Bank of Cyprus reported losses of EUR 438 mln for 2015, according to the preliminary financial results released by the board, having raised provisions for impairment of loans by EUR 600 mln during the fourth quarter of 2015, and increasing its coverage ratio to 50%.
However, the bank said in an announcement that after boosting its coverage ratio, CET1 is expected to remain strong at 14.0% from 15.6% in September 2015.
Thus, the bank is confident it does not need to raise additional capital.
CEO John Hourican pointed out that during the fourth quarter, the Group’s operating performance was strong. As he said in a statement, the group continues to make good progress towards its strategic objectives.
“We made very good progress in reducing the stock of loans with arrears greater than 90 days by EUR 668 mln or 6% during the quarter and we expect to continue this progress in 2016”, he said.
He also said that the funding position of the bank continues to improve, with customer deposits in Cyprus growing by EUR 533 mln in the fourth quarter and the bank’s ELA reliance reduced to a current EUR 3.5 bln, almost EUR 8 bln lower than the peak of EUR 11.4 bln in April 2013, when it was burdened with the debts from now-defunct Laiki Popular bank.
“Due to the elevated provisions for the quarter, the Group reported a loss after tax of EUR 438 mln for the year. Nevertheless, the Group continues to have a strong capital position. The CET1 ratio was 14.0% on 31 December 2015. The Group does not expect to need to raise capital to complete its journey back to strength,” he said.
According to the bank’s results, during 2015 there was good progress in tackling delinquent loans and loans with arrears greater than 90 days were reduced by EUR 1.3 bln or 10%, due to restructuring activity and deleveraging. The 90+ DPD provision coverage was boosted by 7 percentage points in 4Q2015 to 48% as on 31 December 2015, due to elevated provision charges following assumption changes in the bank’s provisioning methodology.
Customer deposits increased by EUR 1.6 bln or 12% in 2015. The loans to deposits ratio (L/D) declined by 11 percentage points in 4Q2015 to 121% as at 31 December 2015.
Profit before provisions of EUR 624 mln was announced for 2015. Loss after tax from continuing operations and loss after tax for 2015 were EUR 394 mln and EUR 438, mln respectively.
At the same time, the bank said it continues to review the appropriateness of its current stock exchange listings and to assess other appropriate listing venues. It aims to list its securities on a major, liquid, index-driven European stock exchange in order to improve over time the liquidity and attractiveness of the stock. The review is ongoing and no specific decision has yet been taken.
Additionally, according to sources, the bank has completed the establishment of a Real Estate Management Unit (REMU) and has already begun its work in order to manage the properties that come to its control, in order to maximise its benefit while not adversely affect the real estate market. However, the staffing of the unit has not been fully completed.
The aim of the unit is to speed up loan restructuring, offering the option to exchange the loan with property. It will mostly have to do with large units, tourist and commercial real estate and land development companies.
