Bank of Cyprus Holdings PLC · CSECY:BOCH
Bank of Cyprus — Q1 2018 Earnings Presentation
57 slides from Bank of Cyprus's earnings presentation, May 29, 2018
Slide 1: Group Financial Results for the quarter ended 31 March 2018
Bank of Cyprus Group Group Financial Results for the quarter ended 31 March 2018 The Group Financial Results have been neither audited nor reviewed by the Group’s external auditors. This financial information is presented in Euro (€) and all amounts are rounded as indicated. A comma is used to separ
Slide 2: 1Q2018 – Highlights
1Q2018 – Highlights Continued • Twelve consecutive quarters of organic NPE reduction Progress on • NPEs reduced by €454 mn (5%) qoq to €8.3 bn (reduced by 44% since December 2014) Balance Sheet • NPE ratio at 45%; NPE coverage at 51%1 Repair • Continue to explore other structured solutions to accele
Slide 3: Group Loan Portfolio and Asset Quality
Group Loan Portfolio and Asset Quality 3
Slide 4: Organic NPE reduction on track with our guidance
Organic NPE reduction on track with our guidance NPEs down by €454 mn or 5% in 1Q2018 NPEs (€ bn) NPE ratio NPEs with forbearance measures, no arrears 62.9% 63.0% 62.2% 61.9% 61.8% 61.0% 59.3% 57.8% 54.8% • NPEs reduced by €6.7 bn (44%) since 51.8% Dec 2014 50.0% 47.6% 46.9% • NPE ratio reduced by 4
Slide 5: Core NPE risk at €6.8 bn down by c.40% since 2015 and 58% covered
Core NPE risk at €6.8 bn down by c.40% since 2015 and 58% covered €14.0 bn Exit dates for non core NPEs €1.5 bn forborne NPEs with no arrears1,2 Forborne No impairments 2.0 No arrears but Impaired Retail SME Corporate No arrears1,2 €11.0 bn 0.6 No arrears 0.6 € bn but impaired 0.5 0.1 NPEs 0.4 2.0 €
Slide 6: c.€0.6 bn NPE outflows in 1Q2018 leading to €454 mn organic NPE reduction
c.€0.6 bn NPE outflows in 1Q2018 leading to €454 mn organic NPE reduction Outflows of NPEs on curing and exits (€ bn) 1 Curing of restructured loans DFAs & DFEs Write offs and non contractual write offs Other (Interest / Collections / Change in balances) Cyprus operations 0.50 0.30 0.10 - 0.04 -0.10
Slide 7: NPE provision coverage at 51%; Total Provision coverage at 119%
NPE provision coverage at 51%; Total Provision coverage at 119% Quarterly CoR at 1.2% NPE total coverage at 119% when collateral included Quarterly Cost of Risk - Group (excluding additional provisions in 2Q17) 1 Quarterly Cost of Risk - Group (including additional provisions in 2Q17) 1 Loan loss re
Slide 8: New lending of €717 mn in 1Q2018
New lending of €717 mn in 1Q2018 1Q2018– Total New Lending of €717 mn (Group) Tourism & Trade core sectors Contribution to FY2017 Real GDP growth in p.p. (total 3.9%) 154 Cyprus UK Tourism, trade and transport 1.2 563 Construction 1.2 Public, education & health 0.4 Industry 0.4 >98% of new lending i
Slide 9: REMU sale agreements of €114 mn YTD
REMU sale agreements of €114 mn YTD €114 mn sales agreed ytd; REMU profit of €11 mn in 1Q2018 Sales contract prices4 (€ mn) • 123 properties sold in 1Q2018, representing c.5% of 60 Total sale total REMU properties agreements €114 mn 61 • SPAs signed for additional 170 235 properties 17 97 Offers acc
Slide 10: Capital and Funding Position
Capital and Funding Position 10
Slide 11: Capital ratios remain adequate
Capital ratios remain adequate CET1 ratio at 12.0%, with organic capital generation offset by Organic capital rebuild expected through operating profitability previously guided impact of EBA CRR DD5 and DTA phasing in min SREP requirement COR 2018 <1.0% 0.6% (0.4%) (0.1%) >13% (0.2%) 12.7% (0.5%) (0
Slide 12: Capital and solvency position after IFRS 9 FTA
Capital and solvency position after IFRS 9 FTA The impact of IFRS 9 is manageable and within the Group’s capital plans1 Gross Loans Provisions € bn € bn 31 Mar 2018 31 Mar 2018 Stage 1 5.8 0.06 Opening position 1 Jan 2018 31 Dec 2017 Transitional Δ change Arrangements2 Stage 23 4.4 0.13 Equity €2.6
Slide 13: Full compliance with all liquidity requirements
Full compliance with all liquidity requirements Deposits increased by c.1% qoq to €18.0 bn; Local deposits increased by €291 mn in 1Q2018 >2% qoq increase in local deposits, offsets the 4% qoq Minimum Liquidity ratio 31 Mar 2018 Surplus reduction in IBU deposits required Cyprus deposits by geography
Slide 14: Operating Performance
Operating Performance Bank of Cyprus of Cyprus Fed
Slide 15: Balance sheet de-risking results in a smaller but safer loan book
Balance sheet de-risking results in a smaller but safer loan book • €7 mn reduction in interest income on loans in 1Q2018, all from legacy book Net Loans: Performing vs Legacy Interest Income on Loans: Performing vs Legacy 3 € bn (pre FTP1) Performing2 Legacy 3 € mn (pre FTP1) Performing 2 Legacy 17
Slide 16: Profitability
Risk adjusted yield will rise as Legacy book reduces Performing Legacy Group 1Q2018 1Q2018 1Q2018 Interest Income on • Performing Book is expected to grow 101 62 163 loans (€ mn) (pre FTP)1 and to increasingly drive Group results Provisions (7) (51) (58) (€ mn) • Legacy book revenues predominantly P
Slide 17: NIM remains under pressure by otherwise individually positive actions as expected
NIM remains under pressure by otherwise individually positive actions as expected A Total Assets (€ bn) B AIEA4 mix (% Total) C Effective yield on assets & cost of funding Performing 2 Legacy3 Liquids 1 2 3 NIM (bps) Performing Legacy Performing Legacy Liquids 1 Non int-producing Effective yield 5 L
Slide 18: Non interest income of €107 mn
Non interest income of €107 mn Analysis of Non Interest Income (€ mn) – Quarterly Net FX gains/(losses) & Net gains/(losses) on other financial instruments, and other income Net fee and commission % Gains/(losses) from revaluation and disposal of investment properties and on disposal of stock of pro
Slide 19: Focus on revenue generation and total income target
Focus on revenue generation and total income target Total Income up by 8% qoq; NIM down by 2% qoq Total income (€ bn) NIM (bps) 363 355 335 337 333 338 350 286 300 257 251 250 200 244 238 235 246 237 233 223 231 214 150 100 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 3Q2017 4Q2017 1Q2018 • Total Incom
Slide 20: Total Expenses
Total Expenses Cost to Income Ratio (C/I ratio) Cost to Income ratio Cost to Income ratio excluding special levy on banks and SRF contibution 47% 46% 46% 45% 46% • C/I ratio at 46% for 1Q2018, down from 47% for FY2017 42% 42% 41% 44% 42% 43% 43% 40% 40% 41% 39% 1H2016 9M2016 FY2016 1Q2017 1H2017 9M2
Slide 21: Income Statement Review
Income Statement Review € mn 1Q2018 1Q2017 4Q2017 qoq % yoy% Key Highlights Net Interest Income 124 156 129 -3% -21% • NII for 1Q2018 amounted to Non interest income 107 77 85 25% 39% €124 mn, compared to €129 mn for 4Q2017 Total income 231 233 214 8% -1% Total expenses (106) (107) (109) -2% -1% • N
Slide 22: Guidance
Guidance Bank of Cyprus of Cyprus Fed
Slide 23: 2018 Targets and Medium Target Guidance
2018 Targets and Medium Target Guidance Medium Term 2018 Key performance Guidance Type Dec-17 Mar-186 Target indicators (excluding impact of any (excluding impact of any accelerated asset disposals)6 accelerated asset disposals)6 NPEs ratio 47% 45% <40%, ~ €2 bn organic reduction <25% Asset NPEs cov
Slide 24: Key Information and Contact Details
Key Information and Contact Details Credit Ratings: Standard & Poor’s Global Ratings: Long-term issuer credit rating: Assigned at B on 23 October 2017 (positive outlook) Short-term issuer credit rating: Assigned at B on 23 October 2017 Fitch Ratings: Long-term Issuer Default Rating: Affirmed at “B-"
Slide 25: Appendix – Macroeconomic overview
Appendix – Macroeconomic overview 25
Slide 26: Cypriot economy on a sustainable growth path…
Cypriot economy on a sustainable growth path… GDP growth of 3.8% seasonally adjusted in 1Q2018 The unemployment rate dropped to 10.3% in Q4 2017 SA 6.0 18.0 15.8 440 4.0 3.8 3.5 16.0 4.0 420 13.0 14.0 3.9 11.2 2.0 3.4 12.0 389 10.3 400 2.0 0.0 1.3 10.0 0.3 380 -2.0 8.0 -1.4 6.0 351 360 -4.0 -3.1 4.0
Slide 27: …on the back of improving macro fundamentals
…on the back of improving macro fundamentals Economic activity has been broadly based Tourism arrivals (mn) Tourism Revenues with main drivers tourism and construction 4.00 3.7 Contribution to growth of real GVA 2017 in € bn % of GDP percentage points (total 3.9%) 3.50 3.2 13.7% 1.2 13.0% 1.2 3.00 2
Slide 28: Appendix – Additional asset quality slides
Appendix – Additional asset quality slides As from 1 January 2018 and following IFRS 9 implementation, the Bank’s disclosure in relation to the loan portfolio quality is based on Non Performing Exposures (NPEs), in line with the EBA standards and ECB NPEs Guidance to the banks. Exposures that meet t
Slide 29: Movement of NPEs within business lines following RRD reorganisation
Movement of NPEs within business lines following RRD reorganisation Reporting as from 31 December 2017 includes transfers within RRD1 business lines following an internal reorganisation of RRD1 in 4Q2017 Group NPEs Total € bn 8.8 8.8 Forborne No impairments 1.3 Movement of NPEs 1.3 No arrears1,2 wit
Slide 30: Restructuring efforts continue; re-default level stable
Restructuring efforts continue; re-default level stable Quarterly evolution of restructuring activity (€ bn) (Cy operations) 1 2 Restructured loans Write offs & non contractual write offs DFAs 2.2 2.0 0.3 0.4 0.4 1.3 0.3 1.1 0.9 0.9 0.8 0.2 0.7 0.8 0.8 0.7 1.50 0.2 1.33 1.26 0.2 0.1 0.5 0.2 0.1 0.2
Slide 31: Adequacy of provisions with NPE provision coverage at 51%
Adequacy of provisions with NPE provision coverage at 51% NPE coverage at 51% after IFRS 9 FTA 1 Quarterly Provisions for impairment of customer loans (€ mn) NPEs provision coverage 60% 49% 51% 48% 48% 42% 50% 39% 40% 41% 38% 40% 592 30% 20% 10% 62 96 109 103 64 73 50 58 0% 1Q2016 2Q2016 3Q2016 4Q20
Slide 32: Continuous progress across all segments
Continuous progress across all segments Focus shifts to Retail and SME after intense Corporate attention NPEs (Cy) €8.00 bn transfers within business lines during 4Q2017 Corporate Dec-16 4.51 Exits 3.24 (1.27) NPE ratio 44.4% Corporate Inflows 0.14 0.3 1.875 Dec 17 3.68 NPE provision coverage 45.9%
Slide 33: Gross loans by Geography and by Customer Type
Gross loans by Geography and by Customer Type Gross loans by geography 31 March 2018 (%) 2 Cyprus UK Other countries Total (€ bn) 9.5% 21.08 20.60 20.13 20.01 1.8% 19.50 19.25 18.75 18.59 1.18 0.63 1.23 0.60 1.30 0.56 0.33 0.35 Other countries 1 1.44 0.51 1.43 0.38 1.51 1.62 0.32 1.76 UK 19.27 18.77
Slide 34: NPEs by Geography and by Customer Type
NPEs by Geography and by Customer Type NPEs by geography 31 March 2018 (%) 1 12.49 Cyprus UK Other countries Total 0.57 11.03 0.05 10.37 (€ bn) 0.51 9.75 0.02 9.16 4.1% 0.02 0.46 8.80 0.1% Other countries 1 0.02 0.38 0.33 8.35 0.02 0.02 0.31 0.01 0.34 11.87 UK 10.50 9.89 9.35 8.81 8.47 8.00 Cyprus J
Slide 35: NPE provision coverage at 49%; Total coverage (Cy) at 120%
NPE provision coverage at 49%; Total coverage (Cy) at 120% Adequate NPE total coverage when collateral is included (Cyprus operations) 1 Loan loss reserves Tangible Collateral Corporate Retail-Other SME Retail-Housing Total BoC –Cyprus 124% 122% 120% 118% 118% 116% 116% 115% 115% 112% 109% 109% 108%
Slide 36: Asset Quality- NPEs analysis
Asset Quality- NPEs analysis (€ mn) Mar-18 Dec-17 Sep-17 Jun-17 Mar-17 A. Gross Loans after Fair value on Initial recognition 18,020 18,087 18,532 18,693 19,142 Fair value on Initial recognition 566 668 721 812 869 B. Gross Loans 18,586 18,755 19,253 19,505 20,011 B1. Loans with no arrears 9,922 9,5
Slide 37: Analysis of Loans and NPEs ratios by Business Line
Analysis of Loans and NPEs ratios by Business Line1 Gross loans by business line2 (€ bn) 30.06.16 30.09.16 31.12.16 31.03.17 30.06.17 30.09.17 31.12.17 31.03.18 % of total 28% 8% 17% 6% 4% 6% 6% 4% 7% 14% 5.48 5.17 5.09 5.02 5.02 4.40 4.31 4.10 3.61 3.58 3.54 3.51 3.14 3.09 3.08 3.02 2.93 2.92 2.91
Slide 38: Analysis of Loans and NPEs ratios by Economic Activity
Analysis of Loans and NPEs ratios by Economic Activity Gross loans by economic activity (€ bn) 31.03.16 31.06.16 30.09.16 31.12.16 31.03.17 30.06.17 30.09.17 31.12.17 31.03.18 % of % of total 11% 11% 3% 4% 7% 7% 15% 11% 16% 18% 35% 36% 7% 7% 6% 6% total 7.25 7.17 7.11 7.09 7.03 6.88 6.83 6.82 6.77 3
Slide 39: Rescheduled Loans for the Cyprus Operations
Rescheduled Loans for the Cyprus Operations Rescheduled Loans1 by customer type (€ bn) Retail housing Retail consumer SMEs Corporate 8.1 7.8 7.4 7.1 6.9 6.7 1.7 1.7 6.3 5.9 1.7 1.7 0.6 0.6 1.6 1.5 0.6 1.4 1.8 0.6 0.5 0.6 1.4 1.7 0.6 1.7 1.6 1.6 0.5 1.6 1.3 1.3 4.0 3.8 3.4 3.2 3.2 3.0 3.0 2.7 30.06.1
Slide 40: Rescheduled Loans – Asset Quality
Rescheduled Loans – Asset Quality € ‘000 United Cyprus Greece Russia Romania Total Kingdom 31 March 2018 Stage 1 607,047 - - - - 607,047 Stage 2 1,000,853 - - 4,235 61 1,005,149 Stage 3 3,499,989 3,370 68,933 5,345 14,355 3,591,992 POCI 501,117 - - - 1,466 502,583 FVPL 301,346 - - - - 301,346 Total
Slide 41: REMU – the engine for dealing with foreclosed assets
REMU – the engine for dealing with foreclosed assets REMU focus now on sales (Group) € mn BV1 (55) 134 (166) (5) 3 1,641 1.554 1.549 1.549 1,552 Stock as at 31 Dec 2017 Additions Sales Transfer to Investment Impairment loss Foreign exchange and Stock as at 31 March Properties other movements 2018 Pr
Slide 42: REMU – the engine for dealing with foreclosed assets
REMU – the engine for dealing with foreclosed assets Book Value Sales of €82 mn in 2018 (Group) Book Value sales by type (Group) Hotels Commercial Residential Land 100% 16 2018 ytd 110 €82 mn 11 80% 7 60% 64 60 82 56 55 48 46 40% 40 27 48 16 20% 1 2 0% 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 3Q201
Slide 43: Fair value of collateral and credit enhancements held by the Group
Fair value of collateral and credit enhancements held by the Group 31 Mar 2018 Loans and advances to customers (€ mn) Cash 361 Securities 272 Letters of credit / guarantee 249 Property 21,505 Other 900 Surplus collateral (10,309) Net collateral 12,978 43
Slide 44: Appendix – Additional financial information
Appendix – Additional financial information 44
Slide 45: Consolidated Balance Sheet
Consolidated Balance Sheet % % Assets (€ mn) change 31.03.18 31.12.17 Liability and Equity (€ mn) change 31.03.18 31.12.17 Cash and balances with Deposits by banks -12% 436 495 -3% 3,281 3,394 Central Banks Funding from central banks 1% 940 930 Loans and advances to 18% 1,413 1,193 banks Repurchase
Slide 46: Income Statement Review
Income Statement Review € mn 1Q2018 1Q2017 4Q2017 qoq % yoy% Net Interest Income 124 156 129 -3% -21% Net fee and commission income 41 43 47 -14% -6% Insurance income net of insurance claims 12 10 11 10% 19% Core income 177 209 187 -5% -16% Other income 54 24 27 98% 131% Total income 231 233 214 8%
Slide 47: Analysis of Interest Income and Interest Expense
Analysis of Interest Income and Interest Expense Analysis of Interest Income 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 3Q2017 4Q2017 1Q2018 Loans and advances to customers 217 203 204 195 200 180 170 163 Loans and advances to banks and central banks 4 5 (2) 3 2 3 3 4 Investments available-for-sale 2 2 3 4
Slide 48: Core Cypriot business
Core Cypriot business Market shares3 Strong market shares in resident and non-resident deposits 3 Loans Loans new basis Deposits Residents Non-residents 39.4% 39.1% 38.7% 39.5% 39.2% 36.8% 37.3% 37.1% 35.8% 34.5% 35.3% 37.4% 37.4% 37.5% 37.5% 37.1% 37.1% 36.7% 33.2% 34.1% 30.1% 30.9% 31.5% 32.8% 29.
Slide 49: Income Statement bridge for 1Q2018
Income Statement bridge1 for 1Q2018 € mn Underlying basis Reclassification Statutory Basis Net interest income 124 (1) 123 Net fee and commission income 41 41 Net foreign exchange gains and net gains on other financial instruments and disposal/ dissolution of 29 (2) 27 subsidiaries Insurance income
Slide 50: Cyprus: Income Statement by business line for 1Q2018
Cyprus: Income Statement by business line for 1Q2018 Consumer SME Corporate International Wealth & Total € mn RRD REMU Insurance Other Banking Banking Banking Banking Markets Cyprus Net interest income 48 10 25 14 2 28 (5) 0 (6) 116 Net fee & commission income 12 3 4 15 1 2 0 (1) 3 39 Other income 1
Slide 51: BOC UK operations
BOC UK operations Gross loans and customer deposits Loans by sector at 31 March 2018 Gross loans (£ bn) 7% 1% Corporate 1.52 13% 1.41 SMEs 1.32 1.24 Consumer credit 1.09 79% 0.93 0.83 Housing Dec 2015 Jun 2016 Dec 2016 Jun 2017 Sep 2017 Dec 2017 Mar 2018 Core operating profitability Customer deposit
Slide 52: Risk Weighted Assets – Regulatory Capital
Risk Weighted Assets – Regulatory Capital Risk weighted assets by Geography (€ mn) Equity and Regulatory Capital (€ mn) 31.03.17 30.06.17 30.09.17 31.12.17 31.03.18 31.03.17 30.06.17 30.09.17 31.12.17 31.03.18 Cyprus 17,336 16,128 16,098 16,011 16,711 Russia 33 32 30 27 25 Shareholders’ equity 3,079
Slide 53: Analysis of Deposits by Currency and by Type
Analysis of Deposits by Currency and by Type Deposits by Currency 31 March 2018 (%) Total EUR USD GBP Other Currencies EUR USD GBP Other currencies 17.85 18.00 1.0% (€ bn) 17.31 16.51 16.54 16.58 0.17 0.18 15.64 0.18 2.12 11.8% 0.22 0.15 0.14 14.75 1.98 2.11 0.20 1.69 1.69 1.81 1.58 0.24 1.63 1.76 1
Slide 54: Analysis of Deposits by Sector and cost of deposits
Analysis of Deposits by Sector and cost of deposits Deposits by customer Sector Total Corporate SME Retail (€ bn) 17.85 18.00 17.31 16.51 16.54 16.58 15.64 14.75 8.98 10.31 10.79 9.06 9.36 9.73 8.59 8.43 0.75 0.80 0.80 0.87 0.90 0.91 0.92 0.74 6.30 6.73 6.68 6.35 6.68 6.63 6.29 5.58 Jun-16 Sep-16 De
Slide 55: Reduction in Overseas Non-Core Exposures
Reduction in Overseas Non-Core Exposures Overseas non-core exposures1 (€ mn) Russia: Net exposure Romania: Net exposure Serbia: Net exposure Greece: Net exposure • In addition, at 31 March 2018, there were €184 mn2 of overseas exposures in Greece (€168 mn as at 31 December 2017) not identified as no
Slide 56: Non-Performing Loans definition
Non-Performing Loans definition Non-Performing Exposures (NPEs) –as per the EBA definition: According to the EBA reporting standards on forbearance and non-performing exposures (NPEs), published on 2014 and ECB’s Guidance to Banks on Non-Performing Loans published on March 2017 a loan is considered
Slide 57: Disclaimer
Disclaimer This document contains certain forward-looking statements which can usually be identified by terms used such as “expect”, “should be”, “will be” and similar expressions or variations thereof. These forward-looking statements include, but are not limited to, statements relating to the Grou