CYPRUS: With healthy 1Q profits Hellenic claims retail bank throne

Hellenic Bank announced a healthy after-tax profit of EUR 14.9 mln for the first quarter of the year, making it the fifth consecutive period of being in the black, allowing it to declare itself as the leading retail lender, boosting business and increasing the money it has injected into the economy.

Hellenic said in an announcement that it has become a a strong bank with a pivotal role in the growth of the economy, while CEO Yannis Matsis said the now enlarged Hellenic Bank is performing at a much better rate compared to Q1 2018. We are excited to continue pursuing our growth strategy through financing the growth of the economy.

Matsis said: The takeover of the Cooperative Central Bank (CCB) operations and the simultaneous de-risking of our balance sheet and business model established Hellenic Bank as the strongest and most viable bank in Cyprus, safeguarding our depositors’ assets, generating value to our shareholders and providing good quality products and services to all our customer.

The lender, that did not seek a state bailout during the 2013 financial crisis and resorted to private investors, said it successfully completed a share capital raise of EUR 150 mln in the first quarter and sees itself as the leading retail bank on the island with the largest branch network and market share of 38.9% and 29.7% in household deposits and loans, respectively

The bank also boasts a robust capital position with a benchmark Common Equity Tier 1 capital (CET1) ratio of 18.5 and capital adequacy ratio of 21.16%, well above minimum regulatory requirements.

Following the C0-op acquisition, Hellenic’s balance sheet has been significantly de-risked, the bank said, adding that the NPE ratio of non-performing exposures was at 26.5% and net NPEs to assets ratio was at 4.2% compared to 11.7% in June 2018.

The NPEs increase, Matsis said, emerged from the NPE portfolio of the CCB, totalling EUR 433 mln, transferred to the bank as part of the acquisition. The CCB NPEs are covered by an asset protection scheme.

Matsis added that the total approved new lending for the first quarter reached EUR 177.2 mln, higher again than the respective quarter of the previous year. Also, we intensively focus on improving the quality of assets on our balance sheet through resolving and deleveraging our NPE exposures.

investment in our associate loan servicer, APS, is yielding results. The integration process is on track and I am confident that it will be effectively completed by the end of the year, the CEO said.

Customer deposits amounted to EUR 14.6 bln as at 31 March, compared with EUR 14.7 bln on 31 December.

The bank said that net interest income (NII) for the first quarter amounted to EUR 75.3 mln, up by 157% compared to the respective period of 2018, which was before the acquisition of the CCB.

Compared with the previous quarter, NII dropped by 6% mainly driven by lower interest income, affected by the decreasing carrying amount of the impaired loan portfolio in combination with lower lending rates affecting the performing loan portfolio and net deleveraging as well as lower interest income from debt securities due to maturity of Cyprus Government Bonds (CGBs) in December 2018.

Total expenses for 1Q 2019 amounted to EUR 63.5 mln, up by 55% year-on-year mainly impacted by the acquisition of the CCB.

Compared with the previous quarter, total expenses declined by 8% mostly due to the elevated administrative and other expenses in 4Q2018, associated with the cost of advisory services in relation to the acquisition.

Staff costs for 1Q2019 amounted to EUR 29.2 mln and accounted for 46% of the Group’s total expenses.

The Cyprus News Agency quoted Matsis as saying there is pressure from the regulators for NPE reduction, but that pressure is not unbearable.

The risk in our balance sheet is not that great and in reality we have a net worth of NPEs amounting to EUR 700 mln or 4%, while the value of collateral is EUR 1.2 bln, he said.

However, Matsis said that amendments to the foreclosure law currently being discussed in the parliament, would backtrack the economy and the banking system.

Recalling the amendments made to the foreclosure law in the summer of 2018 that assisted banks carry out NPE sales and were praised by rating agencies and the ECB, Matsis said a return to the previous regime involving a much slower procedure would affect the economy.

The moves under discussion to take us back (to the previous regime), giving tools to delinquent borrowers to delay foreclosures, will back track the banking system and the economy and would result in Cyprus not meeting its obligations to the European Commission.

Hs added that such amendments would potentially incur capital needs to the banks as the period for the liquidation of collateral would increase, affecting the values in the bank’s books.

Source: The Financial Mirror