Thursday, June 2, 2016

Bank of Cyprus reports earnings


“We are satisfied with the overall progress we made during the first quarter of 2016. We continue to drive loan restructuring momentum from the previous quarter by completing €1,5 bn of restructurings during the quarter. We made very good progress in reducing the stock of loans with arrears greater than 90 days by €1,0 bn or 9% during the quarter and we expect to drive further reduction during the coming quarters of 2016.

Our funding position continues to improve. We intend to fully repay ELA as soon as we can. It was pleasing that we were able to make meaningful progress towards this ambition in the year to date. ELA now stands at €2,8 bn, €1 bn lower since the beginning of the year. The net interest margin remains healthy and the cost to income ratio for the quarter was a satisfactory 40%. Profit before provisions and impairments and profit after tax for the first quarter of 2016 were €145 mn and €50 mn, respectively. We have bolstered the Group’s capital ratio (CET1) by 30 basis points to 14,3% due to organic capital generation and decrease of risk weighted assets.”


During 4Q2015, as part of the Group’s efforts to provide solutions to distressed borrowers the Real Estate Management Unit (REMU) has been set up to take on board assets through debt for property swaps and to manage those assets (including selective investment and development) and to execute exit strategies in order to monetise those assets. As at 31 December 2015, the carrying value of properties held as inventories was €516 mn. During 1Q2016, REMU acquired €285 mn of assets via the execution of debt for property swaps. As at 31 March 2016, REMU had inventories with total carrying value of €746 mn. During the quarter, the Bank completed the disposal of assets acquired from distressed customers amounting to €48 mn.

Things continue to improve at the Bank of Cyprus. The Bank has set up a unit to work through the distressed Real Estate loans. The bank continues to improve on disposing of these assets and lowering the number of distressed loans. The stock reacted positively to the recent news. However it is still cheaper than when billionaire Wilbur Ross and the other investors got in a couple of years ago.

Another potential positive is that the company will move its listing to the London Stock exchange in the near future. Obviously this will give the company shares more exposure and liquidity than the Athens Stock Exchange. 

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