Bank of Cyprus losses triple amid COVID

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Bank of Cyprus saw its losses triple last year to €175 mln. Its chief executive is confident 2021 will be better, focusing on reducing costs and liabilities while increasing retail loans and aiding small businesses.

The group, preliminary financial results for 2020 released on Wednesday, showed that losses for the year increased from -€67.74 mln at the end of 2019 to -€174.78 mln as of December 31, 2020.

This was due mainly to a significant drop in revenues. However, some expenses were contained, and disposals continued, while non-performing loans seemed well managed.

The insurance sector stands out for its regular contribution to the group turnover, marginally down at €56 mln, from €57.7 mln in 2019, when it also disposed of its ex-Laiki stake in CNP Insurance.

CEO Panicos Nicolaou said 2020 was to be the year that determined growth for the economy and the bank; these goals were threatened by the pandemic “but not overturned,” he said in a staff memo.

“We closed the most difficult year, with strong capital and having significantly reduced the risk,” Nicolaou said.

In his official statement attached to the preliminary results, Nicolaou said the bank “granted payment holidays to over 25,000 customers representing loans of €5.9 bln, all of which expired on December 31 2020.

“We continue to closely monitor the performance of these loans, and we remain cautiously optimistic as results to mid-February 2021 are encouraging. We also granted €1.4 bln new loans in 2020.”

Nicolaou said a key factor on the balance sheet was selling two non-performing exposure (NPE) portfolios in August 2020 and January 2021 as part of Project Helix.

That combined with earlier organic reductions that saw NPEs reduced to €1.8 bln and the NPE ratio cut from 30% to 16% of the bank’s entire loans portfolio.

The bank issued €374 mln in new loans in the last quarter of 2020, and the “capital position remains good and comfortably in excess of our regulatory requirements,” Nicolaou added.

“As of December 31 2020, our capital ratios were 18.7% for the Total Capital ratio and 15.2% for CET1 ratio, both pro forma for NPE sales.

“Our liquidity position also remains strong, and we continue to operate with a significant surplus of €4.2 bln. Deposits on our balance sheet remained broadly flat in the quarter and the year at €16.5 bln.”

De-risking balance sheet

The CEO said the future includes completing the balance sheet’s de-risking by a target of achieving a single-digit NPE ratio within 2022 and an NPE ratio of c.5% medium-term.

“We will continue to assess the potential to accelerate NPE reduction through additional sales.”

Nicolaou said the focus would remain to drive down costs through effective digitisation and automation and enhancing revenues.

“We remain confident that the initiatives we are focused on will allow us to create shareholder value in the medium term.”

Staff costs continue to burden the bank. Although reduced by a third to €201 mln, employee numbers remain high at 3,572, just five less than at the end of the third quarter and reduced by only 100 from 2019.

Closing at 70.7c on Tuesday, the bank’s share price is 38% down from the year-earlier level of 112.6c on February 25, 2020, before the downturn caused by coronavirus.

The bank’s stock struggles with legacy issues while trying to rid itself of the NPLs burden, going downhill when it listed on the London Stock Exchange on January 14, 2017, with an opening price of 297.5c.