Bank of Cyprus Holdings PLC · CSECY:BOCH
Bank of Cyprus — Q1 2019 Earnings Presentation
63 slides from Bank of Cyprus's earnings presentation, May 13, 2019
Slide 1: Group Financial Results for the period ended 31 March 2019
Bank of Cyprus Group Group Financial Results for the period ended 31 March 2019 This presentation has not been audited 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 separate thousands and a dot is us
Slide 2: 1Q2019 - Highlights
1Q2019 - Highlights Good Capital • CET1 ratio of 14.9%1,2 pro forma for Helix (13.4% as reported) Position • Total Capital ratio of 17.9%1,2 pro forma for Helix (16.2% as reported) • Helix legal completion process underway, following ECB’s “Significant Risk Transfer” approval received in March 2019.
Slide 3: Good capital position
Good capital position CET1 ratio at 14.9%1,2 pro forma for Helix 17.9% 1.4% 14.9% 1.6% 13.4% 1.5% 12.1% 11.9% 1.9% (0.2%) (0.3%) 0.5% (0.5%) (0.1%) 1 1 1 CET 1 DTA CET1 IFRS9 Operating Provisions Helix DTC CET 1 Helix CET 1 1 AT1 T2 Total Capital 31 Dec 2018 phasing in 31 Dec 2018 phasing in profita
Slide 4: €10.4 bn or c.70% NPE reduction since peak
€10.4 bn or c.70% NPE reduction since peak 76% reduction of Net NPEs since peak (Dec 14) Group € bn Net NPEs (€ bn) Gross NPE ratio LLR (€ bn) UK sale in 3Q2018 reduced performing loans by €1.8 bn; 63% 62% increased NPE ratio by 5 p.p • Sixteen consecutive quarters of 55% 60.0% €7.7 bn organic NPE r
Slide 5: €281 mn NPE outflows in 1Q2019, leading to €157 mn organic reduction
€281 mn NPE outflows in 1Q2019, leading to €157 mn organic reduction on residual portfolio Outflows of NPEs on curing and exits (€ bn) Cyprus operations (€bn) Curing of restructured loans DFAs & DFEs Write offs and non contractual write offs Other (Interest / Collections / Change in balances) 0.04 (
Slide 6: Core NPE risk at €3.74 bn down by c.70% since 2015
Core NPE risk at €3.74 bn2 down by c.70% since 2015 and 55% covered € bn 14.00 NPEs no impairment, no arrears1 % of Gross Loans Provision coverage Forborne, NPEs, no arrears but impaired 2.0 Exit dates for non core NPEs 0.6 €0.87 bn NPEs with no arrears1 € bn No impairments no arrears 8.80 No arrear
Slide 7: Clear strategy for residual NPEs
Clear strategy for residual NPEs Net organic reduction of €157 mn on residual portfolio in 1Q2019 broadly in line with target of c.€200 mn reduction per quarter Group NPEs (€ bn) pro forma for Helix1 Non Core NPEs • Close monitoring of redefaults & quality of restructurings 4.61 Core NPEs-ESTIA (see
Slide 8: ESTIA- Government scheme for the resolution of NPEs
ESTIA- Government scheme for the resolution of NPEs backed by Primary Residence • 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
Slide 9: Foreclosures becoming an important tool in NPEs resolution
Foreclosures becoming an important tool in NPEs resolution Foreclosure commenced 2 • >350 auctions held in 1Q2019 mainly relating to Helix no. of properties assets as the foreclosure process for larger corporate Including Helix assets Excluding Helix assets exposures commenced earlier • Auctions hel
Slide 10: REMU sale agreements of €140 mn
REMU sale agreements of €140 mn €37 mn assets sold in 1Q2019 with a profit of €4 mn Sales contract prices1 (€ mn) Total Sale Agreements of €140 mn • 119 properties sold in 1Q2019 46 • SPAs signed for additional 64 properties 186 103 160 37 Offers accepted SPA in preparation SPA signed Sold Agreement
Slide 11: Provisions and Coverage
Provisions and Coverage Quarterly CoR 1 at 1.18% NPE total coverage at 118% when collateral included Quarterly Cost of Risk - Group (as previously reported) 4 Loan loss reserves Tangible Collateral Quarterly Cost of Risk-Group (including unrecognised interest on previously credit impaired loans with
Slide 12: Total income of €176 mn in 1Q2019
Total income of €176 mn in 1Q2019 Net Interest Income (NII) Non Interest Income 218 197 188 189 179 179 176 105 74 85 66 74 85 74 113 114 113 112 105 104 102 1Q2018 2Q2018 3Q2018 4Q2018 1Q2019 4Q2018 1Q2019 w/o UK w/o UK Including unrecognised interest on previously credit impaired loans 1 Excluding
Slide 13: New lending of €563 mn in 1Q2019
New lending1 of €563 mn in 1Q2019 97% of new exposures2 in Cyprus since 2016 is performing New lending to core sectors driving GDP growth New Lending (Cyprus) Retail Other Retail Housing SME Corporate New lending Cyprus (€ mn) – 1Q2019 563 563 Trade 153 502 486 456 Private individuals 140 410 411 Ho
Slide 14: Balance sheet de-risking results in a smaller but safer loan book
Balance sheet de-risking results in a smaller but safer loan book Net Loans: Performing vs Legacy Interest Income on Loans: Performing vs Legacy € mn (pre FTP) 1 € bn Performing Legacy Performing Legacy Helix pro forma for Helix 1 17.1 125 123 123 117 109 101 15.6 14.6 Sale of BOC UK €1.8 bn net loa
Slide 15: Profitability
Risk adjusted yield will rise as Legacy book reduces Performing Legacy Group Of which Of which Of which 1Q2019 1Q2019 1Q2019 included included included in Helix in Helix in Helix • Performing Book is expected to grow and to increasingly drive Interest Income on loans (€ mn) (pre 74 - 44 17 118 17 Gr
Slide 16: Deposits at €16.3 bn, down 3% qoq, up 1% yoy for Cyprus
Deposits at €16.3 bn, down 3% qoq, up 1% yoy for Cyprus 1 Cyprus deposits € bn Cyprus non-IBU Cyprus IBU Cyprus deposits by Liquidity Minimum 31 Mar passport origin2 Surplus 16.85 16.84 ratio required 2018 16.11 16.48 16.30 15.98 3.81 3.70 4%6% 4.00 3.54 4.16 4.00 3% LCR 100% 216% €2,661 mn (Group)
Slide 17: Drivers of NIM
Drivers of NIM Total Assets (€ bn) AIEA mix (% Total) Effective yield on assets & cost of funding Performing Legacy 1 Performing Legacy NIM Performing Legacy Liquids 3 Liquids 1 Non int-producing Liquids 2 Cost of funding Effective yield (bps) 256 254 247 239 221 227 AIEA €18.2 bn €18.4 bn €18.2bn 2
Slide 18: Non interest income of €74 mn in 1Q2019
Non interest income of €74 mn in 1Q2019 Analysis of Non Interest Income (€ mn) – Quarterly Net FX gains/(losses) & Net gains/(losses) on other financial instruments, and other income1 % Net fee and commission Recurring income 2 income % Total income 3 Gains/(losses) from revaluation and disposal of
Slide 19: Total Expenses
Total Expenses Cost to Income Ratio (C/I ratio)1 C/I ratio (as previously reported) C/I ratio excluding unrecognised interest on previously credit impaired loans from net • C/I ratio at 56% for 1Q2019 (excl special levy on banks and interest income 2 56% SRF contribution), compared to 50% for FY2018
Slide 20: Income Statement Review
Income Statement Review 1Q2018 4Q2018 € mn 1Q2019 qoq% yoy% Key Highlights represented1 represented1 Net Interest Income 102 106 104 -1% -3% Non interest income 74 105 85 -13% -30% • NII broadly flat qoq at €102 mn €8 mn €8mn Total income 176 211 189 -6% -17% Total expenses (105) (96) (110) -3% 9% •
Slide 21: Key Information and Contact Details
Key Information and Contact Details Credit Ratings: Standard & Poor’s Global Ratings: Long-term issuer credit rating: Upgraded to “B+” on 30 August 2018 (stable outlook) Short-term issuer credit rating: Affirmed at “B” on 30 August 2018 Fitch Ratings: Long-term Issuer Default Rating: Affirmed at “B-
Slide 22: Appendix – Macroeconomic overview
Appendix – Macroeconomic overview 22
Slide 23: Recovery of the Cypriot economy continues
Recovery of the Cypriot economy continues … Unemployment rate dropped to 7.6% in 4Q2018 SA bringing the GDP increased by 3.9% in 2018, surpassing pre-recession levels yearly average unemployment rate to 8.4% 18.0 16.1 8.0 15.4 460 16.0 6.0 14.0 440 3.8 3.8 4.0 3.9 12.0 4.9 420 4.3 2.0 10.0 2.9 9.5 7
Slide 24: Driven by tourism, professional services and construction activity
… driven by tourism, professional services and construction activity Economic activity has been broadly based with Tourism arrivals (mn) Tourism: % changes yoy main drivers tourism and construction1 4.0 3.8 3.8 3.8 3.9 Total arrivals (% change) Total receipts (% change) 4.0 5.1 3.7 Arts & Oher 19.8
Slide 25: Appendix-Helix additional information
Appendix-Helix additional information 25
Slide 26: Impact of Helix on 1Q2019 Financial Results
Impact of Helix on 1Q2019 Financial Results 31.03.2019 Balance Sheet 31.03.2019 Helix1 pro forma for Helix1 5.9 1.2 7.1 A more liquid balance sheet Liquid Assets2 • Loan to deposit ratio of 67% from 74% Net Loans 12.0 (1.1) 10.9 • Loan/Assets decrease to 50% from 55% Total Assets 21.7 21.7 • Liquid
Slide 27: Impact of Helix on 1Q2019 Financial Results
Impact of Helix on 1Q2019 Financial Results 31.03.2019 Asset Quality 31.03.2019 Helix1 pro forma1 for Helix Accelerated de-risking Gross Loans 15.9 (2.7) 13.2 • €2.7 bn or 37% reduction in gross NPEs NPEs 7.3 (2.7) 4.6 • Provisions coverage at 48% NPE ratio 46% 35% • Organic NPE reduction expected t
Slide 28: Helix key highlights
Helix key highlights 31 March 2019 Assets sold (based on carrying value as at 30 June 2018, before the impact of the Transaction on the 2Q2018 income statement) € bn Receipts € bn Contractual Loans1 5.71 Consideration 1.38 Gross Loans 2.81 of which: of which NPEs 2.70 - Cash 1.33 Provisions Held (1.
Slide 29: Transformational NPE Trade (Helix) Delivers Accelerated Risk Reduction
Transformational NPE Trade (Helix) Delivers Accelerated Risk Reduction First sizeable Corporate and SME secured NPE sale in Cyprus (c.15% of Cyprus GDP) Helix Portfolio (€ bn ) 2.7 Non Core NPEs 0.2 0.1 Update Core NPEs: 0.5 Retail • As at 31 Mar 2019 portfolio includes €2.7 bn gross loans, SMEs of
Slide 30: Helix- Legal structure
Helix- Legal structure Key Steps and Diagram • The transaction intends to follow the below broad key steps: • The portfolio will be transferred by the Bank of Cyprus (Seller) to a licensed Cypriot Credit Acquiring Company (“CyCAC”). • The transfer is expected to take place pursuant to a court sancti
Slide 31: Helix- Conditions Precedent in current draft SPA
Helix- Conditions Precedent in current draft SPA Helix conditions precedent Condition Precedent Description Transfer of the Assets Transfer of the NPL Assets to the CyCAC in accordance with the Scheme of Arrangement (this is the arrangement as per which the NPL Assets will be transferred by the Sell
Slide 32: 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 33: Improved Legislative Framework supporting realisation and disposal of collateral
Improved Legislative Framework1 supporting realisation and disposal of collateral Amendments approved aim to strength the foreclosure framework via: Clarifying and limiting the reasons for setting aside the foreclosure process through court Foreclosure Enhance auction routes Law • Introduction o
Slide 34: Restructuring efforts continue; re-default levels stable
Restructuring efforts continue; re-default levels stable Quarterly evolution of restructuring activity (€ bn) (Cy operations) Restructured loans Write offs & non contractual write offs DFAs 0.9 0.8 0.7 0.8 0.1 0.1 0.1 0.2 0.5 0.2 0.5 0.2 3 0.4 0.1 0.3 0.4 0.1 0.3 0.3 0.6 0.2 0.3 0.1 0.1 0.4 0.1 0.1
Slide 35: Fair value of collateral and adequacy of provisions
Fair value of collateral and adequacy of provisions NPE Coverage at 53% Fair value of collateral and credit enhancements 31 Mar 2019 Loans and advances to customers Quarterly Provisions for impairment of customer loans (€ mn) (€ mn) NPEs provision coverage Cash 428 54% 53% Securities 322 52% 52% 52%
Slide 36: Continuous progress across all segments (Cy operations)
Continuous progress across all segments (Cy operations) Focus shifts to Retail and SME after intense Corporate attention 3 Transfers within business lines during 4Q2018 Transfers within business lines during 4Q2017 Corporate NPEs (Cy) €4.48 bn Dec 16 4.51 Mar 2019 Mar 2019 pro forma Inflows 0.14 0.3
Slide 37: Gross loans & NPEs by Customer Type
Gross loans & NPEs by Customer Type Gross loans by customer type (€ bn) Total 20.13 18.75 2.09 15.90 15.88 2.06 4.22 13.15 4.17 1.79 1.86 4.35 4.07 4.07 1.82 3.51 2.98 2.88 4.07 2.30 9.47 9.01 7.06 7.07 4.96 1 Dec-16 Dec-17 Dec-18 Mar-19 Mar-19 2 pro-forma for Helix Retail other Retail Housing SMEs
Slide 38: NPE provision coverage and Total coverage by segment (Cy)
NPE provision coverage and Total coverage by segment (Cy) Coverage and collateral maintained post Helix Cyprus operations 1 Pro forma NPEs Loan loss reserves Tangible Collateral Corporate €0.9 bn SME €1.1 bn €1.5 bn Retail-Other €1.0 bn Total Cyprus €4.5 bn Retail-Housing 127% 127% 124% 123% 123% 12
Slide 39: Asset Quality- NPEs analysis
Asset Quality- NPEs analysis (€ mn) Mar-19 Dec-18 Sep-18 Jun-18 Mar-18 A. Gross Loans after Fair value on Initial recognition 15,437 15,438 15,721 17,798 18,020 Fair value on Initial recognition 445 462 480 514 566 B. Gross Loans 15,882 15,900 16,201 18,312 18,586 B1. Loans with no arrears 8,402 8,2
Slide 40: Analysis of gross loans and NPE ratio by Economic Activity
Analysis of gross loans and NPE ratio by Economic Activity Gross loans by economic activity (€ bn) % of total 31.12.17 31.12.18 31.03.19 12% 4% 8% 12% 10% 40% 8% 6% 6.77 6.47 6.41 3.20 2.34 1.95 1.90 2.04 1.85 1.83 1.61 1.59 1.35 1.27 1.25 1.39 1.20 1.31 0.91 0.91 1.04 0.66 0.64 0.66 Trade Manufactu
Slide 41: Rescheduled Loans for the Cyprus Operations
Rescheduled Loans for the Cyprus Operations Rescheduled Loans by customer type (€ bn) Retail housing Retail consumer SMEs Corporate 7.4 6.3 1.7 5.9 5.6 5.4 0.6 1.4 4.8 4.7 1.4 1.3 0.6 1.3 1.7 0.5 0.5 1.1 1.2 1.3 0.5 1.3 1.3 0.5 0.5 1.2 1.0 0.9 3.4 3.0 2.7 2.5 2.4 2.2 2.1 31.12.16 31.12.17 31.03.18 3
Slide 42: Gross loans and provisions by IFRS 9 stage
Gross loans and provisions by IFRS 9 stage 31 Mar 2019 Gross Loans (€ bn) 31 Mar 2019 31 Dec 2018 qoq % Pro forma for Helix2 Stage 1 6.30 6.20 2% 6.28 Stage 2 2 2.31 2.28 1% 2.26 Stage 3 2 7.27 7.42 -2% 4.61 Total 15.88 15.90 0% 13.15 31 Mar 2019 Provisions (€ bn) 31 Mar 2019 31 Dec 2018 qoq % Pro f
Slide 43: REMU – stock of properties
REMU – stock of properties REMU focus now on sales (Group) € mn BV 45 (30) (2) (1) 1530 1542 Stock as at 01 Jan 2019 Additions Sales Impairment loss Transfer to non-current Stock as at 31 Mar 2019 assets and disposal groups held for sale Property stock split as at 31 March 2019 - on boarded at conse
Slide 44: REMU – the engine for dealing with foreclosed assets
REMU – the engine for dealing with foreclosed assets Book Value Sales of €30 mn for the 1Q2019 (Group) Book Value sales by type (Group) Commercial Residential Land 110 71 64 12 60 55 40 42 30 6 30 28 12 1 1Q2017 2Q2017 3Q2017 4Q20172 1Q2018 2Q2018 3Q2018 4Q2018 1Q2019 Total Sales (1Q2019) Commercial
Slide 45: Appendix – Additional financial information
Appendix – Additional financial information 45
Slide 46: Consolidated Balance Sheet
Consolidated Balance Sheet % % Assets (€ mn) 31.03.19 31.12.18 change Liability and Equity (€ mn) 31.03.19 31.12.18 change Cash and balances with Deposits by banks 480 432 11% 3,913 4,610 -15% Central Banks Loans and advances to Funding from central banks 830 830 - 448 473 -5% banks Repurchase agree
Slide 47: Consolidated Balance Sheet – ignoring classification of Helix as Held for Sale
Consolidated Balance Sheet – ignoring classification of Helix as Held for Sale % % Assets (€ mn) 31.03.19 31.12.18 change Liability and Equity (€ mn) 31.03.19 31.12.18 change Cash and balances with Deposits by banks 480 432 11% 3,913 4,610 -15% Central Banks Loans and advances to Funding from centra
Slide 48: Core Cypriot business
Core Cypriot business Market shares1 Strong market shares in resident and non-resident deposits Loans new basis Deposits Residents Non-residents 46.7% 45.4% 45.4% 38.8% 39.3% 38.3% 38.2% 37.3% 37.1% 35.8% 38.6% 37.5% 37.1% 37.4% 35.5% 35.3% 34.1% 34.4% 36.3% 33.2% 36.0% 35.1% 35.2% 31.5% 34.1% 29.5%
Slide 49: Income Statement bridge for 1Q2019
Income Statement bridge1 for 1Q2019 € mn Underlying basis Reclassification Statutory Basis Net interest income 102 - 102 Net fee and commission income 40 (7) 33 Net foreign exchange gains and net gains on financial instrument transactions and disposal/dissolution of 10 1 11 subsidiaries Insurance in
Slide 50: Impact on implementation of IFRIC on interest income and provisions
Impact on implementation of IFRIC on interest income and provisions Before adjusting for IFRIC After adjusting for IFRIC Key Figures and Ratios 1Q20182 2Q20182 3Q2018 4Q2018 1Q2019 1Q20182 2Q20182 3Q2018 4Q2018 1Q2019 Interest income on loans1 147 147 143 139 121 139 140 133 131 118 Net interest inc
Slide 51: Analysis of Interest Income and Interest Expense
Analysis of Interest Income and Interest Expense Representation for deconsolidation of UK subsidiary 4Q2018 Analysis of Interest Income (€ mn) 4Q2017 1Q2018 2Q2018 3Q2018 4Q2018 1Q2019 adjusted1 Loans and advances to customers 155 147 147 143 139 131 118 Loans and advances to banks and central banks
Slide 52: Cyprus: Income Statement by business line for 1Q2019
Cyprus: Income Statement by business line for 1Q2019 Consumer SME Corporate International Wealth & Total € mn RRD REMU Insurance Treasury Other Banking Banking Banking Banking Markets Cyprus Net interest income/(expense) 41 10 30 9 2 16 (3) 0 (2) 1 104 Net fee & commission income 10 3 5 13 - 6 - (1)
Slide 53: Risk Weighted Assets – Regulatory Capital
Risk Weighted Assets – Regulatory Capital Risk weighted assets by Geography (€ mn) Reconciliation of Group Equity to CET 1 31.03.19 pro-forma € mn 31.03.19 31.12.17 31.12.18 31.03.19 Helix2 for Helix2 Group Equity per financial statements 2,469 Cyprus 16,011 15,070 15,113 (1,507) 13,606 Less: Intang
Slide 54: Buffer to MDA Restrictions Level & Distributable Items
Buffer to MDA Restrictions Level & Distributable Items1 Maximum Distributable Amount for BOCH Distributable Items at Bank and BOCH level Pro Forma2 CET1 Ratios (Post Helix) • Distributable Items3 amount to: 14.9%3 - Bank: c.€0.4bn and 390 bps - BOCH: c.€0.7bn c. 11.0% • No prohibition applies to the
Slide 55: Analysis of Deposits
Analysis of Deposits Deposits by Currency (€ bn) 31 March 2019 (%) 17.85 18.00 18.43 16.85 16.84 16.30 1% 16.51 0.17 0.18 0.15 0.12 0.11 2% 2.12 2.17 0.10 9% 0.22 2.11 0.31 0.29 0.29 1.69 1.58 1.51 1.48 1.38 1.74 1.58 2.20 13.83 14.12 14.53 14.91 14.96 14.53 12.40 88% 1 Dec-16 Dec-17 Mar-18 Jun-18 S
Slide 56: Reduction in Overseas Non-Core Exposures
Reduction in Overseas Non-Core Exposures Overseas non-core exposures (€ mn) Russia: Net exposure Romania: Net exposure Serbia: Net exposure UK: Net exposure Greece: Net exposure 518 • The Group continues its efforts for further deleveraging and disposal of non-essential assets 407 and operations in
Slide 57: Appendix – Glossary & Definitions
Appendix – Glossary & Definitions 57
Slide 58: Glossary & Definitions
Glossary & Definitions Comprise (i) provisions for impairment of customer loans and advances, (ii) the fair value adjustment on initial recognition of loans acquired from Laiki Bank and Accumulated provisions on loans classified at FVPL, and (iii) provisions for off-balance sheet exposures disclosed
Slide 59: Glossary & Definitions
Glossary & Definitions ECB European Central Bank Effective yield Interest Income on Loans/Average Net Loans Effective yield of liquid Interest Income on liquids after hedging, over average liquids (Cash and balances with central banks, placements with banks and bonds). Historical information assets
Slide 60: Glossary & Definitions
Glossary & Definitions Net Proceeds Proceeds after selling charges and other leakages Net interest margin is calculated as the net interest income (annualised) divided by the average interest earning assets. Interest earning assets include: cash and NIM balances with central banks, plus loans and ad
Slide 61: Glossary & Definitions
Glossary & Definitions 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 In accordance with the legislation in Cyprus which has been set for all credit institutions, the appli
Slide 62: Glossary & Definitions
Glossary & Definitions Total provisions and Total provisions and impairments comprise provision charge (as defined), plus (provisions)/reversal of provisions for litigation, regulatory and other matters plus impairments (impairments)/reversal of impairments of other financial and non-financial asset
Slide 63: 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 or their negative variations, but their absence does not mean that a statement is not forward look