BOC on the offensive with new takeovers

Forecast of EUR 600 mln profits by 2009

 

After weeks of takeover rumours and bids in the banking sector, the Bank of Cyprus is set to go on the offensive when it announces details of its three-year strategic growth plan on Wednesday.

The banking giant is also expected to release its preliminary 2006 results and may even issue a final dividend recommendation.

Informed sources have confirmed to the Financial Mirror that the “best defense is to go on the offensive,” meaning a wave of takeovers of relatively small banks will be planned in addition to the already known plans to expand into Romania and Russia.

Bank of Cyprus is set to commence full banking operations in Romania in March while in Russia, where the final regulatory approval is still pending, the bank may accelerate its expansion plans.

There are also plans for a faster expansion drive into East Europe where Bank of Cyprus is well known and has excellent business relations with thousands of such companies from the region. The Ukraine is also viewed as a “natural” place for Bank of Cyprus to have a presence.

With respect to relations with Piraeus, the Bank of Cyprus is expected to confirm its “friendly” relations and its new open line of communication, but other reports that it may proceed to buy shares in Piraeus are most likely to be dismissed as “speculation”. Such a move will be viewed as “purely defensive” and it may tie up its capital in a non-performing investment at a time when it will be accelerating its expansion plans and needs every cent of capital to sustain and support such a move.

EUR 311 mln forecast

 

Analysts expect Bank of Cyprus to report a net profit of EUR 311 mln or CYP 180 mln for 2006 with a good possibility to increase the final dividend. If the EPS climbs to 0.54-56 euro cents per share, then the bank may well decide to declare a 12-16 euro cents dividend per share, on top of the 12 euro cents interim already paid. For 2005, Bank of Cyprus paid a final dividend of 12 euro cents or 7 Cyprus cents per share.

Sharelink is forecasting BOCY to report EUR 300 mln in net profit, Citigroup and JP Morgan are anticipating EUR 302.7 mln, P&K Securities EUR 306.3 mln, CLR expects EUR 313.6 mln, while KBW is forecasting EUR 316 mln in profits.

The success with which Bank of Cyprus managed to broaden its product range, keep costs under control and reduce provisions on top of investment gains are the factors on which the bank is basing its success story and the reason why profits will continue to climb in the years to come.

The Financial Mirror estimates that Bank of Cyprus will forecast that its profits will rise by 26% to EUR 390 mln by the end of 2007, to EUR 485 mln by the end of 2008 and reach EUR 600 mln by end-2009.