Friday, November 27, 2015

Bank of Cyprus continues to improve


We have made further progress against our strategic objectives during the third quarter of 2015. We have bolstered the Group's CET1 ratio by 70 basis points to 15,6%, due to reduced risk weighted assets relating to the disposal of the majority of the Russian operations and due to organic capital generation.

However, we are engaged in an on-going regulatory dialogue with ECB for SREP and we do not expect the Group to be required to raise any capital. We are making further inroads in normalizing our funding structure, with our Cypriot deposit base increasing by €527 mn or 5% during the quarter and the loans to deposits ratio improving to 132%. Post 30 June 2015, we have repaid €1,6 bn of ELA, reducing it to a current level of €4,3 bn, which is a 62% reduction from the peak. Loan quality shows further signs of improvement, with loans in arrears more than 90 days decreasing by €649 mn or 5% during the quarter.

The net interest margin remains healthy and the cost to income ratio for the nine months of 2015 was a satisfactory 38%. Finally, profit before provisions and impairments and profit after tax for the nine months of 2015 were €490 mn and €73 mn respectively. 

Things continue to improve at Bank of Cyprus. The economy in Cyprus continues to get better and the memory of the preceding financial crisis fades I anticipate a rerating of the stock. As the CEO said in a previous interview, the banks survival is no longer in question so now it will be a matter of determining what the bank is worth. As non performing loans continue to decrease and the bank is consistent in quarter to quarter improvements we should see a higher stock price. I would note that the current stock price is substantially below where Wilbur Ross and other financiers bought their shares. 

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