Bank of Cyprus issues profit warning, lower capital ratios

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The Bank of Cyprus issued a profit warning Thursday saying that Group after-tax results for 2012 and before the impairment of Greek government bonds (GGBs) wll be worse than the full results for 2011, while the Core Tier 1 ratios may even be below 5% announced last month.
The bank posted a nine-month loss after tax of 211 mln euros on November 28 after including an impairment in the value of Greek bonds held and on higher provisions for non-performing loans. This followed a net loss of 793 mln euros in the nine month period of 2011 on its Greek bond exposure.
Bank of Cyprus was one of two local banks that sought state aid this year after its regulatory capital was eroded from heavy exposure to Greek debt.
According to European Banking Authority estimates, Bank of Cyprus's capital shortfall to reach a core tier 1 ratio of 9.0% – a measure of financial strength – is 722 mln euros.
Issuing its profit warnings for the full 2012 results, the bank said that “the deviation is mainly due to increased provisions for impairment of loans (as a result of the continuing deteriorating economic conditions and the adoption of stricter assumptions in the context of the PIMCO review) as well as reduced operating income.
“As a result, the Group’s capital adequacy ratios will be negatively affected. It is noted that as at 30 September 2012, the capital adequacy ratio of the Group amounted to 7.6% with the Core Tier 1 capital ratio and the Tier 1 capital ratio at 5.0% and 7.3%, respectively.
“On the basis of the above expectations it is possible that the Core Tier 1 capital ratio may be lower than 5% as at 31 December 2012,” it added.