Cyprus’ largest banking and financial services group, Bank of Cyprus Group reported a profit after tax of €349 million for the nine months ending 30th September 2023, a substantial improvement compared to the €19 million loss recorded in the same period last year. Notably, the third quarter of 2023 contributed €129 million to the profit after tax, marking a 3% increase from the previous quarter.
The bank's robust performance is driven by its Net Interest Income (NII), which experienced a 144% year-on-year increase, reaching €572 million. In the third quarter alone, NII rose by 9% compared to the preceding quarter. Complementing this, Non-Net Interest Income (Non-NII) reached €224 million, exhibiting a 5% year-on-year increase, covering 90% of total operating expenses.
Despite a 3% increase in total operating expenses year on year, the bank managed to reduce the cost-to-income ratio to 31%, down from 54% in the prior year. Earnings per share for the first nine months of 2023 stood at €0.78, including €0.29 in the third quarter.
The Return on Tangible Equity (ROTE) reached an impressive 24.6% for the first nine months and 25.6% in the third quarter of 2023, stressing the bank's efficiency in generating value for its shareholders.
Non-Performing Exposure (NPE) ratio was at 3.5%, down 6 percentage points year on year. The NPE coverage ratio stands at 77%, providing a substantial buffer against potential credit losses, and the cost of risk is reported at 58 basis points.
The bank's deposit base remains resilient, with a retail-funded deposit base of €19.3 billion, reflecting a 3% increase year on year and remaining broadly flat quarter on quarter. The balance sheet retains high liquidity, with €9.6 billion placed at the European Central Bank (ECB).
The regulatory Common Equity Tier 1 (CET1) ratio and Total Capital ratio stand at 15.2% and 20.4%, respectively. With profits from the third quarter of 2023 factored in net of dividend accrual, the CET1 ratio rises to 15.8%, and the Total Capital ratio increases to 21.0%. The bank reported organic capital generation of approximately 345 basis points for the first nine months, including around 125 basis points in the third quarter.
Panicos Nicolaou, the Group Chief Executive of Bank of Cyprus, expressed satisfaction and confidence as the bank unveiled another quarter of robust profitability. Nicolaou highlighted the achievement of a Return on Tangible Equity (ROTE) exceeding 20% for the third consecutive quarter, underscoring the Group's sustained ability to generate profitability and create shareholder value.
In a statement, Nicolaou noted that the bank recorded a profit after tax of €349 million during the nine months of 2023, translating to an impressive ROTE of 24.6%. This strong performance was attributed to substantial revenues, with total income reaching €796 million. Notably, as he said, net interest income accounted for €572 million, more than double the previous year's level, reflecting the impact of a higher interest rate environment and effective deposit pass-through management.
Non-interest income, he added, a significant and sustainable contributor to the Group's profitability, covered approximately 90% of total operating expenses. The cost-to-income ratio further improved to 31%, driven by higher income, while the cost base remained under control, with savings mitigating inflationary pressures.
He also said that as the largest financial group in Cyprus, Bank of Cyprus continued to support the economy by extending approximately €1.6 billion in new loans during the first nine months of 2023.
Nicolaou emphasised the bank's balance sheet strength, characterised by ample liquidity, strong asset quality, and a robust capital position.
He also noted that Moody's upgraded the bank's long-term deposit rating to investment grade in October 2023, marking a new chapter in the institution's journey towards becoming a strong, diversified, well-capitalised, and sustainably profitable organisation.
Nicolaou expressed confidence that the Group's performance is well ahead of the 2023 targets. Despite typical seasonality expectations in the fourth quarter, the bank anticipates comfortably exceeding the 2023 ROTE target of over 17%. He expressed particular satisfaction with the bank's diversified business model, which generates income from various sources, including interest, subsidiaries, and more. He added that the bank maintains good liquidity, has limited investments in bonds, and is at the forefront of digital transformation.
The Bank's CEO also noted that new loans in Cyprus have not decreased significantly as people gradually realise that a return to very low interest rates, as seen in the past, was unlikely in the near future. Early loan repayments have also increased.
Nicolaou also expressed satisfaction with the laws under consideration for foreclosures, indicating that they have correspondence with the Ministry of Finance on the matter. Nicolaou believes that unless the laws change dramatically in parliament, they create a framework that could solve a problem that has plagued Cyprus for many years. However, he expressed concern about the time it would take to resolve disputes, highlighting the preference for resolution through the Financial Ombudsman, which takes approximately three months, over going to court, the duration of which is uncertain.
In response to a question about collaborations and acquisitions among banks, Nicolaou said that if it adds value to shareholders, they will certainly consider it.