Financial Mirror (Cyprus)

Bank of Cyprus posts increased Q1 net profits


Bank of Cyprus posted after-tax EUR 21 mln profits for the first quarter of 2022, compared to a net profit of EUR 8 mln a year ago.

It announced a record EUR 618 mln in new loans and further reduction of non-performing exposures (NPE), marking the third consecutiv­e quarter of accelerati­ng loan growth.

The bank balance sheet normalisat­ion continued in Q1 with a further EUR 100 mln of organic NPE reduction, reducing the NPE ratio to 6.5%, pro forma for NPE sales.

As a result, the bank remains on track to achieve the target NPE ratio of 5% by the end of 2022 and less than 3% by 2025. It also announced a 2% increase in its loan portfolio.

In a press conference, the Group’s Chief Executive Panicos Nicolaou said: “New lending reached higher levels than the equivalent period pre-pandemic, whilst maintainin­g strict lending criteria.”

As of 31 March 2022, the bank’s Total Capital ratio was 20.3%, and its CET1 ratio was 15.2%, on a transition­al and pro forma basis.

Its liquidity position also remained strong, and it continued to operate with over EUR 6 bln surplus liquidity and a liquidity coverage ratio (LCR) of 296%.

Deposits on the balance sheet increased by 1% in the quarter to EUR 17.7 bln.

The bank announced it has a clear focus on creating shareholde­r value and providing the foundation­s for a return to dividend distributi­ons.

“Our plan for the future is clear. We have a dynamic strategy in place, leveraging our strong customer base and customer trust, market leadership position, and developing digital knowledge and infrastruc­ture,” said Nicolaou.

According to Nicolaou, the bank’s forecasts consider “worse macroecono­mic forecasts, lower GDP growth, higher risk-to-forecast costs, reduced new loans and similar direct and indirect effects of the war in Ukraine”.

He also added that the expected rise in interest rates by the ECB “outweighs the negatives of the war”.

On the tendency of interest rate increases by the Central Banks, the Executive Director of the Financial Management Department of BoC, Eliza Livadiotou, agreed this “is very positive …mainly because the bank has large liquidity reserves which are deposited with the European Central Bank and today we pay 0.5%”.

“Any change in the ECB interest rates will immediatel­y bring better income for the Bank of Cyprus.

“For the EUR 9.3 bln currently deposited with the ECB and paying 0.5%, we will either not have this loss or start to have income as interest rates rise.”

She refuted that Cypriot banks are exposed to Russian capital and said the Bank of Cyprus’ income from commission­s from the Russian market is only 3% of its total commission­s.

The group generated a total income of EUR 146 mln and a positive operating result of EUR 50 mln.

The CEO said: “Despite inflationa­ry pressures, we kept our total operating expenses broadly flat in the quarter at EUR 86 mln, reflecting our ongoing efforts to contain costs”.

The quarterly cost of risk increased modestly to 44 bps in the quarter, reflecting the update in the macroecono­mic outlook but remaining well within the group’s normalised target range.

“We delivered a resilient profit after tax and before nonrecurri­ng items of EUR 27 mln, with a correspond­ing return on tangible equity of 6.7%.”

Nicolaou said the bank plans to reduce the number of branches to 60, from 80 today, while reducing its staff by 15%. “When and how we will reduce it is something that has not been decided yet”.

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