BOC posts net loss of €554m in H1 (Update-1)

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(Adds CEO comment in seventh paragraph)

By Stelios Orphanides

Bank of Cyprus, the island’s largest lender said that it generated in the first six months of the year a net loss of €554m compared to a net profit of €54m in the respective period of 2016 on increased provisions.

The after-tax loss in January to June was on a €556m loss posted in the second quarter of the year which more than offset the €2m net profit posted in the first quarter, the bank said in a statement on the website of the Cyprus Stock Exchange on Tuesday. In the first half of the year, the lender announced €727m in provisions for loan impairments, broken down to €614m in the second quarter and €113m in the first, against provisions totalling €180m in the respective six-month period last year.

The bank also saw its net interest income drop in the first half of the year to €316m from €360m in the respective period last year reflecting the downwards trend of interest rates with the net interest margin falling to 3.37 per cent from 3.59 per cent respectively, Bank of Cyprus said. In addition, total expenses rose to €214m from €202m respectively. As a result, its operating profit dropped to €256m from €280m also respectively.

The bank, which saw its cost to income ratio rise to 46 per cent in the first half of the year from 42 per cent in January to June 2016, had net loans and advances to customers worth €14.9bn at the end of June compared to €15.6bn in December, it said. Its customer deposits rose to €15.6bn from €16.5bn respectively. Its common equity tier 1 ratio fell to 12.3 per cent at the end of June compared to 13.9 per cent six months before as a result of the increase in provisions which also reduced shareholders’ equity to €2.5bn from €3.1bn respectively.

Its non-performing loan stock dropped to €9.8bn at the end of the second quarter and for the first time since December 2014 below the €10bn mark, or to €50 per cent of its total loans, compared to €10.4bn in March or 52 per cent, the bank said. In December, the non-performing loans ratio stood at 55 per cent.

The bank’s chief executive John Hourican said that despite the setback, the bank continues “to make steady progress in its journey back to full strength”.

“The board also made a deliberate decision to allocate a further c.€500m of the bank’s capital, through increased provisioning, to further accelerate risk reduction,” the Irish banker was quoted as saying adding, that now the provisioning level of Bank of Cyprus’s delinquent portfolio stands at 48 per cent, and so “above the EU average” and is expected to rise to the medium-term target of 50 per cent by December.

“This substantially concludes our discussions with the European Central Bank on this matter,” he added. “We expect to continue to utilise the operating profit of the Bank in the remainder of 2017 for further balance sheet de-risking and, post the introduction of International Financial Reporting Standards 9 (IFRS9) on 1 January 2018, to be in a position to present a more normal credit cycle charge”.

Hourican said that the bank is pleased to see the Cypriot economy grow 3.5 per cent in the second quarters of the year, as much as it expanded in the quarter before, and added that Bank of Cyprus extended in the first six months of the year €1.1bn in fresh lending, which is more than double the credit it extended in the respective period last year.

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About Author

Stelios Orphanides is a journalist at CyprusBusinessMail.com. To contact Stelios Orphanides: [email protected]

  • costas

    Cyprus the land of opportunity.these banks are useless with there own money,other peoples money

    • I’llbeback

      I am no fan of Grivas but I regocnize he could have been useful here.

  • I’llbeback

    If a profesional gambler suffered a loss like this, or lets be more realistic, a loss of 0.1% of this amount then I am sure they would be judged to be an irresponsible non skillfull gambler lol.

  • Dave The Impaler

    This is just a rummer but apparently Mickey Mouse wears a Bank Of Cyprus wristwatch

  • LOL and they issued shares to depositors who lost cash.

  • Steve Quin

    How can they have lent 10,000,000,000 Euros to people who cannot even pay the interest. Unless they were friends

  • Stepharakalo

    So the position remains just as bad as its been since day 1 of the “crisis”. €10bn of non performing loans still on the books. BOC will need to make annual provisions of €500 million for the next 20 years. Only problem? The bank hasn’t got 20 years.