Hellenic Bank Public Co. (HB) reported a 27% year-on-year decrease in first nine month profits to CYP 2.9 mln from CYP 4.02 mln a year ago as cost and provision in doubtful debt increases as well as continued losses at its Greek operations more than offset a 7% increase in net income.
Net interest income improved 7% to CYP 58.75 mln from CYP 54.8 mln a year ago in the first nine months ending September 30, but the interest margin fell to 2.84% from 3% because of interest rate cuts by the Central Bank and an aggressive campaign to attract deposits.
Commission income was up 11% at CYP 16.9 mln, income from FX was down 14% at CYP 4.03 mln while income from other activities, mainly insurance was up 22% at CYP 5.06. Total income was up 7% y/y at CYP 84.74 mln.
Total expenses however, surged 11% to CYP 62.65 mln with staff costs galloping 13% to CYP 41.76 mln as the Bank charged more to cover against its staff pension fund and redundancy schemes.
Share of profit from Athena Investment Fund amounted to CYP 737.000 against CYP 1.1 mln losses a year ago, while HB also booked a CYP 240.000 revaluation profit as equity prices rebounded on the CSE compared to CYP 303.000 losses a year ago.
Provisions play havoc
The provision for doubtful debt charge was increased 19% y/y to CYP 19.75 mln from CYP 16.6 mln charge a year ago in the first nine months, raising total provisions to CYP 195.8 mln, or 11.9% of gross loans. The level of non-performing loans (NPLs) reached CYP 233.8 mln from CYP 216.6 mln end of December 2004, with the Bank revealing that the level of collateral of the NPLs was 60.5% end of September.
Revaluation gain
Net profit as stated in the P&L account fell 27% y/y to CYP 2.922.000 for the first nine months ending September 30, 2005 from CYP 4.021.000 a year ago. Earnings per share fell to 1.2 cent from 1.7 cent earlier.
Book value improved to 66.57 cent from 63 cent according to Financial Mirror calculations, helping lift price to book value to 0.86x as shareholders funds’ were boosted to the tune of CYP 16.36 mln as during the first nine months of the year, HB booked a revaluation of investments profit of CYP 12.1 mln, which when combined with other revaluation gains of CYP 1.3 mln and the stated profits of CYP 2.9 mln, boosted shareholders funds to CYP 157.38 mln from CYP 141.02 mln end of December 2004.
Greece remains a drag
While turnover in Cyprus improved 16.7% to CYP 124.7 mln, turnover in Greece fell 1.2% to CYP 21.8 mln, while in terms of profitability, Cyprus operations contributed CYP 10.2 mln in pretax profits before the share of subsidiary profit while operations in Greece lost CYP 7.7 mln compared to a loss of CYP 1.5 mln a year ago. The number of branches in Greece was stable at 25 compared to end of 2004.
Another negative development was the ruling by the Supreme Court which backed a Nicosia court ruling ordering HB to pay CYP 750.000 in back stamp duties plus CYP 150.000 in penalties referring to a dispute on stamp duty over the non-convertible bonds 2004/2009.
Balance sheet
Total loans were up 3% at CYP 1.64 bln of which loans in Greece were up 11% at CYP 299 mln, while customer deposits were up 19% at CYP 2.55 bln of which deposits in Greece were up 16% at CYP 366 mln. The Bank also revealed that it will soon issue its prospectus regarding plans to issue up to CYP 75 mln in Tier 2 capital.
