20.09.2022
Hellenic Bank released its financial results for the first half of 2022 on Tuesday, reporting a profit of €55.4 million compared to a profit of €21 million for the corresponding period in 2021.
The increase in profitability is primarily driven by improved earnings performance, ongoing cost management efforts and the reversal of some €11.2 million impairment losses. In addition, during this time the bank recorded a net interest income of 133 million euros with a net interest margin of 1.4%, and a cost-to-income ratio of 76%.
The bank’s return on equity (RoTE) reached 10.2% in the first half of the year. Moreover, the bank’s new lending amounted to 556 million euros compared to 388 million euros in the same period of the previous year, an increase of 43% year on year.
According to the bank, the forecast for the full year is likely to be affected by the costs incurred during the implementation of the staff layoff scheme, the completion of the Starlight project, as well as the difficult macroeconomic situation. The Starlight project, which means an agreement to sell around €0.7 billion of non-performing assets and service APS debt, is expected to be completed by the end of this year.
In addition, the bank also acquired a portfolio of performing loans from RCB Bank for an approximate amount of 337 million euros, further improving the quality of its assets.
The bank’s pro forma NPE ratio was 3.6%, the lowest among its peers, while its pro forma NPE reserve coverage was 57%.
In terms of the bank’s capital and financing, its capital adequacy ratio and CET 1 ratio were 20.95% and 18.68% respectively, both of which were well above the minimum capital requirement. In addition, in July of this year, the bank successfully completed the first issue of MREL eligible senior preferred notes in the amount of EUR 100 million.
The bank also boasts sufficient liquidity with a liquidity coverage ratio (LCR) of 473%. In the medium term, the bank aims to achieve an NPE ratio of around 3 percent, a cost of risk of 50 basis points, and a CET 1 ratio of less than 14 percent. It also aims to reach €1 billion a year in new loans, achieve a net loan-to-deposit ratio of less than 55 percent, a cost-to-income ratio of less than 60 percent, and a return on tangible capital (RoTE) of around 7 percent.
As for the strategy for moving forward, the bank has a strategic plan for the period from 2022 to 2024, which aims to transform the bank, address structural challenges, with a focus on digitalization and cost control. In addition, the bank is focused on retail clients, has a solid client base and a significant market share among households, with a share of deposits of 38% and loans of 33%.
The Bank has also implemented a comprehensive Environment, Social Protection and Governance (ESG) strategy. Regarding the Cypriot economy and the environment in which the bank operates, it was noted that the GDP of Cyprus grew by approximately 6% in the first half of the year, despite the war in Ukraine and the ongoing adverse effects of the Covid-19 pandemic. He also highlighted inflationary pressures and rising interest rates driven by monetary measures coupled with widening credit spreads.
“The second quarter of 2022 continued to be dominated by the war in Ukraine, leading to very high inflation, lower consumer confidence and a worse outlook for the global economy,” Hellenic Bank CEO Oliver Gatzke said. “Despite the weak outlook, the Cypriot economy grew by 6.1% in the first six months of the year,” he added, noting that the positive GDP growth rate was mainly due to the good performance of trade, transport and hospitality. industries, as well as other industries related to leisure.
Gatzke also said that the interest rate environment has changed significantly, with the ECB raising interest rates for the first time in 11 years, and in July 2022 the rate was set at 0%. In addition, he noted that recently interest rates were further raised to 0.75%, and further increases are expected by the end of this year.
At the same time, long-term interest rates were raised across Europe, with Cyprus 10-year sovereign bonds peaking at 3.5% towards mid-2022, mainly due to widening credit spreads reflecting capital market uncertainty . Environment.
Hellenic Bank CEO Oliver Gatzke:
“Despite these difficult conditions, Hellenic Bank fared much better than expected, making significant progress towards its strategic goals,” said Gatzke.
We generated an after-tax profit of 55.4 million euros, which proves the resilience and reliability of our business model,” he added.
Speaking about the bank’s new lending, risk/return ratio and capital adequacy ratio, the CEO of Hellenic Bank said the bank is well positioned and committed to supporting its viable retail and business clients.
“Despite progress, we remain vigilant and especially cautious about upcoming challenges, so we have been consistent and therefore have worked intensively to improve the quality of our portfolio,” he said.
“The Starlight project, which involved the sale of a €0.7bn non-performing loan portfolio and an agreement with RCB to acquire a performing loan portfolio, significantly reduced our NPE forecast to around 3.6%, one of the lowest among peers.” he added.
Regarding the bank’s future prospects, Gatzke said Hellenic Bank’s three-year transformation journey is on track.
The Bank seeks to improve the quality of customer service and increase revenues, as well as increase efficiency.
“We are in the process of transforming ourselves into a customer-centric organization by improving the customer experience through digitalisation, streamlining our processes and offering simple and competitive products,” Gatzke said.
“At the same time, we are improving the profile of our loan portfolio through healthy growth, with a focus on environmental, social and governance (ESG) issues,” he added.
In addition, Gatzke said rising interest rates are expected to support the bank’s key performance indicators over the medium term.
At the same time, the bank stated that it is focusing on healthy new lending with a sufficient yield profile, both in Cyprus and internationally, as well as improving the profitability of its investment portfolio.
“On labor issues, I reiterate our unconditional commitment to signing a new collective agreement and formulating an exit scheme to improve the bank’s cost-to-income ratio,” said Gatzke, noting that active cost management remains at the core of the bank’s strategy.
“Discussions with the union are ongoing and I believe that we will soon achieve a successful outcome, mainly for the benefit of our employees, which will ensure a healthy and reliable organization in the future,” he concluded.
