Bank of Cyprus Group generated profit after tax of €487m in 2023

The Bank of Cyprus Group generated profit after tax of €487 mn during 2023, its Preliminary Group Financial Results for the year have revealed.

Among other things, the results also demonstrated how the Group's business model is diversified as demonstrated by the significant contribution of non-interest income to the Group’s profitability, covering almost 90% of its total operating expenses.

Panicos Nicolaou, Group CEO, Bank of Cyprus, commented, "2023 was a milestone year for the Group representing the new chapter of becoming a strong and well capitalised organisation. During 2023 we achieved strong financial and operational performance. We generated profit after tax of €487 mn, benefiting from sharply rising interest rates and ample liquidity whilst maintaining cost control despite inflationary pressures and robust asset quality."

"Our business model is diversified as demonstrated by the significant contribution of non-interest income to the Group’s profitability, covering almost 90% of our total operating expenses. Overall, we delivered a ROTE of 24.8%, significantly surpassing our 2023 targets. This performance facilitated rapid capital build-up, unlocking c.480 bps organic capital generation and driving our CET1 ratio to 18.7% at year end, pre- distributions," he continued.

As Nicolaou went on, "Accruing for a dividend at the top end of our dividend policy our regulatory CET1 ratio stands at 16.5%. Our tangible book value per share improved by 24% year on year to €4.93, reflecting accelerating shareholder value creation. The Cypriot economy remains strong with GDP growing by 2.3% in 4Q2023, demonstrating once again its resilience to external shocks. In this supportive environment, we are entering 2024, from a position of strength. We will continue to execute on those levers under our control and we are confident that we can deliver a ROTE of over 17% on a 15% CET1 ratio for 2024 and mid-teens on a more normalised interest rate environment (2.0- 2.5%)."

"We recognise the importance of shareholder returns and reiterate our dividend policy to build prudently and progressively towards a 30% to 50% payout ratio. 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.

Key Highlights for the year ended 31 December 2023

Resilient economic outlook

• Continued strong economic growth; Cyprus’ GDP growth of 2.3%1 for 4Q2023, outperforming the Eurozone average

• New lending of €2.0 bn, despite the rising interest rate environment

• Gross performing loan book at €9.8 bn, broadly flat year on year as repayments offset new lending

Delivering ROTE of 24.8% in FY2023

• NII of €792 mn up 114% year on year; which peaked at €220 mn in 4Q2023 (up 3% quarter on quarter)

• Non-NII of €300 mn up 3% year on year, covering 88% of total operating expenses2

• Total operating expenses2 up 5% year on year with 2022 efficiency actions partly offsetting inflationary pressures; cost to income ratio2 reduced to 31% (vs 49% in FY2022)

• Profit after tax of €487 mn (vs €57 mn in FY2022); basic earnings per share of €1.09 for FY2023

Liquid and resilient balance sheet

• NPE ratio broadly flat on prior quarter at 3.6% (1.0% on net basis) down 40 bps year on year and in line with guidance

• NPE Coverage at 73% up 4 p.p. on prior year; cost of risk at 62 bps

• Retail funded deposit base at €19.3 bn, up 2% year on year and broadly flat compared to prior quarter

• Highly liquid balance sheet with €9.6 bn placed at the ECB

Robust capital and shareholder focus

• Regulatory CET1 ratio and Total Capital ratio of 16.5% and 21.5% respectively

• Organic capital generation3 of 482 bps in FY2023, of which 134 bps in 4Q2023

• Tangible book value per share of €4.93 in 2023, up 24% year on year

2024-2025 Targets

• Reiterated ROTE of over 17%4 for 2024 and over 16%4 for 2025 based on a 15% CET1 ratio

• Net interest income for 2024 upgraded to over €670 mn

• NPE ratio of c.3% by end-2024 and <3% by end-2025

• Reiterated dividend policy to build prudently and progressively towards a 30-50% payout ratio