Bank of Cyprus Holdings PLC · CSECY:BOCH
Bank of Cyprus — 9M2014 Earnings Presentation
54 slides from Bank of Cyprus's earnings presentation, Nov 27, 2014
Slide 1: Group Financial Results for the nine months ended 30 September 2014
Bank of Cyprus Group Group Financial Results for the nine months ended 30 September 2014 Capital Position 2014 ECB Comprehensive Assessment Income Statement Review Balance Sheet Review Loan Quality Key Performance Indicators Key Takeaways 27 November 2014 Additional Information 1
Slide 2: 9M2014 Financial Results – Key Highlights
9M2014 Financial Results – Key Highlights Common Equity Tier 1 capital (CET1) ratio (transitional) increased to 15,4% following successful capital increase Passed the 2014 ECB Comprehensive Assessment Profit after tax excluding one-off items for 3Q2014 totalled €6 mn and Loss after tax for 3Q2014 to
Slide 3: Cypriot Economy proving resilient & on recovery path
Cypriot Economy proving resilient & on recovery path GDP growth expected to be positive from 2015E – Banking system deposits outflow arrested (€ bn) faster recovery than other peripheral countries Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014E2015E2016E
Slide 4: Capital Position
Capital Position 2014 ECB Comprehensive Assessment Income Statement Review Balance Sheet Review Loan Quality Key Performance Indicators Key Takeaways Additional Information Following the Eurogroup decisions to recapitalise the Bank via a bail-in of depositors, the Bank was placed under resolution fr
Slide 5: Capital Position – Impact of capital increase
Capital Position – Impact of capital increase Successful capital raising places the Bank at the upper end of the capital league table €1,6 bn buffer vs 8% +4,3% -0,2% 15,4% -0,5% 14,9% 11,3% Capital increase of €1 bn 1 30.06.2014 Capital increase 3Q2014 movement 30.09.2014 CET1 ratio BIII FL impact
Slide 6: BoC appropriately capitalised
BoC appropriately capitalised A solid Basel III capital position leading to successfully clearing the AQR and the stress test Basel III fully loaded CET1 ratio of Southern European banks* 14,9% 14,9% 12,4% 12,0% 11,8% 11,7% 11,5% 11,4% 11,3% 11,2% 10,8% 10,4% 10,4% 10,2% 9,9% BoC Peer 1 Peer 2 Peer
Slide 7: 2014 ECB Comprehensive Assessment
Capital Position 2014 ECB Comprehensive Assessment Income Statement Review Balance Sheet Review Loan Quality Key Performance Indicators Key Takeaways Additional Information 7
Slide 8: 2014 ECB Comprehensive Assessment
2014 ECB Comprehensive Assessment The size and timing of the capital increase allowed the Bank to pass the ECB’s Comprehensive Assessment Overview AQR Overview Baseline Overview Adverse 3,13% 0,45% Adverse 10,41% Scenario 5,78% Threshold 7,28% 7,28% 7,73% 7,28% 4,34% 5,5% 5,85% 1,51% CET1 ratio AQR
Slide 9: 2014 ECB Comprehensive Assessment: Analysis of Aggregate Adjustments due to AQR
2014 ECB Comprehensive Assessment Analysis of Aggregate Adjustments due to AQR Adjustments to Adjustments to Adjustments due to Impact on CET provisions on provisions due to collective Portfolio 1 capital sampled files extrapolation of provisioning review € mn € mn findings € mn € mn Retail - - 240
Slide 10: Income Statement Review
Capital Position 2014 ECB Comprehensive Assessment Income Statement Review Balance Sheet Review Loan Quality Key Performance Indicators Key Takeaways Additional Information 10
Slide 11: Income Statement Review
Income Statement Review qoq Selected lines from Income Statement (€ mn) 9M2014 3Q2014 2Q2014 change % 1Q2014 Net interest income 790 244 279 -12% 267 Net fee and commission income 131 43 43 +1% 45 Insurance income net of insurance claims 35 10 12 -13% 13 Other (expenses)/income (15) (6) (24) -66% 15
Slide 12: Net Interest Income and Net Interest Margin
Net Interest Income and Net Interest Margin Net Interest Income (€ mn) • 3Q2014 Net Interest Income (NII) at €244 mn (compared to €279 mn for 2Q2014) on the back Interest income from Laiki Recapitalisation Bond of lower customer spread reflecting reduced lending rates and lower interest income follo
Slide 13: Analysis of Non-interest income
Analysis of Non-interest income Analysis of Non Interest Income (€ mn) Fee and commission Income Insurance income net of insurance claims % FX income & Net income/(loss) from financial instruments Other income/(expense) Non Interest Income % 18% 13% 21% 10% 16% Operating income 65 42 73 31 47 x 41 4
Slide 14: Total Expenses
Total Expenses Quarterly Total expenses (€ mn) • 3Q2014 Total expenses of €122 mn compared Other operating expenses Staff costs to €121 mn for 2Q2014 134 • Staff costs for 3Q2014 at €67 mn broadly at 126 124 121 122 the same level as in the previous quarters 52 62 57 53 55 • The cost-to-income ratio
Slide 15: Income Statement Highlights – Group vs Cyprus
Income Statement Highlights – Group vs Cyprus 9M2014 Group Income Statement Highlights (€ mn) % 89% 88% 76% 95% 76% 204% % contribution of Cyprus operations 941 790 826 704 546 574 Cyprus 171 84 Group -280 -367 -373 -492 Net interest income Total income Total expenses Profit before Provisions for Pr
Slide 16: Core Cyprus operations key driver of Group performance
Core Cyprus operations key driver of Group performance High net interest margins for Cyprus– supported by Lower CIR for Cyprus driven by Laiki integration / cheap Eurosystem funding streamlining (bps) 423 24% reduction in personnel (VRS) 377 372 384 35% reduction in expenses 354 314 50% 43% 9M2014:
Slide 17: Balance Sheet Review
Capital Position 2014 ECB Comprehensive Assessment Income Statement Review Balance Sheet Review Loan Quality Key Performance Indicators Key Takeaways Additional Information 17
Slide 18: Balance Sheet Deleverage - Shrinking to Strength
Balance Sheet Deleverage - Shrinking to Strength Change Jun Sep Dec Mar Jun Sep Since € mn 2013 2013 2013 2014 2014 2014 Jun 2013 Cash & bank placements 3.012 2.578 2.530 2.105 1.973 2.417 -595 Investments 3.413 3.505 3.433 3.475 3.538 2.578 -835 Net loans reduction driven by Net Loans 23.769 22.575
Slide 19: Gross Loans
Gross Loans Gross Loans by Geography (€ mn ) • Stable reduction of Gross Loans on a quarterly basis Cyprus Russia UK Other • Overall, a 13% reduction in Group gross loans -13% since June 2013 -3% 28.349 -2% 27.402 -2% • Overseas loan book reduced by 34% since June 1.104 26.743 -4% 2013, reflecting t
Slide 20: Funding Structure
Funding Structure Analysis of Liabilities and Equity (€ bn) Funding from Central Banks Total equity Other liabilities ELA ELA funding (€ bn) ECB funding (€ bn) ECB funding Customer deposits 11,11 11,16 10,96 10,91 10,18 32,96 1,30 1,40 1,40 31,03 31,40 1,40 30,35 8,60 8,39 29,38 28,56 11,11 0,92 0,8
Slide 21: Eurosystem Funding Reliance reducing fast
Eurosystem Funding Reliance reducing fast Continuous reduction of ELA and ECB funding with further potential going forward (€ bn) Eurosystem 36% 36% 37% 36% 31% Funding as xx% of balance sheet 11,40 11,16 10,96 10,91 1,30 10,18 1,40 1,40 1,40 8,60 8,39 0,92 0,89 11,4 9,86 9,56 9,51 8,78 Further acti
Slide 22: Customer Deposits
Customer Deposits Customer Deposits by Geography (€ mn ) Loans to deposits ratio Cyprus Russia UK Other Net loans (€ bn) Customer deposits (€ bn) 16.970 15.468 14.971 Loans to deposits ratio 105 1.295 103 14.066 13.803 103 1.153 1.285 65 13.330 1.244 18 151% 1.078 1.249 4 146% 145% 148% 148% 919 1.2
Slide 23: Loan Quality
Capital Position 2014 ECB Comprehensive Assessment Income Statement Review Balance Sheet Review Loan Quality Key Performance Indicators Key Takeaways Additional Information 23
Slide 24: Credit Risk – Quality of Loan portfolio
Credit Risk – Quality of Loan portfolio Problem Loans (€ bn) +3% +1% +1% +7% NPLs (Old definition) 14,04 14,44 14,58 14,74 +29% 13,13 NPLs>90+DPD NPLs (New definition) 11,01 by €1,8 bn 90+ DPD 12,98 13,00 12,76 12,59 12,98 7,69 10,21 +18% +0% -2% -1% +3% 6,45 5,13 8,25 4,97 6,66 4,82 4,05 2,95 31.12
Slide 25: Credit Risk – Provisions
Credit Risk – Provisions Trends in 90+DPD and provisions Group loan quality indicators • 90+ DPD ratio at 52,5% 90+ DPD provision coverage 90+ DPD ratio • 90+ DPD provision coverage stood 48,6% 48,6% 49,8% 52,5% at 38%; Taking into account 47,4% tangible collateral, 90+ DPD are 38,8% fully covered 2
Slide 26: Credit Risk – 90+ DPD by Geography and Segment
Credit Risk – 90+ DPD by Geography and Segment Group 90+DPD loans by geography €bn 90+DPD ratio 27,4% 38,8% 47,4% 48,6% 49,8% (% of total loans) 52,5% 13,0 13,0 12,6 13,0 7,7 11,0 0,4 0,7 0,8 0,3 0,4 0,3 0,7 0,5 0,3 0,5 0,5 0,6 0,3 0,2 0,5 2,9 0,1 11,5 11,5 11,4 11,7 0,5 9,7 4,2 31.12.12 30.06.131 3
Slide 27: Credit Risk – 90+ DPD fully covered by provisions & tangible collateral
Credit Risk – 90+ DPD fully covered by provisions & tangible collateral Corporate SMEs Housing Consumer RRD Cyprus 14,8% 8,1% 17,5% 7,3% 52,3% 100,0% 21,9 Gross loans 11,5 3,2 1,8 3,8 (€bn) 1,6 81,9% 90+DPD loans 53,7% 22,7% 30,5% 29,0% by segment 16,2% Loan Loss Reserve (LLR) 46,0% 48,6% 36,5% 29,3
Slide 28: Key Performance Indicators
Capital Position 2014 ECB Comprehensive Assessment Income Statement Review Balance Sheet Review Loan Quality Key Performance Indicators Key Takeaways Additional Information 28
Slide 29: KPIs and Targets based on Restructuring Plan
KPIs and Targets based on Restructuring Plan Medium- Key Performance Actual Actual Term Indicators Target Dec-13 Sept.-14 Dec-17 Asset quality • The Group will publish 90+ DPD coverage ratio 38% 38% >50% on a quarterly basis Provisioning charge 3,7% 2,6% <1,5% selective features of its Restructuring
Slide 30: Key Takeaways
Capital Position 2014 ECB Comprehensive Assessment Income Statement Review Balance Sheet Review Loan Quality Key Performance Indicators Key Takeaways Additional Information 30
Slide 31: Key Takeaways
Key Takeaways Leading financial institution in an economy that is on the road to economic recovery MoU implementation on track with 5th Troika review mission being another positive one CET1 ratio improved to 15,4% (transitional basis) driven the successful €1 bn share capital increase through
Slide 32: Additional Information
Capital Position 2014 ECB Comprehensive Assessment Income Statement Review Balance Sheet Review Loan Quality Key Performance Indicators Key Takeaways Additional Information 32
Slide 33: Key Information and Contact Details
Key Information and Contact Details Credit Ratings: Fitch Ratings: Long-term Issuer Default Rating: upgraded to "CC" on 4 July 2014 Short-term Issuer Default Rating: upgraded to "C" on 4 July 2014 Viability Rating: affirmed at “cc” on 4 July 2014 Moody’s Investors Service: Long-term deposit ratings:
Slide 34: Consolidated Balance Sheet
Consolidated Balance Sheet € mn % 30.09.14 31.12.13 € mn % 30.09.14 31.12.13 change change Cash and balances with Amounts due to banks -34% 130 196 -32% 840 1.240 Central Banks Funding from Central Banks -21% 8.604 10.956 Placements with banks +22% 1.577 1.290 Repurchase agreements -3% 577 594 Debt
Slide 35: Income Statement Bridge for 9M2014
Income Statement Bridge for 9M2014 Per financial Per € mn Reclassification statements presentation Net interest income 790 - 790 Net fee and commission income 131 - 131 Insurance income net of insurance claims 35 - 35 Other income/(expenses) 159 (174)* (15) Total income 1.115 (174) 941 Total expense
Slide 36: Risk Weighted Assets evolution
Risk Weighted Assets evolution Risk weighted assets (RWA, € bn) • RWA have increased in 3Q2014 following the capital increase and the 23,51 23,53 23,25 resulting increase of the 22,97 22,86 22,44 22,49 threshold exemptions on items that are risk weighted at 250% 30.06.13 30.09.13 31.12.13 31.12.13 3
Slide 37: Reconciliation of Group Equity to CET 1
Reconciliation of Group Equity to CET 1 (€ bn) 9M2014 Group Equity per financial statements 3,78 Less : Intangibles and other deductions (0,03) Less: In force value (Insurance companies) (0,10) Less: Non banking subsidiaries reserves, adjustments on Minority (0,10) Interest and other items Less: Rev
Slide 38: Loans and Deposits by Geography
Loans and Deposits by Geography Gross Loans by Geography Deposits by Geography € mn 31.12.13 31.03.14 30.06.14 30.09.14 € mn 31.12.13 31.03.14 30.06.14 30.09.14 Cyprus 22.964 22.763 22.185 21.881 Cyprus non-IBU 8.658 8.196 8.094 7.785 Cyprus IBU 4.047 3.789 3.594 3.458 UK 1.284 1.194 1.172 1.112 Cyp
Slide 39: Gross loans by Geography and by Type
Gross loans by Geography and by Type Gross loans by geography 28,35 27,40 26,74 26,26 25,30 24,74 Total 1,11 1,09 1,07 1,02 (€ bn) 0,64 0,54 Other countries* 1,46 1,79 1,38 1,62 1,28 1,43 1,29 1,30 1,21 1,19 1,17 1,11 Russia UK Cyprus 23,99 23,31 22,96 22,76 22,18 21,88 30.06.13 30.09.13 31.12.13 31
Slide 40: Analysis of Deposits by Geography and by Type
Analysis of Deposits by Geography and by Type Deposits by geography 16,97 Other countries* 0,10 15,47 14,97 13,80 Total 1,15 14,07 13,33 1,30 1,08 0,10 0,92 0,10 Russia 1,29 0,77 0,06 0,02 0,01 (€ bn) 1,24 1,25 0,85 0,79 1,29 UK 4,75 1,25 4,05 4,05 3,79 3,59 3,46 Cyprus IBU Cyprus non-IBU 9,67 8,95
Slide 41: Cyprus: Summary Income Statement and Key Indicators
Cyprus: Summary Income Statement and Key Indicators (€ mn) 9M2014 3Q2014 2Q2014 qoq (%) 1Q2014 Net interest income 704 217 251 -14% 236 Net fee & commission income 111 36 35 - 40 Net foreign exchange income/(losses) and net gains/(losses) from financial instruments (22) (4) (31) +86% 13 Insurance in
Slide 42: Loans and Deposits in Cyprus
Loans and Deposits in Cyprus Gross loans by type/business line (presentation adopted as from June 2014*) 23,99 23,31 22,96 22,76 22,18 21,88 RRD- Recoveries Total RRD- Mid Corporations (€ bn) 2,99 2,91 2,60 2,57 RRD- Large Corporations 4,06 4,41 5,33 5,20 5,28 5,23 1,50 Retail Consumer and other 1,4
Slide 43: Russia: Summary Income Statement and Key Indicators
Russia: Summary Income Statement and Key Indicators (€ mn) 9M2014 3Q2014 2Q2014 qoq (%) 1Q2014 Net interest income 48 14 15 -16% 19 Net fee & commission income 15 5 6 +2% 4 Net foreign exchange income and net gains from financial instruments 3 1 1 -16% 1 Other income/(expenses) - - - - - Total incom
Slide 44: Russian Operations
Russian Operations Russian Loans (€ bn) Loans by sector Consumer 2,02 1,79 Credit 1,62 24% 1,43 1,29 1,30 1,21 Housing Corporate 3% 54% SMEs 31.12.12 30.06.13 30.09.13 31.12.13 31.03.14 30.06.14 30.09.14 19% Russian Deposits (€ bn) 1,25 1,15 1,08 0,92 0,77 0,85 0,79 31.12.12 30.06.13 30.09.13 31.12.
Slide 45: UK: Summary Income Statement and Key Indicators
UK: Summary Income Statement and Key Indicators (€ mn) 9M2014 3Q2014 2Q2014 qoq (%) 1Q2014 Net interest income 26 10 9 +31% 7 Net fee & commission income 3 1 1 +6% 1 Net foreign exchange income and (losses)/gains from financial instruments 1 - 1 - - Other (expenses)/income - 1 (1) - - Total income 3
Slide 46: UK Operations
UK Operations UK Loans (€ bn) Loans by sector ex-Laiki UK loans Consumer Credit 1,46 1,38 Housing 2% 1,28 2% 1,19 1,17 1,11 0,83 0,72 0,65 0,56 0,45 0,40 0,30 Corporate 43% 0,83 0,74 0,73 0,72 0,74 0,77 0,81 SMEs 53% 31.12.12 30.06.13 30.09.13 31.12.13 31.03.14 30.06.14 30.09.14 UK Deposits (€ bn) 1
Slide 47: Other Countries: Summary Income Statement
Other Countries*: Summary Income Statement (€ mn) 9M2014 3Q2014 2Q2014 qoq (%) 1Q2014 Net interest income 13 3 4 +7% 5 Net fee & commission income 2 1 1 +49% - Net foreign exchange losses and losses from financial instruments (3) (2) (1) -311% - Insurance income net of insurance claims 2 - 1 +47% 1
Slide 48: 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* 13,00 79,1% 12,98 73,9% 12,76 12,98 71,4% 12,59 68,9% 11,01 0,74 0,76 0,43 0,32 0,75 0,25 0,38 0,28 0,26 0,55 62,5% 0,28 0,47 0,45 0,51 59,9% 0,44 53,7% 0,
Slide 49: Analysis of Loans and 90+ DPD ratios by Type
Analysis of Loans and 90+ DPD ratios by Type* Gross loans by customer type (€ bn) 30.06.13 30.09.13 31.12.13 31.03.14 13,10 12,51 12,24 11,93 6,37 6,24 6,12 6,09 5,44 5,30 5,37 5,30 3,44 3,35 3,01 2,93 Corporate SMEs Housing Consumer Credit 90+ DPD ratios by customer type 30.06.13 30.09.13 31.12.13
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 % of total 20% 10% 16% 8% 22% 6% 18% 5,21 5,84 5,55 4,87 4,41 3,94 3,90 4,06 2,73 2,63 2,01 1,90 1,50 1,48 Corporate SMEs Housing Consumer Credit RRD-Mid and RRD-SMEs RRD - Recoveries Large C
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) 30.06.13 31.12.13 31.03.14 30.06.14 30.09.14 % of 11% 4% 6% 17% 15% 32% 9% 6% total 8,73 8,54 8,41 8,05 7,96 4,61 4,25 4,21 4,20 4,15 4,13 4,12 4,09 3,63 3,59 3,12 2,83 2,82 2,78 2,74 2,44 2,31 2,70 2,1
Slide 52: 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) 13,0 13,0 12,8 12,6 13,0 Quarterly change of 90+ DPD (€ mn) 11,0 90+ DPD (€ bn) 90+ DPD formation 7,7 6,5 5,0 5,1 5,1 4,0 4,4 3,5 3,6 3,8 2,9 2,5 1,6 2,0 2,3 2,2 9M2014 1,3 -€25 mn 1.319 1.240 3.319 1.972 3
Slide 53: Credit Risk – Non-performing Loans
Credit Risk – Non-performing Loans Trends in Non-performing loans NPLs (based on Central Bank of Cyprus rules) Loans restructured and less than 90 days past due Loans more than 90 days past due and Loans restructured and more than 90 days past due Total NPL ratio 58% 58% 60% 60% 55% 55% 53% 53% 9% 9
Slide 54: 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