19/02/2024 16:17
Bank of Cyprus, the island’s largest lender, announced net profits of €487 million for full year 2023, edging closer to pre-financial crisis levels, driven by the high interest rates environment.
«The Bank’s results were excellent, our net profit after tax was close to €500 million,” its Managing Director Panicos Nicolaou said during a press conference on Monday, noting that the return on tangible equity index (ROTE) amounted to almost 25%, “one of the highest in Europe.”
Nicolaou also highlighted that the Bank’s non-interest income amounted to €300 million for 2023, covering 90% of its expenses, while the Bank’s “good return” will continue this year as interest rates will normalize.
«Our business model is diversified, as shown by our non-interest income which contributes considerably to the group’s profitability,” he said.
Nicolaou did not reveal the amount of dividend to be distributed this year, noting that this is a matter of discussions with the ECB, recalling the Bank’s medium-term target of a payout ratio of 30% to 50%, compared with last year’s 14%.
“Our priority is to reward our shareholders,” he said.
Total income exceeds €1 billion
According to the Bank’s financial results, total income amounted to €1,09 billion, up by 65% year on year with 72% of total income stemming from net interest income which amounted to €792 million. Non-interest income reached €300 million in 2023, of which €181 million came from fees and commissions. In 2023 the Bank’s Net Interest Margin amounted 3.41% from 1.65% in 2022.
The Bank’s total expenditure in 2023 rose by an annual 6% to €384 million, of which €149 million was in staff costs. According to the Bank the cost to income ratio (net of the special levy on deposits) dropped to 31% in 2023 from 49% in 2022.
Provisions for credit losses in 2023 amounted to 63 million, with non-performing loans amounting to €365 million or 3.6% of total loans, the Bank added.
In the end of 2023, the Bank’s Core Tier 1 ratio rose by 130 basis points to 16.5% with total adequacy ratio up by 110 basis points to 21.5%, the Bank added.
Customer deposits totalled €19.34 billion at 31 December 2023, compared to €18,99 billion at 31 December 2022, of which 58% of deposits are protected under the deposit guarantee scheme as at 31 December 2023.
New lending at €2 billion
The Bank’s loans totalled €10.07 billion at 31 December 2023, compared to €10,22 billion in end- 2022, broadly flat year on year as repayments offset new lending, the Bank said.
New lending for 2023 amounted to €2.02 billion from €2.10 billion in 2022, despite the rising interest rate environment, driven mainly by corporate demand, the bank added.
The group’s Liquidity Coverage Ratio (LCR) stood at 359% from 291% in end-2022, well above the minimum regulatory requirement of 100%.
The LCR surplus as at 31 December 2023 amounted to €9.1 bn (compared to €8.6 bn at 30 September 2023 and to €7.2 bn at 31 December 2022).
When disregarding the ECB’s Targeted Lont-term Refinancing Operations (TLTRO III), the Group’s liquidity position remains strong with an LCR of 302% and liquidity surplus of €7.1 billion, the bank added.
“Priority to reward investors”
Replying to questions, Nicolaou did not reveal the Bank’s intention over dividend distribution, noting that this is a matter of discussions with the ECB. The dialogue has begun but there are no final decisions yet,” he said. For 2022 the Bank distributed a dividend of €0.05 per share.
«Our priority is to reward our shareholders,” he said.
Furthermore, replying to a question whether the Bank’s lending rate will decline as the ECB has terminated rate hikes, Nicolaou said lending rates are expected to decline this year, as Euribor precedes the ECB decisions.
Euribor expected in the coming months are lower than 2023 so I expect lending rates to be lower this year, he said.
Furthermore, the Bank said it intends to make its lending book “greener”, with Eliza Livadiotou, the group's Chief Financial Officer, noting that green loans are a priority for the Bank.
Annita Pavlou, the Bank’s Head of investor relations said Bank of Cyprus has outlined a target for the reduction of emissions from its mortgage loan book by 43% by 2030.
«We want to give incentives to our customers to opt for green housing loans, complying with the provisions of energy efficiency,” she said, adding that gradually this will extend to cover the Bank’s total loan book.