BANK of Cyprus (BoC) on Friday announced a €2.2 billion net loss for 2012 on rising provisions for loans and declining profits, up more than 60 per cent on its 2011 losses.
In its financial results, the bank said that “Provisions for impairment of loans and advances have increased significantly (€2.306 million in 2012, compared with €426 million in 2011), reflecting the deterioration in the quality of the loan portfolio and the declining collateral values.
“Loss after tax for 2012, including the impairment of Greek Government Bonds (GGBs) (€188 million), the impairment of goodwill and other intangible assets (€360 million) and the restructuring costs (€21 million), reached €2.214 million compared to €1.359 million for 2011.”
Its non-performing loans ratio at 31 December 2012 reached 23.7%, compared to 10.2% at 31 December 2011. In addition, the events of March 2013 are expected to cause further declines in collateral values. These factors are reflected in the significantly higher levels of provisions for impairment of loans, with accumulated provisions for impairment of loans reaching €3.7 billion and the provision coverage ratio of non-performing loans amounting to 55%.
The bank warned that more borrowers are expected to default, while collateral values are expected to fall even further, leading to increased levels of non-performing loans and provisions for impairment.
The Bank’s Board of Directors believes that the Group is taking all the necessary measures to maintain its viability and the development of its business in the current business and economic environment. However, a number of uncertainties remain:
- The recession may be more severe than envisaged in the macroeconomic scenario which formed the basis for the estimation of future credit losses for the recapitalisation of the Group.
- The liquidity situation is impacted by the level of confidence in the banking system and the period over which the restrictive measures and capital controls are in place. The Group currently has limited access to interbank and wholesale markets which, combined with a reduction in deposits in Cyprus, has resulted in increased reliance on Eurosystem funding.
- The Group is exposed to litigation and claims mainly relating to the bail-in of depositors and the absorption of losses by the holders of equity and debt instruments of the Company.
The bank’s core tier 1 ratio (a measure of a bank’s financial health) sank to minus 1.9 per cent by the end of 2012, way below the EU-mandated level of 9 per cent.