Bank of Cyprus reports €349m profit by end of 2023’s third quarter

“During the nine months of 2023, we recorded a profit after tax of €349m, corresponding to a ROTE of 24.6%, facilitated by strong revenues,” Bank of Cyprus Group CEO Panicos Nicolaou has said.

Nicolaou was commenting on the Group’s financial results for the period up until 30 September.

As the CEO noted, “We have delivered another quarter of strong profitability, achieving an ROTE of over 20% for the third consecutive quarter, demonstrating the Group’s continuing ability to generate sustainable profitability and shareholder value creation.”

Total income amounted to €796m, of which €572m related to net interest income, more than double last year’s level, a reflection of the higher interest rate environment and a well-managed deposit pass-through level, Nicolaou continued.

He also pointed out that non-interest income represents a significant and sustainable contributor to the Group’s profitability and covers c.90% of total operating expenses. “Our cost to income ratio improved further to 31%, driven by higher income, whilst our cost base remains under control, with savings partly offsetting inflationary pressures,” Nicolaou added.

He continued, “Against the backdrop of geopolitical developments and heightened uncertainty, the Cypriot economy is once again proving resilient with strong economic growth of 2.3% in 2Q2023, outpacing the Eurozone average. As the largest financial group in Cyprus, we continue to support the economy by extending c.€1.6b new loans in 9M2023, whilst maintaining prudent underwriting standards.”

Nicolaou noted that the Bank of Cyprus’ balance sheet was characterised “by ample liquidity as well as strong asset quality and a robust capital position.”

He said that over one third of the Group’s assets were cash balances with central banks, benefitting significantly from higher rates while its deposit base continued to grow. “Our NPE ratio stood at 3.5%, in line with our target and our coverage stood at 77%. Our cost of risk at 58 bps remains within our 2023 target range,” Nicolaou also stated.

“In October 2023 Moody’s upgraded the Bank’s long term deposit rating to investment grade for the first time in 12 years, confirming this new chapter of becoming a strong, diversified well-capitalised and sustainably profitable organisation. With another strong set of results in 3Q2023, the Group’s performance is well ahead of 2023 targets and notwithstanding typical 4Q2023 seasonality, we expect to comfortably exceed our 2023 ROTE target of over 17%. We continue to execute strategy, with a clear focus on supporting our customers, delivering shareholder value and assisting the development of the Cypriot economy,” Panicos Nicolaou concluded.

Key highlights from the results can be viewed in more detail below:

Resilient economic outlook

• Continued strong economic growth; Cyprus’ GDP expanded by 2.3% in 2Q2023, outperforming the Eurozone average
• New lending of c.€1.6b, despite the rising interest rate environment
• Gross performing loan book at €9.9b broadly flat year on year as repayments continue to offset new lending

Another strong quarterly performance

• NII of €572m up 144% year on year; up 9% in 3Q2023 compared to prior quarter
• Non-NII of €224m up 5% year on year, covering 90% of total operating expenses
• Total operating expenses up 3% year on year with savings partly offsetting inflationary pressures; cost to income ratio reduced to 31%, down from 54% in prior year
• Profit after tax of €349m (vs loss of €19m in 9M2022); 3Q2023 profit after tax of €129m up 3% on prior quarter
• Earnings per share of €0.78 for 9M2023, of which €0.29 in 3Q2023
• ROTE of 24.6% in 9M2023 and 25.6% in 3Q2023

Liquid and resilient balance sheet

• Asset quality in line with target; NPE ratio at 3.5% (0.8% on net basis) down 6 p.p. year on year
• NPE Coverage at 77%; Cost of risk at 58 bps
• Sticky, retail funded deposit base at €19.3b, up 3% year on year and broadly flat quarter on quarter
• Highly liquid balance sheet with €9.6b placed at the ECB

Robust capital and shareholder focus

• Regulatory CET1 ratio and Total Capital ratio of 15.2% and 20.4% respectively
• Including 3Q2023 profits net of dividend accrual, CET1 ratio at 15.8% and Total Capital ratio at 21.0%
• Organic capital generation of c.345 bps in 9M2023, of which c.125 bps in 3Q2023

Long Term Deposit rating upgraded to Investment grade by Moody’s in October 2023