Year-end forecast calls for 50% increase in profits
Bank of Cyprus (BOC), reporting its first quarter results on May 12, 2005 is seen lifting net profits by an average 40% on the back of higher interest income, a slow pace of provision increases and a positive impact from the rapid increase in equity prices during the first quarter.
Market forecasts on BOC first quarter profits range between CYP 13 mln to CYP 16.8 mln, for an average gain of CYP 14.6 mln compared to CYP 10.6 mln profits reported in the first quarter of 2004.
Elina Kyriakidou, Head of Research at Egnatia Financial Services, is the most bullish, expecting BOC to lift its net profits by more than 50% to CYP 16.8 mln, including some CYP 2.8 mln in investment-related gains compared to only CYP 0.8 mln a year ago in the same period.
Christos Hadjichristodoulou, Head of Research at CLR, is more conservative, expecting profits to grow by 32% to CYP 14 mln, while analysts at Eurobank of Greece expect profits to increase by 25% to EUR 22.5 mln or CYP 13 mln.
BULLISH EXPECTATIONS
Analysts will look into the first quarter results to see if the performance of the Bank is in line with their general year-end forecast, where BOC is seen lifting profits by more than 50%.
CLR’s Hadjichristodoulou is forecasting BOC lifting net profits to CYP 58.1 mln for 2005, Kyriakidou of Egnatia is forecasting net profits of CYP 56.5 mln while Constantinos Kypreos of SFS is forecasting net profits of CYP 58.2 mln. BOC had reported net profits of CYP 37.5 mln for 2004.
Based on the average forecast of CYP 57.6 mln in net profits for 2005, the advance price to earnings (p/e) ratio comes to 14.3 times, which is significantly better than the 2004 p/e of 22 times based on the current price of CYP 1.76 in the CSE.
In the event that the profit forecast proves correct, then the Bank will be on track to meet its ambitious target of doubling its Return on Capital (ROE) to 13% by 2007 from 6.7% in 2004.
According to Financial Mirror calculations and including the dividend payment of 4 cents, but excluding the planned rights issue due end of the year, the ROE of 2005 is seen around 9.5%.
The outlook for BOC shares generally remains positive amid expectations that with the Bank returning to a dividend paying policy — for 2004 it declared and will pay 4 cents per share dividend, it will be able to attract investments on its shares in a declining interest rate environment. The launch of the common trading platform with the ASE and the debut of mutual funds is also seen benefiting the Bank.
