…revises long term targets
Laiki Bank Group beat market expectations by a wide margin reporting net profit of CYP 20.2 mln for the first quarter of 2006, which were 126% higher than the first quarter profits of CYP 8.9 mln reported a year ago.
The annualised Return on Equity of the Group reached 17.1% while the cost to income ratio was squeezed to 53.4% end of Q1’06 from 58.8% end of 2005, leading the Laiki Group to revise its strategic targets until 2008 for the Return on Equity and the Cost to Income ratio to 18% and 51% respectively.
The Group’s profitability prospects for the future, given the current economic and geopolitical conditions, are very positive, the Bank said. It is anticipated that Group profit for the whole of 2006 will maintain its upward trend. The target of the Group for the whole of 2006 is to maintain the Return on Equity (taking into account the inflow of new funds from the exercise of Rights that will take place in the mid of 2006) at 17% and to contain the Cost to Income ratio at 54%.
The positive prospects are reinforced even further through the cooperation with Marfin Financial Group, which, together with the Tosca Investment Fund, are the new major shareholders of Laiki Group.
Improvement in income
Operating income increased by 22.5% y/y to CYP 72.5 mln mostly as a result of an increase in net interest income with the annualised net interest margin declining slightly to 2.86% from 2.92% end of 2005. The Group’s other income, which mainly consists of the income from the insurance operations, rose by 28.1%.
Group operating expenses increased by 5.5%. The greatest part of the Group’s operating expenses consists of staff costs, which rose by 8.6% compared to the first quarter of 2005.
Staff costs in Cyprus, which constitute the greatest part of the Group’s staff costs, rose by 5.5%. Due to the Group’s policy for restrictive recruitment in Cyprus, the number of staff dropped from 2.422 end of 2005 to 2.397 end of March. The number of employees in Greece rose from 815 a year ago to 887 and in Australia from 102 to 116. Since January 2006 the Group operates in Serbia with 336 employees, 50 of
which are employed on a temporary basis, the staff costs of which are included in the staff costs of the Group.
The depreciation, amortisation and goodwill impairment cost of the Group declined by 35.4%. It is noted that the first quarter of 2005 was burdened with an impairment charge of CYP 1 mln, which related to the
acquisition of the Paneuropean Group (CYP 0,9 mln) and to the acquisition of Laiki Attalos Securities S.A. in Greece (CYP 0,1 mln).
The other expenses of the Group increased by 13.5%.
Provisions
The provision for impairment of advances dropped by 10.4% compared to the first three months of 2005 to CYP 9.8 mln. The percentage of non-performing loans to total loans (excluding interest in suspense) increased slightly to 10.5% compared to 10.1% end of 2005.
The percentage coverage of non-performing loans by accumulated provisions (including interest in suspense) also dropped to 60.5%. This drop is attributed to the introduction of the stricter Central Bank of Cyprus regulations that resulted in the increase of the non-performing loans, which are, however, covered by tangible security to a large extent.
Balance Sheet
The Group’s advances rose to CYP 4.6 bln recording a very satisfactory annual increase of 16.6%. In Cyprus, advances reached CYP 2.6 bln having recorded an annual increase of 11.3%. The highest growth rates in the advances of the Group in Cyprus were recorded in the construction and retail sector (especially for private consumption and housing purposes).
The advances of the Group in Greece achieved a very satisfactory annual growth of 21,3% and rose to CYP 1.4 bln, with a substantial increase of the small and medium-size enterprises portfolio as well as the advances for housing and consumption purposes.
In the United Kingdom and Guernsey and Australia the annual increase of advances was particularly satisfactory having risen by 27.3% and 21.1% respectively.
The Group’s customer deposits reached CYP 5.9 bln recording a satisfactory annual growth of 23.9%. The deposits in Cyprus achieved an annual growth of 27.7% which is particularly satisfactory. The factors that contributed to this high increase include the significant growth of the deposits in foreign currency in the Cypriot banking system and the
appreciation of the exchange rate of the US dollar against the Cyprus pound.
In Greece, Group customer deposits reached CYP 1.4 bln., recording an annual growth of 14,4%.
In the United Kingdom and Guernsey customer deposits grew by 11.8%, while the deposits in Australia registered a very satisfactory increase of 23.6%.
