BOC announces €553m net loss, real estate fund to reduce NPLs

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By Stelios Orphanides

Bank of Cyprus (BoC) said Tuesday it generated an after-tax loss of €553m on reduced net interest income in the first nine months of the year, as it announced new initiatives to reduce bad loans faster.

The island’s largest lender had recorded a net profit of €62m at the same period last year.

BoC said it also received regulatory approval to set up a real estate fund and have it listed on the Cyprus Stock Exchange.

The bank’s income dropped 3 per cent in the first nine months, to €693m, mainly on reduced net interest income, which fell 13 per cent, to €454m.

Total provisions and impairments rose to €840m in the first three quarters of 2017, from €301m a year before, or 180 per cent, the bank said.

It includes €729m in provisioning charges, up 173 per cent, €38m in impairments of other financial and non-financial assets, up 11 per cent, and €73m in provisions for litigation against zero in the respective period last year.

The bank reduced its delinquent loan portfolio by €588m in the third quarter to below €9.2bn, or 47.6m, for the very first time since the introduction, in December 2014, of the current classification rules for non-performing loans ,which include a probation period for restructured loans, it said.

At the end of June, non-performing loans stood at €9.7bn, or 50 per cent.

“Today we are pleased to announce the first of these accelerative non-organic balance sheet repair initiatives,” the bank’s chief executive officer John Hourican was quoted as saying. “Following approval by CySeC (the Cyprus Securities and Exchange Commission) to register a real estate fund as an alternative investment fund (AIF), the bank is launching a Real Estate Fund to be listed on the CSE, subject to meeting certain conditions. This circa €190m fund is the first of its kind in Cyprus and adds further pace to our efforts to accelerate balance sheet de-risking”.

Hourican said that the lender, which pioneered the banking sector’s fight against non-performing loans with the creation of an internal division for loan restructurings and recoveries, maintained its momentum in reducing bad loans for a tenth consecutive quarter.

In the first nine months of the year alone, BoC reduced its non-performing loans by €2bn, Hourican said. Since December 2014, they dropped by 40 per cent while the coverage ratio against delinquent loans rose “above the EU average,” to 49 per cent.

“We expect the organic reduction of our non-performing exposures stock to continue its downward trajectory in the coming quarters,” the Irish banker said. “At the same time, we are actively exploring structured solutions to further accelerate reduction and further normalise the bank.”

The bank’s real estate management unit took on assets worth €356m in the first nine months of the year, including €127m in the third quarter, it said. Its revenue in the first nine-months of the year was €204m, including €64m in July to September.

BoC, which had its share listed at the London Stock Exchange (LSE) in January, saw its cost-to-income ratio rise to 45 per cent, from 42 per cent the previous year, at the end of September.

Its net interest margin fell to 3.18 per cent from 3.51 per cent in September 2016.

“The bank continues to make steady and positive progress in its journey back to strength,” Hourican said. “Our results this quarter reflect our previously communicated strategy. In the third quarter, we continued to direct all operating profitability to further increase coverage levels on delinquent exposures to best position the bank to present a more normal credit cycle charge in 2018”.

The lender which fully repaid its outstanding emergency central bank liquidity in January, saw its deposits rise 5 per cent in nine months, to €17.3bn in September, against a 5 per cent drop in loans to €14.8bn, it said.

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About Author

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

  • SuzieQ

    What’s that noise I can hear? Oh, it’s the warning bells…..

    • Gavin Croucher

      Actually I think it’s a 50-cal shell being rammed up the breech….

  • Jeremy Rigg

    When all the MP’s are shown to be free of NPL’s I will begin to think this country is on the road to recovery. But not until.

  • almostbroke

    The bank union will probably be demanding a rise in pay !

  • Terryw45

    “Today we are pleased to announce the first of these accelerative non-organic balance sheet repair initiatives,”
    Not even ‘google translate’ could help me with that one !

    • Bob Ellis

      Even in Greek it is nonsense.

    • Cydee

      Yeah, real gobbledegook ……Is he a farmer?

    • Neroli

      The Irish banker is making it up as he goes along now! He’s caught the Cypriot bug

  • Bob Ellis

    Should have shut the banks when they could get away with it in 2013. Closing them now will invoke Crisis 2 – the point of no return.

  • John Henry

    I generate a loss between one to three times a day depending on how much fiber I consume.

  • Jim

    I wonder how long the bank can last before the next cash call comes along?

    • Mario Draghi recently suggested removing any insured amounts from bail-ins.

      • Cydee

        What !! You mean they could wipe us out competely?

        • Yes he slipped it into a recent 58 page document. Search “ECB Proposes End To Deposit Protection” You have been warned 😉

  • kimberworth

    I would love to know how many N P L s that are supposed to be restructered are being paid, also how many have been wiped off to show less monies owed, my monies are out now before the 3 go to the wall together.

  • alexander reutersward

    since the share was listed in november 2012 its value has fallen from €5.99 to €2.63, the market seems to lose its faith in the bank..

    • Accelerative non-organic balance sheet repair initiatives ?

      • Philippos

        Definitely not recommended for vegetarians!

      • Cydee

        Is that like a white mist that comes out of a spray-bottle??

  • Philippos

    Better late than never, I suppose. A “Real Estate Fund” (To repackage NPL’s) could have been set up yonks ago and was a friggingly obvious thing to do when there wasn’t any other market for real estate. Sometimes this country drives me nuts with its fear of innovation and reluctance to try anything new. Sometimes, its a wonder we have cars instead of donkeys and camels

    • Neroli

      There is no thinking out of the box

      • Philippos

        Soon there will not be any box!