Bank of Cyprus to sell Russia subsidiary, € 42 mln in op. profits
Bank of Cyprus seems to have turned the corner and reported after-tax profits and pre-restructuring costs of EUR 42 mln for the full year, the chief executive of the island’s biggest lender said last week.
This compares to a loss after tax, on the same basis, of EUR 359 mln in 2013.
“Our recurring profitability is stabilising with profit before provisions and impairments for the fourth quarter of 2014 totalling EUR 169 mln,” CEO John Hourican said in a statement.
“The results of the fourth quarter were negatively affected by increased provisions and impairments in Russia, as well as the classification of the Russian operations as held for sale. Loss after tax for the fourth quarter of 2014 and for the year ended 31 December 2014 totalled EUR 332 mln and EUR 256 mln, respectively,” Hourican said.
The CEO, who was head-hunted in November 2013 to turn the bank around and has subsequently attracted high calibre investors such as Wilbur Ross, with former Deutsche Bank executive Josef Ackermann now the bank’s chairman, has finally laid to rest rumours of the sale of 80%-subsidiary Uniastrum in Russia.
Hourican’s two main objectives had been to shrink the bank back to its core activities by selling off unprofitable assets and to reduce the bank’s high risk exposure to nonperforming loans, currently running at a national average of 50% of all loans.
In statements released to the media, the bank said it has deleveraged its balance sheet by EUR 3.5 bln, disposing of its Ukranian operations, its investment in the Romanian Banca Transilvania, its loans in Serbia, assets in Romania and the UK loan portfolio acquired from Laiki Bank.
“The bank is running a process to dispose of its operations in Russia,” the statement added, suggesting that Uniastrum, itself at the heart of a struggle by control by its former owners, will no longer burden the Group with a deterioration of its loanbook and deposits.
The bank also said it reduced loans in arrears for more than 90 days by EUR 350 mln during the year, but is still waiting for Cyprus parliament to pass the much-delayed foreclosures and insolvencies legislation that will help all banks recover assets from non-performing loans.
This had been a condition set by the Troika of international lenders when they committed Cyprus to a EUR 10 bln bailout programme, but subsequently burdened Bank of Cyprus with unbearable debts from bankrupt Popular Laiki Bank.
Bank of Cyprus, that recently returned to the Cyprus Stock Exchange after a near two-year absence had been saddled with ECB-sponsored emergency liquidity assistance (ELA) of almost EUR 11.4 bln and under Hourican’s watch, this has now been reduced to EUR 7.2 bln, with EUR 200 mln paid down in the past month alone.
The bank also said that despite the general impression of capital flight, deposits are trickling back, up EUR 72 mln in Q4 2014 for the first time since March 2013 improving its net loans to deposit ratio to 142% (from 145% at 31 December 2013).
The bank that was bailed out by foreign investors who pumped in about EUR 1 bln last year, following a near EUR 4 bln bail-in by depositors the year before, said it remains adequately capitalised with a CET1 ratio of 14% (transitional basis) compared to 10.4% at 31 December 2013.
“The Restructuring and Recoveries Division (RRD) is making progress in arresting loan quality deterioration, with loan restructuring of viable borrowers progressing well and loans in arrears for more than 90 days reduced by 3% during the fourth quarter of 2014,” Hourican’s statement added.