Bank of Cyprus sees 2020 loss of €171mn, but Q4 new lending up 30% at €374mn

Bank of Cyprus on Wednesday announced a loss of €171 million for 2020, but showed a promising outlook for the coming year as fourth quarter results saw total income rise to €142 million in the fourth quarter, up 3 per cent.

“Despite the negative bottom line, we believe that 2020 ends well for Bank of Cyprus. It is on track to report an NPE stock and ratio in the teens, around half of the level reported at the end of 2019, while increasing the cash coverage and preserving the capital ratios,” notes Jonas S. Floriani, director of Research at Axia Ventures Group.

New lending was at €374 million in the fourth quarter, an increase of 30 per cent. The bank earned an organic post-tax profit of €2  million. Total operating expenses for the full year declined 12 per cent from the previous year. Deposits were flat at €16.5 billion year-on-year and quarter-on-quarter, according to the statement on Wednesday.

“Above all, the Bank’s new lending focused on small and medium-sized businesses, small townspeople, small businesses and households. We did not achieve the goal with large high-risk projects which today show weaknesses, but by supporting the average Cypriot and employment. We granted more than 50 per cent of mortgage loans in the country,” explains CEO Panikos Nicolaou.

There are €5.9 billion of loans that were under the 2020 payment moratorium, of which 95 per cent of borrowers have resumed payments, according to the statement. In the current moratorium beginning in January 2021, there are €17 million in loans approved to date, with applications received for €27 million.

Losses were due to exceptional provisioning at €51 million, while losses related to sales of non-performing loans were at €42 million.

In the course of the year, the bank has made significant progress in de-risking, with the gross NPE ratio reduced to 16 per cent (7 per cent net) and NPE coverage improving to 59 per cent. The bank’s Common Equity Tier 1 ratio (CET1), which compares a bank’s capital with its assets, was at a relatively low 15.2 per cent, and the Total Capital Ratio at 18.7 per cent.

“Bank of Cyprus (BoC) continuous sales of its non-performing exposures (NPEs) confirm its strong commitment to investors. Despite BoC’s sensitivity to a downside scenario due to high NPEs amid a turbulent year dominated by the Covid-19 crisis, the milder-than-expected 2020 economic recession for Cyprus and a projected robust rebound in the latter half of 2021 will give to BoC some breathing space to end the current year on a higher note,” comments Athanasia Kokkinogeni, Europe Senior Analyst, EMEA FrontierView.”

Total operating expenses were at €91 million in the fourth quarter, up 7 per cent from the previous quarter.

“We managed to grant € 1.4 billion in new borrowing (for the year) in defiance of the pandemic. We thus supported the economy more than the rest of the banking system and helped to restart the economy with the #Restart program. Of course, the trend continues and the economy will need extra support in 2021. However, the picture is very encouraging. In fact, the way out of the moratorium until today is going well, thanks to the preventive moves to support our customers and your own efforts. Installments were granted to more than 25,000 of our customers representing € 5.9 billion in loans.,” comments Nicolau.

“Beyond the financial numbers, however, the rest of our course justifies satisfaction. The shift to new technology was not just leaps and bounds with new, cheaper, faster, safer and more comfortable services for our customers through the #CYON project. In addition, we offered support to the State, with moves such as the electronic signature. The number of our digitally active customers exceeded 75 per cent, and 85 per cent of the Bank’s transactions are done electronically, while we have about 300,000 active users of Internet and Mobile Banking.”