(Adds background in second paragraph and manager comment in ninth paragraph)
By Stelios Orphanides
Hellenic Bank, Cyprus’s third largest lender, said that it generated an after-tax loss of €62.7m in 2016 compared to a net profit of €13m in 2015, citing mainly the derecognition of a deferred tax asset of €51.2m.
The loss attributable to shareholders was €63.5m last year compared to €12.1m in 2015, the bank said in a statement on the website of the Cyprus Stock Exchange on Wednesday.
The bank’s total loans dropped to €4.1bn in December from €4.4bn a year before while total deposits remained unchanged at €6.1bn, Hellenic said.
The bank’s non-performing loans ratio fell to 56.6 per cent in December or €2.3bn from 59.2 per cent in December 2015 or €2.6bn, the bank said. The bank’s common equity tier 1 ratio fell to 13.8 per cent compared to 14.8 per cent at the end of 2015 and to a minimum CET 1 ratio of 9.25 per cent set by the regulator.
The reduction of non-performing loans “remains the number one priority of the bank,” the lender said, adding that they fell for the fifth consecutive quarter in October to December.
Last year, Hellenic saw its net interest income increase 1 per cent €147.5m, it said. Still, total income dropped 3 per cent to €247.7m, outstripped by a 5 per cent drop in total expenses to €144.5m on a 16 per cent reduction in administrative expenses to €56.4m. Staff costs rose 2 per cent to €82m last year.
The cost to income ratio dropped to 58.3 per cent last year from 59.3 per cent in 2015, the lender said.
Total provisions for loan impairments rose 14 per cent to €115.2m, Hellenic said. Profit before provisions was €103.2m last year down from €104.5m in 2015.
“We have made further progress executing our strategic priorities during the last quarter of 2016,” Phivos Stasopoulos, group general manager, corporate and insurance division, was cited as saying. Stasopoulos cited the continuing drop in delinquent portfolio, the completion of €701m in loan restructurings and the completion of an agreement with APS Holding s.a. The deal, which requires regulatory approval, provides for the establishment of APS Recovery, a joint venture company, to which the bank will outsource the management of its non-performing loans.
“At the same time, we are fully aware that there is a lot more work to be done to achieve significant reduction in the level of non-performing exposures, and, cognizant of the challenges ahead, we continue to explore all available options in an effort to decisively address problematic loans, using a toolset of sustainable solutions such as debt to asset swaps, balance reductions, maturity extensions, grace periods and instalment reductions,” he said.
“During the fourth quarter, in light of the regulatory dialogue, we proceeded with certain changes in the Bank’s provisioning methodology, resulting in an increase in the level of provisions for impairments and an improvement in the provisioning coverage of NPEs to 52 per cent,” he said.
“The increased provisions, coupled with the derecognition of deferred tax asset of €51 million, resulted in the group reporting a loss after tax of €63 million for the year”.
Hellenic, which extended fresh lending of about €354m last year, is in position as a result of its low loans-to-deposits ratio to provide further lending this year, Stasopoulos said.