Cyprus Mail

Hellenic: no surprises in bank’s solid 2019 results

While total expenses for 2019 were up 36 per cent, amounting to €273m, up from €201.3m in the previous year, a large part of that figure resulted from the acquisition and integration of the Cyprus Cooperative Bank

AMIDST a slew of grim reports from European banks, Hellenic Bank met analyst expectations this week with solid results for earnings and profit and an improved balance sheet, according to Jonas Floriani of Axia Research.

Total net income rose to €404.6 million, up 40 per cent from €289.2m in the previous year. Profit after tax was at €108.4m for the full year.

While total expenses for 2019 were up 36 per cent in 2019, amounting to €273m, up from €201.3m in the previous year, a large part of that figure resulted from the acquisition and integration of Cyprus Cooperative Bank.

Nonetheless, the lion’s share of income was generated by regular banking operations, and not by trading – this is somewhat unusual in any bank, anywhere in the world today.

CEO Yiannis Matsis commented: “Our 2019 financial results demonstrate the robustness and solidity of the enlarged Hellenic Bank. A significantly de-risked balance sheet, enhanced and sustainable profitability and a strong capital position of Capital Adequacy Ratio at 22,56 per cent prove that the enlarged Hellenic Bank has a solid, viable, long -term business model, that safeguards our depositors, provides confidence to our borrowers and creates shareholder value.”

One measure of de-risking has been to reduce the portfolio of non-performing loans. The ratio of non-performing exposures to gross loans was at 25 per cent, excluding exposures covered by the bank’s agreement with the government’s asset protection scheme.

Fitch downgraded Hellenic Bank’s rating at the beginning of April, along with those of the other major Cyprus banks.

“We believe that the banks will remain vulnerable to an adverse scenario of a lengthier stress extending into 2021. At least initially we consider the Cypriot banks to be more vulnerable to corporates and SMEs experiencing distress and drawing down on overdrafts and credit facilities.”

Fitch also cited concerns about the heavy burden of corporate debt in the country.

In contrast with these concerns, citing Hellenic Bank’s strong balance sheet, the magazine Global Finance last week announced its ranking of the best banks in Western Europe, and Hellenic Bank was among the top 23.

“Hellenic Bank performed well ahead of its Cypriot competitors in deleveraging and rationalising its non-performing loans. Hellenic Bank’s share of total lending on the island rose sharply in 2019,” the magazine wrote.

After taking over the assets of Cyprus Cooperative Bank that it purchased in 2018, the bank was able to integrate them into its own strong governance framework, the magazine noted.

One analyst notes that this is partly the result of the acquisition. “Hellenic Bank is still basking in the afterglow of the co-op acquisition,” comments Fiona Mullen, an economist with Sapientia Economics.

“First, it acquired some stable depositors, who were not being paid much interest, and second, it managed to do some fancy hedging on the Cyprus government bonds that it acquired, which also turned in a handsome profit. Those were the two biggest gains on net interest income, which was €117m higher in 2019 than in 2018, despite the fact that its interest expenses were also higher.”

As the statement pointed out: “The Bank maintains a strong liquidity position allowing, as the economy recovers post coronavirus, development of further lending programmes across Cyprus and selected international lending and investment opportunities.

“The Bank aims to continue its pivotal role in the recovery of the economy supporting creditworthy Cypriot businesses and households with a comprehensive range of quality banking services.

The focus of domestic lending will continue towards businesses increasing Cyprus’ competitiveness and productivity including retail and commercial activities, manufacturing, and tourism; and loans to the private sector including house purchase mortgages.”

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