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Bank of Cyprus GroupGroup Financial ResultsFor the year ended 31 December 2019
Group Financial Results for the year ended 31 December 2019
DISCLAIMER
2
Group Financial Results for the year ended 31 December 2019
This presentation has not been audited by the Group’s external auditors.
The Group statutory financial statements for the year ended 31 December 2019, upon which the
auditors have given an unqualified report, can be found on the website
(https://www.bankofcyprus.com/en-GB/investor-relations-new/reports-presentations/financial-
results/)
This financial information is presented in Euro (€) and all amounts are rounded as indicated. A
comma is used to separate thousands and a dot is used to separate decimals.
Important Notice Regarding Additional Information Contained in the Investor Presentation
The presentation for the Group Financial Results for the year ended 31 December 2019 (the
“Presentation”), available on https://www.bankofcyprus.com/en-GB/investor-relations-new/reports-
presentations/financial-results/, includes additional financial information not presented within the
Group Financial Results Press Release (the “Press Release”), primarily relating to (i) NPE
analysis (movements by segments and customer type), (ii) rescheduled loans analysis, (iii) details
of historic restructuring activity including REMU activity, (iv) analysis of new lending, (v) Income
statement by business line, (vi) NIM and interest income analysis and (vii) Loan portfolio analysis
in accordance with the three-stages model for impairment of IFRS 9. Except in relation to any non-
IFRS measure, the financial information contained in the Investor Presentation has been prepared
in accordance with the Group’s significant accounting policies as described in the Group’s Annual
Financial Report 2019. The Investor Presentation should be read in conjunction with the
information contained in the Press Release and neither the financial information in the Press
Release nor in the Investor Presentation constitutes statutory financial statements prepared in
accordance with International Financial Reporting Standards.
Group Financial Results for the year ended 31 December 2019
Supporting the Cypriot economy during the COVID-19 crisis
3
Significant SurplusLiquidity
Good Capital Position• Total Capital ratio of 18.0%1 and CET1 ratio of 14.8%1
• CET1 capital buffer of c.380 bps
• Surplus liquidity of €3.2 bn
• Deposits at €16.7 bn; Loan to deposit ratio at 64%
Group Financial Results for the year ended 31 December 2019
Robust Pandemic Plan in place
• Considerable experience in managing challenging circumstances
• Activation of Pandemic Plan to ensure operational resilience and no disruption of day-to-day activities
• Operational resilience strengthened by digital initiative, providing alternative solutions for carrying out daily
banking transactions online
Key priorities
• Safeguard health of staff and customers, while ensuring operational resilience of the Bank
• Support customers affected by COVID-19 and wider Cypriot economy
• Provision of liquidity to affected businesses & households, to alleviate short term cash flow burden
(1) Allowing for IFRS 9 transitional arrangements
Group Financial Results for the year ended 31 December 2019
Government’s fast reaction contained the spread of COVID-19 in Cyprus
4
Group Financial Results for the year ended 31 December 2019
(1) According to the information provided by University of Cyprus as at 24 April 2020 - https://covid19.ucy.ac.cy
(2) Based on information up to 24 April 2020 provided by https://www.ecdc.europa.eu/en/publications-data/download-todays-data-geographic-distribution-covid-19-cases-worldwide
603
362
455
6,070
3,426
2,922
2,614
2,499
2,299
1,990
692
Cyprus
Luxemburg
66
181
217
314
Portugal
Italy
Germany
Ireland
Spain
180France
55222Greece
Total sample testing per 100,000 population per country1
• Swift government reaction following the outbreak of COVID-19 in Cyprus in mid-March 2020 for the containment of the pandemic spread
• COVID-19 sample testing per 100,000 population amongst the highest within EU
• Confirmed cases per 100,000 population amongst the lowest within EU
• Daily reported incidents stabilised and remain consistently low
• The Government is working on the gradual relaxation of measures, currently expected to be phased out from early May
Confirmed cases Tests
Cumulative cases per 100,000 population2 per country
Days since first case
6622
207
455
217
181
314
500
80
200
602010 30 40 7050 90
300
100
400
Cyprus Portugal
SpainGreece
UK
Germany
Italy
1 All schools closed
2 Travel ban & country lockdown
Stricter lockdown measures
1 2 3
Fast escalation of measures in Cyprus
6622
207
455
217
181
314
706030 5010 20 8040 90
100
200
300
400
500
Cyprus Portugal
Greece Spain
UK
Germany
Italy
1 All schools closed
2 Travel ban & country lockdown
1 2 3
Fast escalation of measures in Cyprus
3
Group Financial Results for the year ended 31 December 2019
Protection of staff and customers’ health is the key priority, while ensuring operational resilience of the Bank
5
Group Financial Results for the year ended 31 December 2019
Measures to Safeguard Health & Safety
• Establishment of a committee to monitor COVID-19 measures,
trace incidents and to provide regular updates to staff
• Implementation of Health & Safety measures in line with the
guidelines and recommendations issued by Ministry of Health
• Special purpose leave for employees that belong to vulnerable
groups
• Enhanced intensive clean-ups, a precautionary disinfection
procedure is in place throughout the Bank
• Shipment of masks and gloves and sanitisers to branches
• Participation in government’s COVID-19 testing schemes
Ensuring Operational Resilience
(1) This is the ratio of digitally engaged individual customers to the total number of individual customers as per the engagement scorecard. Digital channels include mobile, browser and ATMs. It also captures access to a card as well as online card purchases
• Activation of the Pandemic Plan to ensure operational
resilience and no disruption of the day-to-day activities
• Splitting the operations of critical units to separate locations
and provision of remote access availability
• Branch network operates on a rotational basis, as a
precautionary measure
• 44% of staff (excluding branches) work remotely
• Digital service channels provide alternative solutions for
carrying out daily banking transactions online
• 70% of customers are currently digitally engaged1
Group Financial Results for the year ended 31 December 2019
Significant Regulatory measures to mitigate COVID-19 impact
6
• Increased capital and liquidity flexibility
• Flexibility to temporarily “dip into” certain capital buffers
(P2G & CCB) and minimum liquidity requirements
(LCR)
• Bringing forward ability to use lower quality own funds
to meet Pillar 2 Requirements (P2R)
• Delay of phasing-in of 1 Jan 2021 O-SII buffer (0.5%
for the Bank) by 12 months
• Launch of a new Pandemic Emergency Purchase
Programme (PEPP) for an amount of €750 bn
• Exercise temporary flexibility regarding the “Unlikely
to Pay”
• Exercise full flexibility when discussing with banks
the implementation of their NPE reduction strategies
• Avoid procyclicality in models to determine expected
loan credit losses. Central macroeconomic scenarios will
be provided to support IFRS 9 application. Banks should
give a greater weight to long term stable outlook
evidenced by past experience
ECB/CBC
• IFRS 9
• COVID-19 moratorium not an automatic trigger for
increased credit risk
• Minimise cliff effect of transfers between stages
• Govt guarantees may mitigate ECL impact on P&L; no
impact from guarantees on assessment of increased
credit risk
• ECB to provide central macroeconomic scenarios to
guide provisioning policies
• Forbearance
• General COVID-19 moratorium does not trigger
automatic reclassification due to forbearance
• Prudential Definition of Default
• Moratorium extends “90 days past due” deadline via
modified payment schedule
• Renegotiated loans (where NPV remains constant) not
considered distressed restructuring
• EU wide stress test postponed to 2021 to allow banks
to prioritise operational continuity
EBA and ESMA
Group Financial Results for the year ended 31 December 2019
7
(1) For further information, please refer to the Market Update published by the Ministry of Finance: https://www.mof.gov.cy/mof/pdmo/pdmo.nsf/6B8C5026F3AE168BC2258345003BAFEF/$file/Market%20Communication%2006%20April%202020.pdf
(2) For tax periods ending February, March and April, 2020. It involves all companies, without imposing any charges or additional tax. It is noted that arrangements will be made so that the debts will be paid progressively until November 10, 2020 with the exception of companies that do not
have liquidity problems such as pharmacies, supermarkets, etc.
• Immediate introduction of fiscal measures1
accounting for 5.4% of GDP, according to MOF
• Liquidity support to businesses and households
• Prevention of sharp rise in unemployment
• A large and wide-ranging package of financial
measures amongst the most generous within
Eurozone
• €3.0 bn of funding raised in April 2020; vote of
confidence to the Cypriot economy
• Issuance of €1.75 bn of 7 year and 30 year Eurobonds
• Issuance of €1.25 bn of 52-week treasury bills
Measures announced in March 2020 include:
• Moratorium of loan instalments for 9 months
• Capital and interest
• Available for all customers (businesses and
private individuals) with less than 30 days past due
as at 29 Feb 2020
Timely and strong response by the Government of Cyprus
• Liquidity support to businesses and self employed, through
government guarantees to banks up to €2.5 bn (guarantee 70%)
• Approved by the Council of Ministers
• Pending approval by the Parliament
• Temporary suspension of VAT payments for 3 months2
• Suspension of the added contribution to the National Health
System for 3 months
• Employment compensation schemes for businesses impacted
by COVID-19, to protect jobs and avoid layoffs
• >50% of private sector employees (220,000) and c.40,000
self-employed workers expected to benefit
Eurogroup’s measures-Implications for Cyprus
• Access to €400 mn funding for companies with a focus on SMEs
through the European Investment Bank
• Access to €160 mn loan facility with favourable terms for the
protection of jobs and layoffs during crisis (SURE)
• Access to ESM’s Pandemic Crisis Support through the Enhanced
Conditions Credit Line, for c.€440 mn (2% of GDP)
Key Highlights:
Group Financial Results for the year ended 31 December 2019
Deterioration of the short term prospects of the Cypriot economy, following the outbreak of COVID-19
8
Gross Value Added by sector of economic activity (2019)1
• Open, small and flexible economy which has demonstrated historically that recovery from economic crisis can be quick
• The spread of COVID-19 is expected to have a significant impact on the global and the Cypriot economy, at least in the first half of 2020
• The impact on the Cypriot economy and the Bank will largely depend on the duration and the intensity of the pandemic
• Sectors most adversely affected initially by COVID-19 are expected to be Tourism, Trade and Construction accounting for 32% of GDP
• As the pandemic is still unfolding, at this stage it is not possible to assess the full likely impact
• Coordinated monetary, fiscal and regulatory measures announced by the Government and the European Authorities are expected to mitigate the impact
4%
6%
6%
7%
8%
10%
11%
21%
24%
3% Trade, Transport,Tourism
Information
Professional administrative
Public, education& health
Construction
Real Estate
Financial
Manufacture
Arts and other
Other
20122010 2011 2015 20162013 2014 2017 2018 2019
6.7%
3.2%
2.0%
0.4%
-3.4%
-6.6%
-1.9%
3.4%
4.4%4.1%
Annual Real GDP yoy % change1
(1) Source: Cyprus Statistical Service
Group Financial Results for the year ended 31 December 2019
Liquidity of c.25% of GDP through government measures, to support performing businesses and the wider economy
9
• €23.6 bn1 of performing loans in the Cypriot banking system
Tools for the support of these loans
• c.€2.5 bn liquidity injection through bank loans backed by government guarantees (70% guarantee)
• Approved by the Council of Ministers
• Pending approval by the Parliament
• €400 mn funding to businesses with a focus on SMEs through the European Investment Bank
• c.€2.3 bn of payment deferrals through the government COVID-19 loan moratorium
• Banking mechanism expertise to offer liquidity in a timely and effective way to affected businesses
(1) Based on Aggregate Cyprus Banking Sector Data as at 30 November 2019: https://www.centralbank.cy/images/media/redirectfile/2020_03_27%20Summary_EN.doc. In addition there are €4.2 bn restructured facilities that continue to be classified as non-performing exposures
Comprehensive and far reaching measures to support performing businesses and the wider economy
Group Financial Results for the year ended 31 December 2019
Well diversified performing loan portfolio; close monitoring and set up of strategies to prevent further asset quality deterioration
10
PrivateIndividuals
3.94
Hotels & Catering
Real Estate
Trade
Other sectors
Professional & Other services
Manufacturing
Construction
1.02
1.01
1.01
0.74
0.63
0.54
0.34
Sectors most adversely affected by the COVID-19 outbreak:
• Tourism (Hotels & Catering): €1.01 bn
Travel bans and travellers’ concerns adversely impact the sector
• Trade: €1.01 bn
Reduced consumption and low consumer sentiment due to lockdown
• Construction: €0.54 bn
Slower production and lower demand due to lockdown
• Any prolonged outbreak of COVID-19 is expected to impact all sectors to a certain
extent with few exceptions
• No exposure to Aviation
• Small exposure to oil and gas industry of less than €50 mn
Strategy
• In contact with impacted customers to provide relief in the form of payment
deferrals and restructurings, as necessary
• Provision of liquidity to alleviate short term cash flow burden through:
• Government guaranteed facilities (pending approval by the Parliament)
• Short term funding based on CBC directive
• Other lending products
Performing gross loans1 by business activity
Total Performing book: €9.2 bn2€ bn
(1) Gross loans of the following business lines: Corporate (incl. IB and W&M), SME, Retail, Insurance and other (incl. H/O)
(2) As at 31 December 2019
Group Financial Results for the year ended 31 December 2019
Supporting customers through payment deferrals
• COVID-19 moratorium until the end of 2020, as per the
government measures
• Started on 30 March 2020
• Clients can request moratorium on the payment of capital &
interest for loans, overdrafts and credit cards
• Moratorium period of 9 months to address seasonality of the
Cypriot economy
• Available to all customers (private individuals and businesses)
with arrears less than 30 days as at 29 Feb 2020
• Capital plus interest
• Loan terms will be extended so that payments will continue as per
existing schedule
• COVID-19 moratorium does not trigger automatic
reclassification due to forbearance
• Interest continues to accrue
• Continue to monitor the creditworthiness of customers who
applied for the loan moratorium
as at 23 April 2020 Requests € bn
%
Performing
book
Private
Individuals17,591 1.77 45%
Businesses 3,278 3.40 66%
Total 20,869 5.17 56%
Applications received
1.5
8
2.1
4 3.3
9
3.4
0
0.3
9
0.8
2
1.7
4
1.7
7
1.9
7 2.9
5
5.1
3
5.1
7
Business Private Individuals Column1
Applications received stabilised at c.€5 bn
€ bn
11
Group Financial Results for the year ended 31 December 2019
Supporting private individuals through COVID-19
12
• >35% of total employment are expected to be least affected by COVID-19
measures as employed in the government, semi-government and financial
sector1
• Employment compensation scheme for businesses impacted by COVID-19,
to protect jobs and avoid layoffs until mid June 2020
• Scheme requirement is that no employee has been fired since 1 March 2020
• Compensation for 60% of the wage cost, for up to 60% to 90% of workforce,
depending on extent of loss of turnover and number of employees
• >50% of private sector employees (220,000) and c.40,000 self-employed
workers expected to benefit
Performing book- Private Individuals: €3.94 bn
• Implementation of COVID-19 moratorium until the end
of 2020, as per the government measures
• 17,591 applications received for €1.77 bn of loans as
at 23 April 2020
• Requests driven by Mortgages and Personal loans
Applications received by product, as at 23 April 2020
80%
13%
Housing
1%
Other
3%
Credit Card Business
Personal
3%
€1.77 bn
1) Source: Cyprus Statistical Service
Group Financial Results for the year ended 31 December 2019
13
Supporting impacted businesses through COVID-19
Performing Book- Tourism (Hotels & Catering): €1.01 bn
Hotels & Catering31 Dec 2019
€ bn% of portfolio
Food services 0.06 6%
Accommodation 0.95 94%
Total 1.01 100%
Unutilised Liquidity1 (€ bn)
as at 31 March 20200.34
- of which deposits (€ bn) 0.28 28%
• c. 6% of Tourism exposure is Food services
• Better positioned to manage social distancing through take out and drive-
through facilities
• Accommodation customers are expected to be under the most pressure
• Majority of Accommodation customers entered the crisis with significant
liquidity, following strong performance in recent years
• €0.89 bn or 88% applied for payment deferrals
Trade31 Dec 2019
€ bn
% of
portfolio
Supermarkets, pharmacies and other
essential retail businesses0.28 28%
All other 0.73 72%
Total 1.01 100%
Unutilised Liquidity1 (€ bn)
as at 31 March 20200.83
- of which deposits (€ bn) 0.53 52%
Performing Book- Trade: €1.01 bn
• c. 28% tied up to lower risk essential retail services, not
materially impacted by COVID-19
• €0.54 bn or 53% applied for payment deferrals
(1) Unutilised overdraft amounts and deposits
Group Financial Results for the year ended 31 December 2019
Operational resilience facilitated by Digital Transformation
14
• The Bank continues to operate smoothly
• Digital channels, provide alternative solutions to customers for carrying
out daily banking transactions online
• Branch network operates on a rotational basis, as a precautionary
measure
• Digitally engaged1 customers increased by 2 p.p. to 70%, since
Dec 2019
• Ratio of online banking transactions to total transactions
increased by 15 p.p. since 15 March 2020
• Following outbreak of COVID-19, initiatives launched aimed to provide
alternative solutions to customers for carrying out daily banking
transactions online
• Issuance of debit cards free of charge until 31 May 2020
• Digipass devices provided free of charge
• Customers can open account via the Bank’s website & receive debit
card free of charge
• Customers can receive free subscription to internet banking
40%35%
26% 28% 25%
30%
28%
25%27% 30%
30%37%
49%45% 45%
16 Mar2020
Branch
7 Apr2020
23 Mar2020
OnlineBanking
15 Apr2020
30 Mar 2020
ATM
100% 100% 100% 100% 100%
Channel Usage (% of volume of transactions) since COVID-19 outbreak
(1) This is the ratio of digitally engaged individual customers to the total number of individual customers as per the engagement scorecard. Digital channels include mobile, browser and ATMs. It also captures access to a card as well as online card purchases
Group Financial Results for the year ended 31 December 2019
FY2019 - Highlights
15
Performance in 4Q2019
Active Liquidity Management
Good Capital Position
Balance Sheet Repair Continues
• Total Capital ratio of 18.0%1 and CET1 ratio of 14.8%1
• New lending of €443 mn for 4Q2019, totalling €2 bn for FY2019, up 9% yoy and highest since 2015
• Total Income of €156 mn, Operating profit of €53 mn in 4Q2019
• Cost of risk at 0.9% for 4Q2019
• Underlying result of a loss after tax from organic operations of €6 mn for 4Q2019 and a profit of €36 mn for FY2019
• Provisions/net loss relating to NPE sales of €86 mn, including, as previously announced, loan credit losses within
the context of IFRS 9 of €75 mn, as a result of the anticipated balance sheet de-risking through further NPE sales in
the future
• Loss after tax of €186 mn in 4Q2019 and €70 mn in FY2019
• Deposits at €16.7 bn
• Loan to deposit ratio at 64%
• Introduction of liquidity fees for specific customer groups in March 2020
• Organic NPE reduction of €889 mn for FY2019, ahead of guidance
• NPEs reduced to €3.9 bn (€1.8 bn net)
• Gross NPE ratio reduced to 30%, coverage increased to 54%
• NPE portfolio sale currently delayed due to prevailing market and operational conditions resulting from COVID-19
outbreak
(1) Allowing for IFRS 9 transitional arrangements
(2) The gross annual saving does not include any impact from the renewal of the collective agreement for 2019
(3) Excludes special levy on banks and SRF contribution
(4) This is the ratio of digitally engaged individual customers to the total number of individual customers as per the engagement scorecard. Digital channels include mobile, browser and ATMs. It also captures access to a card as well as online card purchases
Group Financial Results for the year ended 31 December 2019
Active Cost Management
• Successful completion of Voluntary Staff Exit Plan, resulting in gross annual savings2 of 13% (€28 mn); one-off cost
of €81 mn in 4Q2019
• Full time employees reduced by 11%
• Cost to income ratio3 at 59% in FY2019
• 18% reduction in number of branches in 2019 supported by digital transformation
• 70% of customers currently digitally engaged4
Group Financial Results for the year ended 31 December 2019
16
Comfortable liquidity position with €3.2 bn liquidity surplus
€ bn31 Dec
2018
31 Dec
2019
Customer deposits 16.8 16.7
Cash & Balances with
Central Banks4.6 5.1
LCR (%) 231% 208%
Liquidity surplus 3.1 3.2
L/D ratio 72% 64%
ECB liquidity relaxations for COVID-19 announced in March 2020:
• Flexibility to operate below 100% LCR limit in the short term
• Updated TLTRO III terms significantly more generous
• Introduction of LTROs, providing liquidity until next TLTRO in
June 2020
• Launch of Pandemic Emergency Purchase Programme
(PEPP) for an amount of €750 bn
• Relaxation of collateral rules for ECB funding enhances
borrowing capacity of banks
16.3
Dec 18 Mar 19
16.4
Sep 19
16.7
Jun 19 Dec 19
16.8 16.5
Stable deposit base of €16.7 bn at 31 December 2019
€ bn
• Stable deposit base of c.€16.7 bn, as at 31 December 2019
• Significant surplus liquidity of €3.2 bn, as at 31 December
2019
• Liquidity surplus remains broadly unchanged to date
Group Financial Results for the year ended 31 December 2019
Good capital position to withstand the COVID-19 impact
17
SREP requirement for 2020
Pillar 2 Requirement (P2R) of which: 3.0% 3.0%
CET1 3.0% 1.69%
Pillar 1 AT1 0.56%
Pillar 1 T2 0.75%
CET1
ratio
CET1
ratio
post ECB
announcement
14.8% 14.8%
11.0%
9.7%
• SREP CET1 requirement1 for 2020 at 11.0%; buffer of 380 bps
• SREP Total Capital requirement1 for 2020 at 14.5%; buffer of 350 bps
• ECB capital relaxations for COVID-19 announced in March 2020:
• Ability to use AT1 and T2 to meet P2R requirement increases CET1 buffer
by 131 bps
• Flexibility to operate temporarily below CCB, increases CET1 and Total
capital buffer by 250 bps
• In April 2020, the CBC decided to delay the phasing-in of the 1 Jan 2021
O-SII buffer4 (0.5%) by 12 months
131
bps
Capital position as at 31 December 2019
Total
capital ratio
Total capital
ratio
post ECB
announcement
18.0% 18.0%
14.5% 14.5%
min OCR (SREP)1 requirement for 2020
(1) OCR(SREP)- Overall Capital Requirement comprises the Total SREP Capital Requirement (Pillar 1 and Pillar 2 Requirement) plus combined
buffer requirements (capital conservation buffer, countercyclical buffer and systemic buffers). As from 31 March 2020, following ECB measures
CET1 ratio is 9.7%
(2) Allowing for IFRS 9 transitional arrangements
(3) On 12 March 2020 the ECB announced the implementation of a package of monetary policy measures in order to secure favourable conditions
of financing for the economy with the aim to mitigate the effects of the crisis. Specifically the ECB announced the following relaxation measures
for the minimum capital requirements for Banks in the Eurozone: Banks are temporarily allowed to operate below the level of capital defined by
the Pillar 2 Guidance, the Capital Conservation Buffer and the Countercyclical Buffer. Furthermore, the upcoming change under CRD5
regarding the P2R buffer was brought forward allowing the Pillar 2 Requirement (P2R) to be covered by Additional Tier 1 (AT1) capital and Tier
2 (T2) capital and not only by CET1
(4) The Central Bank of Cyprus (CBC) set the O-SII buffer for the Group at 2%. This buffer will be phased-in gradually, having started from 1
January 2019 at 0.5% and increasing by 0.5% every year thereafter, until being fully implemented (2.0%) on 1 January 2022. In April 2020 the
CBC, as part of the COVID measures, decided to delay the phasing-in by 12 months (1 January 2023). As a result, the phasing-in of 0.5% on 1
January 2021 has been delayed for 12 months.
3 3
2 2 2 2
2019 2020
2020post ECB’s
amendment
of P2R
composition3
Pillar 1 CET1 4.50% 4.50% 4.50%
Pillar 2 Requirement (P2R) CET1 3.00% 3.00% 1.69%
Capital Conservation Buffer (CCB) 2.50% 2.50% 2.50%
Other Systemically Important Institutions (O-SII)4 0.50% 1.00% 1.00%
CET1 Requirement 10.50% 11.00% 9.69%
Pillar 1 AT1 1.50% 1.50% 1.50%
Pillar 1 T2 2.00% 2.00% 2.0%
Total Capital Requirement 14.00% 14.50% 14.50%
Group Financial Results for the year ended 31 December 2019
18
• Extent of the spread of COVID-19
• Direct and indirect impact on customers
• Effectiveness of the regulatory and fiscal measures taken to
support the economy and mitigate the impact of the virus
2020 unknowns 2020 knowns
Key Takeaways
• Good capital and strong liquidity position
• Cypriot Government is successfully managing the containment of the
virus
• Government measures provide significant liquidity injection to support
viable customers
• Deterioration of the short term prospects of the Cypriot economy
• Well diversified performing book with most affected sectors entering
the crisis with liquidity buffers
• Update of macroeconomic assumptions underlying the IFRS 9 calculation of loan credit losses for 1Q2020 in line with the relevant regulatory guidance,
may result in increased organic provisions in 1Q2020, although the exact quantum is as yet unknown
• Despite the lower transactional income and lower demand for loans currently seen, the on-going economic uncertainty means that the Group does not
have sufficient visibility about the likely future impact of COVID-19 on its operations or financial results, and therefore is currently not in a position to
provide guidance for the current financial year
Key strategic focus remains the improvement of the asset quality and efficiency of the Bank
Group Financial Results for the year ended 31 December 2019
FY2019 Group Financial Results
19
Group Financial Results for the year ended 31 December 2019
0
2
4
6
8
10
12
14
16
18
20
22
24
0.3%
CET1
31 Dec
2018
IFRS 9
impact for
future
NPE sales
Operating
Profits
T2Sale of CNPCET1
30 Sep 2019
14.8%0.3%(0.3%)0.4%
1.5%
Loan credit
losses and
other
impairments
RWAs
(0.6%)
Voluntary
Staff Exit
Plan
(0.5%)
CET1
31 Dec 2019
1.7%
AT1 Total
Capital
31 Dec 2019
12.1%
15.2%
18.0%
CET1 ratio at 14.8%1,2 and Total capital ratio at 18.0%1
(1) Allowing for IFRS 9 transitional arrangements
(2) The CET1 ratio for 31 Dec 2019, including the full impact of IFRS 9 amounted to 13.1%
(3) Loan credit losses and other impairments include the net change of the prudential charges relating to specific credits and other items
(4) OCR(SREP)- Overall Capital Requirement comprises the Total SREP Capital Requirement (Pillar 1 and Pillar 2 Requirement) plus
combined buffer requirements (capital conservation buffer, countercyclical buffer and systemic buffers). ). As from 31 March 2020,
following ECB measures CET1 ratio is 9.7%
(5) The Central Bank of Cyprus (CBC) set the O-SII buffer for the Group at 2%. This buffer will be phased-in gradually, having started from 1
January 2019 at 0.5% and increasing by 0.5% every year thereafter, until being fully implemented (2.0%) on 1 January 2022. In April 2020
the CBC, as part of the COVID measures, decided to delay the phasing-in by 12 months (1 January 2023). As a result, the phasing-in of
0.5% on 1 January 2021 has been delayed for 12 months
(6) On 24 April 2020, the Group held Cyprus sovereign debt securities of a nominal amount of €772 mn, compared to €477mn on 31/12/19,
of which €350 mn is held at FVOCI portfolio and €422mn is held at AC portfolio. The increase since year end is mainly due to the Group’s
participation on the issuance of 52-week treasury bills of the Cyprus Government in April 2020
CET1 at 14.8%, well above regulatory requirements
min OCR (SREP) requirement for 2020
11.0%
14.5%
20
1 1 1,23
1
• Completion of CNP sale added 30 bps to capital
• Loan credit losses within the context of IFRS 9 as a result of the anticipated balance sheet de-risking through further NPE sales in the future, of €75 mn reduced
capital by 46 bps
• Completion of Voluntary Staff Exit Plan reduced capital by 60 bps
• Unchanged SREP capital requirements for 2020 when ignoring the phasing-in of O-SII5 of 50 bps
• Following the COVID-19 outbreak and the resultant volatile market and economic environment, the Fair Value Reserve of the FVOCI debt security portfolio of the
Group held as at 31 December 2019 has decreased by €39m on 24 April 2020. This change is recognised directly in Equity6
Total Capital ratio
CET1 ratio
14.5%
17.7%
Capital position
1 January 2020
1
1
9.7%
14.5%
min OCR (SREP) requirement for 2020
post ECB Announcement 4
Group Financial Results for the year ended 31 December 2019
RWA intensity1 reduced to 61%
RWA intensity1 reduced to 61%
21
• RWA intensity1 reduced to 61%
• Reduction of 4 p.p. qoq, mainly due to
✓ the completion of the disposal of investment in CNP2
✓ the disposal of a large REMU exposure (Nicosia Mall)
✓ the reduction of the operational risk RWAsDec 16Dec 14 Dec 17Dec 15
85%
Dec 18 Sep 19 Dec 19
85% 85%
73%70%
65%61%
-4 p.p.
RWAs reduced by c. €10 bn since peak
RWAs Dec 14 Dec 15 Dec 16 Dec 17 Dec 18 Sep 19 Dec 19
€ bn 22,715 19,666 18,865 17,260 15,373 13,758 12,890
(1) Risk Weighted Assets over Total Assets
(2) In Oct 2019 the Bank completed the disposal of its entire shareholding of 49.9% in its associate CNP Insurance Holdings Limited (“CNP”)
Group Financial Results for the year ended 31 December 2019
>€11 bn or 74% NPE reduction since peak
22
0
20
40
60
80
18%
63%
Dec 14
53%
62%55%
30%
50%
Dec 15
42%
Dec 16 Dec 19
47%
Sep 19
32%
Dec 17
31%
47%
Dec 18
30%
17%
-33 p.p.
Gross NPE ratio Net NPE ratio
• > €11 bn or 74% NPE reduction since peak
✓ c. €2.7 bn NPE through trades
✓ c. €8.4 bn organic
• SPA for the sale of c.€140 mn retail unsecured
NPEs signed in Jan 2020 (Velocity 2)
✓ 33 p.p. reduction since peak
(8.4)
Organic
5.1
31 Dec 14
2.1
(2.7)
NPE trades 31 Dec 2019
Allowance for Expected Loan
credit losses
Net NPEs 9.9
15.0
3.9
1.8
€11.1 bn
NPEs (€ bn)
Gross NPE ratio reduced to 30%; 17% on a net basis
Group Financial Results for the year ended 31 December 2019
(1) In pipeline to exit NPEs subject to meet all exit criteria; the analysis is performed on a customer basis (formerly called Non-core NPEs)
Core NPE risk reduced to €3.45 bn; 58% cash covered
23
Core NPEs reduced by €2.8 bn yoy
Re-performing NPEs
Dec 15 Dec 18
0.53 0.43
Core NPEs
Sep 19
6.21
Dec 19
3.88
13.97
7.42
4.0811.36
2.61
1.21
3.55 3.45
-€2.81 bn
5.70 Corporate
3.07
Retail
SMEs
2.59
1
€ bn
0.54
2.28
Corporate
0.63 SMEs
Retail
11.36
0.56
2.21
Corporate
0.78 SMEs
Retail
Core NPEs (€ bn)
3.553.45
2.51
SMEs
Corporate
1.55
Retail2.15
6.21
Group Financial Results for the year ended 31 December 2019
58%
24%
54%
Dec 19
Re-performing NPEs
Core NPEs
(1) Restricted to Gross IFRS balance
(2) In pipeline to exit NPEs subject to meet all exit criteria; the analysis is performed on a customer basis (formerly called Non-core NPEs)
(3) Based on EBA Risk Dashboard as at 31 December 2019
NPE Coverage increased to 54%
24
NPE total coverage at 122% when collateral included
54%
CY
54%
BOC IT
48%50% 45%
PT
45%
GR EU average
43%
ES
NPE coverage remains above EU average3
• Cash coverage at 54%, increased by 3 p.p.
qoq
• Cash coverage of Core NPEs at 58%
• Collateral coverage at 68%
1
2
52%
68%
69%
Dec 17 Dec 19Dec 16
41%
67%70%
48%
Dec 18
115%
51%
Sep 19
68%
54%
109%
122% 120% 122%
Tangible collateral
Allowance for expected loan credit losses
Group Financial Results for the year ended 31 December 2019
-0.02-0.10
DFAs & DFEs
-0.28
Curing of restructuring
-2.66
-0.02
Write-offs
-0.04
-0.06
Other
-3.03
-0.27-0.24
-0.06
-0.12
-0.14
-0.08
-0.11
-0.09
-0.09-0.10
-0.06
-0.07
Net organic
outflows
(1) Other includes interest, cash collections and changes in balances
c.€1.2 bn organic NPE outflows in FY2019, leading to €889 mn organic NPE reduction
25
0.03
0.03
1Q2019 2Q2019
0.010.02 0.01
0.03
0.01
3Q2019
0.13
0.01
Redefaults
4Q2019
New inflows
Unlikely to pay
0.060.05
0.04
0.06
0.030.02
Sales of NPEs
1
• NPE outflows of €237 mn & inflows of €32 mn in
4Q2019
• NPE inflows for FY2019 limited to 3.1% of
performing book (GBV)
• Moratorium of loan instalments for 9 months
for all customers with less than 30 days past
due as at 29 Feb 2020, does not trigger
automatic reclassification due to forbearance
€ bn
-0.15 -0.31 -0.22 -0.21
Group Financial Results for the year ended 31 December 2019
(1) In pipeline to exit NPEs subject to meet all exit criteria; the analysis is performed on a customer basis (formerly called Non-core NPEs)
(2) ESTIA-eligible portfolio refers to the initial potentially eligible portfolio based on the Bank’s available data
Clear strategy for further NPE reduction once economic conditions normalise
26
Group NPEs (€ bn)
SME
Re-performing loans
Retail-
Non Estia eligible
31 Dec 2019
Estia eligible
Corporate
3.88
0.54
0.63
1.46
0.82
0.43
€2.63 bn
Re-performing NPEs1: €0.43 bn
Close monitoring of redefaults & quality of restructurings
Exit date may be extended if customers are eligible and apply for the loan moratorium
ESTIA eligible2: €0.82 bn (see slides 27 & 49)
• Following Covid-19 outbreak, focus on arresting any potential asset quality deterioration.
Once economic conditions normalise, the Group expects to resume its efforts to improve
its asset quality position by seeking solutions, both organic and inorganic
• Realising collateral via consensual and non consensual foreclosures for non-Estia
eligible clients
• On board assets in REMU at conservative c.25%-30% discount to open market value
(OMV)
• SPA for the sale of c.€140 mn retail unsecured NPEs signed in Jan 2020 (Velocity 2)
• Management continues to actively explore strategies to further accelerate de-risking
including further portfolio sales
✓ NPE portfolio sale currently delayed due to prevailing market and operational
conditions, resulting from COVID-19 outbreak
✓ Smaller tail trades under consideration
Core NPEs excluding ESTIA eligible2: €2.63 bn
1
2
up to 2021 2022+
0.36
0.07
€ bn
Exit dates for re-performing
NPEs1:
Group Financial Results for the year ended 31 December 2019
(1) ESTIA-eligible portfolio refers to the potentially eligible portfolio based on the Bank’s available data
(2) Please refer to slide 75 for the NPE forborne exit criteria
(3) Data available as at 10 April 2020
ESTIA- Government scheme for the resolution of NPEs backed by primary residence
27
• Clear definition of socially protected borrowers
• Resolution part of ESTIA- eligible1 portfolio
• Identification of non-viable (vulnerable) customers
• Facilitates resolution of remaining customers mainly through consensual and
non consensual foreclosures
• Deadline for completion of applications extended to 30 June 2020, due to
COVID-19 outbreak
382434Estia
eligible
ApplicantsNon applicants
€ mn
• Restructured loans will exit NPE definition in accordance with the NPE exit
criteria2
• Government solution under consideration
• Covered by 58% by allowance for expected loan credit losses
• Enforcement measures initiated for non Estia applicants
• Focus on realizing collateral via consensual and non-consensual
foreclosures
• On-board assets in REMU at conservative c.25%-30% discount to open
market value
• Smaller tail trades under consideration
Participants: €41 mn3
Non viable: €30 mn3
Other: €745 mn3
Incomplete/Under review
41
Participants
311 30
Non viable
€816 mn
1
Coverage: 58%
Group Financial Results for the year ended 31 December 2019
Foreclosures are an important tool in NPEs resolution
28
• Foreclosures commenced2 and auctions held, accelerated in 4Q2019
• Solution rate4 at 68%
• c.1/5 properties auctioned are sold at auction
• >400 properties in the pipeline for repossession3
• 8 months time to auction (refer to slide 48)
• Period for repossession reduced from 12 to 6 months from date of first
unsuccessful auction
• Following COVID-19 outbreak, foreclosure process suspended until
18 June 2020, in line with the decision of the Association of Cyprus
Banks
1,245 properties resolved excluding Helix assets since Jan 2016
Sold at
auction
353
655 Consensual
deals
Repossessed
237
Cumulative
2016 - 20181 2019
Foreclosures
commenced2 1,437 1,829
Auctions held 470 807
1Q2019 2Q2019 3Q2019 4Q2019
330 527 436 536
82 163 189 373
No. of properties
(1) Excluding Helix
(2) The foreclosure process is considered to have commenced upon serving notice to the mortgagor
(3) Properties that have been auctioned unsuccessfully at least once
(4) The [number of cases resolved] as a proportion of [the number of cases that reached or would have reached an auction had they not
closed prior to the auction set date]
(5) Includes DFAs, restructurings and settlements
5
3
1,245
Group Financial Results for the year ended 31 December 2019
REMU: €1.25 bn sales of 1,584 properties across all property classes since set-up in Jan 2016
29
(1) Amounts as per Sales purchase Agreements (SPAs)
(2) Number of properties sold include 21 properties from the disposal of Cyreit and 23 properties from NPE sale (Helix)
(3) Legacy properties relate to properties that were on-boarded before REMU set-up in January 2016
(4) The BV of the properties disposed at the date of disposal as a proportion of the [BV of the properties disposed at the time of the disposal
plus the BV of the residual properties managed by REMU as at 31 Dec 2019]
Sales since Real Estate Management Unit set-up
Sales contract prices1 (€ mn)
# 99 # 331 # 575 # 5792
179
330
238
345
160
505
201920172016 2018
Cyreit Sales # properties
Sales €1.25 bn
Breakdown of cumulative sales1
by on-boarding year (€ mn)
294 546 318 93
2017
1
2018 20192016Legacy
€1,252
% Sales
of vintage stock
(BV)454% 45% 48% 26%
37%
23%
11%
9%
13%
7%
Land
CyreitCommercial
Hotels
Residential
Overseas
by property type
✓ Asset disposal strategy tackles both value and volume of assets
✓ Asset disposals across all property classes
✓ 54% of Legacy3 and 45% of 2016 book assets now sold
✓ 37% of sales (by value) relate to land
3
Group Financial Results for the year ended 31 December 2019
REMU sales achieved comfortably above Book Value
30
280
628
273
182
103
Dec
2016
Greece & Romania
Dec
2019
Sep
2019
Dec
2017
Dec
2018
24
Residential
1,513
Commercial properties
Hotels
Land & plots
1,427
Golf
1,490
1,6411,530
Group BV (€ mn)
Evolution of REMU stock1
345
105
182
46
Total Sales
2019
Land
12
Hotels Commercial Residential
94% 101% 94% 93% 94%
112% 127% 106% 120% 118%
Net Proceeds / BV Gross Proceeds / OMV
• Encouraging trends on real estate market
✓ Sale contracts (excluding DFAs) up 12% yoy3
✓ Residential property price index up 2.8% yoy4
• Visible pipeline of €36 mn (SPAs signed)
• Regulatory approval received for the setup of an Additional
Investment Fund (AIF) with GBV of €45 mn (8 assets with yield
c.6.5%)
€505 mn sales at a profit of €32 mn in FY2019
Sales contract prices2 – Organic (€ mn)
(1) In addition to assets held by REMU, properties classified as “Investment properties” with carrying value of €24 mn as at 31 December
2019 relate to legacy properties
(2) Amounts as per Sales purchase Agreements (SPAs)
(3) Based on data from Land of Registry- Sales contracts
(4) Based on Residential price index published by Central Bank
Group Financial Results for the year ended 31 December 2019
(1) AIEA: Average Interest earning assets. Please refer to slide 72 for the definition
(2) Debt securities, treasury bills and equity investments
Balance sheet composition
31
Total assets
1.91
REMU properties
0.32
31 Dec 2019
Other assets
(including HFS)
Performing net loans
Legacy net loans
Due from banks
Securities
Cash
21.12
5.06
8.94
1.79
1.49
1.61
50%
11%
39%
Performing
net loans
Liquids
Legacy
net loans
Equity
31 Dec 2019
0.270.53
Other
Wholesale
Due to banks
Customer
deposits
21.12
16.69
2.29
1.34
Total equity & liabilities
AIEA Mix
4Q2019
AIEA:
€17.7 bn
€ bn € bn
1
1
2
Group Financial Results for the year ended 31 December 2019
(1) Servicing exclusively international activity companies registered in Cyprus and abroad and not residents
(2) Origin is defined as the country of the passport of the Ultimate Beneficial Owner
(3) NSFR has not yet been introduced. NSFR will become a regulatory indicator when CRR2 is enforced, with the limit set at 100%. The
NSFR is calculated as the amount of “available stable funding” (“ASF”) relative to the amount of “required stable funding” (“RSF”), on the
basis of Basel III standards
Stable deposit base and strong liquidity position
32
Deposits
€ bn
Liquidity
ratio
Minimum
required
31 Dec
2019Surplus
LCR
(Group)100% 208% €3,189 mn
NSFR3 100% 127% €3,392 mn
1
Sep 19Jun 19Dec 18
12.76
Mar 19 Dec 19
16.30 16.4716.84 16.38 16.69
13.14
3.70 3.54 3.46
12.92 12.98
3.49
13.15
3.54
+1.3%
Cyprus non-IBUCyprus IBU
67%
21%
6%4%2% Cyprus
Russia
Other EU
Other European countries, excl. Russia
Other countries
Cyprus deposits by passport origin2
✓ Significant surplus liquidity of €3.2 bn
✓ Deposits at €16.7 bn, up 1% qoq
✓ Strong deposit market share of 35.1% at Dec 2019
• Liquidity fees for specific customer groups introduced in March 2020
Group Financial Results for the year ended 31 December 2019
(1) New disbursements in the reporting period including the average YTD change (if positive) for overdraft facilities
(2) Facilities/limits approved in the reporting period
New lending1 at €2.0 bn in FY2019, highest since FY2015
33
98% of new exposures2 in Cyprus since 2016 are performing Performing gross loans by business activity
563
146
486
410
411
321
175
232
996
1,870
2Q2018 FY20183Q20181Q2018 4Q2018
563
173
548
491
443
366
200
211
1Q2019 3Q20192Q2019 4Q2019 FY2019
2,045
1,095
€ mn
Corporate Syndicated & shippingSME Retail-other Retail-housing
9.9%
14.3%
14.0%
-9.1%
18.5%
% change yoy
3.94
Trade
Real Estate
PrivateIndividuals
Manufacturing
Construction
Professional & Other services
Hotels & Catering
Other sectors
4.04
1.02
1.10
0.71
1.01
0.93
1.01
0.77
0.74
0.32
0.60
0.63
0.55
0.54
0.34
2018 2019
€ bn
-2.5%
-8.1%
8.9%
32.6%
3.4%
4.2%
-1.9%
7.3%
% change yoy
9.4%
Group Financial Results for the year ended 31 December 2019
(1) The interest income, non-interest income, staff costs, other operating expenses and loan credit losses related to Project Helix are disclosed under ‘Provisions/net loss relating to NPE sales’ since they are considered one-off items
(2) Including the impact from IFRIC Presentation of unrecognised interest following the curing of a credit-impaired financial asset (IFRS 9). This resulted to a reclassification between net interest income and loan credit losses, with no impact on the overall profitability
(3) An amount of c.€12 million relating to one off charge included in ‘Net interest income’ under the statutory basis is presented within ‘Loan credit losses’ under the underlying basis which is related to a change in the method of amortising arrangement fees given that this was a non
recurring item
(4) Properties held by the Bank prior to REMU set-up in January 2016
(5) NPE sales refer to NPE sale transactions completed in the year as well as sale transactions being contemplated as at year-end irrespective of whether they met the held for sale classification criteria as at 31 December 2019
(6) ‘Provisions/net loss relating to NPE sales’ refer to the net loss on transactions completed during FY2019, net loan credit losses on transactions under consideration at 31 December 2019, as well as the restructuring costs relating to these trades. For further details on ‘Provisions/net
loss relating to NPE sales’ please refer to Section B.3.4 of the FY2019 Press Release
Income Statement
34
€ mn FY20191 FY20181,2 4Q20191 3Q20191 qoq% yoy%
Net Interest Income 344 331 84 90 -7% 4%
Non interest income 307 326 72 72 1% -6%
Total income 651 657 156 162 -4% -1%
Total expenses (410) (393) (103) (99) 5% 4%
Operating profit 241 264 53 63 -17% -9%
Loan credit losses (146)3 (135) (29)3 (30) -3% 8%
(Impairments)/ reversal of impairments of other financial
and non-financial instruments(22) (20) (13) 1 - 12%
Provisions for litigation, claims, regulatory and other matters (10) (23) (7) (6) 19% -54%
Total loan credit losses, impairments and provisions (178) (178) (49) (35) 41% 0%
Advisory and other restructuring costs-organic (22) (42) (8) (4) 63% -49%
Profit/(loss) after tax-Organic (attributable to the owners) 36 46 (6) 23 - -22%
Restructuring costs- Voluntary Staff Exit Plan (VEP) (81) - (81) - - -
Provisions/net loss relating to NPE sales6 (92) (83) (86) (4) - 12%
Net (loss)/ profit on remeasurement of investment in
associate (CNP)(21) 9 - 0 - -
Reversal of impairment of DTA and impairment of other tax
receivables88 (79) (13) - - -
(Loss)/profit after tax-attributable to owners (70) (104) (186) 19 - -32%
Net Interest margin (annualised) 1.90% 1.82% 1.87% 1.99% -12 bps +8 bps
Cost to income ratio 63% 60% 67% 61% +6 p.p. +3 p.p.
Cost-to-Income ratio adjusted for the
special levy and SRF contribution59% 56% 63% 57% +6 p.p. +3 p.p.
Cost of Risk (annualised) 1.12% 0.99% 0.89% 0.90% -1 bps +13 bps
EPS – Organic (€ cent) 8.0 10.2 -1.3 5.2 -6.5 -2.2
• NII decreased to €84 mn in 4Q2019, mainly due
to higher interest cash collections not previously
recognised, in 3Q2019
• Non-interest income at €72 mn for 4Q2019,
broadly flat qoq
• Loan credit losses at €29 mn for 4Q2019, broadly
flat qoq
• Impairment of other financial and non-financial
instruments of €13 mn for 4Q2019 , mainly due to
the further de-risking of the REMU legacy4
properties
• Completion of Voluntary staff exit plan (VEP) in
4Q2019 at an one off cost of €81 mn
• Provisions/net loss relating to NPE sales5 of €86
mn, including additional loan credit losses within
the context of IFRS 9 of €75 mn, as a result of
the anticipated balance sheet de-risking through
further NPE sales in the future
• Reversal of impairment of DTA and impairment of
other tax receivables of c. €13 mn in 4Q2019
relates to an additional estimated guarantee fee
provision relating to tax credits
• Loss after tax of €186 mn for 4Q2019
• Loss after tax of €70 mn for FY2019
Group Financial Results for the year ended 31 December 2019
(1) Interest income on performing book for 1Q2019 increased from €74 mn to €77 mn since previously disclosed on 13 May 2019, due to reclassification between exposures
Balance sheet de-risking results in a smaller but safer loan book
35
Net Loans: Performing vs Legacy
• Lower but higher quality income resulting from balance sheet de-risking
• Interest Income of performing book reduced by €1 mn qoq, mainly due to higher interest collections not previously recognised, recorded in 3Q2019
• Interest Income of legacy book reduced by €6 mn qoq as balance sheet de-risking continues
• Interest on Net NPEs not received in cash, fully provided
• Lending rates remain under pressure due to the sustained low interest rate environment
Interest Income on Loans: Performing vs Legacy
9.98
Dec 16 Dec 17 Dec 18
8.85
Mar 19
8.9710.15
Sep 19
4.40
8.87
1.97
8.65
Dec 19Jun 19
12.04
15.6214.55
5.64 12.0410.93 10.94 10.73
3.39 3.192.06
8.94
1.79 17%
36%
83%64%
Legacy Performing
77 74 76 75
27 27 29 23
4Q20193Q20191Q2019
105
2Q2019
98104 101
€ mn€ bn
Legacy Performing
1
Group Financial Results for the year ended 31 December 2019
Performing Legacy Group
FY2019 FY2019 FY2019
Pro
fita
bil
ity
Interest Income on loans (€ mn) (pre FTP) 3021 106 408
Reversal/(Loan credit losses)
(€ mn)33 (179) (146)
Interest Income net of loan credit losses
(€ mn)335 (73) 262
Cost of Risk -0.37% 4.58% 1.12%
Effective Yield 3.40%1 5.25% 3.75%
Risk adjusted Yield2 3.78%1 -3.59% 2.41%
Cap
ita
l &
ba
lan
ce
Sh
ee
t Average Net Loans (€ mn) 8,854 2,031 10,885
RWA Intensity3 53% 103% 61%
(1) Interest income on performing book for 1Q2019 increased from €74 mn to €77 mn since previously disclosed on 13 May 2019, due to reclassification between exposures
(2) Interest Income on loans net of loan credit losses/ Average Net Loans
(3) Risk Weighted Assets over Total Assets
Risk adjusted yield will rise as Legacy book reduces
36
• Performing Book is expected to grow and to
increasingly drive Group results
• Legacy book revenues predominantly driven
by loan credit losses unwinding (but offset via
loan credit losses)
• Release of €33 mn of provisions in
performing book mainly due to loan migration
from Stage 2 to Stage 1
• Interest on Net NPEs not received in cash,
fully provided (€18 mn in 4Q2019 and €77
mn in FY2019)
• As Legacy book reduces:
• Group risk adjusted yield expected to
rise
• Group Risk intensity expected to fall
supporting CET1 ratio buildCorporate
IB, W&M
SME and
Retail Banking
Insurance and
Other incl H/O
RRD
Overseas non core
REMU
Group Financial Results for the year ended 31 December 2019
(1) Cash, placements with banks, balances with central banks and bonds
(2) Other includes funding from central banks and deposits by banks and repurchase agreements. For further details, please see slide 64
(3) Effective yield of liquid assets: Interest income on liquids after hedging, over average liquids (Cash and balances with central banks, placements with banks and bonds)
(4) Effective yield of cost of funding: Interest expense of all interest bearing liabilities after hedging, over average interest bearing liabilities (customer deposits, funding from the central bank, interbank funding, subordinated liabilities)
(5) Interest income on performing book for 1Q2019 increased from €74 mn to €77 mn since previously disclosed on 13 May 2019, due to reclassification between exposures
Drivers of NIM
37
Composition of NII Liquidity build up:
• Challenging interest rate outlook continues
to put pressure on the effective yield of
liquids
• Balance sheet de-risking–smaller but safer
loan book
• Higher-yielding, higher-risk legacy loans
are reducing as we successfully exit NPEs
Loan yields:
• Performing book yields remain under
pressure mainly due to the continued
lower interest rate environment
• Legacy book yields remain volatile
• Interest on Net NPEs not received in
cash, fully provided
Cost of funding:
• Improved to 38 bps, positively affected by
the 3 bps reduction in cost of deposits in
4Q2019
• Overall cost of deposits reduced by 60 bps
since year end 2017
Effective yield on assets & cost of funding
77 74 76 75
27 27 2923
6 65
1Q2019
Legacy
2Q2019
4
3Q2019 4Q2019
Liquids
Performing
110 107 110102
-3 -3 -3-3 -3 -3
-6 -6 -6-6
-13-10 -8
-8
-2Net derivative -2
-18
Other
Subordinated
loan stock
Customer
deposits
-25-22
-20
355 335 338 330
506 530576
485
19 17 7 6
-50 -43 -39 -38
1Q2019 2Q2019 3Q2019 4Q2019
Performing Legacy
Liquids Cost of funding
5
5
2
43
188 189 199 187NIM
(bps)85 85 90 84NII (€ mn)
1
Group Financial Results for the year ended 31 December 2019
162
53
18
93
326
FY2018
150
58
32
67
FY2019
307
37 38 36 39
12 18 12 16
1210
18
24
14 11
1Q2019
4
2Q2019
6
72
3Q2019
92
4Q2019
71 72
(1) Net FX gains/(losses & Net gains/(losses) on financial instruments, and other income
(2) Gains/(losses) from revaluation and disposal of investment properties and on disposal of stock of properties
(3) The interest income, non-interest income, staff costs, other operating expenses and loan credit losses related to Project Helix are disclosed under ‘Provisions/net loss relating to NPE sales’ since they are considered one-off items
Non interest income of €72 mn in 4Q2019 broadly flat qoq
38
Analysis of Non Interest Income (€ mn) – Quarterly
• Net fee and commission income
accounts for 25% of Total Income,
compared to 23% the previous quarter
• Recurring income of €55 mn for
4Q2019, up 13% qoq mainly due to
higher insurance income
• Net insurance income of €16 mn for
4Q2019, compared to €12 mn for
3Q2019, primarily due to the change in
the valuation rate and the positive
effect from lower insurance claims
(c.€5 mn)
• Net REMU gains2 of €6 mn in 4Q2019
compared to net gains of €10 mn in
3Q2019; REMU remains volatile
• Net gains on financial instruments1 and
other income of €11 mn for 4Q2019
compared to €14 mn in 3Q2019, driven
by lower net foreign exchange gains
and lower revaluation gains of financial
instruments
5648
49
Net FX and other income REMU Insurance income net of insurance claims Net fee & commission Recurring income1 2
Net fee &
commission %
of total income25% 23% 22% 23% 25% 23%
55
215 208
3
73%
9%
-27%
-8%
% change yoy
Group Financial Results for the year ended 31 December 2019
Stable recurring fees from insurance business
39
• Leading life insurer in Cyprus
• 24% market share (Life & Health regular)
• Gross Written Premiums (GWP) up 6% yoy
Product Mix by premium
• Non-Life leading insurer
• 17.7% market share2 (excl. motor)
• GWP up 2% yoy
Product Mix by premium
GWP evolution (€ mn) GWP evolution (€ mn) Group Insurace income net of claims (€ mn)
106 115 122
FY2017 FY2018 FY2019
+8% +6%
47 49 50
FY2019FY2017 FY2018
+4% +2%
50 53 58
FY2017 FY2018 FY2019
✓ Comprehensive insurance
business package providing
coverage for all financial needs
✓ Stable contributor to the Bank’s
profitability
✓ Well positioned for growth over
medium term
Eurolife
key metrics
FY2019
GWP (€ mn) 122
PAT (€ mn) 17
Dividend paid to the
Bank in 2019 (€ mn)
12
AUM1 (€ mn) 456
60%22%
18%Unit-linked
Traditional Life
Accidents &Health50%
26%
5%19%
Other
Accidents & Health
Property
Motor
GIC
key metrics
FY2019
GWP (€ mn) 50
PAT (€ mn) 8
Dividend paid to the
Bank in 2019 (€ mn)
8
Contribution
to BOCH
% of total
FY2019
Non interest income 19%
(1) Assets under management
(2) Data based on statistics published on IAC website
Group Financial Results for the year ended 31 December 2019
(1) Loan credit losses on customer loans including off-balance sheet exposures, net of gains/(losses) on derecognition of loans and advances to customers and change in expected cash flows over average gross loans
Cost of risk
40
Quarterly CoR1 at 0.89%
• Cost of risk for FY2019 at 1.1% of gross loans,
compared to 1.0% for FY2018 on the same basis,
reflecting further de-risking and IFRS 9 model volatility
• Cost of risk for 4Q2019 at 0.89% of gross loans,
compared to 0.90% for 3Q2019, on the same basis
• Interest on Net NPEs not received in cash, fully
provided (€18 mn in 4Q2019 and €77 mn in FY2019)
• Reversal in 4Q2019 relates mainly to the migration of
loans from Stage 2 to Stage 1 due to the reduction in
credit risk and the improvement in probabilities of
default
bps
FY2018FY2014 FY2015 FY2017
2.8%
FY2016 FY2019
4.3%
1.7%
4.0%
1.0% 1.1%
COR1 at 1.1% for FY2019
7529 48
11629
65
56
55
58
1Q2019
77
2Q2019
7
3Q2019
1112
4Q2019
147123
173
Interest on net NPEs not received in cash
New lending Stage 1 & 2
Stage 3
-3-21
-84
144 123 90 89
Group Financial Results for the year ended 31 December 2019
(1) Excludes special levy on banks and SRF contribution
(2) Representation for deconsolidation of UK subsidiary in 3Q2018
(3) The interest income, non-interest income, staff costs, other operating expenses and loan credit losses related to Project Helix are
disclosed under ‘Provisions/net loss relating to NPE sales’ since they are considered one-off items
(4) The contributions are calculated based on the Risk Based Methodology (RBM) as approved by the management committee of the
Deposit Guarantee and Resolution of Credit and Other Institutions Schemes (DGS) and is publicly available on the CBC’s website. In line
with the RBM the contributions are broadly calculated on the covered deposits of all authorised institutions and the target level is to reach
at 0.8% of these deposits by 3 July 2024
Total Expenses
41
Cost to Income Ratio (C/I ratio)1,3
• Staff costs for 4Q2019 at €53 mn broadly flat qoq
• Operating expenses for 4Q2019 increased to €43 mn,
mainly due to seasonality and lower marketing expenses in
3Q2019 and at similar levels to the previous quarters
• As from 1 January 2020 and by 3 July 2024 the Group is
subject, on a semi-annual basis, on the Contribution to the
Deposit Guarantee Fund (DGF). The said contribution of the
Group has been set at €2.9 mn for the 1H2020 and it will be
charged in 1Q2020 financial results of the Group4
Total operating expenses 3 (€ mn)
59%
1Q2019
59%
FY2018 1H2019 9M2019 FY2019
56%
62%58%
50 52 52 54 56 56 55 53
37 43 3441 43 38 4342
100
4Q2018
4
86
1Q2018
96
1Q2019
99
2Q2018 3Q20193Q2018 2Q2019 4Q2019
8795 97 93
Other operating expenses Staff costs unrelated to 4Q2018 Staff costs
75 6 7 6 6 6 7
4Q20193Q20194Q20181Q2018 2Q2018 3Q2018 1Q2019 2Q2019
Special Levy and SRF contribution (€ mn)
• C/I ratio1 increased to 59% in FY2019, compared to 58% for
9M2019, principally reflecting the reduction in interest
income and increase in operating expenses in 4Q2019
• C/I ratio1 increased by 3 p.p. yoy, mainly due to the increase
in total operating expenses
22
Group Financial Results for the year ended 31 December 2019
121 121108
99 99
60%
64%
67% 68%70%
Dec-17 Dec-18 Sep-19 Dec-19 Mar-20
Branches Digitally engaged
(1) This is the ratio of digitally engaged individual customers to the total number of individual customers as per the engagement scorecard. Digital channels include mobile, browser and ATMs. It also captures access to a card as well as online card purchases
Cost Management Actions Supported by Digital Transformation
42
11% reduction in FTEs following VEP completion
Branch footprint rationalisation continues facilitated by digital transformation
Dec-19Dec-17 Dec-18 Sep-19
4,355
4,146 4,134
3,672
-11%
1
Management remains focused on further improvement in efficiency
• Successful completion of Voluntary Staff Exit Plan (VEP) in 4Q2019 at
one-off cost of €81 mn
• Gross annual savings in staff costs of 13% (€28 mn)
• Annual savings in staff costs net of the impact of the renewal of the
collective agreement for 2019 and 2020 of 11% (€23 mn)
• Staff reduced by 11%
• Additionally, c.100 FTEs relating to Helix were transferred to the buyer
upon full migration in January 2020
Digital Transformation Programme
• Digital Transformation Programme that started in 2017 beginning to
clearly deliver an improved customer experience
• Awarded as Best Consumer Digital Bank in Cyprus for 2019 by Global
Finance
• 70% of customers are digitally engaged1, up 6 p.p. since Dec-18
• Considerable work is going on to further rationalise, modernise and reduce
costs
• 22 branches closed (-18%) in 2019
• Overall 57% reduction in number of branches since 2013
Group Financial Results for the year ended 31 December 2019
Key Information and Contact Details
43
Contacts
Investor RelationsTel: +35722122239, Email: [email protected]
Annita Pavlou Investor Relations Manager
Tel: +357 22 122740, Email: [email protected]
Elena Hadjikyriacou ([email protected]),
Marina Ioannou ([email protected])
Andri Rousou ([email protected]),
Stephanie Koumera ([email protected])
Executive Director Finance
Eliza Livadiotou, Tel: +35722 122128, Email: [email protected]
Visit our website at: www.bankofcyprus.com
Credit Ratings
Standard & Poor’s Global Ratings:
Long-term issuer credit rating: Affirmed at “B+” on 30 July 2019 (stable outlook)
Short-term issuer credit rating: Affirmed at “B” 30 July 2019
Fitch Ratings:
Long-term Issuer Default Rating: Affirmed at “B-" on 29 November 2019 (outlook revised to
negative on 7 April 2020)
Short-term Issuer Default Rating: Affirmed at “B" on 29 November 2019
Viability Rating: Affirmed at “b-” on 29 November 2019
Moody’s Investors Service:
Baseline Credit Assessment: Affirmed at “caa1” on 24 January 2019
Short-term deposit rating: Affirmed at "Not Prime" on 14 June 2019
Long-term deposit rating: Affirmed to “B3” on 14 June 2019 (positive outlook)
Counterparty Risk Assessment: Affirmed at B1(cr) / Not-Prime (cr) on 14 June 2019
Listing:
LSE – BOCH, CSE – BOCH/ΤΡΚΗ, ISIN IE00BD5B1Y92
Group Financial Results for the year ended 31 December 2019
APPENDIXMacroeconomic overview
44
Group Financial Results for the year ended 31 December 2019
SOURCE: Statistical Service of Republic of Cyprus; Bloomberg;
(1) Normalised against Germany Government bond with maturity 15/8/2025 except Greece
(2) Due to the Debt swap of the Hellenic Republic, from November 2017 onwards data for the new Hellenic Republic Bond with maturity
30/01/2028 was used and normalised against the closest maturity of German Government bond (DBR) 15/08/2027
(3) Official estimate from Eurostat’s monthly data
(4) SA: Seasonally Adjusted
Cypriot economy grew by 3.2% in 2019; Deterioration of the short term prospects, following the outbreak of COVID-19
45
GDP increased by 3.2% in 2019
COVID-19 pandemic poses serious challenges to sovereign ratings
Dec 1
2
Mar
13
May 1
3
Au
g 1
3
Oct
13
Ja
n 1
4
Mar
14
Ju
n 1
4
Au
g 1
4
Nov 1
4
Ja
n 1
5
Ap
r 15
Ju
n 1
5
Se
p 1
5
Nov 1
5
Ja
n 1
6
Ap
r 16
Ju
n 1
6
Se
p 1
6
Nov 1
6
Feb
17
Ap
r 17
Ju
l 1
7
Se
p 1
7
Dec 1
7
Feb
18
May 1
8
Ju
l 1
8
Oct
18
Dec 1
8
Feb
19
May 1
9
Ju
l 1
9
Oct
19
Dec 1
9
Mar
20
Cyprus Portugal Italy Spain Greece Ireland
0
0.1
0.2
0.3
0.4
0.5
0.6
Ja
n 2
01
8
Mar
20
18
May 2
01
8
Ju
l 20
18
Oct 20
18
De
c 2
018
Feb
20
19
Apr
20
19
Ju
n 2
01
9
Sep
2019
No
v 2
019
Ja
n 2
02
0
Mar
20
20
Cyprus - maturity 4/11/2025 Portugal - maturity 15/10/2025 Spain - maturity 31/10/2025
Italy - maturity 01/12/2025 Greece - maturity 30/01/2028
1 1
1
1
2
Unemployment rate dropped to 7.3% in 2Q2019 SA4
Widening of spreads reflecting uncertainty due to COVID-19 spread
BBB-
AA-
BB-
A
BBB
3.3 3.1 3.3 3.2
-6.5
-1.9
3.4
6.74.4
3.2
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
2011Q4 2012Q4 2013Q4 2014Q4 2015Q4 2016Q4 2017Q4 2018Q4 2019Q4
Real GDP Quarterly SA % change y-o-y Real GDP SA annualised % change y-o-y4 4
400
358
413
7.5 7.4 7.2
300
320
340
360
380
400
420
440
460
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20
10
Q1
20
10
Q4
20
11
Q3
20
12
Q2
20
13
Q1
20
13
Q4
20
14
Q3
20
15
Q2
20
16
Q1
20
16
Q4
20
17
Q3
20
18
Q2
20
19
Q1
Employment in 000s (4Q average NSA (RHS) Unemployment rate SA (%) 4
2019Q
3
S&
P c
red
it r
ati
ng
s
Sp
read
s (
%)
3
Group Financial Results for the year ended 31 December 2019
SOURCES; Statistical Service of Republic of Cyprus, Eurostat; Calculations by BOC Economic Research
Sectors most adversely affected initially by COVID-19 are expected to be Tourism, Trade andConstruction accounting for 32% of GDP
46
Economic activity has been broadly based with main
drivers tourism and construction
Construction activity – strong recovery in FY2019 Support from key business enablers
Corporate tax rates - 2019
40.2%
38.5%
21.3%
Upper and post-
secondary, non-
tertiary
Less than
Upper secondary
Tertiary
Level of education 2019, age 15-64
Cyprus has the highest number of
university graduates in the population
in the EU after Ireland, at par with UK
31.0%
30.0%
28.0%
25.0%
24.0%
21.0%
19.0%
12.5%
12.5%
Tourism arrivals (mn)Tourism: % changes yoy
20192017
0.2
2011 2012 20162013 20152014 2018 1Q
2019
3.7
1Q
2020
2.4 2.5 2.4 2.4
3.9
2.7
3.2
4.0
0.4
-31%
11.914.6
2020
Mar YTD
(Jan for
receipts)
20172016
2.0
19.8
2018
11.7
7.8
2.7
-31.0
Total arrivals (% change)
Total receipts (% change)
1.20.0 0.3 0.2
1.0
1.01.5
1.0
1.6
1.61.0
0.6
1.5
1.00.1
0.6
-0.8 -0.5 -1.0 -0.4
0.6
0.4 0.6
0.5
0.4
0.6 0.4
0.5
6.7
4.44.1
3.2
2016 2017 2018 2019
Arts & Oher
Public, Edu. &HealthProf. & Admin
Real Est.
Financial
Information
Trade, Tran. &Tour.Construction
18.4 17.3
16.8 17.3
13.8
42.9 41.6
9.3
24.7
0.0
10.0
20.0
30.0
40.0
50.0
% changes year-on-year
Production index in construction Building permits volume
Group Financial Results for the year ended 31 December 2019
APPENDIXAdditional asset quality slides
47
Group Financial Results for the year ended 31 December 2019
The legislative framework1 positively supports organic delivery and the sale of NPEs
48
Other changes
Securitisation Law
Foreclosure Law
Sale of Loans Law
• The July 2018 foreclosure law amendments1 have expedited the process and limited options to frustrate execution
• In July 2019 the Parliament has voted through certain changes to that law which, in the most part, seek to:
– Provide additional checks and balances where banks are seeking to foreclose small loans (<€350k) secured by a PPR, and
– Extend the foreclosure timetable by extending various notice periods
• These amendments have not yet passed into law, as the President of the Republic has referred these to the Supreme Court,
based on legal advice from the Attorney General that elements thereof are unconstitutional
• Discussions are on-going, including, inter alia the MoF, the CBC and the Financial Ombudsman, aiming to introduce
amendments to the foreclosure and loan restructuring framework that are acceptable to all stakeholders
Tax legislation
• Incentives to customers agreeing consensual solutions continue including exception of capital gains tax and transfer fees in sale
of property to banks
• Additional exemption for sale of property directly to third party introduced
Insolvency framework
• Changes aim to close gaps and enhance the participation and applicability of personal repayment schemes for physical persons
• Easier for banks to securitise NPΕs
• Regulated by CBC
Amendments1 approved in July 2018 aim to improve the law and close current gaps that hindered the use of the law via:
✓ Improving the framework around transfer of rights and obligations to the buyer
• Regulating the transfer of rights, obligations, benefits, continuity of lawsuits etc between parties
• Splitting of collateral to cover disposed part of loan in case of cross-collateralisation of loans
• Transfer of collaterals to the name of the buyer without further costs
Group Financial Results for the year ended 31 December 2019
TIMEFRAME Foreclosure DecisionService time of Notices
Servicing Time +40 days
Valuation
30-115 days
Service Announcement
3-5 days + Servicing Time+ 30 daysAuction
Property transfer & Distribution of proceeds
1-50 days immediately after auction
(1) Amendments to the Foreclosure Legislation, the Sale of Loans Law, the Insolvency framework and the introduction of the Securitisation
Law came into effect on 13/7/2018
(2) The timeframe up to the first auction of 8 months relates to the period from the commencement of the foreclosure (the foreclosure process
is considered to have commenced upon serving notice to the mortgagor) up to the first auction
TIME UP TO AUCTION: ~ 8 MONTHS2
1
Group Financial Results for the year ended 31 December 2019
ESTIA- Government scheme for the resolution of NPEs backed by Primary Residence
49
• Eligible loans to be restructured to lower of contractual and Open Market Value (OMV) (on balance sheet solution)
• Government to subsidise 1/3 of instalment, provided certain eligibility criteria1 are met:
➢ Borrowers with loans linked to a Primary Residence (PR) with OMV ≤ €350k
➢ At least 20% of the total borrower’s credit exposures > 90 days past due as at 30 Sept 2017
➢ Annual gross income < €20k to €60k, ranging from €20k for single persons to €60k for couples with 4 or more dependents
• Other household’s net assets, excluding the PR <80% of the OMV of the PR. Cap on value of asset of €250k
• European citizen with legal and continuous residency in EU since 2013
Group Financial Results for the year ended 31 December 2019
✓ Restructured loans will exit NPE definition in accordance to the NPE exit criteria1
Clear definition of socially protected borrowers, acting as enabler against non-Estia eligible borrowers
Expected to resolve part of ESTIA-eligible portfolio, identify non-viable (vulnerable) customers and facilitate resolution of remaining customers through alternative solutions
Scheme summary
(1) Please refer to slide 75 for the NPE forborne exit criteria
Group Financial Results for the year ended 31 December 2019
47
% 56
% 69
%
63
%
10
0%
79
%
73
% 84
%10
0%
78
%
70
% 85
%
59
%
80
%
74
%
74
%
72
%
73
%
69
%
58
%
89
%
88
%
81
%
85
%97
%
96
%
79
% 88
%10
0%
75
%
79
%
80
%
10
0%
94
%
88
%
94
%
0%
20%
40%
60%
80%
100%
Corporate SMEs Retail Total Bank - Cyprus
3Q2017 4Q2017 1Q2018 2Q2018 3Q2018 4Q2018 1Q2019 2Q2019 3Q2019
74%80%
Weighted Avg since Sep-17
(1) Write offs in 1Q2018 include a net impact of (c.€11 mn) of IFRS 9 grossing up and set offs
(2) Excluding write offs & non contractual write offs and DFAs and terminated accounts
(3) The performance of loans restructured during 4Q2019 is not presented in this graph as it is too early to assess
Restructuring efforts continue; re-default levels stable
50
Quarterly evolution of restructuring activity (Cy operations)
Cohort analysis of restructured 2,3 loans; 80% of restructured loans present no arrears
Corporate SMEs Retail Total Bank – Cyprus
1
NO ARREARS
78%92%
3Q2018
0.28
0.52
0.10 0.06 0.02
1Q2018 1Q2019
0.09
0.10
2Q2018 4Q2018
0.05
2Q2019
0.06
0.02
4Q20193Q2019
0.12
0.79
0.310.37
0.13
0.07
0.34
0.15 0.180.40
0.27
0.29
0.16
0.140.130.16
0.11
0.070.12
0.08
0.12
0.07
Restructured loans Write-offs & non-contractual write-offs DFAs
€ bn
Group Financial Results for the year ended 31 December 2019
Fair value of collateral and adequacy of loan credit losses
51
NPE Coverage at 54%
• Resolution of cases within loan credit losses
continued in 4Q2019
• Back-testing of c.17k fully settled customers over
last 20 quarters on average within c.10% surplus
over net book value
Back-testing of loan credit losses supports past loan credit losses adequacy
QuarterGross Contractual Balance
€ mn
Surplus/(Gap) in
loan credit losses€ mnNo. of Customers
1Q2015 6.0 1.4 148
2Q2015 79.2 16.0 242
3Q2015 20.2 0.0 441
4Q2015 65.7 -2.1 551
1Q2016 158.3 0.5 1,276
2Q2016 266.9 12.1 2,298
3Q2016 124.5 13.9 115
4Q2016 71.9 -1.1 2,343
1Q2017 119.2 1.2 2,194
2Q2017 200.9 7.5 2,369
3Q2017 75.7 7.8 1,081
4Q2017 137.6 1.8 498
1Q2018 71.7 -3.9 427
2Q2018 44.1 2.6 390
3Q2018 37.4 -0.2 343
4Q2018 47.9 1.6 322
1Q2019 excl. Helix 31.9 1.3 319
2Q2019 39.6 1.6 878
3Q2019 44.1 2.1 336
4Q2019 36.1 2.2 305
1,678.9 66.3 16.876
Loans and advances to customers31 Dec 2019
(€ mn)
Cash 435
Securities 638
Letters of credit / guarantee 171
Property 15,537
Other 1,404
Surplus collateral (8,557)
Net collateral 9,628
Fair value of collateral and credit enhancements
4047 47
4030 29
0
10
20
30
40
50
60
0
10
20
30
40
50 52%
2Q20194Q2018
53%
1Q2019pro forma for Helix
1Q2019
48% 50% 51%
3Q2019
54%
4Q2019
Cash coverage
Loan credit losses
€ mn
Group Financial Results for the year ended 31 December 2019
Continuous progress across all segments (Cy operations)
52
Focus shifts to Retail and SME after intense Corporate attention
Corporate
Dec 2019
Terminated Retail
Terminated Corporate
SME
Terminated SMEs
1.64
Retail 0.79
NPEs (Cy) €3.79 bn
0.47
0.25
0.11
0.53
€2.43 bn
€0.64 bn
€0.72 bn
Retail
SME
Corporate
Dec 18
Sep 19
(0.41)
Inflows
Helix
Exits
0.08
(1.99)
(0.05)
3.01
Exits
Dec 19
0.69
0.64
Sep 19
0.03
Exits (0.36)
Inflows
Dec 18
(0.56)Helix
0.01Inflows
(0.15)Exits
Dec 19
0.86
1.75
0.72
(0.11)
Inflows 0.13
Dec 18
Exits
Inflows
(0.05)
Sep 19
Helix
0.02
(0.03)Exits
Dec 19
2.47
2.44
2.43
Dec 2019
NPE ratio 13%
NPE coverage 49%
NPE total coverage 103%
Dec 2019
NPE ratio 38%
NPE coverage 52%
NPE total coverage 124%
Dec 2019
NPE ratio 41%
NPE coverage
➢ Retail Housing 48%
➢ Retail Other 64%
NPE total coverage 125%
1
€ bn
Group Financial Results for the year ended 31 December 2019
(1) Reporting as at 31 December 2017 includes transfers within RRD business lines following an internal reorganisation of RRD in 4Q2017
Gross loans and NPEs by Customer Type
53
Gross loans by customer type (€ bn)
Sep 19
1.874.35
Dec 17Dec 16
9.01
Dec 18 Dec 19
20.1318.75
15.90
2.74
4.2213.04 12.82
4.07
9.47
4.08
1.79
2.09
3.51
4.17
5.03
2.06
7.06
2.98
4.07
2.06
1.88
2.21
1.92
Global CorporateRetail other CorporateRetail Housing SMEs
1.77
Dec 16 Dec 19Dec 17 Dec 18 Sep 19
0.160.87
0.56
11.03
4.08
7.42
8.80
3.88
5.00
2.99
1.27
3.99
2.02
1.57
0.77
1.22
3.19
1.76
1.49
0.98
1.41
1.03
0.73
1.39
1.04
NPEs by customer type (€ bn)
1
1
Group Financial Results for the year ended 31 December 2019
(1) Restricted to Gross IFRS balance
NPE Coverage and Total coverage by segment (Cy)
54
Coverage and collateral maintained post NPE sale (Helix)
1
Total Cyprus €3.79 bnCorporate €0.53 bn SME €0.72 bn Retail-Housing €1.39 bn Retail-Other €1.04 bnGlobal Corporate: €0.11
72%
51%
54%
51%
Dec 18
50%
126%
Dec 19
54%
57%
118%
Sep 19 Dec 19 Sep 19
57%
43%
Dec 19
70%
57%
Dec 18
67%
58%
Dec 18
56% 58%
72%
52%
100%
84%
131%
123%
39%51%
Dec 18 Sep 19
85%
121%
41%
118%
83%
127%
48%
Dec 19
60%
64%
54%
Dec 19Sep 19
72%
Dec 18
104%
53%
69%
50%
119%123%123%
Sep 19 Dec 19
124%
105%
123%
115%
68%
Tangible Collateral
Allowance for expected loan credit losses
Group Financial Results for the year ended 31 December 2019
Asset quality- NPE analysis
55
(€ mn) Dec-19 Sep-19 Jun-19 Mar-19 Dec-18
A. Gross Loans after Residual Fair value adjustment on initial
recognition12,551 12,757 12,782 15,437 15,438
Residual Fair value adjustment on initial recognition 271 278 290 445 462
B. Gross Loans 12,822 13,035 13,072 15,882 15,900
B1. Loans with no arrears 8,820 8,794 8,565 8,402 8,260
B2. Loans with arrears but not NPEs 122 156 195 207 221
1-30 DPD 88 119 150 138 166
31-90 DPD 34 37 45 69 55
B3. NPEs 3,880 4,085 4,312 7,273 7,419
With no arrears 722 802 949 1,356 1,482
Up to 30 DPD 54 69 89 108 136
31-90 DPD 76 86 125 183 231
91-180 DPD 121 159 149 240 178
181-365 DPD 263 251 225 316 393
Over 1 year DPD 2,644 2,718 2,775 5,070 4,999
NPE ratio (NPEs / Gross Loans) 30% 31% 33% 46% 47%
Allowance for expected loan credit losses (including residual fair
value adjustment on initial recognition1)2,096 2,086 2,145 3,846 3,852
Gross loans coverage 16% 16% 16% 24% 24%
NPEs coverage 54% 51% 50% 53% 52%
(1) Comprise (i) loan credit losses for impairment of customer loans and advances, (ii) the residual fair value adjustment on initial recognition of loans acquired from Laiki Bank and on loans classified at FVPL, and (iii) loan credit losses on off-balance sheet exposures disclosed on the
balance sheet within other liabilities
Group Financial Results for the year ended 31 December 2019
Analysis of gross loans and NPE ratio by Economic activity
56
Gross loans by economic activity (€ bn)
2.0
4
0.6
6
1.3
9
2.3
4
3.2
0
6.7
7
1.3
1
1.0
4 1.8
5
0.6
4
1.2
7
1.9
5
1.6
1
6.4
7
1.2
0
0.9
1
1.4
1
0.4
7
1.0
8
0.8
9
1.2
9
6.1
0
1.0
4
0.7
6
1.3
6
0.4
7
1.0
8
0.8
5
1.2
9
6.0
2
1.0
0
0.7
5
Trade Manufacturing Hotels & Restaurant Construction Real Estate Private Individuals Professional andother services
Other sectors
31.12.17 31.12.18 30.09.19 31.12.19
10%11% 47% 8% 6%7%8%3%
NPE ratio by economic activity
45
% 53
%
32
%
76
%
33
%
45
% 52
%
51
%
49
%
52
%
28
%
68
%
53
%
43
%
46
%
34
%
32
%
29
%
8%
36
%
24
%
38
%
32
%
17
%
31
%
27
%
7%
34
%
23
%
37
%
31
%
17
%
Trade Manufacturing Hotels and Catering Construction Real estate Private individuals Professional and other services
Other sectors
31.12.17 31.12.18 30.09.19 31.12.19
% of total
Group Financial Results for the year ended 31 December 2019
(1) Reporting as from 31 December 2017 includes transfers within RRD business lines following an internal reorganisation of RRD in 4Q2017
Rescheduled Loans for the Cyprus Operations
57
Rescheduled loans by customer type (€ bn)
1.7
0.4
0.5
Dec 16
0.4
6.3
Dec 17
1.3 0.5
0.5
Sep 19Dec 18
0.5
4.8
0.4
Dec 19
7.4
2.9 2.7
3.4
0.6
1.7
3.0
0.6
1.4
2.2
1.0 1.0
1.1
0.9
1.0
CorporateRetail housing Global CorporateRetail other SMEs
Rescheduled loans1 % gross loans by customer type
32
%
SMEs RetailConsumer
40
%
Corporate GlobalCorporate
44
%
RetailHousing
18
%
16
%
15
%
41
%
40
%
34
%
40
%
24
% 28
%
35
%
29
%
26
%
24
% 27
%
27
%
25
% 28
%
23
%
Dec 19Dec 16 Sep19Dec 17 Dec 18
Rescheduled loans-Asset Quality
31 December 2019 € ‘000
Stage 1 357,772
Stage 2 299,471
Stage 3 1,605,588
POCI 206,734
FVPL 228,804
Total 2,698,369
Group Financial Results for the year ended 31 December 2019
(1) Includes purchased or originated credit-impaired
Gross loans and allowance for expected loan credit losses by IFRS 9 Stage
58
Gross Loans (€ bn) 31 Dec 2019 30 Sep 2019 qoq %
Stage 1 7.21 6.26 15%
Stage 21 1.73 2.70 -35%
Stage 31 3.88 4.08 -5%
Total 12.82 13.04 -2%
Allowance for expected
loan credit losses (€ bn)31 Dec 2019 30 Sep 2019 qoq %
Stage 1 0.09 0.08 10%
Stage 21 0.05 0.07 -37%
Stage 31 1.96 1.94 1%
Total 2.10 2.09 0%
• Increase in Stage 1 gross loans by c. €950 mn in
4Q2019, mainly due to loan migration from Stage 2
to Stage 1 mainly due to the reduction in credit risk
and the improvement in probabilities of default
• Net organic reduction of Stage 3 loans by €205 mn
in 4Q2019
Group Financial Results for the year ended 31 December 2019
REMU – the engine for dealing with foreclosed assets
59
Total Book Value Sales of €455 mn for the FY2019
Encouraging trends in Real Estate Market;
property prices up 2.8% in 2Q20192
4230
62 6748
160
88
4Q2018 1Q2019 Nicosia Mall
3Q20192Q2019 4Q2019 Cyreit
103
196
112(5)
Impairment loss
1,427
AdditionsProperties
managed by
REMU as at
01 Jan 2019
(24)
(207)
Sales Transfer to non-
current assets and
disposal groups
held for sale
1,378
Properties
managed by
REMU as at
31 Dec 2019
1,5301,490
Investment Properties
REMU focuses now on sales
77.6
2.7 2.8
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
30.0
50.0
70.0
90.0
110.0
Q42015 Q22016 Q42016 Q22017 Q42017 Q22018 Q42018 Q22019
Central Bank Residential Property Price index
Residential Propert Price index (2010Q1=100) % change y-o-y (RHS)
Sales contracts (excl. DFAs) in 2019 up 12% yoy3
201220102008
10.366
2013 20192009 2011 1Q202020182014 2015 2016 2017
5.885
4.481
1Q2019
2.366
8.734 9.242
1.991
-16%
Sales to Cypriots Sales to non-Cypriots
BV € mn
(1) In addition to assets held by REMU, properties classified as “Investment properties” with carrying value of €24 mn as at 31 December
2019 relate to legacy properties
(2) Based on Residential price index published by Central Bank, dated 8 January 2020
(3) Based on data from Land of Registry- Sales contracts
1
Sales: €207 mn€ mn
Group Financial Results for the year ended 31 December 2019
APPENDIXAdditional financial information
60
Group Financial Results for the year ended 31 December 2019
Liability and Equity (€ mn) 31.12.2019
31.12.18
(restated)
%
change
Deposits by banks 533 432 23%
Funding from central banks - 830 -100%
Repurchase agreements 168 249 -32%
Customer deposits 16,692 16,844 -1%
Subordinated loan stock 272 271 0%
Other liabilities 1,169 1,082 8%
Total liabilities 18,834 19,708 -4%
Shareholders’ equity 2,040 2,121 -4%
Other equity instruments 220 220 -
Total equity excluding non-
controlling interests2,260 2,341 -3%
Non controlling interests 29 26 10%
Total equity 2,289 2,367 -3%
Total liabilities and equity 21,123 22,075 -4%
Consolidated Balance Sheet
61
Assets (€ mn) 31.12.2019
31.12.2018
(restated)
%
change
Cash and balances with Central Banks 5,060 4,610 10%
Loans and advances to banks 321 473 -32%
Debt securities, treasury bills and equity
investments1,906 1,515 26%
Net loans and advances to customers 10,722 10,922 -2%
Stock of property 1,378 1,427 -3%
Investment properties 136 127 6%
Other assets 1,574 1,531 3%
Non current assets and disposal groups
classified as held for sale26 1,470 -98%
Total assets 21,123 22,075 -4%
Comparative information was restated following the change in the
classification of stock of properties which are leased out under operating
leases as ‘investment properties’. For further information on restatements
on comparative information, please refer to Note 2.38 of the Consolidated
Financial Statements for the year ended 31 December 2019. The changes
did not have an impact on the results for the year or the equity of the Group.
Group Financial Results for the year ended 31 December 2019
Core Cypriot business
62
Average contractual interest rates (bps) (Cy)
37.5% 37.1%
45.4% 47.1%41.3% 40.8% 41.1%
31.1%32.8%
36.0%34.7% 34.7% 34.6%
35.1%
Dec 16 Dec 17 Dec 18 May 19before Helix
Jun 19after Helix
Sep 19 Dec 19
Loans Deposits
Strong market shares in resident and non-resident deposits
29.5% 31.5% 34.1% 35.3% 34.6% 34.9%
35.8% 37.3% 38.8% 38.3% 34.7% 35.8%
Dec 16 Dec 17 Jun 18 Dec 18 Sep 19 Dec 19
Residents Non-residents
7758
4739 33
1 1 1 1 1-50
-30
-10
10
30
50
70
90
110
130
150
170
190
210
230
250
4Q2018 1Q2019 2Q2019 3Q2019 4Q2019
Time & Notice accounts Savings and Current accounts
475 468 460413 402 396
41 32 24 24 19 16
434 436 436389 383 380
4Q2018 1Q2019 2Q2019 2Q2019(excluding
Helix)
3Q2019 4Q2019
Yield on Loans Cost of Deposits Customer spread
Market shares1
Customer deposit rates decline further (bps) (Cy)
(1) The market share on loans was affected as from 30 September 2018 following a decrease in total loans in the banking sector, mainly attributed to €6 bn non-performing loans of Cyprus Cooperative Bank (CyCB) which remained to SEDIPES (a legal entity without license to operate as
a credit institution) as a result of the agreement between CyCB and Hellenic Bank
3241 24 19
Cost of deposits
16
Group Financial Results for the year ended 31 December 2019
Income Statement bridge1 for FY2019
63
€ mnUnderlying
basis
Helix
PortfolioNPE sales
Investment in
associate
Tax related
itemsOther
Statutory
Basis
Net interest income 344 34 - - - (12) 366
Net fee and commission income 150 12 - - - 162
Net foreign exchange gains and net gains on financial instrument transactions and disposal/dissolution of subsidiaries and
associates38 - - - - 7 45
Insurance income net of claims and commissions 58 - - - - - 58
Net gains from revaluation and disposal of investment properties and on disposal of stock of properties 32 - - - - (4) 28
Other income 29 - - - - 29
Total income 651 46 - - - (9) 688
Total expenses (410) (36) (15) - (19) (113) (593)
Operating profit 241 10 (15) - (19) (122) 95
Loan credit losses (146) (16) (71) - - 9 (224)
Impairments of other financial and non-financial instruments (22) - - - (8) - (30)
Provisions for litigation, claims, regulatory and other matters (10) - - - - 10 -
Remeasurement of investment in associate upon classification as held for sale - - - (26) - - (26)
Share of profit from associate - - - 5 - - 5
Profit/loss) before tax and non-recurring items 63 (6) (86) (21) (27) (103) (180)
Tax (3) - - - 115 - 112
Profit attributable to non-controlling interests (2) - - - - - (2)
Profit/ (loss) after tax and before non-recurring items (attributable to the owners of the Company) 58 (6) (86) (21) 88 (103) (70)
Advisory and other restructuring costs - organic (22) - - - - 22 -
Profit/ (loss) after tax – Organic (attributable to the owners of the Company) 36 (6) (86) (21) 88 (81) (70)
Restructuring costs – Voluntary Staff Exit Plan (VEP) (81) - - - - 81 -
Provisions/net loss relating to NPE sales (92) 6 86 - - - -
Loss on remeasurement of investment in associate upon classification as held for sale (CNP) net of share of profit from
associates(21) - - 21 - - -
Reversal of impairment of DTA and impairment of other tax receivables 88 - - - (88) - -
Loss after tax - attributable to the owners of the Company (70) - - - - - (70)
(1) Please refer to section B1 “Unaudited reconciliation of Income Statement for the year ended 31 December 2019 between statutory and underlying basis” of the Group Financial Results
Group Financial Results for the year ended 31 December 2019
Analysis of Interest Income and Interest Expense
64
(1) Interest income on loans and advances to customers for 1Q2019 increased from €101 mn to €104 mn and Interest income on loans and advances to banks and central banks decreased to €2 mn from €5 mn since previously disclosed on 13 May 2019, due to reclassification of
between exposures
(2) The interest income, non-interest income, staff costs, other operating expenses and loan credit losses related to Project Helix are disclosed under ‘Provisions/net loss relating to NPE sales’ since they are considered one-off items
Analysis of Interest Income (€ mn) 1Q20191,2 2Q20192 3Q2019 4Q2019
Loans and advances to customers 104 101 105 98
Loans and advances to banks and central banks 2 2 1 1
Investment at amortised costs 3 3 3 3
Investments FVOCI 5 5 6 5
Investments classified as loans and receivables - - - -
114 111 115 107
Trading Investment - - - -
Derivative financial instruments 9 9 9 10
Other investments at fair value through profit or loss - - - -
Total Interest Income 123 120 124 117
Analysis of Interest Expense (€ mn)
Customer deposits (13) (10) (8) (8)
Funding from central banks and deposits by banks (1) (1) (1) (0)
Subordinated loan stock (6) (6) (6) (6)
Repurchase agreements (2) (2) (2) (2)
Negative interest on loans and advances to banks and central banks (4) (4) (5) (5)
(26) (23) (22) (21)
Derivative financial instruments (12) (12) (12) (12)
Total Interest Expense (38) (35) (34) (33)
Group Financial Results for the year ended 31 December 2019
Cyprus: Income Statement by business line1 for FY2019
65
(1) The interest income, non-interest income, staff costs, other operating expenses and loan credit losses related to Project Helix are disclosed under ‘Provisions/net loss relating to NPE sales’ since they are considered one-off items
€ mnConsumer
Banking
SME
Banking
Corporate
Banking
Global
corporate
International
Banking
Wealth &
MarketsRRD REMU Insurance Treasury Other
Total
Cyprus
Net interest income/(expense) 145 37 64 54 34 7 19 (13) 0 1 4 352
Net fee & commission income (expense) 45 9 11 6 50 2 21 - (6) 2 10 150
Other income 3 1 1 1 7 3 - 34 58 21 26 155
Total income 193 47 76 61 91 12 40 21 52 24 40 657
Total expenses (171) (23) (22) (11) (37) (8) (61) (9) (21) (10) (27) (400)
Operating profit/(loss) 22 24 54 50 54 4 (21) 12 31 14 13 257
Loan credit losses of customer loans net of
gains/(losses) on derecognition of loans and changes
in expected cash flows
(5) 9 15 22 1 - (181) (4) - - (4) (147)
Impairment of other financial and non financial
instruments- - - - - - - (11) - - (4) (15)
Provision for litigation, claims, regulatory and other
matters- - - - - - - - - - (11) (11)
Profit/(loss) before tax 17 33 69 72 55 4 (202) (3) 31 14 (6) 84
Tax (2) (4) (9) (9) (7) - 25 0 (3) (1) 8 (2)
Profit attributable to non controlling interest - - - - - - - - - - (3) (3)
Profit/(loss) after tax and before restructuring
costs, Helix, and reversal of DTA impairment and
impairment of tax receivables (attributable to
owners of the Company)
15 29 60 63 48 4 (177) (3) 28 13 (1) 79
Excluding Helix
Group Financial Results for the year ended 31 December 2019
Risk Weighted Assets – Regulatory Capital
66
Risk weighted assets by type of risk (€ mn)
Reconciliation of Group Equity to CET1 Risk weighted assets by Geography (€ mn)
Equity and Regulatory Capital (€ mn)
(1) Allowing for IFRS 9 transitional arrangements
(2) Capital ratios include unaudited/un-reviewed profits for 9M2019
€ mn 31.12.19
Group Equity per financial statements 2,289
Less: Intangibles (51)
Less: Deconsolidation of insurance and other entities (187)
Add: Regulatory adjustments (IFRS 9 and other items) 111
Less: Revaluation reserves and other unrealised items transferred to Tier II (253)
CET11 1,909
Risk Weighted Assets 12,890
CET1 ratio 1 14,8%
31.12.18 30.09.192 31.12.19
Total equity excl. non-controlling interests 2,341 2,454 2.260
CET1 capital 1,864 2,098 1,909
Tier I capital 2,084 2,318 2,129
Tier II capital 212 188 190
Total regulatory capital (Tier I + Tier II) 2,296 2,506 2,319
31.12.17 31.12.18 30.09.19 31.12.19
Cyprus 16,011 15,070 13,550 12,678
Russia 27 24 15 8
United Kingdom 922 84 69 48
Romania 118 38 16 29
Greece 168 144 102 121
Other 14 13 6 6
Total RWA 17,260 15,373 13,758 12,890
RWA intensity 73% 70% 65% 61%
31.12.17 31.12.18 30.09.19 31.12.19
Credit risk 15,538 13,833 12,219 11,547
Market risk 5 2 - -
Operational risk 1,717 1,538 1,539 1,343
Total 17,260 15,373 13,758 12,890
Group Financial Results for the year ended 31 December 2019
Unchanged SREP capital requirements for 2020 when ignoring the phasing-in of O-SII1
67
SREP requirements for 2020 : Total Capital ratio at 14.5%SREP requirements for 2020: CET1 ratio at 9.7% post ECB
announcement
• Per EBA final guidelines on SREP and supervisory stress testing and the Single Supervisory Mechanism’s (SSM) 2018 SREP methodology own funds held for the
purposes of Pillar II Guidance cannot be used to meet any other capital requirements (Pillar 1, Pillar II requirement or the combined buffer requirements), and
therefore cannot be used twice5
• The Bank has received formal notification from the Single Resolution Board (SRB), of its draft decision for the binding minimum requirement for own funds and
eligible liabilities (MREL) for the Bank, determined as the preferred resolution point of entry. The MREL requirement has been set at 28.36% of risk weighted assets
as of 30 June 2019 and must be met by 31 December 2025. This MREL requirement would be equivalent to 18.54% of total liabilities and own funds (TLOF) as at
30 June 2019. The MREL requirement is in line with the Bank’s expectations, and largely in line with its funding plans6
• The MREL ratio of the Bank as at 31 December 2019, calculated according to SRB’s eligibility criteria currently in effect, and based on our internal estimate stood at
18.54% of RWAs
1.7%
4.5%
3.0%
4.5%
2.5%
3.0%
O-SII 0.5%
2.5%
1.0%
2019
4.5%
2020
1.0%
2.5%
2020
post ECB
announcement
CCB
Pillar 2R
Pillar 1
10.5%
11.0%
9.7%
4.5%
0.5%
2.5%
Tier 2
3.0%
4.5%
2019
2.0%
1.5%
1.0%14.0%
2.5%
3.0%
2.0%
1.5%
2020
O-SII
CCB
14.5%
Pillar 2R
AT1
Pillar 1
Total
Pillar 1
of 8%
1
4
2
3
1
23
(1) The Central Bank of Cyprus (CBC) set the O-SII buffer for the Group at 2%. This buffer will be phased-in gradually, having started from 1
January 2019 at 0.5% and increasing by 0.5% every year thereafter, until being fully implemented (2.0%) on 1 January 2022. In April 2020
the CBC, as part of the COVID measures, decided to delay the phasing-in by 12 months (1 January 2023). As a result, the phasing-in of
0.5% on 1 January 2021 has been delayed for 12 months
(2) In accordance with the legislation in Cyprus which has been set for all credit institutions the applicable rate of the CCB was fully phased in
at 2.5% in 2019
(3) Pillar 2 requirement in the form of CET1
(4) Additional Tier 1 Capital
(5) The new provisions are expected to be effective from January 2020 and remain subject to ECB final confirmation
(6) The MREL requirements remain subject to final confirmation by the SRB. This decision is based on the current legislation, it is expected to
be updated annually and could be subject to subsequent changes by the resolution authorities, especially considering the developments of
the Bank Recovery and Resolution Directive (BRRD) and its transposition into the local legislation
Group Financial Results for the year ended 31 December 2019
Buffer to MDA Restrictions Level & Distributable Items1
68
Distributable Items at Bank and BOCH levelMaximum Distributable Amount for BOCH• Distributable Items amount to:
- Bank: c.€0.1 bn and
- BOCH: c.€0.3 bn
• Reduction in distributable items during 4Q2019 is attributable mainly to
the Voluntary Staff Exit Cost (VEP) of c. €81 mn and increased loan
credit losses of €75 mn for the anticipated balance sheet de-risking
through further NPEs in the future
• The Bank and BOCH will proceed with a capital reduction process
which will result in the reclassification of €619 mn and €700 mn of
share premium to distributable reserves respectively
• Distributable reserves of Bank and BOCH will increase to c. €0.8 bn and c. €1 bn
respectively, on a pro forma basis as at 31 Dec 2019
• Subject to approvals by ECB, Cyprus and Irish High Court and shareholders
• No prohibition applies to the payment of coupons on any AT1 capital
instruments issued by the Company and the Bank2
• Significant CET1 MDA buffer3 (1 Jan 2020) : ~320 bps (~€410 mn)
• ECB frontloaded the ability to use AT1 and T2 to meet P2R
requirement; this increases CET1 and MDA buffer by c.131 bps
11.0%
0.3%
14.5%
CET11 Jan 2020 1 Jan 20203
MDA Threshold
CET1 Ratios
Unfilled
AT1 + T2
capacity
320 bps
[ ] bpsDistance
to MDACET1Ratio (%)
CET1Req
Unfilled AT1 &
T2 Bucket
c. 11.3%
11.0%
(1) Distributable Items definition per CRR
(2) Based on the SREP decisions of prior years, the Company and the Bank were under a regulatory prohibition for equity dividend distribution and therefore no dividends were declared or paid during years 2019 and 2018. Following the 2018 SREP decision, the Company and the
Bank are still under equity dividend distribution prohibition. This prohibition does not apply if the distributions are made via the issuance of new ordinary shares to the shareholders which are eligible as CET1 capital
(3) Including phasing in of O-SII buffer (+50 bps). The Central Bank of Cyprus (CBC) set the O-SII buffer for the Group at 2%. This buffer will be phased-in gradually, having started from 1 January 2019 at 0.5% and increasing by 0.5% every year thereafter, until being fully implemented
(2.0%) on 1 January 2022. In April 2020 the CBC, as part of the COVID measures, decided to delay the phasing-in by 12 months (1 January 2023). As a result, the phasing-in of 0.5% on 1 January 2021 has been delayed for 12 months
Group Financial Results for the year ended 31 December 2019
(1) The reduction relates to the sale of BOC UK in Sep 18
Analysis of Deposits
69
Deposits by Currency (€ bn)
Deposits by customer Sector (€ bn)
Deposits by Type (€ bn)
12.40 13.83 14.96 14.75 15.01
2.201.74
1.481.692.11 0.11 0.10 0.10
16.47
Dec 17
0.170.22
1.34 0.28
Dec 16
0.29
Dec 18 Sep 19
0.291.29
Dec 19
16.5117.85
16.84 16.69
9.27 10.00 8.78 7.94 7.53
6.186.31
6.71 7.07 7.591.54
Dec 17
1.06
16.84
Dec 16
1.35
Dec 18
1.46
Sep 19
1.57
Dec 19
16.5117.85
16.47 16.69
6.73 6.63 5.96 5.80 5.05
8.98 10.31 10.05 9.88 10.15
0.80
Dec 17
0.91
Dec 16
0.83
Dec 18
0.79
Sep 19
0.80
0.69
Dec 19
16.5117.85 16.84 16.47 16.69
1
1
1
Current & demand accounts
Savings accounts
Time deposits
Other Currencies
EUR
GBP
USD
Retail
SME
Corporate
Global Corporate
90%
8%2%
9%
45%46%
30%
5%61%
4%
Dec 19
Group Financial Results for the year ended 31 December 2019
Reduction in Overseas Non-Core Exposures
70
Overseas non-core exposures (€ mn)
• The Group continues its efforts for further
deleveraging and disposal of non-essential assets and
operations in Greece, Romania and Russia
• In accordance with the Group’s strategy to exit from
overseas non-core operations, the operations of the
branch in Romania were terminated in January 2019,
following the completion of deregistration formalities
with respective authorities
• In addition as at 31 December 2019, there were €265
mn of overseas exposures in Greece (€279 mn at 30
September 2019) not identified as non-core exposures
• During 3Q2019 the Group completed the sale of the
overseas exposures in Serbia, with a carrying value of
€8 mn
283
193164
138 139
42
149
79
35
32 25
44
31
23
197
Sep 19
9
518
Dec 16 Dec 17
11
Dec 18
18
Dec 19
312
240
188 183
Greece Serbia Romania Russia UK
Group Financial Results for the year ended 31 December 2019
APPENDIXGlossary & Definitions
71
Group Financial Results for the year ended 31 December 2019
Glossary & Definitions
72
Allowance for expected loan credit
losses (previously ‘Accumulated
provisions’)
Comprises (i) allowance for expected credit losses (ECL) on loans and advances to customers (including allowance for expected credit losses on loans and advances to customers held for sale), (ii)
the residual fair value adjustment on initial recognition of loans and advances to customers, (iii) allowance for expected credit losses for off-balance sheet exposures (financial guarantees and
commitments) disclosed on the balance sheet within other liabilities, and (iv) the aggregate fair value adjustment on loans and advances to customers classified and measured at FVPL
Advisory and other restructuring
costsComprise mainly: fees of external advisors in relation to: (i) disposal of operations and non-core assets, and (ii) customer loan restructuring activities
AIEAAverage of interest earning assets as at the beginning and end of the relevant quarter. Interest earning assets include: cash and balances with central banks, plus loans and advances to banks,
plus net loans and advances to customers (including loans and advances to customers classified as non-current assets held for sale), plus investments (excluding equities and mutual funds)
AT1 AT1 (Additional Tier 1) is defined in accordance with Articles 51 and 52 of the Capital Requirements Regulation (EU) No 575/2013, as amended by CRR II applicable as at the reporting date
Average contractual interest rates
Interest rates on cost of deposits were previously calculated as the Interest Expense over Average Balance. The current calculation which the Bank considers more appropriate is based on the
weighted average of the contractual rate times the balance at the end of the month. The rates are calculated based on the month end contractual interest rates. The quarterly rates are the average
of the three quarter month end contractual rates
Book Value BV= book value = Carrying value prior to the sale of property
CET1 capital ratio (transitional basis) CET1 capital ratio (transitional basis) is defined in accordance with the Capital Requirements Regulation (EU) No 575/2013, as amended by CRR II applicable as at the reporting date
CET1 fully loaded (FL) The CET1 fully loaded (FL) ratio is defined in accordance with the Capital Requirements Regulation (EU) No 575/2013, as amended by CRR II applicable as at the reporting date
Cost of FundingEffective yield of cost of funding: Interest expense of all interest bearing liabilities after hedging, over average interest bearing liabilities (customer deposits, funding from the central bank, interbank
funding, subordinated liabilities). Historical information has been adjusted to take into account hedging
Contribution to SRF Relates to the contribution made to the Single Resolution Fund
Cost to Income ratio Cost-to-income ratio comprises total expenses (as defined) divided by total income (as defined)
Cost of RiskLoan credit losses charge (cost of risk) (year to date) is calculated as the annualised ‘loan credit losses’ (as defined) divided by average gross loans (the average balance is calculated as the
average of the opening balance and the closing balance)
CRR DD Default Definition
DFAs Debt for Asset Swaps
DFEs Debt for Equity Swaps
Digitally engaged customers ratioThis is the ratio of digitally engaged individual customers to the total number of individual customers, as per the engagement scorecard. Digital channels include mobile, browser and ATMs. It also
captures access to a card as well as online card purchases
DTA Deferred Tax Assets
Group Financial Results for the year ended 31 December 2019
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73
DTC Deferred Tax Credit
EBA European Banking Authority
ECB European Central Bank
Effective yield Interest Income on Loans/Average Net Loans
Effective yield of liquid assetsInterest Income on liquids after hedging, over average liquids (Cash and balances with central banks, placements with banks and bonds). Historical information has been adjusted to take into
account hedging
ESMA European Securities and Markets Authority
Foreclosures Value of on-boarded assets is set at a conservative 25%-30% discount from open market valuations, by two independent sources; Includes consensual and non consensual DFAs and DFEs
FTP Fund transfer pricing methodologies applied between the business lines to present their results on an arm’s length basis
GBV Gross Book Value
Gross Loans
Gross loans are reported before the residual fair value adjustment on initial recognition relating to loans acquired from Laiki Bank (calculated as the difference between the outstanding contractual
amount and the fair value of loans acquired) amounting to €271 mn at 31 December 2019 (compared to €278 mn at 30 September 2019 and €462 mn at 31 December 2018).
Additionally, gross loans (i) include loans and advances to customers classified and measured at fair value through profit and loss adjusted for the aggregate fair value adjustment of €427 mn at 31
December 2019 (compared to €430 mn at 30 September 2019 and €456 mn as at 31 December 2018), and (ii) are reported after the reclassification between gross loans and allowance for
expected credit losses on loans and advances to customers classified as held for sale of Nil as at 31 December 2019 (compared to Nil as at 30 September 2019 and €99 mn at 31 December 2018)
Gross Sales Proceeds Proceeds before selling charge and other leakages
GVA Gross Value Added
Group The Group consists οf Bank of Cyprus Holdings Public Limited Company, “BOC Holdings” or the “Company”, its subsidiary Bank of Cyprus Public Company Limited, the “Bank” and the Bank’s
subsidiaries
H/O Head Office
IB, W&M International Banking, Wealth and Markets
IBU Servicing exclusively international activity companies registered in Cyprus and abroad and not residents
Group Financial Results for the year ended 31 December 2019
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74
Legacy Legacy relates to RRD, REMU and non-core overseas exposures
Loan credit losses (PL) (previously
‘Provision charge’)
Loan credit losses comprise: (i) credit losses to cover credit risk on loans and advances to customers, (ii) net gains on derecognition of financial assets measured at amortised cost and (iii) net gains
on loans and advances to customers at FVPL
Market shares
Both deposit and loan market shares are based on data from the Central Bank of Cyprus.
The Bank is the single largest credit provider in Cyprus with a market share of 41.1% at 31 December 2019, compared to 40.8% at 30 September 2019, 41.3% at 30 June 2019, 46.7% at 31 March
2019, 45.4% at 31 December 2018 and as at 30 September 2018, 38.6% at 30 June 2018 and 37.4% at 31 March 2018.
The market share on loans was affected as at 30 June 2019 following the derecognition of the Helix portfolio upon the completion of Project Helix announced on 28 June 2019.
The market share on loans was affected during the quarter ended 31 March 2019 following a decrease in total loans in the banking sector of €1 bn, mainly attributed to reclassification, revaluation,
exchange rate and other adjustments (CBC).
The market share on loans was affected as at 30 September 2018 following a decrease in total loans in the banking sector, mainly attributed to €6 bn non-performing loans of Cyprus Cooperative
Bank (CyCB) which remained to SEDIPES as a result of the agreement between CyCB and Hellenic Bank.
The market share on loans was affected as at 30 June 2018 following a decrease in total loans in the banking sector of €2.1 bn, due to loan reclassifications, revaluations, exchange rate or other
adjustments (CBC)
Net Proceeds Proceeds after selling charges and other leakages
Net fee and commission income over
total incomeFee and commission income less fee and commission expense divided by total income (as defined)
Net interest margin (NIM)
Net interest margin is calculated as the net interest income (annualised) divided by the quarterly average interest earning assets. Average interest earning assets exclude interest earning assets of
any discontinued operations at each quarter end, if applicable. Interest earning assets include: cash and balances with central banks, plus loans and advances to banks, plus net loans and
advances to customers (including loans and advances to customers classified as non-current assets held for sale), plus investments (excluding equities and mutual funds)
Net loans and advances to
customersComprise gross loans (as defined) net of allowance for expected loan credit losses (as defined, but excluding credit losses on off-balance sheet exposures)
Net loan to deposit ratio Net loan to deposit ratio is calculated as gross loans (as defined) net of allowance for expected loan credit losses (as defined) divided by customer deposits
New lending New lending includes the average YTD change (if positive) for overdraft facilities.
Non-interest income
Non-interest income comprises Net fee and commission income, Net foreign exchange gains and net gains on financial instrument transactions and disposal/dissolution of subsidiaries and
associates (excluding net gains on loans and advances to customers at FVPL), Insurance income net of claims and commissions, Net gains/(losses) from revaluation and disposal of investment
properties and on disposal of stock of properties, and Other income
Group Financial Results for the year ended 31 December 2019
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75
Non-recurring items
Non-recurring items as presented in the ‘Unaudited Consolidated Income Statement – Underlying basis’ relate to: (i) advisory and other restructuring costs - organic, (ii) restructuring costs – Voluntary
Staff Exit Plan (VEP), (iii) Provisions/net (loss)/profit relating to NPE sales, (iv) (Loss)/profit on remeasurement of investment in associate upon classification as held for sale (CNP) net of share of
profit from associates, (v) Reversal of impairment of DTA and impairment of other tax receivables, and (vi) Profit from discontinued operations (UK)
NPEs
According to the EBA standards and ECB’s Guidance to Banks on Non-Performing Loans (published in March 2017), NPEs are defined as those exposures that satisfy one of the following conditions:
(i) the borrower is assessed as unlikely to pay its credit obligations in full without the realisation of the collateral, regardless of the existence of any past due amount or of the number of days past due,
(ii) defaulted or impaired exposures as per the approach provided in the Capital Requirement Regulation (CRR), which would also trigger a default under specific credit adjustment, distress
restructuring and obligor bankruptcy, (iii) material exposures as set by the CBC , which are more than 90 days past due, (iv) performing forborne exposures under probation for which additional
forbearance measures are extended, and (v) performing forborne exposures under probation that present more than 30 days past due within the probation period. When a specific part of the
exposures of a customer that fulfils the NPE criteria set out above is greater than 20% of the gross carrying amount of all on balance sheet exposures of that customer, then the total customer
exposure is classified as non-performing; otherwise only the specific part of the exposure is classified as non-performing. The NPEs are reported before the deduction of allowance for expected loan
credit losses (as defined)
The exit criteria of NPE forborne are the following:
1. The extension of forbearance measures does not lead to the recognition of impairment or default
2. One year has passed since the forbearance measures were extended
3. There is not, following the forbearance measures, any past due amount or concerns regarding the full repayment of the exposure according to the post forbearance conditions
NPE coverage ratio (previously
‘NPE Provisioning coverage ratio’)The NPE coverage ratio is calculated as the allowance for expected loan credit losses (as defined) over NPEs (as defined)
NPE ratio NPEs ratio is calculated as the NPEs as per EBA (as defined) divided by gross loans (as defined)
NPEs salesNPE sales refer to NPE sale transactions completed in the year, as well as sale transactions being contemplated as at year-end, irrespective of whether they met the held for sale classification criteria
as at 31 December 2019
NSFRThe NSFR is calculated as the amount of “available stable funding” (ASF) relative to the amount of “required stable funding” (RSF), on the basis of Basel III standards. Its calculation is a SREP
requirement. The EBA is working on finalising the NSFR and enforcing it as a regulatory ratio under CRR II
OMV Open Market Value
Operating profit Comprises profit before Total loan credit losses, impairments and provisions (as defined), tax, (profit)/loss attributable to non-controlling interests and non-recurring items (as defined)
p.p. percentage points
Performing Relates to all business lines excluding Restructuring and Recoveries Division (“RRD”), REMU and non-core overseas exposures
Phased-in Capital Conservation
Buffer (CCB)In accordance with the legislation in Cyprus which has been set for all credit institutions, the applicable rate of the CCB is 1.25% for 2017, 1.875% for 2018 and 2.5% for 2019 (fully phased-in)
Group Financial Results for the year ended 31 December 2019
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76
Pro forma for HelixIncludes the impact from the completion of Project Helix, as well as the impact from the agreement for the sale of a portfolio of retail unsecured NPEs, with gross book value €33 mn as at 31 March
2019, known as Project Velocity
Loan credit losses for impairment of
customer loans Credit losses for impairment of customer loans and gains/(losses) on derecognition of loans and changes in expected cash flows on acquired loans
Profit/(loss) after tax and before non-
recurring items (attributable to the
owners of the Company)
Excludes non-recurring items (as defined)
Profit/(loss) after tax – organic
(attributable to the owners of the
Company)
Profit/(loss) after tax and before ‘non-recurring items’ as defined (attributable to the owners of the Company), except for the ‘advisory and other restructuring costs – organic’
qoq Quarter on quarter change
Restructured loans Restructuring activity within quarter as recorded at each quarter end and includes restructurings of NPEs, performing loans and re-restructurings
Risk adjusted yield Interest Income on Loans net of allowance for expected loan credit losses/Net Loans
RRD Restructuring and Recoveries Division
RWA Risk Weighted Assets
RWA Intensity Risk Weighted Assets over Total Assets
Special levy Relates to the special levy on deposits of credit institutions in Cyprus
Stage 2 & Stage 3 Loans Include purchased or originated credit-impaired
Tangible Collateral Restricted to Gross IFRS balance
Total Capital ratio Total capital ratio is defined in accordance with the Capital Requirements Regulation (EU) No 575/2013, as amended by CRR II applicable as at the reporting date
Total expenses
Total expenses comprise staff costs, other operating expenses and the special levy and contribution to the Single Resolution Fund. It does not include ‘advisory and other restructuring costs-
organic’, or any restructuring costs relating to the Voluntary Staff Exit Plan, or any restructuring costs relating to NPE sales. ‘Advisory and other restructuring costs-organic’ amounted to €22 mn for
FY2019 (compared to €42 mn for FY2018) and to €8 mn for 4Q2019 (compared to €4 mn for 3Q2019). Restructuring costs relating to the Voluntary Staff Exit Plan amount to €81 mn for both
4Q2019 and FY2019. Restructuring costs relating to NPE sales amounted to €25 mn for FY2019 (compared to €18 mn for FY2018) and to €10 mn for 4Q2019 (compared to €6 mn for 3Q2019).
Group Financial Results for the year ended 31 December 2019
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77
Total income Total income comprises net interest income and non-interest income (as defined)
Total loan credit losses, impairments
and provisions
Total loan credit losses, impairments and provisions comprises loan credit losses (as defined), plus (provisions)/reversal of provisions for litigation, claims, regulatory and other matters plus
(impairments)/reversal of impairments of other financial and non-financial assets
T2 Tier 2 Capital
Underlying basis This refers to the statutory basis after being adjusted for certain items as explained in the Basis of Presentation
Write offs
Loans together with the associated loan credit losses are written off when there is no realistic prospect of future recovery. Partial write-offs, including non-contractual write-offs, may occur when it is
considered that there is no realistic prospect for the recovery of the contractual cash flows. In addition, write-offs may reflect restructuring activity with customers and are part of the terms of the
agreement and subject to satisfactory performance
yoy Year on year change
Group Financial Results for the year ended 31 December 2019
Disclaimer
78
This document contains certain forward-looking statements which can usually be identified by terms used such as “expect”, “should be”, “will be” and similarexpressions or variations thereof or their negative variations, but their absence does not mean that a statement is not forward-looking. Examples of forward-lookingstatements include, but are not limited to, statements relating to the Group’s near term and longer term future capital requirements and ratios, intentions, beliefs orcurrent expectations and projections about the Group’s future results of operations, financial condition, expected impairment charges, the level of the Group’s assets,liquidity, performance, prospects, anticipated growth, provisions, impairments, business strategies and opportunities. By their nature, forward-looking statementsinvolve risk and uncertainty because they relate to events, and depend upon circumstances, that will or may occur in the future. Factors that could cause actualbusiness, strategy and/or results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statementsmade by the Group include, but are not limited to: general economic and political conditions in Cyprus and other European Union (EU) Member States, interest rateand foreign exchange fluctuations, legislative, fiscal and regulatory developments and information technology, litigation and other operational risks. Should any one ormore of these or other factors materialise, or should any underlying assumptions prove to be incorrect, the actual results or events could differ materially from thosecurrently being anticipated as reflected in such forward looking statements. The forward-looking statements made in this document are only applicable as from thedate of publication of this document. Except as required by any applicable law or regulation, the Group expressly disclaims any obligation or undertaking to releasepublicly any updates or revisions to any forward looking statement contained in this document to reflect any change in the Group’s expectations or any change inevents, conditions or circumstances on which any statement is based.