BANK of Cyprus (BoC) yesterday announced core profits, before provisions for bad and doubtful debts for 2003, of £100.6 million, a 12 per cent increase over 2002 but the bank posted a pre-tax loss for the year of £17.4 million and an after-tax loss of £28.8 million.
The pre-tax loss in 2002 was £13.9 million and after-tax loss £21.3 million. Last year’s losses were mainly a result of the increased provisions for bad and doubtful debts, the bank said.
This was mainly due to the slowdown in the local and European economies, especially in the tourism sector, the extended stagnation of the Cyprus stock market and the introduction of new, stricter interest income suspension rules, according to an announcement from the bank. The provision charge for bad and doubtful debts for 2003 was significantly higher than that for 2002 and reached £110.2million compared to £80.1 million for 2002.
The increase in the Group’s core profit for 2003 was attributed to the good performance of its Greek operations, as well as to the positive impact of the Group’s actions aimed towards improving interest spreads, despite the reduction in interest rates.
The contribution of BoC’s Greek operations in 2003 reached £41.8 million, representing a 42 per cent share. The core profit of the Group’s Greek operations increased by 26 per cent over 2002.
According to the bank, the increase in core profit was achieved despite the negative effect of the reduction in interest rates in Cyprus and internationally, and the introduction as of 1 January 2003 of the new, stricter Central Bank of Cyprus directive regarding suspension of interest income.
According to the new regulations, in addition to suspending interest income on loans for which the Group has made a provision, banks also suspend interest income on all loans which are more than nine months in arrears and are not fully secured, regardless of whether these amounts are collectible or not. The suspended interest income is not recognised in the financial results of banks.
BoC said the Group’s results for 2003 do not allow the payment of a dividend for the year. “The Group is aware of its shareholders’ expectations for dividend payment and is taking all necessary actions to revert to the payment of dividend as soon as possible,” the announcement said.
“Based on the Group’s financial plan for 2004-2006 and the assumptions used and on the current indications and the actions taken by the Group, and without taking into account any unforeseen exogenous factors or any consequences, positive or negative, stemming from the solution or not of the Cyprus problem, the Group’s expectations for 2004 profits, as well as for the profits of the next two years, are positive, and will therefore allow the Group to revert to the payment of a dividend”
BoC said that in view of the island’s upcoming membership of the EU, that it was optimistic about the coming years, based on its strong capital base, its increasing core profitability and its dynamic expansion in Greece.
“Cyprus’ accession to the European Union is a fact. The renewed efforts to resolve the Cyprus problem may lead to a final solution,” the bank said. “Such a development will strengthen further the Bank of Cyprus’ leading role, as a result of the Bank’s participation in re-building the occupied land that will be returned to its legal owners. Obviously, the extent of the impact of a possible solution of the Cyprus problem will depend on the exact form the solution will take and the Group cannot make any projections at this stage.”
