The economic growth of the Bank of Cyprus group remained robust in the nine-month period, with the bank recording profits after tax amounting to €349 million, compared to losses of €19 million in the corresponding period of 2022.
Panicos Nicolaou, CEO, Bank Of Cyprus, declared: “We have delivered another quarter of strong profitability, achieving an ROTE of over 20% for the third consecutive quarter, demonstrating the Group’s continuing ability to generate sustainable profitability and shareholder value creation. During the nine months of 2023, we recorded a profit after tax of €349 mn, corresponding to a ROTE of 24.6%, facilitated by strong revenues.
Total income amounted to €796 mn, of which €572 mn related to net interest income, more than double last year’s level, a reflection of the higher interest rate environment and a well-managed deposit pass-through level.
Non-interest income represents a significant and sustainable contributor to the Group’s profitability and covers c.90% of total operating expenses. Our cost to income ratio improved further to 31%, driven by higher income, whilst our cost base remains under control, with savings partly offsetting inflationary pressures.
Against the backdrop of geopolitical developments and heightened uncertainty, the Cypriot economy is once again proving resilient with strong economic growth of 2.3% in 2Q2023, outpacing the Eurozone average. As the largest financial group in Cyprus, we continue to support the economy by extending c.€1.6 bn new loans in 9M2023, whilst maintaining prudent underwriting standards.
Our balance sheet is characterised by ample liquidity as well as strong asset quality and a robust capital position. Over one third of our assets are cash balances with central banks, benefitting significantly from higher rates while our deposit base continued to grow. Our NPE ratio stood at 3.5%, in line with our target and our coverage stood at 77%. Our cost of risk at 58 bps remains within our 2023 target range.
In October 2023 Moody’s upgraded the Bank’s long term deposit rating to investment grade for the first time in 12 years, confirming this new chapter of becoming a strong, diversified well-capitalised and sustainably profitable organisation. With another strong set of results in 3Q2023, the Group’s performance is well ahead of 2023 targets and notwithstanding typical 4Q2023 seasonality, we expect to comfortably exceed our 2023 ROTE target of over 17%. We continue to execute strategy, with a clear focus on supporting our customers, delivering shareholder value and assisting the development of the Cypriot economy.”
The financial information presented in this Section provides an overview of the Group financial results for the nine months ended 30 September 2023 on the ‘underlying basis’ which management believes best fits the true measurement of the performance and position of the Group, as this presents separately any non-recurring items and also includes certain reclassifications of items, other than non-recurring items, which are done for presentational purposes under the underlying basis for aligning the presentation with items of a similar nature Reconciliations between the statutory basis and the underlying basis to facilitate the comparability of the underlying basis to the statutory information, are included in Section F.1 ‘Reconciliation of Interim Income statement for the nine months ended 30 September 2023 between statutory basis and underlying basis’ and Section H under ‘Alternative Performance Measures’ and Section I under ‘Definitions & Explanations’.
Throughout this announcement, financial information in relation to FY2022 and quarterly 2022 financial information has been restated for the effects of transition to IFRS 17 which was adopted on 1 January 2023 and applied retrospectively. As a result, 2022 financial information, ratios and metrics are presented on a restated basis unless otherwise stated. Further information on the impact of IFRS 17 transition is provided below and in Section F.9 of this announcement.
Throughout this announcement, the capital ratios as at 31 December 2022 have been restated in order to take into consideration the 2022 dividend declaration. This refers to the proposal by the Board of Directors to the shareholders of a final dividend in respect of the FY2022 earnings following the approval by the European Central Bank (‘ECB’). The proposed final dividend was declared at the Annual General Meeting (‘AGM’) which was held on 26 May 2023. This dividend amounted to €22.3 mn in total and had a negative impact of 22 bps on the Group’s CET1 ratio and Total Capital ratio as at 31 December 2022. As a result, the 31 December 2022 capital ratios are presented as restated for the 2022 dividend unless otherwise stated. Additionally, throughout this announcement, the capital ratios as at 30 June 2023 are presented including 1H2023 reviewed profits and a dividend accrual thereon at the top end of the payout range of the Group’s approved dividend policy in compliance with the Capital Requirements Regulation and in line with the ECB Decision EU (2015/656) on the recognition of interim profits in CET1 capital. Further details are provided in Section ‘A.1.1 Capital Base’.
Capital ratios including retained earnings are referred to the CET1 ratio and Total capital ratios as at 30 September 2023 which include unaudited/unreviewed profits for the quarter ended 30 September 2023 and a dividend accrual thereon at the top end of the Group’s dividend policy.
Transition to IFRS 17
On 1 January 2023 the Group adopted IFRS 17 ‘Insurance Contracts’ (‘IFRS 17’) which replaced IFRS 4 ‘Insurance contracts. IFRS 17 is an accounting standard that was implemented on 1 January 2023, with retros ective application and establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts issued, investment contracts with discretionary participation features issued and reinsurance contracts held. In substance, IFRS 17 impacts the phasing of profit recognition for insurance contracts as profitability is spread over the lifetime of the contract compared to being recognised substantially up-front under IFRS 4. This new accounting standard does not change the economics of the insurance contracts but decreases the volatility of the Group’s insurance companies profitability.
