps is both comical and sad.

    Creating planes and ships is nice, but the players will most likely be from tanks and it will cannibalize that game with an overall small gain after spending all of that money on development and then maintenance.

    I am debating whether or not to write an article on what they should do with tanks, as I have so many ideas that would revive the game and make them a fortune. It would also create a high tier game mode that people would play because there is an incentive. But, it would go far beyond that and create new revenue streams from the existing game. Still on he fence about it and not sure if you would want it on the site to begin with, so I would have to get your permission to do so.

  12. Thing 1 says:

    They did the same thing to Masters of Orion – COMPLETELY IGNORED THE PLAYER BASE.

    Many of the old guard players were shooting great ideas at them, updates they’d like to see, expansion of things they’d been dreaming about…

    What Wargaming did was give them a worthless, dumbed down, lame assed version that is the worst ever so they could bilk money out of initial sales and that was it.

    They wound up losing their ass on it because word QUICKLY got out how horrible it was.

    The robot game was the same.

    Total War Arena is the same as well. That series had already been done to death and lost most of its audience by switching to Sega (who TOTALLY fucked it up) and on to Wargaming who, even though most thought it impossible, fucked it up even more.

    Since 2012, every single thing Wargaming has touched has been a complete, total failure. Everything. They’ve to this day not had one successful thing done with the possible exception of Warships, but they even put the screws to that very, very quickly as well according to Alex and Gomez.

    As for how to fix tanks…shit. I don’t know.

    That would probably take a whole new sub site. It’s not a bad idea actually…make a subdomain and call it Fixing World of Tanks. LOL.

  13. Shadora says:

    “make a subdomain and call it Fixing World of Tanks. LOL.”

    LOL. They are the opposite of Midas, everything they touch turns to shit and by just seeing what they do in WoTs, I understand why.

    They completely ignore their player base as if they were parasites. They treat them with disdain. They think they know better what players want, than the players do.

    They are out of touch with reality and living in a bubble. Everything they do comes from the desk of accountants and other bean counter types who should not be involved in game play decisions.

    The NA promotion team with the Black Friday Feast $909 shit tank sale should have been marched out the door the day this was posted to the website for sale. You could get a better promotion idea hiring a tween who played the game for two weeks.

  14. Shadora says:

    You are right, its pointless. They wouldn’t listen anyway and are quite content running the company into the ground.

  15. Insurrectional_Leftist says:

    In Wargaming’s eyes, or whomever is making these decisions, thinks as Gomez once mentioned to me, “Thinks they are the Smartest Guys in the Room.” They don’t listen because of that mere fact alone. And if that were not enough, their pure avarice and greed stops them, their inability to have much of an ethical bone in their bodies, when it come’s to business practices etc. They’re so interested in grabbing as much cash as quickly as possible, they don’t give a damn about rules, regulations, trading or financial disclosures, banking laws, they treat people like throw away paper towels, and customers like cows they need to be milked every morning, while their being told their eating premium food, while in fact their eating rotted hay with flavoring.

    I noticed in the Long-Read [ And I did take much time reading all of this very slowly ], that this clearly shows Wargaming is responsible for being involved in “Money Laundering”, they are 26.2% owners of the enterprise. Where there is smoke, there is fire. I can’t see how they avoid this fire? I only see legal explanations, in their future at some point on the horizon. They’ll pay for the best lawyers money can buy etc. I’m not saying that they will not find a way to sleaze out of it, they in all probability will, but not without cost?

    Who knows? I could be wrong completely? On both counts.

    – I noticed in the article links { I carefully read those as well }, the one about in Cyprus where they even have a consumer protection office that is trying to look after these matters etc. Yet Trump is trying to internally destroy ours here in the U.S. { my how he works hard for banks, money launderers etc. and protects Russian financial operations etc. }

    -” Executive Order 6102 signed in 1933, which made it illegal to own gold in the US, and if you had any, you would have to bring it in to be converted to US dollars for $20.67 per Troy ounce. You ”
    ^^ My mother and father remember this. They were both born in 1939. My mother remembers it, because her mother told her about it, and everyone talking about it when it occurred as she grew up as a girl. It did in fact happen. And they can do that too. They can impose penalties, and you can get in trouble if your caught with that gold and don’t turn it over [ the government has to pay you, but most people don’t want to part with the Gold ].

    -Also, the Russian Shell Operations, there are so many ways that can be manipulated !! A good financial criminal mind can go to town with that. As posted in the forum area under the forum title:
    http://exposingwot.com/forum/viewtopic.php?f=8&t=47
    NRA being used for Russian Money Laundering for Trump Campaign. This is being looked into already. And it highlights the many points you are making here. This is a very serious TOPIC. People should not dismiss Cyprus, how it operates, and it’s connections to us here in the United States, and how the Russian Government/Putin, and yes — Wargaming is in the matter.

    Those shell companies, firms, are a huge fraudulent embezzling, bank robbing operation, milking people world wide.

    The CEO of Wargaming had better understand what he’s up against, and his bank as well.

    Article well done man. Lot of stuff here. Hats off to you.

  16. Shadora says:

    Insurrectional_Leftist:

    Thank you for your nice comments about the article and experiences with your parents from an era when the US government took extreme measures to defraud Americans out of gold that had real value because it can and will happen again in our lifetime.

    It already has when you think about the savings and loan crisis, where banks defrauded taxpayers and also during the derivatives crash a few years ago.

    In both instances, banks lobbied for changes in laws to give them more power to regulate themselves and Congress gave it to them because of the obvious financial kickbacks involved (both passive and active).

    Banks were not allowed to speculate with derivatives because of the ease of pretending to lose money from hard to understand transactions which created more value than there were assets, so they could show a higher loss without there being a true loss. It is hard to understand, but that is what happened.

    Russia has been laundering money for a long time and they go from country to country, island to island to do so. Belarus, Iceland, and now Cyprus.

    What is going on in Cyprus is going to take a turn for the worse soon as regulations from the EU look like they are specifically designed to put an end to the ease of sabotaging public banks to run laundering operations out of.

    My prediction is that is 2018 or 2019, there will be a major investigation and sanction against the banks in Cyprus and announcement that they will no longer be part of the EU banking system. Cyprus banks will collapse again when it becomes apparent that there are no real assets there and the banks have been gutted. In order for the bank to do this they would have to be knowingly lying on financial statements and defrauding the bank and its depositors.

    In the derivatives crash in the US as I mentioned above, the banks were allowed to make risky investment because they got approval from Congress after paying everybody off, and they make it all look like they lost money with bad decision-making.

    One thing that can’t be avoided is the collapse of Cyprus banks for whatever reason. The only question is, how long can they keep the smoke and mirrors illusion going?

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