Bank of Cyprus Holdings PLC is returning to strength and is "well placed" to support a rebound in the Cypriot economy, outgoing CEO John Patrick Hourican told analysts during a first-half earnings call.
Aug. 27 is Hourican's last official day with the bank before group CEO designate Panicos Nicolaou takes over.
The bank reported a post-tax profit of €97.4 million in the first half, compared with a loss of €54.0 million in the same period in 2018. Nonperforming exposures stood at €4.3 billion at the end of the first half, compared with €7.5 billion at the end of December 2018. Since the end of the reporting period, the bank completed the sale of a loan portfolio with a gross book value of €2.8 billion, of which €2.7 billion were nonperforming loans, to U.S. private equity firm Apollo Global Management LLC.
"I am extremely proud of the progress the bank has made since late 2013 when I joined the executive team. The bank is returning to strength, through a disciplined approach to balance sheet repair and disposal of noncore business. It is now well placed to support the strengthening Cypriot economy, which expanded by 3.3% during the first half of the year," Hourican said.
His comments come shortly after Scope Ratings affirmed its BBB- credit rating with stable outlook for Cyprus after market close on Aug. 23. Cyprus' strong economic recovery is one of the reasons behind the rating, according to Scope. Cyprus has one of the strongest growth rates in the Euro area, with real GDP growth averaging 4.2% year on year since Cyprus exited the EU-IMF economic adjustment program in 2016, Scope analysts said. Scope predicts GDP growth to average 3% over the 2019 to 2021 period, fueled by "sustained foreign investment and robust domestic demand."
New lending by Bank of Cyprus in the first half totaled €548 million at the end of the first half, compared with €486 million a year previously. Corporate lending made up the bulk of new lending in the first half of this year at €355 million, followed by lending to retail housing at €99 million.
Looking ahead, foreclosures of distressed property will play an increasingly important tool for reducing the bank's pile of bad loans, Nicolaou said during the call. In addition to this, a long-awaited scheme named Estia, in which the state helps struggling mortgage borrowers to continue paying off their debts rather than defaulting, will be supportive of Bank of Cyprus' efforts to reduce bad debts, according to a company presentation. Some €840 million of the bank's NPEs are eligible for Estia, which was passed into law in late June.
