Bank of Cyprus posts €70 mln net loss for 2019

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Bank of Cyprus, the island’s largest lender, posted a net loss of €70 mln for 2019, due to increased provisions after postponing a sale of non-performing loans and the cost of a voluntary retirement scheme.

In view of the COVID-19 outbreak, the bank is updating macroeconomic assumptions underlying the IFRS9 calculations which may lead to increased organic provisions in Q1 2020, amid the crisis.

In a statement, the bank’s CEO, Panicos Nicolaou said the current economic uncertainty means that “we cannot at this stage have clear visibility of the future impact of COVID-19 on the Group’s operations and financial results”.

He added: “Lower transactional income and lower demand for loans, the on-going economic uncertainty means that we do not have sufficient visibility about the likely future impact of COVID-19 on the Group’s operations or financial results, and are not in a position  to provide guidance for the current financial year.”

“However, we are confident that the Bank’s good capital base and strong liquidity, position us to be able to support our customers through this period of extreme volatility, playing our part in limiting the impact of the pandemic in Cyprus.”

BoC’s Common Equity Tier 1 (CET1) ratio declined to 14.8% from 15.2% in the third quarter of 2019 while total capital adequacy amounted to 18% 0.2% lower compared with September 2019.

Loan loss provision coverage rose to 54% from 51% in Q3, 2019 and 52% at the end of 2018.

The bank reported a net interest income of €344 for 2019, up by 4% compared with 2018.

Net fee and commission income declined by 8% in 2019 year on year to €150 mln from €162 mln in 2018. Total income amounted to €641 mln in 2019 from €657 mln in 2018.

Total expenses for 2019 amounted to €410 mln (compared to €393 mln for FY2018), 54% of which related to staff costs (€220 mln), 40% to other operating expenses (€165 mln).

Staff costs of €220 mln for FY2019 increased by 4% YoY (compared to €212 mln in FY2018) mainly driven by the increase in employer’s social insurance contributions and additional contributions to the new general healthcare system which commenced in March 2019, as well as the effect of the renewal of the annual collective agreement.

Staff exit cost €81 mln

In October 2019, the Group completed a voluntary staff exit plan (VEP), through which 11% of the Group’s full-time employees were approved to leave at a total cost of €81 mln.

“Following the completion of the VEP, the gross annual savings are estimated at €28 mln or 13% of staff costs (excluding the 100 people related to the Helix transaction).

Annual savings net of the impact from the renewal of the collective agreement for 2019 and 2020, are estimated at €23 mln or 11% of staff costs,” BoC said.

The bank’s total non-performing exposures amounted to €3.9 bln or 30.3% of total loans from €4.08 bln at the end of September 2019.

Organic reduction (restructurings, debt for asset swaps and write offs) amounted to €889 mln, while new loans granted throughout 2019 amounted to over €2 bln.

Customer deposits totalled €16.692 bln at 31 December 2019, compared to €16.473 bln at 30 September 2019 and €16.844 bln at 31 December 2018, remaining broadly flat year on year, with the bank’s deposit market share reaching 35.1%

The net Loans to Deposit ratio (L/D) stood at 64%, compared to 66% as at 30 September 2019 and 65% at 31 December 2018 pro forma for Helix.

At 31 December 2019, the Group Liquidity Coverage Ratio (LCR) stood at 208% (compared to 218% at 30 September 2019 and 231% at 31 December 2018) and was in compliance with the minimum regulatory requirement of 100%.

The bank’s gross loans amounted to €12.822 bln at 31 December 2019, compared to €13.035 bln at 30 September 2019 and €15.900 bln at 31 December 2018 (ignoring the classification of the Helix loan portfolio as disposal held for sale).

At 31 December 2019, the Group net loans and advances to customers totalled €10.722bln (compared to €10.971 bln at 30 September 2019 and €10.922 bln at 31 December 2018).