Bank of Cyprus Group (BOC) reported a robust increase in first quarter (Q1) profits, lifting net profits by 49% to CYP 16 mln from last year’s slightly adjusted net profits of CYP 10.8 mln.
As a result of the adoption of IAS 39, BOC’s first quarter profits were adjusted higher to the tune of CYP 200.000 and CYP 1 mln for the whole of 2004, lifting total profits made last year to CYP 38.5 mln from CYP 37.5 mln.
While in actual numbers, the profits were above expectations, but in percentage terms, they matched the increase. Analysts polled by the Financial Mirror before the release of the results, had forecast a 49% increase in Q1 profits to CYP 14.6 mln.
BOC Group CEO Andreas Eliades attributed the satisfactory increase in profitability to a dramatic rebound in core earnings in Cyprus, which surged by 74% year-on-year, while core profits in Greece lagged, gaining by 1% y/y.
Eliades, flanked by Yiannis Kypri and Charilaos Stavrakis told reporters during the presentation of the first quarter results that the return on equity of the Group in the first quarter climbed from 6.9% in Q104 to 11.3% in Q105 and in is line with the target to reach 13% by 2007.
Group core profit (profit before provisions for bad and doubtful debts and before tax) reached CYP 39 mln, up by 36% against CYP 29 mln in the 1st quarter 2004.
Net interest income increased significantly (20%) to CYP 66 mln compared to CYP 55 mln in the 1st quarter 2004.
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.
The cost to income ratio recorded a significant improvement to 59.9% compared to 62% for 2004.
Total costs recorded an 8% annual increase compared to the corresponding prior year period, mainly due to the increase in staff costs and despite the containment of other operating expenses to prior year levels.
The containment of costs and the resultant reduction of the cost to income ratio remains a major challenge for the Group. Even though the number of staff employed by the Group in Cyprus is gradually decreasing (106 persons since 31 December 2003), staff costs still remain high, mainly due to the wage increases that are part of the collective agreement with the labour union.
In Cyprus, core profit recorded a 74% increase to reach CYP 23 mln against CYP 13 mln in the corresponding 2004 period. The increase was due to the positive impact of the programmes for containing operating costs and enhancing total revenue, especially in respect of banking activities, as well as the positive results of the Group’s insurance subsidiaries.
Despite the satisfactory increase in core profit generated by the Group’s Cyprus operations, the return on assets and equity remain at a relatively low level and the cost to income ratio is still high.
In Greece, core profit remained stable at CYP 14 mln despite the significant expenses of the branch network expansion and the higher increase in deposits in relation to the increase in loans and advances. The core profit generated by the Greek operations contributes 35% to the Group total core profit.
Since the beginning of 2005, the Bank’s branch network in Greece was enhanced by the opening of four new branches. The Group now operates 100 branches in Greece, with a target to reach 120 branches by early 2006.
The provision charge for bad and doubtful debts for the 1st quarter 2004 increased by 24.4% to CYP 20 mln representing 1.2% of total loans and advances on an annualised basis.
Earnings per share climbed to 3.5 cent from 2.3 cent a year ago.
FINANCIAL FOOTINGS
Group total assets at 31 March 2005 reached CYP 10,60 bln, recording a 10% annual increase. The total assets of the Group’s Greek operations reached CYP 4,54 bln (EUR 7,76 bln), registering a 29% annual increase.
The Group’s total loans and advances recorded an 11% annual increase and reached CYP 6,53 bln at 31 March 2005. This increase is mainly attributable to the significant annual growth (21%) in the loans and advances portfolio of the Group’s Greek operations to CYP 2,70 bln (EUR 4,61 bln).
According to the January 2005 figures published by the Bank of Greece, the market share of Bank of Cyprus Greece in respect of loans and advances was 3,69%. Operations in Greece accounted for 41% of the Group’s total portfolio at the end of March 2005.
The Group non-performing loans and advances (after suspension of interest income) stood at 9,0% of total Group loans and advances, compared to 10,8% at 31 December 2004. The reduction in non-performing loans derived mainly from the write-off of loans which were fully provided for.
Total customer deposits reached CYP 8,92 bln recording a 12% annual increase. The customer deposits of the Group’s Greek operations recorded an impressive increase (31%) and reached CYP 3,48 bln (EUR 5,96 bln).
According to the January 2005 figures published by the Bank of Greece, the market share of Bank of Cyprus Greece in respect of deposits was 3,77%.
The Group maintains a strong capital base, which amounted to CYP 942 mln at 31 March 2005, marking a 4% annual increase compared to 31 March 2004.
