* BOCY impact on equity €20 mln; MPB €56 mln; HB €23 mln *
The island’s two main banks, Bank of Cyprus and Marfin Popular, have taken a hit in their first half results due to provisions for a Greek sovereign debt swap and a local bank tax aimed to boost the deficit-laden government’s coffers.
Excluding the hit from Greek bonds, both banks said in their announcements on Tuesday that they would have reported net profits of 155 mln euros and 77 mln euros, respectively.
The third largest bank, Hellenic, announced losses on Wednesday of 36 mln euros.
BANK OF CYPRUS
Bank of Cyprus swung to a first-half net loss of 112 mln euros. However, excluding the hit from Greek bonds, it stood by full-year profitability targets with net first-half earnings falling 4% to 155 mln euros.
It had previously said earnings would be in line with 2010, when it turned a net profit of 306 mln euros, with profit before provisions up 15% year-n-year at 377 mln euros.
"Profitability is expected to exceed the impact from the exchange plan of Greek Government bonds, based on its current terms, resulting in the group reporting significant net profitability for the full year 2011," the bank said.
Bank of Cyprus held Greek bonds with a nominal value of 1.076 bln euros eligible for the swap plan at the end of June, which the group had written down by 281 mln.
It said the net effect would be a 20 mln euro hit to its equity, after allowing for a gain on completion of the bond swap and previous moves to account for the expected writedown.
The bank said it showed a healthy balance sheet and capital base combined with strong liquidity and continued improving underlying performance.
Net interest income (NII) rose 11% to 553 mln euros, led by a strong performance at its Russian subsidiary. Net interest income rose 14% y/y in Cyprus to 282 mln euros, +3% y/y to 158 mln in Greece and +21% y/y to 65 mln in Russia.
In Cyprus, the Group enjoyed a strong deposit franchise benefiting from a flight to quality and maintained a leading deposit market share of 31,5% with a 3.4 percentage growth of market share since December 2009. Loans and deposits rose 7% y/y.
In Greece, its loans to deposits ratio stood at 111% and enjoyed a selective increase in corporate loans (+23% y/y) with a reduction in SMEs and retail, while its loans market share stood at 4.2%.
In Russia, the Group business expansion continued in 1H11 with a strong increase in deposits (+21% y/y, +28% y/y in local currency) and increase in loans (+6% y/y, +12% y/y in local currency).
MARFIN POPULAR BANK
Marfin Popular Bank made a net loss of 196.9 mln euros in the first half after the impact of a Greek government bond swap.
Excluding its participation in the bond swap, Marfin said it would have posted a net profit of 77.1 mln euros in the first six months of the year, up from 52.6 mln in the first half of 2010.
Cypriot banks are significant holders of Greek debt. It is a factor instrumental in Cyprus's sovereign ratings being pummelled in the past year by agencies worried a fiscally weak government would be unable to step in and assist them if required.
Marfin said bonds with a nominal value of 2.6 bln euros would participate in the swap. It said the the impact of the swap of Greek government bonds plus writedowns on other equity and bond holdings would be 274 mln euros.
Operating revenues rose 6% y/y to 262.8 mln euros, underpinned by a sustained improvement of the Group’s net interest income (NII), the bank said, adding that the revenue quality improvement has been reflected in higher core banking revenues, which rose 5% y/y.
NII rose to an all time high of 195.3 mln euros, a 9% increase y/y driven by expanding asset and deposit spreads across all key geographic areas. Operating expenses were further contained, the bank said, declining by 2% y/y driven by an ongoing group-wide cost reduction programme aiming to maximise efficiencies
The Group’s 2Q11 net profit was 3.6 mln euros. After impairment losses, the
Group reported a quarterly net loss of 270.4 mln euros. The impact from the Group’s impairment losses is 274 mln, of which the impact on regulatory capital is estimated at 56.3 mln.
The Group’s said its international operations maintained their positive trajectory both in terms of NII as well as net profits.
“Despite an adverse business environment, MPB delivered another set of improving underlying performance underpinned by rising revenues, declining operating expenses and stable asset quality trends,” said CEO Efthimios Bouloutas.
“The 1% and 6% revenue increase on a sequential and yearly basis, respectively, has been driven by expanding net interest income of 8% for the quarter and 9% on an annual basis, which in turn has been a function of improving margins across the Group’s key geographic and business areas. That combined with a 1% reduction on operating expenses for the quarter and 2% y/y has resulted to a 21% y/y increase on pre provision profit. The quarterly NPL formation remained broadly stable at 113 mln euros and close to the average of the last three quarters, as the Group continues to benefit from a favorable asset mix effect related to its Cypriot core and international business. Post impact of impairment loss the Group maintains a strong regulatory capital position corresponding to a 13.0% total capital ratio, one of the highest among its peers. The Group’s strong capital and liquidity position combined with its improving underlying operating profitability should enable it to attain its medium term strategic objectives, thus delivering high quality services to its expanding customer base and sustainable value creation for its shareholders.”
HELLENIC BANK
Hellenic Bank posted a 35.9 mln euro first-half net loss after taking provisions on a Greek sovereign debt swap, it said on Wednesday.
Its pretax loss was 29.17 mln euros. Excluding the Greek impairment, the group said its net income rose 13% in the first half of the year.
Hellenic said it had an estimated impairment of 23.1 mln euros from its participation in the Greek debt swap programme. It holds Greek sovereign bonds with a nominal value of 110 mln euros, the smallest and the least exposed among its Cypriot peers.
