By George Psyllides
BANK of Cyprus (BoC) posted a €1.94 billion net loss in the first nine months of the year on the back of losses from discontinued operations and from the disposal of its branches in Greece.
The lender, which had to seize its customers’ deposits to recapitalise, said it made a loss of €1.45 billion from the forced disposal of its Greek business and discontinued operations.
Chief Executive Officer John Hourican said the bank’s priority was to restore investor and customer confidence.
“This can only be achieved through our focusing on arresting asset quality deterioration, making progress on non-core disposals and maintaining capital ratios so as to build a strong platform for the safe return of depositors to the bank,” he said.
BoC converted large deposits into equity, a process known as a ‘bail-in’ as a condition for Cyprus to receive €10 billion in aid from international lenders last March.
Under terms of the accord, the island’s second biggest bank, Laiki, was shut down and some of its assets were absorbed by BoC.
The bank was also forced to sell its Greek operations to ring-fence the Cyprus crisis and stop it spreading to other eurozone nations.
The lender has seen its deposit base showing signs of stabilisation in the last couple of months.
“The large customer outflows experienced in the immediate months following the Eurogroup decisions have abated significantly, suggesting the growing confidence of customers towards the Bank,” Hourican said.
Sixty-five per cent of new deposits were for periods exceeding 12 months, the bank said, referring to deposits since October.
BoC had €15.4 billion in deposits at the end of September 2013, 46 per cent down from a year earlier.
The ratio of non performing loans (NPLs), under the new definition, continued to rise – 48 per cent — “due to the lengthy curing period for restructured loans.”
Under the new definition, restructured loans remain classified as NPLs for a longer period.
Otherwise, loans more than 90 days past due showed signs of stabilising at 47 per cent.
The bank does not expect the NPL to be arrested effectively before the island’s economy improved.
Its core tier 1 capital ratio was 10.2 per cent in Q3, down from 10.5 per cent the previous quarter.
The reduction was due to the one-off cost of the voluntary retirement scheme – 98 million or 0.4 percentage points – and by the loss from continuing operations of €35 million in Q3 – 0.1 percentage points. On the plus side, the lender benefited from a 2.0 per cent reduction in risk weighted assets, which had a positive impact of 0.2 percentage points.
The bank said it continued to implement its restructuring plans.
The integration of ex-Laiki business was on track while the branch network in Cyprus has been reduced to 133 from 203 branches. In addition, another 6 branches are expected to close during 2014.
Measures to reduce personnel expenses resulted in an improved cost to income ratio, BoC said.