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Bank of Cyprus posts 2014 net loss on Russia exposure

Bank of Cyprus posted a €256 million loss for the whole of 2014, it said on Wednesday, triggered by elevated provisioning in the fourth quarter on its Russian exposure.

The bank, Cyprus’ largest, said it had recognised €309 million for the whole year in impairment losses from discontinued operations in Russia and Ukraine. Without factoring in those restructuring costs and discontinued operations, the bank recorded a full-year net profit of €42 million.

The bank’s chief executive John Hourican said that for the first time since Cyprus’ financial crisis in March 2013 its deposits were growing.

The lender, which underwent an €1bn capital increase in August which subsequently helped it successfully complete the European Central Bank’s asset quality review in October, said that its deposits increased for the first time since March 2013 by €70m in the last quarter of 2014.

At the end of December, the bank, which as part of Cyprus’s €10 billion March 2013 bailout, absorbed the operations of failed lender Cyprus Popular Bank, and turned almost half of uninsured deposits into equity, remained “adequately capitalised with a common equity tier 1 capital ratio of 14 per cent compared to 10.4 per cent,” a year ago, the bank said.

Bank of Cyprus reduced its net loans to deposit ratio to 142 per cent by the end of 2014, which is three percentage points below the respective 2013 levels, the lender said.

By December 31, the non-performing loan ratio in accordance to the European Banking Authority’s standards, rose to 63 per cent or below €15bn from 61 per cent on September 30, or above €15bn.

According to the Central Bank of Cyprus’ standards, the non-performing loan ratio stood at 60 per cent or €14.7bn on September 30, Bank of Cyprus said, without reporting the respective December 2014 figures.

The amount of loans with more than 90 days in arrears fell to €12.7bn in December 2014 or 53 per cent of total loan portfolio from €13bn a quarter before or 52 per cent respectively.

“It is imperative that new foreclosure and insolvency legislation is implemented swiftly to support Cypriot banks in their efforts to address their problematic loan portfolios,” the lender commented.

“An improved legal environment will help the Cypriot banks to address their problematic loan portfolios and will allow them to support the recovery of the Cypriot economy through the provision of credit to creditworthy households and businesses,” Hourican said. “As the leading bank in the country, with a significantly improved financial and operational position, the Bank is well positioned to spearhead the recovery of the Cypriot economy and to benefit from such recovery.”

Bank of Cyprus saw its emergency liquidity facility from the ECB fall by €2.2bn in 2014 to €7.4bn, down from peak of €11.4bn in April 2013, the bank said adding that “ELA has been reduced by a further €200m since 31 December 2014”.

Its fourth-quarter results were affected by increased provisions related to the bank having to align accounting policies to those adopted in European Union-wide bank stress tests last year, as well as classification of Russian operations as held for sale, he said.

Most of those losses concerned Uniastrum a Russian entity Bank of Cyprus has said it wants to sell as part of its strategy on shifting focus back to its core Cypriot market.

 

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