Bank of Cyprus profits up despite the crunch

BANK of Cyprus nine month net profit edged up 1 per cent to €375 million, the island’s largest lender said yesterday, as it was largely shielded from the global economic crisis.  

Bank of Cyprus said it still expected to meet its net profit guidance for 2008 of €540 million and was proposing a €0.15 dividend to shareholders.  

“It has no exposure to high-risk derivative products and has minimal reliance on wholesale (11 per cent), whereas 80 per cent of the group’s assets are funded by customer deposits,” the bank said.

It said nine month net interest income rose 4 per cent to €578 million. Profit before tax for the nine months was flat at €433 million.  

Bank of Cyprus, which is heavily focussed on retail banking, said it had little exposure to high market costs on the interbank market, and had not dabbled in toxic assets partly responsible for plunging the world economy into turmoil.  

But the bank appeared to be paying a higher cost to retain deposits and market share, which went up to 28.8 per cent at the end of September, compared to 28.3 per cent in September 2007.

“Our cost of money is what we are paying our depositors, and that is going up,” said Andreas Eliades, the bank’s CEO.

Cypriot banks have been hiking deposit rates in recent months to snare market shares away from rivals.

Bank of Cyprus’ net interest margin stood at 2.52 per cent in the first nine months, from 2.87 per cent last year.

Eliades said Cypriot banks had held consultations with the Central Bank on how to address the divergence between the euribor bank-to-bank lending rates, the ECB benchmark rate and offered deposit rates.  

“There is liquidity in the economy. It is a matter of how the mechanisms will work to gradually converge the deposit rates and the euribor in the direction of the ECB [rate],” Eliades said.  

“We are hoping to find a way to converge the rates,” he said.  

The Bank has a presence in Cyprus, Greece, Britain, Romania and recently acquired 80 per cent of Uniastrum, a Russian bank.  

Relative to the previous quarter, the bank registered a 3 per cent rise in net profit to €131 million in the third quarter, a 2 per cent drop in pretax earnings to €148

million and a 2 per cent fall in net interest income to €195 million.   (R)

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