A sharp increase in first half losses in Greece nearly wiped off the satisfactory increase in profits from the Cyprus operations of Hellenic Bank Group (HB) on the back of a massive increase in bad debt provisions, forcing the bank to report a substantial decline in first half profits.
The Greek operations of Hellenic Bank showed a very small increase in turnover to CYP 14.57 mln from CYP 14.14 mln, while pretax losses surged sharply to CYP 5.7 mln from CYP 1.35 mln losses a year ago in the same period.
In contrast, operations in Cyprus showed a highly satisfactory improvement with turnover jumping 20% year-on-year to CYP 82.8 mln while pretax profits jumped 52.7% to CYP 6.25 mln.
The massive drop in profitability came after a sharp increase in the second quarter provisions charge, which jumped to CYP 9.19 mln from CYP 5.23 mln a year ago, forcing the Bank to report a CYP 2.17 mln loss in the second quarter.
The Bank’s weak loan portfolio and the need to continue to increase bad debt provisions were one of the reasons cited by Moody’s Credit Rating agency when earlier it downgraded the Hellenic Bank’s rating.
Last year, Hellenic was hammered with a sharp increase in bad debt provisions to CYP 45.5 mln, which forced the Bank to report CYP 15.3 mln in losses, at a time when its peers, Bank of Cyprus and Laiki Bank reported a sharp increase in profitability and resumed paying dividends.
During the first half, Hellenic reported total income improved by 11% to CYP 56.9 mln from CYP 51.2 mln while total expenses were also 11% higher at CYP 41.8 mln. With the help of CYP 477.000 in share of profits from Athena Investments, the Bank said core profits were up 16% y/y to CYP 15.56 mln.
The cost to income ratio however, remained stubbornly up at 73.5%, unchanged from a year ago and up sharply from 69.8% at the end of 2004 compared to 59% for BOC.
Net interest margin also deteriorated to 2.93% from 3.02% a year ago as the bank cut its margins to increase its deposits, which showed a satisfactory increase during the first half.
Despite the massive increase in bad debt provisions at the end of last year, Hellenic was forced to take another massive provisions charge, raising worries about the quality of its loan portfolio, especially in Greece.
Bad debt provisions were hiked by 36% y/y to CYP 14.26 mln from CYP 10.5 mln a year ago, forcing net profits to drop by 63% to CYP 794.000 in the first half of 2005 compared to CYP 2.12 mln a year ago.
Shareholders funds’ however, improved by CYP 7.6 mln to CYP 148.7 mln after the Bank booked CYP 6.5 mln in additional gain from revaluation of investments in the Reserve account.
Customer advances gained 4% to CYP 1.65 bln, while customer deposits were up 15% to CYP 2.37 bln.
