BoC's Panicos Nicolaou: "We are now targeting a distribution towards the higher end of our payout ratio range for 2024"

"Capitalising on this strong performance, and on the back of a supportive macroeconomic environment we are upgrading today our 2024 and 2025 financial targets," the Bank of Cyprus Group Chief Executive Panicos Nicolaou has announced.

Commenting on the Group's Financial Results for the six months ended 30 June 2024, Nicolaou elaborated, "We now expect that reported ROTE will exceed 19% for 2024, and be mid-teens in 2025, facilitating strong CET1 generation of over 300 bps per annum before distributions."

"Our commitment to delivering sustainable shareholder returns is demonstrated by the distribution of €137 mn in respect of 2023 earnings comprising a cash dividend of €112 mn that was paid in June 2024 and a share buyback of up to €25 mn that was launched in April 2024. Looking forward, we are now targeting a distribution towards the higher end of our payout ratio range (i.e 50%) for 2024, subject to market conditions and required approvals. Given our strong capital generation, we will review our distribution policy alongside full year 2024 results in the context of prevailing market conditions," he said.

Nicolaou also confirmed that the Group's Board had reached the view that a listing on the Athens Stock Exchange (ATHEX) in conjunction with a delisting from the London Stock Exchange (LSE), would yield a number of long-term strategic and capital market benefits.

Key Highlights for the six months ended 30 June 2024:

Strong economic growth continues

• GDP projected to grow by c. 2.9%1 in 2024 outpacing Euro area average
• Strong new lending of €1.2 bn, up 10% yoy
• Gross performing loan book at €10.1 bn, up 3% since December 2023

Delivered ROTE of 23.7% in 1H2024

• NII at €420 mn in 1H2024 up 17% yoy; 2Q2024 NII at €207 mn, down 3% qoq mainly reflecting increased hedging activity
• Total operating expenses2 up 4% yoy to €167 mn, impacted by inflation; cost to income ratio2 at 30% down 2 p.p. yoy
• Profit after tax of €270 mn up 23% yoy, of which €137 mn in 2Q2024 up 4% qoq
• Basic earnings per share of €0.61 for 1H2024 (vs €0.49 for 1H2023)

Liquid and resilient balance sheet

• NPE ratio at 2.8% (0.4% on a net basis) down 60 bps qoq
• NPE coverage at 85%; cost of risk at 31 bps
• Retail funded deposit base at €19.7 bn, up 3% yoy and 2% qoq
• Highly liquid balance sheet with €7.3 bn placed at the ECB; TLTRO fully repaid in June 2024
• In compliance with 2024 final MREL target post successful issuance of €300 mn Green Senior Preferred Notes in April 2024

Robust capital and shareholder focus

• CET1 ratio and Total Capital ratio at 18.3% and 23.3% respectively
• CET1 generation3 of 214 bps in 1H2024; of which 129 bps in 2Q2024
• Tangible book value per share of €5.274 as at 30 June 2024 up 21% yoy
• Distribution yield at 8%5; €112 mn cash dividend paid in June 2024 and €25 mn buyback launched in April 2024

Long-term deposit rating upgraded by Moody’s to Baa1 in July 2024; 2 notches above investment grade

Nicolaou's full statement can be read below:

“We are pleased to announce that we delivered another quarter of strong profitability, demonstrating the sustainability of our business model. For the sixth consecutive quarter, we achieved a ROTE of over 20%, comfortably exceeding our 2024 targets set in February 2024. This strong performance was the outcome of resilient net interest income evolution, continued cost discipline amid inflationary pressures and a low cost of risk. Overall, we recorded earnings per share of €0.61 during the first half, delivering strong shareholder value creation, with tangible book value per share improving by 21% year on year to €5.27.

Our capital position remains robust; rapid capital build-up drove our CET1 ratio to 18.3% and Total Capital ratio to 23.3% net of distribution accrual1 as at 30 June 2024. Our asset quality is healthy and continues to improve with the NPE ratio falling below 3% for the first time.

The Cypriot economy continues to display strength and resilience against the backdrop of geopolitical uncertainty. In 2024, GDP is forecast to grow by c.2.9%2 and is expected to outpace the Eurozone average.

Our strong financial and operational performance is also being reflected in higher credit ratings, with recent upgrades from Moody’s, Fitch and S&P. This includes a two-notch upgrade from Moody’s to the Bank’s long-term deposit rating to Baa1, two notches above investment grade, representing the highest long-term deposit rating for the Bank since 2011.

Capitalising on this strong performance, and on the back of a supportive macroeconomic environment we are upgrading today our 2024 and 2025 financial targets. We now expect that reported ROTE will exceed 19% for 2024, and be mid-teens in 2025, facilitating strong CET1 generation of over 300 bps per annum before distributions.

Our commitment to delivering sustainable shareholder returns is demonstrated by the distribution of €137 mn in respect of 2023 earnings comprising a cash dividend of €112 mn that was paid in June 2024 and a share buyback of up to €25 mn that was launched in April 2024. Looking forward, we are now targeting a distribution towards the higher end of our payout ratio range (i.e 50%) for 2024, subject to market conditions and required approvals. Given our strong capital generation, we will review our distribution policy alongside full year 2024 results in the context of prevailing market conditions.

At Bank of Cyprus we regularly evaluate how best to position the Group to deliver sustainable value to shareholders. One of the matters we have been assessing is how best to enhance the Group’s market visibility, making it more accessible to a new pool of investors. In this spirit, the Board has reached the view that a listing on the Athens Stock Exchange (ATHEX) in conjunction with a delisting from the London Stock Exchange (LSE), will yield a number of long-term strategic and capital market benefits. In the coming weeks we will outline why we are recommending the above, with a proposal to be put to shareholders at a forthcoming EGM to be convened in due course.

We are pleased with the progress we have made so far but remain focused on delivering for all our key stakeholders. We continue to execute our strategy, solidifying our position of strength with a clear focus on supporting our customers, delivering shareholder value and supporting the growth of the Cypriot economy.”