AstroBank: €39.4m profit for 2023 along with 23.7% capital adequacy ratio

Διευθύνων Σύμβουλο της AstroBank κ. Αριστείδη Βουράκη

He also stated that the decisive actions of the management have allowed us to transform the Bank into a strong and well-capitalized banking institution, capable of adding value to its customers and shareholders. With supervisory capital of almost 24%, a wide presence throughout Cyprus and modern digital channels, AstroBank plays a key role in serving Cypriot businesses and individuals.

He also noted that AstroBank announced strong profitability for the year 2023 with profit after tax of €39.4 million excluding non-recurring items (€30.4 million net profit after tax). Equity amounted to €234.1 million while the overall capital adequacy ratio was significantly strengthened through organic creation and increased to 23.7%.

Finally he said that” “We remain committed to our business plan, the which in recent years has led to substantial operational efficiency, quality customer service and improved profitability”.

Important Details

Profit after tax €39.4m in 2023, excluding non-recurring items Profit after tax €30.4m vs €12.2m in 2022 Significant organic capital generation? Capital Adequacy Ratio 23.7% to 22.1% Common Equity Tier 1 (CET 1) Successful issuance of MREL eligible capital bonds of €34m in 2023; MREL ratio 27.8% MEX ratio decreased to 14.9% vs. 19.8% in 2022, solely through organic reduction Cost to income ratio decreased to 52.3% vs. 68.2% in 2022 Return on Equity 13.9% against 6.2% in 2022

Income Statement

AstroBank recorded Profit After Tax of €30.4m in 2023, representing a 13.9% return on average Equity, compared to €12.2m and a yield of 6.2% in 2022.

The Group's profit After Taxes and excluding non-recurring items1 for the year 2023 amounted to €39.4 million (2022: €21.7 million). Total operating income increased by 34% to €97.2 million compared to €72.7 million in 2022.

The increase is primarily due to net interest income, which increased by 46% in 2023 to €74.8 million, reflecting the impact of the favorable interest rate environment on the Bank's strong liquidity. Net interest margin for the year 2023 was 3.0% (2022: 1.9%) supported by the rising interest rate environment.

Net fee and commission income and other non-interest income , amounted to €22.5 million compared to €21.5 million in 2022.

Total expenses amounted to €50.9 million in 2023, an increase of 2.8% compared to €49.5 million in 2022. Personnel expenses represent 53.2% of total expenses, which amounted to €27, 1m in 2023 up 4.8% from €25.9m in 2022, reflecting annual increases provided for in the bankers' collective agreement and automatic indexation (ATA) and partially offset by voluntary scheme savings severance.

 In 2023, the Group proceeded with a voluntary severance plan in which 55 full-time employees were approved to leave at a total cost of €7.0 million (2022: 16 employees left at a total cost €1.9 million). The total number of permanent staff on 31 December 2023 amounted to 392 (2022: 443). Other operating expenses in 2023 were up 1.8% to €16.2m compared to €15.9m in 2022.

Depreciation and write-offs decreased to €3.3 million compared to €3.7 million in 2022 while the special fee, contributions to the Single Resolution Fund, and other charges amounted to €4.3 million (2022: €4, 1 million). The cost-to-income ratio decreased to 52.3% in 2023 from 68.2% in 2022, primarily due to increased operating income and management's continued focus on efficiency and cost management.

Pre-provisions income mainly from core banking shows improved in 2023 to €46.4m compared to €23.1m in 2022, an increase of 100.9% mainly attributed to the rise in net income from interest.

Total impairment charges for 2023 amounted to €6.7 million compared to €3.7 million in 2022. The increase in 2023 is mainly attributable to higher loan impairment charges. Non-recurring costs of €9.0m include the Voluntary Redundancy Plan (VRS) of €7.0m and €1.9m of depreciation costs arising from the acquisition of the MEX management company in 2022 (ex-Quant) .

Ibalance sheet and capital position

The total assets of the Group amounted to €2,725 million on December 31, 2023 ( December 31, 2022: €2,726 million) remaining stable compared to the previous year.

Loans after provisions decreased from €1,091m at 31 December 2022 to €933m at 31 December 2023 reflecting the significant consolidation in the MEX portfolio. The total of new lending during this period amounted to approximately €90 million. The continuous new lending to businesses and individuals in Cyprus confirms AstroBank's strong commitment to the Cypriot economy and its strong financial position that facilitates new business activity.

Customer deposits showed an increase of 2.0% and amounted to €2,155 million compared to €2,112 million in the previous year and consist of deposits in Euros and foreign currencies, mainly US dollars and British Sterling.

At 31 December 2023 central bank financing amounted to €200 million (2022: €300 million) and consists exclusively of financing through the program Targeted Longer-Term Refinancing Operations (TLTRO) III. The Bank proceeded to repay €100 million of financing TLTRO III in September 2023 and €100 million in March 2024.

Backed by common equity of €234.1 million, the Bank's capital adequacy ratio rose to 23.7% from 18.0% the previous year, driven by internal capital generation through profitability and significant non-performing loan consolidation. The Core Tier 1 ratio, which consists entirely of common equity, stood at 22.1% as at 31 December 2023.

AstroBank's liquidity ratio remained strong throughout the year, with a coverage ratio of at 366% at the end of 2023 and a stable loan-to-deposit ratio at 43%.

The MEX ratio decreased to 14.9% at 31 December 2023, from 19.8% at 31 December 2022, solely through organic resolution, while provision coverage stands at 44.0% (2022: 46.1%). Asset sales (REOs), direct and indirect, amounted to €43 million for the year 2023, of which €33.7 million represent direct sales. The total sales during the last three years amount to approximately €150 million.

During 2023, the capital adequacy ratios were significantly improved by the annual profits but also the reduction in the weighted assets (RWAs), mainly due to the reduction of NPLs and loan repayments. CET 1 and Total Capital ratios stood at 22.1% and 23.7% respectively as at 31 December 2023 compared to 16.5% and 18.0% in 2022. The Bank's capital adequacy ratios are well above the minimum supervisory requirements.

As of December 31, 2023, the MREL ratio stood at 27.8% and meets the final binding target set by the supervisors of 26.0% effective December 31, 2024, which also includes the increase in the countercyclical buffer by 0 .5% in June 2024. The indirect sale represents the direct disposal of the property in debt settlement.

ESG and digital transformation

The Bank is committed to operating in an economically and socially sustainable manner. In this direction, it has drawn up and intends to implement an upgraded ESG program with significant improvements in the Governance Pillar, while giving more weight to the Environment Pillar, in combination with AstroBank's already strong commitment to the Social Pillar. With the main objectives of increasing energy efficiency and supporting customers in the green transition, AstroBank has a wide range of environmentally friendly loan products, which in combination with the implementation of a plan to reduce field 1, 2, and 3 emissions (including financed emissions) and the full integration of the environmental agenda into the Bank's business model, are the core of the environmental pillar.

In order to remain competitive and provide quality and efficient services to its customers, Astrobank continues to invest in technology and automation. In November 2023, the Bank launched a new website and mobile banking application, thereby providing an improved banking experience to its customers. Around the middle of 2024, the full digitization of the Bank's cards is also expected. These moves are combined with a series of digitization and integration of internal processes that will make customer service even more efficient. With the integrated new digital channels and a strong network in 14 locations Pan-Cypriot, AstroBank aspires to play a pivotal role in the Cyprus banking sector.