Bank of Cyprus to sell Rus­sia sub­sidiary, € 42 mln in op. prof­its

Financial Mirror (Cyprus) - - FRONT PAGE -

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.

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