Hellenic Bank, taking the mantle of leading retail and SME bank in Cyprus, whilst de-risking its balance sheet and business model, posted record post-tax profits of EUR 320 mln for 2018, driven mainly by the ‘negative goodwill’ of EUR 297.9 mln tied to the Co-op deal.
Negative goodwill is an accounting term to describe the amount that Hellenic saved from not paying for the full value of the Co-op takeover, in effect showing a profit.
The bank said in its announcement that it generated a EUR 24.1 mln net profit, EUR 38.5 mln before impairments, during Q4 of 2018.
Hellenic said that its balance sheet has been de-risked substantially and the end of 2018 saw an improvement in the quality of its loan portfolio.
Non-performing exposures (NPEs) dropped significantly, from 51.6 per cent in June 2018, to 26.5 per cent at the end of the year.
The ratio of net NPEs to assets fell from 11.7 per cent to 4.3 per cent.
Hellenic said its CET1 ratio after the completion of a €150 mln capital raise was 19 per cent and its capital adequacy ratio 21.7 per cent, which was well above the minimum regulatory requirements.
“The acquisition of Cyprus Central Co-op business established Hellenic Bank as the leading retail and SME bank in Cyprus whilst simultaneously de-risking our balance sheet and business model,” Hellenic CEO Yiannis Matsis said.
“The profitability and resulting capital position safeguards our depositors and creates shareholder value.”
Promising to keep its eye on customer services, Matsis said: “As the biggest retail bank on the island, our mission is to provide an excellent service as well as competitive products and solutions to our enlarged customer base and to also continue financing the growth of the real economy”.
Following the Co-op takeover, the Group’s total assets more than doubled to €16 bln, making it the leading retail bank, with the largest branch network and with market shares of 39% (up from 12%) and 30% (up from 6%) in household deposits and loans, respectively.
Hellenic Bank is now the second largest bank in Cyprus, with a market share of 20% (up from 9%) and 31% (up from 12%) in terms of loans and deposits, respectively.
The Co-op deal included acquisition of a balance sheet totaling €9.3 bln, comprising of loans of €4.0 bln (€3.6 bln of performing loans and €400 mln of NPEs), Cyprus Government Bonds (“CGBs”) (€4.1 bln), cash (€1.0 bln), customer deposits (€8.8 bln) and certain other current liabilities and assets.
