Cyprus’ largest lender, Bank of Cyprus (BOCY), in a profit warning issued to the Cyprus Stock Exchange Thursday notifies that the Group’s results for the financial year ending on December 31 are expected to have a significant negative deviation compared to the results for 2011.

BOCY, along with Cyprus Popular Bank were severely affected by the haircut of the Greek bonds and by massive write downs to loans granted to Greece. Excluded by the international markets Cyprus applied for financial assistance to rescue its two banks which sought state aid. As part of Cyprus’ application investment consulting firm PIMCO has carried out a due diligence review that would determine the capital needs of the banking sector.

“This deviation is mainly due to increased provisions for impairment of loans (as a result of the continuing deteriorating economic conditions and the adoption of stricter assumptions in the context of the PIMCO review) as well as reduced operating income”, the Bank said in the profit warning, adding that “as a result of the above, the Group’s capital adequacy ratios will be negatively affected.”

The Bank`s Core Tier 1 capital, an index of a bank`s robustness, which stood at 5.0% on September 30, “may be lower than 5% as at 31 December 2012,” the statements said