Hellenic Bank aims for EUR 90m profits by 2009

Hellenic Bank Pcl (HB) is forecasting pretax profit to increase by 17.9% YoY to CYP 48.7 mln in 2007 from CYP 41.3 mln in 2006 and to reach CYP 63.6 mln by 2009, according to the 3-year Strategic Plan 2007-2009 presented to the press and analysts on February 22, 2007.

HB CEO Makis Keravnos said the objective of the 3-year plan is to achieve a steady increase in profitability, expansion in new markets, improvement of the Bank’s loan portfolio coupled with efficiencies at all levels of operations.

Stripping out the tax and minority interest component from the pretax projections, the Financial Mirror estimates that the Bank’s net profits should climb by 17% to CYP 40 mln or EUR 69 mln from net profit of CYP 34 mln or EUR 58.8 mln in 2006.

Based on the same assumptions, net profit in 2007 is seen climbing by 16% to CYP 46 mln or EUR 80 mln and by a further 12% to CYP 52.5 mln or EUR 90 mln by 2009.

Keravnos said the 2007-2009 plan envisages total income rising from CYP 147 mln in 2006 to CYP 158 mln in 2007 and CYP 184 mln by 2009. The cost to income ratio from 60.1% in 2006 is seen declining to 57.5% in 07, 56.1% in 08 and 54.5% by 2009.

The level of provisions to gross loans is seen declining from 1.17% in 2006 to 0.89% in 07, 0.75% in 08 and 0.75% in 2009. The ratio of Nonperforming loans to advances is seen declining from 12.6% in 2006 to 6.2% by 2009.

The Return on Equity (ROE), which in 2006 was 18% has been adjusted by the Bank to strip out the extraordinary investment and interest rate derivative trades to 15.2%, after which the ROE is seen rising to 16.4% in 2007 for an 8% increase, then to 16.5% by 2008 and 16.7% by 2009.

Assuming that Hellenic Bank will generate sufficient investment banking, treasury and interest related gains as Cyprus and euro rates converge, then taking the 18% effective ROE of Hellenic Bank in 2006 as a base, the ROE should improve to 19.5% in 2007.