Bank of Cyprus prof­its slow in 3Q

Financial Mirror (Cyprus) - - FRONT PAGE -

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.

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