Bank of Cyprus profit at EUR 485 mln

…dividend raised to EUR 0.44

Bank of Cyprus announced its 2007 results, lifting net profit by 55% YoY to EUR 485 mln from EUR 313 mln in 2006. The ratio of non-performing loans to total loans has improved from 5,6% at 31 December 2006 to 3,8% at 31 December 2007, achieving two years earlier the target of decreasing provisions to below 4% by 2009. At the beginning of 2008, the Group is strategically positioned in three new geographic markets aiming to initially leverage on the large number of client relationships with companies that operate in Russia, Romania and Ukraine and with excellent prospects of expanding operations in these countries given the healthy liquidity of the Group.

The increased Group profitability, led to the decision of the Board of Directors of the Bank to propose at the Annual General Meeting of its shareholders a dividend of €0,25 per share. The total of the proposed dividend and the interim dividend of €0,19 per share which was paid in December 2007 amounts to €0,44 per share compared to €0,29 paid last year, recording an increase of 52%.

The cost to income ratio improved to 43,6% compared to 46,7% for 2006.

 

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The improvement of profitability is the result of the following:

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Increase of business volumes (31% in loans and 21% in deposits).

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Increase of income (increase of net interest income by 23%, fees and commission income by 15% and insurance income by 25%).

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Containment of cost growth at rates lower (15%) than those of the growth of business volumes (31%).

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Further improvement in loan quality, with a resultant decrease of the annual provision charge to 0,3% of total loans.

 

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The improvement in the profitability of the Group’s Cyprus operations is spectacular. Profit after tax increased by 56% to €377 mn (C£221 mn).

 

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The profitability of the Greek operations also registered a spectacular increase in 2007, with profit after tax increasing by 57% compared to 2006 to reach €100 mn (C£59 mn).

 

Group Loans

The Group’s loans reached €19,50 bn (C£11,41 bn) at 31 December 2007, recording an annual increase of 31%.

B.1.1 Loans in Cyprus

The Group’s total loans in Cyprus at 31 December 2007 amounted to €9,57 bn (C£5,60 bn), recording an annual increase of 38%.

The Group has increased its market share in total loans of commercial banks and credit cooperatives in Cyprus, to 29,0% in December 2007 (latest available data), compared to 26,7% in December 2006, an increase of 2,3 percentage points in the last 12 months. The continued increase in our market share is the result of the recognition of Bank of Cyprus’ leading brand name, as well as its extensive network and the effective marketing campaigns focusing on the business sector and mortgage lending.

During 2007, the improvement in the quality of the Group’s loan portfolio was exceptional and was the result of, among others:

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Collections of overdue amounts.

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Lower inflow of new NPLs as a result of the continuous improvement of credit risk management.

 

Specifically, the total amount of loans in arrear for longer than three months which are not fully covered by collateral (“non performing loans”) has decreased to €747 mn (C£437 mn), an 11% decline in absolute numbers since 31 December 2006.

The ratio of NPLs to total Group loans at 31 December 2007 was 3,8% compared to 5,6% at 31 December 2006, thus achieving two years earlier the target of improving the NPL ratio to below 4% by 2009.

In parallel, the coverage ratio (provisions/NPLs) increased to 78% as at 31 December 2007, compared to 66% one year ago. The remaining balance of NPLs is fully covered by tangible collateral.

The quality of the loan portfolio in Cyprus registered a significant improvement with the relevant indicator improving to 5,0% at 31 December 2007 compared to 8,2% one year ago.

The quality of the Group loan portfolio in Greece remains very good. Using the NPL definition mentioned above, the Group’s NPLs in Greece improved to 3,2% at 31 December 2007, compared to 3,9% a year earlier. This ratio compares favourably to the ratio of the Greek banking system, as per Bank of Greece data.

B.2 Group Deposits

The Group’s total deposits recorded a significant increase of 21% and on 31 December 2007 they reached €25,18 bn (C£14,74 bn), enhancing its liquidity.

The increase in the Group’s deposits is particularly important due to the recent turmoil in the money and debt financial markets. The continuous increase in deposits and the low loans to deposits ratio (77%), confirm the Group’s ability to implement its strategic plan with moderate reliance on wholesale funding. It is noted that as at 31 December 2007, 79% of assets were funded by customer deposits and only 11% by wholesale funding.

During 2007, the improvement in the quality of the Group’s loan portfolio was exceptional and was the result of, among others:

•

Collections of overdue amounts.

•

Lower inflow of new NPLs as a result of the continuous improvement of credit risk management.

 

Specifically, the total amount of loans in arrear for longer than three months which are not fully covered by collateral (“non performing loans”) has decreased to €747 mn (C£437 mn), an 11% decline in absolute numbers since 31 December 2006.

The ratio of NPLs to total Group loans at 31 December 2007 was 3,8% compared to 5,6% at 31 December 2006, thus achieving two years earlier the target of improving the NPL ratio to below 4% by 2009.

In parallel, the coverage ratio (provisions/NPLs) increased to 78% as at 31 December 2007, compared to 66% one year ago. The remaining balance of NPLs is fully covered by tangible collateral.

The quality of the loan portfolio in Cyprus registered a significant improvement with the relevant indicator improving to 5,0% at 31 December 2007 compared to 8,2% one year ago.

The quality of the Group loan portfolio in Greece remains very good. Using the NPL definition mentioned above, the Group’s NPLs in Greece improved to 3,2% at 31 December 2007, compared to 3,9% a year earlier. This ratio compares favourably to the ratio of the Greek banking system, as per Bank of Greece data.

B.2 Group Deposits

The Group’s total deposits recorded a significant increase of 21% and on 31 December 2007 they reached €25,18 bn (C£14,74 bn), enhancing its liquidity.

The increase in the Group’s deposits is particularly important due to the recent turmoil in the money and debt financial markets. The continuous increase in deposits and the low loans to deposits ratio (77%), confirm the Group’s ability to implement its strategic plan with moderate reliance on wholesale funding. It is noted that as at 31 December 2007, 79% of assets were funded by customer deposits and only 11% by wholesale funding.