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* Income up 25%, deposits stable, NPLs rise to 16% *
The Cyprus Popular Bank, the island’s second-largest lender facing a state bailout unless it finds investors by the end of June, posted a 23% drop in its first quarter net profits to 54.8 mln euros, down from 71 mln in the same quarter last year.
Popular, which has agreed to five state-appointed board members in exchange for the government underwriting a 1.8 bln euro rights issue and capital increase, said net profits included a deferred tax asset of 84.7 mln euros relating to its massive write-down of Greek sovereign bonds which pushed it to record losses in 2011.
The worsening situation in the Greek market took its toll on the bank's loan portfolio as well, with advances and deposits down 5% and 16%, respectively. Greek operations account for 50% of Group activities.
If Popular does not find investors by the end of June, the state will be forced to inject up to 1.8 bln euros, or 10% of Cypriot GDP, into the bank to keep it afloat.
It is already underwriting the bank's rights issue in an attempt to lure potential buyers.
A lack of investors could force Cyprus, the third-smallest member of the euro zone, to a financial stability mechanism to find the cash and signal growing contagion from the debt crisis rippling through Europe.
The bank reported losses of 2.8 bln euros last year from a writedown in the value of its Greek sovereign bonds, depleting its regulatory capital.
The European Banking Authority expects the bank to replenish its capital by 1.97 bln euros to reach a core tier 1 capital level — a signal of financial strength – of 9% by June 30.
The bank said net interest income (NII) fell by 2% on a yearly basis, reflecting a deleveraging of its loan portfolio and lower deposit spreads. Fee and commission income also fell on subdued activity in capital markets.
EXPENSES DOWN
The bank booked a profit of 2.9 mln euros from the sale of its Estonian subsidiary Marfin Pank Eesti AS, following last year’s sale of Laiki Bank (Australia) Ltd for 53.4 mln.
In the short-term, the Group seems to be on a path of recovery as it reported total operating income of 247 mln euros, up by 25% compared to the last quarter of 2011, but still down 22% from 317 mln in the first quarter last year.
Total operating expenses of 148 mln euros were down 16% from the last quarter of 2011 and 6% on a yearly basis.
Total Group provisions were up nearly 51% to 119 mln euros compared to 78 mln a year ago.
Total net loans stood at 24.2 bln, 2% lower from the previous quarter ended 31 December 2011, but still 5% below the Q1 loan portfolio of 25.6 bln euros.
The Cypriot net loan book stood at 10.6 bln euros in the first quarter 2012, 3% higher on a yearly basis mainly driven by a 5% rise in business loans. On a quarterly basis the loan book remained unchanged.
The Greek net loan book decreased by 13% on a yearly basis and 3% on a quarterly basis and stood at 11.5 bln.
As at the end of March 2012, the Group said that its net loan portfolio consisted of 70% business loans and 30% loans to households. Mortgages accounted for 18% of the loan book and consumer loans for 12%.
Total deposits stabilised at 20 bln from the previous quarter “despite the adverse macroeconomic environment that prevailed in general and especially in Greece”, but were still down 16.5% from the first quarter of 2011 mainly due to the reduction in deposits in Greece.
NPL RATIO AT 16%
The NPL ratio increased to 16% compared with 13.9% on 31 December 2011. Cypriot non-performing loans increased by 141 mln in the first quarter 2012, driving the NPL ratio to 9.4%, 130 basis points higher compared to fourth quarter 2011.
In Greece due to the ongoing worsening crisis, the NPL ratio rose to 22.8% in the first quarter, 330 basis points higher versus fourth quarter 2011.
With regards to Group international operations, non-performing loans fell by 23 mln euros in the first quarter 2012, resulting in a decrease of the NPL ratio by 50 basis points on a quarterly basis and by 140 basis points on a yearly basis to 10.3%.
