Updated: Lombard shareholder Marfin bank takes €2.5 bn hit

(Adds Lombard's statement)

Cyprus's Marfin Popular Bank said today it made a record net loss of €3.3 billion euros in 2011 after incorporating a 62 per cent "haircut" on toxic Greek bonds.

There were net losses of 2.5 billion euros ($3.4 billion) due to Greek government bond restructuring, Marfin said in a statement.

Marfin owns 48.9 per centy of Lombard Bank.

In a statement this evening, Lombard said Marfin was not a majority sharholder in Lombard. Lombard, it said, held no financial exposure whatsoever to any member of the Marfin Popuar Bank Group or to any other Greek or Cypriot entity. It also held no exposure to any form of non-Maltese sovereign or corporate securitieis.

Lombard said it will continue to implement its policy of a prudent and cuatious approach to treasury management.

Apart from the Greek debt writedown, a 796 million euro"goodwill impairment" related to Marfin's Greek operations was also taken into account, making total losses after tax of 3.335 billion euros for 2011.

"With these actions, the group can look forward to a new era of increased operational profitability, enhanced liquidity and strengthened capacity to finance businesses and households," it added

The group holds Greek government bonds with a nominal value 3.052 billion euros ($4.1 billion).

As a result of its Greek operations, linked to the triple merger of Egnatia Bank, Marfin Bank and Laiki Bank in 2006, a goodwill impairment charge of 796 million euros was recognised in the last quarter of 2011, Marfin said.

The charge does not affect the group's regulatory capital position.

The bank said it was optimistic about achieving its capital enhancement plan to raise 1.5 billion euros ($2 billion) deemed by the regulatory authorities as an adequate buffer against the euro crisis worsening.

There was a 3.2 percent increase of pre-provision profit reaching 388 million euros ($522 million), and total operating income also increased 1.5 percent to 1.04 billion euros ($1.4 billion), while operating expenses remained flat.

Marfin, the holiday island's second largest bank after the Bank of Cyprus, also operates in Australia, Britain, Estonia, Greece, Malta, Romania, Serbia, the Ukraine and Russia.

The Bank of Cyprus posted a one billion euro net loss last week after writing off Greek sovereign debt.

"Marfin has suffered significant losses stemming mainly from the private sector involvement in the Greek sovereign debt restructuring, but also from the ongoing poor Greek macroeconomic conditions," said group chairman Michael Sarri.

"We have acknowledged the problem in full transparency, which enables us to embark on a new beginning."