Hellenic Bank, Cyprus' second largest lender announced net profits amounting to €21 million in the first nine months of 2021, compared with net profit of €40 million in the respective period of last year, with profitability affected by the continued pressure in lending rates and the reduced portfolio of Cypriot government bonds.
Oliver Gatzke, the bank’s CEO, said the banks is focusing on a non-performing loan sale that would reduce its NPL ration to single digits.
“Our Project Starlight is on track and with its conclusion, we will expedite the clean-up of our balance sheet to mid-single digit percentage of NPEs,” he said, noting that the vast majority of the borrowers that joined the loan moratorium scheme are performing well.
The German banker also said that “another priority for us is to accelerate our transformation journey, to unlock our potential and achieve long term sustainable profitability. We reiterate our commitment to transform the Bank into a customer friendly organisation by improving our customer experience through digital onboarding, streamlining of our procedures and enhanced product scope.”
The bank maintained its strong capital indices with total adequacy ratio at 22.3% and Common Equity Tier 1 Capital ratio at 19,99% in end-September 2021.
According to the financial results, the bank’s net interest income for 9M2021 amounted to €192.8 million, down by 9% compared to €212.2 million in the respective period of 2020, with the decline mainly attributed to the lower income on performing loans and lower income from Cyprus Government Bonds with nominal value of €750 million matured in December 2020).
The bank’s annualised net interest margin (NIM) for 9M2021 amounted to 1.55% compared with 1.88% in fully year 2020 and 1.86% in the 9M of 2020.
Net fee and commission income for 9M2021 amounted to €39.2 million, up by 1% compared to €38.6 million in 9M2020, with the rise driven by higher banking fees and commissions in 9M2021 following the release of a revised Table of Commissions and Charges effective from February 2021, and the increase of electronic transactions which have offset the reduction in other banking related fees impacted by the COVID-19 pandemic.
Furthermore the bank’s total expenses for 9M2021 amounted to €200.2 million and compared to €189.6 million for 9M2020 increased by 6% mainly due to higher staff costs, while staff costs amounted to €105.5 million and accounted for 53% of the Group’s total expenses.
The cost to income ratio for 9M2021 was 75.0%, compared to 66.7% for 9M2020 (reflecting the increase in total expenses compared to the decrease in total net income), the bank said.
Furthermore, the bank’s customer deposits amounted to €14.6 billion at end-September 2021 from €14.2 billion in the end of 2020, with the liquidity surplus amounting to €6.1 billion.
Gross loans as at 30 September 2021 amounted to €6.7 billion, recording a decrease of 1% compared to €6.8 billion in end 2020.
Total new lending implemented during 9M2021 reached €628 million (6M2021: €388 million, compared with €712 million in the respective period of 2020 and €1,04 billion in full year of 2020.
The net loans to deposits ratio stood at 41.1% as at 30 September 2021, while the bank’s loan market share at the end of September amounted to 22.4%.
Non-performing exposures (NPEs) amounted to €1,428 million as at 30 September 2021 compared to €1,503 million as at 31 December 2020, recording a decrease of 5%, while NPEs excluding NPEs covered by the APS agreement amounted to €1 billion as at 30 September 2021.
The NPEs to gross loans ratio as at 30 September 2021 was 21.3% compared to 22,1% as at 31 December 2020, while the NPE ratio excluding the NPEs covered by the APS agreement as at 30 September 2021 was 14.5%, with the NPEs provision coverage ratio amounting to 49.3% as at 30 September 2021.
The bank is working with its advisors over a significant sale of NPE portfolio, called project “Starlight”, involving NPEs amounting to circa €700 aiming to accelerate the Bank’s balance sheet clean-up. The transaction is expected to complete in early 2022.
“Post completion of the transaction the Bank is expected to reach its medium-term target of mid-single digit NPE ratio (excl. APS-NPEs),” he bank said.