Bank of Cyprus seems to be struggling with its never-ending cost-cutting measures, announcing a major reduction in nine-month losses to €37 mln, compared to a whopping €554 mln this time last year.
The picture is rosier on a quarterly basis recording a Q3 pretax profit of €48 mln, down 4% from the second quarter’s €50 mln, but these were subsequently wiped out by the €150 mln losses related to the sale of a quarter of its non-performing loans portfolio.
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After its dual listing on the London stock exchange in January 2017, the bank’s shares continue to struggle having seen the stock price take a beating, losing almost half of its value since listing on the LSE at €3.35, closing at €1.71 last week, and plunging further to €1.66 on Monday, fast approaching its year-low of €1.61 in May.
Having agreed to offload a significant chunk of its non-performing loans worth about €2.7 bln as part of the Helix Project, its gross loans in the nine-month period totaled €13.45 bln, down from €18.76 bln for full year 2017, while 9M deposits were relatively stable at €16.85 bln, compared to Y2017 deposits of €17.85.
Total NPLs stood at €7.6 bln, with the bank boasting its steady path of reducing NPLs (or non-performing exposures, NPEs) for the 14th consecutive quarter. Post-Helix, that portfolio should be reduced to €5 bln.
Despite the closure of the struggling Cyprus Co-operative Bank and splitting its good and bad bank portfolios, BOC does not seem to have gained many customers from the Co-op, while harsher controls targeting Russian depositors may also have had their impact on BOC’s deposits.
The NPL sale, which is expected to conclude in the first quarter of 2019, also prompted the reduction of provisions from €836 mln to €150 mln, with bad loans accounting for 47% of its total loan’s portfolio, adjusted to 37% after Helix.
Net interest income in the third quarter was flat at €113 mln from €114 mln in the second quarter, while total income dropped 4.8% from €188 mln to €179 mln.
Staff costs refuse to come down, with the quarterly payroll unchanged at €53 mln, and the 9-month wage total rising 4% on an annual basis, where they should have been declining.
Commenting on the announcement of 9-month results, CEO John Hourican said the third quarter results “reflect continuing delivery against our core objective of balance sheet repair. This was accelerated through the agreement for the sale of non-performing loans in Project Helix.
Helix is an important step forward in repairing our balance sheet and stabilising our capital position. We expect execution in the first quarter of 2019, upon receipt of regulatory approval from the ECB.”
He added that in November, “we completed the sale of our UK subsidiary. The sale adds c.70 bps to capital ratios, of which c.60 bps were recorded in the third quarter and is broadly neutral to the profit and loss account. In addition, in August, we priced €220 mln of Additional Tier 1 Capital Securities (AT1) and we expect this to be issued before the year end.”
“Our capital levels remain adequate at the quarter end. As at 30 September 2018, the Bank’s CET1 ratio (transitional) was 11.9% and the Total Capital Ratio was 13.4%, both in excess of regulatory requirements. Pro forma for both Helix and the AT1 issuance, the capital ratios are expected to improve to 13.2% and 16.2%, respectively.”
