AstroBank's record-breaking year: €30.4M in profits for 2023

AstroBank reported Profit After Tax of €30.4 million for 2023, representing a return on equity (RoE) of 13.9%, compared with €12.2 million and RoE of 6.2% for 2022, achieving an increase on profit of 150%, mainly due to increased interest income.

The Group’s Profit After Tax before non-recurring costs for the year ended 31 December 2023 amounted to €39.4 million, up from €21.7 million in 2022. Non-recurring costs of €9 million, consist of €7 million Voluntary Retirement Scheme Cost and €1.9 million of Servicer's amortisation cost acquired back in 2022.

Total operating income increased to €97.2 million, up by 34%, compared with €72.7 million in 2022. According to the Bank, the increase is largely due to net interest income, which increased to €74.8 million, up by 46% in 2023, reflecting the impact of the increased interest rate environment on the Bank’s strong liquidity position. The net interest margin for 2023 was 3%, while in 2022 was at 1.9%, supported by the rising interest rate environment.

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

Total expenses were €50.9 million for year 2023, up by 2.8%, compared with €49.5 million for 2022.

Staff cost represents 53.2% of total expenses, reaching €27.1 million for 2023, up by 4.8% from €25.9 million in 2022, reflecting the annual increments stemming from the bank employees union collective agreement and the increased COLA, partially offset by saving through the Voluntary Retirement Scheme. During 2023, the Group completed a VRS through which 55 full-time employees were approved to leave at a total cost of €7 million, while another 16 employees had left in 2022, at a total cost of €1.9 million. The number of permanent staff was 392 as at 31 December 2023 (2022: 443).

Other operating expenses for 2023 were €16.2 million, up by 1.8% from €15.9 million in 2022. Depreciation and amortisation was decreased to €3.3 million compared to €3.7 million in 2022 and the special levy, contributions to Single Resolution Fund and other levies were €4.3 million (2022: €4,1 million).

The cost to income ratio decreased to 52.3% in 2023 compared with 68.2% in 2022, driven mainly by higher total income and the management’s ongoing focus on efficiency and cost discipline, the Group reported.

Pre-provisions income arising mainly from core banking activities is improved in 2023 at €46.4 million from €23.1 million in 2022, an increase of 100.9%, driven mainly by the increase in net interest income.

Total impairment charges for 2023 amounted to €6.7 million compared with €3.7 million in 2022. The increase in 2023 is primarily due to higher loan impairment charges.

The Group’s total assets amounted to €2,725 million as at 31 December 2023 (31 December 2022: €2,726 million), remaining stable compared with the previous year.

Net loans decreased from €1,091 million as of December 31, 2022 to €933 million as of December 31, 2023 reflecting significant resolutions in the non-performing portfolio. Total new lending for the period reached around €90 million. "Sustained new lending to companies and individuals in Cyprus reflects AstroBank’s strong commitment to Cyprus economy and its strong financial position, which facilitates new business activity", the Bank noted.

Customer deposits totaled €2,155 million as at 31 December 2023 (31 December 2022: €2,112 million), an increase of 2% and comprised of deposits in Euro and foreign currencies, mostly US Dollars and British Pounds.

As at 31 December 2023, funding from central banks amounted to €200 million (2022: €300 million), comprising solely of funding through the Targeted Longer-Term Refinancing Operations (TLTRO) III. The Bank proceeded with the repayment of €100 million of TLTRO III funding in September 2023 and by €100 million in March 2024.

Underpinned by common equity of €234.1 million, the bank's capital adequacy ratio improved to 23.7% as at 31 December 2023, up from 18% in the previous year, due to internal capital generation through profitability and resolution of non-performing loans. Core Tier 1 ratio, consisting exclusively of common equity, stood at 22.1% as at 31 December 2023.

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

The NPE ratio dropped to 14.9% as at 31 December 2023, down from 19.8% as of December 31, 2022, exclusively through organic resolutions. Provision coverage stood at 44% end of 2023 (2022: 46.1%).

Real Estate Owned Assets (REOs), direct and indirect, disposals reached €43 million, of which €33.7 million, represents direct sales. The cumulative sales over the last three years reached c.€150 million.

During 2023, capital ratios were significantly strengthened by the profit of the year and the decrease in risk weighted assets (“RWAs”), primarily due to the reduction of the NPEs and loan repayments. On 31 December 2023 the CET 1 and Total Capital ratios were at 22.1% and 23.7% respectively, compared with 16.5% and 18% end of 2022. The Bank’s capital ratios are well above the minimum regulatory requirements.

As at 31 December 2023, the MREL ratio stood at 27.8%, meeting the final binding target of 26% set by the regulator, which is effective from 31 December 2024 and also takes into account the increase of Counter-cyclical Buffer by a further 0.5% in June 2024.

AstroBank noted that it is committed to operate in an economically and socially sustainable manner. An ESG working plan has been established with significant improvements in the Governance Pillar and an expanding effort on the Environmental Pillar, accompanying the Bank’s already strong Social Pillar commitment.

AstroBank's primary goals to increase energy efficiency and support customers in their green transition, offering an extensive suite of environmentally friendly loan products along with a plan to reduce scope 1, 2 and 3 emissions (including financed emissions) and full integration of the environmental agenda in the Bank’s business model, form the core of the environmental pillar, the Bank reported.

"With the aim of remaining competitive and providing quality and efficient services to its customers, Astrobank continues to invest in technology and automation solutions", it said, adding that in November 2023 it launched a new Internet and Mobile Banking App providing an upgraded banking experience to its customers.

Full digitisation of the bank’s card offering is expected to be completed mid-2024. According to the Group, "those initiatives accompany a range of digitisation and integration of internal processes extending client facing capacity. With the integrated new digital platforms and its 14 locations network, AstroBank aims to play a key role in the Cyprus banking sector".

Aristidis Vourakis, AstroBank’s Chief Executive Officer stated that 2023 "has been a remarkable year for AstroBank. The systematic efforts during the last years, towards a focused business model, streamlined operations, and reshaping and derisking of our balance sheet, together with the favourable interest rate and macroeconomic environment, have supported delivering a strong financial performance".

He added that "the decisive management actions underpinned the transformation of the bank into a strong and well capitalised banking institution, capable to deliver value to its customers and its shareholders".

"We remain committed to our Business Plan, which over the last years has resulted in substantial operational efficiencies, quality customer service and improved profitability," he concluded.