Bank of Cyprus Holdings PLC · CSECY:BOCH
Bank of Cyprus — FY2016 Earnings Presentation
56 slides from Bank of Cyprus's earnings presentation, Mar 28, 2017
Slide 1: Group Financial Results for the year ended 31 December 2016
Bank of Cyprus Group Group1 Financial Results for the year ended 31 December 2016 The Group Financial Statements have been audited by the Group‟s external auditors 28 March 2017 (1) The Group Financial Results referred to in this Presentation relate to the Bank of Cyprus Public Company Limited, the
Slide 2: FY2016 Financial Results - Highlights
FY2016 Financial Results - Highlights Key Milestones • Listing on LSE • Trading of shares on the LSE and the CSE commenced on 19 January 2016 Achieved in • ELA fully repaid January 2017 • Another significant milestone in journey back to strength • Successful issuance of €250 mn Tier 2 Notes Seven co
Slide 3: At a glance - Significant Improvement in all Financial Indicators
At a glance- Significant Improvement in all Financial Indicators €3,0 bn reduction in 90+DPD in FY2016; €2,9 bn reduction in NPEs in FY2016; Rising coverage ratios Down by 36% since peak Down by 27% since peak Change in 90+ DPD1 (€ bn) Change in NPEs (€ bn) 90+DPD ratio NPE ratio 90+DPD provision co
Slide 4: Seven consecutive quarters of material improvement in 90+DPD
Seven consecutive quarters of material improvement in 90+DPD High correlation between formation of problem loans & economic cycle Quarterly change of 90+ DPD (€ mn) 90+ DPD (€ bn) Slow deterioration Economic crisis Stabilisation Recovery 13,0 13,0 13,0 12,8 12,8 12,7 12,6 12,6 12,0 11,3 11,0 10,3 9,
Slide 5: Seven consecutive quarters of material improvement in NPEs
Seven consecutive quarters of material improvement in NPEs €4,0 bn drop since Dec-2014; €867 mn drop in 4Q2016 NPEs (€ bn) NPE ratio NPEs with forbearance measures no impairments, no arrears 63,0% Forborne NPEs with no impairments or 62,9% 61,9% 62,2% 61,8% arrears1 (€ bn) – in pipeline to exit NPEs
Slide 6: 90+ DPD provision coverage ratio at 54%; Total Coverage at 116%
90+ DPD provision coverage ratio at 54%; Total Coverage (Cy) at 116% 16 p.p.1 coverage ratio increase;€1,7 bn additional provisions since Sep-14 Cost of risk3: PPI4 directed to de-risk balance sheet Cost of Risk - Cyprus Cost of Risk - Group Quarterly Provisions for impairment of customer loans² (€
Slide 7: NPE provision coverage ratio at 41%; Total Coverage at 108%
NPE provision coverage ratio at 41%; Total Coverage (Cy) at 108% 7 p.p.1 coverage ratio increase; €1,7 bn additional provisions since Sep-14 Quarterly Provisions for impairment of customer loans²… 45% 40% 40% 41% 35% • NPEs provision coverage increases 39% 38% 39% 35% 36% 34% 34% 35% 30% significant
Slide 8: 90+ DPD and NPE outflows significantly exceed inflows
90+ DPD and NPE outflows significantly exceed inflows 90+DPD inflows in Cyprus operations (€ bn) arrested 0,68 0,60 • Close monitoring to arrest 0,34 0,36 deterioration of portfolio 0,22 Average: 0,29 0,13 0,14 0,14 0,14 • Ramp up in restructuring efforts 0,11 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015 4Q20
Slide 9: Total €6,2 bn of restructurings in 2016
Total €6,2 bn of restructurings1 in 2016 Quarterly evolution of restructuring activity (€ bn) 3 4 Restructured loans Write offs & non contractual write offs DFAS FY20161: €6,2 bn 2,2 2,0 0,3 0,4 0,4 1,3 0,3 1,1 Average2: c.1,0 0,9 0,8 0,8 0,7 0,2 1,33 1,50 0,2 0,2 1,26 0,2 0,84 0,81 0,69 0,68 0,53 1
Slide 10: Good progress across all segments (Cy operations)
Good progress across all segments (Cy operations) NPEs (€ bn) Restructurings as % of total Net drop (€2,1 bn) restructurings2 6,6 Average • Restructuring of corporate clients 62% materially progressed 61% 59% Recoveries 0,4 (2,5) 4,5 49% Corporate 6,6 2,4 4,5 45% • €544 mn of portfolio transferred 3
Slide 11: Good progress across all segments (Cy operations)
Good progress across all segments (Cy operations) • From inefficient legacy operations… Results being delivered, but ongoing focus area ̶ Rigid legal framework with very long execution timelines • €823 mn of NPEs deleverage in FY2016 ̶ Inefficient processes with significant time wasted • To improv
Slide 12: 2016 movement in 90+ DPD 3x that of 2015 as momentum builds
2016 movement in 90+ DPD 3x that of 2015 as momentum builds Introducing additional tools to resolve long outstanding loan portfolios (90+ DPD Cyprus operations) FY2015 Net reduction : c.€0,9 bn FY 2016 Net reduction: c.€2,8 bn 0,2 (0.9 ) 0,6 (0.1 ) (0.0) (1.5 ) (1.1) 11,5 11,5 (0.8) 10,6 7,8 Jun 201
Slide 13: BoC compares favourably vs. peer
BoC compares favourably vs. peer1 Highest reduction of NPE as % of nominal GDP vs peer Strong progress on NPE coverage Change in NPE as % of nominal GDP since 20142 NPE coverage progress since 20142,3 (22,2%) 11% 9% 9% 7% 7% 6% 4% 4% 4% Average: 5,48% (1,6%) 2% 2% (0,8%)(0,7%) 1% (0,4%) (0,3%) (0,1%
Slide 14: Cyprus NPL framework proving effective
Cyprus NPL framework proving effective Robust foreclosure legal framework adopted in Cyprus in April 2015 • Enables the enforcement of mortgages as security rights against debtors through foreclosure • Minimises the involvement of the Land Registry Office and procedure is driven by the secured credi
Slide 15: REMU: €170 mn sales agreed; €155 mn executed at 104% of book value
REMU: €170 mn sales agreed; €155 mn executed on average at 104% of Book value (Cy) 1 Property stock (31 Dec 2016) 2 Stock movement (Group) (€ mn) Group: €1,4 bn Cyprus: €1,2 bn 2,3% 0,2% (166) 3,8% (35) Nicosia 10,7% Larnaca 1.086 26,3% 34,8% Limassol Paphos 1.427 87,0% Famagusta 24,1% 10,8% Other 5
Slide 16: Deposit growth of 16% in FY2016
Deposit growth of 16% in FY2016 Deposits up by €867 mn in 4Q2016 and by €2,3 bn in FY2016; L/D ratio improved to 95% 16,5 15,6 1,5 14,8 14,2 14,1 0,01 1,4 13,6 13,6 13,6 124% 125% 125% 123% 13,3 0,011,4 121% 122% 121% 13,2 120% 0,61 0,61 1,5 1,4 0,80 0,56 1,4 148% 1,4 1,4 15,0 141% 138% 136% 1,3 1,3
Slide 17: Adequately capitalised relative to risk profile
Adequately capitalised relative to risk profile CET1 ratio (transitional) of 14,5% compares favorably with EU average of 14,1% 13,4% 13,4% 14,4% 15,1% 13,1% 13,5% 13,6% 13,8% 13,9% 15,6% 14,9% 1 14,4% 14,6% 14,5% 14,3% 14,0% 13,9% 14,0% 14,1% 13,5% 13,4% 13,6% 12,8% 13,0% 12,5% 12,4% Dec 2014 Mar 20
Slide 18: Total Capital position 15,7% (pro forma)
Total Capital position 15,7% (pro forma) Total Capital Adequacy Ratios Total Capital ratio vs SREP7 minimum requirement Issuance of Tier 2 Notes 13,00% Overall 15,5% 15,7% 15,7% Total Capital8 15,0% Requirement 14,7% 14,6% 15,7% 14,2% 14,1% 14,4% 14,5% 1,25% CCB3(CET1) 14,1% 3,75% Pillar 2R4 2,00% T
Slide 19: Modest profitability of €64 mn for FY2016
Modest profitability of €64 mn for FY2016 € mn FY2016 FY2015 yoy % 4Q2016 3Q2016 qoq % Key Highlights QoQ change Total income 963 1.040 -7% 246 235 5% • NII at €162 mn for 4Q2016, compared Total expenses (397) (408) -3% (98) (97) 1% to €164 mn for 3Q2016, reflecting the reduction in customer loan ba
Slide 20: Stable NIM despite negative interest rate environment
Stable NIM despite negative interest rate environment Net Interest Income and Net Interest Margin • Net Interest Income (NII) at €162 mn for 4Q2016, Interest income from Republic of Cyprus bond (€ mn) € bn Interest bearing compared to €164 mn for 3Q2016, reflecting the Net interest income (€ mn) ass
Slide 21: Increased Non Interest Income as % of Total Income
Increased Non Interest Income as % of Total Income Analysis of Non Interest Income (€ mn) – Quarterly 1 Net fee and commission income Insurance income net of insurance claims Other % 14% 15% 15% 16% 16% 20% Net fee and commission income % Total income 77 71 x 63 20 59 23 55 Non interest income (€ 46
Slide 22: Costs under control
Costs under control Total expenses (€ mn) • Total expenses for 4Q2016 were €98 mn, in line Staff costs Special levy on deposits Operating expenses with the previous quarter 113 102 102 101 101 97 98 • Staff costs for 4Q2016 were €53 mn, down by 2% qoq 90 51 mainly due to the VEP completed in 2Q2016
Slide 23: Profitable Core Cypriot business
Profitable Core Cypriot business 4Q2016 Cyprus Vs Group performance (€ mn) 94% 94% 88% 98% 245% % 232 246 % contribution of 162 Cyprus operations 153 146 148 -86 44 Cyprus operations 9 14 2 18 Rest of operations -12 -26 -98 Net interest income Total income Total expenses Profit before provisions and
Slide 24: Expansion of BOC UK operations
Expansion of BOC UK operations Gross loans and customer deposits Loans by sector as at 31 December 2016 1% Gross loans (£ bn) 1% Corporate 1,09 17% 1,01 SMEs 0,93 0,88 0,83 Consumer credit 0,78 0,74 81% 0,67 Housing Mar 2015 Jun 2015 Sep 2015 Dec 2015 Mar 2016 Jun 2016 Sep 2016 Dec 2016 Core operati
Slide 25: Significant Progress made on Group KPIs
Significant Progress made on Group KPIs Well on track to meet targets set in 2016 – A clear plan of action to achieve new Medium Term Targets Medium New Key Pillars & Plan of action Term Key performance Dec- Dec- Medium Category Targets indicators 2015 2016 Term set in Targets 2016 1. Significantly
Slide 26: Key Takeaways
Key Takeaways • Key Milestones Achieved in January 2017; Listing on LSE and CSE, ELA fully repaid, successful issuance of €250 mn Tier 2 Notes • Satisfactory results this quarter reflecting our strategy of continued de-risking • Leading position in a recovering economy • 90+ DPD down by €459 mn or 5
Slide 27: 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 28: Appendix – Macroeconomic overview
Appendix – Macroeconomic overview 28
Slide 29: Growth accelerated with broad sector participation
Growth accelerated with broad sector participation Real GDP (SA) continued to expand in 2016 ... with broad sector participation particularly from ... on the expenditure side growth came from dom. registering a yearly growth of 2,8% (1,7% in 2015) trade , tourism, and professional services, whilst….
Slide 30: Key economic sectors are performing well
Key economic sectors are performing well The unemployment rate peaked in 2013Q4 at 16,6% SA and dropped to 12,8% In construction the main frequency indices have turned up in 2016 in 2016Q2 rising to 14,1% in 2016Q4 18,0 16,6 16,5 102,0 Index 100=2008Q3 of 4Q moving averages/sums 100,0 14,1 16,0 100,
Slide 31: Tourism is expanding & Residential Property Index is stabilising
Tourism is expanding & Residential Property Index is stabilising Tourist activity increased sharply in 2016 and continued into 2017 up in Jan- The distribution of tourist arrivals has been shifting over time and appears Feb by 26% y-o-y driven by arrivals from Germany and Russia shifting again with
Slide 32: Consumer prices continued to drop in 2016
Consumer prices continued to drop in 2016 while on the demand side of the economy, retail trade volumes continued to increase Following three consecutive years of decline, consumer prices dropped 1,4% in 2016 and rose by 1,1% in January-February 2017 4,0 Consumer Price Index: % changes year-on-year
Slide 33: Appendix – Additional financial information
Appendix – Additional financial information 33
Slide 34: Consolidated Balance Sheet
Consolidated Balance Sheet % % € mn change 31.12.16 31.12.15 € mn change 31.12.16 31.12.15 Cash and balances with Deposits by banks 80% 435 242 6% 1.506 1.423 Central Banks Funding from central banks -81% 850 4.453 Loans and advances to -17% 1.088 1.314 banks Repurchase agreements -30% 257 368 Custo
Slide 35: Income Statement Review
Income Statement Review yoy qoq € mn FY2016 FY2015 4Q2016 3Q2016 2Q2016 1Q2016 +% +% Net interest income 686 842 -19% 162 164 -1% 175 185 Net fee and commission income 167 154 9% 55 38 43% 38 36 Insurance income net of insurance claims 44 48 -7% 9 10 -3% 11 14 Core income 897 1.044 -14% 226 212 7% 2
Slide 36: Good underlying profitability continues in 4Q2016
Good underlying profitability continues in 4Q2016 Group Income Statement Highlights (€ mn) 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 253 244 238 235 246 140 143 137 138 148 50 6 5 2 -62 -113 -101 -101 -97 -98 -96 -109-103 -630 -512 Total Income Total Expenses Profit before impairments1 Provisions for impai
Slide 37: Income Statement bridge for FY2016
Income Statement bridge for FY2016 Per financial € mn Per presentation Reclassification statements Net interest income 686 - 686 Net fee and commission income 167 - 167 Net foreign exchange gains and net gains on other financial instruments 48 59 107 Insurance income net of insurance claims 44 - 44
Slide 38: Cyprus: Income Statement by business line for FY2016
Cyprus: Income Statement by business line for FY2016 Wealth & International Consumer SME Corporate Brokerage & Total € mn Banking RRD REMU Insurance Other Banking Banking Banking Asset Cyprus Management Net interest income 247 62 81 62 11 202 (13) - (9) 643 Net fee & commission income 46 9 10 65 2 1
Slide 39: Risk Weighted Assets – Regulatory Capital
Risk Weighted Assets – Regulatory Capital Risk weighted assets by Geography (€ mn) Equity and Regulatory Capital (€ mn) 31.12.15 31.03.16 30.06.16 30.09.16 31.12.16 31.12.15 31.03.16 30.06.16 30.09.16 31.12.16 Cyprus 18.438 18.276 17.845 17.675 17.554 Russia Shareholders‟ equity 3.055 3.101 3.054 3.
Slide 40: BOC - Main performance indicators
BOC - Main performance indicators Ratios Group FY2016 ROAA (annualised) 0,3% ROTE (annualised) 2,2% Performance Net Interest Margin 3,47% Cost to income ratio 41% Loans to deposits 95% 90+ DPD / 90+ DPD ratio €8.309 mn (41%) 90+ DPD coverage 54% Asset Quality Cost of risk (annualised) 1,7%1 Provisio
Slide 41: Reduction in Overseas Non-Core Exposures
Reduction in Overseas Non-Core Exposures Overseas non-core exposures (€ mn) The non-core overseas exposures at 31 December 2016 were as 1040 follows: 957 Greece: Net exposure comprised: 512 139 911 a. Net on-balance sheet exposures (excluding foreclosed 477 870 151 464 821 properties) totalling €17
Slide 42: Analysis of Deposits by Geography and by Type
Analysis of Deposits by Geography and by Type Deposits by geography 31 December 2016 (%) 1 1 Cyprus - non IBU Cyprus - IBU Total Cyprus non-IBU Cyprus IBU UK Other countries2 16,51 UK Other countries 2 14,97 15,64 (€ bn) 14,18 14,13 14,75 0,0% 13,80 13,61 13,63 13,61 1,46 1,02 13,33 13,17 0,01 0,01
Slide 43: Gross loans by Geography and by Customer Type
Gross loans by Geography and by Customer Type Gross loans by geography 31 December 2016 (%) 1 Total Cyprus UK Other countries (€ bn) 23,77 24,09 23,93 6,4%2,8% 22,86 22,59 21,85 1,61 21,08 20,60 0,91 1,66 1,03 1,74 1,13 1,14 0,75 1,21 0,72 0,70 0,63 0,60 20,13 1,17 1,18 0,56 Other 1,23 1,30 1 countr
Slide 44: NPEs by Geography and by Customer Type
NPEs by Geography and by Customer Type NPEs by geography 31 December 2016 (%) 1 Total Cyprus UK Other countries 14,96 15,17 14,81 14,22 13,97 (€ bn) 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 11,90 0,05 0,57 11,03 4,6% 0,06 0,53 0,51 0,2% Other countries 1 0,02 13,75 13,
Slide 45: Asset Quality - 90+ DPD analysis
Asset Quality- 90+ DPD analysis (€ mn) Dec-16 Sept-16 Jun - 16 Mar-16 Dec-15 A. Gross Loans after Fair value on Initial recognition 19.202 19.607 20.040 20.719 21.385 Fair value on Initial recognition 928 989 1.043 1.130 1.207 B. Gross Loans 20.130 20.596 21.083 21.849 22.592 B1. Loans with no arrea
Slide 46: Progress on top 20 group exposures
Progress on top 20 group exposures Top 20 - total exposure split (€ bn) Top 20 exposures down by €1,7 bn since 30 Sep 2014 € bn3 67% 69% 64% 64% 66% 61% 2,73 53% 45% 45% 42% 4,4 4,2 4,0 4,0 3,7 3,8 3,5 0,9 1,6 3,4 1,5 1,3 1,3 Performing 1,1 3,0 1,5 2,7 1,6 2,0 1,7 90+DPD reduced by 56% 1,5 2,8 2,7 2
Slide 47: Plans are in place to maintain positive progress
Plans are in place to maintain positive progress Aggressive target setting • c.€6,8 bn of 90+DPDs managed by RRD - o/s c.€4,8bn is managed via RRD recoveries 20,1 Other 1,8 18,3 Performing Forborne NPEs: 5,7 • NPEs with forbearance measure no impairments and no arrears1: €2,0 bn Performing restructu
Slide 48: 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% 90% 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 44
Slide 49: 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 8,77 2,20 2,95 2,24 8,31 2,31
Slide 50: Performance of Restructured Loans
Performance of Restructured Loans1 Total Bank – Cyprus Corporate 1Q2014 2Q2014 3Q2014 4Q2014 97% 99% 96% 93% 90% 94% 89% 88% 85% 1Q2015 2Q2015 3Q2015 4Q2015 100% 84% 81% 87% 1Q2016 2Q2016 3Q2016 93% 83% 76% 74% 75% 76% 81% Quarterly average 71% 70% 70% 69% 80% 65% 60% 40% 25% 24% 21% 18% 16% 16% 15%
Slide 51: 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) 30.06.15 30.09.15 31.12.15 31.03.16 30.06.16 30.09.16 31.12.16 % of total 22% 8% 18% 7% 5% 11% 6% 9% 14% 4,59 4,40 4,38 4,31 4,29 4,15 4,10 3,80 3,75 3,68 3,62 3,61 3,58 3,54 3,22 2,98 2,94 2,93 2,92 2,91 2,91
Slide 52: 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 31.06.16 30.09.16 31.12.16 % of 11% 3% 7% 15% 16% 35% 7% 6% total 7,86 7,41 7,33 7,25 7,17 7,11 7,03 4,19 4,14 4,07 3,92 3,43 3,42 3,38 3,33 3,32 3,30 3,22 3,20 3,30
Slide 53: 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 3.237 (1.516) 8,4 8,2 8,4 8,3 8,1 7,8 7,4 (2.044) (667) 1,7 1,7 1,7 1,7 8.392 1,7 1,7 0,6 0,6 0,6 1,7 7.402 0,6 0,6 0,6 1,8 1,7 1,7 1,7 0,6 1,8
Slide 54: Reconciliation of 90+ DPD to NPEs Cyprus Operations
Reconciliation of 90+ DPD to NPES Cyprus Operations (€ bn) (Dec-16) 0,4 10,5 0,5 0,0 1,8 0,1 7,8 7,3 0,4 €2,7 bn with arrears Impaired -no Impaired arrears - Total 90+ DPD with forbearance re-forborne within forborne >30+ Contagion effect NPEs >90+DPD arrears less than 90 days measure<90+ 2 years DP
Slide 55: Non-Performing Loans definition
Non-Performing Loans definition Non-Performing Exposures (NPEs) –as per the EBA definition: In 2014 the European Banking Authority (EBA) published its reporting standards on forbearance and non-performing exposures (NPEs). According to the EBA standards, a loan is considered a non-performing exposur
Slide 56: 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
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