A massive increase in provisions for doubtful debts forced Hellenic Bank (HB) to miss a rebound in earnings as is the case with the two other major banks, resulting in huge losses for another year.
Hellenic Bank confirmed the worst expectations of the market, hiking its provisions for bad debts by 13.8% to CYP 45.47 mln for 2004 from CYP 39.97 mln in 2003, with Constantinos Loizides, Vice-Chairman of HB explaining that the increase was deemed necessary to reflect a true and better picture of the Bank’s loan portfolio.
“We did a thorough analysis of our loan portfolio and in view of the situation of a small number of our large clients, we decided that it would be prudent to hike our provisions,” said Loizides.
The higher provision charges more than wiped off the benefit from a 22% increase in core profits before provisions, which rose to CYP 29.48 mln from CYP 24.12 mln previously.
While the Bank managed to reduce its cost to income ratio to 69.8% from 73.3%, it acknowledged that the figure remained high compared to its peers.
Net income improved by 16% to CYP 109.06 mln from CYP 93.4 mln in 2003, but total expenses remained up 11% at CYP 76.16 mln. Results were further burdened by share of losses from Athena Investments, or CYP 1.5 mln as well as CYP 1.8 mln in revaluation losses.
Net after tax losses surged to CYP 15.31 mln in 2004 from losses of CYP 14.41 mln in 2003, with losses per share surging to 6.5 cent from 6.1 cent previously.
The results include a CYP 830.000 charge for the fine imposed by the Price Competition Committee on all the three major banks. HB Group Financial Controlled George Appios revealed that the net interest margin of the Bank improved to 3.02% from 2.7% previously.
Following the CYP 45 mln provision charge for 2004, of which CYP 6 mln refer to the operations in Greece, the total of provisions of the Bank climbed to CYP 170 mln or 10.4% of the loan portfolio.
The non-performing loans meanwhile climbed to CYP 216.55 mln from CYP 188.67 mln, of which 42.7% are covered by adequate guarantees, according to the Bank.
In response to a question by the Financial Mirror on whether high ranking officials in Cyprus were responsible for the deterioration witnessed in the loan portfolio, Loizides said the whole situation was being evaluated, without going into details.
Asked by an analyst regarding the possibility of Moody’s downgrading the Bank’s rating another notch to below investment grade, Loizides said a meeting was planned with Moody’s in April, where the Bank would attempt to explain the situation at the Bank.
