Bank of Cyprus Holdings PLC · CSECY:BOCH
Bank of Cyprus — 9M 2019 Earnings Presentation
57 slides from Bank of Cyprus's earnings presentation, Nov 26, 2019
Slide 1: Bank of Cyprus Group Financial Results, Nine Months 2019
Bank of Cyprus Group Group Financial Results for the nine months ended 30 September 2019 The financial information included in this presentation is neither reviewed nor audited by the Group’s external auditors. This financial information is presented in Euro (€) and all amounts are rounded as indica
Slide 2: 3Q2019 - Highlights
3Q2019 - Highlights Good Capital • Total Capital ratio of 17.9%1 pro forma for disposal of investment in CNP2 and Voluntary Staff Exit Plan (VEP)3 (18.2%1 as reported) Position • CET1 ratio of 14.9%1 pro forma for disposal of investment in CNP2 and VEP3 (15.2%1 as reported) • NPEs of €4.1 bn (€2.0 b
Slide 3: Capital at 14.9%, well above regulatory requirements
Capital at 14.9%, well above regulatory requirements CET1 ratio at 14.9%1,2; Total capital ratio at 17.9%1 17.9% 1.4% 15.2% 14.9% 1.6% 14.9% 0.5% (0.3%) (0.1%) 0.3% (0.6%) 0.2% 1,2 5 1,2 CET1 1,2 Operating Loan credit RWAs Other CET 1 Disposal of VEP CET 1 AT1 T2 Total Capital 4 30 Jun 2019 profitab
Slide 4: €10.9 bn or 73% NPE reduction since peak
€10.9 bn or 73% NPE reduction since peak €10.9 bn NPE reduction since 2014, of which c.€8.2 bn organic Gross NPE ratio reduced to 31%; 18% on a net basis Group (€ bn) -73% 15.0 -32 p.p. 14.0 63% 62% 55% 11.0 47% 47% 53% 50% 35% 33% 8.8 31% 42% 7.4 32% 30% 9.9 4.6 4.3 4.1 8.5 22% 20% 6.5 18% 4.6 3.6
Slide 5: Core NPE risk at €3.55 bn, 56% covered
Core NPE risk at €3.55 bn, 56% covered € bn NPEs no impairment, no arrears1 % of Gross Loans 13.97 Forborne, NPEs, no arrears but impaired Coverage 1.97 Core NPEs 0.64 8.80 1.35 7.47 0.27 0.87 0.34 11.36 4.61 4.31 Core NPEs 0.53 4.08 50% 0.44 0.34 0.22 0.34 Non Core NPEs 7.18 0.19 36% 6.26 Core NPEs
Slide 6: Clear strategy for further NPE reduction
Clear strategy for further NPE reduction Net organic reduction of €227 mn in 3Q2019 and of €684 mn for 9M2019, ahead of target of c.€800 mn for FY2019 Good momentum in efforts to accelerate de-risking with further portfolio sales Group NPEs (€ bn) 4.08 Non Core: €0.53 bn Non Core €0.53bn Exit da
Slide 7: ESTIA - Government scheme launched in September 2019
ESTIA- Government scheme launched in September 2019 Clear definition of socially protected borrowers ESTIA expected to: • resolve part of ESTIA- eligible3 portfolio • identify non-viable (vulnerable) customers and • facilitate resolution of remaining customers mainly through consensual and non c
Slide 8: NPE Coverage at 51%
NPE Coverage at 51% Quarterly CoR 1 at 0.90% NPE total coverage at 120% when collateral included Quarterly Cost of Risk - Group 2 Quarterly Cost of Risk - Group (excluding Helix) Loan loss reserves Tangible Collateral 123% 122% 120% 119% 118% 115% 109% 1.44% 1.23% 70% 70% 69% 69% 70% 67% 0.93% 68% 0
Slide 9: Foreclosures becoming an important tool in NPEs resolution
Foreclosures becoming an important tool in NPEs resolution Foreclosure commenced4 • Auctions held for 434 assets in 9M2019 • c.1/5 properties auctioned are sold at auction no. of properties Including Helix assets • Solution rate1 exceeds 70% • 8 months time to auction (refer to slide 27) 1293 • Redu
Slide 10: REMU: €1.10 bn sales of 1,459 properties since set-up
REMU: €1.10 bn sales of 1,459 properties since set-up in Jan 2016 Asset disposal strategy tackles both value and volume of assets 46% of Legacy3 assets now sold 44% of 2016 book now sold Sales contract prices1 (€ mn) Breakdown of cumulative sales1 by on-boarding year (€ mn) # 99 # 331 # 575 #
Slide 11: REMU sales achieved comfortably above Book Value
REMU sales achieved comfortably above Book Value €355 mn sales at a profit of €26 mn in 9M2019 Organic sales in 9M2019 achieved at 116% of Book Value €79 mn in the pipeline Sales contract prices3 (€ mn) Net Proceeds / BV Gross Proceeds / OMV Sales contract prices3 (€ mn) 116% 127% 108% 122% 118% Tot
Slide 12: New lending of €1.6 bn in 9M2019
New lending1 of €1.6 bn in 9M2019 98% of new exposures2 in Cyprus since 2016 are performing New lending to core sectors driving GDP growth New Lending (Cyprus) (€ mn) 9M2019:€1.6 bn New lending Cyprus (€ mn) – 9M2019 9M2018:€1.5 bn Private individuals 429 Trade 371 563 563 548 17 486 35 491 Real est
Slide 13: Balance sheet de-risking results in a smaller but safer loan book
Balance sheet de-risking results in a smaller but safer loan book Net Loans: Performing vs Legacy Interest Income on Loans (excluding Helix): Performing vs Legacy € bn Performing Legacy € mn (pre FTP) Performing Legacy 17.15 Sale of BOC UK - 15.62 €1.8 bn net loans 14.55 42% 7.19 109 5.64 12.04 12.0
Slide 14: Profitability: Risk adjusted yield will rise as Legacy book reduces
Risk adjusted yield will rise as Legacy book reduces Performing Legacy Group • Performing Book is expected to grow and to increasingly drive Group results Excluding Helix 9M2019 9M2019 9M2019 • Legacy book revenues predominantly driven by loan Interest Income on loans (€ mn) credit losses unwinding
Slide 15: Deposits at €16.5 bn, flat qoq; Excess Liquidity reduced to €3.0 bn
Deposits at €16,5 bn, flat qoq; Excess Liquidity reduced to €3.0 bn on TLTRO repayment Cyprus deposits (€ bn) Cyprus deposits by Liquidity Minimum 30 Sep passport origin2 Surplus ratio required 2019 16.48 16.85 16.84 16.38 16.47 4% 6% 16.30 3% LCR (Group) 100% 218% €2,997 mn 3.81 3.70 3.46 3.49 4.00
Slide 16: Drivers of NIM
Drivers of NIM Total Assets (€ bn) AIEA mix (% Total) Effective yield on assets & cost of funding Performing Legacy Liquids Non int-producing Performing Legacy Liquids 1 Performing Legacy NIM 1 3 Liquids 2 Cost of funding (bps) Effective yield AIEA €18.2 bn €18.2 bn €18.1 bn €18.0 bn 227 221 188 189
Slide 17: Non interest income of €72 mn in 3Q2019
Non interest income of €72 mn in 3Q2019 Analysis of Non Interest Income (€ mn) – Quarterly Net FX gains/(losses) & Net gains/(losses) on other financial instruments, and other income Net fee and commission Recurring income % Gains/(losses) from revaluation and disposal of investment properties and o
Slide 18: Total Expenses
Total Expenses Cost to Income Ratio (C/I ratio)1,3 C/I ratio excluding Helix C/I ratio (as reported) • C/I ratio1 remained broadly flat at 58% for 9M2019 excluding 62% Helix, compared to 59% for 1H2019 on the same basis 59% 58% 56% • Staff costs for 3Q2019 broadly flat at €55 mn qoq 49% 50% 56% 42%
Slide 19: Cost Management Actions Supported by Digital Transformation
Cost Management Actions Supported by Digital Transformation 11% reduction in FTEs following VEP completion Management remains focused on further improvement in efficiency • Successful completion of Voluntary Staff -11% Exit Plan (VEP) in 4Q2019 at one-off cost of 4.355 4.146 4.134 €79 mn 3.664 • Gro
Slide 20: Income Statement
Income Statement € mn (comparables adjusted for Helix) 9M2019 9M20181,2 3Q20191 2Q20191 qoq% yoy% Key Highlights Net Interest Income 260 250 90 85 5% 4% Non interest income 235 244 72 92 -22% -4% • NII increased to €90 mn in 3Q2019, mainly helped by the further decrease Total income 495 494 162 177
Slide 21: CEO Priorities
CEO Priorities • Maintain good capital position • Fully committed to accelerate de-risking, organically and non-organically • Focused on further improving efficiency to reflect our smaller revenue base, supported by our on-going Digital Transformation Programme Medium Term Guidance will be communica
Slide 22: Key Information and Contact Details
Key Information and Contact Details Credit Ratings: Standard & Poor’s Global Ratings: Long-term issuer credit rating: Affirmed at “B+” on 30 July 2019 (stable outlook) Short-term issuer credit rating: Affirmed at “B” on 30 July 2019 Fitch Ratings: Long-term Issuer Default Rating: Affirmed at “B-" on
Slide 23: Appendix – Macroeconomic overview
Appendix – Macroeconomic overview 23
Slide 24: Recovery of the Cypriot economy continues
Recovery of the Cypriot economy continues Unemployment rate dropped to 7.3% in 2Q2019 SA4 compared with GDP increased by 3.0% in 3Q2019 a yearly average unemployment rate of 8.4% for FY2018 18.0 8.0 16.0 460 6.0 3.8 14.0 440 4.0 3.5 12.0 3.2 411 420 2.0 3.3 3.1 10.0 398 3.0 8.0 400 0.0 -2.0 6.0 7.5
Slide 25: Driven by tourism, professional services and construction activity
… driven by tourism, professional services and construction activity Economic activity has been broadly based with main Tourism arrivals (mn) Tourism: % changes yoy drivers tourism and construction 3.9 Total arrivals (% change) Total receipts (% change) 0.4 3.7 0.6 6.7 19.8 Arts & Oher 3.2 3.3 3.2 P
Slide 26: Appendix – Additional asset quality slides
Appendix – Additional asset quality slides As from 1 January 2018 and following IFRS 9 implementation, the Bank’s disclosure in relation to the loan portfolio quality is based on Non Performing Exposures (NPEs), in line with the EBA standards and ECB NPEs Guidance to the banks. Exposures that meet t
Slide 27: The legislative framework supports organic delivery and sale of NPEs
The legislative framework1 positively supports organic delivery and the sale of NPEs • The July 2018 foreclosure law amendments1 have expedited the process and limited options to frustrate execution • In July 2019 the Parliament has voted through certain changes to that law which, in the most part,
Slide 28: ESTIA - Government scheme for resolution of NPEs backed by Primary Residence
ESTIA- Government scheme for the resolution of NPEs backed by Primary Residence • Eligible loans to be restructured to lower of contractual and Open Market Value (OMV) (on balance sheet solution) • Government to subsidise 1/3 of instalment, provided certain eligibility criteria1 are met: • Borrowers
Slide 29: Good NPE outflows & low inflows in 3Q2019
Good NPE outflows & low inflows in 3Q2019, leading to €227 mn net organic reduction Quarterly NPE outflows of €243 mn Cyprus operations (€ bn) Curing of restructured loans DFAs & DFEs Write offs and non contractual write offs Other (Interest / Collections / Change in balances) (0.09) (0.05) (0.10) (
Slide 30: Restructuring efforts continue; re-default levels stable
Restructuring efforts continue; re-default levels stable Quarterly evolution of restructuring activity (€ bn) (Cy operations) Restructured loans Write offs & non contractual write offs DFAs 0.79 0.12 0.52 0.40 0.07 0.37 0.34 0.31 0.28 1 0.29 0.05 0.10 0.08 0.15 0.06 0.13 0.16 0.12 0.14 0.02 0.27 0.0
Slide 31: Fair value of collateral and adequacy of loan credit losses
Fair value of collateral and adequacy of loan credit losses NPE Coverage at 51% Fair value of collateral and credit enhancements 30 Sep 2019 Quarterly Credit losses of customer loans (€ mn) Loans and advances to customers NPEs coverage (excluding Helix) (€ mn) 52% 52% 52% 53% Cash 452 51% 50% 52% 51
Slide 32: Continuous progress across all segments (Cy operations)
Continuous progress across all segments (Cy operations) Focus shifts to Retail and SME after intense Corporate attention Corporate NPEs (Cy) €3.99 bn Dec 18 3.01 Inflows 0.04 Sep 2019 Exits (0.16) Corporate Mar 2019 2.89 0.57 Helix (1,99) €0.69 bn NPE ratio 14% Mar 19 pro forma 0.90 Terminated Corpo
Slide 33: Gross loans & NPEs by Customer Type
Gross loans & NPEs by Customer Type Gross loans by customer type (€ bn) 20.13 18.75 2.09 15.90 15.88 2.06 4.22 13.15 13.07 13.04 4.17 1.79 1.86 4.35 4.07 4.07 1.82 1.85 1.88 3.51 2.98 2.88 4.07 4.07 4.07 2.30 2.15 2.06 9.47 9.01 7.06 7.07 4.96 5.00 5.03 1 Dec-16 Dec-17 Dec-18 Mar-19 Mar-19 Jun-19 Se
Slide 34: NPE coverage and Total coverage by segment (Cy)
NPE coverage and Total coverage by segment (Cy) Coverage and collateral maintained post Helix Cyprus operations 1 Loan loss reserves Tangible Collateral Corporate €0.7 bn SME €0.9 bn Retail-Housing €1.4 bn Retail-Other €1.0 bn Total Cyprus €4.0 bn 127% 126% 125% 123% 123% 123% 123% 123% 122% 122% 11
Slide 35: Asset Quality - NPEs analysis
Asset Quality- NPEs analysis (€ mn) Sep-19 Jun-19 Mar-19 Dec-18 Sep-18 A. Gross Loans after Fair value on Initial recognition 12,757 12,782 15,437 15,438 15,721 Fair value on Initial recognition 278 290 445 462 480 B. Gross Loans 13,035 13,072 15,882 15,900 16,201 B1. Loans with no arrears 8,794 8,5
Slide 36: Analysis of gross loans and NPE ratio by Economic Activity
Analysis of gross loans and NPE ratio by Economic Activity Gross loans by economic activity (€ bn) % of total 31.12.17 31.12.18 31.03.19 30.06.19 30.09.19 11% 3% 8% 7% 10% 47% 8% 6% 6.77 6.47 6.41 6.13 6.10 3.20 2.34 1.95 1.90 1.85 2.04 1.83 1.61 1.59 1.46 1.41 1.35 1.29 1.27 1.26 1.25 1.20 1.39 1.3
Slide 37: Rescheduled Loans for the Cyprus Operations
Rescheduled Loans for the Cyprus Operations Rescheduled Loans by customer type (€ bn) Retail housing Retail consumer SMEs Corporate 7.4 6.3 1.7 5.9 5.6 5.4 1.4 4.8 4.7 0.6 1.4 1.3 1.3 1.7 0.6 0.5 1.1 0.5 0.5 1.2 3.1 2.9 1.3 1.3 0.5 1.3 1.2 0.5 1.0 0.9 1.1 1.0 3.4 3.0 0.5 0.5 2.7 2.5 2.4 2.2 2.1 0.6
Slide 38: Gross loans and allowance for expected loan credit losses by IFRS 9 stage
Gross loans and allowance for expected loan credit losses by IFRS 9 stage Gross Loans (€ bn) 30 Sep 2019 30 Jun 2019 qoq % Stage 1 6.26 6.02 4% • Increase in Stage 1 loans by c. €240 mn in 3Q2019, attributable mainly to: Stage 21 2.70 2.74 -2% • High quality of new lending Stage 31 4.08 4.31 -5% • L
Slide 39: REMU – the engine for dealing with foreclosed assets
REMU – the engine for dealing with foreclosed assets Book Value Sales of €67 mn for the 3Q2019 (Group) REMU focus now on sales (Group) BV (€ mn) BV (€ mn) 159 (159) Investment Properties 1,530 (12) 1,513 (5) 103 114 71 62 55 67 42 1,427 1,399 30 28 Properties Additions Sales Impairment Transfer to P
Slide 40: Appendix – Additional financial information
Appendix – Additional financial information 40
Slide 41: Consolidated Balance Sheet
Consolidated Balance Sheet 31.12.2018 % 31.12.18 % Assets (€ mn) 30.09.2019 (restated) change Liability and Equity (€ mn) 30.09.19 (restated) change Cash and balances with Deposits by banks 451 432 4% 4,413 4,610 -4% Central Banks Loans and advances to Funding from central banks - 830 -100% 428 473
Slide 42: Core Cypriot business
Core Cypriot business Market shares1 Strong market shares in resident and non-resident deposits Loans new basis Deposits Residents Non-residents 45.4% 47.1% 41.3% 40.8% 37.5% 37.1% 38.6% 37.3% 38.8% 38.3% 38.2% 37.2% 35.8% 34.7% 35.1% 36.0% 34.7% 34.7% 32.8% 34.6% 31.1% 34.1% 35.3% 34.4% 34.0% 34.6%
Slide 43: Income Statement bridge for 9M2019
Income Statement bridge1 for 9M2019 Underlying Helix Investment in associate Tax related Statutory € mn Other basis Portfolio classified as HFS items Basis Net interest income 260 34 - - - 294 Net fee and commission income 111 9 - (6) - 114 Net foreign exchange gains and net gains on financial instr
Slide 44: Analysis of Interest Income and Interest Expense
Analysis of Interest Income and Interest Expense Analysis of Interest Income (€ mn) 1Q20191,2 2Q20192 3Q2019 Loans and advances to customers 104 101 105 Loans and advances to banks and central banks 2 2 1 Investments available-for-sale - - - Investment at amortised costs 3 3 3 Investments FVOCI 5 5
Slide 45: Cyprus: Income Statement by business line for 9M2019
Cyprus: Income Statement by business line1 for 9M2019 Excluding Helix Consumer SME Corporate International Wealth & Total € mn RRD REMU Insurance Treasury Other Banking Banking Banking Banking Markets Cyprus Net interest income/(expense) 113 29 89 26 5 11 (10) 0 0 3 266 Net fee & commission income 3
Slide 46: Risk Weighted Assets – Regulatory Capital
Risk Weighted Assets – Regulatory Capital Risk weighted assets by Geography (€ mn) Reconciliation of Group Equity to CET 1 31.12.17 31.12.18 31.03.19 Helix 30.06.19 30.09.2019 € mn 30.09.19 Group Equity per financial statements 2,482 Cyprus 16,011 15,070 15,113 (1,452) 13,680 13.550 Russia Less: Int
Slide 47: Unchanged SREP capital requirements for 2020
Unchanged SREP capital requirements for 20201 when ignoring the phasing-in of O-SII4 SREP requirements for 2020: CET1 ratio at 11.0% SREP requirements for 2020 : Total Capital ratio at 14.5% 14,5% 4 14,0% O-SII 0,5% 1,0% 11,0% 3 4 10,5% CCB 2,5% 2,5% O-SII 0,5% 1,0% 3 2 CCB 2,5% 2,5% Pillar 2R 3,0%
Slide 48: Buffer to MDA Restrictions Level & Distributable Items
Buffer to MDA Restrictions Level & Distributable Items1 Maximum Distributable Amount for BOCH Distributable Items at Bank and BOCH level CET1 Ratios (Pro forma for CNP & VEP) 14.9% • Distributable Items amount to: 340 bps - Bank: c.€0.4bn and c. 11.5% - BOCH: c.€0.7bn Unfilled 0.5% AT1 + T2 capacity
Slide 49: Analysis of Deposits
Analysis of Deposits Deposits by Currency (€ bn) 30 Sep 2019 (%) 17.85 16.51 16.84 16.30 16.38 16.47 8% 0.17 2% 0.22 2.11 0.290.11 0.10 0.11 0.10 0.29 0.28 0.28 1.69 1.48 1.38 1.30 1.34 2.20 1.74 90% 12.40 13.83 14.96 14.53 14.69 14.75 1 Dec-16 Dec-17 Dec-18 Mar-19 Jun-19 Sep-2019 EUR USD GBP Other
Slide 50: Reduction in Overseas Non-Core Exposures
Reduction in Overseas Non-Core Exposures Overseas non-core exposures (€ mn) Russia: Net exposure Romania: Net exposure Serbia: Net exposure UK: Net exposure Greece: Net exposure 518 • The Group continues its efforts for further deleveraging and disposal of non-essential assets and operations in Gree
Slide 51: Appendix – Glossary & Definitions
Appendix – Glossary & Definitions 51
Slide 52: Glossary & Definitions
Glossary & Definitions Allowance for expected credit Allowance for expected credit losses to cover credit risk on loans and advances to customers comprise: (i) allowance for ECL on loans and advances to losses on loans and customers, (ii) the fair value adjustment on initial recognition of loans and
Slide 53: Glossary & Definitions
Glossary & Definitions Effective yield Interest Income on Loans/Average Net Loans Effective yield of liquid Interest Income on liquids after hedging, over average liquids (Cash and balances with central banks, placements with banks and bonds). Historical information assets has been adjusted to take
Slide 54: Glossary & Definitions
Glossary & Definitions Net Proceeds Proceeds after selling charges and other leakages Net fee and commission Fee and commission income less fee and commission expense divided by total income (as defined) income over total income Net interest margin is calculated as the net interest income (annualise
Slide 55: 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), on the basis of Basel III NSFR standards. Its calculation is a SREP requirement. The European Banking Authority (EBA) is working on finalising th
Slide 56: Glossary & Definitions
Glossary & Definitions Total Capital ratio Total capital ratio is defined in accordance with the Capital Requirements Regulation (EU) No 575/2013 Total expenses comprise staff costs, other operating expenses and the special levy and contribution to the Single Resolution Fund. It does not include ‘ad
Slide 57: Disclaimer
Disclaimer This document contains certain forward-looking statements which can usually be identified by terms used such as “expect”, “should be”, “will be” and similar expressions or variations thereof or their negative variations, but their absence does not mean that a statement is not forward-look