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BoC reports €2.2bln loss in 2012 (updated)

Bank of Cyprus (BoC) on Friday announced a €2.2 billion net loss for 2012 on rising provisions for loans and declining profits.

BoC, which is currently undergoing a major overhaul, said provisions for impairment of loans rose significantly in 2012 – €2.3 billion compared with €426 million the previous year – reflecting the deterioration of the lender’s loan portfolio and declining collateral values.

The lender said it had recorded a €620 million profit before impairments and restructuring costs, a 22 per cent year-on-year fall.

Its net loss in 2011 was €1.4 billion.

The lender said its non performing loans (NPLs) reached 23.7 per cent at the end of 2012, up from 10.2 per cent in 2011.

It warned that provisions for NPLs were “expected to remain high” in 2013 “as more borrowers are expected to default while collateral values are expected to fall even further.”

Publication of the results was delayed for months due to the turmoil that followed the island’s bailout back in March.

As part of the terms of the €10 billion bailout, BoC had been forced to convert large deposits to equity to recapitalise.

It also took over the assets of the now-defunct Laiki Bank, which is being wound down also as part of the bailout.

BoC said the March events had a negative impact on the 2012 results with respect to conditions that existed on December 31, 2012 — the recoverability of deferred tax assets in Greece, expectations about the realisable values from collaterals, and the impact on the impairment testing on the assessment of the goodwill of overseas subsidiaries.

As part of the bailout, BoC was also forced to sell its operations in Greece, which it said resulted in “a loss currently estimated at approximately €1.4 billion.”

“This loss represents future expected losses for three years to June 2015 and other adjustments as determined by the Resolution Authority,” BoC said.

Along with Laiki’s assets – whose fair value is still being assessed — BoC was also saddled with a €9.0 billion debt to the European Central Bank.

This had been provided by the ECB to Laiki in the form of emergency liquidity funding (ELA).

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