By George Psyllides

THE Bank of Cyprus (BoC) said on Wednesday it made a net profit of €60mln in the first half of the year as it continued its deleveraging from non-core markets overseas.

The bank said it recorded a net profit of €29mln in the second quarter.

BoC, Cyprus’ largest, had posted an €81mln net profit in the first half of 2014.

It said the results were not directly comparable because of a significant deleveraging which had taken place in the past year, including a partial repayment of a bond held by the bank by the Cypriot state in July 2014.

“The second quarter results demonstrate that we are continuing to make good progress against our strategic objectives and we are progressively improving our key financial metrics,” BoC CEO John Hourican said.

The lender has strengthened its capital position by 100 basis points to 14.9 per cent on the back of reduced risk weighted assets (RWAs) reflecting its on-going efforts for improving credit risk management and optimising RWAs management, deleveraging and the reduction of problem loans, he added.

The BoC’s funding structure has improved, with the loan-to-deposits ratio declining to 136 per cent.

“The Bank’s strengthened capital position and overall improvement in its financial position enhance its funding options and will facilitate access to the capital markets for wholesale funding, subject to market conditions and investor appetite, allowing the Bank to further normalise its funding structure,” he said.

The continuation of positive customer flows and the deleveraging allowed BoC to repay €1bln of ELA (emergency liquidity assistance) during the second quarter and another €500mn post quarter-end, reducing ELA to a current level of €5.4bln.

BoC had ‘inherited’ €9bln in ELA from Laiki Bank, which was shut down as part of the island’s bailout terms.

The terms also called for BoC to seize 47.5 per cent of deposits over €100,000 to recapitalise.

The bank is gradually finding its feet but it needs to tackle the high level of non performing loans.

“Addressing the Group’s asset quality problem remains the key priority,” Hourican said. “Loan quality shows further signs of stabilisation, with the level of problem loans decreasing and the provisioning coverage gradually increasing.”

Loans in arrears for more than 90 days were reduced by €143mln during Q2, to €12.646mln, accounting for 53 per cent of gross loans. Provisioning coverage ratio improved to 43 per cent.

Group customer deposits totalled €13.629mln on June 30, 2015, compared with €13.611mln on March 31, 2015 and €13.169mln on December 31, 2014.

Despite the full abolition of capital controls in April 2015, customer deposits in Cyprus remained relatively stable and stood at €11.631mln on June 30, 2015.

“Positive customer flows were recorded post quarter end to date, despite the turbulence in Greece, underlining the decoupling of the Cypriot banking system and economy,” the bank said.

At the end of June, customer deposits in Cyprus accounted for 85 per cent of Group deposits, the United Kingdom for 10 per cent and Russia for 4 per cent. The Bank’s deposit market share in Cyprus reached 25.7per cent compared with a low of 24.6 per cent at the end of November 2014.

Group gross loans totalled €23.926mln on June 30, 2015, compared with €24.085mln at the end of March 2015 and €23.772mln on December 31, 2014.

Gross loans in Cyprus totalled €21.191mln and accounted for 89 per cent of the Group’s gross loans.

BoC continues to be the single largest credit provider in Cyprus with a 38.5 per cent market share at the end of the second quarter, compared with 37.7 per cent the previous quarter. Loans in Russia, €1.033mln, and the UK operations — €1.132mln — accounted for 9 per cent of total loans.





