Bank of Cyprus profits slow in 3Q
Third quarter profits at the Bank of Cyprus were EUR 5 mln, a million short of the second quarter profit, for an accumulated 9-month result of EUR 62 mln, 16% down from the three-quarter profits this time last year.
But the bank’s CEO, John Hourican, is unfazed by this slowdown, confident that the non-performing loans portfolio had been reduced, as has the ELA facility, which has dipped below EUR 1 bln for the first time to EUR 800 mln “and full repayment now looks like a realistic near-term target.”
He added that deposits increased by about EUR 900 mln in the period and that EUR 1 bln in new loans were issued, three quarters in Cyprus and the rest in the U.K.
The bank said in an announcement that profit before provisions was EUR 138 mln for 3Q2016, directed at increased provisions and impairment charges to faster derisk balance sheet, a practice which is expected to continue into 2017.
The bank’s capital base strengthened further. The core equity tier 1 (CET1) capital ratio totalled 14.6% as at September 30, compared to 14.4% on June 30 and 14% on December 31, 2015. The CET1 was positively affected by the lower risk weighted assets mainly driven by balance sheet movements.
The emergency liquidity assistance (ELA), a burden it inherited when it was forcefully merged with now-defunct Laiki Popular Bank in 2013, was reduced from the beginning of the year by EUR 3.0 bln and is now at EUR 800 mln.
In the third quarter, there was a 6% increase in deposits by EUR 896 mln with the year-to-date deposits up by EUR 1.5 bln or a 10% from the nine-month period of 2015.
Group gross loans totalled EUR 20.596 bln as at September 30, compared to EUR 21.083 bln at June 30 and EUR 22.592 bln at 31 December 2015. The reduction in gross loans is, to a large extent, driven by the restructuring activity, including debt for property and debt for equity swaps. Gross loans in Cyprus totalled EUR 18.773 bln at September 30 and accounted for 91% of Group gross loans.
Loans in arrears for more than 90 days (90+ DPD) were reduced by EUR 501 mln (5% reduction q-o-q) in 3Q2016.
Non-performing exposures (NPEs) as defined by the European Banking Authority (EBA) were reduced by EUR 592 mln or 5% during 3Q2016 to EUR 11.901 bln at 30 September 2016, accounting for 58% of gross loans. For the first time, the reduction of NPEs during the quarter exceeded the reduction of 90+ DPD mainly due to curing of restructured performing NPEs that met the exit criteria following satisfactory performance post their restructuring.
“We are pleased that the positive momentum continued in the third quarter of 2016, strengthening further our CET1 ratio and accelerating the reduction of non-performing loans and the increase in deposits compared to the previous quarter”, said Hourican.
He said the bank reduced the stock of non-performing loans for a sixth consecutive quarter and by EUR 2.6 bln or 23% during the nine month period. It has also completed EUR 3.4 bln of restructurings with the success of the restructurings performed starting to yield results.
“We are satisfied that our funding conditions continue to improve. We have repaid EUR 3.0 bln of ELA year to date to a current level of EUR 0.8 bln and full repayment now looks like a realistic near-term target. At the same time our deposits grew by EUR 896 mln in the third quarter and our loans to deposit ratio stands at 102% as at the end of September”, he said.
“We remain focused on operating as an accelerator for growth in the real Cypriot economy. Since the beginning of the year, we granted over EUR 1 bln of new loans to promising sectors of the domestic economy through our core operations and to entrepreneurs in the UK through our UK subsidiary. New loans of EUR 763 mln were granted to Cypriot households and businesses this year and we are actively seeking to provide more credit to viable businesses and consumers,” he added.