FTSE/XA 40 inclusion from June 1
20% held by foreign institutionals
Pension fund liability CYP 35 mln
Having staged the most dramatic turnaround in the results of any large organisation in Cyprus, Bank of Cyprus Public Co. Ltd. is steaming ahead towards its objective of commencing full banking operations in Russia and Romania by early 2007.
BOC Chairman Vassilis Rologis told a packed Annual General Meeting on Tuesday that the Group has started recruitment and will be ready to start full scale operations in Russia and Romania.
“We intend to become the first bank from Greece or Cyprus to commence full scale operations in Russia,” said Rologis, adding that while prospects in Cyprus are very good, the Group’s future lies abroad.
“We have a duty to the more than 60.000 shareholders and our 6.000 staff to stay abreast of developments and it is our belief that the next propeller of growth in our earnings will come from overseas operations,” said Rologis.
Cheerful shareholders approved the board proposal to pay a 7 cents per share dividend to all shareholders registered by June 2.
Four pillars
BOC CEO Andreas Eliades told shareholders that the Group’s four main pillars are its shareholders, the clients, staff and society in general.
Under the leadership of the management team headed by Eliades as well as Charilaos Stavrakis and Yiannis Kypri and backed by the board headed by Vassilis Rologis, the BOC Group delivered the most spectacular turnaround for an organisation of its size.
During 2005, net profit surged 88% to CYP 72 mln and following the release of the first quarter 2006 results, where profits exploded by 132% to CYP 37 mln, BOC announced that it will beat its own target of CYP 120 mln in net profit for 2006.
Eliades said the profit improvement was achieved as revenue grew 25% while cost increases were contained at 2% and the ratio of non performing loans to overall loans fell to 8.6%.
“We reduced our cost-to-income ratio to 49% and lifted the return on equity ratio to 19.1% in the first quarter, a record for any Cypriot bank.”
But for the highly energetic CEO, the improvement is not enough as the effort continues to boost operations at all levels, increase staff productivity and at the same time improve customer service and remain price competitive.
Eliades also referred to the imminent entry of BOC shares traded on the Athens Stock Exchange in the FTSE/XA 40 index as of June 1 with a 25% weight on the index and the fact that the shares are first in line to enter the more prestigious FTSE/XA 20.
“We are confident that the inclusion in the Footsie 40 and then 20 will broaden our shareholder base with the inclusion of more Greek institutional investors.”
On entry, BOC will be the 8th largest bank in the XA index based on free float.
Delivering results
During his address, Charilaos Stavrakis stressed that what the top management promised during last year’s AGM, was delivered and surpassed.
Stavrakis, who has spearheaded the drive to improve the core operations said local profits in Cyprus shot 207% higher and profits increased 58% in Greece during 2005, while other areas of activity, such as insurance, factoring, leasing and property all showed improvements.
“We have in effect created two separate banks in Cyprus, one for the local operations and one for our international clients,” said Stavrakis adding that local personal loans in 2005 surged 81%, while housing loans were up a stagerring 121%.
While the bank increased the number of products on offer and simplified procedures, the Group also reduced the number of staff by 132 in 2005 through early retirement and a hiring freeze.
The good news, according to Stavrakis, is that during the first five months of this year, the Cyprus operations continued to improve at the same rate as last year, which helps explain why the Group is confident that it will exceed its own target of CYP 120 mln in net profits for 2006.
Foreign stake
Yiannis Kypri told cheering shareholders that following an intense effort to attract foreign institutional investors through numerous road-shows, investor briefings and conference calls, the BOC Group has attracted the interest of foreign fund managers, who currently hold 20% of the bank’s capital.
“I’m happy to note that our stock is currently covered by Deutsche Bank, UBS, JP Morgan, KBW, Eurobank, P&K, Egnatia, CLR and Sharelink.”
Kypri said that the largest foreign fund controls 2% of the bank’s capital and the 20% stake is spread among 322 institutional investors. For comparison, Kypri mentioned that the share of foreign funds in the share capital of National Bank of Greece is 41%.
The stake of Greek institutional investors was only 0.6% as at end of May, but this is expected to change following the inclusion of BOC in the FTSE/XA 40 as of June 1 and later on when it enters FTSE/XA 20.
Kypri added that with the sharp increase in foreign holding of the bank’s capital, which is predominantly done through XA, the percentage of BOC shares traded in Greece has increased to 33% from 18% at end 2004.
The increase in foreign holding was chiefly responsible for the massive increase in the bank’s share price, which after rising 70% in 2005, is up another 55% since the start of the year.
Pension fund liability
The swift advance in the share price as well as higher contributions from increased profits have helped shrink the staff pension fund liability of the BOC Group from CYP 116 mln at the end of 2003, to CYP 70 mln end of 2005 and at present only CYP 35 mln.
The phenomenal improvement in results and the reduction in the pension fund liability — for a long time the main point of criticism by international rating agencies — allowed the BOC Group to issue a EUR 200 mln eurobond in April, which was not only over-subscribed, but was locked in at the extremely favourable price of 63 basis points above EURIBOR, a new best record for a Cyprus debt issuer, said Kypri.
