Bank of Cyprus eyes dividend payments

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Bank of Cyprus aims to return to substantial dividend payouts this year as it posted after-tax profits of €71.1 mln for 2022 from €29.7 mln the year before.

Announcing its latest financial results, the bank said it had set a goal of creating shareholder value and returning to substantial dividend distributions from 2023 onwards, subject to regulatory approval and market conditions.

The island’s largest lender had not paid a dividend since 2011 when it underwent two rounds of bailouts from depositors.

It significantly increased the target for Return on Tangible Equity ( ROTE ) for 2023, with the updated ROTE target being >13% compared to the November target of> 10%.

Profit after tax for the fourth quarter of 2022 was €80 mln, from a loss of €59 mln in the third quarter, which included non-recurring costs of €101 mln from the Voluntary Staff exit plan.

The bank’s total provisions fell to €91 million compared to €100 million.

“We are pleased to announce a positive set of financial results for 2022, exceeding our targets and confirming the sustainability of our business model with well-diversified revenues and disciplined cost containment despite inflationary pressures,” CEO Panicos Nicolaou said.

“Our profit after tax before non-recurring items of €188 mln has more than doubled on the prior year, corresponding to a return on tangible equity of 11.3%,” said the bank.

Strong economy

He noted that despite challenges, 2022 saw a strong recovery in the Cypriot economy.

“Against the backdrop of the challenging global and European economic environment, the Cypriot economy is proving resilient and is delivering strong growth notwithstanding headwinds.

“In the fourth quarter, GDP increased by 4.4% in Cyprus and is forecast to grow by c.3.0% in 2023, according to the Ministry of Finance, outperforming the Eurozone average”.

Nicolaou said that BoC, the largest financial group in Cyprus, continued to support the economy by extending a record €2.1 bln of new loans in 2022, an increase of 17% on the prior year, whilst maintaining strict lending criteria.

“Our net performing loan book of €9.6 bln grew by 3% in 2022, demonstrating strong fundamentals to withstand uncertainties in the macroeconomic outlook.”

He said that during 2022 the bank generated total income of €699 mln and a positive operating result of €318 mln, up 62% on 2021.

Net interest income amounted to €370 mln, up 25% on the prior year, of which €136 mln was generated in Q4.

“Our non-interest income was marked by strong performance in net fee and commission income as well as exceptionally strong insurance income in 2022 and contributed 47% to total income”.

Nicolaou attributed the €71 mln profit to “the large restructuring charge we took earlier in the year for our Voluntary Staff Exit Plan”.

The latest exit scheme in the summer of 2022 resulted in the desired voluntary departure of some 550 employees but cost the bank €104 mln.

Furthermore, as Nicolaou noted, the bank brought down its NPE exposure with the completion of Project Helix 3, with some €550 mln being scrapped from the balance sheet.

“Together with further organic NPE reduction of €360 mln, our NPE ratio stood at 4% as of 31 December 2022, achieving our 2022 NPE ratio target of sub-5%”.

The bank’s Total Capital ratio and CET1 ratio were 20.6% and 15.4%, respectively, on a transitional basis.

BoC’s liquidity remains strong, as cash balances with ECB (excluding TLTRO III of €2.0 bln) amounted to €7.6 bln, leaving the bank well positioned to benefit from further interest rate increases.

Deposits on its balance sheet remained broadly flat during the quarter but increased by 8% on 2021 to €19.0 bln.