Bank of Cyprus (BOC) announced a significant turnaround in its 2004 results, lifting net profits to CYP 37.5 mln compared to CYP 28.8 mln losses in 2003.
Core profits (before provisions for bad and doubtful debts and before tax) reached CYP 140 mln, up by 39% against CYP 101 mln for the prior year.
Net interest income increased by 24% to CYP 246 mln compared to CYP 199 mln for 2003. The increase was due to the improved net interest margin, which resulted from the actions taken to further improve pricing, as well as the significant increase in the Group’s Greek loans and advances portfolio and the collection of overdue amounts.
The cost to income ratio recorded a significant improvement to 62% compared to 67% for 2003.
Total costs recorded a 10% annual increase in 2004, mainly due to the increase in staff costs (12%). The increase in other operating expenses was contained at a relatively lower level of 8% compared to the increase in total assets (13%).
Even though the number of staff employed by the Group in Cyprus is gradually decreasing (81 people in 2004), staff costs still remain high, mainly due to the wage increases that formed part of the three-year collective agreement with the labour union which expired in December 2004.
In Cyprus, core profit recorded a 57% increase to reach CYP 79 mln against CYP 50 mln for 2003. Despite the satisfactory increase in core profit generated by the Group’s Cyprus operations, the return on assets and equity remain at a low level and the cost to income ratio is still high.
In Greece, core profit increased by 17% to CYP 49 mln compared to CYP 42 mln for the prior year, contributing 35% to the Group total core profit.
The significant expansion of the Group’s Greek operations continues with high profitability and very satisfactory return on assets and equity and cost to income ratio.
The provision charge for bad and doubtful debts decreased to CYP 84 mln against CYP 110 mln for 2003. The charge for 2004 represents 1,3% of total loans and advances.
The BOC Group also booked a CYP 5.9 mln in losses from the impairment of available for sale investments compared to CYP 7.8 mln a year ago. Pretax profits amounted to CYP 49.9 mln from pretax losses of CYP 17.4 mln in 2003, and after the payment of CYP 12.4 mln in taxes, net after tax profits amounted to CYP 37.5 mln compared to CYP 28.8 mln net losses in 2003. Earnings per share climbed to 8.1 cent from a loss of 6.5 cent in 2003.
Group total assets reached CYP 10,26 bln, recording a 13% increase. The total assets of the Group’s Greek operations reached CYP 4,28 bln , registering a 31% annual increase.
Loans and advances
The Group’s total loans and advances recorded a 13% annual increase and reached CYP 6,45 bln at 31 December 2004. This increase is mainly attributable to the significant annual growth (23%) in the loans and advances portfolio of the Group’s Greek operations to CYP 2,59 bln. This rate of expansion is much higher than that of the Greek banking market (17%). According to the November 2004 figures published by the Bank of Greece, the market share of Bank of Cyprus Greece in respect of loans and advances was 3,67%. Operations in Greece accounted for 40% of the Group’s total portfolio at the end of 2004.
With effect from 1 January 2004, a stricter regulation was introduced by the Central Bank of Cyprus regarding suspension of interest income. According to the new regulation, banks cannot recognise interest income on loans and advances which are not fully secured and are more than six months in arrears, instead of more than nine months that applied up to the end of 2003. Based on the new regulation, the Group non-performing loans and advances (after suspension of interest income) at 31 December 2004 stood at CYP 343 mln (2003: CYP 280 mln) representing 10.8% of total Group loans and advances, compared to 12.4% at 31 December 2003.
Customer deposits
Total customer deposits reached CYP 8,66 bln recording a 17% annual increase. The customer deposits of the Group’s Greek operations recorded an impressive increase (36%) and reached CYP 3,29 bln. This rate of expansion is much higher than the one for the Greek banking market (16%). According to the November 2004 figures published by the Bank of Greece, the market share of the Bank of Cyprus Greece in respect of deposits was 3,64%.
Group capital base
The Group maintains a strong capital base, which amounted to CYP 927 mln at 31 December 2004, marking a 7% annual increase. In 2004, Bank of Cyprus successfully completed the public issue of Capital Securities Series B in Cyprus Pounds, for a total amount of CYP 30 mln.
The Group capital adequacy ratio at 31 December 2004 stood at 13,7%, compared to the 10% minimum required by the Central Bank of Cyprus and 8% required by the European Union Directive.
