BANK of Cyprus (BoC), the island’s biggest lender, has posted a €1.01 billion net loss for 2011 after taking provisions for a Greek sovereign debt swap.
BoC said the total impact of its participation in a voluntary swap of Greek government bonds with a 60% impairment, amounted to €1.3 billion for 2011.
The nominal value of the Greek government bonds held by the group, after the write-down, totalled €975 million at the end of December 2011.
The total nominal value of bonds affected by the write-down was €2.08 billion.
Excluding the impairment, the group’s net profit for the period reached €312 million, an annual increase of 2.0%.
Profit before provisions and tax reached €802 million – up 11%.
“Due to the uncertainty concerning the Greek bond swap program, the group has cut the nominal value of the bonds it holds by 60 percent, a fact that affects net profits,” a joint statement by BoC chairman Theodoros Aristodimou and CEO Andreas Eliades said.
However, the bank also said its final audited results for last year could “potentially be materially different” from the preliminary results due to the final terms of the private sector involvement for the restructuring of Greek public debt.
Eurozone finance ministers yesterday agreed on a €130 billion rescue for Greece to avert an imminent chaotic default after forcing Athens to commit to unpopular cuts and private bondholders to take bigger losses.
The accord will enable Athens to launch a bond swap with private investors to help put it on a more stable financial footing and keep it inside the euro zone.
Private sector holders of Greek debt will take losses of 53.5% on the nominal value of their bonds, which equates to a loss of around 73 to 74 percent on the net present value of the bonds.
BoC said it is pushing ahead with its plan to boost capital, expected to be complete next March.
It will do so through a rights issue of up to €396.3 million and a voluntary exchange of convertible securities of up to €600 million, the lender has said.
“With the completion of the program and the very satisfactory liquidity it possesses, the group will actively continue to support its customers and the economy,” the joint statement said.
The bank said that excluding the write-down, it has achieved its profitability goals for the year and “remains in position to tackle the challenges of the uncertain economic environment.”
The bank closed the year with a total of €28.9 billion on its loan books, a 4.0% rise from 2010.
Some €10 billion in loans were given in Greece.
Deposits were down 7.0% at the end of 2011 – €29.7 billion.
The percentage of non-performing loans reached 10.2 in 2011, compared with 7.3% in 2010, the bank said.
Non-performing loans in Cyprus were 9.5% while the respective figure for Greece was 11.6%.
@Denton – thanks for your email with the procedure for obtaining information about the financial position of a company (including property developers).
Unfortunately, you will only be able to obtain this information if you are using an obsolete version of the Microsoft Internet Explorer web browser as the Registrar of Companies and Official Receiver’s website is in out of date.
However, those with steam driven computers using using Microsoft Internet Explorer versions 6, 7 or 8 ONLY may proceed as follows:
No doubt, in the fullness of time, someone will drag the website into the 21st century.
@Gavin. Thanks. Just a point of clarification. A developer’s bank debts are not all necessarily toxic. They become toxic if and when the developer fails to service the debt for (I think) two consecutive 90-day periods. Nevertheless, in the market conditions of the past 2+ years with almost zero sales, it stands to reason that most developers have been struggling to service their debts. That probably partly explains why the banks have ceased offering them any new loans and/or extension and credit facilities.
The problem has spread to other sectors. I am reliably informed that a major supermarket chain is now having to operate cash-only because their loan and credit facilities have been stopped.
Denton Mackrell.
Thank you for that little gem of inside information.
We all hear certain snippets on our daily travels but it’s always useful to get chapter and verse concerning something that is factual and substantive.
The amount of risky ‘assets’ that are lurking within the portfolios of Cypriot banks is a frightening prospect and doubtless mirrors those in Western Europe and America.
What you’ve laid out for us is but one part of the whole and confirms that bank toxic exposure to developers may well be greater than was thought.
What’s equally dismaying is that there are still those who continue to feed the gullible with tales that all is under control: gas is on the way; the Russians are coming; the hotels will have a good season. I’m also told on a regular basis, by Cypriots as well as foreigners, that the government is sorting out the title deed problem and that all will be shortly resolved. Quite.
I suppose people want to believe what suits. More fool them. Revolution road some time soon?
If you want to know just how much a developer owes the banks here, there is a relatively simple way to find out on-line. It costs 8 Euro per company search and it’s official govt info. Yesterday a friend showed us the printout for his smallish developer. It was a shock for all of us. Although only capitalized at 100,000 Euros, this developer had borrowed over 38m Euros since 2001 and all the loans were still active – all with the Cyprus banks. The printout tabulates each borrowing separately and then gives a grand total.
Although it does not cite what each borrowing is for, it is sufficient to indicate in a developer’s case the scale of his business banking debts and therefore his likely stability. Easy to see why title deeds are not being issued!!
I am passing Nigel the step-by-step procedure and hope that he will do a piece on it.
If just one insignificant local developer can rack up a 38m Euro bank debt, no doubt the rest are also heavily in debt. If the 3,000 developers have bank borrowings averaging, say, only 5m Euros each, the total debt is 15bn Euros. Can it really be that much? However, the total indebtedness is probably considerably higher than the 6bn Euros figure cited for the past couple of years. Would anyone like to refine the estimate?
@hector – a loan becomes non-performing when payments have not been made for 90 days from the due date.
There was a report a couple of years ago that the banks were restructuring loans to avoid them becoming non-performing. See the article Non-performing bank loan restructuring.
Why am I sceptical at the apparent low level of ‘non-performing’ loans? I assume that means loans not being repaid. I also wonder just what the true value of collateral (land/property) registered against those loans really is.
If we apply the Royal Bank of Scotland philosophy to the Bank of Cyprus then this is a tremendous success to be rewarded by massive bonuses for all its staff. When banks make a profit they get rewarded when they declare a loss due to write-downs then they are also making a future profit by eliminating future toxic debt so deserve a massive bonus either way.
Win win all round, if you are in banking. All the taxpayer has to do is contribute more into the coffers to support these people.
Has anyone at the BoC been sacked for their bad judgement in extending these loans to Greece?