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— Hit by provisions; NII up 25% at €768 mln —
Bank of Cyprus net profits for the first nine months of the year fell 6% to 248 mln euros after hiking its provisioning costs in debt-ridden Greece and in Cyprus, while Group net interest income rose to 768 mln euros amid adverse economic conditions, up 25% on the first nine months of 2009. The bank reiterated its forecast of a profit of 300 – 400 mln euros in the full year.
While profits after tax climbed 58% in Greece, profit fell 18% in Cyprus which has just shaken off the first recession in three decades.
The bank is expanding its presence in south-eastern Europe and also Russia where it launched in 2008. It posted a 300% increase in net profit in Russia for the first nine months of the year compared to a loss last year.
Russian oligarch Dmitriy Rybolovlev owns just under 10% of the bank.
Reflecting deteriorating economic conditions, the bank said provisioning went up by 57% in Cyprus and by 84% in Greece.
The 3Q10 results, released just after the stock markets closed in Cyprus and Greece, improved on analyst estimates. While 3Q10 net profitability was expected to reach EUR 83 mln, it actually posted a quarterly increase of 5% to EUR 85 mln on the back of higher revenues and improving spreads, despite the higher costs and provisions.
Prior to the announcement, Marfin CLR had reiterated its positive stance on the stock, highlighting the bank’s recently enhanced capital position and relatively lower exposure in the Greek market.
“As far as 3Q10 results are concerned, focus should once again remain on new NPL formations, the Russian and Greek operations and of course liquidity levels,” Marfin CLR said, adding that following the interim dividend distribution and the increase in the number of the bank’s shares, it adjusted the target price to EUR 4.10/share from EUR 4.70/share previously.
In its own summary, Bank of Cyprus said that the results “highlight that the Group is in a strong position to face the continuing challenges in its main markets having achieved selected business growth, increasing recurring profitability and strengthening further its balance sheet, in line with the 2010 business and financial targets.”
The profit before provisions for the nine months of 2010 reached EUR 512 mln and recorded a significant increase of 13% compared to the same period the year before. Profit after tax reached EUR 248 mln, with the Group being profitable in all the markets in which it operates.
In its statement, the bank explained that “the Group enjoys strong capital adequacy (Tier 1 ratio 9.7%) and healthy liquidity (loans to deposits ratio 87%). Capital adequacy has been further strengthened with the successful completion of the capital increase, with the pro-forma Tier 1 ratio at September 30 reaching 11.1%. Though deteriorating, loan quality remains satisfactory (non-performing loans ratio of 6.7%) given the challenging macro environment.”
It went on to add that “amid the negative economic environment, the Group continues its selective business expansion, by increasing its footings in the main markets in which it operates, strengthening its balance sheet and achieving increased recurring profitability. At the same time, the successful share capital increase offers the Group further strategic flexibility to capitalise on its liquidity by seizing profitable growth opportunities across its various markets.”
Group chairman Theodoros Aristodemou thanked shareholders for supporting the recent capital increase by exercising the 604 mln rights that helped raise EUR 330 mln in fresh funds.
“The satisfactory profit levels with a positive contribution to profits from all the markets where the Group has a presence, in combination with the high levels of liquidity, enhanced capital adequacy and a satisfactory loan portfolio prove the sound reasoning behind our strategy and effective business model,” he said, adding that the favourable results so far also justify the interim dividend expected soon and that “we are on the right path to achieve our targets for the whole of 2010.”
Group CEO Andreas Eliades added that the results also allow the island’s premier financial institution to “proceed steadily with its targets and plan its future development, protected from conditions of uncertainty that continue to exist in the greater economic environment.”
