By Stelios Orphanides
Bank of Cyprus said it has generated a €5m profit in the third quarter, raising its nine-month earnings to €62m.
The bank used €138m of its profit to raise provisions for loan impairment “to faster de-risk its balance sheet, a practice which is expected to continue into 2017,” it said in a statement on Tuesday.
It also said it reduced non-performing loans by €501m between July and September, compared to the previous quarter.
NPLs were €11.9bn, or 57.8 per cent of its loan portfolio. Loans with 90 days in arrears dropped to €8.8bn, or 42.6 per cent of overall advances. The lender said it aims at reducing them in the medium term to around 30 per cent.
Bank of Cyprus, which announced its intention to apply for a standard listing at the London Stock Exchange before applying for a premium listing, also reduced its emergency liquidity (ELA) debt to the European Central Bank by €3bn €0.8bn. At its peak, in April 2013, ELA was €10.6bn.
The core equity tier 1 capital ratio rose by 60 basis points since December, to 14.6 per cent, it said, adding that it wants to raise it to over 15 per cent in the medium term.
“We are pleased that the positive momentum continued in the third quarter of 2016, strengthening further our core equity tier 1 ratio, and accelerating the reduction of non-performing loans and the increase in deposits compared to the previous quarter,” CEO John Hourican was quoted as saying.
“Full repayment now looks like a realistic near-term target,” Hourican said, in reference to ELA. “At the same time our deposits grew by €896m in the third quarter and our loans to deposit ratio stands at 102 per cent as at the end of September 2016.”
The bank’s deposits at the end of September stood at €15.6bn, compared to €14.2bn in December 2015.
Bank of Cyprus said total income in the third quarter dropped an annual 1 per cent, to €235m, reflecting a drop in net interest income, which fell 7 per cent to €164m. In January to September, total income fell by €69m, to €717m, compared to the respective nine-month period of 2015. Net interest income in the first nine months of the year fell 19 per cent, to €524m, partly a result of deleveraging.
Non-interest income in the first nine months of the year fell 3 per cent year-on-year, to €193m, including €112m in commission income, and €35m in net insurance income. In the third quarter, non-interest income was €71m.
While the lender said it provided fresh lending in excess of €1bn in the first nine months of the year at home and in the UK, including €763m to Cypriot households and business, net loans to customers dropped to €15.9bn in September, compared to €17.2bn at the end of December, it said.
“We remain focused on operating as an accelerator for growth in the real Cypriot economy,” Hourican said. “We are actively seeking to provide more credit to viable businesses and consumers”.
The net interest margin in the third quarter was 3.35 per cent and in January to September 3.51 per cent, Bank of Cyprus said.
Bank of Cyprus, which cut its staff by 350 through successive voluntary retirement schemes, saw personnel cost decline in the third quarter to €54m, 7 per cent lower compared to the previous quarter.
In the first nine months, total staff cost dropped 3 per cent, to €171m, compared to the respective period last year. Still, overall expenses in the first three quarters of the year rose 1 per cent, to €299m.
The lender’s cost-to-income ratio in the third quarter declined to 41 per cent, from 43 per cent the previous quarter, and was expected to remain between 40 per cent and 45 per cent over the medium term.