Bank of Cyprus staff have managed to boost productivity by 60% during the past two years, helping drive the Bank’s profits higher and higher, which at the same time has been instrumental in boosting the share price.
BOC Cyprus CEO & Group Deputy CEO Charilaos Stavrakis told a briefing for financial journalists during a luncheon that since the new Management team took charge of the Bank in 2005, giving new direction combined with the right incentives and safeguarding correct staff vetting procedures, the Bank’s staff productivity has increased by 60% during 2005 and 2006.
During the same period, Bank of Cyprus managed to reduce the number of staff by 173 through a staff hiring freeze and voluntary early retirement, a new record for the bank, as it launched new products and services.
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Income growth
Stavrakis said that Bank of Cyprus has managed to lift its total income from CYP 268 mln in September 2004 to CYP 384 mln by September 2006 for a 43% increase, while costs have increased by only 9% in the same period from CYP 165 mln to CYP 180 mln.
“The double digit growth in income at a time when costs are up only in single digits combined with lower provisions and higher investment gains helped net after tax profits surge from CYP 30 mln in Sep 04 to CYP 130 mln by end of September 2006,” said Stavrakis.
He added that this phenomenal growth in profitability has been instrumental in boosting the value of the share price from CYP 1.5 or EUR 2.6 per share in 2004 to CYP 6 or EUR 10 per share November 2006.
The sharp increase in the value of the share price has been instrumental in closing the staff pension liability, which from a deficit of CYP 106 mln end of December 2004 is now showing a small surplus.
“The breakeven level is CYP 5.47 or EUR 9.48 per share,” said Stavrakis, adding that the Bank will be taking steps to ensure a lesser dependence on the BOCY share price.
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New targets
No wonder that the Bank of Cyprus has been continuously beating its own targets, said Stavrakis. For example, the cost to income ratio, which in 2004 was 62.3% was supposed to be reduced to 58% by 2007. BOC met and surpassed that target by 2005 and set a new target of 51% by 2008. Guess what, the Bank managed to beat and surpass the new target end of September 2006 when its cost to income ratio fell to 46.9%.
The same happened in the case of the ratio of provisions to advances, which from 1.3 in 2004 has now declined to 0.8, while the Return on Equity (ROE) ratio, which end of 2004 was 7.1% and was on target to reach 13% end 2007 and then upped to 18% by end of 2008, has already reached 21.2% end of September 2006.
“We shall be revising our three-year target in January 2007,” said Stavrakis who recalled that the Bank of Cyprus has also announced that it will beat and surpass its net profit target for the whole of 2006, which has been estimated by the bank at CYP 160 mln or EUR 277 mln.
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“The fantastic turnaround is due to the efforts of our staff who have embraced the new banking philosophy introduced by management and together made strides in boosting the Group’s market share,” said Stavrakis.
No wonder that in the local share of advances, Bank of Cyprus lifted its share from 24.8% in August 05 to 26.3% end of August 06, while also lifting its share of local deposits from 29.5% to 29.8% in the same period.
The Bank estimates that the amount of housing loans by end of 2006 will reach CYP 448 mln from only CYP 120 mln in 2004. Another testimony of the Group’s penetration in the local market is its dominant share of credit cards at 40.3%, compared to second placed Laiki at 29.5%, Hellenic at 14.4%, Coops 10.6% and all the others at 5.2%.
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