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OFFON

BANK OF CYPRUS HOLDINGS PUBLIC LIMITED COMPANY

(BOCH)
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Bank of Cyprus : Group Financial Results for the nine months ended 30 September 2020

11/27/2020 | 02:19am EST

Announcement

Group Financial Results for the nine months ended 30 September 2020 and Medium-Term Strategic Targets

Nicosia, 27 November 2020

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014.

1

Key Highlights for the nine months ended 30 September 2020

COVID-19 Developments

  • Cypriot economy more resilient in 3Q2020 than anticipated earlier in the year
  • We continue to support the recovery of the Cypriot economy
  • New lending of €288 mn for 3Q2020 recovering post lockdown, driven by retail housing, reaching c.€1 bn for 9M2020
  • Careful on-going monitoring of credit quality of loans under moratorium

Positive Performance in 3Q2020

  • Total income of €137 mn; operating profit of €44 mn
  • Cost of risk of 97 bps
  • Profit after tax of €4 mn

Operating Efficiency

  • Total operating expenses (excluding special levy and contributions to SRF and DGF) at €84 mn for 3Q2020, up by 4% qoq as more normal business operations have resumed post lockdown, and €249 mn for 9M2020 down by 13% yoy
  • Cost to income ratio (excluding special levy and contributions to SRF and DGF) at 62% for 3Q2020 and 59% for 9M2020

Good Capital, Strong Liquidity

  • CET1 ratio of 14.7% and Total Capital ratio of 18.2% (both pro forma for Helix 2 and on a transitional basis)
  • Deposits at €16.4 bn, broadly flat qoq
  • Significant surplus liquidity of €4.1 bn (LCR at 256%)

Balance Sheet Repair Continues

  • Organic NPE reduction of €230 mn for 3Q2020, with pace returning to pre-lockdown levels
  • €0.9 bn NPE sale (Helix 2) agreed in August 2020
  • NPEs reduced to €2.4 bn (€1.0 bn net), pro forma for Helix 2
  • Gross NPE ratio reduced to 21% (10% net) and coverage maintained at 59%, all pro forma for Helix 2

Strategy and Outlook

  • Clear path to reduce NPE ratio to single digit by end of 2022 and to c.5% in the medium term
  • Enhance revenues in a more capital efficient way, capitalising on strong market position
  • Improve operating efficiency through leaner operations, digitisation and automation
  • Initiate MREL issuance and refinance Tier 2, subject to market conditions
  • Position the Bank on the path for sustainable profitability delivering shareholders returns; target of ROTE of c.7% in the medium term

2

Group Chief Executive Statement

"Signs of economic recovery to pre-pandemic levels marked the third quarter of the year, with the Cypriot economy showing more resilience than initially anticipated, proving its open, small and flexible characteristics. However, as the number of new COVID-19 cases has increased in recent weeks, local restrictions have been re-imposed to contain the spread, which is likely to lead to some loss of momentum in economic recovery in the fourth quarter. The latest news for an effective vaccine is encouraging, which in time should support a return to more normal conditions.

Our strategic priorities of strengthening our balance sheet and improving our asset quality and efficiency, while supporting our customers, colleagues and community through COVID-19 remain unchanged.

During the third quarter of the year we continued to support the Cypriot economy and extended a further €288 mn in new loans, up by over 20% compared to the previous quarter, as new demand increased post lockdown, driven by retail housing, supported by the Government's interest rate subsidy scheme. Overall, we have granted c.€1 bn new loans in the first nine months of the year.

During the third quarter of the year, we generated total income of €137 mn and a positive operating result of €44 mn. Cost of risk was maintained at below 100 bps. Q3 was profitable and the profit after tax for the quarter was €4 mn. The overall result for the nine months was a loss after tax of €122 mn, when including the loss on Project Helix 2 and loan credit losses for potential future NPE sales, both recorded in the previous quarter.

In the nine months of the year we reduced our total operating expenses by €40 mn or 13% on a yearly basis, reflecting our on-going efforts to contain costs. The quarterly increase of 4% is reflective of the lower cost base in the second quarter as a result of the restrictive measures for COVID-19.

The Bank's capital position remains good and comfortably in excess of our regulatory requirements. As at 30 September 2020, our capital ratios (on a transitional basis) were 18.2% for the Total Capital ratio and 14.7% for CET1 ratio, both pro forma for Helix 2. Our liquidity position also remains strong as we continue to operate with a significant surplus of €4.1 bn (LCR at 256%). Deposits on our balance sheet remained broadly flat in the quarter at €16.4 bn.

During the third quarter of the year we maintained our focus on dealing with legacy issues. The pace of organic NPE reduction returned to pre-lockdown levels, as we reduced NPEs further by €230 mn, bringing the total organic reduction in the first nine months of the year to over €500 mn. Together with the sales of loans achieved earlier this year (Helix 2 and Velocity 2), we have substantially reduced NPEs by €1.5 bn in the first nine months of 2020. Overall, since the peak in 2014, we have now reduced the stock of delinquent loans by €12.6 bn or 84% to €2.4 bn (on a pro forma basis) and our NPE ratio from 63% to 21% (on a pro forma basis). NPE coverage was maintained at 59%, reducing the residual risk on our balance sheet to €1 bn.

We remain committed to completing the de-risking of the balance sheet and we will continue to assess the potential to accelerate NPE reduction through additional sales. At the same time, we continue to monitor the credit quality of loans under moratorium.

Although there remains uncertainty in the broader operating environment as a result of the pandemic, our vision for the future of the Bank is clear, together with our confidence in delivering our strategic objectives.

Bank of Cyprus has been through a period of considerable change and we are now laying the foundations for delivering greater shareholder value. Our near term priorities include the completion of our balance sheet de-risking and ensuring our cost base remains appropriate whilst further investing in our digital capabilities; and our medium term priorities include capitalising on our strong market position, enhancing revenues, driving down costs and navigating a clear path to sustainable profitability."

Panicos Nicolaou

3

A. Group Financial Results - Underlying Basis

Unaudited Consolidated Condensed Interim Income Statement

€ mn

9M2020

9M20191

3Q2020

2Q2020

qoq

yoy +%

+%

Net interest income

250

260

82

83

-1%

-4%

Net fee and commission income

106

111

35

33

6%

-4%

Net foreign exchange gains and net gains on

financial instrument transactions and

14

34

2

6

-76%

-59%

disposal/dissolution of subsidiaries and

associates

Insurance income net of claims and

42

42

13

18

-28%

0%

commissions

Net gains/ (losses) from revaluation and

disposal of investment properties and on

2

26

2

(1)

-

-90%

disposal of stock of properties

Other income

11

22

3

4

-13%

-48%

Total income

425

495

137

143

-5%

-14%

Staff costs

(145)

(167)

(49)

(47)

5%

-12%

Other operating expenses

(104)

(122)

(35)

(34)

4%

-15%

Special levy and contributions to Single

Resolution Fund (SRF) and Deposit Guarantee

(24)

(18)

(9)

(6)

42%

28%

Fund (DGF)

Total expenses

(273)

(307)

(93)

(87)

7%

-11%

Operating profit

152

188

44

56

-23%

-19%

Loan credit losses

Impairments of other financial and non-financial assets

Provisions for litigation, claims, regulatory and other matters

(118)

(117)

(31)

(23)

28%

1%

(36)

(9)

(7)

(25)

-73%

-

(4)

(3)

0

(2)

-83%

33%

Total loan credit losses, impairments and

(158)

(129)

(38)

(50)

-26%

22%

provisions

(Loss)/profit before tax and non-recurring items

(6)

59

6

6

7%

-

Tax

(7)

(1)

(2)

(3)

-18%

-

Loss/(profit) attributable to non-controlling

4

(2)

0

4

-96%

-

interests

(Loss)/profit after tax and before non-

recurring items (attributable to the owners

(9)

56

4

7

-38%

-116%

of the Company)

Advisory and other restructuring costs -

(9)

(14)

(3)

(3)

1%

-36%

organic

(Loss)/profit after tax - organic (attributable

(18)

42

1

4

-71%

-

to the owners of the Company)

Provisions/net loss relating to NPE sales,

(104)

(6)

3

(104)

-

-

including restructuring expenses2

Loss on remeasurement of investment in

associate upon classification as held for sale

-

(21)

-

-

-

-

(CNP) net of share of profit from associates

Reversal of impairment of DTA and impairment

-

101

-

-

-

-

of other tax receivables

(Loss)/profit after tax (attributable to the

(122)

116

4

(100)

-

-

owners of the Company)

4

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Bank of Cyprus Holdings plc published this content on 27 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 November 2020 07:18:03 UTC


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Sales 2021 569 M 642 M 642 M
Net income 2021 11,7 M 13,2 M 13,2 M
Net Debt 2021 - - -
P/E ratio 2021 43,7x
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Capitalization 455 M 513 M 514 M
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Last Close Price 1,02 €
Average target price 1,73 €
Spread / Average Target 69,6%
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Managers and Directors
Panicos Nicolaou Group Chief Executive Officer & Executive Director
Eliza Livadiotou Executive Director-Finance
Efstratios-Georgios Arapoglou Non-Executive Chairman
Marios Skandalis Director-Group Compliance Division
Arne Berggren Independent Non-Executive Director