Bank of Cyprus, the island’s largest lender posted net profit of €4 million in the third quarter of 2020 following two quarters of loss due to increased provisions for credit losses due to the coronavirus pandemic.
In the second quarter the Bank posted a net loss of €100 million while for the nine months of 2020 ending in September the Bank recorded a net loss of €122 million.
However, the bank announced its medium target over a return on equity of approximately 7% and the reduction of its non-performing loans (NPLs) to 5% of total loans by end 2022 from 21% in end-September, after it disposed an NPL portfolio resulting in a €886-million reduction of its total NPLs.
Adjusting for the loan sale (Helix 2), the bank’s capital rations rose to 18.2% in Total Capital and 14.7% for CET1 from 17.9% and 14.4% in end-June respectively.
Panicos Nicolaou, the group’s Chief financial officer said in statement that despite 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,” he added.
According to the bank results new lending gathered pace following the lock down measures with fresh credit amounting to €288 million in the third quarter up by 21% compared with the previous quarter, while total new lending for the nine months of 2020 amounted to circa €1 billion. New lending came mainly from mortgages assisted by the government’s scheme to subsidize interest rates for new loans.
The bank said that its organic NPL reduction in the third quarter amounted to €230 million with loan workout pace returning to pre lock down levels.
Furthermore, adjusted for Helix 2, the bank’s NPLs declined to €2.4 billion with gross NPL ratio reduced to 21%. From its peak level in 2014 NPLs have marked a reduction of 84% which corresponds to €2.4 billion, the bank said.
The NPL coverage ratio rose to 60% compared with 59% in the previous quarter and 54% in the end of 2019.
Furthermore, the bank said it continues to the credit quality of loans under the government-inducted moratorium (payment holiday), which amount to 65% of the loans performing in the end February.
“A review campaign was initiated in May 2020 for gross loans of €5.2 bn. Approximately 80% of the review campaign has been completed with no significant change in the “unlikely to pay” (UTP) status,” the bank said, pointing out however that as stricter measures -with a direct impact on the economy -are being imposed in recent weeks following a second wave of new COVID-19 infections “the monitoring and review of the credit quality of loans under moratorium remain both on-going and dynamic.”
Deposits amounted to €14.6 billion remaining broadly stable compared with the previous quarter with its surplus liquidity amounting to €4.1 billion. The Bank’s liquidity coverage ratio amounted to 256% in the end of September 2020.
The bank’s total loans amounted to €12.31 billion in end-September, compared with €12.50 bl in the previous quarter and €12.8 in the end of 2019, marking the continued deleveraging efforts.
According to the bank, net loans to deposit ratio amounted to 63% in end September broadly unchanged compared to the previous quarter.
The bank’s total income in the nine moths of 2020 amounted to €425 million, down by 14% year on year, with operating profit amount to €152 miliion down by 19% year on year. Operating profit in Q3 reached €44 million compared with €52 in the previous quarter, the bank said.
Total expenses in the nine months of 2020 amounted to €273 million, down by 11% year on year, of which €145 million were staff costs which marked a reduction of 12% year on year, the bank added.
Provisions for loan credit losses totalled to €118 million in the nine months of 2020, broadly stabled year on year, whereas the bank took additional provisions amounting to €31 million in Q3. The cost to income ratio for the nine months of 2020 reached 59%, the bank added.