Profit after tax attributable to the owners of the Bank of Cyprus for the first nine months of the year totaled €76 mn., while loss after tax attributable to the owners of the Bank for the third quarter of 2014 reached €5 mn, compared to a profit of €50 mn for the second quarter of 2014.
According to the Group`s financial results for the nine months that ended on the 30th of September 2014, the Bank`s deposit base continues to stabilise, with the Bank experiencing positive customer flows during recent months, despite the release of €1,2 bn of blocked decree deposits in July and October 2014.
In a statement, John Patrick Hourican, Group Chief Executive Officer, noted that “during the third quarter of 2014 we reached a major milestone in our effort to strengthen the Bank’s balance sheet. We completed a €1 bn share capital increase, comprising a private placement among high quality institutional investors from Europe, North America and Russia and a placement with existing shareholders”.
As a result, he added, the Bank’s Common Equity Tier 1 capital ratio (transitional basis) was increased to 15,4% as at 30 September 2014.
“The size and timing of the capital increase allowed the Bank to pass the ECB’s Comprehensive Assessment, demonstrating that the Bank has sufficient capital to withstand even the adverse stress scenario”, he underlined.
Hourican said that “during the quarter we have made further progress in delivering against our strategic objectives. Profit after tax excluding one-off items for the third quarter of 2014 totalled €6 mn. Taking into account one-off items related to restructuring costs, the Bank incurred a loss after tax of €5 mn for the third quarter of 2014”.
In addition, he noted that profit after tax excluding one-off items and profit after tax for the nine months ended 30 September 2014 totalled €84 mn and €76 mn, respectively.
“The Group’s performance is underpinned by the performance of our core Cypriot operations, supporting our efforts of shrinking to strength through the disposal of non-core operations and assets. The balance sheet was deleveraged by a further €1,1 bn during the third quarter”, he went on to say.
The Restructuring and Recoveries Division (RRD) is making some progress in arresting the deterioration in the Bank’s loan quality, despite the adverse legislative framework. Nevertheless, the on-going economic recession continues to impact the quality of the retail and SME clients.
Referring to the newly elected Board of Directors, he said that it brings “a wealth of banking and broader corporate experience and skills that will be of significant value as we continue to strengthen the Bank and position it to support, and benefit from, the economic recovery in Cyprus”.
According to the financial results for the first nine months of the year, the Common Equity Tier 1 capital (CET1) ratio (transitional basis) was strengthened to 15,4% at 30 September 2014, compared to 11,3% at 30 June 2014, primarily due to the €1 bn share capital increase completed in September 2014.
At 30 September 2014, gross loans and deposits were €24,7 bn and €13,3 bn respectively, with the net loans to deposits ratio remaining at 148%.
Emergency Liquidity Assistance (ELA) has been reduced to €7,68 bn at 30 September 2014 (compared to €8,78 bn at 30 June 2014 and a high of €11,4 bn at end April 2013), and accounted for 28% of total assets. ECB funding has been reduced to €920 mn at 30 September 2014 from €1,4 bn at 30 June 2014. Post 30 September 2014, ELA was reduced further by €180 mn and ECB funding was reduced further by €30 mn.
Loans in arrears for more than 90 days (90+ DPD) totaled €12.978 mn at 30 September 2014 and represented 52% of gross loans (90+ DPD ratio). 90+ DPD increased by 3% during the third quarter of 2014 (compared to an increase of 4% during the second quarter of 2014), with the retail and SME portfolio continuing to deteriorate primarily due to the on-going recessionary conditions. The provision coverage ratio of 90+ DPD totaled 38%, while taking into account tangible collateral at fair value, the 90+ DPD are fully covered.
Net interest income (NII) for the nine months ended 30 September 2014 was €790 mn, while the net interest margin (NIM) was 4,03%. NII for the third quarter of 2014 was €244 mn (compared to €279 mn for the second quarter of 2014) and the NIM was 3,83% (compared to 4,26% for the second quarter of 2014). The reduction in the NII during the third quarter of 2014 was mainly due to the repayment of €950 mn of a Cyprus sovereign bond held by the Bank and the reduction in the customer spread due to reduced lending rates.
Total income for the nine months ended 30 September 2014 was €941 mn. Total income for the third quarter of 2014 was €291 mn, compared to €310 mn for the second quarter of 2014. Non-interest income for the third quarter of 2014 was €47 mn compared to €31 mn for the second quarter of 2014. Non-interest income for the second quarter of 2014 was negatively affected by impairments of Laiki related exposures transferred to the Bank totaling €32 mn.
Total expenses for the nine months ended 30 September 2014 were €367 mn and the cost to income ratio was 39%. Total expenses for the third quarter of 2014 were €122 mn (compared to €121 mn for the second quarter of 2014) and the cost to income ratio was 42% (compared to 39% in the second quarter of 2014).
Profit before provisions for impairment of customer loans, restructuring costs and discontinued operations for the nine months ended 30 September 2014 was €574 mn. Profit before provisions for impairment of customer loans, restructuring costs and discontinued operations for the third quarter of 2014 was €169 mn, compared to €189 mn for the second quarter of 2014.
Provisions for impairment of customer loans for the nine months ended 30 September 2014 were €492 mn, with the provisioning charge accounting for 2,6% of gross loans on an annualised basis. Provisions for impairment of customer loans for the third quarter of 2014 were €163 mn (compared to €183 mn for the second quarter of 2014), with the provisioning charge accounting for 2,6% of gross loans on an annualised basis (compared to 2,8% for the second quarter of 2014).
Profit after tax excluding one-off items (relating to restructuring costs, discontinued operations and net profit from disposal of non-core assets) for the nine months ended 30 September 2014 totaled €84 mn. Profit after tax excluding one-off items for the third quarter of 2014 totaled €6 mn, at the same level as the second quarter of 2014. Profit after tax excluding one-off items in the Cypriot operations for the nine months ended 30 September 2014 totaled €171 mn.
Restructuring costs for the nine months ended 30 September 2014 totaled €32 mn. Loss from discontinuing operations for the nine months ended 30 September 2014 totaled €36 mn. During the nine months ended 30 September 2014, there was a profit of €60 mn from the disposal of non-core assets (i.e. the Ukrainian operations, the investment in Banca Transilvania, the loans in Serbia and the early repayment of a sovereign bond issued by the Republic of Cyprus).