…Nine month profits hit CYP 50 mln, up 66%
…New targets for 2006-08 will be set in Jan
Bank of Cyprus Public Co. Ltd. is on track to lift its 2005 profits to CYP 70-73 mln, following an impressive growth in profits during the third quarter ending September 30.
BOC reported that the first nine month profits increased by 66% year-on-year to CYP 50 mln in line with expectations, with profits during the third quarter increasing by 25% to CYP 19 mln compared to CYP 15 mln in the second quarter and CYP 16 mln in the first quarter.
BOC CEO Andreas Eliades told reporters that the fourth quarter results would be similar to the third quarter, meaning that the Bank’s profits for the whole of 2005 should range between CYP 70-73 mln, a forecast which is very close to what many analysts are already forecasting for the Bank.
BOC Chairman Vasilis Rologis said the Group restructuring had been instrumental in boosting the profits in Cyprus, which surged by 289% to CYP 27 mln.
The improvement in the operations in Cyprus also helped lower the cost-to-income ratio to 57.8%, which is below the 58% target set by the Bank by 2007. The return-on-equity (ROE) of the Group also surged to 11.3%, very close to the 13% target by 2007.
The massive improvement in the overall ratios has led the BOC Group to decide to revise its 2006-2008 targets. “We shall revise our internal 3-year target by January 2006,” said CEO Eliades.
Overall, the results were exceptionally positive in Cyprus, which in addition to the 289% profit gain, also saw the Bank increasing its loan market share from 24.3% to 24.9% including the Cooperatives, while the reduction of Cyprus employees by 75 staff, coupled by the increase in business helped contain the cost-to-income ratio of the operations in Cyprus to 59.4% from 67.4% end of 2004.
In Greece, Eliades said the share of deposits increased to 3.85% from 3.66%, while the share of loans was up at 3.81% from 3.69%. The Bank has a target to grab a 5% market share in Greece by 2007. It also plans to expand its branch network to 120 by 2006 from 101 now.
Asked to comment on the fact that the level of provisions for bad debts in Greece increased by 25% whereas in Cyprus, provisions were up by 2%, while in terms of net profits, there was no growth in Greece with profits unchanged at CYP 18 mln, whereas in Cyprus profits surged by 289% to CYP 27 mln, both Rologis and Eliades said this is not a matter of concern.
“We are expanding our network and this carries a cost,” is how Rologis explained the mediocre performance of the operations in Greece, while Eliades explained that the policy to pay at least 0.5% above what the major Greek banks like Ethniki pay for deposits was having an impact on net profits.
“We prefer to sacrifice a bit of our profits and continue to grow, rather than become a mainstream bank, satisfied with current levels,” said Eliades.
The capital adequacy ratio, now at 12.7% is set to receive a timely boost when the forthcoming rights issue, aiming to raise CYP 110 mln is completed before the end of 2005.
“The new capital will allow us to follow on our promise for an organic expansion in Greece, the Balkans and Russia,” said Rologis.
Nine month results
Group profit after tax reached CYP 50 mln for the 9 month period ended 30 September 2005 compared to CYP 30 mln for the corresponding prior year period, recording a 66% increase.
As a result of the significant increase in the Group’s profitability, the return on equity of the Group increased by 3,7 percentage points compared to the corresponding 2004 period, reaching 11,3%.
The quarterly profitability of the Group also exhibited improvement. Group profit after tax for the 3rd quarter 2005 recorded a 25% increase against the 2nd quarter 2005.
Core profit (profit before provisions and tax) reached CYP 129 mln for the 9 months, recording an annual increase of 24%. The cost to income ratio further improved to 57,8% compared to 61,4% for the corresponding prior year period.
During the period, net interest income was up 12% to CYP 202 mln while income from insurance business was up 32% to CYP 18 mln, helping lift total income by 14% y/y to CYP 305 mln.
With staff costs increasing by 7% to CYP 110 mln while other costs were up 5% to CYP 66 mln, the Group managed to keep overall cost increase to 7% or CYP 176 mln, at a time when the rate of increase of deposits and loans was 14% and 12%, respectively.
Core profits (before provisions) were up 24% to CYP 129 mln, while after hiking provisions by 9% to CYP 67 mln, the Group reported that pretax profits improved by 54% to CYP 62 mln while net profits gained 66% to CYP 50 mln compared to CYP 30 mln in the same period a year ago.
The contribution (36%) of the Group’s Greek operations and the increase of footings in Greece continues to be noteworthy: Deposits increased by 19% while loans increased by 22%.
The Group’s loans reached CYP 6,96 bln at 30 September 2005, recording an increase of 12%.
In Cyprus, the Group’s total loans at the end of September 2005 amounted to CYP 3,32 bln. It is noted that, during the first 9 months of 2005, the Group proceeded with loan writeoffs of a total of CYP 169 mln, the majority of which relates to the Group’s Cyprus operations.
In Greece, the annual rate of increase in the Group’s loans reached 22% and continues to be higher than that of the total market (16%). The Group’s loan portfolio in Greece increased to CYP 2,94 bln at the end of September 2005.
New housing and consumer loan disbursements in the first 9 months of 2005 reached CYP 163 mln and CYP 162 mln, respectively. The balance of housing and consumer loans at 30 September 2005 increased by 46% and 38%, respectively, since the start of the year.
Non-performing loans
At 30 September 2005, the Group’s non-performing loans accounted for 8,7% of Group total loans, compared to 10,8% at 31 December 2004. The reduction in non-performing loans is mainly the result of loan writeoffs (net of suspended interest income) totaling CYP 132 mln. The loans written-off were fully covered by provisions.
In Greece, the Group’s non-performing loans at 30 September 2005 accounted for 4,3% of total loans. The Bank said that 45% of non-performing loans are covered by provisions. Even though the balance is covered by tangible and other collateral, the Group aims to further increase the provision coverage of NPLs over the next two years. In the first 9 months of 2005, the provision charge was 1,28% of total loans. The Group aims to reduce this percentage to around 1% by the end of 2007.
Deposits
The Group’s total deposits at 30 September 2005 reached CYP 9,71 bln, recording a 14% increase compared to September 2004. In Cyprus, the Group’s deposits at 30 September 2005 recorded an annual increase of 12% reaching CYP 5,33 bln.
In Greece, the rate of increase in Group deposits reached 19% and continues to be higher than that of the market (15%). At 30 September 2005, Group total deposits in Greece reached CYP 3,71 bln.
At end-September 2005, the assets managed by the Group reached CYP 583 mln.
