BoC posts €95 mln Q1 net profit

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Largest lender Bank of Cyprus posted after-tax profits of €95 mln for the first quarter of 2023 from €17 mln in the same period last year.

The Bank announced Tuesday that net income from interest reached €162 mln showing an increase of 127% compared to last year.

In comparison, return on tangible equity (ROTE) stood at 21.3% from 4% for Q1 2022, “with rates higher than expected and anticipated increases in deposit costs not yet developing.”

The NPE ratio was 3.8% (1.1% net), down by 7.6 p.p annually, while the NPE coverage was 73%.

Regarding robust capital and liquidity, the CET1 ratio was 15.2%, and the Total Capital ratio was 20.3%.

According to the bank, new lending was seasonally strong and reached €624 mln, up 41% every quarter and broadly flat on an annual basis, while the gross performing loan book of €9.9 bln was up 1% on a quarterly and yearly basis.

Group Chief Executive Panicos Nicolaou said: “This year, we have achieved a significant milestone in delivering our longstanding intention to resume dividend payments after 12 years.

“This represents an important step in the Group’s journey of delivering sustainable profitability and shareholder returns”.

“We have proposed a dividend of €0.05 per ordinary share, in respect of 2022 earnings, equivalent to a 14% payout ratio on adjusted recurring profitability or 31% based on profit after tax as reported in the 2022 annual report”.

He said dividends are expected to build prudently and progressively towards a payout ratio of 30-50%, adding that the dividend decision was supported by the strong start to the year with the performance in the quarter ahead of FY2023 targets.

“Overall, we generated profit after tax of €95 mln, corresponding to a ROTE of 21.3%.

“Total income amounted to €234 mln, of which €162 mln relates to net interest income, more than double last year’s level”.

He said that the growth in net interest income was underpinned by interest rate rises and a continued modest deposit pass-through level, while the noninterest income of €72 mln (increased by 8%) remained a significant contributor to their profitability and diversified business model.

Growth

Despite elevated inflation, “our cost base was 3% lower on the prior period, reflecting the benefits from recent efficiency actions.

“As a result, the cost-to-income ratio (excluding levies and contributions) stood at 34%, compared to 60% in the prior year.

“Against the backdrop of the global and European economic environment, the Cypriot economy continues to demonstrate its strength, with GDP forecast to grow by c.2.8% in 2023, expected to outperform the Eurozone average.

Nicolaou said that as the largest financial group in Cyprus, “we continued to support the economy by extending a seasonally strong €0.6 bln of new loans in 1Q2023, an increase of 41% on the prior quarter, whilst maintaining strict lending criteria”.

“Our performing loan book grew by 1% both qoq and yoy to €9.9 bln.

“Our capital position remains robust and comfortably in excess of our regulatory requirements.

“We ended the quarter with a CET1 ratio of 15.2% and a Total Capital ratio of 20.3%, generating c.90 bps of organic capital.

“Our liquidity position remains robust, stemming from our highly liquid balance sheet and growing retail-funded deposit base”.

Nicolaou said the restructuring effort of recent years is over, and a new chapter started “to provide sustainable returns to shareholders while continuing to serve our customers, support the Cypriot economy and contribute to the community.

“Our positive set of financial results this quarter provides the foundations to help us deliver against our targets.”