Bank of Cyprus profits up, eyes on dividend

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Bank of Cyprus, the target of a failed takeover bid by a US-based investment fund, said Wednesday it improved first-half profits, further reduced its payroll and exposure to non-performing loans, and is on track to pay a dividend to shareholders.

The January-June after-tax profit jumped to €50.75 mln, from €1.15 mln a year ago, with profits attributable to shareholders estimated at 11.2c a share.

More than half of the profits were generated by non-banking operations, such as insurance subsidiaries and a credit card clearing house.

The news helped bolster the price to 127c on the Cyprus Stock Exchange, up 2.5c from the previous day and edging closer to the 151c final offer from Texas-based Lone Star.

The BoC board rejected three successive bids from Lone Star, arguing the proposal grossly undervalued the bank’s potential.

Minority shareholders are angry at the bank’s board of directors and institutional investors for not accepting the Lone Star deal or pushing the offer up to 200c a share that would allow them to offload the stocks they received in exchange for the deposits they lost a decade ago.

The bid also prompted the government to fast-track a bill through parliament that could block the takeover of a systemic bank, as it would greatly impact the local economy.

The bank claims a 41% market share in loans at €9.72 bln and is considered the leader, and a 37% share in deposits, currently at €18.45 bln.

With the bank’s profitability growth (return on tangible equity, ROTE) at 7.3% for the first half, Group CEO Panicos Nicolaou said he was confident “in accelerating the delivery of our target of double-digit ROTE earlier, in 2023.”

“This lays the foundations for a meaningful return to dividend distributions which we expect from 2023 onwards, subject to regulatory approvals and market conditions.”

The bank had not paid a dividend since 2011, when it underwent two rounds of bailouts by own funds from depositors.

By July this year, the bank reduced its staff numbers with 550 accepting a voluntary exit plan, including a generous tax-free bonus of €200,000 per person, thus reducing the Group’s workforce by 16% to about 2,870.

Briefing journalists on the half-year results, Nicolaou said this plan was no longer on the table for future staff cutbacks. The branch network was also reduced by 25% this year.

Non-performing exposures were lowered from 6.5% of the Group’s loan book at the end of the first quarter to 5.7% at the end of the second.

“We remain on track to achieve our target NPE ratio of c.5% by the end of this year and less than 3% by the end of 2025,” Nicolaou said.

Wholly owned subsidiaries Eurolife and General Insurance, as well as a controlling stake in card payments company JCC, generated €26.4 mln, or 52% of the Group’s after-tax profits.