The Bank of Cyprus posts €54 million loss, following €2.8 billion NPL sale

The Bank of Cyprus, the island’s largest lender, posted a €54 million loss for the first half of 2018, absorbing a €135 million loss from the sale of an NPL portfolio of €2.8 billion which reduces significantly its risk in its balance sheet.
 
Following the loan sale to Apollo Fund LLC, the bank’s total non-performing exposures declined to €5.2 billion with the NPLs percentage to total loans declining to 38% from 45% in March 2018. The sale along with the organic wind down of the banks NPLs represents a total reduction of 65% and 72% since the peak, the bank said.
 
Coverage ratio declined slightly to 49% from 51% last June.
 
The bank’s CET1 capital ratio following the sale of loans and the sale of Bank of Cyprus UK is expected to increase to 13.6% from 12% in end-March 2018, while its capital adequacy ratio will rise to 15.4% adjusting for the sale of loans and the sale of the bank’s operation in the UK.
 
Furthermore, the Bank announced that it is in the process of finalising the terms and seeking binding commitments from investors in respect of a privately place AT 1 Capital transaction at an anticipated size of €200 million subject to market conditions.
 
John Patrick Hourican, the bank’s CEO, said in statement that the group’s results “reflect our continuing delivery against our core objective of balance sheet repair,” adding that the corporate transactions “accelerate this repair and deliver value to our shareholders.”
 
He said the sale of NPLs is the first meaningful corporate SME NPL in Cyprus complements the bank’s successful programme of organic non-performing exposure reduction.
 
“Since 2014 we have focused on decreasing our stock of NPEs and on improving the asset quality of the Bank. Today’s transaction is a significant step forward and an important landmark on our journey of de-risking our balance sheet and enhancing our capital position,” Hourican added.

The bank continued its organic reduction of NPEs which declined by €435 million in the second quarter, while the bank aims for a total reduction of €2 billion by the end of the year.

Factoring in the sale of loans the bank’s total NPEs declined to €5,2 billion compared with €8.3 in the end of the first quarter of 2018.

Total income for the second quarter reached €201 million with operating profit amounting to €89 million. Profit after tax and before the loan sale amounted to €44 million.

Net interest income declined to €249 million in the first half of 2018 compared with €316 in the respective period of last year, reflecting lower volume of loans, pressure on lending rates and the cost of liquidity compliance, the bank said.

The bank’s total cost amounted to €218 million in the fist half of 2018, of which 53%, amounting to €116 million in staff costs.
Cost to income ratio amounted to 51% in the first half of 2018, compared with 46% in the respective period of 2017.
 
The bank’s total loans reflecting the NPL portfolio sale and the operations of Bank of Cyprus UK declined to 13.7 billion, marking a reduction of over €5 billion compared with December 2017.

New loans amounted to €1.31 billion for the first half of 2018 surpassing new loans of the respective period of last year, the bank added.

Total deposits rose by 2% on a quarterly basis amounting to €18.46 billion and the loan to deposits ratio declining to 68% adjusted for the NPL portfolio sale. Cash with central banks amounted to over €4 billion compared with €3.4 billion in end-2017.

Bank of Cyprus stock of real estate assumed in the process of debt for assets swaps amounted to €1.52 billion in the end of the first half of 2018, the bank said.