Cyprus larger lender, Bank of Cyprus (Holdings) announced losses €554 million for the first half of 2017, as it injected half a billion euros to increase its provisions to Non-Performing Exposures (NPE).
The results reflect the Bank’s policy of absorbing all its operating profitability in further de-risking its balance sheet, something that according to the Bank, substantially concludes its discussions with the European Central Bank (ECB) on this matter.
“The Bank is continuing to make steady progress in its journey back to full strength. The Bank’s first half results reflect the Bank’s
previous policy of absorbing all its operating profitability in further de-risking the balance sheet. The Board also made a deliberate
decision to allocate a further €500 mn of the Bank’s capital, through increased provisioning, to further accelerate risk reduction”, said the Bank’s CEO John Patrick Hourican.
As a result, NPEs now have provisions at 48%, above the EU average, and the banks expects to exceed the medium-term target of 50% by the year end. It is also important that since 2014, the Bank’s provisions coverage increased by 14 p.p. (€2.6 bn) without need for new equity.
However, the Bank’s CET1 ratio (transitional) was at 12.3% and the total capital ratio was 13.8%, in excess of regulatory requirements and the Bank considers potential tier-1 (AT1) issuance.
NPEs at €9.75 billion
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The Bank recorded NPE reductions for nine consecutive quarters
and its expects the organic reduction of NPEs to continue in the coming quarters.
NPEs as defined by the European Banking Authority (EBA) were reduced by
€620 mn or 6% during 2Q2017 and by €1.3 bn or 12% during 1H2017 to €9,752 mn at 30 June 2017, accounting for 50% of gross loans.
Loans in arrears for more than 90 days (90+ DPD) were reduced by €450 mn (6% reduction qoq) in 2Q2017 and by €748 mn in 1H2017. 90+ DPD
stood at €7,561 mn at 30 June 2017, accounting for 39% of gross loans (90+ DPD ratio). The provisioning coverage ratio of 90+ DPD improved to 61% at 30 June 2017.
€1.1. billion new loans
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The Bank’s gross loans totalled €19,505 mn at 30 June 2017, compared to €20,011 mn at 31 March 2017 and €20,130 mn at the end of 2016.
e 2017.
However new loans reached €1,143 mn for the 1H2017 of which €845 mn were granted in Cyprus and €298 mn by the UK subsidiary, more than double the new lending in the corresponding period in the previous year.
Deposits
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Group customer deposits totalled €16,584 mn at 30 June 2017, compared to €16,537 mn at 31 March 2017 and €16,510 mn at 31 December 2016.
The Loan to Deposit ratio stood at 90% at 30 June 2017, down
from 95% at 31 March 2017 and 31 December 2016, compared to a high of 151% at 31 March 2014.
Operating profit for 1H2017 was €256 mn, compared to €280 mn for 1H2016 (down by 9% yoy). The decrease mainly reflects the lower net interest income (€316 million compared to €360 in 1H2016) and higher non-staff costs.
Total expenses for 1H2017 were €214 mn, 52% of which related to staff costs (€111 mn), 40% to other operating expenses (€85 mn) and 8% to special levy and contribution to Single Resolution Fund (SRF) (€18 mn).
Real Estate Management Unit
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The Real Estate Management Unit (REMU) on-boarded €101 mn of assets, via the execution of debt for asset swaps, in 2Q2017 (down by 21% qoq) and €229 mn of assets in 1H2017.
The Group completed disposals of €30 mn in 2Q2017, compared to €110 mn in 1Q2017 and disposals of €140 mn in 1H2017.
Post 30 June 2017, the Group completed additional disposals of €35 mn.
Since the beginning of the year, the Group signed sale-purchase agreements (SPAs) for disposals of assets in Cyprus with contract value of €30 mn, in addition to the executed SPAs with contract value of €218 mn.
As at 30 June 2017, assets held by REMU had a carrying value of €1.5 bn.
