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Bank of Cyprus reports €9 million net loss for first nine months

comment koumoullids ethically the bank of cyprus has the moral obligation to compensate the bailed in depositors

Bank of Cyprus reported a €9 million net loss for the first nine months of 2022, largely due to the voluntary staff exit plan and its respective one-off cost of €101m recorded in the third quarter.

Nonetheless, the bank recorded profit after tax before non-recurring items amounting to €109m, up 71 per cent year on year underpinned by higher revenues.

“We reported a strong performance in the third quarter of 2022, delivering tangible results against our strategic targets, and confirming the sustainability of our business model with well-diversified revenues and tight cost control,” said group chief executive Panicos Nicolaou.

“As the largest financial group in Cyprus, we continued to support the economy by extending €1.7 billion of new loans in the first nine months of 2022, an increase of 25 per cent on the prior year, whilst maintaining strict lending criteria. Our performing loan book has strong fundamentals and is well positioned to face external shocks.”

At the same time, the bank announced that its non-performing exposures (NPE) ratio fell to 4.5 per cent of the total loan portfolio, while it showed a significant increase in interest income due to the increase in interest rates by the European Central Bank.

Key milestones achieved by the group in the third quarter include an NPE ratio below five per cent, delivering the 2022 target early. Return on tangible equity before non-recurring items (ROTE) was 11.7 per cent, increasing confidence of achieving a recurring ROTE of c.10% already in 2022.

“Our vision for the future of the bank is clear. We are determined to continue the successful execution of our strategy to transform the Group into a sustainably profitable organisation for banking and broader financial products and services in Cyprus,” Nicolaou said.
“We expect the actions we are taking and the momentum in our business to create shareholder value and we now have the foundations for meaningful return to dividend distributions from 2023 onwards, subject to regulatory approval and market conditions.”

Net loans and receivables from customers stood at €10bn, showing an increase of three per cent compared to the end of 2021. Thus the ratio of net loans to deposits stood at 54 per cent.
Indicatively, the net interest income in the nine months recorded an increase of 19 per cent on an annual basis, while the net profit after tax and before the VAT amounted to €109m.

At the end of September 2022, customer deposits stood at €18.8bn showing an increase of almost €1.3b or seven per cent compared to the end of 2021. The bank’s deposits with central banks stood at €9.83b in nine months of 2022, revealing a six per cent increase. These deposits also include €2.95bn that the bank has drawn from the ECB through the targeted long-term financing operations
The bank observed a €1.7bn increase in deposits year-on-year. Quarterly average interest earning assets for the third quarter increased by three per cent.

“During the third quarter of 2022 we generated total income of €172m and a positive operating result of €81m, up 36 per cent on the previous quarter, underpinned by strong growth in net interest income, with loan and liquid yields continuing to improve,” Nicolaou highlighted.

“In this respect, we are upgrading our net interest income guidance for 2022 to over €350m, reflecting the Group’s positive gearing to higher and faster interest rate rises. Operating expenses were contained in the third quarter, on the back of efficiency actions undertaken in the current inflationary environment. Our cost to income ratio stood at 47 per cent, down 10 p.p. on the prior quarter. Our cost of risk stood at 45 bps and remained well within our normalised target range.”

According to the results, net interest income at the nine month mark stood at €234m, showing a 19 per cent increase on a quarterly basis and an increase of five per cent, compared to the corresponding period of 2021, reflecting the positive impact of the ECB interest rate hike, the bank said.

The bank has now upgraded its full-year 2022 interest income target to €350m from €320m, which was the previous guidance.

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