The Bank of Cyprus, the island's largest lender, said on Thursday it posted post-tax losses of 134 million euros ($168 million) in the first six months because of provisions for bad loans and a Greek debt write-off.
"Losses after tax and including the impairment of Greek government bonds reached 134 million euros for the first half of 2012 compared to 107 million in the first half of 2011," said a BoC statement.
The bank asked for state assistance in June after it fell 500 million euros short in bolstering its regulatory capital as required by the European Union.
The island's second largest bank, Cyprus Popular, needs 1.8 billion euros to recapitalise, forcing a cash-strapped government to request an EU bailout in June to prop up the banking system.
Nicosia is still negotiating with the troika -- the European Commission, European Central Bank and International Monetary Fund -- over the terms of a loan deal, with estimates putting the amount needed at around 15 billion euros.
EU officials are expected back in September to finalise an agreement.
Cyprus has a low-interest, 2.5-billion-euro loan from staunch ally Russia to meet its financing needs for the year, and is still holding out for a fresh five-billion-euro loan from Moscow to soften the bailout impact.
The BoC's provisions for impairment of loans reached 568 million euros, a 210 percent increase compared with the same period last year, the bank's statement said.
Group profit before provisions for the first half of 2012 was 360 million euros, a decrease of 6 percent on last year's first half.
Taking into account the deterioration of its loan portfolio, BoC increased the provisions for loan impairment to 568 million euros, raising the accumulated provisions at June 30 to 2 billion euros and the coverage ratio of non-performing loans to 50 percent from 46 percent as of March 31.
It said the capital deficit as defined by the European Banking Authority is estimated at approximately 730 million euros because of additional provisions relating to the loan portfolio in Cyprus and Greece and the further impairment of Greek bonds.
"Faced with an extreme and uncertain economic environment in the key markets where it operates, the Group continues to focus on strengthening its capital adequacy and liquidity, maintaining adequate organic profitability and effective management of risks," the BoC statement said.
The Group currently has 561 branches -- 191 in Russia, 184 in Greece, 127 in Cyprus, 44 in Ukraine, 10 in Romania, four in Britain and one in the Channel Islands.
On August 23, Cyprus projected its economy will slip deeper into recession than projected in 2012, shrinking 1.5 percent, and the fiscal deficit wil fall outside a three percent of GDP target.
Before Nicosia applied for financial aid in June it had pledged to lower its deficit to below the EU-stipulated three percent. The island's deficit ballooned to 6.1 percent of GDP last year.