BOC posts net loss of €438m in 2015, as bad loans drop sharply (Update-1)

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By Stelios Orphanides

Bank of Cyprus, the island’s largest lender said that it generated an after tax loss of €438m in 2015 mainly on increased provisions on impairments of customer loans compared to an after tax loss of €261m the year before.

The bank increased its provisions in 2015 to €959m, after raising provisions for impairment on customer loans by €630m in the fourth quarter of 2015, the bank said in a statement. Profit before provisions in 2015 was €624m.

The bank’s non-performing loans fell in December to below €14bn or 61.8 per cent of the total loan portfolio from €14.2bn or 62.2 per cent in September, Bank of Cyprus said. Loans with 90 days or more in arrears fell to €11.3bn in December from €12bn at the end of the third quarter of the year and by €1.3bn compared to a year before, the largest post crisis drop. Provision coverage of 90 past due loans was 48 per cent in December.

The bank said it restructured loans totalling €3.3bn last year.

A Bank of Cyprus manager who was commenting on condition of anonymity said that the drop in the bank’s delinquent loan portfolio “has now become a trend and is no more an early sign”.

Chief Executive Officer John Patrick Hourican said that the bank continued last year to make good progress against its strategic objectives.

“During the fourth quarter, the group’s operating performance was strong,” Hourican was quoted as saying according to the bank’s statement. “We made very good progress in reducing the stock of loans with arrears greater than 90 days by €668m or 6 per cent during the quarter and we expect to continue this progress into 2016”.

The bank reduced its outstanding emergency funding from the European Central bank to €3.5bn which is almost €8bn below the €11.4bn peak in April 2013, Hourican said.

“In the fourth quarter, cognizant of our on-going regulatory dialogue, we made certain changes to the bank’s provisioning methodology,” Hourican said. “These changes increased the level of provisions against delinquent exposures and brought coverage levels against our stock of 90 days past due exposures to near 50 per cent”.

The group, Hourican continued, continues to have a “strong capital position” and “does not expect to need to raise capital to complete its journey back to strength,” even after last year’s net loss. “The core equity tier 1 ratio was 14 per cent at 31 December 2015,” Hourican said.

Customer deposits increased by €1.6bn or 12 per cent to €14.2bn in 2015, almost three years after depositors saw almost half of their deposits in excess of €100,000 turned into equity, Bank of Cyprus said. Customer deposits accounted for 61 per cent of total assets while the ratio of loans to deposits stood at 121 per cent.

Bank of Cyprus also saw its deposit market share increase by 3.4 percentage points to over 28 per cent, it said. Its net lending increased by €0.6bn last year “to support economic recovery and promising sectors”.

In 2015, the bank’s total income fell to over €1bn from below €1.2bn the year before, while its expenses fell by €10m to €417m, the lender said. Total net interest income last year fell to €842m from €969m in 2014.

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