Bank of Cyprus Holdings PLC · CSECY:BOCH
Bank of Cyprus — 9M2016 Earnings Presentation
54 slides from Bank of Cyprus's earnings presentation, Nov 15, 2016
Slide 1: Preliminary Group Financial Results for the nine months ended 30 September 2016
Bank of Cyprus Group Preliminary Group Financial Results for the nine months ended 30 September 2016 15 November 2016 The Financial Statements for the nine months ended 30 September 2016 have been reviewed by the Bank’s external auditors.
Slide 2: London-Cyprus Listing – Overview
London-Cyprus Listing – Overview Another significant milestone in journey back to strength Delivering on key Positive signal for our investors, regulators and depositors commitments First step in the long-term plan to achieve eligibility for inclusion in FTSE UK index series Greater visibility
Slide 3: 9M2016 Financial Results – Highlights
9M2016 Financial Results – Highlights • Positive momentum continued in 3Q2016 Declining • Problem loans (90+ DPD)1 down by €501 mn (or 5%) qoq and by €2,6 bn (or 23%) in 9M2016 Non performing • 90+ DPD ratio reduced to 43% and provisioning coverage ratio increased to 54% exposures • NPE reduction of
Slide 4: Significant reduction in Problem Loans…
Significant reduction in Problem Loans… €2,6 bn or 23% drop in 90+ DPD during 9M2016 to €8,8 bn €2,1 bn or 15% reduction in NPEs during 9M2016 90+ DPD (€ bn) 90+ DPD ratio NPEs with forbearance measures, no impairments, no arrears NPEs (€ bn) Quarterly reduction of NPEs Quarterly reduction of 90+ DP
Slide 5: …driven by slower formation of new problem loans and ramp up in restructuring activity
…driven by slower formation of new problem loans and ramp up in restructuring activity 90+ DPD inflows in Cyprus operations (€ bn) Quarterly evolution of restructured loans Corporate SMEs Retail Total restructurings Average restructurings 0,68 FY2015: 9M2016: 0,60 €3,7 bn €3,4 bn 1,50 1,33 1,26 1,02
Slide 6: Conservative provisioning policy leading to increased coverage levels
Conservative provisioning policy leading to increased coverage levels Coverage ratio improvement of 16 p.p1 driven by over €1,6 bn Continuing high cost of risk3 additional cumulative provisions since September 2014 Quarterly Provisions for impairment of customer loans2 (€ mn) Cost of Risk - Cyprus C
Slide 7: Bulk of the 90+DPD stock is managed by the RRD
Bulk of the 90+DPD stock is managed by the RRD Gross loans breakdown by asset quality (€ bn) 90+DPD and NPE split in Cyprus 90+DPD (Sep 2016): €8,2 bn • c.€7,2 bn of 90+DPDs 9% managed by RRD 3% - o/w c.€4,9 bn is managed 2% 3 20,6 via RRD recoveries Other 1,8 18,8 27% 59% Performing 5,5 Performing
Slide 8: Sustainable asset quality improvement across the RRD
Sustainable asset quality improvement across the RRD Bespoke tactical plans in place for each segment within RRD RRD Major corporate Corporate SME (Excluding recoveries) • Large diversified groups • Mid market businesses • Small OMBs1 Business unit • 23 connections • c.150 connections • c.1.900 conn
Slide 9: Enhanced focus on unlocking the Recoveries portfolio
Enhanced focus on unlocking the Recoveries portfolio Key developments / action points from the private auction process During 9M2016 • Commencement of private foreclosures in late June 2016 0,7 • 42 assets auctioned with 12 assets sales been achieved as at 30 September 2016 0,3 • Foreclosure Task Fo
Slide 10: Increased reduction of Cypriot 90+DPD stock in 9M2016
Increased reduction of Cypriot 90+DPD stock in 9M2016 90+DPD evolution by movement of stock of loans and solutions applied (Cyprus) € bn Net reduction: c.€0,9 bn Net reduction: c.€2,4 bn 0,2 (0.9 ) (0.1 ) 0,4 (0.0) (1.2 ) (0.8) (0.8) 11,5 10,6 10,6 8,2 Jun 2015 Inflows Restructurings / Write-offs Co
Slide 11: Progress on top 20 group exposures
Progress on top 20 group exposures Top 20 - total exposure split (€ bn) Top 20 exposures down by €1,4 bn since 30 Sep 2014 € bn3 67% 69% 64% 64% 66% 61% 3,03 53% 45% 42% 4,4 4,2 4,0 4,0 3,7 3,8 3,5 1,6 1,5 3,4 Performing 1,3 1,3 3,0 1,0 1,1 1,5 1,6 2,0 1,7 90+DPD reduced by 52% 2,8 2,7 2,7 2,7 2,6 2
Slide 12: Real estate sales gathering momentum via REMU
Real estate sales gathering momentum via REMU Property Sales Dynamics in Cyprus for 9M2016 Property stock movement (Group) (€ mn) Residential Commercial Land Hotel/Touristic (110) (21) €177,4 mn €8,8 mn 894 3 1.305 5 1 €51,6 mn 2 542 1 Stock as at 01 Additions Sales¹ Impairment Stock as at 30 15 Jan
Slide 13: Significant reduction in ELA achieved with plans to fully repay early 2017
Significant reduction in ELA achieved with plans to fully repay early 2017 Over €10 bn reduction in ELA achieved since peak, with €3,0 bn reduction during 2016… € bn Plans to fully eliminate ELA 11,4 11,1 9,9 9,6 9,5 • Deposit Growth 8,8 7,7 7,4 • Wholesale and interbank market 6,9 access 5,9 €3,0 b
Slide 14: Growing deposit base resulting in improving liquidity and increasing market shares
Growing deposit base resulting in improving liquidity and increasing market shares €1,46 mn or 10% growth of deposits in 9M2016 to 70% of total assets with sequential improvement in loans to deposits ratio 15,6 14,8 14,2 14,1 0,01 1,4 13,6 13,6 13,6 124% 125% 125% 13,3 0,01 1,4 123% 122% 13,2 121% 1
Slide 15: Strong Capital Adequacy ratios
Strong Capital Adequacy ratios CET 1 ratio (transitional) of 14,6% compares favorably with European peers 13,4% 13,4% 14,4% 15,1% 13,1% 13,5% 13,6% 13,8% 15,6% 14,9% 14,6% 14,3% 14,4% 14,0% 13,9% 14,0% 13,6% 13,5% 13,4% 13,0% 12,8% 12,5% 12,4% Dec 2014 Mar 2015 Jun 2015 Sep 2015 Dec 2015 Mar 2016 Ju
Slide 16: Capital Position
Capital Position Capital Adequacy Ratios Total capital ratio (transitional) Minimum Capital Requirment • Overall Total Capital ratio stood at 14,7% as at 30 September 2016 compared to 14,5% as at 30 June 15,7% 15,5% 2016 15,0% 14,5% 14,7% 14,2% 14,4% 14,1% 14,1% 14,25% • Following SREP1 performed by
Slide 17: Income Statement Review
Income Statement Review € mn 9M2016 9M2015 yoy % 3Q2016 2Q2016 qoq % 1Q2016 Key Highlights QoQ change Total income 717 786 -9% 235 238 -1% 244 • NIM at 3,51% for 9M2016 compared Total expenses (299) (296) 1% (97) (103) -5% (99) to 3,59% for 1H2016 reflecting the reduction in customer loan balance Pr
Slide 18: Good underlying profitability continues in 3Q2016
Good underlying profitability continues in 3Q2016 Group Income Statement Highlights (€ mn) 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016 251 253 244 238 235 149 134 145 135 138 50 13 6 5 -62 -102 -119 -99 -103 -97 -96 -96 -109 -630 -512 Total Income Total Expenses Profit before impairments1 Provisions for impa
Slide 19: Stable NIM and Customer Spread in a Competitive Market
Stable NIM and Customer Spread in a Competitive Market Net Interest Income and Net Interest Margin • Net Interest Income (NII) at €164 mn, compared to Interest income from Republic of Cyprus bond (€ mn) € bn Net interest income (€ mn) Interest bearing assets1 €175 mn for 2Q2016, reflecting the reduc
Slide 20: Growing Non-interest Income as percentage of Total Income
Growing Non-interest Income as percentage of Total Income Analysis of Non Interest Income (€ mn) – Quarterly Net fee and commission income Insurance income net of insurance claims Other 1 % 14% 14% 15% 15% 16% 16% Net fee and commission income % Total income 71 63 x 59 55 14 23 49 46 1 9 Non interes
Slide 21: Costs under control
Costs under control Total expenses (€ mn) Staff costs Operating expenses • Total expenses for 3Q2016 were €97 mn, compared to €103 mn a quarter earlier, down 5% qoq primarily driven by the 7% decrease in staff costs reflecting 119 115 the effect of the voluntary exit plan (VEP) completed 102 102 103
Slide 22: Profitable Core Cypriot business
Profitable Core Cypriot business 3Q2016 Cyprus Vs Group performance (€ mn) 95% 94% 88% 97% 169% % 220 235 % contribution of 164 Cyprus operations 155 138 134 Cyprus operations 9 15 -87 -97 27 4 16 Rest of operations -10 -11 Net interest income Total income Total expenses Profit before provisions and
Slide 23: Expansion of BOC UK operations
Expansion of BOC UK operations Gross loans and customer deposits Loans by sector as at 30 September 2016 Gross loans (£ bn) 2%1% 1,01 Corporate 0,93 20% 0,88 SMEs 0,83 0,78 Consumer credit 0,74 0,67 77% Housing Mar 2015 Jun 2015 Sep 2015 Dec 2015 Mar 2016 Jun 2016 Sep 2016 Profitability Customer dep
Slide 24: Significant Progress made on Group KPIs
Significant Progress made on Group KPIs A clear plan of action to achieve Medium Term Targets Medium Key Pillars & Plan of action Key performance Dec- Sept- Category Term indicators 2015 2016 Targets • Intensify restructuring and workout activity of delinquent 1. Significantly borrowers reduce • Mai
Slide 25: Key Takeaways
Key Takeaways • The Bank announced its intention to apply for a listing on the LSE in addition to its existing listing on the CSE; Significant milestone to increase the visibility of the Bank’s stock • BOC franchise remains dominant in an economy that continues to perform better than expected • Prob
Slide 26: Key Information and Contact Details
Key Information and Contact Details Credit Ratings: Fitch Ratings: Long-term Issuer Default Rating: upgraded to “B-" on 25 April 2016 (stable outlook) Short-term Issuer Default Rating: upgraded to “B" on 25 April 2016 Viability Rating: upgraded to “b-” on 25 April 2016 Moody’s Investors Service: Bas
Slide 27: Appendix – Macroeconomic overview
Appendix – Macroeconomic overview 27
Slide 28: Growth accelerated with broad sector participation
Growth accelerated with broad sector participation Real GDP continued to expand in the first half of ... with broad sector participation particularly from ... on the expenditure side growth came from both the year … trade , tourism, and professional services, whilst…. domestic demand and net exports
Slide 29: Key economic sectors are performing well
Key economic sectors are performing well The unemployment rate dropped to 12,4% in Q2 from 13,2% in Q1 and a In construction the main indices may have bottomed in the first half of 2015 peak rate of 16,5% in Q4 of 2013. and started to rise from there 18,0 16,5 100 Unemployment rate and unemployed pe
Slide 30: Tourism is expanding & Residential Property Index is stabilising
Tourism is expanding & Residential Property Index is stabilising Tourist activity accelerated in 2015 and 2016 with total arrivals up 18,8% in the The distribution of tourist arrivals has been shifting over time with the UK first nine months driven by a 44,5% increase from Russia and 11% from the UK
Slide 31: Consumer prices continued to drop while retail trade volumes continued to increase
Consumer prices continued to drop while on the demand side of the economy, retail trade volumes continued to increase Following three consecutive years of decline, consumer prices dropped 1,6% ... driven mainly by housing and transport expenditures which are energy in January-October, the decline sl
Slide 32: Appendix – Additional financial information
Appendix – Additional financial information 32
Slide 33: Consolidated Balance Sheet
Consolidated Balance Sheet % % € mn change 30.09.16 31.12.15 € mn change 30.09.16 31.12.15 Cash and balances with Deposits by banks 53% 371 242 12% 1.587 1.423 Central Banks Funding from central banks -56% 1.950 4.453 Loans and advances to -10% 1.184 1.314 banks Repurchase agreements -11% 329 368 Cu
Slide 34: Income Statement Review
Income Statement Review yoy qoq € mn 9M2016 9M2015 3Q2016 2Q2016 1Q2016 +% +% Net interest income 524 644 -19% 164 175 -7% 185 Net fee and commission income 112 115 -3% 38 38 1% 36 Insurance income net of insurance claims 35 32 9% 10 11 -9% 14 Core income 671 791 -15% 212 224 -6% 235 Other income 46
Slide 35: Income Statement bridge for 9M2016
Income Statement bridge for 9M2016 Per financial € mn Per presentation Reclassification statements Net interest income 524 - 524 Net fee and commission income 112 - 112 Net foreign exchange gains and net gains on other financial instruments 35 59 94 Insurance income net of insurance claims 35 - 35 G
Slide 36: Cyprus: Income Statement by business line for 9M2016
Cyprus: Income Statement by business line for 9M2016 Wealth & International Consumer SME Corporate Brokerage & Total € mn Banking RRD REMU Insurance Other Banking Banking Banking Asset Cyprus Management Net interest income 187 48 60 46 6 160 (9) - (7) 491 Net fee & commission income 34 6 7 38 2 9 -
Slide 37: Risk Weighted Assets – Regulatory Capital
Risk Weighted Assets – Regulatory Capital Risk weighted assets by Geography (€ mn) Equity and Regulatory Capital (€ mn) 30.06.15 30.09.15 31.12.15 31.03.16 30.06.16 30.09.16 30.06.15 30.09.15 31.12.15 31.03.16 30.06.16 30.09.16 Cyprus 19.607 19.473 18.438 18.276 17.845 17.675 Russia Shareholders’ eq
Slide 38: BOC - Main performance indicators
BOC - Main performance indicators Ratios Group 9M2016 ROAA (annualised) 0,4% ROTE (annualised) 2,8% Performance Net Interest Margin 3,51% Cost to income ratio 42% Loans to deposits 102% 90+ DPD / 90+ DPD ratio €8.768 mn (43%) 90+ DPD coverage 54% Asset Quality Cost of risk (annualised) 1,6%1 Provisi
Slide 39: Reduction in Overseas Non-Core Exposures
Reduction in Overseas Non-Core Exposures Overseas non-core exposures (€ mn) 1.105 The non-core overseas exposures at 30 September 2016 were as follows: 1.040 Greece: Net exposure comprised: 140 528 512 957 a. Net on-balance sheet exposures (excluding foreclosed 139 911 properties) totalling €12 mn;
Slide 40: Analysis of Deposits by Geography and by Type
Analysis of Deposits by Geography and by Type Deposits by geography 30 September 2016 (%) 1 1 Cyprus - non IBU Cyprus - IBU Total Cyprus non-IBU Cyprus IBU UK Other countries2 UK Other countries 2 14,97 15,64 (€ bn) 14,18 14,13 14,75 0,1% 13,80 13,61 13,63 13,61 1,02 13,33 13,17 0,01 0,01 1,43 1,24
Slide 41: Gross loans by Geography and by Customer Type
Gross loans by Geography and by Customer Type Gross loans by geography 30 September 2016 (%) 1 Total Cyprus UK Other countries (€ bn) 2,9% 6,0% 24,74 23,77 24,09 23,93 22,86 22,59 21,85 Other 21,08 countries 1 1,11 1,91 0,91 1,66 1,03 1,74 1,13 1,61 1,14 0,75 1,21 0,72 1,17 0,70 0,63 20,60 1,18 0,60
Slide 42: NPEs by Geography and by Customer Type
NPEs by Geography and by Customer Type NPEs by geography 30 September 2016 (%) 1 Total Cyprus UK Other countries (€ bn) 14,96 15,17 14,81 14,22 13,97 1,20 13,33 0,11 1,10 0,11 0,10 1,12 0,08 0,65 0,64 12,49 11,90 0,07 0,06 0,63 4,4% Other countries 1 0,05 0,57 0,06 0,53 0,5% UK 13,75 13,86 13,59 13,
Slide 43: Asset Quality- 90+ DPD analysis
Asset Quality- 90+ DPD analysis (€ mn) Sept-16 Jun - 16 Mar-16 Dec-15 Sept-15 A. Gross Loans after Fair value on Initial recognition 19.607 20.040 20.719 21.385 21.597 Fair value on Initial recognition 989 1.043 1.130 1.207 1.266 B. Gross Loans 20.596 21.083 21.849 22.592 22.863 B1. Loans with no ar
Slide 44: Asset Quality – NPEs analysis
Asset Quality – NPEs analysis Total Coverage for NPES Cyprus – Adequately provided Provision Coverage Tangible Collateral Total Coverage (capped MV 30.09.16) 160,0% 140,0% 123,9% 120,0% 112,4% 100,3% 100,0% 90,7% 68,3% 79,1% 64,1% 80,0% 60,0% 74,1% 94,5% 77,6% 40,0% 55,6% 48,3% 20,0% 16,6% 1,5% 5,8%
Slide 45: 90+ DPD by Geography
90+ DPD by Geography 90+ DPD by Geography (€ bn) 90+ DPD ratios by Geography 1 1 Cyprus UK Other countries Cyprus UK Other countries 91% 90% 90% 87% 87% 12,65 12,79 12,65 1,15 12,00 1,09 1,08 0,65 67% 0,11 0,09 11,33 66% 0,09 66% 0,08 0,63 0,07 10,29 54% 54% 54% 54% 51% 0,63 48% 45% 0,06 9,27 44% 0,
Slide 46: Analysis 90+ DPD ratios by Business Line
Analysis 90+ DPD ratios by Business Line1 90+ DPD by business line (€ bn) Corporate SMEs Housing Consumer Credit RRD-Major Corporations RRD- Corporates RRD-SMEs RRD-Recoveries corporates RRD-Recoveries SMEs & Retail 12,79 12,65 12,00 11,33 2,72 2,77 2,82 10,29 2,90 9,27 8,77 2,20 2,95 2,24 2,31 2,91
Slide 47: Further break down of 90+ DPD coverage by business line - Cyprus
Further break down of 90+ DPD coverage by business line - Cyprus Corporate SMEs Consumer Housing 134% 108% 109% 53% 96% 71% 48% 84% 81% 53% 64% 37% 52% 53% 50% 47% 35% 48% 26% 28% 26% 27% 26% 25% Dec-15 Mar-16 Jun -16 Sep - 16 Tangible Total Dec-15 Mar-16 Jun -16 Sep-16 Tangible Total Dec-15 Mar-16
Slide 48: Performance of Restructured Loans
Performance of Restructured Loans1 Total Bank – Cyprus Corporate 1Q2014 2Q2014 3Q2014 4Q2014 96% 97% 92% 1Q2015 2Q2015 3Q2015 4Q2015 87% 100% 86% 85% 85% 85% 89% 81% 82% 1Q2016 2Q2016 91% 76% 77% 77% 77% 79% Quarterly average 70% 71% 68% 80% 63% 61% 60% 31% 40% 25% 20% 18% 16% 14% 13% 13% 12% 14% 11
Slide 49: Analysis of Loans and 90+ DPD ratios by Business Line
Analysis of Loans and 90+ DPD ratios by Business Line1 Gross loans by business line (€ bn) 31.03.15 30.06.15 30.09.15 31.12.15 31.03.16 30.06.16 30.09.16 % of total 21% 8% 18% 7% 5% 11% 6% 10% 14% 4,59 4,53 4,38 4,31 4,29 4,15 4,10 3,85 3,80 3,75 3,68 3,62 3,61 3,58 3,36 3,22 2,98 2,94 2,92 2,91 2,9
Slide 50: 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) 31.03.15 30.06.15 30.09.15 31.12.15 31.03.16 31.06.16 30.09.16 % of 11% 3% 7% 16% 16% 34% 7% 6% total 7,92 7,86 7,41 7,33 7,25 7,17 7,11 4,19 4,14 4,07 4,04 3,92 3,43 3,42 3,38 3,33 3,32 3,30 3,22 3,20
Slide 51: Rescheduled Loans for the Cyprus Operations
Rescheduled Loans for the Cyprus Operations Rescheduled Loans by customer type (€ bn) Rescheduled Loans (€ bn) Retail housing Retail consumer SMEs Corporate 2.725 (1.284) 8,4 8,2 8,4 8,3 8,1 7,8 (1.575) 7,4 (435) 1,7 1,7 1,7 1,7 8.392 1,7 1,7 7.823 1,5 0,6 0,6 0,6 0,6 0,6 0,5 0,6 1,8 1,7 1,7 1,7 1,8
Slide 52: Reconciliation of 90+ DPD to NPEs Cyprus Operations (Sep-16)
Reconciliation of 90+ DPD to NPES Cyprus Operations (€ bn) (Sep-16) 11,3 0,4 0,7 0,0 8,2 2,0 7,6 0,1 0,5 €3,1 bn with arrears Impaired -no Impaired arrears - Total 90+ DPD with forbearance re-forborne within forborne >30+ Contagion effect NPEs >90+DPD arrears less than 90 days measure<90+ 2 years DP
Slide 53: Non-Performing Loans definition
Non-Performing Loans definition Non-Performing Exposures (NPEs) –as per the EBA definition: In 2014 the European Banking Authority (EBA) published its reporting standards on forbearance and non-performing exposures (NPEs). According to the EBA standards, a loan is considered a non-performing exposur
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