Hellenic Bank first to show profit in Cyprus, albeit a small one

Hellenic Bank, the island’s third biggest lender controlled by the Church of Cyprus, is the first of the local banks to show a profit for the first nine months of the year, when it’s two largest peers showed a cumulative loss of about 2 bln euros for the period.
The turnaround, albeit a small one, may fuel talk of mergers among banks, as central bank Governor Panicos Demetriades suggested during a press briefing on Friday that local banks, heavily exposed to Greek sovereign and private sector debt, ought to consider consolidation plans ahead of a due diligence report from global fund manager Pimco.
Already, the island’s two largest banks – Bank of Cyprus and part-nationalised Laiki Popular Bank – announced cumulative losses of about 2 bln euros for the nine-month period of January-September.
Hellenic, often accused of maintaining a conservative investment policy, has nearly written off the 110 mln euros it held in toxic Greek sovereign bonds, and thanks to a cost-cutting policy and revenue-increasing blitz, turned the results around from a 73 mln euro loss in the three quarters of 2011 to an after-tax profit of 219,000 euros in January to September this year.
The bank reported a 15% year-on-year increase in net income of 255 mln euros before impairment of Greek government bonds (GGBs), but reduced a further 7 mln in GGB writedowns, compared to 55 mln in writedowns last year. On the other hand, it slashed operating costs by 7% to 119 mln euros, and after raising provision by 27 year-on-year to 129 mln euros, was left with a pre-tax profit of 700,000 euros, compared to a 63 mln loss in the same period last year.
The bank boasts a healthy loans-to-deposits ratio of 63% based on 5.6 bln euros in loans against 7.7 bln in deposits which give it “ample liquidity and a stable funding base”, according to analysts’ reports.
The bank recently raised some 51 mln euros in fresh capital and with a strong deposits base said is not dependent on the interbank market or the ECB, raising its Core Tier 1 ratio from 7.1% to 8.3%, 0.3 percentage points above the Central Bank of Cyprus requirements, and a Tier 1 ratio of 11.3%, up from 10.2% and 1.8 percentage points above the central bank level. This results in a capital adequacy ratio of 14%, up from 12.9% last year and above the central bank benchmark of 11.5%.