Bank of Cyprus profits seen rising to EUR 480 mln

— 3-year strategic growth plan to be revised higher

 

Bank of Cyprus Pcl (BOC) is expected to report yet another spectacular rise in third quarter profits ending September, which will allow the bank’s management to revise higher its forecasts for the full year and beyond.

Deutsche Bank is forecasting a third quarter profit (July-September) increase by 66% year-on-year to EUR 130 mln, which would lift the first nine month profits to EUR 360 mln compared to EUR 222.5 mln in the same period a year ago, for a gain of 62%.

All eyes will be on the third quarter and guidance revision that CEO Andreas Eliades will release after the closing bell on Thursday for the full year results and the profit forecast and targets until 2009. For the first time this will also include the operations recently launched in Russia and Romania.

Analysts polled by the Financial Mirror expect Bank of Cyprus to beat its original forecast for a 2007 profit of EUR 415 mln. The Financial Mirror sees BOC’s 2007E profit at EUR 480 mln based on the median forecast of analyst estimates.

DB is forecasting EUR 492 mln or 0.88 euro cent earnings per share for 2007. Citigroup is forecasting 2007E profit at EUR 375 mln, JP Morgan at EUR 484 mln or 0.86 EPS, while KBW sees BOC 2007 profit at EUR 466 mln. Eurobank is forecasting full-year profits at EUR 452 mln and P&K at EUR 442 mln.

Sharelink Research is forecasting nine-month profits at EUR 350 mln, while the full year profit is seen at EUR 470 mln, CLR sees 9-month profits at EUR 360 mln, while Egnatia’s forecast is at EUR 359.4 mln.

 

— Targets to be revised

 

In addition to the profit targets, Eliades is expected to revise higher most other ratios of the bank on the back of a spectacular improvement in all areas of activity and in all markets where it operates.

Under the previous guidance, the management had forecast net interest income growth at 18% during 2007-2009, which is now set to improve to 22%. Total income previously forecast to increase 16% in the 3-year period, is now forecast to rise to 19%. Total expenses, forecast to grow 9%, should decline to 8%. Profit after tax, initially forecast to grow in excess of 25% during 2007-09 is now seen climbing by 32%.

Other guidance targets previously issued by the management for 2007-2009 in February were: total loans forecast to grow 21%; Greece loans up 23%; Cyprus loans 13%. Deposits were set to grow by 15%, the cost-to-income ratio target was 40% and the return on equity (ROE) target 25%, which may well be improved.

 

— Price targets to increase

 

After the management obliges and increases its profit targets, then in most likelihood, analysts will proceed to adjust their forecasts, which may lead to a revision or confirmation of price targets issued on the bank’s share price.

The highest price target on Bank of Cyprus is at EUR 18 per share issued by JP Morgan. DB follows with a EUR 17 share price target, followed by Citigroup and KBW at EUR 16.

P&K sees BOC at EUR 15.10, Eurobank has a price target of EUR 15, while Sharelink has a price target of EUR 14.90.

 

— Ukraine takeover

 

The Bank of Cyprus management may take the opportunity to announce a takeover in the Ukraine, following its successful push into Romania and Russia and at the same time confirm its total investment target.

Previously, Chairman Eleftherios Ioannou had said that the Group plans to invest up to EUR 1 bln in new takeovers and investments during the next three years, with Group Deputy CEO and Cyprus CEO Charilaos Stavrakis and Group Chief General Manager Yiannis Kypri confirming that the expansion drive will be funded from own resources (profitability), high liquidity and capital adequacy ratios.