Bank Of Cyprus Holdings Plc · CSECY:BOCH
Bank Of Cyprus — Investor Presentation (June 2023)
70 slides from Bank Of Cyprus's investor presentation, Jun 8, 2023
Slide 1: Bank of Cyprus Group Investor Update
Bank of Cyprus Group Investor Update 8 June 2023
Slide 2: Disclaimer
DISCLAIMER The financial information included in this presentation is not audited by the Group’s external auditors. term and longer term future capital requirements and ratios, intentions, beliefs or current expectations and projections about the Group’s future results of operations, financial condi
Slide 3: Agenda
Agenda Topic Speaker Update of Cyprus macroeconomic outlook Chris Patsalides, Special Advisor to the President of Cyprus on Economic Affairs Strategy Update & Business Lines overview Panicos Nicolaou, Group Chief Executive Officer Insurance spotlight Louis Pochanis, Director Insurance Business Digit
Slide 4: Table of contents: Executive Summary – Updated Financial Targets
Table of contents Executive Summary – Updated Financial Targets Strategy Update Appendix Panicos Nicolaou Chief Executive Officer 4
Slide 5: Why Bank of Cyprus
Why Bank of Cyprus Strong Macro Market Leader • Open economy growing faster than the Eurozone • Market leader in a consolidated market • Strong and continued recovery in tourism • 42% loan market share; 37% deposit market share • Fiscal discipline, sovereign rated investment grade • #1 Life and #2 N
Slide 6: Our Shareholder Focus
Our Shareholder Focus • Raising our 2023 ROTE guidance to >17% Highly • ROTE of >13% in 2025 Profitable • ROTE of >16% on 15% CET1 ratio4 in 2025 Highly • Expected to generate 200-250 bps per annum of CET1 pre distributions Capital Generative • Current CET1 ratio 15.2%1, expected to increase signifi
Slide 7: Capacity for Creating Shareholder Value
Capacity for Creating Shareholder Value € bn 1.8 Targeted payout ratio of 30-50% on adjusted recurring profitability1 Expected to distribute cumulatively c.20-35% of current 1.1 1.1 market cap between 2023-2025 Capital 5 Accruing 30% payout ratio2 in 2023 building progressively c.30-45% excess
Slide 8: Highly Attractive Market and Demographics…
Highly Attractive Market and Demographics… GDP growth 23-24¹ Cyprus is growing +3.1 ppts 6.8% 5.8% faster than EU Cyprus economic growth vs EU Cyprus unemployment rate 2.7% average 2023-2024 March 2023 Euro area Cyprus Tax rate Attractive business >1,600 companies #3 country 21% hub relocated to Cyp
Slide 9: …Complementing the Leading Position for Banking and Financial Services in Cyprus
…Complementing the Leading Position for Banking and Financial Services in Cyprus A consolidated banking sector…. …with market leadership €bn Market share Loans BOC Peer 1 85% BOC 42% 37% #1 31% Peer 1 28% 27% 22% Peer 2 #1 14% 15% 15% #1 #1 Peer 4 Peer 3 #2 Rest 1 2 2 2 Deposits Loans1 Deposits Life
Slide 10: Our Universal Offering Creates Strong and Lasting Relationships
Our Universal Offering Creates Strong and Lasting Relationships… Retail & Wealth Corporate & SME • #1 Retail bank • >2.5k Corporates and c.5k SMEs • Servicing c.3/4 of the population • €4.7 bn loans and €2.8 bn deposits • €4.4 bn loans and €12.0 bn deposits • Private Banking as well as Custody and D
Slide 11: The Bank has been Radically Transformed…
The Bank has been Radically Transformed… NPE ratio reduced to 4%; no tail risk Capital strengthened organically while restructuring NPE ratio 63% 47% 4% No equity issuance since 2014 15.0 14.5% 13.4% 7.4 -97% 10.1% Net NPEs 9.9 CET1 ratio (FL) 0.4 3.5 0.1 Dec 14 Dec 18 Dec 22 Dec 14 Dec 18 Dec 22 1
Slide 12: …Now Well Positioned to Deliver >17% ROTE in 2023
…Now Well Positioned to Deliver >17% ROTE in 2023 Net Interest Income to be 2x average Diversified business model 2019-2021 level >45% of revenues from Non-NII (€ mn) FY2022 >650 344 330 370 Confirming strong ROTE trajectory 296 47% Non-NII NII 53% 2020 2021 2022 2023 162 1Q2023 FY2019 FY2020 FY2021
Slide 13: Bank of Cyprus of Tomorrow
Bank of Cyprus of Tomorrow Strength Profitability c.19% >13% ROTE CET1 ratio (>16% based on 15% CET1 ratio) Significant surplus capital Shareholder Asset quality distributions 2025 <3% 30-50% NPE ratio Dividend payout ratio 13
Slide 14: Our Vision and Strategic Pillars Going Forward
Our Vision and Strategic Pillars Going Forward To create lifelong partnership with our customers, guiding and supporting them in a changing world Revenue growth Lean Operating Model Robust asset quality Organisational in capital efficient resilience and ESG and diversified way • Grow high quality ne
Slide 15: Table of contents: Business Lines overview
Table of contents Executive Summary – Updated Financial Targets Business Lines overview Appendix 15
Slide 16: Universal Offering to Our Customers
Universal Offering to Our Customers Retail & Wealth International1 c.32% c.20% Wealth International Retail Non-Banking c.14% Insurance • Insurance 9% Payment Services • Payment Services 5% • Upside expected Treasury Corporate Corporate & SME SME c.28% Treasury & Markets c.6% Uniquely positioned to s
Slide 17: Retail Banking at a Glance
Group contribution Retail Banking at a Glance – Servicing c.3/4 of the Population 60% Deposits 43% Loans Key Facts Key Highlights • #1 Retail Bank in Cyprus Cyprus Market 45% of loans are Household loans • Re-defined operating model driving profitability: migration of sales and servicing to digital
Slide 18: Grow Relationship Value by Offering the Best Service, Products and Solutions
Grow Relationship Value by Offering the Best Service, Products and Solutions Retail Banking Ambition To be achieved by…. • Relevant products and services for key customer segments o Improve lending by establishing partnerships with key retailers through Digital loans (“Quickloans”) and POS credit1 V
Slide 19: Corporate & SME Banking at a Glance
Group contribution Corporate & SME Banking at a Glance – Cyprus Bank of Choice for Businesses 15% 48% Deposits Loans Key Facts Key Highlights • #1 Corporate & SME bank in Cyprus Cyprus Market 48% of loans in Cyprus are corporate loans1 • Wide network of specialised SME & Corporate units • Digitised
Slide 20: Established Partner for Businesses, Offering Holistic Suite of Products and Solutions
Established Partner for Businesses, Offering Holistic Suite of Products and Solutions Corporate & SME Banking Ambition To be achieved by…. Accelerate cross-selling opportunities • Enhance cross-selling through digital economy platform to improve customer profitability (“Jinius”) to fully digitalise
Slide 21: International Banking at a Glance
Group contribution International Banking at a Glance – the Preferred Choice 22% Deposits 8% Loans Key Facts Key Highlights • #1 choice for International customers in Cyprus of International Companies opened in 2022 are • International Banking consists of: 96% registered in Cyprus/European Economic A
Slide 22: Continue Providing Diversified Banking Activities
Continue Providing Diversified Banking Activities, capitalising on Cyprus’ growing business hub International Banking Ambition To be achieved by…. Expand diversified international lending including Shipping and • Expand international lending through specialised units Syndications participations • Ca
Slide 23: Leading Card Processing and Payment Solutions Business in Cyprus
Leading Card Processing and Payment Solutions Business in Cyprus Key Facts Key Highlights • #1 Payments hub; 75% Shareholding c.85% Market Cyprus Payments processor Leader • Leading player in the market share1 • Strong presence in both physical and online card processing and acquiring space • Compre
Slide 24: Table of contents: Insurance spotlight
Table of contents Executive Summary – Updated Financial Targets Insurance spotlight Appendix Louis Pochanis Director Insurance 24
Slide 25: Strong, Sustainable Insurance Business
Strong, Sustainable Insurance Business Competitive strengths Contribution to Group 100% owner in both life and non-life insurance % Group’s Non-NII 13% 1Q2023 7% 6% Well established, market leaders % Group’s Profit 6% 4% 10% Contribution High Return on Equity & resilient 1Q2023 profitability Average
Slide 26: Profitable Life Insurance Business
Profitable Life Insurance Business – Valuable and Sustainable Contribution Key Facts Key Highlights 2%1 of Life Insurance premiums vs 4.0% for Europe • #1 in Life Insurance in Cyprus; established in 1989 Cyprus Market GDP Further Market penetration potential • Attractive tax incentives for Life insu
Slide 27: Successful Distribution Model will Drive Further Growth
Successful Distribution Model will Drive Further Growth Complimentary distribution Focused more on agency network… …by strengthening agency network and Growth expected to continue bancassurance model CAGR % of individual new business premiums, FY2022 Agency network +6% Bancassurance 162 26% 37 120 O
Slide 28: Market Leader with Potential for Further Penetration
Market Leader with Potential for Further Penetration Well positioned amongst peers Leader in Life insurance¹ in a …and in Unit linked Funds under Consistently increasing market % concentrated market… management (total market %1) 26.7% 35.2% 21.8% 25.0% 26.7% 22.9% 23.0% 23.8% 16.0% 14.6% Peer 1 Peer
Slide 29: Clear and Consistent Strategy with Increased Ambition
Clear and Consistent Strategy with Increased Ambition Ambition To be achieved by…. 2025 Targets • Pursuing new market segments Further penetrate Life insurance • Cross-sell opportunities with the Bank in the market in Cyprus area of Occupational Pensions and appealing products/ services to extend cu
Slide 30: Profitable Non-Life Insurance Business
Profitable Non-Life Insurance Business – Valuable and Sustainable Contribution Key Facts Key Highlights c.1.7%1 • Well established since 1951 Cyprus Market of GDP Non-Life Insurance vs 2.5% for Europe • Strong bancassurance and agency channels 3.7% 2 2019-2022 Cyprus market premium vs • Increasing m
Slide 31: Well Positioned with Complimentary Distribution
Well Positioned with Complimentary Distribution Complimentary distribution Three distribution channels Growth in bancassurance leveraging on Growth also achieved through Direct Bank’s leading position sales and the Agency network % of premiums, FY2022 Premiums through bancassurance (€ mn) Premiums (
Slide 32: Most Profitable Non-Life Company in Cyprus
Most Profitable Non-Life Company in Cyprus, with Potential to Further Penetrate the Market High profitability More profitable than the market in all major classes Highest share of market profits Profit margins by class1 Shares in market profits (%)1 32% 29% Strategy for prudent 26% 26% underwriting
Slide 33: Clear and Consistent Strategy with Increased Ambition
Clear and Consistent Strategy with Increased Ambition Ambition To be achieved by…. 2025 Targets • Grow the bancassurance potential to leverage Further penetrate the non-life insurance on Bank’s strong market share market in Cyprus • Continue promoting and enhancing the digital sales offering through
Slide 34: Table of contents: Digital and Jinius spotlight
Table of contents Executive Summary – Updated Financial Targets Digital and Jinius spotlight Appendix Demetris Nicolaou Chief Digital Officer 34
Slide 35: Leverage Leading Digital Capabilities to Serve Customers and the Economy
Leverage Leading Digital Capabilities to Serve Customers and the Economy Expand the Accelerate Be the driver of the Bank’s digital digital adoption national digital offerings and digital sales economy Creating shareholders value • Improved efficiency: • Increasing digital sales • Branch rationalisat
Slide 36: Our Digital Transformation Journey
Our Digital Transformation Journey 2022 Mobile Cheque Deposit 2023 AI based Personal Financial QuickLoans Management Tools - MoneyFit QuickHub GooglePay Enhance and launch new digital products and 2017 2019 improve customer Digital Transformation eAccounts experience Program begins ApplePay 2021 New
Slide 37: The QuickHub Era
The QuickHub Era © = QuickHub EB opmmmacount EJ ostaneweur b offes GF cartrepretase |, Perontinn Get it dons Deposit a Update your Link other cheque contact info Banks 37
Slide 38: Our Journey has Enabled a Best in Class Digital Offering
Our Journey has Enabled a Best in Class Digital Offering and Embraced by Customers Leading position Making digital channels a “one-stop shop” for our customers Multi-channel offering 94% digital transactions ratio +15 p.p. Engagement and Transaction Ratios transactions 94% 94% Digitally Digital 79%
Slide 39: Transforming the Bank and Creating Value to Shareholders
…Transforming the Bank and Creating Value to Shareholders From Enabling Cost optimisation To Driving sales and revenue Bank committed to continue investing Scaling up digital transformation Improve customers’ experience and business Progressing to accelerating and enhancing efficiency while enhancin
Slide 40: Jinius by Bank of Cyprus
JINIUS O by Bank of Cyprus
Slide 41: The Vision
The Vision To become the go-to platform for Businesses and Individuals by facilitating transactions through online ecosystems supported by Banking products and services. Orchestrator of Cyprus Digital Economy Ecosystem Driven Platform to Create Opportunities for All 41
Slide 42: The Concept
The Concept What? Why? To Connect Businesses Together To Support the Digital Economy • Facilitate end to end business transactions (invoicing, • Facilitate the digitisation of national economy tendering, remittance etc.) • Enable efficiencies for our clients • Enable businesses to optimise and digit
Slide 43: An Ecosystem Example: Mini-Markets & Kiosks (before Jinius)
An Ecosystem Example: Mini-Markets & Kiosks Invoicing & Payments, before Jinius Orders products Mini Market Supplier 4. Order accepted, paper 1. Order placed invoice received and signed 2. Invoice printed 5. Delivery person collects cash or cheques and takes 3. Order ready for them to supplier deliv
Slide 44: An Ecosystem Example: Mini-Markets & Kiosks (the Jinius way)
An Ecosystem Example: Mini-Markets & Kiosks Invoicing & Payments, the Jinius way Orders products Mini Market Supplier 1. Order placed 3. Order is delivered 2. Order ready for delivery Invoice received Invoice sent Invoice paid Real-time update No paper Eliminating No cash Easier account Efficien
Slide 45: Long Term Vision for B2B and B2C Services
Long Term Vision for B2B and B2C Services For companies For Consumers Business to Business Services Business to Consumer Services Advanced Analytics, Offers, Promotions Personalised Analytics, Offers and Promotions Company Ratings Ratings and Consumer Communities Payments due and Cash Flow Mgmt. Pay
Slide 46: Reflections of 2022, the Focus and Vision for 2023 and Beyond
Reflections of 2022, the Focus and Vision for 2023 and Beyond 2022 2022 2023 and beyond Launching and evolving What comes next first services Launching and evolving first services Launched first Launched B2B first B2Bservice services Continue building and evolving B2B Services ~1500 Approx.businesse
Slide 47: Table of contents: Financial Outlook
Table of contents Executive Summary – Updated Financial Targets Financial Outlook Appendix Eliza Livadiotou Executive Director Finance 47
Slide 48: What Makes Bank of Cyprus Different
What Makes Bank of Cyprus Different Highly liquid • Sticky deposit base; one of the lowest loan to deposit ratios in Europe balance sheet • One of the most geared banks to higher rates; 2023 NII to reach 2x 2019-2021 average Diversified • Non-NII sustainable revenue streams offsetting NII headwinds
Slide 49: Highly Liquid Balance Sheet
Highly Liquid Balance Sheet (€ bn) 25.4 25.4 Other assets 3.4 Other liabilities 4.3 Equity 2.1 8% Net loans 10.0 39% >95% of loan book is variable based Fixed income portfolio 2.7 11% Fixed income portfolio; expanding Loan to deposit ratio at 53% carefully Customer 19.0 75% One of the lowest loan to
Slide 50: NII-Highly Geared to Rising Rates
NII-Highly Geared to Rising Rates Due to Strong Liquidity and Sticky Retail Funding Outlook NII bottomed out; reverted to growth on the back of higher rates Highly sensitive P&L to interest rate movements Average ECB depo rate -0.40% -0.50% 0.10% 3.0% 3.1% • 2023 NII upgraded to >€650 mn • 2024 NII
Slide 51: NII-Prudent Loan Growth, Defending Margins
NII-Prudent Loan Growth, Defending Margins New lending and performing book to grow in line with economic growth Outlook CAGR € bn +4% • New lending and performing book to grow by c.4% p.a. 2.0 2.1 from 2022-2025 0.6 Drivers FY2019 FY2022 FY2023 FY2024 FY025 • Economic growth expected to continue at
Slide 52: NII-Sticky Deposit Base Resulting in Modest Deposit Pass-Through
NII-Sticky Deposit Base Resulting in Modest Deposit Pass-Through Outlook Resilient deposit pass-through1; gradually increasing at sustained levels of 50% 2023-2024 • Assumptions updated to reflect resilient pass- through Cost (bps) 4Q2022 1Q2023 • Gradual increase in Time and Notice deposit pass- Cu
Slide 53: NII-Careful, Low-Risk Expansion of Fixed Income Portfolio
NII-Careful, Low-Risk Expansion of Fixed Income Portfolio, Subject to Market Conditions Outlook Fixed Income portfolio to increase to % assets2 8% 8% 9% 11% 12% c.15% • Conservative growth of fixed income portfolio to by Dec 20243 reach c.15% of total assets3, broadly in line with 2.75 average of EU
Slide 54: Non-NII - Net F&C Income Remains an Important Contributor
Non-NII - Net F&C Income Remains an Important Contributor to Group’s Revenues Outlook Net F&C income to grow by c.3% mainly driven by economic growth • Net fee and commission income expected to grow by c.3% (2022-2024), net of liquidity and NPE sales servicing fees (c.€21 mn p.a.), driven by: 192 CA
Slide 55: Costs-Significant Improvement in Cost to Income Ratio
Costs-Significant Improvement in Cost to Income Ratio Outlook Substantial optimisation of workforce and branches facilitated by digital transformation • 2023 cost to income ratio expected at sub 40s benefiting from 82% 83% higher revenues Digitally engaged customers 69% • 2024 cost to income ratio a
Slide 56: Asset Quality-Conservative Assumptions on Cost of Risk
Asset Quality-Conservative Assumptions on Cost of Risk and Asset Quality Outlook Maintaining high asset quality and prudent cost of risk 140 60.00% • 2023 NPE ratio expected to remain <4.0% and to drop 118 Cost of risk bps to <3.0% by 2025 120 50.00% • Prudent Cost of Risk assumptions; maintaining w
Slide 57: Real Estate Management Unit (REMU)
Real Estate Management Unit (REMU) Properties sold exceed properties acquired since 2017 Outlook • REMU stock expected to halve by December 2025 (€bn) • Continue to dispose REMU properties comfortably above 1.41 (1.58) book value and close to open market value 1.44 • Average sales of c.€200 mn p.a.
Slide 58: Upgrading 2023-2024 Targets
Upgrading 2023-2024 Targets FY2023 targets FY2024 targets Updated FY2023 Updated FY2024 (February 2023) (February 2023) targets targets Net Interest €520-550 mn Sustainable NII >650 mn >625 mn Income (40-50% yoy) Cost to Around similar levels to sub 40% c.40% Mid-40s Income Ratio 2023 >14% ROTE1 >13
Slide 59: Our Shareholder Focus
Our Shareholder Focus • Raising our 2023 ROTE guidance to >17% Highly • ROTE of >13% in 2025 Profitable • ROTE of >16% on 15% CET1 ratio4 in 2025 Highly • Expected to generate 200-250 bps per annum of CET1 pre distributions Capital Generative • Current CET1 ratio 15.2%1, expected to increase signifi
Slide 60: Strong Organic Capital Generation with Healthy Buffers
Strong Organic Capital Generation with Healthy Buffers Strong capital position; building up rapidly and organically… c.19% • CET1 >16% for 2023 and c.19% for 2025 >16% 15.0% 12.9% 13.7% • Beyond 2023, capital generation of 200-250 bps p.a pre distributions CET1 (FL) • Modest RWAs growth Dec 20 Dec 2
Slide 61: Bank of Cyprus of Tomorrow
Bank of Cyprus of Tomorrow Strength Profitability c.19% >13% ROTE CET1 ratio (>16% based on 15% CET1 ratio) Significant surplus capital Shareholder Asset quality distributions 2025 <3% 30-50% NPE ratio Dividend payout ratio 61
Slide 62: Agenda
Agenda Topic Speaker Update of Cyprus macroeconomic outlook Chris Patsalides, Special Advisor to the President of Cyprus on Economic Affairs Strategy Update & Business Lines overview Panicos Nicolaou, Group Chief Executive Officer Insurance spotlight Louis Pochanis, Director Insurance Business Digit
Slide 63: Key Information and Contact Details
Key Information and Contact Details Contacts Investor Relations & ESG Executive Director Finance & Legacy Tel: +35722122239, Email: investors@bankofcyprus.com Eliza Livadiotou, Tel: +35722 122128, Email: eliza.livadiotou@bankofcyprus.com Annita Pavlou Manager Investor Relations & ESG Tel: +357 22 12
Slide 64: Table of contents: FY2022 Financial Performance
Table of contents Executive Summary – Updated Financial Targets FY2022 Financial Performance Appendix 64
Slide 65: Beyond Banking – ESG key Highlights
Beyond Banking – ESG key Highlights Environment Social Governance BOC Oncology Center GHG Emissions – Loan portfolio 60% (CO2 tonnes in ths) of the diagnosed cases in Cyprus treated at the Centre. 70% Business Loans 1.162 of independent non-executive directors in Commercial Real Estate 36 €1.1 mn Bo
Slide 66: Glossary & Definitions
Glossary & Definitions AC Amortised cost bonds Adjusted recurring profitability The Group’s profit after tax before non-recurring items (attributable to the owners of the Company) taking into account distributions under other equity instruments such as the annual AT1 coupon. Comprise mainly (a) fees
Slide 67: Glossary & Definitions
Glossary & Definitions GBV Gross Book Value. Gross loans comprise: (i) gross loans and advances to customers measured at amortised cost before the residual fair value adjustment on initial recognition (including loans and advances to customers classified as non-current assets held for sale where app
Slide 68: Glossary & Definitions
Glossary & Definitions Key simplifying assumptions An instantaneous and sustained parallel movement in EUR and USD interest rates. Static balance sheet in size and composition. NII sensitivity Assets and liabilities whose pricing is mechanically linked to market / central bank rates assumed to repri
Slide 69: Glossary & Definitions
Glossary & Definitions The NSFR is calculated as the amount of “available stable funding” (ASF) relative to the amount of “required stable funding” (RSF). The regulatory limit, enforced in June 2021, has been set at 100% NSFR as per the CRR II. OMV Open Market Value. The operating profit comprises p
Slide 70: Glossary & Definitions
Glossary & Definitions Total income Total income comprises net interest income and non-interest income (as defined). Total loan credit losses, impairments Total loan credit losses, impairments and provisions comprises loan credit losses (as defined), plus impairments of other financial and non-finan
Bank of Cyprus Holdings — Investor Presentation (June 2023) on 6ix