Bank of Cyprus posts €133 million profit —new lending hits €676 million

The Bank of Cyprus on Thursday released its financial results for the first quarter of 2024, posting a profit after tax of €133 million.

While this figure represents a 4 per cent drop from the previous quarter, it corresponds to a massive 40 per cent rise when compared to the same quarter of the previous year.

“We had a strong start to the year underpinned by compelling financial results and the approval of a meaningful distribution, representing another important milestone in our strategic progress,” Group CEO Panicos Nicolaou said.

“We proposed a total distribution of €137 mn in respect of 2023 earnings comprising a cash dividend of €112 mn and an inaugural share buyback of up to €25 mn, corresponding to an overall payout ratio of 30 per cent, a material increase compared to the previous year,” he added.

 

Economic Resilience

In the announcement accompanying the results, the bank highlighted that its performance is underpinned by a resilient economic outlook in Cyprus, with a 3.3 per cent GDP growth in the first quarter of 2024.

This growth is projected to reach approximately 2.9 per cent for the entirety of 2024, surpassing the Euro area average.

Moreover, the bank experienced a seasonally strong quarter of new lending, totalling €676m, marking a 46 per cent increase quarter-on-quarter and an 8 per cent increase year-on-year.

Additionally, the gross performing loan book reached €10 billion, indicating a 2 per cent increase quarter-on-quarter.

“This was all supported by a Cypriot economy that continues to display strength and resilience against the backdrop of geopolitical uncertainty,” the bank’s chief executive stated.

 

Profitability and Efficiency

The Bank of Cyprus also delivered a Return on Tangible Equity (ROTE) of 23.6 per cent in the first quarter of 2024.

Net Interest Income (NII) stood at €213m, showing a marginal 3 per cent decrease quarter-on-quarter, attributed to a modest decline in Euribor rates, hedging, and slightly higher costs of deposits.

Total operating expenses saw a 14 per cent decrease compared to the previous quarter, resulting in a reduced cost-to-income ratio of 29 per cent, compared to 34 per cent in the first quarter of 2023.

Profit after tax reached €133m, reflecting a 4 per cent decrease quarter-on-quarter but a substantial 40 per cent increase year-on-year, with basic earnings per share amounting to €0.30 for the first quarter of 2024.

“During the first quarter of the year, we delivered a ROTE of 23.6 per cent, the fifth consecutive quarter with a ROTE over 20 per cent, tracking ahead of our 2024 targets,” Nicolaou said.

“Our performance was supported by continued strong net interest income, declining only modestly from the previous quarter, reflecting high rates and ample liquidity as well as our continuous focus on cost discipline and robust asset quality,” he added.

 

Balance Sheet Strength

The results also showed that the bank maintains a liquid and resilient balance sheet, with a Non-Performing Exposure (NPE) ratio of 3.4 per cent (0.8 per cent on a net basis), marking a 20 basis points decrease quarter-on-quarter.

The NPE coverage ratio increased to 77 per cent, up by 4 percentage points compared to the previous year, with a cost of risk at 27 basis points.

The retail funded deposit base remained stable quarter-on-quarter at €19.3bn, marking a 2 per cent increase year-on-year.

Additionally, the bank showcased high liquidity, with €7.2bn placed at the European Central Bank and €1.7bn repaid in Targeted Longer-Term Refinancing Operations (TLTRO) in March 2024.

Furthermore, the Bank of Cyprus achieved compliance with its 2024 final Minimum Requirement for Own Funds and Eligible Liabilities (MREL) target after the successful issuance of €300m Green Senior Preferred Notes in April 2024.

“In April 2024 the Group successfully issued €300 mn MREL-eligible green senior preferred notes, thereby finalising our MREL requirements and including a comfortable buffer,” Nicolaou noted.

“This issuance was the first ever green bond issuance for the Bank of Cyprus, representing an important step to lead the transition of Cyprus to a sustainable future,” he added.

 

Capital and Shareholder Focus

Meanwhile, the Bank of Cyprus’ results also showcased a robust capital position and a focus on shareholder value.

The regulatory Common Equity Tier 1 (CET1) ratio and Total Capital ratio stood at 17.1 per cent and 22 per cent respectively.

Including profits net of distribution accrual for the first quarter of 2024, the CET1 ratio reached 17.6 per cent, and the Total Capital ratio reached 22.5 per cent.

In addition, the bank achieved organic capital generation of 128 basis points in the first quarter of 2024, with a tangible book value per share of €5.23 as of March 31, 2024, marking a 26 per cent increase year-on-year.

“Our tangible book value per share improved by 26 per cent year on year to €5.23, reflecting our delivery for shareholder value creation,” Nicolaou stated.

In his final remarks, Nicolaou said that the bank “will review our financial targets alongside our 1H2024 financial results“.

“We continue to execute our strategy, with a clear focus on supporting our customers, delivering shareholder value and assisting the development of the Cypriot economy,” he concluded.