By Stelios Orphanides
The state-owned Cyprus Cooperative Bank announced a net loss of €63.3m in the first nine months of this year, compared to a profit of €53.9m in the same period of 2016.
The deterioration in the second largest Cypriot lender’s profitability resulted from an increase in provisions to €149.5m in the first nine months of 2017 from €44.7m a year before, the lender said in an emailed statement on Wednesday. Net interest income fell to €188.5m from €213.9m while total operational expenses fell to €122.8m from €132.8m respectively.
The bank, which in 2014 and 2015 received almost €1.7bn in taxpayers’ money in the form of capital injection, reported a drop in non-performing loans which declined to €6.7bn from €7.2bn in December last year, or by more than €0.5bn to 58.8 per cent of total loans from 60 per cent respectively, it said. On January 1, its agreement with Spain’s non-performing loans specialist Altamira is entering into force.
The bank, which is in the process of carrying out a capital increase as part of its listing on the Cyprus Stock Exchange, also said that its core equity tier 1 ratio was 15.2 per cent at the end of September, compared to 15.4 per cent in December. Its cost-to-income ratio improved to 49.9 per cent from 50.5 per cent at the end of last year.
Total gross loans fell in September to €11.1bn from €12bn nine months before, while customer deposits fell to below €12bn from €12.6bn respectively, the Co-op said.
“The third quarter was a historic milestone for us as well as Cyprus because the merger of the cooperative credit sector was completed successfully,” Nicholas Hadjiyiannis, chief executive officer of the bank, was cited as saying in reference of the Cooperative Central Bank’s merger with 18 cooperative credit institutions it administered.
Hadjiyiannis said that the bank’s agreement with Altamira to set up a unit to manage non-performing loans and with Citi Group which will coordinate the bank’s efforts to attract investors from abroad as part of its planned capital increase, “will give answers to the big challenges we are facing”.
“We are establishing a bank which will address the continuously increasing customer demands and will at the same time engage in dealing with the non-performing loans legacy,” he said. “This transformation is not easy and surely takes time. With our actions, we are creating the suitable preconditions to achieve this”.
Another legacy the lender has to deal with is related to wrongdoings of its previous managers who are the subject of several police probes
One of them, concerning five loans extended to Erotocritos Chlorakiotis, who had served as director general of the Cooperative Central Bank and head of a public body tasked with the administration of the cooperative banks, and two other managers at the Strovolos cooperative bank, and members of their family, is nearing its end, a police source said.
“The case is in the process of being sent to the Law Office for further instructions,” a police source said.
On Wednesday, a report in Politis said that the police recommended that Chlorakiotis, the secretary of the Strovolos co-op Demetrakis Stavrou and financial director Andreas Michaelides, should be criminally charged for receiving loans worth €40m to themselves and family members or companies they owned which were never repaid.