Egnatia Financial Services are forecasting that Bank of Cyprus net profit for the first quarter of 2006 will surge by an impressive 83% year-on-year to CYP 27.1 mln compared to CYP 14.8 mln in the first quarter of 2005 and CYP 22.0 mln in the final quarter of last year.
The Group’s BoD will convene on 11 May 2006 to examine its 1Q06
results. The management has issued a positive profit warning compared
to both its respective 1Q05 results and its 4Q05 results.
Egnatia basis its optimism based on an improved stream of revenues, coupled with BOC’s cost containment efforts as well as lower
provision levels.
Specifically, total operating revenues for 1Q06 are expected to advance by 16.3% to CYP 112.8 mln due to a robust net interest income (NII) growth associated with the solid expansion of the Group’s loan and advances portfolio, especially in Greece. NII is seen at CYP 79.2 mln (+20.2% yoy). Egnatia also expect that operating revenues will be underpinned by strong growth in net fees and commission income (+21.7% YoY) as well as a solid growth associated with revenues from insurance activities.
On the costs side, Egnatia expect total operating costs for 1Q06 to reach CYP 62.7 mln, up by 5.6% yoy and the cost to income ratio for 1Q06 to improve to 55.6% from 60.7% in 1Q05 (vs 57.9% in FY05) amid the Group’s continued strive for cost containment, as expressed in the form of a staff “hire freeze”, an early retirement plan set for its Cyprus operations, as well as the centralization of the Group’s operations and the rationalization of costs at all levels.
Consequently, core profits are estimated to reach CYP 50.1 mln, up by 31.3% YoY. Loan loss provisions are expected to fall by 12.7% YoY to CYP 17.4 mln despite the increase in BOC’s retail lending which continues to increase its weight in it’s loan book; this reduction in provision levels is the result of an improvement in BOC’s debt collection department.
Egnatia continue to support the management’s efforts to enhance its profit power, but more importantly its unremitting efforts for further expansion of its loan business and loan mix coupled with the improvement of its loan quality level. We believe that the Group will successfully meet its targeted profitability for FY06 which was set at CYP 120 mln earlier in the year, Egnatia noted.
