Wednesday, May 31, 2017

Bank of Cyprus reports earnings

Here is a link to the earnings report

Although the market did not like the news that earnings were only $2 million euro I think it is important to focus on the bigger picture which is another quarter of lowering non-performing loans and repairing of the balance sheet.

The bank is currently focused on reducing non-performing loans and shoring up the balance sheet. This is another quarter of them doing that.

At some point earnings will be important. The economy is growing and the bank is increasing loan growth. This coupled with continued lowering of non-performing loans should eventually lead to a higher stock price.

CEO's comments:

The Bank continues to make good progress in its journey back to strength. Our results this quarter reflect our strategy of continued attention to balance sheet de-risking and, consequently, we continued to direct substantially all our operating profitability to increased coverage levels on delinquent exposures. 

Despite this, and despite accommodating the €18 mn non-recurring Competition Commission fine which we intend to contest vigorously, the Bank posted a modest positive
result in the quarter. Momentum in risk reduction continued. This is the eighth consecutive quarter we delivered a further material reduction in non-performing loans. In 1Q2017 we reduced NPEs by a further €662 mn and we reduced 90+ DPD by €298 mn. 

We expect the reduction in non-performing loans to continue and we are actively exploring a number of avenues to accelerate
this reduction. When taking into account tangible collateral at fair value, both 90+ DPD and NPEs are fully covered.

We were pleased to start the year with the complete repayment of Emergency Liquidity Assistance (ELA), a successful return to the debt capital markets and the listing of shares on the London Stock Exchange.

The Bank’s deposit base is now adequate to fund loan balances. Our loan to deposit ratio stands at 95% and deposit balances are stable. During the quarter our Liquidity Coverage Ratio reached European Central Bank compliance levels.

The Bank’s capital position was improved by the issuance of €250 mn of Tier 2 capital in January 2017. As at 31 March 2017, our Total Capital Ratio stood at 15.6% and our fully loaded CET 1 ratio stood at 14.0%.

We are pleased to see the Cypriot economy continuing to recover and to note that we continue to maintain strong market shares in lending and deposit-taking in Cyprus. We continue to lend into the Cyprus economy. New lending in the quarter was €690 mn, up by 89% on the FY2016 quarterly average of €365 mn.”

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