Insider Business BoC posts €116 million in profits in first nine months 2019

BoC posts €116 million in profits in first nine months 2019

Bank of Cyprus posted profits of €116 million in the first nine months of 2019 and said NPLs had dropped significantly following the sale of €2.7b (project Helix) to currently stand at €4.1 billion.

During the third quarter of the year, the Group generated total income of €162 mn and a positive operating result of €63 mn. The underlying result was a profit after tax of €18 mn, whilst the reported profit after tax for the third quarter was €19 mn. After the net loss from the sale of BoC’s investment in CNP of €21 mn and the net impact from the reversal of impairments of €101 mn, the reported profit after tax for the first nine months of the year amounted to €116 mn.

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

“Following the completion of the sale of c.€2.7 bn non-performing loans in Project Helix in June, which added 140 bps of capital in the second quarter, the continued organic NPE reduction remains ahead of our organic target of c.€800 mn for 2019. The organic NPE reduction in the third quarter of the year amounted to €227 mn, bringing the total organic reduction in the nine months of 2019 to €684 mn. This represents the eighteenth consecutive quarter of organic NPE reductions.

“Since the peak in 2014, we have now reduced the stock of NPEs by 73% to €4.1 bn. This stock of NPEs is now covered by 51% loan credit losses. Overall, since 2014 we have managed a reduction in NPEs of €10.9 bn, of which €8.2 bn has been through organic actions,” he said.

The Bank’s capital position remains good and well in excess of regulatory requirements. As at 30 September 2019, pro forma for the sale of our investment in CNP and the voluntary staff exit plan,  capital ratios (IFRS 9 transitional) were CET1 of 14.9% and Total Capital ratio of 17.9%.

During the quarter deposits remained broadly flat at €16.5 bn and BoC reduced the cost of deposits by a further 5 bps. Overall, it reduced the cost of deposits by 57 bps since January 2018. In the third quarter of 2019, new lending in Cyprus grew 20% from the prior year to €491 mn, helping support the continued growth in the Cypriot economy. Overall in the first nine months of 2019, BoC lent €1.6 bn to customers. Loan to deposit ratio at the quarter-end stood at 66%.

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

“The changed interest rate environment in Europe continues to present a challenge to our 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,” he said.

In September, BoC decided to early repay ECB funding in the form of TLTRO of €830 mn, given the 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 of the third quarter amounted to €3.0 bn.

In October, BoC completed a voluntary staff exit plan through which c.470 applicants were approved to leave at a total one-off cost of c.€79 mn to be recorded in the fourth quarter, reducing the number of employees by c.11%, whilst gross annual savings are estimated at c.€28 mn or c.13% of staff costs. In addition, BoC continues its branch footprint rationalisation as it expects to reduce the number of branches by a further 8% by the year end, further improving its operating model and remains focused on further improvement in efficiency, he added.

 These actions have been supported by an on-going Digital Transformation Programme. The adoption of digital products and services continues to grow and gain momentum. Today, 75% of 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.

 

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