Bank of Cyprus has cut the final dividend proposed for 2008 to 12 euro cent per share in an effort to save cash and allow it to increase its capital adequacy ratio much faster, a policy decision which is in line with a similar approach adopted by most global banks.
The total of the proposed dividend and the interim dividend of 15 cent per share which was paid in December 2008 amounts to 27 cents per share, down from 43.80 cent paid for 2007. According to Financial Mirror calculations, the dividend yield on the total 27 cent dividend amounts to 14.6% based on current prices, while the yield on the 12 cent final dividend amounts to 6.5%.
The Board of Directors decided that the discount offered under the Dividend Reinvestment Plan is 10%.
Profits up 4%
Releasing the final accounts for 2008, Bank of Cyprus reported total net profit of EUR 502 mln, up 4% year-on-year compared to EUR 485 mln reported in 2007, but slightly down from the EUR 506 mln reported at the preliminary stage. Earnings per share amounted to 85.5 cent.
Return on equity amounted to 25.1%, while the cost to income ratio remained at 44.9% despite the significant investment for the further expansion of the network in Greece, and also the cost of the development of operations in Russia, Romania and Ukraine.
Specifically, the Group has almost doubled its branch network, from 301 branches in 2007 to 574 at the end of 2008. The high quality of the loan portfolio has also been maintained with the ratio of non-performing loans to total loans standing at 3.8% (2007: 3.8%) at 31 December 2008 despite the negative economic environment.
It is noted that on 31 October 2008 Bank of Cyprus completed the acquisition of an 80% interest in Uniastrum Bank in Russia. Uniastrum Bank is accounted for as a subsidiary from the date of acquisition.
The Group maintained its strong liquidity with a loan to deposit ratio of 90%.
The net profit figure includes the positive results of actions taken by the Group for hedging foreign exchange risk. The foreign exchange income for 2008 reached EUR159mln from EUR47mln in 2007 mainly as result of gains from transactions for hedging foreign exchange risk. There were also losses of EUR36 mln from the sale and change in the fair value of financial instruments compared to EUR24 mln gains for 2007 as a result of the significant drop in the capital markets.
The contribution to profitability of the Group’s operations in its two main geographic markets, Cyprus and Greece, has been significant. Profit after tax in Cyprus reached EUR401 mln, including the significant gains from transactions for hedging foreign exchange risk. In Greece, profit after tax for 2008 reached EUR74 mln in parallel with the very satisfactory growth rates of loans and deposits.
The Group results in the new markets are remarkable, with positive results in all the countries of operation. Profit after tax for 2008 reached EUR3 mln each for Russia (excluding Uniastrum) and Romania and EUR1 mln for Ukraine. The net profit of Uniastrum Bank for 2008 reached EUR16 mln and its contribution to the total profits of the Group for 2008 amounted to EUR5 mln, as only the last two months of its 2008 profits were consolidated.
Loans and deposits
The Group’s loans reached EUR 25,14 bln at 31 December 2008, recording an annual increase of 29%. The Group’s total loans in Cyprus at 31 December 2008 amounted to EUR 11.97 bln, recording an annual increase of 25% and represented 48% of the Group’s total loan portfolio.
The Group has increased its market share in total loans of commercial banks and credit cooperatives in Cyprus, to 29.2% in November 2008 (latest available data), compared to 28.6% in December 2007. The increase of our leading market share is the result of the recognition of Bank of Cyprus’ leading brand name, its extensive network as well as the effective marketing campaigns focusing on the SME and mortgage sectors.
The Group’s total deposits noted an annual increase of 11% reaching EUR 27,94 bln at 31 December 2008.
In Cyprus, the annual rate of increase in Group deposits was 1% with total deposits reaching EUR 15.03 bln at 31 December 2008. The Group has the leading market share (30,5%) of total deposits of commercial banks and credit cooperatives as well as foreign currency deposits (43,9%).
At 31 December 2008, the Group shareholders’ funds amounted to EUR 2,04 bln. The Group capital adequacy ratio as per Basel II requirements stood at 11.2% and the tier 1 ratio at 7.2%. The core tier 1 ratio stood at 6.5%.
