Bank of Cyprus and Laiki Bank Group are on track to record a better profit performance compared to the major Greek banks in the first half, a process that may possibly increase buying interest from foreign institutional funds at least on the BOC shares trading on Sophocleous.
BOC saw its first half profits surge by a whopping 97.5% year-on-year to CYP 31.31 mln in the first half of 2005, followed by Laiki Bank, which managed to boost net profits by 63.2% to CYP 18.12 mln.
This compares to expectations by Greek analysts for gains of under 5% for National Bank of Greece and 10% for Alpha Bank, while other Greek banks are expected to record a similar performance.
The laggard in Cyprus among the major banks is Hellenic Bank, which because of another sharp increase in bad debt provisions in Greece reported a 62.7% drop in earnings to CYP 794.000 for another disappointing performance. Recently Moody’s cut the rating of HB citing its weak loan portfolio.
Analysts expect additional foreign fund buying to emerge on the BOC shares trading in Greece, and lift the combined foreign fund stake in the Bank’s capital above 5%.
According to comparative data prepared by the Financial Mirror, BOC reported the best performance during the first half among the major Cypriot banks.
Despite its relative big size, BOC increased total income by 15.6% to CYP 197.1 mln, well above the 11.8% increase of Laiki to CYP 119 mln and 11.1% by Hellenic to CYP 57 mln.
In terms of cost containment, Laiki was again the best performer, curtailing the growth in total costs to 7.1%, while BOC saw its total expenses increase by 7.9% while HB saw costs grow out of control, increasing by 11%.
The cost containment drive helped BOC lower its cost-to-income ratio to 59.1% from 62.3% at the end of last year, followed by Laiki at 62.1% from 62.3% and Hellenic stuck at 73.5%, which deteriorated from the 69.8% cost-to-income ratio at the end of 2004.
Hellenic was also troubled by its weak loan portfolio, especially in Greece forcing total provisions for doubtful debt up by 35.6% at a time when BOC hiked its doubtful provisions by 24% while Laiki continued to reduce its total provisions, decreasing the charge by 1.6% y/y.
The Greek operations continued to have a major impact on the results of all three major banks. BOC reaped the full benefits of its first expansion drive into Greece, declaring that 35% of its bumper profits now originate from its 100-strong branch network there.
Laiki was burdened by a CYP 1.7 mln impairment in value of its holding in Attalos Securities and an aggressive provision hike, which reduced the contribution of Greece profits of CYP 900.000 to a minimum.
A massive increase in bad debt provisions by Hellenic in Greece meant that the Greek operations of HB remained in the red, reducing the profit from the local operations.
In terms of growth in advances, Laiki lifted total advances by 13.9% to CYP 4 bln, with BOC increasing its advances by 11% to CYP 6.8 bln while HB increased total advances by 4% to CYP 1.65 bln.
Laiki also scored the best advance in terms of deposit growth, lifting deposits by 16.8% to CYP 5.07 bln, followed by HB lifting its deposits by 15% to CYP 2.3 bln and BOC lifting its deposits by 12% to CYP 9.2 bln.
Laiki also claimed the best annualised return on capital or equity in the first half, reporting its ROE at 11.51% and a 12% target by 2007, while BOC reported its annualised ROE at 10.9% and a 13% target by 2007.
