Bank of Cyprus profits surge

THE BANK of Cyprus, the country’s largest financial group, made 88 per cent more after-tax profit in 2005 and said cost containment, a growing market for consumer credit and an improvement in net interest margins would boost profits further in 2006.

The group, which has a rapidly expanding presence in neighbouring Greece, said yesterday that after-tax earnings rose 88 per cent in 2005 to £72 million, and said it anticipated a further 65 per cent increase in 2006.

Pre-tax profit rose 78 per cent to £91 million. The group said it recommended shareholders get a seven-cent dividend per share.

Profitability was rising on the back of a resurgence in consumer credit and particularly home mortgages, and in its insurance divisions, and due to lower bad debt provisions and cost containment.

There was also an increase in net interest income from better pricing and more efficient management of foreign deposits, which have surged across the banking sector since Cyprus joined the ERM-2 currency mechanism last year.

“We have boosted our market share, particularly among private consumers,” said Group Finance Manager Yiannis Kypri. “There was also cost containment, and in Cyprus there is still a freeze on new recruitment,” he said.

After-tax profit for the fourth quarter of 2005 rose 15 per cent compared with the third quarter of the year.

“Based on the group’s financial results to date, the indications for their further development, as well as the current conditions in the market in which the group operates, it is expected that the group profit after tax will reach £120 million for 2006,” the bank said.

The forecast represents a tripling of profits within two years. The group made an after-tax profit of £39 million in 2004.

Reflecting a more aggressive marketing strategy targeting homebuyers in particular, Bank of Cyprus said its market share in the domestic consumer lending sector rose to 25.6 per cent at the end of December 2005 from 24.3 per cent the year before. Loans registered an annual increase of 10 per cent.

In early 2005 the bank wrote off loans totalling £130 million. They represented amounts outstanding for years and had been accounted for by provisions, Kypri said.

In Greece, the annual rate of increase of loans was 21 per cent, higher than the 17 per cent of the total market, while its market share was 3.86 per cent.

The bank’s share of the Greek loan market in 2004 was 3.67 per cent.