Bank of Cyprus Holdings PLC · CSECY:BOCH
Bank of Cyprus — H1 2015 Earnings Presentation
58 slides from Bank of Cyprus's earnings presentation, Aug 26, 2015
Slide 1: Group Financial Results for the six months ended 30 June 2015
Bank of Cyprus Group Group Financial Results for the six months ended 30 June 2015 Overview Income Statement Review Balance Sheet Review KPIs – Key Takeaways Additional Information 26 August 2015 1
Slide 2: 1H2015 Group Financial Results – Key Highlights
1H2015 Group Financial Results – Key Highlights Improving funding structure; Loans to deposits ratio at 136% (138% at 31 March 2015) and customer deposits accounting for 54% of total assets (51% at 31 March 2015) Emergency Liquidity Assistance (ELA) reduced by €1 bn during 2Q2015 to €5,9 bn and by f
Slide 3: Overview
Overview Income Statement Review Balance Sheet Review KPIs – Key Takeaways Additional Information 3
Slide 4: BOC Overview
BOC Overview Strengthened capital position Significant Balance Sheet deleveraging Adjusting for the disposal Adjusting for the disposal of the majority of the CET1 ratio (transitional basis) of the majority of the Russian operations Russian operations Total assets (€ bn) -25% 15,4% * 15,2% 14,9% 33,
Slide 5: Macroeconomic overview
Macroeconomic overview GDP growth expected to be positive from 2015 – GDP Growth (yoy) faster recovery than other peripheral countries 1,2% 0,9% 2010 2011 2012 2013 2014 2015f 2016f 0,2% -0,4% -0,8% -1,2% 1,4% 1,6% -1,8% -1,8% -2,1% -2,3% -2,4% 0,3% 0,4% -3,2% -3,7% (2,4%) (2,3%) -4,7% -5,3% -5,5% -
Slide 6: Macroeconomic overview
Macroeconomic overview Evolution of Residential Property Price Index (RPPI) Tourist Arrivals and Receipts: annual % changes (yoy % change) 25% 14,4% Residential Property Price Index Arrivals Receipts 20% 15% -43% since 10,1% 8,7% 1Q2008 8,0% 10% 6,5% 5% 3,8% 0% 3,2% 1,5% 1,5% -5% -10% -1,0% -15% 1Q2
Slide 7: Income Statement Review
Overview Income Statement Review Balance Sheet Review KPIs – Key Takeaways Additional Information 7
Slide 8: Income Statement Review
Income Statement Review 1H2015 1H20143 yoy % 2Q2015 1Q2015 qoq % Net interest income 439 514 -14% 214 225 -5% Other income 94 115 -19% 47 47 - Total income 533 629 -15% 261 272 -4% Total expenses (194) (208) -7% (92) (102) -10% Profit before provisions and impairments1 339 421 -19% 169 170 - Provisi
Slide 9: Net Interest Income and Net Interest Margin
Net Interest Income and Net Interest Margin Net Interest Income (€ mn) and Net Interest Margin (bps) Interest income from Laiki Recapitalisation bond Net interest income (other) • 2Q2015 Group Net Interest Income (NII) at €214 mn NIM FY2014: 394 1H2015: 388 compared to €225 mn for 1Q2015, reflecting
Slide 10: Analysis of Non-interest income
Analysis of Non-interest income Analysis of Non Interest Income (€ mn) Net fee and commission income Insurance income net of insurance claims Net FX gains/(losses) & Net gains/(losses) on other financial instruments % (Losses)/gains from revaluation and disposal of investment properties Net fee and
Slide 11: Total expenses
Total expenses Total expenses (€ mn) • Total expenses for 2Q2015 decreased to €92 Other operating expenses Staff costs mn from €102 mn for 1Q2015, driven by the reduction of operating expenses due to lower 105 103 103 114 advertising, consultancy and professional 102 92 expenses. Operating expenses
Slide 12: Group Income Statement Highlights
Group Income Statement Highlights Group Income Statement Highlights (€ mn) 1Q2014 2Q2014 3Q2014 4Q2014 1Q2015 2Q2015 205 215 161 167 170 169 83 43 57 50 25 16 31 29 31 -5 -122 -111 -105 -122 -156 -164 -276 -337 Profit before impairments* restructuring Provisions for impairment of customer Profit/(lo
Slide 13: Income Statement Highlights – Group vs Cyprus
Income Statement Highlights – Group vs Cyprus 1H2015 Cyprus Vs Group performance (€ mn) 93% 96% 92% 99% 173% % % contribution of 513 533 Cyprus operations 411 439 335 339 Cyprus operations 127 -178 73 Rest of operations 28 20 -194 4 Group -16 -54 Net interest income Total income Total expenses Profi
Slide 14: Balance Sheet Review
Overview Income Statement Review Balance Sheet Review KPIs – Key Takeaways Additional Information 14
Slide 15: Balance Sheet Deleverage - Shrinking to Strength
Balance Sheet* Deleverage - Shrinking to Strength Change Jun Dec Mar Jun Sep Dec Mar Jun € mn Since 2013 2013 2014 2014 2014 2014 2015 2015 Jun 2013 Cash & bank 3.012 2.530 2.105 1.973 2.417 2.908 2.748 2.558 -454 placements Investments 3.413 3.433 3.475 3.538 2.578 2.541 2.401 1.631 -1.782 Net loan
Slide 16: Funding Structure
Funding Structure Analysis of Liabilities and Equity (€ bn) Loans to Deposits ratio Total equity Other liabilities ELA Customer deposits (€ bn) to Total Assets Adjusting for the disposal of the majority of the ECB funding Customer deposits Loans to deposits ratio (net) Russian operations 30,35 151%
Slide 17: Eurosystem Funding Reliance Reducing Fast
Eurosystem Funding Reliance Reducing Fast Continuous reduction of ELA and ECB funding with further potential going forward 37% 36% 36% 36% 34% 31% 31% 11,40 11,16 29% 11,11 10,96 10,91 In light of challenging market conditions given 1,30 10,18 25% 1,40 1,40 * recent developments in 23% Greece and Ru
Slide 18: Customer Deposits
Customer Deposits Customer Deposits by Geography (€ mn ) Evolution of Customer deposits** (€ mn) Cyprus UK Russia & Other countries* Group Cyprus 442 326 14.971 14.066 13.803 71 18 13.330 13.169 13.611 13.629 1.022 1.244 832 863 614 607 1.249 798 550 -9 1.252 1.289 1.305 1.357 1.391 -161 -297 -263 -
Slide 19: Capital Position
Capital Position Evolution for CET1 ratio during 2Q20151 Capital Adequacy Ratios 14,9%4,0% 31.03.14 30.06.14 30.09.14 31.12.14 +0,7% +0,9% 14,4% 31.03.15 30.06.15 prof 30.06.15 13,9% Adjusting for the disposal of the majority of the -0,5% Russian operations -0,5% -0,1% 15,6% 15,4% 15,2% 15,3% 14,9%
Slide 20: Gross Loans
Gross Loans Gross Loans* by Geography (€ mn) • Group gross loans totalled €23,9 bn at 30 June 2015, compared to €24,1 bn at 31 March 2015. Cyprus Russia UK Other countries** Gross loans in Cyprus totalled €21,2 bn at 30 June 2015, and accounted for 89% of gross -16% loans of the Group. -6% 28.349 -2
Slide 21: Credit Risk – Quality of Loan portfolio
Credit Risk – Quality of Loan portfolio Problem Loans (€ bn) Adjusting for the 90+ DPD NPLs (CBC definition) NPEs (EBA definition) disposal of the majority of the Russian operations 15,0 15,0 15,2 14,8 14,4 14,6 14,2 14,0 14,7 13,1 10,2 13,0 13,0 12,8 12,6 13,0 12,7 12,8 12,6 12,1 11,0 7,7 6,7 31.12
Slide 22: Credit Risk – Provisions
Credit Risk – Provisions Accumulated provisions Group loan quality indicators Accumulated provisions (€ bn) 90+ DPD provision coverage 90+ DPD ratio Provisions % Gross loans Adjusting for the disposal of the majority of the Russian operations 21,6% 22,2% 22,5% 19,1% 19,3% 20,0% 17,6% 18,6% 16,2% 52,
Slide 23: Credit Risk – 90+ DPD loans by number of days past due
Credit Risk – 90+ DPD loans by number of days past due 90+ DPD loans by number of days past due (€ bn) 13,00 12,76 12,98 12,79 • 90+ DPD at €12,65 bn at 30 June 12,59 12,65 12,65 2015 compared to €12,79 bn a 4,02 3,54 3,76 3,36 3,37 3,00 quarter earlier. 4,85 1,05 1,13 1,15 1,15 1,01 0,34 0,97 0,22
Slide 24: Credit Risk by customer type – 90+ DPD fully covered
Credit Risk by customer type – 90+ DPD fully covered by provisions & tangible collateral Retail - Retail - 30 June 2015 Corporate SMEs Cyprus Housing Other 47% 21% 21% 11% 100% 21,2 Gross loans 10,1 4,5 4,3 (€ bn) 2,3 61,7% 66,7% 90+ DPD loans 48,6% 54,2% by segment 26,7% Loan Loss Reserve (LLR) 50,
Slide 25: Restructuring and Recoveries Division
Restructuring and Recoveries Division Good progress has been made with Restructuring efforts on top 30 exposures1 assumed by RRD € bn €5,8 bn Restructuring implemented or to be signed €5,3 bn €5,0 bn €4,7 bn RRD set up and assumption Detailed non binding heads of terms for €4,3 bn restructuring agre
Slide 26: Overseas non-core operations
Overseas non-core operations Disposing of overseas operations considered as non-core During 2Q2015 the Bank disposed of its investment in Marfin Diversified Strategy Fund • Post 30 June 2015, the Bank has reached an agreement to sell the majority of its Russian operations, including Uniastrum Bank.
Slide 27: KPIs – Key Takeaways
Overview Income Statement Review Balance Sheet Review KPIs – Key Takeaways Additional Information 27
Slide 28: Significant progress made on Group KPIs
Significant progress made on Group KPIs, with a clear plan of action to achieve medium-term targets Key Pillars & Plan of action Medium- Key Group Group Cyprus term Category performance Dec- Jun- Jun- target indicators 2014 2015 2015 • Continue restructuring, capitalising on the foreclosure (2017) *
Slide 29: Key Takeaways
Key Takeaways Leading financial institution in an economy that is on the road to economic recovery CET1 ratio at 14,9% (transitional basis); capital position shields the Group from further shocks and helps in regaining trust of counterparties Post 30 June 2015 the Bank has reached an agreement
Slide 30: Additional Information
Overview Income Statement Review Balance Sheet Review KPIs – Key Takeaways Additional Information 30
Slide 31: Key Information and Contact Details
Key Information and Contact Details Credit Ratings: Fitch Ratings: Long-term Issuer Default Rating: upgraded to "CCC" on 28 April 2015 Short-term Issuer Default Rating: affirmed at "C" on 28 April 2015 Viability Rating: upgraded to “ccc” on 28 April 2015 Moody’s Investors Service: Baseline Credit As
Slide 32: Consolidated Balance Sheet
Consolidated Balance Sheet € mn % 30.06.15 31.12.14 € mn % 30.06.15 31.12.14 change change Cash and balances with Amounts due to banks +24% 201 162 -11% 1.011 1.139 Central Banks Funding from Central Banks -23% 6.403 8.284 Placements with banks -13% 1.425 1.647 Repurchase agreements -1% 576 580 Debt
Slide 33: Consolidated Income Statement
Consolidated Income Statement € mn 2Q2015 1Q2015 4Q2014* 3Q2014* 2Q2014* Net interest income 214 225 225 232 264 Net fee and commission income 36 43 37 37 37 Net foreign exchange gains/(losses) and net gains/(losses) on other financial instruments 12 (4) 14 (13) (1) Insurance income net of insurance
Slide 34: Income Statement bridge for 1H2015
Income Statement bridge for 1H2015 Per financial € mn Per presentation Reclassification statements Net interest income 439 439 Net fee and commission income 79 79 Net foreign exchange gains/(losses) and net gains/(losses) on other financial instruments 8 271 279 Insurance income net of insurance cla
Slide 35: Cyprus Income Statement
Cyprus Income Statement (€ mn) 1H2015 1H2014 2Q2015 1Q2015 4Q2014 3Q2014 2Q2014 Net interest income 411 487 200 211 216 216 251 Net fee & commission income 76 75 34 42 34 35 36 Net FX income/(losses) and net gains/(losses) from financial 7 5 12 (5) 12 (9) (2) instruments Insurance income net of insu
Slide 36: Cyprus operations: key driver of Group performance
Cyprus operations: key driver of Group performance High NIM Cyprus operations – supported by high Lower Cost to Income ratio for Cyprus operations funding reliance on Eurosystem funding (bps) 423 377 372 384 379 386 369 354 314 50% 43% 38% FY2014: 385 35% 35% 35% 1H2015: 33% 31% 31% FY2013: 379 353
Slide 37: Summary Income Statement by Geography
Summary Income Statement by Geography (€ mn) UK OTHER 1H2015 1H2014 1H2015 1H2014 Net interest income 15 15 24 47 Net fee & commission income 3 2 5 11 Net FX income/(losses) and net gains/(losses) from financial instruments 1 1 4 2 Insurance income net of insurance claims - - 0 2 Other income /(expe
Slide 38: Cyprus: Income Statement by business line
Cyprus: Income Statement by business line (€ mn) Consumer SME Corporate International Wealth & RRD Other Total Banking Banking Banking Banking Brokerage & Cyprus Asset Management Net interest income 114 32 33 31 3 166 32 411 Net fee & commission income 27 5 4 27 1 7 5 76 Other income /(expenses) 3 0
Slide 39: Risk Weighted Assets by Geography – Regulatory Capital
Risk Weighted Assets by Geography – Regulatory Capital Risk weighted assets by Geography (€ mn) Equity and Regulatory Capital (€ mn) 30.06.14 30.09.14 31.12.14 31.03.15 30.06.15 30.6.14 30.9.14 31.12.14 31.03.15 30.06.15 Cyprus 19.807 20.296 20.452 20.473 19.607 Shareholders’ equity 2.748 3.728 3.46
Slide 40: Reconciliation of Group Equity to CET1
Reconciliation of Group Reconciliation Equity of Group to CET Equity 1 1 to CET (€ mn) 30.06.15 Group Equity per financial statements 3.519 Less : Intangibles and other deductions (16) Less: Deconsolidation of insurance and other entities (222) Less: Regulatory adjustments (Minority Interest, DTA an
Slide 41: Loans and Deposits by Geography
Loans and Deposits by Geography Gross Loans by Geography Deposits by Geography € mn 30.06.14 30.09.14 31.12.14 31.03.15 30.06.15 € mn 30.06.14 30.09.14 31.12.14 31.03.15 30.06.15 Cyprus 22.020 21.716 21.200 21.320 21.191 Cyprus non-IBU** 8.094 7.785 7.847 8.080 8.421 Cyprus IBU** 3.594 3.458 3.467 3
Slide 42: Gross loans by Geography and by Customer Type
Gross loans by Geography and by Customer Type Gross loans by geography 28,35 Total 26,74 26,26 1,27 25,30 24,74 24,09 1,23 23,77 23,93 (€ bn) 1,46 1,79 1,18 0,80 Other countries* 1,28 1,43 1,29 1,30 0,70 0,69 0,67 1,07 0,58 1,19 1,17 1,11 1,21 0,97 1,03 0,91 1,03 1,13 Russia UK Cyprus 23,83 22,80 22
Slide 43: Analysis of Deposits by Geography and by Type
Analysis of Deposits by Geography and by Type Deposits by geography Total Russia & Other 16,97 countries* 1,25 14,97 (€ bn) 14,07 13,80 13,33 13,61 13,63 UK 1,29 1,02 13,17 1,24 0,83 0,87 0,61 1,25 0,79 0,55 0,61 4,75 1,25 1,29 1,30 1,36 1,39 Cyprus IBU 4,05 3,79 3,21 3,59 3,46 3,47 3,57 Cyprus non-
Slide 44: Market Shares and Customer flows in Cyprus
Market Shares and Customer flows in Cyprus Market share evolution in Cyprus Deposits Loans • Around 1% increase in the Bank’s market share in deposits since low of 24,6% in November 2014. 41,1% 40,8% 40,5% 40,0% 39,5% 39,1% 38,8% 38,6% 38,5% 38,1% 38,0% 37,7% 37,3% 37,2% • The Bank’s market share in
Slide 45: UK Operations
UK Operations UK Loans (€ bn) Loans by sector ex-Laiki UK loans Consumer 1,46 Credit 1,38 Housing 2% 1,28 1,19 1,17 1,11 1,13 2% 1,03 SMEs 0,83 0,72 0,65 0,91 0,56 0,45 0,40 0,30 23% 1,03 1,13 0,83 0,77 0,81 0,91 0,74 0,73 0,72 0,74 Dec Jun Sep Dec Mar Jun Sep Dec Mar Jun Corporate 2012 2013 2013 20
Slide 46: Overseas Operations – Russia, Romania and Greece
Overseas Operations – Russia, Romania and Greece Romanian Gross loans (€ mn) Total exposure in Greece and Romania Romania € mn 31.12.14 31.03.15 30.06.15 Overall net exposure 520 439 368 Greece € mn 31.12.14 31.03.151 30.06.151 657 637 631 533 Net Exposure from on 97 76 56 518 520 balance sheet fina
Slide 47: Adoption of Foreclosure law and Insolvency framework
Adoption 7 of Foreclosure law and Insolvency framework Adoption removes the uncertainty of previous months, but implementation risks remains Foreclosure Law Key challenges & issues • Provides for the holding of private auctions and sales of mortgaged property by Creditors, without the involvement of
Slide 48: Asset Quality
Asset Quality (€ mn) Jun-15 Mar-15 Dec-14 Sep-14 Jun-14 A. Gross Loans after Fair value on Initial recognition 22.575 22.540 22.206 23.136 23.685 Fair value on Initial recognition 1.351 1.545 1.566 1.606 1.615 B. Gross Loans 23.926 24.085 23.772 24.742 25.300 B1. Loans with no arrears 10.178 10.038
Slide 49: 90+ DPD by Geography
90+ DPD by Geography 90+ DPD by Geography (€ bn) 90+ DPD ratios by Geography Cyprus Russia UK Other countries* Cyprus Russia UK Other countries* 84% 83% 82% 80% 12,98 12,79 12,76 12,65 12,65 75% 12,59 0,57 0,55 0,47 0,89 0,52 0,26 0,58 0,11 0,09 65% 0,28 0,55 0,09 0,51 0,60 0,61 0,25 0,51 59% 0,44 5
Slide 50: Analysis of Loans and 90+ DPD ratios by Business Line
Analysis of Loans and 90+ DPD ratios by Business Line* Gross loans by business line (€ bn) 30.06.14 30.09.14 31.12.14 31.03.15 30.06.15 % of total 19% 9% 16% 8% 22% 6% 20% 5,84 5,55 5,37 5,33 5,21 5,20 5,02 4,91 4,87 4,78 4,59 4,53 4,41 4,34 4,06 3,94 3,90 3,85 3,85 3,80 2,73 2,63 2,30 2,20 2,14 2,0
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) 31.12.13 31.03.14 30.06.14 30.09.14 31.12.14 31.03.15 30.06.15 % of 10% 4% 7% 17% 13% 33% 8% 6% total 8,41 8,54 8,05 7,96 7,92 7,86 7,85 4,21 4,13 4,12 4,09 4,25 4,20 4,19 3,63 3,59 4,04 3,96 2,82 2,74
Slide 52: Credit Risk – 90+ DPD by Geography and by customer type
Credit Risk – 90+ DPD by Geography and by customer type Group 90+ DPD loans by geography (€ bn) 48,6% 48,6% 49,8% 52,5% 53,1% 90+DPD ratio • Group 90+ DPD have 53,2% 52,9% (% of total loans) stabilised below €13 bn 13,0 12,8 12,6 13,0 12,7 12,8 12,6 0,9 0,9 0,5 0,6 0,6 0,5 0,5 0,30,5 0,30,4 0,3 0,5
Slide 53: 90+ DPD and Quarterly Change of 90+ DPD
90+ DPD and Quarterly Change of 90+ DPD 90+ DPD (€ bn) and Quarterly change of 90+ DPD (€ mn) Quarterly change of 90+ DPD (€ mn) 13,0 13,0 12,8 12,6 13,0 12,7 12,8 12,6 90+ DPD (€ bn) 11,0 90+ DPD formation 7,7 6,5 5,0 5,1 5,1 4,4 3,8 4,0 3,5 3,6 2,9 2,3 2,2 2,5 2,0 1,6 1,3 1.319 1.240 3.319 1.973 3
Slide 54: Rescheduled Loans
Rescheduled Loans Rescheduled Loans by customer type (€ bn) Rescheduled Loans Retail housing Retail consumer SMEs Corporate (€ mn) 31.12.14 31.03.15 30.06.15 8,06 9,03 Loans with no arrears 2.788 2.907 3.532 7,66 1,72 1,49 0,59 1,41 Loans with arrears but not impaired 1.806 1.887 1.942 0,50 0,52 1,8
Slide 55: Credit Risk - Analysis of problem loans
Credit Risk - Analysis of problem loans Analysis of problem loans - Cyprus operations (€ bn) (Jun-15) 0,4 0,1 13,6 1,0 0,6 0,1 11,4 10,5 0,1 0,8 €2,5 bn with arrears Impaired -no other IFRS and Total 90+ DPD with forbearance re-forborne forborne >30+ Contagion effect Other NPEs >90+DPD arrears recla
Slide 56: Provisioning Methodology
Provisioning Methodology Valuation of collateral – A Conservative approach for Key highlights of provisioning methodology prudent calculation of provisions Assumptions and Key drivers: The valuation is a combination of: • Older valuations are adjusted/indexed to market • New valuations, from indepen
Slide 57: Non-Performing Loans definition
Non-Performing Loans definition Non-Performing Loans (NPLs) –as per the Central Bank of Cyprus Directive: In accordance with the directive, a loan is considered as non-performing when it shows arrears of more than 90 days or if it has been restructured and at the time of restructuring presented arre
Slide 58: 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