News Column

H1 RESULTS: Bank of Cyprus profits slightly up in Q2 at €50m

August 28, 2014



Bank of Cyprus seems to have returned to a gradual path of recovery with a second successive quarter of profits, as total after tax for H1 stood at 81 mln.



Following seven consecutive quarters of devastating losses, a near-fatal bail-in of depositors, forced absorption of the now defunct Laiki Popular Bank and the loss of all banking operations in Greece, the island's biggest lender continues with cost-cutting, downsizing and asset sales.

With Q1 after tax profits at 31 mln, mainly on local operations and deposits in the UK and Russia down, a similar pattern was painted for Q2, where local operations provided the bulk of profits, probably from administration costs and bank charges, for an accumulated H1 profit of 81 mln.

"We have made good progress in the implementation of our restructuring during the second quarter, and we continue to deliver against our strategic objectives. Profit after tax excluding one-off items and profit after tax for the six months ended June 30 totalled 78 mn and 81 mn, respectively," said Group CEO John Hourican.

"The performance of the Cypriot operations, our core business, remains much stronger than the Group's overall performance, supporting our efforts of shrinking to strength through the disposal of non-core operations and assets," Hourican added.

"Despite the full abolition of internal restrictive measures as of 30 May 2014, our deposit base is showing stabilising signs. The ex-Laiki integration has been completed with the successful IT systems migration in June, ensuring uniform service for all our customers. The Restructuring and Recoveries Division (RRD) is fully operational, with 11.4 bln of large and delinquent loans managed by a dedicated workforce of about 500 people. Despite the difficult legislative framework, the RRD is showing some early successes," the CEO added.

The Group's capital position was strengthened with Core Equity Tier 1 ratio increased from 10.5% in end-December to 11.3% as at June 30. Combined with Thursday's anticipated decision on the 1 bln capital increase, the bank's Core Equity Tier 1 ratio is expected to increase to 15.6% (transitional basis) and 15.1% (fully-loaded basis) making it one of the best capitalised banks in Europe.

By the end of H1, bank had reduced its Eurosystem (ECB and ELA) funding by 800 mln from 11.0 bln to 10.2 bln, while further sales of non-core assets totalled around 450 mln, including the sale of Ukranian operations for 202.5 mln, the sale of investment in Romanian Banca Transilvania for 82 mln and the sale of loans in Serbia for 165 mln.

H1 gross loans and deposits were 25.3 bln and 13.8 bln, respectively, with the net loans to deposits ratio totalling 148%, compared to 151% at Q1 and 145% as at 31 December 2013.

The non-performing loans book declined by 1,3% during the second quarter, totalling 12.591 mln at June 30, compared to 12.756 mln at March 31 and 13.003 mln at December 31, 2013, representing 49.8% of gross loans for H1. Adjusting for the disposal of the Ukrainian operations and the loans in Serbia, there was an increase of 0.4 bln in the loanbook "reflecting the recessionary environment in the Group's home market of Cyprus and the lack of relevant legislative tools to enable the bank to engage effectively with borrowers," the bank added.


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Source: Financial Mirror (Cyprus)


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