Marfin Popular Bank (CPB.CY) reported a 35.6% decrease in first half 2008 net profit to EUR 220.4 mln compared to EUR 342.1 mln a year ago in the same period, short of expectations of EUR 226 mln in profits.
The Bank said that adjusted for exceptional income and profit from discontinued operations, net profits climbed by 7% compared to EUR 205.9 mln profit reported in the first half of 2007.
Total assets of the Group exceeded EUR 35 bln, recording an annual increase of 22%, reinforcing the Group’s leading position in the Cyprus market and the fifth position in the Greek market.
Both total loans and deposits of the Group recorded remarkable annual increases of 40% and 19% respectively, driven by the enlargement of the branch network, the expansion of the customer base and the gradual maturing of new branches. Loan to deposit ratio stands at the very low 89%, for both Greek and European Banking standards, demonstrating the high liquidity of the Group.
Net interest income amounted to EUR 359.3 m achieving an increase of 8% year-on-year from the first half of 2007. The negative factors affecting net interest income mainly include: the downward adjustment of the base rate in Cyprus by 50 basis points (being the difference between the Cyprus Pound and the Euro base rate), which was set as the interest rate for the loans that were converted from Cyprus Pound into Euro on 01 January 2008 (as required by a circular of the Central Bank of Cyprus), the decrease of the interest rates in the USA and the devaluation of the US Dollar that reduced the income from the US Dollar deposits (mainly of the international business banking operations in Cyprus) and finally the intense competition on deposits from competitors facing constrained liquidity in Greece and Cyprus.
Net interest margin decreased from 2.73% (after adjusting for interest write backs) in the first half of 2007 to 2.44% in the first half of 2008, due to the aforementioned cyclical and technical factors. Regarding the imposed decrease in the base rate of the loans, which were converted into Euro from Cyprus Pound, the Group has already proceeded in a number of compensating actions during 2008 that include the increase of the base rate of the Bank by 100 basis points. The gradual reversal of the negative factors will have a positive impact in operational performance of the Group in the coming quarters.
Net fee and commission income recorded a significant increase of 32% year-on-year to EUR 147.1 mln, as a result of the leading position of the Group in investment banking and brokerage, and the dynamic growth of the banking operations.
Total operating expenses reached EUR 270.6 mln, increased by 15% compared to the first half of 2007. First half 2008 expenses included operating expenses from the consolidation of the Ukrainian bank, Marine Transport Bank (consolidated since the last quarter of 2007) and Lombard Bank Malta Plc (consolidated since 01 March 2008). Excluding the expenses of the new subsidiaries consolidated, the increase in the operating expenses is contained to 7%. The increase in expenses is a result of the dynamic growth of the Group’s operations and the opening of 6 new branches and 10 business centers in Greece and 20 new branches in the international network (5 in Romania, 8 in Ukraine and 7 in Serbia). Cost-to-income ratio of the Group remained relatively stable at 46% compared with 44% (adjusted for exceptional income) in first half 2007.
The consolidated net profit reached EUR 220.4 mln recording an increase of 11% compared to the first quarter of 2008 and 7% compared to the first half of 2007 (after adjusting for exceptional income and profit from discontinued operations).
The enhanced profitability of the Group in the first half 2008 has resulted in a return on assets ratio (RoA) of 1.35% and a return on tangible equity (RoTE) of 20.3%.
The capital adequacy ratio according to Basel II is estimated at 10.5% and Tier I ratio at 8.9% in June of 2008. The Group maintains one of the highest capital adequacy ratios in the Greek banking market.
The provisions as a percentage of gross loans were 0.47% at the end of the first half of 2008. The coverage ratio stood at 61%. The non performing loans ratio (NPL) decreased significantly to 4.5% in June of 2008 from 5.3% in June of 2007.
During the second quarter of 2008, a series of important strategic events took place. The most important are the following:
Τhe Central Bank of Cyprus decided (a) the reduction of the minimum liquidity in Euro from 25% to 20% (effective from June 2008), and (b) the reduction of the minimum required ratio of liquid assets to total deposits in foreign currencies of the Bank in Cyprus from 75% to 70% (effective from August 2008).
On 22 July, 2008 the Bank and CNP Assurances signed an agreement for a long term business partnership for the development of insurance and pension sales through the Group’s banking networks in Greece and Cyprus. It is expected that this insurance partnership will be extended to other countries in the future, following the international expansion of the Group in Southeast Europe. According to the terms of the agreement CNP Assurances will acquire the 50.1% of the insurance arm of the Group and will assume management control of these companies. It is expected that the transaction will be finalised by the end of the year, once the necessary regulatory authorisations are obtained.
Commenting on the results, MPB’s CEO, Mr. Efthimios Bouloutas, said the following:
“During the second quarter of 2008, Marfin Popular Bank has sustained its expansion both in terms of business and profitability despite a difficult global capital markets environment dominated by intense volatility, the ongoing credit crisis and elevated funding cost. The group has managed to achieve strong business expansion, improve its margins and sustain improvements in its cost structure and asset quality. All the above dynamics have been accompanied by the maintenance of a strong capital position and one of the most comfortable liquidity positions among the peer group. The results for the first half of 2008 point to a significant improvement in operating performance, a trend we as management expect to be maintained in the coming quarters.”
