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BOC: Recovery signs?

08/01/2004 11:17
The Bank of Cyprus expressed its optimism on Thursday for a recovery of the banking sector and an improvement of its loan portfolio but warned that provisions for bad debts for 2003 will be higher than the already high provisions of 2002 (£80mln). According to an announcement, the Group anticipates that “the provisions for bad debts for 2004 will revert to normal levels”. The drop in the bad debt provisions in conjunction with the increase in core profitability is expected to affect positively the profits of the Group for 2004.

Despite the optimism for 2004 the analysts’ fear for an increase in bad debts for 2003 has been confirmed. According to the announcement, the bad debts for 2003 will be “significantly higher” compared to the provision of £80 million for 2002. This is based on the preliminary indications of the annual review of the Group’s loan portfolio.

“The need for increased provisions stems from the continuous slowdown in the European and Cyprus economy, especially in the tourism sector, the extended stagnation of the Cyprus stockmarket and the concurrent introduction of new, stricter interest income suspension rules. All these factors led to increased non-performing loans” the Bank announced.

Due to the increased provisions for bad and doubtful debts, the Group is expected to record losses at about the same level as in 2002, the Bank reported (£21mln).

“This is a message that we have cleared up the provisions for bad debts for 2003. We will be able to give more information, however, on February”, Head of the Bank of Cyprus’ Investment Relations, Marianna Pantelidou told StockWatch.

Responding to a question on what the bank considers “normal levels”, Mrs. Pantelidou said that in 2001 BOC made bad debt provisions of £33 million, which is "somewhat low".

The profit warning of the Bank of Cyprus made the CSE general index to drop from the 88 points. BOC fell from £1,46 to £1.42. In the ASE, BOC closed at £1.57 on Wednesday.