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Bank Of Cyprus Posts €171 Net Loss In 2021, Continues De-Risking Despite Covid Crisis

Bank Of Cyprus Posts €171 Net Loss In 2021, Continues De-Risking Despite Covid Crisis

Bank of Cyprus, Cyprus’ largest lender posted a net loss of €171 million in 2020 amid the coronavirus pandemic, with the bank stressing that aim amid the pandemic was to further reduce the risks in its balance sheet than making a profit.

 

Despite of the pandemic the bank concluded two sales of non-performing loans (projects Helix 2 A and B) totalling €1.4 billion which combined with the organic in-house NPL reduction led to a 16% NPL rate in end-2020 from 30% a year before and a single-digit net NPL rate, while improving its CET1 and Total capital ratios to 15.2% and 18.7% respectively adjusting for the NPL transactions, while NPL coverage ratio rose to 59% compared with 54% in 2019.

 

In 2020, the bank’s new lending amounted to €1.4 billion compared with €2 billion in 2019, with loan origination picking up in the last quarter. Furthermore, the bank said in January 2021 new lending rose to €180 million.

 

“2020 was a difficult year for the country, Europe and the world, we end up better off from where we started,” the bank CEO Panicos Nicolaou told a virtual press conference, noting that the bank has reduced risk, higher capital and ample liquidity.

 

“Our priority was not to generate profits but to reduce risks in our balance sheet,” Nicolaou added. As he said “despite the challenging market conditions we remained focused on further de-risking our balance sheet and improving asset quality where we showed significant progress.”

 

Nicolaou said the bank is focusing on achieving its medium-term targets of 5% NPL rate and a 7% return on tangible equity, “creating value for our share holders.”

 

Furthermore, Nicolou said the bank receives optimistic signs in terms of loan repayment by borrowers who opted to utilizes a nine-month payment holiday in 2020 which ended in December 2020. The bank’s loan moratorium covered €5.9 billion performing loans. Loans under payment holidays accounted for 64% of the bank`s performing loans.

 

According to our data by mid -February 95% of the borrowers in payment holiday in 2020 are repaying their loans, Nicoalou said.

 

Noting that this is an encouraging sign, Nicolou said the bank is monitoring the situation on a daily basis “as this will determine the bank’s future NPLs.”

 

For 2021, Nicolaou said the target is further balance sheet de-risking and progress in asset quality, both through organic NPL workout and a new NPL transaction. Sources said the bank is aiming for one smaller NPL transaction.

 

“The risk in the bank is incredibly smaller compared with one, two or three years before and this provides us with optimism for the future,” he said.

 

Customer deposits totalled €16,533 mn at 31 December 2020 (compared to €16,384 mn at 30 September 2020 and €16,692 mn at 31 December 2019), remaining broadly flat in the quarter and since the year end. The Bank’s deposit market share in Cyprus reached 35.0% as at 31 December 20.

 

The net Loans to Deposit ratio (L/D) stood at 63% as at 31 December 2020 (at the same level as at 30 September 2020 and compared to 64% as at 31 December 2019). The L/D ratio had reached a peak of 151% as at 31 March 2014.

 

Group gross loans totaled €12,261 mn at 31 December 2020, compared to €12,822 mn at 31 December 2019. Gross loans of the Group’s Cyprus operations totaled €12,196 mn at 31 December 2020 accounting for 99% of Group gross loans. Pro forma for Helix 2, gross loans are reduced by €1,354mn to €10,907mn as at 31 December 2020.

 

The bank’s NPLS adjusting for Helix A and B amounted to €1.76 billion of 16.1% of gross loans marking a reduction of 25% compared with end-2019. “The Group remains committed to assess the potential to accelerate the decrease in NPEs through further NPE sales in the future,” the bank said.

 

Source: CNA

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