Bank of Cyprus posts after-tax profit of €487 million for 2023

The Bank of Cyprus on Monday released its financial results for the fiscal year ending December 31, 2023, posting a profit after tax of €487 million, with new lending reaching €2 billion in total.

“2023 was a milestone year for the Group representing the new chapter of becoming a strong and well-capitalised organisation,” Group CEO Panicos Nicolaou said, hailing the bank’s “strong financial and operational performance”.

“We generated profit after tax of €487 million, benefiting from sharply rising interest rates and ample liquidity whilst maintaining cost control despite inflationary pressures and robust asset quality,” he added.

According to the results, the bank achieved a Return on Tangible Equity (ROTE) of 24.8 per cent for the fiscal year 2023, a result attributed to the bank’s effective management and financial performance.

In addition, Net Interest Income (NII) surged to €792 million, marking a remarkable 114 per cent increase year-on-year.

Notably, it peaked at €220 million in the fourth quarter of 2023, up by 3 per cent quarter-on-quarter.

Non-Net Interest Income (Non-NII) reached €300 million, up 3 per cent year-on-year, covering 88 per cent of total operating expenses.

Despite a 5 per cent year-on-year increase in total operating expenses, efficient actions taken in 2022 partially offset inflationary pressures, leading to a reduced cost-to-income ratio of 31 per cent, compared to 49 per cent for the entirety of 2022.

The bank reported a significant profit after tax of €487 million, a substantial increase from €57 million in 2022, with basic earnings per share reaching €1.09 at the end of 2023.

Moreover, the Bank of Cyprus maintained a liquid and resilient balance sheet throughout 2023.

“Our business model is diversified as demonstrated by the significant contribution of non-interest income to the group’s profitability, covering almost 90 per cent of our total operating expenses,” Nicolaou stated.

“Overall, we delivered a ROTE of 24.8 per cent, significantly surpassing our 2023 targets,” he added.

The bank’s Non-Performing Exposure (NPE) ratio remained broadly flat at 3.6 per cent, down 40 basis points year-on-year, and in line with guidance.

NPE Coverage increased to 73 per cent, up by 4 percentage points from the prior year, with a cost of risk at 62 basis points.

The retail-funded deposit base grew to €19.3 billion, showing a 2 per cent increase year-on-year and remaining broadly flat compared to the prior quarter.

Furthermore, the bank exhibited a highly liquid balance sheet, with €9.6 billion placed at the European Central Bank (ECB).

What is more, the bank demonstrated a robust capital position, underling its focus on shareholder value.

Regulatory CET1 and Total Capital ratios stood at 16.5 per cent and 21.5 per cent, respectively.

Organic capital generation reached 482 basis points in 2023, including 134 basis points in the fourth quarter.

Tangible book value per share increased to €4.93 in 2023, marking a substantial 24 per cent year-on-year growth.

Nicolaou explained that “this performance facilitated rapid capital build-up, unlocking circa 480 bps organic capital generation and driving our CETI ratio to 18.7 per cent at year-end, pre- distributions”.

He continued by saying that “accruing for a dividend at the top end of our dividend policy’ our regulatory CETI ratio stands at 16.5 per cent”.

“Our tangible book value per share improved by 24 per cent year on year to €4.93, reflecting accelerating shareholder value creation,” the CEO stated.

The bank also referenced the country’s continued strong economic growth, with Cyprus’ GDP growing by 2.3 per cent in the fourth quarter of 2023, surpassing the Eurozone average.

The bank also explained that despite the prevailing rising interest rate environment, the bank successfully engaged in new lending activities, totalling €2 billion.

The gross performing loan book remained stable at €9.8 billion, showing a balanced picture as repayments offset new lending, contributing to the bank’s overall stability.

“The Cypriot economy remains strong, with GDP growing by 2.3 per cent in 4Q2023, demonstrating once again its resilience to external shocks,” Nicolaou said.

“In this supportive environment, we are entering 2024 from a position of strength,” he added.

Looking ahead, the Bank of Cyprus outlined its targets for 2024-2025, emphasising sustained profitability and prudent growth.

The bank reiterated ROTE targets of over 17.4 per cent for 2024 and over 16.4 per cent for 2025, based on a 15 per cent CET1 ratio.

Additionally, it is said that Net Interest Income for 2024 has been upgraded to more than €670 million, while the NPE ratio is projected to reach approximately 3 per cent by the end of 2024, before dropping to below 3 per cent by the end of 2025.

The bank also reiterated its dividend policy, aiming to “build prudently and progressively towards a 30-50 per cent payout ratio”.

“We will continue to execute on those levers under our control and we are confident that we can deliver a ROTE of over 17 per cent on a 15 per cent CETI ratio for 2024 and mid-teens on a more normalised interest rate environment (2.0-2.5 per cent),” Nicolaou said.

“We recognise the importance of shareholder returns and reiterate our dividend policy to build prudently and progressively towards a 30 per cent to 50 per cent payout ratio,” he added.

“We continue to execute our strategy, with a clear focus on supporting our customers, delivering shareholder value and assisting the development of the Cypriot economy,” Nicolaou concluded.