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BOCH: €553 mn loss for 9M2017

21/11/2017 14:04
Bank of Cyprus Holdings PLC announced €553 mn loss after tax attributable to the owners of the Company for 9M2017, compared to a profit after tax of €62 mn for 9M2016.

Profit after tax attributable to the owners of the Company for 3Q2017 was €1 mn, compared to a loss after tax of €556 mn for 2Q2017.

Non-performing exposures (NPEs) as defined by the European Banking Authority (EBA) were reduced by €588 mn or 6% during 3Q2017 and by €1.9 bn or 17% during 9M2017 to €9,164 mn at 30 September 2017, accounting for 48% of gross loans, compared to 50% at 30 June 2017 and 55% at 31 December 2016. The provisioning coverage ratio of NPEs improved to 49% at 30 September 2017, up from 48% at 30 June 2017 and 41% at 31 December 2016.

“Momentum in NPE reduction was maintained. This is the tenth consecutive quarter of material NPE reduction”, said in a written statement the Bank’s CEO John Patrick Hourican.

He added thatCoverage levels against non-performing exposures are now above the EU average and still increasing. “We expect the organic reduction of our NPE stock to continue its downward trajectory in the coming quarters”, he noted.

New lending in the nine months to 30 September 2017 was €1.7 bn and this exceeded lending in the entirety of 2016.
The Common Equity Tier 1 capital (CET1) ratio (transitional basis) improved to 12.4% at 30 September 2017, compared to 12.3% at 30 June 2017 and 14.5% at 31 December 2016. During 9M2017 the CET1 ratio was negatively affected by the additional provision charge in 2Q2017 and the deferred tax asset phasing-in, despite the reduction in risk- weighted assets (RWA). Adjusting for Deferred Tax Assets, the CET1 ratio on a fully-loaded basis totalled 11.9% at 30 September 2017, compared to 11.8% at 30 June 2017 and 13.9% at 31 December 2016. As at 30 September 2017, the Total Capital ratio stood at 13.8%, in excess of regulatory requirements.

International Financial Reporting Standard IFRS 9 estimated impact based on 30 September 2017 Balance Sheet, is a decrease in shareholders’ equity ranging between €250 mn - €300 mn.

“We have now substantially completed our work in anticipation of the introduction of IFRS 9. The expected impact on the Bank’s starting shareholders’ equity for 2018, based on the Balance Sheet as at 30 September 2017 is estimated to be in the range of €250 mn - €300 mn. This is conservatively inside the range we previously expected”, said Hourican.
Deposits increased by €731 mn or 4% in the quarter. Loan to deposit ratio was at 85%

“The increase in our deposit base facilitates compliance with liquidity requirements. The re-shaping of deposit tenures to drive EU and local liquidity ratio compliance and the continued de-risking of higher margin delinquent exposures adds negative pressure on the Bank’s Net Interest Margin”, Hourican noted. He added that the profit-pressure created by this dynamic in the future should be more than offset by reduced provisioning and the positive contribution of new lending.
“In the near-term we expect to see continued headline margin pressure. However we are maintaining our 2018 EPS guidance of 40 cents and a return to profitability in 2018”, he added.

Real Estate Fund

At the same time the Bank announced the launch of a Real Estate Fund to be listed on the Cyprus Stock Exchange.

“This c.€190 mn Fund is the first of its kind in Cyprus and adds further pace to our efforts to accelerate balance sheet de-risking”, said Hourican.

The Fund is structured as an Alternative Investment Fund (AIF) and its strategy is to acquire a diversified portfolio of high-quality income yielding commercial real estate assets in Cyprus with stable lease roll.

These properties are located throughout Cyprus and are currently rented to various tenants offering gross average rental yield returns of over 6% per annum on a 5 to 10 year horizon.

The Fund will be distributing, in the form of cash dividends, at least 80% of all distributable net proceeds on an annual basis. Upon satisfaction of CySEC’s conditions and the Fund receiving final authorisation from CySEC for commencing its operations, the Bank shall proceed with the offering of all or part of its shares in the Fund to qualifying local and international institutional and well-informed investors. The shares of the Fund will be listed on the Non-Tradable Investment Schemes Market of the Cyprus Stock Exchange (CSE).