By Angelos Anastasiou
BANK of Cyprus CEO John Patrick Hourican raised a few eyebrows yesterday after he announced the Group’s end of a streak of seven consecutive loss-making quarters.
Though Hourican presented a flurry of encouraging performance indicators in various aspects of the bank’s operation, the lender’s surprising return to profitability made headlines and caught the attention of the financial and business world.
Hourican announced Group-wide profits from continuing operations of €72 million and after-tax profits of €31 million, with core Cyprus operations driving profitability, as they incurred profits of €209 million and €96 million, respectively.
“The performance of the Cypriot operations, our core business, was significantly stronger than the Group’s overall performance, supporting our efforts in shrinking to strength through the disposal of non-core operations,” he said.
Deleveraging actions through the disposal of non-core assets impacted positively both dependence on Emergency Liquidity Assistance – down by €50 million in Q1, and a further €270 million in Q2 – as well as core tier 1 capital, now up to 10.6 per cent. The sale of non-core operations – including Ukraine operations, Romanian Banca Transilvania and a loan portfolio in Serbia – has translated to a reduction in assets of approximately €1 billion.
“Arresting asset quality deterioration, making progress on non-core disposals and maintaining capital ratios are core to building confidence in the Bank of Cyprus,” Hourican said.
In announcing the positive results yielded by the reorganisation and operation of the Restructuring and Recovery Division, the bank said that non-performing loans in arrears for over 90 days were reduced for the first time after sixteen consecutive quarters, marking a decrease of 1.9 per cent to 39 per cent.
The bank’s boss, however, was careful to manage expectations, saying it was “too early to call this a sustainable trend.”
“The establishment of the Restructuring and Recoveries Division has ensured that we have a systematic approach to managing stressed and delinquent customer accounts,” he said.
Improved liquidity allowed the bank to release term deposits ahead of schedule, most of which were retained.
Addressing the press after the presentation of the results, Hourican said these were the first tangible evidence of a job done right at the bank, and that trust and confidence are being regained.
With regard to a rumoured capital issue by the bank, Hourican said it is no secret that the bank has hired HSBC in a consultancy role and that every option that could increase liquidity is being examined, but there is nothing to announce at present.
With regard to reports that he does not enjoy the bank board’s trust, Hourican said he feels he has the full respect of the board.
“You can ask the board if they trust me or not,” he said.
President Nicos Anastasiades said last night he was especially pleased to hear that the BoC had achieved a profit for the first time in several quarters, calling it “important”.
Anastasiades was addressing the inauguration ceremony of the Cyprus International Institute of Management (CIIM) branch in Limassol.
He said the island still had a long way to go however.
The main priority and challenge for the government was the employment of unemployed Cypriots and the restoration of competitiveness.
At the same time he noted the positive evaluations by international bodies over the last six months.
“The banking sector has been restructured, the modernisation of the public sector is under way and we have already achieved the first upgradings of our borrowing capacity by international rating agencies, after 22 consecutive downgrades,” he said.
“There is a long way ahead of us but we are on the right track and we know where it will take us,” Anastasiades said.