Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bank of Cyprus Holdings PLC (BKCYF, Financial) reported a strong profit after tax of EUR 270 million for the first half of 2024, with EUR 137 million in the second quarter alone.
- The company achieved a return on tangible equity (ROTE) of 23.7% for the first half of 2024, demonstrating the sustainability of its business model.
- Net interest income (NII) for the first half of 2024 stood at EUR 420 million, up 17% year-on-year, benefiting from higher rates and ample liquidity.
- The bank's cost-to-income ratio remained low at 32%, reflecting strong income and continuous focus on cost management.
- The non-performing exposure (NPE) ratio decreased to 2.8%, achieving the 2024 target early, with improved coverage of 85%.
Negative Points
- Consumer inflation in Cyprus continues to be impacted by energy prices, although it has come under control.
- The cost of wholesale funding increased due to the issuance of Green Senior Preferred Notes at a 5% coupon rate.
- Net interest income is expected to decline in 2025 due to projected lower interest rates and higher cost of deposits.
- The bank's hedging activities had a small cost impact on the first half NII of around EUR 10 million.
- The shift in deposit mix towards time and notice deposits is progressing more slowly than expected, potentially impacting future income.
Q & A Highlights
Q: Can you provide more details on the dividend policy for 2025 and whether it might exceed the 50% payout targeted for 2024? Also, will the mix between cash dividends and buybacks remain similar to 2023?
A: It's premature to comment on the payout ratio post-2025, but we aim to align with the sector. We started with a 14% payout in 2022, moved to 30% in 2023, and target the higher end of our 50% policy for 2024. The mix and timing will be subject to Board approval by year-end. (Panicos Nicolaou, CEO)
Q: Regarding the share of term deposits, your guidance suggests an increase from 33% to 42%. Are you being conservative here, and are there other areas where your guidance might be conservative?
A: The deposit environment has been better than expected, with volumes increasing and costs remaining low. We remain conservative for 2024 and 2025, assuming a slight increase in deposit costs. We prefer to observe depositor behavior as market rates decrease before adjusting assumptions. (Panicos Nicolaou, CEO)
Q: Can you elaborate on the impact of the delisting from the London Stock Exchange and listing on the Athens Stock Exchange? Will there be any significant cost impacts?
A: We do not expect any material costs that would alter our basic assumptions. The listing and delisting are aimed at enhancing liquidity and market visibility without significant cost implications. (Panicos Nicolaou, CEO)
Q: With the strong decrease in NPEs this quarter, can this trend continue? What are your expectations for NPE levels?
A: Our asset quality is robust, and we expect the NPE ratio to remain below 3% in 2024 and below 2.5% in 2025. We are comfortable with our assumptions and expect organic reductions in NPEs. (Panicos Nicolaou, CEO)
Q: Could you clarify the potential impact of Basel IV on your capital position?
A: Basel IV comes into effect on January 1st next year. We do not expect any material changes to our capital position and will disclose any impacts at year-end. (Eliza Livadiotou, Executive Director of Finance)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
