Bank of Cyprus losses top €122 mln in 9 months

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Bank of Cyprus announced after-tax profits of €4 mln in the third quarter, somewhat easing the pain of €122 mln in losses during the nine months, while its chief executive warned of a slowdown in recovery due to the COVID-19 spike.

The impact of the coronavirus and lockdown measures on the economy had a clear impact on the bank’s performance, with a considerable balance sheet deterioration during the past 12 months.

The island’s largest lender had posted after-tax profits of €19 mln in the same quarter last year and €116 mln for the 9 months of 2019, following losses of €37 mln in 9M 2018, with CEO Panicos Nicolaou saying at the time that the results reflected “continuing progress against our core objective of balance sheet repair and normalisation of our bank.”

For this year, the head of the bank said that during the third quarter, “we generated total income of €137 mln and a positive operating result of €44 mln. Cost of risk was kept at below 100 bps. Q3 was profitable and the profit after tax for the quarter was €4 mln.

Nicolaou said that the overall result for the nine months was a loss after tax of €122 mln when including the loss on the offloading of risky loans and deleveraging of mortgages as part of Project Helix 2 and loan credit losses for potential future non-performing exposure (NPE) sales, both recorded in the previous quarter.

He added that in the nine months of the year “we reduced our total operating expenses by €40 mln or 13% annually, reflecting our on-going efforts to contain costs. The quarterly increase of 4% is reflective of the lower cost base in the second quarter as a result of the restrictive measures for COVID-19.”

On a positive note, Nicolaou said that the bank’s capital position remains good and comfortably in excess of regulatory requirements.

“During the third quarter of the year we continued to support the Cypriot economy and extended a further €288 mln in new loans, up 20% from the previous quarter, as new demand increased post lockdown, driven by retail housing, supported by the government’s interest rate subsidy scheme. Overall, we have granted about €1 bln new loans in the first nine months of the year.”

Nicolaou said that the Cypriot economy showed more resilience than initially expected in the third quarter, proving its open, small and flexible characteristics.

“As the number of new COVID-19 cases has increased in recent weeks, local restrictions have been re-imposed to contain the spread, which is likely to lead to some loss of momentum in economic recovery in the fourth quarter.

The latest news for an effective vaccine is encouraging, which in time should support a return to more normal conditions.”

The bank’s CEO said that during the third quarter of the year “we maintained our focus on dealing with legacy issues.

The pace of organic NPE reduction returned to pre-lockdown levels, as we reduced NPEs further by €230 mln, bringing the total organic reduction in the first nine months of the year to over €500 mln.

“We remain committed to completing the de-risking of the balance sheet and we will continue to assess the potential to accelerate NPE reduction through additional sales.

“Although there remains uncertainty in the broader operating environment as a result of the pandemic, our vision for the future of the bank is clear, together with our confidence in delivering our strategic objectives.

“We are now laying the foundations for delivering greater shareholder value. Our near-term priorities include the completion of our balance sheet de-risking and ensuring our cost base remains appropriate whilst further investing in our digital capabilities.”

Bank of Cyprus shares were trading at 64c on Friday, less than half the value of €1.35 on November 28, 2019.