FINANCE: Bank of Cyprus posts EUR 19 mln net profit in Q3

The island’s largest lender Bank of Cyprus posted after tax profits of Euros 19 mln for Q3 2019 and Euros 116 mln for the first nine months as it continues on the road to recovery.

Our results this quarter reflect continuing progress against our core objective of balance sheet repair and normalisation of our bank, said BoC CEO Panicos Nicolaou.

He said completion of the sale of Euros 2.7 bln non-performing loans in Project Helix in June, adding 140 bps of capital in Q2, continued organic NPE reduction that remains ahead of the Euros 800 mln target for 2019.

Organic NPE reduction in Q3 amounted to Euros 227 mln, bringing the total reduction for the nine months to Euros 684 mln.

Since the toxic debt peak in 2014, BoC has reduced its stock of NPEs by 73% to Euros 4.1 bln. This stock of NPEs is covered by 51% loan credit losses.

Overall, since 2014 we have managed a reduction in NPEs of Euros 10.9 bln, of which Euros 8.2 bln has been through organic actions, said Nicolaou.

During Q3 deposits remained broadly flat at Euros 16.5 bln while the cost of deposits was reduced by a further 5 bps.

In Q3 2019, new lending in Cyprus grew 20% from the previous year to Euros 491 mln.

Overall in the first nine months of 2019, we lent Euros 1.6 bln to customers. Our loan to deposit ratio at the quarter-end stood at 66%.

During Q3, the group generated total income of Euros 162 mln and a positive operating result of Euros 63 mln.

After the net loss from the sale of BoC’s investment in CNP of Euros 21 mln and the net impact from the reversal of impairments of Euros 101 mln, profit after tax for the first nine months of the year amounted to Euros 116 mln.

Our on-going insurance business provides recurring income for the Group and, following the disposal of our investment in CNP, it remains well positioned for growth over the medium term, said Nicolaou.

He said the changed interest rate environment in Europe continues to present a challenge to profitability levels.

In response, we remain focused on actively managing our funding costs and reducing our cost base. We have made progress in these areas this quarter.

In September, BoC decided to early repay ECB funding in the form of TLTRO of Euros 830 mln, given its comfortable liquidity position.

The repayment is expected to result in savings as these funds were deposited at negative interest rates. The Bank continues to operate with a significant liquidity surplus, which at the end Q3 amounted to Euros 3 bln.

In October, the bank completed a voluntary staff exit plan through which 470 applicants were approved to leave at a total one-off cost of Euros 79 mln, reducing the number of employees by 11%, whilst gross annual savings are estimated at Euros 28 mln or 13% of staff costs.

BoC expects to reduce the number of its branches by a further 8% by the end of 2019.

These actions have been supported by our on-going Digital Transformation Programme. The adoption of digital products and services continues to grow and gain momentum, said Nicolaou.

Around 75% of BoC transactions involving deposits, cash withdrawals and transfers, are performed through digital channels, whilst the number of active users of mobile banking has increased by 54% since June 2017.

The Bank is returning to strength, through a disciplined approach to balance sheet repair, the disposal of non-core businesses and cost rationalisation through digital transformation.

Nicolaou said good progress has been made, however, there remains more to do and we are focused on delivering balance sheet de-risking at pace and further efficiency gains across our cost base.

Our strategy of making the bank stronger, safer and future-focused is unchanged. This will enable us to continue to support the strengthening Cypriot economy.

Source: The Financial Mirror