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HB interest income doubles, profits soar

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Hellenic Bank, the island’s second biggest lender aiming to claim the throne after its takeover by Eurobank Cyprus, saw its net interest income nearly double last year, with profits surging 1,500% from €21.8 mln to €365 mln.

Having posted a return to profits in 2022, with €24.2 mln, the momentum continued through 2023 recording profits of €69.7 mln in the first quarter, €160 mln for the first half and €240.7 mln for the nine-month period to end-September.

Interim CEO, Antonis Rouvas, said the bank delivered an “enviable set of financial results with a profit for the year of €365.4 mln, mainly due to higher interest income arising primarily from central bank placements and debt securities.”

The bank enjoyed ample liquidity, with a liquidity coverage ratio (LCR) of 542% and with €5.8 bln placed at the ECB, benefiting the bank because of higher interest rates.

Also, meeting the minimum requirement for own funds and eligible liabilities (MREL), Tier 2 Subordinated Notes of €200 mln were issued at 10.25% in March 2023.

Contributing to the healthy profits was a lower total expense following the staff voluntary early exit scheme (VEES) that concluded in December 2022, with the cost to income ratio reduced from 85% in 2022 to 39% last year.

The bank’s earnings per share (EPS) soared from 5.3c in 2022 to 88.5c.

“In 2023, Hellenic Bank proved its resilience, delivering solid results despite challenges and uncertainty rising mainly from the geopolitical and economic environment. This confirms the progress made on several fronts, inclusive of our transformation towards a client-centric and technology-driven bank.”

Looking back, Rouvas said that the resilience of the bank’s business model was also acknowledged by international rating agencies, with both Moody’s and Fitch upgrading the long-term deposit ratings to Baa3 and BBB-, respectively, placing it at investment grade for the first time since the 2013 financial crisis.

In December, Capital Intelligence raised the bank’s rating by one notch and improved its outlook by one grade to ‘positive’.

Vote of confidence

“Moreover, the decision of one of the largest financial organisations in Greece to invest in Hellenic Bank, constitutes a vote of confidence in our business model and franchise and as a result in our country’s economy,” he said.

Eurobank has agreed to acquire additional holdings of 26.1% which, subject to regulatory approvals, will increase its holding to 55.3% and, as per the Cyprus Takeover Bids Law, Eurobank will then have to immediately proceed to a mandatory tender offer for the remaining shares.

New lending during 2023 reached €1.204 bln, up 2% year on year, marking another record year for Hellenic Bank.

Financing sectors such as health, education, energy, ICT, shipping, hospitality and transportation remained a high priority, contributing to the competitiveness and productivity of the economy.

The bank’s net interest income reached €536 mln, up 78% from 2022, while non-interest income for 2023 amounted to €128 mln, up 26% year on year.

With a common equity tier 1 (CET1) capital ratio of 22.8% and a pro forma total capital ratio of 28.4%, significantly above minimum regulatory requirements, and ample liquidity (liquidity coverage ratio of 542%), “we are well positioned and fully committed to continue supporting our retail and business customers in the future,” Rouvas said.

The net loans to deposits ratio was 39.3%, compared to 37.9% in 2022, enabling further business expansion.

“At the same time, we remain watchful of potential risks that could adversely affect the bank’s performance, due to the challenging economic and operational environment and elevated geopolitical risks.”

Retail focused

The bank’s strategy remained retail focused, with a solid customer base and major market share in households (37% in deposits and 33% in loans).

The ratio of non-performing exposures (NPE) was reduced to 2.5%, with the NPE provision coverage at 41% and Net NPEs collateral coverage at 139%. Nearly the entirety or 99.7% of new lending exposures after 2018 are considered as performing.

The Hellenic CEO said Project Starlight was completed “as planned”.

“The transaction has significantly de-risked the Bank’s balance sheet by around €700 mln, with the NPE ratio, excluding the NPEs covered by the Asset Protection Scheme, reduced to a low 2.5% in December 2023.

“Further reduction of our NPE’s ratio remains a top priority for us. Although non-performing loans were mostly shifted outside the banking sector, the level of problem loans in Cyprus remains one of the highest in Europe, limiting the sovereign credit ratings of the country.

“We welcome the ‘Mortgage to Rent’ scheme which is a favourable arrangement safeguarding housing for vulnerable households and we reiterate our commitment to supporting our vulnerable customers.”

“In 2023, our transformation journey, to address structural challenges and unleash hidden potential remained on track. Decisive steps were taken towards digitalisation, further enhancing our digital channels offering a lending product online, as well as streamlining the network of branches, processes, and cost management.

“Reaffirming our commitment that corporate responsibility, sustainability, and green growth are fundamental pillars of the overall operation of Hellenic Bank, the revised ESG Strategy became an integral part of the bank’s strategic plan, incorporating specific objectives at all levels of our operations. Our goal is to further enhance the profile of our loan book through healthy growth with a strong focus on environmental, social and governance (ESG).