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Bank of Cyprus continued profits boost stock price

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Bank of Cyprus saw its stock price trade at a recent high of €3.56 on the Cyprus Stock Exchange on Tuesday, up 3c from Monday’s close, when the bank announced €487 mln in after-tax profits for 2023, improving on the first-half profits of €220 mln.

BOCH also closed at an all-time high of GBP 3.03 on the London Stock Exchange, recovering to above its January 2017 listing at 2.85 and remaining above GBP 3.00 for most of January and February this year.

Monday and Tuesday also saw healthy trading volumes of 200,000 shares per day on the CSE, a level maintained throughout the past six weeks, with 66,000 shares trading hands on the LSE on Monday, above last week’s daily average of about 20,000 shares.

Pushing the bank’s stock price has been the steady return to profitability and a dividend paying policy last year, having offloaded several non-performing loan portfolios.

For 2022, Bank of Cyprus announced €56.5 mln in profits, with earnings per share at 12.7c, rising to €1.09 for 2023.

“We recognise the importance of shareholder returns and reiterate our dividend policy to build prudently and progressively towards a 30% to 50% payout ratio,” CEO Panicos Nicolaou said, with the 2022 dividend payout at 14%.

He said that 2023 was a “milestone year” for the Group, becoming a strong and well-capitalised organisation.

“During 2023 we achieved strong financial and operational performance. We generated profit after tax of €487 mln, benefiting from sharply rising interest rates and ample liquidity, whilst maintaining cost control despite inflationary pressures and robust asset quality.

“Our business model is diversified as demonstrated by the significant contribution of net interest income (NII) to the Group’s profitability, covering almost 90% of our total operating expenses.

Nicolaou said that overall, the bank delivered a return on tangible equity (ROTE) of 24.8%, significantly surpassing the 2023 targets.

“This performance facilitated rapid capital build-up, unlocking c.480 bps organic capital generation and driving our CET1 (common equity tier 1) ratio to 18.7% at year end, pre- distributions. Accruing for a dividend at the top end of our dividend policy, our regulatory CET1 ratio stands at 16.5%. Our tangible book value per share improved by 24% year on year to €4.93, reflecting accelerating shareholder value creation.

Position of strength

With the Cypriot economy remaining strong with GDP growing by 2.3% in 4Q2023, Nicolaou said the bank is entering 2024, “from a position of strength. We will continue to execute on those levers under our control and we are confident that we can deliver a ROTE of over 17% on a 15% CET1 ratio for 2024 and mid-teens on a more normalised interest rate environment (2.0-2.5%).”

New lending in 2023 reached €2 bln, despite the rising interest rate environment, with the gross performing loan book at €9.8 bln, broadly flat year on year as repayments offset new lending.

In new lending, shipping and international business was up, as well as loans to SMEs and other retail, and down for corporates and retail housing.

The ratio of non-performing exposures (NPE) was broadly flat from prior quarter at 3.6% (1.0% on net basis) down 40 bps year on the year and in line with the bank’s guidance for 2023.

NII was up 114% year on year at €792 mln, which peaked at €220 mln in 4Q2023 (up 3% quarter on quarter). Non-NII was marginally up 3% year on year at €300 mln, covering 88% of total operating expenses, which were up 5% year on year from 2022, while the cost to income ratio was reduced to 31% from 49% in 2022.

Other significant contributors to the bank’s profitability were the insurance division, with life insurer Eurolife contributing €31.7 mln, non-life General Insurance Co. adding €22.4 mln, while the payment clearing house JCC, with the Bank of Cyprus its largest shareholder at 75%, contributing a further €11.9 mln.

The retail funded deposit base was up 2% year on year and broadly flat at €19.3 bln as at December 31, 2023, compared to the prior quarter.

BOCH also has a highly liquid balance sheet with €9.6 bln placed at the ECB.