Insider Business BoC reports €70 m net loss for 2019

BoC reports €70 m net loss for 2019

Bank of Cyprus, the island’s largest lender, said it will update macroeconomic assumptions underlying the IFRS9 calculations which may lead to increased organic provisions in Q1 2020, amid the crisis caused by the coronavirus pandemic.

The bank reported a net loss of €70 million for 2019, the financial results affected in the last quarter due to increased provisions after postponing a sale of non-performing loans (Helix 2) as well as the impact of a voluntary retirement scheme.

In a statement, the bank’s CEO, Panicos Nicolaou said the current economic uncertainty means that we cannot at this stage have clear visibility of the future impact of COVID-19 on the Group’s operations and financial results.

“As a consequence of the current challenging economic conditions resulting from the COVID-19 outbreak, we will update the macroeconomic assumptions underlying the IFRS 9 calculation of loan credit losses for 1Q2020 in line with the relevant regulatory guidance, and anticipate that this may result in increased organic provisions in 1Q2020, although the exact quantum of any such increase is as yet unknown,” he said.

He added that the bank is seeing “lower transactional income and lower demand for loans, the on-going economic uncertainty means that we do not have sufficient visibility about the likely future impact of COVID-19 on the Group’s operations or financial results, and are therefore currently not in a position  to provide guidance for the current financial year.”

“However, we are confident that the Bank’s good capital base and strong liquidity, position us to be able to support our customers through this period of extreme volatility, playing our part in limiting the impact of the pandemic in Cyprus,” Nicolaou added.

The bank’s Common Equity Tier 1 (CET1) ratio declined to 14.8% from 15.2% in the third quarter of 2019 while total capital adequacy amounted to 18% 0.2% lower compared with September 2019. Loan loss provision coverage rose to 54% from 51% in the third quarter of 2019 and 52% in the end of 2018.

The bank reported a net interest income of €344 m for full year 2019, up by 4% compared with full year 2018. Net fee and commission income declined by 8% in 2019 year on year to €150 m from €162 m in 2018. Total income amounted to €641 m in 2019 compared with €657 m in 2018.

Total expenses for 2019 amounted to €410 m (compared to €393 m for FY2018), 54% of which related to staff costs (€220 m), 40% to other operating expenses (€165 m).

Staff costs of €220 m for FY2019 increased by 4% yoy (compared to €212 m in FY2018) mainly driven by the increase in employer’s social insurance contributions from the beginning of the year and the additional contributions to the new general healthcare system which commenced in March 2019, as well as the effect of the renewal of the annual collective agreement for 2019 with the employees’ union.

In October 2019, the Group completed a voluntary staff exit plan (VEP), through which c.11% of the Group’s full-time employees were approved to leave at a total cost of €81 m, recorded in the consolidated income statement in 4Q2019.

“Following the completion of the VEP, the gross annual savings are estimated at c.€28 m or c.13% of staff costs (excluding the c.100 persons relating to the Helix transaction). The annual savings net of the impact from the renewal of the collective agreement for 2019 and 2020, are estimated at €23 m or 11% of staff costs,” the bank added.

According to the results, the bank’s total non-performing exposures amounted to €3.9 billion or 30.3% of total loans from €4.08 bl in the end of September 2019. Organic reduction (restructurings, debt for asset swaps and write offs) amounted to €889 million, while new loans granted throughout 2019 amounted to over €2 billion.

Customer deposits totalled €16,692 m at 31 December 2019, compared to €16,473 m at 30 September 2019 and €16,844 m at 31 December 2018, remaining broadly flat year on year, with the bank’s deposit market share reaching 35.1%

The net Loans to Deposit ratio (L/D) stood at 64% as at 31 December 2019, compared to 66% as at 30 September 2019 and 65% at 31 December 2018 pro forma for Helix, the bank said.

At 31 December 2019 the Group Liquidity Coverage Ratio (LCR) stood at 208% (compared to 218% at 30 September 2019 and 231% at 31 December 2018) and was in compliance with the minimum regulatory requirement of 100%.

The bank’s gross loans amounted to €12,822 m at 31 December 2019, compared to €13,035 m at 30 September 2019 and €15,900 m at 31 December 2018 (ignoring the classification of the Helix loan portfolio as a disposal group held for sale).

At 31 December 2019, the Group net loans and advances to customers totalled €10,722m (compared to €10,971 m at 30 September 2019 and €10,922 m at 31 December 2018), the bank said.


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