Roundup: Cypriot banks stage strong comeback three years after resolution, says economist

Data released by Cypriot banks this week on the results of the first half of the year showed a strong comeback three years after Cypriot lenders were resolved, an economist said on Friday.

"First-half of the year results are a strong indication that the banking system is springing back and is on the verge of expanding again," said Marios Mavrides, a financial analyst and parliamentary deputy.

But he also noted that banks were still weighed down by the impact of a three-year economic adjustment program under a 10-billion-euro (11.2 billion U.S. dollar) bailout agreement with the Eurogroup and the International Monetary Fund (IMF).

The biggest problem for the banks is non-performing loans, the result of still-high unemployment standing at 11.6 percent but down from its peak of 17 percent three years ago, Mavrides said.

Non-performing loans for all banks soared close to 28 billion euros or about half of the total after the bailout in March 2013.

Bank of Cyprus, the eastern Mediterranean island's biggest lender, posted a net profit of 56 million euros from Jan. 1 to June 30.

The bank's Irish CEO, John Patrick Hourican, said the bank's operating profitability for the second quarter actually reached 135 million euros but the net profit was brought down to just six million euros, after the bank decided on a faster risk reducing though increased provisions.

It also reduced problematic loans by 16 percent through restructuring bad debts amounting to 2 billion euros and brought down Emergency Liquidity Assistance (ELA) from the European Central Bank by 2.3 billion euros to 1.5 billion euros.

The Bank of Cyprus was burdened by ELA amounting to about 10 billion euros when it was forced to recapitalize by seizing almost half of large deposits three years ago.

Bank of Cyprus said its Core Tier 1 capital rose to 14.4 percent, as against 12.25 percent required by the European Banking Authority.

Cooperative banks have emerged as the second largest lender of Cyprus, following the winding down of the bankrupted Cyprus Popular Bank.

The 17 cooperative banks -- down from their original number of about 300 local cooperative credit societies -- are grouped under the Cooperative Central Bank.

It also reported a good profit of 55.3 million euros during the first half compared to 46.7 billion euros for the corresponding period last year.

Cooperative banks also reported an extensive restructuring of red loans amounting to nearly 700 million euros.

But a statement said these loans were still recorded as non-performing due to the requirement of the European Banking Authority for restructured loans to be struck from the list after 12 months.

The Cooperative Central Bank reported a 16.38-percent Core Tier 1 ratio.

Hellenic Bank posted a first-half profit of 1.1 million euros, up from 543,000 euros of the first half of 2015.

It also reported a reduction of non-performing loans by 2.0 percent in the first half and 4.0 percent on a yearly basis.

The bank's Core Tier 1 capital stood at 17.15 percent, it said. Endit