Bank Of Cyprus Holdings Plc · CSECY:BOCH
Bank Of Cyprus — H1 2016 Earnings Presentation
54 slides from Bank Of Cyprus's earnings presentation, Aug 30, 2016
Slide 1: Group Financial Results for the six months ended 30 June 2016
Bank of Cyprus Group Group Financial Results for the six months ended 30 June 2016 30 August 2016 The Financial Statements for the six months ended 30 June 2016 have been audited by the Bank‟s external auditors.
Slide 2: 1H2016 Financial Results – Highlights
1H2016 Financial Results – Highlights • Positive momentum continued in 2Q2016 Declining • Problem loans (90+ DPD)1 down by €1 bn (or 10%) qoq and by €2 bn (or 18%) in 1H2016 Problem Loans • 90+ DPD ratio reduced to 44% and provisioning coverage ratio increased to 53% • Loan restructurings of €2,76 b
Slide 3: Reduction in problem loans for a fifth consecutive quarter
Reduction in problem loans for a fifth consecutive quarter 90+ DPD dropped by €2,0 bn or (18%) in 1H2016 NPEs reduced by €1,47 bn or (11%) in 1H2016 NPEs with forbearance measures, no impairments, no 90+ DPD (€ bn) 90+ DPD ratio arrears NPEs (€ bn) Quarterly reduction of 90+ DPD Quarterly reduction
Slide 4: Slower 90+ DPD formation supports reduction of problem loans
Slower 90+ DPD formation supports reduction of problem loans Group 90+ DPD by Customer type (€ bn) Slower formation of new problem loans (€ bn) Corporate SMEs Retail other Retail housing 90+ DPD inflows - Cyprus operations 12,65 12,79 12,65 0,68 Average quarterly inflows 12,00 1,21 11,33 1,17 1,24 0
Slide 5: Conservative provisioning policy – Increasing coverage levels
Conservative provisioning policy – Increasing coverage levels Coverage ratio improvement of 12 p.p3 driven by over €1,3 bn additional cumulative provisions since Dec-14 Quarterly Provisions for impairment of customer loans¹ (€ mn) 90+ DPD coverage ratio 53% NPEs provision coverage 48% 49% Adjusted N
Slide 6: 90+ DPD Fully Covered by Provisions & Tangible collateral
90+ DPD Fully Covered by Provisions & Tangible collateral Analysis of 90+ DPD coverage for Cyprus operations Corporate SME Retail-Housing Retail-Other Total BoC – Cyprus 119%117%119% 113%112%115% 112%112%114% 114%113% 110%109%111% 115%114%115% 107%107%108% 107%105%106%110% 104%102%104%106%107%106% 6
Slide 7: Strong Momentum in Loan Restructurings continues
Strong Momentum in Loan Restructurings continues €2,76 bn of Restructurings in 1H2016 Corporate SMEs Retail Total restructurings Average restructurings 1,50 1,35 1,26 0,95 0,73 0,82 0,69 0,74 0,56 0,78 0,44 0,38 0,32 0,33 0,34 0,35 0,33 0,20 0,24 0,29 0,17 0,15 0,09 0,19 0,19 0,19 0,07 0,07 0,11 4Q2
Slide 8: Sustainable Asset Quality Improvement across the RRD book
Sustainable Asset Quality Improvement across the RRD book Bespoke tactical plans are in place for each segment within RRD, delivering asset quality improvements … Business unit summary (€ bn) Key management actions Progress • 23 connections Major • c. 70 experienced restructuring officers 2,9 2,8 2,
Slide 9: Sustainable Asset Quality Improvement across the RRD book
Sustainable Asset Quality Improvement across the RRD book Focus in unlocking the Recoveries portfolio. Results are encouraging Business unit summary (€ bn) 5,3 5,2 5,1 Inflows/ Outflows to 0,6 0,7 Recoveries (€ bn) in 1H2016 0,8 0,8 0,7 Rec- Retail Housing 0,8 0,4 1,5 1,5 • Retail €1,5 bn, 21k custo
Slide 10: Progress on top 20 Group Exposures
Progress on top 20 Group Exposures Top 20 group exposures as at 30 September 2014 and their progress since then 1 Total Exposure (€ bn) Loans other than 90+ DPD (€ bn) 90+ DPD (€ bn) NPEs over Total Exposure 90+ DPD over Total Exposure Restructured loans over Total Exposure 107% 110% Top 20 group
Slide 11: Real Estate Management Unit (REMU)
Real Estate Management Unit (REMU) On boarded assets and sales dynamics-Cyprus operations Property movement of Other Total (Carrying value € mn) Cyprus Greece countries3 Group 1H2016 (€ mn) Hotels Manufacturing & Industrial &under construction Residential Offices & Commercial Stock 1 January 336 171
Slide 12: Rapid reduction of ELA
Rapid reduction of ELA €2,3 bn Reduction of ELA during 2016 Plans to fully eliminate ELA 34% 32% 31% 31% 31% 28% 28% 11,40 • Deposit Growth 11,11 26% 9,86 9,56 9,51 23% • Wholesale and interbank market access 8,78 20% • Retention of cash profits from operations 7,68 7,40 16% 6,90 15% • Proceeds from
Slide 13: Increasing Deposits and Improving Loan to Deposit ratio
Increasing Deposits and Improving Loan to Deposit ratio Growing customer deposit base (€ bn ) Improving funding structure 1 Customer deposits to Total Assets Cyprus UK Other countries Loans to deposits ratio (net) 2 EU average Loans to deposits ratio 14,18 14,13 14,75 148% 13,80 13,61 13,63 13,61 0,
Slide 14: Liabilities and Equity structure - CET1 ratio
Liabilities and Equity structure- CET1 ratio Analysis of Liabilities and Equity (€ bn) Total equity Other liabilities ELA ECB funding Customer deposits • The Bank considers that it is appropriately capitalised, taking into account its risk profile, level of non-performing loans, the macro- economic
Slide 15: Capital Position Compares well with Peers
Capital Position Compares well with Peers „Clean‟ Fully Loaded CET1 ratio1 (March 20162) 'Clean' Fully Loaded CET1 ratio (LHS) Average 'Clean' Fully Loaded CET1 ratio • “Clean” Fully loaded RWA % Total Assets (RHS) Average (RWA % Total Assets) CET1 ratio at 13,6%, 25% 90% higher than average BOC 80%
Slide 16: Income Statement Review
Income Statement Review € mn 1H2016 1H20152 yoy % 2Q2016 1Q2016 qoq % Key Highlights QoQ change Total income 482 535 -10% 238 244 -3% • Total Income down by 3% Total expenses (202) (194) 4% (103) (99) 5% qoq driven by reduction in customer loan balance Profit before provisions and impairments1 280 3
Slide 17: Profitable 1H2016
Profitable 1H2016 Group Income Statement Highlights (€ mn) 2Q2015 3Q2015 4Q2015 1Q2016 2Q2016 261 251 253 244 238 169 149 134 145 135 50 31 13 6 -62 -92 -102 -99 -103 -96 -96 -119 -123 -630 -512 Total Income Total Expenses Profit before impairments1 Provisions for impairment of Profit/(loss) after t
Slide 18: Healthy NIM and Customer Spread in a Competitive Market
Healthy NIM and Customer Spread in a Competitive Market Net Interest Income and Net Interest Margin Interest income from Republic of Cyprus bond (€ mn) € bn • Net Interest Income (NII) at €175 mn, compared to Net interest income (€ mn) Interest bearing €185 mn for 1Q2016, reflecting the reduction in
Slide 19: Growing Non-interest Income
Growing Non-interest Income Analysis of Non Interest Income (€ mn) – Quarterly Net fee and commission income Insurance income net of insurance claims Other 1 % 16% 14% 14% 15% 15% 16% Net fee and commission income % Total income 59 63 47 49 46 55 9 x 1 14 11 54 4 54 Non interest income (€ 16 50 11 4
Slide 20: Costs under control
Costs under control Total expenses (€ mn) Staff costs Operating expenses • Total expenses in line with previous quarters • Staff costs in line with previous quarters; Following 119 115 the completion of the voluntary exit plan (VEP) 103 102 102 103 92 99 during the first half of 2016, an annual savi
Slide 21: Core Profitability Residing in the Cyprus Operations
Core Profitability Residing in the Cyprus Operations 2Q2016 Cyprus Vs Group performance (€ mn) 93% 92% 89% 95% 214% % 220 238 % contribution of 164 175 Cyprus operations 128 135 Cyprus operations 11 18 -92 -103 7 36 17 Rest of operations -11 -19 Net interest income Total income Total expenses Profit
Slide 22: Expansion of UK operations
Expansion of UK operations • BOC UK is growing its lending business in order to improve profitability; Self funded growth through retail deposits • BoC UK has a branch in North London and business centres in Central London, South London and Birmingham and focuses on meeting the needs of entrepreneur
Slide 23: Significant Progress made on Group KPIs
Significant Progress made on Group KPIs A clear plan of action to achieve Medium Term Targets Medium Key Pillars & Plan of action Key performance Dec- Jun- Category Term indicators 2015 2016 Targets • Intensify restructuring and workout activity of delinquent borrowers 1. Significantly • Maintain in
Slide 24: Key Takeaways
Key Takeaways • BOC franchise remains strong in an economy that is recovering quickly • Problem loans (90+ DPD) down by €1,0 bn (or 10%) qoq and by €2 bn (or 18%) during 1H2016 ; Provision coverage improved to 53% • Strong Restructuring momentum continues with €2,76 bn of restructurings in 1H2016 •
Slide 25: Key Information and Contact Details
Key Information and Contact Details Credit Ratings: Fitch Ratings: Long-term Issuer Default Rating: upgraded to “B-" on 25 April 2016 (stable outlook) Short-term Issuer Default Rating: upgraded to “B" on 25 April 2016 Viability Rating: upgraded to “b-” on 25 April 2016 Moody‟s Investors Service: Bas
Slide 26: Appendix – Macroeconomic overview
Appendix – Macroeconomic overview 26
Slide 27: Growth accelerated in 1H2016 and fiscal conditions are improving
Growth accelerated in 1H2016 and fiscal conditions are improving ... on the expenditure side growth came from net Real GDP continued to expand in the first quarter ... with broad sector participation particularly from exports reflecting exceptional items such as … trade , tourism, professional servi
Slide 28: Key economic sectors are performing well
Key economic sectors are performing well The unemployment rate dropped to 11,9% in Q2 from 12,9% in Q1 and a In construction the main indices may have bottomed in the first half of 2015 peak rate of 16,5% in Q4 of 2013. and started to rise from there 18,0 16,5 16,3 100 Unemployment rate and unemploy
Slide 29: Tourism is expanding & Residential Property Index is stabilising
Tourism is expanding & Residential Property Index is stabilising Tourist activity accelerated in 2015 and 2016 with total arrivals up 21,2% in the The distribution of tourist arrivals has been shifting over time with the UK first half driven by a 48% increase from Russia now at 37,1% and Russia at 2
Slide 30: Consumer prices continued to drop while retail trade volumes increase
Consumer prices continued to drop while on the demand side of the economy, retail trade volumes continued to increase Following three consecutive years of decline, consumer prices dropped by ... driven mainly by housing and transport expenditures which are energy 2,2% in the first half of the curren
Slide 31: Appendix – Additional financial information
Appendix – Additional financial information 31
Slide 32: Consolidated Balance Sheet
Consolidated Balance Sheet % % € mn change 30.06.16 31.12.15 € mn change 30.06.16 31.12.15 Cash and balances with Deposits by banks 42% 343 242 7% 1.519 1.423 Central Banks Funding from central banks -30% 3.101 4.453 Loans and advances to -11% 1.174 1.314 banks Repurchase agreements 8% 398 368 Custo
Slide 33: Income Statement Review
Income Statement Review 1H2015 yoy qoq € mn 1H2016 2Q2016 1Q2016 represented3 +% +% Net interest income 360 439 -18% 175 185 -5% Net fee and commission income 74 79 -7% 38 36 5% Insurance income net of insurance claims 25 20 22% 11 14 -19% Core income 459 538 -15% 224 235 -4% Other income 23 -3 - 14
Slide 34: Income Statement bridge for 1H2016
Income Statement bridge for 1H2016 Per financial € mn Per presentation Reclassification statements Net interest income 360 - 360 Net fee and commission income 74 - 74 Net foreign exchange gains and net gains on other financial instruments 15 59 74 Insurance income net of insurance claims 25 - 25 Gai
Slide 35: Cyprus: Income Statement by business line for 1H2016
Cyprus: Income Statement by business line for 1H2016 Wealth & International Consumer SME Corporate Brokerage & Total € mn Banking RRD REMU Insurance Other Banking Banking Banking Asset Cyprus Management Net interest income 126 33 39 32 4 114 (5) - (7) 336 Net fee & commission income 22 4 5 25 1 7 -
Slide 36: Risk Weighted Assets – Regulatory Capital
Risk Weighted Assets – Regulatory Capital Risk weighted assets by Geography (€ mn) Equity and Regulatory Capital (€ mn) 31.03.15 30.06.15 30.09.15 31.12.15 31.03.16 30.06.16 31.03.15 30.06.15 30.09.15 31.12.15 31.03.16 30.06.16 Cyprus 20.473 19.607 19.473 18.438 18.276 17.845 Russia Shareholders‟ eq
Slide 37: BOC - Main performance indicators
BOC- Main performance indicators 30 June2016 Ratios Group 1H2016 ROAA (annualised) 0,5% ROTE (annualised) 3,8% Performance Net Interest Margin 3,59% Cost to income ratio 42% Loans to deposits 110% 90+ DPD/ 90+ DPD ratio €9.269 mn (44%) 90+ DPD coverage 52,6% Asset Quality Cost of risk (annualised) 1
Slide 38: Reduction in Overseas Non-Core Exposures
Reduction in Overseas Non-Core Exposures The non-core overseas exposures at 30 June 2016 were as Overseas non-core exposures (€ mn) follows: Greece: Net exposure comprised: (a) Net on-balance sheet exposures (excluding foreclosed properties) totalling €13 mn; 1.105 (b) 639 foreclosed properties with
Slide 39: Analysis of Deposits by Geography and by Type
Analysis of Deposits by Geography and by Type Deposits by geography 30 June 2016 (%) 1 Total Cyprus non-IBU Cyprus IBU1 UK Other countries 2 Cyprus - non IBU Cyprus - IBU UK Other countries 2 (€ bn) 14,97 14,13 14,75 13,80 13,61 13,63 13,61 14,18 0,1% 1,02 13,33 13,17 0,01 0,01 1,24 0,87 0,61 0,61 1
Slide 40: Analysis of Deposits by sector for Cyprus operations
Analysis of Deposits by sector for Cyprus operations Deposits by sector as per CBC classification for Cyprus operations 30 June 2016 (%) Total Market Shares Households Non financial corporations Other financial corporations General Governments (€ bn) General Governments Other financial corporations
Slide 41: Gross loans by Geography and by Customer Type
Gross loans by Geography and by Customer Type Gross loans by geography 30 June 2016 (%) 1 Total Cyprus UK Other countries (€ bn) 3,0% 5,6% 24,74 23,77 24,09 23,93 22,86 22,59 21,85 Other 21,08 1 1,11 1,91 0,91 1,66 1,03 1,74 1,13 1,61 1,14 0,75 0,72 countries 1,21 1,17 0,70 0,63 1,18 UK 21,72 21,20
Slide 42: NPEs by Geography and by Customer Type
NPEs by Geography and by Customer Type NPEs by geography 30 June 2016 (%) 1 Total Cyprus UK Other countries (€ bn) 14,96 15,17 14,81 14,22 13,97 1,20 13,33 0,11 1,10 0,11 0,10 1,12 0,08 0,65 0,64 12,49 0,07 0,06 0,63 4,6% Other countries 1 0,05 0,57 0,4% UK 13,75 13,86 13,59 13,49 13,26 12,64 11,87
Slide 43: Asset Quality - 90+ DPD analysis
Asset Quality- 90+ DPD analysis (€ mn) Jun - 16 Mar-16 Dec-15 Sept-15 Jun-15 A. Gross Loans after Fair value on Initial recognition 20.040 20.719 21.385 21.597 22.575 Fair value on Initial recognition 1.043 1.130 1.207 1.266 1.351 B. Gross Loans 21.083 21.849 22.592 22.863 23.926 B1. Loans with no a
Slide 44: Asset Quality – NPEs analysis
Asset Quality – NPEs analysis Cyprus NPEs – 30.06.16 Total Coverage for NPES Cyprus – Adequately provided NPEs with forbearance measures, no impairments, no arrears - not included in Recoveries Provision Coverage Tangible Collateral Total Coverage (capped MV 30.06.16) NPEs with forbearance measures,
Slide 45: 90+ DPD by Geography
90+ DPD by Geography 90+ DPD by Geography (€ bn) 90+ DPD ratios by Geography 1 1 Cyprus UK Other countries Cyprus UK Other countries 91% 90% 87% 87% 12,65 12,79 12,65 1,15 12,00 1,09 1,08 0,65 67% 0,11 0,09 11,33 66% 0,09 66% 0,08 0,63 0,07 10,29 54% 54% 54% 54% 51% 0,63 48% 45% 0,06 9,27 0,57 0,05
Slide 46: Analysis 90+ DPD ratios by Business Line
Analysis 90+ DPD ratios by Business Line1 90+ DPD by business line (€ bn) Corporate SMEs Housing Consumer Credit RRD-Major Corporations RRD- Corporates RRD-SMEs RRD-Recoveries corporates RRD-Recoveries SMEs & Retail 12,79 12,65 12,00 11,33 2,72 2,77 2,82 10,29 2,90 9,27 2,20 2,95 2,24 2,31 2,91 1,12
Slide 47: RRD - Important Actions Throughout the Organisation
RRD - Important Actions Throughout the Organisation A results focused culture continues to be driven top down throughout the organisation via a number of important actions… • Department „stretch‟ targets, focused on materially outperforming budget for all key asset quality metrics, are set at the ou
Slide 48: Further break down of 90+ DPD coverage by business line - Cyprus
Further break down of 90+ DPD coverage by business line - Cyprus Corporate SMEs Consumer Housing 119% 108% 110% 96% 55% 73% 46% 84% 53% 64% 52% 53% 50% 47% 35% 26% 28% 26% 27% 26% Dec-15 Mar-16 Jun -16 Tangible Total Dec-15 Mar-16 Jun -16 Tangible Total Dec-15 Mar-16 Jun-16 Tangible Total Dec-15 Mar
Slide 49: Performance of Restructured Loans
Performance of Restructured Loans1 Total Bank – Cyprus Corporate 95% 94% 98% 1Q2014 2Q2014 3Q2014 4Q2014 1Q2015 91% 88% 100% 85% 98% 85% 82% 81% 2Q2015 3Q2015 4Q2015 1Q2016 92% 80% 75% 74% 73% Quarterly average 72% 79% 74% 80% 65% 59% 60% 31% 40% 24% 20% 16% 14% 13% 13% 14% 11% 10% 9% 9% 9% 20% 11%
Slide 50: Analysis of Loans and 90+ DPD ratios by Business Line
Analysis of Loans and 90+ DPD ratios by Business Line1 Gross loans by business line (€ bn) 31.03.15 30.06.15 30.09.15 31.12.15 31.03.16 30.06.16 % of total 20% 8% 17% 7% 6% 12% 6% 10% 14% 4,59 4,53 4,38 4,29 4,15 4,10 3,85 3,80 3,75 3,68 3,62 3,61 3,36 3,22 2,98 2,94 2,92 2,91 2,91 2,83 2,77 2,76 2,
Slide 51: Analysis of Loans and 90+ DPD ratios by Economic Activity
Analysis of Loans and 90+ DPD ratios by Economic Activity Gross loans by economic activity (€ bn) 30.06.15 30.09.15 31.12.15 31.03.16 30.06.16 % of total 11% 4% 7% 16% 16% 34% 7% 5% 7,86 7,41 7,33 7,25 7,17 4,19 4,14 4,07 3,92 3,43 3,42 3,38 3,33 3,32 3,20 2,50 2,38 2,36 2,26 2,23 2,07 1,84 1,79 1,6
Slide 52: Rescheduled Loans for the Cyprus Operations
Rescheduled Loans for the Cyprus Operations Rescheduled Loans by customer type (€ bn) Rescheduled Loans (€ bn) Retail housing Retail consumer SMEs Corporate 8,4 8,2 8,4 8,3 8,1 -1.130 7,4 2.304 1,7 1,7 1,7 1,7 1,7 8.392 -1.137 1,5 0,6 0,6 0,6 0,6 0,6 8.102 0,5 -327 1,8 1,7 1,7 1,7 1,8 - 1,5 3,9 4,3
Slide 53: Reconciliation of 90+ DPD to NPEs Cyprus Operations (Jun-16)
Reconciliation of 90+ DPD to NPES Cyprus Operations (€ bn) (Jun-16) 11,9 0,4 0,7 0,0 8,7 2,1 8,0 0,1 0,6 €3,2 bn with arrears Impaired -no other IFRS and Total 90+ DPD with forbearance re-forborne within forborne >30+ Contagion effect NPEs >90+DPD arrears reclassification measure<90+ 2 years DPD adj
Slide 54: Disclaimer
Disclaimer Certain statements, beliefs and opinions in this presentation are forward-looking. Such statements can be generally identified by the use of terms such as “believes”, “expects”, “may”, “will”, “should”, “would”, “could”, “plans”, “anticipates” and comparable terms and the negatives of suc