The Bank of Cyprus will implement its dividend policy in a predictable, stable, prudent manner and without surprises, Bank of Cyprus Group Chairman Takis Arapoglou stressed on Friday amid proposals by shareholders to increase dividends due to the bank's "very good" financial results.

Speaking at the Annual General Meeting of Shareholders both Arapoglou and the Group Chief Executive Officer Panicos Nicolaou, stressed that the bank will achieve its medium-term financial goals even with much lower interest rates than the European Central Bank, compared to today's high levels.

The bank maintains a payout ratio between 30% and 50% in its mid-term goals, with shareholders considering that this does not correspond to the bank's profitability. On behalf of Senvest Capital (it owns a share of 8.59% of the share capital) Stefanos Hailis said it underestimates the ability to distribute dividends, thus affecting the bank's valuation which is one of the lowest in Europe, while at the same time the bank has the highest return on equity (ROE) ratio and one of the highest capital ratio in the EU.

Hailis proposed that the distribution rate should increase between 40% and 60% if the CETI1 capital ratio, without transitional provisions, is above 15%. Similar suggestions were made by other shareholders, while all of them praised the financial results of the bank.

Arapoglou assured that both the Management and the Administration of the bank wish to increase the distribution rate. But we always do it with stability, predictability and no surprises depending on profitability, he said.

He added that the distribution rates must increase in a smooth and controlled and prudent way so that we can repeat it, at least at the same level next year, he stressed, adding that they want to be predictable, stable and responsible and they want to go to 50% but we seek to do it gradually.

Replying to a shareholder's question whether the expected reductions in ECB interest rates will affect the group's profitability, Arapoglou said that this does not particularly concern them, as the reductions in interest rates by the ECB are expected to be fewer, smaller and a bit later.

In his speech, Group Chairman Takis Arapoglou acknowledged that the economic results, a record, in 2023, were clearly strengthened by the higher interest rates that prevailed. He stressed however that this should not downgrade the tremendous progress made in reducing costs, increasing efficiency, increasing non-interest income, disciplined risk management and effective controls.

It is for these reasons that we believe that the Bank of Cyprus will be able to deliver sustainable profitability even after interest rates return to a downward trend, he stressed.

He noted that for the Bank of Cyprus, 2023 was a year in which they gained the full benefits of the Bank's evolution into a well-capitalized Group with a strong, diversified business model, after many years of restructuring.

In his speech, Panicos Nicolaou, Group Chief Executive Officer, said that the Bank had a strong start to 2024, particularly in terms of profitability. Our strong performance this quarter indicates that we are tracking ahead of our 2024 targets, he said.

"We delivered a profit after tax of €133 mn with ROTE of 23.6%, which is the 5th consecutive quarter of ROTE above 20%" he said.

He described 2023 as a milestone for the Bank, since the Bank of Cyprus was the first bank in Cyprus and Greece to secure approval from the European Central Bank to resume dividend payments after 12 years.

"The dividend of €22.3 mn was equivalent to a payout ratio of 14% of the full-year 2022 adjusted recurring profits. It confirmed Bank of Cyprus’ transformation into a well-capitalised, diversified and sustainably profitable banking and financial services group" he said.

He noted that our particularly strong performance in 2023 enabled us to gain approval from the ECB in March 2024 to significantly increase the shareholder distribution from full-year 2023 earnings to €137 mn. This comprises a proposed cash dividend of €112 mn (25 cents per ordinary share) and an inaugural share buyback of up to €25 mn.

"This distribution is over six-times higher than the distribution in 2023, with the proposed cash dividend five-times higher than that paid in 2023. We have more than doubled the payout ratio to 30% compared to last year, meeting our target payout range of 30%-50%" he went on to say.