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Bank of Cyprus is kick-starting the reporting season for the nine-month results Wednesday with market analysts expecting the bank to report improved profits compared to the previous quarter, but still lag last year’s profitability levels.
The recent improvement in credit markets and some stability in the main markets where Bank of Cyprus is active, namely Cyprus and Greece, is expected to have been the principle reason for the improvement in performance compared to the second quarter.
The average of analyst forecasts polled by the Financial Mirror gives a profitability forecast range of EUR 75 – 93.3 mln for the third quarter profits of the Bank. HSBC is forecasting EUR 75 mln, Marfin CLR is forecasting profits of EUR 90.1 mln while Euroxx is forecasting Q309 profits of Bank of Cyprus at EUR 93.3 mln.
In the second quarter, Bank of Cyprus reported a net profit of EUR 84.5 mln, which means the average of forecasts is 6.5% better than the Q209. However, when compared to the Q308 net profits of EUR 131 mln, the profitability situation shows a marked deterioration.
For the first nine months of 2009, Bank of Cyprus profits are expected to show a decline of EUR 237 mln compared to EUR 374.7 mln in the first nine months of 2008.
Bank of Cyprus CEO Andreas Eliades will announce the 3Q09 results Wednesday after the market close during a press conference to be held in Athens. A conference is scheduled to take place at 6pm Cyprus time by Yiannis Kypri, Group Chief General Manager.
The increased liquidity in major operating geographies, the satisfactory improvement in spreads on both sides of the balance sheet, the easing and rationalisation of competition on deposits (in Cyprus and Greece) and the exceptional trading gains recorded from the reversal of financial markets’ performance are some of the factors cited by Marfin CLR analysts as having contributed to the improvement in the bank’s results vis-a-vis 2Q09.
Analysts however remain concerned regarding the deteriorating quality of the loan book and the rising trend of non performing loans primarily in Greece and Russia. The results are not directly comparable due to the acquisition of Uniastrum Bank in 4Q08. Loan provisions are expected to settle marginally lower vs. 2Q09 (benefit from lower provisions in Cyprus) but the main provision adjustment is expected to be made when the preliminary results for 2009 will be prepared sometime in February.
The net interest margin is expected to have improved due to a more favourable asset and liability pricing. The recovery and improved working conditions in capital markets is also expected to have contributed to higher fees and commissions.
Despite the Uniastrum acquisition, analysts expect BOC to report further cost efficiencies. Operating costs for 3Q09 are seen almost flat or are forecast to register a small increase.
INTERIM DIVIDEND
The Bank of Cyprus board is also expected to announce whether or not it will declare an interim dividend for 2009. A number of analysts including those at Euroxx expect the bank to declare an interim dividend of 0.10 euros per share compared to 0.15 euros a year ago.
A dividend announcement however is not a foregone conclusion if the bank decides to postpone an announcement until February when the preliminary results are announced and a better analysis of the prospects of the global economy in the aftermath of the credit crisis will be possible.
