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BOCY: What do analysts say?

29/05/2008 08:49
Commenting on Bank of Cyprus’ Q1 results for 2008, the analysts focused on the net income from interests and the drop in costs. They support that the first quarter is weak but they see positive prospects for the next quarters. The analysts also referred to the pressures on the interest rate margin due to the adoption of the euro, the drop of the dollar and the increased competition in deposits.


In its report dated May 28, KBW supports that BOC 1Q08 net profit of €116mn was 4% ahead of KBWe, but the quality could have been better. “BOC 1Q08 net profit of €116mn was 4% ahead of KBWe, but the quality could have been better, with weaker NII and fees offset by stronger non-core revenues, lower costs and taxes. We believe 1Q08 will be the weakest quarter this year with progressive earnings acceleration thereafter”, the report said. “We believe the weak 1Q08 results are largely priced into the shares, while the medium-term growth profile in Cyprus, Greece and new markets (Russia) remains attractive”, it added..

According to KBW, “NII was 2% below KBWe, should improve going forward. As expected there was a negative impact on margins from the convergence to euro interest rates, a further negative impact from a lower $/€ on the NII from FX deposits and contributing to weak deposit growth of 12% YoY”.


The firm supports that the Russian market contributed o in loans by €131 million for the first time.

“We cut our EPS estimate by 2% in 2008 and leave our 2009 number unchanged”. The EPS are expected to reach €0.85 in 2008 and €1.16 in 2009 from €0.95 that the previous estimate was. The net profits will stand at €537 million in 2008 and €656 million in 2009.

Last week, KBW upgraded the bank’s recommendation to outperform from market perform “since its share suffered in the past few months”. The recommendation is still outperform and the TP at €12.


In its analysis, Citigroup support that NII of €185m, up 8% yoy, was in-line with consensus but below our (high end) estimate. Revenues were in line with consensus expectations, with costs better than expected.

According to the report, “the NIM was affected by the Jan 08 adoption of the Euro in Cyprus, the fall in US interest rates and an increase in competition for deposits.

“We reiterate our Buy (1M) rating with a target price of €15.”, Citigroup said. The EPS are expected to reach €1.00 in 2008, €1.24 in 2009 and €1.48 in 2010. The net profits will stand at €561 million in 2008, €698 million in 2009 and €830 million in 2010.

BOCY remains one of Citigroup’s top pics.


In its report, Cheuvreux of Credit Agricole said that Q1 was difficult, but this was largely expected. According to the firm, “Cost control was very encouraging in Q1, loan growth exceeded expectations (+30%) and insurance income was strong. Better non-core income also helped bottom line. Trends from Q2 onwards should show an improvement amid gradual asset re-pricing and consistently high volumes. First indications from Russia are also positive, albeit still at an infant stage”.

“Management re-iterated target for net profits EUR540m in 2008 and growth of 25% in 2009 and 2010 respectively. However, we further reduced our forecasts (second time this year) by ~3% in 2008 and ~6% in 2009 since the environment remains difficult, particularly on the deposit side, the report added.

Cheuvreux expects that the bank will achieve profits of €535 million from €550 million that the previous estimate was, pushing the cost of assets up to 10.50% from 10%. The target is reduced to EUR11 per share from EUR14 per share previously. “Despite the short term weakness in fundamentals Bank of Cyprus remains an attractively valued growth story trading at a ~10% discount to Greek peers’ it concluded.


P&K supports that that given Q1 results the FY target for € 540m is achievable. “During the conference call, management expressed its confidence in achieving its FY 2008 net profit target and its intention to acquire a small bank in Russia”, the report said.

We maintain our Overweight rating and our positive outlook for the bank. Our € 11.1 year-end target price implies 30% upside from current levels”. The EPS are expected to reach €0.92 this year, €1.04 in 2009 and €1.20 in 2010. The net profits will stand at €522 million in 2008, €587 million in 2009 and €680 million in 2010.

JP Morgan

JP Morgan believes that Q1'08 results are better than expected. “Core revenues of €233mn (NII €185mn + fees €48mn) higher than JPME €221mn (NII €177mn + fees €44mn) but below consensus €240mn (NII €188mnn + fees €52mn). However, we don't expect consensus downgrades as result of miss on the core due to i) Q1’08 being an exceptionally challenging quarter for BOC (on margin dynamics) & ii) convincing guidance from mgmt”.

BOCY is still among the firm’s top picks in the Greek banking system. The TP is €15 with an overweight recommendation.