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CYPRUS: BOCH back in profit; after-tax €64m, 2 more years for NPLs

08 March, 2017

Bank of Cyprus posted after-tax profits of EUR 64 mln for 2016, its first year back in the black after the economic crisis and banking sector meltdown in 2013.


 
The bank said it achieved a EUR 3.0 bln reduction (-27%) in 90+ DPD loans, full repayment of EUR 11 bln in emergency liquidity assistance (ELA), deposit growth of EUR 2.3 bln or 16%, and improvement of its loan to deposit ratio at 95%.
The CET1 ratio improved to 14.7%, compared to 14,6% as at 30 September 2016 and increased by 70 basis points during the year compared to 14.0% at 31 December 2015.
Total Capital ratio amounted to 16% mainly due to the issuance of EUR 250 mln unsecured unsubordinated Tier 2 Capital Notes.
Group customer deposits totalled EUR 16.51 mln at 31 December 2016 (compared to EUR 15.643 mln at 30 September 2016 and EUR 14.18 mln at 31 December 2015), and recorded an increase of 6% quarter-on-quarter and 16% year-on-year. Customer deposits in Cyprus increased by EUR 833 mln during the quarter, of which EUR 494 mln relates to local deposits. Cyprus deposits stood at EUR 15.043 bln at 31 December 2016, accounting for 91% of Group customer deposits.
CEO John Hourican said that the results were satisfactory and reflected the bank’s strategy of continued de-risking.
During the fourth quarter of 2016, he said “we saw continued positive momentum in risk reduction”. He added that deposit growth in the fourth quarter was extremely strong and helped contribute to the Bank`s ability to fully repay ELA so rapidly.
However, Hourican said he was not in favour of creating an external ‘bad bank’, saying that the bank’s internal unit for bad loans management was doing significant progress.
Saying that there is a lot of talk about “separating things”, Hourican pointed out that BOC’s internal service for bad loan management, is performing at one of the best levels of any bank across the whole of Europe. As he said “we need to not disrupt that”.
He also said that there’s not yet a model that would really accelerate the reduction of NPLs by changing the way they are doing it.
“Just putting people in a company outside the bank doesn’t change anything, you have to bring additional capital, you have to bring expertise and you have to have purpose for doing such a thing. We haven’t seen that purpose yet”, he said.
The CEO added that the existing model of the in-house bad bank is working and has achieved a EUR 3 bln reduction in NPLs after after seven quarters of absolute real progress.
Hourican added that the bank aims to grant more new loans to significantly exceed EUR 1 bln, that the bank lent in 2016.
“We expect that number to be significantly higher this year and we have an appetite to lend in the economy”, he said.
He also said that two more years are needed in order to deliver a further significant reduction in the overall number of NPLs to acceptable levels.
“There is going to be a lot of work over the next of the two years to deliver a further significant reduction in the overall number, to get us back into what can be described as the pack of the periphery”, he said.
Regarding the loan to deposit ratio, he said he would not want that to be at 47%.
“I think that is crazy, I would want us to be more or less where are today and only grow our deposit base fast if we would grow our loans, but that depends on the economy and the opportunity to lend”, he said.
Meanwhile, the board appointed James B. Lockhart III as a member after the resignation of Wilbur L. Ross following his appointment as U.S. Commerce Secretary.
Lockhart serves as Vice Chairman of WL Ross & Co. LLC in New York since 2009. The appointment is subject to approval by the European Central Bank (ECB). Once approved by the ECB, Lockhart will also participate as a member of the Nominations and Corporate Governance Committee and the Risk Committee.