Record new lending in 2022 – Net profit €71m for Bank of Cyprus

Bank of Cyprus recorded profits after tax of €71m for 2022, compared to €30m for 2021

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Bank of Cyprus recorded profit after tax of €71m for 2022, compared to €30m for 2021. Exceeding the targets of the latest November 2022 forecasts, the Bank recorded improved performance, while 2022 was also a record year in new lending.

Presenting the results at a press conference on Monday, Group CEO Panikos Nikolaou said that "the positive financial results for the year 2022 that we are announcing today exceed our targets and confirm the sustainability of our business model with well-diversified revenues , while expenses remain under tight control despite inflationary pressures."

Profitability, income-expenses

Profit after tax was €71m, compared to €30m in 2021. Return on Tangible Equity (ROTE) after tax and before non-recurring items was 11,3% for the year 2022, from around 10% from the last November forecast, at €188m, up 107% year-on-year, supported by rising interest rates.

Total revenue in 2022 was €699m, compared to €581m in 2021. Net interest income was €370m, up 25% on the previous year. Non-interest income for 2022 included increased net fee and commission income, as well as exceptionally high insurance income, contributing a total of 47% to total income.

Total expenses amounted to €381 million, compared to €383 million for 2021, down 1% year-on-year, of which 50% related to personnel costs, 40% related to other operating expenses and 10% related to the special tax on deposits and other fees/contributions.

Personnel costs amounted to €190 million for the year 2022, compared to €202 million for the year 2021, down 6% year-on-year, as a result of the Voluntary Severance Plans, which took place during 2022. SEA led to the reduction of the Group's permanent staff by 16%. Specifically, the Group employed 2.889 people on 31 December 2022 compared to 3.438 people on 31 December 2021. With the completion of the SEA, annual savings are estimated at approximately €37 million or 19% of personnel costs with a payback period of 2,7 years .

The cost-to-income ratio adjusted for the special tax on deposits and other fees/levies for the year 2022 stood at 49%, compared to 60% in 2021.

"Given this strong performance, we are today upgrading our 2023 Return on Tangible Equity (ROTE) target to above 13%, setting the stage to start paying a substantial dividend from 2023, depending on market conditions and under receiving supervisory approvals", said Mr. Nikolaou. He underlined that the upgrade of the target for Return on Tangible Equity (ROTE) is based on the favorable position for further interest rate hikes, the significant contribution of non-interest income while keeping costs under control, the healthy loan portfolio and the strong capital position.

Deposits and capital adequacy

The total deposits of the Bank at the end of 2022 amount to €19 billion, increased by 8% on an annual basis. The Bank holds 37,2% of the market share in deposits. The cost of deposits remains low, with interest rates on time deposits having increased by 10 basis points from the third to the fourth quarter of 2022. To a related question, Mr. Nikolaou replied that within 2023 there is a provision for a further increase in deposit rates .

The Bank's liquidity remains at high levels, with €7,6 billion of deposits placed with the ECB, in a favorable position for further interest rate increases.

The Common Equity Tier 1 (CET1) Capital Ratio rose to 15.4% and the Total Capital Adequacy Ratio to 20,6%.

Loan portfolio, record for new lending

With new lending of €2,1 billion, up 17% year-on-year, 2022 was a record year for Bank of Cyprus since 2015, with business loans making up the vast majority of the portfolio. The Bank claims the title of "the lifeblood of the Cypriot economy", as it holds 40,9% of the loan market share, up from 38,8% in 2021. However, it is noted that in 2023 the demand for new lending is expected to decrease, due to the increase interest rates and inflation.

The quality of the Bank's portfolio is also noted, as, according to the data it presented, the loans granted from 2016 onwards are 99% serviceable, in a favorable position to face external challenges. The portfolio of net serviced loans amounts to €9,6 billion and is increased by 3% on an annual basis.

At the same time, the NPL ratio fell to 4%, from 12,4% in 2021, with the completion of Helix 3 in November and the sale of €0,6bn. The NPL Coverage Ratio stands at 69%. "Taking into account collateral at fair value, the NPLs are fully covered," the Bank states in its report.

Asked about the increase in interest rates on mortgages, Mr. Nikolaou said that compared to the option of renting, the installment mortgage is still advantageous, while he noted that customer requests for interest rate changes are being considered by the stores. He further noted that there was no worsening of the portfolio or increase in arrears.

Beyond a bank

Mr. Nikolaou also emphasized the technological development of the Agency, typically stating that "we are a technology company that happens to give loans, we are not just a bank". Specifically, active internet and mobile banking users reached 412.000 at the end of the year, while 94% of total transactions are conducted digitally. In addition, as of January, mobile loans are being provided, with the aim of gradually replacing all activities carried out in stores digitally.

Highlighting the total offer of the Bank of Cyprus in the country, Mr. Nikolaou said that "in addition to being a financial blood donor" of Cyprus, the Bank of Cyprus offers more overall, through the Oncology Center, to which more than €70 million has been donated since 1998, through the Support CY network, with over €880 million in contribution to society, with the latest example being the sending of aid to the earthquake victims in Syria. He also highlighted the Cultural Foundation of the Bank of Cyprus, with its rich activities, while he also spoke about IDEA, an NGO that helps in the development of start-ups.

Asked to take stock of the decade from 2013 until today, Mr. Nikolaou stated that "it is impressive" the change of the Bank and the trust of the people, "it is something that honors us". He said that during the decade the Bank focused not only on tackling NPLs, but also on digital reform and the new business model, while also acknowledging the contribution of staff to the Bank's good results.

Source: KYPE