Bank of Cyprus (Holdings) announced Monday a loss after tax of €104 mn for 2018 and a capital strength into 2019, due to a project the Project Helix for the sale of non-performing loans and legislative amendments allowing for the conversion of deferred tax assets (DTA) into deferred tax credits (DTC).
According to the Bank`s preliminary results for 2018, CET1 rose to 15.4% pro forma for Deferred Tax Credits (DTC) and Helix (12.1% as reported). Total Capital ratio rose to 18.3% pro forma for DTC and Helix (14.9% as reported).
Total income amounted to € 781 million. Operating profit were € 381 million and underlying profit was € 140 million for the year 2018.
Loss relating to Helix was €150 mn, declining to €105 mn by completion as the time value of money unwinds.
The rapid de-risking of the Bank also resulted in a 4Q 2018 impairment of the DTA of €79 mn, expected to be reversed in 1Q2019, following the recharacterisation of the tax asset to DTC. The combination of all the above resulted in a loss after tax of €104 mn for FY2018.
Legislative amendments to convert DTA to DTC approved on 1 March 2019 resulted in a more capital efficient tax asset, releasing €285 mn of capital, adding c.170 bps of capital, while Helix is expected to add c.160 bps of capital (pro forma as at 31 Dec 2018).
Non- Performing Exposures (NPEs) reduced by €4.0 bn to €4.8 bn, pro forma for Helix, 68% down since December 2014. NPE ratio was at 36% and coverage at 47% pro forma for Helix.
“We have a clear strategy for continuing the improvement in the asset quality position of the Bank and to further deal with the residual c.€4.8 bn of non-performing loans. This includes Estia, a government scheme for the resolution of NPEs backed by primary residence, expected to be launched around the end of the first quarter 2019 that will positively impact c.€900 mn of NPEs”, said in a written statement the Banks’ CEO John Patrick Hourican.
Agreement to sell €2.7 bn of NPEs (Project Helix) completion is scheduled around end 1Q / beginning 2Q 2019.
Provisions declined by 78% year on year to € 168 million in 2018, compared to € 780 million for the year 2017.
During the fourth quarter of 2018, the Bank’s deposits in Cyprus remained broadly stable and a surplus liquidity of €3.1 bn as at 31 December 2018 was recorded, expected to increase to €4.4 bn pro forma for Helix. New lending in Cyprus was €1.9 bn in 2018, exceeding new lending in Cyprus in 2017.
“We are pleased to have maintained our leading market position in a strengthening Cypriot economy, which expanded by 3.9% in 2018.”, said Hourican.
The loan to deposit ratio at the year-end stood at 65% pro forma for Helix
“We are proud of the significant progress we have made this year against our strategic objectives. We recognise, however, that there is still much to do, and we remain as focused as ever on continuing to seek solutions, both organic and inorganic, to make the Bank a stronger, safer, Cyprus-focused institution, capable of supporting the local economy”, he said.
The Group’s CEO announced Monday his decision to leave Bank of Cyprus next September, after serving a notice period of six months. By the time he leaves, Mr. Hourican will have spent nearly six years as the Group Chief Executive Officer. According to its notice for resignation Hourican intends to pursue a commercial opportunity in the United Kingdom.
Sky News has reported last Saturday that Hourican was close to being named chief executive of NewDay, a consumer finance provider which runs co-branded credit cards with retail giants including Amazon, Sir Philip Green`s Arcadia Group, Debenhams and the tour operator Tui Travel.