Bank of Cyprus first quarter net profit up

The Bank of Cyprus posted a 49 percent increase in first-quarter net profit on Thursday, helped by a rise in net interest income and an improved loans and advances portfolio, it said. Core profits in Greece, its main overseas market, were flat because of network expansion costs and a higher number of interest-paying deposits compared to revenue-generating loans and advances. The bank, Cyprus's largest with an estimated 40 percent share of the domestic market, said it was pressing ahead with plans to expand into the Balkans and Russia to complement its presence in Greece for the past 15 years.
"We are preparing feasibility studies on our expansion into the Balkans and we will be in a position to discuss it with the board and the Central Bank in the coming months," Chief Executive Officer Andreas Eliades told Reuters.
He said the bank was primarily looking at the Romanian and Bulgarian market.
Net profit rose to 16 million Cyprus pounds ($35.20 million) from 11 million Cyprus pounds in the first quarter of 2004.
Net interest income - the difference between interest earned from lending money and payments made by the bank for its own refinancing - rose 20 percent to 66 million pounds, reflecting higher interest charges to clients, it said.
Bank of Cyprus has been showing a return to profits for the past two years after being hit badly by its exposure to the collapse of domestic equity prices in 1999 and 2000.
Group core profit reached 39 million Cyprus pounds, a 36 percent increase from the corresponding period of 2004.
Charilaos Stavrakis, chief executive officer for Cyprus operations, dismissed suggestions that the bank's bottom line would suffer from an anticipated decline in interest rates.
"We have about 250 million Cyprus pounds tied up in long-term government bonds. We are optimistic a rate reduction would have minimum impact on our profitability," Stavrakis said.
Speculation is rife that the Central Bank may imminently cut its 4.25 percent minimum intervention rate in a drive to converge with the euro zone, where it is 2.0 percent.
The Central Bank's rate-setting Monetary Policy Committee meets on May 20 in its first session since Cyprus joined the European Exchange Rate Mechanism on April 29. The bank said core profits from operations within Cyprus recorded a 74 percent increase to 23 million pounds.
Its performance benefited from containment of operating costs, revenue from banking activities and results from insurance divisions, it said.