Bank of Cyprus Holdings PLC · CSECY:BOCH
Bank of Cyprus — Q1 2014 Earnings Presentation
52 slides from Bank of Cyprus's earnings presentation, May 30, 2014
Slide 1: Group Financial Results for the quarter ended 31 March 2014
Bank of Cyprus Group Group Financial Results for the quarter ended 31 March 2014 A Year After Income Statement Review Balance Sheet Review Restructuring Key Takeaways Additional Information 30 May 2014 1
Slide 2: 1Q2014 Financial Results - Highlights
1Q2014 Financial Results - Highlights Common Equity Tier 1 capital (CET1) ratio* improved to 10,6% driven by adoption of CRD IV/CRR methodology, deleveraging and 1Q2014 profitability Group reports its first profit after seven consecutive loss making quarters. Profit from continuing operations** and
Slide 3: Agenda
Agenda A Year After Income Statement Review Balance Sheet Review Restructuring Key Takeaways Additional Information Following the Eurogroup decisions to recapitalise Bank of Cyprus (Bank) via a bail-in of depositors, the Bank was placed under resolution from 25 March 2013 until 30 July 2013, a perio
Slide 4: A Year After: Cyprus economy
A Year After: Cyprus economy Resilient Cyprus economy - Economic performance exceeds expectations GDP growth quarterly: actual vs projections Banking system deposit flows (€ bn) Actual Initial projections 0,2 0,2 1Q-12 2Q-12 3Q-12 4Q-12 1Q-13 2Q-13 3Q-13 4Q-13 1Q-14 -0,2-0,1-0,2-0,1-0,5-0,2 -1,0 -1,
Slide 5: A Year After: BOC Group - Strengthened capital position
A Year After: BOC Group Strengthened capital position – Deleveraging progressing quickly Common Equity Tier 1 capital ratio Total Assets (€ bn) Common Equity Tier 1 capital ratio Prior to Bail-in Core Tier 1 capital ratio 33,0 -11% 10,5% +0,3% 10,5% 10,6% 10,2% 31,0 30,3 29,4 -1,9% 31.12.12 BII 30.0
Slide 6: A Year After: BOC Group - 1Q2014 profitable
A Year After: BOC Group 1Q2014 profitable – Cyprus operations main engine for Group profitability Profit after tax and before restructuring costs and Group Profitability (€ mn) discontinued operations (€ mn) Profit after tax and before restructuring costs and Cyprus operations Rest of operations Gro
Slide 7: A Year After: BOC Group - Laiki integration on track
A Year After: BOC Group Laiki integration on track - Significant reduction of operating expenses Branch rationalisation – branch numbers Cost to income ratio – Total expenses (€ mn) -36% Total expenses Cost to income ratio 203 190 57% 158 142 38% 41% 133 130 36% 134 126 124 May-13 Jun-13 Sep-13 Nov-
Slide 8: A Year After: BOC Group - Loan portfolio quality stabilizing
A Year After: BOC Group Loan portfolio quality stabilizing, with 90+ DPD reduced for the first time 90+ DPD quarterly change (€ mn) Loan Quality Indicators 90+ DPD provision coverage 90+ DPD ratio 3.319 47,4% 48,6% 48,6% 38,8% 1.972 1.319 1.240 20 42% 37% 38% 39% -247 30.06.13 30.09.13 31.12.13 31.0
Slide 9: A Year After: BOC Group - Improved liquidity position
A Year After: BOC Group Improved liquidity position - Reduced Eurosystem funding Maturity analysis of New Accounts by Month* Reduced Eurosystem funding 3 Months 6- and 12-months ELA ECB funding 11,4 11,16 11,11 10,96 10,91 10,63 56% 52% 53% 64% 65% 72% 1,30 1,40 80% 1,40 1,40 11,4 11,11 9,86 9,56 9,
Slide 10: A Year After: BOC Group - Regaining customer trust
A Year After: BOC Group Regaining customer trust by demonstrating solid and tangible progress Capital position strengthened through deleverage and 1Q2014 Capital profitability Deleveraging proceeding quickly, reorganisation in core and non-core, Cyprus main engine for Group profitability operations
Slide 11: Financial Results 1Q2014 – Highlights
Financial Results 1Q2014 – Highlights A Year After Income Statement Review Balance Sheet Review Restructuring Key Takeaways Additional Information 11
Slide 12: Income Statement Review
Income Statement Review* Selected lines from Income Statement (€ mn ) 1Q2014 4Q2013 Change 3Q2013 Net Interest income 267 268 - 290 Net fee & commission income 45 43 +5% 41 Other income 28 (1) n/a 24 Total income 340 310 +10% 355 Total expenses (124) (126) -2% (134) Profit before impairments, restru
Slide 13: Net Interest Income (NII) and Net Interest Margin (NIM)
Net Interest Income (NII) and Net Interest Margin (NIM) Net Interest Income (€ mn) • 1Q2014 NII maintained at €267 mn (compared to €268 mn for 4Q2013). NII for 4Q2013 affected by lower customer spread compared to 3Q2013 290 268 267 • 1Q2014 Group NIM improved to 3,99% on the back of improved funding
Slide 14: Analysis of Non Interest Income
Analysis of Non Interest Income Quarterly Non Interest Income (€ mn) • 1Q2014 Non interest income of €73 mn compared to €42 mn for 4Q2013; Other income/(expense) Insurance income • A 5% increase in fee and commission income FX income & Net income from financial instruments Fee and commission Income
Slide 15: Total Expenses
Total Expenses Quarterly Total expenses (€ mn) • 1Q2014 Total expenses of €124 mn compared to €126 mn for 4Q2013; Other operating expenses Staff costs • Staff costs for 1Q2014 at €67mn. 4Q2013 staff 134 126 124 costs positively affected by one-off items. 52 62 57 • The cost-to-income ratio has been
Slide 16: Group Income Statement Highlights
Group Income Statement Highlights Group Income Statement Highlights (€ mn) 355 290 268 267 310 340 3Q2013 4Q2013 1Q2014 221 184 216 72 31 -39 -38 -134 -126 -124 -103 -146 -146 -258 -229 Net interest Total income Total expenses Profit before Provisions for Profit/(loss) after Profit/(loss) after inco
Slide 17: 1Q2014 Income Statement Highlights: Group vs Cyprus
1Q2014 Income Statement Highlights: Group vs Cyprus 1Q2014 Group Income Statement Highlights (€ mn) % 88% 88% 73% 97% 74% 142% 310% % contribution of Cyprus operations 340 267 300 236 209 216 101 72 96 Cyprus 31 Group -91 -124 -109 -146 Net interest Total income Total expenses Profit before Provisio
Slide 18: Financial Results 1Q2014 – Highlights
Financial Results 1Q2014 – Highlights A Year After Income Statement Review Balance Sheet Review Restructuring Key Takeaways Additional Information 18
Slide 19: Shrinking to Strength
Shrinking to Strength 31.12.13 31.03.14 Change Change € mn € mn € mn % Reduction of cash and bank placements by €425 mn Cash & bank 2.530 2.105 -425 -16,8% during 1Q2014; Disposal of Ukrainian operations, of placements investment in Banca Transilvania and of loans in Investments 3.433 3.475 +42 +1,
Slide 20: Gross Loans
Gross Loans Gross Loans by Geography (€ mn ) • Stable reduction of Gross Loans on a quarterly basis Cyprus Russia UK Other • Following the deleveraging actions completed in -10% April and May 2014, Gross Loans are reduced 28.349 -3% by a further 3% 27.402 -2% -2% 1.104 26.743 -3% 1.459 1.087 26.263
Slide 21: Funding Structure
Funding Structure Analysis of Liabilities and Equity (€ bn) Funding from Central Banks ELA funding (€ bn) ECB funding (€ bn) Total equity Other liabilities ELA 11,16 11,11 10,96 10,91 10,63 ECB funding Customer deposits 1,30 1,40 1,40 -5% 1,40 32,96 -3% 31,03 31,40 -3% 11,11 30,35 29,38 9,86 9,56 9,
Slide 22: Customer Deposits
Customer Deposits Deposits by Geography (€ mn ) Loans to deposits ratio Cyprus Russia UK Other Net loans (€ bn) Customer deposits (€ bn) 16.970 -9% 15.468 105 14.971 Loans to deposits ratio -3% 14.066 1.295 103 103 1.153 -6% 140% 146% 145% 151% 1.285 1.244 65 -7% 1.078 918 1.249 767 23,8 22,6 21,8 -
Slide 23: Loan Quality
Loan Quality Problem Loans (€ bn) qoq:+3% NPLs (Old definition) qoq:+7% 14,04 14,44 NPLs (New definition) qoq:+29% 12,98 NPLs>90+DPD 90+ DPD by €1,7 bn 11,01 13,13 13,00 12,76 qoq:+0,2% 7,69 10,21 qoq:+18% qoq:-1,9% 6,45 4,97 5,13 8,25 6,66 4,82 4,05 2,95 31.12.11 30.06.12 30.09.12 31.12.12 30.06.13
Slide 24: Loan Quality
Loan Quality Trends in 90+DPD and provisions Group loan quality indicators • 90+ DPD ratio at 48,6%; 90+ DPD provision coverage 90+ DPD ratio • 90+ DPD provision coverage improved to 39%; Taking into account 47,4% 48,6% 48,6% tangible collateral, 90+ DPD are fully 38,8% covered 27,4% • Accumulated p
Slide 25: Loan Quality
Loan Quality Trends in Non-performing loans (New definition) New definition of NPLs 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 New definition NPLs 53% 55% 55% 53% 48% 48% 8% 6% 4% 44% 47% 47% 30.09.13 30.09
Slide 26: Capital Position – Under CRD IV/CRR
Capital Position – Under CRD IV/CRR Common Equity Tier 1 capital (CET1) ratio Evolution of CET1 ratio Common Equity Tier 1 capital ratio 10,5% 10,6% Core Tier 1 capital ratio -0,6% -0,3% +0,1% +0,3% +0,9% 10,5% 10,2% 10,2% 10,5% 10,6% CET1 ratio Profit before Provisions Other RWA Change CET1 ratio 3
Slide 27: Financial Results 1Q2014 – Highlights
Financial Results 1Q2014 – Highlights A Year After Income Statement Review Balance Sheet Review Restructuring Key Takeaways Additional Information 27
Slide 28: Restructuring Plan charts future strategic direction
Restructuring Plan charts future strategic direction Restructuring Plan objectives Key pillars of BoC’s strategy • Restoring trust and confidence of • Redefine the Group’s business model and objectives: both depositors and investors – Revamp domestic core business lines by protecting deposits throug
Slide 29: Restructuring of Cypriot operations
Restructuring of Cypriot operations • Integration of ex-Laiki business on track Cost to income ratio of Cyprus operations • Branch network in Cyprus reduced to 130 branches from 203 branches in May 2013; 2 branches expected to close during 2014. 50% 43% 38% • Next milestone for the integration proce
Slide 30: Creation of Restructuring and Recoveries Division
Creation of Restructuring and Recoveries Division Division handles delinquent customers in all sectors • Most significant change is the establishment of a strong restructuring and recovery area. The Bank had a fragmented approach to the management of stressed, distressed and delinquent clients • A s
Slide 31: Restructuring and Recoveries Division
Restructuring and Recoveries Division The RRD has brought a major change in the way BOC is managing its delinquent portfolio From… …to Restructuring Risk Credit Finance & Recoveries Division Corporate SME Retail Financial Strategy and IBUs centres centres branches Solutions analytics Corporate worko
Slide 32: Deleveraging progressing ahead of plan
Deleveraging progressing ahead of plan Deleveraging process through specific, deliberate and well-timed actions, progressing ahead of plan: Disposal of Ukrainian business completed Sale of stake in Banca Transilvania completed Sale of loans to Rubne Koce Beograd in Serbia completed Combine
Slide 33: Financial Results 1Q2014 – Highlights
Financial Results 1Q2014 – Highlights A Year After Income Statement Review Balance Sheet Review Restructuring Key Takeaways Additional Information 33
Slide 34: Key Takeaways
Key Takeaways Leading financial institution in an economy that has been proven quite resilient and is on the road to economic recovery MoU implementation on track with the 4th Troika review mission being another positive one Ahead of Restructuring Plan, with Laiki integration on track to be co
Slide 35: Financial Results 1Q2014 – Highlights
Financial Results 1Q2014 – Highlights A Year After Income Statement Review Balance Sheet Review Restructuring Key Takeaways Additional Information 35
Slide 36: Key Information and contact details
Key Information and contact details Credit Ratings: Fitch Ratings: Long-term Issuer Default Rating: affirmed at “Restricted Default” on 5 March 2014 Short-term Issuer Default Rating: affirmed at “Restricted Default” on 5 March 2014 Viability Rating: upgraded to “cc” from “f” on 5 March 2014 Moody’s
Slide 37: Transition from CRD III to CRD IV/CRR
Transition from CRD III to CRD IV/CRR Provisional Capital base and Risk Weighted Assets from CRD III to CRD IV/CRR € mn Core Tier 1 31.12.2013 2.282 Add back deductions (mainly investments in FSEs within 15% of CET1) 135 Other (mainly revaluation reserve available to cover risks or losses) 79 CET1 3
Slide 38: Consolidated Balance Sheet
Consolidated Balance Sheet € mn % qoq 31.03.14 31.12.13 € mn % qoq 31.03.14 31.12.13 Cash and balances with Amounts due to banks -13% 171 196 -22% 964 1.240 Central Banks Funding from Central Banks - 10.906 10.956 Placements with banks -12% 1.141 1.290 Repurchase agreements -2% 582 594 Debt securiti
Slide 39: Loans and Deposits by Geography
Loans and Deposits by Geography Gross Loans by Geography Deposits by Geography € mn 30.09.13 31.12.13 31.03.14 € mn 30.09.13 31.12.13 31.03.14 Cyprus 23.312 22.964 22.763 Cyprus non-IBU 8.948 8.658 8.196 Cyprus IBU 4.054 4.047 3.789 UK 1.383 1.284 1.194 Cyprus – Total 13.002 12.705 11.985 Russia 1.6
Slide 40: Analysis of Gross Loans by Geography and Customer Type
Analysis of Gross Loans by Geography and Customer Type Gross loans by geography 28,35 27,40 26,74 26,26 1,11 1,09 1,07 1,02 Other countries* 1,46 1,79 1,38 1,62 1,28 1,43 1,29 Total 1,19 Russia (€ bn) UK Cyprus 23,99 23,31 22,96 22,76 30.06.13 30.09.13 31.12.13 31.03.14 *Other countries: Greece, Rom
Slide 41: Analysis of Deposits by Geography and by Type
Analysis of Deposits by Geography and by Type Deposits by geography 16,97 Other countries* 15,47 Total 0,1 14,97 1,15 14,07 Russia 1,30 1,08 0,1 0,92 0,1 (€ bn) 1,29 1,24 0,77 0,06 4,75 1,25 UK 4,05 4,05 3,79 Cyprus IBU Cyprus non-IBU 9,67 8,95 8,66 8,20 30.06.13 30.09.13 31.12.13 31.03.14 * Other c
Slide 42: Cyprus: Summary income statement and key indicators
Cyprus: Summary income statement and key indicators (€ mn) 1Q2014 4Q2013 qoq (%) 3Q2013 Net interest income 236 240 -2% 254 Net fee & commission income 40 35 +13% 31 Net foreign exchange income and net gains from financial instruments 13 36 -65% 11 Insurance income net of insurance claims 12 12 -6%
Slide 43: Loans and Deposits in Cyprus
Loans and Deposits in Cyprus Cyprus Loans by customer type (€ bn) 23,99 23,31 22,96 22,76 2,99 2,91 2,60 2,57 Consumer Credit 5,33 5,20 5,28 5,23 Housing 5,35 5,28 5,20 5,21 SMEs Corporate 10,32 9,92 9,88 9,75 30.06.13 30.09.13 31.12.13 31.03.14 Cyprus Deposits (€ bn) IBUs 14,42 13,00 12,71 11,99 No
Slide 44: Russia: Summary income statement and key indicators
Russia: Summary income statement and key indicators (€ mn) 1Q2014 4Q2013 qoq (%) 3Q2013 Net interest income 19 22 -15% 23 Net fee & commission income 4 7 -36% 7 Net foreign exchange income and net gains from financial instruments 1 - - 1 Other income/(expenses) - (1) - - Total income 24 28 -13% 31 S
Slide 45: Russian operations
Russian operations Russian Loans (€ bn) Loans by sector 2,00 Consumer 1,89 2,02 Credit 1,79 25% 1,62 1,43 1,29 Mortgages Corporate 3% 54% SMEs 31.12.10 31.12.11 31.12.12 30.06.13 30.09.13 31.12.13 31.03.14 18% Russian Deposits (€ bn) 1,29 1,25 1,12 1,15 1,08 0,92 0,77 31.12.10 31.12.11 31.12.12 30.0
Slide 46: UK: Summary income statement and key indicators
UK: Summary income statement and key indicators (€ mn) 1Q2014 4Q2013 qoq (%) 3Q2013 Net interest income 7 5 +63% 10 Net fee & commission income 1 1 +19% 1 Net foreign exchange income and (losses)/gains from financial instruments - (2) - 2 Other income - (0) - 0 Total income 8 4 +151% 13 Staff costs
Slide 47: UK operations
UK operations UK Loans (€ bn) Loans by sector ex-Laiki UK loans Consumer Credit 1,46 1,38 Mortgages 2% 1,28 2% 1,19 1,08 1,03 0,83 0,72 0,65 0,56 0,51 Corporate 1,08 47% 1,03 SMEs 0,83 0,74 0,73 0,72 0,68 49% 31.12.10 31.12.11 31.12.12 30.06.13 30.09.13 31.12.13 31.03.14 UK Deposits (€ bn) 1,29 1,28
Slide 48: Other countries: Summary income statement
Other countries*: Summary income statement (€ mn) 1Q2014 4Q2013 qoq (%) 3Q2013 Net interest income 5 1 +198% 3 Net fee & commission income - - - 2 Net foreign exchange losses and losses from financial instruments - (11) - (5) Insurance income net of insurance claims 1 2 -19% 1 Other income/(expenses
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* 73,9% 71,4% 68,9% 62,5% 12,98 13,00 12,76 11,01 49,9% 49,7% 0,76 49,3% 0,74 0,28 0,75 0,47 0,45 0,32 0,44 0,25 40,3% 0,69 0,18 0,46 33,7% 31,7% 28,9% 25,6%
Slide 50: Analysis of loans and 90+ DPD ratios by customer type
Analysis of loans and 90+ DPD ratios by customer 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 3
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) 8,41 8,73 8,54 8,49 30.06.13 30.09.13 31.12.13 31.03.14 4,61 4,54 4,21 4,12 4,25 4,20 4,15 4,06 3,12 2,82 2,99 2,83 2,78 2,44 2,18 2,31 1,85 1,72 1,93 1,92 1,92 1,90 1,89 1,73 0,95 1,11 1,06 1,00 Profes
Slide 52: 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