BOCY re­turns to profit in Q1, ELA down to € 6.5 bln

Financial Mirror (Cyprus) - - FRONT PAGE -

Bank of Cyprus is ex­pected to re­turn to prof­itabil­ity in the first quar­ter, com­pared to the loss-mak­ing fourth quar­ter of 2014 (loss af­ter tax of EUR 337 mln), it an­nounced on Fri­day, adding that has taken a more con­ser­va­tive ap­proach to its Rus­sian sub­sidiary, now re­garded as a “dis­posal group”.

It also said that the ex­po­sure to ECB fund­ing through the Emer­gency Liq­uid­ity As­sis­tance (ELA) pro­gramme has been re­duced to EUR 6.5 bln. The bank said it had in­creased its pro­vi­sions for losses from cus­tomer loans in the fi­nal quar­ter of 2014 to EUR 248 mln, com­pared to a pro­vi­sion of EUR 115 mln in the third quar­ter.

“The el­e­vated level of pro­vi­sions for im­pair­ment of cus­tomer loans (con­tin­u­ing op­er­a­tions) charged dur­ing the fourth quar­ter of 2014 is not ex­pected to be re­peated in the first quar­ter of 2015, where the charge is ex­pected to be in line with the first three quar­ters of 2014. Profit be­fore pro­vi­sions and im­pair­ments, re­struc­tur­ing costs and dis­con­tin­ued op­er­a­tions for the first quar­ter of 2015 is ex­pected to be in line with the fourth quar­ter of 2014. As a re­sult, it is ex­pected that the first quar­ter of 2015 will be prof­itable af­ter tax,” the bank said.

“Fur­ther­more, in light of the de­te­ri­o­rat­ing eco­nomic con­di­tions in Rus­sia since mid-De­cem­ber 2014, and fol­low­ing the re­clas­si­fi­ca­tion of the Rus­sian op­er­a­tions as a dis­posal group held for sale, the bank pro­ceeded to pru­dently re­assess its op­er­a­tions in that coun­try and in­creased the level of pro­vi­sions for im­pair­ment of cus­tomer loans and other as­sets dur­ing the fourth quar­ter of 2014. As a re­sult, the loss from dis­con­tin­ued op­er­a­tions for the fourth quar­ter of 2014 to­talled EUR 214 mln.”

The bank, that was restruc­tured af­ter de­pos­i­tors re­ceived eq­uity for cash as part of the 2013 “bail in” im­posed by the Troika of Cyprus’ cred­i­tors, and later bailed out with a fur­ther EUR 1.1 bln in­jec­tion from for­eign and lo­cal in­vestors, said that its first quar­ter of 2015 is not com­pa­ra­ble to the first quar­ter of 2014 “given the sig­nif­i­cant delever­ag­ing com­pleted since then, in­clud­ing the par­tial re­pay­ment of the sovereign bond held by the bank,” which had been used to re­cap­i­talised failed Laiki Bank and bur­dened Bank of Cyprus with a fur­ther EUR 9.5 bln of ELA funds.

The bank said it “con­tin­ues to make good progress in de­liv­er­ing against strate­gic ob­jec­tives. The bal­ance sheet delever­ag­ing is con­tin­u­ing and the bank com­pleted the dis­posal of its in­vest­ment in Marfin Di­ver­si­fied Strat­egy Fund Plc on April 30, thereby en­hanc­ing its liq­uid­ity and cap­i­tal po­si­tion.”

As part of the delever­ag­ing, the bank’s man­age­ment team, headed by out­go­ing CEO John Houri­can, has dis­posed of as­sets across eastern Europe and the U.K., has shrunk the work­force by more than a third and dis­posed of non-core prop­er­ties, con­cen­trat­ing staff in own of­fices.

The bank also said it “is mak­ing progress in ar­rest­ing the de­te­ri­o­ra­tion of its loan book qual­ity. The Bank’s com­mon eq­uity tier 1 (CET 1) ra­tio is ex­pected to be main­tained at around 14%. The liq­uid­ity po­si­tion con­tin­ues to im­prove, ben­e­fit­ing from cus­tomer in­flows ex­pe­ri­enced through­out the first quar­ter of 2015 and also dur­ing April 2015 de­spite the full abo­li­tion of cap­i­tal con­trols. As a re­sult, the Bank has man­aged to re­duce its ELA fund­ing by EUR 0.9 bln since De­cem­ber 31, 2014 to a cur­rent level of EUR 6.5 bln, com­pared to a high of EUR 11.4 bln in April 2013.”

Last month, par­lia­ment passed a much-de­layed packages of mea­sures on fore­clo­sures and in­sol­ven­cies that will help all com­mer­cial banks to re­cover as­sets from bad clients, re­struc­ture loans and re­duce the rate of non-per­form­ing loans (NPLs), cur­rently ac­count­ing for more than 50% of the bank­ing sys­tem’s loan­book.

The board will con­vene on Fri­day, May 29, to re­view the fi­nan­cial re­sults for the first quar­ter of 2015 that will be an­nounced on the same day af­ter mar­ket close to the Cyprus Stock Ex­change and the Athens Ex­change.

As at De­cem­ber 31, 2014, the Group to­tal as­sets amounted to EUR 26.8 bln and to­tal eq­uity was EUR 3.5 bln.

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