Bank of Cyprus posted after-tax €21 mln profits for the first quarter of 2022, compared to a net profit of €8 mln a year ago.
It announced a record €618 mln in new loans and further reduction of non-performing exposures (NPE), marking the third consecutive quarter of accelerating loan growth.
The bank balance sheet normalisation continued in Q1 with a further €100 mln of organic NPE reduction, reducing the NPE ratio to 6.5%, pro forma for NPE sales.
As a result, the bank remains on track to achieve the target NPE ratio of 5% by the end of 2022 and less than 3% by 2025. It also announced a 2% increase in its loan portfolio.
In a press conference, the Group’s Chief Executive Panicos Nicolaou said: “New lending reached higher levels than the equivalent period pre-pandemic, whilst maintaining strict lending criteria.”
As of 31 March 2022, the bank’s Total Capital ratio was 20.3%, and its CET1 ratio was 15.2%, on a transitional and pro forma basis.
Its liquidity position also remained strong, and it continued to operate with over €6 bln surplus liquidity and a liquidity coverage ratio (LCR) of 296%.
Deposits on the balance sheet increased by 1% in the quarter to €17.7 bln.
The bank announced it has a clear focus on creating shareholder value and providing the foundations for a return to dividend distributions.
“Our plan for the future is clear.
“We have a dynamic strategy in place, leveraging our strong customer base and customer trust, market leadership position, and developing digital knowledge and infrastructure,” said Nicolaou.
According to Nicolaou, the bank’s forecasts consider “worse macroeconomic forecasts, lower GDP growth, higher risk-to-forecast costs, reduced new loans and similar direct and indirect effects of the war in Ukraine”.
He also added that the expected rise in interest rates by the ECB “outweighs the negatives of the war”.
On the tendency of interest rate increases by the Central Banks, the Executive Director of the Financial Management Department of BoC, Eliza Livadiotou, agreed this “is very positive …mainly because the bank has large liquidity reserves which are deposited with the European Central Bank and today we pay 0.5%”.
“Any change in the ECB interest rates will immediately bring better income for the Bank of Cyprus.
“For the €9.3 bln currently deposited with the ECB and paying 0.5%, we will either not have this loss or start to have income as interest rates rise.”
She refuted that Cypriot banks are exposed to Russian capital and said the Bank of Cyprus’ income from commissions from the Russian market is only 3% of its total commissions.
The group generated a total income of €146 mln and a positive operating result of €50 mln.
The CEO said: “Despite inflationary pressures, we kept our total operating expenses broadly flat in the quarter at €86 mln, reflecting our ongoing efforts to contain costs”.
The quarterly cost of risk increased modestly to 44 bps in the quarter, reflecting the update in the macroeconomic outlook but remaining well within the group’s normalised target range.
“We delivered a resilient profit after tax and before non-recurring items of €27 mln, with a corresponding return on tangible equity of 6.7%.”
Nicolaou said the bank plans to reduce the number of branches to 60, from 80 today, while reducing its staff by 15%.
“When and how we will reduce it is something that has not been decided yet”.