Bank of Cyprus Group (BOC) managed to beat market expectations, reporting CYP 31.3 mln in first half profits, up 97.5% from CYP 15.9 mln a year ago in the same period, and CYP 2 mln above analyst expectations forecasting gains of CYP 29.3 mln.
Core profit (profit before provisions for bad and doubtful debts and before tax) reached CYP 81 mln, up by 29% against CYP 63 mln for the 1st half 2004.
Net interest income increased significantly (14%) to CYP 132 mln compared to CYP 116 mln for the corresponding 2004 period, as a result of the significant increase in the Group’s loans and advances portfolio, especially in Greece. The net interest income margin remained at 2.63% despite the 1.25 percentage reduction in Cyprus interest rates.
The cost to income ratio improved significantly to 59% compared to 62% for the year 2004. This significant improvement was the result of containing the rate of increase in costs (8%), especially other operating expenses, to lower levels than the rate of increase in total assets (14%). A key target of the Group is the containment of costs and the resultant reduction of the cost to income ratio.
The increase in total costs is mainly due to the rise in staff costs. The containment of staff costs through a corresponding improvement in productivity, especially in Cyprus, remains a major challenge for the Group.
In Cyprus, core profit recorded a 52% increase to reach CYP 47 mln. The increase was due to the positive results of the programmes for containing operating expenses, in conjunction with enhancement of total revenue of both banking and insurance operations. It is noted that the profit from insurance operations doubled in relation to the corresponding prior year period.
As a result of the substantial improvement in the core profitability of the Group’s operations in Cyprus, key ratios of the Cyprus operations, such as the return on assets and equity and the cost to income ratio, recorded a significant improvement. Particularly, the cost to income ratio improved from 69% for the 1st half 2004 to 61% for the 1st half 2005. The Group aims at further improving these ratios.
In Greece, core profit remained reached CYP 28 mln, recording a 3% increase 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. It is noted that despite the significant costs of the dynamic expansion, the Group’s operations in Greece continue to have very satisfactory profitability ratios, with a cost to income ratio of around 56%.
The provision charge for bad and doubtful debts for the 1st half 2005 reached CYP 42 mln representing 1,2% of total loans and advances on an annualised basis.
FINANCIAL FOOTINGS
Group total assets at 30 June 2005 reached CYP 11,38 bln, recording a 14% annual increase. The total assets of the Group’s Greek operations reached CYP 4,54 bln, registering a 16% annual increase.
The Group’s total loans and advances recorded an 11% annual increase and reached CYP 6,78 bln.
The above increase is mainly attributable to the significant annual growth (19%) in the loans and advances portfolio of the Group’s Greek operations to CYP 2,79 bln. According to the May 2005 data published by the Bank of Greece, the market share of Bank of Cyprus Greece in respect of loans and advances is 3,78% and the annual increase in loans and advances is higher than that of the Greek banking market (15%). The annual increase recorded in the Bank’s consumer (62%) and housing (43%) loans in Greece is noteworthy, especially the increase in the sales of housing loan products during the 1st half 2005 (125% increase against 1st half 2004).
At 30 June 2005, the Group non-performing loans and advances (after suspension of interest income) stood at 8,7% of total Group loans and advances, compared to 10,8% at 31 December 2004. The reduction in non-performing loans was derived mainly from the write-off of loans (after suspension of interest income) of CYP 131 mln, which were fully provided for, as well as from the improvement in loan quality and the collection of arrears.
In the 1st half 2005 the Bank wrote off total loans and advances of CYP 168 mln, including suspended interest. This amount is significantly higher than writeoffs of previous years, as a result of widening the criteria for defining loans considered as non-collectible. It is noted that the amounts written-off include loans for which a final settlement has not yet been concluded and for which the Group continues to take all necessary measures for their collection.
Total customer deposits reached CYP 9,26 bln recording a 12% annual increase. The customer deposits of the Group’s Greek operations recorded an impressive increase (25%) and reached CYP 3,58 bln, representing 39% of total Group deposits at 30 June 2005. According to the May 2005 data published by the Bank of Greece, this rate of expansion is much higher than the one for the Greek banking market (15%) and the Bank’s market share in respect of deposits is 3,84%.
At 30 June 2005, the Group’s capital base amounted to CYP 955 mln, marking a 6% increase compared to 30 June 2004. The Group capital adequacy ratio at 30 June 2005 is approximately 13%.
