BOC 9-month profit to surprise on upside

Full year target may reach CYP 180 mln

 

Bank of Cyprus Pcl, due to report its nine-month results on Friday, may deliver a stronger than expected set of results, and may even exceed its full year profit target of CYP 160 mln by far.

Most of the analysts polled by the Financial Mirror expect BOC to deliver a near-173% increase in nine month profits ending September at CYP 124 mln compared to CYP 45.4 mln in the same period a year ago. The forecast by the island’s top firms, CLR, SFS and Egnatia is in line with a similar poll by Bloomberg in Greece which also expects 9M profits to reach CYP 124 mln or EUR 215 mln.

CLR is forecasting 9M profits to reach CYP 128 mln, SFS sees it at CYP 122 mln and Egnatia at CYP 124 mln. The Bloomberg poll also finds the majority of analysts forecasting profit growth to CYP 124 mln.

BOC’s ability to boost revenue while at the same time keeping costs under check, coupled with lower provision levels compared to previous years as well as significant gains from trading in securities and other financial instruments are the primary reason explaining the spectacular improvement in profit.

Net interest income is seen continuing to advance at above 20% levels on the back of higher loans in the local market as well as a surge in lending in Greece. Recent data by the bank that it has improved its market share with respect to property and housing loans and its ability to lure away customers from the Cooperatives because of its flexibility and superior range of products and its willingness to lend in foreign currency have combined to propel the bank’s loan book higher.

Operating revenue will be underpinned by strong growth in net fees and commission income as well as by a solid growth associated with revenues from insurance activities.

Total operating cost increases for the first nine months are expected to hover in the same region as those of the first half, with analysts forecasting a modest increase of 2-3% following the Group’s success to adhere to a staff hiring freeze, an early retirement plan for its Cyprus operations, as well as the centralization and rationalization of its operations.

Loan provisions are expected to slide considerably despite the increase in BOC’s retail lending, which is the result of BOC’s improvement in its debt collection department.

 

Exceed target

BOC results will be positively affected by additional gains from the trading of securities and other financial instruments, which is seen by the Financial Mirror as one of the principle reasons allowing the bank to beat its own estimate of CYP 160 mln net after-tax profit for the whole year.

Due to the massive increase in the bank’s loan portfolio, lower provisions, costs under control and huge gains from investments, the Financial Mirror forecasts that the BOC will report net final profit for 2006 in the range of CYP 180-185 mln, but above CYP 180 mln.