* NPLs down 6%, launches property fund *
Bank of Cyprus Holdings announced EUR 553 mln in losses for the first none months of the year, a dramatic turnaround from the after-tax profit of 62 mln in the same three quarter period last year.
After-tax profit attributable to the owners for the third quarter was EUR 1 mln, compared to a loss after tax of EUR 556 mln in the second quarter.
Non-performing exposures (NPEs) were reduced by EUR 588 mln or 6% during the third quarter and by EUR 1.9 bln or 17% during the nine-month period to EUR 9,164 mln, accounting for 48% of gross loans, compared to 50% at June 30 and 55% at 31 December 2016. The provisioning coverage ratio of NPEs improved to 49% at 30 September, up from 48% at 30 June and 41% at 31 December 2016.
“Momentum in NPE reduction was maintained. This is the tenth consecutive quarter of material NPE reduction”, the bank’s CEO John Hourican said in a statement.
He added that coverage levels against non-performing exposures are now above the EU average and still increasing. “We expect the organic reduction of our NPE stock to continue its downward trajectory in the coming quarters”, he noted.
At the same time, the bank announced the launch of a Real Estate Fund to be listed on the Cyprus Stock Exchange.
“This EUR 190 mn fund is the first of its kind in
The fund is structured as an Alternative Investment Fund (AIF) and its strategy is to acquire a diversified portfolio of high-quality income yielding commercial real estate assets in
These properties are located throughout
The fund will be distributing, in the form of cash dividends, at least 80% of all distributable net proceeds on an annual basis. Upon CySEC approval, the bank shall proceed with the offering of all or part of its shares in the fund to qualifying local and international institutional and well-informed investors. The shares will be listed on the Non-Tradable Investment Schemes Market of the Cyprus Stock Exchange (CSE).
The bank said it “continues to explore other structured solutions to accelerate de-risking potentially in the near term, in one or more transactions.”
As regards the nine-month performance, new lending reached EUR 1.7 bln, exceeding lending in the entirety of 2016.
The Common Equity Tier 1 capital (CET1) ratio (transitional basis) improved to 12.4% at September 30, compared to 12.3% at June 30 and 14.5% at 31 December 2016. During 9M2017, the CET1 ratio was negatively affected by the additional provision charge in 2Q2017 and the deferred tax asset phasing-in, despite the reduction in risk- weighted assets (RWA), the bank announcement said.
Adjusting for deferred tax assets, the CET1 ratio on a fully-loaded basis totalled 11.9% at September 30, compared to 11.8% at June 30 and 13.9% at 31 December 2016. As at September 30, the Total Capital ratio stood at 13.8%, in excess of regulatory requirements.
Deposits increased by EUR 731 mln or 4% in the quarter, while the loan-to-deposit ratio was at 85%.
“The increase in our deposit base facilitates compliance with liquidity requirements. The re-shaping of deposit tenures to drive EU and local liquidity ratio compliance and the continued de-risking of higher margin delinquent exposures adds negative pressure on the Bank’s Net Interest Margin”, Hourican noted. He added that the profit-pressure created by this dynamic in the future should be more than offset by reduced provisioning and the positive contribution of new lending.
“In the near-term we expect to see continued headline margin pressure. However we are maintaining our 2018 EPS guidance of 40 cents and a return to profitability in 2018”, he added.
Meanwhile, the bank also announced that it is pursuing a sale of a package of loans amounting to EUR 450 mln as part of its efforts to reduce its non-performing loans.
