The island’s three main banks announced 9-monthly losses this week, as anticipated, higher than in their half-yearly results due to a 50% haircut provision on their Greek debt holdings.
However, all three are confident that they are on the path to recovery and that operation-wise they are achieving profit targets.
BOCY: €801 mln loss
Bank of Cyprus said the total impact of its participation in a voluntary swap of Greek government bonds with a 50% impairment, including related hedging adjustments, amounted to 1.04 bln euros for the first nine months of 2011. This is 20 times the impairment announced by third biggest lender Hellenic Bank with a total holding of Greek bonds at 110 mln.
The nominal value of Greek government bonds held by the Bank of Cyprus Group totalled 2.09 bln euros at the end of September. Based on preliminary EBA estimates second lender Marfin Popular Bank, the most heavily exposed to Greek debt among Cypriot banks, needs an estimated capital buffer of 2.116 bln euros to reach a core tier 1 ratio of 9% by June 2012.
The haircut forced Bank of Cyprus to post a net loss of 801 mln euros for the first nine months of the year. However, excluding this exercise, the group's profit before provisions reached 597 mln euros, a year-on-year increase of 17%.
Excluding the Greek impact, the bank said it had achieved its profitability targets.
“The Group expects that it will achieve satisfactory recurring profitability with higher profit before provisions for 2011 compared to 2010, while profit after tax for 2011 is estimated to be at around similar levels to 2010, 306 mln euros,” the bank said in a statement.
Profit after tax excluding the Greek bond impairment was 245 mln euros compared with 248 mln for the first nine months of 2010.
In a joint statement issued after the results announcement, chairman Theodoros Aristodemou and Group CEO Andreas Eliades said that the bank enjoys healthy level of liquidity and that the loan-to-deposits ratio stood at 89%, up 2 percentage points from the same period last year. Loans were up 5% at 29.8 bln euros, while deposits increased marginally to 31.9 bln. However, non-performing loans were up 1.9 percentage points at 8.6%.
Profits from the Cyprus operations rose 23% and up 95% in Russia.
Bank of Cyprus announced on November 3 it would boost capital via a rights issue of up to 396 million euros and a voluntary exchange of convertible securities because of increased regulatory requirements and the impact of further writedowns on its Greek government bond holdings.
MPB: €282 mln loss
Marfin Popular Bank said it lost 86 mln euros in the third quarter, including one-off extraordinary items amounting to 96.7 mln. For the first nine months of the year, the bank reported a loss of 282.2 mln.
Marfin Popular Bank Group reports third quarter 2011 financial results
The Group said that “ongoing improvement in revenue quality was reflected in stronger core banking revenues, which rose 12% y/y and 9% q/q to 260 mln euros. Third quarter operating revenues rose 2% y/y and remained flat q/q at 262.5 mln.”
Commenting on the third quarter results, Group CEO Efthimios Bouloutas said that despite an adverse business environment, Marfin Popular Bank delivered “improving underlying performance underpinned by expanding revenues, as well as improving revenue quality, declining operating expenses and stable asset quality trends.”
“The 9% and 12% core banking revenues increase on a sequential and annual basis, respectively, has been driven by expanding net interest income of 10% for the quarter and 18% on an annual basis, which in turn has been a function of improving margins across the Group’s key geographic and business areas. That combined with a 1% reduction on operating expenses for the year has resulted in a 9% y/y increase on pre-provision profit. The quarterly non-performing loans (NPL) formation remained broadly stable at 103 mln euros and close to the average of the last four quarters, as the Group continues to benefit from a favourable asset mix effect related to its core Cypriot business, as well as to its international business.”
The Group gross loan portfolio rose 1% to 26.8 bln euros in the third quarter, but dropped 1% on an annual basis. The Greek loan book decreased by 4% on an annual basis and 1% on a quarterly basis, but in Cyprus it reported a 6% y/y growth, mainly driven by an 8% y/y increase in business loans and 4% y/y increase in mortgages.
Group deposits stood at 21.6 bln in the third quarter, a decrease of 13% y/y and 6% q/q. International Business Banking (IBB) deposits in Cyprus dell 8% y/y and 13% q/q, while total Cyprus deposits amounted to 12.4 bln euros, 4% and 8% lower on an annual and quarterly basis, respectively.
HB: €72 mln loss
Hellenic Bank swung to a net loss of 72.10 mln euros in the first nine months of the year, hit by high provisioning costs and a writedown on its Greek bonds.
It posted a net profit of 12.05 mln euros in the first three quarters of 2010.
The bank, in which the Church of Cyprus is a key shareholder with a 25% direct and indirect control, said on Tuesday its pretax loss was 63.04 mln euros compared with a profit of 16.14 mln in the first nine months of 2010.
Hellenic Bank hiked its provisions by 120% in the first nine months of the year compared with 2010.
The bank, which has only 110 mln euros in Greek bonds, said it took a 55 mln euro impairment from the 50% haircut on Greek sovereign debt agreed by euro zone leaders in October.
Excluding the participation in the Greek sovereign debt swap and provisions, earnings rose on the year by 50% to 93.3 mln euros, the bank said.
In a note to institutional investors, the bank said that it enjoyed a robust capital base with a capital adequacy ratio of 13%, a stable funding base with a healthy net loans to deposits ratio of 68%, and ample liquidity.
Net loans were up 3% to 5.02 bln euros, while deposits were 8% higher at 7.4 bln euros. Of these, 6.8 bln were deposits in Cyprus of which some 38% were customers from Russia, reinstating the bank’s profile of a good liquidity and funding profiles, helped by a large customer deposit base.
