Bank of Cyprus Group CEO Panicos Nicolaou described 2023 as a milestone year for the organisation, as it became the first bank in Cyprus and Greece to secure approval from the ECB to restart dividend payments after 12 years.
The dividend of €22.3 million was equivalent to a payout ratio of 14 per cent of the full-year 2022, adjusted recurring profits.
Addressing the bank’s annual general meeting on Friday, Nicolaou said that the dividend “confirmed the Bank of Cyprus’ transformation into a well-capitalised, diversified and sustainably profitable banking and financial services group”.
“In a further demonstration of the significant progress we have made in recent years and the credibility we have built with international investors, the Bank of Cyprus re-opened the euro-denominated AT1 debt market in June 2023,” he added.
The chief executive officer explained that this market had been closed following the emergency takeover of Credit Suisse and the write-down of its AT1 debt in March 2023.
“Our successful issue of €220m AT1 capital securities was 12 times over-subscribed with interest from approximately 240 institutional investors,” he said, noting that” this enabled us to price the issue much more keenly than our previous AT1 issue in 2018″.
“This transaction was also recognised as the Best Financial Institution Bond in South East Europe by EMEA Finance in its 2023 awards,” he added.
Nicolaou also highlighted the resilience and strong performance of the Cypriot economy amid geopolitical and macroeconomic challenges in 2023.
He said that despite the increased geopolitical uncertainty due to conflicts such as the war in Ukraine and the Israel-Hamas conflict, Cyprus continued to outperform the euro area, achieving a GDP growth of 2.5 per cent compared to the euro area’s 0.5 per cent.
Moreover, he said that tourism played a significant role in this growth, with arrivals increasing by 20.1 per cent year-on-year, reaching 3.8 million, and tourist revenue growing by 22.6 per cent to almost €3 billion.
“Tourist activity continued to improve in 2023 after a strong performance in 2022,” said Nicolaou, emphasizing that this revenue was 11 per cent higher than in 2019.A
Additionally, he said that the Cypriot economy also benefited from lower inflation rates, with an average of 3.9 per cent compared to the euro area’s 5.4 per cent. This trend is expected to continue, with the European Commission forecasting inflation of 2.4 per cent for Cyprus in 2024.
Reflecting on the bank’s achievements, Nicolaou highlighted the bank’s successful de-risking strategy, which reduced non-performing exposures (NPEs) by €14.6 billion since December 2014, bringing the NPE ratio down to 3.6 per cent by the end of 2023.
Nicolaou also pointed out the Bank’s improved capital ratios and liquidity profile, resulting in a reported Return on Tangible Equity (ROTE) of 24.8 per cent for the year.
“It [2023] was the start of a new chapter in which the bank is well capitalised, has a diversified business model and is sustainably profitable,” he stated.
Nicolaou spoke about the bank’s financial results for 2023. During this period, the bank generated a profit after tax of €487m (up from €57m in 2022), benefitting from sharply rising interest rates, and surpassing the full-year 2023 targets initially set at its investor update event in June 2023.
He also noted that the bank “continued to support our clients and the Cypriot economy in 2023 with approximately €2 billion in new lending though our gross performing loan book remained broadly flat year-on-year at €9.8 bn as repayments offset new lending”.
Revisiting the achievement of dividend payments, Nicolaou said “our particularly strong performance in 2023 enabled us to gain approval from the ECB in March 2024 to significantly increase the shareholder distribution from full-year 2023 earnings to €137m”.
“This comprises a proposed cash dividend of €112m (25 cents per ordinary share) and an inaugural share buyback of up to €25m,” he said, noting that “this distribution is over six times higher than the distribution in 2023, with the proposed cash dividend five-times higher than that paid in 2023”.
“We have more than doubled the payout ratio to 30 per cent compared to last year, meeting our target payout range of 30-50 per cent,”
He also referenced the group’s first quarter results for 2024, which were published on Thursday, May 16.
At the end of the first quarter, the bank posted a profit after tax of €133m, reflecting a 4 per cent decrease quarter-on-quarter but a substantial 40 per cent increase year-on-year, with basic earnings per share amounting to €0.30 for the first quarter of 2024.
“Our strong performance this quarter indicates that we are tracking ahead of our 2024 targets,” Nicolaou said.
Nicolaou also outlined the bank’s immediate priorities, emphasising digital transformation as a cornerstone for operational excellence.
Moreover, he said that the bank is a pioneer in digital banking innovation in Cyprus, aiming to reshape the banking experience to be more intuitive, responsive, and customer-centric.
“We are reshaping the banking experience so that it is more intuitive, more responsive, and more aligned with the needs of our customers,” he said.
“The group aims to continue to innovate, and simplify the banking journey, providing a unique and personalised experience to each of our customers,” he added.
He noted that in 2023, the bank launched Quickhub, a digital branch designed to facilitate everyday transactions and financial needs in a user-friendly and efficient manner.
One of the key innovations within Quickhub is Quickloans, accessible through both the BOC Mobile App and Internet Banking.
This feature, he said, has allowed customers to receive instant credit decisions without visiting a branch.
Since the beginning of 2023, over 33,000 applications have been processed, resulting in €100 million in new loans.
Additionally, in April 2023, the bank established Jinius Ltd, a wholly-owned subsidiary that serves as a digital economy platform connecting the entire Cypriot market.
Jinius offers businesses innovative services that streamline and accelerate their daily transactions and activities, and it is expected to generate new revenue sources for the bank in the medium term.
The B2B services of Jinius include tenders management, ecosystem management, invoicing management, various payment methods, and remittance management for bulk payments to multiple suppliers.
Nicolaou also spoke about the bank’s environmental, social and governance (ESG) agenda.
“Climate change and the transition to a sustainable economy are two of the world’s greatest challenges,” he stated.
“As part of our vision to be the leading financial hub in Cyprus, we are determined to lead the transition of Cyprus to a sustainable future,” he added, noting that “the group continues to progress towards its goal to embrace ESG in all aspects of business as usual”.
In terms of the organisation’s social contributions, he mentioned that the Bank of Cyprus Oncology Centre has supported nearly 50,000 patients since 1998, while the SupportCY network responds to societal needs and emergencies.
Exceeding its ESG target, the bank also achieved 33 per cent female representation in executive positions by 2023, while female representation in key leadership roles reached 41 per cent.
“The progress we are making on embracing ESG in all aspects of business as usual was demonstrated by our AA rating (on a scale of AAA-CCC) in the MSCI ESG Ratings assessment in 2023,” Nicolaou said.
“We maintain our strong commitment to sustainability and to long-term value creation for all of our stakeholders,” he added.
In terms of medium-term priorities, Nicolaou said that the group’s vision “is to create lifelong partnerships with our customers guiding and supporting them in a changing world”.
In this regard, strategic priorities include growing revenues efficiently through high-quality lending and diversification, achieving a lean operating model via automation and AI, maintaining robust asset quality, and enhancing resilience and the bank’s ESG agenda.
“I am incredibly proud that after ten years of decisive management actions and the extraordinary efforts and dedication of our staff, the bank was not only able to support its clients, the Cypriot economy and society and to deliver sustainable value to you, our shareholders, in 2023, but also led the way among banks in the region and in the EU more broadly,” Nicolaou said.
“Our proven strategy and well-diversified business model position the Group for success over the years ahead,” he added.
Meanwhile, Group Chairman Takis Arapoglou also addressed the meeting, saying that “for the Bank of Cyprus, 2023 was a year during which we fully reaped the benefits of the bank’s transformation into a well-capitalised group with a strong, diversified business model after many years of restructuring”.
“We have improved our operating models and processes, focused on compliance and governance and reinforced our ESG initiatives, while continuing to deliver our digital transformation programme, benefiting our customers and the Bank’s operational efficiency,” he added. (Cyprus Mail)
