The dismantling of Cyprus Popular Bank marks the end of a troubled investment for Dubai Group, the holding company that was once its largest shareholder.
Cyprus Popular Bank's branches will reopen today under the control of Bank of Cyprus, which will also take ownership of its domestic deposits.
Cyprus Popular Bank - which trades under the brand name Laiki Bank, and was previously known as Marfin Popular Bank, has had its share price collapse since 2007, when Dubai Group valued its stake at €1.425bn (Dh6.7bn).
Once the largest shareholder in Cyprus Popular Bank, it currently holds a 0.2 per cent share in the bank after being massively diluted by a rights issue last year. Dubai Group held an 18.6 per cent stake prior to that point.
Cyprus Popular Bank said last week in a statement to the Athens Exchange that the central bank of Cyprus had appointed a special administrator to split up the bank.
As part of the plan, the bank is to be split in two: its branches will be divided between Bank of Cyprus and Greece's Piraeus Bank, preserving deposits under €100,000. A "bad" bank, which is to be wound down, will hold any deposits exceeding that limit.
Separately, Dubai Holding Commercial Operations Group (DHCOG) yesterday announced profits of Dh1.2bn for last year, a six-fold increase on the previous year.
The holding company owns the hotel chain Jumeirah Group, Tecom Investments, Dubai Properties Group and regional telecoms assets.
DHCOG has substantially improved performance during the period, said Mohammad Abdulla Al Gergawi, Dubai Holding's chairman.
"Our turnaround strategy has made considerable strides in 2012 and our businesses across the commercial operations group are increasingly well positioned," he said.
"This, together with the strengthening of Dubai as the region's financial, business and tourism hub, gives me confidence that we are set for the next phase of future growth."
Dubai Financial Group, a subsidiary of Dubai Group, said it invested €625 million in Marfin Popular Bank between May 2006 and the end of that year and had intended to take its shareholding to 30 per cent. It valued its stake at €1.425bn as of March 2007.
The bank's shares have lost 99.5 per cent of their value since peaking later that year and last traded at 4.5 euro cents each, before their suspension last month. Dubai Group's stake was heavily diluted as a result of a €1.8bn rights issue, in which the Cypriot government was the biggest subscriber.
Dubai Group, an arm of Dubai Holding, entered negotiations with lenders in 2010 over US$10bn (Dh36.73bn) in liabilities.
Dubai Group "has no meaningful stake any more" in Cyprus Popular Bank and the lender's administration would have little impact on its debt restructuring talks, said a person familiar with the matter who spoke on condition of anonymity.
Dubai Group declined to comment.
Cyprus Popular Bank's request for a bailout last year forced the Cypriot government to seek its own rescue package from the European Union. Cyprus became the fifth country in the euro zone to seek a bailout.
Efforts to unlock €10bn in funding from the so-called troika of the European Commission, the European Central Bank and the IMF led Cyprus to seek a €5.8bn levy on bank deposits last month. The measure was rejected by the Cypriot parliament as citizens rushed to ATMs to withdraw their savings.