Cyprus bank earnings in the spotlight.
The three major banks, reporting their 2009 preliminary results this week will dominate the earnings calendar, but the real impact in the stock market will be felt on Thursday after Bank of Cyprus releases its guidance for 2010.
The largest lender will report its 2009 preliminary results today, Wednesday, after the market close with analysts expecting net after-tax profits to decline 35% year-on-year to EUR 330 mln from EUR 502.4 mln in 2008.
Cyprus' second and third largest lenders, Marfin Laiki Bank and Hellenic Bank will follow on Thursday with the announcement of their preliminary 2009 results. Analysts expect Marfin Laiki to report a 57% decline in net profits to EUR 170 mln from EUR 394.5 mln in 2008, while Hellenic is forecast to report a 28% decline in net profits to EUR 24.5 mln from EUR 33.9 mln in 2008.
A poll of analysts carried out by Bloomberg sees the total profits of the three largest banks declining 44% YoY to EUR 524.5 mln in 2009 from EUR 930.8 mln in 2008. PROVISIONS
Since the profit decline is already widely anticipated and is reflected in current prices, the announcement of the actual profitability levels is not expected to shake the market. Analysts will play closer attention to the geographical breakdown of how the banks are generating their income, the net interest margin, new loans and, more importantly, the level of provisions for bad debts.
With property prices artificially supported with the active participation of the banks that have been rescheduling non-performing loans in an effort to avoid the need to set aside provisions, analysts expect a low provision rate to hang as a "dark cloud" over the results of 2010 and 2011, where new additional provisions will likely pressure future profits lower. GUIDANCE
Of particular importance is the press briefing called for Thursday noon by Bank of Cyprus Chairman Theodoros Aristodemou and CEO Andreas Eliades who will analyse the 2009 results and most probably issue a guidance for 2010.
Bank of Cyprus was the only listed company in Cyprus and among the few globally to issue a profit forecast at the beginning of 2009, when CEO Eliades said the bank's profits for 2009 would range between EUR 300-400 mln. The profit guidance for 2009 is in line and very close to the average of EUR 330 mln profit forecast made by analysts.
The guidance from the bank's management is seen as particularly important considering that most analysts are forecasting a dismal 2010 performance for Bank of Cyprus. The average profit forecast for 2010 is EUR 335 mln, according to a poll of analysts conducted by Bloomberg.
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