Hellenic Bank announces first half profit of €160.2m

Hellenic Bank (HB) has announced a first half profit after tax of €160.2m, saying it was mainly driven by higher income from Central Bank placements and debt securities.

It added that it has a solid capital position with a CET1 ratio of 20.8% and capital adequacy ratio of 26.5%, which is significantly above minimum regulatory requirements.

HB also boasts a de-risked balance sheet, with an NPE ratio of 8.9% (3.3% excluding the NPEs covered by the bank’s agreement with APS Debt Servicing Cyprus).

This no doubt helped its new lending momentum, with €657m in new loans granted in the first half of the year, up 16% y-o-y.

Commenting on the Group’s financial results, HB’s Interim Chief Executive Officer Antonis Rouvas stated:

“Hellenic Bank’s performance for the first half of 2023 was solid,” said the Group’s Interim CEO Antonis Rouvas. “Profit after tax totalled €160 million, mainly driven by higher interest income from Central Bank placements and debt securities as interest rates rise, as well as lower expenses. This performance demonstrates the resilience of our business model and our efforts to continue to unlock value.”

The Bank’s capital position is strong with a Capital Adequacy Ratio of 26.5%, he added. “Liquidity remains ample with a Liquidity Coverage Ratio of 499%, allowing us to continue supporting our customers by providing competitive, tailor-made credit and insurance products.”

Following the successful Voluntary Early Exit Scheme (VEES) of 2022, the adjusted cost-to-income ratio for the first half of 2023 was 38%, in line with the Bank’s medium-term targets, said Rouvas.

“However, the economic and operating environment remains challenging, with rising interest rates and inflation above the long-term average, as well as the ongoing Russia/Ukraine crisis, which could affect the Bank’s financial performance in the coming quarters,” he warned.

During the first half of 2023, HB successfully issued €200m Tier 2 Subordinated Notes under our EMTN Programme. “The total orderbook was almost 4.5 times oversubscribed re-affirming the market’s confidence for the Bank,” said Rouvas. “Nevertheless, the Bank’s funding from capital markets remains costly reflecting the Bank’s current non-investment grade credit rating. By demonstrating sustainable financial performance and by operating in an environment that will remain supportive, we will work towards obtaining an investment grade credit rating to further facilitate the Bank’s access to the capital markets at more competitive rates.”

In March 2023, HB completed Project Starlight, significantly de-risking the Bank’s balance sheet and reducing the non-performing exposures ratio.

However, despite the shift of the problem loans outside the banking sector, the level of problem loans in Cyprus remains one of the highest in Europe, said Rouvas. “Therefore, we consider it imperative that the country has a stable and functional foreclosure framework for addressing strategic defaulters, to enhance the country’s appeal for attracting foreign direct investments and to facilitate the access of domestic debt issuers to the international capital markets. We reiterate our commitment to support our vulnerable customers and to work closely with the authorities for any proposed measures that will address the long-standing issue of NPEs.”

Regarding the bank’s ESG Impact Report for 2022, which was released in June, Rouvas said: “It reiterates our commitment to lead a sustainable transition of the economy and sets ambitious goals to become a climate neutral Bank, increase our green lending (€107 million during the first half of 2023), improve our ESG rating and support customers and investors in their green transition.”

Other key highlights:

• 1H23 Net interest income of €235.4m, up 77% y-o-y, benefiting from interest rates and the bank’s balance sheet structure, mainly driven by Central Bank placements
• Cost to income ratio of 38% driven by higher NII and lower staff costs due to December 2022 Voluntary Early Exit Scheme
• 99.6% of new lending exposures post 2018 are performing
• NPEs provision coverage ratio (excluding NPEs covered by the APS agreement) at 51% as of 30 June 2023
• Ample liquidity, with an LCR of 499% and with €6.0b placed at the ECB (excluding TLTRO of €2.3b)
• MREL TREA position at 29.1%, above the Dec-25 final MREL requirement