Bank of Cyprus Public Co. Ltd. reported a spectacular 88% year-on-year increase in net profit for 2005 to CYP 72 mln, beating market expectations which had earlier forecast profits ranging from CYP 68-70 mln.
BOC Chairman Vasilis Rologis said the reorganisation of the Group’s
activities in Cyprus, combined with the cost containment and income enhancement plans, the positive course of the Group’s insurance operations and the continuation of its dynamic expansion in Greece
contributed to the profitability improvement.
“As a result, we exceeded our targets,” said Rologis.
Net interest income reached CYP280 mln, recording an annual increase of 14%. The Group net interest margin (NIM) for 2005 was 2,60%, compared to 2,66% for the 2004.
The net interest margin in Cyprus was contained at 2,27% for 2005 compared to 2,30% for 2004. The net interest margin of the Group’s Greek operations for 2005 stood at 2,82%.
Insurance Business
Income from insurance business increased by 29% increase, reaching CYP23 mln, generating 8% of Group core profit for 2005. The profit before tax of the insurance operations recorded an increase of 47%, reaching CYP14 mln, generating 16% of Group profit before tax.
The profit before tax of the Group’s life insurance subsidiary, EuroLife, recorded an annual increase of 59%. This was the result of increased volume of business (increase in new business premiums of 14%), relatively lower claims and very good performance of its investment portfolio. EuroLife’s operations in Greece continue to expand at a fast pace and doubled their after tax profits during 2005.
The performance of General Insurance of Cyprus, the Group’s general insurance subsidiary, was also good. The company’s gross premiums recorded an annual increase of 15%.
Expenses
Staff costs amounted to CYP151 mln, recoding an annual increase of 9%, mainly due to the 9% increase in staff numbers in Greece (from 2.222 persons at the end of 2004 to 2.419 at the end of 2005) to support and operate the ten new branches which commenced operations in 2005 and the recent opening of four new branches in 2006.
In Cyprus, there was a reduction of 79 persons in the number of staff employed by the Group since the last quarter of 2004. Staff costs for the Group’s Cyprus operations increased by 8%. Excluding the cost of the Early Retirement Plan amounting to CYP 3,7 mln, the increase in staff costs is adjusted to 6%.
The 4% reduction in the Group’s other (non-staff) operating expenses to CYP86 mln is noteworthy. The reduction was mainly the result of the significant reduction (12%) recorded in the other operating expenses of the Group in Cyprus.
As a result of the cost containment programme, as well as the increased level of income, the cost to income ratio of the Group’s operations in Cyprus improved to 58,0% for 2005, compared to 67,4% for 2004. The cost to income ratio of the Group’s Greek operations remains at the very satisfactory level of 52,4%, despite being burdened by increased expenses for the opening and preparation of the new branches.
Provisions for Doubtful Debts
The provision charge for 2005 was CYP91 mln. The provision charge represents 1,2% of total Group loans, compared to 1,3% for 2004. This percentage is expected to fall from 1,2% for 2005 to under 1% for 2006, targeting a further reduction to 0,8% for 2008.
Group Loans
The Group’s loans reached CYP7,40 bn at 31 December 2005, recording an increase of 15%. The Group has significantly strengthened its presence in the consumer lending sector in Cyprus. As such, the market share of the Bank of Cyprus in total advances of the banking system, including credit cooperatives, increased from 24,3% at the end of 2004 to 25,6% in December 2005. The market share among the commercial banks increased from 34,4% to 36,3%.
In Cyprus, the Group’s total loans at the end of December 2005 amounted to CYP3,55 bn, recording an annual increase of 10%. During 2005, the Group proceeded with loan write-offs totaling CYP180 mln, the majority of which relates to the Group’s Cyprus operations. Adjusted for the write-offs, the increase in the Group’s loans in Cyprus would have reached 16%.
In Greece, the annual rate of increase in the Group’s loans reached 21% and continues to be higher than that of the total market (17%). The Group’s loan portfolio in Greece increased to CYP3,14 bn at the end of December 2005.
As of end-November 2005, the Group’s market share in loans in Greece increased to 3,86%, up from 3,67% a year ago.
Non-Performing Loans
The quality of the Group’s loan portfolio improved further, with a reduction in the ratio of non-performing loans to total loans to 8,1% at 31 December 2005, compared to 10,8% for December 2004 and 8,7% for September 2005. The reduction in non-performing loans was the result of loan write-offs (net of suspended interest income) totaling CYP138 mln and collections of accrued and overdue amounts.
In Greece, the Group’s non-performing loans at 31 December 2005 accounted for 4,4% of total loans. The ratio of coverage of non-performing loans by provisions was maintained at 50% at the end of
2005, despite the write-offs of fully provided loans during the year. The remaining balance of non-performing loans is covered by tangible collateral.
Deposits
The Group’s total deposits at 31 December 2005 reached CYP10,72 bn, recording a 24% annual increase. The attraction of new deposits by the Group in Cyprus, especially deposits in foreign currency, was significant. The Bank’s market share in total banking system deposits in Cyprus, including credit cooperatives, increased from 29,4% In December 2004 to 31,9% in December 2005. The market share among the commercial banks increased from 40,0% to 42,2%. The Group’s total deposits in Cyprus at 31 December 2005 recorded an annual increase of 30% reaching CYP6,19 bn.
In Greece, the rate of increase in Group deposits reached 17% and continues to be higher than that of the market (15%). At 31 December 2005, Group total deposits in Greece reached CYP3,86 bn. At end-November 2005, the Group’s market share in deposits in Greece increased to 3,81%, up from 3,64% a year ago.
